exv10w13



 





Exhibit 10.13




[Southwest Georgia Farm Credit Letterhead]




October 4, 2006




First United Ethanol, LLC

2 West Broad Street

Camilla, GA 31730

Attn: Murray Campbell





			
	Re:	 	Proposed Senior Secured Credit Facilities — $82,500,000 Letter of Credit/$11,000,000 Operating
Line of Credit





Dear Mr. Campbell:



Southwest Georgia Farm Credit, ACA (“Southwest Georgia”) is pleased to offer its conditional
commitment to arrange credit facilities (the “Credit Facilities”) for the Borrower, as described
below, and subject to the terms and conditions outlined herein:




     1. Background: It is proposed that the Mitchell County Development Authority issue
solid waste disposable bonds and taxable bonds not to exceed $82,500,000 (the “Bonds”), the
proceeds of which will be loaned to First United Ethanol, LLC, a Georgia limited liability company
to be used for the purpose of financing a portion of the construction of a 100,000,000 gallon per
year (minimum) annual capacity dry-mill ethanol production facility in Camilla, Georgia (the
“Project”). Depending upon the structure of the Bonds, proceeds may also be used to fund a debt
service reserve fund, and to fund a capitalized interest fund for the Bonds in the approximate
amount of interest to accrue during the period of construction of the Project. Proceeds may also
be used to finance the approved costs of issuance and soft costs incurred by the Borrower in
connection with the issuance of the Bonds and of the Letter of Credit (as defined below).



     2. Borrower: First United Ethanol, LLC, a Georgia limited liability company (the
“Borrower”).



     3. Agent/Arranger: Southwest Georgia Farm Credit, ACA (the “Arranger”).



     4. Bond Underwriter: W. R. Taylor & Company, LLC (the “Underwriter”).



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     5. Credit Facilities:



          (a) Letter of Credit Facility: Credit facilities committed by the LC Issuer and
Lenders to support one or more direct pay letters of credit of up to $82,500,000 as credit
enhancement on the Bonds (the “Letter of Credit”). The Letter of Credit shall have an expiry of 12
months from the date of issuance, renewable annually in the discretion of the LC Issuer.



          (b) Operating Line: a revolving line of credit in the amount of up to $11,000,000 to
be used by the Borrower for working capital purposes (the “Operating Line”).



(The Letter of Credit and the Operating Line, together, the “Credit Facilities”).




     6. The Bonds: The Bonds (as defined in the Background Statement at Section 1
hereof) are to be issued in accordance with the general terms described in that certain letter
dated as of April 25, 2006 from the Underwriter to the Borrower. Proceeds of the Bonds shall be
used to finance a portion of the construction of a 100,000,000 gallon per year (minimum) capacity
dry-mill ethanol production facility in Camilla, Georgia (the “Project”).



     7. The LC Issuer/Lenders: The Credit Facilities shall be extended to the Borrower by
a syndication of lenders (the “Lenders” or the “LC Issuer” as the context requires) to be agreed
upon by the Arranger. Obligations of the LC Issuer/Lenders to provide the Credit Facilities shall
be absolutely conditioned upon the success of the Arranger’s best efforts to obtain full
subscriptions for the Credit Facilities for the entire amount thereof from a syndication of
lenders.



     8. Construction Period: 18 months from closing (the “Construction Period”).



     9. Closing: to be determined by mutual agreement of the Arranger and the Borrower
(such actual date, the “Closing” or “Closing Date”).



     10. Maturity:



          (a) Bonds: seven years from date of Closing.



          (b) Operating Line: annually renewable for up to three years from Closing.



     11. Amortization:



          (a) Bonds: Interest only during Construction Period, due to a sinking fund monthly,
to be applied to the Bonds quarterly; followed by fixed principal payments, due quarterly with
monthly interest only payments, based upon a 10 year amortization with a balloon due at maturity.



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          (b) Operating Line: Interest only, due monthly with a balloon at maturity.



