SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period __________ to __________
Commission File Number: 0-24724
HEARTLAND FINANCIAL USA, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
42-1405748
(I.R.S. Employer identification number)
1398 Central Avenue, Dubuque, Iowa 52001
(Address of principal executive offices Zip Code)
319) 589-2100
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
Registrant's common stock as of the latest practicable date: As
of August 12, 1996, the Registrant had outstanding 4,709,970
shares of common stock, $1.00 par value per share.
<PAGE>
HEARTLAND FINANCIAL USA, INC.
Form 10-Q Quarterly Report
Table of Contents
Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Form 10-Q Signature Page
<PAGE>
HEARTLAND FINANCIAL USA, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
6/30/96 12/31/95
------- --------
<S> <C> <C>
ASSETS
Cash and due from banks $ 23,791 $ 31,305
Federal funds sold 32,800 23,500
--------- ---------
Cash and cash equivalents 56,591 54,805
Time deposits in other
financial institutions 151 145
Securities:
Available for sale-at market
(cost of $166,902 for 1996
and $141,680 for 1995) 166,678 145,857
Held to maturity-at cost (approximate
market value of $1,950 for 1996 and
$2,503 for 1995) 1,870 2,369
Loans and leases:
Held for sale 1,128 790
Held to maturity 460,570 454,115
Allowance for possible loan and
lease losses (6,089) (5,580)
--------- ---------
Loans and leases, net 455,609 449,325
Premises, furniture and equipment, net 13,284 12,519
Other real estate, net 527 640
Other assets 15,374 11,653
--------- ---------
TOTAL ASSETS $710,084 $677,313
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 43,278 $ 49,283
Savings 230,121 210,853
Time 279,143 274,451
--------- ---------
Total deposits 552,542 534,587
Short-term borrowings 44,307 23,241
Accrued expenses and other liabilities 7,485 9,579
Other borrowings 40,400 45,400
--------- ---------
TOTAL LIABILITIES 644,734 612,807
-------- --------
STOCKHOLDERS' EQUITY:
Common stock (par value $1 per share;
authorized, 7,000,000 shares;
issued, 4,853,626 and 2,426,813
shares at June 30, 1996, and
December 31, 1995, respectively) 4,854 2,427
Capital surplus 13,123 13,090
Retained earnings 49,948 49,171
Net unrealized gain (loss) on
securities available for sale (141) 2,620
Treasury stock at cost
(140,060 and 166,652 shares
at June 30, 1996, and
December 31, 1995, respectively) (2,434) (2,802)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 65,350 64,506
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $710,084 $677,313
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees
on loans and leases $ 10,048 $ 9,771 $ 19,934 $ 18,772
Interest on investment
securities:
Taxable 2,260 2,047 4,348 4,071
Nontaxable 334 473 689 950
Interest on trading
account securities 0 0 0 10
Interest on federal
funds sold 199 92 412 123
Interest on interest-
bearing deposits in
other financial
institutions 36 33 111 43
-------- -------- -------- --------
TOTAL INTEREST INCOME 12,877 12,416 25,494 23,969
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on deposits 5,765 5,532 11,482 10,613
Interest on short-
term borrowings 494 308 910 654
Interest on other
borrowings 597 588 1,271 942
-------- -------- -------- --------
TOTAL INTEREST EXPENSE 6,856 6,428 13,663 12,209
-------- -------- -------- --------
NET INTEREST INCOME 6,021 5,988 11,831 11,760
Provision for possible
loan and lease losses 228 217 975 435
-------- -------- -------- --------
NET INTEREST INCOME
AFTER PROVISION FOR
POSSIBLE LOAN AND
LEASE LOSSES 5,793 5,771 10,856 11,325
-------- -------- -------- --------
OTHER INCOME:
Service charges 588 508 1,154 997
Trust fees 465 383 895 768
Brokerage commissions 59 34 94 71
Insurance commissions 165 180 319 339
Investment securities
gains, net 76 8 1,398 84
Gain on sale of loans 16 9 44 14
Other 111 38 222 113
-------- -------- -------- --------
TOTAL OTHER INCOME 1,480 1,160 4,126 2,386
-------- -------- -------- --------
OTHER EXPENSES:
Salaries and employee
benefits 2,762 2,470 5,556 5,004
Occupancy 297 226 580 498
Equipment 335 351 652 697
Outside services 319 349 574 600
FDIC assessment 52 288 102 575
Advertising 206 165 556 339
Other operating expense 720 672 1,416 1,301
-------- -------- -------- --------
TOTAL OTHER EXPENSES 4,691 4,521 9,436 9,014
-------- -------- -------- --------
INCOME BEFORE TAXES 2,582 2,410 5,546 4,697
Income taxes 712 691 1,398 1,288
-------- -------- -------- --------
NET INCOME $ 1,870 $ 1,719 $ 4,148 $ 3,409
======== ======== ======== ========
NET INCOME AVAILABLE
FOR COMMON STOCK $ 1,870 $ 1,719 $ 4,148 $ 3,409
======== ======== ======== ========
NET INCOME PER
COMMON SHARE $ .40 $ .36 $ .88 $ .71
DIVIDENDS DECLARED
PER COMMON SHARE $ .10 $ .08 $ .20 $ .15
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,718,887 4,824,100 4,713,667 4,832,146
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HEARTLAND FINANCIAL USA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
6/30/96 6/30/95
------- -------
<S> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 4,272 $ 7,340
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of time deposits (6) -
Proceeds from the sale of investment
securities available for sale 5,987 25,979
Proceeds from the sale of mortgage-
backed securities available for sale - 8,352
Proceeds from the maturity of and
principal paydowns on investment
securities held to maturity 498 5,651
Proceeds from the maturity of and
principal paydowns on investment
securities available for sale 23,203 13,397
Proceeds from the maturity of and
principal paydowns on mortgage-
backed securities held to maturity - 389
Proceeds from the maturity of and
principal paydowns on mortgage-
backed securities available for sale 6,254 3,050
Purchase of investment securities
available for sale (32,766) (35,689)
Purchase of mortgage-backed
securities available for sale (26,156) 0
Purchase of interest in low-income
housing project (2,865) (2,892)
Net increase in loans and leases (8,760) (33,008)
Capital expenditures (1,552) (354)
Proceeds on sale of fixed assets 2 51
Proceeds on sale of repossessed assets 197 110
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (35,964) (14,964)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand
deposits and savings accounts 13,263 (11,977)
Net increase in time deposit accounts 4,692 5,596
Net increase in other borrowings - 19,838
Net increase (decrease) in
short-term borrowings 16,066 (7,636)
Purchase of treasury stock (330) (567)
Proceeds from sale of treasury stock 731 233
Dividends (944) (1,646)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 33,478 3,841
--------- ---------
Net increase (decrease) in cash
and cash equivalents 1,786 (3,783)
Cash and cash equivalents at
beginning of year 54,805 35,656
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 56,591 $ 31,873
========= =========
Supplemental disclosures:
Cash paid for income/franchise taxes $ 1,723 $ 513
Cash paid for interest $ 13,758 $ 11,882
Investment securities transferred
from available for sale to public
charitable trust $ 220 $ -
Other borrowings transferred to
short-term borrowings $ 5,000 $ -
See accompanying notes to consolidated financial statements.
<PAGE>
HEARTLAND FINANCIAL USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1: BASIS OF PRESENTATION
The interim unaudited consolidated financial statements contained
herein should be read in conjunction with the audited
consolidated financial statements and accompanying notes to the
financial statements for the fiscal year ended December 31, 1995,
included in the Company's Form 10-K filed with the Securities and
Exchange Commission on March 29, 1996. Accordingly, footnote
disclosure which would substantially duplicate the disclosure
contained in the audited consolidated financial statements has
been omitted.
The financial information of Heartland Financial USA, Inc. (the
"Company") included herein is prepared pursuant to the rules and
regulations for reporting on Form 10-Q. Such information
reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary
for a fair presentation of results for the interim periods. The
results of the interim period ended June 30, 1996, are not
necessarily indicative of the results expected for the year
ending December 31, 1996.
On March 4, 1996, the Company's Board of Directors declared a two-
for-one stock split in the form of a 100% stock dividend to
stockholders of record on March 14, 1996, payable on March 29,
1996. Accordingly, all per share data have been restated to
reflect the stock split.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's results of operations depend primarily on net
interest income, which is the difference between interest income
from interest earning assets and interest expense on interest
bearing liabilities. Noninterest income, which includes service
charges, fees and gains on loans and trust income, also affects
the Company's results of operations. The Company's principal
operating expenses, aside from interest expense, consist of
compensation and employee benefits, occupancy and equipment costs
and provision for loan and lease losses.
Net income totaled $1,870,000 or $.40 per common share for the
quarter ended June 30, 1996, an increase of $151,000 (8.78%) from
the June 30, 1995, total of $1,719,000 or $.36 per common share.
Income for the six months ended June 30, 1996, was $4,148,000 or
$.88 per common share as compared to $3,409,000 or $.71 for the
same period in 1995. Net income recorded during the first quarter
of 1996 included a gain of $1,174,000 on the sale of stock held
in the investment portfolio at First Community Bank, FSB ("FCB"),
one of the Company's bank subsidiaries. This gain impacted per
common share earnings by $.16 for the six month period ended June
30, 1996. The writedown of a $469,000 loan at FCB was also
recorded during the first quarter of 1996 and impacted per common
share earnings by $.10 for the six month period ended June 30,
1996.
Net Interest Income
Net interest income remained stable at $6,021,000 and $5,988,000
for the three month periods ended June 30, 1996 and 1995,
respectively. Net interest income increased slightly to
$11,831,000 for the six month period ended June 30, 1996, and
$11,760,000 for the same period in 1995. Net interest income to
average earning assets on a fully tax equivalent basis was 3.92%
for the three month and 3.89% for the six month periods ended
June 30, 1996, as compared to 4.21% for the three month and 4.24%
for the six month periods ended June 30, 1995. This reduction
was primarily attributable to a shift from higher yielding loans
to lower yielding securities as a result of decreased loan
demand.
<PAGE>
Noninterest Income
Noninterest income was $1,480,000 for the three months ended June
30, 1996, and $1,160,000 for the same period in 1995, an increase
of $320,000 (27.59%). Total noninterest income for the six
months ended June 30, 1996, was $4,126,000 compared to $2,386,000
for the same period ended June 30, 1995, a 72.93% increase. The
largest component of this $1,740,000 increase was the $1,314,000
change in investment security gains from $84,000 during the first
six months of 1995 to $1,398,000 during the same period in 1996.
Of these gains, $1,174,000 resulted from the sale of Federal Home
Loan Mortgage Corporation Common Stock held in the investment
portfolio at FCB. As interest rates declined during 1994, this
stock experienced substantial appreciation and, in anticipation
of rising interest rates in 1996, management decided to sell the
stock to reduce the interest rate risk within the investment
portfolio.
Service charges increased $80,000 (15.75%) from $508,000 for the
three month period ended June 30, 1995, to $588,000 for the same
period in 1996. Service charges totaled $1,154,000 and $997,000
for the six month periods ended June 30, 1996 and June 30, 1995,
respectively, an increase of $157,000 (15.75%). The addition of
new merchants in the credit card processing area was primarily
responsible for these increases.
Trust fees totaled $465,000 and $383,000 for the three months
ended June 30, 1996 and June 30, 1995, respectively, an increase
of $82,000 (21.41%). Trust fees increased $127,000 (16.54%) for
the six months ended June 30, 1996, compared to the same period
in 1995. These increases were primarily attributable to growth
in assets under management due to investment performance and the
development of new trust relationships through continued
marketing efforts. Total trust assets under management grew
$76,696,000 (26.50%) from $289,391,000 at December 31, 1995, to
$366,087,000 at June 30, 1996. Trust assets under management as
of June 30, 1996, included temporary investments of $15,000,000.
Brokerage commissions grew $25,000 (73.53%) for the three month
and $23,000 (32.39%) for the six month periods ended June 30,
1996 when compared to the same periods in 1995. These increases
reflect personnel changes in the brokerage area. For the three
month period ended June 30, 1996 and 1995, brokerage commissions
totaled $59,000 and $34,000, respectively. For the six month
period ended June 30, 1996, brokerage commissions were $94,000
compared to $71,000 for the same period in 1995.
During the three month period ended June 30, 1996, insurance
commissions decreased $15,000 (8.33%) to $165,000 as compared to
$180,000 for the same period in 1995. For the six month periods
ending June 30, 1996 and 1995, insurance commissions decreased
$20,000 (5.90%) from $339,000 to $319,000.
Gains on sales of loans totaled $16,000 and $9,000 for the three
month periods ended June 30, 1996 and 1995, respectively, an
increase of $7,000 (77.78%). Gains on sales of loans increased
$30,000 (214.29%) from $14,000 for the six months ended June 30,
1995, to $44,000 for the same period ended June 30, 1996. These
increases were due to consumers' renewed interest in fixed rate
fifteen- and thirty-year real estate loans which the Company
sells into the secondary market while retaining servicing of the
loans.
Other income increased $73,000 (192.11%) from $38,000 for the
three month period ended June 30, 1995, to $111,000 for the same
period in 1996. For the six month periods ended June 30, 1996
and 1995, other income was $222,000 and $113,000, respectively,
an increase of $109,000 (96.46%). The majority of these increases
in other income were attributable to increases in the cash
surrender value of life insurance policies on officers of the
Company.
Noninterest Expense
Noninterest expense increased from $4,521,000 for the three
months ended June 30, 1995, to $4,691,000 for the same period in
1996, an increase of $170,000 (3.76%). For the six month period
ended June 30, 1996, noninterest expense was $9,436,000 compared
to $9,014,000 for the same period in 1995, an increase of
$422,000 (4.68%). Salaries and employee benefits, the largest
component of noninterest expense, increased $292,000 (11.82%) for
the three month and $552,000 (11.03%) for the six month periods
under comparison. These increases were primarily the result of
the opening of the Company's de novo bank operation, Riverside
Community Bank ("RCB"), in Rockford, Illinois.
Occupancy expense increased $71,000 (31.42%) from $226,000 during
the three month period ended June 30, 1995 to $297,000 for the
same period in 1996. For the six month period ended June 30,
1996, occupancy expense was $580,000 compared to $498,000 for the
same period in 1995, an increase of $82,000 (16.47%). The
majority of these increases resulted from the rental of temporary
facilities for RCB. Furniture and equipment expense decreased
$16,000 (4.56%) and $45,000 (6.46%) for the three and six month
periods, respectively, ending June 30, 1996 when compared to the
same periods in 1995.
Fees paid for outside services also decreased slightly during the
three and six month periods ended on June 30, 1996 as compared
with the same periods in 1995 at $30,000 (8.60%) and $26,000
(4.33%), respectively.
FDIC insurance premium expense decreased $236,000 (81.94%) to
$52,000 for the three month period ended June 30, 1996, compared
to $288,000 for the same period in 1995. For the six month
period ended June 30, 1996, FDIC insurance premium expense
decreased $473,000 (82.26%) to $102,000 from $575,000 for the
same period in 1995. These decreases were the result of a change
in the premium on deposits charged to members of the Bank
Insurance Fund from .23% to .04% of deposits and subsequently to
$2,000 per year for well-capitalized banks. Three of the
Company's four banks were affected by this reduction. FCB, a
federal savings bank, is a member of the Savings Association
Insurance Fund which did not have a reduction in the premium on
deposits.
For the three month period ended June 30, 1996, advertising and
public relations expense increased $41,000 (24.85%) from $165,000
in 1995 to $206,000 in 1996. This increase was the result of
marketing efforts in Rockford, Illinois to promote the opening of
RCB. Advertising and public relations expense experienced the
largest single percentage increase within the noninterest expense
category during the six month period ended June 30, 1996, rising
$217,000 (64.01%) to $556,000 from $339,000. The primary
component of this increase was the contribution of stock from
FCB's investment portfolio to a public charitable trust at a cost
basis of $220,000 with an associated market value of $820,000.
Other operating expenses increased $48,000 (7.14%) from $672,000
for the three month period ended June 30, 1995, to $720,000 for
the same period in 1996. For the six month periods ended June
30, 1996 and 1995, other operating expenses were $1,416,000 and
$1,301,000, respectively, an increase of $115,000 (8.84%). These
increases were attributable to expenses incurred due to growth
within the merchant credit card processing area and the opening
of RCB.
Income Tax Expense
Income tax expense for the first six months of 1996 increased
8.54% over the same period in 1995, primarily as a result of
corresponding increases in pre-tax earnings. The Company's
effective tax rate declined from 27.42% for the six month period
ended June 30, 1995, to 25.21% for same period in 1996. This
change was the result of additional tax credits associated with
the investment in low-income housing projects and the previously
discussed contribution of appreciated property to a public
charitable trust.
FINANCIAL CONDITION
Loans and Provision for Loan and Lease Losses
Net loans and leases remained stable at $455,609,000 at June 30,
1996, when compared to the December 31, 1995, total of
$449,325,000. Commercial loans experienced modest growth of
$2,910,000 (1.52%) during the first six months of 1996, with
outstanding loans of $191,866,000 at December 31, 1995,
increasing to $194,776,000 at June 30, 1996. Real estate loans
were $159,357,000 at June 30, 1996, a slight increase of
$1,033,000 (.65%) over the December 31, 1995, balance of
$158,324,000. Agricultural loans remained relatively constant at
$58,970,000 at June 30, 1996, as compared to the December 31,
1995 increasing balance of $59,089,000. Consumer loans
experienced the most significant growth of $4,194,000 (10.76%)
with outstanding loans increasing to $43,182,000 at June 30,
1996, from $38,988,000 at December 31, 1995. Due to reduced
demand for lease financing during the first six months and to
scheduled paydowns, the Company's lease financing balances
declined $1,134,000 (13.29%) to a total of $7,396,000 at June 30,
1996.
The adequacy of the allowance for loan and lease losses is
determined by management using factors that include the overall
composition of the loan portfolio, types of loans, past loss
experience, loan delinquencies, and potential losses on
substandard and doubtful credits. The adequacy of the allowance
for loan and lease losses is monitored by the loan review staff,
senior management and the Board of Directors. The maintenance of
the allowance for loan and lease losses at an amount in excess of
four and one-half times nonperforming loans and leases is due to
a number of factors including the following: i) the economies of
the Company's primary market areas have been stable since 1989
and the growth of the allowance is intended to anticipate the
cyclical nature of most economies; ii) an increase in the amount
of nonperforming loans; and iii) an increase in the amount of
charge-offs for the first time since 1992.
The Company's provision for loan and lease losses was $228,000
for the three months ended June 30, 1996, compared to $217,000
for the same period in 1995, an increase of $11,000 (5.07%).
For the six months ended June 30, 1996, the provision for loan
and lease losses was $975,000 compared to $435,000 for the same
period in 1995, an increase of $540,000 (124.14%). Net charge-
offs were $466,000 and $108,000 during the first six months of
1996 and 1995, respectively. Included in the first six months of
1996 chargeoffs was the $469,000 writedown on a loan at FCB. The
allowance for loan and lease losses as a percentage of total
loans was 1.32% as of June 30, 1996, 1.23% as of December 31,
1995, and 1.20% as of June 30, 1995.
Nonperforming loans, defined as nonaccrual loans and loans past
due ninety days or more, increased from $1,203,000 at December
31, 1995, to $1,350,000 at June 30, 1996, an increase of $147,000
(12.22%).
Other real estate owned totaled $527,000 at June 30, 1996, a
decrease of $113,000 (17.66%), from the December 31, 1995, total
of $640,000.
Securities
The dual objectives of the investment portfolio are to provide
the Company with sources of both liquidity and earnings.
Investment securities represented $168,548,000 or 23.74% of total
assets at June 30, 1996, as compared to $148,226,000 or 21.88% at
December 31, 1995. This $20,322,000 (13.71%) change resulted
from the decreased demand for loans.
The available for sale securities portfolio of $145,857,000 at
December 31, 1995, increased $20,821,000 (14.27%) to $166,678,000
at June 30, 1996. Specifically, U.S. treasury and agency
securities increased $8,980,000 (15.22%) to $67,986,000 at June
30, 1996, from the December 31, 1995, total of $59,006,000.
Mortgage-backed securities increased $19,085,000 (48.37%) to
$58,538,000 at June 30, 1996 from $39,453,000 at December 31,
1995. Municipal obligation securities decreased $2,134,000
(10.45%) to $18,279,000 at June 30, 1996, due to maturities and
scheduled calls. Other securities totaled $14,610,000 at June
30, 1996, a decrease of $5,251,000 (26.44%), from the December
31, 1995, total of $19,861,000 and included equity securities,
corporate bonds and bankers acceptances.
Amortized cost of securities held to maturity was $1,870,000 at
June 30, 1996, a decrease of $499,000 (21.06%) from the December
31, 1995, total of $2,369,000. This decrease was due to
scheduled maturities and calls.
Deposits and Borrowed Funds
Total deposits were $552,542,000 at June 30, 1996, an increase of
$17,955,000 (3.36%) from the December 31, 1995, total of
$534,587,000. Demand deposits experienced a decrease of
$6,005,000 (12.18%), ending the period at $43,278,000. Much of
this reduction was due to normal seasonal fluctuations in demand
deposit accounts. Savings accounts increased $19,268,000 (9.14%)
to $230,121,000 at June 30, 1996. The majority of this increase
was related to isolated accounts. Certificates of deposit were
$279,143,000 at June 30, 1996, reflecting a modest $4,692,000
(1.71%) increase over the December 31, 1995, total of
$274,451,000.
Short-term borrowings generally include federal funds purchased,
securities sold under agreement to repurchase and short-term
Federal Home Loan Bank ("FHLB") advances. These funding
alternatives are utilized in varying degrees depending on their
pricing and availability. As of June 30, 1996, the balance in
this account had increased to $44,307,000 from the December 31,
1995, total of $23,241,000. This $21,066,000 (90.64%) increase
was primarily attributable to growth in securities sold under
agreement to repurchase and the transfer of $5,000,000 in FHLB
borrowings from other borrowings to short-term borrowings due to
approaching maturities.
Other borrowings includes the Company's long-term FHLB funding
which decreased to $40,400,000 at June 30, 1996, from the
December 31, 1995, total of $45,400,000 due to the transfer of
$5,000,000 to short-term borrowings. Total long-term FHLB
advances had a melded remaining term of 3.53 years at an average
rate of 5.85% as of June 30, 1996.
Capital Resources
Bank regulatory bodies have adopted capital standards by which
all bank holding companies will be evaluated. Under the risk-
based method of measurement, the resulting ratio is dependent
upon not only the level of capital and assets, but the
composition of assets and capital and the amount of off-balance
sheet commitments. The Company's capital ratios were as follows
for the dates indicated:
</TABLE>
<TABLE>
CAPITAL RATIOS
(Dollars in thousands)
<CAPTION>
June 30, 1996 December 31, 1995
Amount Ratio Amount Ratio
Risk-Based Capital Ratios:(1)
<S> <C> <C> <C> <C>
Tier 1 capital $ 64,499 13.41% $ 60,780 13.28%
Tier 1 capital minimum
requirement 19,243 4.00% 18,302 9.00%
Excess $ 45,256 9.41 42,478 9.28%
Total capital $ 70,312 14.62% $ 66,165 4.46%
Total capital minimum
requirement 38,487 8.00% 36,603 8.00%
Excess $ 31,825 6.62% $ 29,562 6.46%
Total risk adjusted assets $481,085 $457,539
Leverage Capital Ratios:(2)
Tier 1 capital $ 64,499 9.38% $ 60,780 9.47%
Tier 1 capital minimum
requirement(3) $ 34,379 5.00% $ 32,083 5.00%
Excess $ 30,120 4.38% $ 28,697 4.47%
Average adjusted assets
(less goodwill) $687,580 $641,650
</TABLE>
(1)Based on the risk-based capital guidelines of the Federal
Reserve, a bank holding company is required to maintain a
Tier 1 capital to risk-adjusted assets ratio of 4.00% and
total capital to risk-adjusted assets ratio of 8.00%.
