-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ChKe5SfJ4fHaPlJw6H+hIeBENQebwa2V982OmTyQrZBXYi7wdAjWWsZN1NYWEW0e 8keFW25r0R7ba1NZFuRjaQ== 0001047469-99-035917.txt : 19990917 0001047469-99-035917.hdr.sgml : 19990917 ACCESSION NUMBER: 0001047469-99-035917 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19990916 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEARTLAND FINANCIAL USA INC CENTRAL INDEX KEY: 0000920112 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 421405748 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-87179 FILM NUMBER: 99712331 BUSINESS ADDRESS: STREET 1: 1398 CENTRAL AVE CITY: DUBUQUE STATE: IA ZIP: 52001 BUSINESS PHONE: 3195892000 MAIL ADDRESS: STREET 1: 1398 CENTRAL AVE CITY: DUBUQUE STATE: IA ZIP: 52001 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEARTLAND FINANCIAL CAPITAL TRUST I CENTRAL INDEX KEY: 0001095001 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 516512637 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-87179-01 FILM NUMBER: 99712332 BUSINESS ADDRESS: STREET 1: 1398 CENTRAL AVENUE CITY: DUBUQUE STATE: IA ZIP: 52001 BUSINESS PHONE: 3195892100 MAIL ADDRESS: STREET 1: 1398 CENTRAL AVENUE CITY: DUBUQUE STATE: IA ZIP: 52001 S-3 1 S-3 Registration No. 333- Registration No. 333- As filed with the Securities and Exchange Commission on September 16, 1999 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 HEARTLAND FINANCIAL USA, INC. HEARTLAND FINANCIAL CAPITAL TRUST I (Exact name of the registrant and co-registrant as specified in their charters)
DELAWARE 42-1405748 DELAWARE 51-6512637 (State or other jurisdiction of (I.R.S. Employer (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) of incorporation or organization) Identification No.)
1398 CENTRAL AVENUE 1398 CENTRAL AVENUE DUBUQUE, IOWA 52001 DUBUQUE, IOWA 52001 (319) 589-2000 (319) 589-2000 (Addresses, including zip codes, and telephone numbers of registrant's and co-registrant's principal executive offices) JOHN K. SCHMIDT EXECUTIVE VICE PRESIDENT HEARTLAND FINANCIAL USA, INC. 1398 CENTRAL AVENUE DUBUQUE, IOWA 52001 (319) 589-2000 (Name, address and telephone number of agent for service) WITH COPIES TO: JOHN E. FREECHACK, ESQ. DAVE M. MUCHNIKOFF, P.C. KRISTA A. ENDRES, ESQ. SILVER, FREEDMAN & TAFF, L.L.P. BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG 1100 NEW YORK AVENUE, N.W. 333 W. WACKER DRIVE, SUITE 2700 SUITE 7000 CHICAGO, ILLINOIS 60606 WASHINGTON, D.C. 20005-3934 (312) 984-3100 (202) 414-6100 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If the only securities being registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box: / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Amount to be Proposed Maximum Proposed Maximum Amount of Registration Registered Registered Price per Unit Aggregate Offering Price Fee(1) - ----------------------------------------------------------------------------------------------------------------------------------- ___% Capital Securities of Heartland 1,000,000 $25.00 $25,000,000 $6,950.00 Financial Capital Trust I ___% Junior Subordinated Debentures(2) of Heartland Financial USA, Inc. (2) Guarantee(3) of Capital Securities (3)
(1) The registration fee is calculated in accordance with Rule 457 (a), (i) and (n). (2) The Debentures will be purchased by Heartland Financial Capital Trust I with the proceeds from the sale of Capital Securities. Such securities may later be distributed for no additional consideration to the holders of the Capital Securities of Heartland Financial Capital Trust I upon its dissolution. (3) This Registration Statement is deemed to cover the Debentures of Heartland Financial USA, Inc., the rights of holders of Debentures of Heartland Financial USA, Inc. under the Indenture, and the rights of holders of the Capital Securities under the Trust Agreement, the Guarantee and the Expense Agreement entered into by Heartland Financial USA, Inc. No separate consideration will be received for the Guarantee. THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED SEPTEMBER ___, 1999 PROSPECTUS 1,000,000 CAPITAL SECURITIES HEARTLAND FINANCIAL CAPITAL TRUST I ______% CUMULATIVE CAPITAL SECURITIES (LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY) GUARANTEED AS DESCRIBED IN THIS PROSPECTUS BY HEARTLAND FINANCIAL USA, INC. ------------------- The capital securities represent undivided beneficial interests in the assets of Heartland Financial Capital Trust I. The trust will invest the proceeds of this offering of capital securities in the _____% junior subordinated debentures of Heartland Financial USA, Inc. For each of the capital securities that you own, you will receive cumulative cash distributions at an annual rate of _____% on March 31, June 30, September 30 and December 31 of each year, beginning December 31, 1999, from payments on the debentures. We may defer payments of distributions at any time for up to 20 consecutive quarters. The capital securities are effectively subordinated to all senior and subordinated indebtedness of Heartland Financial USA, Inc. and its subsidiaries. The debentures mature and the capital securities must be redeemed by September 30, 2029. The trust may redeem the capital securities, at a redemption price of $25 per capital security plus accrued and unpaid distributions, at any time on or after December 31, 2004, or earlier under certain circumstances. Application has been made to have the capital securities listed on the American Stock Exchange under the symbol "HFT.Pr" upon completion of this offering. THESE SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OBLIGATIONS OF ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. INVESTING IN THE CAPITAL SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 10. -------------------
PER CAPITAL SECURITY TOTAL ----------- -------------- Public offering price......................................................... $ 25.00 $ 25,000,000 Underwriting fees to be paid by Heartland Financial USA, Inc.................. $ $ Proceeds to the trust......................................................... $ 25.00 $ 25,000,000
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. ------------------- DAIN RAUSCHER WESSELS A DIVISION OF DAIN RAUSCHER INCORPORATED HOWE BARNES INVESTMENTS, INC. ------------------- _____________, 1999 TABLE OF CONTENTS
PAGE ---- Cautionary Statements.............................. 2 Summary............................................ 3 Summary Consolidated Financial Data................ 9 Risk Factors....................................... 10 Use of Proceeds.................................... 17 Capitalization..................................... 18 Accounting and Regulatory Treatment................ 19 Management......................................... 20 Description of the Trust........................... 22 Description of the Capital Securities.............. 23 Description of the Debentures...................... 34 Book-Entry Issuance................................ 42 Description of the Guarantee....................... 44 Relationship Among the Capital Securities, the Debentures and the Guarantee.................................... 46 Federal Income Tax Consequences.................... 48 ERISA Considerations............................... 51 Underwriting....................................... 51 Legal Matters...................................... 52 Where You Can Find Information..................... 53 Experts............................................ 53 Incorporation of Documents by Reference..................................... 53
Certain persons participating in this offering may engage in transactions that stabilize, maintain, or otherwise affect the price of the capital securities being offered, including over-allotting the capital securities and bidding for and purchasing capital securities at a level above that which otherwise might prevail in the open market. For a description of these activities, see "Underwriting." Such stabilizing transactions, if commenced, may be discontinued at any time. In connection with this offering, certain underwriters (and selling group members) may engage in passive market making transactions in the capital securities on the American Stock Exchange or otherwise in accordance with Rule 103 of the Securities and Exchange Commission's Regulation M. See "Underwriting." CAUTIONARY STATEMENTS This prospectus contains forward-looking statements which describe our future plans, strategies and expectations. All forward-looking statements are based on assumptions and involve risks and uncertainties, many of which are beyond our control and which may cause our actual results, performance or achievements to differ materially from the results, performance or achievements that we anticipate. Factors that might affect forward-looking statements include, among other things: - the demand for our products; - our inability to sustain or improve the performance of our subsidiaries; - our ability to enter new markets successfully and capitalize on growth opportunities; - our inability to identify suitable future acquisition candidates; - the timing, impact and other uncertainties of our future acquisitions and our success or failure in the integration of their operations; - increased costs or other difficulties relating to our pending acquisition of National Bancshares, Inc.; - our inability to achieve the financial goals in our strategic plans, including any financial goals related to both contemplated and consummated acquisitions; - increases in defaults by borrowers and other loan delinquencies resulting in increases in our provision for losses on loans and related expenses; - our ability to manage growth, including the successful expansion of the customer support, administrative infrastructure and internal management systems necessary to manage such growth; - adverse changes in the economy or business conditions, either nationally or in our market areas that could increase credit-related losses and expenses; - the consequences of continued bank acquisitions and mergers in our market areas, resulting in fewer but much larger and financially stronger competitors, and actions taken by our competitors which could increase competition for financial services to our detriment; - fluctuations in interest rates and market prices, which could reduce our net interest margins, asset valuations and expense expectations; - changes in legislative or regulatory requirements applicable to bank holding companies and our present and future banking and other subsidiaries; - changes in tax requirements, including tax rate changes, new tax laws and revised tax law interpretations; - general economic conditions; - year 2000 (Y2K) computer, embedded chip and related data processing issues; and - other factors discussed in "Risk Factors." We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the events discussed in any forward-looking statements in this prospectus might not occur. You should rely on the information contained or incorporated by reference in this prospectus. We have not, and our underwriters have not, authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and our underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. 2 SUMMARY THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN, OR INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS. BECAUSE THIS IS A SUMMARY, IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. THEREFORE, YOU SHOULD ALSO READ THE MORE DETAILED INFORMATION SET FORTH IN THIS PROSPECTUS, OUR FINANCIAL STATEMENTS AND THE OTHER INFORMATION THAT IS INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS THE CONTEXT CLEARLY SUGGESTS OTHERWISE, REFERENCES IN THIS PROSPECTUS TO "OUR," "US," "WE," "HEARTLAND FINANCIAL" OR "THE COMPANY" INCLUDE HEARTLAND FINANCIAL USA, INC., ITS WHOLLY OWNED, DIRECT AND INDIRECT SUBSIDIARIES AND NEW MEXICO BANK AND TRUST. HEARTLAND FINANCIAL USA, INC. BACKGROUND We are a diversified financial services holding company headquartered in Dubuque, Iowa. We offer full-service community banking through six banking subsidiaries with a total of 24 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. At June 30, 1999, we had total assets of $1.0 billion, net loans and leases of $693.1 million, deposits of $729.9 million and stockholders' equity of $85.5 million. Our largest bank subsidiary, Dubuque Bank and Trust Company, was organized in 1935 and was reorganized into the current holding company structure with Heartland Financial in 1982. From this beginning, we have grown significantly and have expanded geographically, acquiring entities or establishing DE NOVO operations in selected other markets in Iowa, Illinois, Wisconsin and New Mexico. The following table details our principal operating subsidiaries:
NUMBER ASSETS AT YEAR OF JUNE 30, 1999 NAME HEADQUARTERS AFFILIATED LOCATIONS (IN MILLIONS) BUSINESS - --------------------------- ----------------- ---------- --------- ------------- --------------------- BANKING SUBSIDIARIES: Dubuque Bank and Trust Dubuque, IA 1982 8 $582.7 Community banking Company and trust services Galena State Bank and Trust Galena, IL 1992 3 133.9 Community banking Company and trust services First Community Bank, FSB Keokuk, IA 1994 3 99.6 Community banking and trust services Riverside Community Bank Rockford, IL 1995 2 66.3 Community banking Wisconsin Community Bank Cottage Grove, WI 1997 4 79.9 Community banking and trust services New Mexico Bank & Trust Albuquerque, NM 1998 4 60.0 Community banking and trust services NON-BANKING SUBSIDIARIES: Citizens Finance Co. Dubuque, IA 1988 4 14.3 Consumer finance ULTEA, Inc. Madison, WI 1996 2 41.0 Vehicle leasing/fleet management
On July 23, 1999, we acquired Bank One Corporation's branch in Monroe, Wisconsin, which had approximately $94.5 million in deposits at the time of the acquisition. In addition, on August 17, 1999, we announced the expansion of our New Mexico operations through the pending acquisition of National Bancshares, Inc., the one-bank holding company of First National Bank of Clovis, located in Clovis, New Mexico. At June 30, 1999, National Bancshares had $111.9 million in assets, $97.9 million in deposits and $68.6 million in loans, primarily agricultural loans. 3 Our principal executive offices are located at 1398 Central Avenue, Dubuque, Iowa 52001, and our telephone number is (319) 589-2000. OPERATING STRATEGY Our primary operating strategy is to differentiate ourselves as a growing consortium of strong community banks through community involvement, active boards of directors, local presidents and local decision making. As part of our operating strategy, we encourage all of our directors, officers and employees to maintain a strong ownership interest in Heartland Financial. As of June 30, 1999, these individuals owned approximately 54% of our outstanding common stock. We believe that the personal and professional service that we offer to our customers provides an appealing alternative to the "megabanks" that have resulted from the recent mergers and acquisitions in the financial services industry. While we employ a community banking philosophy, we believe that our size, combined with our full line of financial products and services, is sufficient to effectively compete in our market areas. At the same time, we realize that to remain price competitive we must manage expense levels by centralizing our back office support functions to gain economies of scale. In order to accomplish our strategic objectives, we have focused on improving the performance of our existing subsidiaries while simultaneously pursuing an acquisition and expansion strategy. With respect to our existing subsidiaries, we have primarily focused on the following strategies: - de-emphasizing lower-yielding, single-family mortgage loans while increasing the emphasis on commercial and consumer loans which yield higher risk-adjusted returns; - improving our bank subsidiaries' funding costs by reducing the levels of higher-cost certificates of deposit, increasing the percentage of lower-cost transaction accounts such as checking, savings and money market accounts, emphasizing relationship banking and capitalizing on cross-selling opportunities; - emphasizing the expansion of our non-traditional sources of income, including trust and investment services, consumer finance and vehicle leasing and fleet management; - centralizing back office support functions to enable us to operate as efficiently as possible; and - continually evaluating new technology and acquiring it when the expected return justifies the cost. EXPANSION STRATEGY Another aspect of our primary strategy is to diversify both our market area and asset base while increasing profitability through acquisitions and through expansion of our current subsidiaries. Our goal is to expand through the acquisition of established financial services organizations, primarily commercial banks or thrifts, when suitable candidates can be identified and acceptable business terms negotiated. We have also formed DE NOVO banking institutions in market areas where we have identified market potential and management with banking expertise and philosophies similar to our own. In evaluating expansion and acquisition opportunities, we have focused on geographic areas in the Midwest or Southwest with growth potential. Our acquisitions have historically focused on traditional community banks and thrifts located in stable or growing areas of Iowa, Wisconsin and Illinois. For example, in 1994 we acquired Keokuk Bancshares, Inc., the holding company of First Community Bank, FSB. First Community, with its headquarters in Keokuk, Iowa, had assets of $97.9 million at the time of the acquisition. In March 1997, we acquired Cottage Grove State Bank (subsequently renamed Wisconsin Community Bank,) a Wisconsin state bank located in the Madison metropolitan area with $39.0 million in assets at the time of acquisition. As discussed above, in July 1999, we significantly increased our Wisconsin operations when we acquired a branch office of Bank One in Monroe, Wisconsin, and as a result, obtained $94.5 million in deposits, $38.8 million in loans and $46.7 million in trust assets. 4 We continually seek and evaluate opportunities to establish branches, loan production offices or other business facilities as a means of expanding our presence in current or new market areas. We established Riverside Community Bank in Rockford, Illinois as a DE NOVO bank in October 1995. Since then, it has grown to approximately $66.3 million in total assets. We also opened a new branch of Riverside Community Bank in southeastern Rockford in July 1999. In addition, Wisconsin Community Bank established offices in Green Bay, Sheboygan and Eau Claire in 1999. We also look for opportunities beyond the Midwest and beyond the categories of community banks and thrifts when we believe that the opportunity will provide a desirable strategic fit without posing undue risks. In May 1998, we enhanced our geographic diversity by establishing New Mexico Bank & Trust as a DE NOVO institution, in Albuquerque, New Mexico. This is a joint venture with local investors, executive officers and directors in which we became the 80% owner. Prior to May 5, 2003, each of the investors has the right to require us to purchase their shares at a price that will provide the investor with a 10% compounded return on their investment. On May 5, 2003, we are required to purchase any remaining outstanding shares at a price determined by an appraisal of New Mexico Bank & Trust. The purchase price is payable in cash, our common stock or a combination of both. In no event may we pay a price that will give the investors less than a 10% return on their investment. In the event that New Mexico Bank & Trust has over $200 million in assets and a 12% return on equity at the time of the repurchase, then we must pay a price that will give the investors at least a 15% return on their investment. In the third quarter of 1998, we further diversified our asset base by significantly enlarging our motor vehicle fleet leasing operations through the acquisition of Lease Associates Group of Milwaukee, Wisconsin. The merger of that company with our vehicle leasing and fleet management subsidiary, ULTEA, Inc., created the largest fleet management company based in Wisconsin, with total assets of $41.0 million at June 30, 1999. ULTEA specializes in motor vehicle fleet leasing and management for small to medium sized companies with strong credit histories. We also acquired Citizens Finance, a consumer finance company, in November 1988. Citizens Finance specializes in making consumer loans to borrowers with past credit problems or limited credit histories. While it is headquartered in Dubuque, Citizens Finance has opened locations in Madison and Appleton, Wisconsin and Rockford, Illinois. Citizens Finance has experienced significant growth during 1999 with total assets increasing to $14.3 million at June 30, 1999. In August 1999, we agreed to acquire National Bancshares, Inc., the one-bank holding company of First National Bank of Clovis. The bank has four locations, with $111.9 million in assets and $97.9 million in deposits. The total purchase price for National Bancshares will be approximately $23.3 million, of which up to $5.8 million may be paid in our common stock. The largest stockholder of National Bancshares, owning approximately 30% of its outstanding capital stock, is also a director and stockholder of New Mexico Bank & Trust. The acquisition is expected to close by the end of 1999 or during the first quarter of 2000, pending stockholder and regulatory approvals. We expect to merge the Clovis bank into New Mexico Bank & Trust after the closing of the acquisition. As a result of this acquisition, our ownership interest in New Mexico Bank & Trust will rise to approximately 86%. At June 30, 1999 we had an 8.49% leverage ratio, a 10.21% tier 1 risk-based ratio and a total risk based ratio of 11.32%. As adjusted for this offering, as well as for the acquisition of the Bank One branch in Monroe, Wisconsin and the proposed acquisition of National Bancshares, these ratios would have been 7.71%, 9.26% and 10.39%, respectively at June 30, 1999. In addition, the combined assets of New Mexico Bank & Trust at June 30, 1999, adjusted for the proposed acquisition of National Bancshares, would increase from $60.0 million to $179.9 million. 5 HEARTLAND FINANCIAL CAPITAL TRUST I The trust, which is the issuer of the capital securities, is a statutory business trust we formed under the Delaware Business Trust Act. Upon issuance of the capital securities offered by this prospectus, the purchasers in this offering will own all of the issued and outstanding capital securities of the trust. In exchange for our capital contribution to the trust, we will own all of the common securities of the trust. The trust exists for the following purposes: - issuing the capital securities to the public for cash; - issuing the common securities to us; - investing the proceeds from the sale of the capital and common securities in an equivalent amount of ____% junior subordinated debentures due September 30, 2029 issued by us; and - engaging in other activities that are incidental to those listed above. The trust's address is 1398 Central Avenue, Dubuque, Iowa 52001, and its telephone number is (319) 589-2000. THE OFFERING
The issuer................................ Heartland Financial Capital Trust I Securities being offered.................. 1,000,000 capital securities, which represent preferred undivided beneficial interests in the assets of the trust. Those assets will consist solely of the debentures and payments received thereunder. The trust will sell the capital securities to the public for cash. The trust will use that cash to buy the debentures from us. Offering price............................ $25 per capital security. Payment of distributions.................. If you purchase the capital securities, you are entitled to receive cumulative cash distributions at a _____% annual rate. Distributions will accumulate from the date the trust issues the capital securities and will be paid quarterly on March 31, June 30, September 30 and December 31 of each year beginning December 31, 1999. The record date for distributions on the capital securities will be the business day prior to the distribution date. Please note that we may defer the payment of cash distributions, as more fully described below. Maturity.................................. The debentures will mature and the capital securities must be redeemed on September 30, 2029. We have the option, however, to shorten the maturity date to a date not earlier than September 30, 2004. We will not shorten the maturity date unless we have received the prior approval of the Board of Governors of the Federal Reserve System, if required. Redemption of the capital securities is possible.............................. The trust must redeem the capital securities when the debentures are paid at maturity or upon any earlier redemption of the debentures. We may redeem all or part of the debentures at any time on or after September 30, 2004. In addition, we may redeem, at any time, all of the debentures if:
6
- the interest we pay on the debentures is no longer deductible by us for federal tax purposes, or the trust becomes subject to federal income tax; - there is a change in the Investment Company Act of 1940 that requires the trust to register under that law; or - there is a change in the capital adequacy guidelines of the Federal Reserve that results in the capital securities not being counted as Tier 1 capital. Redemption of the debentures prior to maturity will be subject to the prior approval of the Federal Reserve, if required. If the capital securities are redeemed by the trust, you will receive the liquidation amount of $25 per capital security plus any accrued and unpaid distributions to the date of redemption. We have the option to extend the interest payment period............... The trust will rely solely on payments made by us under the debentures to pay distributions on the capital securities. As long as we are not in default under the indenture relating to the debentures, we may, at one or more times, defer interest payments on the debentures for up to 20 consecutive quarters, but not beyond September 30, 2029. If we defer interest payments on the debentures: - the trust will also defer distributions on the capital securities; - the distributions you are entitled to will accumulate; and - these accumulated distributions will earn additional interest at an annual rate of ______%, compounded quarterly. At the end of any deferral period, we will pay to the trust all accrued and unpaid interest under the debentures. The trust will then pay all accumulated and unpaid distributions to you. You will still be taxed if distributions on the capital securities are deferred.............................. If a deferral of payment occurs, you will still be required to recognize the deferred amounts as income for United States federal income tax purposes in advance of receiving these amounts, even if you are a cash basis taxpayer. Our guarantee of payment.................. We guarantee the trust will use its assets to pay the distributions on the capital securities and the liquidation amount upon liquidation of the trust. However, the guarantee does not apply when the trust does not have sufficient funds to make the payments. If we do not make payments on the debentures, the trust will not have sufficient funds to make payments on the capital securities. In this event, your remedy is to institute a legal proceeding directly against us for enforcement of payments under the debentures.
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We may distribute the debentures directly to you....................... We may, at any time, dissolve the trust and distribute the debentures to you, subject to the prior approval of the Federal Reserve, if required. If we distribute the debentures, we will use our reasonable efforts to list them on a national securities exchange or comparable automated quotation system. How the securities will rank in right of payment............................... Our obligations under the capital securities, debentures and guarantee are unsecured and will rank as follows with regard to right of payment: - the capital securities will rank equally with the common securities of the trust. The trust will pay distributions on the capital securities and the common securities pro rata. However, if we default with respect to the debentures, then no distributions on the common securities will be paid until all accumulated and unpaid distributions on the capital securities have been paid; - our obligations under the debentures and the guarantee are unsecured and generally will rank junior in priority to our existing and future senior and other subordinated indebtedness; and - because we are a holding company, the junior subordinated debentures and the guarantee will effectively be subordinated to all existing and future liabilities of our subsidiaries. Voting rights of the capital securities............................ Except in limited circumstances, holders of the capital securities will have no voting rights. Proposed American Stock Exchange symbol.............................. "HFT.Pr" Book-entry................................ The capital securities will be represented by a global security that will be deposited with and registered in the name of The Depository Trust Company, New York, New York or its nominee. This means that you will not receive a certificate for the capital securities. Use of proceeds........................... The trust will invest all of the proceeds from the sale of the capital securities in the debentures. We will use the net proceeds from the sale of the debentures, which we estimate to be approximately $____ million, to repay approximately $15.0 million of indebtedness existing on our revolving credit line currently outstanding with The Northern Trust Company. We will use the remaining net proceeds for general corporate purposes, including, but not limited to, investments in and extensions of credit to our subsidiaries, possible common stock repurchases and financing potential acquisitions.
Before purchasing the capital securities offered by this prospectus, you should carefully consider the "Risk Factors" beginning on page 10. 8 SUMMARY CONSOLIDATED FINANCIAL DATA The summary consolidated financial data presented below for, and as of, the end of each of the years in the five-year period ended December 31, 1998, are derived from our consolidated financial statements, which have been audited by KPMG LLP, independent certified public accountants. The summary data presented below for the six-month periods ended June 30, 1999 and 1998, are unaudited. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of results as of or for the six-month periods indicated have been included. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the notes thereto incorporated by reference into this prospectus from our Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999. Results for past periods are not necessarily indicative of results to be expected for any future period, and results for the six-month period ended June 30, 1999 are not necessarily indicative of results for the entire year.
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, ----------------------- --------------------------------------------------------------- 1999 1998 1998 1997 1996 1995 1994 ----------------------- --------------------------------------------------------------- (Dollars in thousands) STATEMENT OF INCOME DATA: Interest income....................... $ 33,739 $ 31,599 $ 64,517 $ 59,261 $ 51,886 $ 49,149 $ 43,373 Interest expense...................... 18,556 17,245 36,304 31,767 27,644 25,529 20,128 ---------- ---------- ---------- ---------- ---------- ---------- ----------- Net interest income................... 15,183 14,354 28,213 27,494 24,242 23,620 23,245 Provision for loan and lease losses... 1,296 585 951 1,279 1,408 820 811 ---------- ---------- ---------- ---------- ---------- ---------- ----------- Net interest income after provision for loan and lease losses.......... 13,887 13,769 27,262 26,215 22,834 22,800 22,434 Noninterest income.................... 12,824 5,849 17,297 8,565 7,364 4,981 4,965 Noninterest expense................... 20,715 13,087 31,781 22,927 19,507 17,323 17,244 ---------- ---------- ---------- ---------- ---------- ---------- ----------- Pre-tax income........................ 5,996 6,531 12,778 11,853 10,691 10,458 10,155 Provision for income taxes............ 1,784 1,959 3,757 3,338 2,685 2,884 3,015 ---------- ---------- ---------- ---------- ---------- ---------- ----------- Net income............................ $ 4,212 $ 4,572 $ 9,021 $ 8,515 $ 8,006 $ 7,574 $ 7,140 ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ----------- BALANCE SHEET: Total assets.......................... $1,027,833 $ 880,037 $ 953,785 $ 852,060 $ 736,552 $ 677,313 $ 626,490 Securities and federal funds sold..... 219,774 250,437 259,964 234,666 183,966 171,726 162,968 Loans and leases, net of unearned interest........................... 693,058 558,654 590,133 556,406 484,085 454,905 422,216 Allowance for loan and lease losses... 9,171 8,100 7,945 7,362 6,191 5,580 5,124 Deposits.............................. 729,914 660,551 717,877 623,532 558,343 534,587 513,239 Stockholders' equity.................. 85,467 76,499 84,270 77,772 70,259 64,506 56,930 KEY RATIOS: Return on average total assets (1).... 0.87% 1.08% 1.01% 1.09% 1.16% 1.18% 1.18% Return on average stockholders' equity (1)......................... 10.03 11.79 11.26 11.59 12.00 12.28 12.82 Net interest margin (1)(2)(3)......... 3.59 3.78 3.58 3.89 3.98 4.13 4.32 Efficiency ratio (2)(4)............... 74.82 67.06 71.58 64.77 63.03 59.15 59.40 Nonperforming assets to total assets.. 0.25 0.34 0.28 0.34 0.34 0.28 0.17 Allowance for loan and lease losses to total loans and leases... 1.32 1.45 1.35 1.32 1.28 1.23 1.21 Net charge-offs (recoveries) to average loans and leases........... 0.01 (0.03) 0.07 0.08 0.17 0.08 0.03 Average equity to average assets...... 8.66 9.17 9.01 9.39 9.66 9.59 9.22 Earnings to fixed charges: Excluding interest on deposits..... 2.45x 2.76x 2.65x 2.97x 3.38x 3.97x 5.30x Including interest on deposits..... 1.32 1.38 1.35 1.37 1.39 1.41 1.50
- -------------------------------------- (1) The six-month ratios are annualized. (2) Exclusive of the interest recorded on the debt of ULTEA, the net interest margin for the six-month period ended June 30, 1999 was 3.83%. Similarly, the efficiency ratio was 67.43% for the six-month period ended June 30, 1999 when considering only the banking subsidiaries. (3) Tax-equivalent using a 34% rate. (4) Noninterest expense divided by the sum of net interest income before provision for loan losses and noninterest income. 9 RISK FACTORS AN INVESTMENT IN THE CAPITAL SECURITIES INVOLVES A NUMBER OF RISKS. WE URGE YOU TO READ ALL OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. IN ADDITION, WE URGE YOU TO CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING US, OUR BUSINESS AND THE TRUST BEFORE YOU PURCHASE THE CAPITAL SECURITIES OFFERED BY THIS PROSPECTUS. BECAUSE THE TRUST WILL RELY ON THE PAYMENTS IT RECEIVES ON THE DEBENTURES TO FUND ALL PAYMENTS ON THE CAPITAL SECURITIES, AND BECAUSE THE TRUST MAY DISTRIBUTE THE DEBENTURES IN EXCHANGE FOR THE CAPITAL SECURITIES, PURCHASERS OF THE CAPITAL SECURITIES ARE MAKING AN INVESTMENT DECISION THAT RELATES TO THE DEBENTURES AS WELL AS THE CAPITAL SECURITIES. PURCHASERS SHOULD CAREFULLY REVIEW THE INFORMATION IN THIS PROSPECTUS ABOUT THE CAPITAL SECURITIES, THE DEBENTURES AND THE GUARANTEE. RISKS RELATED TO AN INVESTMENT IN HEARTLAND FINANCIAL RISKS RELATED TO OUR CURRENT BUSINESS ACTIVITIES Our business strategy centers around increasing our commercial banking activities. In order to realize this objective, one of our main strategies is to replace lower-yielding one- to four-family residential mortgage loans with commercial and consumer loans and leases with higher risk-adjusted returns. As this process takes place, a gradual increase in our consolidated credit risk is likely to occur, which means that there is a greater risk that borrowers will be unable to repay their loans from us or make all required lease payments to us. Borrower defaults resulting in losses in excess of our allowance for loan and lease losses could have a material adverse effect on our business, profitability and financial condition. ONE- TO FOUR-FAMILY RESIDENTIAL MORTGAGE LOANS. One- to four-family residential mortgage loans comprised $160.1 million, or 23.0%, of our loan and lease portfolio at June 30, 1999, and are secured primarily by properties located in the Midwest. Our concentration of these loans results in lower yields and lower profitability for us. These loans are generally made on the basis of the borrower's ability to make repayments from his or her employment and the value of the property securing the loan. COMMERCIAL REAL ESTATE LENDING. At June 30, 1999, commercial real estate loans totaled $202.5 million, or 29.1%, of our total loan and lease portfolio. Commercial real estate lending typically involves higher loan principal amounts and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties. From time to time, we have purchased participation interests in commercial real estate loans. We apply the same approval standards and procedures to participation interests as to the loans we originate directly. There is no assurance, however, that we may not experience future delinquencies from these participation interests. At June 30, 1999, participation interests included in our total commercial real estate loan and lease portfolio totaled $43.7 million. COMMERCIAL LOANS AND LEASES. Our commercial loans and leases are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral is accounts receivable, inventory, machinery or real estate. Credit support provided by the borrower for most of these loans and leases and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any exists. As a result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing other loans and equipment leases may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. Commercial loans and leases were $123.2 million, or 17.7% of our total loan and lease portfolio, as of June 30, 1999. This amount does not include $37.2 million of leases held by ULTEA. These leases require the lessee to pay an amount over the life of the lease equal to the total of all costs related to the purchase and use of the automobile and ULTEA's fleet management fees less the amount received 10 upon sale of the leased automobile. In the event the lessee fails to pay the total required payment, ULTEA may incur a loss. COMMERCIAL CONSTRUCTION LENDING. At June 30, 1999, commercial construction loans, including land acquisition and development, totaled $28.3 million, or 4.1%, of our total loan and lease portfolio. Construction and land acquisition and development lending involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. As a result, commercial construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project. AGRICULTURAL LENDING. At June 30, 1999, agricultural real estate loans totaled $56.6 million, or 8.1%, of our total loan and lease portfolio. Agricultural real estate lending involves a greater degree of risk and typically involves larger loans to single borrowers than lending on singlefamily residences. Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan. The success of the farm may be affected by many factors outside the control of the farm borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields (such as hail, drought and floods), loss of livestock due to disease or other factors, declines in market prices for agricultural products (both domestically and internationally) and the impact of government regulations (including changes in price supports, subsidies and environmental regulations). In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower's ability to repay the loan may be impaired. The primary crops in our market areas are corn and soybean. Accordingly, adverse circumstances affecting corn and soybean crops could have an adverse effect on our agricultural real estate loan portfolio. We also originate agricultural operating loans. At June 30, 1999, these loans totaled $27.6 million, or 4.0%, of our total loan and lease portfolio. As with agricultural real estate loans, the repayment of operating loans is dependent on the successful operation or management of the farm property. Likewise, agricultural operating loans involves a greater degree of risk than lending on residential properties, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets such as farm equipment or assets such as livestock or crops. The primary livestock in our market areas include dairy cows, hogs and feeder cattle. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. National Bancshares, Inc. had $32.1 million in agricultural operating loans and $8.0 million in agricultural real estate loans at June 30, 1999. These loans were heavily concentrated in the cattle industry as well as in grain operations. Because National Bancshares' underwriting standards are different than ours, this portion of the loan portfolio may initially involve more risk. At June 30, 1999, National Bancshares had $1.1 million in nonperforming loans, which was 1.6% of its total loan portfolio. CONSUMER LENDING. At June 30, 1999, consumer loans totaled $88.3 million, or 12.7%, of our total loan and lease portfolio. Consumer loans typically have shorter terms and lower balances with higher yields as compared to one- to four-family residential mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on these loans. Our consumer loan portfolio at June 30, 1999 included $16.8 million of consumer loans made by Citizens Finance to borrowers with past credit problems or limited credit histories. Lending to these borrowers entails a greater risk of default than does lending to individuals who have a better credit history. We expect to incur a higher level of credit losses on Citizens Finance's loans as compared to our other consumer loans. 11 WE MAY EXPERIENCE DIFFICULTIES IN MANAGING OUR GROWTH As part of our general strategy, we may acquire banks and related businesses that we believe provide a strategic fit with our business. To the extent that we grow through acquisitions, we cannot assure you that we will be able to adequately and profitably manage such growth. Acquiring other banks and businesses, including our proposed acquisition of National Bancshares, will involve risks commonly associated with acquisitions, including: - potential exposure to unknown or contingent liabilities of banks and businesses we acquire; - exposure to potential asset quality issues of the acquired bank or related business; - difficulty and expense of integrating the operations and personnel of banks and businesses we acquire; - potential disruption to our business; - potential diversion of our management's time and attention; - the possible loss of key employees and customers of the banks and businesses we acquire; and - incurrence of goodwill if we account for an acquisition as a purchase. In addition to acquisitions, we may expand into additional communities or attempt to strengthen our position in our current markets by undertaking additional DE NOVO bank formations or branch openings. Based on our experience, we believe that it generally takes up to two years for new banking facilities to first achieve operational profitability, due to the impact of organization and overhead expenses and the start-up phase of generating loans and deposits. To the extent that we undertake additional branching and DE NOVO bank and business formations, we are likely to continue to experience the effects of higher operating expenses relative to operating income from the new operations, which may have an adverse effect on our levels of reported net income, return on average equity and return on average assets. OUR ALLOWANCE FOR LOAN AND LEASE LOSSES MAY NOT BE ADEQUATE TO COVER ACTUAL LOAN LOSSES As a lender, we are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the lending business and could have a material adverse effect on our operating results and our ability to make payments on the debentures. We make various assumptions and judgments about the collectibility of our loan portfolio and provide an allowance for potential losses based on a number of factors. If our assumptions are wrong, our allowance for loan and lease losses may not be sufficient to cover our losses, thereby having an adverse effect on our operating results, and may cause us to increase the allowance in the future. Additions to our allowance for loan and lease losses would decrease our net income. CHANGES IN LOCAL ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR LOAN PORTFOLIO Most of our business is located in adjoining portions of Iowa, Illinois and Wisconsin with a substantial amount concentrated in the Dubuque, Iowa area. Unfavorable or worsening economic conditions in these areas could have a material adverse effect on us in a number of ways. The ability of our borrowers to repay their loans and the value of the collateral securing these loans would be negatively impacted by adverse changes in local economic conditions. In addition, these regions are heavily dependent on the agricultural industry, which has a history of fluctuating economic conditions. 12 INTEREST RATES AND OTHER CONDITIONS IMPACT OUR RESULTS OF OPERATIONS Our profitability is in part a function of the spread between the interest rates earned on investments and loans and the interest rates paid on deposits and other interest-bearing liabilities. Like most banking institutions, our net interest spread and margin will be affected by general economic conditions and other factors, including fiscal and monetary policies of the federal government, that influence market interest rates and our ability to respond to changes in such rates. At any given time, our assets and liabilities will be such that they are affected differently by a given change in interest rates. As a result, an increase or decrease in rates, the length of loan terms or the mix of adjustable and fixed rate loans in our portfolio could have a positive or negative effect on our net income, capital and liquidity. At June 30, 1999, we had a liability sensitive gap at one year and in time periods exceeding one year. With a liability sensitive gap, a decrease in interest rates will generally have a positive effect on net interest income, while increases in interest rates will generally have a negative effect on net interest income. WE RELY HEAVILY ON OUR MANAGEMENT We are dependent upon the efforts and services of Lynn B. Fuller, our president and chief executive officer and our other senior officers. The loss of the services of Mr. Fuller, or any of our other senior officers, could have a material adverse effect on our operations. Because Mr. Fuller has taken on increased responsibilities at the holding company level, we are in the process of searching for a replacement president of Dubuque Bank and Trust, our largest bank subsidiary, where Mr. Fuller has been president since 1987. Until this occurs, Mr. Fuller will continue to hold this position. Our success also depends on the experience of the officers of our subsidiaries, the managers of our banking facilities and on their relationships with the communities they serve. The loss of these key persons could negatively impact the affected banking operations. We may not be able to retain our current key personnel or attract additional qualified key persons as needed. WE HAVE A CONTINUING NEED FOR TECHNOLOGICAL CHANGE The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We cannot provide you with assurance that we will be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers. UNCERTAINTY EXISTS WITH RESPECT TO THE YEAR 2000 The year 2000 has posed a unique set of challenges to those industries reliant on information technology. As a result of methods employed by early programmers, many software applications and operational programs may be unable to distinguish the year 2000 from the year 1900. If not effectively addressed, this problem could result in the production of inaccurate data, or, in the worst cases, the inability of the systems to continue to function altogether. Financial institutions are particularly vulnerable due to the industry's dependence on electronic data processing systems. We could experience interruptions in our business and suffer significant losses if we, or a supplier or vendor with whom we contract, are unable to achieve year 2000 readiness before January 1, 2000. In addition, our bank subsidiaries' customers may withdraw their deposits due to uncertainty of the impact of year 2000 issues, resulting in decreased liquidity. 13 THERE IS STRONG COMPETITION IN THE FINANCIAL SERVICES INDUSTRY We compete for loan and deposit customers with other banks and thrifts, as well as other financial services organizations such as credit unions, finance companies, brokerage firms, insurance companies and money market mutual funds, all of whom aggressively solicit customers within our market areas by advertising through direct mail, electronic media, including the internet, and other means. Many of the competitors in our markets have been in business for many years, have established customer bases and are substantially larger than us. In addition, many of these entities have greater capital resources than we do, and some of these are not subject to the same degree of regulation. WE ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION The banking industry is heavily regulated under both federal and state law. These regulations are primarily intended to protect customers, not our creditors or stockholders. We are also subject to extensive regulation by the Federal Reserve Board, in addition to other regulatory and self-regulatory organizations. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of such changes, which could have a material adverse effect on our profitability or financial condition. Regulations and laws may be modified at any time, and new legislation may be enacted that adversely affects us and our subsidiaries. RISKS RELATED TO AN INVESTMENT IN THE CAPITAL SECURITIES IF WE DO NOT MAKE INTEREST PAYMENTS UNDER THE DEBENTURES, THE TRUST WILL BE UNABLE TO PAY DISTRIBUTIONS AND LIQUIDATION AMOUNTS. THE GUARANTEE WILL NOT APPLY BECAUSE THE GUARANTEE COVERS PAYMENTS ONLY IF THE TRUST HAS FUNDS AVAILABLE. The trust will depend solely on our payments on the debentures to pay amounts due to you on the capital securities. If we default on our obligation to pay the principal or interest on the debentures, the trust will not have sufficient funds to pay distributions or the liquidation amount on the capital securities. In that case, you will not be able to rely on the guarantee for payment of these amounts because the guarantee only applies if the trust has sufficient funds to make distributions on or to pay the liquidation amount of the capital securities. Instead, you or the property trustee will have to institute a direct action against us to enforce the property trustee's rights under the indenture relating to the debentures. TO THE EXTENT WE MUST RELY ON DIVIDENDS FROM OUR SUBSIDIARIES TO MAKE INTEREST PAYMENTS ON THE DEBENTURES TO THE TRUST, OUR AVAILABLE CASH FLOW MAY BE RESTRICTED We are a holding company and substantially all of our assets are held by our subsidiaries. Our ability to make payments on the debentures when due will depend primarily on available cash resources at the holding company and dividends from our subsidiaries. Dividend payments or extensions of credit from our banking subsidiaries are subject to regulatory limitations, generally based on capital levels and current and retained earnings, imposed by the various regulatory agencies with authority over such subsidiaries. The ability of each banking subsidiary to pay dividends is also subject to its profitability, financial condition, capital expenditures and other cash flow requirements. We cannot assure you that our subsidiaries will be able to pay dividends in the future. THE DEBENTURES AND THE GUARANTEE RANK LOWER THAN OUR OTHER INDEBTEDNESS AND OUR HOLDING COMPANY STRUCTURE EFFECTIVELY SUBORDINATES ANY CLAIMS AGAINST US TO THOSE OF OUR SUBSIDIARIES' CREDITORS Our obligations under the debentures and the guarantee are unsecured and will rank junior in priority of payment to our existing and future senior and subordinated indebtedness, which totaled approximately $195.4 million at June 30, 1999. The issuance of the debentures and the capital securities does not limit our ability or the ability of our subsidiaries to incur additional indebtedness, guarantees or other liabilities. 14 Because we are a holding company, the creditors of our subsidiaries also will have priority over you in any distribution of our subsidiaries' assets in liquidation, reorganization or otherwise. Accordingly, the debentures and the guarantee will be effectively subordinated to all existing and future liabilities of our subsidiaries, and you should look only to our assets for payments on the capital securities and the debentures. WE HAVE THE OPTION TO DEFER INTEREST PAYMENTS ON THE DEBENTURES FOR SUBSTANTIAL PERIODS We may, at one or more times, defer interest payments on the debentures for up to 20 consecutive quarters. If we defer interest payments on the debentures, the trust will defer distributions on the capital securities during any deferral period. During a deferral period, you will be required to recognize as income for federal income tax purposes the amount approximately equal to the interest that accrues on your proportionate share of the debentures held by the trust in the tax year in which that interest accrues, even though you will not receive these amounts until a later date. You will also not receive the cash related to any accrued and unpaid interest from the trust if you sell the capital securities before the end of any deferral period. During a deferral period, accrued but unpaid distributions will increase your tax basis in the capital securities. If you sell the capital securities during a deferral period, your increased tax basis will decrease the amount of any capital gain or increase the amount of any capital loss that you may have otherwise realized on the sale. A capital loss, except in certain limited circumstances, cannot be applied to offset ordinary income. As a result, deferral of distributions could result in ordinary income, and a related tax liability for the holder, and a capital loss that may only be used to offset a capital gain. We do not currently intend to exercise our right to defer interest payments on the debentures. However, if we exercise our right in the future, the market price of the capital securities would likely be adversely affected. The capital securities may trade at a price that does not fully reflect the value of accrued but unpaid interest on the debentures. If you sell the capital securities during an interest deferral period, you may not receive the same return on investment as someone who continues to hold the capital securities. Due to our right to defer interest payments, the market price of the capital securities may be more volatile than the market prices of other securities without the deferral feature. WE HAVE MADE ONLY LIMITED COVENANTS IN THE INDENTURE AND THE TRUST AGREEMENT The indenture governing the debentures and the trust agreement governing the trust do not require us to maintain any financial ratios or specified levels of net worth, revenues, income, cash flow or liquidity, and therefore do not protect holders of the debentures or the capital securities in the event we experience significant adverse changes in our financial condition or results of operations. In addition, neither the indenture nor the trust agreement limits our ability or the ability of any subsidiary to incur additional indebtedness. Therefore, you should not consider the provisions of these governing instruments as a significant factor in evaluating whether we will be able to comply with our obligations under the debentures or the guarantee. WE MAY REDEEM THE DEBENTURES BEFORE SEPTEMBER 30, 2029 Under the following circumstances, we may redeem the debentures before their stated maturity: - We may redeem the debentures, in whole or in part, at any time on or after September 30, 2004. - We may redeem the debentures in whole, but not in part, within 90 days after certain occurrences at any time during the life of the trust. These occurrences may include adverse tax, Investment Company Act or bank regulatory developments. You should assume that we will exercise our redemption option if we are able to obtain capital at a lower cost than we must pay on the debentures or if it is otherwise in our interest to redeem the debentures. If 15 the debentures are redeemed, the trust must redeem capital securities having an aggregate liquidation amount equal to the aggregate principal amount of debentures redeemed, and you may be required to reinvest your principal at a time when you may not be able to earn a return that is as high as you were earning on the capital securities. WE CAN DISTRIBUTE THE DEBENTURES TO YOU, WHICH MAY HAVE ADVERSE TAX CONSEQUENCES FOR YOU AND WHICH MAY ADVERSELY AFFECT THE MARKET PRICE OF THE CAPITAL SECURITIES The trust may be dissolved at any time before maturity of the debentures on September 30, 2029. As a result, and subject to the terms of the trust agreement, the trustees may distribute the debentures to you. We cannot predict the market prices for the debentures that may be distributed in exchange for capital securities upon liquidation of the trust. The capital securities, or the debentures that you may receive if the trust is liquidated, may trade at a discount to the price that you paid to purchase the capital securities. Because you may receive debentures, your investment decision with regard to the capital securities will also be an investment decision with regard to the debentures. You should carefully review all of the information contained in this prospectus regarding the debentures. Under current United States federal income tax laws, a distribution of the debentures to you upon the dissolution of the trust would not be a taxable event to you. Nevertheless, if the trust is classified for United States income tax purposes as an association taxable as a corporation at the time it is dissolved, the distribution of the debentures would be a taxable event to you. In addition, if there is a change in law, a distribution of debentures upon the dissolution of the trust could be a taxable event to you. THERE IS NO CURRENT PUBLIC MARKET FOR THE CAPITAL SECURITIES AND THEIR MARKET PRICE MAY BE SUBJECT TO SIGNIFICANT FLUCTUATIONS There is currently no public market for the capital securities. Although we have applied to list the capital securities on the American Stock Exchange, there is no guarantee that an active or liquid trading market will develop for the capital securities or that listing of the capital securities will continue on the American Stock Exchange. If an active trading market does not develop, the market price and liquidity of the capital securities will be adversely affected. Even if an active public market does develop, there is no guarantee that the market price for the capital securities will equal or exceed the price you pay for the capital securities. Future trading prices of the capital securities may be subject to significant fluctuations in response to prevailing interest rates, our future operating results and financial condition, the market for similar securities and general economic and market conditions. The initial public offering price of the capital securities has been set at the liquidation amount of the capital securities and may be greater than the market price following the offering. The market price for the capital securities, or the debentures that you may receive in a distribution, is also likely to decline during any period that we are deferring interest payments on the debentures. If this were the case, the capital securities or the debentures would not trade at a price that accurately reflects the value of accumulated but unpaid interest on the debentures. YOU MUST RELY ON THE PROPERTY TRUSTEE TO ENFORCE YOUR RIGHTS IF THERE IS AN EVENT OF DEFAULT UNDER THE INDENTURE You may not be able to directly enforce your rights against us if an event of default under the indenture occurs. If an event of default under the indenture occurs and is continuing, this event will also be an event of default under the trust agreement. In that case, you must rely on the enforcement by the property trustee of its rights as holder of the debentures against us. The holders of a majority in liquidation amount of the capital securities will have the right to direct the property trustee to enforce its rights. If the property trustee does not enforce its rights following an event of default and a request by the record holders to do so, any record holder may, to the extent permitted by applicable law, take action directly against us to enforce the property trustee's rights. If an event of default occurs under 16 the trust agreement that is attributable to our failure to pay interest or principal on the debentures, or if we default under the guarantee, you may proceed directly against us. You will not be able to exercise directly any other remedies available to the holders of the debentures unless the property trustee fails to do so. AS A HOLDER OF CAPITAL SECURITIES YOU HAVE LIMITED VOTING RIGHTS Holders of capital securities have limited voting rights. Your voting rights pertain primarily to amendments to the trust agreement. In general, only we can replace or remove any of the trustees. However, if an event of default under the trust agreement occurs and is continuing, the holders of at least a majority in aggregate liquidation amount of the capital securities may replace the property trustee and the Delaware trustee. THE CAPITAL SECURITIES ARE NOT FDIC INSURED Neither the Federal Deposit Insurance Corporation nor any other governmental agency has insured the capital securities. USE OF PROCEEDS The trust will invest all of the proceeds from the sale of the capital securities in the debentures. We will use the net proceeds from the sale of the debentures, which we estimate to be approximately $____ million, to repay $15.0 million of indebtedness existing on our revolving credit line currently outstanding with The Northern Trust Company. The interest rate on the revolving line of credit is currently a weighted average of the rates on overnight Federal fund transactions plus 60 to 90 basis points, based on our total debt to tangible net worth ratio. The interest rate fluctuates daily because the interest rate is tied to Federal funds. Under the loan agreement, we are required to reduce the total outstanding principal on this revolving credit line by $15.0 million by December 31, 1999. The revolving line of credit matures on July 23, 2000. We used $20.0 million of the proceeds of this revolving credit line to capitalize Wisconsin Community Bank after the acquisition of the Monroe bank branch in July 1999, and used the balance for other general corporate purposes. We will use the remaining net proceeds from the sale of the debentures for general corporate purposes, including, but not limited to, investments in and extensions of credit to our subsidiaries, possible common stock repurchases and financing of potential acquisitions, including the acquisition of National Bancshares, Inc., the holding company for First National Bank of Clovis. 17 CAPITALIZATION The following table sets forth our total deposits, indebtedness and capitalization at June 30, 1999, on an historical basis and as adjusted for the offering and the application of the estimated net proceeds from the corresponding sale of the debentures as if such sale had been consummated on June 30, 1999. These data should be read in conjunction with the Consolidated Financial Statements and notes thereto incorporated by reference into this prospectus from our Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999 (See "Incorporation of Documents by Reference").
JUNE 30, 1999 ACTUAL AS ADJUSTED ------------- ------------- (Dollars in thousands) DEPOSITS: Noninterest-bearing deposits............................................. $ 80,580 $ 80,580 Interest-bearing deposits................................................ 649,334 649,334 ------------- ------------- Total deposits...................................................... $ 729,914 $ 729,914 ------------- ------------- ------------- ------------- INDEBTEDNESS: Short-term borrowings (including short-term portion of Federal Home Loan Bank advances and contracts payable)...................... $ 140,992 $ 140,992 Other borrowings Federal Home Loan Bank advances..................................... 19,112 19,112 Notes payable on leased assets...................................... 14,109 14,109 Credit lines with The Northern Trust Company(1)..................... 20,000 20,000 Contracts payable to previous stockholders of Lease Associates Group for acquisition.......................... 643 643 Contracts payable to previous stockholders of Wisconsin Community Bank for acquisition........................ 583 583 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures.......... - 25,000 ------------- ------------- Total indebtedness.................................................. $ 195,439 $ 220,439 ------------- ------------- ------------- ------------- STOCKHOLDERS' EQUITY: Preferred stock, $1.00 par value, authorized 200,000 shares.............. $ - $ - Common stock, $1.00 par value, authorized 12,000,000 shares; issued 9,707,252 shares..................................... 9,707 9,707 Capital surplus.......................................................... 15,281 15,281 Retained earnings........................................................ 62,844 62,844 Accumulated other comprehensive income................................... (381) (381) Treasury stock at cost (118,433 shares).................................. (1,984) (1,984) ------------- ------------- Total stockholders' equity.......................................... 85,467 85,467 ------------- ------------- TOTAL DEPOSITS, INDEBTEDNESS AND STOCKHOLDERS' EQUITY.................... $ 1,010,820 $ 1,035,820 ------------- ------------- ------------- -------------
- ----------------------------- (1) In July 1999, we entered into an Amended and Restated Loan Agreement with The Northern Trust Company to establish a term credit line as well as to increase the availability under an existing revolving credit line. Under this agreement, we incurred an additional $20.0 million of indebtedness, a majority of the proceeds were used to fund the acquisition of Bank One's branch in Monroe, Wisconsin. The total principal amount outstanding under the loan agreement with Northern Trust was $40.0 million at September 13, 1999. We will repay $15.0 million of this amount with the net proceeds from the sale of the debentures. 18 ACCOUNTING AND REGULATORY TREATMENT The trust will be treated, for financial reporting purposes, as our subsidiary and, accordingly, the accounts of the trust will be included in our consolidated financial statements. The capital securities will be presented as a separate line item in our consolidated balance sheet under the caption "Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures," and appropriate disclosures about the capital securities, the guarantee and the debentures will be included in the notes to our consolidated financial statements. For financial reporting purposes, we will record distributions payable on the capital securities in our consolidated statements of income. Our future reports filed under the Securities Exchange Act of 1934 will include a footnote to the consolidated financial statements stating that: - the trust is wholly-owned; - the sole assets of the trust are the debentures and specifying the debentures' principal amount, interest rate and maturity date; and - our obligations described in this prospectus, in the aggregate, constitute a full, irrevocable and unconditional guarantee on a subordinated basis by us of the obligations of the trust under the capital securities. The capital securities have been structured to qualify as Tier 1 capital. However, the capital securities cannot be used to constitute, together with any outstanding cumulative preferred stock of Heartland Financial, more than 25% of Heartland Financial's total Tier 1 capital. As adjusted for this offering as well as for the acquisition of Bank One's branch in Monroe, Wisconsin and the pending acquisition of National Bancshares, Heartland Financial's Tier 1 capital as of June 30, 1999 would have been approximately $88.3 million, of which $22.1 million would have been attributable to the capital securities. At the close of this offering, we anticipate that the total net proceeds will qualify as Tier 1 capital. 19 MANAGEMENT The names and ages of the executive officers of Heartland Financial as of September 1, 1999, offices held by these officers on that date and other positions held with Heartland Financial and its principal operating subsidiaries are set forth below.