     12. Free Cash Flow: Quarterly free cash flow payments will be required by the LC
Issuer which will consist of special principal installments, to be applied to the Bonds in inverse
order of maturity, in an amount equal to the applicable Cash Sweep Percentage of the available Free
Cash Flow (if any) of the Borrower during the previous quarter, provided that if such installment
would result in a covenant default, the amount of the installment shall be reduced to an amount
which would not result in a default.


Free Cash Flow shall be defined as the Borrower’s annual net income before taxes plus the
respective fiscal year depreciation and amortization expense minus allowed capital expenditures for
fixed assets minus allowed distributions to shareholders (excluding Additional Shareholder
Distributions) minus regular scheduled term debt principal installments.



Cash Sweep Percentage shall be determined based on a matrix attached as Addendum I and shall be
subject to change annually based on the Borrower’s Equity Ratio.




     13. Interest Rate:



          (a) Bonds: The Bonds are projected to bear interest as set forth in the April 7, 2006
letter from the Underwriter to the Borrower.



          (b) Letter of Credit Draws: Draws under the Letter of Credit shall be payable on
demand and, unless repaid on the same day of the advance thereof, shall bear interest at a daily
variable rate, based upon the prime rate (as published by The Wall Street Journal) plus 2.50%, or
three month LIBOR plus 5.25%.



          (c) Operating Line: Amounts outstanding under the Operating Line shall bear interest
at a daily variable rate based upon the prime rate (as published by
the Wall Street Journal) plus. 50%, or three month LIBOR plus 3.25%.



     14. Operating Line Advance Rate: Outstanding borrowings under the Operating Line from
time to time shall not exceed a borrowing base equal to the sum of 80% of Borrower’s eligible
inventory plus 80% of the Borrower’s eligible accounts (each as determined by the Arranger and the
Lenders).



     15. Default Rate: Payment defaults under the Operating Line shall be subject to a 10
day grace period, with certain other defaults which are capable of being cured (but excluding
bankruptcy, breach of representations and warranties, cross defaults with other lenders, etc.)
being subject to a 30 day grace period. Following the occurrence of an event of default which is
not cured within any applicable cure period, default interest will accrue at a rate that is two
percent (2.00%) per annum in excess of the applicable interest rate, which would otherwise be
applicable and payable on demand. The default rate excludes any late charges.



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     16. Debt Service Reserve: The Borrower shall establish and maintain a Debt Service
Reserve. The amount of Debt Service Reserve will be sufficient to cover up to six months of
scheduled principal and interest under the Bonds. The funds comprising the Debt Service Reserve
shall be maintained in an interest bearing account with a financial institution reasonably
acceptable to the Arranger, and shall at all times be subject to the sole dominion and control of
the Arranger, on terms more particularly set forth in the credit facility documents. Subject to
the approval of bond counsel, the Debt Service Reserve shall be funded by proceeds of tax-exempt
Bonds, taxable Bonds, or equity, or any combination thereof.



     17. Construction Capital Call: During the Construction Period, the Borrower will be
responsible for any and all cost overruns over and above the $2 million dollar construction
contingency set forth in the Borrower’s construction budget.



     18. Fees: The Borrower shall pay the following fees:



          (a) Origination Fee: 100 basis points of total Credit Facilities.



          (b) Letter of Credit Fee: 350 basis points annually payable in advance to the LC
Issuer plus up to 33 basis points annually payable to a confirming bank. In addition, the Borrower
shall pay to the LC Issuer an administration fee in the amount of $300 upon each draw made under
the Letter of Credit.



          (c) Servicing Fee: Annual servicing fee of 7.5 basis points of the total Credit
Facilities, payable each year beginning in 2008.



          (d) Unused Commitment Fee: .25% of the unused Operating Line commitment, billed
monthly in arrears.