(2)The leverage ratio is defined as the ratio of Tier 1 capital
to average adjusted assets.
(3)Management of the Company has established a minimum target
leverage ratio of 5.00%. Based on Federal Reserve
guidelines, a bank holding company generally is required to
maintain a leverage ratio of 3.00% plus an additional cushion
of at least 100 to 200 basis points.
Commitments for capital expenditures are an important factor in
evaluating capital adequacy. Construction of the $1,800,000
permanent facility for RCB is near completion. Bank staff will
begin occupying the facility in August and grand opening
celebrations are scheduled during September.
An $800,000 branch facility is nearing completion on Keokuk's
northwest side in direct response to potential growth
opportunities. FCB is scheduled to occupy this facility in late
August.
Construction of a $2,200,000 bank facility in Galena, Illinois
began during the third quarter of 1995 with anticipated
completion by the end of this year. This project will allow
Galena State Bank and Trust Company to consolidate operations
into one bank building and provide better accessibility and
parking for bank customers.
Heartland entered into a license and service agreement for the
installation of Fiserv's Comprehensive Banking Systems software
with an approximate project cost of $730,000. Conversion is
scheduled for the fall of 1996 and spring of 1997 and will
provide Heartland the technology to remain competitive.
Heartland continues to explore opportunities to expand its
umbrella of independent community banks through mergers and
acquisitions as well as de novo and branching opportunities.
Future expenditures relating to these efforts are not estimable
at this time.
Liquidity
Liquidity measures the ability of the Company to meet maturing
obligations and its existing commitments, to withstand
fluctuations in deposit levels, to fund its operations and to
provide for customers' credit needs. The liquidity of the
Company principally depends on cash flows from operating
activities, investment in and maturity of assets, changes in
balances of deposits and borrowings and its ability to borrow
funds in the money or capital markets.
Net cash outflows from investing activities were $35,964,000 and
$14,964,000 during the first six months of 1996 and 1995,
respectively. Net principal disbursed on loans totaled
$8,760,000 during the first quarter of 1996 compared to
$33,008,000 for the same period in 1995. Proceeds from the
maturity and paydowns on securities totaled $29,955,000 and
$22,487,000 for the six month periods ended June 30, 1996 and
1995, respectively. Cash provided from the sales of securities
decreased from $34,331,000 for the first six months of 1995 to
$5,987,000 for the same period in 1996. Cash used for the
purchases of securities was $58,922,000 for the first six months
of 1996 compared to $35,689,000 for the same period in 1995.
Additional purchases of interests in low-income housing projects
totaled $2,865,000 during the first six months of 1996 compared
to $2,892,000 during the first six months of 1995.
Cash inflows from financing activities increased from $3,841,000
for the six month period ended June 30, 1995, to $33,478,000 for
the same period in 1996. The net change in demand deposits and
savings accounts used cash of $11,977,000 during the first six
months of 1995 and provided cash of $13,263,000 during the same
period in 1996. For the six month period ended June 30, 1996, cash
provided by a net increase in time deposit accounts was $4,692,000
compared with $5,596,000 for the same period in 1995. Short-term
borrowings experienced a net decrease of $7,636,000 during the six
month period ended June 30, 1995, compared to a net increase of
$16,066,000 during the same six month period in 1996. Other
borrowings experienced a net increase of $19,838,000 during the
first six months of 1995 and no change during the same period in
1996.
In the event of short term liquidity needs, the Company may
purchase federal funds from correspondent banks. The Company may
also borrow funds from the Federal Reserve Bank of Chicago, but
has not done so during the period covered in this report. The
Company sells securities under agreements to repurchase. These
agreements, which are principally to local businesses, have been
utilized by Dubuque Bank and Trust Company as a funding mechanism
for several years. Finally, the Company's subsidiary banks'
memberships in the FHLB System has given them the ability to
borrow funds from the FHLB of Des Moines and Chicago for short-
and long-term purposes.
Total cash inflows from operating activities exceeded outflows
during the first six months of 1996 by $4,272,000 and $7,340,000
during the first six months of 1995. Management of investing and
financing activities, and market conditions, determine the level
and the stability of net interest cash flows. Management
attempts to mitigate the impact of changes in market interest
rates to the extent possible, so that balance sheet growth is the
principal determinant of growth in net interest cash flows.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company or its subsidiaries is a party other than ordinary
routine litigation incidental to their respective businesses.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on April
22, 1996. At the meeting, Lynn S. Fuller and Evangeline K.
Jansen were elected to serve as Class III directors (term expires
in 1999). Continuing as Class I directors (term expires in 1997)
are Lynn B. Fuller and Gregory R. Miller. Continuing as Class II
directors (term expires in 1998) are Mark C. Falb, James A.
Schmid and Robert Woodward. The stockholders approved an
amendment to the Heartland Financial USA, Inc. 1993 Stock Option
Plan to authorize the allocation of an additional 200,000 shares
of the Company's common stock for distribution under the plan.
Also approved by the stockholders was the adoption of the
Heartland Financial USA, Inc. Employee Stock Purchase Plan and
the appointment of KPMG Peat Marwick LLP as the Company's
independent public auditors for the year ending December 31,
1996.
There were 4,719,152 issued and outstanding shares of Common
Stock at the time of the annual meeting. The voting on the above
described items were as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
Election of Directors
<S> <C> <C>
Lynn S. Fuller 4,123,998 41,704
Evangeline K. Jansen 4,121,850 43,852
</TABLE>
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes Total
<S> <C> <C> <C> <C> <C>
Amendment of
Stock Option
Plan 3,868,622 93,664 1,160 202,256 4,165,702
Adoption of
Employee Stock
Purchase Plan 3,873,052 89,610 784 202,256 4,165,702
Appointment of
KPMG Peat
Marwick LLP 4,150,488 2,400 12,814 0 4,165,702
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
10.38 Contract for Purchase between Galena State Bank and
Trust Company as "Seller" and Charles Schnepf and
Daniel O'Keefe as "Buyers" dated December 4, 1995.
10.39 Purchase Agreement between Galena State Bank and Trust
Company as "Seller" and Hoskins Lumber Company as
"Buyer" dated September 12, 1995.
10.40 Employment Agreement between Heartland Financial USA,
Inc. and James E. Lukas dated April 1, 1996.
10.41 Purchase Agreement between Hoskins Lumber Company as
"Seller" and Galena State Bank and Trust Company as
"Buyer" dated May 17, 1996.
10.42 Exchange Agreement/Exchange Escrow No. 960265 between
Galena State Bank and Trust Company as "Exchangor" and
Attorneys' Title Guaranty Fund, Inc. as "Qualified
Intermediary" dated May 17, 1996.
10.43 License and Service Agreement, Software License
Agreement, and Professional Services Agreement between
Fiserv and Heartland Financial USA, Inc. dated June 21,
1996.
27.1 Financial Data Schedule
Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned there unto duly authorized.
HEARTLAND FINANCIAL USA, INC.
(Registrant)
By: /s/ Lynn B. Fuller
-----------------------
Lynn B. Fuller
By: /s/ John K. Schmidt
-----------------------
John K. Schmidt
Dated: August 14, 1996
CONTRACT FOR PURCHASE
1. TO: GALENA STATE BANK AND TRUST CO., an I1linois Banking
Corp. of 216 S. Commerce St., Galena, IL 61036, hereinafter
referred to as "Seller".
2. CHARLES SCHNEPF and DANIEL O'KEEFE of 125 South Main
Street, Galena,Illinois 61036, hereinafter referred to as
"Buyers", offers to purchase the following described real estate
situated in the City of Galena, Jo Daviess County, Illinois,
commonly known as 400 South Main Street, Galena, Illinois, and
further described as follows:
Lots Numbered Five (5), Six (6), the North Twenty-two (22) feet
of Lot Number Nine (9) and the North Fourteen and Seven-twelfths
(14 7/12) feet of the South Twenty-four and Six-Twelfths (24
6/12) feet of Lot Number Eight (8) all in Block B on the West
side of the Galena River, in the City of Galena, Jo Daviess
County, Illinois. ALSO, the South Twenty-seven (27) feet of Lot
Number Nine (9) in Block B extending from Water Street to the
rear of said Lot Nine (9) and the North Twenty-four and Six-
Twelfths (24 6/12) feet of Lot Number Eight in Block B extending
from Water Street to the rear of said Lot Eight (8) and on the
West side of the Galena River, in the City of Galena, situated in
the County of Jo Daviess, in the State of Illinois. EXCEPT that
part of Lot 5 in Block B on the West side of the Galena River, in
the City of Galena, Jo Daviess County, Illinois, bounded by a
line described as follows: Commencing at the Northwest corner of
said Block B; thence South 12 degrees 07 minutes 05 seconds West
35.77' along the West line of said Block B to the point of
beginning, thence South 76 degrees 25 minutes 28 seconds East
58.52' along the North line of a four story brick building,
thence South 12 degrees 04 minutes 58 seconds West 20.21' along
the East line of a four story brick building, thence South 12
degrees 35 minutes 45 seconds West 25.95' along the East line of
a four story brick building to a point on the South line of said
Lot 5; thence North 76 degrees 38 minutes 48 seconds West 58.32'
along the South line of said Lot 5 to the Southwest corner of
said Lot 5; thence North 12 degrees 07 minutes 05 seconds East
46.40' along the West line of said Lot 5 to the point of
beginning. Subject to easement recorded in the Jo Daviess
County, Illinois Recorder's Office as Document No. 234205.
3. And to pay you for the premises the sum of $262,275.00, in
the manner following: $10,000.00 upon the signing of this
Contract the same to be refunded to Buyer if this offer is not
accepted. The earnest money deposit of $10,000.00 shall be held
in an interest bearing amount with interest credited to Buyers at
closing. The balance of $252,275.00 shall be paid in cash at the
time of closing coincident with the delivery of Deed. The
closing shall be conducted by a representative of Attorneys'
Title Guaranty Fund, Inc., through an Escrow Exchange Agreement
No.96026S, at the office of Vincent & Roth, P.C., 122 1/2 N. Main
Street, Galena, Illinois 61036.
4. THIS CONTRACT IS CONTINGENT UPON THE ABILITY OF SELLERS TO
QUALIFY THIS TRANSACTION AS AN EXCHANGE PURSUANT TO IRS RULES AND
REGULATIONS.
THIS CONTRACT IS ALSO CONTINGENT UPON THE ABILITY OF BUYER TO
RECEIVE FROM SELLERS WITHIN ONE MONTH OF THE ACCEPTANCE OF THE
CONTRACT, THE FOLLOWING:
1) List of personal property located on the premises to
be transferred to Buyer;
2) Evidence that the premises are presently zoned general
business.
3) Inspection of premises within seven days by Buyers.
5. IF ANY CONTINGENCY IN PARAGRAPH 4 CANNOT BE CARRIED OUT, THIS
CONTRACT SHALL BECOME VOID AND BUYER AND SELLER SHALL SIGN AN
AGREEMENT TERMINATING THE CONTRACT FOR PURCHASE AND RELEASING THE
EARNEST MONEY DEPOSIT TO BUYER.
6. Seller agrees to pay a real estate commission in the amount
of $6,725.00.
7. The time of closing shall be on or before June 15, 1996, and
Seller shall deliver possession at time of closing, and all
documents relative to the transaction shall be signed and
delivered.
8. Parties agree that Seller shall lease the improvements on the
premises being conveyed herein until its new bank building is
constructed and ready for possession or until January 1, 1997,
whichever shall first occur. During said time, Seller shall pay
all utility costs involved in operating this bank facility on
said premises, pay all real estate taxes assessed against said
premises, pay for the cost of building insurance in the minimum
amount of $260,000.00 and liability insurance insuring the
interests of both Seller and Buyers and pay all repair costs to
the premises. Seller shall also pay rent for said period of time
based upon a formula yielding 8.00% of the net purchase price of
the premises, computed on a 365 day basis. (Example:
$262,275.00 less commission of $6,725.00 = $255,550 x 8% =
$20,444/365 - $56.0ll per day)
9. Seller warrant that it sells all fixtures attached to the
premises and that there are no rented fixtures or equipment.
10. Buyers agree that the real estate being conveyed herein may
not be used as a bank building, a savings & loan office or a
financial institution that would compete with Galena State Bank &
Trust Co., until after June 1, 2006.
11. Except as otherwise stated in this Contract, Seller warrants
that all mechanical equipment, heating and air conditioning
equipment, water softener, water heater, plumbing and electrical
systems are in normal operating condition as of date of
possession.
12. All prorations, including rents, general taxes, utilities and
fuel oil shall be made as of closing with tax prorations based
upon latest available information. Tax prorations shall be made
on a 365 day basis if the tax proration used at closing differs
from the tax proration using the actual tax bill by more than
$25.00, the parties agree to adjust the difference when the tax
bill is issued.
13. Risk of loss from all causes except fault of Buyer shall
remain upon Seller until transfer of title or possession. Seller
shall keep improvements on the premises insured to their full
insurable value with respect at least to those hazards covered by
the usual fire and extended coverage insurance. If, while risk of
loss remains on Seller, the property is damaged, except through
fault of Buyer, in an amount less than 25% of the purchase price,
Seller shall restore the same forthwith and the parties shall
remain bound to perform this Contract. In all other respects the
Illinois Uniform Vendor and Purchaser Risk Act applies. Damage
in an amount equal to 25% or more of the purchase price is
"material". (If damage is material the Act entitles the Buyer to
recover any portion of the purchase price paid.)
14. Conveyance of the property shall be by stamped Corporate
Warranty Deed releasing homestead, or such other appropriate deed
as may be required by this Contract. Said conveyance shall be
subject only to the following: All taxes and special assessments
levied or confirmed after the date of closing; building and
building line, use and occupancy restrictions, conditions and
covenants of record, provided the same are not violated by the
existing improvements or the present use thereof and do not
contain a reverter or right of re-entry; zoning laws and
ordinances of which there are no violations; easements for the
use of public utilities, if any, roads and highways, drainage
ditches, feeders and laterals, if any, existing leases and
tenancies and any mortgage or agreement for deed to be assumed
pursuant to this Contract.
15. Seller shall, at seller's expense, before closing, furnish a
current title insurance commitment in the amount of the purchase
price, and a final policy thereafter or mutually acceptable
evidence of title. Liens or encumbrances with a total balance
due of an amount not more than the balance due at the time of
closing under this Contract shall not constitute material defects
if said liens or encumbrances are paid and released at the time
of closing.
l6. If Seller cannot deliver merchantable title to Buyer at
closing, subject only to the permitted exceptions, this Contract,
at Buyers option shall be void and earnest money shall be
returned to Buyer or Buyer may elect to close and deduct from the
purchase price a definite and ascertainable amount required to
satisfy and release any non-permitted exceptions, and in such
case, Seller shall convey the premises to Buyer.
17. Should the Buyer fail to perform this contract at the time
and in the manner herein specified, the earnest money shall, at
the option of the Seller, be forfeited by Buyer as liquidated
damages, and this Contract shall become null and void, and the
Seller shall then have right to possession of the premises. Time
is of the essence of this Contract, and of all of the terms and
conditions hereof. In the event the Seller does not elect to
accept forfeiture of the earnest money, Seller shall be entitled
to exercise all other remedies available to Seller under Illinois
law.
18. In the event of legal action to construe or enforce the
provisions of this Contract, the prevailing party shall be
entitled to collect his reasonable attorney's fees court costs
and related expenses from the losing party and the court having
jurisdiction of the dispute shall be authorized to determine the
amount of such fees, costs and expenses and enter judgment
therefor.
19. Should Buyer fail to perform this contract promptly on his
part at the time and in the manner specified, and Seller
exercises the options of forfeiture contained hereinabove, the
total earnest money deposit shall be retained by the Seller as
liquidated damages.
20. Seller shall not be required to furnish a survey.
m
21. All refuse and Personal Property which is not being conveyed
to Buyer shall be removed from the Rea1 Estate at Seller's
expense before the date of possession, unless otherwise agreed
upon. Seller shall surrender possession of the premises in a
broom-clean condition.
22. Buyer shall have the right to inspect the premises within 48
hours prior to closing to determine that the premises are in the
same condition as date of acceptance of Contract; ordinary wear
and tear excepted.
23. Neither Seller nor any authorized agent or representative of
Seller has received, prior to the date of seller's execution of
this Contract, any notice from any governmental body describing
or relating to any alleged violation at the premises of any
applicable zoning, building, dwelling, fire, electrical, health
and safety, environmental protection or similar laws, statutes,
ordinances, codes, rules or regulations which are uncured or
uncorrected as of the date of Seller's execution of this
Contract.
24. Parties agree to comply with the provisions of the Real
Estate Settlement Procedures Act of 1974 (RESPA).
25. Each party agrees to provide the information necessary to
complete the portions of the Illinois Department of Revenue Real
Estate Transfer Declaration that are applicable to him, and to
execute such declaration pursuant to the Real Estate Transfer
Act, 35 ILCS 305/3.
26. Buyer and Seller agree that signatures on faxed copies of the
Contract for Purchase will be binding on both parties.
Buyer/Seller agrees to deliver an originally signed copy of this
agreement to Listing broker and Selling broker within 10 days
after receipt of faxed copy.
27. THIS DOCUMENT REPRESENTS THE ENTIRETY OF THE AGREEMENT
BETWEEN THE PARTIES AND SHALL BE BINDING UPON THE PARTIES, THEIR
HEIRS, SUCCESSORS AND ASSIGNS.
Dated this 04th day of December, 1995, at Galena, Illinois.
BUYERS SELLERS
GALENA STATE BANK & TRUST CO.
\s\ Charles Schnepf BY: \s\ Jerry L. Murdock
- -------------------------- --------------------------
\s\ Daniel O'Keefe Attest: \s\Libby Miller
- -------------------------- --------------------------
PURCHASE AGREEMENT
1. GALENA STATE BANK & TRUST CO., as Trustee under Trust
Agreement dated July 16, 1976, known as Trust No. 167 whose
address is 216 S. Commerce St., Galena, IL 61036,
hereinafter referred to as "Seller".
2. HOSKINS LUMBER COMPANY, an Illinois Corporation of 107
East Myrtle Street, Elizabeth, Illinois 61028, hereinafter
referred to as "BUYER" offers to purchase the following
described real estate situated in the City of Galena, Jo
Daviess County, Illinois, legally described as Lot 1 of the
Plat of Subdivision of Galena State Bank Commercial Center, a
subdivision located in the Southwest Quarter of Section 13,
Township 28 North, Range 1 West of the Fourth Principal
Meridian, West Galena Township, in the City of Galena, West
side of Galena River, Jo Daviess County, Illinois, subject to
easements, right of ways and building setback lines all as
shown on the plat thereof recorded in the Jo Daviess County,
Illinois Recorder's office as Document No. 240146 in Planhold
D of Plats, at No 431.
3. And to pay you for the premises the sum of $200,OOO.OO,
TOGETHER WITH INTEREST AT THE RATE OF EIGHT AND THREE-FOURTHS
PERCENT (8.75%) from the date hereof until the date of
closing, said sum to be paid in cash at the time of closing
coincident with the delivery of Deed.
4. THIS CONTRACT IS CONTINGENT UPON THE ABILITY OF SELLER TO
QUALIFY THIS TRANSACTION AS AN EXCHANGE PURSUANT TO IRS RULES
AND REGULATIONS.
5. IF ANY CONTINGENCY IN PARAGRAPH 4 CANNOT BE CARRIED OUT,
THIS CONTRACT SHALL BECOME VOID AND BUYER AND SELLER SHALL
SIGN AN AGREEMENT TERMINATING THE CONTRACT FOR PURCHASE AND
RELEASING THE EARNEST MONEY DEPOSIT TO BUYER.
6. The time of closing shall be on or before February 15,
1996 and a11 documents relative to the transaction shall be
signed and delivered.
7. Seller warrants as of closing:
a) Sewer/water is/will be available at the lot line.
b) A building permit is obtainable for the construction
of a bank building on said lot.
C) The premises are presently zoned general business.
8. Seller warrants that natural gas and electric service is
available to the lot lines subject to normal connection charges
only. Seller further warrants that NO supplemental pumping or
gravity assist equipment is needed to utilize sewer service to
each lot.
9. Seller shall be responsible for payment of all real estate
taxes up to the date of closing. All real estate tax prorations
shall be made as of closing with tax prorations based upon latest
available information. Tax prorations shall be made on a 365 day
basis if the tax proration used at closing differs from the tax
proration using the actual tax bill by more than $25.00, the
parties agree to adjust the difference when the tax bill is
issued.
10. Conveyance of the property shall be by Corporate Deed or such
other appropriate deed as may be required by this Contract. Said
conveyance shall be subject only to the following: All taxes and
special assessments levied or confirmed after the date of
closing; building and building line, use and occupancy
restrictions, conditions and covenants of record, provided the
same are not violated by the existing improvements or the present
use thereof and do not contain a reverter or right of re-entry;
zoning laws and ordinances of which there are no violations;
easements for the use of public utilities, if any, roads and
highways, drainage ditches, feeders and laterals, if any,
existing leases and tenancies and any mortgage or agreement for
deed to be assumed pursuant to this Contract.
11. Seller shall, at seller's expense, before closing, furnish a
current title insurance commitment in the amount of the purchase
price, and a final policy thereafter or mutually acceptable
evidence of title. Liens or encumbrances with a total balance
due of an amount not more than the balance due at the time of
closing under this Contract shall not constitute material defects
if said liens or encumbrances are paid and released at the time
of closing.
12. If Seller cannot deliver merchantable title to Buyer at
closing, subject only to the permitted exceptions, this Contract,
at Buyer's option shall be void and earnest money shall be
returned to Buyer or Buyer may elect to close and deduct from the
purchase price a definite and ascertainable amount required to
satisfy and release any non-permitted exceptions, and in such
case, Seller shall convey the premises to Buyer.
13. Should the Buyer fail to perform this contract at the time
and in the manner herein specified, the earnest money shall, at
the option of the Seller, be forfeited by Buyer as liquidated
damages, and this Contract shall become null and void, and the
Seller shall then have right to possession of the premises. Time
is of the essence of this Contract, and of all or the terms and
conditions hereof. In the event the Seller does not elect to
accept forfeiture of the earnest money, Seller shall be entitled
to exercise all other remedies available to Seller under Illinois
law.
14. In the event of legal action to construe or enforce the
provisions of this Contract, the prevailing party shall be
entitled to collect his reasonable attorney's fees court costs
and related expenses from the losing party and the court having
jurisdiction of the dispute shall be authorized to determine the
amount of such fees, costs and expenses and enter judgment
therefor.
15. Should Buyer fail to perform this contract promptly on his
part at the time and in the manner specified, and Seller
exercises the options of forfeiture contained hereinabove, the
total earnest money deposit shall be retained by the Seller as
liquidated damages.
