Exhibit 10.3

 

EXECUTION COPY

 

CONFIDENTIAL

 

THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This THIRD AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (this
“Amendment”), dated as of April 15, 2020, is made and entered into by and among
PACIFIC ETHANOL CENTRAL, LLC, a Delaware limited liability company (the
“Seller”), PACIFIC AURORA, LLC, a Delaware limited liability company (the
“Company”), and AURORA COOPERATIVE ELEVATOR COMPANY, a Nebraska cooperative
company (“Buyer”). Seller, the Company and Buyer are sometimes referred to
herein, individually, as a “Party” and, collectively, as the “Parties”.

 

RECITALS

 

WHEREAS, the Parties entered into that certain Membership Interest Purchase
Agreement dated as of February 28, 2020, that certain First Amendment to
Membership Interest Purchase Agreement dated as of March 17, 2020, and that
certain Second Amendment to Membership Interest Purchase Agreement dated as of
March 31, 2020 (as amended, the “Agreement”), pursuant to which Buyer will
purchase from Seller, and Seller will sell to Buyer, all of the Company
Interests, subject to and in accordance with the terms of the Agreement; and

 

WHEREAS, the Parties now desire to amend the Agreement with respect to the
Closing.

 

NOW THEREFORE, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties hereby agree as follows:

 

1. Definitions. Except as otherwise expressly provided herein, all capitalized
terms used in this Amendment and not defined herein shall have the respective
meanings ascribed thereto in the Agreement.

 

2. Amendment to Agreement. The Agreement is hereby amended as follows:

 

(A) Amendments to Article I (Definitions) – New Definitions. Article I of the
Agreement is amended by adding in the appropriate alphabetical order the
following definitions in their entirety to read as follows:

 

“‘Environmental Indemnity’ has the meaning set forth in Section 10.2(a).

 

“‘ERI’ means ERI Solutions, LLC.

 

“‘ERI SOWs’ means (a) that certain Statement of Work to the Master Agreement for
Services dated April 15, 2020 by and between Buyer and ERI with respect to the
west ethanol production facilities at the Aurora Facilities; and (b) that
certain Statement of Work to the Master Agreement for Services dated April 15,
2020 by and between Buyer and ERI with respect to the east ethanol production
facilities at the Aurora Facilities.

 

“‘FCC’ means the United States Federal Communications Commission.”

 

 

 

 

“‘FCC Indemnity’ has the meaning set forth in Section 10.2(a).

 

“‘FCC Violations’ has the meaning set forth in Section 10.2(a).

 

“‘Pekin Facility’ has the meaning set forth in Section 6.15.

 

“‘Reference Price’ has the meaning set forth in Section 6.15.

 

“‘Repair Indemnity’ has meaning set forth in Section 10.2(a).

 

“‘Phase II Report’ means that certain draft Phase II Environmental Site
Assessment dated April 10, 2020, prepared by Pinnacle Engineering, Inc. as
Pinnacle Project EM20202009.

 

“‘Special Indemnities’ means the (a) FCC Indemnity, (b) Environmental Indemnity,
(c) Repair Indemnity, (d) Syngenta Indemnity, and (e) Title Indemnity.”

 

“‘Title Indemnity’ has meaning set forth in Section 10.2(a).

 

(B) Amendments to Article I (Definitions) – Amended Definitions. Article I of
the Agreement is further amended as follows:

 

(1) Seller Negotiable Note. The definition of “Seller Negotiable Note” is hereby
amended by deleting “7.5%” and replacing “5.0%” in substitution therefor.

 

(2) Seller Non-Negotiable Note. The definition of “Seller Non-Negotiable Note”
is hereby amended by deleting “7.5%” and replacing “4.5%” in substitution
therefor.

 

(C) Section 6.9 (Reduction of Railcar Fleet). Section 6.9 of the Agreement is
hereby amended and restated in its entirety to read as follows:

 

“6.9 Reduction of Railcar Fleet. During the Interim Period and after Closing,
the Parties agree to use commercially reasonable efforts to enter into
amendments to the leases or other Contracts for the Railcar Fleet to reduce the
number of railroad cars in the Railcar Fleet to no more than 200 cars, which
shall include all 100 J cars available from the Railcar Fleet, and obtain any
necessary Third Party Consents with respect to such amendments and any required
assignment of such leases or other Contract to Company after Closing.”

