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TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT (the "Agreement") is made as of
____________, 1997, by and among Penford Corporation, a Washington corporation
("Parent" and, together with its subsidiaries existing immediately following the
Distribution, the "Parent Group"), and Penwest Pharmaceuticals Co., a Washington
corporation and a 82%-owned subsidiary of Parent ("Penwest" and, together with
its subsidiaries existing immediately following the Distribution, the "Penwest
Group").
WHEREAS, Parent and Penwest have entered into the Separation Agreement
(as defined below) providing for the distribution of all of the Penwest stock
owned by Parent to Parent's shareholders in accordance with the Separation
Agreement; and
WHEREAS, Parent and Penwest desire to set forth their agreement
regarding the allocation between the Parent Group and the Penwest Group of all
responsibilities, liabilities and benefits affecting Taxes (as defined below)
paid or payable by either of them for all taxable periods.
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meanings given them in the Separation Agreement. As used
in this Agreement, the following terms shall have the following meanings:
(a) "Affiliate" of any person means any person, corporation,
partnership or other entity directly or indirectly controlling, controlled by or
under common control with such person.
(b) "Penwest" has the meaning set forth in the preamble hereto.
(c) "Penwest-Caused Taxes" means any liability for Taxes,
including interest and penalties, incurred by the Parent Group or the Penwest
Group arising from or attributable to any of the transactions that are directly
related to the Distribution failing to qualify under Code Sections 355 or 368
(or any comparable provisions of state law), but only if such failure (i) was
caused by an act that occurred after the Distribution and in which Penwest
participated or (ii) was otherwise attributable to one or more of the
representations contained in Section 8 hereof failing to be true as of the date
of this Agreement. For purposes of this definition, if any failure to so qualify
occurs and Penwest has participated in a Post- Distribution Act, such failure
shall be deemed to have been caused by Penwest's participation in the
Post-Distribution Act unless established to the contrary by clear and convincing
evidence that the Post-Distribution Act did not cause the failure to
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qualify under Code Sections 355 or 368. Penwest-Caused Taxes shall include any
increase in Taxes of the Parent Group or the Penwest Group for any period to the
extent such increase in Taxes would not have occurred but for the transactions
directly related to the Distribution failing to qualify under Sections 355 or
368 of the Code (or comparable provisions of state law). Thus, for example, if
the failure of any of the transactions to so qualify results in additional
income being realized by the Parent Group in its 1997 taxable year, but such
income is substantially offset by operating losses or net operating loss
carryovers (other than operating losses or net operating loss carryovers of the
Penwest Group), Penwest-Caused Taxes will include (to the extent the other
requirements of this definition are met) any increase in Taxes realized by any
member of the Parent Group in subsequent years to the extent such increase in
Taxes would not have been realized had the loss or loss carryovers not been used
in 1997.
(d) "Penwest Group" has the meaning set forth in the preamble
hereto.
(e) "Code" means the Internal Revenue Code of 1986, as amended
or, as the context may require, the Internal Revenue Code applicable to the
taxable year in question.
(f) "Distribution" has the meaning set forth in the Separation
Agreement.
(g) "Separation Agreement" means the Separation Agreement dated
_____________, 1997 between Parent and Penwest providing for the Distribution.
(h) "Distribution Date" has the meaning set forth in the
Separation Agreement.
(i) "Final Determination" shall mean the final resolution of
liability for any Tax for a taxable period, (i) by Internal Revenue Service Form
870 or 870-AD (or any successor forms thereto), on the date of acceptance by or
on behalf of the taxpayer, or by comparable form under the laws of other
jurisdictions; except that a Form 870 or 870-AD or comparable form that reserves
(whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund and/or the right of the taxing authority to assert a further
deficiency shall not constitute a Final Determination; (ii) by a decision,
judgment, decree, or other order by a court of competent jurisdiction, which has
become final and unappealable; (iii) by a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable agreements
under the laws of other jurisdictions; (iv) by any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the expiration of all
periods during which such refund may be recovered (including by way of offset)
by the Tax imposing jurisdiction; or (v) by any other final
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disposition, including by reason of the expiration of the applicable statute of
limitations or by mutual agreement of the parties.