16. Seller shall be required to furnish a survey.
17. Neither Seller nor any authorized agent or representative of
seller has received, prior to the date of seller's execution of
this contract, any notice from any governmental body describing
or relating to any alleged violation at the premises of any
applicable zoning, building, dwelling, fire, electrical, health
and safety, environmental protection or similar laws, statutes,
ordinances, codes, rules or regulations which are uncured or
uncorrected as of the date of Seller's execution of this
Contract.
18. Parties agree to comply with the provisions of the Real
Estate Settlement Procedures Act of 1974 (RESPA).
19. Each party agrees to provide the information necessary to
complete the portions of the Illinois Department of Revenue Real
Estate Transfer Declaration that are applicable to him, and to
execute such declaration pursuant to the Real Estate Transfer
Act, 35 ILCS 305/3.
20. THIS DOCUMENT REPRESENTS THE ENTIRETY OF THE AGREEMENT
BETWEEN THE PARTIES AND SHALL BE BINDING UPON THE PARTIES, THEIR
HEIRS, SUCCESSORS AND ASSIGNS.
Dated this 12th day of September, 1995.
BUYER SELLER
HOSKINS LUMBER COMPANY GALENA STATE BANK & TRUST CO.
BY: \s\ Vincent E. Toepfer BY: \s\ Jerry L. Murdock
------------------------- -------------------------
\s\ Cheryl Toepfer \s\ Libby Miller
------------------------- -------------------------
STATE OF ILLINOIS )
ss.
COUNTY OF JO DAVIESS)
I, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY, that Jerry L. Murdock, President
of Galena State Bank & Trust Co. and Libby Miller, Vice President
of said corporation, who are personal1y known to me to be the
same persons whose names are subscribed to the foregoing
instrument as such officers, respectively, appeared before me
this day in person and acknowledged that they signed, sealed and
delivered the said instrument as their free and voluntary act of
said respective officers for the uses and purposes therein set
forth.
Given under my hand and notarial seal this 12th day of September,
A.D. 1995.
\s\ Robert R. Roth
Notary Public
STATE OF ILLINOIS )
ss.
COUNTY OF JO DAVIESS)
I, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY, that Vincent E. Toepfer, President
of Hoskins Lumber Company and Cheryl Toepfer, Secretary of said
corporation, who are personal1y known to me to be the same
persons whose names are subscribed to the foregoing instrument as
such officers, respectively, appeared before me this day in
person and acknowledged that they signed, sealed and delivered
the said instrument as their free and voluntary act of said
respective officers for the uses and purposes therein set forth.
Given under my hand and notarial seal this 12th day of September,
A.D. 1995.
\s\ Robert R. Roth
Notary Public
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), is made and
entered into as of the 1st day of April, 1996 (the "Effective
Date"), by and between HEARTLAND FINANCIAL USA, INC., a Delaware
corporation (the "Employer"), and JAMES E. LUKAS (the
"Executive").
RECITALS
A. The Employer will own all of the issued and outstanding
stock of the Riverside Community Bank (in formation), Rockford,
Illinois (the "Bank").
B. The Employer desires to employ the Executive as an
officer of the Bank for a specified term.
C. The Executive is willing to accept such employment upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter contained, it is covenanted
and agreed by and between the parties hereto as follows:
AGREEMENTS
Position and Duties. The Employer hereby employs the
Executive as the President of the Bank, or in such other senior
executive capacity as shall be mutually agreed between the
Employer and the Executive. During the period of the Executive's
employment hereunder, the Executive shall devote his best efforts
and full business time, energy, skills and attention to the
business and affairs of the Employer. The Executive's duties and
authority shall consist of and include all duties and authority
customarily performed and held by persons holding equivalent
positions with business organizations similar in nature and size
to the Employer, as such duties and authority are reasonably
defined, modified and delegated from time to time by the board of
directors of the Employer (the "Board"), or the board of
directors of the Bank, provided, however, that in the case of
conflicting directives, those of the board of directors of the
Employer shall control. The Executive shall have the powers
necessary to perform the duties assigned to him and shall be
provided such supporting services, staff, secretarial and other
assistance, office space and accoutrements as shall be reasonably
necessary and appropriate in the light of such assigned duties.
Compensation. As compensation for the services to be
provided by the Executive hereunder, the Executive shall receive
the following compensation, expense reimbursement and other
benefits:
(a) Base Compensation. The Executive shall receive an
aggregate annual minimum base salary at the rate of ninety
thousand dollars ($90,000) payable in installments in accordance
with the regular payroll schedule of the Bank. Such base
compensation shall be subject to review annually commencing in
1996 and shall be maintained or increased during the term hereof
in accordance with the Bank's established management compensation
policies and plans.
(b) Reimbursement of Expenses. The Executive shall be
reimbursed, upon submission of appropriate vouchers and
supporting documentation, for all travel, entertainment and other
out-of-pocket expenses reasonably and necessarily incurred by the
Executive in the performance of his duties hereunder and shall be
entitled to attend seminars, conferences and meetings relating to
the business of the Bank consistent with the Bank's established
policies in that regard.
(c) Other Benefits. The Executive shall be entitled
to all benefits specifically established for him and, when and to
the extent he is eligible therefor, to participate in all plans
and benefits generally accorded to senior executives of the Bank,
including, but not limited to, pension, profit-sharing,
supplemental retirement, incentive compensation, stock option
program, stock purchase plan, disability income, split-dollar
life insurance, group life, medical and hospitalization
insurance, and similar or comparable plans, and also to
perquisites extended to similarly situated senior executives,
provided, however, that such plans, benefits and perquisites
shall be no less than those made available to all other employees
of the Bank.
(d) Withholding. The Bank shall be entitled to
withhold from amounts payable to the Executive hereunder, any
federal, state or local withholding or other taxes or charges
which it is from time to time required to withhold. The Bank
shall be entitled to rely upon the opinion of its legal counsel
with regard to any question concerning the amount or requirement
of any such withholding.
(e) Vacations. The Executive shall be entitled to an
annual vacation in accordance with the vacation policy of the
Bank which vacation shall be taken at a time or times mutually
agreeable to the Bank and the Executive.
(f) Allocations. The Executive and the Employer
intend that the Executive will be an employee of the Bank, and
that the Executive will be devoting his full time and attention
to the affairs of the Bank in his capacity as the Bank's
President. The Employer may allocate to the Bank any portion of
the Executive's salary, cash bonus and other compensation and
benefits that the Employer and the Bank deem to be a lawful and
appropriate allocation, but no such allocation will relieve the
Employer of any of its obligations to the Executive under this
Agreement.
Confidentiality and Loyalty. The Executive acknowledges
that heretofore or hereafter during the course of his employment
he has produced and may hereafter produce and have access to
material, records, data, trade secrets and information not
generally available to the public (collectively, "Confidential
Information") regarding the Employer and its subsidiaries and
affiliates. Accordingly, during and subsequent to termination of
this Agreement, the Executive shall hold in confidence and not
directly or indirectly disclose, use, copy or make lists of any
such Confidential Information, except to the extent that such
information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by
the Employer, required by a law or any competent administrative
agency or judicial authority, or otherwise as reasonably
necessary or appropriate in connection with performance by the
Executive of his duties hereunder. All records, files, documents
and other materials or copies thereof relating to the Employer's
business which the Executive shall prepare or use, shall be and
remain the sole property of the Employer, shall not be removed
from the Employer's premises without its written consent, and
shall be promptly returned to the Employer upon termination of
the Executive's employment hereunder. The Executive agrees to
abide by the Employer's reasonable policies, as in effect from
time to time, respecting avoidance of interests conflicting with
those of the Employer.
Term and Termination.
(a) Basic Term. The Executive's employment hereunder
shall be for a term of three (3) years commencing as of the
Effective Date.
(b) Premature Termination. In the event of the
termination of this Agreement by the Employer for any reason
prior to the receipt by the Employer of regulatory approval to
commence operations of the Bank in Rockford, Illinois, the
Employer shall pay the Executive one year's base salary and shall
continue to provide coverage for the Executive under the health
and life insurance programs maintained by the Employer for one
year following the date of such termination. Payments shall not
be reduced in the event the Executive obtains other employment
following the termination of employment by the Employer.
(c) Constructive Termination. If at any time during
the term of this Agreement, except in connection with a
termination pursuant to paragraph (d) of this Section 4, the
Executive is Constructively Discharged (as hereinafter defined)
then the Executive shall have the right, by written notice to the
Employer within sixty (60) days of such Constructive Discharge,
to terminate his services hereunder, effective as of thirty (30)
days after such notice, and the Executive shall have no rights or
obligations under this Agreement other than as provided in this
Section 4 and Section 5 hereof. The Executive shall in such
event be entitled to a lump sum payment of compensation and
benefits and continuation of the health, life and disability
insurance as if such termination of his employment was pursuant
to paragraph (b) of this Section 4.
For purposes of this Agreement, the Executive shall be
"Constructively Discharged" upon the occurrence of any one of the
following events:
(i) The Executive is not re-elected or is removed
from the positions with the Employer set forth in Section 1
hereof, other than as a result of the Executive's election or
appointment to positions of equal or superior scope and
responsibility; or
(ii) The Executive shall fail to be vested by the
Employer with the powers, authority and support services of any
of said offices; or
(iii) The Employer otherwise commits a
material breach of its obligations under this Agreement.
(d) Termination for Cause. This Agreement may be
terminated for cause as hereinafter defined. "Cause" shall mean:
(i) the Executive's death or his permanent disability, which
shall mean the Executive's inability, as a result of physical or
mental incapacity, substantially to perform his duties hereunder
for a period of six (6) consecutive months; (ii) a material
violation by the Executive of any applicable material law or
regulation respecting the business of the Employer; (iii) the
Executive being found guilty of a felony, an act of dishonesty in
connection with the performance of his duties as an officer of
the Employer, or which disqualifies the Executive from serving as
an officer or director of the Employer; or (iv) the willful or
negligent failure of the Executive to perform his duties
hereunder in any material respect. The Executive shall be
entitled to at least thirty (30) days' prior written notice of
the Employer's intention to terminate his employment for any
cause (except the Executive's death) specifying the grounds for
such termination, a reasonable opportunity to cure any conduct or
act, if curable, alleged as grounds for such termination, and a
reasonable opportunity to present to the Board his position
regarding any dispute relating to the existence of such cause.
(e) Termination upon Death. In the event payments are
due and owing under this Agreement at the death of the Executive,
payment shall be made to such beneficiary as Executive may
designate in writing, or failing such designation, to the
executor of his estate, in full settlement and satisfaction of
all claims and demands on behalf of the Executive. Such payments
shall be in addition to any other death benefits of the Employer
for the benefit of the Executive and in full settlement and
satisfaction of all payments provided for in this Agreement.
(f) Termination upon Disability. The Employer may
terminate the Executive's employment after having established the
Executive's Disability. For purposes of this Agreement,
"Disability" means a physical or mental infirmity which impairs
the Executive's ability to substantially perform his duties under
this Agreement which continues for a period of at least one
hundred eighty (180) consecutive days. The Executive shall be
entitled to the compensation and benefits provided for under this
Agreement for any period during the term of this Agreement and
prior to the establishment of the Executive's Disability during
which the Executive is unable to work due to a physical or mental
infirmity. Notwithstanding anything contained in this Agreement
to the contrary, until the date specified in a notice of
termination relating to the Executive's Disability, the Executive
shall be entitled to return to his position with the Employer as
set forth in this Agreement in which event no Disability of the
Executive will be deemed to have occurred.
(g) Termination upon Change of Control.
(i) In the event of a Change in Control (as
defined below) of the Employer and the termination of the
Executive's employment under either A or B below, the Executive
shall be entitled to a lump sum payment equal to two (2) times
the sum of his base salary then payable and an amount equal to
the most recent bonus paid to the Executive. The Employer shall
also continue to provide coverage for the Executive under the
health and life insurance programs for two (2) years following
such termination unless and until the Executive becomes eligible
for coverage under the terms of any other health or life
insurance program of a subsequent employer. The following shall
constitute termination under this paragraph:
A. The Executive terminates his employment
under this Agreement by a written notice to that effect delivered
to the Board within six (6) months after the Change in Control.
B. The Agreement is terminated by the
Employer or its successor either in contemplation of or after the
Change in Control.
(ii) For purposes of this paragraph, the term
"Change in Control" shall mean the following:
A. The consummation of the acquisition by
any person (as such term is defined in Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"))
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of fifty-one percent (51%) or
more of the combined voting power of the then outstanding voting
securities of the Employer; or
B. The individuals who, as of the date
hereof, are members of the Board cease for any reason to
constitute a majority of the Board, unless the election, or
nomination for election by the stockholders, of any new director
was approved by a vote of a majority of the Board, and such new
director shall, for purposes of this Agreement, be considered as
a member of the Board; or
C. Approval by stockholders of the Employer
of: (1) a merger or consolidation if the stockholders,
immediately before such merger or consolidation, do not, as a
result of such merger or consolidation, own, directly or
indirectly, more than forty-nine percent (49%) of the combined
voting power of the then outstanding voting securities of the
entity resulting from such merger or consolidation in
substantially the same proportion as their ownership of the
combined voting power of the voting securities of the Employer
outstanding immediately before such merger or consolidation; or
(2) a complete liquidation or dissolution or an agreement for the
sale or other disposition of all or substantially all of the
assets of the Employer.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because fifty-one percent (51%) or more
of the combined voting power of the then outstanding securities
of the Employer are acquired by: (1) a trustee or other
fiduciary holding securities under one or more employee benefit
plans maintained for employees of the entity; or (2) any
corporation which, immediately prior to such acquisition, is
owned directly or indirectly by the stockholders in the same
proportion as their ownership of stock immediately prior to such
acquisition.
(e) Regulatory Suspension and Termination.
(i) If the Executive is suspended from office
and/or temporarily prohibited from participating in the conduct
of the Employer's affairs by a notice served under Section
8(e)(3) (12 U.S.C. 1818(e)(3)) or 8(g) (12 U.S.C. 1818(g)) of
the Federal Deposit Insurance Act, as amended, the Employer's
obligations under this contract shall be suspended as of the date
of service, unless stayed by appropriate proceedings. If the
charges in the notice are dismissed, the Employer may in its
discretion (A) pay the Executive all or part of the compensation
withheld while their contract obligations were suspended and (B)
reinstate (in whole or in part) any of the obligations which were
suspended.
(ii) If the Executive is removed and/or
permanently prohibited from participating in the conduct of the
Employer's affairs by an order issued under Section 8(e) (12
U.S.C. 1818(e)) or 8(g) (12 U.S.C. 1818(g)) of the Federal
Deposit Insurance Act, as amended, all obligations of the
Employer under this contract shall terminate as of the effective
date of the order, but vested rights of the contracting parties
shall not be affected.
(iii) If the Employer is in default as defined
in Section 3(x) (12 U.S.C. 1813(x)(1)) of the Federal Deposit
Insurance Act, as amended, all obligations of the Employer under
this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting
parties.
(iv) All obligations of the Employer under this
contract shall be terminated, except to the extent determined
that continuation of the contract is necessary for the continued
operation of the institution by the Federal Deposit Insurance
Corporation (the "FDIC"), at the time the FDIC enters into an
agreement to provide assistance to or on behalf of the Employer
under the authority contained in Section 13(c) (12 U.S.C.
1823(c)) of the Federal Deposit Insurance Act, as amended, or
when the Employer is determined by the FDIC to be in an unsafe or
unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
5. Non-Competition Covenant.
(a) Restrictive Covenant. The Employer and the
Executive have jointly reviewed the customer lists and operations
of the Employer and have agreed that the primary service area of
the Employer's lending and deposit taking functions in which the
Executive will actively participate extends to an area
encompassing a fifty (50) mile radius from the main office of the
Bank in Rockford, Illinois. Therefore, as an essential
ingredient of and in consideration of this Agreement and the
payment of the amounts described in Section 2, the Executive
hereby agrees that if his employment under this Agreement is
terminated under any of the circumstances described in either
Section 4(g)(i)A. or Section 4(g)(i)B. of this Agreement, for a
period of one (1) year after such termination (the "Restrictive
Period"), he will not directly or indirectly compete with the
business of the Employer or any of its subsidiaries, including,
but not by way of limitation, by directly or indirectly owning,
managing, operating, controlling, financing, or by directly or
indirectly serving as an employee, officer or director of or
consultant to, or by soliciting or inducing, or attempting to
solicit or induce, any employee or agent of Employer or any of
its subsidiaries to terminate employment with Employer or any of
its subsidiaries and become employed by any person, firm,
partnership, corporation, trust or other entity which owns or
operates, a bank, savings and loan association, credit union or
similar financial institution (a "Financial Institution") within
a fifty (50) mile radius of the Bank's main office in Rockford,
Illinois (the "Restrictive Covenant"). If the Executive violates
the Restrictive Covenant and the Employer brings legal action for
injunctive or other relief, the Employer shall not, as a result
of the time involved in obtaining such relief, be deprived of the
benefit of the full period of the Restrictive Covenant.
Accordingly, the Restrictive Covenant shall be deemed to have the
duration specified in this Section 5(a) computed from the date
the relief is granted but reduced by the time between the period
when the Restrictive Period began to run and the date of the
first violation of the Restrictive Covenant by the Executive. In
the event of a premature termination under Section 4(b), the
Executive will have no continuing obligations to the Employer
under this Section. The foregoing Restrictive Covenant shall not
prohibit the Executive from owning directly or indirectly capital
stock or similar securities which are listed on a securities
exchange or quoted on the National Association of Securities
Dealers Automated Quotation System which do not represent more
than one percent (1%) of the outstanding capital stock of any
Financial Institution.
(b) Remedies for Breach of Restrictive Covenant. The
Executive acknowledges that the restrictions contained in
Sections 3 and 5(a) of this Agreement are reasonable and
necessary for the protection of the legitimate business interests
of the Employer, that any violation of these restrictions would
cause substantial injury to the Employer and such interests, that
the Employer would not have entered into this Agreement with the
Executive without receiving the additional consideration offered
by the Executive in binding himself to these restrictions and
that such restrictions were a material inducement to the Employer
to enter into this Agreement. In the event of any violation or
threatened violation of these restrictions, the Employer, in
addition to and not in limitation of, any other rights, remedies
or damages available to the Employer under this Agreement or
otherwise at law or in equity, shall be entitled to preliminary
and permanent injunctive relief to prevent or restrain any such
violation by the Executive and any and all persons directly or
indirectly acting for or with him, as the case may be.
6. Intercorporate Transfers. If the Executive shall be
voluntarily transferred to an affiliate of the Employer, such
transfer shall not be deemed to terminate or modify this
Agreement and the employing corporation to which the Executive
shall have been transferred shall, for all purposes of this
Agreement, be construed as standing in the same place and stead
as the Employer as of the date of such transfer. For purposes
hereof, an affiliate of the Employer shall mean any corporation
directly or indirectly controlling, controlled by, or under
common control with the Employer.
7. Interest in Assets. Neither the Executive nor his
estate shall acquire hereunder any rights in funds or assets of
the Employer, otherwise than by and through the actual payment of
amounts payable hereunder; nor shall the Executive or his estate
have any power to transfer, assign, anticipate, hypothecate or
otherwise encumber in advance any of said payments; nor shall any
of such payments be subject to seizure for the payment of any
debt, judgment, alimony, separate maintenance or be transferable
by operation of law in the event of bankruptcy, insolvency or
otherwise of the Executive.
8. Indemnification.
(a) The Employer shall hold harmless and indemnify the
Executive (and his heirs, executors and administrators) to the
fullest extent permitted under applicable law against all
expenses and liabilities reasonably incurred by him in connection
with or arising out of any action, suit or proceeding in which he
may be involved by reason of his having been an officer of the
Employer or any of its subsidiaries (whether or not he continues
to be an officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not
be limited to, judgments, court costs and attorneys' fees and the
cost of reasonable settlements.
(b) In the event the Executive becomes a party, or is
threatened to be made a party, to any action, suit or proceeding
for which the Employer has agreed to provide indemnification
under this Section 8, the Employer shall, to the full extent
permitted under applicable law, advance all expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in
settlement (collectively "Expenses") incurred by the Executive in
connection with the investigation, defense, settlement, or appeal
of any threatened, pending or completed action, suit or
proceeding, subject to receipt by the Employer of a written
undertaking from the Executive to reimburse the Employer for all
Expenses actually paid by the Employer to or on behalf of the
Executive in the event it shall be ultimately determined that the
Executive is not entitled to indemnification by the Employer for
such Expenses.
9. General Provisions.
(a) Successors; Assignment. This Agreement shall be
binding upon and inure to the benefit of the Executive, the
Employer and his and its respective personal representatives,
successors and assigns, and any successor or assign of the
Employer shall be deemed the "Employer" hereunder. The Employer
shall require any successor to all or substantially all of the
business and/or assets of the Employer, whether directly or
indirectly, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent
as the Employer would be required to perform if no such
succession had taken place.
(b) Entire Agreement; Modifications. This Agreement
constitutes the entire agreement between the parties respecting
the subject matter hereof, and supersedes all prior negotiations,
undertakings, agreements and arrangements with respect thereto,
whether written or oral. Except as otherwise explicitly provided
herein, this Agreement may not be amended or modified except by
written agreement signed by the Executive and the Employer.
(c) Enforcement and Governing Law. The provisions of
this Agreement shall be regarded as divisible and separate; if
any of said provisions should be declared invalid or
unenforceable by a court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be
affected thereby. This Agreement shall be construed and the
legal relations of the parties hereto shall be determined in
accordance with the laws of the state of Illinois without
reference to the law regarding conflicts of law.
(d) Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by the Executive
within fifty (50) miles from the main office of the Employer, in
accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that
the Executive shall be entitled to seek specific performance of
his right to be paid through the date of termination during the
pendency of any dispute or controversy arising under or in
connection with this Agreement.
(e) Legal Fees. All reasonable legal fees paid or
incurred by the Executive pursuant to any dispute or question of
interpretation relating to this Agreement shall be paid or
reimbursed by the Employer if the Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement.
(f) Waiver. No waiver by either party at any time of
any breach by the other party of, or compliance with, any
condition or provision of this Agreement to be performed by the
other party, shall be deemed a waiver of any similar or
dissimilar provisions or conditions at the same time or any prior
or subsequent time.
(g) Notices. Notices pursuant to this Agreement shall
be in writing and shall be deemed given when received; and, if
mailed, shall be mailed by United States registered or certified
mail, return receipt requested, postage prepaid; and if to the
Employer, addressed to the principal headquarters of the
Employer, attention: President; or, if to the Executive, to the
address set forth below the Executive's signature on this
Agreement, or to such other address as the party to be notified
shall have given to the other.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
HEARTLAND FINANCIAL USA, INC.
By: \s\ Lynn B. Fuller \s\ James E. Lukas
----------------------- ------------------------
PURCHASE AGREEMENT
1. HOSKINS LUMBER COMPANY, an Illinois Corporation of 107 East
Myrtle Street, Elizabeth, Illinois 61028, hereinafter referred to
as "SELLER".