POSITIONS WITH HEARTLAND FINANCIAL NAME AGE AND PRINCIPAL OPERATING SUBSIDIARIES ---------------- -------------------------- ------------------------------------------------------ Lynn B. Fuller 50 Director, President and Chief Executive Officer of Heartland Financial and Dubuque Bank and Trust; Director of Galena State Bank, First Community Bank, Riverside Community Bank, Wisconsin Community Bank, New Mexico Bank & Trust and Keokuk Bancshares; Director and President of Citizens Finance; Director and Chairman of ULTEA Lynn S. Fuller 74 Chairman of the Board of Heartland Financial; Director and Vice Chairman of the Board of Dubuque Bank and Trust; Director of Citizens Finance James A. Schmid 76 Vice Chairman of the Board of Heartland Financial; Chairman of the Board of Dubuque Bank and Trust; Director of Citizens Finance John K. Schmidt 40 Executive Vice President and Chief Financial Officer of Heartland Financial; Senior Vice President and Chief Financial Officer of Dubuque Bank and Trust; Treasurer of Citizens Finance and ULTEA Kenneth J. Erickson 48 Senior Vice President of Heartland Financial; Senior Vice President, Lending of Dubuque Bank and Trust; Senior Vice President of Citizens Finance; Senior Vice President and Director of ULTEA Edward H. Everts 48 Senior Vice President, Heartland Financial; Senior Vice President of Operations and Retail Banking of Dubuque Bank and Trust Douglas J. Horstmann 46 Senior Vice President, Lending of Dubuque Bank and Trust Paul J. Peckosh 54 Senior Vice President, Trust of Dubuque Bank and Trust
Mr. Lynn B. Fuller is the son of Mr. Lynn S. Fuller. There are no other family relationships among any of the directors or executive officers of Heartland Financial. LYNN B. FULLER has been a director of Heartland Financial and of Dubuque Bank and Trust since 1984 and has been President of Heartland Financial and Dubuque Bank and Trust since 1987. In May 1999, Mr. Fuller became Chief Executive Officer of Heartland Financial, a position which he has held at Dubuque Bank and Trust since 1986. He has been a director of Galena State Bank since its acquisition by Heartland Financial in 1992 and of Keokuk Bancshares and First Community Bank since the merger in 1994. Mr. Fuller 20 joined Dubuque Bank and Trust in 1971 as a consumer loan officer and was named Dubuque Bank and Trust's Executive Vice President and Chief Executive Officer in 1986. He was named Chairman and director of Riverside Community Bank in conjunction with the opening of the DE NOVO operation in 1995, director of Wisconsin Community Bank in conjunction with the purchase of Cottage Grove State Bank in 1997 and director of New Mexico Bank & Trust in conjunction with the opening of the DE NOVO bank in 1998. LYNN S. FULLER has been a director of Heartland Financial since its formation in 1981 and of Dubuque Bank and Trust since 1964. Mr. Fuller began his banking career in 1946 in Minnesota, and he returned to Iowa in 1949 to serve as Executive Vice President and Cashier of Jackson State Savings Bank in Maquoketa. Mr. Fuller joined Dubuque Bank and Trust in 1964. He was later named President of Dubuque Bank and Trust and held this position until 1987. Mr. Fuller currently serves as the Chairman of the Board of Heartland and Vice Chairman of Dubuque Bank & Trust. JAMES A. SCHMID has been a director of Heartland Financial since its formation in 1981 and of Dubuque Bank and Trust since 1966. Mr. Schmid also currently serves as the Vice Chairman of Heartland Financial and as the Chairman of the Board of Dubuque Bank and Trust. JOHN K. SCHMIDT has been Heartland Financial's Executive Vice President and Chief Financial Officer since 1991. He has been employed by Dubuque Bank and Trust since September 1984 and became Dubuque Bank and Trust's Vice President, Finance in 1986, and Senior Vice President and Chief Financial Officer in January, 1991. Mr. Schmidt is a certified public accountant and worked at KPMG Peat Marwick in Des Moines, Iowa, from 1982 until joining Dubuque Bank and Trust. KENNETH J. ERICKSON has been Senior Vice President of Heartland Financial since 1992 and Senior Vice President, Lending of Dubuque Bank and Trust since 1989. Mr. Erickson joined Dubuque Bank and Trust in 1975 and was appointed Vice President, Commercial Loans in 1985. EDWARD H. EVERTS was appointed as Senior Vice President of Heartland Financial in 1996. Mr. Everts joined Dubuque Bank and Trust as Senior Vice President, Operations and Retail Banking in 1992. Prior to his service with Dubuque Bank and Trust, Mr. Everts was Vice President and Lead Retail Banking Manager of First Bank, Duluth, Minnesota. DOUGLAS J. HORSTMANN has been Senior Vice President, Lending, of Dubuque Bank and Trust since 1989. Mr. Horstmann joined Dubuque Bank and Trust in 1980 and was appointed Vice President, Commercial Loans in 1985. Prior to joining Dubuque Bank and Trust, Mr. Horstmann was an examiner for the Iowa Division of Banking. PAUL J. PECKOSH has been Senior Vice President, Trust, of Dubuque Bank and Trust since 1991. Mr. Peckosh joined Dubuque Bank and Trust in 1975 as Assistant Vice President, Trust and was appointed Vice President, Trust in 1980. Mr. Peckosh is an attorney and graduated from the Marquette University School of Law in 1970. 21 DESCRIPTION OF THE TRUST The trust is a statutory business trust formed pursuant to the Delaware Business Trust Act under a trust agreement executed by us, as sponsor for the trust, and the trustees, and a certificate of trust filed with the Delaware Secretary of State. The trust agreement will be amended and restated in its entirety in the form filed as an exhibit to the registration statement of which the prospectus is a part, as of the date the capital securities are initially issued. The trust agreement will be qualified under the Trust Indenture Act of 1939. The holders of the capital securities issued pursuant to the offering described in this prospectus will own all of the issued and outstanding capital securities. We will not initially own any of the capital securities. We will acquire common securities in an amount equal to at least 3% of the total capital of the trust and will initially own, directly or indirectly, all of the issued and outstanding common securities (together with the capital securities, the "trust securities"). The trust exists for the purposes of: - issuing the capital securities to the public for cash; - issuing its common securities to us in exchange for our capitalization of the trust; - investing the proceeds from the sale of the trust securities in an equivalent amount of debentures; and - engaging in other activities that are incidental to those listed above. The rights of the holders of the trust securities are as set forth in the trust agreement, the Delaware Business Trust Act and the Trust Indenture Act. The trust agreement does not permit the trust to borrow money or make any investment other than in the debentures. Other than with respect to the trust securities, Heartland Financial has agreed to pay for all debts and obligations and all costs and expenses of the trust, including the fees and expenses of the trustees and any income taxes, duties and other governmental charges, and all costs and expenses related to these charges, to which the trust may become subject, except for United States withholding taxes that are properly withheld. The number of trustees of the trust will initially be five. Three of the trustees will be persons who are employees or officers of or who are affiliated with Heartland Financial (the "administrative trustees"). The fourth trustee will be an entity that maintains its principal place of business in the State of Delaware (the "Delaware trustee"). Initially, First Union Trust Company, National Association, a national banking association ("First Union"), will act as Delaware trustee. The fifth trustee will be a financial institution that is unaffiliated with us and will serve as institutional trustee under the trust agreement and as indenture trustee for the purposes of compliance with the provisions of the Trust Indenture Act (the "property trustee"). Initially, First Union will also be the property trustee. For the purpose of compliance with the Trust Indenture Act, First Union will also act as guarantee trustee and indenture trustee under the guarantee agreement and the indenture. See "Description of the Debentures" and "Description of the Guarantee." We, as holder of all of the common securities, will have the right to appoint or remove any trustee unless an event of default under the indenture shall have occurred and be continuing, in which case only the holders of the capital securities may remove the indenture trustee or the property trustee. The trust has a term of approximately 31 years but may terminate earlier as provided in the trust agreement. The property trustee will hold the debentures for the benefit of the holders of the trust securities and will have the power to exercise all rights, powers and privileges under the indenture as the holder of the debentures. In addition, the property trustee will maintain exclusive control of a segregated noninterest-bearing "property account" to hold all payments made on the debentures for the benefit of the holders of the trust securities. The property trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the trust securities out of funds from the property account. The guarantee trustee will hold the 22 guarantee for the benefit of the holders of the capital securities. We will pay all fees and expenses related to the trust and the offering of the capital securities, including the fees and expenses of the trustees. DESCRIPTION OF THE CAPITAL SECURITIES The capital securities will be issued pursuant to the trust agreement, which will be qualified as an indenture under the Trust Indenture Act. First Union will act as property trustee for the capital securities under the trust agreement for purposes of complying with the provisions of the Trust Indenture Act. The terms of the capital securities will include those stated in the trust agreement and those made part of the trust agreement by the Trust Indenture Act. A form of the trust agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part. GENERAL The trust agreement authorizes the administrative trustees, on behalf of the trust, to issue the trust securities, which are comprised of the capital securities to be sold to the public and the common securities. We will own all of the common securities issued by the trust. The capital securities will represent preferred undivided beneficial interests in the assets of the trust, and the holders of the capital securities will be entitled to a preference over the common securities upon an event of default with respect to distributions and amounts payable on redemption or liquidation. The trust is not permitted to issue any securities other than the trust securities or incur any other indebtedness. The capital securities will rank equally, and payments on the capital securities will be made proportionally, with the common securities, except as described under "--Subordination of Common Securities of the Trust" below. The property trustee will hold legal title to the debentures in trust for the benefit of the holders of the trust securities. We will guarantee the payment of distributions out of money held by the trust, and payments upon redemption of the capital securities or liquidation of the trust, to the extent described under "Description of the Guarantee." The guarantee agreement does not cover the payment of any distribution or the liquidation amount when the trust does not have sufficient funds available to make these payments. DISTRIBUTIONS SOURCE OF DISTRIBUTIONS. The funds of the trust available for distribution to holders of the capital securities will be limited to payments made under the debentures, which the trust will purchase with the proceeds from the sale of the trust securities. Distributions will be paid through the property trustee, which will hold the amounts received from our interest payments on the debentures in the property account for the benefit of the holders of the trust securities. If we do not make interest payments on the debentures, the property trustee will not have funds available to pay distributions on the capital securities. PAYMENT OF DISTRIBUTIONS. Distributions on the capital securities will be payable at the annual rate of _____% of the $25 stated liquidation amount, payable quarterly on March 31, June 30, September 30 and December 31 of each year, to the holders of the capital securities on the relevant record dates. The record date will be the business day immediately preceding the relevant distribution date. The first distribution date for the capital securities will be December 31, 1999. Distributions will accumulate from the date of issuance, will be cumulative and will be computed on the basis of a 360-day year of twelve 30-day months. If the distribution date is not a business day, then payment of the distributions will be made on the next day that is a business day, without any additional interest or other payment for the delay. However, if the next business day is in the next calendar year, payment of the distribution will be made on the business day immediately preceding the scheduled distribution date. "Business day" means any day other than a Saturday, a Sunday, a day on which banking institutions in New 23 York, New York or Wilmington, Delaware are authorized or required by law or executive order to remain closed or a day on which the corporate trust office of the property trustee or the indenture trustee is closed for business. EXTENSION PERIOD. As long as no event of default under the indenture has occurred and is continuing, we have the right to defer the payment of interest on the debentures at any time for a period not exceeding 20 consecutive quarters. However, no extension period may extend beyond September 30, 2029 or end on a date other than an interest payment date, which dates are the same as the distribution dates. If we defer the payment of interest, quarterly distributions on the capital securities will also be deferred during any such extension period. Any deferred distributions under the capital securities will accumulate additional amounts at the annual rate of ______%, compounded quarterly from the relevant distribution date. The term "distributions" as used in this prospectus includes those accumulated amounts. During an extension period, we may not: - declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock (other than the reclassification of any class of our capital stock into another class of capital stock) or allow any of our subsidiaries to do the same with respect to their capital stock (other than the payment of dividends or distributions to us); - make any payment of principal, interest or premium on or repay, repurchase or redeem any debt securities that rank equally with or junior in interest to the debentures or allow any of our subsidiaries to do the same; - make any guarantee payments with respect to any other guarantee by us of any other debt securities of any of our subsidiaries if the guarantee ranks equally with or junior to the debentures (other than payments under the guarantee); or - redeem, purchase or acquire less than all of the debentures or any of the capital securities. After the termination of any extension period and the payment of all amounts due, we may elect to begin a new extension period, subject to the above requirements. We do not currently intend to exercise our right to defer distributions on the capital securities by extending the interest payment period on the debentures. REDEMPTION OR EXCHANGE GENERAL. Subject to the prior approval of the Federal Reserve, if required, we will have the right to redeem the debentures: - in whole at any time, or in part from time to time, on or after September 30, 2004; or - at any time, in whole, within 90 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event, as defined below. MANDATORY REDEMPTION. Upon our repayment or redemption, in whole or in part, of any debentures, whether on September 30, 2029 or earlier, the property trustee will apply the proceeds to redeem the same amount of the trust securities, upon not less than 30 days' nor more than 60 days' notice, at the redemption price. The redemption price will equal 100% of the aggregate liquidation amount of the trust securities plus accumulated but unpaid distributions and Additional Interest (as defined below) to the date of redemption. If less than all of the debentures are to be repaid or redeemed on a date of redemption, then the proceeds from such repayment or redemption will be allocated to redemption of the capital securities and the common securities proportionately. 24 "Additional Interest" means the additional amounts as may be necessary to be paid by us in order that the amount of distributions then due and payable by the trust on the outstanding trust securities will not be reduced as a result of any additional taxes, duties and other governmental charges to which the trust has become subject. DISTRIBUTION OF DEBENTURES. Upon prior approval of the Federal Reserve, if required, we will have the right at any time to dissolve, wind-up or terminate the trust and, after satisfaction of the liabilities of creditors of the trust as provided by applicable law, including, without limitation, amounts due and owing the trustees of the trust, cause the debentures to be distributed directly to the holders of trust securities in liquidation of the trust. See "--Liquidation Distribution Upon Termination." After the liquidation date fixed for any distribution of debentures in exchange for capital securities: - those capital securities will no longer be deemed to be outstanding; - any certificates representing capital securities will be deemed to represent debentures with a principal amount equal to the liquidation amount of those capital securities, and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid distributions on the capital securities until the certificates are surrendered to the administrative trustees in exchange for certificates representing the debentures. There can be no assurance as to the market prices for the capital securities or the debentures that may be distributed if a dissolution and liquidation of the trust were to occur. The capital securities that an investor may purchase, or the debentures that an investor may receive on dissolution and liquidation of the trust, may trade at a discount to the price that the investor paid to purchase the capital securities. REDEMPTION UPON A TAX EVENT, INVESTMENT COMPANY EVENT OR CAPITAL TREATMENT EVENT. If a Tax Event, an Investment Company Event or a Capital Treatment Event occurs, we will have the right to redeem the debentures in whole and thereby cause a mandatory redemption of the trust securities in whole at the redemption price. If one of these events occurs and we do not elect to redeem the debentures, or to dissolve the trust and cause the debentures to be distributed to holders of the trust securities, then the capital securities will remain outstanding and Additional Interest may be payable on the debentures. See "Description of Debentures--Redemption or Exchange." "Tax Event" means the receipt by the trust and us of an opinion of counsel experienced in such matters stating that there is more than an insubstantial risk that: - interest payable by us on the debentures is not, or within 90 days of the date of the opinion will not be, deductible by us, in whole or in part, for federal income tax purposes; - the trust is, or will be within 90 days after the date of the opinion, subject to federal income tax with respect to income received or accrued on the debentures; or - the trust is, or will be within 90 days after the date of opinion, subject to more than an immaterial amount of other taxes, duties, assessments or other governmental charges, as a result of any amendment to any tax laws or regulations. "Investment Company Event" means the receipt by the trust and us of an opinion of counsel experienced in such matters to the effect that the trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act, as a result of a change in law or regulation or a change in interpretation or application of law or regulation. "Capital Treatment Event" means the receipt by the trust and us of an opinion of counsel experienced in such matters to the effect that there is more than an insubstantial risk of impairment of our ability to treat the 25 capital securities as Tier 1 capital for purposes of the current capital adequacy guidelines of the Federal Reserve, as a result of any amendment to any laws or any regulations. For all of the events described above, we or the trust must request and receive an opinion with regard to the event within a reasonable period of time after we become aware of the possible occurrence of an event of this kind. REDEMPTION PROCEDURES Capital securities will be redeemed at the redemption price with the applicable proceeds from our contemporaneous redemption of the debentures. Redemptions of the capital securities will be made and the redemption price will be payable on each redemption date only to the extent that the trust has funds available for the payment of the redemption price. See "--Subordination of Common Securities." Notice of any redemption will be mailed at least 30 days but not more than 60 days before the date of redemption to each holder of trust securities to be redeemed at its registered address. Unless we default in payment of the redemption price on the debentures, interest will cease to accumulate on the debentures called for redemption on and after the date of redemption. If the trust gives notice of redemption of its trust securities, then the property trustee, to the extent funds are available, will irrevocably deposit with the depositary for the trust securities funds sufficient to pay the aggregate redemption price and will give the depositary for the trust securities irrevocable instructions and authority to pay the redemption price to the holders upon surrender of their certificates evidencing the trust securities. See "Book-Entry Issuance." If the capital securities are no longer in book-entry form, the property trustee, to the extent funds are available, will deposit with the designated paying agent for such capital securities funds sufficient to pay the aggregate redemption price and will give the paying agent irrevocable instructions and authority to pay the redemption price to the holders upon surrender of their certificates evidencing the capital securities. Notwithstanding the foregoing, distributions payable on or prior to the date of redemption for any trust securities called for redemption will be payable to the holders of the trust securities on the relevant record dates for the related distribution dates. If notice of redemption has been given and we have deposited funds as required, then on the date of the deposit all rights of the holders of the trust securities called for redemption will cease, except the right to receive the redemption price, but without interest on such redemption price after the date of redemption. The trust securities will also cease to be outstanding on the date of the deposit. If any date fixed for redemption of trust securities is not a business day, then payment of the redemption price payable on that date will be made on the next day that is a business day without any additional interest or other payment in respect of the delay. However, if the next business day is in the next succeeding calendar year, payment of the interest will be made on the immediately preceding business day. If payment of the redemption price in respect of trust securities called for redemption is improperly withheld or refused and not paid by the trust, or by us pursuant to the guarantee, distributions on the trust securities will continue to accumulate at the applicable rate from the date of redemption originally established by the trust for the trust securities to the date the redemption price is actually paid. In this case, the actual payment date will be considered the date fixed for redemption for purposes of calculating the redemption price. See "Description of the Guarantee." Payment of the redemption price on the capital securities and any distribution of debentures to holders of capital securities will be made to the applicable recordholders as they appear on the register for the capital securities on the relevant record date. The record date will be the business day immediately preceding the date of redemption or liquidation date, as applicable. If less than all of the trust securities are to be redeemed, then the aggregate liquidation amount of the trust securities to be redeemed will be allocated proportionately to those trust securities based upon the relative 26 liquidation amounts. The particular capital securities to be redeemed will be selected by the property trustee from the outstanding capital securities not previously called for redemption by a method the property trustee deems fair and appropriate. This method may provide for the redemption of portions equal to $25 or an integral multiple of $25 of the liquidation amount of the capital securities. The property trustee will promptly notify the registrar for the capital securities in writing of the capital securities selected for redemption and, in the case of any capital securities selected for partial redemption, the liquidation amount to be redeemed. Subject to applicable law, and if we are not exercising our right to defer interest payments on the debentures, we may, at any time, purchase outstanding capital securities. SUBORDINATION OF COMMON SECURITIES Payment of distributions on, and the redemption price of, the capital securities and common securities will be made based on the liquidation amount of these securities. However, if an event of default under the indenture has occurred and is continuing, no distributions on or redemption of the common securities may be made. Further, no payments may be made on the common securities unless payment in full in cash of all accumulated and unpaid distributions (including Additional Interest, if any is required) on all of the outstanding capital securities for all distribution periods terminating on or before that time, or in the case of payment of the redemption price, payment of the full amount of the redemption price on all of the outstanding capital securities then called for redemption, has been made or provided. All funds available to the property trustee will first be applied to the payment in full in cash of all distributions (including Additional Interest, if any is required) on, or the redemption price of, the capital securities then due and payable. In the case of the occurrence and continuance of any event of default under the trust agreement resulting from an event of default under the indenture, we, as holder of the common securities, will be deemed to have waived any right to act with respect to that event of default under the trust agreement until the effect of the event of default has been cured, waived or otherwise eliminated. Until the event of default under the trust agreement has been so cured, waived or otherwise eliminated, the property trustee will act solely on behalf of the holders of the capital securities and not on our behalf, and only the holders of the capital securities will have the right to direct the property trustee to act on their behalf. LIQUIDATION DISTRIBUTION UPON TERMINATION We will have the right at any time to dissolve, wind-up or terminate the trust and cause the debentures to be distributed to the holders of the capital securities. This right is subject, however, to us receiving approval of the Federal Reserve, if required. In addition, the trust will automatically terminate upon expiration of its term and will terminate earlier on the first to occur of: - our bankruptcy, dissolution or liquidation; - the distribution of a like amount of the debentures to the holders of its trust securities, if we have given written direction to the property trustee to terminate the trust; - redemption of all of the capital securities as described under "--Redemption or Exchange--Mandatory Redemption;" or - the entry of a court order for the dissolution of the trust. With the exception of a redemption as described under "--Redemption or Exchange--Mandatory Redemption," if an early termination of the trust occurs, the trust will be liquidated by the administrative trustees as expeditiously as they determine to be possible. After satisfaction of liabilities to creditors of the trust as provided by applicable law, the trustees will distribute to the holders of trust securities debentures: 27 - in an aggregate stated principal amount equal to the aggregate stated liquidation amount of the trust securities; - with an interest rate identical to the distribution rate on the trust securities; and - with accrued and unpaid interest equal to accumulated and unpaid distributions on the trust securities. However, if the property trustee determines that the distribution is not practical, then the holders of trust securities will be entitled to receive, in lieu of debentures, a proportionate amount of the liquidation distribution. The liquidation distribution will be the amount equal to the aggregate of the liquidation amount plus accumulated and unpaid distributions to the date of payment. If the liquidation distribution can be paid only in part because the trust has insufficient assets available to pay in full the aggregate liquidation distribution, then the amounts payable directly by the trust on the trust securities will be paid to us, as the holder of the common securities, and the holders of the capital securities on a proportional basis based on liquidation amounts. However, if an event of default under the indenture has occurred and is continuing, the capital securities will have a priority over the common securities. See "--Subordination of Common Securities." Under current United States federal income tax law and interpretations and assuming that the trust is treated as a grantor trust, as is expected, a distribution of the debentures should not be a taxable event to holders of the capital securities. Should there be a change in law, a change in legal interpretation, a Tax Event or another circumstance, however, the distribution could be a taxable event to holders of the capital securities. See "Federal Income Tax Consequences--Receipt of Debentures or Cash Upon Liquidation of the Trust." If we do not elect to redeem the debentures prior to maturity or to liquidate the trust and distribute the debentures to holders of the capital securities, the capital securities will remain outstanding until the repayment of the debentures. If we elect to dissolve the trust and thus cause the debentures to be distributed to holders of the capital securities in liquidation of the trust, we will continue to have the right to shorten the maturity of the debentures. See "Description of the Debentures--General." LIQUIDATION VALUE The amount of the liquidation distribution payable on the capital securities in the event of any liquidation of the trust is $25 per capital security plus accumulated and unpaid distributions to the date of payment, which may be in the form of a distribution of debentures having a liquidation value and accrued interest of an equal amount. See "--Liquidation Distribution Upon Termination." EVENTS OF DEFAULT; NOTICE Any one of the following events constitutes an event of default under the trust agreement with respect to the capital securities: - the occurrence of an event of default under the indenture (see "Description of the Debentures--Debenture Events of Default"); - a default by the trust in the payment of any distribution when it becomes due and payable, and continuation of the default for a period of 30 days; - a default by the trust in the payment of any redemption price of any of the trust securities when it becomes due and payable; - a default in the performance, or breach, in any material respect, of any covenant or warranty of the trustees in the trust agreement, other than those defaults covered in the previous two points, and 28 continuation of the default or breach for a period of 60 days after there has been given, by registered or certified mail, to the trustee(s) by the holders of at least 25% in aggregate liquidation amount of the outstanding capital securities, a written notice specifying the default or breach and requiring it to be remedied and stating that the notice is a "Notice of Default" under the trust agreement; or - the occurrence of events of bankruptcy or insolvency with respect to the property trustee and our failure to appoint a successor property trustee within 60 days. Within five business days after the occurrence of any event of default actually known to the property trustee, the property trustee will transmit notice of the event of default to the holders of the capital securities, the administrative trustees and to us, unless the event of default has been cured or waived. Heartland Financial and the administrative trustees are required to file annually with the property trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the trust agreement. If an event of default under the indenture has occurred and is continuing, the capital securities will have preference over the common securities upon termination of the trust. See "--Subordination of Common Securities" and "--Liquidation Distribution Upon Termination." The existence of an event of default under the trust agreement does not entitle the holders of capital securities to accelerate the maturity thereof, unless the event of default is caused by the occurrence of an event of default under the indenture and both the indenture trustee and holders of at least 25% in principal amount of the debentures fail to accelerate the maturity thereof. REMOVAL OF THE TRUSTEES Unless an event of default under the indenture has occurred and is continuing, we may remove any trustee at any time. If an event of default under the indenture has occurred and is continuing, only the holders of a majority in liquidation amount of the outstanding capital securities may remove the property trustee or the Delaware trustee. The holders of the capital securities have no right to vote to appoint, remove or replace the administrative trustees. These rights are vested exclusively with us as the holder of the common securities. No resignation or removal of a trustee and no appointment of a successor trustee will be effective until the successor trustee accepts the appointment in accordance with the trust agreement. CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE Unless an event of default under the indenture has occurred and is continuing, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the trust property may at the time be located, we will have the power to appoint at any time or times, and upon written request of the property trustee will appoint, one or more persons or entity either (1) to act as a co-trustee, jointly with the property trustee, of all or any part of the trust property, or (2) to act as separate trustee of any trust property. In either case these trustees will have the powers that may be provided in the instrument of appointment, and will have vested in them any property, title, right or power deemed necessary or desirable, subject to the provisions of the trust agreement. In case an event of default under the indenture has occurred and is continuing, the property trustee alone will have power to make the appointment. MERGER OR CONSOLIDATION OF TRUSTEES Generally, any person or successor to any of the trustees may be a successor trustee to any of the trustees, including a successor resulting from a merger or consolidation. However, any successor trustee must meet all of the qualifications and eligibility standards to act as a trustee. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST The trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other person, except as 29 described below. The trust may, at our request, with the consent of the administrative trustees and without the consent of the holders of the capital securities, the property trustee or the Delaware trustee, undertake a transaction listed above if the following conditions are met: - the successor entity either (a) expressly assumes all of the obligations of the trust with respect to the capital securities, or (b) substitutes for the capital securities other securities having substantially the same terms as the capital securities (referred to as "successor securities") so long as the successor securities rank the same in priority as the capital securities with respect to distributions and payments upon liquidation, redemption and otherwise; - we appoint a trustee of the successor entity possessing substantially the same powers and duties as the property trustee in its capacity as the holder of the debentures; - the successor securities are listed or will be listed on any national securities exchange or other organization on which the capital securities are then listed; - the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the capital securities (including any successor securities) in any material respect; - the successor entity has a purpose substantially identical to that of the trust; - prior to the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, we have received an opinion from independent counsel that (a) any transaction of this kind does not adversely affect the rights, preferences and privileges of the holders of the capital securities (including any successor securities) in any material respect, and (b) following the transaction, neither the trust nor the successor entity will be required to register as an "investment company" under the Investment Company Act; and - we own all of the common securities of the successor entity and guarantee the obligations of the successor entity under the successor securities at least to the extent provided by the guarantee. Notwithstanding the foregoing, the trust may not, except with the consent of every holder of the capital securities, enter into any transaction of this kind if the transaction would cause the trust or the successor entity not to be classified as a grantor trust for United States federal income tax purposes. VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT Except as described below and under "Description of the Guarantee--Amendments and Assignment" and as otherwise required by the Trust Indenture Act and the trust agreement, the holders of the capital securities will have no voting rights. The trust agreement may be amended from time to time by us and the trustees, without the consent of the holders of the capital securities, in the following circumstances: - with respect to acceptance of appointment by a successor trustee; - to cure any ambiguity, correct or supplement any provisions in the trust agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the trust agreement, as long as the amendment is not inconsistent with the other provisions of the trust agreement and does not have a material adverse effect on the interests of any holder of trust securities; or 30 - to modify, eliminate or add to any provisions of the trust agreement if necessary to ensure that the trust will be classified for federal income tax purposes as a grantor trust at all times that any trust securities are outstanding or to ensure that the trust will not be required to register as an "investment company" under the Investment Company Act. With the consent of the holders of a majority of the aggregate liquidation amount of the outstanding trust securities, we and the trustees may amend the trust agreement if the trustees receive an opinion of counsel to the effect that the amendment or the exercise of any power granted to the trustees in accordance with the amendment will not affect the trust's status as a grantor trust for federal income tax purposes or the trust's exemption from status as an "investment company" under the Investment Company Act. However, without the consent of each holder of trust securities, the trust agreement may not be amended to (a) change the amount or timing of any distribution on the trust securities or otherwise adversely affect the amount of any distribution required to be made in respect of the trust securities as of a specified date, or (b) restrict the right of a holder of trust securities to institute suit for the enforcement of the payment on or after that date. As long as the property trustee holds any debentures, the trustees will not: - direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or executing any trust or power conferred on the property trustee with respect to the debentures; - waive any past default that is waivable under the indenture; - exercise any right to rescind or annul a declaration that the principal of all the debentures will be due and payable; or - consent to any amendment or termination of the indenture or the debentures, where the consent is required, without obtaining the prior approval of the holders of a majority in aggregate liquidation amount of all outstanding trust securities. However, where a consent under the indenture requires the consent of each holder of the affected debentures, no consent will be given by the property trustee without the prior consent of each holder of the trust securities. The trustees may not revoke any action previously authorized or approved by a vote of the holders of the trust securities except by subsequent vote of the holders of the trust securities. The property trustee will notify each holder of trust securities of any notice of default with respect to the debentures. In addition to obtaining the foregoing approvals of the holders of the trust securities, prior to taking any of the foregoing actions the trustees must obtain an opinion of counsel experienced in these matters to the effect that the trust will not be classified as an association taxable as a corporation for federal income tax purposes on account of the action. Any required approval of holders of trust securities may be given at a meeting of holders of the trust securities convened for the purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of the trust securities are entitled to vote, or of any matter upon which action by written consent of the holders is to be taken, to be given to each holder of record of trust securities. No vote or consent of the holders of capital securities will be required for the trust to redeem and cancel its capital securities in accordance with the trust agreement. Notwithstanding the fact that holders of capital securities are entitled to vote or consent under any of the circumstances described above, any of the capital securities that are owned by Heartland Financial, the trustees or any affiliate of Heartland Financial or any trustee, will, for purposes of the vote or consent, be treated as if they were not outstanding. 31 GLOBAL CAPITAL SECURITIES The capital securities will be represented by one or more global capital securities registered in the name of The Depository Trust Company, New York, New York ("DTC") or its nominee. A global capital security is a security representing interests of more than one beneficial holder. Beneficial interests in the global capital securities will be shown on, and transfers will be effected only through, records maintained by participants. Participants are brokers, dealers, or others with accounts with DTC. Except as described below, capital securities in definitive form will not be issued in exchange for the global capital securities. See "Book-Entry Issuance." No global capital security may be exchanged for capital securities registered in the names of persons other than DTC or its nominee unless: - DTC notifies the indenture trustee that it is unwilling or unable to continue as a depositary for the global capital security and we are unable to locate a qualified successor depositary; - we execute and deliver to the indenture trustee a written order stating that we elect to terminate the book-entry system through DTC; or - there shall have occurred and be continuing an event of default under the indenture. Any global capital security that is exchangeable pursuant to the preceding sentence shall be exchangeable for definitive certificates registered in the names as DTC shall direct. It is expected that the instructions will be based upon directions received by DTC with respect to ownership of beneficial interests in the global capital security. If capital securities are issued in definitive form, the capital securities will be in denominations of $25 and integral multiples of $25 and may be transferred or exchanged at the offices described below. Unless and until it is exchanged in whole or in part for the individual capital securities represented thereby, a global capital security may not be transferred except as a whole by DTC to a nominee of DTC, by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee to a successor depositary or any nominee of the successor. Payments on global capital securities will be made to DTC, as the depositary for the global capital securities. If the capital securities are issued in definitive form, distributions will be payable, the transfer of the capital securities will be registrable, and capital securities will be exchangeable, for capital securities of other denominations of a like aggregate liquidation amount, at the corporate office of the property trustee, or at the offices of any paying agent or transfer agent appointed by the administrative trustees. However, payment of any distribution may be made at the option of the administrative trustees by check mailed to the address of record of the persons entitled to the distribution or by wire transfer. In addition, if the capital securities are issued in definitive form, the record dates for payment of distributions will be the 15th day of the month in which the relevant distribution date occurs. For a description of the terms of DTC arrangements relating to payments, transfers, voting rights, redemptions and other notices and other matters, see "Book-Entry Issuance." Upon the issuance of one or more global capital securities, and the deposit of the global capital security with or on behalf of DTC or its nominee, DTC or its nominee will credit, on its book-entry registration and transfer system, the respective aggregate liquidation amounts of the individual capital securities represented by the global capital security to the accounts of persons that have accounts with DTC. These accounts will be designated by the dealers, underwriters or agents with respect to the capital securities. Ownership of beneficial interests in a global capital security will be limited to persons or entities with an account with DTC or who may hold interest through any person or entity with an account that may hold interests through participants. With respect to interests of any person or entity with an account with DTC, ownership of beneficial interests in a global capital security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the applicable depositary or its nominee. With respect to persons or entities who hold interest in a global capital security through a participant, the interest and any transfer of the interest will be shown on the 32 participant's records. The laws of some states require that certain purchasers of securities take physical delivery of these securities in definitive form. These laws may impair the ability to transfer beneficial interests in a global capital security. So long as DTC or another depositary, or its nominee, is the registered owner of the global capital security, the depositary or the nominee, as the case may be, will be considered the sole owner or holder of the capital securities represented by the global capital security for all purposes under the trust agreement. Except as described in this prospectus, owners of beneficial interests in a global capital security will not be entitled to have any of the individual capital securities represented by the global capital security registered in their names, will not receive or be entitled to receive physical delivery of any the capital securities in definitive form and will not be considered the owners or holders of the capital securities under the trust agreement. None of us, the property trustee, any paying agent or the securities registrar for the capital securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the global capital security representing the capital securities or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests. We expect that DTC or its nominee, upon receipt of any payment of the liquidation amount or distributions in respect of a global capital security, immediately will credit participants' accounts with payments in amounts proportionate to their respective beneficial interest in the aggregate liquidation amount of the global capital security as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the global capital security held through the participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name." The payments will be the responsibility of the participants. See "Book-Entry Issuance." PAYMENT AND PAYING AGENCY Payments in respect of the capital securities shall be made to DTC, which shall credit the relevant accounts of participants on the applicable distribution dates, or, if any of the capital securities are not held by DTC, the payments shall be made by check mailed to the address of the holder as listed on the register of holders of the capital securities. The paying agent for the capital securities will initially be the property trustee and any co-paying agent chosen by the property trustee and acceptable to us and the administrative trustees. The paying agent for the capital securities may resign as paying agent upon 30 days' written notice to the administrative trustees, the property trustee and us. If the property trustee no longer is the paying agent for the capital securities, the administrative trustees will appoint a successor to act as paying agent. The successor must be a bank or trust company acceptable to us and the property trustee. REGISTRAR AND TRANSFER AGENT The property trustee will act as the registrar and the transfer agent for the capital securities. Registration of transfers of capital securities will be effected without charge by or on behalf of the trust, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The trust and its registrar and transfer agent will not be required to register or cause to be registered the transfer of capital securities after they have been called for redemption. INFORMATION CONCERNING THE PROPERTY TRUSTEE The property trustee, until the occurrence and continuance of an event of default under the trust agreement, undertakes to perform only the duties set forth in the trust agreement. After an event of default under the trust agreement, the property trustee must exercise the same degree of care and skill as a prudent person exercises or uses in the conduct of its own affairs. The property trustee is under no obligation to exercise any of the powers vested in it by the trust agreement at the request of any holder of capital securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred. If no event of default 33 under the trust agreement has occurred and is continuing and the property trustee is required to decide between alternative causes of action, construe ambiguous provisions in the trust agreement or is unsure of the application of any provision of the trust agreement, and the matter is not one on which holders of capital securities are entitled to vote upon, then the property trustee will take the action directed in writing by us. If the property trustee is not so directed, then it will take the action it deems advisable and in the best interests of the holders of the trust securities and will have no liability except for its own bad faith, negligence or willful misconduct. MISCELLANEOUS The administrative trustees are authorized and directed to conduct the affairs of and to operate the trust in such a way that: - the trust will not be deemed to be an "investment company" required to be registered under the Investment Company Act; - the trust will not be classified as an association taxable as a corporation for federal income tax purposes; and - the debentures will be treated as indebtedness of Heartland Financial for federal income tax purposes. In this regard, we and the administrative trustees are authorized to take any action not inconsistent with applicable law, the certificate of trust or the trust agreement, that we and the administrative trustees determine to be necessary or desirable for these purposes. Holders of the capital securities have no preemptive or similar rights. The trust agreement and the capital securities will be governed by Delaware law. DESCRIPTION OF THE DEBENTURES Concurrently with the issuance of the capital securities, the trust will invest the proceeds from the sale of the trust securities in the debentures issued by us. The debentures will be issued as unsecured debt under the indenture between us and First Union, as trustee (the "indenture trustee"). The indenture will be qualified under the Trust Indenture Act. The following discussion is subject to, and is qualified in its entirety by reference to, the indenture and to the Trust Indenture Act. We urge prospective investors to read the form of the indenture, which is filed as an exhibit to the registration statement of which this prospectus forms a part. GENERAL The debentures will be limited in aggregate principal amount to $25.77 million. This amount represents the sum of the aggregate stated liquidation amounts of the trust securities. The debentures will bear interest at the annual rate of _____% of the principal amount. The interest will be payable quarterly on March 31, June 30, September 30 and December 31 of each year, beginning December 31, 1999, to the person in whose name each debenture is registered at the close of business on the business day immediately preceding the day interest is due. It is anticipated that, until the liquidation, if any, of the trust, the debentures will be held in the name of the property trustee in trust for the benefit of the holders of the trust securities. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. If any date on which interest is payable on the debentures is not a business day, then payment of interest will be made on the next day that is a business day without any additional interest or other payment in respect of the delay. However, if the next business day is in the next calendar year, payment of the interest will 34 be made on the immediately preceding business day. Accrued interest that is not paid on the applicable interest payment date will bear additional interest on the amount due at the annual rate of _____%, compounded quarterly. The term "interest," includes quarterly interest payments, interest on quarterly interest payments not paid on the applicable interest payment date and additional interest, as applicable. The debentures will mature on September 30, 2029, the stated maturity date. We may shorten this date once at any time to any date not earlier than September 30, 2004, subject to the prior approval of the Federal Reserve, if required. We will give notice to the indenture trustee and the holders of the debentures, no more than 180 days and no less than 90 days prior to the effectiveness of any change in the stated maturity date. We will not have the right to redeem the debentures from the trust until after September 30, 2004, except if a Tax Event, an Investment Company Event or a Capital Treatment Event has occurred, or to the extent we have repurchased capital securities. The debentures will be unsecured and will rank junior to all of our senior and subordinated indebtedness. Because we are a holding company, our right to participate in any distribution of assets of any of our subsidiaries, upon any subsidiary's liquidation or reorganization or otherwise, and thus the ability of holders of the debentures to benefit indirectly from any distribution by a subsidiary, is subject to the prior claim of creditors of the subsidiary, except to the extent that we may be recognized as a creditor of the subsidiary. The debentures will, therefore, be effectively subordinated to all existing and future liabilities of our subsidiaries, and holders of debentures should look only to our assets for payment. The indenture does not limit our ability to incur or issue secured or unsecured senior and junior debt. See "--Subordination." The indenture does not contain provisions that afford holders of the debentures protection in the event of a highly leveraged transaction or other similar transaction involving us, nor does it require us to maintain or achieve any financial performance levels or to obtain or maintain any credit rating on the debentures. OPTION TO EXTEND INTEREST PAYMENT PERIOD As long as no event of default under the indenture has occurred and is continuing, we have the right under the indenture to defer the payment of interest on the debentures at any time for a period not exceeding 20 consecutive quarters. However, no extension period may extend beyond the stated maturity of the debentures or end on a date other than a date interest is normally due. At the end of an extension period, we must pay all interest then accrued and unpaid, together with interest thereon at the annual rate of _____%, compounded quarterly. During an extension period, interest will continue to accrue and holders of debentures, or the holders of capital securities if they are then outstanding, will be required to accrue and recognize as income for federal income tax purposes the accrued but unpaid interest amounts in the year in which such amounts accrued. See "Federal Income Tax Consequences--Interest Payment Period and Original Issue Discount." During an extension period, we may not: - declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of our capital stock (other than the reclassification of any class of capital stock into another class of capital stock) or allow any of our subsidiaries to do the same with respect to their capital stock (other than payment of dividends or distributions to us); - make or allow any of our subsidiaries to make any payment of principal, interest or premium on, or repay, repurchase or redeem any debt securities issued by us that rank equally with or junior to the debentures; - make or allow any of our subsidiaries to make any guarantee payments with respect to any other guarantee by us of any other debt securities of any of our subsidiaries if the guarantee ranks equally with or junior to the debentures (other than payments under the guarantee); or 35 - redeem, purchase or acquire less than all of the debentures or any of the capital securities. Prior to the termination of any extension period, so long as no event of default under the indenture is continuing, we may further defer the payment of interest subject to the above stated requirements. Upon the termination of any extension period and the payment of all amounts then due, we may elect to begin a new extension period at any time. We do not currently intend to exercise our right to defer payments of interest on the debentures. We must give the property trustee, the administrative trustees and the indenture trustee notice of our election of an extension period at least two business days prior to the earlier of (a) the next date on which distributions on the trust securities would have been payable except for the election to begin an extension period, or (b) the date we are required to give notice of the record date, or the date the distributions are payable, to the American Stock Exchange, or other applicable self-regulatory organization, or to holders of the capital securities, but in any event at least one business day prior to the record date. Other than as described above, there is no limitation on the number of times that we may elect to begin an extension period. ADDITIONAL SUMS TO BE PAID AS A RESULT OF ADDITIONAL TAXES If the trust is required to pay any additional taxes, duties or other governmental charges as a result of the occurrence of a Tax Event, we will pay as additional amounts on the debentures any amounts which may be required so that the net amounts received and retained by the trust after paying any additional taxes, duties or other governmental charges will not be less than the amounts the trust would have received had the additional taxes, duties or other governmental charges not been imposed. REDEMPTION OR EXCHANGE Subject to prior approval of the Federal Reserve, if required, we may redeem the debentures prior to maturity: - on or after September 30, 2004, in whole at any time or in part from time to time; - in whole at any time within 90 days following the occurrence of a Tax Event, an Investment Company Event or a Capital Treatment Event; or - at any time, to the extent of any capital securities we repurchase. In each case we will pay a redemption price equal to the accrued and unpaid interest on the debentures so redeemed to the date fixed for redemption, plus 100% of the principal amount of the debentures. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of debentures to be redeemed at its registered address. Redemption of less than all outstanding debentures must be effected proportionately, by lot or in any other manner deemed to be fair by the indenture trustee. Unless we default in payment of the redemption price for the debentures, on and after the redemption date interest will no longer accrue on the debentures or the portions of the debentures called for redemption. The debentures will not be subject to any sinking fund. DISTRIBUTION UPON LIQUIDATION As described under "Description of the Capital Securities--Liquidation Distribution Upon Termination," under certain circumstances and with the Federal Reserve's approval, the debentures may be distributed to the 36 holders of the capital securities in liquidation of the trust after satisfaction of liabilities to creditors of the trust. If this occurs, we will use our reasonable efforts to list the debentures on the American Stock Exchange or other stock exchange or national quotation system on which the capital securities are then listed, if any. There can be no assurance as to the market price of any debentures that may be distributed to the holders of capital securities. RESTRICTIONS ON PAYMENTS We are restricted from making certain payments (as described below) if we have chosen to defer payment of interest on the debentures, an event of default has occurred and is continuing under the indenture or we are in default with respect to our obligations under the guarantee. If either of these events shall have occurred, we will not: - declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of our capital stock (other than the reclassification of any class of our capital stock into another class of capital stock) or allow any of our subsidiaries to do the same with respect to their capital stock (other than payment of dividends or distributions to us); - make or allow any of our subsidiaries to make any payment of principal, interest or premium on, or repay or repurchase or redeem any of our debt securities that rank equally with or junior to the debentures; - make or allow any of our subsidiaries to make any guarantee payments with respect to any guarantee by us of the debt securities of any of our subsidiaries if the guarantee ranks equally with or junior to the debentures (other than payments under the guarantee); or - redeem, purchase or acquire less than all of the debentures or any of the capital securities. SUBORDINATION The debentures are subordinated and junior in right of payment to all of our senior and subordinated debt (as defined below). Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceedings of Heartland Financial, the holders of our senior and subordinated debt will first be entitled to receive payment in full of principal and interest before the holders of debentures will be entitled to receive or retain any payment in respect of the debentures. If the maturity of any debentures is accelerated, the holders of all of our senior and subordinated debt outstanding at the time of the acceleration will also be entitled to first receive payment in full of all amounts due to such holders, including any amounts due upon acceleration, before the holders of the debentures will be entitled to receive or retain any payment in respect of the principal of or interest on the debentures. No payments of principal or interest on the debentures may be made if there has occurred and is continuing a default in any payment with respect to any of our senior or subordinated debt or an event of default with respect to any of our senior or subordinated debt resulting in the acceleration of the maturity of the senior or subordinated debt, or if any judicial proceeding is pending with respect to any default. The term "debt" means, with respect to any entity, whether recourse is to all or a portion of the assets of the entity and whether or not contingent: - every obligation of the entity for money borrowed; 37 - every obligation of the entity evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; - every reimbursement obligation of the entity with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of the entity; - every obligation of the entity issued or assumed as the deferred purchase price of property or services, excluding trade accounts payable or accrued liabilities arising in the ordinary course of business; - every capital lease obligation of the entity; and - every obligation of the type referred to in the first five points of another entity and all dividends of another entity the payment of which, in either case, the first entity has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. The term "senior debt" means the principal of and premium and interest, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us, on debt, whether incurred on or prior to the date of the indenture or incurred after the date. Senior debt also includes all indebtedness, whether incurred on or prior to the date of the indenture or thereafter incurred, for claims in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements. However, senior debt will not be deemed to include: - any debt where it is provided in the instrument creating the debt that the obligations are not superior in right of payment to the debentures or to other debt which is equal with, or subordinated to, the debentures; - any of our debt that when incurred and without regard to any election under the federal bankruptcy laws, was without recourse to us; - any debt of ours to any of our subsidiaries; - any debt to any of our employees; - any debt that by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of the debt by the holders of the debentures as a result of the subordination provisions of the indenture would be greater than they otherwise would have been as a result of any obligation of the holders to pay amounts over to the obligees on the trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which the debt is subject; and - debt which constitutes subordinated debt. The term "subordinated debt" means the principal of, premium and interest, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us, on debt. Subordinated debt includes debt incurred on or prior to the date of the indenture or thereafter incurred, which is by its terms expressly provided to be junior and subordinate to other debt of ours, other than the debentures. However, subordinated debt will not be deemed to include: - any of our debt which when incurred and without regard to any election under the federal bankruptcy laws was without recourse to us; - any debt of ours to any of our subsidiaries; 38 - any debt to any of our employees; - any debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of the debt by the holders of the debentures as a result of the subordination provisions of the indenture would be greater than they otherwise would have been as a result of any obligation of the holders to pay amounts over to the obligees on the trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which the debt is subject; - debt which constitutes senior debt; and - any debt of ours under debt securities (and guarantees in respect of these debt securities) initially issued to any trust, or a trustee of a trust, partnership or other entity affiliated with us that is, directly or indirectly, our financing vehicle in connection with the issuance by that entity of preferred securities or other securities which are intended to qualify for "Tier 1" capital treatment. We expect from time to time to incur additional indebtedness, and there is no limitation under the indenture on the amount we may incur. We had consolidated senior and subordinated debt of approximately $195.4 million at June 30, 1999. We also incurred additional indebtedness of $20.0 million after this date under the loan agreement with The Northern Trust Company. Although a portion of these amounts are expected to be repaid with a portion of the proceeds from the sale of the debentures, additional senior or subordinated debt can be expected to be incurred in the future. PAYMENT AND PAYING AGENTS Generally, payment of principal of and interest on the debentures will be made at the office of the indenture trustee in Wilmington, Delaware. However, we have the option to make payment of any interest by (a) check mailed to the address of the person entitled to payment at the address listed in the register of holders of the debentures, or (b) transfer to an account maintained by the person entitled thereto as specified in the register of holders of the debentures, provided that proper transfer instructions have been received by the applicable record date. Payment of any interest on debentures will be made to the person in whose name the debenture is registered at the close of business on the regular record date for the interest payment, except in the case of defaulted interest. Any moneys deposited with the indenture trustee or any paying agent for the debentures, or then held by us in trust, for the payment of the principal of or interest on the debentures and remaining unclaimed for two years after the principal or interest has become due and payable, will be repaid to us on May 31 of each year. If we hold any of this money in trust, then it will be discharged from the trust to us and the holder of the debenture will thereafter look, as a general unsecured creditor, only to us for payment. REGISTRAR AND TRANSFER AGENT The indenture trustee will act as the registrar and the transfer agent for the debentures. Debentures may be presented for registration of transfer, with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed, at the office of the registrar. Provided that we maintain a transfer agent in Wilmington, Delaware, we may rescind the designation of any transfer agent or approve a change in the location through which any transfer agent acts. We may at any time designate additional transfer agents with respect to the debentures. If we redeem any of the debentures, neither we nor the indenture trustee will be required to (a) issue, register the transfer of or exchange debentures during a period beginning at the opening of business 15 days before the day of selection for redemption of debentures and ending at the close of business on the day of mailing of the relevant notice of redemption, or (b) transfer or exchange any debentures so selected for redemption, except, in the case of any debentures being redeemed in part, any portion not to be redeemed. 39 MODIFICATION OF INDENTURE We and the indenture trustee may, from time to time without the consent of the holders of the debentures, amend, waive our rights under or supplement the indenture for purposes which do not materially adversely affect the rights of the holders of the debentures. Other changes may be made by us and the indenture trustee with the consent of the holders of a majority in principal amount of the outstanding debentures. However, without the consent of the holder of each outstanding debenture affected by the proposed modification, no modification may: - extend the maturity date of the debentures; or - reduce the principal amount or the rate or extend the time of payment of interest; or - reduce the percentage of principal amount of debentures required to amend the indenture. As long as any of the capital securities remain outstanding, no modification of the indenture may be made that requires the consent of the holders of the debentures, no termination of the indenture may occur, and no waiver of any event of default under the indenture may be effective, without the prior consent of the holders of a majority of the aggregate liquidation amount of the capital securities. DEBENTURE EVENTS OF DEFAULT The indenture provides that any one or more of the following events with respect to the debentures that has occurred and is continuing constitutes an event of default under the indenture: - our failure to pay any interest on the debentures for 30 days after the due date, except where we have properly deferred the interest payment; - our failure to pay any principal on the debentures when due whether at maturity, upon redemption or otherwise; - our failure to observe or perform in any material respect other covenants contained in the indenture for 90 days after written notice to us from the indenture trustee or the holders of at least 25% in aggregate outstanding principal amount of the debentures; or - our bankruptcy, insolvency or reorganization or dissolution of the trust. The holders of a majority of the aggregate outstanding principal amount of the debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee. The indenture trustee, or the holders of at least 25% in aggregate outstanding principal amount of the debentures, may declare the principal due and payable immediately upon an event of default under the indenture. The holders of a majority of the outstanding principal amount of the debentures may annul the declaration and waive the default if the default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration, has been deposited with the indenture trustee. The holders may not annul the declaration and waive a default if the default is the non-payment of the principal of the debentures which has become due solely by the acceleration. Should the holders of the debentures fail to annul the declaration and waive the default, the holders of at least 25% in aggregate liquidation amount of the capital securities will have this right. If an event of default under the indenture has occurred and is continuing, the property trustee will have the right to declare the principal of and the interest on the debentures, and any other amounts payable under the indenture, to be immediately due and payable and to enforce its other rights as a creditor with respect to the debentures. 40 We are required to file annually with the indenture trustee a certificate as to whether or not we are in compliance with all of the conditions and covenants applicable to us under the indenture. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE CAPITAL SECURITIES If an event of default under the indenture has occurred and is continuing and the event is attributable to the failure by us to pay interest on or principal of the debentures on the date on which the payment is due and payable, then a holder of capital securities may institute a direct action against us to compel us to make the payment. We may not amend the indenture to remove the foregoing right to bring a direct action without the prior written consent of all of the holders of the capital securities. If the right to bring a direct action is removed, the trust may become subject to the reporting obligations under the Securities Exchange Act of 1934. The holders of the capital securities will not be able to exercise directly any remedies, other than those set forth in the preceding paragraph, available to the holders of the debentures unless there has been an event of default under the trust agreement. See "Description of the Capital Securities--Events of Default; Notice." CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS We may not consolidate with or merge into any other entity or convey or transfer our properties and assets substantially as an entirety to any entity, and no entity may be consolidated with or merged into us or sell, convey, transfer or otherwise dispose of its properties and assets substantially as an entirety to us, unless: - if we consolidate with or merge into another person or convey or transfer our properties and assets substantially as an entirety to any person, the successor person is organized under the laws of the United States or any State or the District of Columbia, and the successor person expressly assumes by supplemental indenture our obligations on the debentures, or substitutes securities having substantially similar terms; - immediately after the transaction, no event of default under the indenture, and no event which, after notice or lapse of time, or both, would become an event of default under the indenture, has occurred and is continuing; and - other conditions as prescribed in the indenture are met. SATISFACTION AND DISCHARGE The indenture will cease to be of further effect and we will be deemed to have satisfied and discharged our obligations under the indenture when all debentures not previously delivered to the indenture trustee for cancellation: - have become due and payable; - will become due and payable at their stated maturity within one year or are to be called for redemption within one year, and we deposit or cause to be deposited with the indenture trustee funds, in trust, for the purpose and in an amount sufficient to pay and discharge the entire indebtedness on the debentures not previously delivered to the indenture trustee for cancellation, for the principal and interest due to the date of the deposit or to the stated maturity or redemption date, as the case may be. We may still be required to provide officers' certificates, opinions of counsel and pay fees and expenses due after these events occur. 41 GOVERNING LAW The indenture and the debentures will be governed by and construed in accordance with the laws of the State of Delaware. INFORMATION CONCERNING THE INDENTURE TRUSTEE The indenture trustee is subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to these provisions, the indenture trustee is under no obligation to exercise any of the powers vested in it by the indenture at the request of any holder of debentures, unless offered reasonable indemnity by the holder against the costs, expenses and liabilities which might be incurred. The indenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the indenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. MISCELLANEOUS We have agreed, pursuant to the indenture, for so long as capital securities remain outstanding: - to maintain directly or indirectly 100% ownership of the common securities of the trust, except that certain successors that are permitted pursuant to the indenture may succeed to our ownership of the common securities; - not to voluntarily terminate, wind up or liquidate the trust without prior approval of the Federal Reserve, if required; - to use our reasonable efforts to cause the trust (a) to remain a business trust (and to avoid involuntary termination, winding up or liquidation), except in connection with a distribution of debentures, the redemption of all of the trust securities of the trust or mergers, consolidations or amalgamations, each as permitted by the trust agreement; and (b) to otherwise continue not to be treated as an association taxable as a corporation or partnership for federal income tax purposes; and - to use our reasonable efforts to cause each holder of trust securities to be treated as owning an individual beneficial interest in the debentures. BOOK-ENTRY ISSUANCE GENERAL DTC will act as securities depositary for the capital securities and may act as securities depositary for all of the debentures in the event of the distribution of the debentures to the holders of capital securities. Except as described, the capital securities will be issued only as registered securities in the name of Cede & Co. (DTC's nominee). One or more global capital securities will be issued for the capital securities and will be deposited with DTC. DTC is a limited purpose trust company organized under New York banking law, a "banking organization" within the meaning of the New York banking law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants deposit with DTC. DTC also facilitates the settlement among participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and 42 certain other organizations. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to indirect participants, such as securities brokers and dealers, banks and trust companies that clear through or maintain custodial relationships with direct participants, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC. Purchases of capital securities within the DTC system must be made by or through direct participants, which will receive a credit for the capital securities on DTC's records. The ownership interest of each actual purchaser of each capital security ("beneficial owner") is in turn to be recorded on the direct and indirect participant's records. Beneficial owners will not receive written confirmation from DTC of their purchases, but beneficial owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the direct or indirect participants through which the beneficial owners purchased capital securities. Transfers of ownership interests in the capital securities are to be accomplished by entries made on the books of participants acting on behalf of beneficial owners. Beneficial owners will not receive certificates representing their ownership interest in capital securities, except if use of the book-entry system for the capital securities is discontinued. DTC will have no knowledge of the actual beneficial owners of the capital securities; DTC's records reflect only the identity of the direct participants to whose accounts the capital securities are credited, which may or may not be the beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that we believe to be accurate, but we and the trust assume no responsibility for the accuracy thereof. Neither we nor the trust have any responsibility for the performance by DTC or its participants of their respective obligations as described in this prospectus or under the rules and procedures governing their respective operations. NOTICES AND VOTING Conveyance of notices and other communications by DTC to direct participants, by direct participants to indirect participants, and by direct and indirect participants to beneficial owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to Cede & Co. as the registered holder of the capital securities. If less than all of the capital securities are being redeemed, the amount to be redeemed will be determined in accordance with the trust agreement. Although voting with respect to the capital securities is limited to the holders of record of the capital securities, in those instances in which a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to capital securities. Under its usual procedures, DTC would mail an omnibus proxy to the property trustee as soon as possible after the record date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to those direct participants to whose accounts the capital securities are credited on the record date. DISTRIBUTION OF FUNDS The property trustee will make distribution payments on the capital securities to DTC. DTC's practice is to credit direct participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on the payment date. Payments by participants to beneficial owners will be governed by standing instructions and customary practices and will be the responsibility of the participant and not of DTC, the property trustee, the trust or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of the property trustee, disbursement of the payments to direct participants is the 43 responsibility of DTC, and disbursements of the payments to the beneficial owners is the responsibility of direct and indirect participants. SUCCESSOR DEPOSITARIES AND TERMINATION OF BOOK-ENTRY SYSTEM DTC may discontinue providing its services with respect to any of the capital securities at any time by giving reasonable notice to the property trustee and us. If no successor securities depositary is obtained, definitive capital securities representing the capital securities are required to be printed and delivered. We also have the option to discontinue use of the system of book-entry transfers through DTC (or a successor depositary). After an event of default under the indenture, the holders of a majority in liquidation amount of capital securities may determine to discontinue the system of book-entry transfers through DTC. In these events, definitive certificates for the capital securities will be printed and delivered. DESCRIPTION OF THE GUARANTEE The capital securities guarantee agreement will be executed and delivered by us concurrently with the issuance of the capital securities for the benefit of the holders of the capital securities. The guarantee agreement will be qualified as an indenture under the Trust Indenture Act. First Union, the guarantee trustee, will act as trustee for purposes of complying with the provisions of the Trust Indenture Act, and will also hold the guarantee for the benefit of the holders of the capital securities. Prospective investors are urged to read the form of the guarantee agreement, which has been filed as an exhibit to the registration statement of which this prospectus forms a part. GENERAL We agree to pay in full on a subordinated basis, to the extent described in the guarantee agreement, the guarantee payments (as defined below) to the holders of the capital securities, as and when due, regardless of any defense or counterclaim that the trust may have or assert other than the defense of payment. The following payments with respect to the capital securities are called the "guarantee payments" and, to the extent not paid or made by the trust and to the extent that the trust has funds available for those distributions, will be subject to the guarantee: - any accumulated and unpaid distributions required to be paid on the capital securities; - with respect to any capital securities called for redemption, the redemption price; and - upon a voluntary or involuntary dissolution, winding up or liquidation of the trust (other than in connection with the distribution of debentures to the holders of capital securities or a redemption of all of the capital securities), the lesser of: (a) the amount of the liquidation distribution; and (b) the amount of assets of the trust remaining available for distribution to holders of capital securities in liquidation of the trust. We may satisfy our obligations to make a guarantee payment by making a direct payment of the required amounts to the holders of the capital securities or by causing the trust to pay the amounts to the holders. The guarantee agreement is a guarantee, on a subordinated basis, of the guarantee payments, but the guarantee only applies to the extent the trust has funds available for those distributions. If we do not make interest payments on the debentures purchased by the trust, the trust will not have funds available to make the distributions and will not pay distributions on the capital securities. 44 STATUS OF THE GUARANTEE The guarantee constitutes our unsecured obligation that ranks junior in right of payment to all of our senior and subordinated debt in the same manner as the debentures and senior to our capital stock. We expect to incur additional indebtedness in the future, although we have no specific plans in this regard presently, and neither the indenture nor the trust agreement limits the amounts of the obligations that we may incur. The guarantee constitutes a guarantee of payment and not of collection. If we fail to make guarantee payments when required, holders of capital securities may institute a legal proceeding directly against us to enforce their rights under the guarantee without first instituting a legal proceeding against any other person or entity. The guarantee will not be discharged except by payment of the guarantee payments in full to the extent not paid by the trust or upon distribution of the debentures to the holders of the capital securities. Because we are a holding company, our right to participate in any distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent we may be recognized as a creditor of that subsidiary. Our obligations under the guarantee, therefore, will be effectively subordinated to all existing and future liabilities of our subsidiaries, and claimants should look only to our assets for payments under the guarantee. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of the capital securities, in which case no vote will be required, the guarantee may be amended only with the prior approval of the holders of a majority of the aggregate liquidation amount of the outstanding capital securities. See "Description of the Capital Securities--Voting Rights; Amendment of Trust Agreement." EVENTS OF DEFAULT; REMEDIES An event of default under the guarantee agreement will occur upon our failure to make any required guarantee payments or to perform any other obligations under the guarantee. The holders of a majority in aggregate liquidation amount of the capital securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee trustee in respect of the guarantee and may direct the exercise of any power conferred upon the guarantee trustee under the guarantee agreement. Any holder of capital securities may institute and prosecute a legal proceeding directly against us to enforce its rights under the guarantee without first instituting a legal proceeding against the trust, the guarantee trustee or any other person or entity. We are required to provide to the guarantee trustee annually a certificate as to whether or not we are in compliance with all of the conditions and covenants applicable to us under the guarantee agreement. TERMINATION OF THE GUARANTEE The guarantee will terminate and be of no further force and effect upon: - full payment of the redemption price of the capital securities; - full payment of the amounts payable upon liquidation of the trust; or - distribution of the debentures to the holders of the capital securities. 45 If at any time any holder of the capital securities must restore payment of any sums paid under the capital securities or the guarantee, the guarantee will continue to be effective or will be reinstated with respect to such amounts. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The guarantee trustee, other than during the occurrence and continuance of our default in performance of the guarantee, undertakes to perform only those duties as are specifically set forth in the guarantee. When an event of default has occurred and is continuing, the guarantee trustee must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to those provisions, the guarantee trustee is under no obligation to exercise any of the powers vested in it by the guarantee at the request of any holder of any capital securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. EXPENSE AGREEMENT We will, pursuant to the Agreement as to Expenses and Liabilities entered into by us and the trust under the trust agreement, irrevocably and unconditionally guarantee to each person or entity to whom the trust becomes indebted or liable, the full payment of any costs, expenses or liabilities of the trust, other than obligations of the trust to pay to the holders of the capital securities or other similar interests in the trust of the amounts due to the holders pursuant to the terms of the capital securities or other similar interests, as the case may be. Third party creditors of the trust may proceed directly against us under the expense agreement, regardless of whether they had notice of the expense agreement. GOVERNING LAW The guarantee will be governed by the laws of the State of Delaware. RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE DEBENTURES AND THE GUARANTEE FULL AND UNCONDITIONAL GUARANTEE We irrevocably guarantee, as and to the extent described in this prospectus, payments of distributions and other amounts due on the capital securities, to the extent the trust has funds available for the payment of these amounts. We and the trust believe that, taken together, our obligations under the debentures, the indenture, the trust agreement, the expense agreement and the guarantee agreement provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of payment of distributions and other amounts due on the capital securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes a guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the obligations of the trust under the capital securities. If and to the extent that we do not make payments on the debentures, the trust will not pay distributions or other amounts due on the capital securities. The guarantee does not cover payment of distributions when the trust does not have sufficient funds to pay the distributions. In this event, the remedy of a holder of capital securities is to institute a legal proceeding directly against us for enforcement of payment of the distributions to the holder. Our obligations under the guarantee are subordinated and junior in right of payment to all of our other indebtedness. 46 SUFFICIENCY OF PAYMENTS As long as payments of interest and other payments are made when due on the debentures, these payments will be sufficient to cover distributions and other payments due on the capital securities, primarily because: - the aggregate principal amount of the debentures will be equal to the sum of the aggregate stated liquidation amount of the trust securities; - the interest rate and interest and other payment dates on the debentures will match the distribution rate and distribution and other payment dates for the capital securities; - we will pay for any and all costs, expenses and liabilities of the trust, except the obligations of the trust to pay to holders of the capital securities the amounts due to the holders pursuant to the terms of the capital securities; and - the trust will not engage in any activity that is not consistent with the limited purposes of the trust. ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES A holder of any capital security may institute a legal proceeding directly against us to enforce its rights under the guarantee without first instituting a legal proceeding against the guarantee trustee, the trust or any other person. A default or event of default under any of our senior or subordinated debt would not constitute a default or event of default under the trust agreement. In the event, however, of payment defaults under, or acceleration of, our senior or subordinated debt, the subordination provisions of the indenture provide that no payments may be made in respect of the debentures until the obligations have been paid in full or any payment default has been cured or waived. Failure to make required payments on the debentures would constitute an event of default under the trust agreement. LIMITED PURPOSE OF THE TRUST The capital securities evidence preferred undivided beneficial interests in the assets of the trust. The trust exists for the exclusive purposes of issuing the trust securities, investing the proceeds thereof in debentures and engaging in only those other activities necessary, advisable or incidental thereto. A principal difference between the rights of a holder of a capital security and the rights of a holder of a debenture is that a holder of a debenture is entitled to receive from us the principal amount of and interest accrued on debentures held, while a holder of capital securities is entitled to receive distributions from the trust (or from us under the guarantee) if and to the extent the trust has funds available for the payment of the distributions. RIGHTS UPON TERMINATION Upon any voluntary or involuntary termination, windingup or liquidation of the trust involving the liquidation of the debentures, the holders of the capital securities will be entitled to receive, out of assets held by the trust, the liquidation distribution in cash. See "Description of the Capital Securities--Liquidation Distribution Upon Termination." Upon our voluntary or involuntary liquidation or bankruptcy, the property trustee, as holder of the debentures, would be a subordinated creditor of ours. Therefore, the property trustee would be subordinated in right of payment to all of our senior and subordinated debt, but is entitled to receive payment in full of principal and interest before any of our stockholders receive payments or distributions. Since we are the guarantor under the guarantee and have agreed to pay for all costs, expenses and liabilities of the trust other than the obligations of the trust to pay to holders of the capital securities the amounts due to the holders pursuant to the terms of the capital securities, the positions of a holder of the capital securities and a holder of the debentures relative to our 47 other creditors and to our stockholders in the event of liquidation or bankruptcy are expected to be substantially the same. FEDERAL INCOME TAX CONSEQUENCES GENERAL The following summary of the material federal income tax considerations that may be relevant to the purchasers of capital securities represents the opinion of Barack Ferrazzano Kirschbaum Perlman & Nagleberg counsel to Heartland Financial and the trust insofar as it relates to matters of law and legal conclusions. The conclusions expressed herein are based upon current provisions of the Internal Revenue Code of 1986, regulations thereunder and current administrative rulings and court decisions, all of which are subject to change at any time, with possible retroactive effect. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. Furthermore, the authorities on which the following summary is based are subject to various interpretations, and it is therefore possible that the federal income tax treatment of the purchase, ownership and disposition of capital securities may differ from the treatment described below. No attempt has been made in the following discussion to comment on all federal income tax matters affecting purchasers of capital securities. Moreover, the discussion generally focuses on holders of capital securities who are individual citizens or residents of the United States and who acquire capital securities on their original issue at their offering price and hold capital securities as capital assets. The discussion has only limited application to dealers in securities, corporations, estates, trusts or nonresident aliens and does not address all the tax consequences that may be relevant to holders who may be subject to special tax treatment, such as, for example, banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors or persons that will hold the capital securities as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment, or as other than a capital asset. The following summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of capital securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the capital securities. Accordingly, each prospective investor should consult, and should rely exclusively on, the investor's own tax advisors in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of capital securities. CLASSIFICATION OF THE DEBENTURES In accordance with the opinion of Barack Ferrazzano Kirschbaum Perlman & Nagleberg, we intend to take the position that the debentures will be classified for federal income tax purposes as indebtedness of Heartland Financial under current law, and, by acceptance of a capital security, each holder covenants to treat the debentures as indebtedness and the capital securities as evidence of an indirect beneficial ownership interest in the debentures. No assurance can be given, however, that this position will not be challenged by the Internal Revenue Service or, if challenged, that it will not be successful. The remainder of this discussion assumes that the debentures will be classified for federal income tax purposes as indebtedness of Heartland Financial. CLASSIFICATION OF THE TRUST With respect to the capital securities, Barack Ferrazzano Kirschbaum Perlman & Nagleberg, tax counsel for Heartland Financial and the trust, has rendered its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the trust agreement and indenture, the trust will be classified for federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for federal income tax purposes, each holder of capital securities generally will be treated as owning an undivided beneficial interest in the debentures, and each holder will be required to include in its gross income 48 any interest with respect to the debentures at the time such interest is accrued or is received, in accordance with the holder's method of accounting. If the debentures were determined to be subject to the original issue discount ("OID") rules, each holder would instead be required to include in its gross income any OID accrued with respect to its allocable share of the debentures whether or not cash were actually distributed to the holder. INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT United States persons (including cash basis taxpayers) that hold debt instruments issued with OID must generally include such OID in income as it accrues on a constant yield method even if there is not a corresponding receipt of cash attributable to such income. A debt instrument such as the debentures will generally be treated as issued with OID if the stated interest on the instrument does not constitute "qualified stated interest." Qualified stated interest is generally any one of a series of stated interest payments on an instrument that are unconditionally payable at least annually at a single fixed rate. In determining whether stated interest on an instrument is unconditionally payable and thus constitutes qualified stated interest, remote contingencies as to the timely payment of stated interest are ignored. In the case of the debentures, we have concluded that the likelihood of exercising our option to defer payments of interest is remote. This is in part because we have a history of declaring dividends on our common stock and we would be unable to continue making these dividends if we deferred our payments under the debentures. If the option to defer any payment of interest was determined not to be "remote" or if Heartland Financial actually exercises its option to defer the payment of interest, the debentures would be treated as issued with OID at the time of issuance or at the time of such exercise, as the case may be, and all stated interest would thereafter be treated as OID as long as the debentures remained outstanding. In such event, all of a United States person's taxable interest income in respect of the debentures would constitute OID that would have to be included in income on a constant yield method before the receipt of the cash attributable to such income, regardless of such person's method of tax accounting, and actual distributions of stated interest would not be reported as taxable income. Consequently, a holder of capital securities would be required to include such OID in gross income even though Heartland Financial would not make any actual cash payments during an Extension Period. The above information is based on recently promulgated Treasury Regulations, which have not been interpreted by any court decisions or addressed in any ruling or other pronouncements of the IRS, and it is possible that the IRS could take a position contrary to the conclusions herein. Because income on the capital securities will constitute interest, corporate holders of capital securities will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the capital securities. MARKET DISCOUNT AND ACQUISITION PREMIUM Holders of capital securities other than a holder who purchased the capital securities upon original issuance may be considered to have acquired their undivided interests in the debentures with "market discount" or "acquisition premium" as these phrases are defined for federal income tax purposes. Such holders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the capital securities. RECEIPT OF DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST Under the circumstances described under "Description of the Capital Securities--Redemption or Exchange" and "--Liquidation Distribution Upon Termination," the debentures may be distributed to holders of capital securities upon a liquidation of the trust. Under current federal income tax law, such a distribution would be treated as a nontaxable event to the holder and would result in the holder having an aggregate tax basis in the debentures received in the liquidation equal to the holder's aggregate tax basis in the capital securities immediately before the distribution. A holder's holding period in debentures received in liquidation of the trust would include the period for which the holder held the capital securities. 49 If, however, a Tax Event occurs which results in the trust being treated as an association taxable as a corporation, the distribution would likely constitute a taxable event to holders of the capital securities. Under certain circumstances described herein, the debentures may be redeemed for cash and the proceeds of the redemption distributed to holders in redemption of their capital securities. Under current law, such a redemption should, to the extent that it constitutes a complete redemption, constitute a taxable disposition of the redeemed capital securities, and a holder for federal income tax purposes, should recognize gain or loss as if the holder sold the capital securities for cash. DISPOSITION OF CAPITAL SECURITIES A holder that sells capital securities will recognize gain or loss equal to the difference between the amount realized on the sale of the capital securities and the holder's adjusted tax basis in the capital securities. A holder's adjusted tax basis in the capital securities generally will be its initial purchase price increased by OID previously includible in the holder's gross income to the date of disposition and decreased by payments received on the capital securities to the date of disposition. A gain or loss of this kind will generally be a capital gain or loss and will be a long-term capital gain or loss if the capital securities have been held for more than one year at the time of sale. The capital securities may trade at a price that does not accurately reflect the value of accrued but unpaid interest with respect to the underlying debentures. A holder that disposes of its capital securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the debentures through the date of disposition in income as ordinary income, and to add the amount to its adjusted tax basis in its proportionate share of the underlying debentures deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis a holder will recognize a capital loss. The adjusted basis would include, in the form of OID, all accrued but unpaid interest. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for federal income tax purposes. EFFECT OF POSSIBLE CHANGES IN TAX LAWS Congress and the Clinton Administration have considered certain proposed tax law changes in the past that would, among other things, generally deny corporate issuers a deduction for interest in respect of certain debt obligations if the debt obligations have a maximum term in excess of 15 years and are not shown as indebtedness on the issuer's applicable consolidated balance sheet. Other proposed tax law changes would have denied interest deductions if the term was in excess of 20 years. Although these proposed tax law changes have not been enacted into law, there can be no assurance that tax law changes will not be reintroduced into future legislation which, if enacted after the date hereof, may adversely affect the federal income tax deductibility of interest payable on the debentures. Accordingly, there can be no assurance that a Tax Event will not occur. A Tax Event would permit us, upon approval of the Federal Reserve if then required to cause a redemption of the capital securities before, as well as after, September 30, 2004. See "Description of the Debentures--Redemption or Exchange" and "Description of the Capital Securities--Redemption or Exchange--Redemption upon a Tax Event, Investment Company Event or Capital Treatment Event." BACKUP WITHHOLDING AND INFORMATION REPORTING The amount of qualified stated interest, or, if applicable, OID, accrued on the capital securities held of record by individual citizens or residents of the United States, or certain trusts, estates and partnerships, will be reported to the Internal Revenue Service on Forms 1099-INT, or, where applicable, forms 1099-OID, which forms should be mailed to the holders by January 31 following each calendar year. Payments made on, and proceeds from the sale of, the capital securities may be subject to a "backup" withholding tax (currently at 31%) unless the holder complies with certain identification and other requirements. Any amounts withheld under the backup withholding rules will be allowed as a credit against the holder's federal income tax liability, provided the required information is provided to the Internal Revenue Service. 50 THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE PARTICULAR SITUATION OF A HOLDER OF CAPITAL SECURITIES. HOLDERS OF CAPITAL SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. ERISA CONSIDERATIONS Employee benefit plans that are subject to the Employee Retirement Income Security Act of 1974, or Section 4975 of the Internal Revenue Code, generally may purchase capital securities, subject to the investing fiduciary's determination that the investment in capital securities satisfies ERISA's fiduciary standards and other requirements applicable to investments by the plan. In any case, we and/or any of our affiliates may be considered a "party in interest" (within the meaning of ERISA) or a "disqualified person" (within the meaning of Section 4975 of the Internal Revenue Code) with respect to certain plans. These plans generally include plans maintained or sponsored by, or contributed to by, any such persons with respect to which we or any of our affiliates are a fiduciary or plans for which we or any of our affiliates provide services. The acquisition and ownership of capital securities by a plan (or by an individual retirement arrangement or other plans described in Section 4975(e)(1) of the Internal Revenue Code) with respect to which we or any of our affiliates are considered a party in interest or a disqualified person may constitute or result in a prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code, unless the capital securities are acquired pursuant to and in accordance with an applicable exemption. As a result, plans with respect to which we or any of our affiliates or any of its affiliates is a party in interest or a disqualified person should not acquire capital securities unless the capital securities are acquired pursuant to and in accordance with an applicable exemption. Any other plans or other entities whose assets include plan assets subject to ERISA or Section 4975 of the Internal Revenue Code proposing to acquire capital securities should consult with their own counsel. UNDERWRITING Heartland Financial, the trust, and the underwriters named below have entered into an underwriting agreement with respect to the capital securities. The underwriters, and the amount of capital securities that each of them has agreed to purchase, are as follows:
NUMBER OF UNDERWRITER CAPITAL SECURITIES ----------- ------------------ Dain Rauscher Wessels, a division of Dain Rauscher Incorporated........ Howe Barnes Investments, Inc........................................... --------- Total.......................................................... 1,000,000 --------- ---------
The underwriters have agreed to purchase the capital securities on a firm-commitment basis. That means that they will purchase all of the capital securities if they purchase any of them. If one underwriter defaults under the underwriting agreement, the purchase commitment of the other underwriter may be increased or the underwriting agreement may be terminated. The underwriters have agreed to purchase the capital securities at the price stated on the cover page of this prospectus. Because the trust will use the proceeds from the sale of the capital securities to purchase the debentures from us, we have agreed to pay the underwriters the following fees: 51
Underwriting Fees Per Capital Security............. $ Total............................ $
In addition to the underwriting fees, we estimate that we will spend approximately $_____________ for printing, depository and trustees' fees, legal and accounting fees, and other expenses of the offering. The underwriters will initially offer the capital securities to the public at the price stated on the cover page. The underwriters may offer capital securities to selected dealers at the public-offering price less a concession of up to $_______ per capital security. Those dealers may reallow a discount not in excess of $______ per capital security to other brokers and dealers. After the initial offering of the capital securities, the underwriters may change the offering price, concession, discount and other selling terms. In connection with the offering, the underwriters and their affiliates may engage in transactions, effected in accordance with Rule 104 of the SEC's Regulation M, that are intended to stabilize, maintain or otherwise affect the market price of the capital securities. These transactions may include transactions in which the underwriters create a short position for their own account by selling more capital securities than they are committed to purchase from the trust. In such a case, to cover all or part of the short position, the underwriters may purchase capital securities in the open market following completion of the initial offering. The underwriters also may engage in stabilizing transactions in which they bid for, and purchase, the capital securities at a level above that which might otherwise prevail in the open market for the purpose of preventing or retarding a decline in the market price of the capital securities. Any of these transactions may result in the maintenance of a price for the capital securities at a level above that which might otherwise prevail in the open market. Neither Heartland Financial nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the market price of the capital securities. The underwriters are not required to engage in any of these transactions. These transactions may be effected on the American Stock Exchange, and, if commenced, may be discontinued at any time without notice. Heartland Financial and the trust have agreed to indemnify the underwriters against liabilities arising from the offering of the capital securities, including civil liabilities under the Securities Act of 1933, or to contribute to payments that the underwriters may be required to make in connection with those liabilities. The underwriters have advised us that they do not intend to confirm any sales of trust preferred securities to any discretionary accounts. The underwriters will comply with Rule 2810 under the NASD Conduct Rules when they offer and sell the trust preferred securities because the National Association of Securities Dealers, Inc. may view the trust preferred securities as interests in a direct participation. The underwriters and their affiliates may provide investment banking services for us or our affiliates in the future for which they would expect to receive customary fees and commissions. LEGAL MATTERS Legal matters, including matters relating to federal income tax considerations, for Heartland Financial and the trust will be passed upon by Barack Ferrazzano Kirschbaum Perlman & Nagelberg, Chicago, Illinois, counsel to Heartland Financial and the trust. Certain legal matters will be passed upon for the underwriters by Silver, Freedman & Taff, L.L.P., Washington, D.C. Barack Ferrazzano Kirschbaum Perlman & Nagelberg and Silver, Freedman & Taff, L.L.P. may rely on the opinion of Richards, Layton & Finger, P.A. as to matters of Delaware law. 52 WHERE YOU CAN FIND INFORMATION This prospectus is a part of a Registration Statement on Form S-3 filed by Heartland Financial and the trust with the Securities and Exchange Commission under the Securities Act, with respect to the capital securities, the debentures and the guarantee. This prospectus does not contain all the information set forth in the registration statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information with respect to Heartland Financial and the securities offered by this prospectus, reference is made to the registration statement, including the exhibits to the registration statement and documents incorporated by reference. Statements contained in this prospectus concerning the provisions of such documents are necessarily summaries of such documents and each such statement is qualified in its entirety by reference to the copy of the applicable document filed with the Securities and Exchange Commission. We file periodic reports, proxy statements and other information with the SEC. Our filings are available to the public over the Internet at the SEC's web site. The address of that site is http://www.sec.gov. You may also inspect and copy these materials at the public reference facilities of the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well as at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 75 Park Place, Room 1400, New York, New York 10007. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information. The trust is not currently subject to the information reporting requirements of the Securities Exchange Act of 1934 and although the trust will become subject to such requirements upon the effectiveness of the Registration Statement, it is not expected that the trust will be required to file separate reports under the Securities Exchange Act of 1934. We have not included separate financial statements of the trust in this prospectus. We do not consider that separate financial statements would be material to holders of capital securities because we will own all of the trust's voting securities, the trust has no independent operations and we guarantee the payments on the capital securities to the extent described in this prospectus. Each holder of the trust securities will receive a copy of our annual report at the same time as we furnish the annual report to the holders of our common stock. EXPERTS The consolidated financial statements of Heartland Financial and its subsidiaries as of December 31, 1998 and 1997, and for each of the years in the three-year period ended December 31, 1998, are incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. These consolidated financial statements have been incorporated herein by reference in reliance upon the report of KPMG LLP, independent certified public accountants, which is incorporated herein by reference, and upon the authority of that firm as experts in accounting and auditing. INCORPORATION OF DOCUMENTS BY REFERENCE We "incorporate by reference" into this prospectus the information in documents we file with the Securities and Exchange Commission, which means that we can disclose important information to you through those documents. The information incorporated by reference is an important part of this prospectus. Some information contained in this prospectus updates the information incorporated by reference and some information that we file subsequently with the SEC will automatically update this prospectus. We incorporate by reference the documents listed below: (a) our Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the SEC on March 31, 1999; 53 (b) our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, filed with the SEC on May 16, 1999; (c) our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, filed with the SEC on August 16, 1999; and (d) our Current Report on Form 8-K filed on August 26, 1999, relating to the acquisition of National Bancshares, Inc. We also incorporate by reference any filings we make with the SEC under sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the initial filing of the registration statement that contains this prospectus and before the time that all of the securities offered in this prospectus are sold. You may request a copy of these filings at no cost by contacting us at the following address: Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, Iowa 52001 Attn: Jacquie M. Manternach (319) 589-2000 54 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- 1,000,000 CAPITAL SECURITIES HEARTLAND FINANCIAL CAPITAL TRUST I ______% CUMULATIVE CAPITAL SECURITIES (LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY) GUARANTEED AS DESCRIBED IN THIS PROSPECTUS BY HEARTLAND FINANCIAL USA, INC. ----------------- DAIN RAUSCHER WESSELS A DIVISION OF DAIN RAUSCHER INCORPORATED HOWE BARNES INVESTMENTS, INC. ----------------- _______, 1999 ----------------- Until , 1999 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the various expenses in connection with the sale and distribution of the securities being registered, other than underwriting discounts and commissions. All amounts shown are estimates, except the SEC registration fee and the NASD and the American Stock Exchange filing fees: SEC registration fee...............................................$ 6,950 American Stock Exchange filing fee................................. 16,500 NASD filing fee.................................................... 3,000 Trustees' fees..................................................... 4,000 Printing and mailing expenses...................................... 15,000 Fees and expenses of counsel....................................... 100,000 Accounting and related expenses.................................... 20,000 Blue Sky fees and expenses......................................... 2,000 Miscellaneous...................................................... 2,550 ---------- Total..............................................................$ 170,000 ---------- ----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. In accordance with the Delaware General Corporation Law, ArticlesI X and X of Heartland Financial's Certificate of Incorporation provides as follows: ARTICLE IX: Each person who is or was a director or officer of the corporation and each person who serves or served at the request of the corporation as a director, officer or partner of another enterprise, shall be indemnified by the corporation in accordance with, and to the fullest extent authorized by, the General Corporation Law of the State of Delaware, as the same now exists or may be hereafter amended. No amendment to or repeal of this Article IX shall apply to or have any effect on the rights of any individual referred to in this Article IX for or with respect to acts or omissions of such individual occurring prior to such amendment or repeal. ARTICLE X: To the fullest extent permitted by the General Corporation Law of Delaware, as the same now exists or may be hereafter amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to or repeal of this Article X shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to the effective date of such amendment or repeal. Article VIII of Heartland Financial's Bylaws further provides as follows: SECTION 8.1 DIRECTORS AND OFFICERS. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with II-1 respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. (c) To the extent that any person referred to in paragraphs (a) and (b) of this Section 8.1 has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. (d) Any indemnification under paragraphs (a) and (b) of this Section 8.1 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he or she has met the applicable standard of conduct set forth in paragraphs (a) and (b) of this Section 8.1. Such determination shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding or (ii) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. (e) Expenses (including attorneys' fees) incurred in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as provided in this Section 8.1. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by or granted pursuant to this Section 8.1 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. (g) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Section 8.1. II-2 (h) For purposes of this Section 8.1, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Section 8.1. (i) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 8.1 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (j) Unless otherwise determined by the board of directors, references in this section to "the corporation" shall not include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. SECTION 8.2 EMPLOYEES AND AGENTS. The board of directors may, by resolution, extend the indemnification provisions of the foregoing Section 8.1 to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Heartland Financial also carries Directors' and Officers' liability insurance in the amount of $1.0 million. II-3 ITEM 16. EXHIBITS.
Exhibit Number ------- 1.1 Form of Underwriting Agreement for Capital Securities 2.1 Agreement and Plan of Merger Among Heartland Financial USA, Inc., NBI Acquisition Corporation and National Bancshares, Inc. (incorporated by reference to exhibit 2.1 to the Form 8-K, filed August 26, 1999) 4.1 Form of Indenture 4.2 Form of Subordinated Debenture (included as an exhibit to Exhibit 4.1) 4.3 Certificate of Trust 4.4 Trust Agreement 4.5 Form of Amended and Restated Trust Agreement 4.6 Form of Capital Securities Certificate (included as an exhibit to Exhibit 4.5) 4.7 Form of Capital Securities Guarantee Agreement 4.8 Form of Agreement of Expenses and Liabilities (included as an exhibit to Exhibit 4.5) 5.1 Opinion of Barack Ferrazzano Kirschbaum Perlman & Nagelberg 5.2 Opinion of Richards, Layton & Finger, P.A. 8.1 Tax Opinion of Barack Ferrazzano Kirschbaum Perlman & Nagelberg 10.1 Amended and Restated Credit Agreement, Dated as of July 23, 1999 between Heartland Financial USA, Inc. and The Northern Trust Company (incorporated by reference to exhibit 10.16 of Form 10-Q filed on August 16, 1999) 12.1 Calculations of ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred stock dividends 23.1 Consent of KPMG LLP 23.2 Consent of Barack Ferrazzano Kirschbaum Perlman & Nagelberg (included in opinion filed as Exhibit 5.1) 23.3 Consent of Richards, Layton & Finger, P.A. (included in opinion filed as Exhibit 5.2) 23.4 Consent of Barack Ferrazzano Kirschbaum Perlman & Nagelberg (included in opinion filed as Exhibit 8.1) 24.1 Powers of Attorney (included as part of Signature Pages) 25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First Union Trust Company, National Association, as trustee under the Indenture 25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First Union Trust Company, National Association, as trustee under the Trust Agreement 25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First Union Trust Company, National Association, as trustee under the Guarantee Agreement
II-4 ITEM 17. UNDERTAKINGS. (b) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer, or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, each Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (i) The Undersigned Registrants hereby undertake that: (1) For purposes of determining any liability under the Securities act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (j) The undersigned Registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the SEC under Section 305(b)(2) of that Act. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dubuque, State of Iowa, on September 15, 1999. HEARTLAND FINANCIAL USA, INC. By:/s/ Lynn B. Fuller --------------------------------------------------------- Lynn B. Fuller, President and Chief Executive Officer By:/s/ John K. Schmidt --------------------------------------------------------- John K. Schmidt, Executive Vice President and Chief Financial and Accounting Officer Pursuant to the requirements of the Securities Act of 1933, the Trust certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dubuque, State of Iowa, on September 15, 1999. HEARTLAND FINANCIAL CAPITAL TRUST I By:/s/ Lynn B. Fuller ------------------------------ Lynn B. Fuller, Trustee By:/s/ John K. Schmidt ------------------------------ John K. Schmidt, Trustee By:/s/ Jacquie M. Manternach ------------------------------ Jacquie M. Manternach, Trustee S-1 Know all men by these presents, that each person whose signature appears below constitutes and appoints Lynn B. Fuller and John K. Schmidt, and each of them, his or her true and lawful attorney-in-fact and agent, each with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities (including in his or her capacity as a director or officer of Heartland Financial USA, Inc.) to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming al that said attorney-in-fact and agent, or any of them, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on September 15, 1999.
Signature Title --------- ----- /s/ Lynn S. Fuller Chairman of the Board ------------------------------------ Lynn S. Fuller /s/ James A. Schmid Vice Chairman of the Board ------------------------------------ James A. Schmid /s/ Lynn B. Fuller President, Chief Executive Officer and ------------------------------------ Lynn B. Fuller Director /s/ Gregory R. Miller Director ------------------------------------ Gregory R. Miller /s/ Evangeline K. Jansen Director ------------------------------------ Evangeline K. Jansen /s/ Mark C. Falb Director ------------------------------------ Mark C. Falb /s/ Robert Woodward Director ------------------------------------ Robert Woodward
S-2 EXHIBIT INDEX
Exhibit Filed Number Description of Exhibit Incorporated Herein by Reference to Herewith - -------------- ---------------------------------------- ---------------------------------------- ------------ 1.1 Form of Underwriting Agreement for X Capital Securities 2.1 Agreement and Plan of Merger Among Exhibit 2.1 to the Current Report on Heartland Financial USA, Inc., NBI Form 8-K filed August 26, 1999 Acquisition Corporation and National Bancshares, Inc. 4.1 Form of Indenture X 4.2 Form of Subordinated Debenture X (included as an exhibit to Exhibit 4.1) 4.3 Certificate of Trust X 4.4 Trust Agreement X 4.5 Form of Amended and Restated Trust X Agreement 4.6 Form of Capital Securities Certificate X (included as an exhibit to Exhibit 4.5) 4.7 Form of Capital Securities Guarantee X Agreement 4.8 Form of Agreement of Expenses and X Liabilities (included as an exhibit to Exhibit 4.5) 5.1 Opinion of Barack Ferrazzano X Kirschbaum Perlman & Nagelberg 5.2 Opinion of Richards, Layton & Finger, X P.A. 8.1 Tax Opinion of Barack Ferrazzano X Kirshbaum Perlman & Nagelberg 10.1 Amended and Restated Credit Agreement, Exhibit 10.16 to the Form 10-Q filed Dated as of July 23, 1999 between on August 16, 1999 Heartland Financial USA, Inc. and The Northern Trust Company
Exhibit Filed Number Description of Exhibit Incorporated Herein by Reference to Herewith - -------------- ---------------------------------------- ---------------------------------------- ------------ 12.1 Calculations of ratios of earnings to X fixed charges and ratios of earnings to combined fixed charges and preferred stock dividends 23.1 Consent of KPMG LLP X 23.2 Consent of Barack Ferrazzano X Kirschbaum Perlman & Nagelberg (included in opinion filed as Exhibit 5.1) 23.3 Consent of Richards, Layton & Finger, X P.A. (included in opinion filed as Exhibit 5.2) 23.4 Consent of Barack Ferrazzano Kirshbaum X Perlman & Nagelberg (included in opinion filed as Exhibit 8.1) 24.1 Powers of Attorney (included as part of Signature Pages) 25.1 Form T-1 Statement of Eligibility X under the Trust Indenture Act of 1939, as amended, of First Union Trust Company, National Association, as trustee under the Indenture 25.2 Form T-1 Statement of Eligibility X under the Trust Indenture Act of 1939, as amended, of First Union Trust Company, National Association, as trustee under the Trust Agreement 25.3 Form T-1 Statement of Eligibility X under the Trust Indenture Act of 1939, as amended, of First Union Trust Company, National Association, as trustee under the Guarantee Agreement
EX-1.1 2 EXHIBIT 1.1 DRAFT EXHIBIT 1.1 1,000,000 CAPITAL SECURITIES HEARTLAND FINANCIAL CAPITAL TRUST I ________ % CUMULATIVE CAPITAL SECURITIES (LIQUIDATION PREFERENCE OF $25 PER CAPITAL SECURITY) FORM OF UNDERWRITING AGREEMENT ------------------------------ _________ _____, 1999 Dain Rauscher Wessels, a division of Dain Rauscher Incorporated Howe Barnes Investments, Inc. c/o Dain Rauscher Incorporated Dain Rauscher Plaza 60 South Sixth Street Minneapolis, Minnesota 55402 Ladies and Gentlemen: Heartland Financial USA, Inc., a Delaware corporation (the "Company"), and its subsidiary, Heartland Financial Capital Trust I, a statutory business trust organized under the Delaware Business Trust Act (the "Delaware Act") (the "Trust" and, together with the Company, the "Offerors"), propose, subject to the terms and conditions stated herein, to issue and sell to you (the "Underwriters"), an aggregate of 1,000,000 of the Trust's ____% Cumulative Capital Securities, with a liquidation preference of $25.00 per capital security (the "Capital Securities"). The Offerors propose that the Trust issue the Capital Securities pursuant to an amended and restated trust agreement, by First Union Trust Company, National Association, a national banking association ("First Union"), as Property Trustee and Delaware Trustee, the administrative trustees named therein (the "Administrative Trustees") and the Company and by the holders from time to time of undivided beneficial interests in the Trust (the "Trust Agreement"). The Capital Securities will be guaranteed by the Company (the "Guarantee") as set forth in a Capital Securities Guarantee Agreement (the "Guarantee Agreement"), to be dated ________ __, 1999, between the Company and First Union, as trustee (the "Guarantee Trustee"). The proceeds of the sale of the Capital Securities will be used to purchase junior subordinated deferrable interest debentures (the "Junior Subordinated Debentures") issued by the Company pursuant to that certain Indenture, to be dated _________ __, 1999, between the Company and First Union, as trustee (the "Indenture"). 1 The Offerors have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (File Nos. 333-_______ and 333-______) for the registration of the Capital Securities, the Guarantee and the Junior Subordinated Debentures under the Securities Act of 1933, as amended (the "Act") and the rules and regulations thereunder and the qualification of the Indenture, the Trust Agreement and the Guarantee under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and the rules and regulations thereunder. If the Offerors have elected to rely upon Rule 430A under the Act, they will prepare and file a prospectus (or a term sheet meeting the requirements of Rule 434) pursuant to Rule 424(b) that discloses the information previously omitted from the prospectus in reliance upon Rule 430A. Such registration statement, as amended at the time it is or was declared effective by the Commission, and, in the event of any amendment thereto after the effective date and prior to the Closing Date (as hereinafter defined), such registration statement as so amended (but only from and after the effectiveness of such amendment), including a registration statement (if any) filed pursuant to Rule 462(b) under the Act increasing the size of the offering registered under the Act and information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rules 430A(b) and 434(d) under the Act, is hereinafter called the "Registration Statement". The prospectus included in the Registration Statement at the time it is or was declared effective by the Commission is hereinafter called the "Prospectus," except that if any prospectus (including any term sheet meeting the requirements of Rule 434 under the Act provided by the Offerors for use with a prospectus subject to completion within the meaning of Rule 434 under the Act in order to meet the requirements of Section 10(a) of the Act) filed by the Offerors with the Commission pursuant to Rule 424(b) under the Act (and Rule 434 under the Act, if applicable) or any other such prospectus provided to the Underwriters by the Offerors for use in connection with the offering of the Capital Securities (whether or not required to be filed by the Offerors with the Commission pursuant to Rule 424(b) under the Act) differs from the prospectus on file at the time the Registration Statement is or was declared effective by the Commission, the term "Prospectus" shall refer to such differing prospectus (including any term sheet within the meaning of Rule 434 under the Act) from and after the time such prospectus is filed with the Commission or transmitted to the Commission for filing pursuant to such Rule 424(b) (and Rule 434, if applicable) or from and after the time it is first provided to the Underwriters by the Offerors for such use. The term "Preliminary Prospectus" as used herein means the preliminary prospectus included in any Registration Statement prior to the time it becomes or became effective under the Act and any prospectus subject to completion as described in Rule 430A or 434 under the Act. References to the Registration Statement, the Prospectus and the Preliminary Prospectus include all information incorporated therein by reference. Copies of the Registration Statement, including all exhibits and schedules thereto, any amendments thereto and all Preliminary Prospectuses have been delivered to the Underwriters. The Offerors hereby confirm their agreement with respect to the purchase of the Capital Securities by the Underwriters as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS. 2 (a) The Offerors jointly and severally represent and warrant to, and agree with, each of the Underwriters that: (i) The Registration Statement has been declared effective under the Act, and no post-effective amendment to the Registration Statement has been filed with the Commission as of the date of this Agreement. No stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or, to the Company's knowledge, threatened by the Commission. (ii) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission promulgated thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Offerors make no representation or warranty as to information contained in or omitted in reliance upon, and in conformity with, written information furnished to the Offerors by or on behalf of any Underwriter, expressly for use in the preparation thereof. (iii) The Registration Statement and the Prospectus conform in all material respects to the requirements of the Act and the rules and regulations thereunder and the Trust Indenture Act and the rules and regulations thereunder. Neither the Registration Statement, as of its effective date and the date of any amendment thereto, nor the Prospectus contains any untrue statement of a material fact or omits or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Offerors make no representation or warranty as to (i) information contained in or omitted from the Registration Statement or the Prospectus, or any such amendment or supplement, in reliance upon, and in conformity with, written information furnished to the Offerors by or on behalf of any Underwriter, expressly for use in the preparation thereof or (ii) information in those parts of the Registration Statement which constitute Statements of Eligibility and Qualification ("Form T-1") under the Trust Indenture Act. Each Preliminary Prospectus and the Prospectus will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"), except to the extent permitted by Regulation S-T. (iv) The documents of the Company incorporated by reference in the Registration Statement and the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not 3 misleading; and any further documents so filed and incorporated by reference in the Registration Statement and the Prospectus or any further amendment or supplement thereto, when such documents are filed with the Commission will conform in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder, and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (v) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act with full trust power and authority to own property and to conduct its business as described in the Registration Statement and Prospectus and is authorized to do business in each jurisdiction in which such qualification is required, except where the failure to so qualify would not have a material adverse effect on the Trust's condition (financial or otherwise), earnings, business, prospects, assets, results of operations or properties taken as a whole; the Trust has conducted and will conduct no business other than the transactions contemplated by the Trust Agreement and described in the Prospectus; the Trust is not a party to or otherwise bound by any agreement other than this Agreement and those described in the Prospectus; the Trust is and will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation; and the Trust is and will be treated as a consolidated subsidiary of the Company pursuant to generally accepted accounting principles. (vi) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"), supervised by the Board of Governors of the Federal Reserve System (the "FRB"). The subsidiaries of the Company are Dubuque Bank and Trust Company ("DB&T"), DB&T Insurance, Inc., DB&T Community Development Corp., Galena State Bank and Trust Company ("GSB"), Riverside Community Bank ("RCB"), First Community Bank, FSB ("FCB"), KFS Services Inc., Wisconsin Community Bank ("WCB"), DBT Investment Corporation, New Mexico Bank & Trust ("NMB"), Citizens Finance Co., ULTEA, Inc. and Keokuk Bancshares, Inc. (each a ASubsidiary" and collectively the ASubsidiaries"). DB&T is a commercial bank chartered under the laws of the State of Iowa. GSB and RCB are commercial banks chartered under the laws of the State of Illinois. FCB is a capital stock savings bank having a valid charter from the federal government of the United States. FCB is a member in good standing of the Federal Home Loan Bank of Des Moines. WCB is a commercial bank chartered under the laws of the State of Wisconsin. NMB is a commercial bank chartered under the laws of the State of New Mexico. None of DB&T, GSB, RCB, WCB and NMB are Federal Reserve Bank members. Each Subsidiary has been duly incorporated or organized and is validly existing and in good standing under the laws of the jurisdiction of its incorporation. Each of the Company and the Subsidiaries has the corporate power and authority to own or lease its properties and conduct its business as described in the Prospectus; is, to the Company's knowledge, in compliance with all federal and state regulatory rules and guidelines; and is duly qualified to transact business in all jurisdictions in which the conduct of its business or its ownership or leasing of property requires 4 such qualification and the failure so to qualify would have a material adverse effect on the business or condition, financial or otherwise, of the Company and the Subsidiaries, taken as a whole. All outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable, and are owned, directly or indirectly, by the Company free and clear of all liens, encumbrances and security interests, except as disclosed in the Registration Statement and Prospectus and except that approximately 20% of the outstanding shares of capital stock of NMB are not owned, directly or indirectly, by the Company. No options, warrants or other rights to purchase, agreements or other obligations to issue, or other rights to convert any obligations into, shares of capital stock or ownership interests in any of the Subsidiaries are outstanding. (vii) All of the issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, were offered and sold in compliance with all federal and state securities laws, and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. Except as otherwise stated in the Registration Statement and Prospectus, there are no preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, the Junior Subordinated Debentures, the common securities of the Trust held by the Company (the "Common Securities") or the Capital Securities. Neither the filing of the Registration Statement nor the registration of the Capital Securities, the Guarantee or the Junior Subordinated Debentures gives rise to any rights for or relating to the registration of any capital stock or other securities of the Company or the Trust. The Company has an authorized and outstanding capitalization as set forth in the Registration Statement and the Prospectus. (viii) Each of this Agreement, the Indenture, the Trust Agreement and the Guarantee Agreement has been duly authorized, executed and delivered by the Company and/or the Trust, as the case may be, and constitutes a valid, legal and binding obligation of the Company and/or the Trust, as the case may be, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity and, with respect to Section 7 hereof, by the public policy underlying the federal or state securities laws. The execution, delivery and performance of this Agreement, the Indenture, the Trust Agreement and the Guarantee Agreement and the consummation of the transactions herein or therein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, (x) any statute, any indenture, mortgage, deed of trust, loan agreement, lease, franchise, license or other agreement or instrument to which the Trust, the Company or any of the Subsidiaries is a party or by which the Trust, the Company or any of the Subsidiaries is bound or to which any property or assets of the Trust, the Company or any of the Subsidiaries is subject or any order, rule, regulation, order, agreement or decree of any court or governmental agency or body having jurisdiction over the Company, any Subsidiary or the Trust or any of the properties of the Company, any Subsidiary or the Trust or (y) the Company's or any Subsidiary's charter or bylaws or the Trust Agreement or the Trust's certificate of trust filed with the State of 5 Delaware on ________ __, 1999 (the "Certificate of Trust"). No consent, approval, authorization or order of, or filing with, any court or governmental agency or body is required for the execution, delivery and performance of this Agreement, the Indenture, the Trust Agreement and the Guarantee Agreement or for the consummation of the transactions contemplated hereby or thereby, including the issuance or sale of the Junior Subordinated Debentures by the Company and the Common Securities and the Capital Securities by the Trust, except such as may be required under the Act, all of which have been obtained or made, and under state securities or blue sky laws. Each of the Company and the Trust has full power and authority to enter into this Agreement, the Indenture, the Trust Agreement and the Guarantee Agreement, as the case may be, and to authorize, issue and sell the Junior Subordinated Debentures or the Common Securities and the Capital Securities, as the case may be, as contemplated by this Agreement; and each of the Indenture, the Trust Agreement and the Guarantee Agreement has been duly qualified under the Trust Indenture Act and will conform in all material respects to the statements relating thereto in the Registration Statement and the Prospectus. (ix) The Junior Subordinated Debentures have been duly authorized by the Company and at the Closing Date will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered against payment therefor as described in the Prospectus, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity, will be in the form contemplated by, and entitled to the benefits of, the Indenture, will conform in all material respects to the statements relating thereto in the Prospectus, and will be owned by the Trust free and clear of any security interest, pledge, lien, encumbrance, claim or equity. (x) The Common Securities have been duly authorized by the Trust Agreement and, when issued and delivered by the Trust to the Company against payment therefor as described in the Prospectus, will be validly issued and (subject to the terms of the Trust Agreement) fully paid and nonassessable undivided beneficial interests in the assets of the Trust and will conform in all material respects to all statements relating thereto contained in the Prospectus; and at the Closing Date all of the issued and outstanding Common Securities of the Trust will be directly owned by the Company free and clear of any security interest, pledge, lien, encumbrance, claim or equity. (xi) The Capital Securities have been duly authorized by the Trust Agreement and, when issued and delivered pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable undivided beneficial interests in the Trust, will be entitled to the benefits of the Trust Agreement and will conform in all material respects to the statements relating thereto contained in the Prospectus; and holders of Capital Securities will be entitled to the same limitation of personal liability under Delaware law as extended to stockholders of private corporations for profit. 6 (xii) The Indenture, the Trust Agreement and the Guarantee Agreement are in substantially the respective forms filed as exhibits to the Registration Statement. (xiii) The Company's obligations under the Guarantee are subordinated and junior in right of payment to all Senior and Subordinated Debt (as defined in the Indenture) of the Company. (xiv) The Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior and Subordinated Debt of the Company. (xv) Each of the Administrative Trustees of the Trust is an officer of the Company and has been duly authorized by the Company to execute and deliver the Trust Agreement. (xvi) The financial statements, together with the related notes and schedules, contained or incorporated by reference in the Registration Statement and Prospectus present fairly the consolidated financial position, results of operations, shareholders' equity and cash flows of the Company and its consolidated Subsidiaries on the basis stated therein at the indicated dates and for the indicated periods. Such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as expressly stated therein, and all adjustments necessary for a fair presentation of results for such periods have been made, except as otherwise stated therein. The selected financial and statistical data included in the Registration Statement and the Prospectus present fairly the information shown therein on the basis stated in the Registration Statement and the Prospectus and have been compiled on a basis consistent with the financial statements presented therein. (xvii) There is no action, suit or proceeding pending or, to the knowledge of the Trust or the Company, threatened or contemplated against any of the Trust, the Company or any Subsidiary before any court or administrative or regulatory agency which, if determined adversely to the Trust, the Company or such Subsidiary would, individually or in the aggregate, result in a material adverse change in the business or condition (financial or otherwise), results of operations, shareholders' equity or prospects of the Trust, or of the Company and it Subsidiaries taken as a whole, except as set forth in the Registration Statement or the Prospectus. (xviii) There are no contracts or documents of the Trust or the Company or any Subsidiary that are required by the Act or by the rules and regulations thereunder to be filed as exhibits to the Registration Statement or any document incorporated by reference therein which contracts or documents have not been so filed. (xix) The Company and the Subsidiaries have good and marketable title to all properties and assets reflected as owned in the financial statements hereinabove described (or as described as owned in the Prospectus), in each case free and clear of all liens, 7 encumbrances and defects, except such as are described in the Prospectus or do not substantially affect the value of such properties and assets and do not materially interfere with the use made and proposed to be made of such properties and assets by the Company and the Subsidiaries; and any real property and buildings held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and the Subsidiaries. (xx) Since the respective dates as of which information is given in the Registration Statement, as it may be amended or supplemented, (A) there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the condition, financial or otherwise, of the Trust, or of the Company and the Subsidiaries taken as a whole, or the business affairs, management, financial position, shareholders' equity or results of operations of the Trust, or of the Company and the Subsidiaries taken as a whole, whether or not occurring in the ordinary course of business, including, without limitation, any material increase in delinquencies or the amount or number of classified assets of the Company, any decrease in net interest margin for any month, or any material decrease in the volume of loan originations, the amount of deposits or the amount of loans, (B) there has not been any transaction not in the ordinary course of business entered into by the Trust, the Company or any of the Subsidiaries which is material to the Trust, or the Company and the Subsidiaries taken as a whole, other than transactions described or contemplated in the Registration Statement, (C) the Trust, the Company and the Subsidiaries have not incurred any material liabilities or obligations, which are not in the ordinary course of business or which could result in a material reduction in the future earnings of the Trust, or the Company and the Subsidiaries taken as a whole, (D) the Trust, the Company and the Subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance, (E) there has not been any change in the capital stock of the Company or the Subsidiaries (other than upon the exercise of options and warrants described in the Registration Statement), or any material increase in the short-term or long-term debt (other than the Junior Subordinated Debentures) (including capitalized lease obligations) of the Company and the Subsidiaries taken as a whole, and (F) there has not been any declaration or payment of any dividends or any distributions of any kind with respect to the capital stock of the Company or the Subsidiaries other than any dividends or distributions described or contemplated in the Registration Statement and the Company's regular quarterly common stock dividend. (xxi) Neither the Company nor any of the Subsidiaries is in violation of its respective charter or bylaws; the Trust is not in violation of the Trust Agreement or its Certificate of Trust; and none of the Trust, the Company, or the Subsidiaries is in violation of or otherwise in default under any statute, or any rule, regulation, order, supervisory agreement, judgment, decree or authorization of any court or governmental or administrative agency or body having jurisdiction over the Trust, the Company or any of the Subsidiaries or any of their properties, or any indenture, mortgage, deed of trust, loan agreement, lease, franchise, license or 8 other agreement or instrument to which the Trust, the Company or any of the Subsidiaries is a party or by which any of them are bound or to which any property or assets of the Trust, the Company or any of the Subsidiaries is subject, which violation or default would have a material adverse effect on the business, condition (financial or otherwise), results of operations, shareholders' equity or prospects of the Trust, or of the Company and the Subsidiaries taken as a whole. (xxii) The Trust, the Company and each of the Subsidiaries holds and is operating in compliance in all material respects with all licenses, approvals, certificates and permits from governmental and regulatory authorities which are necessary to the conduct of its business as described in the Prospectus. Without limiting the generality of the foregoing, the Company has all necessary federal or state approvals to own the stock of the Subsidiaries. None of the Trust, the Company or any Subsidiary has received notice of or has knowledge of any basis for any proceeding or action relating specifically to the Trust, the Company or the Subsidiaries for the revocation or suspension of any such consent, authorization, approval, order, license, certificate or permit or any other action or proposed action by any regulatory authority having jurisdiction over the Trust, the Company or the Subsidiaries that would have a material adverse effect on the Trust, the Company or any Subsidiary. (xxiii) KPMG LLP, which have certified certain of the financial statements filed with the Commission and incorporated by reference into the Registration Statement, are independent public accountants with respect to the Company as required by the Act and the rules and regulations thereunder. (xxiv) The Offerors have not taken and will not take, directly or indirectly, any action designed to, or which has constituted, or which might reasonably be expected to cause or result in, stabilization or manipulation of the price of the Capital Securities. (xxv) The Offerors' registration statement pursuant to Section 12(b) of the Exchange Act with respect to the Capital Securities has been declared effective by the Commission; and the Capital Securities have been approved for designation upon notice of issuance on the American Stock Exchange under the symbol "_____." (xxvi) The Offerors have not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Capital Securities other than any Preliminary Prospectus or the Prospectus or other materials permitted by the Act to be distributed by the Company. (xxvii) The deposit accounts of each of DB&T, GSB, RCB, FCB, WCB and NMB are insured by the Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent provided by law. No proceeding for the termination of such insurance is pending or, to the knowledge of the Company, is threatened. Neither the Company nor any Subsidiary has received or is subject to any directive, order or supervisory agreement or arrangement from the 9 FRB, the FDIC, the Office of Thrift Supervision (the AOTS"), or any other state or federal regulatory authority to make any material change in the method of conducting their respective businesses that has not been complied with in all material respects. (xxviii) The Offerors are in material compliance with all provisions of Florida Statutes Section 517.075 (Chapter 92-198, laws of Florida). Neither of the Offerors nor any of their affiliates does any business, directly or indirectly, with the government of Cuba or with any person or entity located in Cuba. (xxix) The Trust, the Company and the Subsidiaries have filed all federal, state, local and foreign tax returns or reports required to be filed (including extensions), and have paid in full all taxes indicated by said returns or reports and all assessments received by it or any of them to the extent that such taxes have become due and payable (including extensions), except where the Trust, the Company and the Subsidiaries are contesting in good faith such taxes and assessments. The Company and the Subsidiaries have also filed all required applications, reports, returns and other documents and information with all state and federal savings bank authorities and agencies. (xxx) The Trust, the Company and each of the Subsidiaries owns or licenses all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and other similar rights necessary for the conduct of their businesses as described in the Prospectus, except where the failure to so own would not have a material adverse effect on the Trust, the Company or any Subsidiary, taken as a whole. Neither the Trust nor the Company has any knowledge of any infringement by them or the Subsidiaries of any patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets or other similar rights of others, and none of the Trust, the Company or any of the Subsidiaries has received any notice or claim of conflict with the asserted rights of others with respect to any of the foregoing. (xxxi) None of the Trust, the Company or any of the Subsidiaries is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or an "investment adviser" within the meaning of the Investment Advisers Act of 1940, as amended. (xxxii) The Company and its Subsidiaries maintain, and the Trust will maintain, a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to records is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with 10 respect to any differences. (xxxiii) Other than as contemplated by this Agreement and as disclosed in the Registration Statement, the Company has not incurred any liability for any finder's or broker's fee or agent's commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. (xxxiv) No report or application filed by the Company or any of its Subsidiaries with the FRB, the FDIC, the OTS or any other state or federal regulatory authority, as of the date it was filed or amended, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading when made or failed to comply in all material respects with the applicable requirements of the FRB, the FDIC, the OTS, or any other state or federal regulatory authority, as the case may be. (xxxv) Based upon current guidelines of the FRB, the Junior Subordinated Debentures will constitute "tier 1" capital (as defined in 12 C.F.R. Part 225), subject to applicable regulatory restrictions on the amount thereof that can be included in tier 1 capital. (xxxvi) The Offerors meet all of the requirements for the use of Form S-3 to register the Capital Securities, the Guarantee and the Junior Subordinated Debentures under the Act. (xxxvii) National Bancshares, Inc. ("National") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Mexico and is duly registered as a bank holding company under the BHC Act. The First National Bank of Clovis ("Clovis Bank") has been duly organized and is validly existing as a national banking association under the laws of the United States. The deposit accounts of Clovis Bank are insured by the FDIC to the fullest extent provided by law. Each of National and Clovis Bank has the corporate power and authority to own or lease its properties and conduct its business as described in the Prospectus and is duly qualified to transact business in all jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification and the failure so to comply or qualify would have a material adverse effect on its business or condition, financial or otherwise. All outstanding shares of capital stock of Clovis Bank have been duly authorized and validly issued, are fully paid and non-assessable, and are owned, directly or indirectly, by National, free and clear of all liens, encumbrances and security interests, except as disclosed in the Prospectus. No options, warrants or other rights to purchase, agreements or other obligations to issue, or other rights to convert any obligations into, shares of capital stock or ownership interests in Clovis Bank are outstanding. (xxxviii) The Offerors have provided the Underwriters with copies of the audited consolidated balance sheets of National as of December 31, 1998 and 1997 and the related audited consolidated statements of income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 1998, together with the related notes and schedules, and copies of the unaudited consolidated balance sheets of National 11 as of June 30, 1999 and December 31, 1998 and the related unaudited consolidated statements of income, cash flows and changes in shareholders' equity for the three and six month periods ended June 30, 1999 and 1998, together with the related notes and schedules (collectively the "National Financial Statements"). The National Financial Statements present fairly the consolidated financial position, results of operations, shareholders' equity and cash flows of National and its consolidated subsidiaries on the basis stated therein at the indicated dates and for the indicated periods. The National Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as expressly stated therein, and all adjustments necessary for a fair presentation of results for such periods have been made, except as otherwise stated therein. (xxxix) Except as disclosed in the Prospectus, there are no issues known to the Offerors that make consummation of the transactions contemplated by the Agreement and Plan of Merger, dated August 17, 1999 (the "Merger Agreement"), among the Company, NBI Acquisition Corporation and National, improbable. (b) Any certificate signed by or on behalf of the Trust or the Company and delivered to the Underwriters or counsel to the Underwriters shall be deemed to be a representation and warranty of the Trust or the Company to each Underwriter as to the matters covered thereby. 2. PURCHASE, SALE AND DELIVERY OF CAPITAL SECURITIES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Trust agrees to issue and sell to each Underwriter, and each of the Underwriters agrees, severally and not jointly, to purchase from the Trust, at a purchase price per Capital Security of $25.00, the number of Capital Securities set forth opposite the name of such Underwriter in Schedule A hereto. As compensation to the Underwriters for their commitments hereunder and in view of the fact that the proceeds of the sale of the Capital Securities (together with the entire proceeds from the sale by the Trust to the Company of the Common Securities) will be used to purchase the Junior Subordinated Debentures, the Company hereby agrees to pay at the Closing Date to the Underwriters a commission of $____ per Capital Security sold by the Trust hereunder. The Capital Securities will be delivered by the Company to the Underwriters against payment of the purchase price therefor at the offices of Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., 7th Floor, Washington, D.C. 20005, or such other location as may be mutually acceptable, at 10:00 a.m. Eastern time on _________ __, 1999, or such other time and date as the Underwriters and the Company may agree upon in writing, such time and date of delivery being herein referred to as the "Closing Date." The purchase price shall be payable by wire transfer of immediately available funds to an account designated by the Trust at least two business days preceding the Closing Date. The Underwriters' commission shall be payable by wire transfer of immediately available funds to an account designated by the Underwriters at least two business days preceding the Closing Date. Delivery of the Capital Securities may be 12 made by credit through full fast transfer to the accounts at The Depository Trust Company ("DTC") designated by the Underwriters. Certificates representing the Capital Securities, in definitive form and in such denominations and registered in such names as the Underwriters may request upon at least two business days' prior notice to the Company shall be prepared and will be made available for checking and packaging, not later than 10:30 a.m., Central time, on the business day next preceding the Closing Date at the offices of Dain Rauscher Incorporated, Dain Rauscher Plaza, 60 South Sixth Street, Minneapolis, Minnesota, or such other location as may be mutually acceptable. It is understood that any Underwriter may (but shall not be obligated to) make payment to the Company on behalf of the other Underwriter for the Securities to be purchased by such Underwriter. Any such payment shall not relieve such other Underwriter of any of its obligations hereunder. Nothing herein contained shall constitute the Underwriters as an unincorporated association or partner with either or both Offerors. 3. OFFERING BY UNDERWRITERS. It is understood that the several Underwriters propose to make a public offering of the Capital Securities as soon as the Underwriters deem it advisable to do so. The Capital Securities are to be initially offered to the public at the initial public offering price set forth in the Prospectus. The Underwriters may from time to time thereafter change the public offering price and other selling terms. 4. COVENANTS OF THE OFFERORS. The Offerors jointly and severally covenant and agree with the several Underwriters that: (a) If the Registration Statement has not already been declared effective by the Commission, the Company will use its best efforts to cause the Registration Statement and any post-effective amendments thereto to become effective as promptly as possible; the Company will notify the Underwriters promptly of the time when the Registration Statement or any post-effective amendment to the Registration Statement has become effective or any supplement to the Prospectus (including any term sheet within the meaning of Rule 434 under the Act) has been filed and of any request by the Commission for any amendment or supplement to the Registration Statement or Prospectus or additional information; if the Company has elected to rely on Rule 430A under the Act, the Company will prepare and file a Prospectus (or term sheet within the meaning of Rule 434 under the Act) containing the information omitted therefrom pursuant to Rule 430A under the Act with the Commission within the time period required by, and otherwise in accordance with the provisions of, Rules 424(b), 430A and 434, if applicable; the Offerors will prepare and file with the Commission, promptly upon the Underwriters' request, any amendments or supplements to the Registration Statement or Prospectus (including any term sheet within the meaning of Rule 434 under the Act) that, in their opinion, may be necessary or advisable in connection with their distribution of the Capital Securities; and the Offerors will not file any amendment or supplement to the Registration Statement or Prospectus (including any term sheet within the meaning of Rule 434 under the Act) to which the Underwriters shall reasonably object by notice to the Company after having 13 been furnished a copy a reasonable time prior to the filing. (b) The Offerors will advise the Underwriters promptly of any request of the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, or of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus, of the suspension of the qualification of the Capital Securities for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for that purpose, and the Offerors will use their best efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus or suspending such qualification and to obtain as soon as possible the lifting thereof, if issued. (c) The Offerors will cooperate with the Underwriters and the Underwriters' counsel in order to qualify the Capital Securities for sale under the securities laws of such jurisdictions as the Underwriters' may reasonably have designated in writing and to continue such qualifications in effect for so long as the Underwriters may reasonably request for distribution of the Capital Securities (or obtain exemptions from the application of such laws), provided that neither Offeror shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Offerors will, from time to time, prepare and file such statements, reports and other documents as may be requested by the Underwriters for that purpose. (d) The Offerors will furnish the Underwriters with as many copies of any Preliminary Prospectus as the Underwriters may reasonably request and, during the period when delivery of a prospectus is required under the Act, the Offerors will furnish the Underwriters with as many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Underwriters may, from time to time, reasonably request. The Offerors will deliver to the Underwriters, at or before the Closing Date, two conformed copies of the Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Underwriters such number of conformed copies of the Registration Statement, without exhibits, and of all amendments thereto, as the Underwriters may reasonably request. (e) If, during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or if for any other reason it shall be necessary at any time to amend or supplement the Prospectus to comply with any law, the Offerors promptly will prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as so amended or supplemented will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein in light of the circumstances when it is so delivered, not misleading, or so that the Prospectus will comply with law. 14 (f) The Offerors will make generally available to their security holders, as soon as it is practicable to do so, but in any event not later than 18 months after the effective date of the Registration Statement, an earnings statement (which need not be audited) in reasonable detail, covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, which earnings statement shall satisfy the requirements of Section 11(a) of the Act and Rule 158 thereunder and will advise the Underwriters in writing when such statement has been so made available. (g) The Company will, for five years from the Closing Date, deliver to each Underwriter, as soon as they are available, copies of its annual report and copies of all other documents, reports and information furnished by the Company to its security holders or filed with any securities exchange pursuant to the requirements of such exchange or with the Commission pursuant to the Act or the Exchange Act. The Company will deliver to each Underwriter similar reports with respect to significant subsidiaries, as that term is defined in the rules and regulations under the Act, which are not consolidated in the Company's financial statements. (h) The Offerors will apply the net proceeds from the sale of the Junior Subordinated Debentures and the Capital Securities substantially in accordance with the purposes set forth under "Use of Proceeds" in the Prospectus. (i) The Offerors will use their best efforts to maintain the listing of the Capital Securities on the American Stock Exchange. (j) The Offerors shall promptly notify the Underwriters if any issues arise that make consummation of the transactions contemplated by the Merger Agreement materially less probable. 5. COSTS AND EXPENSES. (a) The Offerors will pay (directly or by reimbursement) all costs, expenses and fees incident to the performance of the obligations of the Offerors under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Offerors; the fees and disbursements of counsel for the Offerors; the cost of preparing, printing and filing of the Registration Statement, the Preliminary Prospectus(es) and the Prospectus and any amendments and supplements thereto and the printing, mailing and delivery to the Underwriters and dealers of copies thereof and of this Agreement, any selected dealers agreement, any blue sky memorandum and any supplements or amendments thereto (excluding, except as provided below, fees and expenses of counsel to the Underwriters); the filing fees of the Commission; the filing fees and expenses (including legal fees and disbursements of counsel for the Underwriters) incident to securing any required review by the NASD of the terms of the sale of the Capital Securities; the fees and expenses of the Indenture Trustee, including the fees 15 and disbursements of counsel for the Indenture Trustee in connection with the Indenture and Junior Subordinated Debentures; the fees and expenses of the Property Trustee and the Delaware Trustee, including the fees and disbursements of counsel for the Property Trustee and the Delaware Trustee in connection with the Trust Agreement and the Certificate of Trust; the fees and expenses of the Guarantee Trustee, including the fees and disbursements of counsel for the Guarantee Trustee in connection with the Guarantee and Guarantee Agreement; listing fees, if any, transfer taxes and the expenses, including the fees and disbursements of counsel for the Underwriters, incurred in connection with the qualification of the Capital Securities under state securities or Blue Sky laws; the fees and expenses incurred in connection with the listing of the Capital Securities on the American Stock Exchange; the costs of preparing certificates representing Junior Subordinated Debentures or Capital Securities; the costs and fees of any registrar or transfer agent and all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section 5. Notwithstanding anything to the contrary in the foregoing sentence, the Offerors shall not be required to pay more than an aggregate of (i) $______ of fees and expenses (x) related to qualification of the Capital Securities under state securities or Blue Sky laws or (y) incident to securing any required review by the NASD of the terms of the sale of the Capital Securities and (ii) $______ of fees and expenses of the Guarantee Trustee, including the fees and disbursements of counsel for the Guarantee Trustee in connection with the Guarantee and Guarantee Agreement. The Offerors shall not be required to pay for any of the Underwriters' expenses (other than those related to qualification of the Capital Securities under state securities or Blue Sky laws and those incident to securing any required review by the NASD of the terms of the sale of the Capital Securities which shall be paid by the Offerors as provided above) except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof are not satisfied, or because this Agreement is terminated by the Underwriters pursuant to Section 9(b) hereof, or by reason of any failure, refusal or inability on the part of the Offerors to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on either of their parts to be performed, unless such failure to satisfy said condition or to comply with said terms shall be due to the default or omission of any Underwriter, then the Offerors promptly upon request by the Underwriters shall reimburse the several Underwriters for all actual, accountable out-of-pocket expenses, including fees and disbursements of counsel reasonably incurred in connection with investigating, marketing and proposing to market the Capital Securities or in contemplation of performing their obligations hereunder; but the Offerors shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Capital Securities. (b) Upon successful completion of the offering contemplated by this Agreement, the Offerors will pay all reasonable and customary costs, expenses and fees incident to tombstone advertisements of the offering and incurred with the approval of the Company. 