(j) "Post-Distribution Act" means any event or transaction (or
the execution of an agreement, letter of intent or option providing for a
transaction) in which Penwest participates and in which any of the following
occurs:
(i) Penwest transfers (whether or not in liquidation) a
material portion of its assets (other than a transfer of assets in the
ordinary course of business) within one year following the Distribution
Date;
(ii) Penwest merges with another corporation within one year
following the Distribution Date;
(iii) Within two years of following the Distribution Date
Penwest discontinues a material portion of its historic business
activities;
(iv) Within one year following the Distribution Date Penwest
Common Stock distributed in the Distribution is converted into (or
redeemed or exchanged for) any other stock, any security, any property
or cash; and
(v) An issuance (or series of issuances) of stock in Penwest
within 6 months of the Distribution in an amount sufficient that such
issuance would have prevented Parent from having "control" (within the
meaning of Code Section 368(c)) of Penwest had such issuance (or
issuances) occurred immediately prior to the Distribution.
(k) "Post-Distribution Taxes" means any and all liability for
Taxes of the Penwest Group or the Parent Group, as appropriate, other than for
Pre-Distribution Taxes.
(l) "Pre-Distribution Taxes" means any and all Taxes of the
Parent Group or the Penwest Group for all periods that ended on or prior to the
Distribution Date. For purposes of computing the amount of Pre-Distribution
Taxes in the case of a Tax period that begins before and ends after the
Distribution Date, the amount of Taxes considered to have accrued with respect
to the portion of the Tax period that ended on the Distribution Date shall be
determined as follows:
(i) In the case of any ad valorem, personal property and
real property Taxes, an amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days
in the portion of the Tax period ended on the Distribution Date and the
denominator of which is the number of days in the entire Tax period;
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(ii) In the case of any Tax other than ad valorem, personal
property and real property Taxes, the amount that would be payable if
the relevant Tax period ended on the Distribution Date; and
(iii) In the case of any withholding Tax, the amount of Taxes
required to be held which relates to any payment by any member of the
Parent Group or the Penwest Group on or before the Distribution Date.
Any credits relating to a Tax period that begins before and ends
after the Distribution Date shall be taken into account as though the relevant
Tax period ended on the Distribution Date.
(m) "Returns" means all returns, reports and information
statements (including all exhibits and schedules thereto) required to be filed
with a Taxing Authority with respect to any Taxes.
(n) "Taxes" means any income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, environmental excise, severance,
stamp, transfer, recording occupation, premium, property, value added, windfall
profit tax, custom duty, or other tax of any kind whatsoever, together with any
interest and any penalty, addition to tax or additional amount imposed by any
governmental authority (a "Taxing Authority") responsible for the imposition of
any such tax (domestic or foreign).
2. OPERATIVE PROVISIONS.
(a) Parent shall indemnify Penwest against and be responsible for
all Post-Distribution Taxes attributable to any member of the Parent Group and
all Pre-Distribution Taxes other than Penwest-Caused Taxes.
(b) Penwest shall indemnify Parent against and shall be
responsible for all Post-Distribution Taxes attributable to any member of the
Penwest Group and all Penwest-Caused Taxes.
(c) With respect to the tax year of the Parent Consolidated Group
that includes the Distribution Date and the tax year of Penwest that commences
immediately following the Distribution Date, the Parent Consolidated Group shall
claim on its federal income tax returns the benefit of (i) the graduated tax
rates of Code Section 11, (ii) the $25,000 bracket amount in Code Section 38,
(iii) the $40,000 exemption amount and the $150,000 bracket amount in Section
55, and (iv) the $2,000,000 bracket amount in Section 59A and Penwest shall
claim none of such benefits.
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3. RETURNS; REFUNDS; CONTEST PROVISIONS.
(a) Parent shall have the obligation and the sole right and full
discretion to control (i) the preparation of all Returns with respect to
Pre-Distribution Taxes (including Penwest-Caused Taxes) and (ii) the defense,
settlement or compromise of any audit, examination, investigation suit, action
or other proceeding relating to Pre-Distribution Taxes other than Penwest-Caused
Taxes. Parent shall be entitled to all refunds of Pre-Distribution Taxes other
than Penwest-Caused Taxes paid or reimbursed by Penwest pursuant to this
Agreement. Notwithstanding the foregoing, in the event that Parent decides to
abandon the defense of, or settle or compromise any claim relating to any
Pre-Distribution Taxes and such claim may have an effect on Post-Distribution
Taxes, Parent shall notify Penwest of such decision and Penwest shall have ten
days to notify Parent that it assumes all liability with respect to the
Pre-Distribution Taxes under dispute and wishes to assume the defense of such
audit or other proceedings at its own expense. In the event that Parent timely
receives such notice from Penwest, it shall use all reasonable efforts to
cooperate so as to facilitate Penwest's handling of such proceedings.