2. GALENA STATE BANK & TRUST CO., as Trustee under Trust
Agreement dated July 16, 1976, known as Trust No. 167 whose
address is 216 S. Commerce St., Galena, IL 61036, hereinafter
referred to as "BUYER", offers to purchase the following
described real estate situated in the City of Galena, Jo Daviess
County, Illinois, legally described as Lot 1 of the Plat of
Subdivision of Galena State Bank Commercial Center, a subdivision
located in the Southwest Quarter of Section 13, Township 28
North, Range 1 West of the Fourth Principal Meridian, West Galena
Township, in the City of Galena, West side of Galena River, Jo
Daviess County, Illinois, subject to easements, right of ways and
building setback lines all as shown on the plat thereof recorded
in the Jo Daviess County, Illinois Recorder's Office as Document
No. 240146 in Planhold D of Plats, at No. 431, together with
improvements located thereon, at the time said improvements have
reached the amount of $515,000.00.
3. And to pay you for the premises the sum of $715,OOO.OO; said
sum to be paid in cash at the time of closing, coincident with
the delivery of Deed.
4. The time of closing shall be on or before June 21, 1996, or
as the parties agree, and all documents relative to the
transaction shall be signed and delivered.
5. Seller warrants as of closing:
a) Sewer/water is/will be available at the lot line.
b) The premises are presently zoned general business.
6. Seller warrants that natural gas and electric service is
available to the lot lines subject to normal connection charges
only. Seller further warrants that NO supplemental pumping or
gravity assist equipment is needed to utilize sewer service to
each lot.
7. Buyer shall be responsible for payment of all real estate
taxes for the year 1995 and thereafter.
8. Conveyance of the property shall be by Corporate Deed or such
other appropriate deed as may be required by this Contract. Said
conveyance shall be subject only to the following: All taxes and
special assessments levied or confirmed after the date of
closing; building and building line, use and occupancy
restrictions, conditions and covenants of record, provided the
same are not violated by the existing improvements or the present
use thereof and do not contain a reverter or right of re-entry;
zoning laws and ordinances of which there are no violations;
easements for the use of public utilities, if any, roads and
highways, drainage ditches, feeders and laterals, if any,
existing leases and tenancies and any mortgage or agreement for
deed to be assumed pursuant to this Contract.
9. Seller shall, at Seller's expense, before closing, furnish a
current title insurance commitment in the amount of the purchase
price, and a final policy thereafter or mutually acceptable
evidence of title. Liens or encumbrances with a total balance
due of an amount not more than the balance due at the time of
closing under this Contract shall not constitute material defects
if said liens or encumbrances are paid and released at the time
of closing.
10. If Seller cannot deliver merchantable title to Buyer at
closing, subject only to the permitted exceptions, this Contract,
at Buyer's option shall be void and earnest money shall be
returned to Buyer or Buyer may elect to close and deduct from the
purchase price a definite and ascertainable amount required to
satisfy and release any non-permitted exceptions, and in such
case, Seller shall convey the premises to Buyer.
11. Should the Buyer fail to perform this contract at the time
and in the manner herein specified, the earnest money shall, at
the option of the Seller, be forfeited by Buyer as liquidated
damages, and this Contract shall become null and void, and the
Seller shall then have right to possession of the premises. Time
is of the essence of this Contract, and of all of the terms and
conditions hereof. In the event the Seller does not elect to
accept forfeiture of the earnest money, Seller shall be entitled
to exercise all other remedies available to Seller under Illinois
law.
12. In the event of legal action to construe or enforce the
provisions of this Contract, the prevailing party shall be
entitled to collect his reasonable attorney's fees court costs
and related expenses from the losing party and the court having
jurisdiction of the dispute shall be authorized to determine the
amount of such fees, costs and expenses and enter judgment
therefor.
13. Should Buyer fail to perform this contract promptly on his
part at the time and in the manner specified, and Seller
exercises the options of forfeiture contained hereinabove, the
total earnest money deposit shall be retained by the Seller as
liquidated damages.
14. Seller shall not be required to furnish a survey.
17. Neither Seller nor any authorized agent or representative of
Seller has received, prior to the date of seller's execution of
this Contract, any notice from any governmental body describing
or relating to any alleged violation at the premises of any
applicable zoning, building, dwelling, fire, electrical, health
and safety, environmental protection or similar laws, statutes,
ordinances, codes, rules or regulations which are uncured or
uncorrected as of the date of Seller's execution of this
Contract.
18. Parties agree to comply with the provisions of the Real
Estate Settlement Procedures Act of 1974 (RESPA).
19. Each party agrees to provide the information necessary to
complete the portions of the Illinois Department of Revenue Real
Estate Transfer Declaration that are applicable to him, and to
execute such declaration pursuant to the Real Estate Transfer
Act, 35 ILCS 305/3.
20. This Contract will be assigned to Attorneys' Title Guaranty
Fund,Inc. as Qualified Intermediary pursuant to an Exchange
Agreement.
21. THIS DOCUMENT REPRESENTS THE ENTIRETY OF THE AGREEMENT
BETWEEN THE PARTIES AND SHALL BE BINDING UPON THE PARTIES, THEIR
HEIRS, SUCCESSORS AND ASSIGNS.
Dated this 17th day of May, 1996.
SELLER BUYER
HOSKINS/INS LUMBER COMPANY GALENA STATE BANK & TRUST CO.
BY: /s/ Vincent E. Toepfer BY: /s/ Jerry L. Murdock
/s/ Cheryl A. Toepfer /s/ Lois Jean Wienen
STATE OF ILLINOIS )
) ss:
COUNTY OF JO DAVIESS)
I, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY, that Jerry L. Murdock, President
of Galena State Bank & Trust Company and Lois Jean Wienen, Senior
Vice President of said corporation, who are personally known to
me to be the same persons whose names are subscribed to the
foregoing instrument as such officers, respectively, appeared
before me this day in person and acknowledged that they signed,
sealed and delivered the said instrument as their free and
voluntary act of said respective officers for the uses and
purposes therein set forth.
Given under my hand and notarial seal this 17th day of May, A.D.
1996.
/s/ Ann Silaggi
Notary Public
STATE OF ILLINOIS )
) ss:
COUNTY OF JO DAVIESS)
I, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY, that Vincent E. Toepfer, President
of Hoskins Lumber Company and Cheryl A. Toepfer, Secretary of
said corporation, who are personally known to me to be the same
persons whose names are subscribed to the foregoing instrument as
such officers, respectively, appeared before me this day in
person and acknowledged that they signed, sealed and delivered
the said instrument as their free and voluntary act of said
respective officers for the uses and purposes therein set forth.
Given under my hand and notarial seal this ,17th day of May, A.D.
1996.
/s/ Jeanette B. Podnar
Notary Public
RIDER TO REAL ESTATE SALES CONTRACT
In connection with any tax-free exchange pursuant to
Section 1031 of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, involving the
Premises and other property owned or to he acquired by
[Purchaser/Seller] (the "Exchangor"), Exchangor may, without the
consent of [Seller/Purchaser](the "Other Party"), assign this
Agreement and Exchangor's rights hereunder to any Qualified
Intermediary ("Intermediary") participating with Exchangor in
such exchange [as contemplated by Treasury Regulation Section
1.1031(k)-1 (g)(4) and related regulations]. In the event of any
such assignment to an Intermediary: (i) Exchangor shall give
written notice of the assignment and the identity of the
Intermediary to the Other Party at least ten (10) days prior to
the date of dosing; (ii) except to the extent of any liabilities
expressly assumed by the Intermediary in writing in connection
with such assignment, the Intermediary shall have no personal
liability to the Other Party or any other person or entity under
this Agreement, or under any other document or instrument at any
time executed by Exchangor or the Intermediary in connection with
or pursuant to, this Agreement (each such document or instrument
being referred to herein as a "Related Document"), and neither
the Other Party nor any other person or entity shall have any
recourse against the Intermediary or any of its assets on account
of any breach or default hereunder or under any Related Document;
(iii) the Intermediary shall have all of the rights and remedies
of Exchangor provided for herein or in any Related Documents;
(iv) there shall be no diminution of the Other Party's rights or
remedies, and no increase of the Other Party's liabilities or
obligations, hereunder or under any Related Document on account
of such assignment; (v) notwithstanding anything to the contrary
contained herein, Exchangor shall continue to be liable to the
Other Party for all obligations imposed upon Exchangor under this
Agreement and under any Related Document executed by Exchangor.
ATTORNEYS' TITLE GUARANTY FUND, INC.
EXCHANGE AGREEMENT
EXCHANGE ESCROW NO. 96026S
THIS EXCHANGE AGREEMENT is made as of the 17th day of May, 1996,
by and between Galena State Bank & Trust Co. & Galena State Bank
& Trust Co., as Trustee * ("Exchangor") and ATTORNEYS' TITLE
GUARANTY FUND, INC. ("Qualified Intermediary"). *under Trust
Agreement dated July 16, 1976, known as TRUST NO. 167
WITNESSETH:
WHEREAS, Exchangor is the holder of an interest in certain
property or properties commonly known as (1) 216 S. Commerce St.,
Galena, IL (2) 400 S. Main St., Galena, IL (3) Gear St., Galena,
IL and more fully described in Exhibit A attached hereto
(individually and collectively referred to herein as the
"Relinquished Property"); and
WHEREAS, Exchangor desires to exchange the Relinquished
Property for other property or properties of a like-kind
(individually and collectively referred to herein as the
"Replacement Property") in accordance with Section 1031 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder (the "Regulations"); and
WHEREAS, Exchangor has entered into or is about to enter
into a contract or contracts to sell the Relinquished Property
(individually and collectively referred to herein as the
"Relinquished Property Contract"); and
WHEREAS, the Relinquished Property Contract does or will
permit Exchangor to effect a like-kind exchange of the
Relinquished Property for Replacement Property in accordance with
Section 1031 of the Code and the Regulations; and
WHEREAS, in accordance with paragraph (g)(4) of Section
l.l03l(k)-l of the Regulations, Exchangor desires Qualified
Intermediary to acquire the Relinquished Property from Exchangor,
to transfer the Relinquished Property to the purchaser or
purchasers under the Relinquished Property Contract (individually
and collectively referred to herein as the "Relinquished Property
Purchaser"), to acquire the Replacement Property from the owner
or owners thereof (individually and collectively referred to
herein as the "Replacement Property Seller"), and to transfer the
Replacement Property to Exchangor; and
WHEREAS, Qualified Intermediary desires to act as
Exchangor's "qualified intermediary" as such term is defined in
paragraph (g)(4) of Section 1.1031(k)-l of the Regulations and,
except for purposes of Section 1031(a) of the Code, as
Exchangor's agent.
NOW, THEREFORE, for and in consideration of the mutual
covenants, conditions and agreements set forth herein, Exchangor
and Qualified Intermediary hereby agree as follows:
ARTICLE 1
AGREEMENT TO EXCHANGE
1.1 Upon the terms and conditions set forth in this Exchange
Agreement, Qualified Intermediary agrees to acquire the
Relinquished Property from Exchangor, to transfer the
Relinquished Property to the Relinquished Property Purchaser, to
acquire the Replacement Property from the Replacement Property
Seller and to transfer the Replacement Property to Exchangor.
1.2 For purposes of the satisfaction of Qualified
Intermediary's obligation to acquire and transfer the
Relinquished Property and to acquire and transfer the Replacement
Property as set forth above in Section 1.1, in accordance with
paragraphs (g)(4)(iv) and (g)(4)(v) of Section 1.1031(k)-1 of the
Regulations, Exchangor shall assign to Qualified Intermediary all
of Exchanger's rights in and to (a) the Relinquished Property
Contract and (b) the contract or contracts to be entered into
between Exchangor and the Replacement Property Seller for the
sale of the Replacement Property (individually and collectively
referred to herein as the "Replacement Property Contract").
ARTICLE 2
QUALIFIED INTERMEDIARY'S ACQUISITION AND TRANSFER
OF THE RELINQUISHED PROPERTY
2.1 On or before the date on which the transfer of the
Relinquished Property is consummated pursuant to the Relinquished
Property Contract (the "Relinquished Property Closing Date"), but
in any event prior to such transfer:
(a) Exchangor (i) shall assign to Qualified Intermediary all of
Exchangor's rights in and to the Relinquished Property Contract
by executing and delivering to Qualified Intermediary an
Assignment in the form attached hereto as Exhibit B and (ii)
shall deliver all earnest money deposited under the Relinquished
Property Contract to Qualified Intermediary to be held by
Qualified Intermediary in accordance with Article 5 below;
(b) Qualified Intermediary shall accept from Exchangor the
assignment of all of Exchangor's rights in and to the
Relinquished Property Contract by executing and delivering to
Exchangor an Acceptance in the form attached hereto as Exhibit B;
(c) Exchangor shall, in accordance with the Regulations, notify
in writing the Relinquished Property Purchaser that all of
Exchangor's rights in and to the Relinquished Property Contract
have been assigned to Qualified Intermediary, which written
notification shall be in the form of Exhibit B attached hereto;
and
(d) Exchangor shall obtain the Relinquished Property
Purchaser's consent to the assignment described in this Section
2.1, which consent (i) shall include the Relinquished Property
Purchaser's acknowledgment that neither Qualified Intermediary
nor its officers, directors, agents or employees shall be
personally liable for a breach of any representations or
warranties or any obligations of Exchangor as seller under the
Relinquished Property Contract, and (ii) shall be in the form of
Exhibit B attached hereto.
For purposes of this Section 2.1, in the case of Relinquished
Property consisting of multiple properties, with regard to each
such property the Relinquished Property Closing Date shall mean
the date of transfer of that property.
2.2 To effectuate the transfer of the Relinquished Property to
the Relinquished Property Purchaser, Qualified Intermediary
hereby authorizes and directs Exchangor to convey the
Relinquished Property directly to the Relinquished Property
Purchaser in satisfaction of Qualified Intermediary's obligations
as assignee of Exchangor's rights under the Relinquished Property
Contract.
2.3 In the event the Relinquished Property consists of multiple
properties, then, for purposes of determining the commencement of
the "Identification Period" (defined in Section 3.2 below) and
the commencement of the "Exchange Period" (defined in Section 4.5
below) and for purposes of Section 4.4 below, the Relinquished
Property Closing Date shall mean the earliest date on which any
of such properties are transferred.
ARTICLE 3
IDENTIFICATION OF THE
REPLACEMENT PROPERTY
3.1 At any time prior to the Relinquished Property Closing
Date, Exchangor may identify one or more properties as the
Replacement Property in accordance with paragraph (c) of Section
1.1031(k)-l of the Regulations.
3.2 If Exchangor has not identified the Replacement Property
prior to the Relinquished Property Closing Date (as such term is
described in Section 2.3 above), then at any time during the
period commencing on the Relinquished Property Closing Date and
ending at midnight on the 45th day thereafter (the Identification
Period") Exchangor may identify one or more properties as the
Replacement Property in accordance with paragraphs (b) and (c) of
Section 1.1031(k)-1 of the Regulations.
3.3 Such identification (and, if applicable, the revocation
thereof in accordance with paragraph (c)(6) of Section 1.1031
(k)-1 of the Regulations) shall be made in a written document
signed by Exchangor and given before the end of the
Identification Period, in accordance with paragraph (c)(2) of
Section 1.1031(k)-1 of the Regulations, and to the Qualified
Intermediary, pursuant to the notice provisions set forth in
Section 9.1 below.
3.4 Any identification of the Replacement Property shall be
made in the form of Exhibit C attached hereto.
ARTICLE 4
QUALIFIED INTERMEDIARY'S ACQUISITION AND
TRANSFER OF THE REPLACEMENT PROPERTY
4.1 Following the identification of the Replacement Property,
Exchangor shall enter into the Replacement Property Contract with
the Replacement Property Seller.
4.2 On or before the date on which the transfer of the
Replacement Property is consummated pursuant to the Replacement
Property Contract (the "Replacement Property Closing Date"), but
in any event prior to such transfer:
(a) Exchangor shall assign to Qualified Intermediary all of
Exchangor's rights in and to the Replacement Property Contract by
executing and delivering to Qualified Intermediary an Assignment
in the form attached hereto as Exhibit D;
(b) Qualified Intermediary shall accept from Exchangor the
assignment of all of Exchangor's rights in and to the Replacement
Property Contract by executing and delivering to Exchangor an
Acceptance in the form attached hereto as Exhibit D;
(c) Exchangor shall, in accordance with the Regulations,
notify in writing the Replacement Property Seller that all of
Exchangor's rights in and to the Replacement Property Contract
have been assigned to Qualified Intermediary, which written
notification shall be in the form of Exhibit D attached hereto;
and
(d) Exchangor shall obtain the Replacement Property
Seller's consent to the assignment described in this Section 4.2,
which consent (i) shall include the Replacement Property Seller's
acknowledgment limiting the liability of Qualified Intermediary
(and its officers, directors, agents and employees) as assignee
of Exchangor's rights under the Replacement Property Contract to
the forfeiture of the earnest money deposit provided for in the
Replacement Property Contract, and (ii) shall be in the form of
Exhibit D attached hereto.
For purposes of this Section 4.2, in the case of Replacement
Property consisting of multiple properties, with regard to each
such property the Replacement Property Closing Date shall mean
the date of transfer of that property.
4.3 To effectuate the transfer of the Replacement Property to
Exchangor, Qualified Intermediary, as assignee of Exchangor's
rights under the Replacement Property Contract, shall direct the
Replacement Property Seller to convey the Replacement Property
directly to Exchangor pursuant to a Direction in the form
attached hereto as Exhibit E.
4.4 The Replacement Property Closing Date, which for purposes
of this Section 4.4 in the case of Replacement Property
consisting of multiple properties shall mean the earliest date on
which any of such properties are transferred, shall occur not
earlier than the Relinquished Property Closing Date (as such term
is described in Section 2.3 above).
4.5 The Replacement Property Closing Date, which for purpose of
this Section 4.5 in the case of Replacement Property consisting
of multiple properties shall mean the latest date on which any of
such properties are transferred, shall occur not later than the
end of the "Exchange Period" (as such term is hereinafter
defined). The "Exchange Period" means the period which begins on
the Relinquished Property Closing Date (as such term is described
in Section 2.3 above) and ends at midnight on the earlier of (a)
the 180th day thereafter or (b) the due date (including
extensions) for Exchangor's return of the tax imposed by chapter
1 of subtitle A of the Code for the taxable year in which the
Relinquished Property Closing Date (as such term is described in
Section 2.3 above) occurs.
ARTICLE 5
THE EXCHANGE FUNDS
5.1 The cash proceeds realized by Qualified Intermediary from
the transfer of the Relinquished Property to the Relinquished
Property Purchaser, net of amounts paid in respect of
encumbrances on the Relinquished Property, commissions, prorated
taxes, recording fees, transfer taxes and title and escrow
closing fees (the "Exchange Funds"), shall be held by Qualified
Intermediary in accordance with the provisions of this Exchange
Agreement.
5.2 Qualified Intermediary shall deposit the Exchange Funds
(other than such portion of the Exchange Funds which is
immediately required in connection with the acquisition of the
Replacement Property) in a financial institution, the accounts of
which are federally insured, or shall invest the Exchange Funds
in securities of the United States Government.
5.3 All earnings realized from the deposit or investment of the
Exchange Funds shall become a part of the Exchange Funds. All
such earnings shall be attributed to Exchangor for federal income
tax purposes and Qualified Intermediary shall report such
earnings to the Internal Revenue Service on the appropriate
forms. Exchangor shall complete Internal Revenue Service Form W-9
and shall deliver such Form W-9 to Qualified Intermediary
concurrently with the execution of this Exchange Agreement.
5.4 Exchangor shall have no right to receive, pledge, borrow or
otherwise obtain the benefits of money or other property
constituting the Exchange Funds, including the earnings thereon,
until the day following the last day of the Exchange Period,
except that:
(a) if Exchangor has not identified the Replacement
Property by the end of the Identification Period, then Exchangor
shall have the right to receive, pledge, borrow or otherwise
obtain the benefits of the Exchange Funds, if any, any time
following the end of the Identification Period upon written
demand of Exchangor; and
(b) if Exchangor has identified the Replacement Property by
the end of the Identification Period, then Exchangor shall have
the right to receive, pledge, borrow or otherwise obtain the
benefits of the Exchange Funds, if any, any time following
Exchangor's receipt of all of the Replacement Property to which
Exchangor is entitled under this Exchange Agreement upon written
demand of Exchangor.
5.5 If the balance of the Exchange Funds has not previously
been delivered to Exchangor pursuant to Section 5.4 above, then
following the last day of the Exchange Period, upon written
demand of Exchangor, Qualified Intermediary shall pay to
Exchangor the then current balance of the Exchange Funds
including accrued interest or other earnings thereon, less (a)
the then unpaid balance of "Qualified Intermediary's Fees" (as
such term is hereinafter defined) and (b) such other amounts as
Qualified Intermediary may retain pursuant to Article 8 below.
ARTICLE 6
USE OF EXCHANGE FUNDS TO
ACQUIRE THE REPLACEMENT PROPERTY
6.1 Qualified Intermediary shall use the Exchange Funds in
order to make earnest money deposits and to pay the balance of
the purchase price due on the purchase of the Replacement
Property in accordance with the Replacement Property Contract.
6.2 If the sum of the aggregate cash consideration to be paid
by Qualified Intermediary for the purchase of the Replacement
Property plus acquisition costs in connection therewith,
including but not limited to recording fees, transfer taxes,
title and escrow closing charges and closing adjustments, exceed
the then available Exchange Funds, Exchangor shall provide the
excess amount required to consummate the acquisition of the
Replacement Property to Qualified Intermediary on or before the
Replacement Property Closing Date by certified or cashier's check
or by wire transfer of immediately available funds.
ARTICLE 7
QUALIFIED INTERMEDIARY'S FEES
7.1 As compensation for its services under this Exchange
Agreement, Qualified Intermediary shall receive a fee of $975.00.
In the event that the Exchange Funds exceed $750,000 or if
multiple Relinquished and/or Replacement properties are involved,
additional fees shall be due, as agreed upon by the Exchangor and
the Qualified Intermediary. Such amounts shall be deemed to have
been earned upon the execution of this Exchange Agreement by
Exchangor and Qualified Intermediary. Qualified Intermediary
shall also receive reasonable compensation for any special
services that it may render in connection with this Exchange
Agreement. All such compensation is herein referred to as
"Qualified Intermediary's Fee."
7.2 Qualified Intermediary's Fee, if not sooner paid directly
by Exchangor, shall be paid from the Exchange Funds. Qualified
Intermediary shall have the right to withdraw from the Exchange
Funds an amount sufficient to pay Qualified Intermediary's Fee
immediately upon its receipt of any Exchange Funds. If the
Exchange Funds are insufficient for the payment of the then
unpaid balance of Qualified Intermediary's Fee, Exchangor shall
pay the difference to Qualified Intermediary immediately upon
demand therefor.
ARTICLE 8
INDEMNITY BY EXCHANGOR;
EXCULPATION OF QUALIFIED INTERMEDIARY
8.1 Exchangor hereby agrees to indemnify and hold harmless
Qualified Intermediary, its officers, directors, employees and
agents (collectively the "Indemnified Parties") from and against
all claims, liabilities, demands and expenses, including
reasonable attorneys' fees, of any kind which may be asserted
against any of the Indemnified Parties by any person or entity
other than Exchangor which arise out of any acts or omissions
related to the carrying out of the terms of this Exchange
Agreement, the Relinquished Property Contract or the Replacement
Property Contract, including taxes, claims for breach of contract
or injury to person or property, and fines or penalties under any
law, including without limitation under any federal, state or
local law with respect to environmental matters or hazardous
wastes, except for any of the foregoing which arise from the
gross negligence or willful misconduct of any of the Indemnified
Parties.