6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations of the Underwriters to purchase the Capital Securities on the 16 Closing Date are subject to the condition that all representations and warranties of the Offerors contained herein are true and correct, at and as of the Closing Date, and the condition that each Offeror shall have performed all of its covenants and obligations hereunder and to the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 4(a) hereof (or any required post-effective amendment to the Registration Statement shall have been filed and declared effective in accordance with the requirements of Rule 430A); no stop order suspending the effectiveness of the Registration Statement, as amended from time to time, or any part thereof shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to the reasonable satisfaction of the Underwriters. (b) The Underwriters shall have received on the Closing Date the opinions of Barack Ferrazzano Kirschbaum Perlman & Nagelberg, counsel for the Offerors, dated the Closing Date, addressed to the Underwriters, in the form attached hereto as EXHIBIT 1. Such counsel shall also state that on the basis of such counsel's review and participation in conferences in connection with the preparation of the Registration Statement and the Prospectus, such counsel has no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Offerors prior to the Closing Date, including any document incorporated by reference in the Registration Statement, as the case may be (other than the financial statements, other financial and statistical data and related schedules therein, as to which such counsel need express no statement) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Offerors prior to the Closing Date, including any document incorporated by reference in the Prospectus (other than the financial statements, other financial and statistical data and related schedules therein, as to which such counsel need express no statement) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading or that, as of the Closing Date, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Offerors prior to the Closing Date (other than the financial statements, other financial and statistical data and related schedules therein, as to which such counsel need express no statement) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; and they do not know of any amendment to the Registration Statement (or any document incorporated therein by reference) required to be filed. In rendering the above opinions, counsel may rely (i) as to matters of law other than 17 federal law, upon the opinion or opinions of local counsel provided that the extent of such reliance is specified in such opinion and that such counsel shall state that such opinion or opinions of local counsel are satisfactory to them and they believe they and the Underwriters are justified in relying thereon and (ii) as to matters of fact, upon the representations of the Trust and the Company contained in this Agreement and upon certificates of trustees or officers of the Trust, the Company and of public officials. (c) The Underwriters shall have received on the Closing Date the opinions of _________________________, dated the Closing Date addressed to the Underwriters, to the effect that: (i) The statements set forth in the Prospectus under the caption "Federal Income Tax Consequences" constitute a fair and accurate summary of the matters addressed therein, based upon current law and the assumptions stated or referred to therein. (ii) Under current law, the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation; accordingly, for United States federal income tax purposes each beneficial owner of Capital Securities will be treated as owning an undivided beneficial interest in the Junior Subordinated Debentures, and stated interest on the Junior Subordinated Debentures generally will be included in income by a holder of Capital Securities at the time such interest income is paid or accrued in accordance with such holder's regular method of tax accounting. (iii) For federal income tax purposes, (a) the Junior Subordinated Debentures will constitute indebtedness of the Company and (b) the interest on the Junior Subordinated Debentures will be deductible by the Company on an economic accrual basis in accordance with Section 163(e) of the Internal Revenue Code of 1986, as amended, and Treasury Regulation Section 1.163-7. (d) The Underwriters shall have received on the Closing Date the opinion of Richards, Layton & Finger, counsel to First Union, as Property Trustee under the Trust Agreement, Indenture Trustee under the Indenture, and Guarantee Trustee under the Guarantee Agreement, dated the Closing Date, addressed to the Underwriters, to the effect that: (i) First Union is a national banking association, duly organized and validly existing under the laws of the United States. (ii) First Union has the power and authority to execute, deliver and perform its obligations under the Trust Agreement, the Indenture and the Guarantee Agreement. (iii) Each of the Trust Agreement, the Indenture and the Guarantee Agreement has been duly authorized, executed and delivered by First Union and constitutes a legal, valid and binding obligation of First Union, enforceable against First Union in accordance 18 with its terms. (iv) The execution, delivery and performance by First Union of the Trust Agreement, the Indenture and the Guarantee Agreement do not conflict with or constitute a breach of the articles of association or by-laws of First Union. (v) No consent, approval or authorization of, or registration with or notice to, any governmental authority or agency governing the banking or trust powers of First Union is required for the execution, delivery or performance by First Union of the Trust Agreement, the Indenture and the Guarantee Agreement. (e) The Underwriters shall have received on the Closing Date the opinion of Richards, Layton & Finger, as special Delaware counsel for the Offerors, dated the Closing Date, addressed to the Underwriters, to the effect that: (i) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act, and all filings required as of the date hereof under the Delaware Act with respect to the creation and valid existence of the Trust as a business trust have been made. (ii) Under the Trust Agreement and the Delaware Act, the Trust has the trust power and authority to own property and to conduct its business, all as described in the Prospectus. (iii) The Trust Agreement constitutes a valid and binding obligation of the Company, the Property Trustee and each of the Administrative Trustees, and is enforceable against the Company, the Property Trustee and each of the Administrative Trustees in accordance with its terms. (iv) Under the Trust Agreement and the Delaware Act, the Trust has the trust power and authority (i) to execute and deliver, and to perform its obligations under, this Agreement, and (ii) to issue, and to perform its obligations under, the Capital Securities and the Common Securities. (v) Under the Trust Agreement and the Delaware Act, the execution and delivery by the Trust of this Agreement, and the performance by the Trust of its obligations under this Agreement, have been duly authorized by all necessary trust action on the part of the Trust. (vi) Under the Delaware Act, the certificate attached to the Trust Agreement as Exhibit D is an appropriate form of certificate to evidence ownership of the Capital Securities. The Capital Securities have been duly authorized by the Trust Agreement and are duly and validly issued and, subject to the qualifications hereinafter expressed in this paragraph (vi), fully paid and non-assessable undivided beneficial interests in the assets of the Trust and are entitled to the benefits of the Trust Agreement. The Common Securities have been duly 19 authorized by the Trust Agreement and are duly and validly issued undivided beneficial interests in the assets of the Trust and are entitled to the benefits of the Trust Agreement. The holders of the Capital Securities, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. Such counsel may note that the respective holders of the Capital Securities may be obligated, pursuant to the Trust Agreement, to make certain payments under the Trust Agreement. (vii) Under the Trust Agreement and the Delaware Act, the issuance of the Capital Securities and the Common Securities is not subject to preemptive or similar rights. (viii) The issuance and sale by the Trust of the Capital Securities and the Common Securities, the purchase by the Trust of the Junior Subordinated Debentures, the execution, delivery and performance by the Trust of this Agreement and the Guarantee Agreement, the consummation by the Trust of the transactions contemplated by this Agreement and compliance by the Trust with its obligations under this Agreement do not violate (a) any of the provisions of the Certificate of Trust or the Trust Agreement, or (b) any applicable Delaware law or Delaware administrative regulation. (ix) No authorization, approval, consent or order of any Delaware court or any Delaware governmental authority or Delaware agency is required to be obtained by the Trust solely in connection with the issuance and sale by the Trust of the Common Securities or the Capital Securities or the performance by the Trust of its obligations under the Trust Agreement or this Agreement. (x) The Capital Security holders (other than those Capital Security holders who reside or are domiciled in the State of Delaware) will have no liability for income taxes imposed by the State of Delaware solely as a result of their participation in the Trust, and the Trust will not be liable for any income tax imposed by the State of Delaware or any political subdivisions or taxing authority thereof. (f) The Underwriters shall have received from Silver, Freedman & Taff, L.L.P., counsel for the Underwriters, an opinion dated the Closing Date, with respect to the formation of the Trust, the validity of the Capital Securities, the Indenture, the Trust Agreement, the Guarantee Agreement, this Agreement, the Registration Statement, the Prospectus, and other related matters as the Underwriters may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. In rendering the above opinions, counsel may rely (i) as to matters of law other than federal law, upon the opinion or opinions of local counsel provided that the extent of such reliance is specified in such opinion and (ii) as to matters of fact, upon the representations of the Trust and the Company contained in this Agreement and upon certificates of trustees or officers of the Trust, the Company and of public officials. 20 (g) The Underwriters shall have received on each of the date hereof and the Closing Date signed letters, dated as of the date hereof and the Closing Date in form and substance reasonably satisfactory to the Underwriters, from KPMG LLP, (i) to the effect that they are independent public accountants with respect to the Trust, the Company and the Subsidiaries within the meaning of the Act and the related rules and regulations, (ii) containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus and (iii) confirming that the Trust is and will be treated as a consolidated subsidiary of the Company pursuant to generally accepted accounting principles. (h) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have been any change, or any development involving a reasonably foreseeable change, in or affecting the general affairs, management, financial position, shareholders' equity or results of operations of the Offerors otherwise than as set forth or contemplated in the Prospectus, the effect of which, in the Underwriters' reasonable judgment, is material and adverse to the Offerors and makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Capital Securities being delivered at the Closing Date on the terms and in the manner contemplated in the Prospectus. (i) The Underwriters shall have received on the Closing Date a certificate or certificates of the chief executive officer and the chief financial officer of the Company, to the effect that, as of the Closing Date, each of them severally represents as follows: (i) The Prospectus was filed with the Commission pursuant to Rule 424(b) within the applicable period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 4 of this Agreement; no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for such purpose have been initiated or are, to his knowledge, threatened by the Commission. (ii) The representations and warranties of the Company set forth in Section 1 of this Agreement are true and correct at and as of the Closing Date, and the Company has performed all of its obligations under this Agreement to be performed at or prior to the Closing Date. (iii) The signers of said certificate have carefully examined the Registration Statement and the Prospectus, and any amendments thereof or supplements thereto (including any term sheet within the meaning of Rule 434 under the Act), and (a) such documents contain all statements and information required to be included therein, the Registration Statement, or any amendment thereof, does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus, as amended or supplemented, does not include any untrue statement of material fact or omit to state a material fact necessary to make 21 the statements therein, in light of the circumstances under which they were made, not misleading, (B) since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amended or supplemented prospectus which has not been so set forth, (C) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, neither the Company nor any of its Subsidiaries has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business, or declared or paid any dividends or made any distribution of any kind with respect to its capital stock (other than any dividends or distributions described or contemplated in the Registration Statement and the Prospectus and the Company's regular quarterly common stock dividend), and except as disclosed in the Prospectus, there has not been any change in the capital stock, or any material change in the short-term or long-term debt, or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock of the Company or any Subsidiary, or any material adverse change or any development involving a prospective material adverse change (whether or not arising in the ordinary course of business), in the general affairs, condition (financial or otherwise), business, key personnel, property, prospects, net worth or results of operations of the Company or any Subsidiary, and (D) except as stated in the Registration Statement and the Prospectus, there is not pending, or, to the knowledge of the signer, threatened or contemplated, any action, suit or proceeding to which the Company or any Subsidiary is a party before or by any court or governmental agency, authority or body, or any arbitrator, which might result in any material adverse change in the condition (financial or otherwise), business, prospects or results of operations of the Company or any Subsidiary. (j) The Underwriters shall have received on the Closing Date a certificate or certificates of the Administrative Trustees, to the effect that, as of the Closing Date, each of them severally represents as follows: (i) The Prospectus was filed with the Commission pursuant to Rule 424(b) within the applicable period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 4 of this Agreement; no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for such purpose have been initiated or are, to his knowledge, threatened by the Commission. (ii) The representations and warranties of the Trust set forth in Section 1 of this Agreement are true and correct at and as of the Closing Date, and the Trust has performed all of its obligations under this Agreement to be performed at or prior to the Closing Date. (iii) The signers of said certificate have carefully examined the Registration Statement and the Prospectus, and any amendments thereof or supplements thereto (including any term sheet within the meaning of Rule 434 under the Act), and (a) such documents contain all statements and information required to be included therein, the Registration Statement, or any amendment thereof, does not contain any untrue statement of a 22 material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as amended or supplemented, does not include any untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (B) since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amended or supplemented prospectus which has not been so set forth, (C) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Trust has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business, or declared or paid any dividends or made any distribution of any kind with respect to its capital securities, and except as disclosed in the Prospectus, there has not been any change in the capital securities, or any material change in the short-term or long-term debt, or any issuance of options, warrants, convertible securities or other rights to purchase the capital securities, of the Trust or any material adverse change or any development involving a prospective material adverse change (whether or not arising in the ordinary course of business), in the general affairs, condition (financial or otherwise), business, key personnel, property, prospects, net worth or results of operations of the Trust, and (D) except as stated in the Registration Statement and the Prospectus, there is not pending, or, to the knowledge of the signer, threatened or contemplated, any action, suit or proceeding to which the Trust is a party before or by any court or governmental agency, authority or body, or any arbitrator, which might result in any material adverse change in the condition (financial or otherwise), business, prospects or results of operations of the Trust. (k) The Offerors shall have furnished to the Underwriters such further certificates and documents as the Underwriters may reasonably have requested. The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects reasonably satisfactory to the Underwriters and to Silver, Freedman & Taff, L.L.P., counsel for the Underwriters. If any of the conditions hereinabove provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Underwriters by notifying the Trust of such termination in writing or by telegram at or prior to the Closing Date. In such event, the Trust and the Underwriters shall not be under any obligation to each other (except to the extent provided in Sections 5 and 7 hereof). 7. INDEMNIFICATION. (a) The Offerors jointly and severally agree to indemnify and hold harmless each Underwriter, each officer and director thereof, and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities to 23 which such Underwriter or such persons may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus or the Prospectus, including any amendments or supplements thereto (including any term sheet within the meaning of Rule 434 under the Act), (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading in light of the circumstances under which they were made, or (iii) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Capital Securities or the offering contemplated hereby, and which is included as part of or referred to in any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arising out of or based upon matters covered by clause (i) or (ii) above, and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Offerors shall not be liable (1) in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission, made in the Registration Statement, any Preliminary Prospectus or the Prospectus, including any amendments or supplements thereto, in reliance upon and in conformity with written information furnished to the Offerors by any Underwriter specifically for use therein or (2) in the case of any matter covered by clause (iii) above to the extent that it is determined in a final judgment by a court of competent jurisdiction that such losses, claims, damages or liabilities resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence or willful misconduct. (b) Each Underwriter severally agrees to indemnify and hold harmless the Offerors and the trustees and directors and officers who have signed the Registration Statement, and each person, if any, who controls the Offerors within the meaning of the Act, against any losses, claims, damages or liabilities to which the Offerors or any such person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and will reimburse any legal or other expenses reasonably incurred by the Offerors or any such person in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that each Underwriter will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Trust or the Company by or through the Underwriters specifically for use therein. The obligations of the 24 Underwriters under this Section 7(b) are several in proportion to their respective underwriting obligations and not joint. (c) The Company agrees to indemnify the Trust against all loss, liability, claim damage and expense whatsoever, which may become due from the Trust under subsection (a). (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity or contribution may be sought pursuant to this Section 7, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 7(a) or (b) or contribution provided for in Section 7(e) shall be available with respect to a proceeding to any party who shall fail to give notice of such proceeding as provided in this Section 7(d) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party otherwise than on account of the provisions of Section 7(a) or (b). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay promptly as incurred the reasonable fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and the indemnified party shall have reasonably concluded that there may be a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it or other indemnified parties which are different from or additional to those available to the indemnifying party. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm at any time for all such indemnified parties. Such firm shall be designated in writing by the Underwriters and shall be reasonably satisfactory to the Offerors in the case of parties indemnified pursuant to Section 7(a) and shall be designated in writing by the Offerors and shall be reasonably satisfactory to the Underwriters in the case of parties indemnified pursuant to Section 7(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. 25 (e) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Offerors on the one hand and the Underwriters on the other from the offering of the Capital Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Offerors on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Offerors on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Offerors bears to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Offerors on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Offerors and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 7(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereto) referred to above in this Section 7(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(e), no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Capital Securities purchased by such Underwriter; and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this Section 7(e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) The obligations of the Offerors under this Section 7 shall be in addition to any liability which the Offerors may otherwise have, and the obligations of the Underwriters under this Section 7 shall be in addition to any liability which the Underwriters may otherwise have. 26 8. NOTICES. All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered, telegraphed or sent via facsimile transmission and confirmed as follows: if to the Underwriters, to them c/o Dain Rauscher Incorporated, 60 South Sixth Street, Minneapolis, Minnesota 55402, Attention: J. David Welch, Managing Director, with a copy to Dave M. Muchnikoff, P.C., Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., 7th Floor, Washington, D.C. 20005; if to the Company, to Heartland Financial USA, Inc., 1398 Central Avenue, Dubuqe, Iowa 52001, Attention: John K. Schmidt, Executive Vice President and Chief Financial Officer, with a copy to John Freechack, Barack Ferrazzano Kirschbaum Perlman & Nagelberg, 333 West Wacker Drive, Suite 2700, Chicago, Illinois 60606, and if to the Trust, to it c/o Heartland Financial USA, Inc., 1398 Central Avenue, Dubuqe, Iowa 52001, Attention: John K. Schmidt, with a copy to First Union, One Rodney Square, 920 King Street, First Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration. All notices given by facsimile transmission shall be electronically confirmed and a copy of such notice shall be sent promptly via U.S. mail. All notices given by telegram shall be promptly confirmed by letter sent by U.S. mail. Any notice to the Trust shall also be copied to the Company at the address previously stated, Attention: John K. Schmidt. Any party may change its address for notice purposes by written notice to the other parties. 9. TERMINATION. This Agreement may be terminated by the Underwriters by notice to the Offerors as follows: (a) at any time prior to the earlier of (i) the time the Capital Securities are released by the Underwriters for sale or (ii) 10:00 A.M., Eastern time, on the first business day following the date of this Agreement; (b) at any time prior to the Closing Date if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change in or affecting the condition, financial or otherwise, of the Trust, or of the Company and the Subsidiaries taken as a whole or the business affairs, management, financial position, shareholders' equity or results of operations of the Trust, or of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or declaration of war or national emergency after the date hereof or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on the financial markets of the United States would, in the Underwriters' judgment, make the offering or delivery of the Capital Securities impracticable or inadvisable, (iii) suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, or a halt or suspension of trading in securities generally which are quoted on Nasdaq or (iv) declaration of a banking moratorium by either federal authorities or by state authorities in Iowa, Illinois, Wisconsin, New Mexico or New 27 York; or (c) as provided in Section 6 of this Agreement. 10. WRITTEN INFORMATION. For all purposes under this Agreement (including, without limitation, Section 1, Section 3 and Section 7 hereof), the Offerors understand and agree with each of the Underwriters that the following constitutes the only written information furnished to the Offerors by the Underwriters specifically for use in preparation of the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto: (i) the per share "Public Offering Price" and per share "Underwriting Fees to be Paid by the Company" set forth on the cover page of the Prospectus, and (ii) the information set forth under the caption "Underwriting" in the Preliminary Prospectus and the Prospectus. 11. SUCCESSORS. This Agreement has been and is made solely for the benefit of and shall be binding upon the Underwriters, the Trust and the Company and their respective successors, executors, administrators, heirs and assigns, and the trustees and controlling persons and the officers and directors of any such controlling person referred to herein, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Capital Securities merely because of such purchase. 12. MISCELLANEOUS. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Offerors or controlling persons thereof and (c) delivery of and payment for the Capital Securities under this Agreement. Each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable under any applicable law or rule in any jurisdiction, such provision will be ineffective only to the extent of such invalidity, illegality or unenforceability in such jurisdiction or any provision hereof in any other jurisdiction. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. If the foregoing letter is in accordance with the Underwriters' understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Offerors and the Underwriters in accordance with its terms. 28 [The remainder of this page intentionally left blank.] Very truly yours, HEARTLAND FINANCIAL CAPITAL TRUST I, a Delaware business trust By:________________________________ _____________, Administrative Trustee HEARTLAND FINANCIAL USA, INC. By:________________________________ The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. DAIN RAUSCHER WESSELS, A DIVISION OF DAIN RAUSCHER INCORPORATED HOWE BARNES INVESTMENTS, INC. By: Dain Rauscher Incorporated By: ---------------------------------- Matthew L. Johnson, Vice President SCHEDULE A SCHEDULE OF UNDERWRITERS
Number of Capital Securities Capital Securities Underwriter to be purchased Dain Rauscher Wessels, a division of Dain Rauscher Incorporated.......................................... Howe Barnes Investments, Inc.......................... ---------- 1,000,000 Total................................................. ---------- ----------
29 EXHIBIT I (FORM OF OPINION OF COMPANY COUNSEL) (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). Each Subsidiary of the Company has been duly incorporated or organized, is validly existing and in good standing under the laws of the jurisdiction of its formation. Each of the Company and its Subsidiaries has the corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus; is, to such counsel's knowledge, in compliance with all federal and state regulatory rules and guidelines; and is duly qualified to transact business in all jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification and the failure so to qualify would have a material adverse effect on the business or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole. (ii) DB&T, GSB, RCB, WCB and NMB have each been duly chartered under the laws of their states of organization to conduct the business of a bank and FCB has been duly chartered under federal law to conduct the business of a savings association. The Company and its Subsidiaries have all necessary consents and approvals under applicable federal and state laws and regulations to own their respective assets and carry on their respective businesses as currently conducted. The deposit accounts of each of DB&T, GSB, RCB, WCB, NMB and FCB are insured by the Federal Deposit Insurance Corporation (the "FDIC") up to the maximum applicable amount in accordance with the rules and regulations of the FDIC, and, to the knowledge of such counsel, no proceedings for the termination or revocation of such insurance are pending or threatened. (iii) All of the issued and outstanding shares of the capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, and the holders thereof are not subject to personal liability by reason of being such holders. Except as otherwise stated in the Registration Statement and Prospectus, there are no preemptive rights or options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company any shares of the capital stock of the Company or the Junior Subordinated Debentures or the Capital Securities pursuant to the Company's certificate of incorporation, bylaws or any agreement or other instrument or arrangement known to such counsel to which the Company is a party or by which the Company is bound. Neither the filing of the Registration Statement nor the offering or sale of the Junior Subordinated Debentures or Capital Securities as contemplated by this Agreement gives rise to any rights for or relating to the registration of any shares of capital stock or other securities of the Company. The authorized capital stock of the Company is comprised of 12,000,000 shares of common stock, par value $1.00 per share __________, of which were issued and outstanding as of ________, 1999 and 200,000 shares of preferred stock par value $1.00 per share, none of which were issued and outstanding as of _________, 1999. (iv) All of the issued and outstanding shares of capital stock of each of the Company's Subsidiaries have been duly and validly authorized and issued and are fully paid and nonassessable, and, to such counsel's knowledge, except as otherwise described in the Registration Statement and Prospectus, except for directors' qualifying shares, and except for NMB, the Company owns of record and beneficially all of the issued and outstanding shares of the capital stock of each of the Subsidiaries. All of the shares of the capital stock of the Subsidiaries which are owned by the Company are so owned free and clear of any security interests, claims, liens, proxies, equities or other encumbrances. To such counsel's knowledge, except as described in the Registration Statement and Prospectus, there are no preemptive rights or options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company or any of its Subsidiaries any shares of the capital stock of any Subsidiary of the Company. (v) All of the issued and outstanding Common Securities of the Trust are owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right. (vi) National Bancshares, Inc. ("National") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Mexico and is duly registered as a bank holding company under the BHC Act. The First National Bank of Clovis ("Clovis Bank") has been duly organized and is validly existing as a national banking association under the laws of the United States. The deposit accounts of Clovis Bank are insured by the FDIC up to the maximum applicable amount in accordance with the rules and regulations of the FDIC. Each of National and Clovis Bank has the corporate power and authority to own or lease its properties and conduct its business as described in the Prospectus and is duly qualified to transact business in all jurisdictions in which the conduct of its business or its ownership or leasing of property requires such qualification and the failure so to comply or qualify would have a material adverse effect on its business or condition, financial or otherwise. (vii) Based upon current guidelines of the Federal Reserve Board, the liquidation amount of the Capital Securities will constitute "tier 1" capital (as defined in 12 C.F.R. Part 225), subject to applicable regulatory limitations on the amount thereof that can be included in tier 1 capital. (viii) The Trust Agreement, the Indenture and the Guarantee Agreement have each been duly qualified under the Trust Indenture Act. (ix) The Junior Subordinated Debentures are in the form contemplated by the Indenture, have been duly authorized, executed and delivered by the Company and, when authenticated by the Indenture Trustee in the manner provided for in the Indenture and delivered against payment therefor, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. (x) The Trust Agreement has been duly authorized, executed and delivered by the Company and the Administrative Trustees, and is a valid and binding obligation of the Company and each of the Administrative Trustees, enforceable against the Company and each of the Administrative Trustees in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, and subject to general principles of equity. (xi) The Guarantee Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, and subject to general principles of equity. (xii) The Indenture has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, and subject to general principles of equity. (xiii) The Company has full corporate power and authority to enter into this Agreement, the Indenture, the Trust Agreement and the Guarantee Agreement, to issue the Junior Subordinated Debentures and to effect the transactions contemplated by this Agreement, the Indenture, the Trust Agreement and the Guarantee Agreement. The Trust has full trust power and authority to enter into this Agreement and the Trust Agreement, to issue the Capital Securities and to effect the transactions contemplated by this Agreement, the Trust Agreement, the Indenture and the Guarantee Agreement. The execution, delivery and performance of this Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement, the Expense Agreement, the Capital Securities, the Common Securities and the Junior Subordinated Debentures and the consummation of the transactions herein or therein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, rule or regulation, any lease, contract, indenture, mortgage, loan agreement or other agreement or instrument known to such counsel to which the Company or the Trust is a party or by which either is bound or to which any of their property is subject, the Company's or any Subsidiary's charter or bylaws, or the Trust's Certificate of Trust or the Trust Agreement or any permit, judgment, order or decree known to such counsel of any court or governmental agency or body having jurisdiction over the Company or the Trust or any of its respective properties, except for any breach, violation or default which would not have a material adverse effect on the Company and the Trust, taken as a whole; and no consent, approval, authorization or order of, or filing with, any court or governmental agency or body is required for the execution, delivery and performance of this Agreement, the Indenture, the Trust Agreement, the Guarantee Agreement, the Capital Securities, the Junior Subordinated Debentures, or the Guarantee or for the consummation of the transactions contemplated hereby or thereby, including the issuance or sale of the Junior Subordinated Debentures by the Company and the Common Securities and Capital Securities by the Trust, except (a) such as may be required under the Act, which has been obtained, or under state securities or blue sky laws, and (b) the qualification of the Trust Agreement, the Guarantee Agreement and the Indenture under the Trust Indenture Act and the regulations thereunder, all of which have been effected. (xiv) The Junior Subordinated Debentures are subordinate and junior in right of payment to all ASenior and Subordinated Debt" (as defined in the Indenture) of the Company. (xv) Neither the Company nor the Trust is an Ainvestment company" or a company Acontrolled" by an Ainvestment company" within the meaning of the 1940 Act. (xvi) To such counsel's knowledge and information after due inquiry, the Trust is not a party to or otherwise bound by any agreement other than those described in the Prospectus. (xvii) To such counsel's knowledge and information after due inquiry, the Offerors are not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or any other instrument known to such counsel to which either of the Offerors is a party or by which either of them may be bound, or to which any of the property or assets of either the Company or the Trust is subject. (xviii) The Registration Statement has become effective under the Act and, to such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or, to the knowledge of such counsel, threatened by the Commission. (xix) The statements (a) in the Prospectus under the caption "Risk Related to an Investment in Heartland Financial -- We are subject to significant government regulation," (b) in the Registration Statement in Item 15 and (c) in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 under the caption "Supervision and Regulation," insofar as such statements constitute a summary of matters of law, are accurate summaries and fairly present the information called for with respect to such matters. The statements in the Prospectus under the captions "Risks Related to an Investment in the Capital Securities," "Description of the Trust," "Description of the Capital Securities," Description of the Debentures," "Description of the Guarantee" and "Relationship Among the Capital Securities, the Debentures and the Guarantee," insofar as such statements constitute a summary of matters of law or of the legal matters, documents or proceedings referred to therein, are accurate summaries and fairly present the information called for with respect to such matters. (xx) The statements, other than those referred to in paragraph (xviii) of counsel's opinion, in the Registration Statement and the Prospectus describing (a) statutes, rules and regulations, (b) legal and governmental proceedings or rulings, and (c) contracts and other documents are accurate and fairly present the information required to be shown; and such counsel does not know of any statutes, rules or regulations or legal or governmental proceedings, pending or threatened, required to be described in the Registration Statement and the Prospectus that are not described as required, or of any contracts or documents of a character required to be described in the Registration Statement or Prospectus or included as exhibits to the Registration Statement that are not described or included as required. (xxi) The reports of the Company incorporated by reference in the Registration Statement and the Prospectus or any further amendment or supplement thereto made by the Company (other than the financial statements, other financial data and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. Such counsel does not know of any contracts, agreements, documents or instruments required to be filed as exhibits to any such reports or described in any such reports which are not so filed or described as required; and, insofar as any statements in any such report constitute summaries of any contract, agreement, document or instrument to which the Company or any Subsidiary is a party, such statements are accurate summaries and fairly present the information called for with respect to such matters. (xxii) To such counsel's knowledge, neither the Company nor any of its Subsidiaries is in violation of its respective charter or bylaws. (xxiii) The Registration Statement and the Prospectus, and any amendment thereof or supplement thereto (including any term sheet within the meaning of Rule 434 under the Act), comply as to form in all material respects with the requirements of the Act and the rules and regulations thereunder and the Trust Indenture Act and the rules and regulations thereunder. EX-4.1 3 EXHIBIT 4.1 EXHIBIT 4.1 FORM OF INDENTURE BETWEEN HEARTLAND FINANCIAL USA, INC. AND FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE ____% SUBORDINATED DEBENTURES DUE 2029 DATED AS OF _________ __, 1999 TABLE OF CONTENTS CROSS-REFERENCE TABLE...........................................................................................vii INDENTURE.........................................................................................................1 RECITALS..........................................................................................................1 ARTICLE I DEFINITIONS............................................................................................2 SECTION 1.1 DEFINITIONS OF TERMS...................................................................2 ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND EXCHANGE OF THE DEBENTURES..................................................................................10 SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT......................................................10 SECTION 2.2 MATURITY..............................................................................10 SECTION 2.3 FORM AND PAYMENT......................................................................10 SECTION 2.4 INTENTIONALLY LEFT BLANK..............................................................11 SECTION 2.5 INTEREST..............................................................................11 SECTION 2.6 EXECUTION AND AUTHENTICATIONS.........................................................11 SECTION 2.7 REGISTRATION OF TRANSFER AND EXCHANGE.................................................12 SECTION 2.10 CANCELLATION..........................................................................14 SECTION 2.11 BENEFIT OF INDENTURE..................................................................15 ARTICLE III REDEMPTION OF DEBENTURES............................................................................15 SECTION 3.1 REDEMPTION............................................................................15 SECTION 3.2 SPECIAL EVENT REDEMPTION..............................................................16 SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY........................................................16 SECTION 3.4 NOTICE OF REDEMPTION..................................................................16 SECTION 3.5 PAYMENT UPON REDEMPTION...............................................................17 SECTION 3.6 NO SINKING FUND.......................................................................18 ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD.................................................................18 SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD..................................................18 SECTION 4.2 NOTICE OF EXTENSION...................................................................19 SECTION 4.3 LIMITATION ON TRANSACTIONS............................................................19 ARTICLE V PARTICULAR COVENANTS OF THE COMPANY...................................................................20 SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST.....................................................20 SECTION 5.2 MAINTENANCE OF AGENCY.................................................................20 SECTION 5.3 PAYING AGENTS.........................................................................20 SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE......................................21 SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS..............................................21 SECTION 5.6 LIMITATION ON TRANSACTIONS............................................................22 SECTION 5.7 COVENANTS AS TO THE TRUST.............................................................22 ii SECTION 5.8 COVENANTS AS TO PURCHASES.............................................................23 SECTION 5.9 WAIVER OF USURY, STAY OR EXTENSION LAWS...............................................23 ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE..................................................................................23 SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF DEBENTUREHOLDERS...................................................................23 SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS.................................................................23 SECTION 6.3 REPORTS BY THE COMPANY................................................................24 SECTION 6.4 REPORTS BY THE TRUSTEE................................................................24 ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON EVENT OF DEFAULT.............................................................................................25 SECTION 7.1 EVENTS OF DEFAULT.....................................................................25 SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE................................................................26 SECTION 7.3 APPLICATION OF MONEYS COLLECTED.......................................................28 SECTION 7.4 LIMITATION ON SUITS...................................................................28 SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER............................................................................29 SECTION 7.6 CONTROL BY DEBENTUREHOLDERS...........................................................29 SECTION 7.7 UNDERTAKING TO PAY COSTS..............................................................30 ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE...............................................................31 SECTION 8.1 FORM OF DEBENTURE.....................................................................31 SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES..........................................................31 ARTICLE IX CONCERNING THE TRUSTEE...............................................................................31 SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE....................................31 SECTION 9.2 NOTICE OF DEFAULTS....................................................................32 SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE.............................................................33 SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.............................................34 SECTION 9.5 MAY HOLD DEBENTURES...................................................................34 SECTION 9.6 MONEYS HELD IN TRUST..................................................................34 SECTION 9.7 COMPENSATION AND REIMBURSEMENT........................................................34 SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE.....................................................35 SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS...............................................35 SECTION 9.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY...............................................35 SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.............................................................................36 SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................................................37 SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY...............................................................................38 iii ARTICLE X CONCERNING THE DEBENTUREHOLDERS.......................................................................38 SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS.........................................................38 SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS................................................39 SECTION 10.3 WHO MAY BE DEEMED OWNERS..............................................................39 SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED...........................................................................39 SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS............................................40 ARTICLE XI SUPPLEMENTAL INDENTURES..............................................................................40 SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS...................................................................40 SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS......................................................................41 SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES.....................................................41 SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES............................................................................42 SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES..................................................42 ARTICLE XII SUCCESSOR CORPORATION...............................................................................42 SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC..........................................................42 SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED.....................................................43 SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE............................................43 ARTICLE XIII SATISFACTION AND DISCHARGE.........................................................................44 SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE...............................................44 SECTION 13.2 DISCHARGE OF OBLIGATIONS..............................................................44 SECTION 13.3 DEPOSITED MONIES TO BE HELD IN TRUST..................................................45 SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS...............................................45 SECTION 13.5 REPAYMENT TO COMPANY..................................................................45 ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS..........................................................................................45 SECTION 14.1 NO RECOURSE...........................................................................45 ARTICLE XV MISCELLANEOUS PROVISIONS.............................................................................46 SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS......................................................46 SECTION 15.2 ACTIONS BY SUCCESSOR..................................................................46 SECTION 15.3 SURRENDER OF COMPANY POWERS...........................................................46 SECTION 15.4 NOTICES...............................................................................46 SECTION 15.5 GOVERNING LAW.........................................................................47 SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT.......................................................47 SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS..................................................47 SECTION 15.8 PAYMENTS ON BUSINESS DAYS.............................................................47 SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT.....................................................48 SECTION 15.10 COUNTERPARTS..........................................................................48 iv SECTION 15.11 SEPARABILITY..........................................................................48 SECTION 15.12 ASSIGNMENT............................................................................48 SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS..............................................................48 SECTION 15.14 ADDITIONAL PROVISIONS FOR THE PAYMENT OF EXPENSES...........................................................................49 ARTICLE XVI SUBORDINATION OF DEBENTURES.........................................................................49 SECTION 16.1 AGREEMENT TO SUBORDINATE..............................................................49 SECTION 16.2 DEFAULT ON SENIOR DEBT, SUBORDINATED DEBT OR ADDITIONAL SENIOR OBLIGATIONS.........................................................50 SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY..................................................50 SECTION 16.4 SUBROGATION...........................................................................51 SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION...................................................52 SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS..........................................................................53 SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED.....................................................53
v CROSS-REFERENCE TABLE
SECTION OF TRUST INDENTURE ACT OF 1939, AS AMENDED SECTION OF INDENTURE - ------------------------------- -------------------- 310(a) 9.10 310(b) 9.9 9.11 310(c) Not Applicable 311(a) 9.14 311(b) 9.14 311(c) Not Applicable 312(a) 6.1 312(b) 6.2(a) 312(c) 6.2(c) 6.2(c) 313(a) 6.4(a) 313(b) 6.4(b) 313(c) 6.4(a) 6.4(b) 313(d) 6.4(c) 314(a) 6.3(a) 314(b) Not Applicable 314(c) 15.7 314(d) Not Applicable 314(e) 15.7 314(f) Not Applicable 315(a) 9.1(a) 9.3 315(b) 9.2 315(c) 9.1(a) 315(d) 9.1(b) 315(e) 7.7 316(a) 1.1 7.6 316(b) 7.4(b) 316(c) 10.1(b) 317(a) 7.2 317(b) 5.3 318(a) 15.9
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Indenture. vi INDENTURE INDENTURE, dated as of _________ __, 1999, between HEARTLAND FINANCIAL USA, INC., a Delaware corporation (the "Company") and FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association with its principal place of business in the State of Delaware (the "Trustee"); RECITALS WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of securities to be known as its ____% Subordinated Debentures due 2029 (hereinafter referred to as the "Debentures"), the form and substance of such Debentures and the terms, provisions and conditions thereof to be set forth as provided in this Indenture; WHEREAS, Heartland Financial Capital Trust I, a Delaware statutory business trust (the "Trust"), has offered to the public up to $25,000,000 aggregate liquidation amount of its Capital Securities (as defined herein) and proposes to invest the proceeds from such offering, together with the proceeds of the issuance and sale by the Trust to the Company of up to $_______ aggregate liquidation amount of its Common Securities (as defined herein), in up to $__________ aggregate principal amount of the Debentures; WHEREAS, the Company has requested that the Trustee execute and deliver this Indenture; WHEREAS, all requirements necessary to make this Indenture a valid instrument in accordance with its terms, and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Indenture have been duly authorized in all respects; WHEREAS, to provide the terms and conditions upon which the Debentures are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture; and WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, in consideration of the premises and the purchase of the Debentures by the holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the holders of the Debentures: 1 ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS OF TERMS. The terms defined in this Section 1.1 (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1 and shall include the plural as well as the singular. All other terms used in this Indenture that are defined in the Trust Indenture Act, or that are by reference in the Trust Indenture Act defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this instrument. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with Generally Accepted Accounting Principles. "Accelerated Maturity Date" means if the Company elects to accelerate the Maturity Date in accordance with Section 2.2(b), the date selected by the Company which is prior to the Scheduled Maturity Date, but is not earlier than September 30, 2004. "Additional Interest" shall have the meaning set forth in Section 2.5. "Additional Senior Obligations" means all indebtedness of the Company whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of financial derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; provided, however, that Additional Senior Obligations does not include claims in respect of Senior Debt or Subordinated Debt or obligations which, by their terms, are expressly stated to be not superior in right of payment to the Debentures or to rank pari passu in right of payment with the Debentures. For purposes of this definition, "claim" shall have the meaning assigned thereto in Section 101(4) of the United States Bankruptcy Code of 1978, as amended. "Administrative Trustees" shall have the meaning set forth in the Trust Agreement. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person; (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person; (d) a partnership in which the specified Person is a general partner; (e) any officer or director of the specified Person; and (f) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner. 2 "Authenticating Agent" means an authenticating agent with respect to the Debentures appointed by the Trustee pursuant to Section 2.12. "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company or any duly authorized committee of such Board or any other duly designated officers of the Company. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day" means, with respect to the Debentures, any day other than a Saturday or a Sunday or a day on which federal or state banking institutions in New York, New York or Wilmington, Delaware are authorized or required by law, executive order or regulation to close, or a day on which the Corporate Trust Office of the Trustee or the Property Trustee is closed for business. "Capital Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Capital Securities. "Capital Securities Guarantee" means any guarantee that the Company may enter into with the Trustee or other Persons that operate directly or indirectly for the benefit of holders of Capital Securities. "Capital Treatment Event" means the receipt by the Company and the Trust of an Opinion of Counsel, rendered by a law firm having a recognized national bank regulatory practice, to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision thereof or therein, or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Capital Securities under the Trust Agreement, there is more than an insubstantial risk of impairment of the Company's ability to treat the Capital Securities (or any substantial portion thereof) as Tier 1 capital (or the then equivalent thereof), for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company; provided, however, that the Trust or the Company shall have requested and received such an Opinion of Counsel with regard to such matters within a reasonable period of time after the Trust or the Company shall have become aware of the possible occurrence of any such event. 3 "Certificate" means a certificate signed by the principal executive officer, the principal financial officer, the principal accounting officer, the treasurer or any vice president of the Company. The Certificate need not comply with the provisions of Section 15.7. "Change in 1940 Act Law" shall have the meaning set forth in the definition of "Investment Company Event." "Commission" means the Securities and Exchange Commission. "Common Securities" means undivided beneficial interests in the assets of the Trust which rank pari passu with the Capital Securities; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Capital Securities. "Company" means Heartland Financial USA, Inc., a corporation duly organized and existing under the laws of the State of Delaware, and, subject to the provisions of Article XII, shall also include its successors and assigns. "Compounded Interest" shall have the meaning set forth in Section 4.1. "Corporate Trust Office" means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at One Rodney Square, 920 King Street, 1st Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration. "Coupon Rate" shall have the meaning set forth in Section 2.5. "Custodian" means any receiver, trustee, assignee, liquidator, or similar official under any Bankruptcy Law. "Debentures" shall have the meaning set forth in the Recitals hereto. "Debentureholder," "holder of Debentures," "registered holder," or other similar term, means the Person or Persons in whose name or names a particular Debenture shall be registered on the books of the Company or the Trustee kept for that purpose in accordance with the terms of this Indenture. "Debenture Register" shall have the meaning set forth in Section 2.7(b). "Debt" means with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, 4 bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; and (vi) and every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. "Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default. "Deferred Interest" shall have the meaning set forth in Section 4.1. "Dissolution Event" means that as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Trust Agreement and the Debentures held by the Property Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Trust Agreement. "Event of Default" means, with respect to the Debentures, any event specified in Section 7.1, which has continued for the period of time, if any, and after the giving of the notice, if any, therein designated. "Exchange Act," means the Securities Exchange Act of 1934, as amended, as in effect at the date of execution of this instrument. "Extended Interest Payment Period" shall have the meaning set forth in Section 4.1. "Federal Reserve" means the Board of Governors of the Federal Reserve System. "Generally Accepted Accounting Principles" means such accounting principles as are generally accepted at the time of any computation required hereunder. "Governmental Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged; or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America that, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such Governmental Obligation or a specific payment of principal of or interest on any such Governmental Obligation held by such custodian for the account of the holder of such depositary receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Governmental Obligation or the specific payment of principal of or interest on the Governmental Obligation evidenced by such depositary receipt. 5 "Herein," "hereof," and "hereunder," and other words of similar import, refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into in accordance with the terms hereof. "Interest Payment Date," when used with respect to any installment of interest on the Debentures, means the date specified in the Debenture or in an indenture supplemental hereto with respect to the Debentures as the fixed date on which an installment of interest with respect to the Debentures is due and payable. "Investment Company Act," means the Investment Company Act of 1940, as amended, as in effect at the date of execution of this instrument. "Investment Company Event" means the receipt by the Trust and the Company of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities law practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or shall be considered an "investment company" that is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Capital Securities under the Trust Agreement; provided, however, that the Trust or the Company shall have requested and received such an Opinion of Counsel with regard to such matters within a reasonable period of time after the Trust or the Company shall have become aware of the possible occurrence of any such event. "Maturity Date" means the date on which the Debentures mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "Ministerial Action" shall have the meaning set forth in Section 3.2. "Officers' Certificate" means a certificate signed by the Chief Executive Officer, President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company that is delivered to the Trustee in accordance with the terms hereof. Each such certificate shall include the statements provided for in Section 15.7, if and to the extent required by the provisions thereof. "Opinion of Counsel" means an opinion in writing of independent, outside legal counsel for the Company that is delivered to the Trustee in accordance with the terms hereof. Each such opinion shall include the statements provided for in Section 15.7, if and to the extent required by the provisions thereof. 6 "Outstanding," when used with reference to the Debentures, means, subject to the provisions of Section 10.4, as of any particular time, all Debentures theretofore authenticated and delivered by the Trustee under this Indenture, except (a) Debentures theretofore canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or that have previously been canceled; (b) Debentures or portions thereof for the payment or redemption of which moneys or Governmental Obligations in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that if such Debentures or portions of such Debentures are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in Article III provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debentures in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.7; provided, however, that in determining whether the holders of the requisite percentage of Debentures have given any request, notice, consent or waiver hereunder, Debentures held by the Company or any Affiliate of the Company shall not be included; provided, further, that the Trustee shall be protected in acting upon any request, notice, consent or waiver unless a Responsible Officer of the Trustee shall have actual knowledge that the holder of such Debenture is the Company or an Affiliate thereof. "Person" means any individual, corporation, partnership, trust, limited liability company, joint venture, joint-stock company, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Debenture" means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under Section 2.9 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture. "Property Trustee" has the meaning set forth in the Trust Agreement. "Redemption Price" shall have the meaning set forth in Section 3.2. "Responsible Officer" when used with respect to the Trustee means any officer within the Corporate Trust Office of the Trustee with direct responsibility for the administration of this Indenture, including any vice president, any assistant vice president, any assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Scheduled Maturity Date" means September 30, 2029. "Securities Act," means the Securities Act of 1933, as amended, as in effect at the date of execution of this instrument. 7 "Senior Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Debentures or to other Debt which is pari passu with, or subordinated to, the Debentures; provided, however, that Senior Debt shall not be deemed to include (i) any Debt of the Company which when incurred and without respect to any election under section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Company; (ii) any Debt of the Company to any of its subsidiaries; (iii) Debt to any employee of the Company; (iv) Debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of such Debt by the holders of the Debentures as a result of the subordination provisions of this Indenture would be greater than they otherwise would have been as a result of any obligation of such holders to pay amounts over to the obligees on such trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which such Debt is subject; and (v) Debt which constitutes Subordinated Debt. "Senior Indebtedness" shall have the meaning set forth in Section 16.1. "Special Event" means a Tax Event, an Investment Company Event or a Capital Treatment Event. "Subordinated Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of this Indenture or thereafter incurred, which is by its terms expressly provided to be junior and subordinate to Senior Debt of the Company (other than the Debentures); provided, however, that Subordinated Debt will not be deemed to include (i) any Debt of the Company which when incurred and without respect to any election under section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was without recourse to the Company, (ii) any Debt of the Company to any of its subsidiaries, (iii) any Debt to any employee of the Company, (iv) any Debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business to the extent that payments made to the holders of such Debt by the holders of the Subordinated Debentures as a result of the subordination provisions of the Indenture would be greater than they otherwise would have been as a result of any obligation of such holders to pay amounts over to the obligees on such trade accounts payable or accrued liabilities arising in the ordinary course of business as a result of subordination provisions to which such Debt is subject, (v) Debt which constitutes Senior Debt and (vi) any Debt of the Company under debt securities (and guarantees in respect of these debt securities) initially issued to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a financing vehicle of the Company in connection with the issuance by that entity of preferred securities or other securities which are intended to qualify for Tier 1 capital treatment. 8 "Subsidiary" means, with respect to any Person, (i) any corporation at least a majority of whose outstanding Voting Stock shall at the time be owned, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries; (ii) any general partnership, joint venture or similar entity, at least a majority of whose outstanding partnership or similar interests shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner; and (iv) any limited liability company, a majority of the membership interests of which are held by such Person or one or more of its Subsidiaries. "Tax Event" means the receipt by the Company and the Trust of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Capital Securities under the Trust Agreement, there is more than an insubstantial risk that (i) the Trust is, or shall be within 90 days after the date of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days after the date of such Opinion of Counsel, shall not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or shall be within 90 days after the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges; provided, however, that the Trust or the Company shall have requested and received such an Opinion of Counsel with regard to such matters within a reasonable period of time after the Trust or the Company shall have become aware of the possible occurrence of any of the events described in clauses (i) through (iii) above. "Trust" means Heartland Financial Capital Trust I, a Delaware statutory business trust. "Trust Agreement" means the Amended and Restated Trust Agreement, dated [ ], 1999, of the Trust. "Trustee" means First Union Trust Company, National Association and, subject to the provisions of Article IX, shall also include its successors and assigns, and, if at any time there is more than one Person acting in such capacity hereunder, "Trustee" shall mean each such Person. "Trust Indenture Act," means the Trust Indenture Act of 1939, as amended, subject to the provisions of Sections 11.1, 11.2, and 12.1, as in effect at the date of execution of this instrument. "Trust Securities" means the Common Securities and Capital Securities, collectively. "Voting Stock," as applied to stock of any Person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting 9 power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency. ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND EXCHANGE OF THE DEBENTURES SECTION 2.1 DESIGNATION AND PRINCIPAL AMOUNT. There is hereby authorized Debentures designated the "[ ]% Subordinated Debentures due 2029," limited in aggregate principal amount to $__________, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Debentures pursuant to Section 2.6. SECTION 2.2 MATURITY. (a) The Maturity Date shall be either: (i) the Scheduled Maturity Date; or (ii) if the Company elects to accelerate the Maturity Date to be a date prior to the Scheduled Maturity Date in accordance with Section 2.2(c), the Accelerated Maturity Date. (b) The Company may at any time before the day which is 90 days before the Scheduled Maturity Date and not earlier than September 30, 2004, elect to shorten the Maturity Date only once to the Accelerated Maturity Date provided that the Company has received the prior approval of the Federal Reserve if then required under applicable capital guidelines, policies or regulations of the Federal Reserve. (c) If the Company elects to accelerate the Maturity Date in accordance with Section 2.2(b), the Company shall give notice to the Trustee and the Trust (unless the Trust is not the holder of the Debentures, in which case the Trustee will give notice to the holders of the Debentures) of the acceleration of the Maturity Date and the Accelerated Maturity Date at least 90 days and no more than 180 days before the Accelerated Maturity Date. SECTION 2.3 FORM AND PAYMENT. The Debentures shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Debentures issued in certificated form shall be payable, the transfer of such Debentures shall be registrable and such Debentures shall be exchangeable for Debentures bearing identical terms and provisions at the office or agency of the Trustee; provided, however, that 10 payment of interest may be made at the option of the Company by check mailed to the holder at such address as shall appear in the Debenture Register or by wire transfer to an account maintained by the holder as specified in the Debenture Register, provided that the holder provides proper transfer instructions by the regular record date. Notwithstanding the foregoing, so long as the holder of any Debentures is the Property Trustee, the payment of principal of and interest (including Compounded Interest and Additional Interest, if any) on such Debentures held by the Property Trustee shall be made at such place and to such account as may be designated by the Property Trustee. SECTION 2.4 INTENTIONALLY LEFT BLANK. SECTION 2.5 INTEREST. (a) Each Debenture shall bear interest at the rate of [ ]% per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article IV) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing on December 31, 1999 to the Person in whose name such Debenture or any Predecessor Debenture is registered, at the close of business on the regular record date for such interest installment, which shall be the fifteenth day of the last month of the calendar quarter. (b) The amount of interest payable for any period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed, shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day (and without any reduction of interest or any other payment in respect of any such acceleration), in each case with the same force and effect as if made on the date such payment was originally payable. (c) If, at any time while the Property Trustee is the holder of any Debentures, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company shall pay as additional interest ("Additional Interest") on the Debentures held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties, assessments or other governmental charges shall be equal to the amounts the Trust and the Property Trustee would have received had no such taxes, duties, assessments or other government charges been imposed. 11 SECTION 2.6 EXECUTION AND AUTHENTICATIONS. (a) The Debentures shall be signed on behalf of the Company by its President or one of its Vice Presidents, under its corporate seal, if any, attested by its Secretary or one of its Assistant Secretaries. Signatures may be in the form of a manual or facsimile signature. The Company may use the facsimile signature of any Person who shall have been a President or Vice President thereof, or of any Person who shall have been a Secretary or Assistant Secretary thereof, notwithstanding the fact that at the time the Debentures shall be authenticated and delivered or disposed of such Person shall have ceased to be the President or a Vice President, or the Secretary or an Assistant Secretary, of the Company (and any such signature shall be binding on the Company). The seal of the Company may be in the form of a facsimile of such seal and may be impressed, affixed, imprinted or otherwise reproduced on the Debentures. The Debentures may contain such notations, legends or endorsements required by law, stock exchange rule or usage. Each Debenture shall be dated the date of its authentication by the Trustee. A Debenture shall not be valid until authenticated manually by an authorized signatory of the Trustee, or by an Authenticating Agent. Such signature shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture. (b) At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debentures executed by the Company to the Trustee for authentication, together with a written order of the Company for the authentication and delivery of such Debentures signed by its Chairman, President or any Vice President and its Treasurer or any Assistant Treasurer, and the Trustee in accordance with such written order shall authenticate and deliver such Debentures. (c) In authenticating such Debentures and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 9.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the form and terms thereof have been established in conformity with the provisions of this Indenture. (d) The Trustee shall not be required to authenticate such Debentures if the issue of such Debentures pursuant to this Indenture shall affect the Trustee's own rights, duties or immunities under the Debentures and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee. SECTION 2.7 REGISTRATION OF TRANSFER AND EXCHANGE. (a) Debentures may be exchanged upon presentation thereof at the office or agency of the Company designated for such purpose in New York, New York, Wilmington, Delaware or at the office of the Debenture Registrar, for other Debentures and for a like aggregate principal amount in denominations of integral multiples of $25, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, all as provided in this Section 2.7. In respect of any Debentures so surrendered for exchange, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in exchange therefor the Debenture or Debentures that the Debentureholder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding. 12 (b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose in New York, New York or Wilmington, Delaware or at the office of the Debenture Registrar or such other location designated by the Company a register or registers (herein referred to as the "Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Debentures and the transfers of Debentures as in this Article II provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering Debentures and transfer of Debentures as herein provided shall initially be the Trustee and thereafter as may be appointed by the Company as authorized by Board Resolution (the "Debenture Registrar"). Upon surrender for transfer of any Debenture at the office or agency of the Company designated for such purpose, the Company shall execute, the Trustee shall authenticate and such office or agency shall deliver in the name of the transferee or transferees a new Debenture or Debentures for a like aggregate principal amount. All Debentures presented or surrendered for exchange or registration of transfer, as provided in this Section 2.7, shall be accompanied (if so required by the Company or the Debenture Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Debenture Registrar, duly executed by the registered holder or by such holder's duly authorized attorney in writing. (c) No service charge shall be made for any exchange or registration of transfer of Debentures, or issue of new Debentures in case of partial redemption, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.8, the second paragraph of Section 3.5 and Section 11.4 not involving any transfer. (d) The Company shall not be required (i) to issue, exchange or register the transfer of any Debentures during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the Outstanding Debentures and ending at the close of business on the day of such mailing; nor (ii) to register the transfer of or exchange any Debentures or portions thereof called for redemption. (e) Debentures may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Indenture. Any transfer or purported transfer of any Debenture not made in accordance with this Indenture shall be null and void. SECTION 2.8 TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute, and the Trustee shall authenticate and deliver, temporary Debentures (printed, lithographed, or typewritten). Such temporary Debentures shall be substantially in the form of the definitive Debentures in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Debentures. Without unnecessary delay the Company shall execute and shall furnish definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor (without charge to the holders), at the office or agency of the Company designated for the purpose in New York, New York 13 or Wilmington, Delaware and the Trustee shall authenticate and such office or agency shall deliver in exchange for such temporary Debentures an equal aggregate principal amount of definitive Debentures, unless the Company advises the Trustee to the effect that definitive Debentures need not be executed and furnished until further notice from the Company. Until so exchanged, the temporary Debentures shall be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder. SECTION 2.9 MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. (a) In case any temporary or definitive Debenture shall become mutilated or be destroyed, lost or stolen, the Company (subject to the next succeeding sentence) shall execute, and upon the Company's request the Trustee (subject as aforesaid) shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost, stolen or mutilated. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of the applicant's Debenture and of the ownership thereof. The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of the Chairman, President or any Vice President and the Treasurer or any Assistant Treasurer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Debenture that has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as they may require to save them harmless, and, in case of destruction, loss or theft, evidence to the satisfaction of the Company and the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof. (b) Every replacement Debenture issued pursuant to the provisions of this Section 2.9 shall constitute an additional contractual obligation of the Company whether or not the mutilated, destroyed, lost or stolen Debenture shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures, and shall preclude (to the extent lawful) any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. 14 SECTION 2.10 CANCELLATION. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer shall, if surrendered to the Company or any paying agent, be delivered to the Trustee for cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no Debentures shall be issued in lieu thereof except as expressly required or permitted by any of the provisions of this Indenture. On request of the Company at the time of such surrender, the Trustee shall deliver to the Company canceled Debentures held by the Trustee. In the absence of such request the Trustee may dispose of canceled Debentures in accordance with its standard procedures and deliver a certificate of disposition to the Company. If the Company shall otherwise acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are delivered to the Trustee for cancellation. SECTION 2.11 BENEFIT OF INDENTURE. Nothing in this Indenture or in the Debentures, express or implied, shall give or be construed to give to any Person, other than the parties hereto and the holders of the Debentures (and, with respect to the provisions of Article XVI, the holders of Senior Indebtedness) any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of the Debentures (and, with respect to the provisions of Article XVI, the holders of Senior Indebtedness). SECTION 2.12 AUTHENTICATION AGENT. (a) So long as any of the Debentures remain Outstanding there may be an Authenticating Agent for any or all such Debentures, which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Debentures issued upon exchange, transfer or partial redemption thereof, and Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. All references in this Indenture to the authentication of Debentures by the Trustee shall be deemed to include authentication by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation that has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and that is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by federal or state authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately. (b) Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon resignation, termination or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor 15 Authenticating Agent acceptable to the Company. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto. ARTICLE III REDEMPTION OF DEBENTURES SECTION 3.1 REDEMPTION. Subject to the Company having received prior approval of the Federal Reserve, if then required under the applicable capital guidelines, policies or regulations of the Federal Reserve, the Company may redeem the Debentures issued hereunder on and after the dates set forth in and in accordance with the terms of this Article III. SECTION 3.2 SPECIAL EVENT REDEMPTION. Subject to the Company having received the prior approval of the Federal Reserve, if then required under the applicable capital guidelines, policies or regulations of the Federal Reserve, if a Special Event has occurred and is continuing, then, notwithstanding Section 3.3(a) yet subject to Section 3.3(b), the Company shall have the right upon not less than 30 days nor more than 60 days notice to the holders of the Debentures to redeem the Debentures, in whole but not in part, for cash within 90 days following the occurrence of such Special Event (the "90-Day Period") at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Redemption Price"), provided that if at the time there is available to the Company the opportunity to eliminate, within the 90-Day Period, a Tax Event by taking some ministerial action (a "Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption. The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid. SECTION 3.3 OPTIONAL REDEMPTION BY COMPANY. (a) Subject to the provisions of Section 3.3(b), except as otherwise may be specified in this Indenture, the Company shall have the right to redeem the Debentures, in whole or in part, from time to time, on or after September 30, 2004, at a Redemption Price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption. Any redemption pursuant to this Section 3.3(a) shall be made upon not less than 30 days' nor more than 60 days' notice to the holder of the Debentures, at the Redemption Price. If the Debentures are only partially redeemed pursuant to this Section 3.3, the Debentures shall be redeemed pro rata or by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion. The 16 Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines provided that the Company shall deposit with the Trustee an amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date such Redemption Price is to be paid. (b) If a partial redemption of the Debentures would result in the delisting of the Capital Securities issued by the Trust from American Stock Exchange or any national securities exchange or other organization on which the Capital Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Debentures in whole. SECTION 3.4 NOTICE OF REDEMPTION. (a) In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Debentures in accordance with the right reserved so to do, the Company shall, or shall cause the Trustee to upon receipt of 45 days' written notice from the Company (which notice shall, in the event of a partial redemption, include a representation to the effect that such partial redemption will not result in the delisting of the Capital Securities as described in Section 3.3(b) above), give notice of such redemption to holders of the Debentures to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 60 days before the date fixed for redemption to such holders at their last addresses as they shall appear upon the Debenture Register unless a shorter period is specified in the Debentures to be redeemed. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Debenture designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Debentures. In the case of any redemption of Debentures prior to the expiration of any restriction on such redemption provided in the terms of such Debentures or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the Redemption Price and shall state that payment of the Redemption Price shall be made at the office or agency of the Company or at the Corporate Trust Office, upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption shall be paid as specified in said notice and that from and after said date interest shall cease to accrue. If less than all the Debentures are to be redeemed, the notice to the holders of the Debentures shall specify the particular Debentures to be redeemed. If the Debentures are to be redeemed in part only, the notice shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the redemption date, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof shall be issued. (b) If less than all the Debentures are to be redeemed, the Company shall give the Trustee at least 45 days' notice in advance of the date fixed for redemption as to the aggregate principal amount of Debentures to be redeemed, and thereupon the Trustee shall select, pro rata or by lot or in such other manner as it shall deem appropriate and fair in its discretion, the portion or portions (equal to $25 or any integral multiple thereof) of the Debentures to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Debentures to be redeemed, in whole 17 or in part. The Company may, if and whenever it shall so elect pursuant to the terms hereof, by delivery of instructions signed on its behalf by its Chairman, its President or any Vice President, instruct the Trustee or any paying agent to call all or any part of the Debentures for redemption and to give notice of redemption in the manner set forth in this Section 3.4, such notice to be in the name of the Company or its own name as the Trustee or such paying agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Debenture Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such paying agent to give any notice by mail that may be required under the provisions of this Section 3.4. SECTION 3.5 PAYMENT UPON REDEMPTION. (a) If the giving of notice of redemption shall have been completed as above provided, the Debentures or portions of Debentures to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable Redemption Price, and interest on such Debentures or portions of Debentures shall cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such Redemption Price with respect to any such Debenture or portion thereof. On presentation and surrender of such Debentures on or after the date fixed for redemption at the place of payment specified in the notice, said Debentures shall be paid and redeemed at the Redemption Price (but if the date fixed for redemption is an interest payment date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 3.3). (b) Upon presentation of any Debenture that is to be redeemed in part only, the Company shall execute and the Trustee shall authenticate and the office or agency where the Debenture is presented shall deliver to the holder thereof, at the expense of the Company, a new Debenture of authorized denomination in principal amount equal to the unredeemed portion of the Debenture so presented. SECTION 3.6 NO SINKING FUND. The Debentures are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1 EXTENSION OF INTEREST PAYMENT PERIOD. The Company shall have the right, at any time and from time to time during the term of the Debentures so long as no Event of Default has occurred and is continuing, to defer payments of interest by extending the interest payment period of such Debentures for a period not exceeding 20 18 consecutive quarters (the "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable; provided that no Extended Interest Payment Period may extend beyond the Maturity Date or end on a date other than an Interest Payment Date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, shall bear interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period, the Company shall calculate (and deliver such calculation to the Trustee) and pay all interest accrued and unpaid on the Debentures, including any Additional Interest and Compounded Interest (together, "Deferred Interest") that shall be payable to the holders of the Debentures in whose names the Debentures are registered in the Debenture Register on the first record date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period so long as no Event of Default has occurred and is continuing, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date of the Debentures or end on a date other than an Interest Payment Date. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company may prepay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. SECTION 4.2 NOTICE OF EXTENSION. (a) If the Property Trustee is the only registered holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to the Administrative Trustees, the Property Trustee and the Trustee of its selection of such Extended Interest Payment Period two Business Days before the earlier of (i) the next succeeding date on which Distributions on the Trust Securities issued by the Trust are payable; or (ii) the date the Trust is required to give notice of the record date, or the date such Distributions are payable, to the American Stock Exchange or other applicable self-regulatory organization or to holders of the Capital Securities issued by the Trust, but in any event at least one Business Day before such record date. (b) If the Property Trustee is not the only holder of the Debentures at the time the Company selects an Extended Interest Payment Period, the Company shall give the holders of the Debentures and the Trustee written notice of its selection of such Extended Interest Payment Period at least two Business Days before the earlier of (i) the next succeeding Interest Payment Date; or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the American Stock Exchange or other applicable self-regulatory organization or to holders of the Debentures. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. 19 SECTION 4.3 LIMITATION ON TRANSACTIONS. If (i) the Company shall exercise its right to defer payment of interest as provided in Section 4.1; (ii) there shall have occurred and be continuing any Event of Default; or (iii) the Company is in default with respect to its obligations under the Capital Securities Guarantee, then (a) the Company will not, and will not permit any Subsidiary to, declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (I) as a result of a reclassification of its capital stock for another class of its capital stock or (II) declarations or payments of dividends or distributions on capital stock by a Subsidiary of the Company to the Company); (b) the Company shall not and will not permit any Subsidiary to make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures or make any guarantee payment with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior to the Debentures; provided, however, that notwithstanding the foregoing the Company may make payments pursuant to its obligations under the Capital Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire less than all of the outstanding Debentures or any of the Capital Securities. ARTICLE V PARTICULAR COVENANTS OF THE COMPANY SECTION 5.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company shall duly and punctually pay or cause to be paid the principal of and interest on the Debentures at the time and place and in the manner provided herein. SECTION 5.2 MAINTENANCE OF AGENCY. So long as any of the Debentures remain Outstanding, the Company shall maintain, or shall cause to be maintained, an office or agency in New York, New York or Wilmington, Delaware, and at such other location or locations as may be designated as provided in this Section 5.2, where (i) Debentures may be presented for payment; (ii) Debentures may be presented as hereinabove authorized for registration of transfer and exchange; and (iii) notices and demands to or upon the Company in respect of the Debentures and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by its President or an Executive Vice President and delivered to the Trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands. In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside of New York, New York or Wilmington, Delaware 20 where the Debentures may be presented for registration or transfer and for exchange in the manner provided herein, and the Company may from time to time rescind such designation as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in New York, New York or Wilmington, Delaware for the purposes above mentioned. The Company shall give the Trustee prompt written notice of any such designation or rescission thereof. SECTION 5.3 PAYING AGENTS. (a) The Company shall be the initial paying agent. If the Company shall appoint one or more paying agents for the Debentures, other than the Trustee, the Company shall cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 5.3: (i) that it shall hold all sums held by it as such agent for the payment of the principal of or interest on the Debentures (whether such sums have been paid to it by the Company or by any other obligor of such Debentures) in trust for the benefit of the Persons entitled thereto; (ii) that it shall give the Trustee prompt written notice of any failure by the Company (or by any other obligor of such Debentures) to make any payment of the principal of or interest on the Debentures when the same shall be due and payable; (iii) that it shall, at any time during the continuance of any failure referred to in the preceding paragraph (a)(ii) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and (iv) that it shall perform all other duties of paying agent as set forth in this Indenture. (b) If the Company shall act as its own paying agent with respect to the Debentures, it shall on or before each due date of the principal of or interest on such Debentures, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal or interest so becoming due on Debentures until such sums shall be paid to such Persons or otherwise disposed of as herein provided and shall promptly notify the Trustee of such action, or any failure (by it or any other obligor on such Debentures) to take such action. Whenever the Company shall have one or more paying agents for the Debentures, it shall, prior to each due date of the principal of or interest on any Debentures, deposit with the paying agent a sum sufficient to pay the principal or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest, and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee of this action or failure so to act. (c) Notwithstanding anything in this Section 5.3 to the contrary, (i) the agreement to hold sums in trust as provided in this Section 5.3 is subject to the provisions of Section 13.3 and 13.4; and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums 21 held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such payment by any paying agent to the Trustee, such paying agent shall be released from all further liability with respect to such money. SECTION 5.4 APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, shall appoint, in the manner provided in Section 9.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 5.5 COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company shall not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or convey, transfer or lease all or substantially all of its property and assets to any other entity and no entity shall consolidate with or merge into the Company or convey, transfer or lease substantially all of its properties and assets to the Company, unless the provisions of Article XII hereof are complied with. SECTION 5.6 LIMITATION ON TRANSACTIONS. If Debentures are issued to the Trust or a Trustee of the Trust in connection with the issuance of Trust Securities by the Trust and (i) there shall have occurred any event that would constitute an Event of Default; (ii) the Company shall be in default with respect to any of its obligations under the Capital Securities Guarantee relating to the Trust; or (iii) the Company shall have given notice of its election to defer payments of interest on such Debentures by extending the interest payment period as provided in this Indenture and such period, or any extension thereof, shall be continuing, then (a) the Company shall not and will not permit any Subsidiary to declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (I) as a result of a reclassification of its capital stock or (II) declarations or payments of dividends or distributions on capital stock by a Subsidiary of the Company to the Company); and (b) the Company shall not and will not permit any Subsidiary to make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Debentures or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee ranks pari passu with or junior in interest to the Debentures; provided, however, that the Company may make payments pursuant to its obligations under the Capital Securities Guarantee; and (c) the Company shall not redeem, purchase or acquire less than all of the outstanding Debentures or any of the Capital Securities. SECTION 5.7 COVENANTS AS TO THE TRUST. For so long as such Trust Securities of the Trust remain outstanding, the Company shall (i) maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company under this Indenture may succeed to the 22 Company's ownership of the Common Securities; (ii) not voluntarily terminate, wind up or liquidate the Trust, except upon prior approval of the Federal Reserve if then so required under applicable capital guidelines, policies or regulations of the Federal Reserve and use its reasonable efforts to cause the Trust (a) to remain a business trust (and to avoid involuntary termination, winding up or liquidation), except in connection with a distribution of Debentures, the redemption of all of the Trust Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement; and (b) to otherwise continue not to be treated as an association taxable as a corporation or partnership for United States federal income tax purposes; and (iii) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an individual beneficial interest in the Debentures. In connection with the distribution of the Debentures to the holders of the Capital Securities issued by the Trust upon a Dissolution Event, the Company shall use its best efforts to list such Debentures on the American Stock Exchange or on such exchange or self regulatory organization as the Capital Securities are then listed. SECTION 5.8 COVENANTS AS TO PURCHASES. Prior to ________, 2004, the Company shall not purchase any Debentures, in whole or in part, from the Trust. SECTION 5.9 WAIVER OF USURY, STAY OR EXTENSION LAWS. The Company shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performances of this Indenture, and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 6.1 COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF DEBENTUREHOLDERS. The Company shall furnish or cause to be furnished to the Trustee (a) on a quarterly basis on each regular record date (as described in Section 2.5) a list, in such form as the Trustee may reasonably require, of the names and addresses of the holders of the Debentures as of such regular record date, provided that the Company shall not be obligated to furnish or cause to furnish such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company (in the event the Company fails to provide such list on a quarterly basis, 23 the Trustee shall be entitled to rely on the most recent list provided by the Company); and (b) at such other times as the Trustee may request in writing within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that, in either case, no such list need be furnished if the Trustee shall be the Debenture Registrar. SECTION 6.2 PRESERVATION OF INFORMATION COMMUNICATIONS WITH DEBENTUREHOLDERS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures contained in the most recent list furnished to it as provided in Section 6.1 and as to the names and addresses of holders of Debentures received by the Trustee in its capacity as registrar for the Debentures (if acting in such capacity). (b) The Trustee may destroy any list furnished to it as provided in Section 6.1 upon receipt of a new list so furnished. (c) Debentureholders may communicate as provided in Section 312(b) of the Trust Indenture Act with other Debentureholders with respect to their rights under this Indenture or under the Debentures. SECTION 6.3 REPORTS BY THE COMPANY. (a) The Company covenants and agrees to file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports that may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange or the applicable self-regulatory organization as may be prescribed from time to time in such rules and regulations. (b) The Company covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations, including Section 314(a)(4) of the Trust Indenture Act. (c) The Company covenants and agrees to transmit by mail, first class postage prepaid, or the reputable over-night delivery service that provides for evidence of receipt, to the Debentureholders, as their names and addresses appear upon the Debenture Register, within 30 days 24 after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 6.3 as may be required by rules and regulations prescribed from time to time by the Commission. SECTION 6.4 REPORTS BY THE TRUSTEE. (a) On or before July 15 in each year in which any of the Debentures are Outstanding, the Trustee shall transmit by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register, a brief report dated as of the preceding May 15, if and to the extent required under Section 313(a) of the Trust Indenture Act. (b) The Trustee shall comply with Section 313(b) and 313(c) of the Trust Indenture Act. (c) A copy of each such report shall, at the time of such transmission to Debentureholders, be filed by the Trustee with the Company, with each stock exchange or applicable self-regulatory organization upon which any Debentures are listed (if so listed) and also with the Commission. The Company agrees to notify the Trustee when any Debentures become listed on any stock exchange applicable self-regulatory organization. ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON EVENT OF DEFAULT SECTION 7.1 EVENTS OF DEFAULT. (a) Whenever used herein with respect to the Debentures, "Event of Default" means any one or more of the following events that has occurred and is continuing: (i) the Company defaults in the payment of any installment of interest upon any of the Debentures, as and when the same shall become due and payable, and continuance of such default for a period of 30 days; provided, however, that a valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; (ii) the Company defaults in the payment of the principal on the Debentures as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise; (iii) the Company fails to observe or perform any other of its covenants or agreements with respect to the Debentures for a period of 90 days after the date on which written notice of such failure, requiring the same to be remedied and stating that such notice 25 is a "Notice of Default" hereunder, shall have been given to the Company by the Trustee, by registered or certified mail, or to the Company and the Trustee by the holders of at least 25% in principal amount of the Debentures at the time Outstanding; (iv) the Company pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (iv) makes a general assignment for the benefit of its creditors; (v) a court of competent jurisdiction enters an order under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case; (ii) appoints a Custodian of the Company for all or substantially all of its property; or (iii) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 60 days; or (vi) the Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Debentures to holders of Trust Securities in liquidation of their interests in the Trust; (ii) the redemption of all of the outstanding Trust Securities of the Trust; or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Trust Agreement. (b) In each and every such case, unless the principal of all the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by such Debentureholders) may declare the principal of all the Debentures to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything contained in this Indenture or in the Debentures. (c) At any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the holders of a majority in aggregate principal amount of the Debentures then Outstanding hereunder, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of any and all Debentures that shall have become due otherwise than by acceleration (with interest upon such principal, and, to the extent that such payment is enforceable under applicable law, upon overdue installments of interest, at the rate per annum expressed in the Debentures to the date of such payment or deposit) and the amount payable to the Trustee under Section 9.6; and (ii) any and all Events of Default under this Indenture, other than the nonpayment of principal on Debentures that shall not have become due by their terms, shall have been remedied 26 or waived as provided in Section 7.6. No such rescission and annulment shall extend to or shall affect any subsequent default or impair any right consequent thereon. (d) In case the Trustee shall have proceeded to enforce any right with respect to Debentures under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company and the Trustee shall continue as though no such proceedings had been taken. SECTION 7.2 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. (a) The Company covenants that (1) in case it shall default in the payment of any installment of interest on any of the Debentures, and such default shall have continued for a period of 90 Business Days; or (2) in case it shall default in the payment of the principal of any of the Debentures when the same shall have become due and payable, whether upon maturity of the Debentures or upon redemption or upon declaration or otherwise, then, upon demand of the Trustee, the Company shall pay to the Trustee, for the benefit of the holders of the Debentures, the whole amount that then shall have been become due and payable on all such Debentures for principal or interest, or both, as the case may be, with interest upon the overdue principal and (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of the Trust, without duplication of any other amounts paid by the Trust or trustee in respect thereof) upon overdue installments of interest at the rate per annum expressed in the Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, and the amount payable to the Trustee under Section 9.7. (b) If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or other obligor upon the Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or other obligor upon the Debentures, wherever situated. (c) In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, readjustment, arrangement, composition or judicial proceedings affecting the Company or the creditors or property of either, the Trustee shall have power to intervene in such proceedings and take any action therein that may be permitted by the court and shall (except as may be otherwise provided by law) be entitled to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Trustee and of the holders of the Debentures allowed for the entire amount due and payable by the Company under this Indenture at the date of institution of such proceedings and for any additional amount that may become due and payable by the Company after such date, and to collect and receive any moneys or other property payable or deliverable on any such claim, and to distribute the same after the deduction of the amount payable 27 to the Trustee under Section 9.7; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the holders of the Debentures to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to such Debentureholders, to pay to the Trustee any amount due it under Section 9.7. (d) All rights of action and of asserting claims under this Indenture, or under any of the terms established with respect to Debentures, may be enforced by the Trustee without the possession of any of such Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for payment to the Trustee of any amounts due under Section 9.7, be for the ratable benefit of the holders of the Debentures. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Debentureholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Debentureholder in any such proceeding. SECTION 7.3 APPLICATION OF MONEYS COLLECTED. Any moneys or other assets collected by the Trustee pursuant to this Article VII with respect to the Debentures shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such moneys or other assets on account of principal or interest, upon presentation of the Debentures, and notation thereon the payment, if only partially paid, and upon surrender thereof if fully paid: FIRST: To the payment of costs and expenses of collection and of all amounts payable to the Trustee under Section 9.6; SECOND: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XVI; and THIRD: To the payment of the amounts then due and unpaid upon the Debentures for principal and interest, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Debentures for principal and interest, respectively. SECTION 7.4 LIMITATION ON SUITS. (a) Except as set forth herein, no holder of any Debenture shall have any right by virtue or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity 28 or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (i) such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof with respect to the Debentures specifying such Event of Default, as hereinbefore provided; (ii) the holders of not less than 25% in aggregate principal amount of the Debentures then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as trustee hereunder; (iii) such holder or holders shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby; (iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have failed to institute any such action, suit or proceeding; and (v) during such 60 day period, the holders of a majority in principal amount of the Debentures do not give the Trustee a direction inconsistent with the request. (b) Notwithstanding anything contained herein to the contrary or any other provisions of this Indenture, the right of any holder of the Debentures to receive payment of the principal of and interest on the Debentures, as therein provided, on or after the respective due dates expressed in such Debenture (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other of such Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section 7.4, each and every Debentureholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 7.5 RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER. (a) Except as otherwise provided in Section 2.9, all powers and remedies given by this Article VII to the Trustee or to the Debentureholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to such Debentures. (b) No delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or on acquiescence therein; and, subject to the provisions of Section 7.4, every power and 29 remedy given by this Article VII or by law to the Trustee or the Debentureholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Debentureholders. SECTION 7.6 CONTROL BY DEBENTUREHOLDERS. The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding, determined in accordance with Section 10.4, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that such direction shall not be in conflict with any rule of law or with this Indenture. Subject to the provisions of Section 9.1, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding affected thereby, determined in accordance with Section 10.4, may on behalf of the holders of all of the Debentures waive any past default in the performance of any of the covenants contained herein and its consequences, except (i) a default in the payment of the principal of or interest on, any of the Debentures as and when the same shall become due by the terms of such Debentures otherwise than by acceleration (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal has been deposited with the Trustee (in accordance with Section 7.1(c)); (ii) a default in the covenants contained in Section 5.7; or (iii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the holder of each Outstanding Debenture affected; provided, however, that if the Debentures are held by the Trust or a trustee of the Trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in liquidation preference of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver; provided further, that if the consent of the holder of each Outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 7.7 UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debentures by such holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.7 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Debentureholder, or group of Debentureholders holding more than 10% in aggregate principal amount of the Outstanding Debentures, or to any suit instituted by any 30 Debentureholder for the enforcement of the payment of the principal of or interest on the Debentures, on or after the respective due dates expressed in such Debenture or established pursuant to this Indenture. SECTION 7.8 DIRECT ACTION; RIGHT OF SET-OFF. In the event that an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest on or principal of the Debentures on the payment date on which such payment is due and payable, then a holder of Capital Securities may institute a legal proceeding directly against the Company for enforcement of payment to such holder of the principal of or interest on such Debentures having a principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder (a "Direct Action"). In connection with such Direct Action, the Company will have a right of set-off under this Indenture to the extent of any payment made by the Company to such holder of the Capital Securities with respect to such Direct Action. The Company may not amend this Indenture to remove this right to institute a suit directly against the Company without the prior consent of the holders of all the Capital Securities. ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE SECTION 8.1 FORM OF DEBENTURE. The Debenture and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the forms contained as Exhibit A to this Indenture, attached hereto and incorporated herein by reference. SECTION 8.2 ORIGINAL ISSUE OF DEBENTURES. Debentures in the aggregate principal amount of $__________ may, upon execution of this Indenture, be executed by the Company and delivered to the Trustee for authentication. The Trustee shall thereupon authenticate and deliver said Debentures to or upon the written order of the Company, signed by its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE IX CONCERNING THE TRUSTEE SECTION 9.1 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. (a) The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform with respect to the Debentures such duties and only such duties as are specifically set forth in this Indenture, and no implied 31 covenants shall be read into this Indenture against the Trustee. In case an Event of Default has occurred that has not been cured or waived, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of its own affairs. (b) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (1) the duties and obligations of the Trustee shall with respect to the Debentures be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to the Debentures except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to the Debentures conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the Debentures at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Debentures; and (iv) none of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it. 32 SECTION 9.2 NOTICE OF DEFAULTS. Within five business days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Debentures, the Trustee shall transmit by mail to all holders of the Debentures, as their names and addresses appear in the Debenture Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case default in the payment of the principal or interest (including any Additional Interest and Compounded Interest, if any) on any Debenture, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of the directors and/or Responsible Officers of the Trustee determines in good faith that the withholding of such notice is in the interests of the holders of such Debentures; and provided, further, that in the case of any default of the character specified in Section 7.1(a)(iii), no such notice to holders of Debentures need be sent until at least 30 days after the occurrence thereof. For the purposes of this Section 9.2, the term "default" means any event which is, or after notice or lapse of time or both, would become, an Event of Default with respect to the Debentures. SECTION 9.3 CERTAIN RIGHTS OF TRUSTEE. Except as otherwise provided in Section 9.1: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) Any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company by its President or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer thereof (unless other evidence in respect thereof is specifically prescribed herein); (c) The Trustee shall not be deemed to have knowledge of a default or an Event of Default, other than an Event of Default specified in Section 7.1(a)(i); or (ii), unless and until it receives written notification of such Event of Default from the Company or by holders of at least 25% of the principal amount of the Debentures at the time Outstanding; (d) The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon; (e) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Debentureholders, pursuant to the provisions of this Indenture, unless such Debentureholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, 33 upon the occurrence of an Event of Default (that has not been cured or waived) to exercise with respect to the Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (f) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, unless requested in writing to do so by the holders of not less than a majority in principal amount of the Outstanding Debentures (determined as provided in Section 10.4); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding. The reasonable expense of every such examination shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; and (h) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 9.4 TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC. (a) The Recitals contained herein and in the Debentures shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. (b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures. (c) The Trustee shall not be accountable for the use or application by the Company of any of the Debentures or of the proceeds of such Debentures, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture, or for the use or application of any moneys received by any paying agent other than the Trustee. SECTION 9.5 MAY HOLD DEBENTURES. The Trustee or any paying agent or registrar for the Debentures, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, paying agent or Debenture Registrar. 34 SECTION 9.6 MONEYS HELD IN TRUST. Subject to the provisions of Section 13.5, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company to pay thereon. SECTION 9.7 COMPENSATION AND REIMBURSEMENT. (a) The Company covenants and agrees to pay to the Trustee, and the Trustee shall be entitled to, such compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), as the Company and the Trustee may from time to time agree in writing, for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and, except as otherwise expressly provided herein, the Company shall pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability, claim, action, suit, cost or expense incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises. (b) The obligations of the Company under this Section 9.7 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures. SECTION 9.8 RELIANCE ON OFFICERS' CERTIFICATE. Except as otherwise provided in Section 9.1, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof. 35 SECTION 9.9 DISQUALIFICATION: CONFLICTING INTERESTS. If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 9.10 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee with respect to the Debentures issued hereunder which shall at all times be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or other Person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 9.10, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 9.10, the Trustee shall resign immediately in the manner and with the effect specified in Section 9.11. SECTION 9.11 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) The Trustee or any successor hereafter appointed, may at any time resign by giving written notice thereof to the Company and by transmitting notice of resignation by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to Debentures by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Debentures, or any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 9.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any one of the following shall occur 36 (i) the Trustee shall fail to comply with the provisions of Section 9.9 after written request therefor by the Company or by any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 9.10 and shall fail to resign after written request therefor by the Company or by any such Debentureholder; or the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of the Trustee or of its property shall be appointed or consented to, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company may remove the Trustee with respect to all Debentures and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 9.9, unless the Trustee's duty to resign is stayed as provided herein, any Debentureholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, on behalf of that holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Debentures at the time Outstanding may at any time remove the Trustee by so notifying the Trustee and the Company and may appoint a successor Trustee with the consent of the Company. (d) Any resignation or removal of the Trustee and appointment of a successor trustee with respect to the Debentures pursuant to any of the provisions of this Section 9.11 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 9.12. (e) Any successor trustee appointed pursuant to this Section 9.11 may be appointed with respect to the Debentures, and at any time there shall be only one Trustee with respect to the Debentures. SECTION 9.12 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor trustee with respect to the Debentures, every successor trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly 37 assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) of this Section 9.12. (c) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article IX. (d) Upon acceptance of appointment by a successor trustee as provided in this Section 9.12, the Company shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid, to the Debentureholders, as their names and addresses appear upon the Debenture Register. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company. SECTION 9.13 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 9.9 and eligible under the provisions of Section 9.10, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any Debentures shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Debentures. SECTION 9.14 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein. 38 ARTICLE X CONCERNING THE DEBENTUREHOLDERS SECTION 10.1 EVIDENCE OF ACTION BY HOLDERS. (a) Whenever in this Indenture it is provided that the holders of a majority or specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such majority or specified percentage have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Debentures in Person or by agent or proxy appointed in writing. (b) If the Company shall solicit from the Debentureholders any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for the determination of Debentureholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Debentureholders of record at the close of business on the record date shall be deemed to be Debentureholders for the purposes of determining whether Debentureholders of the requisite proportion of Outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the Outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Debentureholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 10.2 PROOF OF EXECUTION BY DEBENTUREHOLDERS. Subject to the provisions of Section 9.1, proof of the execution of any instrument by a Debentureholder (such proof shall not require notarization) or his agent or proxy and proof of the holding by any Person of any of the Debentures shall be sufficient if made in the following manner: (a) The fact and date of the execution by any such Person of any instrument may be proved in any reasonable manner acceptable to the Trustee. (b) The ownership of Debentures shall be proved by the Debenture Register of such Debentures or by a certificate of the Debenture Registrar thereof. (c) The Trustee may require such additional proof of any matter referred to in this Section 10.2 as it shall deem necessary. 39 SECTION 10.3 WHO MAY BE DEEMED OWNERS. Prior to the due presentment for registration of transfer of any Debenture, the Company, the Trustee, any paying agent, any Authenticating Agent and any Debenture Registrar may deem and treat the Person in whose name such Debenture shall be registered upon the books of the Company as the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notice of ownership or writing thereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of and interest on such Debenture (subject to Section 2.3) and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Authenticating Agent nor any Debenture Registrar shall be affected by any notice to the contrary. SECTION 10.4 CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, the Debentures that are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures that the Trustee actually knows are so owned shall be so disregarded. The Debentures so owned that have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 10.4, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 10.5 ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 10.1, of the taking of any action by the holders of the majority or percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder of a Debenture that is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 10.2, revoke such action so far as concerns such Debenture. Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange therefor, on registration of transfer thereof or in place thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the holders of all the Debentures. 40 ARTICLE XI SUPPLEMENTAL INDENTURES SECTION 11.1 SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS. In addition to any supplemental indenture otherwise authorized by this Indenture, the Company and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect), without the consent of the Debentureholders, for one or more of the following purposes: (a) to cure any ambiguity, defect, or inconsistency herein, in the Debentures; (b) to comply with Article X; (c) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; (d) to add to the covenants of the Company for the benefit of the holders of all or any of the Debentures or to surrender any right or power herein conferred upon the Company; (e) to add to, delete from, or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication, and delivery of Debentures, only as herein set forth; (f) to make any change that does not adversely affect the rights of any Debentureholder in any material respect; (g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or of the Debentures, or to add to the rights of the holders of the Debentures; or (h) qualify or maintain the qualification of this Indenture under the Trust Indenture Act. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 11.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time Outstanding, notwithstanding any of the provisions of Section 11.2. 41 SECTION 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS. With the consent (evidenced as provided in Section 10.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time Outstanding, the Company, when authorized by Board Resolutions, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner not covered by Section 11.1 the rights of the holders of the Debentures under this Indenture; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then Outstanding and affected thereby, (i) extend the fixed maturity of any Debentures, reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, without the consent of the holder of each Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture; provided further, that if the Debentures are held by the Trust or a trustee of the Trust, such supplemental indenture shall not be effective until the holders of a majority in liquidation preference of Trust Securities of the Trust shall have consented to such supplemental indenture; provided further, that if the consent of the holder of each Outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such supplemental indenture. It shall not be necessary for the consent of the Debentureholders affected thereby under this Section 11.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. SECTION 11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article XI, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 11.4 DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES. Debentures affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article XI, may bear a notation in form approved by the Company, provided such form meets the requirements of any exchange upon which the Debentures may be listed, as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Debentures then Outstanding. 42 SECTION 11.5 EXECUTION OF SUPPLEMENTAL INDENTURES. (a) Upon the request of the Company, accompanied by their Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Debentureholders required to consent thereto as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee, subject to the provisions of Section 9.1, may receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article XI is authorized or permitted by, and conforms to, the terms of this Article XI and that it is proper for the Trustee under the provisions of this Article XI to join in the execution thereof. (b) Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 11.5, the trustee shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Debentureholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. ARTICLE XII SUCCESSOR CORPORATION SECTION 12.1 COMPANY MAY CONSOLIDATE, ETC. Nothing contained in this Indenture or in any of the Debentures shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company, as the case may be), or successive consolidations or mergers in which the Company, as the case may be, or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company, as the case may be, or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company, as the case may be, or its successor or successors) authorized to acquire and operate the same; provided, however, the Company hereby covenants and agrees that, (i) upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment, in the case of the Company, of the principal of and interest on all of the Debentures, according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company as the case may be, shall be expressly assumed, by supplemental indenture (which shall conform to the provisions of the Trust Indenture Act, as then in effect) satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company, as the case may be, shall have been merged, or by the entity which shall have acquired such property; (ii) in case the Company consolidates with or merges into another Person 43 or conveys or transfers its properties and assets substantially then as an entirety to any Person, the successor Person is organized under the laws of the United States or any state or the District of Columbia; and (iii) immediately after giving effect thereto, an Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing. SECTION 12.2 SUCCESSOR CORPORATION SUBSTITUTED. (a) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of, in the case of the Company, the due and punctual payment of the principal of and interest on all of the Debentures Outstanding and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, as the case may be, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named as the Company herein, and thereupon the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Debentures. (b) In case of any such consolidation, merger, sale, conveyance, transfer or other disposition such changes in phraseology and form (but not in substance) may be made in the Debentures thereafter to be issued as may be appropriate. (c) Nothing contained in this Indenture or in any of the Debentures shall prevent the Company from merging into itself or acquiring by purchase or otherwise all or any part of the property of any other Person (whether or not affiliated with the Company). SECTION 12.3 EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE. The Trustee, subject to the provisions of Section 9.1, may receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, conveyance, transfer or other disposition, and any such assumption, comply with the provisions of this Article XII. ARTICLE XIII SATISFACTION AND DISCHARGE SECTION 13.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time: (a) the Company shall have delivered to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures that shall have been destroyed, lost or stolen and that shall have been replaced or paid as provided in Section 2.9) and Debentures for whose payment money or Governmental Obligations have theretofore been deposited in trust or segregated and held in trust by the Company (and thereupon repaid to the Company or discharged from such trust, as provided in Section 13.5); or (b) all such Debentures not theretofore delivered 44 to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit or cause to be deposited with the Trustee as trust funds the entire amount in moneys or Governmental Obligations sufficient or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay at maturity or upon redemption all Debentures not theretofore delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company; then this Indenture shall thereupon cease to be of further effect except for the provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3 and 9.7, that shall survive until the date of maturity or redemption date, as the case may be, and Sections 9.7 and 13.5, that shall survive to such date and thereafter, and the Trustee, on demand of the Company and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. SECTION 13.2 DISCHARGE OF OBLIGATIONS. If at any time all Debentures not heretofore delivered to the Trustee for cancellation or that have not become due and payable as described in Section 13.1 shall have been paid by the Company by depositing irrevocably with the Trustee as trust funds moneys or an amount of Governmental Obligations sufficient in the opinion of a nationally recognized certified public accounting firm to pay at maturity or upon redemption all Debentures not theretofore delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity or date fixed for redemption, as the case may be, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then after the date such moneys or Governmental Obligations, as the case may be, are deposited with the Trustee, the obligations of the Company under this Indenture shall cease to be of further effect except for the provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.6, 9.7 and 13.5 hereof that shall survive until such Debentures shall mature and be paid. Thereafter, Sections 9.7 and 13.5 shall survive. SECTION 13.3 DEPOSITED MONIES TO BE HELD IN TRUST. All monies or Governmental Obligations deposited with the Trustee pursuant to Sections 13.1 or 13.2 shall be held in trust and shall be available for payment as due, either directly or through any paying agent (including the Company acting as its own paying agent), to the holders of the Debentures for the payment or redemption of which such moneys or Governmental Obligations have been deposited with the Trustee. 45 SECTION 13.4 PAYMENT OF MONIES HELD BY PAYING AGENTS. In connection with the satisfaction and discharge of this Indenture, all moneys or Governmental Obligations then held by any paying agent under the provisions of this Indenture shall, upon demand of the Company, be paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys or Governmental Obligations. SECTION 13.5 REPAYMENT TO COMPANY. Any monies or Governmental Obligations deposited with any paying agent or the Trustee, or then held by the Company in trust, for payment of principal of or interest on the Debentures that are not applied but remain unclaimed by the holders of such Debentures for at least two years after the date upon which the principal of or interest on such Debentures shall have respectively become due and payable, shall be repaid to the Company, as the case may be, on May 31 of each year or (if then held by the Company) shall be discharged from such trust; and thereupon the paying agent and the Trustee shall be released from all further liability with respect to such monies or Governmental Obligations, and the holder of any of the Debentures entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company for the payment thereof. ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 14.1 NO RECOURSE. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of the Debentures, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor corporation, either directly or through the Company or any such predecessor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this 46 Indenture or in any of the Debentures or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Debentures. ARTICLE XV MISCELLANEOUS PROVISIONS SECTION 15.1 EFFECT ON SUCCESSORS AND ASSIGNS. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company shall bind their respective successors and assigns, whether so expressed or not. SECTION 15.2 ACTIONS BY SUCCESSOR. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the corresponding board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company. SECTION 15.3 SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by appropriate authority of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company, and thereupon such power so surrendered shall terminate both as to the Company, as the case may be, and as to any successor corporation. SECTION 15.4 NOTICES. Except as otherwise expressly provided herein any notice or demand that by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures to or on the Company may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: Heartland Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001, Attention: John K. Schmidt, Executive Vice President. Any notice, election, request or demand by the Company or any Debentureholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee. 47 SECTION 15.5 GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the internal laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of said State. SECTION 15.6 TREATMENT OF DEBENTURES AS DEBT. It is intended that the Debentures shall be treated as indebtedness and not as equity for federal income tax purposes. The provisions of this Indenture shall be interpreted to further this intention. SECTION 15.7 COMPLIANCE CERTIFICATES AND OPINIONS. (a) Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. (b) Each certificate or opinion of the Company provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant in this Indenture shall include (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as, in the opinion of such Person, is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with; provided, however, that each such certificate shall comply with the provisions of Section 314 of the Trust Indenture Act. SECTION 15.8 PAYMENTS ON BUSINESS DAYS. In any case where the date of maturity of interest or principal of any Debenture or the date of redemption of any Debenture shall not be a Business Day, then payment of interest or principal may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date. 48 SECTION 15.9 CONFLICT WITH TRUST INDENTURE ACT. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 15.10 COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 15.11 SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of the Debentures, but this Indenture and the Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 15.12 ASSIGNMENT. The Company shall have the right at all times to assign any of its respective rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company shall remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto. SECTION 15.13 ACKNOWLEDGMENT OF RIGHTS. The Company acknowledges that, with respect to any Debentures held by the Trust or a trustee of the Trust, if the Property Trustee fails to enforce its rights under this Indenture as the holder of the Debentures held as the assets of the Trust, any holder of Capital Securities may, to the extent permitted under applicable law, institute legal proceedings directly against the Company to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company acknowledges that a holder of Capital Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures. 49 SECTION 15.14 ADDITIONAL PROVISIONS FOR THE PAYMENT OF EXPENSES. In connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Trust Securities by the Trust, the Company, in its capacity as borrower with respect to the Debentures, and not in limitation of the provisions contained in the "Expense Agreement" (as such term is defined in the Trust Agreement) or the other provisions contained herein, agrees to pay the following: (a) All debts and other obligations (other than with respect to the Capital Securities) of the Trust and all costs and expenses of the Trust (including costs and expenses relating to the organization of the Trust, the fees and expenses of the Property Trustee and the other costs and expenses relating to the operation of the Trust); and (b) Any and all taxes and all costs and expenses with respect thereto (other than United States withholding taxes) to which the Trust might become subject. The foregoing obligations of the Company are for the benefit of, and shall be enforceable by, any person to whom such debts, obligations, costs, expenses and liabilities are owed (a "Creditor") whether or not such Creditor has received notice thereof. Not in limitation of the provisions of the Expense Agreement, any such Creditor may enforce such obligations of the Company directly against the Company, and the Company irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other person before proceeding against the Company. The Company also agrees to execute such additional agreements as may be necessary or desirable to give full effect to the foregoing. ARTICLE XVI SUBORDINATION OF DEBENTURES SECTION 16.1 AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures issued hereunder by such holder's acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XVI; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of and interest on all Debentures issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Debt, Subordinated Debt and Additional Senior Obligations (collectively, "Senior Indebtedness") to the extent provided herein, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article XVI shall prevent the occurrence of any default or Event of Default hereunder. 50 SECTION 16.2 DEFAULT ON SENIOR DEBT, SUBORDINATED DEBT OR ADDITIONAL SENIOR OBLIGATIONS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of or interest on the Debentures. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding sentence of this Section 16.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 16.3 LIQUIDATION; DISSOLUTION; BANKRUPTCY. (a) Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal or interest on the Debentures; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XVI, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the holders of the Debentures or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the holders of Debentures or to the Trustee. (b) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid 51 in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. (c) For purposes of this Article XVI, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XVI with respect to the Debentures to the payment of all Senior Indebtedness of the Company, as the case may be, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment; and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XII shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 16.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XII. Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 9.7. SECTION 16.4 SUBROGATION. (a) Subject to the payment in full of all Senior Indebtedness of the Company, the rights of the holders of the Debentures shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, as the case may be, applicable to such Senior Indebtedness until the principal of and interest on the Debentures shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the holders of the Debentures or the Trustee would be entitled except for the provisions of this Article XVI, and no payment over pursuant to the provisions of this Article XVI to or for the benefit of the holders of such Senior Indebtedness by holders of the Debentures or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures, be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XVI are and are intended solely for the purposes of defining the relative rights of the holders of the Debentures, on the one hand, and the holders of such Senior Indebtedness on the other hand. 52 (b) Nothing contained in this Article XVI or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors (other than the holders of Senior Indebtedness of the Company), and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness of the Company, as the case may be, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XVI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, as the case may be, received upon the exercise of any such remedy. (c) Upon any payment or distribution of assets of the Company referred to in this Article XVI, the Trustee, subject to the provisions of Article IX, and the holders of the Debentures shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the holders of the Debentures, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XVI. SECTION 16.5 TRUSTEE TO EFFECTUATE SUBORDINATION. Each holder of Debentures by such holder's acceptance thereof authorizes and directs the Trustee on such holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XVI and appoints the Trustee such holder's attorney-in-fact for any and all such purposes. SECTION 16.6 NOTICE BY THE COMPANY. (a) The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XVI. Notwithstanding the provisions of this Article XVI or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XVI, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 9.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 16.6 at least two Business Days prior to the date upon which by the terms hereof any money may 53 become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. (b) The Trustee, subject to the provisions of Section 9.1, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XVI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XVI, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 16.7 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. (a) The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XVI in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. The Trustee's right to compensation and reimbursement of expenses as set forth in Section 9.7 shall not be subject to the subordination provisions of this Article XVI. (b) With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XVI, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 9.1, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to holders of Debentures, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XVI or otherwise. SECTION 16.8 SUBORDINATION MAY NOT BE IMPAIRED. (a) No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and 54 covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. (b) Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to the Trustee or the holders of the Debentures, without incurring responsibility to the holders of the Debentures and without impairing or releasing the subordination provided in this Article XVI or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. HEARTLAND FINANCIAL USA, INC. By:________________________________ Name:______________________________ Title:_____________________________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE By:________________________________ Name:______________________________ Title:_____________________________ 55 STATE OF __________ ) ) ss: COUNTY OF _________ ) On the __ day of ____, 1999, before me personally came __________________to me known, who, being by me duly sworn, did depose and say that he is the______________________ of Company, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ___________________________________ Notary Public (seal) My Commission expires:_____________ EXHIBIT A (FORM OF FACE OF DEBENTURE) HEARTLAND FINANCIAL USA, INC. ____% SUBORDINATED DEBENTURE DUE _______________, 2029 No. -1- $__________ CUSIP No. ______ ___ __ Heartland Financial USA, Inc., a Delaware corporation (the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to, _________________________ or registered assigns, the principal sum of _____________________________ ($) on September 30, 2029 (the "Stated Maturity"), and to pay interest on said principal sum from ________ __, 1999, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year commencing December 31, 1999, at the rate of ____% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Debenture is not a business day, then payment of interest payable on such date shall be made on the next succeeding day that is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day is in the next succeeding calendar year, payment of such interest will be made on the immediately preceding business day, in each case, with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, which shall be the close of business on the business day next preceding such Interest Payment Date unless otherwise provided in the Indenture. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date and may be paid to the Person in whose 1 name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of and the interest on this Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture Register. Notwithstanding the foregoing, so long as the holder of this Debenture is the Property Trustee, the payment of the principal of and interest on this Debenture shall be made at such place and to such account as may be designated by the Trustee. The Stated Maturity may be shortened at any time by the Company to any date not earlier than September 30, 2004, subject to the Company having received prior approval of the Federal Reserve if then required under applicable capital guidelines, policies or regulations of the Federal Reserve. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions; (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided; and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. 2 IN WITNESS WHEREOF, the Company has caused this instrument to be executed. Dated: ________ __, 1999. HEARTLAND FINANCIAL USA, INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ Attest: _________________________________ By: _________________________________ Name: _________________________________ Title: _________________________________ 3 FORM OF CERTIFICATE OF AUTHENTICATION CERTIFICATE OF AUTHENTICATION This is one of the Debentures described in the within-mentioned Indenture. Dated: ________ __, 1999 First Union Trust Company, National Association, as Trustee ___________________________________ or Authentication Agent By: ______________________________ By: _______________________________ Authorized Signatory 4 FORM OF REVERSE OF DEBENTURE ____% SUBORDINATED DEBENTURE (CONTINUED) This Debenture is one of the subordinated debentures of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, all issued or to be issued under and pursuant to an Indenture dated as of _________, 1999 (the "Indenture") duly executed and delivered between the Company and First Union Trust Company, National Association, as Trustee (the "Trustee"), to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture. Because of the occurrence and continuation of a Special Event, in certain circumstances, this Debenture may become due and payable at the principal amount together with any interest accrued thereon (the "Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon, Eastern Standard Time, time, on the date of such redemption or at such earlier time as the Company determines. The Company shall have the right to redeem this Debenture at the option of the Company, without premium or penalty, in whole or in part at anytime on or after September 30, 2004 (an "Optional Redemption"), or at any time in certain circumstances upon the occurrence of a Special Event, at a Redemption Price equal to 100% of the principal amount plus any accrued but unpaid interest, to the date of such redemption. Any redemption pursuant to this paragraph shall be made upon not less than 30 days nor more than 60 days notice, at the Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures shall be redeemed pro rata or by lot or by any other method utilized by the Trustee. In the event of redemption of this Debenture in part only, a new Debenture or Debentures for the unredeemed portion hereof shall be issued in the name of the holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of the Debentures except as provided in the Indenture, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, without the consent of the holder of each Debenture so affected; or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of each Debenture then outstanding and affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding, on behalf of all of the holders of the Debentures, to waive 5 any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in the payment of the principal of or interest on any of the Debentures. Any such consent or waiver by the registered holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. Provided certain conditions are met, the Company shall have the right at any time during the term of the Debentures and from time to time to extend the interest payment period of such Debentures for up to 20 consecutive quarters (each, an "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Debentures to the extent that payment of such interest is enforceable under applicable law). Before the termination of any such Extended Interest Payment Period, so long as no Event of Default shall have occurred and be continuing, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters, extend beyond the Stated Maturity or end on a date other than an Interest Payment Date. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due and subject to the foregoing conditions, the Company may commence a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Debenture Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Trustee accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures of authorized denominations and for the same aggregate principal amount shall be issued to the designated transferee or transferees. No service charge shall be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Trustee, any paying agent and the Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal hereof and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. 6 No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Debentures are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. 7 EX-4.3 4 EXHIBIT 4.3 Exhibit 4.3 CERTIFICATE OF TRUST OF HEARTLAND FINANCIAL CAPITAL TRUST I THIS CERTIFICATE OF TRUST OF Heartland Financial Capital Trust I (the "Trust") is being duly executed and filed by the undersigned as trustees, to form a business trust under the Delaware Business Trust Act (12 DEL. C. Section 3801 ET SEQ.)(the "Act"). 1. NAME. The name of the business trust formed hereby is Heartland Financial Capital Trust I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust in the State of Delaware is First Union Trust Company, National Association, One Rodney Square, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration. 3. EFFECTIVE DATE. This Certificate of Trust will be effective upon filing. IN WITNESS WHEREOF, the undersigned being all of the trustees of the Trust have duly executed this Certificate of Trust in accordance with Section 3811(a)(1) of the Act. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware trustee By: /S/ Edward L. Truitt, Jr. ------------------------------------------ Name: Edward L. Truitt, Jr. Title: Vice President /s/ Lynn B. Fuller ------------------------------------------------ Lynn B. Fuller, as Administrative Trustee /s/ John K. Schmidt ------------------------------------------------ John K. Schmidt, as Administrative Trustee /s/ Jacquie M. Manternach ------------------------------------------------ Jacquie M. Manternach, as Administrative Trustee EX-4.4 5 EXHIBIT 4.4 Exhibit 4.4 TRUST AGREEMENT OF HEARTLAND FINANCIAL CAPITAL TRUST I THIS TRUST AGREEMENT is made as of September 13, 1999 (this "Trust Agreement"), by and among Heartland Financial USA, Inc., a Delaware corporation, as depositor (the "Depositor"), First Union Trust Company, National Association, a national banking association, as trustee (the "Delaware Trustee"), and Lynn B. Fuller, John K. Schmidt and Jacquie M. Manternach, as administrators (the "Administrative Trustees", and together with the Delaware Trustee, the "Trustees"). The Depositor, the Administrative Trustees and the Delaware Trustee hereby agree as follows: 1. The trust created hereby shall be known as "Heartland Financial Capital Trust I" (the "Trust"), in which name the Administrative Trustees, the Delaware Trustee or the Depositor, to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Trust the sum of $10.00. The Delaware Trustee and the Administrative Trustees hereby acknowledge receipt of such amount from the Depositor, which amount shall constitute the initial trust estate. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 DEL. C, Section 3801, ET SEQ. (the "Business Trust Act"), and that this document constitute the governing instrument of the Trust. The Delaware Trustee is hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in such form as the Delaware Trustee may approve. 3. The Depositor, the Administrative Trustees and the Delaware Trustee will enter into an amended and restated Trust Agreement, satisfactory to each such party, to provide for the contemplated operation of the Trust created hereby and the issuance of the Capital Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Administrative Trustees and the Delaware Trustee shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery of any licenses, consents or approvals required by applicable law or otherwise. 4. The Depositor, as the depositor of the Trust, is hereby authorized, in its discretion, (i) to prepare a Form S-3 Registration Statement in accordance with the requirements of the Securities Act of 1933, as amended (the "1933 Act"), and such other forms or filings as may be required by the 1933 Act, the Securities Exchange Act of 1934, as amended, or the Trust Indenture Act of 1939, as amended, in each case relating to the Capital 1 Securities of the Trust; (ii) to file and execute on behalf of the Trust, such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents that shall be necessary or desirable to register or establish the exemption from registration of the Capital Securities of the Trust under the securities or "Blue Sky" laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable; (iii) to execute and deliver letters or documents to, or instruments for filing with, a depository relating to the Capital Securities of the Trust; and (iv) to execute, deliver and perform on behalf of the Trust one or more purchase agreements, dealer manager agreements, escrow agreements, registration rights agreements and other related agreements providing for or relating to the sale of the Capital Securities of the Trust. In the event that any filing referred to in this Section 4 as required by the rules and regulations of the Securities and Exchange Commission (the "Commission") or state securities or "Blue Sky" laws to be executed on behalf of the Trust by a party other than the Depositor, the Administrative Trustees are hereby authorized to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that the Administrative Trustees, in their capacities as administrators of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission or state securities or "Blue Sky" laws. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of trustees of the Trust initially shall be four and thereafter the number of trustees of the Trust shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of trustees of the Trust; provided, however, that to the extent required by the Business Trust Act, one trustee of the Trust shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any trustee of the Trust at any time. Any trustee of the Trust may resign upon thirty days' prior notice to the Depositor. 7. First Union Trust Company, National Association, in its capacity as trustee of the Trust, shall not have any of the powers or duties of the Administrative Trustees set forth herein and shall be a trustee of the Trust for the sole purpose of satisfying the requirements of Section 3807 of the Business Trust Act. 8. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). [SIGNATURE PAGE FOLLOWS] 2 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. HEARTLAND FINANCIAL USA, INC., as Depositor By: /s/ John K. Schmidt ---------------------------------------- Name: John K. Schmidt ---------------------------------------- Title: Executive Vice President ---------------------------------------- FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as not in its individual capacity but solely as trustee of the Trust By: /s/ Edward L. Truitt, Jr. ------------------------------------------ Name: Edward L. Truitt, Jr. ------------------------------------------ Title: Vice President ------------------------------------------ /s/ Lynn B. Fuller ------------------------------------------------ Lynn B. Fuller, not in his individual capacity, but solely as trustee of the Trust /s/ John K. Schmidt ------------------------------------------------- John K. Schmidt, not in his individual capacity, but solely as trustee of the Trust /s/ Jacquie M. Manternach -------------------------------------------------- Jacquie M. Manternach, not in his individual capacity, but solely as trustee of the Trust 3 EX-4.5 6 EXHIBIT 4.5 EXHIBIT 4.5 FORM OF HEARTLAND FINANCIAL CAPITAL TRUST I AMENDED AND RESTATED TRUST AGREEMENT AMONG HEARTLAND FINANCIAL USA, INC., AS DEPOSITOR, FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, AS PROPERTY TRUSTEE, FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, AS DELAWARE TRUSTEE, AND THE ADMINISTRATIVE TRUSTEES NAMED HEREIN DATED AS OF _________, 1999 TABLE OF CONTENTS CROSS-REFERENCE TABLE.............................................................................................v AMENDED AND RESTATED TRUST AGREEMENT..............................................................................1 RECITALS..........................................................................................................1 ARTICLE I DEFINED TERMS..........................................................................................2 SECTION 101. DEFINITIONS............................................................................2 ARTICLE II ESTABLISHMENT OF THE TRUST...........................................................................10 SECTION 201. NAME..................................................................................10 SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.....................................................................10 SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES...............................................................10 SECTION 204. ISSUANCE OF THE CAPITAL SECURITIES....................................................10 SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF DEBENTURES...............................................11 SECTION 206. DECLARATION OF TRUST..................................................................11 SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS..........................................................................11 SECTION 208. ASSETS OF TRUST.......................................................................15 SECTION 209. TITLE TO TRUST PROPERTY...............................................................15 ARTICLE III PAYMENT ACCOUNT.....................................................................................15 SECTION 301. PAYMENT ACCOUNT.......................................................................15 ARTICLE IV DISTRIBUTIONS; REDEMPTION............................................................................15 SECTION 401. DISTRIBUTIONS.........................................................................15 SECTION 402. REDEMPTION............................................................................16 SECTION 403. SUBORDINATION OF COMMON SECURITIES....................................................18 SECTION 404. PAYMENT PROCEDURES....................................................................19 SECTION 405. TAX RETURNS AND REPORTS...............................................................19 SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST...........................................19 SECTION 407. PAYMENTS UNDER INDENTURE..............................................................19 ARTICLE V TRUST SECURITIES CERTIFICATES.........................................................................20 SECTION 501. INITIAL OWNERSHIP.....................................................................20 SECTION 502. THE TRUST SECURITIES CERTIFICATES.....................................................20 SECTION 503. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST SECURITIES CERTIFICATES...............................................................20 i SECTION 503A. GLOBAL CAPITAL SECURITY...............................................................21 SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL SECURITIES CERTIFICATES.......................................................22 SECTION 506. PERSONS DEEMED SECURITYHOLDERS........................................................23 SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES.........................................................................24 SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.......................................................24 SECTION 509. APPOINTMENT OF PAYING AGENT...........................................................24 SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR...........................................25 SECTION 511. TRUST SECURITIES CERTIFICATES.........................................................25 SECTION 512. NOTICES TO CLEARING AGENCY............................................................25 SECTION 513. RIGHTS OF SECURITYHOLDERS.............................................................26 ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING.............................................................26 SECTION 601. LIMITATIONS ON VOTING RIGHTS..........................................................26 SECTION 602. NOTICE OF MEETINGS....................................................................27 SECTION 603. MEETINGS OF CAPITAL SECURITYHOLDERS...................................................27 SECTION 604. VOTING RIGHTS.........................................................................28 SECTION 605. PROXIES, ETC..........................................................................28 SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT..............................................28 SECTION 608. ACTS OF SECURITYHOLDERS...............................................................29 SECTION 609. INSPECTION OF RECORDS.................................................................30 ARTICLE VII REPRESENTATIONS AND WARRANTIES......................................................................30 SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY TRUSTEE..................................................................30 SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND THE DELAWARE TRUSTEE.........................................................31 SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR...........................................32 ARTICLE VIII TRUSTEES...........................................................................................33 SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES...................................................33 SECTION 802. CERTAIN NOTICES.......................................................................34 SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE....................................................34 SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.........................................................................36 SECTION 805. MAY HOLD SECURITIES...................................................................36 SECTION 806. COMPENSATION; INDEMNITY; FEES.........................................................37 SECTION 808. CONFLICTING INTERESTS.................................................................38 SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE......................................................38 SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR..........................................................................39 SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................................................41 SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS...........................................................................41 ii SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST....................................................................41 SECTION 814. REPORTS BY PROPERTY TRUSTEE...........................................................42 SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.......................................................42 SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.............................................................................42 SECTION 817. NUMBER OF TRUSTEES....................................................................42 SECTION 818. DELEGATION OF POWER...................................................................43 SECTION 819. VOTING................................................................................43 ARTICLE IX TERMINATION, LIQUIDATION AND MERGER..................................................................43 SECTION 901. TERMINATION UPON EXPIRATION DATE......................................................43 SECTION 902. EARLY TERMINATION.....................................................................44 SECTION 903. TERMINATION...........................................................................44 SECTION 904. LIQUIDATION...........................................................................44 SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST.............................................................46 ARTICLE X MISCELLANEOUS PROVISIONS..............................................................................47 SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS...............................................47 SECTION 1002. AMENDMENT.............................................................................47 SECTION 1003. SEPARABILITY..........................................................................48 SECTION 1004. GOVERNING LAW.........................................................................48 SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY......................................................48 SECTION 1006. SUCCESSORS............................................................................49 SECTION 1007. HEADINGS..............................................................................49 SECTION 1008. REPORTS, NOTICES AND DEMANDS..........................................................49 SECTION 1009. AGREEMENT NOT TO PETITION.............................................................49 SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT...................................................................................50 SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE...............................................................50
EXHIBITS Exhibit A Certificate of Trust Exhibit B Form of Common Securities Certificate Exhibit C Form of Expense Agreement Exhibit D Form of Capital Securities Certificate Exhibit E Form of Capital Securities Certificate of Authentication iii CROSS-REFERENCE TABLE
SECTION OF TRUST INDENTURE ACT OF 1939, AS AMENDED SECTION OF INDENTURE ---------------------------------- -------------------- 310(a)(1) 807 310(a)(2) 807 310(a)(3) 807 310(a)(4) 207(a)(ii) 310(b) 808 311(a) 813 311(b) 813 312(a) 507 312(b) 507 312(c) 507 313(a) 814(a) 313(a)(4) 814(b) 313(b) 814(b) 313(c) 1008 313(d) 814(c) 314(a) 815 314(b) Not Applicable 314(c)(1) 816 314(c)(2) 816 314(c)(3) Not Applicable 314(d) Not Applicable 314(e) 101, 816 315(a) 801(a), 803(a) 315(b) 802, 1008 315(c) 801(a) 315(d) 801, 803 316(a)(2) Not Applicable 316(b) Not Applicable 316(c) 607 317(a)(1) Not Applicable 317(a)(2) Not Applicable 317(b) 509 318(a) 1010