(b) Except as otherwise provided for herein, Penwest shall have
the obligation and the sole right and full discretion to control (i) the
preparation of all Returns with respect to Post-Distribution Taxes attributable
to any member of the Penwest Group and (ii) the defense, settlement or
compromise of any audit, examination, investigation suit, action or other
proceeding relating to (A) Post-Distribution Taxes attributable to any member of
the Penwest Group and (B) any Penwest-Caused Taxes. Penwest shall have the right
to all refunds of Post-Distribution Taxes attributable to any member of the
Penwest Group and of Penwest-Caused Taxes paid (directly or indirectly) by any
member of the Penwest Group. Notwithstanding the foregoing, in the event that
Penwest decides to abandon the defense of, or settle or compromise any claim
relating to any Penwest-Caused Taxes, Penwest shall notify Parent of such
decision and Parent shall have ten days to notify Penwest that it assumes all
liability with respect to the Penwest-Caused Taxes under dispute and wishes to
assume the defense of such audit or other proceedings at its own expense. In the
event that Penwest timely receives such notice from Parent, it shall use all
reasonable efforts to cooperate so as to facilitate Parent's handling of such
proceedings.
(c) Except as otherwise provided for herein, Parent shall have
the obligation and the sole right and full discretion to control (i) the
preparation of all Returns with respect to Post-Distribution Taxes attributable
to any member of the Parent Group and (ii) the defense, settlement or compromise
of any audit, examination, investigation suit, action or other proceeding
relating to Post-Distribution Taxes attributable to any member of the Parent
Group. Parent shall have the right to all refunds of Post-Distribution Taxes
attributable to any member of the Parent Group and of Penwest-Caused Taxes paid
(directly or indirectly) by any
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member of the Parent Group which were not reimbursed by Penwest pursuant to this
Agreement.
4. WINDFALLS.
(a) Parent shall promptly pay to Penwest the amount of any
incremental Tax savings generated by (i) a deduction, credit or exclusion that
(A) is actually realized by the Parent Group with respect to Pre-Distribution
Taxes and (B) relates to or is based on an item that is the basis for a similar
deduction, credit or exclusion taken on a Return with respect to
Post-Distribution Taxes of the Penwest Group that is denied, disallowed,
forfeited, or accelerated until prior to the Distribution Date or (ii) a
reduction in the amount of any gross income or revenue that (A) is actually
realized by the Parent Group with respect to Pre-Distribution Taxes and (B)
relates to, or is based on, a similar item of gross income or revenue that the
Penwest Group is required to include on a Return or otherwise required to
include in its computation of taxable income as a result of an audit, other
administrative proceeding or otherwise. Parent shall use reasonable best efforts
to realize any such incremental tax savings that may potentially be available.
(b) Penwest shall promptly pay to Parent the amount of any
incremental Tax savings generated by (i) a deduction, credit or exclusion that
(A) is actually realized by the Penwest Group with respect to its
Post-Distribution Taxes and (B) relates to or is based on an item that is the
basis for a similar deduction, credit or exclusion taken on a Return with
respect to Pre-Distribution Taxes other than Penwest-Caused Taxes that is
denied, disallowed, forfeited, or deferred until after the Distribution Date or
(ii) a reduction in the amount of any gross income or revenue that (A) is
actually realized by the Penwest Group with respect to Post-Distribution Taxes
and (B) relates to, or is based on, a similar item of gross income or revenue
that the Parent Group is required to include on a Return or otherwise required
to include in its computation of taxable income as a result of an audit, other
administrative proceeding or otherwise. Penwest shall use reasonable best
efforts to realize any such incremental tax savings that may potentially be
available.
5. AGENCY.
Penwest irrevocably designates Parent (and shall cause each member
of the Penwest Group to irrevocably designate Parent) as its agent and attorney
in fact (and shall execute any necessary powers of attorney) for the purpose of
taking any and all actions necessary or incidental to the filing of federal
income tax returns and state unitary or combined Returns for (i) any period
during which any member of the Penwest Group or any predecessor qualified to
file a consolidated, combined, unitary or similar Return with any member of the
Parent Group and (ii) any period ending on or before the Distribution Date.
Parent shall keep Penwest reasonably informed
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of, and shall reasonably consult with Penwest with respect to, all actions to be
taken on behalf of any member of the Penwest Group. Parent and Penwest will each
furnish the other any and all information which the other may reasonably request
in order to carry out the provisions of this Agreement to determine the amount
of any Tax liability.