8.2 Qualified Intermediary shall not be required to accept,
convey, transfer or otherwise deal with the Relinquished
Property, the Replacement Property, the Exchange Funds or any
part thereof until all of the payments, advances and expenses
made or incurred by it (including Qualified Intermediary's Fee)
shall have been paid or until adequate provision has been made
therefor, in the sole discretion of Qualified Intermediary.
8.3 Exchangor and Qualified Intermediary agree that, except for
purposes of Section 1031(a) of the Code and the Regulations,
Qualified Intermediary shall act as Exchangor's agent in
performing Qualified Intermediary's obligations under this
Exchange Agreement. Qualified Intermediary shall not assume or
bear any personal liability in connection with the Relinquished
Property Contract or the Replacement Property Contract.
Notwithstanding anything to the contrary in this Exchange
Agreement, Qualified Intermediary shall be under no obligation to
disburse any portion of the Exchange Funds if Qualified
Intermediary reasonably believes it may be held accountable to
any person or entity either for money or other damages or claims
unless it is provided with funds which it deems to be sufficient
or is indemnified to its satisfaction.
8.4 Qualified Intermediary shall not be liable for any loss of
the principal amount of the Exchange Funds or the earnings
thereon resulting from the investment thereof except in the case
of Qualified Intermediary's willful misconduct or gross
negligence.
8.5 Qualified Intermediary makes no representation or warranty
regarding, nor shall Qualified Intermediary be liable for, the
tax consequences to Exchangor of the transaction contemplated by
this Exchange Agreement, including, without limitation, the
status of the Replacement Property as like-kind property or the
qualification of the transaction as a like-kind exchange pursuant
to Section 1031 of the Code.
ARTICLE 9
NOTICES
9.1 Any notice or other communication required or permitted to
be given pursuant to this Exchange Agreement shall be given in
writing and shall be deemed properly given or made when hand
delivered, or mailed by first class United States certified or
registered mail return receipt requested, or telecopied (faxed),
addressed to the other party hereto as follows:
If to Exchangor: Galena State Bank & Trust Co.
216 S. Commerce Street
Galena, IL 61036
Telecopier (Fax) Number: 815/777-8944
If to Qualified
Intermediary: ATTORNEYS' TITLE GUARANTY FUND, INC.
29 South LaSalle Street
Fifth Floor
Chicago, Illinois 60603-1503
Attention: Hugh E. Pollard
Telecopier (Fax) Number: (312)372-9509
9.2 Either party hereto may change its address by giving notice
of the new address to the other party in the manner provided for
in Section 9.1 above.
ARTICLE 10
SECTION 1445 CERTIFICATION
10.1 Exchangor hereby certifies under penalties of perjury that
Exchangor is not a "foreign person" as such term is defined in
Section 1445 of the Code and the regulations promulgated
thereunder.
10.2 Exchangor's United States taxpayer identification number is
36-2597424
10.3 Exchangor's address is 216 S. Commerce Street, Galena,
Illinois 61036
ARTICLE 11
MISCELLANEOUS
11.1 This Exchange Agreement shall be governed by and shall be
construed in accordance with the laws of the State of Illinois.
11.2 This Exchange Agreement and the rights, obligations and
duties hereunder shall not be assigned or transferred by either
party hereto without the prior written consent of the other
party.
11.3 This Exchange Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and permitted
assigns.
11.4 Each of the terms and provisions of this Exchange Agreement
is severable and if any term or provision or the application
thereof in any circumstance should become invalid, illegal or
unenforceable, the remaining terms and provisions or the
application thereof to other circumstances shall not be affected
thereby and shall remain in full force and effect.
11.5 The Exhibits attached hereto and the recitals set forth
above shall all constitute a part of this Exchange Agreement.
11.6 The covenants and agreements contained in this Exchange
Agreement, including, without limitation, any indemnities
contained herein, shall survive the termination of this Exchange
Agreement and the consummation of the transactions contemplated
hereby.
11.7 All terms used herein in the singular shall include the
plural and all terms used herein in the plural shall include the
singular.
11.8 This Exchange Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all
of which together shall constitute one instrument.
11.9 Time is of the essence of this Exchange Agreement.
11.10 This Exchange Agreement may be amended only by an
instrument in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Exchange Agreement as of the date first above written.
EXCHANGOR: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Lois Jean Wienen
QUALIFIED INTERMEDIARY:
ATTORNEYS' TITLE GUARANTY FUND, INC.
By: /s/ Hugh E. Pollard
Its ESCROW ADMINISTRATOR
EXHIBIT A
to Exchange Agreement
DESCRIPTION OF THE THREE RELINQUISHED PROPERTIES
PARCEL I: (216 S. Commerce Street Property)
Lot Number Sixty-eight (68) on the Easterly side of Commerce
Street and Lot Number Seventy-six (76) on Water Street both lots
being in the block between Green Street and Washington Street on
the West side of Galena River and the South Twenty-two (22) feet
of Lot Sixty-seven (67) on Commerce Street, in the City of
Galena, on the West side of Galena River, situated in the County
of Jo Daviess and State of Illinois.
PARCEL II: (400 South Main St. Property)
Lots Numbered Five (5), Six (6), the North Twenty-two (22) feet
of Lot Number Nine (9) and the North Fourteen and Seven-twelfths
(14 7/12) feet of the South Twenty-four and Six-Twelfths (24
6/12) feet of Lot Number Eight (8) all in Block B on the West
side of the Galena River, in the City of Galena, Jo Daviess
County, Illinois. ALSO, the South Twenty-seven (27) feet of Lot
Number Nine (9) in Block B extending from Water Street to the
rear of said Lot Nine (9) and the North Twenty-four and Six-
Twelfths (24 6/12) feet of Lot Number Eight in Block B extending
from Water Street to the rear of said Lot Eight (8) and on the
West side of the Galena River, in the City of Galena, situated in
the County of Jo Daviess, in the State of Illinois. EXCEPT that
part of Lot 5 in Block B on the West side of the Galena River, in
the City of Galena, Jo Daviess County, Illinois, bounded by a
line described as follows: Commencing at the Northwest corner
of said Block B; thence South 12 degrees 07 minutes O5 seconds
West 35.77' along the West line of said Block B to the point of
beginning, thence South 76 degrees 25 minutes 28 seconds East
58.52' along the North line of a four story brick building,
thence South 12 degrees 04 minutes 58 seconds West 20.21' along
the East line of a four story brick building, thence South 12
degrees 35 minutes 45 seconds West 25.95' along the East line of
a four story brick building to a point on the South line of said
Lot 5; thence North 76 degrees 38 minutes 48 seconds West 58.32'
along the South line of said Lot 5 to the Southwest corner of
said Lot 5; thence North 12 degrees 07 minutes O5 seconds East
46.40' along the West line of said Lot 5 to the point of
beginning.
PARCEL III: (Gear Street Property)
Lots 3, 4, 6 & 7 of the Plat of Subdivision Galena State Bank
Commercial Center, a subdivision located in the Southwest Quarter
of Section 13, Township 28 North, Range 1 West of the Fourth
Principal Meridian, West Galena Township, in the City of Galena,
West side of Galena River, Jo Daviess County, Illinois, subject
to easements, right of ways and building setback lines all as
shown on the plat thereof recorded in the Jo Daviess County,
Illinois Recorder's Office as Document No. 240146 in Planhold D
of Plats, at No. 431.
EXHIBIT B
to Exchange Agreement
ASSIGNMENT, ACCEPTANCE, NOTICE OF ASSIGNMENT
AND CONSENT TO ASSIGNMENT OF
THE RELINQUISHED PROPERTY CONTRACT
ASSIGNMENT
(FOR PARCEL I PROPERTY)
FOR VALUE RECEIVED, Galena State Bank & Trust Co. ("Exchangor")
hereby assigns all of Exchangor's right in and to a certain
Contract for Purchase November 29, 1995, by and between Exchangor
and Labatyd, Inc. for the property located at 216 S. Commerce
St., Galena, IL (the "Relinquished Property Contract"), a copy of
which is attached hereto, including all of Exchangor's rights in
and to the earnest money deposited thereunder, to ATTORNEYS'
TITLE GUARANTY FUND, INC. ("Qualified Intermediary"), pursuant to
an Exchange Agreement dated May 17, 1996 by and between Exchangor
and Qualified Intermediary, this 14th day of June , 1996.
Exchangor: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
ACCEPTANCE
ATTORNEYS' TITLE GUARANTY FUND, INC. ("Qualified Intermediary")
hereby accepts the foregoing assignment of the Relinquished
Property Contract as of the _________ day of, 199 ;
provided, however, that such acceptance is upon the express
condition that Labatyd. Inc. the Purchaser under the Relinquished
Purchase Contract, acknowledges in writing that neither Qualified
Intermediary nor its officers, directors, agents or employees
shall be personally liable for a breach of any representations or
warranties or any obligations of Exchangor as seller under the
Relinquished Property Contract.
ATTORNEYS' TITLE GUARANTY FUND, INC.
By: /s/ Hugh E. Pollard
Its ESCROW ADMINISTRATOR
NOTICE
RE PARCEL I PROPERTY
To: Labatyd, Inc.
Address: 1205 Bussan
Galena, IL 61036
Date: June 14, 1996
You are hereby notified that all of the rights of Galena State
Bank & Trust Co. ("Exchangor") under that certain Contract for
Purchase dated November 29, 1995, by and between Exchangor and
you for the property located at 216 S. Commerce Street, Galena,
IL 61036, the "Relinquished Property Contract") have been
assigned to ATTORNEYS' TITLE GUARANTY FUND, INC.("Qualified
Intermediary"), pursuant to an Exchange Agreement dated May 17,
1996, by and between Exchangor and Qualified Intermediary.
Exchangor: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
CONSENT
Labatyd. Inc. (the "Relinquished Property Purchaser")
hereby consents to the foregoing assignment of the Relinquished
Property Contract and acknowledges that neither qualified
Intermediary nor its officer, directors, agents or employees
shall be personally liable for a breach of any representations or
warranties or any obligations of Exchangor as seller under the
Relinquished Property Contract; provided, however, that this
consent shall in no way be deemed to release Exchangor from any
of Exchangor's agreements, representations, warranties and
indemnifications set forth in the Relinquished Property Contract.
Date: June 14,1996
RELINQUISHED PROPERTY PURCHASER:
/s/ David H. Thiltgen
EXHIBIT B
to Exchange Agreement
ASSIGNMENT, ACCEPTANCE, NOTICE OF ASSIGNMENT
AND CONSENT TO ASSIGNMENT OF
THE RELINQUISHED PROPERTY CONTRACT
ASSIGNMENT
RE PARCEL II
FOR VALUE RECEIVED, Galena State Bank & Trust Co. ("Exchangor")
hereby assigns all of Exchangor's right in and to a certain
Contract for Purchase dated December 04, 1995, by and between
Exchangor and Charles Schnepf & Daniel 0'Keefe for the property
located at 400 S. Main St., Galena, IL 61036 (the "Relinquished
Property Contract"), a copy of which is attached hereto,
including all of Exchangor's rights in and to the earnest money
deposited thereunder, to ATTORNEYS' TITLE GUARANTY FUND, INC.
("Qualified Intermediary"), pursuant to an Exchange Agreement
dated May 17, 1996, by and between Exchangor and Qualified
Intermediary, this 04th day of June, 1996.
Exchangor: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
ACCEPTANCE
ATTORNEYS' TITLE GUARANTY FUND, INC. ("Qualified
Intermediary") hereby accepts the foregoing assignment of the
Relinquished Property Contract as of the 04th day of June, 1996
provided, however, that such acceptance is upon the express
condition that Charles Schnepf & Daniel O'Keefe, the Purchaser
under the Relinquished Property Contract, acknowledges in writing
that neither Qualified Intermediary nor its officers, directors,
agents or employees shall be personally liable for a breach of
any representations or warranties or any obligations of Exchangor
as seller under the Relinquished Property Contract.
ATTORNEYS' TITLE GUARANTY FUND, INC.
By: /s/ Hugh E. Pollard
Its: ESCROW ADMINISTRATOR
NOTICE
RE PARCEL II
To: Charles Schnepf & Daniel O'Keefe
Address: 125 South Main Street
Galena, IL. 61036
Date: June 04, 1996
You are hereby notified that all of the rights of Galena State
Bank & Trust Co. ("Exchangor") under that Certain Contract for
Purchase dated December 04, 1995, by and between Exchangor and
you for the property located at 400 S. Main Street. Galena. IL
61O36 (the "Relinquished Property Contract") have been assigned
to ATTORNEYS' TITLE GUARANTY FUND, INC. ("Qualified
Intermediary"), pursuant to an Exchange Agreement dated May 17,
1996 by and between Exchangor and Qualified Intermediary.
Exchangor: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
CONSENT
Charles Schnepf & Daniel 0'Keefe (the "Relinquished Property
Purchaser") hereby consents to the foregoing assignment of the
Relinquished Property Contract and acknowledges that neither
Qualified Intermediary nor its officer, directors, agents or
employees shall be personally liable for a breach of any
representations or warranties or any obligations of Exchangor as
seller under the Relinquished Property Contract; provided,
however, that this consent shall in no way be deemed to release
Exchangor from any of Exchangor's agreements, representations,
warranties and indemnification's set forth in the Relinquished
Property Contract.
Date: June 04, 1996
RELINQUISHED PROPERTY PURCHASER:
/s/ Charles A. Schnepf
/s/ Daniel O'Keefe
Beneficiaries of Galena State Bank
& Trust Co. Trust No. 478
(uta 2/15/96)
EXHIBIT B
to Exchange Agreement
ASSIGNMENT, ACCEPTANCE, NOTICE OF ASSIGNMENT
AND CONSENT TO ASSIGNMENT OF
THE RELINQUISHED PROPERTY CONTRACT
ASSIGNMENT
RE PARCEL III
FOR VALUE RECEIVED, Galena State Bank & Trust Co., as Trustee
under trust agt. dated 7/16/1976, known as ("Exchangor") hereby
assigns all of Exchangor's right in and to a certain Contract for
Purchase dated October 19, 1995, by and between Exchangor and
Merkle Engineers, Inc. for the property located at Gear Street,
Galena, IL 61036 (the "Relinquished Property Contract"), a copy
of which is attached hereto, including all of Exchangor's rights
in and to the earnest money deposited thereunder, to ATTORNEYS'
TITLE GUARANTY FUND, INC. ("Qualified Intermediary"), pursuant to
an Exchange Agreement dated May 17, 1996, by and between
Exchangor and Qualified Intermediary, this 17th day of May, 1996
Exchangor: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
ACCEPTANCE
ATTORNEYS' TITLE GUARANTY FUND, INC. ("Qualified Intermediary")
hereby accepts the foregoing assignment of the Relinquished
Property Contract as of the _____ day of _______, 199____
provided, however, that such acceptance is upon the express
condition that Merkle Engineers, Inc., the Purchaser under the
Relinquished Property Contract, acknowledges in writing that
neither Qualified Intermediary nor its officers, directors,
agents or employees shall be personally liable for a breach of
any representations or warranties or any obligations of Exchangor
as seller under the Relinquished Property Contract.
ATTORNEYS' TITLE GUARANTY FUND, INC.
By: /s/ Hugh E. Pollard
Its: ESCROW ADMINISTRATOR
NOTICE
RE PARCEL III
To: Merkle Engineers, Inc.
Address: 100 Perry Street
Galena, IL. 61036
Date: May 17, 1996
You are hereby notified that all of the rights of Galena State
Bank & Trust Co., as Trustee under Trust Agreement dated July 16,
1976 ("Exchangor") under that Certain Contract for Purchase dated
October 19, 1995, by and between Exchangor and you for the
property located at Gear Street, Galena, IL 61O36 (the
"Relinquished Property Contract") have been assigned to
ATTORNEYS' TITLE GUARANTY FUND, INC. ("Qualified Intermediary"),
pursuant to an Exchange Agreement dated May 17, 1996, by and
between Exchangor and Qualified Intermediary.
Exchangor: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
CONSENT
Merkle Engineers, Inc. (the "Relinquished Property Purchaser")
hereby consents to the foregoing assignment of the Relinquished
Property Contract and acknowledges that neither Qualified
Intermediary nor its officer, directors, agents or employees
shall be personally liable for a breach of any representations or
warranties or any obligations of Exchangor as seller under the
Relinquished Property Contract; provided, however, that this
consent shall in no way be deemed to release Exchangor from any
of Exchangor's agreements, representations, warranties and
indemnification's set forth in the Relinquished Property
Contract.
Date: May 17, 1996
RELINQUISHED PROPERTY PURCHASER:
/s/ William R. Matoms
President
EXHIBIT C
to Exchange Agreement
IDENTIFICATION OF REPLACEMENT PROPERTY
Date: May 17, 1996
To: Attorneys' Title Guaranty Fund, Inc.
("Qualified Intermediary")
29 South LaSalle Street
Fifth Floor
Chicago, Illinois 60603-1503
Attention: Hugh E. Pollard
From: Galena State Bank & Trust Co.("Exchangor")
& Galena State Bank & Trust Co., Trustee of Trust No. 167
216 S. Commerce St. - Galena, IL 61036
Pursuant to that certain Exchange Agreement dated May 17, l996,
by and between Qualified Intermediary and Exchangor (the
"Exchange Agreement"), Exchangor hereby identifies the following
property(ies) as Replacement Property (as defined in the Exchange
Agreement):
1. Street Address: Gear Street
Galena, IL 61036
P.I.N.
Common Name:
Legal Description: See Attached Continuation
(Lot 1 of Plat of Subdv. of Galena
State Bank Commercial Center
Galena, IL
2. Street Address:
P.I.N.
Common Name:
Legal Description:
EXHIBIT C TO EXCHANGE AGREEMENT
REPLACEMENT PROPERTY
Lot 1 of the Plat of Subdivision Galena State Bank
Commercial Center, a subdivision located in the Southwest Quarter
of Section 13, Township 28 North, Range 1 West of the Fourth
Principal Meridian, West Galena Township, in the City of Galena,
West side of Galena River, Jo Daviess County, Illinois, subject
to easements, right of ways and building setback lines all as
shown on the plat thereof recorded in the Jo Daviess County,
Illinois Recorder's Office as Document No. 240146 in Planhold D
of Plats, at No. 431.
3. Street Address:
P.I.N.
Common Name:
Legal Description:
Exchangor may identify up to three properties as Replacement
Property without regard to their fair market value. In the event
Exchangor identifies more than three properties as Replacement
Property during the Identification Period (as defined in the
Exchange Agreement), Exchangor acknowledges that it is familiar
with the "200-percent rule" and the "95-percent rule" of
paragraph (c)(4) of Section 1.1031(k)-1 of the Regulations (as
defined in the Exchange Agreement).
EXCHANGOR: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
Receipt acknowledged this _______ day of ________, 199___
ATTORNEYS' TITLE GUARANTY FUND, INC.
By:
Its:
EXHIBIT D
to Exchange Agreement
ASSIGNMENT, ACCEPTANCE, NOTICE OF ASSIGNMENT
AND CONSENT TO ASSIGNMENT OF
THE REPLACEMENT PROPERTY CONTRACT
ASSIGNMENT
*u/t/a dated 7/16/1976, known
as Trust No. 167
FOR VALUE RECEIVED, Galena State Bank & Trust Co. as Trustee*
("Exchangor") hereby assigns all of Exchangor's right in and to a
certain Purchase Agreement dated May 17, 1996, by and between
Exchangor and Hoskins Lumber Company for the property located at
Gear St., Galena, IL 61036 (the "Replacement Property Contract"),
a copy of which is attached hereto, to ATTORNEYS' TITLE GUARANTY
FUND, INC. ("Qualified Intermediary"), pursuant to an Exchange
Agreement dated May 17, 1996, by and between Exchangor and
Qualified Intermediary, this 17th day of May, 1996.
EXCHANGOR: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
ATTEST: /s/ Michele M. Berning
ACCEPTANCE
ATTORNEYS' TITLE GUARANTY FUND, INC. ("Qualified Intermediary")
hereby accepts the foregoing assignment of the Replacement
Property Contract as of the _______ day of, 1996; provided,
however, that such acceptance is upon the express condition that
Hoskins Lumber Company, the Seller under the Replacement Property
Contract, acknowledges in writing that the liability of Qualified
Intermediary (and its officers, directors, agents and employees)
as assignee of Exchangor's rights under the Replacement Property
Contract is limited to forfeiture of the earnest money deposit
provided for in the Replacement Property Contract.
ATTORNEYS' TITLE GUARANTY FUND, INC.
By: Hugh E. Pollard
Its: ESCROW ADMINISTRATOR
NOTICE
To: Hoskins Lumber Company
Address: 107 E. Myrtle St.
Elizabeth, IL 61028
Date: May 17, 1996
You are hereby notified that all of the rights of Galena State
Bank & Trust Co. ("Exchangor")under that certain Purchase
Agreement dated May 17, l996 by and between Exchangor and you for
the property located at Gear Street, Galena, IL 61036 (the
"Replacement Property Contract") have been assigned to ATTORNEYS'
TITLE GUARANTY FUND, INC.("Qualified Intermediary"), pursuant to
an Exchange Agreement dated May 17, 1996 by and between Exchangor
and Qualified Intermediary.
EXCHANGOR: GALENA STATE BANK & TRUST CO.
BY: /s/ Jerry L. Murdock
Attest: /s/ Michele M. Berning
CONSENT
Hoskins Lumber Company (the "Replacement Property Seller")
hereby consents to the foregoing assignment of the Replacement
Property Contract and acknowledges that the liability of
Qualified Intermediary (and its officers, directors, agents and
employees) as assignee of Exchangor's rights under the
Replacement Property Contract is limited to forfeiture of the
earnest money deposit provided for in the Replacement Property
Contract; provided, however, that this consent shall in no way be
deemed to release Exchangor from any of Exchangor's agreements,
representations IL:, warranties and indemnifications set forth in
the Replacement Property Contract.
Date: May 21, l996.
REPLACEMENT PROPERTY SELLER:
HOSKINS LUMBER COMPANY
By: /s/ Vincent E. Toepfer
/s/ Cheryl A. Toepfer
EXHIBIT E
to Exchange Agreement
DIRECTION
ATTORNEYS' TITLE GUARANTY FUND, INC., as assignee of the rights
of Galena State Bank & Trust Co. ("Purchaser")under a certain
Purchase Agreement dated May 17, 1996, (the "Contract") with
Hoskins Lumber Company ("Seller"), hereby directs Seller to
convey or cause to be conveyed to Purchaser the property commonly
known as Gear Street, Galena, IL 61036 which property is the
subject of the Contract.
Dated: June 18, 1996
ATTORNEYS' TITLE GUARANTY FUND, INC.
BY: /s/ Hugh E. Pollard
Its: ESCROW ADMINISTRATOR
FISERV
License and Service Agreement
This LICENSE AND SERVICE AGREEMENT numbered 3810163 is entered
into as of the Effective Date below by and between
Fiserv
a Corporation whose registered office is located at
2601 Technology Drive
Orlando, FL 32804
(hereinafter called 'Company') and
Heartland Financial USA, Inc.
whose registered office is located at
1398 Central Avenue
Dubuque, Iowa 52001
(hereinafter called 'Client')
This Agreement shall be construed and enforced under the laws of
the State of Florida.
Effective Date: June 21, 1996
<PAGE>
Witnesseth:
WHEREAS, Company is the licensor of the Software System (as
hereinafter defined), and
WHEREAS, Client wishes to install and Use (as hereinafter
defined), the Software System in Client's premises.