Note: This Cross-Reference Table does not constitute part of this Agreement and shall not affect the interpretation of any of its terms or provisions. iv AMENDED AND RESTATED TRUST AGREEMENT AMENDED AND RESTATED TRUST AGREEMENT, dated as of _________ __, 1999, among (i) HEARTLAND FINANCIAL USA, INC., a Delaware corporation (including any successors or assigns, the "Depositor"), (ii) FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association with its principal place of business in the State of Delaware, as property trustee (the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee, the "Bank"), (iii) FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association with its principal place of business in the State of Delaware, as Delaware trustee (the "Delaware Trustee," and, in its separate corporate capacity and not in its capacity as Delaware Trustee, the "Delaware Bank") (iv) ___________________, an individual, _____________________, an individual, and ________________, an individual, each of whose address is c/o Company (each an "Administrative Trustee" and collectively the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees referred to collectively as the "Trustees"), and (v) the several Holders (as hereinafter defined). RECITALS WHEREAS, the Depositor, the Delaware Trustee, and ______________, ____________ and _______________, each as an Administrative Trustee, have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by the entering into of that certain Trust Agreement, dated as of ___________________, 1999 (the "Original Trust Agreement"), and by the execution and filing by the Delaware Trustee and the Administrative Trustees with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on _____________, 1999, the form of which is attached as Exhibit A; and WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and the Administrative Trustees desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities (as defined herein) by the Trust (as defined herein) to the Depositor; (ii) the issuance and sale of the Capital Securities (as defined herein) by the Trust pursuant to the Underwriting Agreement (as defined herein); (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures (as defined herein); and (iv) the appointment of the Trustees; NOW THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Securityholders (as defined herein), hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I DEFINED TERMS SECTION 101. DEFINITIONS. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article I have the meanings assigned to them in this Article I and include the plural as well as the singular; (b) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) unless the context otherwise requires, any reference to an"Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 608. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of additional interest accrued on interest in arrears and paid by the Depositor on a Like Amount of Debentures for such period. "Additional Interest" has the meaning specified in Section 1.1 of the Indenture. "Administrative Trustee" means each of __________________, __________________ and _______________, solely in his or her capacity as Administrative Trustee of the Trust formed and continued hereunder and not in his or her individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person; (b) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person; (c) a partnership in which the specified Person is a general partner; (d) any officer or director of the specified Person; and (e) if the specified Person is an individual, any entity of which the specified Person is an officer, director or general partner. 2 "Authenticating Agent" means an authenticating agent with respect to the Capital Securities appointed by the Property Trustee pursuant to Section 503. "Bank" has the meaning specified in the Preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises adjudging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking liquidation or reorganization of or in respect of such Person under the United States Bankruptcy Code of 1978, as amended, or any other similar applicable federal or state law, and the continuance of any such decree or order unvacated and unstayed for a period of 90 days; or the commencement of an involuntary case under the United States Bankruptcy Code of 1978, as amended, in respect of such Person, which shall continue undismissed for a period of 90 days or entry of an order for relief in such case; or the entry of a decree or order of a court having jurisdiction in the premises for the appointment on the ground of insolvency or bankruptcy of a receiver, custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such Person or of its property, or for the winding up or liquidation of its affairs, and such decree or order shall have remained in force unvacated and unstayed for a period of 60 consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a voluntary bankrupt, or the consent by such Person to the filing of a bankruptcy proceeding against it, or the filing by such Person of a petition or answer or consent seeking liquidation or reorganization under the United States Bankruptcy Code of 1978, as amended, or other similar applicable Federal or State law, or the consent by such Person to the filing of any such petition or to the appointment on the ground of insolvency or bankruptcy of a receiver or custodian or liquidator or trustee or assignee in bankruptcy or insolvency of such Person or of its property, or shall make a general assignment for the benefit of creditors. "Bankruptcy Laws" has the meaning specified in Section 1009. "Board Resolution" means a copy of a resolution certified by the Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or such committee of the Board of Directors or officers of the Depositor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the appropriate Trustee. "Business Day" means a day other than a Saturday or Sunday, a day on which banking institutions in New York, New York or Wilmington, Delaware are authorized or required by law, executive order or regulation to remain closed, or a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. "Capital Security" means a preferred undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust 3 Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Capital Securities Certificate" means a certificate evidencing ownership of Capital Securities, substantially in the form attached as Exhibit D. "Certificate of Trust" means the certificate of trust filed with the Secretary of State of the State of Delaware with respect to the Trust, as amended or restated from time to time. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. DTC shall be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank or other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Company" means Heartland Financial USA, Inc. "Corporate Trust Office" means the office at which, at any particular time, the corporate trust business of the Property Trustee or the Debenture Trustee, as the case may be, shall be principally administered, which office at the date hereof, in each such case, is located at One Rodney Square, 920 King Street, 1st Floor, Wilmington, Delaware 19801, Attn: Corporate Trust Administration. "Debenture Event of Default" means an "Event of Default" as defined in Section 7.1 of the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption under the Indenture. 4 "Debenture Trustee" means First Union Trust Company, National Association, a national banking association with its principal place of business in the State of Delaware and any successor thereto, as trustee under the Indenture. "Debentures" means the $__________ aggregate principal amount of the Depositor's ____% Subordinated Debentures due 2029, issued pursuant to the Indenture. "Definitive Capital Securities Certificates" means Capital Securities Certificates issued in certified, fully registered form as provided in Section 513. "Delaware Bank" has the meaning specified in the Preamble to this Trust Agreement. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from time to time. "Delaware Trustee" means the commercial bank or trust company identified as the "Delaware Trustee" in the Preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "Depositary" means DTC or any successor thereto. "Depositor" has the meaning specified in the Preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 401(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 401. "DTC" means The Depository Trust Company. "Event of Default" means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the occurrence of a Debenture Event of Default; or (b) default by the Trust in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (c) default by the Trust in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or 5 (d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in this Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (b) or (c), above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the defaulting Trustee or Trustees by the Holders of at least 25% in aggregate Liquidation Amount of the Outstanding Capital Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Property Trustee and the failure by the Depositor to appoint a successor Property Trustee within 60 days thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Expense Agreement" means the Agreement as to Expenses and Liabilities between the Depositor and the Trust, substantially in the form attached as Exhibit C, as amended from time to time. "Expiration Date" has the meaning specified in Section 901. "Extended Interest Payment Period" has the meaning specified in Section 4.1 of the Indenture. "Global Capital Securities Certificate" means a Capital Securities Certificate evidencing ownership of Global Capital Securities. "Global Capital Security" means a Capital Security, the ownership and transfer of which shall be made through book entries by a Clearing Agency as described herein. "Guarantee" means the Capital Securities Guarantee Agreement executed and delivered by the Depositor and First Union Trust Company, National Association, as trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the holders of the Capital Securities, as amended from time to time. "Indenture" means the Indenture, dated as of _____________, 1999, between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Investment Company Act," means the Investment Company Act of 1940, as amended, as in effect at the date of execution of this instrument. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. 6 "Like Amount" means (a) with respect to a redemption of Trust Securities, Trust Securities having an aggregate Liquidation Amount equal to the aggregate principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture and the proceeds of which shall be used to pay the Redemption Price of such Trust Securities; and (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a termination or liquidation of the Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed. Each Debenture distributed pursuant to clause (b) above shall carry with it accrued interest in an amount equal to the accrued and unpaid interest then due on such Debentures. "Liquidation Amount" means the stated amount of $25 per Trust Security. "Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 904(a). "Liquidation Distribution" has the meaning specified in Section 904(d). "Majority in liquidation amount of the Outstanding Capital Securities" means, except as provided in the terms of the Capital Securities or, except as provided by the Trust Indenture Act, a vote by Holder(s) of Capital Securities, voting separately as a class, of more than 50% of the Liquidation Amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to but excluding the date upon which the voting percentages are determined) of all Outstanding Capital Securities. "Officers' Certificate" means a certificate signed by the President or an Executive Vice President and by the Treasurer or the Vice President--Finance or the Secretary, of the Depositor, and delivered to the appropriate Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 816 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. 7 "Opinion of Counsel" means an opinion in writing of independent, outside legal counsel for the Trust, the Property Trustee, the Delaware Trustee or the Depositor, who shall be reasonably acceptable to the Property Trustee. "Original Trust Agreement" has the meaning specified in the Recitals to this Trust Agreement. "Outstanding", when used with respect to Capital Securities, means, as of the date of determination, all Capital Securities theretofore executed and delivered under this Trust Agreement, except: (a) Capital Securities theretofore canceled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Capital Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Capital Securities; provided that, if such Capital Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (c) Capital Securities which have been paid or in exchange for or in lieu of which other Capital Securities have been executed and delivered pursuant to Sections 504, 505, 511 and 513; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Capital Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Capital Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Capital Securities that such Trustee knows to be so owned shall be so disregarded; and (b) the foregoing shall not apply at any time when all of the outstanding Capital Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Capital Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to the Depositor or any Affiliate of the Depositor. "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 509 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee with the Bank in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures shall be held and from which the Property Trustee shall make payments to the Securityholders in accordance with Sections 401 and 402. "Person" means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof. 8 "Property Trustee" means the commercial bank or trust company identified as the "Property Trustee," in the Preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, paid by the Depositor upon the concurrent redemption of a Like Amount of Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among the Trust Securities. "Relevant Trustee" shall have the meaning specified in Section 810. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 504. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Trust Securities is registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act. "Trust" means the Delaware business trust created and continued hereby and identified on the cover page to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939, as amended, is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures; (b) the rights of the Property Trustee under the Guarantee; (c) any cash on deposit in, or owing to, the Payment Account; and (d) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. 9 "Trust Security" means any one of the Common Securities or the Capital Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Capital Securities Certificates. "Trustees" means, collectively, the Property Trustee, the Delaware Trustee and the Administrative Trustees. "Underwriting Agreement" means the Underwriting Agreement, dated as of [ ], 1999, among the Trust, the Depositor and the Underwriters named therein. ARTICLE II ESTABLISHMENT OF THE TRUST SECTION 201. NAME. The Trust continued hereby shall be known as "Heartland Financial Capital Trust I," as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS. The address of the Delaware Trustee in the State of Delaware is c/o First Union Trust Company, National Association, One Rodney Square, 920 King Street, 1st Floor, Wilmington, Delaware 19801, Attn: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal executive office of the Trust is c/o Heartland Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001. SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES. The Trustees acknowledge receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $25, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. 10 SECTION 204. ISSUANCE OF THE CAPITAL SECURITIES. On ___________, 1999, the Depositor and an Administrative Trustee, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver in accordance with the Underwriting Agreement, Capital Securities Certificates, registered in the name of Persons entitled thereto in an aggregate amount of 1,000,000 Capital Securities having an aggregate Liquidation Amount of $25,000,000 against receipt of the aggregate purchase price of such Capital Securities of $25,000,000, which amount such Administrative Trustee shall promptly deliver to the Property Trustee. SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF DEBENTURES. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 502 and deliver to the Depositor, Common Securities Certificates, registered in the name of the Depositor, in an aggregate amount of Common Securities having an aggregate Liquidation Amount of $_______ against payment by the Depositor of such amount. Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee on behalf of the Trust and having an aggregate principal amount equal to $__________, and, in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $________________. SECTION 206. DECLARATION OF TRUST. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures; and (b) to engage in those activities necessary, advisable or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it shall hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act. SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS. (a) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section 207 and Article 11 VIII, and in accordance with the following provisions (i) and (ii), the Administrative Trustees shall have the authority to enter into all transactions and agreements determined by the Administrative Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Administrative Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the acts set forth in the following provision (i) and the Property Trustee shall have the authority to act, each as set forth below: (i) As among the Trustees, each Administrative Trustee, acting singly or jointly, shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities and the compliance with the Underwriting Agreement in connection therewith; (B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Expense Agreement and such other agreements or documents as may be necessary or desirable in connection with the purposes and function of the Trust; (C) assisting in the registration of the Capital Securities under the Securities Act of 1933, as amended, and under state securities or blue sky laws, and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Capital Securities upon the American Stock Exchange or such securities exchange or exchanges as shall be determined by the Depositor, the registration of the Capital Securities under the Exchange Act, the compliance with the listing requirements of the American Stock Exchange or the applicable securities exchange and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (F) the appointment of a Paying Agent, authenticating agent and Securities Registrar in accordance with this Trust Agreement; (G) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (H) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the 12 Holders of the Capital Securities or to enable the Trust to effect the purposes for which the Trust was created; and (I) the taking of any action incidental to the foregoing as the Administrative Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) the establishment of the Payment Account; (B) the receipt of the Debentures; (C) the collection of interest, principal and any other payments made in respect of the Debentures in the Payment Account; (D) the distribution of amounts owed to the Securityholders in respect of the Trust Securities in accordance with the terms of this Trust Agreement; (E) the exercise of all of the rights, powers and privileges of a holder of the Debentures; (F) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding up of the affairs of and liquidation of the Trust; (I) after an Event of Default, the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); (J) registering transfers of the Trust Securities in accordance with this Trust Agreement; and 13 (K) except as otherwise provided in this Section 207(a)(ii), the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 207(a)(i). (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement; (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein; (iii) take any action that would cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes; (iv) incur any indebtedness for borrowed money or issue any other debt; or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (c) In connection with the issue and sale of the Capital Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Capital Securities, the Debentures, and the Guarantee, including any amendments thereto; (ii) the determination of the states in which to take appropriate action to qualify or, register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advise the Trustees of actions they must take on behalf of the Trust, and prepare for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such States; (iii) the preparation for filing by the Trust and execution on behalf of the Trust of an application to the American Stock Exchange or a national stock exchange or other organizations for listing upon notice of issuance of any Capital Securities and to file or cause an Administrative Trustee to file thereafter with such exchange or organization such notifications and documents as may be necessary from time to time; (iv) the preparation for filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on Form 8-A relating to the 14 registration of the Capital Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto; (v) the negotiation of the terms of, and the execution and delivery of the Underwriting Agreement providing for the sale of the Capital Securities; and (vi) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust shall not be deemed to be an "investment company" required to be registered under the Investment Company Act, shall be classified as a "grantor trust" and not as an association taxable as a corporation for United States federal income tax purposes and so that the Debentures shall be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, subject to Section 1002, the Depositor and the Trustees are authorized to take any action, not inconsistent with applicable law or this Trust Agreement, that each of the Depositor and the Trustees determines in their discretion to be necessary or desirable for such purposes. SECTION 208. ASSETS OF TRUST. The assets of the Trust shall consist of the Trust Property. SECTION 209. TITLE TO TRUST PROPERTY. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement. ARTICLE III PAYMENT ACCOUNT SECTION 301. PAYMENT ACCOUNT. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. 15 (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE IV DISTRIBUTIONS; REDEMPTION SECTION 401. DISTRIBUTIONS. (a) Distributions on the Trust Securities shall be cumulative, and shall accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from the date of issuance, and, except during any Extended Interest Payment Period with respect to the Debentures, shall be payable quarterly in arrears on the last calendar day of March, June, September and December of each year, commencing on December 31, 1999. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day (and without any reduction of interest or any other payment in respect of any such acceleration), in each case with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 401(a), a "Distribution Date"). (b) The Trust Securities represent undivided beneficial interests in the Trust Property, and, as a practical matter, the Distributions on the Trust Securities shall be payable at a rate of ___% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any full period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. During any Extended Interest Payment Period with respect to the Debentures, Distributions on the Capital Securities shall be deferred for a period equal to the Extended Interest Payment Period. The amount of Distributions payable for any period shall include the Additional Amounts and Additional Interest, if any. (c) Distributions on the Trust Securities shall be made by the Property Trustee solely from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds on hand and immediately available by 12:30 p.m. on each Distribution Date in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the record holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be the Business Day immediately prior to the relevant Distribution Date. 16 SECTION 402. REDEMPTION. (a) On each Debenture Redemption Date and on the maturity of the Debentures, the Trust shall be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. The Property Trustee shall have no responsibility for the accuracy of any CUSIP number contained in such notice. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the aggregate Liquidation Amount of the particular Trust Securities to be redeemed; (v) that, on the Redemption Date, the Redemption Price shall become due and payable upon each such Trust Security to be redeemed and that Distributions thereon shall cease to accumulate on and after said date, except as provided in Section 402(d); and (vi) the place or places at which Trust Securities are to be surrendered for the payment of the Redemption Price. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has immediately available funds then on hand and available in the Payment Account for the payment of such Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Capital Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 402(c), the Property Trustee, subject to Section 402(c), shall, with respect to Capital Securities held in global form, deposit with the Clearing Agency for such Capital Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the Holders of the Capital Securities to pay to the appropriate beneficial holders. With respect to Trust Securities that are not held in global form, the Property Trustee, subject to Section 402(c), shall deposit with the Paying Agent funds sufficient to pay the applicable Redemption Price and shall give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the record holders thereof upon 17 surrender of their Capital Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, (i) all rights of Securityholders holding Trust Securities so called for redemption shall cease, except the right of such Securityholders to receive the Redemption Price, (ii) such Securities shall cease to be Outstanding, (iii) the Clearing Agency for the Capital Securities or its nominee, as the registered Holder of the Global Capital Securities Certificate, shall receive a registered global certificate or certificates representing the Debentures to be delivered upon such distribution with respect to Capital Securities held by the Clearing Agency or its nominee, and (iv) any Trust Securities Certificates not held by the Clearing Agency for the Capital Securities or its nominee as specified in clause (iii) above will be deemed to represent Debentures having a principal amount equal to the stated Liquidation Amount of the Trust Securities represented thereby and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on such Trust Securities until such certificates are presented to the Securities Registrar for transfer or reissuance. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day (and without any reduction of interest or any other payment in respect of any such acceleration), in each case with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities shall continue to accumulate, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date shall be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Payment of the Redemption Price on the Trust Securities shall be made to the record holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be the date 15 days prior to the relevant Redemption Date. (f) Subject to Section 403(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated on a pro rata basis (based on Liquidation Amounts) among the Common Securities and the Capital Securities. The particular Capital Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Capital Securities not previously called for redemption, by such method (including, without limitation, by lot) as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or an integral multiple of $25 in excess thereof) of the Liquidation Amount of Capital Securities of a denomination larger than $25. The Property Trustee shall promptly notify the Securities Registrar in writing of the Capital Securities selected for redemption and, in the case of any Capital Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust 18 Agreement, unless the context otherwise requires, all provisions relating to the redemption of Capital Securities shall relate, in the case of any Capital Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Capital Securities which has been or is to be redeemed. SECTION 403. SUBORDINATION OF COMMON SECURITIES. (a) Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made, subject to Section 402(f), pro rata among the Common Securities and the Capital Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date any Event of Default resulting from a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Capital Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Amounts, if applicable) on, or the Redemption Price of, Capital Securities then due and payable. (b) In the case of the occurrence of any Event of Default resulting from a Debenture Event of Default, the record holder of Common Securities, the Depositor, shall be deemed to have waived any right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Capital Securities shall have been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement with respect to the Capital Securities shall have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the record holders of the Capital Securities and not the record holder of the Common Securities, and only the Holders of the Capital Securities shall have the right to direct the Property Trustee to act on their behalf. SECTION 404. PAYMENT PROCEDURES. Payments of Distributions (including Additional Amounts, if applicable) in respect of the Capital Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Capital Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds, which will credit the relevant accounts on the applicable Distribution Dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Common Securityholder. 19 SECTION 405. TAX RETURNS AND REPORTS. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service forms required to be filed in respect of the Trust in each taxable year of the Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate Internal Revenue Service forms required to be furnished to such Securityholder or the information required to be provided on such form. The Administrative Trustees shall provide the Depositor with a copy of all such returns and reports promptly after such filing or furnishing. The Property Trustee shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST. Upon receipt under the Debentures of Additional Interest (as defined in Section 1.1 of the Indenture), the Property Trustee, at the direction of an Administrative Trustee or the Depositor, shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority. SECTION 407. PAYMENTS UNDER INDENTURE. Any amount payable hereunder to any record holder of Capital Securities shall be reduced by the amount of any corresponding payment such Holder has directly received under the Indenture pursuant to Section 513(b) or (c) hereof. ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 501. INITIAL OWNERSHIP. Upon the creation of the Trust and the contribution by the Depositor pursuant to Section 203 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 502. THE TRUST SECURITIES CERTIFICATES. The Capital Securities Certificates shall be issued in minimum denominations of $25 Liquidation Amount and integral multiples of $25 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Administrative Trustee. Trust Securities Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have 20 been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Sections 504 and 511. SECTION 503. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST SECURITIES CERTIFICATES. (a) On the Closing Date and on any date on which the underwriters exercise their over-allotment option, if any and as applicable (an "Option Closing Date"), the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 204 and 205, to be executed on behalf of the Trust by at least one of the Administrative Trustees and delivered to or upon the written order of the Depositor, signed by its Chief Executive Officer, President, any Vice President or its Treasurer without further corporate action by the Depositor, in authorized denominations. (b) A Trust Securities Certificate shall not be valid until authenticated by the manual signature of an authorized signatory of the Property Trustee. The signature shall be conclusive evidence that the Trust Securities Certificate has been authenticated under this Trust Agreement. Each Trust Security Certificate shall be dated the date of its authentication. Upon the written order of the Trust signed by one of the Administrative Trustees, the Property Trustee shall authenticate and make available for delivery the Trust Securities Certificates. The Property Trustee may appoint an Authenticating Agent acceptable to the Trust to authenticate the Trust Securities. An Authenticating Agent may authenticate the Trust Securities whenever the Property Trustee may do so. Each reference in this Trust Agreement to authentication by the Property Trustee includes authentication by such agent. An Authenticating Agent has the same rights as the Property Trustee to deal with the Company or the Trust. SECTION 503A. GLOBAL CAPITAL SECURITY. (a) Any Global Capital Security issued under this Trust Agreement shall be registered in the name of the nominee of the Clearing Agency and delivered to such custodian therefor, and such Global Capital Security shall constitute a single Capital Security for all purposes of this Trust Agreement. (b) Notwithstanding any other provision in this Trust Agreement, no Global Capital Security may be exchanged for Capital Securities registered in the names of persons other than the Depositary or its nominee unless (i) the Depositary notifies the Debenture Trustee that it is unwilling or unable to continue as a depositary for such Global Capital Securities and the Depositor is unable to locate a qualified successor depositary, (ii) the Depositor executes and delivers to the Trustee a 21 written order stating that it elects to terminate the book-entry system through the Depositary or (iii) there shall have occurred and be continuing a Debenture Event of Default. (c) If a Capital Security is to be exchanged in whole or in part for a beneficial interest in a Global Capital Security, then either (i) such Global Capital Security shall be so surrendered for exchange or cancellation as provided in this Article V or (ii) the Liquidation amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the Liquidation Amount of such other Capital Securities to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Securities Registrar, whereupon the Property Trustee, in accordance with the rules and procedures of the Depositary for such Global Capital Security (the "Applicable Procedures"), shall instruct the Clearing Agency or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Capital Security by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees shall execute and the Property Trustee shall, subject to Section 504(b) and as otherwise provided in this Article V, authenticate and deliver any Capital Securities issuable in exchange for such Global Capital Security (or any portion thereof) in accordance with the instructions of the Clearing Agency. The Property Trustee shall not be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. (d) Every Capital Security executed, authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Capital Security or any portion thereof, whether pursuant to this Article V or otherwise, shall be executed, authenticated and delivered in the form of, and shall be, a Global Capital Security, unless such Global Capital Security is registered in the name of a Person other than the Clearing Agency for such Global Capital Security or a nominee thereof. (e) The Clearing Agency or its nominee, as the registered owner of a Global Capital Security, shall be considered the Holder of the Capital Securities represented by such Global Capital Security for all purposes under this Trust Agreement and the Capital Securities, and owners of beneficial interests in such Global Capital Security shall hold such interests pursuant to the Applicable Procedures and, except as otherwise provided herein, shall not be entitled to receive physical delivery of any such Capital Securities in definitive form and shall not be considered the Holders thereof under this Trust Agreement. Accordingly, any such owner's beneficial interest in the Global Capital Securities shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Clearing Agency or its nominee. Neither the Property Trustee, the Securities Registrar nor Depositor shall have any liability in respect of any transfers effected by the Clearing Agency. (f) The rights of owners of beneficial interests in a Global Capital Security shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such owners and the Clearing Agency. 22 SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF CAPITAL SECURITIES CERTIFICATES. (a) The Depositor shall keep or cause to be kept, at the office or agency maintained pursuant to Section 508, a register or registers for the purpose of registering Trust Securities Certificates and, subject to the provisions of Section 503A, transfers and exchanges of Capital Securities Certificates (herein referred to as the "Securities Register") in which the registrar designated by the Depositor (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Capital Securities Certificates and Common Securities Certificates (subject to Section 510 in the case of the Common Securities Certificates) and registration of transfers and exchanges of referred Securities Certificates as herein provided. The Property Trustee shall be the initial Securities Registrar. (b) Subject to the provisions of Section 503A, upon surrender for registration of transfer of any Capital Securities Certificate at the office or agency maintained pursuant to Section 508, the Administrative Trustees or any one of them shall execute and deliver, in the name of the designated transferee or transferees, one or more new Capital Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Securities Registrar shall not be required to register the transfer of any Capital Securities that have been called for redemption. At the option of a record holder, Capital Securities Certificates may be exchanged for other Capital Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount upon surrender of the Capital Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 508. (c) Every Capital Securities Certificate presented or surrendered for registration of transfer or exchange, subject to the provisions of Section 503A, shall be accompanied by a written instrument of transfer in form satisfactory to the Property Trustee and the Securities Registrar duly executed by the Holder or his attorney duly authorized in writing. Each Capital Securities Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by the Property Trustee in accordance with its customary practice. The Trust shall not be required to (i) issue, register the transfer of, or exchange any Capital Securities during a period beginning at the opening of business 15 calendar days before the date of mailing of a notice of redemption of any Capital Securities called for redemption and ending at the close of business on the day of such mailing; or (ii) register the transfer of or exchange any Capital Securities so selected for redemption, in whole or in part, except the unredeemed portion of any such Capital Securities being redeemed in part. (d) No service charge shall be made for any registration of transfer or exchange of Capital Securities Certificates, subject to the provisions of Section 503A, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Capital Securities Certificates. (e) Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Trust Agreement. Any transfer or purported transfer of any 23 Capital Security not made in accordance with this Trust Agreement shall be null and void. A Capital Security that is not a Global Capital Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Capital Security that is not a Global Capital Security as provided in Section 504(a). A beneficial interest in a Global Capital Security may be exchanged for a Capital Security that is not a Global Capital Security only as provided in Section 503A. SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate; and (b) there shall be delivered to the Securities Registrar and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust shall execute and the Property Trustee in the case of a Capital Securities Certificate shall authenticate and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section 505, the Administrative Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section 505 shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 506. PERSONS DEEMED SECURITYHOLDERS. The Trustees, the Paying Agent and the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Securities Registrar shall be bound by any notice to the contrary. SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES. At any time when the Property Trustee is not also acting as the Securities Registrar, the Administrative Trustees or the Depositor shall furnish or cause to be furnished to the Property Trustee (a) within five Business Days of each record date, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent record date; and (b) promptly after receipt by any Administrative Trustee or the Depositor of a request therefor from the Property Trustee in order to enable the Property Trustee to discharge its obligations under this Trust Agreement, in each case to the extent such information is in the possession or control of the Administrative Trustees or the Depositor and is not identical to a 24 previously supplied list or has not otherwise been received by the Property Trustee in its capacity as Securities Registrar. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Trustee shall be as provided in the Trust Indenture Act. Each Holder, by receiving and holding a Trust Securities Certificate, and each owner of a beneficial interest in the Global Capital Securities shall be deemed to have agreed not to hold the Depositor, the Property Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 508. MAINTENANCE OF OFFICE OR AGENCY. The Administrative Trustees shall maintain, or cause to be maintained, in The City of New York, New York or Wilmington, Delaware or other location designated by the Administrative Trustees, an office or offices or agency or agencies where Capital Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate the Corporate Trust Office of the Property Trustee, First Union Trust Company, National Association, as the principal corporate trust office for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor and to the Securityholders of any change in the location of the Securities Register or any such office or agency. SECTION 509. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the Distributions referred to above. The Administrative Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The Paying Agent shall initially be the Property Trustee, and any co-paying agent chosen by the Property Trustee, and acceptable to the Administrative Trustees and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees, the Property Trustee and the Depositor. In the event that the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor that is acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank or trust company). The Administrative Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent shall hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Property Trustee and, upon removal of a Paying Agent, such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 801, 803 and 806 shall apply to the Property Trustee also in its role as Paying 25 Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR. On the Closing Date, the Depositor shall acquire and retain beneficial and record ownership of the Common Securities. To the fullest extent permitted by law, any attempted transfer of the Common Securities (other than a transfer in connection with a merger or consolidation of the Depositor into another corporation pursuant to Section 12.1 of the Indenture) shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 510 OF THE TRUST AGREEMENT." SECTION 511. TRUST SECURITIES CERTIFICATES. (a) Upon their original issuance, Capital Securities Certificates shall be issued in the form of one or more fully registered Global Capital Securities Certificates which will be deposited with or on behalf of the Clearing Agency and registered in the name of the Clearing Agency's nominee. Unless and until it is exchangeable in whole or in part for the Capital Securities in definitive form, a global security may not be transferred except as a whole by the Clearing Agency to a nominee of the Clearing Agency or by a nominee of the Clearing Agency to the Clearing Agency or another nominee of the Clearing Agency or by the Clearing Agency or any such nominee to a successor of such Clearing Agency or a nominee of such successor. (b) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. SECTION 512. NOTICES TO CLEARING AGENCY. To the extent that a notice or other communication to the Holders is required under this Trust Agreement, for so long as Capital Securities are represented by a Global Capital Securities Certificate, the Trustees shall give all such notices and communications specified herein to be given to the Clearing Agency, and shall have no obligations to provide notice to the owners of the beneficial interest in the Global Capital Securities. SECTION 513. RIGHTS OF SECURITYHOLDERS. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 209, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights. When issued and delivered to Holders of the Capital 26 Securities against payment of the purchase price therefor, the Capital Securities shall be fully paid and nonassessable interests in the Trust. The Holders of the Capital Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. (b) For so long as any Capital Securities remain Outstanding, if, upon a Debenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation Amount of the Capital Securities then Outstanding shall have such right by a notice in writing to the Depositor and the Debenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Debentures shall become immediately due and payable, provided that the payment of principal and interest on such Debentures shall remain subordinated to the extent provided in the Indenture. (c) For so long as any Capital Securities remain outstanding, upon a Debenture Event of Default arising from the failure to pay interest or principal on the Debentures, the Holders of any Capital Securities then Outstanding shall, to the fullest extent permitted by law, have the right to directly institute proceedings for enforcement of payment to such Holders of principal of or interest on the Debentures having a principal amount equal to the Liquidation Amount of the Capital Securities of such Holders. ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING SECTION 601. LIMITATIONS ON VOTING RIGHTS. (a) Except as provided in this Section 601, in Sections 512, 810 and 1002 and in the Indenture and as otherwise required by law, no Holder of Capital Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (b) So long as any Debentures are held by the Property Trustee on behalf of the Trust, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures; (ii) waive any past default which is waivable under Article VII of the Indenture; (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a Majority in liquidation amount of the Outstanding Capital Securities; PROVIDED, HOWEVER, that where a consent under the Indenture would require the consent of each Holder of Outstanding Debentures affected thereby, 27 no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Capital Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of the Outstanding Capital Securities, except by a subsequent vote of the Holders of the Outstanding Capital Securities. The Property Trustee shall notify each Holder of the Outstanding Capital Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Capital Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust shall continue to be classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes on account of such action. (c) If any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Capital Securities, whether by way of amendment to the Trust Agreement or otherwise; or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Capital Securities as a class shall be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Outstanding Capital Securities. No amendment to this Trust Agreement may be made if, as a result of such amendment, the Trust would cease to be classified as a grantor trust or would be classified as an association taxable as a corporation for United States federal income tax purposes. SECTION 602. NOTICE OF MEETINGS. Notice of all meetings of the Capital Securityholders, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 1008 to each Capital Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 603. MEETINGS OF CAPITAL SECURITYHOLDERS. (a) No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Securityholders to vote on any matter in respect of which Capital Securityholders are entitled to vote upon the written request of the Capital Securityholders of 25% of the Outstanding Capital Securities (based upon their aggregate Liquidation Amount) and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of Capital Securityholders to vote on any matters as to which the Capital Securityholders are entitled to vote. (b) Capital Securityholders of record of 50% of the Outstanding Capital Securities (based upon their aggregate Liquidation Amount), present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. 28 (c) If a quorum is present at a meeting, an affirmative vote by the Capital Securityholders of record present, in person or by proxy, holding more than a majority of the Capital Securities (based upon their aggregate Liquidation Amount) held by the Capital Securityholders of record present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. SECTION 604. VOTING RIGHTS. Securityholders shall be entitled to one vote for each $25 of Liquidation Amount represented by their Trust Securities (with any fractional multiple thereof rounded up or down as the case may be to the closest integral multiple) in respect of any matter as to which such Securityholders are entitled to vote. SECTION 605. PROXIES, ETC. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Only Holders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and, the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by Securityholders at a meeting may be taken without a meeting and without prior notice if Securityholders holding a majority of all Outstanding Trust Securities (based upon their aggregate Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing (based upon their aggregate Liquidation Amount). SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees or the Property Trustee may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of Distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. 29 SECTION 608. ACTS OF SECURITYHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 801) conclusive in favor of the Trustees, if made in the manner provided in this Section 608. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. (c) The ownership of Capital Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. (e) Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. (f) A Securityholder may institute a legal proceeding directly against the Depositor under the Guarantee to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee), the Trust or any Person. SECTION 609. INSPECTION OF RECORDS. Upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection at the principal executive office of the Trust (as indicated in 30 Section 202) by record holders of the Trust Securities during normal business hours for any purpose reasonably related to such record holder's interest as a record holder. ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY TRUSTEE. The Bank and the Property Trustee, each severally on behalf of and as to itself, as of the date hereof, and each Successor Property Trustee at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee hereunder (in the case of a Successor Property Trustee, the term "Bank" as used herein shall be deemed to refer to such Successor Property Trustee in its separate corporate capacity), hereby represents and warrants (as applicable) for the benefit of the Depositor and the Securityholders that: (a) the Bank is a national banking association with its principal place of business in the State of Delaware or, with respect to a Successor Property Trustee, a state chartered bank and trust company; duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) the Bank has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and constitutes the valid and legally binding agreement of the Property Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors, rights and to general equity principles; (d) the execution, delivery and performance by the Property Trustee of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Property Trustee and does not require any approval of stockholders of the Bank and such execution, delivery and performance shall not (i) violate the Bank's charter or by-laws; (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Property Trustee or the Bank is a party or by which it is bound; or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking or trust powers of the Bank or the Property Trustee (as appropriate in context) or any order, judgment or decree applicable to the Property Trustee or the Bank; 31 (e) neither the authorization, execution or delivery by the Property Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee contemplated herein or therein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing federal law governing the banking or trust powers of the Bank or the Property Trustee, as the case may be, under the laws of the United States or the State of Delaware, other than the filing of a Certificate of Trust with the Secretary of State of the State of Delaware; (f) there are no proceedings pending or, to the best of the Property Trustee's knowledge, threatened against or affecting the Bank or the Property Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Property Trustee to enter into or perform its obligations as one of the Trustees under this Trust Agreement; and (g) the Property Trustee is a Person eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND THE DELAWARE TRUSTEE. The Delaware Bank and the Delaware Trustee, each severally on behalf of and as to itself, as of the date hereof, and each Successor Delaware Trustee at the time of the Successor Delaware Trustee's acceptance of appointment as Delaware Trustee hereunder (the term "Delaware Bank" being used to refer to such Successor Delaware Trustee in its separate corporate capacity), hereby represents and warrants (as applicable) for the benefit of the Depositor and the Securityholders that: (a) the Delaware Bank is a national banking association with its principal place of business in the State of Delaware, or, if a Successor Delaware Trustee, is a Delaware banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) the Delaware Bank has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Delaware Trustee and constitutes the valid and legally binding agreement of the Delaware Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors, rights and to general equity principles; (d) the execution, delivery and performance by the Delaware Trustee of this Trust Agreement has been duly authorized by all necessary corporate or other action on the part of the Delaware Trustee and does not require any approval of stockholders of the Delaware Bank and such 32 execution, delivery and performance shall not (i) violate the Delaware Bank's charter or by-laws; (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Delaware Bank or the Delaware Trustee is a party or by which it is bound; or (iii) violate any law, governmental rule or regulation of the United States or the State of Delaware, as the case may be, governing the banking or trust powers of the Delaware Bank or the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Delaware Bank or the Delaware Trustee; (e) neither the authorization, execution or delivery by the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Delaware Trustee contemplated herein or therein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to any governmental authority or agency under any existing federal law governing the banking or trust powers of the Delaware Bank or the Delaware Trustee, as the case may be, under the laws of the United States or the State of Delaware, other than the filing of the Certificate of Trust with the Secretary of State of the State of Delaware; and (f) there are no proceedings pending or, to the best of the Delaware Trustee's knowledge, threatened against or affecting the Delaware Bank or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Delaware Trustee to enter into or perform its obligations as one of the Trustees under this Trust Agreement. SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR. The Depositor hereby represents and warrants for the benefit of the Securityholders that: (a) the Trust Securities Certificates issued on the Closing Date on behalf of the Trust have been duly authorized and, shall have been, duly and validly executed, issued and delivered by the Administrative Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Securityholders shall be, as of such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Bank, the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. 33 ARTICLE VIII TRUSTEES SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES. (a) The duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Neither the Administrative Trustees nor the Delaware Trustee shall be liable for its act or omissions hereunder except as a result of its own gross negligence or bad faith or willful misconduct. The Property Trustee's liability shall be determined under the Trust Indenture Act. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 801. To the extent that, at law or in equity, an Administrative Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Administrative Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Administrative Trustees otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Administrative Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Securityholder, by its acceptance of a Trust Security, agrees that it shall look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 801(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) No provision of this Trust Agreement shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) the Property Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; 34 (ii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in Liquidation Amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iii) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment Account shall be to deal with such Property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Trust Agreement and the Trust Indenture Act; (iv) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 301 and except to the extent otherwise required by law; and (d) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the negligence, default or misconduct of the Administrative Trustees or the Depositor. SECTION 802. CERTAIN NOTICES. (a) Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 1008, notice of such Event of Default to the Securityholders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. For purposes of this Section 802 the term "Event of Default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. (b) The Administrative Trustees shall transmit, to the Securityholders in the manner and to the extent provided in Section 1008, notice of the Depositor's election to begin or further extend an Extended Interest Payment Period on the Debentures (unless such election shall have been revoked) within the time specified for transmitting such notice to the holders of the Debentures pursuant to the Indenture as originally executed. 35 SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE. Subject to the provisions of Section 801: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action; or (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with other provisions contained herein; or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Capital Securityholders are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting written instructions of the Depositor as to the course of action to be taken and the Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within 10 Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than 2 Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor or the Administrative Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; (d) whenever in the administration of this Trust Agreement, the Property Trustee shall deem it desirable that a matter be established before undertaking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer's Certificate which, upon receipt of such request, shall be promptly delivered by the Depositor or the Administrative Trustees; (e) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof; (f) the Property Trustee may consult with counsel of its choice (which counsel may be counsel to the Depositor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it 36 hereunder in good faith and in reliance thereon and, in accordance with such advice, the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (h) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Securityholders, but the Property Trustee may make such further inquiry or investigation into such facts or matters as it may see fit; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided that the Property Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action; (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received; and (iii) shall be protected in acting in accordance with such instructions; and (k) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The Recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The 37 Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. SECTION 805. MAY HOLD SECURITIES. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 808 and 813 and except as provided in the definition of the term "Outstanding" in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. SECTION 806. COMPENSATION; INDEMNITY; FEES. The Depositor agrees: (a) to pay to the Trustees from time to time compensation for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); in the case of the Property Trustee, as set forth in a written agreement between the Depositor and the Property Trustee; (b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to such Trustee's negligence, bad faith or willful misconduct (or, in the case of the Administrative Trustees or the Delaware Trustee, any such expense, disbursement or advance as may be attributable to its, his or her gross negligence, bad faith or willful misconduct); and (c) to indemnify each of the Trustees or any predecessor Trustee for, and to hold the Trustees harmless against, any loss, damage, claims, liability, penalty or expense of any kind or nature whatsoever, arising out of or in connection with the acceptance or administration of this Trust Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except any such expense, disbursement or advance as may be attributable to such Trustee's negligence, bad faith or willful misconduct (or, in the case of the Administrative Trustees or the Delaware Trustee, any such expense, disbursement or advance as may be attributable to its, his or her gross negligence, bad faith or willful misconduct). SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES. (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee and the Delaware Trustee may be the same Person. The Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section 807, the combined capital and surplus of such Person 38 shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section 807, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VIII. (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware; or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. SECTION 808. CONFLICTING INTERESTS. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE. (a) Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor shall have power to appoint, and upon the written request of the Property Trustee, the Depositor shall for such purpose join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 809. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request to do so, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section 809 shall either be (i) a natural person who is at least 21 years of age and a resident of the United States; or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. (b) Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such 39 property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged, and delivered by the Depositor. (c) Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely:s (i) The Trust Securities shall be executed and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (ii) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (iii) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 809, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have the power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 809. (iv) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (v) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (vi) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. 40 SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article VIII shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 811. (b) Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Securityholders. If the instrument of acceptance by the successor Trustee required by Section 811 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Depositor, any court of competent jurisdiction or the appointment of a successor Relevant Trustee with respect to the Trust Securities. (c) Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a Majority in liquidation amount of the Outstanding Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Common Securityholder at any time. (d) If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees with respect to the Trust Securities and the Trust, and the successor Trustee shall comply with the applicable requirements of Section 811. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Event of Default shall have occurred and is continuing, the Capital Securityholders, by Act of the Securityholders of a Majority in liquidation amount of the Outstanding Capital Securities delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with respect to the Trust Securities and the Trust, and such successor Trustee shall comply with the applicable requirements of Section 811. If an Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to an Administrative Trustee, shall promptly appoint a successor Administrative Trustee or Administrative Trustees with respect to the Trust Securities and the Trust, and such successor Administrative Trustee or Administrative Trustees shall comply with the applicable requirements of Section 811. If no successor Relevant Trustee with respect to the Trust Securities shall have been so appointed by the Common Securityholder or the Capital Securityholders and accepted appointment in the 41 manner required by Section 811, any Securityholder who has been a Securityholder of Trust Securities on behalf of himself and all others similarly situated may petition a court of competent jurisdiction for the appointment Trustee with respect to the Trust Securities. (e) The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 1008 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust office if it is the Property Trustee. (f) Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of remaining Administrative Trustees if there are at least two of them; or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees set forth in Section 807). SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor Relevant Trustee with respect to the Trust Securities and the Trust, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an instrument hereto wherein each successor Relevant Trustee shall accept such appointment and which shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and upon the execution and delivery of such instrument the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust; but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. (b) Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the immediately preceding paragraph, as the case may be. (c) No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article VIII. 42 SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Property Trustee, the Delaware Trustee or any Administrative Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST. If and when the Property Trustee or the Delaware Trustee shall be or become directly or indirectly a creditor of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act, the Property Trustee or the Delaware Trustee, as the case may be, shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). SECTION 814. REPORTS BY PROPERTY TRUSTEE. (a) Not later than July 15 of each year commencing with July 15, 2000, the Property Trustee shall transmit to all Securityholders in accordance with Section 1008, and to the Depositor, a brief report dated as of May 15 with respect to: (i) its eligibility under Section 807 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; and (ii) any change in the property and funds in its possession as Property Trustee since the date of its last report and any action taken by the Property Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities. (b) In addition, the Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with the American Stock Exchange, and each national securities exchange or other organization upon which the Trust Securities are listed, and also with the Commission and the Depositor. 43 SECTION 815. REPORTS TO THE PROPERTY TRUSTEE. The Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of the Depositor and the Administrative Trustees on behalf of the Trust shall provide to the Property Trustee (i) such evidence of compliance with any conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act and (ii) such certificates required by Section 314(a)(4) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. SECTION 817. NUMBER OF TRUSTEES. (a) The number of Trustees shall be five, provided that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Administrative Trustees. The Property Trustee and the Delaware Trustee may be the same Person. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 817(a), or if the number of Trustees is increased pursuant to Section 817(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 810. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 810, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. SECTION 818. DELEGATION OF POWER. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 207(a); and (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the 44 Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 819. VOTING. Except as otherwise provided in this Trust Agreement, the consent or approval of the Administrative Trustees shall require consent or approval by not less than a majority of the Administrative Trustees, unless there are only two, in which case both must consent. ARTICLE IX TERMINATION, LIQUIDATION AND MERGER SECTION 901. TERMINATION UPON EXPIRATION DATE. Unless earlier dissolved, the Trust shall automatically dissolve on, __________, 2034 (the "Expiration Date") subject to distribution of the Trust Property in accordance with Section 904. SECTION 902. EARLY TERMINATION. The first to occur of any of the following events is an "Early Termination Event:" (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (b) delivery of written direction to the Property Trustee by the Depositor at any time (which direction is wholly optional and within the discretion of the Depositor, subject to Depositor having received prior approval of the Board of Governors of the Federal Reserve System if so required under applicable guidelines, policies or regulations thereof) to dissolve the Trust and distribute the Debentures to Securityholders in exchange for the Capital Securities in accordance with Section 904; (c) the redemption of all of the Capital Securities in connection with the redemption of all of the Debentures (whether upon a Debenture Redemption Date or the maturity of the Debentures); or (d) an order for dissolution of the Trust shall have been entered by a court of competent jurisdiction. SECTION 903. TERMINATION. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 904, or 45 upon the redemption of all of the Trust Securities pursuant to Section 402, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders; and (d) the filing of a Certificate of Cancellation by the Administrative Trustee under the Business Trust Act. SECTION 904. LIQUIDATION. (a) If an Early Termination Event specified in clause (a), (b), or (d) of Section 902 occurs or upon the Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Debentures, subject to Section 904(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities shall no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange shall be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or, if Section 904(d) applies, receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 902(c) or 904(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 902(c) or 904(d) applies, after the Liquidation Date, (i) the Trust Securities shall no longer be deemed to be Outstanding; (ii) certificates representing a Like Amount of Debentures shall be issued to holders of Trust Securities Certificates upon surrender of such certificates to the Administrative Trustees or their agent for exchange; (iii) the Depositor shall use its reasonable efforts to have the Debentures listed on the American Stock Exchange or on such other securities exchange or other organization as the Capital Securities are then listed or traded; (iv) any Trust Securities Certificates not so surrendered for exchange shall be deemed to represent a Like Amount of Debentures, accruing interest at the rate and for the period provided for in the Debentures 46 from the last Distribution Date on which a Distribution was made on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal shall be made to holders of Trust Securities Certificates with respect to such Debentures); and (v) all rights of Securityholders holding Trust Securities shall cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. (d) In the event that, notwithstanding the other provisions of this Section 904, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be dissolved, wound-up or terminated, by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the dissolution, winding-up or other termination of the Trust, Securityholders shall be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding-up or termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities shall be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Capital Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Capital Securities shall have a priority over the Common Securities. SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST. The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person, except pursuant to this Section 905. At the request of the Depositor, with the consent of the Administrative Trustees and without the consent of the Holders of the Capital Securities, the Property Trustee or the Delaware Trustee, the Trust may merge with or into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any state; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Capital Securities; or (b) substitutes for the Capital Securities other securities having substantially the same terms as the Capital Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Capital Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise; (ii) the Depositor expressly appoints a trustee of such successor entity possessing substantially the same powers and duties as the Property Trustee as the Holder of the Debentures; (iii) the Successor Securities are listed or traded, or any Successor Securities shall be listed or traded upon notification of issuance, on any national securities exchange or other organization on which the Capital Securities are then listed, if any; (iv) such merger, 47 consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Capital Securities (including any Successor Securities) in any material respect; (v) such successor entity has a purpose substantially identical to that of the Trust; (vi) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the Holders of the Capital Securities (including any Successor Securities) in any material respect; and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity shall be required to register as an "investment company" under the Investment Company Act; and (vii) the Depositor owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of the Holders of 100% in Liquidation Amount of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS. The death, incapacity, dissolution, bankruptcy or termination of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 1002. AMENDMENT. (a) This Trust Agreement may be amended from time to time by the Trustees and the Depositor, without the consent of any Securityholders, (i) as provided in Section 811 with respect to acceptance of appointment by a successor Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein or therein which may be inconsistent with any other provision herein or therein, or to make any other provisions with respect to matters or questions arising under this Trust Agreement, that shall not be inconsistent with the other provisions of this Trust Agreement; or (iii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust shall be classified for United States federal income tax purposes as a grantor trust at all times that any Trust Securities are outstanding or to 48 ensure that the Trust shall not be required to register as an "investment company" under the Investment Company Act; provided, however, that in the case of clause (ii), such action shall not adversely affect in any material respect the interests of any Securityholder, and any amendments of this Trust Agreement shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 601(c) or Section 1002(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor (i) with the consent of Trust Securityholders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment shall not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status of an "investment company" under the Investment Company Act. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 603 or 606 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date; or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 603 or 606 hereof), this paragraph (c) of this Section 1002 may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from status of an "investment company" under the Investment Company Act or to fail or cease to be classified as a grantor trust for United States federal income tax purposes. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. (g) Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement which adversely affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Trust Agreement is in compliance with this Trust Agreement. 49 SECTION 1003. SEPARABILITY. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1004. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF). SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day which is a Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day (and without any reduction of interest or any other payment in respect of any such acceleration), in each case with the same force and effect as though made on the date fixed for such payment, and no distribution shall accumulate thereon for the period after such date. SECTION 1006. SUCCESSORS. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s), including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article XII of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 1007. HEADINGS. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. SECTION 1008. REPORTS, NOTICES AND DEMANDS. Any report, notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Capital Securityholder, to such Capital Securityholder as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Common Securityholder 50 or the Depositor, to Heartland Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001, Attention: John K. Schmidt, facsimile no.: (319) ___-____. Any notice to Capital Securityholders shall also be given to such owners as have, within two years preceding the giving of such notice, filed their names and addresses with the Property Trustee for that purpose. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee to First Union Trust Company, National Association, One Rodney Square, 920 King Street, 1st Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration; (b) with respect to the Delaware Trustee, to First Union Trust Company, National Association at the above address; and (c) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of Capital Trust." Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. SECTION 1009. AGREEMENT NOT TO PETITION. Each of the Trustees and the Depositor agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor or any of the Trustees takes action in violation of this Section 1009, the Property Trustee agrees, for the benefit of Securityholders, that at the expense of the Depositor (which expense shall be paid prior to the filing), it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor or such Trustee against the Trust or the commencement of such action and raise the defense that the Depositor or such Trustee has agreed in writing not to take such action and should be stopped and precluded therefrom. The provisions of this Section 1009 shall survive the termination of this Trust Agreement. SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. 51 (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or to be excluded, as the case may be. The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. SIGNATURE PAGE FOLLOWS 52 HEARTLAND FINANCIAL USA, INC. By:_______________________________ Name:____________________________ Title:_____________________________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Property Trustee By:______________________________ Name:____________________________ Title:_____________________________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By:______________________________ Name:____________________________ Title:_____________________________ _______________________________________________ ____________________, As Administrative Trustee _______________________________________________ ________________, As Administrative Trustee _______________________________________________ ____________________, As Administrative Trustee 53 EXHIBIT A CERTIFICATE OF TRUST OF HEARTLAND FINANCIAL CAPITAL TRUST I THIS CERTIFICATE OF TRUST OF Heartland Financial Capital Trust I (the "Trust"), dated __________ __, 1999, is being duly executed and filed by First Union Trust Company, National Association, a national banking association, ___________________, ________________ and __________________, each an individual, as trustees, to form a business trust under the Delaware Business Trust Act (12 DEL. C. Section 3801 ET SEQ.)(the "Act"). 1. NAME. The name of the business trust formed hereby is Heartland Financial Capital Trust I. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust in the State of Delaware is First Union Trust Company, National Association, One Rodney Square, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration. 3. EFFECTIVE DATE. This Certificate of Trust will be effective upon filing. IN WITNESS WHEREOF, the undersigned have executed this Certificate of Trust in accordance with Section 3811(a)(1) of the Act. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware trustee By:________________________________ Name: Title: _______________________________________________ ____________________, as Administrative Trustee _______________________________________________ ________________, as Administrative Trustee _______________________________________________ ____________________, as Administrative Trustee EXHIBIT B THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 510 OF THE TRUST AGREEMENT CERTIFICATE NUMBER 1 NUMBER OF COMMON SECURITIES _________ CERTIFICATE EVIDENCING COMMON SECURITIES OF HEARTLAND FINANCIAL CAPITAL TRUST I COMMON SECURITIES (LIQUIDATION AMOUNT $25 PER COMMON SECURITY) HEARTLAND FINANCIAL CAPITAL TRUST I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that HEARTLAND FINANCIAL USA, INC. (the "Holder") is the registered owner of _______________ (_______) common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the ____% Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). In accordance with Section 510 of the Trust Agreement (as defined below), the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences, and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of, [ ]1999, as the same may be amended from time to time (the "Trust Agreement"), including the designation of the terms of the Common Securities as set forth therein. The Trust shall furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this ____ day of _________, 1999. HEARTLAND FINANCIAL CAPITAL TRUST I By:_____________________________________ Name:___________________________________ Title:__________________________________ 2 EXHIBIT C AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of _________________ __, 1999, between HEARTLAND FINANCIAL USA, INC., a Delaware corporation (the "Company"), and HEARTLAND FINANCIAL CAPITAL TRUST I, a Delaware business trust (the "Trust"). RECITALS WHEREAS, the Trust intends to issue its common securities (the "Common Securities") to, and receive ____% Subordinated Debentures (the "Debentures") from, the Company and to issue and sell Heartland Financial Capital Trust I ___% Cumulative Trust Capital Securities (the "Capital Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Trust dated as of ________ __, 1999, as the same may be amended from time to time (the "Trust Agreement"); WHEREAS, the Company shall directly or indirectly own all of the Common Securities of the Trust and shall issue the Debentures; NOW, THEREFORE, in consideration of the purchase by each holder of the Capital Securities, which purchase the Company hereby agrees shall benefit the Company and which purchase the Company acknowledges shall be made in reliance upon the execution and delivery of this Agreement, the Company, including in its capacity as holder of the Common Securities, and the Trust hereby agree as follows: ARTICLE I SECTION 1.1. GUARANTEE BY THE COMPANY. Subject to the terms and conditions hereof, the Company, including in its capacity as holder of the Common Securities, hereby irrevocably and unconditionally guarantees to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust other than obligations of the Trust to pay to holders of any Capital Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Capital Securities or such other similar interests, as the case may be. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. SECTION 1.2. TERM OF AGREEMENT. This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all holders of all the Capital Securities (whether upon redemption, liquidation, exchange or otherwise); and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Capital Securities or any Beneficiary must restore payment of any sums paid under the Capital Securities, under any obligation, under the Capital Securities Guarantee Agreement dated the date hereof by the Company and First Union Trust Company, National Association, as guarantee trustee or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. SECTION 1.3. WAIVER OF NOTICE. The Company hereby waives notice of acceptance of this Agreement and of any obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 1.4. NO IMPAIRMENT. The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. SECTION 1.5. ENFORCEMENT. A Beneficiary may enforce this Agreement directly against the Company, and the Company waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against the Company. 2 SECTION 1.6. SUBROGATION. The Company shall be subrogated to all (if any) rights of the Trust in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation of any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II SECTION 2.1. BINDING EFFECT. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. SECTION 2.2. AMENDMENT. So long as there remains any Beneficiary or any Capital Securities of any series are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to any of the holders of the Capital Securities. SECTION 2.3. NOTICES. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same by facsimile transmission (confirmed by mail), telex, or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer back, if sent by telex): Heartland Financial Capital Trust I c/o Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, Iowa 52001 Facsimile No.: (319) ___-____ Attention: __________________, Administrative Trustee Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, Iowa 52001 Facsimile No.: (319) ___-____ Attention: __________________ 3 SECTION 2.4. CHOICE OF LAW This agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware (without regard to conflict of laws principles). THIS AGREEMENT is executed as of the day and year first above written. HEARTLAND FINANCIAL USA, INC. By:_____________________________________ Name:___________________________________ Title:__________________________________ HEARTLAND FINANCIAL CAPITAL TRUST I By:_____________________________________ Name:___________________________________ Title: Administrative Trustee 4 EXHIBIT D CERTIFICATE NUMBER ____________ NUMBER OF CAPITAL SECURITIES ________ CERTIFICATE EVIDENCING CAPITAL SECURITIES OF HEARTLAND FINANCIAL CAPITAL TRUST I ____% CUMULATIVE TRUST CAPITAL SECURITIES (LIQUIDATION AMOUNT $25 PER CAPITAL SECURITY) CUSIP ____________ Heartland Financial Capital Trust I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that _________________ (the "Holder") is the registered owner of _________ Capital securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the _____% Cumulative Trust Capital Securities (liquidation amount $25 per Capital Security) (the "Capital Securities"). The Capital Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 504 of the Trust Agreement (as defined herein). The designations, rights, privileges, restrictions, preferences, and other terms and provisions of the Capital Securities are set forth in, and this certificate and the Capital Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of _______ __, 1999, as the same may be amended from time to time (the "Trust Agreement"), including the designation of the terms of Capital Securities as set forth therein. The Holder is entitled to the benefits of the Capital Securities Guarantee Agreement entered into by Heartland Financial USA, Inc., a Delaware corporation, and First Union Trust Company, National Association, as guarantee trustee, dated as of [ ], 1999, as the same may be amended from time to time (the "Guarantee"), to the extent provided therein. The Trust shall furnish a copy of the Trust Agreement and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. Unless the Certificate of Authentication has been manually executed by the Authentication Agent, this certificate is not valid or effective. IN WITNESS WHEREOF, the Administrative Trustees of the Trust have executed this Certificate this ____ day of _________. CERTIFICATE OF AUTHENTICATION: HEARTLAND FINANCIAL CAPITAL TRUST I This is one of the ____% Cumulative Trust Capital Securities Referred to in the within mentioned By: ________________________________ Amended and Restated Trust Agreement. ____________________, as Administrative Trustee By: ________________________________ ________________, as Administrative Trustee By: ________________________________ ________________, as Administrative Trustee FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Authentication Agent and Registrar By:__________________________________ AUTHORIZED SIGNATURE 2 FORM OF REVERSE OF CERTIFICATE The Trust will furnish without charge to any registered owner of Capital Securities who so requests, a copy of the Trust Agreement and the Guarantee. Any such request should be in writing and addressed to Heartland Financial Capital Trust I, c/o Heartland Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa 52001 or to the Registrar named on the face of this Certificate. The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN CON - as tenants in common TEN ENT - as tenants in the entireties JT TEN - as joint tenants with right of survival UNIF GIFT MIN ACT - under Uniform Gift to Minors Act and not as tenants Additional abbreviations may also be used though not in the above list. ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto: ________________________________________________________________________________ ________________________________________________________________________________ (Please insert social security or other identifying number of assignee) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (insert address and zip code of assignee) the within Certificate and all rights and interests represented by the Capital Securities evidenced thereby, and hereby irrevocably constitutes and appoints attorney to transfer the said Capital Securities on the books of the within-named Trust with full power of substitution in the premises. 3 Dated:_______________________________ Signature: _________________________ NOTE: The signature(s) to this assignment must correspond with the name(s) as written upon the face of this Certificate in every particular, without alteration or enlargement, or any change whatever. Signature(s) Guaranteed: NOTICE: Signature(s) must be guaranteed by an "eligible guarantor institution" that is a member or participant in a "signature guarantee program" (i.e., the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program). 4 EXHIBIT E FORM OF CERTIFICATE OF AUTHENTICATION This is one of the ____% Cumulative Trust Capital Securities referred to in the within-mentioned Amended and Restated Trust Agreement. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Authentication Agent and Registrar By: ______________________________________ AUTHORIZED SIGNATURE EX-4.7 7 EXHIBIT 4.7 EXHIBIT 4.7 FORM OF CAPITAL SECURITIES GUARANTEE AGREEMENT BY AND BETWEEN HEARTLAND FINANCIAL USA, INC. AND FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION DATED AS OF ______ __, 1999 TABLE OF CONTENTS RECITALS .........................................................................................................2 ARTICLE I DEFINITIONS AND INTERPRETATION.........................................................................2 SECTION 1.1. DEFINITIONS AND INTERPRETATION................................................2 ARTICLE II TRUST INDENTURE ACT...................................................................................6 SECTION 2.1. TRUST INDENTURE ACT; APPLICATION..............................................6 SECTION 2.2. LISTS OF HOLDERS OF SECURITIES................................................6 SECTION 2.3. REPORTS BY THE CAPITAL GUARANTEE TRUSTEE......................................6 SECTION 2.4. PERIODIC REPORTS TO CAPITAL GUARANTEE TRUSTEE.......................................................................7 SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.....................................................................7 SECTION 2.6. EVENTS OF DEFAULT; WAIVER.....................................................7 SECTION 2.7. EVENT OF DEFAULT; NOTICE......................................................7 SECTION 2.8. CONFLICTING INTERESTS.........................................................7 ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL GUARANTEE TRUSTEE..................................................................................................8 SECTION 3.1. POWERS AND DUTIES OF THE CAPITAL GUARANTEE TRUSTEE.......................................................................8 SECTION 3.2. CERTAIN RIGHTS OF CAPITAL GUARANTEE TRUSTEE...................................9 SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE....................................................................11 ARTICLE IV CAPITAL GUARANTEE TRUSTEE............................................................................11 SECTION 4.1. CAPITAL GUARANTEE TRUSTEE; ELIGIBILITY.......................................11 ARTICLE V GUARANTEE.............................................................................................13 SECTION 5.1. GUARANTEE....................................................................13 SECTION 5.2. WAIVER OF NOTICE AND DEMAND..................................................13 SECTION 5.3. OBLIGATIONS NOT AFFECTED.....................................................13 SECTION 5.4. RIGHTS OF HOLDERS............................................................14 SECTION 5.5. GUARANTEE OF PAYMENT.........................................................14 SECTION 5.6. SUBROGATION..................................................................15 SECTION 5.7. INDEPENDENT OBLIGATIONS......................................................15 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION............................................................15 SECTION 6.1. LIMITATION OF TRANSACTIONS...................................................15 SECTION 6.2. RANKING......................................................................16 ARTICLE VII TERMINATION.........................................................................................16 i SECTION 7.1. TERMINATION..................................................................16 ARTICLE VIII INDEMNIFICATION....................................................................................16 SECTION 8.1. EXCULPATION..................................................................16 SECTION 8.2. INDEMNIFICATION..............................................................17 ARTICLE IX MISCELLANEOUS........................................................................................17 SECTION 9.1. SUCCESSORS AND ASSIGNS.......................................................17 SECTION 9.2. AMENDMENTS...................................................................17 SECTION 9.3. NOTICES......................................................................17 SECTION 9.4. BENEFIT......................................................................18 SECTION 9.5. GOVERNING LAW................................................................18
