Exhibit 10.12


 


Execution Copy


 


AGREED UPON TERMS AND PROCEDURES


 


THESE AGREED UPON TERMS AND PROCEDURES (these “Terms and Procedures”)
are dated as of January 31, 2008, and are agreed to and acknowledged by OLD SECOND BANCORP, INC., a Delaware
corporation (“Borrower”), and LASALLE BANK NATIONAL ASSOCIATION, a
national banking association (“Lender”),
in connection with certain credit facilities provided by Lender to Borrower.


 


R E C I T A L
S :


 


A.                                   Borrower is a bank holding company that owns 100% of the issued and
outstanding capital stock of Old Second National Bank, a national banking
association, (the “Bank”), and is
acquiring HeritageBanc, Inc. (“Heritage”),
by causing Old Second Acquisition, Inc., a Delaware corporation and a
wholly owned subsidiary of Borrower (“Merger
Corp”), to merge with and into Heritage (the “Merger”) pursuant to the terms and
conditions of an Agreement and Plan of Merger, dated as of November 5,
2007, among Borrower and Merger Corp and Heritage, and immediately thereafter
causing Heritage Bank, a wholly owned subsidiary of Heritage (“Heritage Bank”), to merge with and into Old
Second National Bank (the “Bank Merger”)
pursuant to the terms and conditions of a Merger Agreement, dated as of November 20,
2007, between the Bank and Heritage Bank.


 


                                                B.                                     Borrower has requested that Lender provide it with three credit
facilities in the aggregate principal amount of $75,500,000 consisting of (a) a
term loan in the principal amount of $500,000 (the “Term Loan”), (b) a revolving loan in the principal amount
of up to $30,000,000 and (c) subordinated debt in the principal amount of
up to $45,000,000, to be used to finance the acquisition of Heritage Bank and
to increase the capital of the Bank, with any remaining proceeds to be used for
general corporate purposes.


 


C.                                     These Terms and Procedures have been agreed upon, executed and
delivered by Borrower and Lender pursuant to Sections 2.6 and 2.7
of the Loan Agreement (as defined below).


 


NOW, THEREFORE, in consideration of
the mutual covenants, conditions and agreements and to induce Lender to enter
into the Loan Agreement and to make Loans and other financial accommodations to
Borrower, the parties hereby agree as follows:


 


1.                                      DEFINITIONS. All capitalized terms
used herein that are not otherwise defined herein shall have the meanings
ascribed to them in that certain Loan and Subordinated Debenture Purchase
Agreement of even date herewith between Lender and Borrower (as amended,
restated, supplemented or modified from time to time, the “Loan Agreement”).


 


2.                                      INTEREST RATES. Borrower agrees
that matters concerning the election, payment, application, accrual and
computation of interest and interest rates shall be in accordance with Lender’s
practices set forth herein and in the other Loan Documents.


 


2.1                               Interest Rate Election. Each
Borrowing Tranche under any Loan shall bear interest as a Base Rate Tranche
unless and until Borrower shall otherwise elect. Borrower shall make a LIBO
Rate or Base Rate election by delivering a Rate Election Notice (a) not less
than one Business Day prior to the Borrowing Date, in the case of Base Rate
Tranche, (b) not less 


 


 


 





















 


than three Business Days prior to the Borrowing Date,
in the case of a LIBO Rate Tranche, and (c) in no event more than five
Business Days prior to a Borrowing Date, provided that no more than one LIBO
Rate Tranche for any Loan shall be outstanding at any one time. Each Rate
Election Notice shall specify the effective date for the LIBOR Period to be
applicable to any LIBO Rate Tranche with respect to any Loan. The LIBO Rate
shall remain fixed for all disbursements made under a Loan that bear interest
based on the LIBO Rate until the next LIBOR Period commences. Any Rate Election
Notice delivered by Borrower shall be irrevocable and may not be modified in
any way without the prior written approval of Lender. In addition to initially
electing to designate a Borrowing Tranche as a Base Rate Tranche or a LIBO Rate
Tranche, Borrower may further elect, by designation on a Rate Election Notice, (i) to
convert a Base Rate Tranche or any portion thereof to a LIBO Rate Tranche, (ii) to
convert a LIBO Rate Tranche or any portion thereof into a Base Rate Tranche, or
(iii) to continue any LIBO Rate Tranche or any portion thereof for an
additional LIBOR Period. In the event that Borrower fails to notify Lender that
it desires to continue any LIBO Rate Tranche or any portion thereof by the last
day of the applicable LIBOR Period, Borrower shall be deemed to have elected to
continue the LIBO Rate Tranche in question for an additional LIBOR Period equal
in length to the expiring LIBOR Period. The LIBOR Period for the continuation
of any LIBO Rate Tranche shall commence on the day after the last day of the
next preceding LIBOR Period. Notwithstanding anything to the contrary contained
herein and subject to the default interest provisions contained herein, if an
Event of Default occurs, all LIBO Rate Tranches will convert to Base Rate
Tranches upon the expiration of the LIBOR Periods therefor. The conversion of a
LIBO Rate Tranche to a Base Rate Tranche pursuant to a description in a Rate
Election Notice shall only occur on the last Business Day of the LIBOR Period
relating to such LIBO Rate Tranche. Lender is hereby authorized to rely upon a
Rate Election Notice delivered by any authorized officer of Borrower including
William B. Skoglund, President and Chief Executive Officer, J. Douglas
Cheatham, Executive Vice President and Chief Financial Officer, and James L.
Eccher, Executive Vice President and Chief Operating Officer, which persons are
Borrower’s duly authorized agents, and such additional authorized agents as any
of the above-referenced authorized agents of Borrower shall designate, in
writing, to Lender.