6. CONSISTENT REPORTING.
(a) With respect to all taxable periods ending on or prior to
December 31, 2001, Penwest, each member of the Penwest Group and any future
Affiliates thereof shall file federal income tax and state income tax Returns in
a manner consistent with the Returns filed (or to be filed) in respect to
Pre-Distribution Taxes and in a manner consistent with the form of the
transactions contemplated by the Separation Agreement (the "Form") including
that the Distribution qualifies under Section 355 of the Code.
(b) To the extent there is an inconsistency or an apparent
inconsistency amongst the Returns relating to Pre-Distribution Taxes (including
after taking into account Returns to be filed after the Distribution Date)
and/or the Form, Penwest shall file Returns with respect to Post-Distribution
Taxes in the manner directed by Parent.
(c) Parent and Penwest agree to contest any proposed adjustment
by any Taxing Authority that is, in the sole judgement of Parent, inconsistent
with the provisions of this Section 6.
7. COVENANTS OF PENWEST AND PARENT RELATING TO ACTIONS AFTER THE
DISTRIBUTION DATE.
(a) Penwest shall, and shall cause each member of the Penwest
Group to refrain from participating in any Post-Distribution Act without the
prior written consent of Parent.
(b) Penwest and Parent shall cooperate (and shall cause each of
their Affiliates to cooperate) fully at such time and to the extent reasonably
requested by the other party in connection with the preparation and filing of
any Return or the conduct of any audit, dispute, proceeding, suit or action in
respect of Taxes or other Tax matters. Such cooperation shall include, without
limitation, (i) the retention and provision on demand of books, records,
documentation or other information relating to any Return until the expiration
of the applicable statute of limitation (giving effect to any extension, waiver,
or mitigation thereof) plus two years; (ii) the execution of any document that
may be necessary or reasonably helpful in connection with the filing of any
Return by any member of the Parent Group or the Penwest Group or in connection
with any audit, examination, investigation suit, action or other proceeding;
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and (iii) the use of the parties' reasonable best efforts to obtain any
documentation from a governmental authority or a third party that may be
necessary or helpful in connection with the foregoing.
(c) Penwest and Parent shall cooperate (and shall cause each of
their Affiliates to cooperate) in causing the tax year end of Penwest to be
changed to December 31, effective for the year ended December 31, 1998 with
respect to any jurisdiction in which Penwest is not included in a consolidated
or combined group Tax Return for a Tax period which will end on the Distribution
Date.
8. PENWEST REPRESENTATIONS. Penwest hereby represents and warrants to
the Parent and each member of the Parent Group that the statements contained in
this Section 8 are true and correct in all material respects on the date hereof:
(a) To the best of Penwest's knowledge and belief, no part of its
stock being distributed in the Distribution will be received by a shareholder of
Parent in such shareholder's capacity as a creditor, employee or in any capacity
other than that of a shareholder of Parent.
(b) To the best of Penwest's knowledge and belief, immediately
following the Distribution, no person, group of related persons, or persons who
acted in concert pursuant to a prearranged plan or arrangement will own 50% or
greater of the stock of Parent or Penwest within five years of the Distribution
Date.
(c) Penwest has no plan or intention to liquidate Penwest, to
merge it with another corporation or to sell or otherwise dispose of the assets
of Penwest subsequent to the Distribution except in the ordinary course of
business.
(d) To the best of Penwest's knowledge and belief, no plan or
intention exists by the shareholders of Parent to sell, exchange, transfer by
gift, or otherwise dispose of any of their stock in Parent or Penwest subsequent
to the Distribution.
(e) Following the Distribution, each of Parent and Penwest will
operate as independent corporations except that certain administrative and other
common activities of the two corporations will be undertaken by common personnel
in accordance with the Ancillary Agreements. Payments made in connection with
all continuing transactions between, and services provided for, each of Parent
and Penwest will be for fair market value based on terms and conditions arrived
at by the Parties bargaining at arm's length.
(f) Penwest has no plan involving the issuance or transfer of
equity interests in Penwest following the Distribution other than issuances
pursuant to the
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exercise of stock options granted by Penwest to employees and consultants of
Penwest.
(g) Penwest has no plan or intention for the transfer or
cessation of a substantial portion of the business of Penwest or other
substantial change in the business of Penwest following the Distribution.