ii CROSS REFERENCE TABLE
SECTION OF TRUST INDENTURE ACT SECTION OF OF 1939, AS AMENDED GUARANTEE AGREEMENT - ------------------------------- ------------------------------- 310(a) 1(a) 310(b) 1(c), 2.8 310(c) Not Applicable 311(a) 2.2(b) 311(b) 2.2(b) 311(c) Not Applicable 312(a) 2.2(a) 312(b) 2.2(b) 313 2.3 314(a) 2.4 314(b) Not Applicable 314(c) 2.5 314(d) Not Applicable 314(e) 1.1, 2.5, 3.2 314(f) 2.1, 3.2 315(a) 3.1(d) 315(b) 2.7 315(c) 3.1 315(d) 3.1(d) 316(a) 1.1, 2.6, 5.4 316(b) 5.3 317(a) 3.1 317(b) Not Applicable 318(a) 1(a) 318(b) 1 318(c) 2.1(b)
Note: This Cross-Reference Table does not constitute part of this Agreement and shall not affect the interpretation of any of its terms or provisions. iii CAPITAL SECURITIES GUARANTEE AGREEMENT THIS CAPITAL SECURITIES GUARANTEE AGREEMENT (this "Capital Securities Guarantee"), dated as of ________ __, 1999, is executed and delivered by HEARTLAND FINANCIAL USA, INC., a Delaware corporation (the "Guarantor"), and FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as trustee (the "Capital Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Heartland Financial Capital Trust I, a Delaware statutory business trust (the "Trust"). RECITALS WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of [ ], 1999, among the trustees of the Trust named therein, the Guarantor, as depositor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, the Trust is issuing on the date hereof up to 1,000,000 Capital securities, having an aggregate liquidation amount of $25,000,000, designated the [ ]% Cumulative Trust Capital Securities (the "Capital Securities"); WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Capital Securities Guarantee, to pay to the Holders of the Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Capital Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1. DEFINITIONS AND INTERPRETATION. In this Capital Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Capital Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; 2 (b) terms defined in the Trust Agreement as at the date of execution of this Capital Securities Guarantee have the same meaning when used in this Capital Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee; (c) a term defined anywhere in this Capital Securities Guarantee has the same meaning throughout; (d) all references to "the Capital Securities Guarantee" or "this Capital Securities Guarantee" are to this Capital Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Capital Securities Guarantee to Articles and Sections are to Articles and Sections of this Capital Securities Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Capital Securities Guarantee, unless otherwise defined in this Capital Securities Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Authorized Officer" of a Person means any Person that is authorized to bind such Person; provided, however, that the Authorized Officer signing an Officers' Certificate given pursuant to Section 314(a)(4) of the Trust Indenture Act shall be the principal executive, financial or accounting officer of such Person. "Business Day" means any day other than a Saturday, Sunday, a day on which federal or state banking institutions in New York, New York or Wilmington, Delaware are authorized or required by law, executive order or regulation to close or a day on which the Corporate Trust Office of the Capital Guarantee Trustee is closed for business. "Capital Guarantee Trustee" means First Union Trust Company, National Association, until a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Capital Securities Guarantee and thereafter means each such Successor Capital Guarantee Trustee. "Corporate Trust Office" means the office of the Capital Guarantee Trustee at which the corporate trust business of the Capital Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at One Rodney Square, 920 King Street, 1st Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration. "Covered Person" means any Holder or beneficial owner of Capital Securities. 3 "Debentures" means the ____% Subordinated Debentures due ___________, 2029, of the Debenture Issuer held by the Property Trustee of the Trust. "Debenture Issuer" means Heartland Financial USA, Inc., issuer of the Debentures under the Indenture. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Capital Securities Guarantee. "Guarantor" means Heartland Financial USA, Inc., a Delaware corporation. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Trust: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) that are required to be paid on such Capital Securities, to the extent the Trust shall have funds available therefor, (ii) the redemption price, including all accumulated and unpaid Distributions to but excluding the date of redemption (the "Redemption Price"), to the extent the Trust has funds available therefor, with respect to any Capital Securities called for redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Debentures to the Holders in exchange for Capital Securities as provided in the Trust Agreement), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Trust shall have funds available therefor, and (b) the amount of assets of the Trust remaining available in either case for distribution to Holders in liquidation of the Trust (the "Liquidation Distribution"). If an event of default (as defined in the Indenture) with respect to the Debentures has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Trust Agreement are subordinated to the rights of Holders of Capital Securities to receive Guarantee Payments. "Holder" shall mean any holder, as registered on the books and records of the Trust, of any Capital Securities; provided, however, that, in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Capital Guarantee Trustee or any of their respective Affiliates. "Indemnified Person" means the Capital Guarantee Trustee, any Affiliate of the Capital Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Capital Guarantee Trustee. "Indenture" means the Indenture dated as of [ ], 1999, among the Debenture Issuer and First Union Trust Company, National Association, as trustee, and any indenture supplemental thereto pursuant to which certain subordinated debt securities of the Debenture Issuer are to be issued to the Property Trustee of the Trust. "List of Holders" shall have the meaning assigned thereto in Section 2.2(a) hereof. 4 "Liquidation Amount" means the stated value of $25 per Capital Security. "Liquidation Distribution" has the meaning provided therefor in the definition of Guarantee Payments. "Majority in liquidation amount of the Capital Securities" means, except as provided in the terms of the Capital Securities or, except as provided by the Trust Indenture Act, a vote by Holder(s) of Capital Securities, voting separately as a class, of more than 50% of the Liquidation Amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to but excluding the date upon which the voting percentages are determined) of all Outstanding Capital Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person, at least one of whom shall be the principal executive officer, principal financial officer, principal accounting officer, treasurer or any vice president of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Capital Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Redemption Price" has the meaning provided therefor in the definition of Guarantee Payments. "Responsible Officer" means, with respect to the Capital Guarantee Trustee, any officer within the Corporate Trust Office of the Capital Guarantee Trustee with direct responsibility for the administration of this Capital Securities Guarantee, including any vice-president, any assistant vice-president, any assistant secretary or other officer or assistant officer of the Capital Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom 5 such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Capital Guarantee Trustee" means a successor Capital Guarantee Trustee possessing the qualifications to act as Capital Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE II TRUST INDENTURE ACT SECTION 2.1. TRUST INDENTURE ACT; APPLICATION. (a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Capital Securities Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Capital Securities Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2. LISTS OF HOLDERS OF SECURITIES. (a) In the event the Capital Guarantee Trustee is not also acting in the capacity of the Property Trustee under the Trust Agreement, the Guarantor shall cause to be provided to the Capital Guarantee Trustee a list, in such form as the Capital Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Capital Securities ("List of Holders") as of the date (i) within five (5) Business Days after the last day of March, June, September and December, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 15 days before such List of Holders is given to the Capital Guarantee Trustee; provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders caused to have been given to the Capital Guarantee Trustee by the Guarantor. The Capital Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Capital Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. REPORTS BY THE CAPITAL GUARANTEE TRUSTEE. On or before July 15 of each year, the Capital Guarantee Trustee shall provide to the Holders of the Capital Securities such reports as are required by Section 313 of the Trust Indenture Act, if 6 any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Capital Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4. PERIODIC REPORTS TO CAPITAL GUARANTEE TRUSTEE. The Guarantor shall provide to the Capital Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor shall provide to the Capital Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Capital Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6. EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in liquidation amount of Capital Securities may, by vote, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Capital Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7. EVENT OF DEFAULT; NOTICE. (a) The Capital Guarantee Trustee shall, within five Business Days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities, notices of all Events of Default actually known to a Responsible Officer of the Capital Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided, that, except in the case of a default by Guarantor on any of its payment obligations, the Capital Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Capital Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities. (b) The Capital Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Capital Guarantee Trustee shall have received written notice, or of which a Responsible Officer of the Capital Guarantee Trustee charged with the administration of the Trust Agreement shall have obtained actual knowledge. 7 SECTION 2.8. CONFLICTING INTERESTS. The Trust Agreement shall be deemed to be specifically described in this Capital Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF CAPITAL GUARANTEE TRUSTEE SECTION 3.1. POWERS AND DUTIES OF THE CAPITAL GUARANTEE TRUSTEE. (a) This Capital Securities Guarantee shall be held by the Capital Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Capital Guarantee Trustee shall not transfer this Capital Securities Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Capital Guarantee Trustee on acceptance by such Successor Capital Guarantee Trustee of its appointment to act as Successor Capital Guarantee Trustee. The right, title and interest of the Capital Guarantee Trustee shall automatically vest in any Successor Capital Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Capital Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Capital Guarantee Trustee has occurred and is continuing, the Capital Guarantee Trustee shall enforce this Capital Securities Guarantee for the benefit of the Holders of the Capital Securities. (c) The Capital Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Capital Securities Guarantee, and no implied covenants shall be read into this Capital Securities Guarantee against the Capital Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Capital Guarantee Trustee, the Capital Guarantee Trustee shall exercise such of the rights and powers vested in it by this Capital Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Capital Securities Guarantee shall be construed to relieve the Capital Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (i) the duties and obligations of the Capital Guarantee Trustee shall be determined solely by the express provisions of this Capital Securities Guarantee, and 8 the Capital Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Capital Securities Guarantee, and no implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Guarantee Trustee; and (ii) in the absence of bad faith on the part of the Capital Guarantee Trustee, the Capital Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Capital Guarantee Trustee and conforming to the requirements of this Capital Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Capital Guarantee Trustee, the Capital Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Capital Securities Guarantee; (e) the Capital Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Capital Guarantee Trustee, unless it shall be proved that the Capital Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (f) the Capital Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Capital Guarantee Trustee, or exercising any trust or power conferred upon the Capital Guarantee Trustee under this Capital Securities Guarantee; and (g) no provision of this Capital Securities Guarantee shall require the Capital Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Capital Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Capital Securities Guarantee or indemnity, reasonably satisfactory to the Capital Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2. CERTAIN RIGHTS OF CAPITAL GUARANTEE TRUSTEE. (a) Subject to the provisions of Section 3.1: (i) the Capital Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; 9 (ii) any direction or act of the Guarantor contemplated by this Capital Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever, in the administration of this Capital Securities Guarantee, the Capital Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Capital Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Capital Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof); (v) the Capital Guarantee Trustee may consult with counsel, the written advice or opinion of such counsel with respect legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Capital Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Capital Securities Guarantee from any court of competent jurisdiction; (vi) the Capital Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Capital Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Capital Guarantee Trustee such security and indemnity, reasonably satisfactory to the Capital Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Capital Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Capital Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Capital Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Capital Securities Guarantee; (vii) the Capital Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Capital Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; 10 (viii) the Capital Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Capital Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Capital Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Capital Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Capital Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Capital Securities Guarantee, both of which shall be conclusively evidenced by the Capital Guarantee Trustee's or its agent's taking such action; (x) whenever in the administration of this Capital Securities Guarantee the Capital Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Capital Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or obligation on the Capital Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Capital Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Capital Guarantee Trustee shall be construed to be a duty. SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The Recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Capital Guarantee Trustee does not assume any responsibility for their correctness. The Capital Guarantee Trustee makes no representation as to the validity or sufficiency of this Capital Securities Guarantee. 11 ARTICLE IV CAPITAL GUARANTEE TRUSTEE SECTION 4.1. CAPITAL GUARANTEE TRUSTEE; ELIGIBILITY. (a) There shall at all times be a Capital Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Capital Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Capital Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Capital Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Capital Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF CAPITAL GUARANTEE TRUSTEES. (a) Subject to Section 4.2(b), the Capital Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Capital Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Capital Guarantee Trustee and delivered to the Guarantor. 12 (c) The Capital Guarantee Trustee appointed to office shall hold office until a Successor Capital Guarantee Trustee shall have been appointed or until its removal or resignation. The Capital Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Capital Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Capital Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Capital Guarantee Trustee and delivered to the Guarantor and the resigning Capital Guarantee Trustee. (d) If no Successor Capital Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Capital Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Capital Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Capital Guarantee Trustee. (e) No Capital Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Capital Guarantee Trustee. (f) Upon termination of this Capital Securities Guarantee or removal or resignation of the Capital Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Capital Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1. GUARANTEE. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders. SECTION 5.2. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Capital Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. 13 SECTION 5.3. OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Capital Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in, the Capital Securities; (f) any failure or omission to receive any regulatory approval or consent required in connection with the Capital Securities (or the common equity securities issued by the Trust), including the failure to receive any approval of the Board of Governors of the Federal Reserve System required for the redemption of the Capital Securities; (g) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (h) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. 14 SECTION 5.4. RIGHTS OF HOLDERS. (a) Subject to Section 5.4(b), the Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Capital Guarantee Trustee in respect of this Capital Securities Guarantee or exercising any trust or power conferred upon the Capital Guarantee Trustee under this Capital Securities Guarantee. (b) Any Holder of Capital Securities may institute and prosecute a legal proceeding directly against the Guarantor to enforce its rights under this Capital Securities Guarantee without first instituting a legal proceeding against the Trust, the Capital Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any action be brought first against the Trust or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5. GUARANTEE OF PAYMENT. This Capital Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6. SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Trust in respect of any amounts paid to such Holders by the Guarantor under this Capital Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Capital Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Capital Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Capital Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof. 15 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1. LIMITATION OF TRANSACTIONS. So long as any Capital Securities remain outstanding, if there shall have occurred an Event of Default under this Capital Securities Guarantee, an event of default under the Indenture, an event of default under the Trust Agreement or during an Extended Interest Payment Period (as defined in the Indenture), then (a) the Guarantor shall not and will not permit any Subsidiary to declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (I) as a result of a reclassification of its capital stock for another class of its capital stock or (II) declarations or payments of dividends on capital stock by a Subsidiary of the Company to the Company); (b) the Guarantor shall not and will not permit any Subsidiary to make any payment of interest or principal on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior to the Debentures; (c) the Guarantor shall not make any Guarantee Payments with respect to debt securities of any Subsidiary of the Guarantor that rank pari passu with or junior to the Debentures (other than pursuant to this Capital Securities Guarantee Agreement); and (d) the Guarantor shall not redeem, purchase or acquire less than all of the outstanding Debentures or any of the Capital Securities. SECTION 6.2. RANKING. This Capital Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations, as defined in the Indenture, of the Guarantor, to the extent and in the manner set forth in the Indenture, and the applicable provisions of the Indenture will apply, in all relevant respects, to the obligations of the Guarantor hereunder and (ii) senior to the Guarantor's capital stock. ARTICLE VII TERMINATION SECTION 7.1. TERMINATION. This Capital Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Capital Securities, (ii) upon full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Trust, or (iii) upon distribution of the Debentures to the Holders of the Capital Securities. Notwithstanding the foregoing, this Capital Securities Guarantee shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Capital Securities Guarantee. 16 ARTICLE VIII INDEMNIFICATION SECTION 8.1. EXCULPATION. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Capital Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid. SECTION 8.2. INDEMNIFICATION. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Capital Securities Guarantee. When the Capital Guarantee Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 7.1(a)(iv) or (v) of the Indenture, the expenses including the reasonable charges and expenses of its counsel) and the compensation for services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. 17 ARTICLE IX MISCELLANEOUS SECTION 9.1. SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Capital Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity permitted by Section 12.1 of the Indenture or any sale, transfer, conveyance or other disposition of the property of the Guarantor permitted by Section 12.1 of the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Capital Securities Guarantee. SECTION 9.2. AMENDMENTS. Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Capital Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in Liquidation Amount of the Capital Securities. The provisions of Article VI of the Trust Agreement with respect to meetings of Holders of the Capital Securities apply to the giving of such approval. SECTION 9.3. NOTICES. All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Capital Guarantee Trustee, at the Capital Guarantee Trustee's mailing address set forth below (or such other address as the Capital Guarantee Trustee may give notice of to the Holders of the Capital Securities): First Union Trust Company, National Association One Rodney Square 920 King Street, 1st Floor Wilmington, Delaware 19801 Attention: Corporate Trust Administration (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities): Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, Iowa 52001 Attention: John K. Schmidt, Executive Vice President 18 (c) If given to any Holder of Capital Securities, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4. BENEFIT. This Capital Securities Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 3.1(a), is not separately transferable from the Capital Securities. SECTION 9.5. GOVERNING LAW. THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. 19 This Capital Securities Guarantee is executed as of the day and year first above written. HEARTLAND FINANCIAL USA, INC., as Guarantor By:_________________________________________ Its:_________________________________________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Capital Guarantee Trustee By:_________________________________________ Its:_________________________________________ 20 EX-5.1 8 EXHIBIT 5.1 EXHIBIT 5.1 BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG 333 WEST WACKER DRIVE, SUITE 2700 CHICAGO, ILLINOIS 60606 Telephone (312) 984-3100 Facsimile (312) 984-3150 September 15, 1999 Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, IA 52001 Ladies and Gentlemen: We have acted as special counsel for Heartland Financial USA, Inc., a Delaware corporation (the "Company") in connection with the, in connection with the offering (the "Offering") by Heartland Financial Capital Trust I, a Delaware business trust (the "Trust"), of the capital securities of the Trust (the "Capital Securities") representing preferred undivided beneficial ownership interests in the assets of the Trust, all as described in the Company's and the Trust's Registration Statement on Form S-3 (the "Registration Statement"). At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of (the "Certificate of Trust") of the Trust, as filed with the office of the Secretary of State of the State of Delaware (the "Secretary of State") on September 13, 1999; (b) The Trust Agreement of the Trust, dated as of September 13, 1999, among the Company, First Union Trust Company, National Association, a national banking association with its principal place of business in the State of Delaware ("First Union"), as trustee, and Lynn B. Fuller, John K. Schmidt, and Jacquie M. Manternach, as administrative trustees (the "Administrative Trustees"); (c) A form of Amended and Restated Trust Agreement for the Trust, to be entered into between the Company, the Trustees of the Trust named therein, and the holders, from time to time, of the undivided beneficial ownership interests in the assets of such Trust, attached as an exhibit to the Registration Statement described below (the "Trust Agreement"); (d) A form of certificate representing the Capital Securities; (e) A form of Indenture to be entered into between the Company and First Union, as Indenture Trustee (the "Indenture"); (f) A form of subordinated debenture to represent the subordinated debentures of the Company (the "Debenture"); BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG Heartland Financial USA, Inc. September 15, 1999 Page 2 (g) A form of Capital Securities Guarantee Agreement to be entered into between the Company and First Union, as Guarantee Trustee (the "Guarantee"); (h) A form of Agreement as to Expenses and Liabilities to be entered into between the Company and the Trust (the "Expense Agreement"); (i) the Articles of Incorporation of the Company filed with the Secretary of State of the State of Delaware on June 21, 1993, as amended, and the Company's Bylaws, as amended; (j) Resolutions of the Board of Directors of the Company relating to the Offering and dated August 18, 1999; and (k) The Registration Statement, including the prospectus constituting a part thereof. We have made such legal investigation as we deemed necessary for purposes of this opinion. In that investigation, we have assumed the genuineness of all signatures, the proper execution of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, and the authenticity and proper execution of the originals of such copies. We have not made any independent factual investigation, have relied without such investigation on all the listed documents, and disclaim any duty to make such an independent factual investigation. Our opinions expressed below are subject to the qualifications that we express no opinion as to the applicability of, compliance with, or effect of (i) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar law affecting the enforcement of creditors' rights generally, (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), (iii) public policy considerations which may limit the rights of parties to obtain certain remedies and (iv) any laws except the laws of the State of Illinois, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. Based upon and subject to the foregoing qualifications, assumptions and limitations and the further limitations set forth below, we are of the opinion that: (1) The execution and delivery by the Company of each of the Trust Agreement, the Indenture, the Guarantee and the Expense Agreement has been duly and validly authorized. (2) The Debentures to be issued by the Company to the Trust will, when issued in accordance with the terms of the Indenture as described in the Registration Statement at the time it becomes effective, constitute valid and binding obligations of the Company. BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG Heartland Financial USA, Inc. September 15, 1999 Page 3 (3) The Guarantee Agreement when provided by the Company in accordance with the terms stated in the Registration Statement at the time it becomes effective and upon issuance of the Capital Securities in accordance with the terms described in the Registration Statement, will constitute a valid and binding obligation of the Company. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Experts and Legal Matters" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion is based upon our knowledge of the law and facts as of the date hereof, and we assume no duty to communicate with you with respect to any matter that comes to our attention hereafter. Very truly yours, /s/ Barack Ferrazzano Kirschbaum Perlman & Nagelberg BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG EX-5.2 9 EXHIBIT 5.2 EXHIBIT 5.2 [Letterhead] September 14, 1999 Heartland Financial Capital Trust I c/o Heartland Financial USA, Inc. 1398 Central Avenue P.O. Box 778 Dubuque, IA 52004-0778 Re: HEARTLAND FINANCIAL CAPITAL TRUST I Ladies and Gentlemen: We have acted as special Delaware counsel for Heartland Financial USA, Inc., a Delaware corporation ("Heartland"), and Heartland Financial Capital Trust I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Trust Agreement of the Trust, dated as of September 13, 1999 (the "Original Trust Agreement"), among Heartland, First Union Trust Company, National Association, a national banking association with its principal place of business in the State of Delaware ("First Union"), as trustee (the "Delaware Trustee"), and Lynn B. Fuller, John K. Schmidt and Jacquie M. Manternach, as administrative trustees (the "Administrative Trustees"); (b) A form of Amended and Restated Trust Agreement for the Trust, among Heartland, the Delaware Trustee, First Union, as property trustee (the "Property Trustee"), the Administrative Trustees, and the holders, from time to time, of the undivided beneficial ownership interests in the assets of such Trust (including Exhibits B and D thereto) (the "Amended and Restated Trust Agreement;" and, together with the Original Trust Agreement, the "Trust Agreement"); (d) The Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus with respect to the Trust (the "Prospectus"), relating to the Capital Securities of the Trusts representing preferred undivided beneficial ownership interests in the assets of the Heartland Financial Capital Trust I September 14, 1999 Page 2 Trusts (each, a "Capital Security" and collectively, the "Capital Securities"), filed by Heartland and the Trust with the Securities and Exchange Commission on September 15, 1999; and (e) A Certificate of Good Standing for the Trust, dated September 14, 1999, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that bears upon or is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Trust Agreement will constitute the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, that the Certificate of Trust is in full force and effect and has not been amended and that the Trust Agreement will be in full force and effect and will not be amended, (ii) except to the extent provided in paragraph 1 below, the due creation or due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trusts (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the Trust Agreement and the Registration Statement. We have not participated in the preparation of the Registration Statement or Prospectus and assume no Heartland Financial Capital Trust I September 14, 1999 Page 3 responsibility for their contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, 12 DEL. C. Section 3801, ET SEQ. 2. The Preferred Securities of the Trust have been duly authorized by the Trust Agreement and will be duly and validly issued and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the reference to us as local counsel under the headings "Legal Matters" in the Prospectus Supplement and "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Richards, Layton & Finger, P.A. EX-8.1 10 EXHIBIT 8.1 EXHIBIT 8.1 BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG 333 WEST WACKER DRIVE, SUITE 2700 CHICAGO, ILLINOIS 60606 MICHAEL J. LEGAMARO (312) 629-5181 Telephone (312) 984-3100 Voice Mail Ext. 4581 Facsimile (312) 984-3193 michael.legamaro@bfkpn.com September 15,1999 Heartland Financial Capital Trust I Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, Iowa 52001 RE: HEARTLAND FINANCIAL CAPITAL TRUST I Ladies and Gentlemen: We have acted as counsel to Heartland Financial USA, Inc., a Delaware corporation (the "Company"), and to Heartland Financial Capital Trust I, a Delaware business trust (the "Trust"), in connection with the registration statement of the Company and the Trust on Form S-3 (as amended or supplemented, the "Registration Statement"), of which a preliminary prospectus (the "Prospectus") is a part, filed by the Company and the Trust with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended. In that connection, we have participated in preparation of the section set forth in the Prospectus entitled "Federal Income Tax Consequences." For the purposes of rendering this opinion, we have reviewed and relied upon the Registration Statement; the form of Amended and Restated Trust Agreement for the Trust to be entered into among the Company, First Union Trust Company, National Association, a national banking association ("First Union") and certain administrative Trustees named therein, the form of Indenture to be entered into between the Company and First Union (the "Indenture"); the Certificate of Trust of the Trust, as filed with the office of the Secretary of State of the State of Delaware on September 13, 1999; the Trust Agreement as filed with the office of the Secretary of State of the State of Delaware on September 13, 1999; and such other documents and instruments as we have deemed necessary for the rendering of this opinion. In our examination of the relevant documents, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, the authenticity of such copies and the accuracy and completeness of all corporate records made available to us by the Company and by the Trust. BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG Quad City Holdings Capital Trust I Quad City Holdings, Inc. September 15, 1999 Page 2 Based solely upon our review of such documents, and upon such information as the Company has provided to us (which we have not attempted to verify in any respect), we are of the opinion that, under current federal income tax law: 1. The Trust will be classified as a grantor trust and not as an association taxable as a corporation. 2. The Debentures (as defined in the Indenture) will be classified as indebtedness of the Company, and the interest on the Debentures will be deductible by the Company. 3. The statements set forth in the Prospectus under the caption "Federal Income Tax Consequences" constitute a fair and accurate summary of the matters addressed therein, based upon current law and the assumptions stated therein. Our opinion is limited to the federal income tax matters described above and does not address any other federal income tax considerations or any state, local, foreign, or other tax considerations. If any of the information upon which we have relied is incorrect, or if changes in the relevant facts occur after the date hereof, our opinion could be affected thereby. Moreover, our opinion is based on the Internal Revenue Code of 1986, as amended, applicable Treasury regulations promulgated thereunder, and Internal Revenue Service rulings, procedures, and other pronouncements published by the United States Internal Revenue Service. These authorities are all subject to change, and such change may be made with retroactive effect. We can give no assurance that, after such change, our opinion would not be different. We undertake no responsibility to update or supplement our opinion. This opinion is not binding upon the Internal Revenue Service, and there can be no assurance, and none is hereby given, that the Internal Revenue Service will not take a position contrary to one or more of the positions reflected in the foregoing opinion, or that our opinion will be upheld by the courts if challenged by the Internal Revenue Service. BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG Quad City Holdings Capital Trust I Quad City Holdings, Inc. September 15, 1999 Page 3 We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to the use of our name in the Prospectus under the heading "Federal Income Tax Consequences." In giving the foregoing consents, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion is being furnished to you solely for your benefit in connection with the transactions set forth above. It may not be relied upon by, nor a copy of it delivered to any other party, without our prior written consent. This opinion is based upon our knowledge of the law and facts as of the date hereof, and we assume no duty to communicate with you with respect to any matter that comes to our attention hereafter. Very truly yours, /s/ Barack Ferrazzano Kirschbaum Perlman & Nagelberg BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG EX-12.1 11 EXHIBIT 12.1 EXHIBIT 12.1 HEARTLAND FINANCIAL USA, INC. CALCULATION OF EARNINGS TO FIXED CHARGES AS OF:
June 30, Years ended December 31, 1999 1998 1998 1997 1996 1995 1994 -------- ------- ------ ------- ------- ------- ------- Earnings before income taxes 5,996 6,531 12,778 11,853 10,691 10,458 10,155 Add: preferred dividends on a pretax basis - - - - - - - Add: fixed charges 18,630 17,285 36,393 31,793 27,687 25,549 20,167 Earnings including interest expense on deposits (1) 24,626 23,816 49,171 43,646 38,378 36,007 30,322 Less: interest expense on deposits 14,497 13,575 28,645 25,765 23,190 22,029 17,806 Earnings excluding interest expense on deposits (2) 10,129 10,241 20,526 17,881 15,188 13,978 12,516 Fixed charges: Interest expense on deposits 14,497 13,575 28,645 25,765 23,190 22,029 17,806 Interest expense on borrowings 4,059 3,670 7,659 6,002 4,454 3,500 2,322 Interest expense on capital leases - - - - - - - Portion of rents representative of interest factor 74 40 89 26 43 20 39 Fixed charges including interest expense on deposits (3) 18,630 17,285 36,393 31,793 27,687 25,549 20,167 Less: interest expense on deposits 14,497 13,575 28,645 25,765 23,190 22,029 17,806 Fixed charges excluding interest expense on deposits (4) 4,133 3,710 7,748 6,028 4,497 3,520 2,361 Rents 206 119 268 78 128 59 118 Portions of rents representative of interest factor 74 40 89 26 43 20 39 Ratio of earnings to fixed charges and preferred stock dividends: Excluding interest expense on deposits ((2)/(4)) 2.45 2.76 2.65 2.97 3.38 3.97 5.30 Including interest expense on deposits ((1)/(3)) 1.32 1.38 1.35 1.37 1.39 1.41 1.50
EX-23.1 12 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Heartland Financial USA, Inc. We consent to incorporation by reference in the registration statement on Form S-3 of Heartland Financial USA, Inc. of our report dated January 22, 1999, relating to the consolidated balance sheets of Heartland Financial USA, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 1998, which report appears in the December 31, 1998, annual report on Form 10-K of Heartland Financial USA, Inc. and to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG LLP Des Moines, Iowa September 14, 1999 EX-25.1 13 EXHIBIT 25.1 EXHIBIT 25.1 REGISTRATION NO. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) X ---------- FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) United States National Banking Association 56-1989961 (State of incorporation if (I.R.S. employer not a national bank) identification no.) First Union Trust Company, National Association One Rodney Square, Suite 102 920 King St. Wilmington, DE 19801 (Address of principal (Zip Code) executive offices) SAME AS ABOVE (Name, address and telephone number, including area code, of trustee's agent for service) Heartland Financial USA, Inc. (Exact name of obligor as specified in its charter) The State of Iowa (State or other jurisdiction of incorporation or organization) 42-1405748 (I.R.S. employer identification no.) c/o John K. Schmidt Executive Vice President Heartland Financial USA, Inc. 1398 Central Avenue Dubuque, Iowa 52001 (319) 589-2100 (Address, including zip code, of principal executive offices) -------------------- SUBORDINATED DEBENTURES (Title of the Indenture securities) ------------------------------------------------ 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject - ----------------------------------------------------------------- Name Address - ------------------------------------------------------------------ Federal Reserve Bank of Richmond, VA Richmond, VA Comptroller of the Currency Washington, D.C. Securities and Exchange Commission Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note 1 on Page 4.) Because the obligor is not in default on any securities issued under indentures under which the applicant is trustee, Items 3 through 15 are not required herein. 16. LIST OF EXHIBITS. All exhibits identified below are filed as a part of this statement of eligibility. 1. A copy of the Articles of Association of First Union Trust Company, National Association, as now in effect, which contain the authority to commence business and a grant of powers to exercise corporate trust powers. 2. A copy of the certificate of authority of the trustee to commence business, if not contained in the Articles of Association. 3. A copy of the authorization of the trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) or (2) above. 4. A copy of the existing By-laws of First Union Trust Company, National Association, or instruments corresponding thereto. 5. Inapplicable. 6. The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939 is included at Page 4 of this Form T-1 Statement. 7. A copy of the latest report of condition of the trustee published pursuant to law or to the requirements of its supervising or examining authority is attached hereto. 8. Inapplicable. 9. Inapplicable. 3 NOTE Note 1: Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, First Union Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington, and State of Delaware, on the 14th day of September, 1999. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (trustee) By: \s\ Edward L. Truitt, Jr. Name: Edward L. Truitt, Jr. Title: Vice President CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939, as amended, and in connection with the proposed issuance by Heartland Financial USA, Inc. of Subordinated Debentures, First Union Trust Company, National Association, as the trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION By: \s\ Edward L. Truitt, Jr. Name: Edward L. Truitt, Jr. Title: Vice President Dated: September 14, 1999 4 Legal Title of Bank: First Union Trust Company, National Association Call Date: 12/31/98 FFIEC 032 Address: One Rodney Square, 1st Floor Page RC-1 City, State, Zip: Wilmington, DE 19801 FDIC Certificate #: 34465 ----- CONSOLIDATED REPORT OF CONDITION FOR JUNE 30, 1999 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
C400 DOLLAR AMOUNT IN THOUSANDS RCFD BIL MIL THOU ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin (1)............................... 0081 41 1.a. b. Interest-bearing balances (2)........................................................ 0071 0 1.b. 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A)........................... 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D)......................... 1773 7 2.b. 3. Federal funds sold and securities purchased under agreements to resell................................................................................ 1350 0 3. 4. Loans and lease financing receivables a. Loans and leases, net of unearned income (from Schedule RC-C)..... RCFD 2122 258,689 4.a. b. LESS: Allowance for loan and lease losses......................... RCFD 3123 0 4.b. c. LESS: Allocated transfer risk reserve............................. RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c).................................. 2125 258,689 4.d. 5. Trading assets (from Schedule RC-D)...................................................... 3545 0 5. 6. Premises and fixed assets (including capitalized leases)................................. 2145 0 6. 7. Other real estate owned (from Schedule RC-M)............................................. 2150 0 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)..................................................................... 213 0 8. 9. Customers' liability to this bank on acceptances outstanding..............................2155 0 9. 10. Intangible assets (from Schedule RC-M)................................................... 2143 0 10. 11. Other assets (from Schedule RC-F)........................................................ 2160 3,648 11. 12. Total assets (sum of items 1 through 11)................................................. 2170 262,385 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. Legal Title of Bank: First Union Trust Company, National Association Call Date: 12/31/98 FFIEC 032 Address: One Rodney Square, 1st Floor Page RC-1 City, State, Zip: Wilmington, DE 19801 FDIC Certificate #: 34465 ----- Schedule RC--Continued
DOLLAR AMOUNT IN THOUSANDS BIL MIL THOU -------------------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)............................. RCON 2200 0 13.a. (1) Noninterest-bearing (1)............ RCON 6631 0 13.a.(1) (2) Interest-bearing....................RCON 6636 0 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II).................. RCFN 2200 0 13.b. (1) Noninterest-bearing.................RCFN 6631 0 13.b.(1) (2) Interest-bearing....................RCFN 6636 0 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase.............................. RCFD 2800 0 14. 15. a. Demand notes issued to the U.S. Treasury................. RCON 2840 0 15.a. b. Trading liabilities (from Schedule RC-D)................. RCFD 3548 0 15.b. 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):...................... a. With a remaining maturity of one year or less........... RCFD 2332 1,517 16.a. b. With a remaining maturity of more than one year through three years..................................... RCFD A547 0 16.b. c. With a remaining maturity of more than three years...... RCFD A548 0 16.c. 17. Not applicable.............................................. 18. Bank's liability on acceptances executed and outstanding.... RCFD 2920 0 18. 19. Subordinated notes and debentures (2)....................... RCFD 3200 0 19. 20. Other liabilities (from Schedule RC-G)...................... RCFD 2930 10,929 20. 21. Total liabilities (sum of items 13 through 20).............. RCFD 2948 12,446 21. 22. Not applicable.............................................. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............... RCFD 3838 0 23. 24. Common stock................................................ RCFD 3230 200 24. 25. Surplus (exclude all surplus related to preferred stock).... RCFD 3839 413,719 25. 26. a. Undivided profits and capital reserves.................. RCFD 3632 (163,980) 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities........................... RCFD 8434 0 26.b. 27. Cumulative foreign currency translation adjustments......... RCFD 3284 0 27. 28. Total equity capital (sum of items 23 through 27)........... RCFD 3210 249,939 28. 29. Total liabilities and equity capital (sum of items 21 and 28).................................... RCFD 3300 262,385 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of Number any date during 1996....................................... RCFD 6724 N/A M.1.
1= Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2= Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3= Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4= Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5= Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work 6= Compilation of the bank's financial statements by external auditors 7= Other audit procedures (excluding tax preparation work) 8= No external audit work - ------------------------ (1) Includes total demand deposits and noninterest-bearing time and savings deposit. (2) Includes limited-life stock and related surplus. 6 Comptroller of the Currency Administrator of National Banks Multinational Banking Division 250 E Street, SW Washington, D.C. 20219-0001 CHARTER CERTIFICATE Whereas, satisfactory evidence has been presented to the Office of the Comptroller of the Currency that FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, located in WILMINGTON, State of DELAWARE, has complied with all provisions of the statutes of the United States required to be complied with before being authorized to commence the business of banking as a National Banking Association; Now, therefore, I hereby certify that the above-named association is authorized to commence the business of banking as a National Banking Association. In testimony whereof, witness my signature and Seal of office this fifteenth day of January 1997. - -------------------------------------- Deputy Comptroller for Multinational Banking Charter Number 23201 Charter No. _________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION ARTICLES OF ASSOCIATION For the purpose of organizing an association to carry on the business of banking under the laws of the United States, the undersigned do enter into the following Articles of Association: FIRST. The title of this association shall be FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION SECOND. The main office of this association shall be in Wilmington, Delaware. The business of this association will be limited to that of a national trust bank. This association must obtain the prior written approval of the Office of the Comptroller of the Currency (AOCC@) before amending its Articles of Association to expand the scope of its activities and services. Transfers of this association=s stock are subject to prior approval of a federal depository institution regulatory agency. If no other agency approval is required, the OCC=s approval must be obtained before the transfers. In such cases where OCC approval is required, the OCC will apply the definitions and standards of the Change in Bank Control Act and the OCC=s implementing regulation to ownership changes in this association. THIRD. The Board of Directors of this association shall consist of not less than five nor more than twenty-five shareholders, the exact number to be fixed and determined from time to time by resolution of a majority of the full Board of Directors or by resolution of the shareholders at any annual or special meeting thereof. Each director, during the full term of his directorship, shall own a minimum of $1,000 aggregate par value of stock of this association or a minimum par market value or equity interest of $1,000 of stock in the bank holding company controlling this association. Any vacancy in the Board of Directors may be filled by action of the Board of Directors. FOURTH. There shall be an annual meeting of the shareholders to elect directors and transact whatever other business may be brought before the meeting. It shall be held at the main office or any other convenient place the Board of Directors may designate, on the day of each year specified thereby in the bylaws, but if no election is held on that day, it may be held on any subsequent day according to such lawful rules as may be prescribed by the Board of Directors. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of this association entitled to vote for election of directors. Nominations other than those made by or on behalf of the existing bank management shall be made in writing and be delivered or mailed to the president of this association and to the OCC, Washington, D.C., not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21 days notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of this association and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: - The name and address of each proposed nominee. - The principal occupation of each proposed nominee. - The total number of shares of capital stock of this association that will be voted for each proposed nominee. - The name and residence address of the notifying shareholder. - The number of shares of capital stock of this association owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the chairperson of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. FIFTH. The authorized amount of capital stock of this association shall be 2,000 shares of common stock of the par value of one hundred dollars ($100.00) each; but said capital stock may be increased or decreased from time to time, according to the provisions of the laws of the United States. If the capital stock is increased by the sale of additional shares thereof, each shareholder shall be entitled to subscribe for such additional shares in proportion to the number of shares of said capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution by the shareholders at the time the increase is authorized. The Board of Directors will have the power to prescribe a reasonable period of time within which the preemptive rights to subscribe to the new shares of capital stock must be exercised. This association, at any time and from time to time, may authorize and issue debt obligations, whether or not subordinated, without the approval of the shareholders. SIXTH. The Board of Directors shall appoint one of its members president of this association, who shall be chairperson of the Board of Directors, unless the Board of Directors appoints another director to be the chairperson. The Board of Directors shall have the power to appoint one or more vice presidents and to appoint a cashier and such other officers and employees as may be required to transact the business of this association. The Board of Directors shall have the power to: - Define the duties of the officers and employees of this association. - Fix the salaries to be paid to the officers and employees. - Dismiss officers and employees. - Require bonds from officers and employees and to fix the penalty thereof. - Regulate the manner in which any increase of the capital of this association shall be made. - Manage and administer the business and affairs of this association. - Make all bylaws that it may be lawful for the Board of Directors to make. - Generally to perform all acts that are legal for a Board of Directors to perform. SEVENTH. The Board of Directors shall have the power to change the location of the main office to any other place within the limits of Wilmington, Delaware, without the approval of the shareholders, and shall have the power to establish or change the location of any branch or branches of the association to any other location, without the approval of the shareholders. 3 EIGHTH. The corporate existence of this association shall continue until terminated according to the laws of the United States. NINTH. The Board of Directors of this association, or any three or more shareholders owning, in the aggregate, not less than 10 percent of the stock of this association, may call a special meeting of shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the time, place and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least 10 days prior to the date of the meeting to each shareholder of record at his address as shown upon the books of this association. TENTH. Each director and executive officer of this association shall be indemnified by the association against liability in any proceeding (including without limitation a proceeding brought by or on behalf of this association itself) arising out of his status as such or his activities in either of the foregoing capacities, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of this association. Liabilities incurred by a director or executive officer of this association in defending a proceeding shall be paid by this association in advance of the final disposition of such proceeding upon receipt of an undertaking by the director or executive officer to repay such amount if it shall be determined, as provided in the last paragraph of this Article Tenth, that he is not entitled to be indemnified by this association against such liabilities. The indemnity against liability in the preceding paragraph of this Article Tenth, including liabilities incurred in defending a proceeding, shall be automatic and self-operative. Any director, officer or employee of this association who serves at the request of this association as a director, officer, employee or agent of a charitable, not-for-profit, religious, educational or hospital corporation, partnership, joint venture, trust or other enterprise, or a trade association, or as a trustee or administrator under an employee benefit plan, or who serves at the request of this association as a director, officer or employee of a business corporation in connection with the administration of an estate or trust by this association, shall have the right to be indemnified by this association, subject to the provisions set forth in the following paragraph of this Article Tenth, against liabilities in any manner arising out of or attributable to such status or activities in any such capacity, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of this association, or of the corporation, partnership, joint venture, trust, enterprise, association or plan being served by such person. In the case of all persons except the directors and executive officers of this association, the determination of whether a person is entitled to indemnification under the preceding paragraph of this Article Tenth shall be made by and in the sole discretion of the Chief Executive Officer of this association. In the case of the directors and executive officers of this association, the indemnity against liability in the preceding paragraph of this Article Tenth shall be automatic and self-operative. For purposes of this Article Tenth of these Articles of Association only, the following terms shall have the meanings indicated: (a) "association" means First Union Trust Company, National Association and its direct and indirect wholly-owned subsidiaries. (b) "director" means an individual who is or was a director of this association. (c) "executive officer" means an officer of this association who by resolution of the Board of Directors of this association has been determined to be an executive officer of this association for purposes of Regulation O of the Federal Reserve Board. 4 (d) "liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses, including counsel fees and expenses, incurred with respect to a proceeding. (e) "party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (f) "proceeding" means any threatened, pending, or completed claim, action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. This association shall have no obligation to indemnify any person for an amount paid in settlement of a proceeding unless this association consents in writing to such settlement. The right to indemnification herein provided for shall apply to persons who are directors, officers, or employees of banks or other entities that are hereafter merged or otherwise combined with this association only after the effective date of such merger or other combination and only as to their status and activities after such date. The right to indemnification herein provided for shall inure to the benefit of the heirs and legal representatives of any person entitled to such right. No revocation of, change in, or adoption of any resolution or provision in the Articles of Association or By-laws of this association inconsistent with, this Article Tenth shall adversely affect the rights of any director, officer, or employee of this association with respect to (i) any proceeding commenced or threatened prior to such revocation, change, or adoption, or (ii) any proceeding arising out of any act or omission occurring prior to such revocation, change, or adoption, in either case, without the written consent of such director, officer, or employee. 5 The rights hereunder shall be in addition to and not exclusive of any other rights to which a director, officer, or employee of this association may be entitled under any statute, agreement, insurance policy, or otherwise. This association shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, or employee of this association, or is or was serving at the request of this association as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise, against any liability asserted against such director, officer, or employee in any such capacity, or arising out of their status as such, whether or not this association would have the power to indemnify such director, officer, or employee against such liability, excluding insurance coverage for a formal order assessing civil money penalties against a director, officer or employee of this association. Notwithstanding anything to the contrary provided herein, no person shall have a right to indemnification with respect to any liability (i) incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to this association, (ii) to the extent such person is entitled to receive payment therefor under any insurance policy or from any corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise other than this association, or (iii) to the extent that a court of competent jurisdiction determines that such indemnification is void or prohibited under state or federal law. ELEVENTH. These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount. IN WITNESS WHEREOF, we have hereunto set our hands this 25th day of November, 1996. ORGANIZERS: - -------------------------------- -------------------------- Kent S. Hathaway Keith D. Lembo - -------------------------------- -------------------------- Robert L. Andersen Stephen J. Antal -------------------------- Daniel Glassberg 6 FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION BYLAWS AS AMENDED AND RESTATED MAY 27, 1997 ARTICLE I MEETINGS OF SHAREHOLDERS Section 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders for the election of directors and transaction of whatever other business may properly come before the meeting, shall be held at the Main Office of the Association, or such other place as the Board of Directors may designate, at 10:00 A.M., on the third Tuesday of February in each year, commencing with the year 1997 or such other time within 90 days as may be set by the Board of Directors. If, from any cause, an election of directors is not made on the said day, the Board of Directors shall order the election to be held on some subsequent day, as soon thereafter as practicable, according to the provisions of the law; and notice thereof shall be given in the manner herein. Section 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by statute, special meetings of the shareholders may be called for any purpose at any time by the Board of Directors or by any one or more shareholders owning, in the aggregate, not less than twenty-five percent of the stock of the Association. Section 1.3. NOTICE OF MEETINGS. Notice of Annual and Special meetings shall mailed, postage prepaid, at least ten days prior to the date thereof provided for the annual meeting, addressed to each shareholder at his address appearing on the books of the Association; but any failure to mail such notice, or any irregularity therein, shall not affect the validity of such meeting, or of any of the proceedings thereat. A shareholder may waive any such notice. Section 1.4. ORGANIZATION OF MEETINGS. The Chairman shall preside at all meetings of shareholders. In his absence, the President, or a director designated by the Chairman shall preside at such meeting. Section 1.5. PROXIES. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies shall be valid only for one meeting to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. Section 1.6. QUORUM. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. ARTICLE II DIRECTORS Section 2.1. BOARD OF DIRECTORS. The Board of Directors (hereinafter referred to as the "Board"), shall have power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by said Board. Section 2.2. NUMBER. The Board shall consist of not less than five nor more than twenty-five persons, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of the shareholders at any meeting thereof; provided, however, that a majority of the full Board may not increase the number of directors to a number which: (a) exceeds by more than two the number of directors last elected by shareholders where such number was fifteen or less; and (b) to a number which exceeds by more than four the number of directors last elected by shareholders where such number was sixteen or more, but in no event shall the number of directors exceed twenty-five. Section 2.3. ORGANIZATION MEETING. A meeting shall be held for the purpose of organizing the new Board and electing and appointing officers of the Association for the succeeding year on the day of the Annual Meeting of Shareholders or as soon thereafter as practicable, and, in any event, within thirty days thereof. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting, from time to time, until a quorum is obtained. Section 2.4. REGULAR MEETINGS. The regular meetings of the Board shall be held on such days and time as the directors may, by resolution, designate; and written notice of any change thereof shall be sent to each member. When any regular meeting of the Board falls upon a legal holiday, the meeting shall be held on such other day as the Board may designate. Section 2.5. SPECIAL MEETINGS. Special meetings of the Board may be called by the Chairman of the Board, or President, or at the request of three or more directors. Each director shall be given notice of each special meeting, except the organization meeting, at least one day before it is to be held by facsimile, telephone, telegram, letter or in person. Any director may waive any such notice. Section 2.6. QUORUM. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by law; but a less number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned without further notice. 3 Section 2.7. TERM OF OFFICE AND VACANCY. Directors shall hold office for one year and until their successors are elected and have qualified. No person shall stand for election as a director of this Association if at the date of his election he will have passed his seventieth birthday; provided, however, this prohibition shall not apply to persons who are active officers of this Association, an affiliate bank, or its parent corporation, or a former chief executive officer of the Association. No person, who is not an officer or former officer of this Association, an affiliate bank, or its parent corporation and who has discontinued the principal position or activity the person held when initially elected, shall be recommended to the shareholders for reelection; provided, however, that exceptions may be made because of a change in principal position or activity which would be compatible with continued service to this Association. No person elected as a director may exercise any of the powers of his office until he has taken the oath of office as prescribed by law. When any vacancy occurs among the directors, the remaining members of the Board, in accordance with the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose. Section 2.8. NOMINATIONS. Nominations for election to the Board may be made by the Executive Committee or by any stockholder of any outstanding class of capital stock of the Association entitled to vote for the election of directors. Section 2.9. COMMUNICATIONS EQUIPMENT. Any or all directors may participate in a meeting of the Board by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. Section 2.10. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board or committee thereof by law, the Association's Articles of Association, or these Bylaws may be taken without a meeting, if, prior or subsequent to the action, all members of the Board or 4 committee shall individually or collectively consent in writing to the action. Each written consent or consents shall be filed with the minutes of the proceedings of the Board or committee. Action by written consent shall have the same force and effect as a unanimous vote of the directors, for all purposes. Any certificate or other documents which relates to action so taken shall state that the action was taken by unanimous written consent of the Board or committee without a meeting. ARTICLE III COMMITTEES OF THE BOARD Section 3.1. EXECUTIVE COMMITTEE. The Board may by resolution adopted by a majority of the entire Board designate an Executive Committee consisting of the Chairman of the Board, the President, and not less than two other directors. Subject to the national banking laws and the Association's Articles of Association, the Executive Committee may exercise all the powers of the Board of Directors with respect to the affairs of the Association, except that the Executive Committee may not: 1. (a) exercise such powers while a quorum of the Board of Directors is actually convened for the conduct of business, (b) exercise any power specifically required to be exercised by at least a majority of all the directors, (c) act on matters committed by the Bylaws or resolution of the Board of Directors to another committee of the board, or (d) amend or repeal any resolution theretofore adopted by the Board of Directors which by its terms is amendable or repealable only by the Board; 2. amend the Articles of Association or make, alter or repeal any Bylaw of the 5 Association; 3. elect or appoint any director, create or fill any vacancies in the Board of Directors or remove any director, or authorize or approve any change in the compensation of any officer of the Association who is also a director of the Association; 4. authorize or approve issuance or sale or contract for sale of shares of stock of the Association, or determine the designation and relative rights, preferences and limitations of a class or series of shares; 5. adopt an agreement of merger or consolidation, or submit to shareholders any action that requires shareholder approval, including any recommendation to the shareholders concerning the sale, lease or exchange of all or substantially all the Association's property and assets, a dissolution of the Association or a revocation of a previously approved dissolution; or 6. authorize an expenditure by the Association in excess of $10 million for any one item or group of related items. The committee shall hold regular meetings at such times as the members shall agree and whenever called by the chairman of the committee. A majority of the committee shall constitute a quorum for the transaction of business. The committee shall keep a record of its proceedings and shall report these proceedings to the Board at the regular meetings thereof. The committee shall serve as the nominating committee for nominations to the Board. Section 3.2. CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Board may designate one of its members to be Chairman of the Executive Committee who shall preside at the meetings thereof and shall perform such duties as the Board shall assign to him from time to time. 6 Section 3.3. AUDIT COMMITTEE. The Board shall appoint a committee of three or more persons exclusive of the officers of this Association which committee shall be known as the Audit Committee. It shall be the duty of this committee at least once in every twelve months to examine the affairs of the Association, and determine whether it is in a sound and solvent condition and to recommend to the Board such changes in the manner of doing business, etc., as may seem to be desirable. The committee may cause such examination to be made in its behalf and under its supervision by outside accountants and may also use the services of any other persons either inside or outside the Association to assist in its work. The results of each examination shall be reported in writing to the Board. Section 3.4. AUDIT OF TRUST DEPARTMENT. The Audit Committee shall, at least once during each calendar year and within fifteen months of the last such audit make suitable audits of the Trust Department or cause suitable audits to be made by auditors responsible only to the Board, and at such time shall ascertain whether the department has been administered in accordance with law, Part 9 of the Regulations of the Comptroller of the Currency, and sound fiduciary principles. In lieu of such periodic audit the Audit Committee, at the election of the Board, may conduct or cause to be conducted by auditors responsible only to the Board an adequate continuous audit system adopted by the Board. A written report of such periodic or continuous audit shall be made to the Board. Section 3.5. OTHER COMMITTEES. The Board may appoint from time to time other committees composed of one or more persons each, for such purposes and with such powers as the Board may determine. The Chairman of the Board shall have the power to designate another person to serve on any committee during the absence or inability of any member thereof so to serve. 7 Section 3.6. DIRECTORS' EMERITUS. The Board may designate one or more persons to serve as Director Emeritus. Such Director Emeritus shall have the right to attend any and all meetings of the Board, but shall have no vote at such meetings. A person designated as Director Emeritus may serve in that capacity for a period of three years. Section 3.7. ALTERNATE COMMITTEE MEMBERS. The Board may, from time to time, appoint one or more, but no more than three persons to serve as alternate members of a committee, each of whom shall be empowered to serve on that committee in place of a regular committee member in the event of the absence or disability of that committee member. An alternate committee member shall, when serving on a committee, have all of the powers of a regular committee member. Alternate committee members shall be notified of, and requested to serve at, a particular meeting or meetings, or for particular periods of time, by or at the direction of the chairman of the committee or the Chairman of the Board. ARTICLE IV OFFICERS Section 4.1. OFFICERS. The officers of the Association may be a Chairman of the Board, a Vice Chairman of the Board, one or more Chairmen or Vice Chairmen (who shall not be required to be directors of the Association), a President, one or more Vice Presidents, a Secretary, a Cashier or Treasurer, and such other officers, including officers holding similar or equivalent titles to the above in regions, divisions or functional units of the Association, as may be appointed by the Board of Directors. The Chairman of the Board and the President shall be members of the Board of Directors. Any two or more offices may be held by one person, but no officer shall sign or execute any document in more than one capacity. 8 Section 4.2. TERM OF OFFICE. The officers who are required by the articles of association or the bylaws to be members of the Board shall hold their respective offices until the Organization meeting of the Board following the annual meeting of shareholders or until their respective successors shall have been elected, unless they shall resign, become disqualified or be removed from office. Each other officer shall hold office at the pleasure of the Board. Any officer may be removed at any time by the Board. Section 4.3. CHAIRMAN OF THE BOARD. The chairman of the board shall be designated as Chairman of the Board. He shall preside at all meetings of the stockholders and directors and he shall be a member of all committees of the Board except the Audit Committee. He shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. He shall be subject only to the direction and control of the Board. Section 4.4. PRESIDENT. The president shall be the chief executive officer of the Association and he shall be designated as President and Chief Executive Officer. In the absence of the Chairman the President shall preside at all meetings of the Board. The President shall be a member of each committee of the Board except the Audit Committee. He shall have the powers and perform the duties conferred or imposed upon the President by the national banking laws, and he shall have such other powers and perform such other duties as nay from time to time be imposed upon or assigned to him by the Board. Section 4.5. CHIEF FINANCIAL OFFICER. The Chief Financial officer shall have such title as may be designated by the Board and he shall be responsible for all monies, funds and valuables of this Association, provide for the keeping of proper records of all transactions of the Association, report to the Board at each regular meeting the condition of the Association, submit to the Board, 9 when requested, a detailed statement of the income and expenses, be responsible for the conduct and efficiency of all persons employed under him, and perform such other duties as may be from time to time assigned to him by the Board. Section 4.6. OTHER OFFICERS. All other officers shall respectively exercise such powers and perform such duties as generally pertain to their several offices, or as may be conferred upon or assigned to them by the Board, the Chairman of the Board or the President. Section 4.7. BOND. Each officer and employee, if so required by the Board, shall give bond with surety to be approved by the Board, conditioning for the honest discharge of his duties as such officer or employee. In the discretion of the Board, such bonds may be individual, schedule or blanket form, and the premiums may be paid by the Association. Section 4.8. OFFICERS ACTING AS ASSISTANT SECRETARY. Notwithstanding Section 4.la of this Article IV, any Senior Vice President, Vice President or Assistant Vice President shall have, by virtue of his office, and by authority of the Bylaws, the authority from time to time to act as an Assistant Secretary of the Association, and to such extent, said officers are appointed to the office of Assistant Secretary. ARTICLE V TRUST DEPARTMENT Section 5.1. TRUST DEPARTMENT. There shall be a department of the Association known as the Trust Department which shall perform the fiduciary responsibilities of the Association. Opinions of counsel shall be retained on file in the Trust Department in connection with all important matters pertaining to fiduciary activities. 10 Section 5.2. TRUST INVESTMENT. Funds held in a fiduciary capacity shall be invested in accordance with the instrument establishing the fiduciary relationship and local law. Where such instrument does not specify the character and class of the investments to be made and does not vest in the Association a discretion in the matter, funds held pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under local law. ARTICLE VI STOCK CERTIFICATES AND TRANSFERS Section 6.1. STOCK CERTIFICATES. Ownership of capital stock of the Association shall be evidenced by certificates of stock signed by the Chairman or President, and the Secretary, or an Assistant Secretary. Each certificate shall state upon its face that the stock is transferable only upon the books of the Association by the holder thereof, or by duly authorized attorney, upon the surrender of such certificate, and shall meet the requirements of Section 5139, United States Revised Statutes, as amended. Section 6.2. TRANSFERS. The stock of this Association shall be assignable and transferable only on the books of this Association, subject to the restrictions and provisions of the national banking laws; and a transfer book shall be provided in which all assignments and transfers of stock shall be made. When stock is transferred, the certificates thereof shall be returned to the Association, canceled, preserved and new certificates issued. Section 6.3. DIVIDENDS. Dividends shall be paid to the shareholders in whose names the stock shall stand at the close of business on the day next preceding the date when the dividends are payable, provided, however, that the directors may fix another date as a record date for the determination of the shareholders entitled to receive payment thereof. 11 ARTICLE VII INCREASE OF STOCK 7.1. CAPITAL STOCK. Shares of the capital stock of the Association, which have been authorized but not issued, may be issued from time to time for such consideration, not less than the par value thereof, as may be determined by the Board. ARTICLE VIII CORPORATE SEAL Section 8.1. SEAL. The seal, an impression of which appears below, is the seal of the Association adopted by the Board of Directors: [Seal] The Chairman of the Board, the Vice Chairman, the President, Senior Executive Vice President, Executive Vice President, Senior Vice President, Vice President, each Assistant Vice President, the Chief Financial Officer, the Secretary, each Assistant Secretary, each Trust Officer, each Assistant Trust Officer or each Assistant Cashier, shall have the authority to affix the corporate seal of this Association and to attest to the same. 12 ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1. FISCAL YEAR. The fiscal year of the Association shall be the calendar year. Section 9. 2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, the Vice Chairman of the Board, any Chairman or Vice Chairman, the President, any Vice President or Assistant Vice President, the Secretary or any Assistant Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant Treasurer, or any officer holding similar or equivalent titles to the above in any regions, divisions or functional units of the Association, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Officer (or equivalent titles); provided, however, that where required, any such instrument shall be attested by one of said officers other than the officer executing such instrument. Any such instruments may also be executed, acknowledged, verified, delivered, or accepted in behalf of the Association in such other manner and by such other officers as the Board of Directors may from time to time direct. The provisions of this Section 9.2 are supplementary to any other provision of these Bylaws. Section 9.3. RECORDS. The organization papers of this Association, the articles of association, the bylaws and any amendments thereto, the proceedings of all regular and special meetings of the shareholders and of the directors, the returns of the judges of elections, and the reports of the committees of directors shall be recorded in an appropriate minute book, and the 13 minutes of each meeting shall be signed by the Secretary or any other officer appointed to act as secretary of the meeting. Section 9.4. BANKING HOURS. This Association and its branch offices shall be open on such days and during such hours as shall be fixed from time to time by the Board. Section 9.5. VOTING SHARES OF OTHER CORPORATIONS. The Chairman, any Vice Chairman, the President, or any Vice President is authorized to vote, represent and exercise on behalf of this Association all rights incident to any and all shares of stock of any other corporation standing in the name of the Association. The authority granted herein may be exercised by such officers in person or by proxy or by power of attorney duly executed by said officer. ARTICLE X BYLAWS Section 10.1. INSPECTION. A copy of the Bylaws, with all amendments thereto, shall at all times be kept in a convenient place at the Head Office of the Association, and shall be open for inspection to all shareholders, during banking hours. Section 10.2. AMENDMENTS. These Bylaws may be changed or amended at any regular or special meeting of the Board by the vote of a majority of the Directors. 14 Comptroller of the Currency Administrator of National Banks Multinational Banking Division 250 E Street, SW Washington, D.C. 20219-0001 TRUST CERTIFICATE Whereas, FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, Charter Number 23201, located in WILMINGTON, State of DELAWARE, being a National Banking Association, organized under the statutes of the United States, has made application for authority to act as fiduciary; And whereas, applicable provisions of the statutes of the United States authorize the granting of such authority; Now, therefore, I hereby certify that the said association is authorized to act in all fiduciary capacities by such statutes. In testimony whereof, witness my signature and Seal of office this fifteenth day of January 1997. - -------------------------------------------- Deputy Comptroller for Multinational Banking EX-25.2 14 EXHIBIT 25.2 REGISTRATION NO. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) X --- ---------- FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) United States National Banking Association 56-1989961 (State of incorporation if (I.R.S. employer not a national bank) identification no.) First Union Trust Company, National Association One Rodney Square, Suite 102 920 King St. Wilmington, DE 19801 (Address of principal (Zip Code) executive offices) SAME AS ABOVE (Name, address and telephone number, including area code, of trustee's agent for service) Heartland Financial Capital Trust I (Exact name of obligor as specified in its charter) The State of Delaware (State or other jurisdiction of incorporation or organization) 51-6512637 (I.R.S. employer identification no.) c/o Edward L. Truitt, Jr., Vice President First Union Trust Company, National Association One Rodney Square 920 King Street, Suite 102 Wilmington, DE 19801 (Address, including zip code, of principal executive offices) -------------------- CAPITAL SECURITIES (Title of the Amended and Restated Declaration of Trust securities) ------------------------------------------------ 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject - ----------------------------------------------------------------- Name Address - ------------------------------------------------------------------ Federal Reserve Bank of Richmond, VA Richmond, VA Comptroller of the Currency Washington, D.C. Securities and Exchange Commission Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note 1 on Page 4.) Because the obligor is not in default on any securities issued under indentures under which the applicant is trustee, Items 3 through 15 are not required herein. 16. LIST OF EXHIBITS. All exhibits identified below are filed as a part of this statement of eligibility. 1. A copy of the Articles of Association of First Union Trust Company, National Association, as now in effect, which contain the authority to commence business and a grant of powers to exercise corporate trust powers. 2. A copy of the certificate of authority of the trustee to commence business, if not contained in the Articles of Association. 3. A copy of the authorization of the trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) or (2) above. 4. A copy of the existing By-laws of First Union Trust Company, National Association, or instruments corresponding thereto. 5. Inapplicable. 6. The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939 is included at Page 4 of this Form T-1 Statement. 7. A copy of the latest report of condition of the trustee published pursuant to law or to the requirements of its supervising or examining authority is attached hereto. 8. Inapplicable. 9. Inapplicable. 3 NOTE Note 1: Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, First Union Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington, and State of Delaware, on the 14th day of September, 1999. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (trustee) By: /s/ Edward L. Truitt, Jr. Name: Edward L. Truitt, Jr. Title: Vice President CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939, as amended, and in connection with the proposed issuance by Heartland Financial Capital Trust I of Capital Securities, First Union Trust Company, National Association, as the trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION By: /s/ Edward L. Truitt, Jr. Name: Edward L. Truitt, Jr. Title: Vice President Dated: September 14, 1999 4 Legal Title of Bank: First Union Trust Company, National Association Call Date: 12/31/98 FFIEC 032 Address: One Rodney Square, 1st Floor Page RC-1 City, State, Zip: Wilmington, DE 19801 FDIC Certificate #: 34465 CONSOLIDATED REPORT OF CONDITION FOR JUNE 30, 1999 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
