Exhibit 10.1
Execution Copy
FORBEARANCE
AGREEMENT
THIS FORBEARANCE AGREEMENT (the
“Agreement”) is made as of this 20th day of March, 2009
(the “Effective Date”), between OTTER TAIL AG
ENTERPRISES, LLC, a Minnesota limited liability company
(“Borrower”) and AGSTAR FINANCIAL SERVICES, PCA, a
United States instrumentality (“Lender”).
RECITALS
A.
The Borrower is indebted to Lender
under the following promissory notes (collectively, the
“Notes”):
(i)
A Construction and Term Note dated
March 28, 2007 in the original principal amount of $35,000,000.00
(“Note One”);
(ii)
An Amended and Restated Term
Revolving Note dated June 23, 2008 in the original principal amount
of $6,000,000.00 (“Note Two”);
(iii)
An Amended and Restated Revolving
Line of Credit Note dated June 23, 2008 in the original principal
amount of $6,000,000.00 (“Note Three”), Note Three
matures and is due and payable in full on March 30,
2009.
B.
The Borrower’s obligations to
the Lender are further evidenced by an Amended and Restated Master
Loan Agreement dated as of June 23, 2008; a First Supplement to the
Master Loan Agreement (Construction and Term Loan) dated as of
March 28, 2007 (the “First Supplement”); an Amended and
Restated Second Supplement to the Master Loan Agreement (Term
Revolving Loan) dated as of June 23, 2008 (the “Second
Supplement”); and a Second Amended and Restated Third
Supplement to the Master Loan Agreement (Revolving Line of Credit
Loan) dated as of June 23, 2008 (the “Third
Supplement”) between Borrower and Lender (collectively, the
“Loan Agreement”).
C.
The loans evidenced by the Notes and
the Loan Agreement (the “Loans”) were made by Lender to
Borrower for the purpose of constructing and operating an ethanol
production facility in or near Fergus Falls, Minnesota (the
“Project”).
D.
As collateral for the Notes, the
Borrower has granted to Lender (among other things):
(i)
a Mortgage, Security Agreement and
Assignment of Rents and Leases dated March 28, 2007 and recorded in
the Office of the County Recorder of Otter Tail County on March 30,
2007, as Instrument No. 1016602 and as amended and restated by that
certain Amended and Restated Mortgage, Security Agreement and
Assignment of Rents and Leases dated June 23, 2008, and recorded in
the Office of the County Recorder of Otter Tail County on June 27,
2008, as Instrument No. 1041045 (collectively, the
“Mortgage”) under which
Lender has a lien in certain real property in Otter Tail County,
Minnesota, as further described in the Mortgage (the “Real
Property”);
(ii)
security interests in all of the
assets of the Borrower, including without limitation, inventory,
chattel paper, accounts, equipment, general intangibles, deposit
accounts, and commodity accounts, (collectively, the
“Collateral”) pursuant to the provisions of a Security
Agreement dated March 28, 2007 (the “Security
Agreement”); and
(iii)
collateral assignments of all
material contracts related to the Project, including, without
limitation, construction agreements, ethanol and distillers grains
marketing agreements; and grain procurement contracts
(collectively, the “Assignments”).
E.
The Loan Agreement, the Notes, the
Mortgage, the Security Agreement, the Assignments and all other
documents evidencing the obligations of the Borrower under the
Loans are referred to in this Agreement as the “Loan
Documents.”
F.
The Loans were part of a series of
finance arrangements the Borrower entered into to finance the
Project, and as a result, Lender entered into an Intercreditor
Agreement dated as of March 28, 2007, which is currently
represented by an Amended and Restated Intercreditor Agreement
dated as of June 4, 2008, between Lender and other of
Borrower’s financing sources (the
“ICA”).
G.
The Borrower has failed to (i) make
the payments due on February 1, 2009 and March 1, 2009, and (ii)
maintain an adequate borrowing base to support the advances under
Note Three. As a result of the Borrower’s defaults, Lender
has the option to declare the Notes fully and immediately due and
payable without defense or right of setoff.
H.
As a result of these defaults, the
Borrower has requested that the Lender forbear from i) declaring
the Notes fully and immediately due and payable, ii) from
exercising its enforcement and collection rights, and iii) from
undertaking or allowing certain matters pursuant to the ICA and
allow the Borrower an opportunity to restructure the indebtedness
owed Lender.
I.