 

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(D) Section 6.15 (Non-Compliant Ethanol). Section 6.15 of the Agreement is
hereby amended and restated in its entirety to read as follows:

 

“6.15 Non-Compliant Ethanol. Seller shall (a) not permit, and shall cause Parent
to not permit, Kinergy to (i) exercise any put-back, offset or repurchase rights
with respect to any Non-Compliant Ethanol acquired by Kinergy pursuant to the
Ethanol Marketing Agreement prior to the date of this Agreement, or
(ii) otherwise cause any such Non-Compliant Ethanol to be transferred to the
Company or any Company Subsidiary, and (b) cause Parent to cause Kinergy to
purchase all Non-Compliant Ethanol not previously paid for by Kinergy prior to
the date hereof, at the Reference Price (as defined below) determined as of the
Business Day prior to the Closing Date (the “Non-Compliant Ethanol Purchase
Price”). Payment for the Non-Compliant Ethanol so purchased shall be reflected
in the Closing Cash Payment Amount. The portion of Non-Compliant Ethanol stored
in certain of the Railcar Fleet located at the Aurora Facility and Parent’s
ethanol facility located in Pekin, Illinois (the “Pekin Facility”) and purchased
by Kinergy pursuant to the foregoing may remain stored such railcars at the
Aurora Facility or the Pekin Facility, as the case may be, at no cost or expense
to Kinergy; provided, however, Kingery shall remove such Non-Compliant Ethanol
from the Aurora Facility no later than thirty (30) days after written notice
from the Company directing such removal, and return all railcars being used to
store the Non-Compliant Ethanol to the Company promptly thereafter. Further, no
portion of the Non-Compliant Ethanol may be blended at the Aurora Facility at
any time unless Company and its Subsidiaries, in their sole and absolute
discretion, provide written consent to permit such blending to occur. At any
time that Kinergy removes any Non-Compliant Ethanol from the Aurora Facility or
the Pekin Facility (whether stored in the Railcar Fleet or the storage tank(s)
at the Pekin Facility), if the Reference Price determined as of the Business Day
prior to such removal is higher than the Non-Compliant Ethanol Purchase Price,
then Parent shall cause Kinergy to remit to the Company, within five (5)
Business Days after such removal an amount equal to 50% of the product of (A x
B), where A is equal to such Reference Price minus the Non-Compliant Purchase
Price, and B is equal to the total number of gallons of Non-Compliant Ethanol
removed from the Aurora Facility or the Pekin Facility. For purposes of the
foregoing, the term “Reference Price” means the greater of (y) the OPIS NE
ethanol posting for ethanol meeting the specifications set forth in Exhibit C
FOB the Aurora Facility, and (z) the average of the OPIS NE ethanol posting for
ethanol meeting the specifications set forth in Exhibit C FOB the Aurora
Facility for the ten (10) prior Business Days.”

 

(E) Section 7.1(i) (Closing Deliverables of Seller). Section 7.1(i) of the
Agreement is hereby amended and restated in its entirety to read as follows:

 

“Intentionally omitted.”

 

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(F) Section 10.2 (Indemnification Provisions for Benefit of Buyer). Section 10.2
of the Agreement is hereby amended and restated in its entirety to read as
follows:

 

“10.2 Indemnification Provisions for Benefit of Buyer.

 