 


If pursuant to the Rate Election Notice
received by Lender pursuant to Section 2.1
hereof, the initial Interest Period of any LIBOR Rate Tranche commences on any
day other than the first Business Day of any month, then the initial Interest
Period of such LIBOR Rate Tranche shall end on the first Business Day of the following
calendar month, notwithstanding the Interest Period specified in such notice,
and the LIBOR Rate for such LIBOR Rate Tranche shall be equal to the LIBOR Rate
for an Interest Period equal to the length of such partial month.  Thereafter, each LIBOR Rate Tranche shall
automatically renew for the Interest Period specified in the initial Rate
Election Notice received by Lender.


 


2.2                               Interest Payments. Subject to Section 2.3 hereof and except as
otherwise expressly provided in any Note, interest accrued on each Borrowing
Tranche or any other outstanding amount of the Loans shall be payable by
Borrower in arrears on the 30th day of each March, June, September and
December, commencing March 30, 2008, and on the applicable Maturity Date
of each Loan.


 


2.3                               Default Interest. Notwithstanding
the rates of interest and the payment dates specified in this Section 2, effective immediately
upon the occurrence and during the continuance of any Event of Default, the
principal balance of any Loan then outstanding and, to 


 


 


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the extent permitted by applicable law, any interest
payments not paid within ten (10) days after the same becomes due shall
bear interest payable upon demand at a rate which is two percent (2%) per annum
in excess of the rate of interest otherwise payable under these Agreed Upon
Terms and Procedures (the “Default Rate”).
In addition, all other amounts due Lender (whether directly or for
reimbursement) under these Terms and Procedures or any of the other Loan
Documents, if not paid when due or, in the event no time period is expressed,
if not paid within five (5) days after written notice from Lender that the
same has become due, shall thereafter bear interest at the foregoing Default
Rate. Finally, any amount due on a Maturity Date which is not then paid shall
also bear interest thereafter at the Default Rate. Notwithstanding anything to
the contrary set forth in this Section 2.3
or elsewhere in these Terms and Procedures, the Default Rate of interest shall
apply with respect to an Event of Default relating to the Subordinated Debt if
such Event of Default occurs pursuant to Sections
8.1.1.16 or 8.1.1.17
of the Loan Agreement or such Event of Default is one with respect to which
Lender would be entitled to declare the Subordinated Debenture immediately due
and payable pursuant to Section 8.6
of the Loan Agreement.


 


2.4                               Computation of Interest. Interest
shall be computed on the basis of the actual number of days elapsed in the
period during which interest accrues and a year of 360 days. In computing
interest, the date of funding shall be included and the date of payment shall
be excluded; provided, however, that if any funding is repaid on the same day
on which it is made, one day’s interest shall be paid thereon. The parties
hereto intend to conform strictly to applicable usury laws as in effect from
time to time during the terms of the Loans. Accordingly, if the transaction
contemplated hereby would be usurious under applicable law (including the laws
of the United States of America, or of any other jurisdiction whose laws may be
mandatorily applicable), then, in that event, notwithstanding anything to the
contrary in this Agreement or any of the Notes, Borrower and Lender agree that
the aggregate of all consideration that constitutes interest under applicable
law that is contracted for, charged or received under or in connection with
this Agreement shall under no circumstances exceed the maximum amount of
interest allowed by applicable law, and any excess shall be credited to
Borrower by Lender (or if such consideration shall have been paid in full, such
excess refunded to Borrower by Lender).