NOW, THEREFORE, the parties hereto agree from the Effective Date
as follows:
1. Definitions
The following are the definitions of various terms used in
this Agreement:
1.1 'Accounts' means the total number of individually designated
accounts processed by the Transaction, Time, and Loan
subsystem of the Software System.
1.2 'Basic Maintenance Services' means services to correct a
Nonconformity or Major Nonconformity in the original,
unmodified Software System. Basic Maintenance Services are
available only with respect to the current and last prior
release of the Software System.
1.3 'Business Requirements' means the description of the
Client's business needs and the functionality required.
1.4 'Client Confidential Information' means any confidential
information concerning Client's business, that is labeled as
such and all data pertaining to Client's customers.
1.5 'Computer System' means that dedicated computer machinery
and manufacturer-supplied software identified on Schedule 2.
Client shall have sole responsibility to own or lease,
unpack, plan, install, test, and maintain the equipment
according to any and all applicable building or electrical
codes, regulations or requirements, as well as the
manufacturer and Company recommendations.
1.6 'Effective Date' means the date identified as such in this
Agreement as the date upon which this Agreement shall
commence.
1.7 'Enhancements' means modifications made to the Software
System which add program features or functions not
originally within the Software System and which are
generally provided upon payment of additional License Fees.
Company reserves the right to define which changes are
upgrades or separately priced enhancements.
1.8 'Functional Specifications' means the description of the
detailed functionality changes to product, account and
customer level processing.
1.9 'Location' means only those premises identified on Schedule
1.
1.10 'Maintenance Fee' means that fee for the time being in
effect for the provision of the Maintenance Services
hereunder.
1.11 'Nonconformity' means a failure of the Software System to
accurately process Client's data or to perform functions
described in Company's documentation.
(i) Level One: A Major Nonconformity which renders
the Software System inoperative.
(ii) Level Two: Any nonconformity which significantly
degrades the performance of the Software System or
which affects regulatory compliance, including, but not
limited to, the calculation of interest, fees and
balances, and errors affecting the accuracy of customer
statements.
(iii)Level Three: A nonconformity which has a
significant impact on the Client's ability to perform
its normal business functions and for which no
circumvent procedure is available.
(iv) Level Four: A nonconformity which negatively
impacts the ability of the Client to perform its normal
business functions but for which there is a relative
cost effective circumvent procedure available.
(v) Level Five: A nonconformity which does not fit
into any of the above categories.
1.12 'Professional Service Fees' means the greater of the sums of
amounts derived by multiplying either the minimum number of
days specified on Schedule(s) 1 or the number of days or
fractions of days worked within each grade by the daily fee
rate as defined on the Schedule(s) 1. Additional fees may
be raised in respect of hours worked outside these at the
request of Client at the rates previously agreed in writing
by Client.
1.13 'Software System' means the standard, unmodified computer
programs in object code, unless otherwise specified on
Schedule 1, and procedure statements in machine readable
form, together with one set of Company standard
documentation as listed on Schedule 1. The Software System
does not include separate, independent, and stand-alone
modules or subsystems which Client has developed and
maintained without Company's assistance.
1.14 'Special Maintenance Services' means any other services as
specified on Schedule 1.
1.15 'Specification Nonconformity' means a failure of the
modified Software System to operate in accordance with the
Functional Specifications.
1.16 'Taxes' means all sales, use, excise, value added, and other
taxes and duties however designated which are levied by any
taxing authority having jurisdiction over the Location.
Taxes shall not include any levies by any taxing authority
which are based upon the net income of Company.
1.17 'Third Party' means any party other than Company's employees
or subcontractors and Client.
1.18 'Total License Fee' means the total sum specified as such on
Schedule 1 for standard, unmodified modules of the Software
System. Any fees for modifications, enhancements, upgrades,
or additions to the Software System are excluded from this
Agreement unless otherwise specified.
1.19 'Upgrades' means changes made to maintain compatibility with
new system software releases or to improve upon previously
existing features and operations with the Software System.
This primarily includes program fixes to the existing
Software System.
1.20 'Use' means copying or loading any portion of the Software
System from storage units or media into any equipment for
the processing of data by the Software System once so
loaded, or the operation of any procedure or machine
instruction utilizing any portion of either the computer
program or instructional material supplied with the Software
System. Use is deemed to occur at the location where any of
the above processes happen. Use is limited to type of
operations described in Company documentation solely to
process Client's own work and that of majority-owned
financial institutions. Use specifically excludes any
service bureau or time-share services to minority-owned or
unaffiliated third parties without prior written consent by
Company and payment by Client of additional fees in
accordance with mutually agreed terms.
1.21 'Workday' means Company's working day for the purposes of
this Agreement, as specified on Schedule 1.
2. License to Use the Software System
2.1 Company agrees to furnish the Software System to Client and
does hereby grant to Client a non-exclusive, nontransferable
License to Use the Software System at the Location to
process the designated institutions, corporations or any
other legal entity, as specified on Schedule 1.
2.2 Client may change the Location, without cost to Client, in
the event Client transfers its data processing department to
a new location within the same country as the Location.
Client will provide Company with fifteen (15) days advance
notice of any proposed transfer of operations.
2.3 The Company, prohibits the copying of any portions of the
Software System except that Client may copy reasonable
quantities of any standard end user documentation; and may
copy machine language code, in whole or in part, in
reasonable quantities, in printed or electronic form, for
use by Client at the Location for archive, back-up or
emergency restart purposes, or to replace copy made on
defective media. The original, and any copies of the
Software System, or any part thereof, shall be the property
of Company.
2.4 Client shall maintain any such copies and the original at
the Location and one Client archive site in the same country
as the Location, which site is specified on Schedule 1.
Client may transport or transmit a copy of the Software
System from the Location or the Archive Site to another
location in the same country as the Location for back-up use
when required by Computer System malfunction, provided that
the copy or original is destroyed or returned to the
Location or Archive Site when the malfunction is corrected.
Client shall reproduce and include Company's copyright and
other proprietary notices on all copies, in whole or in
part, in any form, of the Software System made in accordance
with this Section.
2.5 Company grants to Client the right to Use any modifications
furnished or authorized by Company pursuant to a separate
written agreement.
3. Professional Services Terms
3.1 In consideration of the payment to Company by Client of the
Fees and the cost of all items and services provided and any
other expenses incurred by Company in connection with this
Agreement, as defined on Schedule(s) 1, Company hereby
agrees to provide personnel of the grades, and between the
dates specified on Schedule(s) 1 to work on behalf of Client
in accordance with the terms and conditions set out below.
3.2 All work which is to be performed by Company hereunder shall
be based upon the preliminary Business Requirements listed
on Schedule 3. Client shall utilize Schedule 3 to provide
Company with all necessary information concerning its
requirements for modifications to the Software System or
other information requested by Company related to Company's
performance of its obligations under this Agreement. Any
estimates of costs and completion dates listed on the
Schedules are referenced solely for the purpose of allowing
Client to plan its budgets and schedules based upon the then
available information.
3.3 Company shall provide a Preliminary Project Plan based upon
the Business Requirements which shall be incorporated as
Schedule 4 when appropriate. Schedule 4 shall contain a
preliminary listing of the nature and timing of tasks for
the project, some of which are to be performed by Company
and some by Client. Company shall utilize reasonable
efforts to meet the dates set forth in the Project Plan or
any replacement thereof.
3.4 In the event that Company is to provide installation,
conversion or training to Client for the Software System,
the fees therefore shall be as specified on Schedule 1. The
nature and timing of any installation, conversion and
training shall be as specified in the Project Plan mutually
agreed upon by the parties.
3.5 In the event that Company is to provide modifications to the
Software System, the modifications shall be based upon
specifications created by Company and approved by Client as
provided below:
(i) During the phase referred to on the Project Plan
as "Functional Specifications", Company may develop
Functional Specifications based upon the descriptions
contained on Schedule 3 for Client's written approval.
Company shall not be obligated to perform any further
development work until Specifications have been
accepted in writing by Client which acceptance shall
not be unreasonably withheld or unduly delayed.
(ii) Modifications, changes, enhancements, conversions,
upgrades or additions to the Software System beyond
those stated in the Functional Specifications shall be
added only upon mutual written agreement. In the event
the parties agree to add any such items, the Project
Plan shall automatically be modified to the extent
necessary to allow for the implementation or provision
of the items.
(iii)The Project Plan shall also set forth the time
period after the acceptance of the Functional
Specifications within which Company shall prepare
"Functional Specifications" including an acceptance
test script for the adaptations described therein.
After Client's written acceptance of the Functional
Specifications, which acceptance shall not be
unreasonably withheld or delayed, Company shall
commence activities to modify the Software System for
use by Client in accordance with the Project Plan.
(iv) The Software System adaptations shall be deemed to
have been accepted by Client either upon the completion
of a formal Acceptance Test (as set forth in the test
scripts) or 30 days after delivery of the modified
Software System, whichever occurs first. Acceptance by
Client will not be unreasonably withheld or unduly
delayed. Client agrees promptly to notify Company in
writing (and with reasonable particularity) upon
conclusion of the Acceptance Test or earlier upon
discovery of any Specification Nonconformities
disclosed by such testing or use. Company shall
correct any Specification Nonconformities disclosed by
such testing without further charge to Client within a
reasonable time of Client's notice.
3.6 The Professional Services Fees are based on a workday as
defined on Schedule(s) 1. Additional Professional Services
Fees may be raised in respect of hours worked outside these
at the request of Client at the rates previously agreed in
writing by Client.
3.7 If support is primarily required in part days, Company may
notify Client that an hourly fee rate shall apply. The
hourly rate will be calculated pro-rata of the stated daily
rate unless otherwise agreed.
3.8 The daily rates quoted in the table will be valid for three
months from the effective date listed on the relevant
Schedule 1. Thereafter, they will be subject to change by
Company on one-month's notice.
3.9 A higher Professional Services Fee may be applied for an
individual whose support to Client has advanced to a new job
grade or after one month's notice if his general development
warrants a job upgrade by Company.
4. Maintenance Services Terms
4.1 In consideration of the payment to Company by Client of the
Maintenance Fee, Company agrees to furnish to Client
Maintenance Services as described and subject to the terms
and conditions contained in this Agreement.
4.2 Client may elect to receive Basic Maintenance Services
and/or Special Maintenance Services by designating the
services selected on Schedule 1.
4.3 Company shall maintain the Software System in compliance
with applicable Federal regulations.
4.4 Client agrees to train current and future employed staff
members on the technical and user operations of the Software
System. If the Client chooses, training can be provided at
the Company's location or at the Client's location at the
then current training rates. Phone training will also be
invoiced at the said rate.
4.5 As part of Basic Maintenance Services, Company shall provide
telephone support for reporting of Level One, Two, and Three
Nonconformities twenty-four hours per day, seven days per
week. Company shall provide services to correct or resolve
any other Nonconformity of the Software System only on
Workdays. Telephone cost for remote dial-up is Client's
expense. Company may utilize remote diagnostic software and
dial-up telephone lines in providing these services.
4.6 Company and Client shall promptly assign such technical
personnel as are necessary to identify, isolate, and
reconstruct any reported Level One Nonconformity and,
provided that such Nonconformity is capable of
reconstruction and is due to a defect in the Software
System, Company and Client shall utilize its best efforts to
correct or utilize a circumvent procedure to restore system
operation within twenty-four hours of Company's receipt of
the call or before the next occurrence of the nonconformity.
Company shall provide such services to Client free of any
additional fees and charges, including but not limited to
any reimbursement for travel of Company technical personnel
incurred during the resolution of the Major Nonconformity.
4.7 Company and Client shall use its best efforts to correct or
adopt a circumvent procedure with respect to a Level Two
Nonconformity within forty-eight hours of its receipt of the
Level Two Nonconformity report.
4.8 Company and Client shall use its commercially reasonable
best efforts to correct a Level Three Nonconformity within
five business days of its receipt of the Level Three
Nonconformity report by providing a circumvent procedure or
code, whichever is most reasonable.
4.9 Company shall use its commercially best efforts to adopt a
circumvent procedure with respect to a Level Four
Nonconformity within five (5) business days of its receipt
of the Nonconformity or the next occurrence of the issue.
If a circumvent procedure has been adopted, Company may
deliver a software coded correction to the Level Four
Nonconformity with the next scheduled base release of the
Software System that is still open for development changes
at the time of the notice of the Level Four Nonconformity.
4.10 Company shall use its commercially reasonable best efforts
to correct a Level Five Nonconformity with the next Software
System Release open for development at the time of the
notice of the Level Five Nonconformity.
4.11 Should Company's review of the Level One, Two or Three
Nonconformity indicate, in Company's reasonable opinion,
that the reported problem is not in the Software System but
is due to Client's abuse or misuse of the Software System,
or by a modification or addition to the Software System not
performed by Company (inclusive of the integration of Third
Party products with the software system), or by Client's
failure to properly maintain the Computer System or to
install the required system software release as instructed
by Company, then:
(i) Client agrees, if required by Company, to
reimburse Company the related costs of work performed
by Company in investigating the problem including
related system calculated on a time-and-materials basis
at Company's then standard professional service rates,
and
(ii) Company, on request of Client, shall advise Client
whether Company can correct or assist in resolving such
problem, and the terms under which Company shall
undertake the same, and on written acceptance by Client
shall correct or assist in resolving the problem in
accordance with such terms.
4.12 Maintenance Fees cover an average of ten (10) hours of
support per month. If the average for the month is greater
than fifty percent (50%) of the ten (10) hours, the Client
will be contacted and invoiced for hourly support at the
Company's current rates.
4.13 The initial Maintenance Fee and adjustment terms are
specified on Schedule 1. Maintenance Fees shall be subject
to annual increases and shall also be subject to increase
following delivery of new versions of, or modifications or
additions to the Software System or changes in the number of
accounts processed as specified in the License and Service
Agreement.
4.14 All such increases to the Maintenance Fee shall be
incorporated by amending Schedule 1.
4.15 Invoicing of the Maintenance Fee will commence as specified
on Schedule 1.
5. Use Of And Rights To Company's Work Product
All information, reports, studies, object or source code,
flow charts, diagrams and other tangible or intangible
material of any nature whatsoever produced by or as a result
of any of the services performed hereunder shall be the sole
and exclusive property of Company or its corporate parent.
Client shall be entitled to Use all such work product
produced by Company in accordance with the terms and
conditions of the License and Service Agreement. Nothing
contained in this Agreement shall be deemed to provide
greater rights with respect to the Software System, as
modified for Client's use herein, than those provided in the
License and Service Agreement.
6. Term
6.1 The term of the License grant shall begin on the Effective
Date and continue in perpetuity unless terminated earlier as
provided herein.
6.2 The provision of the Maintenance Services by Company shall
commence on the Effective Date specified on Page 1 hereto
and shall continue for a period of five years.
6.3 A Maintenance Services agreement may be renewed for
successive one year terms at Company's then current fees for
all modules then under License.
7. Delivery
The Company agrees to deliver the Software System to the
Location.
8. Payment
8.1 Company shall add to each invoice for reimbursement by
Client an amount equal to any applicable Taxes. Company
shall remit such Taxes to the appropriate taxing
authorities.
8.2 Each payment to be made to Company under this Agreement
shall be paid by Client, in funds as specified on Schedule
1, within fifteen (15) days of the date of an invoice in
respect thereof and the time of payment shall be of the
essence of this Agreement.
8.3 If the whole or any part of any invoice remains outstanding
for thirty (30) days or more, Client shall pay an agreed
financial charge calculated at the rate of one and one half
percent (1-1/2%) per part or complete month on the overdue
balance. Company shall pay the same financial charge on the
amount of any credit due to Client for sums previously paid
by Client which were the subject of a dispute resolved in
Client's favor.
8.4 Except as expressly provided in this Agreement to the
contrary, Client agrees to pay the reasonable travel and
living expenses of any employees of Company and its
authorized contractors who render services at either the
Location or any other Client site in connection with the
activities described in this Agreement. All expenses shall
be itemised on invoices submitted by Company and shall be
due and payable upon presentation of each invoice as
provided herein.
9. Performance
9.1 Client shall give Company full access to the Location, the
Software System, and the Computer System to enable Company
to provide Services and shall make available information,
facilities, and services reasonably required by Company for
the performance of its obligations under this Agreement.
9.2 Work in determining the nature of any problem or in making
corrections, amendments, or additions to the Software System
may be carried out at Company's site or at the Location at
the discretion of Company.
9.3 Client agrees to maintain the Computer System and Software
System according to Company recommendations during the term
of this Agreement.
10. Rescheduling
If Client is unable to provide access to required facilities
or personnel or is unable to meet its tasks assigned on
Schedules 3 and 4 in a timely manner, Company will endeavor
to reschedule tasks to minimize the non-productive time
arising. All such non-productive time is chargeable to
Client. If such non-productive time is expected to be
significant, Company will endeavor to reassign its personnel
to other suitable work. In this event, Client will not be
charged for the time personnel were reassigned.
11. Schedules
The attached Schedules form part of and are included in this
Agreement.
12. Warranties
12.1 The Company warrants that the Software System will perform
the functions specified in the Documentation identified on
Schedule 1. For a period of ninety (90) days after
delivery, Company will promptly provide replacements or
corrections to any part of the Software System which does
not so perform where such failure is material and is
notified in writing to Company within such period. This
warranty shall not apply if the problem has been caused by
unauthorized amendment to the Software System, or by
incorrect Use. Company acknowledges that the Software
System is designed to operate on the Computer System
specified on Schedule 2 and both parties acknowledge that
the warranties given by Company are conditional upon the
procurement and maintenance by Client of the Computer System
in accordance with such configuration.
12.2 The Company's obligation under the warranty stated in the
foregoing paragraph shall be to repair or replace defective
or non-conforming parts of the Software System at its own
expense and within a reasonable time.
12.3 The Company warrants that it has the right to License the
Use of the Software System.
12.4 Company warrants that the Services described in this
Agreement shall be performed in a workmanlike manner and in
accordance with standards applicable to the financial
software services industry.
12.5 THE WARRANTIES STATED ABOVE ARE LIMITED WARRANTIES AND ARE
THE ONLY WARRANTIES MADE BY COMPANY. COMPANY DOES NOT MAKE,
AND CLIENT HEREBY EXPRESSLY WAIVES, ALL OTHER WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE
STATED EXPRESS WARRANTIES ARE IN LIEU OF ALL LIABILITIES OR
OBLIGATIONS OF COMPANY FOR DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF THE
SOFTWARE SYSTEM.
13. Indemnity
13.1 Company shall indemnify Client and hold it harmless against
any claim or action which alleges that the use of the
Software System infringes a patent, copyright or other
proprietary right of a third person enforceable in the
Location. Client agrees that it will notify Company
promptly in writing of any such claim and grants Company
sole right to control the defense and disposition of such
claim.
13.2 If as a result of any such claim Company or Client is
permanently enjoined from using the Software System by a
final, nonappealable decree, Company at its sole option and
expense may procure for Client the right to continue to use
the Software System or at its sole option and expense, may
provide a replacement or modification for the Software
System so as to settle such claim. If modification of the
Software System is not reasonably practical in the sole
opinion of Company (reasonably given), Company shall
discontinue and terminate this License upon written notice
to Client and shall refund to Client all License Fees paid
to Company under this Agreement. In making this
determination, Company will give due consideration to all
factors including financial expense.
13.3 The foregoing states the entire liability of Company for the
infringement of any copyrights, patents or other proprietary
rights of a third person by the Software System or any parts
thereof, and Client hereby expressly waives any other
liabilities on the part of Company arising therefrom.
13.4 The Company shall have no liability for any claim which is
based upon
(a) the Use of any part of the Software System in
combination with Materials or software not provided by
Company; or
(b) modifications made by Client or any Third Party.
14. Limitation of Liability of the Parties
14.1 Each party shall indemnify and hold the other harmless
against any
(a) loss of or any damage to any tangible property or
(b) injury to or death of any person;
caused by the negligence of, breach of statutory duty by, or
willful misconduct of the indemnifying party's employees,
agents, or sub-contractors.
14.2 COMPANY SHALL HAVE NO LIABILITY WITH RESPECT TO ITS
OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR LOSS OF
GOODWILL, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES, WHETHER IN TORT OR IN CONTRACT, EVEN IF
IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN
ANY EVENT, THE LIABILITY OF COMPANY TO CLIENT FOR ANY REASON
AND UPON ANY CAUSE OF ACTION WHATSOEVER SHALL BE LIMITED TO
THE AMOUNT OF ANY LICENSE FEE WHICH CLIENT HAS PAID TO
COMPANY AS OF THE DATE ON WHICH SUCH CAUSE OF ACTION
ACCRUES.
15. Title
15.1 Nothing in this agreement shall convey to Client any title
to or any rights in the Software System including but not
limited to all proprietary rights or ownership of any
modifications. The Client's sole right in relation to the
Software System or any modifications is to Use the same for
the duration of this Agreement under the terms and
conditions herein contained.
15.2 The Software System and all modifications, enhancements, or
upgrades made to the Software System and all patents,
copyrights, or other proprietary rights related to each of
the above are the sole and exclusive property of Company,
whether made by Company, Client, or any of their employees
or agents.
16. Non-Disclosure
16.1 Company has granted Client the limited right to use the
Software System as provided in this Agreement. Client
acknowledges that
(a) the Software System, including all specifications,
work product, translations and other materials
developed by Company, and
(b) the terms and conditions of this Agreement
contain highly confidential, unique, secret and valuable
information of Company. Client agrees that it shall not
decompile, disassemble or reverse engineer the Software
System and that it shall not sell, transfer, publish,
disclose, display or otherwise make available to others the
Software System, any materials relating to or forming a part
of the Software System or any other proprietary information
of Company without the prior written consent of Company.
Client agrees to secure and protect the Software System and
proprietary information and to take appropriate action by
written agreement with its employees who are permitted
access to such materials to satisfy its obligations
hereunder. Client further agrees that it shall use its best
efforts to assist Company in identifying and preventing any
use or disclosure of any portion of the Software System or
proprietary information. As a precondition of Client's
request to Company for consent to disclose the Software
System, in whole or in part, to a Third Party, Client shall
obtain from such party an executed Schedule 5. All
obligations and undertakings of Client relating to
confidentiality and nondisclosure, whether contained in this
Section or elsewhere in this Agreement, shall survive the
termination of this Agreement for any reason.
16.2 Company shall protect any Client Confidential Information
from disclosure with the same degree of care afforded by
Company to its own confidential information. All
obligations and undertakings of Company specified herein
with respect to Client Confidential Information shall
survive the termination of this Agreement for whatever
reason.
16.3 Client shall permit Company's authorized representatives at
all reasonable times during Client's normal hours of
operation to audit Client's Use at the Location to determine
that the provisions of this Agreement are being faithfully
performed. For that purpose, Company shall be entitled to
enter into any of Client's premises and Client hereby
irrevocably grants authority to Company and authorized
representative to enter such premises for such purpose. Any
such audit shall be conducted in such a manner as to
minimize the disruption to Client's business and/or the Use
of the Software System.
16.4 Client shall promptly notify Company if it becomes aware of
any breach of confidence relating to the Software System or
other Company proprietary information and give Company all
reasonable assistance in connection with Company's
investigation of same.