(a) Subject to the terms and conditions of this Article 10, from and after the
Closing, Seller will indemnify and hold harmless Buyer, Company, each Company
Subsidiary and their respective successors and assigns (the “Buyer Indemnitees”)
from and against (i) any Losses that any Buyer Indemnitee incurs (provided that
an indemnification claim with respect to such Losses is made pursuant to this
Article 10 prior to the end of any applicable survival period) resulting from or
caused by (A) any breach or inaccuracy of any representation or warranty made by
Seller in Article 3 or Article 4 or in any exhibits attached hereto, and (B) any
breach of any covenant or agreement of Seller in this Agreement or any
pre-Closing covenant or agreement of the Company, (ii) any Transaction Expenses
to the extent not paid in full on or prior to the Closing Date; (iii) 73.93% of
any amount paid by the Company to Syngenta in excess of $900,000 up to a maximum
of $1,800,000 with respect to the Syngenta Payment Demand (the “Syngenta
Indemnity”); (iv) without limiting Seller’s obligations under Section
10.2(a)(i)(A) but notwithstanding anything to the contrary in this Agreement,
any Losses that any Buyer Indemnitee incurs resulting from any violation
existing at Closing of applicable Laws governing or relating to any radio
license issued by the FCC and held by the Company or any Company Subsidiary or
used in connection with the operation of the Business (the “FCC Violations”),
including without limitation, (A) all out-of-pocket costs and expenses and (B)
fines, penalties or other monetary assessments imposed by the FCC on any Buyer
Indemnitee as a result of any and all FCC Violations (the “FCC Indemnity”); (v)
without limiting Seller’s obligations under Section 10.2(a)(i)(A) but
notwithstanding anything to the contrary in this Agreement, any Losses that any
Buyer Indemnitee incurs relating to the (A) remediation of the soil
contamination and neutralization of stormwater pond described in the Phase II
Report and (B) restoration of the affected soil and stormwater pond located on
the Owned Real Property to their uncontaminated condition, including without
limitation, (1) all out-of-pocket costs and expenses and (2) any fines,
penalties or other monetary assessments imposed upon any Buyer Indemnitee in
connection therewith (the “Environmental Indemnity”); (vi) without limiting
Seller’s obligations under Section 10.2(a)(i)(A) but notwithstanding anything to
the contrary in this Agreement, any Losses that any Buyer Indemnitee incurs in
connection with performing or causing to be performed all tank, vessel and pipe
inspections and repairs set forth in the ERI SOWs relating solely to the matters
described in Items 5, 6, 7 and 8 of Schedule 4.7(a) (the “Repair Indemnity”);
and (vii) without limiting Seller’s obligations under Section 10.2(a)(i)(A) but
notwithstanding anything to the contrary in this Agreement, any Losses that any
Buyer Indemnitee incurs resulting from any Lien filed or recorded against the
Owned Real Property or Leased Real Property at any time after March 11, 2020
(even if such filing or recording occurs after Closing) that relates to actions
or inactions of, or are otherwise caused by, the Company or any Company
Subsidiary prior to Closing (the “Gap Liens”), including without limitation, any
out-of-pockets costs and expenses incurred by any Buyer Indemnitee (A) to remove
or cause the removal of such Gap Lien(s) or (B) under any indemnity obligations
relating to such Gap Liens(s) owing by any Buyer Indemnitee to any title company
insuring all or a portion of the Owned Real Property or the Leased Real Property
(the “Title Indemnity”).

 

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(b) With respect to the matters described in Section 10.2(a), Seller will have
no liability with respect to such matters until Buyer Indemnitees have incurred
aggregate Losses by reason of all such breaches in excess of $250,000 (the
“Deductible”), after which point Seller will be obligated to indemnify Buyer
Indemnitees from and against all indemnifiable Losses exceeding the Deductible;
provided, however, that the foregoing limitation shall not apply to any
indemnifiable Losses resulting from (i) breaches of the Fundamental
Representations made by Company or Seller, (ii) any of the Special Indemnities,
or (iii) for fraud or willful misconduct.

 

(c) The aggregate maximum liability of Seller with respect to the matters
described in Sections 10.2(a) shall in no event exceed $7,920,000.00 (the
“Indemnity Cap”); provided, however, that any indemnifiable Losses resulting
from breaches of the Fundamental Representations or for fraud or willful
misconduct shall not be subject to the Indemnity Cap.