     19. Security: The Credit Facilities will be secured by a first lien on all assets of
the Borrower.


The Arranger will require an assignment of all material contracts and agreements relating to the
Project. In addition, the Borrower will grant to the Arranger for the benefit of the LC
Issuer/Lenders an assignment of its grain hedging account, and the Arranger shall be named loss
payee on all insurance policies (if, at the time of a claim or loss, there exists no event of
default, proceeds from insurance claims in amounts less than $100,000 shall be applied at the
Borrower’s discretion without the Arranger’s consent).




     20. Conditions Precedent To Lending: The Arranger shall require, in addition to usual
and customary conditions precedent for transactions similar to the Credit Facilities, the following
conditions precedent:



          (a) Evidence of Capital: Satisfactory evidence/certification to the Arranger of total
funding from invested equity capital or acceptable binding commitments thereof totaling not less
than $66,500,000. All invested equity capital must be invested prior to any disbursement of Bond
proceeds. In addition to the $66,500,000 equity capital requirement, subordinated debt totaling
$10,000,000 (General Obligation



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Bond) is also required. Terms and conditions of the General Obligation Bond must be approved
by Arranger.




          (b) Environmental Audit: An environmental audit acceptable to the Arranger.



          (c) Access/Egress/Utilities: A certificate or other evidence satisfactory to the
Arranger as to the methods of access to and egress from the Project and the availability of water
supply, electricity, natural gas, and other utilities, and for the disposal of wastewater, all in
locations and capacities sufficient to meet the reasonable requirements of the Project and
otherwise satisfactory to the Arranger.



          (d) Budget/Schedule: A Project budget and schedule acceptable to the Arranger.
Project cost not to exceed $170,000,000, for all direct construction-related costs, contingencies,
capitalized interest and funding for working capital purposes. The schedule must also include a
timeframe for the Project to be in production no later than June 1, 2008.



          (e) Project Documents: A copy, and a collateral assignment of, all material documents
and contracts relating to the Project.



     21. Reporting Requirements:



          (a) Monthly: Beginning with the commencement of operations, the Borrower will submit
certified monthly interim financial statements (i.e. income statement, cash flow and balance
sheet), prepared in accordance with GAAP, within thirty (30) days of each month end. Attached
thereto, the Borrower shall submit a monthly production report, hedging account summary reports,
borrowing base report, compliance certificate, and other reports as may be reasonably requested by
the Arranger.



          (b) Annual: Within ninety (90) days of each fiscal year end, the Borrower shall
submit unqualified audited financial statements prepared by an accounting firm acceptable to the
Arranger (prepared in accordance with GAAP). Attached thereto, the Borrower shall provide an
annual compliance certificate, completed by an authorized representative of the Borrower,
certifying that the Borrower is in compliance with all terms and conditions outlined in the credit
documents.



     22. Covenants and Conditions: A Credit and Reimbursement Agreement, prepared by
counsel for the LC Issuer/Lenders, will be utilized and will contain various affirmative and
negative covenants and requirements typical of transaction of this size and type, including but not
limited to the following:



          (a) Debt Service Coverage Ratio: The Borrower must maintain at all times a minimum
Debt Service Coverage Ratio (DSCR) of 1.50:1. DSCR will be measured quarterly based upon the
Borrower’s in-house financial statements and fiscal year end financial statements and shall be
defined as (a) the sum of net income plus depreciation and amortization minus shareholder
distributions during the respective fiscal year minus extraordinary gains and losses minus gains
and losses from the sale of assets,



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all divided by (b) the sum of current portion of long-term debt as of the previous
fiscal year end.




          (b) Working Capital: The Borrower must have Working Capital in an amount not less
than $8,500,000 effective at plant start-up, and of not less than $12,000,000 after the first full
year of production and at all times thereafter. Working Capital will be measured quarterly and
shall be defined as current assets minus current liabilities. In the event the Operating Line is
not fully funded, the unfunded long-term portion will be included in the calculation of Working
Capital.