In consideration of the facts set
forth in these Recitals, which the parties agree are true and
correct, and in consideration for entering into this Agreement, the
Lender is willing to grant such forbearance upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements set forth in this Agreement,
the parties hereto agree as follows:
1.
Acknowledgment of
Default .
The Borrower acknowledges due execution and delivery of the Loan
Agreement, Notes, Mortgage and Security Agreement and acknowledges
that the same are valid and enforceable by the Lender against the
Borrower in accordance with their terms. The Borrower
acknowledges that it is in default under the Loan
Documents
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2.
Acknowledgment of
Debt . The
Borrower acknowledges that, as a result of the defaults of the
Borrower, Lender has the option to declare that the indebtedness
evidenced by the Notes is, absent the provision of this Agreement,
due and payable without any claims, defenses, counterclaims,
offsets, and/or cross-complaints, or demands of any kind or nature
whatsoever. The Borrower further acknowledges that the
principal balance and accrued and unpaid interest owed on each of
the Notes as of March 13, 2009, is as follows:
|
Note
|
|
Outstanding
Principal Balance
as of March 13,
2009
|
|
Accrued Interest
as of March 13,
2009
|
|
Late Charges as
of March 13, 2009
|
|
Total
Principal,
Interest, and
Late Charges
as of March
13, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Note
|
|
$
|
28,806,137.30
|
|
$
|
217,135.25
|
|
$
|
64,069.08
|
|
$
|
29,087,341.63
|
|
|
Term Revolving Note
|
|
$
|
6,000,000.00
|
|
$
|
45,421.52
|
|
$
|
13,150.40
|
|
$
|
6,058,571.92
|
|
|
Revolving Line of Credit
Note
|
|
$
|
6,000,000.00
|
|
$
|
45,421.53
|
|
$
|
13,150.40
|
|
$
|
6,058,571.93
|
|
|
TOTAL
|
|
$
|
40,806,137.30
|
|
$
|
307,978.30
|
|
$
|
90,369.88
|
|
$
|
41,204,485.48
|
|
In addition to said principal and
interest balances, the Lender has incurred, and will continue to
incur, costs and legal expenses as a result of the Borrower’s
defaults under the Loan Documents which amounts are, in accordance
with the terms of the Loan Documents, due and payable by the
Borrower.
3.
Forbearance
Period . Beginning on February 1, 2009, and ending
on the earlier of an Event of Default (as defined below) or April
30, 2009 (the “Forbearance Period”), provided that the
Conditions Precedent set forth below have first been satisfied and
Borrower complies with the terms of this Agreement, the Lender
agrees (i) it will not declare a default under the Loan Documents
or enforce any remedies available to it under the Loan Documents or
applicable law on account of the Borrower’s defaults; (ii) it
will not consent to the undertaking of any Remedial Action by NMF,
the County, or the Trustee (as such terms are defined in the ICA),
nor will Lender provide any notice of default and/or acceleration
pursuant to Section 4 or Section 7.1 of the ICA; (iii) that the
Borrowing Base shall be deemed to have been increased to the lesser
of $6,000,000 or the sum of 100% of the Borrower’s Eligible
Accounts Receivable and 100% of Borrower’s Eligible
Inventory; (iv) that the passing of the maturity date of Note Three
without payment in full on such date shall not be an Event of
Default during the Forbearance Period; and (v) failure to
comply with the financial covenants set forth in Sections 5.01(d),
(e), (f) and (g) of the Loan Agreement will be excused.
Notwithstanding any of the terms of this Agreement, Lender may
provide Borrower with a distressed loan notice pursuant to
regulations of the Farm Credit Administration (the
“Distressed Loan Notice”).
4.
Conditions
Precedent . As conditions precedent to the
Lender’s and forbearance, as set forth in the preceding
paragraph, the following agreements, documents, and other
items
3
shall have been executed and/or
delivered to the Lender, and the following events shall have
occurred:
a.
Execution and Delivery of
Agreement . The
Borrower shall have executed and delivered to the Lender this
Agreement and any other documents and agreements ancillary or
incident hereto.
b.
Other Documentation
. The Borrower shall have
obtained and delivered to the Lender any and all further
documentation reasonably requested by the Lender.
c.
Title Insurer Approval
. This Forbearance Agreement
has been reviewed by First Minnesota Title and Abstract, LLC and
Lawyers Title Insurance Corporation and AgStar has received
approval of t