 

(d) For purposes of this Article 10, Losses shall be determined without regard
to any materiality, Material Adverse Effect or other similar qualification
contained in or otherwise applicable to the representations or warranties in
this Agreement. The inaccuracy or breach of any representation or warranty in
this Agreement (as opposed to the calculation of Losses) shall be determined
with regard to all materiality, Material Adverse Effect and other similar
qualification contained in or otherwise applicable to such representation or
warranty. In no event shall (i) Seller be liable for any Losses in respect of
any inaccuracy or breach of any representation or warranty hereunder to the
extent such inaccuracy or breach is attributable to (A) fraud, gross negligence
or willful misconduct on the part of Buyer, (B) a violation of Law by Buyer or
(C) any breach or misrepresentation by Buyer under any Affiliate Agreement, or
(ii) Buyer be liable for any Losses in respect of any inaccuracy or breach of
any representation or warranty hereunder to the extent such inaccuracy or breach
is attributable to (A) fraud, gross negligence or willful misconduct on the part
of Seller, (B) a violation of Law by Seller or (C) any breach or
misrepresentation by Seller under the Company Operating Agreement or by Seller
or Company under any Affiliate Agreement.

 

(e) Notwithstanding anything contained in this Agreement to the contrary, for
any indemnification to which Buyer is entitled under this Agreement, Buyer’s
sole and exclusive remedy for the recoupment of all or any portion of its
indemnifiable Losses it may suffer shall be through a reduction in the principal
amount outstanding under the Seller Non-Negotiable Note; provided, however, that
any indemnifiable Losses resulting from breaches of the Fundamental
Representations or for fraud or willful misconduct shall not be subject to the
limitations of this Section 10.2(e). The reduction of the principal amount of
the Seller Non-Negotiable Note shall affect the timing and amount of payments
required under the Seller Non-Negotiable Note in the same manner as if Buyer had
made a permitted prepayment (without premium, interest or penalty) thereunder.
In the event of a reduction in the principal amount of the Seller Non-Negotiable
Note as a result of this Section 10.2(e), Seller and Buyer shall execute an
amendment or supplement to the Seller Non-Negotiable Note to decrease the
principal amount thereof; provided, however, no failure of Seller to deliver
such amendment or supplement shall affect the validity of the reduction
resulting from Buyer’s exercise of its recoupment rights.”

 

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(G) Amended and Restated Disclosure Schedules. The Agreement is amended by
deleting in its entirety the Disclosure Schedules attached thereto and replacing
the same with the Amended and Restated Disclosure Schedules attached hereto.

 

3. FCC Violations. Notwithstanding anything to the contrary in the Agreement or
this Amendment, Seller shall take any and all actions necessary to remedy all
FCC Violations, including without limitation, (a) submitting all required
applications to transfer control of the underlying radio licenses issued by the
FCC and held by the Company or any Company Subsidiary or used in connection with
the operation of the Business, (b) filing all required waiver requests with
respect to the FCC Violations, and (c) filing all required notifications with
respect to the (i) consummation of the transactions giving rise to the FCC
Violations; and (ii) Company Subsidiaries’ prior name changes. The foregoing
actions shall be taken as soon as reasonably practicable and Seller shall (x)
provide drafts of all such applications, requests, notifications and other
documents to be submitted to the FCC in connection therewith to Buyer prior to
such submission, (y) obtain Buyer’s approval thereof, and (z) provide copies of
all such applications, requests, notifications and other documents submitted to
the FCC to Buyer immediately upon submission thereof.

 

4. Seller’s Obligation to Cooperate and Assist. Notwithstanding anything to the
contrary in the Agreement or this Amendment, Seller shall, upon request by any
Buyer Indemnitee, cooperate with and assist, at Seller’s sole cost and expense,
all Buyer Indemnitees and such parties’ agents, employees, officers,
consultants, attorneys and other professionals with respect to all actions
necessary to (a) remedy the FCC Violations, (b) remediate the contamination of
the soil and neutralize the stormwater pond located on the Owned Real Property,
as described in the Phase II Report, and restore the conditions thereof, and (c)
remove the Gap Liens from the Owned Real Property or Leased Real Property.

 

5. References to Agreement and Disclosure Schedules.

 

(a) All references in the Agreement to “this Agreement” shall be deemed to refer
to the Agreement as amended hereby, and any and all references in any of the
Ancillary Agreements to the Agreement shall be deemed to refer to the Agreement
as amended hereby; provided, however, references to “the date of this
Agreement”, “the date hereof” and similar references shall continue to refer to
the original date of the Agreement and not to the date of this Amendment.