17. Termination
17.1 The termination of this Agreement shall automatically, and
without further action by Company, terminate and extinguish
the License, and all rights in and to the Software System
shall automatically revert irrevocably to Company. Company
shall have the right to take immediate possession of the
Software System and all copies thereof wherever located
without further notice or demand.
17.2 Client may terminate the Agreement in the event of a
material default by Company that is not cured within the
applicable cure period specified in this Agreement, or a
reasonable cure period (with the minimum being thirty (30)
days if no other cure period is stated) from receipt by
Company of written notice specifying the nature of the
default with reasonable particularity.
17.3 If Client violates any of the Non-Disclosure, Non-
Assignment, or License to Use provisions of this Agreement
and fails to remedy any such breach within five (5) days of
notice thereof from Company, Company may terminate this
Agreement without further notice.
17.4 If Client violates or fails to perform any of the terms or
conditions other than those specifically expressed in Sub-
clause (17.3) and fails to remedy any such breach within
thirty (30) days of notice thereof from Company, or if
Client shall become insolvent or ceases to do business, then
Company may give a written notice declaring this Agreement
is terminated at the expiration of such notice period.
17.5 Exercise of the right of termination afforded to either
party shall not prejudice legal rights or remedies either
party may have against the other in respect of any breach of
the terms of this Agreement.
17.6 Client's failure to pay on a timely basis is cause for
termination of this agreement and the License.
18. Force Majeure
Neither party shall be responsible for delays or failures in
performance resulting from acts reasonably beyond the
control of that party.
19. Non-Assignment
19.1 In the event of the sale of fifty percent (50%) or more of
Client's common stock, or the sale of all or substantially
all of Client's assets, or in the event of any merger in
which Client is not the surviving organization, Client may
transfer this Agreement and the License upon the prior
written consent of Company, which consent shall not be
unreasonably withheld or delayed.
19.2 If the organization acquiring Client's common stock, assets
or surviving a merger is an organization deriving more than
five percent (5%) of its gross revenues from providing
service bureau, time share, computer software consulting
services, computer software licensing or computer hardware
sales, Company shall be under no obligation to consent to
such transfer.
19.3 Except as expressly provided above, neither party may assign
or transfer its rights, duties or obligations under this
Agreement to any person or entity, in whole or in part,
without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.
20. Entire Agreement
20.1 This instrument constitutes the complete and exclusive
statement of the Agreement between the parties as to the
subject matter hereof and supersedes all previous agreements
with respect thereto.
20.2 Each party hereby acknowledges that it has not entered into
this Agreement in reliance upon any representation made by
the other party but not embodied herein.
20.3 This Agreement may not be modified or altered except by a
written instrument executed by both parties.
21. Variation
No variation of this Agreement shall be binding on either
party unless such variation is incorporated in a revised
Schedule to this Agreement and signed by the duly authorized
representatives of both parties.
22. Notices
Any notice required to be given hereunder shall be given by
sending the same
(a) by air courier to the addresses as first set out
above or to any subsequent address designated by either
party for the purpose of receiving notices pursuant to
this Agreement, and any notice so sent shall be deemed
to have been given three (3) business days after the
same was mailed; or
(b) by confirmed facsimile.
23. Action
No action, regardless of form, arising out of this agreement
shall be brought by Client more than two (2) years after
such cause of action shall have accrued.
24. General Terms
24.1 In the event that a dispute arises concerning the terms of
this Agreement the aggrieved party shall refer such dispute
to arbitration as specified herein. Such arbitration shall
be held in the City or suburbs of Orlando, Florida, in
accordance with the rules of the American Arbitration
Association pertaining to the Resolution of Computer
Disputes ("AAA Rules") then in effect. Judgment upon the
award rendered by the arbitrators may be entered in any
court having jurisdiction over the parties. The arbitrators
shall have the authority to grant any legal remedies that
would be available in any judicial proceeding instituted to
resolve a disputed matter.
24.2 The prevailing party in an action brought against the other
to enforce the terms of this Agreement or any rights or
obligations hereunder, shall be entitled to receive its
reasonable costs and expenses of bringing such action
including its reasonable attorneys fees.
24.3 Company and Client agree that each provision in this
Agreement is deemed equally essential to each party.
24.4 The section headings used herein are inserted only as a
matter of convenience and for reference and shall not affect
the construction or interpretation of this Agreement.
24.5 If any provision of this Agreement is held to be
unenforceable, the other provisions shall nevertheless
continue in full force and effect.
24.6 The failure of either of the parties to insist upon strict
performance of any of the provisions of this Agreement shall
not be construed as the waiver of any subsequent default of
a similar nature.
IN WITNESS whereof this Agreement has been executed as of the
Effective Date set forth on Page 1 by the following duly
authorized representatives:
For and on behalf of Client
By: \s\ Ed Everts
Title: Senior Vice President
For and on behalf of Company
By: \s\ Rosemary K. Hartman
Title: President, CBS USA
<PAGE>
FISERV
License and Service Agreement No. 3810163
SCHEDULE 1
Company: Fiserv
Client: Heartland Financial USA, Inc.
Effective Date: June 21, 1996
License Section
A. Software System Based on Number of Accounts Processed No
Limitations.
1. Software System based on the processing of Heartland
Financial USA, Inc. and subsidiary's in which Heartland
Financial USA, Inc. owns fifty-one percent (51%) or more of
the preferred and/or common stock, herein released to as
additional subsidiary/subsidiaries.
2. The following modules of the FIserv Comprehensive Banking
Systems software to function on the Computer System listed
on Schedule 2.
CBS License Fees include:
Common File Subsystem
CIF Subsystem
General Ledger Subsystem
Universal Loan Subsystem
FTMS Subsystem
Time Subsystem
Transaction Subsystem
ACH Subsystem
Account Reconciliation Subsystem
CBS Chargeback Subsystem
Safe Deposit Subsystem
Item Processing Interface
InterVoice Interface (if Purchase Option exercised)
ATM Positive Balance File
DPSC Call Reporter II Interface
Asset Liability Extract
FAST Account Sales (22 workstations) (if Purchase
Option exercised)
3. System Documentation which are Instruction Manuals
for use of the Software System and for the completion
of documents for the Software System, including one set
of hard copy documentation.
B. Location:
1398 Central Avenue
Dubuque, IA 52001
Archive Site: TBD
C. Total License Fee
Modules License Fee
1.: License Fee for the following subsidiaries:
Dubuque Bank & Trust Company, Dubuque, IA
First Community Bank, FSB - Keokuk, IA
Galena State Bank, Galena, IL
Riverside Community Bank, Rockford, IL
a: CBS License Fees include:
CBS Core
Common File Subsystem
CIF Subsystem
General Ledger Subsystem
Universal Loan Subsystem
FTMS Subsystem
Time Subsystem
Transaction Subsystem
ACH Subsystem
Account Reconciliation Subsystem
CBS Chargeback Subsystem
CBS Core Total $225,000
b: Additional Products $ 10,000
Safe Deposit Subsystem $ 10,000
Item Processing Interface $ 20,000
ATM Positive Balance File $ 5,000
DPSC Call Reporter II Interface $ 10,000
Asset Liability Extract
c. Optional Products
(Pricing good for ten (10) business days from contract
signing)
Intervoice Interface $ 20,000
FAST Account Sales
(22 license object code only) $ 31,900
Total Additional Products $106,900
Total License Fee $331,900
2.: Additional subsidiaries (as defined in Schedule 1.a.1:
$2,800 per month for each additional subsidiary.
D. License Fee Payment Timetable
The Amount Payable is due according to the following
timetable:
D.1 For CBS Products listed in C.1.a and C.1.b
Date Event Amount Payable
Contract signing of products
listed in C.1.a and C.1.b 50%
Upon delivery of CBS Core
products listed in C.1.a 50%
D.2 For Optional Products in C.1.c
Date Event Amount Payable
Contract signing of products
listed in C.1.c 50%
Upon delivery of Optional
Products listed in C.1.c 50%
Professional Services Section
Workday 8 hours.
A. Professional Services Fees
Actual cost for professional Services Fees (excluding
reasonable travel and living expenses) associated with the
implementation and conversion for Heartland Financial USA,
Inc.'s subsidiaries listed in Schedule 1.C.1 will not exceed
$276,000.
A flat daily equivalent rate for Professional Services
during implementation and conversion: $900 per FTE (full-
time employee).
B. Professional Services Fees Payment Timetable
The Amount Payable is due according to the following
timetable:
Date Event Amount Payable
Monthly invoicing for actual
Professional Services rendered
and reasonable travel and
living expenses incurred.
Maintenance Services Section
A. Maintenance Services
Effective Date for Maintenance Services only:
The term of Maintenance Services is seventy-two (72) months
commencing at conversion of the first subsidiary in to a
production environment.
Modules: (Same as Section A.1.)
CBS Core Modules listed in Section C.1.a
Basic Maintenance:
$6,000
Special Maintenance:
Additional license fees listed in C.1.b $1,580
Annual Increase Amount:
Shall be limited to the lesser of ten percent
(10%) or the change in the U.S. Department of
Labor, Consumer Price Index (CPI) for Urban Wage
Earners and Clerical Workers, All Cities, (1982 =
100) for the twelve (12) month period preceding
the anniversary date.
B. Maintenance Fee Payment Timetable
$7,580 payable on the Effective Date above and monthly
thereafter.
This Schedule 1 replaces all previous Schedule 1 forms for the
Agreement as of the Execution Date noted below.
For and on behalf of Client
By \s\ Ed Everts
Title: Senior Vice President
For and on behalf of Company
By: \s\ Rosemary K. Hartman
Title: President, CBS USA
Execution Date: June 30, 1996
<PAGE>
FISERV
License and Service Agreement No. 3810163
Schedule 2 Third Party Hardware and
Operating System Software
FISERV
License and Service Agreement No. 3810163
SCHEDULE 3 Business Requirements
(To Be Agreed Upon Findings of the
Operations Audit. This should
include each party's
responsibilities and a formal sign-
off procedure.)
Company: Fiserv
Client: Heartland Financial USA, Inc.
Effective Date:
Description: Lundy Tellermation Interface
Responsibility: FISERV
Estimated Man Days: 23 days
Personnel Grades: Analyst/Programmer
Estimated Cost: $20,240
Estimated Completion Date: 02/15/97
For and on Behalf of Client
By: \s\ Ed Everts
Title: Sr. Vice President
For and on Behalf of Company
By: \s\ Rosemary K. Hartman
Title: President, CBS USA
<PAGE>
FISERV
License and Service Agreement No. 3810163
SCHEDULE 4 Preliminary Project Plan
Company FISERV
Client Heartland Financial USA, Inc.
Effective Date: June 21, 1996
For and on Behalf of Client
By: \s\ Ed Everts
Title: Senior Vice President
For and on Behalf of Company
By: \s\ John E. O'Malley
Title: President, CBS USA
<PAGE>
FISERV
License and Service Agreement No. 3810163
SCHEDULE 5
CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
Witnesseth:
WHEREAS FIserv CIR, Inc. (hereinafter called the Company), is
the owner and licensor of certain computer software, and
WHEREAS, the Client has entered into a License Agreement for the
use of the Company's Software System (as such items are defined
therein), and
WHEREAS, the undersigned party (hereinafter called the
"Consultant") desires access to certain confidential information
of Company in order to fulfill its obligations to Client:
NOW THEREFORE, in consideration of Consultant's original and
continuing access to Company's confidential information,
Consultant agrees as follows:
For purposes of this Agreement, "Confidential Information" shall
mean information or material proprietary to the Company, which
the Consultant develops or obtains knowledge or access through or
as a result of the Consultant's relationship with the Company or
its Client (including information conceived, originated,
discovered or developed in whole or in part by the Consultant).
The Confidential Information includes, but is not limited to, the
following types of information (whether or not reduced to
writing): discoveries, ideas, concepts, software in various
stages of development, designs, drawings, specifications,
techniques, models, data, source code, object code,
documentation, diagrams, flow charts, research, development,
processes, procedures, "know-how," marketing techniques and
materials, marketing and development plans, customer names and
other information related to customers, price lists, pricing
policies and financial information. Confidential Information
also includes any information described above which the Company
obtains from another party and which it treats as proprietary or
designates as Confidential Information. INFORMATION PUBLICLY
KNOWN THAT IS GENERALLY EMPLOYED BY THE TRADE AT OR AFTER THE
TIME THE CONSULTANT FIRST LEARNS OF SUCH INFORMATION, OR GENERIC
INFORMATION OR KNOWLEDGE WHICH THE CONSULTANT WOULD HAVE LEARNED
IN THE COURSE OF SIMILAR EMPLOYMENT OR WORK ELSEWHERE IN THE
TRADE, SHALL NOT BE DEEMED PART OF THE CONFIDENTIAL INFORMATION.
All notes, materials or records, of any kind, in any way
incorporating or reflecting any of the Confidential Information
shall belong exclusively to the Company and the Consultant agrees
to turn over all copies of such materials in its control to the
Company upon request or upon termination of its assignment to the
Company.
The Consultant agrees during its assignment to the Company's
Client and thereafter to hold in confidence and not to directly
or indirectly reveal, report, publish, disclose or transfer any
of the Confidential Information to any person or utilize any of
the Confidential Information for any purpose, except in the
course of its work for the Company's Client.
The Consultant agrees that any inventions, ideas or original
works of authorship in whole or in part conceived or made by the
Consultant during or after the term of the Company's assignment
to the Company's Client which are made through the use of any of
the Confidential Information shall belong exclusively to the
Company and shall be considered part of the Confidential
Information for purposes of this Agreement whether or not fixed
in a tangible medium of expression. Without limiting the
foregoing, the Consultant agrees that any such original works of
authorship shall be deemed to be "works made for hire" of which
the Company shall be deemed the author, provided that in the
event and to the extent such works are determined not to
constitute "works made for hire" as a matter of law, the
Consultant hereby irrevocably assigns and transfers to the
Company all rights, title, and interest in such works, including
but not limited to Copyrights, patent rights, trade secrets
industrial property rights, and moral rights and shall execute
all documents reasonably requested by the Company for the purpose
of registering such rights.
This Agreement shall be governed by and construed in accordance
with the laws of Florida.
The Consultant agrees to the above terms, which terms constitute
the entire agreement between the parties, and acknowledges
receipt of a copy of this Agreement.
Consultant:
By: \s\ Ed Everts
Name: Ed Everts
Title: Senior Vice President
Date: June 21, 1996
<PAGE>
Software License Agreement
This LICENSE AGREEMENT numbered 3810163.01 is entered into as of
the Effective Date below by and between FIserv CIR, Inc., a
Delaware corporation with offices located at 2601 Technology
Drive, Orlando, FL 32804 ("Fiserv") and Heartland Financial USA,
Inc., with offices located at 1398 Central Avenue, Dubuque, IA
52001 ("you").
Effective Date: June 21, 1996
Witnesseth:
WHEREAS, Fiserv is the licensor of the FAST software and
associated documentation ("Software"), and
WHEREAS, you wish to install and use the Software in your
premises.
NOW, THEREFORE, the parties hereto agree from the Effective Date
as follows:
1. License to Use the Software
1.1 Fiserv hereby grants you the non-exclusive, perpetual right
to use the number of copies of the Software as specified in
Schedule 1. Each such copy may be used only on a single
computer. The Software is in `use' on a computer when
loaded into temporary memory or installed into permanent
memory of that computer. However, installation on a network
server for the sole purpose of internal distribution shall
not constitute `use' for which a separate license is
required, provided you have a separate license for each
computer to which the Software is distributed. You agree
that access to the Software shall be given only to your
employees on a need to know basis, and only after informing
them of the terms and conditions relative to the use and
disclosure of the Software and cause them to adhere to all
such terms and conditions.
1.2 The Software is owned by Fiserv or its suppliers and is
protected by United States copyright laws and international
treaty provisions and other applicable national laws. You
shall have no rights to the Software or any copies thereof,
except for the right to use the Software as described in
this Agreement.
1.3 You agree you will not:
(a) make additional copies of the Software except for
one 1) archival or back-up copy;
(b) use the Software in a computer service business,
network, timesharing, multiple CPU or multiple user
arrangement, or otherwise disclose or allow the
Software to be used by or for the benefit of any third
party;
(c) alter, decompile, disassemble, reverse engineer,
or otherwise modify the Software, and/or merge the
Software with another software product or program;
(d) convey any rights of use or otherwise in or to the
Software to any third party;
(e) make any translations of the Software;
(f) make telecommunications or data transmissions of
the Software; or
(g) remove any copyright or proprietary rights notices
placed upon or within the Software.
2. Payment
2.1 Any taxes applicable to the subject matter of this Agreement
shall be your responsibility.
2.2 Payments of license fees, annual maintenance fees, or other
fees as specified in Schedule 1 are due upon receipt of the
invoice.
2.3 If the whole or any part of any invoice remains outstanding
for thirty (30) days or more, you agree to pay a financial
charge calculated at the rate of one and one half percent (1-
1/2%) per part or complete month on the overdue balance.
3. Warranties
3.1 Fiserv warrants that the Software will perform in
substantial accordance with its functional specifications
when operated in the specified operating environment as
described in the documentation. Fiserv will provide
replacements or corrections to any part of the Software that
does not so perform where such failure is material, provided
Fiserv is notified in writing. This warranty shall not
apply if the problem is caused by unauthorized modification
to the Software or by incorrect use.
3.2 Fiserv's obligation under the warranty stated in the
foregoing paragraph shall be to repair or replace defective
or non-conforming parts of the Software at its own expense
and within a reasonable time.
3.3 Fiserv warrants that it has the right to license the use of
the Software.
3.4 THE WARRANTY STATED ABOVE IS A LIMITED WARRANTY AND IT IS
THE ONLY WARRANTY MADE BY FISERV. FISERV DOES NOT MAKE, AND
YOU HEREBY EXPRESSLY WAIVE, ALL OTHER WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE
STATED EXPRESS WARRANTY IS IN LIEU OF ALL LIABILITIES OR
OBLIGATIONS OF FISERV FOR DAMAGES ARISING OUT OF THE USE OR
PERFORMANCE OF THE SOFTWARE.
4. Indemnity
4.1 Fiserv shall indemnify you and hold you harmless against any
claim or action that alleges use of the Software infringes a
patent, copyright, or other proprietary right of a third
person. Such indemnity is conditioned on you providing
prompt written notification to Fiserv of any such claim and
granting Fiserv sole right to control the defense and
disposition of such claim.
4.2 If as a result of any such claim you or Fiserv is
permanently enjoined from using the Software by a final,
nonappealable decree, Fiserv at its sole option and expense,
may procure for you the right to continue to use the
Software, or at its sole option and expense, may provide a
replacement or modification for the Software so as to settle
such claim. If modification of the Software is not
reasonably practical in Fiserv's sole opinion, Fiserv shall
discontinue and terminate this license upon notice to you
and shall refund to you all license fees paid to Fiserv
under this Agreement. In making this determination, Fiserv
will give due consideration to all factors including
financial expense.
4.3 The foregoing states the entire liability of Fiserv for the
infringement of any copyrights, patents, or other
proprietary rights of a third person by the Software or any
parts thereof. You hereby expressly waive any other
liabilities on the part of Fiserv arising therefrom.
4.4 Fiserv shall have no liability for any claim that is based
upon:
(a) the use of any part of the Software in combination
with materials, software, or equipment not provided by
Fiserv; or
(b) modifications made by you or any third party.
5. Limitation of Liability of the Parties
5.1 Each party shall indemnify and hold the other harmless
against any: (a) loss of or damage to any tangible
property; or (b) injury to or death of any person; caused by
the negligence of, breach of statutory duty by, or willful
misconduct of the indemnifying party's employees, agents, or
sub-contractors.
5.2 FISERV SHALL HAVE NO LIABILITY WITH RESPECT TO ITS
OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR LOSS OF
GOODWILL, OR FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES, WHETHER IN TORT OR IN CONTRACT, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ANY EVENT,
FISERV'S LIABILITY FOR ANY REASON AND UPON ANY CAUSE OF
ACTION WHATSOEVER SHALL BE LIMITED TO THE AMOUNT OF ANY
LICENSE FEE PAID TO FISERV AS OF THE DATE ON WHICH SUCH
CAUSE OF ACTION ACCRUES.
6. Non-Disclosure
6.1 Fiserv has granted you the limited right to use the Software
as provided in this Agreement. You acknowledge that the
Software, including all specifications, work product,
translations, and other materials developed by Fiserv
contains highly confidential, unique, secret, and valuable
information of Fiserv. You agree not to make available to
others the Software, any materials relating to or forming a
part of the Software, or any other proprietary information
of Fiserv. You agree to secure and protect the Software and
proprietary information and to take appropriate action by
written agreement with your employees permitted access to
such materials to satisfy your obligations hereunder. You
further agree to use your best efforts to assist Fiserv in
identifying and preventing any use or disclosure of any
portion of the Software or proprietary information. Your
obligations relating to confidentiality and nondisclosure
shall survive the termination of this Agreement for any
reason.
6.2 You will permit Fiserv's authorized representatives at all
reasonable times during your normal hours of operation to
audit your use of the Software to determine that the
provisions of this Agreement are being faithfully performed.
Any such audit shall be conducted in such a manner as to
minimize the disruption to your business.
6.3 You shall promptly notify Fiserv if you become aware of any
breach of confidence relating to the Software or other
Fiserv proprietary information and give Fiserv all
reasonable assistance in connection with Fiserv's
investigation of same.
7. Termination
7.1 This Agreement shall remain in effect until terminated.
Upon termination, without further action by Fiserv, all
rights in and to the Software by you shall terminate and
shall automatically revert irrevocably to Fiserv. Fiserv
shall have the right to take immediate possession of the
Software and all copies thereof wherever located without
further notice or demand.
7.2 You may terminate this Agreement in the event of a material
default by Fiserv not cured within a reasonable cure period
(with the minimum being thirty (30) days if no other cure
period is stated) after notice to Fiserv specifying the
nature of the default with reasonable particularity.
7.3 If you violate any of the non-disclosure, non-assignment, or
license to use provisions of this Agreement and fail to
remedy any such breach within five (5) days of notice
thereof from Fiserv, Fiserv may terminate this Agreement
without further notice.
7.4 If you violate or fail to perform any of your obligations
other than those specifically expressed in Sub-section 7.3
and fail to remedy any such breach within thirty (30) days
of notice thereof by Fiserv, or if you become insolvent or
cease to do business, then Fiserv may give notice declaring
this Agreement is terminated at the expiration of such
notice period.
7.5 Exercise of either party's right of termination shall not
prejudice legal rights or remedies either party may have
against the other in respect of any breach of this
Agreement.
7.6 Your failure to pay any fees due on a timely basis is cause
for termination of this Agreement.
8. Maintenance
8.1 Annual Maintenance fees shall be based upon Fiserv's then
current single copy license fee and will be invoiced thirty
(30) days following the Effective Date. The following
maintenance services will be provided:
(a) Telephone support during normal business hours
(8:30 a.m. to 5:00 p.m. EST) for reasonable operator
support.
(b) On-site support and training when requested at
Fiserv's then current hourly rate.
(c) Program fixes to correct Software non-conformities
with the functional specifications within a reasonable
period of time upon notice.
(d) Software updates as released by Fiserv. If you so
request, Fiserv shall install such updates at Fiserv's
then current hourly rate.
Maintenance services selected by you shall be described on
Schedule 1.
8.2 Fiserv shall not be required to provide maintenance services
occasioned by improper use or unauthorized modifications of
the Software. When you so request, Fiserv will attempt to
restore the Software to proper working order at Fiserv's
then current hourly rate.