(h) Penwest has not made, and is not subject to, any binding
commitment and is not otherwise obligated or committed to undertake an offering
of Penwest stock following the Distribution.
9. PARENT REPRESENTATIONS. Parent hereby represents and warrants to
Penwest and each member of the Penwest Group that the statements contained in
this Section 9 are true and correct in all material respects on the date hereof:
(a) No part of the Penwest stock being distributed in the
Distribution will be received by a shareholder of Parent in such shareholder's
capacity as a creditor, employee or in any capacity other than that of a
shareholder of Parent.
(b) To the best of Parent's knowledge and belief, immediately
following the Distribution, no person, group of related persons, or persons who
acted in concert pursuant to a prearranged plan or arrangement will own 50% or
greater of the stock of Parent or Penwest within five years of the Distribution
Date.
(c) Parent has no plan or intention to liquidate Parent, to merge
it with another corporation or to sell or otherwise dispose of the assets of
Parent subsequent to the Distribution except in the ordinary course of business.
(d) To the best of Parent's knowledge and belief, no plan or
intention exists by the shareholders of Parent to sell, exchange, transfer by
gift, or otherwise dispose of any of their stock in Parent or Penwest subsequent
to the Distribution.
(e) Following the Distribution, each of Parent and Penwest will
operate as independent corporations except that certain administrative and other
common activities of the two corporations will be undertaken by common personnel
in accordance with the Ancillary Agreements. Payments made in connection with
all continuing transactions between, and services provided for, each of Parent
and Penwest will be for fair market value based on terms and conditions arrived
at by the Parties bargaining at arm's length.
(f) Parent has no plan or intention for the transferor cessation
of a substantial portion of the business of Parent or other substantial change
in the business of Parent following the Distribution.
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(g) To the best of Parent's knowledge and belief, Penwest has not
made, and is not subject to, any binding commitment and is not otherwise
obligated or committed to undertake an offering of Penwest stock following the
Distribution.
10. PAYMENTS. All payments to be made hereunder shall be made in
immediately available funds. Unless otherwise provided herein, any payment not
made when due hereunder shall bear interest from the due date at any annual rate
equal to the lowest prime rate as reported in the Wall Street Journal plus 2%,
compounded and adjusted monthly. For purposes of this Agreement, the following
payments shall be due at the following times:
(a) Payments due under Section 2 hereof shall be paid within 10
days of the receipt of notice from the party entitled to the payment indicating
the occurrence of the later of (i) a Final Determination relating to the item or
items giving rise to the Tax for which indemnification is made and (ii) actual
payment of the Tax giving rise to the claim for indemnification.
(b) In the case of any refunds of Taxes received by a party other
than the party entitled to such refunds pursuant to Section 3 hereof, the
recipient of the refund shall pay the amount of such refund to the other party
within five days of the receipt of such refund.
(c) Amounts payable pursuant to Section 4 hereof shall be paid
within five days of the later to occur of (i) a Final Determination relating to
the Tax item that gave rise to the windfall benefit and (ii) the actual receipt
of the windfall benefit.
11. ARBITRATION. Any dispute, controversy or claim arising out of or
in connection with this Agreement (including any questions of fraud or questions
concerning the validity and enforceability of this Agreement or any of the
rights herein and therein conveyed), shall be determined and settled by
arbitration in Seattle, Washington, pursuant to the rules then in effect of the
American Arbitration Association as modified by this paragraph. Any award
rendered shall be final and conclusive upon the parties and a judgment thereon
may be entered in any court having competent jurisdiction. The party submitting
such dispute shall give written notice to that effect to the other party,
stating the dispute to be arbitrated and the name and address of a person
designated to act as arbitrator on its behalf. Within fifteen (15) days after
such notice, the other party shall give written notice to the first party
stating the name and address of a person designated to act as an arbitrator on
its behalf. In the event that the second party shall fail to notify the first
party of its designation of an arbitrator within the time specified, then the
first party shall request the American Arbitration Association to appoint a
second arbitrator. The two arbitrators so chosen shall meet within fifteen (15)
days after the second arbitrator has been appointed to appoint a third
arbitrator. If the two arbitrators are unable to
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agree on the appointment of a third arbitrator within such fifteen (15) day
period, either party may request the American Arbitration Association to appoint
a third arbitrator. Each arbitrator appointed hereunder shall be independent of
the parties and either party may disqualify an arbitrator who is or is
affiliated with a supplier, customer or competitor of either party without the
consent of the other party. Each arbitrator shall be reasonably knowledgeable
regarding the area or areas in dispute. The arbitrators shall follow substantive
rules of law and the Federal Rules of Evidence, require the parties to conduct
discovery pursuant to the rules then in effect under the Federal Rules of Civil
Procedure in an expeditious manner, cause testimony to be transcribed, and make
an award accompanied by findings of fact and a statement of reasons for the
decision. All costs and expenses, including attorney's fees, of all parties
incurred in any dispute which is determined and/or settled by arbitration
pursuant to this paragraph shall be borne by the party determined to be liable
in respect of such dispute; provided, however, that if complete liability is not
assessed against only one party, the parties shall share the total costs in
proportion to their respective amounts of liability so determined. Except where
clearly prevented by the area in dispute, both parties agree to continue
performing their respective obligations under this Agreement while the dispute
is being resolved. Each party, and the arbitrators, shall use their best
efforts, subject to reasonable prosecution of the arbitration, court order and
disclosure required under securities laws, to keep the subject matter of the
arbitration and confidential information of each party confidential, and the
arbitrators are authorized to impose such protective orders as they may deem
appropriate for such purpose.