          (c) Equity Percentage: The Borrower must maintain, at all times, an Equity Percentage
of not less than thirty-eight percent (38%). Equity Percentage will be measured quarterly and
shall be defined as the Borrower’s total stockholder’s equity divided by the Borrower’s total
assets (determined in accordance with GAAP).



          (d) Shareholder Distributions: After fiscal year-end 2008, the Borrower may declare
or pay cash distributions or dividends to its shareholders during each fiscal year in an amount not
to exceed 40% of net income for the immediately preceding fiscal year following receipt of the
audited financial statements for the immediately preceding fiscal year, provided the Borrower is
and is expected to remain in compliance with all loan-covenants, terms and condition, on a
post-distribution basis. All shareholder distributions will be subordinate to all payments of
principal and interest under the Credit Facilities.



          (e) Additional Shareholder Distributions: With respect to fiscal years ending in 2009
and thereafter, a distribution may be made in excess of 40% of net income, but not to exceed net
income for such year and so long as the Borrower has made the required “Free Cash Flow” payment for
such fiscal year and will remain in compliance with all loan covenants on a pro forma basis net of
said additional payment(s).



          (f) Capital Expenditures: Other than the construction of the Project as detailed in
the approved construction plans and budget, the Borrower’s capital expenditures during any fiscal
year shall not exceed the maximum amount allowed for in Addendum I based on the Borrower’s Equity
Percentage at the preceding fiscal year end.



          (g) Additional Borrowings: Without prior written consent from the Arranger, the
Borrower may not incur, create or assume additional indebtedness to subordinate creditors in an
aggregate amount in excess of $500,000.



          (h) Change of Control: There shall occur no change in the Borrower’s board of
directors in excess of one-third (1/3) of the board seats during any two year period without prior
consent of Arranger.



          (i) Material Changes: Without prior written consent, the Borrower may not alter the
terms of its Articles of Organization, Operating Agreement, Management Agreement or marketing
contracts.



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     23. Events of Default: The Credit Facilities shall be subject to standard and
customary events of default including, without limitation, payment defaults, failure of
representations and warranties, affirmative and negative covenant violations, bankruptcy,
litigation, and so forth, and shall include specifically failure of completion of the Project in a
timely manner, all as more particularly described in the Credit and Reimbursement Agreement.



     24. Closing Costs and Expenses: All out-of-pocket fees and expenses reasonably
incurred by the Arranger in arranging, negotiating, documenting, providing and syndicating the
financing shall be for the account of the Borrower. These shall include, without limitation, all
reasonable fees and disbursements of legal counsel and consultants to the Arranger as well as title
insurance, environmental reports, appraisal reports, cost of disbursements, independent
construction inspector, mortgage fees and taxes.



     25. Independent Consultants: The Arranger will contract an independent engineer to
conduct a feasibility study, perform inspections and advise on the status of the project during
construction. All costs associated with this will be at the sole expense of the Borrower.



     26. Governing Law: State of Georgia.



     27. Integration. Upon execution of a Credit and Reimbursement Agreement and all other
documentation required by the Arranger to evidence the Bond obligations and collateral and security
therefor, as determined by the Arranger in its sole discretion, such documents shall constitute the
entire agreement between the Arranger, the Lenders, the LC Issuer and the Borrower, and shall
supersede any and all prior agreements and understandings, including, but not limited to this
conditional commitment.



     28. Arranger’s Best Efforts: Notwithstanding any inference from this conditional
commitment letter to the contrary, the obligations of the Arranger, the Lenders, and the LC Issuer,
to provide the Credit Facilities shall be absolutely conditioned upon the success of the Arranger’s
best efforts to obtain full subscriptions for the Credit Facilities for the entire amount thereof
from a syndication of lenders. In the event that the Arranger is unable to obtain full
subscriptions for the Credit Facilities, then the committed amount of the Credit Facilities shall
be reduced to the sum of actual subscriptions contained. Moreover, by the Borrower’s acceptance of
this conditional commitment, the Borrower acknowledges that, in order to obtain subscription of the
Credit Facilities, the Lenders may require modified, additional or different terms from those set
forth herein.