8.3 You will reimburse Fiserv for reasonable travel and living
expenses when maintenance and other services rendered herein
so requires.
8.4 Fiserv shall give you thirty (30) days notice of Maintenance
Fee increases unless provided otherwise.
9. Non-Assignment
9.1 Neither party may assign or transfer its rights, duties, or
obligations under this Agreement to any person or entity, in
whole or in part, without the prior written consent of the
other party, except that Fiserv may assign this Agreement to
an affiliate.
10. Entire Agreement
10.1 This Agreement constitutes the complete and exclusive
statement of the agreement between the parties as to the
subject matter hereof and supersedes all previous agreements
with respect thereto. This Agreement may not be amended or
modified except by a written instrument executed by both
parties.
10.2 Each party hereby acknowledges that it has not entered into
this Agreement in reliance upon any representation made by
the other party but not embodied herein.
11. Notices
11.1 Any notice required or permitted to be given hereunder shall
be given in writing by (a) air courier to the addresses set
out above (or to any subsequent address designated by either
party for the purpose of receiving notices); or (b)
confirmed facsimile.
12. Action
12.1 No action, regardless of form, arising out of this Agreement
may be brought more than two (2) years after such cause of
action has accrued.
13. General Terms
13.1 Except for disputes relating to intellectual property rights
or confidential information, both parties agree to arbitrate
disputes arising under this Agreement using the services of
the American Arbitration Association in Florida, with all
decisions by the arbitrator final. Judgment upon the award
rendered by the arbitrator may be entered in any court
having jurisdiction.
13.2 The prevailing party in an action brought against the other
to enforce the terms of this Agreement or any rights or
obligations hereunder, shall be entitled to receive its
reasonable costs, expenses, and attorneys' fees of bringing
such action.
13.3 The section headings used herein are inserted only as a
matter of convenience and for reference and shall not affect
the construction or interpretation of this Agreement.
13.4 Neither party shall be responsible for delays or failures in
performance resulting from acts reasonably beyond the
control of that party.
13.5 This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without
regard to principles of conflicts of law.
13.6 If any provision of this Agreement is held to be
unenforceable or invalid, the other provisions shall
nevertheless continue in full force and effect.
13.7 The failure of either of the parties to insist upon strict
performance of any of the provisions of this Agreement shall
not be construed as the waiver of any subsequent default of
a similar nature.
13.8 The attached Schedules form part of and are included in this
Agreement:
Schedule 1 - Licensed Module(s), Term, Amount/ Maintenance and
Professional Services
Schedule 2 - Implementation Summary
IN WITNESS whereof this Agreement has been executed as of the
Effective Date by the following duly authorized representatives:
For and on behalf of Financial Institution
By: \s\ Ed Everts
Title: Senior Vice President
For and on behalf of Fiserv
By: \s\ Rosemary K. Hartman
Title: President, CBS USA
<PAGE>
PROFESSIONAL SERVICES AGREEMENT
This PROFESSIONAL SERVICES AGREEMENT numbered 3810163 is entered
into as of the Effective Date set forth below by and between
Fiserv
a Corporation whose registered office is located at
2601 Technology Drive
Orlando, FL 32804
(hereinafter called 'Company') and
Heartland Financial USA, Inc.
whose registered office is located at
1398 Central Avenue
Dubuque, Iowa 52001
(hereinafter called 'Client')
This Agreement shall be construed and enforced under the laws of
Florida
Effective Date: June 21, 1996
1. Definitions
In this Agreement, the following terms shall have the
following meanings:
1.1 'Business Requirements' means the description of the
Client's business needs and the functionality required.
1.2 "Client Confidential Information" means any confidential
information concerning Client's business, that is labeled as
such and all data pertaining to Client's customers.
1.3 'Computer System' means that dedicated computer machinery
and manufacturer-supplied software identified in the License
Agreement.
1.4 'Effective Date' means the date identified as such in this
Agreement as the date upon which this Agreement shall
commence.
1.5 'Fees' means the greater of the sums of amounts derived by
multiplying either the minimum number of days specified on
Schedule(s) 1 or the number of days or fractions of days
worked within each grade by the daily fee rate as defined on
the Schedule(s) 1.
1.6 'Functional Specifications' means the description of the
detailed functionality changes to product, account and
customer level processing.
1.7 'License Agreement' means that Agreement between Client and
Company governing use of the Software System and as
identified on Schedule 1.
1.8 'Location' means those premises specified on Schedule 1.
1.9 'Software System' means that Software System identified in
the License Agreement.
1.10 'Specification Nonconformity' means a failure of the
modified Software System to operate in accordance with the
Functional Specifications.
1.11 'Taxes' means all sales, use, excise, value added, and other
taxes and duties however designated which are levied by any
taxing authority having jurisdiction over the Location.
Taxes shall not include any levies by any taxing authority
which are based upon the net income of Company.
1.12 'Third Party' means any party other than Company's employees
or subcontractors and Client.
1.13 'Use' means copying or loading any portion of the Software
System from storage units or media into any equipment for
the processing of data by the Software System once so
loaded, or the operation of any procedure or machine
instruction utilizing any portion of either the computer
program or instructional material supplied with the Software
System. Use is deemed to occur at the location where any of
the above processes happen. Use is limited to type of
operations described in Company documentation solely to
process Client's own work and that of majority-owned
financial institutions. Use specifically excludes any
service bureau or time-share services to minority-owned or
unaffiliated third parties without prior written consent by
Company and payment by Client of additional fees in
accordance with mutually agreed terms.
2. Agreement to Provide Professional Services
2.1 In consideration of the payment to Company by Client of the
Fees and the cost of all items and services provided and any
other expenses incurred by Company in connection with this
Agreement, as defined on Schedule(s) 1, Company hereby
agrees to provide personnel of the grades, and between the
dates specified on Schedule(s) 1 to work on behalf of Client
in accordance with the terms and conditions set out below.
2.2 All work which is to be performed by Company hereunder shall
be based upon the preliminary Business Requirements listed
on Schedule 2. Client shall utilize Schedule 2 to provide
Company with all necessary information concerning its
requirements for modifications to the Software System or
other information requested by Company related to Company's
performance of its obligations under this Agreement. Any
estimates of costs and completion dates listed on the
Schedules are referenced solely for the purpose of allowing
Client to plan its budgets and schedules based upon the then
available information.
2.3 Company shall provide a Preliminary Project Plan based upon
the Business Requirements which shall be incorporated as
Schedule 3 when appropriate. Schedule 3 shall contain a
preliminary listing of the nature and timing of tasks for
the project, some of which are to be performed by Company
and some by Client. Company shall utilize reasonable
efforts to meet the dates set forth in the Project Plan or
any replacement thereof.
2.4 In the event that Company is to provide installation,
conversion or training to Client for the Software System,
the fees therefore shall be as specified on Schedule 1. The
nature and timing of any installation, conversion and
training shall be as specified in the Project Plan mutually
agreed upon by the parties.
2.5 In the event that Company is to provide modifications to the
Software System, the modifications shall be based upon
specifications created by Company and approved by Client as
provided below:
(i) During the phase referred to on the Project Plan
as "Functional Specifications," Company may develop
Functional Specifications based upon the descriptions
contained on Schedule 2 for Client's written approval.
Company shall not be obligated to perform any further
development work until Specifications have been
accepted in writing by Client which acceptance shall
not be unreasonably withheld or unduly delayed.
(ii) Modifications, changes, enhancements, conversions,
upgrades or additions to the Software System beyond
those stated in the Functional Specifications shall be
added only upon mutual written agreement. In the event
the parties agree to add any such items, the Project
Plan shall automatically be modified to the extent
necessary to allow for the implementation or provision
of the items.
(iii)The Project Plan shall also set forth the time
period after the acceptance of the Functional
Specifications within which Company shall prepare
"Functional Specifications" including an acceptance
test script for the adaptations described therein.
After Client's written acceptance of the Functional
Specifications, which acceptance shall not be
unreasonably withheld or delayed, Company shall
commence activities to modify the Software System for
use by Client in accordance with the Project Plan.
(iv) The Software System adaptations shall be deemed to
have been accepted by Client either upon the completion
of a formal Acceptance Test (as set forth in the test
scripts) or 30 days after delivery of the modified
Software System, whichever occurs first. Acceptance by
Client will not be unreasonably withheld or unduly
delayed. Client agrees promptly to notify Company in
writing (and with reasonable particularity) upon
conclusion of the Acceptance Test or earlier upon
discovery of any Specification Nonconformities
disclosed by such testing or use. Company shall
correct any Specification Nonconformities disclosed by
such testing without further charge to Client within a
reasonable time of Client's notice.
3. Use Of And Rights To Company's Work Product
All information, reports, studies, object or source code,
flow charts, diagrams and other tangible or intangible
material of any nature whatsoever produced by or as a result
of any of the services performed hereunder shall be the sole
and exclusive property of Company or its corporate parent.
Client shall be entitled to Use all such work product
produced by Company in accordance with the terms and
conditions of the License Agreement. Nothing contained in
this Agreement shall be deemed to provide greater rights
with respect to the Software System, as modified for
Client's use herein, than those provided in the License
Agreement.
4. Warranties
4.1 Company warrants that the Services described in this
Agreement shall be performed in a workmanlike manner and in
accordance with standards applicable to the financial
software services industry.
4.2 No warranty, condition, undertaking or term, statutory or
otherwise, is given or to be implied as to the suitability,
condition, quality, performance, or merchantability of goods
supplied for any particular purpose or for use under any
specific conditions, notwithstanding that such purpose or
condition may be known or made known to Company and all such
warranties, condition, undertakings, or terms are hereby
nullified and excluded.
5. Rescheduling
If Client is unable to provide access to required facilities
or personnel or is unable to meet its tasks assigned on
Schedules 2 and 3 in a timely manner, Company will endeavor
to reschedule tasks to minimize the non-productive time
arising. All such non-productive time is chargeable to
Client. If such non-productive time is expected to be
significant, Company will endeavor to reassign its personnel
to other suitable work. In this event, Client will not be
charged for the time personnel were reassigned.
6. Fees
6.1 The fees are based on a workday as defined on Schedule(s) 1.
Additional fees may be raised in respect of hours worked
outside these at the request of Client at the rates
previously agreed in writing by Client.
6.2 If support is primarily required in part days, Company may
notify Client that an hourly fee rate shall apply. The
hourly rate will be calculated pro-rata of the stated daily
rate unless otherwise agreed.
6.3 The daily rates quoted in the table will be valid for three
months from the effective date listed on the relevant
Schedule 1. Thereafter, they will be subject to change by
Company on one-month's notice.
6.4 A higher fee may be applied for an individual whose support
to Client has advanced to a new job grade or after one
month's notice if his general development warrants a job
upgrade by Company.
7. Payment of Fees and Expenses
7.1 Company shall add to each invoice and Client shall pay any
Taxes applicable to the Services.
7.2 Except as expressly provided in this Agreement to the
contrary, Client agrees to pay the reasonable travel and
living expenses (including any duties or tariffs but
excluding any employment taxes imposed by the country
governing the Location) of any employees of Company and its
authorized contractors who render services at either the
Location or any other Client site in connection with the
activities described in this Agreement. All expenses shall
be itemised on invoices submitted by Company and shall be
due and payable upon presentation of each invoice as
provided herein.
7.3 Each payment to be made to Company under this Agreement
shall be paid by Client, in funds as specified on Schedule
1, within fifteen (15) days of the date of an invoice in
respect thereof and the time of payment shall be of the
essence of this Agreement.
7.4 Invoices will be raised monthly by Company or at such less
frequent intervals as it decides in its discretion.
7.5 If the whole or any part of any invoice remains outstanding
for 30 days or more, Client agrees to pay an agreed
financial charge calculated at the rate of one and one-half
percent (1-1/2%) per part or complete month on the overdue
balance, and in addition, Company may at its sole option
terminate this Agreement. Company shall pay the same
financial charge on the amount of any credit due to Client
for sums previously paid by Client which were the subject of
a dispute resolved in Client's favor.
8. Limitation of Liability of the Parties
8.1 Each party shall indemnify and hold the other harmless
against any
(a) loss of or any damage to any tangible property or
(b) injury to or death of any person;
caused by the negligence of, breach of statutory duty by, or
willful misconduct of the indemnifying party's employees,
agents, or sub-contractors.
8.2 Company shall have no liability with respect to its
obligations under this agreement or otherwise for loss of
goodwill, or for special, indirect, consequential, or
incidental damages, whether in tort or in contract, even if
it has been advised of the possibility of such damages. In
any event, the liability of Company to Client upon any cause
of action, not including an infringement action, shall be
limited to the amount of any Professional Services Fee which
Client has paid to company in the twelve-month period prior
to the date on which such cause of action accrued.
Notwithstanding the above, the Company's liability with
respect to infringement actions is set forth in Section 18.
9. Termination
9.1 Client may terminate this Agreement after payment of the
fees in full by giving one month prior notice in writing to
Company provided always that termination under this sub-
clause shall not prevent Company from recovering any
outstanding fees and expenses.
9.2 Client may within one month of receipt of a notice by
Company of a fee increase elect to terminate the Agreement
as of the date upon which the fee increase takes effect.
9.3 Client may terminate the Agreement in the event of a
material default by Company that is not cured within the
applicable cure period specified in this Agreement, or a
reasonable cure period (with the minimum being thirty (30)
days if no other cure period is stated) from receipt by
Company of written notice specifying the nature of the
default with reasonable particularity.
9.4 If Client violates or fails to perform any of the terms or
conditions of this Agreement and fails to remedy any such
breach within thirty (30) days of notice thereof from
Company, or if Client shall become insolvent, then Company
may give a written notice declaring this Agreement is
terminated at the expiration of such notice period.
9.5 Exercise of the right of termination afforded to either
party by this Agreement shall not prejudice legal rights or
remedies either party may have against the other in respect
of any breach of the terms of this Agreement.
10. Non-Disclosure
10.1 Client acknowledges that
(a) the Software System, including all specifications,
work product, translations and other materials
developed by Company under this Agreement, and
(b) the terms and conditions of this Agreement
contain highly confidential, unique, secret and
valuable information of Company. Client agrees that
it shall not decompile, disassemble or reverse engineer
the Software System and that it shall not sell,
transfer, publish, disclose, display or otherwise make
available to others the Software System, any materials
relating to or forming a part of the Software System or
any other proprietary information of Company without
the prior written consent of Company. Client agrees to
secure and protect the Software System and proprietary
information and to take appropriate action by written
agreement with its employees who are permitted access
to such materials to satisfy its obligations hereunder.
Client further agrees that it shall use its best
efforts to assist Company in identifying and preventing
any use or disclosure of any portion of the Software
System or proprietary information. As a precondition
of Client's request to Company for consent to disclose
the Software System, in whole or in part, to a Third
Party, Client shall obtain from such party an executed
Schedule 4. All obligations and undertakings of Client
relating to confidentiality and nondisclosure, whether
contained in this Section or elsewhere in this
Agreement, shall survive the termination of this
Agreement for any reason.
10.2 Company shall protect any Client Confidential Information
from disclosure with the same degree of care afforded by
Company to its own confidential information. All
obligations and undertakings of Company specified herein
with respect to Client Confidential Information shall
survive the termination of this Agreement for whatever
reason.
10.3 Client shall permit Company's authorized representatives at
all reasonable times during Client's normal hours of
operation to audit Client's Use at the Location to determine
that the provisions of this Agreement are being faithfully
performed. For that purpose, Company shall be entitled to
enter into any of Client's premises and Client hereby
irrevocably grants authority to Company and authorized
representative to enter such premises for such purpose. Any
such audit shall be conducted in such a manner as to
minimize the disruption to Client's business and/or the Use
of the Software System.
10.4 Client shall promptly notify Company if it becomes aware of
any breach of confidence relating to the Software System or
other Company proprietary information and give Company all
reasonable assistance in connection with Company's
investigation of same.
11. Non Recruitment
For the duration of this Agreement and for one (1) year
thereafter, neither party shall recruit nor employ any
personnel employed by the other party and introduced in
connection with the performance of this Agreement or
otherwise discourage such personnel from continuing their
employment with the other party without the prior written
consent of the other party.
12. Force Majeure
Neither party shall be responsible for delays or failures in
performance resulting from acts reasonably beyond the
control of that party.
13. Variation
No variation of this Agreement shall be binding on either
party unless such variation is in writing and signed by the
duly authorized representatives of both parties.
14. Notices
Any notice required to be given hereunder shall be
given by sending the same
(a) by air courier to the addresses as first
set out above, or to any subsequent address
designated by either party for the purpose of
receiving notices pursuant to this Agreement, and
any notice so sent shall be deemed to have been
given three (3) business days after the same was
mailed; or
(b) by confirmed facsimile.
15. Entire Agreement
15.1 No action, regardless of form, arising out of this
agreement, shall be brought by Client more than two (2)
years after such cause of action shall have accrued.
15.2 This instrument constitutes the entire Agreement between the
parties on the subject matter hereof and supersedes all
previous agreements, arrangements and undertakings with
respect thereto.
15.3 Each party hereby acknowledges that it has not entered into
this Agreement in reliance upon any representation made by
the other party and not embodied herein.
16. Schedules
The attached Schedules form part of and are included in this
Agreement.
17. General Terms
17.1 In the event that a dispute arises concerning the terms of
this Agreement the aggrieved party shall refer such dispute
to arbitration as specified herein. Such arbitration shall
be held in the City or suburbs of Orlando, Florida, in
accordance with the rules of the American Arbitration
Association pertaining to the Resolution of Computer
Disputes ("AAA Rules") then in effect. Judgment upon the
award rendered by the arbitrators may be entered in any
court having jurisdiction over the parties. The arbitrators
shall have the authority to grant any legal remedies that
would be available in any judicial proceeding instituted to
resolve a disputed matter.
17.2 The prevailing party in an action brought against the other
to enforce the terms of this Agreement or any rights or
obligations hereunder, shall be entitled to receive its
reasonable costs and expenses of bringing such action
including its reasonable attorneys fees.
17.3 Company and Client agree that each provision in this
Agreement is deemed equally essential to each party.
17.4 The section headings used herein are inserted only as a
matter of convenience and for reference and shall not affect
the construction or interpretation of this Agreement.
17.5 If any provision of this Agreement is held to be
unenforceable, all other provisions will nevertheless
continue in full force and effect.
17.6 The failure of either of the parties to insist upon strict
performance of any of the provisions of this Agreement shall
not be construed as the waiver of any subsequent default of
a similar nature.
18. Indemnity
18.1 Company shall indemnify Client and hold it harmless against
any claim or action which alleges that the use of the
modifications to the Software System supplied hereunder
infringes a patent, copyright or other proprietary right of
a third person enforceable in the Location. Client agrees
that it will notify Company promptly in writing of any such
claim and grants Company sole right to control the defense
and disposition of such claim.
18.2 If as a result of any such claim Company or Client is
permanently enjoined from using the modifications to the
Software System by a final non-appealable decree, Company at
its sole option and expense may procure for Client the right
to continue to use the modifications or at its sole option
and expense, may replace or change the modifications so as
to settle such claim. If replacement or change of the
modifications is not reasonably practical in the sole
opinion of Company (reasonably applied), after giving due
consideration to all factors including financial expense,
Company shall discontinue Client's license to use such
modifications upon written notice to Client and shall refund
to Client all professional services fees related to such
infringing modifications paid to Company under this
Agreement. The foregoing states the entire liability of
Company with respect to infringement of any copyrights,
patents or other proprietary rights of a third party by the
modifications to the Software System, and Client hereby
expressly waives any other such liabilities. This indemnity
shall not apply to any modifications made to the Software
System by or on behalf of Client, unless the modifications
are made or approved by Company personnel nor shall the
indemnity apply to an infringement which arises out of the
use by Company of Client supplied proprietary information.
IN WITNESS whereof this Agreement has been executed as of the
Effective Date set forth on Page 1 by the following duly
authorized representatives:
Signed for and on Behalf of Company
By: \s\ Ed Everts
Title: Senior Vice President
Signed for and on Behalf of Client
By: \s\ Rosemary K. Hartman
Title: President, CBS USA
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000920112
<NAME> HEARTLAND FINANCIAL USA, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1996 DEC-31-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995 JUN-30-1996 JUN-30-1995
<CASH> 22,307 21,367 22,307 21,367
<INT-BEARING-DEPOSITS> 1,635 2,657 1,635 2,657
<FED-FUNDS-SOLD> 32,800 8,000 32,800 8,000
<TRADING-ASSETS> 000 000 000 000
<INVESTMENTS-HELD-FOR-SALE> 166,678 97,371 166,678 97,371
<INVESTMENTS-CARRYING> 1,870 36,689 1,870 36,689
<INVESTMENTS-MARKET> 1,950 37,121 1,950 37,121
<LOANS> 461,698 453,295 461,698 453,295
<ALLOWANCE> (6,089) (5,451) (6,089) (5,451)
<TOTAL-ASSETS> 710,084 637,104 710,084 637,104
<DEPOSITS> 552,542 506,858 552,542 506,858
<SHORT-TERM> 44,307 16,641 44,307 16,641
<LIABILITIES-OTHER> 7,485 7,908 7,485 7,908
<LONG-TERM> 40,400 43,400 40,400 43,400
000 000 000 000
000 000 000 000
<COMMON> 4,854 2,427 4,854 2,427
<OTHER-SE> 60,496 59,870 60,496 59,870
<TOTAL-LIABILITIES-AND-EQUITY> 710,084 637,104 710,084 637,104
<INTEREST-LOAN> 10,048 9,771 19,934 18,772
<INTEREST-INVEST> 2,594 2,520 5,037 5,031
<INTEREST-OTHER> 235 125 523 166
<INTEREST-TOTAL> 12,877 12,416 25,494 23,969
<INTEREST-DEPOSIT> 5,765 5,532 11,482 10,613
<INTEREST-EXPENSE> 6,856 6,428 13,663 12,209
<INTEREST-INCOME-NET> 6,021 5,988 11,831 11,760
<LOAN-LOSSES> 228 217 975 435
<SECURITIES-GAINS> 76 8 1,398 84
<EXPENSE-OTHER> 4,691 4,521 9,436 9,014
<INCOME-PRETAX> 2,582 2,410 5,546 4,697
<INCOME-PRE-EXTRAORDINARY> 2,582 2,410 5,546 4,697
<EXTRAORDINARY> 000 000 000 000
<CHANGES> 000 000 000 000
<NET-INCOME> 1,870 1,719 4,148 3,409
<EPS-PRIMARY> .40 .36 .88 .71
<EPS-DILUTED> .40 .36 .88 .71
<YIELD-ACTUAL> 3.92 4.21 3.89 4.24
<LOANS-NON> 1,157 885 1,157 885
<LOANS-PAST> 193 298 193 298
<LOANS-TROUBLED> 000 000 000 000
<LOANS-PROBLEM> 000 000 000 000
<ALLOWANCE-OPEN> 5,892 5,354 5,580 5,124
<CHARGE-OFFS> (54) (141) (544) (161)
<RECOVERIES> 28 21 78 53
<ALLOWANCE-CLOSE> 6,089 5,451 6,089 5,451
<ALLOWANCE-DOMESTIC> 3,275 3,024 3,275 3,024
<ALLOWANCE-FOREIGN> 000 000 000 000
<ALLOWANCE-UNALLOCATED> 2,814 2,427 2,814 2,427
</TABLE>