 

(b) All references in the Agreement to “Schedule” and “Disclosure Schedules”
shall be deemed to refer to the Amended and Restated Disclosure Schedules
attached to this Amendment.

 

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6. Ratification; Continuing Effect of the Agreement. This Amendment shall only
amend and modify the Agreement to the extent specifically provided herein. In
all other respects, the Agreement is hereby ratified and confirmed and remains
in full force and effect and shall not be altered by any provisions herein
contained. In the event of any conflict or inconsistency between the provisions
of the Agreement and the provisions of this Amendment, the provisions of this
Amendment shall control.

 

7. Representations and Warranties. Each Party hereto represents and warrants
that (a) it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (b) it has full power and
authority to enter into this Amendment and to perform its obligations hereunder;
(c) the execution and delivery of this Amendment by it and the performance by it
of its obligations hereunder have been duly and validly authorized by all
necessary action; and (d) it has not relied on any representation, warranty,
covenant, understanding, agreement, written or oral, discussions, or negotiation
not expressly contained herein or in the Agreement in entering into this
Amendment.

 

8. No Third-Party Beneficiaries. Except as expressly provided herein, this
Amendment shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.

 

9. Entire Agreement. This Amendment and the Agreement (including the documents
and the instruments referred to therein and attached thereto) shall together
constitutes the entire agreement among the Parties and shall supersede any prior
understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they relate in any way to the subject matter hereof.

 

10. Successors and Assigns. Subject to Section 13.3 of the Agreement, this
Amendment shall be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and permitted assigns.

 

11. Counterparts. This Amendment may be executed in any number of counterparts,
and by the different Parties in separate counterparts, each of which when
executed shall be deemed an original, but all of which shall be considered one
and the same agreement, and shall become effective when each Party has received
counterparts signed by each of the other Parties, it being understood and agreed
that delivery of a signed counterpart signature page to this Amendment by
facsimile transmission, by electronic mail in portable document format (“.pdf”)
form, or by any other electronic means intended to preserve the original graphic
and pictorial appearance of a document shall constitute valid and sufficient
delivery thereof.

 

12. Headings. The title of and the section and paragraph headings contained in
this Amendment are inserted for convenience only and shall not affect in any way
the meaning or interpretation of any of the terms or provisions of this
Amendment.

 

13. Further Amendments; Waiver. Subject to applicable Law, this Amendment may
not be amended, modified or supplemented except by an instrument in writing
signed by the Parties. Any agreement on the part of a Party to any waiver of any
of the provisions of this Amendment shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure of any Party
to this Amendment to assert any of its rights under this Amendment or otherwise
shall not constitute a waiver of such rights, nor shall any single or partial
exercise of any such rights preclude any other or further exercise thereof.

 

14. Severability. If any term, provision, covenant or restriction of this
Amendment is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Amendment shall
nevertheless remain in full force and effect and shall in no way be affected,
impaired or invalidated. Upon such determination that any term, provision,
covenant or restriction is invalid, illegal, void, unenforceable or against
regulatory policy, the Parties shall negotiate in good faith to modify this
Amendment so as to effect the original intent of the Parties as closely as
possible in an acceptable manner in order that the transactions contemplated by
this Amendment are consummated as originally contemplated to the greatest extent
possible.

 

15. Construction. The Parties have participated jointly in the negotiation and
drafting of this Amendment. In the event an ambiguity or question of intent or
interpretation arises, this Amendment shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Amendment.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have executed this Third Amendment to Membership
Interest Purchase Agreement on the date first above written.

 

  SELLER:       PACIFIC ETHANOL CENTRAL, LLC,   a Delaware limited liability
company         By: /s/ Bryon T. McGregor   Name: Bryon T. McGregor   Title
Chief Financial Officer         COMPANY:       PACIFIC AURORA, LLC,   a Delaware
limited liability company         By: /s/ Bryon T. McGregor   Name: Bryon T.
McGregor   Title Chief Financial Officer         BUYER:       AURORA COOPERATIVE
ELEVATOR COMPANY, a Nebraska cooperative corporation         By: /s/ Christopher
J. Vincent   Name: Christopher J. Vincent   Title: Chief Executive Officer

 

Signature Page To Third Amendment To Membership Interest Purchase Agreement