C400 DOLLAR AMOUNT IN THOUSANDS RCFD BIL MIL THOU -------------------------- ----------------- ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin (1).......................... 0081 41 1.a. b. Interest-bearing balances (2)................................................... 0071 0 1.b. 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A)...................... 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D).................... 1773 7 2.b. 3. Federal funds sold and securities purchased under agreements to resell............... 1350 0 3. 4. Loans and lease financing receivables a. Loans and leases, net of unearned income (from Schedule RC-C)...RCFD 2122 258,689 4.a. b. LESS: Allowance for loan and lease losses.......................RCFD 3123 0 4.b. c. LESS: Allocated transfer risk reserve...........................RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)............................. 2125 258,689 4.d. 5. Trading assets (from Schedule RC-D).................................................. 3545 0 5. 6. Premises and fixed assets (including capitalized leases)............................. 2145 0 6. 7. Other real estate owned (from Schedule RC-M)......................................... 2150 0 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)................................................................. 213 0 8. 9. Customers' liability to this bank on acceptances outstanding......................... 2155 0 9. 10. Intangible assets (from Schedule RC-M)............................................... 2143 0 10. 11. Other assets (from Schedule RC-F).................................................... 2160 3,648 11. 12. Total assets (sum of items 1 through 11)............................................. 2170 262,385 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. Legal Title of Bank: First Union Trust Company, National Association Call Date: 12/31/98 FFIEC 032 Address: One Rodney Square, 1st Floor Page RC-1 City, State, Zip: Wilmington, DE 19801 FDIC Certificate #: 34465 Schedule RC--Continued
DOLLAR AMOUNT IN THOUSANDS BIL MIL THOU -------------------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)...................................................................... RCON 2200 0 13.a. (1) Noninterest-bearing (1)............................. RCON 6631 0 13.a.(1) (2) Interest-bearing.................................... RCON 6636 0 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II)....................................... RCFN 2200 0 13.b. (1) Noninterest-bearing................................. RCFN 6631 0 13.b.(1) (2) Interest-bearing.................................... RCFN 6636 0 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase................................................... RCFD 2800 0 14. 15. a. Demand notes issued to the U.S. Treasury...................................... RCON 2840 0 15.a. b. Trading liabilities (from Schedule RC-D)...................................... RCFD 3548 0 15.b. 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):........................................... a. With a remaining maturity of one year or less................................ RCFD 2332 1,517 16.a. b. With a remaining maturity of more than one year through three years.......................................................... RCFD A547 0 16.b. c. With a remaining maturity of more than three years........................... RCFD A548 0 16.c. 17. Not applicable................................................................... 18. Bank's liability on acceptances executed and outstanding......................... RCFD 2920 0 18. 19. Subordinated notes and debentures (2)............................................ RCFD 3200 0 19. 20. Other liabilities (from Schedule RC-G)........................................... RCFD 2930 10,929 20. 21. Total liabilities (sum of items 13 through 20)................................... RCFD 2948 12,446 21. 22. Not applicable................................................................... EQUITY CAPITAL 23. Perpetual preferred stock and related surplus.................................... RCFD 3838 0 23. 24. Common stock..................................................................... RCFD 3230 200 24. 25. Surplus (exclude all surplus related to preferred stock)......................... RCFD 3839 413,719 25. 26. a. Undivided profits and capital reserves....................................... RCFD 3632 (163,980) 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities....... RCFD 8434 0 26.b. 27. Cumulative foreign currency translation adjustments.............................. RCFD 3284 0 27. 28. Total equity capital (sum of items 23 through 27)................................ RCFD 3210 249,939 28. 29. Total liabilities and equity capital (sum of items 21 and 28).................... RCFD 3300 262,385 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of Number any date during 1996............................................................. RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposit. (2) Includes limited-life preferred stock and related surplus. Comptroller of the Currency Administrator of National Banks Multinational Banking Division 250 E Street, SW Washington, D.C. 20219-0001 CHARTER CERTIFICATE Whereas, satisfactory evidence has been presented to the Office of the Comptroller of the Currency that FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, located in WILMINGTON, State of DELAWARE, has complied with all provisions of the statutes of the United States required to be complied with before being authorized to commence the business of banking as a National Banking Association; Now, therefore, I hereby certify that the above-named association is authorized to commence the business of banking as a National Banking Association. In testimony whereof, witness my signature and Seal of office this fifteenth day of January 1997. - -------------------------------------- Deputy Comptroller for Multinational Banking Charter Number 23201 Charter No. _________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION ARTICLES OF ASSOCIATION For the purpose of organizing an association to carry on the business of banking under the laws of the United States, the undersigned do enter into the following Articles of Association: FIRST. The title of this association shall be FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION SECOND. The main office of this association shall be in Wilmington, Delaware. The business of this association will be limited to that of a national trust bank. This association must obtain the prior written approval of the Office of the Comptroller of the Currency (AOCC@) before amending its Articles of Association to expand the scope of its activities and services. Transfers of this association=s stock are subject to prior approval of a federal depository institution regulatory agency. If no other agency approval is required, the OCC=s approval must be obtained before the transfers. In such cases where OCC approval is required, the OCC will apply the definitions and standards of the Change in Bank Control Act and the OCC=s implementing regulation to ownership changes in this association. THIRD. The Board of Directors of this association shall consist of not less than five nor more than twenty-five shareholders, the exact number to be fixed and determined from time to time by resolution of a majority of the full Board of Directors or by resolution of the shareholders at any annual or special meeting thereof. Each director, during the full term of his directorship, shall own a minimum of $1,000 aggregate par value of stock of this association or a minimum par market value or equity interest of $1,000 of stock in the bank holding company controlling this association. Any vacancy in the Board of Directors may be filled by action of the Board of Directors. FOURTH. There shall be an annual meeting of the shareholders to elect directors and transact whatever other business may be brought before the meeting. It shall be held at the main office or any other convenient place the Board of Directors may designate, on the day of each year specified thereby in the bylaws, but if no election is held on that day, it may be held on any subsequent day according to such lawful rules as may be prescribed by the Board of Directors. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of this association entitled to vote for election of directors. Nominations other than those made by or on behalf of the existing bank management shall be made in writing and be delivered or mailed to the president of this association and to the OCC, Washington, D.C., not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21 days notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of this association and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: - The name and address of each proposed nominee. - The principal occupation of each proposed nominee. - The total number of shares of capital stock of this association that will be voted for each proposed nominee. - The name and residence address of the notifying shareholder. - The number of shares of capital stock of this association owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the chairperson of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. FIFTH. The authorized amount of capital stock of this association shall be 2,000 shares of common stock of the par value of one hundred dollars ($100.00) each; but said capital stock may be increased or decreased from time to time, according to the provisions of the laws of the United States. If the capital stock is increased by the sale of additional shares thereof, each shareholder shall be entitled to subscribe for such additional shares in proportion to the number of shares of said capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution by the shareholders at the time the increase is authorized. The Board of Directors will have the power to prescribe a reasonable period of time within which the preemptive rights to subscribe to the new shares of capital stock must be exercised. This association, at any time and from time to time, may authorize and issue debt obligations, whether or not subordinated, without the approval of the shareholders. SIXTH. The Board of Directors shall appoint one of its members president of this association, who shall be chairperson of the Board of Directors, unless the Board of Directors appoints another director to be the chairperson. The Board of Directors shall have the power to appoint one or more vice presidents and to appoint a cashier and such other officers and employees as may be required to transact the business of this association. The Board of Directors shall have the power to: - Define the duties of the officers and employees of this association. - Fix the salaries to be paid to the officers and employees. - Dismiss officers and employees. - Require bonds from officers and employees and to fix the penalty thereof. - Regulate the manner in which any increase of the capital of this association shall be made. - Manage and administer the business and affairs of this association. - Make all bylaws that it may be lawful for the Board of Directors to make. - Generally to perform all acts that are legal for a Board of Directors to perform. SEVENTH. The Board of Directors shall have the power to change the location of the main office to any other place within the limits of Wilmington, Delaware, without the approval of the shareholders, and shall have the power to establish or change the location of any branch or branches of the association to any other location, without the approval of the shareholders. 3 EIGHTH. The corporate existence of this association shall continue until terminated according to the laws of the United States. NINTH. The Board of Directors of this association, or any three or more shareholders owning, in the aggregate, not less than 10 percent of the stock of this association, may call a special meeting of shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the time, place and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least 10 days prior to the date of the meeting to each shareholder of record at his address as shown upon the books of this association. TENTH. Each director and executive officer of this association shall be indemnified by the association against liability in any proceeding (including without limitation a proceeding brought by or on behalf of this association itself) arising out of his status as such or his activities in either of the foregoing capacities, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of this association. Liabilities incurred by a director or executive officer of this association in defending a proceeding shall be paid by this association in advance of the final disposition of such proceeding upon receipt of an undertaking by the director or executive officer to repay such amount if it shall be determined, as provided in the last paragraph of this Article Tenth, that he is not entitled to be indemnified by this association against such liabilities. The indemnity against liability in the preceding paragraph of this Article Tenth, including liabilities incurred in defending a proceeding, shall be automatic and self-operative. Any director, officer or employee of this association who serves at the request of this association as a director, officer, employee or agent of a charitable, not-for-profit, religious, educational or hospital corporation, partnership, joint venture, trust or other enterprise, or a trade association, or as a trustee or administrator under an employee benefit plan, or who serves at the request of this association as a director, officer or employee of a business corporation in connection with the administration of an estate or trust by this association, shall have the right to be indemnified by this association, subject to the provisions set forth in the following paragraph of this Article Tenth, against liabilities in any manner arising out of or attributable to such status or activities in any such capacity, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of this association, or of the corporation, partnership, joint venture, trust, enterprise, association or plan being served by such person. In the case of all persons except the directors and executive officers of this association, the determination of whether a person is entitled to indemnification under the preceding paragraph of this Article Tenth shall be made by and in the sole discretion of the Chief Executive Officer of this association. In the case of the directors and executive officers of this association, the indemnity against liability in the preceding paragraph of this Article Tenth shall be automatic and self-operative. For purposes of this Article Tenth of these Articles of Association only, the following terms shall have the meanings indicated: (a) "association" means First Union Trust Company, National Association and its direct and indirect wholly-owned subsidiaries. (b) "director" means an individual who is or was a director of this association. (c) "executive officer" means an officer of this association who by resolution of the Board of Directors of this association has been determined to be an executive officer of this association for purposes of Regulation O of the Federal Reserve Board. 4 (d) "liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses, including counsel fees and expenses, incurred with respect to a proceeding. (e) "party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (f) "proceeding" means any threatened, pending, or completed claim, action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. This association shall have no obligation to indemnify any person for an amount paid in settlement of a proceeding unless this association consents in writing to such settlement. The right to indemnification herein provided for shall apply to persons who are directors, officers, or employees of banks or other entities that are hereafter merged or otherwise combined with this association only after the effective date of such merger or other combination and only as to their status and activities after such date. The right to indemnification herein provided for shall inure to the benefit of the heirs and legal representatives of any person entitled to such right. No revocation of, change in, or adoption of any resolution or provision in the Articles of Association or By-laws of this association inconsistent with, this Article Tenth shall adversely affect the rights of any director, officer, or employee of this association with respect to (i) any proceeding commenced or threatened prior to such revocation, change, or adoption, or (ii) any proceeding arising out of any act or omission occurring prior to such revocation, change, or adoption, in either case, without the written consent of such director, officer, or employee. 5 The rights hereunder shall be in addition to and not exclusive of any other rights to which a director, officer, or employee of this association may be entitled under any statute, agreement, insurance policy, or otherwise. This association shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, or employee of this association, or is or was serving at the request of this association as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise, against any liability asserted against such director, officer, or employee in any such capacity, or arising out of their status as such, whether or not this association would have the power to indemnify such director, officer, or employee against such liability, excluding insurance coverage for a formal order assessing civil money penalties against a director, officer or employee of this association. Notwithstanding anything to the contrary provided herein, no person shall have a right to indemnification with respect to any liability (i) incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to this association, (ii) to the extent such person is entitled to receive payment therefor under any insurance policy or from any corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise other than this association, or (iii) to the extent that a court of competent jurisdiction determines that such indemnification is void or prohibited under state or federal law. ELEVENTH. These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount. IN WITNESS WHEREOF, we have hereunto set our hands this 25th day of November, 1996. ORGANIZERS: - -------------------------------- -------------------------- Kent S. Hathaway Keith D. Lembo - -------------------------------- -------------------------- Robert L. Andersen Stephen J. Antal -------------------------- Daniel Glassberg 6 FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION BYLAWS AS AMENDED AND RESTATED MAY 27, 1997 ARTICLE I MEETINGS OF SHAREHOLDERS Section 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders for the election of directors and transaction of whatever other business may properly come before the meeting, shall be held at the Main Office of the Association, or such other place as the Board of Directors may designate, at 10:00 A.M., on the third Tuesday of February in each year, commencing with the year 1997 or such other time within 90 days as may be set by the Board of Directors. If, from any cause, an election of directors is not made on the said day, the Board of Directors shall order the election to be held on some subsequent day, as soon thereafter as practicable, according to the provisions of the law; and notice thereof shall be given in the manner herein. Section 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by statute, special meetings of the shareholders may be called for any purpose at any time by the Board of Directors or by any one or more shareholders owning, in the aggregate, not less than twenty-five percent of the stock of the Association. Section 1.3. NOTICE OF MEETINGS. Notice of Annual and Special meetings shall mailed, postage prepaid, at least ten days prior to the date thereof provided for the annual meeting, addressed to each shareholder at his address appearing on the books of the Association; but any failure to mail such notice, or any irregularity therein, shall not affect the validity of such meeting, or of any of the proceedings thereat. A shareholder may waive any such notice. Section 1.4. ORGANIZATION OF MEETINGS. The Chairman shall preside at all meetings of shareholders. In his absence, the President, or a director designated by the Chairman shall preside at such meeting. Section 1.5. PROXIES. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies shall be valid only for one meeting to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. Section 1.6. QUORUM. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. ARTICLE II DIRECTORS Section 2.1. BOARD OF DIRECTORS. The Board of Directors (hereinafter referred to as the "Board"), shall have power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by said Board. Section 2.2. NUMBER. The Board shall consist of not less than five nor more than twenty-five persons, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of the shareholders at any meeting thereof; provided, however, that a majority of the full Board may not increase the number of directors to a number which: (a) exceeds by more than two the number of directors last elected by shareholders where such number was fifteen or less; and (b) to a number which exceeds by more than four the number of directors last elected by shareholders where such number was sixteen or more, but in no event shall the number of directors exceed twenty-five. Section 2.3. ORGANIZATION MEETING. A meeting shall be held for the purpose of organizing the new Board and electing and appointing officers of the Association for the succeeding year on the day of the Annual Meeting of Shareholders or as soon thereafter as practicable, and, in any event, within thirty days thereof. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting, from time to time, until a quorum is obtained. Section 2.4. REGULAR MEETINGS. The regular meetings of the Board shall be held on such days and time as the directors may, by resolution, designate; and written notice of any change thereof shall be sent to each member. When any regular meeting of the Board falls upon a legal holiday, the meeting shall be held on such other day as the Board may designate. Section 2.5. SPECIAL MEETINGS. Special meetings of the Board may be called by the Chairman of the Board, or President, or at the request of three or more directors. Each director shall be given notice of each special meeting, except the organization meeting, at least one day before it is to be held by facsimile, telephone, telegram, letter or in person. Any director may waive any such notice. Section 2.6. QUORUM. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by law; but a less number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned without further notice. 3 Section 2.7. TERM OF OFFICE AND VACANCY. Directors shall hold office for one year and until their successors are elected and have qualified. No person shall stand for election as a director of this Association if at the date of his election he will have passed his seventieth birthday; provided, however, this prohibition shall not apply to persons who are active officers of this Association, an affiliate bank, or its parent corporation, or a former chief executive officer of the Association. No person, who is not an officer or former officer of this Association, an affiliate bank, or its parent corporation and who has discontinued the principal position or activity the person held when initially elected, shall be recommended to the shareholders for reelection; provided, however, that exceptions may be made because of a change in principal position or activity which would be compatible with continued service to this Association. No person elected as a director may exercise any of the powers of his office until he has taken the oath of office as prescribed by law. When any vacancy occurs among the directors, the remaining members of the Board, in accordance with the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose. Section 2.8. NOMINATIONS. Nominations for election to the Board may be made by the Executive Committee or by any stockholder of any outstanding class of capital stock of the Association entitled to vote for the election of directors. Section 2.9. COMMUNICATIONS EQUIPMENT. Any or all directors may participate in a meeting of the Board by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. Section 2.10. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board or committee thereof by law, the Association's Articles of Association, or these Bylaws may be taken without a meeting, if, prior or subsequent to the action, all members of the Board or 4 committee shall individually or collectively consent in writing to the action. Each written consent or consents shall be filed with the minutes of the proceedings of the Board or committee. Action by written consent shall have the same force and effect as a unanimous vote of the directors, for all purposes. Any certificate or other documents which relates to action so taken shall state that the action was taken by unanimous written consent of the Board or committee without a meeting. ARTICLE III COMMITTEES OF THE BOARD Section 3.1. EXECUTIVE COMMITTEE. The Board may by resolution adopted by a majority of the entire Board designate an Executive Committee consisting of the Chairman of the Board, the President, and not less than two other directors. Subject to the national banking laws and the Association's Articles of Association, the Executive Committee may exercise all the powers of the Board of Directors with respect to the affairs of the Association, except that the Executive Committee may not: 1. (a) exercise such powers while a quorum of the Board of Directors is actually convened for the conduct of business, (b) exercise any power specifically required to be exercised by at least a majority of all the directors, (c) act on matters committed by the Bylaws or resolution of the Board of Directors to another committee of the board, or (d) amend or repeal any resolution theretofore adopted by the Board of Directors which by its terms is amendable or repealable only by the Board; 2. amend the Articles of Association or make, alter or repeal any Bylaw of the 5 Association; 3. elect or appoint any director, create or fill any vacancies in the Board of Directors or remove any director, or authorize or approve any change in the compensation of any officer of the Association who is also a director of the Association; 4. authorize or approve issuance or sale or contract for sale of shares of stock of the Association, or determine the designation and relative rights, preferences and limitations of a class or series of shares; 5. adopt an agreement of merger or consolidation, or submit to shareholders any action that requires shareholder approval, including any recommendation to the shareholders concerning the sale, lease or exchange of all or substantially all the Association's property and assets, a dissolution of the Association or a revocation of a previously approved dissolution; or 6. authorize an expenditure by the Association in excess of $10 million for any one item or group of related items. The committee shall hold regular meetings at such times as the members shall agree and whenever called by the chairman of the committee. A majority of the committee shall constitute a quorum for the transaction of business. The committee shall keep a record of its proceedings and shall report these proceedings to the Board at the regular meetings thereof. The committee shall serve as the nominating committee for nominations to the Board. Section 3.2. CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Board may designate one of its members to be Chairman of the Executive Committee who shall preside at the meetings thereof and shall perform such duties as the Board shall assign to him from time to time. 6 Section 3.3. AUDIT COMMITTEE. The Board shall appoint a committee of three or more persons exclusive of the officers of this Association which committee shall be known as the Audit Committee. It shall be the duty of this committee at least once in every twelve months to examine the affairs of the Association, and determine whether it is in a sound and solvent condition and to recommend to the Board such changes in the manner of doing business, etc., as may seem to be desirable. The committee may cause such examination to be made in its behalf and under its supervision by outside accountants and may also use the services of any other persons either inside or outside the Association to assist in its work. The results of each examination shall be reported in writing to the Board. Section 3.4. AUDIT OF TRUST DEPARTMENT. The Audit Committee shall, at least once during each calendar year and within fifteen months of the last such audit make suitable audits of the Trust Department or cause suitable audits to be made by auditors responsible only to the Board, and at such time shall ascertain whether the department has been administered in accordance with law, Part 9 of the Regulations of the Comptroller of the Currency, and sound fiduciary principles. In lieu of such periodic audit the Audit Committee, at the election of the Board, may conduct or cause to be conducted by auditors responsible only to the Board an adequate continuous audit system adopted by the Board. A written report of such periodic or continuous audit shall be made to the Board. Section 3.5. OTHER COMMITTEES. The Board may appoint from time to time other committees composed of one or more persons each, for such purposes and with such powers as the Board may determine. The Chairman of the Board shall have the power to designate another person to serve on any committee during the absence or inability of any member thereof so to serve. 7 Section 3.6. DIRECTORS' EMERITUS. The Board may designate one or more persons to serve as Director Emeritus. Such Director Emeritus shall have the right to attend any and all meetings of the Board, but shall have no vote at such meetings. A person designated as Director Emeritus may serve in that capacity for a period of three years. Section 3.7. ALTERNATE COMMITTEE MEMBERS. The Board may, from time to time, appoint one or more, but no more than three persons to serve as alternate members of a committee, each of whom shall be empowered to serve on that committee in place of a regular committee member in the event of the absence or disability of that committee member. An alternate committee member shall, when serving on a committee, have all of the powers of a regular committee member. Alternate committee members shall be notified of, and requested to serve at, a particular meeting or meetings, or for particular periods of time, by or at the direction of the chairman of the committee or the Chairman of the Board. ARTICLE IV OFFICERS Section 4.1. OFFICERS. The officers of the Association may be a Chairman of the Board, a Vice Chairman of the Board, one or more Chairmen or Vice Chairmen (who shall not be required to be directors of the Association), a President, one or more Vice Presidents, a Secretary, a Cashier or Treasurer, and such other officers, including officers holding similar or equivalent titles to the above in regions, divisions or functional units of the Association, as may be appointed by the Board of Directors. The Chairman of the Board and the President shall be members of the Board of Directors. Any two or more offices may be held by one person, but no officer shall sign or execute any document in more than one capacity. 8 Section 4.2. TERM OF OFFICE. The officers who are required by the articles of association or the bylaws to be members of the Board shall hold their respective offices until the Organization meeting of the Board following the annual meeting of shareholders or until their respective successors shall have been elected, unless they shall resign, become disqualified or be removed from office. Each other officer shall hold office at the pleasure of the Board. Any officer may be removed at any time by the Board. Section 4.3. CHAIRMAN OF THE BOARD. The chairman of the board shall be designated as Chairman of the Board. He shall preside at all meetings of the stockholders and directors and he shall be a member of all committees of the Board except the Audit Committee. He shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. He shall be subject only to the direction and control of the Board. Section 4.4. PRESIDENT. The president shall be the chief executive officer of the Association and he shall be designated as President and Chief Executive Officer. In the absence of the Chairman the President shall preside at all meetings of the Board. The President shall be a member of each committee of the Board except the Audit Committee. He shall have the powers and perform the duties conferred or imposed upon the President by the national banking laws, and he shall have such other powers and perform such other duties as nay from time to time be imposed upon or assigned to him by the Board. Section 4.5. CHIEF FINANCIAL OFFICER. The Chief Financial officer shall have such title as may be designated by the Board and he shall be responsible for all monies, funds and valuables of this Association, provide for the keeping of proper records of all transactions of the Association, report to the Board at each regular meeting the condition of the Association, submit to the Board, 9 when requested, a detailed statement of the income and expenses, be responsible for the conduct and efficiency of all persons employed under him, and perform such other duties as may be from time to time assigned to him by the Board. Section 4.6. OTHER OFFICERS. All other officers shall respectively exercise such powers and perform such duties as generally pertain to their several offices, or as may be conferred upon or assigned to them by the Board, the Chairman of the Board or the President. Section 4.7. BOND. Each officer and employee, if so required by the Board, shall give bond with surety to be approved by the Board, conditioning for the honest discharge of his duties as such officer or employee. In the discretion of the Board, such bonds may be individual, schedule or blanket form, and the premiums may be paid by the Association. Section 4.8. OFFICERS ACTING AS ASSISTANT SECRETARY. Notwithstanding Section 4.la of this Article IV, any Senior Vice President, Vice President or Assistant Vice President shall have, by virtue of his office, and by authority of the Bylaws, the authority from time to time to act as an Assistant Secretary of the Association, and to such extent, said officers are appointed to the office of Assistant Secretary. ARTICLE V TRUST DEPARTMENT Section 5.1. TRUST DEPARTMENT. There shall be a department of the Association known as the Trust Department which shall perform the fiduciary responsibilities of the Association. Opinions of counsel shall be retained on file in the Trust Department in connection with all important matters pertaining to fiduciary activities. 10 Section 5.2. TRUST INVESTMENT. Funds held in a fiduciary capacity shall be invested in accordance with the instrument establishing the fiduciary relationship and local law. Where such instrument does not specify the character and class of the investments to be made and does not vest in the Association a discretion in the matter, funds held pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under local law. ARTICLE VI STOCK CERTIFICATES AND TRANSFERS Section 6.1. STOCK CERTIFICATES. Ownership of capital stock of the Association shall be evidenced by certificates of stock signed by the Chairman or President, and the Secretary, or an Assistant Secretary. Each certificate shall state upon its face that the stock is transferable only upon the books of the Association by the holder thereof, or by duly authorized attorney, upon the surrender of such certificate, and shall meet the requirements of Section 5139, United States Revised Statutes, as amended. Section 6.2. TRANSFERS. The stock of this Association shall be assignable and transferable only on the books of this Association, subject to the restrictions and provisions of the national banking laws; and a transfer book shall be provided in which all assignments and transfers of stock shall be made. When stock is transferred, the certificates thereof shall be returned to the Association, canceled, preserved and new certificates issued. Section 6.3. DIVIDENDS. Dividends shall be paid to the shareholders in whose names the stock shall stand at the close of business on the day next preceding the date when the dividends are payable, provided, however, that the directors may fix another date as a record date for the determination of the shareholders entitled to receive payment thereof. 11 ARTICLE VII INCREASE OF STOCK 7.1. CAPITAL STOCK. Shares of the capital stock of the Association, which have been authorized but not issued, may be issued from time to time for such consideration, not less than the par value thereof, as may be determined by the Board. ARTICLE VIII CORPORATE SEAL Section 8.1. SEAL. The seal, an impression of which appears below, is the seal of the Association adopted by the Board of Directors: [Seal] The Chairman of the Board, the Vice Chairman, the President, Senior Executive Vice President, Executive Vice President, Senior Vice President, Vice President, each Assistant Vice President, the Chief Financial Officer, the Secretary, each Assistant Secretary, each Trust Officer, each Assistant Trust Officer or each Assistant Cashier, shall have the authority to affix the corporate seal of this Association and to attest to the same. 12 ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1. FISCAL YEAR. The fiscal year of the Association shall be the calendar year. Section 9. 2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, the Vice Chairman of the Board, any Chairman or Vice Chairman, the President, any Vice President or Assistant Vice President, the Secretary or any Assistant Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant Treasurer, or any officer holding similar or equivalent titles to the above in any regions, divisions or functional units of the Association, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Officer (or equivalent titles); provided, however, that where required, any such instrument shall be attested by one of said officers other than the officer executing such instrument. Any such instruments may also be executed, acknowledged, verified, delivered, or accepted in behalf of the Association in such other manner and by such other officers as the Board of Directors may from time to time direct. The provisions of this Section 9.2 are supplementary to any other provision of these Bylaws. Section 9.3. RECORDS. The organization papers of this Association, the articles of association, the bylaws and any amendments thereto, the proceedings of all regular and special meetings of the shareholders and of the directors, the returns of the judges of elections, and the reports of the committees of directors shall be recorded in an appropriate minute book, and the 13 minutes of each meeting shall be signed by the Secretary or any other officer appointed to act as secretary of the meeting. Section 9.4. BANKING HOURS. This Association and its branch offices shall be open on such days and during such hours as shall be fixed from time to time by the Board. Section 9.5. VOTING SHARES OF OTHER CORPORATIONS. The Chairman, any Vice Chairman, the President, or any Vice President is authorized to vote, represent and exercise on behalf of this Association all rights incident to any and all shares of stock of any other corporation standing in the name of the Association. The authority granted herein may be exercised by such officers in person or by proxy or by power of attorney duly executed by said officer. ARTICLE X BYLAWS Section 10.1. INSPECTION. A copy of the Bylaws, with all amendments thereto, shall at all times be kept in a convenient place at the Head Office of the Association, and shall be open for inspection to all shareholders, during banking hours. Section 10.2. AMENDMENTS. These Bylaws may be changed or amended at any regular or special meeting of the Board by the vote of a majority of the Directors. 14 Comptroller of the Currency Administrator of National Banks Multinational Banking Division 250 E Street, SW Washington, D.C. 20219-0001 TRUST CERTIFICATE Whereas, FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, Charter Number 23201, located in WILMINGTON, State of DELAWARE, being a National Banking Association, organized under the statutes of the United States, has made application for authority to act as fiduciary; And whereas, applicable provisions of the statutes of the United States authorize the granting of such authority; Now, therefore, I hereby certify that the said association is authorized to act in all fiduciary capacities by such statutes. In testimony whereof, witness my signature and Seal of office this fifteenth day of January 1997. - -------------------------------------------- Deputy Comptroller for Multinational Banking EX-25.3 15 EXHIBIT 25.3 REGISTRATION NO. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) X --- ---------- FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) United States National Banking Association 56-1989961 (State of incorporation if (I.R.S. employer not a national bank) identification no.) First Union Trust Company, National Association One Rodney Square, Suite 102 920 King St. Wilmington, DE 19801 (Address of principal (Zip Code) executive offices) SAME AS ABOVE (Name, address and telephone number, including area code, of trustee's agent for service) Heartland Financial Capital Trust I (Exact name of obligor as specified in its charter) The State of Delaware (State or other jurisdiction of incorporation or organization) 51-6512637 (I.R.S. employer identification no.) c/o Edward L. Truitt, Jr., Vice President First Union Trust Company, National Association One Rodney Square 920 King Street, Suite 102 Wilmington, DE 19801 (Address, including zip code, of principal executive offices) -------------------- GAURANTEE OF CAPITAL SECURITIES OF HEARTLAND CAPITAL TRUST I (Title of the Amended and Restated Declaration of Trust securities) ------------------------------------------------ 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject - ----------------------------------------------------------------- Name Address - ------------------------------------------------------------------ Federal Reserve Bank of Richmond, VA Richmond, VA Comptroller of the Currency Washington, D.C. Securities and Exchange Commission Division of Market Regulation Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any underwriter for the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note 1 on Page 4.) Because the obligor is not in default on any securities issued under indentures under which the applicant is trustee, Items 3 through 15 are not required herein. 16. LIST OF EXHIBITS. All exhibits identified below are filed as a part of this statement of eligibility. 1. A copy of the Articles of Association of First Union Trust Company, National Association, as now in effect, which contain the authority to commence business and a grant of powers to exercise corporate trust powers. 2. A copy of the certificate of authority of the trustee to commence business, if not contained in the Articles of Association. 3. A copy of the authorization of the trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in exhibits (1) or (2) above. 4. A copy of the existing By-laws of First Union Trust Company, National Association, or instruments corresponding thereto. 5. Inapplicable. 6. The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939 is included at Page 4 of this Form T-1 Statement. 7. A copy of the latest report of condition of the trustee published pursuant to law or to the requirements of its supervising or examining authority is attached hereto. 8. Inapplicable. 9. Inapplicable. 3 NOTE Note 1: Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, First Union Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington, and State of Delaware, on the 14th day of September, 1999. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (trustee) By: /s/ Edward L. Truitt, Jr. Name: Edward L. Truitt, Jr. Title: Vice President CONSENT OF TRUSTEE Under section 321(b) of the Trust Indenture Act of 1939, as amended, and in connection with the proposed issuance by Heartland Financial Capital Trust I of Capital Securities, First Union Trust Company, National Association, as the trustee herein named, hereby consents that reports of examinations of said Trustee by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION By: /s/ Edward L. Truitt, Jr. Name: Edward L. Truitt, Jr. Title: Vice President Dated: September 14, 1999 4 Legal Title of Bank: First Union Trust Company, National Association Call Date: 12/31/98 FFIEC 032 Address: One Rodney Square, 1st Floor Page RC-1 City, State, Zip: Wilmington, DE 19801 FDIC Certificate #: 34465 CONSOLIDATED REPORT OF CONDITION FOR JUNE 30, 1999 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
C400 DOLLAR AMOUNT IN THOUSANDS RCFD BIL MIL THOU ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin (1)................................ 0081 41 1.a. b. Interest-bearing balances (2)......................................................... 0071 0 1.b. 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A)............................ 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D).......................... 1773 7 2.b. 3. Federal funds sold and securities purchased under agreements to resell................................................................................. 1350 0 3. 4. Loans and lease financing receivables a. Loans and leases, net of unearned income (from Schedule RC-C)......RCFD 2122 258,689 4.a. b. LESS: Allowance for loan and lease losses..........................RCFD 3123 0 4.b. c. LESS: Allocated transfer risk reserve............................. RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)................................... 2125 258,689 4.d. 5. Trading assets (from Schedule RC-D)....................................................... 3545 0 5. 6. Premises and fixed assets (including capitalized leases).................................. 2145 0 6. 7. Other real estate owned (from Schedule RC-M).............................................. 2150 0 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M).. 213 0 8. 9. Customers' liability to this bank on acceptances outstanding.............................. 2155 0 9. 10. Intangible assets (from Schedule RC-M).................................................... 2143 0 10. 11. Other assets (from Schedule RC-F)......................................................... 2160 3,648 11. 12. Total assets (sum of items 1 through 11).................................................. 2170 262,385 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. Legal Title of Bank: First Union Trust Company, National Association Call Date: 12/31/98 FFIEC 032 Address: One Rodney Square, 1st Floor Page RC-1 City, State, Zip: Wilmington, DE 19801 FDIC Certificate #: 34465 ----- Schedule RC--Continued
DOLLAR AMOUNT IN THOUSANDS BIL MIL THOU -------------------------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I)........................................... RCON 2200 0 13.a. (1) Noninterest-bearing (1)........................ RCON 6631 0 13.a.(1) (2) Interest-bearing............................... RCON 6636 0 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II)................................ RCFN 2200 0 13.b. (1) Noninterest-bearing............................ RCFN 6631 0 13.b.(1) (2) Interest-bearing................................RCFN 6636 0 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase............................................. RCFD 2800 0 14. 15. a. Demand notes issued to the U.S. Treasury................................ RCON 2840 0 15.a. b. Trading liabilities (from Schedule RC-D)................................ RCFD 3548 0 15.b. 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):....................... a. With a remaining maturity of one year or less........................... RCFD 2332 1,517 16.a. b. With a remaining maturity of more than one year through three years..... RCFD A547 0 16.b. c. With a remaining maturity of more than three years...................... RCFD A548 0 16.c. 17. Not applicable............................................... 18. Bank's liability on acceptances executed and outstanding.................... RCFD 2920 0 18. 19. Subordinated notes and debentures (2)....................................... RCFD 3200 0 19. 20. Other liabilities (from Schedule RC-G)...................................... RCFD 2930 10,929 20. 21. Total liabilities (sum of items 13 through 20).............................. RCFD 2948 12,446 21. 22. Not applicable............................................... EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............................... RCFD 3838 0 23. 24. Common stock................................................................ RCFD 3230 200 24. 25. Surplus (exclude all surplus related to preferred stock).................... RCFD 3839 413,719 25. 26. a. Undivided profits and capital reserves.................................. RCFD 3632 (163,980) 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities........................................... RCFD 8434 0 26.b. 27. Cumulative foreign currency translation adjustments......................... RCFD 3284 0 27. 28. Total equity capital (sum of items 23 through 27)........................... RCFD 3210 249,939 28. 29. Total liabilities and equity capital (sum of items 21 and 28).................................................... RCFD 3300 262,385 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of Number any date during 1996......................................... RCFD 6724 N/A M.1.
1= Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2= Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3= Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4= Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5= Review of the bank's financial statements by external auditors 6= Compilation of the bank's financial statements by external auditors 7= Other audit procedures (excluding tax preparation work) 8= No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposit. (2) Includes limited-life preferred stock and related surplus. Comptroller of the Currency Administrator of National Banks Multinational Banking Division 250 E Street, SW Washington, D.C. 20219-0001 CHARTER CERTIFICATE Whereas, satisfactory evidence has been presented to the Office of the Comptroller of the Currency that FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, located in WILMINGTON, State of DELAWARE, has complied with all provisions of the statutes of the United States required to be complied with before being authorized to commence the business of banking as a National Banking Association; Now, therefore, I hereby certify that the above-named association is authorized to commence the business of banking as a National Banking Association. In testimony whereof, witness my signature and Seal of office this fifteenth day of January 1997. - -------------------------------------- Deputy Comptroller for Multinational Banking Charter Number 23201 Charter No. _________ FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION ARTICLES OF ASSOCIATION For the purpose of organizing an association to carry on the business of banking under the laws of the United States, the undersigned do enter into the following Articles of Association: FIRST. The title of this association shall be FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION SECOND. The main office of this association shall be in Wilmington, Delaware. The business of this association will be limited to that of a national trust bank. This association must obtain the prior written approval of the Office of the Comptroller of the Currency (AOCC@) before amending its Articles of Association to expand the scope of its activities and services. Transfers of this association=s stock are subject to prior approval of a federal depository institution regulatory agency. If no other agency approval is required, the OCC=s approval must be obtained before the transfers. In such cases where OCC approval is required, the OCC will apply the definitions and standards of the Change in Bank Control Act and the OCC=s implementing regulation to ownership changes in this association. THIRD. The Board of Directors of this association shall consist of not less than five nor more than twenty-five shareholders, the exact number to be fixed and determined from time to time by resolution of a majority of the full Board of Directors or by resolution of the shareholders at any annual or special meeting thereof. Each director, during the full term of his directorship, shall own a minimum of $1,000 aggregate par value of stock of this association or a minimum par market value or equity interest of $1,000 of stock in the bank holding company controlling this association. Any vacancy in the Board of Directors may be filled by action of the Board of Directors. FOURTH. There shall be an annual meeting of the shareholders to elect directors and transact whatever other business may be brought before the meeting. It shall be held at the main office or any other convenient place the Board of Directors may designate, on the day of each year specified thereby in the bylaws, but if no election is held on that day, it may be held on any subsequent day according to such lawful rules as may be prescribed by the Board of Directors. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of this association entitled to vote for election of directors. Nominations other than those made by or on behalf of the existing bank management shall be made in writing and be delivered or mailed to the president of this association and to the OCC, Washington, D.C., not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21 days notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of this association and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: - The name and address of each proposed nominee. - The principal occupation of each proposed nominee. - The total number of shares of capital stock of this association that will be voted for each proposed nominee. - The name and residence address of the notifying shareholder. - The number of shares of capital stock of this association owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the chairperson of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. FIFTH. The authorized amount of capital stock of this association shall be 2,000 shares of common stock of the par value of one hundred dollars ($100.00) each; but said capital stock may be increased or decreased from time to time, according to the provisions of the laws of the United States. If the capital stock is increased by the sale of additional shares thereof, each shareholder shall be entitled to subscribe for such additional shares in proportion to the number of shares of said capital stock owned by him at the time the increase is authorized by the shareholders, unless another time subsequent to the date of the shareholders' meeting is specified in a resolution by the shareholders at the time the increase is authorized. The Board of Directors will have the power to prescribe a reasonable period of time within which the preemptive rights to subscribe to the new shares of capital stock must be exercised. This association, at any time and from time to time, may authorize and issue debt obligations, whether or not subordinated, without the approval of the shareholders. SIXTH. The Board of Directors shall appoint one of its members president of this association, who shall be chairperson of the Board of Directors, unless the Board of Directors appoints another director to be the chairperson. The Board of Directors shall have the power to appoint one or more vice presidents and to appoint a cashier and such other officers and employees as may be required to transact the business of this association. The Board of Directors shall have the power to: - Define the duties of the officers and employees of this association. - Fix the salaries to be paid to the officers and employees. - Dismiss officers and employees. - Require bonds from officers and employees and to fix the penalty thereof. - Regulate the manner in which any increase of the capital of this association shall be made. - Manage and administer the business and affairs of this association. - Make all bylaws that it may be lawful for the Board of Directors to make. - Generally to perform all acts that are legal for a Board of Directors to perform. SEVENTH. The Board of Directors shall have the power to change the location of the main office to any other place within the limits of Wilmington, Delaware, without the approval of the shareholders, and shall have the power to establish or change the location of any branch or branches of the association to any other location, without the approval of the shareholders. 3 EIGHTH. The corporate existence of this association shall continue until terminated according to the laws of the United States. NINTH. The Board of Directors of this association, or any three or more shareholders owning, in the aggregate, not less than 10 percent of the stock of this association, may call a special meeting of shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the time, place and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least 10 days prior to the date of the meeting to each shareholder of record at his address as shown upon the books of this association. TENTH. Each director and executive officer of this association shall be indemnified by the association against liability in any proceeding (including without limitation a proceeding brought by or on behalf of this association itself) arising out of his status as such or his activities in either of the foregoing capacities, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of this association. Liabilities incurred by a director or executive officer of this association in defending a proceeding shall be paid by this association in advance of the final disposition of such proceeding upon receipt of an undertaking by the director or executive officer to repay such amount if it shall be determined, as provided in the last paragraph of this Article Tenth, that he is not entitled to be indemnified by this association against such liabilities. The indemnity against liability in the preceding paragraph of this Article Tenth, including liabilities incurred in defending a proceeding, shall be automatic and self-operative. Any director, officer or employee of this association who serves at the request of this association as a director, officer, employee or agent of a charitable, not-for-profit, religious, educational or hospital corporation, partnership, joint venture, trust or other enterprise, or a trade association, or as a trustee or administrator under an employee benefit plan, or who serves at the request of this association as a director, officer or employee of a business corporation in connection with the administration of an estate or trust by this association, shall have the right to be indemnified by this association, subject to the provisions set forth in the following paragraph of this Article Tenth, against liabilities in any manner arising out of or attributable to such status or activities in any such capacity, except for any liability incurred on account of activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of this association, or of the corporation, partnership, joint venture, trust, enterprise, association or plan being served by such person. In the case of all persons except the directors and executive officers of this association, the determination of whether a person is entitled to indemnification under the preceding paragraph of this Article Tenth shall be made by and in the sole discretion of the Chief Executive Officer of this association. In the case of the directors and executive officers of this association, the indemnity against liability in the preceding paragraph of this Article Tenth shall be automatic and self-operative. For purposes of this Article Tenth of these Articles of Association only, the following terms shall have the meanings indicated: (a) "association" means First Union Trust Company, National Association and its direct and indirect wholly-owned subsidiaries. (b) "director" means an individual who is or was a director of this association. (c) "executive officer" means an officer of this association who by resolution of the Board of Directors of this association has been determined to be an executive officer of this association for purposes of Regulation O of the Federal Reserve Board. 4 (d) "liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses, including counsel fees and expenses, incurred with respect to a proceeding. (e) "party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (f) "proceeding" means any threatened, pending, or completed claim, action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. This association shall have no obligation to indemnify any person for an amount paid in settlement of a proceeding unless this association consents in writing to such settlement. The right to indemnification herein provided for shall apply to persons who are directors, officers, or employees of banks or other entities that are hereafter merged or otherwise combined with this association only after the effective date of such merger or other combination and only as to their status and activities after such date. The right to indemnification herein provided for shall inure to the benefit of the heirs and legal representatives of any person entitled to such right. No revocation of, change in, or adoption of any resolution or provision in the Articles of Association or By-laws of this association inconsistent with, this Article Tenth shall adversely affect the rights of any director, officer, or employee of this association with respect to (i) any proceeding commenced or threatened prior to such revocation, change, or adoption, or (ii) any proceeding arising out of any act or omission occurring prior to such revocation, change, or adoption, in either case, without the written consent of such director, officer, or employee. 5 The rights hereunder shall be in addition to and not exclusive of any other rights to which a director, officer, or employee of this association may be entitled under any statute, agreement, insurance policy, or otherwise. This association shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, or employee of this association, or is or was serving at the request of this association as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise, against any liability asserted against such director, officer, or employee in any such capacity, or arising out of their status as such, whether or not this association would have the power to indemnify such director, officer, or employee against such liability, excluding insurance coverage for a formal order assessing civil money penalties against a director, officer or employee of this association. Notwithstanding anything to the contrary provided herein, no person shall have a right to indemnification with respect to any liability (i) incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to this association, (ii) to the extent such person is entitled to receive payment therefor under any insurance policy or from any corporation, partnership, joint venture, trust, trade association, employee benefit plan, or other enterprise other than this association, or (iii) to the extent that a court of competent jurisdiction determines that such indemnification is void or prohibited under state or federal law. ELEVENTH. These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount. IN WITNESS WHEREOF, we have hereunto set our hands this 25th day of November, 1996. ORGANIZERS: - -------------------------------- -------------------------- Kent S. Hathaway Keith D. Lembo - -------------------------------- -------------------------- Robert L. Andersen Stephen J. Antal -------------------------- Daniel Glassberg 6 FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION BYLAWS AS AMENDED AND RESTATED MAY 27, 1997 ARTICLE I MEETINGS OF SHAREHOLDERS Section 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders for the election of directors and transaction of whatever other business may properly come before the meeting, shall be held at the Main Office of the Association, or such other place as the Board of Directors may designate, at 10:00 A.M., on the third Tuesday of February in each year, commencing with the year 1997 or such other time within 90 days as may be set by the Board of Directors. If, from any cause, an election of directors is not made on the said day, the Board of Directors shall order the election to be held on some subsequent day, as soon thereafter as practicable, according to the provisions of the law; and notice thereof shall be given in the manner herein. Section 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by statute, special meetings of the shareholders may be called for any purpose at any time by the Board of Directors or by any one or more shareholders owning, in the aggregate, not less than twenty-five percent of the stock of the Association. Section 1.3. NOTICE OF MEETINGS. Notice of Annual and Special meetings shall mailed, postage prepaid, at least ten days prior to the date thereof provided for the annual meeting, addressed to each shareholder at his address appearing on the books of the Association; but any failure to mail such notice, or any irregularity therein, shall not affect the validity of such meeting, or of any of the proceedings thereat. A shareholder may waive any such notice. Section 1.4. ORGANIZATION OF MEETINGS. The Chairman shall preside at all meetings of shareholders. In his absence, the President, or a director designated by the Chairman shall preside at such meeting. Section 1.5. PROXIES. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies shall be valid only for one meeting to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. Section 1.6. QUORUM. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. ARTICLE II DIRECTORS Section 2.1. BOARD OF DIRECTORS. The Board of Directors (hereinafter referred to as the "Board"), shall have power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by said Board. Section 2.2. NUMBER. The Board shall consist of not less than five nor more than twenty-five persons, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of the shareholders at any meeting thereof; provided, however, that a majority of the full Board may not increase the number of directors to a number which: (a) exceeds by more than two the number of directors last elected by shareholders where such number was fifteen or less; and (b) to a number which exceeds by more than four the number of directors last elected by shareholders where such number was sixteen or more, but in no event shall the number of directors exceed twenty-five. Section 2.3. ORGANIZATION MEETING. A meeting shall be held for the purpose of organizing the new Board and electing and appointing officers of the Association for the succeeding year on the day of the Annual Meeting of Shareholders or as soon thereafter as practicable, and, in any event, within thirty days thereof. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting, from time to time, until a quorum is obtained. Section 2.4. REGULAR MEETINGS. The regular meetings of the Board shall be held on such days and time as the directors may, by resolution, designate; and written notice of any change thereof shall be sent to each member. When any regular meeting of the Board falls upon a legal holiday, the meeting shall be held on such other day as the Board may designate. Section 2.5. SPECIAL MEETINGS. Special meetings of the Board may be called by the Chairman of the Board, or President, or at the request of three or more directors. Each director shall be given notice of each special meeting, except the organization meeting, at least one day before it is to be held by facsimile, telephone, telegram, letter or in person. Any director may waive any such notice. Section 2.6. QUORUM. A majority of the directors shall constitute a quorum at any meeting, except when otherwise provided by law; but a less number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned without further notice. 3 Section 2.7. TERM OF OFFICE AND VACANCY. Directors shall hold office for one year and until their successors are elected and have qualified. No person shall stand for election as a director of this Association if at the date of his election he will have passed his seventieth birthday; provided, however, this prohibition shall not apply to persons who are active officers of this Association, an affiliate bank, or its parent corporation, or a former chief executive officer of the Association. No person, who is not an officer or former officer of this Association, an affiliate bank, or its parent corporation and who has discontinued the principal position or activity the person held when initially elected, shall be recommended to the shareholders for reelection; provided, however, that exceptions may be made because of a change in principal position or activity which would be compatible with continued service to this Association. No person elected as a director may exercise any of the powers of his office until he has taken the oath of office as prescribed by law. When any vacancy occurs among the directors, the remaining members of the Board, in accordance with the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose. Section 2.8. NOMINATIONS. Nominations for election to the Board may be made by the Executive Committee or by any stockholder of any outstanding class of capital stock of the Association entitled to vote for the election of directors. Section 2.9. COMMUNICATIONS EQUIPMENT. Any or all directors may participate in a meeting of the Board by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other. Section 2.10. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board or committee thereof by law, the Association's Articles of Association, or these Bylaws may be taken without a meeting, if, prior or subsequent to the action, all members of the Board or 4 committee shall individually or collectively consent in writing to the action. Each written consent or consents shall be filed with the minutes of the proceedings of the Board or committee. Action by written consent shall have the same force and effect as a unanimous vote of the directors, for all purposes. Any certificate or other documents which relates to action so taken shall state that the action was taken by unanimous written consent of the Board or committee without a meeting. ARTICLE III COMMITTEES OF THE BOARD Section 3.1. EXECUTIVE COMMITTEE. The Board may by resolution adopted by a majority of the entire Board designate an Executive Committee consisting of the Chairman of the Board, the President, and not less than two other directors. Subject to the national banking laws and the Association's Articles of Association, the Executive Committee may exercise all the powers of the Board of Directors with respect to the affairs of the Association, except that the Executive Committee may not: 1. (a) exercise such powers while a quorum of the Board of Directors is actually convened for the conduct of business, (b) exercise any power specifically required to be exercised by at least a majority of all the directors, (c) act on matters committed by the Bylaws or resolution of the Board of Directors to another committee of the board, or (d) amend or repeal any resolution theretofore adopted by the Board of Directors which by its terms is amendable or repealable only by the Board; 2. amend the Articles of Association or make, alter or repeal any Bylaw of the 5 Association; 3. elect or appoint any director, create or fill any vacancies in the Board of Directors or remove any director, or authorize or approve any change in the compensation of any officer of the Association who is also a director of the Association; 4. authorize or approve issuance or sale or contract for sale of shares of stock of the Association, or determine the designation and relative rights, preferences and limitations of a class or series of shares; 5. adopt an agreement of merger or consolidation, or submit to shareholders any action that requires shareholder approval, including any recommendation to the shareholders concerning the sale, lease or exchange of all or substantially all the Association's property and assets, a dissolution of the Association or a revocation of a previously approved dissolution; or 6. authorize an expenditure by the Association in excess of $10 million for any one item or group of related items. The committee shall hold regular meetings at such times as the members shall agree and whenever called by the chairman of the committee. A majority of the committee shall constitute a quorum for the transaction of business. The committee shall keep a record of its proceedings and shall report these proceedings to the Board at the regular meetings thereof. The committee shall serve as the nominating committee for nominations to the Board. Section 3.2. CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Board may designate one of its members to be Chairman of the Executive Committee who shall preside at the meetings thereof and shall perform such duties as the Board shall assign to him from time to time. 6 Section 3.3. AUDIT COMMITTEE. The Board shall appoint a committee of three or more persons exclusive of the officers of this Association which committee shall be known as the Audit Committee. It shall be the duty of this committee at least once in every twelve months to examine the affairs of the Association, and determine whether it is in a sound and solvent condition and to recommend to the Board such changes in the manner of doing business, etc., as may seem to be desirable. The committee may cause such examination to be made in its behalf and under its supervision by outside accountants and may also use the services of any other persons either inside or outside the Association to assist in its work. The results of each examination shall be reported in writing to the Board. Section 3.4. AUDIT OF TRUST DEPARTMENT. The Audit Committee shall, at least once during each calendar year and within fifteen months of the last such audit make suitable audits of the Trust Department or cause suitable audits to be made by auditors responsible only to the Board, and at such time shall ascertain whether the department has been administered in accordance with law, Part 9 of the Regulations of the Comptroller of the Currency, and sound fiduciary principles. In lieu of such periodic audit the Audit Committee, at the election of the Board, may conduct or cause to be conducted by auditors responsible only to the Board an adequate continuous audit system adopted by the Board. A written report of such periodic or continuous audit shall be made to the Board. Section 3.5. OTHER COMMITTEES. The Board may appoint from time to time other committees composed of one or more persons each, for such purposes and with such powers as the Board may determine. The Chairman of the Board shall have the power to designate another person to serve on any committee during the absence or inability of any member thereof so to serve. 7 Section 3.6. DIRECTORS' EMERITUS. The Board may designate one or more persons to serve as Director Emeritus. Such Director Emeritus shall have the right to attend any and all meetings of the Board, but shall have no vote at such meetings. A person designated as Director Emeritus may serve in that capacity for a period of three years. Section 3.7. ALTERNATE COMMITTEE MEMBERS. The Board may, from time to time, appoint one or more, but no more than three persons to serve as alternate members of a committee, each of whom shall be empowered to serve on that committee in place of a regular committee member in the event of the absence or disability of that committee member. An alternate committee member shall, when serving on a committee, have all of the powers of a regular committee member. Alternate committee members shall be notified of, and requested to serve at, a particular meeting or meetings, or for particular periods of time, by or at the direction of the chairman of the committee or the Chairman of the Board. ARTICLE IV OFFICERS Section 4.1. OFFICERS. The officers of the Association may be a Chairman of the Board, a Vice Chairman of the Board, one or more Chairmen or Vice Chairmen (who shall not be required to be directors of the Association), a President, one or more Vice Presidents, a Secretary, a Cashier or Treasurer, and such other officers, including officers holding similar or equivalent titles to the above in regions, divisions or functional units of the Association, as may be appointed by the Board of Directors. The Chairman of the Board and the President shall be members of the Board of Directors. Any two or more offices may be held by one person, but no officer shall sign or execute any document in more than one capacity. 8 Section 4.2. TERM OF OFFICE. The officers who are required by the articles of association or the bylaws to be members of the Board shall hold their respective offices until the Organization meeting of the Board following the annual meeting of shareholders or until their respective successors shall have been elected, unless they shall resign, become disqualified or be removed from office. Each other officer shall hold office at the pleasure of the Board. Any officer may be removed at any time by the Board. Section 4.3. CHAIRMAN OF THE BOARD. The chairman of the board shall be designated as Chairman of the Board. He shall preside at all meetings of the stockholders and directors and he shall be a member of all committees of the Board except the Audit Committee. He shall have such other powers and perform such other duties as may be prescribed from time to time by the Board. He shall be subject only to the direction and control of the Board. Section 4.4. PRESIDENT. The president shall be the chief executive officer of the Association and he shall be designated as President and Chief Executive Officer. In the absence of the Chairman the President shall preside at all meetings of the Board. The President shall be a member of each committee of the Board except the Audit Committee. He shall have the powers and perform the duties conferred or imposed upon the President by the national banking laws, and he shall have such other powers and perform such other duties as nay from time to time be imposed upon or assigned to him by the Board. Section 4.5. CHIEF FINANCIAL OFFICER. The Chief Financial officer shall have such title as may be designated by the Board and he shall be responsible for all monies, funds and valuables of this Association, provide for the keeping of proper records of all transactions of the Association, report to the Board at each regular meeting the condition of the Association, submit to the Board, 9 when requested, a detailed statement of the income and expenses, be responsible for the conduct and efficiency of all persons employed under him, and perform such other duties as may be from time to time assigned to him by the Board. Section 4.6. OTHER OFFICERS. All other officers shall respectively exercise such powers and perform such duties as generally pertain to their several offices, or as may be conferred upon or assigned to them by the Board, the Chairman of the Board or the President. Section 4.7. BOND. Each officer and employee, if so required by the Board, shall give bond with surety to be approved by the Board, conditioning for the honest discharge of his duties as such officer or employee. In the discretion of the Board, such bonds may be individual, schedule or blanket form, and the premiums may be paid by the Association. Section 4.8. OFFICERS ACTING AS ASSISTANT SECRETARY. Notwithstanding Section 4.la of this Article IV, any Senior Vice President, Vice President or Assistant Vice President shall have, by virtue of his office, and by authority of the Bylaws, the authority from time to time to act as an Assistant Secretary of the Association, and to such extent, said officers are appointed to the office of Assistant Secretary. ARTICLE V TRUST DEPARTMENT Section 5.1. TRUST DEPARTMENT. There shall be a department of the Association known as the Trust Department which shall perform the fiduciary responsibilities of the Association. Opinions of counsel shall be retained on file in the Trust Department in connection with all important matters pertaining to fiduciary activities. 10 Section 5.2. TRUST INVESTMENT. Funds held in a fiduciary capacity shall be invested in accordance with the instrument establishing the fiduciary relationship and local law. Where such instrument does not specify the character and class of the investments to be made and does not vest in the Association a discretion in the matter, funds held pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under local law. ARTICLE VI STOCK CERTIFICATES AND TRANSFERS Section 6.1. STOCK CERTIFICATES. Ownership of capital stock of the Association shall be evidenced by certificates of stock signed by the Chairman or President, and the Secretary, or an Assistant Secretary. Each certificate shall state upon its face that the stock is transferable only upon the books of the Association by the holder thereof, or by duly authorized attorney, upon the surrender of such certificate, and shall meet the requirements of Section 5139, United States Revised Statutes, as amended. Section 6.2. TRANSFERS. The stock of this Association shall be assignable and transferable only on the books of this Association, subject to the restrictions and provisions of the national banking laws; and a transfer book shall be provided in which all assignments and transfers of stock shall be made. When stock is transferred, the certificates thereof shall be returned to the Association, canceled, preserved and new certificates issued. Section 6.3. DIVIDENDS. Dividends shall be paid to the shareholders in whose names the stock shall stand at the close of business on the day next preceding the date when the dividends are payable, provided, however, that the directors may fix another date as a record date for the determination of the shareholders entitled to receive payment thereof. 11 ARTICLE VII INCREASE OF STOCK 7.1. CAPITAL STOCK. Shares of the capital stock of the Association, which have been authorized but not issued, may be issued from time to time for such consideration, not less than the par value thereof, as may be determined by the Board. ARTICLE VIII CORPORATE SEAL Section 8.1. SEAL. The seal, an impression of which appears below, is the seal of the Association adopted by the Board of Directors: [Seal] The Chairman of the Board, the Vice Chairman, the President, Senior Executive Vice President, Executive Vice President, Senior Vice President, Vice President, each Assistant Vice President, the Chief Financial Officer, the Secretary, each Assistant Secretary, each Trust Officer, each Assistant Trust Officer or each Assistant Cashier, shall have the authority to affix the corporate seal of this Association and to attest to the same. 12 ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1. FISCAL YEAR. The fiscal year of the Association shall be the calendar year. Section 9. 2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, the Vice Chairman of the Board, any Chairman or Vice Chairman, the President, any Vice President or Assistant Vice President, the Secretary or any Assistant Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant Treasurer, or any officer holding similar or equivalent titles to the above in any regions, divisions or functional units of the Association, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Officer (or equivalent titles); provided, however, that where required, any such instrument shall be attested by one of said officers other than the officer executing such instrument. Any such instruments may also be executed, acknowledged, verified, delivered, or accepted in behalf of the Association in such other manner and by such other officers as the Board of Directors may from time to time direct. The provisions of this Section 9.2 are supplementary to any other provision of these Bylaws. Section 9.3. RECORDS. The organization papers of this Association, the articles of association, the bylaws and any amendments thereto, the proceedings of all regular and special meetings of the shareholders and of the directors, the returns of the judges of elections, and the reports of the committees of directors shall be recorded in an appropriate minute book, and the 13 minutes of each meeting shall be signed by the Secretary or any other officer appointed to act as secretary of the meeting. Section 9.4. BANKING HOURS. This Association and its branch offices shall be open on such days and during such hours as shall be fixed from time to time by the Board. Section 9.5. VOTING SHARES OF OTHER CORPORATIONS. The Chairman, any Vice Chairman, the President, or any Vice President is authorized to vote, represent and exercise on behalf of this Association all rights incident to any and all shares of stock of any other corporation standing in the name of the Association. The authority granted herein may be exercised by such officers in person or by proxy or by power of attorney duly executed by said officer. ARTICLE X BYLAWS Section 10.1. INSPECTION. A copy of the Bylaws, with all amendments thereto, shall at all times be kept in a convenient place at the Head Office of the Association, and shall be open for inspection to all shareholders, during banking hours. Section 10.2. AMENDMENTS. These Bylaws may be changed or amended at any regular or special meeting of the Board by the vote of a majority of the Directors. 14 Comptroller of the Currency Administrator of National Banks Multinational Banking Division 250 E Street, SW Washington, D.C. 20219-0001 TRUST CERTIFICATE Whereas, FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, Charter Number 23201, located in WILMINGTON, State of DELAWARE, being a National Banking Association, organized under the statutes of the United States, has made application for authority to act as fiduciary; And whereas, applicable provisions of the statutes of the United States authorize the granting of such authority; Now, therefore, I hereby certify that the said association is authorized to act in all fiduciary capacities by such statutes. In testimony whereof, witness my signature and Seal of office this fifteenth day of January 1997. - -------------------------------------------- Deputy Comptroller for Multinational Banking -----END PRIVACY-ENHANCED MESSAGE-----