THE FOREGOING IS NOT INTENDED TO BE AN EXHAUSTIVE DESCRIPTION OF THE TERMS AND CONDITIONS OF THE
CREDIT FACILITIES. THE DOCUMENTATION REQUIRED BY THE LENDERS IN CONNECTION WITH THE CREDIT
FACILITIES MAY CONTAIN ADDITIONAL TERMS AND CONDITIONS WHICH ARE NOT INCONSISTENT WITH THOSE SET
FORTH HEREIN. MOREOVER, THE ARRANGER




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RESERVES THE RIGHT TO CHANGE THE FOREGOING TERMS AND CONDITIONS, IN ITS SOLE DISCRETION, BASED UPON
INFORMATION IT OR ITS LEGAL COUNSEL MAY RECEIVE IN THE COURSE OF CONDUCTING ITS DUE DILIGENCE IN
PREPARATION FOR THE CLOSING OF THE CREDIT FACILITIES. FURTHER, IF (I) THE ARRANGER ACQUIRES
INFORMATION PRIOR TO THE CLOSING DATE WHICH IS MATERIALLY DIFFERENT FROM THAT IN ITS POSSESSION AS
OF THE DATE HEREOF, OR (II) THERE OCCURS A MATERIAL CHANGE IN THE BORROWER’S PROJECTED FINANCIAL
CONDITION OR BUSINESS PLAN PRIOR TO THE CLOSING DATE FROM THAT REFLECTED ON THOSE FURNISHED TO THE
ARRANGER TO DATE, THEN THE ARRANGER RESERVES THE RIGHT TO MODIFY OR REVOKE THIS COMMITMENT.



We are pleased to have this opportunity to provide this conditional commitment to the Borrower. If
you find the above-described terms acceptable, please indicate your acceptance below and return an
original signed duplicate of this letter to me by August 8, 2006. Should this proposal not be
returned by that date, it will become void.



Southwest Georgia Farm Credit, ACA is looking forward to working with you on this matter and
all of your future financing needs. If you have any questions, please call me at 229-248-0050 x
122.




Sincerely




Southwest Georgia Farm Credit, ACA




	 	 	 	 	 
	By: 


	 	/s/ Ted R. Murkerson

	 	 	 	 	 
	 
	Its:	 	Capital Markets Administrator
	 	 






Accepted by:




First United Ethanol, LLC




	 	 	 	 	 
	By: 



	 	/s/ Antony J. Flagg
	 	 
	 	 	 	 	 
	 
	Its:	 	
CEO
	 	 






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Addendum I




     The Margin Points, Commitment Fee, Cash Sweep Percentage, Maximum Cash Sweep, and Maximum
Capital Expenditures shall be adjusted annually, on May 1, based upon the Borrower’s Equity Ratio
at fiscal year end December 31, as reflected in the Matrix below.



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Level 1	 	Level 2	 	Level 3
	 	 	 	 	 	 	< 60%	 	< 50%
	Equity Ratio	 	> 60%	 	3  50%	 	3 40%
	Margin Points 
	 	 	 	 	 	 
	
PRIME
	 	 	.50	%	 	 	.50	%	 	 	.50	%
	LIBOR
	 	 	3.25	%	 	 	3.25	%	 	 	3.25	%
	Cash Sweep Percentage
	 	 	20	%	 	 	40	%	 	 	60	%
	Maximum Cash Sweep
	 	None	 	 	None	 	 	None	 
	Maximum Capital Expenditures
	 	$	3,000,000	 	 	$	1,500,000	 	 	$	800,000	 






     Level 3 pricing will apply from the Closing Date until the end of construction, at which time
the grid specified above will apply (based upon certification from a senior financial officer of
Borrower as to the Equity Ratio, which certification will be delivered to Lenders from time to time
with the financial statements of Borrower).




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