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FORBEARANCE AND STANDSTILL AGREEMENT
THIS FORBEARANCE AND STANDSTILL AGREEMENT (the “ Agreement ”) is entered into as of June 30, 2011 by and between NEDAK Ethanol, LLC, a Nebraska limited liability company, (the “ Borrower ”), and Arbor Bank, a Nebraska banking corporation (the “ Lead Lender ”) with the intent and agreement that this Agreement shall be effective as of the Effective Date defined below. Lead Lender and Borrower shall each individually be a “Party” and collectively, the “Parties”.
A. Reference is made to that certain Loan Agreement dated as of June 19, 2007 (the “ Loan Agreement ”), by and among Borrower and Lead Lender, and the Promissory note issued thereunder by Borrower and made payable to Lead Lender dated as of June 19, 2007 in the principal sum of $6,864,000 (the “ Borrower’s Note ”) under which Lead Lender and certain other lenders has provided tax increment financing in connection with the development by Borrower of a 44 million gallon ethanol plant in the City of Atkinson (the “ Facility ”). Unless otherwise defined, terms in this Agreement with an initial capital letter will have the meaning given such term in the Loan Agreement.
B. On August 12, 2010, the Lead Lender filed a lawsuit in the District Court of Douglas County, Nebraska (the “ Court ”) against the Borrower (designated Arbor Bank v NEDAK Ethanol, LLC, Doc. 1110 No. 213, the “ Lender Suit ”) alleging that Borrower has failed to make certain payments required under the Borrower’s Note and failed to comply with certain other covenants under the Loan Agreement. On October 29, 2010, the Lead Lender filed a motion for summary judgment (the “ Lender Summary Judgment Motion ”). On April 20, 2011, the Court issued a preliminary order finding in favor of the Lead Lender with respect to the default by the Borrower on the TIF Loan and directing that a hearing be held to establish the interest and costs.
C. Borrower is party to a Master Credit Agreement, as amended and supplemented (the “ Senior Credit Agreement ”), with AgCountry Farm Credit Services FCA (f/k/a Farm Credit Services of Grand Forks, North Dakota) (“ Senior Lender ”) regarding a senior secured credit facility (the “ Senior Credit Facility ”). Borrower and Senior Lender have entered into several forbearance agreements, including the Seventh Supplement and Forbearance Agreement dated as of February 1, 2011 (the “ Senior Lender Forbearance ”) pursuant to which Senior Lender has agreed to forbear from its rights under the Senior Credit Agreement until June 30, 2011, or the occurrence of an event of default under the Senior Lender Forbearance. Included among such events of default are any actions by the Lead Lender to exercise any right or remedy under any the Loan Agreement, or the issuance or entry of any judgment, decree or order for the payment of money against Borrower or the award of equitable relief in connection with the Lender Suit and the Lender Summary Judgment Motion.
D. Borrower has undertaken a plan to raise capital (the “ 2011 Offering ”) in order to remedy the current defaults under the Senior Credit Facility and the Loan Agreement and to complete a restructuring of its debt to allow for continued operations of the Facility, as is more fully described in the Borrower’s Confidential Private Placement Memorandum dated
April 7, 2011 (as supplemented from time to time, the “ 2011 Offering PPM ”). A copy of the 2011 Offering PPM has been provided to the Lead Lender.
E. In connection with the 2011 offering and the proposed restructuring plan, Borrower intends to enter into an Ethanol Purchase And Sale Agreement and the Ethanol Tank Lease with Tenaska Biofules, LLC (together, the “ Tenaska Agreements ”). This Agreement is imperative to aid Borrower in its efforts to negotiate favorable terms with Tenaska Biofuels, LLC and the Senior Lender in their respective agreements. Borrower and Lead Lender wish to cooperate to support Borrower’s activities to complete the 2011 Offering, allow Borrower to enter into the Tenaska Agreements and for the implementation of the plan.
F. To induce Lead Lender to enter into this Agreement and thereby forbear from exercising Lender’s rights, powers and remedies under the Loan Agreement, Borrower’s Note and other Loan Documents and the law, Borrower has agreed to adhere to the promises and covenants set forth herein.
G. Lead Lender is willing to forebear during the Standstill Period (defined below) from exercising its rights, remedies and powers under the Loan Agreement, Borrower’s Note, the other Loan Documents and the law subject to the terms and conditions set forth herein, provided that Lead Lender does not waive any Events of Default by Borrower or any of such rights, powers and remedies.
NOW, THEREFORE, in consideration of the foregoing, and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower and Lead Lender, acting on behalf of itself and each Participant, agree as follows:
1. Recitals . Borrower acknowledges and agrees that each of the Recitals and facts set forth in Paragraphs A through G above is true and correct and is incorporated herein by this reference and made a part hereof.
2. Reaffirmation of the Terms and Undertakings of the Loan Documents and Other Agreements . Borrower acknowledges and agrees that, as a result of certain Events of Default, Lead Lender has validly accelerated and the entire unpaid balance of Borrower’s Note is due and owing to Lead Lender without setoff, defense or counterclaims of any kind whatsoever, and that Borrower is absolutely and unconditionally liable to Lead Lender for the same to the full extent set forth in the Recitals together with any interest and other costs (including collection costs) that continue to accrue after the date hereof, and that such liability is not subject to any defense, setoff or counterclaim. Borrower acknowledges and agrees that the terms of the Loan Agreement, Borrower’s Note, any other Loan Documents, and any other agreements delivered in favor of Lead Lender prior to the date hereof are valid and remain in full force and effect in accordance with their terms, and are hereby reaffirmed and restated effective as of the date hereof as if fully set forth herein.
3. Validity and Enforceability of the Loan Agreement, Borrower’s Note, Loan Documents and Other Agreements . Borrower acknowledges and agrees that the Loan Agreement, Borrower’s Note, and any other Loan Documents, are valid, binding and fully enforceable according to their terms. Any technical defects in the Loan Agreement, Borrower’s
Note, or any other Loan Documents, whether known or unknown, are hereby unconditionally and absolutely waived by Borrower. Borrower hereby waives any and all rules of construction, if any, and arguments that this Agreement, the Loan Agreement, Borrower’s Note and other Loan Documents are to be construed against Lead Lender as a result of its participation in the drafting hereof and thereof.
4. No Waiver by Lead Lender of Existing Defaults, Rights and Remedies . Nothing in this Agreement or otherwise should or shall be construed as a waiver by Lead Lender of any existing Events of Default. Lender retains and has not waived any of its rights and remedies set forth in the Loan Agreement, Borrower’s Note, the other Loan Documents or provided for at law. Lead Lender’s agreement to forbear under this Agreement shall not constitute an extension of the maturity date under the Loan Documents, a waiver of a