 


2.5                               Certain Provisions Regarding LIBO Rate Tranches.


 


2.5.1                     Changes; Legal Restrictions. In
the event the adoption of or any change in any law, treaty, rule, regulation,
guideline or the interpretation or application thereof by a governmental
authority (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) either (a) subjects Lender
to any tax (other than income taxes or franchise taxes not specifically based
on Loan transactions), duty or other charge of any kind with respect to any
LIBO Rate Tranche or changes the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable in connection with a LIBO
Rate Tranche, or (b) imposes on Lender any other condition materially more
burdensome in nature, extent or consequence than those in existence as of the
date of this Agreement, which conditions are related to a LIBO Rate Tranche or
Loan transaction, and the result of any of the foregoing is to increase the
cost to Lender of making, renewing or maintaining any LIBO Rate Tranches or to
reduce any amount receivable thereunder; then, in any such case, Borrower shall
promptly pay to Lender, as applicable, upon demand, such amount or amounts as
may be necessary to compensate Lender for any such additional cost incurred or
reduced amounts received.  


 


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Notwithstanding the foregoing, any increase, change or
modification to any local, state or federal income, franchise or similar tax
which is not specifically directed to or based on a LIBO Rate Tranche or a Loan
transaction shall not result in any change in the payments made by Borrower.


 


2.5.2                     LIBO Rate Lending Unlawful. If
Lender shall determine (which determination shall, upon notice thereof to
Borrower, be conclusive and binding in the absence of readily demonstrable
error) that the adoption of or any change in any law, treaty, rule, regulation,
guideline or in the interpretation or application thereof by any governmental
authority makes it unlawful for Lender to make or maintain any LIBO Rate
Tranche, (a) the obligation of Lender to make or continue any LIBO Rate
Tranche shall, upon such determination, forthwith be suspended until Lender
shall notify Borrower that the circumstances causing such suspension no longer
exist, and (b) if required by such law, interpretation or application, all
LIBO Rate Tranches shall automatically convert into Base Rate Tranches.


 


2.5.3                     Unascertainable Interest Rate. If
Lender shall have determined in good faith that adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO Rate Tranches,
then, upon notice from Lender to Borrower, the obligations of Lender to make or
continue LIBO Rate Tranches shall forthwith be suspended, and thereafter the
Loan shall continue at the applicable Base Rate until Lender shall notify
Borrower that the circumstances causing such suspension no longer exist. Lender
will give such notice when it determines, in good faith, that such
circumstances no longer exist; provided, however, that Lender shall not have
any liability with respect to any delay in giving such notice.


 


2.5.4                     Funding Losses. In the event
Lender shall incur any loss or expense (including, without limitation, any loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by Lender to make or maintain any LIBO Rate Tranche) as a
result of any continuance, conversion, repayment or prepayment of the principal
amount of, or failure to make or termination of, any LIBO Rate Tranche on a
date other than the scheduled last day of the LIBOR Period applicable thereto,
then, upon the written notice of such from Lender to Borrower, Borrower shall
reimburse Lender for such loss or expense within three Business Days after
receipt of such notice. Such written notice (which shall include calculations
in reasonable detail) shall be conclusive and binding in the absence of readily
demonstrable error.


 


2.6                               Additional Interest on LIBO Rate Tranches. So long as and to the extent Lender shall be required under
regulations of the FRB to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (as defined in the
definition of Reserve Percentage), and Lender’s performance under this
Agreement shall have given rise to additional reserve requirements for Lender
thereunder, Borrower shall pay to Lender additional interest on the unpaid
principal amount of each LIBO Rate Tranche. Such additional interest shall
accrue from the later of the date such reserve requirement commences and the
date of the first disbursement under such LIBO Rate Tranche until the earlier
of the date such reserve requirement ends and the date the principal amount of
such LIBO Rate Tranche is paid in full, at an interest rate per annum equal at
all times to the remainder obtained by subtracting (a) the LIBO Rate for
the LIBOR Period for such LIBO Rate Tranche from (b) the rate obtained by
dividing the LIBO Rate by a percentage equal to 100% minus the Reserve
Percentage as in effect from time to time during such LIBOR Period. Lender
shall, as soon as practicable but not later than the last day of the LIBOR
Period, provide notice to Borrower of 


 


 


4





















 


any such additional interest arising in connection
with such LIBO Rate Tranche and the certification of Lender that the additional
amount is due and that the additional reserve requirement is applicable to such
LIBO Rate Tranche. Such additional interest shall be payable directly to Lender
on the dates specified herein for payment of interest.