12. COSTS AND EXPENSES. Except as expressly set forth in this
Agreement, each party shall bear its own costs and expenses incurred pursuant to
this Agreement regardless of the beneficiary of the items or services relating
to such costs and expenses.
13. TERMINATION AND SURVIVAL. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation relating to the assessment of Taxes (giving effect to any extension,
waiver or mitigation thereof) plus two years.
14. AMENDMENTS; LIMITATION ON WAIVERS.
(a) Any provision of this Agreement may be amended if, and only
if, such amendment is in writing and signed by Parent and Penwest.
(b) The provisions of this Agreement may be waived only if the
waiver is in writing and signed by the party making the waiver. No delay or
omission in exercising any right under this Agreement will operate as a waiver
of the right on any further occasion. No waiver of any particular provision of
the Agreement will be treated as a waiver of any other provision, and no waiver
of any
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rights will be deemed a continuing waiver of the same right with respect to
subsequent occurrences that give rise to it. All rights given by this Agreement
are cumulative to other rights provided for in this Agreement and to any other
rights available under applicable law.
15. GOVERNING LAW AND INTERPRETATION. This Agreement shall be governed
by, interpreted and enforced in accordance with the laws of the State of
Washington (regardless of the laws that might be applicable under principles of
conflict of law).
16. CONFIDENTIALITY. Each party shall hold and shall cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than any such
information relating solely to the business or affairs of such party) concerning
the other parties hereto furnished it by such other party or its representatives
pursuant to this Agreement (except to the extent that such information can be
shown to have been (a) previously known by the party to which it was furnished,
(b) in the public domain through no fault of such party, or (c) later lawfully
acquired from other sources by the party to which it was furnished), and each
party shall not release or disclose such information to any other person, except
its auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of the provisions of this Section 16. Each party
shall be deemed to have satisfied its obligation to hold confidential
information concerning or supplied by the other party if it exercises the same
care as it takes to preserve confidentiality for its own similar information.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18. ASSIGNMENTS AND THIRD PARTY BENEFIT. This Agreement and the terms
and provisions hereof shall be binding upon and shall inure to the benefit of,
the parties and their respective successors and assigns.
19. SEVERABILITY. If any term, provision, condition or covenant of
this Agreement, or the application thereof to any party or circumstance shall be
held by a court of competent jurisdiction to be invalid, unenforceable or void,
the remainder of this instrument, or the application of such term, provision,
condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
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20. MERGER OF PRIOR AGREEMENTS.
(a) This Agreement contains all of the terms and provisions and
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior written, oral or implied understandings,
representations and agreements of the parties relating to the subject matter of
this Agreement. Without limiting the foregoing, the parties acknowledge and
agree that in the event of any conflict or inconsistency between the provisions
of this Agreement and the provisions of the Separation Agreement, the provisions
of this Agreement shall control and to such extent shall be deemed to supersede
such conflicting provisions under the Separation Agreement.
(b) The parties acknowledge that pursuant hereto any and all
existing tax sharing agreements or arrangements binding or benefiting Penwest
shall be terminated as of the close of business on the Distribution Date, and
that after the Distribution Date this Agreement shall constitute the sole tax
sharing agreement among Parent and Penwest.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
PENFORD CORPORATION
By:________________________
Title:_____________________
PENWEST PHARMACEUTICALS CO.
By:________________________
Title:_____________________
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