On April 18, 2013, AgFeed USA, LLC and certain subsidiaries of AgFeed USA, LLC, Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA entered into a Forbearance Agreement, dated April 18, 2013, among the Borrowers and Farm Credit, with respect to AgFeed USA, LLC's Credit Agreement, dated June 6, 2006, among the Borrowers and Farm Credit, as previously amended from time to time. In the Forbearance Agreement, Farm Credit agreed that it will extend the period during which it will take no action to enforce its default remedies under the Credit Agreement and related security and other agreements until the earlier of violation of the Forbearance Agreement and July 1, 2013. Pursuant to the Forbearance Agreement, AgFeed USA has committed to complete by July 1, 2013, a transaction that will result in the satisfaction in full of Farm Credit's claims. The Forbearance Agreement further provides that advances of cash that the Borrowers make to the company may not exceed $967,788 during the Forbearance Period or $365,000 during any calendar month during the Forbearance Period. Also on April 18, 2013, the company entered into a Guaranty of the obligations of the Borrowers under the Credit Agreement. The company's obligations under the Guaranty shall not exceed the sum of $1,406,250, which represents cash amounts previously advanced from the Borrowers to the company, plus the aggregate amount of advances to the company during the Forbearance Period (such advances not to exceed $967,788).

On March 1, 2013, AgFeed USA, LLC (M2 P2, LLC), a subsidiary of AgFeed Industries Inc. and certain subsidiaries of AgFeed USA, LLC, Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA entered into an amendment to the Forbearance Agreement, dated February 1, 2013, among the Borrowers and Farm Credit, with respect to AgFeed USA, LLC’s Credit Agreement, dated June 6, 2006, among the Borrowers and Farm Credit, as previously amended from time to time. In the Amendment, Farm Credit agreed that it will extend the period during which it will take no action to enforce its default remedies under the Credit Agreement and related security and other agreements until the earlier of (1) violation of the Forbearance Agreement or further breach of the Credit Agreement and related security and other agreements or (2) May 1, 2013. The company is working closely with Farm Credit in reviewing its financing options.

AgFeed USA, LLC and certain of it’s subsidiaries sell hogs to Hormel Foods Corporation and its subsidiaries under long-term supply agreements. Sales of hogs to Hormel under the Supply Agreements account for substantially all of AgFeed USA’s revenues and a majority of the company’s revenues. On January 9, 2013, AgFeed USA received an adverse decision in arbitration, requiring it to make a net payment of $7.9 million to Hormel. In addition, the arbitrator may decide that AgFeed USA is liable for interest and/or a portion of Hormel’s legal fees. Further, Hormel is initiating a new arbitration proceeding seeking changes to the standard prices used in computing quarterly adjustment payments under the Supply Agreements as well as unspecified monetary damages on other grounds that have not yet been specifically asserted. AgFeed USA intends to defend itself vigorously in the new arbitration proceeding. The Company preliminarily believes that the liabilities and related expense amounts arising from the January 9 arbitration award will be recognized in the Company’s fourth quarter 2012 consolidated financial statements. The $7.9 million payment obligation has been satisfied in full by a set-off against amounts that were otherwise payable by Hormel to AgFeed USA in January, 2013, and the Supply Agreements remain in full force and effect.