 


2.7                               Notice of Changes or Increased Costs Relating to LIBO Rate Tranches. Lender agrees that, as promptly as reasonably practicable after
it becomes aware of the occurrence of an event or the existence of a condition
which would cause it to be affected by any of the events or conditions
described in Sections 2.5
or 2.6 hereof, it will
notify Borrower of such event and the possible effects thereof, provided that
the failure to provide such notice shall not affect Lender’s rights to
reimbursement provided for herein.


 


3.                                      PAYMENTS. Borrower agrees that
matters concerning prepayments, payments and application of payments shall be
in accordance with Lender’s practices set forth herein and in the other Loan
Documents.


 


3.1                               Prepayment. Subject to Section 2.5.4 hereof, Borrower
may, upon at least one (1) Business Day’s notice to Lender, prepay,
without penalty, all or a portion of the principal amount outstanding under the
Subordinated Debt or the Revolving Loan in a minimum aggregate amount of
$25,000 or any larger integral multiple of $25,000 by paying the principal
amount to be prepaid, together with unpaid accrued interest thereon to the date
of prepayment. Notwithstanding anything to the contrary set forth in this
Agreement or in any other Loan Document, principal amounts outstanding under
the Term Loan may not be prepaid without the written consent and approval of
Lender, which consent and approval may be withheld at Lender’s sole and
absolute discretion; provided, however, that if all amounts outstanding under
any other indebtedness owing from Borrower to Lender have been repaid and
Borrower has satisfied in full all other financial obligations to Lender, then
Borrower may prepay, without penalty or the written consent and approval of
Lender, all or a portion of the principal amount outstanding under the Term
Loan by paying the principal amount to be prepaid, together with unpaid accrued
interest thereon to the date of prepayment.


 


3.2                               Manner and Time of Payment. All
payments of principal, interest and fees hereunder payable to Lender shall be
made, without condition or reservation of right and free of set-off or
counterclaim, in U.S. dollars and by wire transfer (pursuant to Lender’s
written wire transfer instructions) of immediately available funds delivered to
Lender not later than 11:00 a.m. (Chicago time) on the date due. Funds
received by Lender after that time and date shall be deemed to have been paid
on the next succeeding Business Day.


 


3.3                               Payments on Non-Business Days.
Whenever any payment to be made by Borrower hereunder shall be stated to be due
on a day which is not a Business Day, payments shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest hereunder.


 


3.4                               Application of Payments. All payments
received by Lender from or on behalf of Borrower shall first be applied to
amounts due to Lender to pay Lender’s fees and reimburse Lender’s costs and
expenses, including those pursuant to Section 5.6
or Section 8.5 of the
Loan Agreement and, second to accrued interest under the Subordinated
Debenture, third to accrued interest under the Term Note, fourth to accrued
interest under the Revolving Note, fifth to 


 


 


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principal amounts outstanding under the Revolving
Note, sixth to principal amounts outstanding under the Subordinated Debenture
and then to principal amounts outstanding under the Term Note; provided,
however, subject to Section 8.6
of the Loan Agreement, that after the date on which the final payment of
principal with respect to any Loan is due or following and during any Event of
Default, all payments received on account of Borrower’s Liabilities shall be
applied in whatever order, combination and amounts as Lender, in its sole and
absolute discretion, decides, to all costs, expenses and other indebtedness
owing to Lender. No amount paid or prepaid on any of the Notes (other than the
Revolving Note) may be reborrowed.


 


4.                                      MISCELLANEOUS. The provisions of Section 9  of the Loan Agreement
shall be incorporated in these Terms and Procedures as though restated herein,
mutatis mutandis.


 


5.                                      CONFLICTS WITH LOAN AGREEMENT. In
the event of a conflict between the terms of the Loan Agreement and the terms
of these Terms and Procedures, the provisions of these Terms and Procedures
shall govern.


 


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IN WITNESS WHEREOF, the undersigned
has caused these Terms and Procedures to be duly executed and delivered as of
the day and year first above written.


 


 


	
   

  	
   

  	
  OLD SECOND BANCORP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ William B. Skoglund

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William B.
  Skoglund

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President,
  Chief Executive Officer and

  
	
   

  	
   

  	
   

  	
   

  	
  Chairman

  



 


 


 


	
   

  	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Jeffrey J. Bowden

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Jeffery J.
  Bowden

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President

  



 


 


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