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Exhibit 10.16
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PENFORD CORPORATION
RESTATEMENT AND EXCHANGE AGREEMENT
Dated as of August 1, 1998
Re: $14,285,600 Adjustable Rate Senior Notes
Due November 30, 2002
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TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF REORGANIZATION, NOTES AND COMMITMENT....................................1
Section 1.1. Reorganization.........................................................................1
Section 1.2. Description of Old Notes...............................................................2
Section 1.3. Description of New Notes...............................................................2
Section 1.4. Commitment, Closing Date...............................................................3
Section 1.5. Other Agreements.......................................................................4
SECTION 2. PREPAYMENT OF NOTES....................................................................4
Section 2.1. Required Prepayments...................................................................4
Section 2.2. Optional Prepayment With Premium.......................................................4
Section 2.3. Notice of Optional Prepayments.........................................................4
Section 2.4. Application of Prepayments.............................................................5
Section 2.5. Direct Payment.........................................................................5
SECTION 3. REPRESENTATIONS........................................................................5
Section 3.1. Representations of the Company.........................................................5
Section 3.2. Representations of the Purchasers......................................................5
SECTION 4. CLOSING CONDITIONS.....................................................................6
Section 4.1. Conditions.............................................................................6
Section 4.2. Waiver of Conditions...................................................................7
SECTION 5. COMPANY COVENANTS......................................................................8
Section 5.1. Corporate Existence, Etc...............................................................8
Section 5.2. Insurance..............................................................................8
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws............................8
Section 5.4. Maintenance, Etc.......................................................................8
Section 5.5. Nature of Business.....................................................................8
Section 5.6. Consolidated Tangible Net Worth........................................................9
Section 5.7. Indebtedness...........................................................................9
Section 5.8. Limitation on Liens...................................................................10
Section 5.9. Restricted Payments...................................................................12
Section 5.10. Mergers, Consolidations and Sales of Assets...........................................12
Section 5.11. Guaranties............................................................................14
Section 5.12. Repurchase of Notes...................................................................14
Section 5.13. Transactions with Affiliates..........................................................14
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Section 5.14. Multiemployer Plan Liability and Termination of Pension Plans.........................15
Section 5.15. Reports and Rights of Inspection......................................................15
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR...............................................18
Section 6.1. Events of Default.....................................................................18
Section 6.2. Notice to Holders.....................................................................19
Section 6.3. Acceleration of Maturities............................................................19
Section 6.4. Rescission of Acceleration............................................................20
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS......................................................20
Section 7.1. Consent Required......................................................................20
Section 7.2. Solicitation of Holders...............................................................21
Section 7.3. Effect of Amendment or Waiver.........................................................21
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS..............................................21
Section 8.1. Definitions...........................................................................21
Section 8.2. Accounting Principles.................................................................31
Section 8.3. Directly or Indirectly................................................................31
SECTION 9. MISCELLANEOUS.........................................................................31
Section 9.1. Registered Notes......................................................................31
Section 9.2. Exchange of Notes.....................................................................32
Section 9.3. Loss, Theft, Etc. of Notes............................................................32
Section 9.4. Expenses, Stamp Tax Indemnity.........................................................32
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative.....................................33
Section 9.6. Notices...............................................................................33
Section 9.7. Successors and Assigns................................................................33
Section 9.8. Survival of Covenants and Representations.............................................33
Section 9.9. Severability..........................................................................34
Section 9.10. Governing Law.........................................................................34
Section 9.11. Captions..............................................................................34
Section 9.12. Oral Agreements.......................................................................34
Signature........................................................................................................35
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ATTACHMENTS TO RESTATEMENT AND EXCHANGE AGREEMENT
Schedule I -- Names and Addresses of Note Purchasers and Amounts of Commitments
Exhibit A -- Form of Adjustable Rate Senior Note due November 30, 2002
Exhibit B -- Representations and Warranties of the Company
Exhibit C -- Form of Guaranty Agreement
Exhibit D -- Form of Intercreditor Agreement
Exhibit E -- Description of Special Counsel's Closing Opinion
Exhibit F -- Form of Closing Opinion of Counsel to the Company and the Guarantor
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PENFORD CORPORATION
000-000XX XXXXXX X.X., XXXXX 0000
XXXXXXXX, XXXXXXXXXX 00000
RESTATEMENT AND EXCHANGE AGREEMENT
Re: $14,285,600 Adjustable Rate Senior Notes
Due November 30, 2002
Dated as of
August 1, 1998
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Gentlemen:
Reference is made to the separate Note Agreements, each dated as of
November 1, 1992 (the "Note Agreements"), between the undersigned, PENFORD
CORPORATION, a Washington corporation which is the successor to Penwest, Ltd., a
Delaware corporation (the "Company"), and the Purchasers named in Schedule I to
this Restatement and Exchange Agreement (the or this "Agreement"). The Company
and the Purchasers entered into a First Amendment, Waiver and Consent dated as
of December 1, 1997 (the "First Amendment"), relating to the Note Agreements,
but the conditions to the effectiveness of the First Amendment were not
satisfied. The Company now wishes to amend and restate the Note Agreements as
hereinafter set forth, subject to the terms and conditions hereof and on the
basis of the representations and warranties hereinafter set forth, you agree to
such amendment and restatement.
SECTION 1. DESCRIPTION OF REORGANIZATION, NOTES AND COMMITMENT.
Section 1.1. Reorganization. The Company proposes the following
corporate reorganization transactions (being referred to individually as a
"Transaction" and collectively as the "Transactions"):
(a) the transfer of certain assets currently used in the
Company's pharmaceuticals business to the Restricted Subsidiary of the
Company which is primarily engaged in the pharmaceuticals business,
formerly known as Xxxxxx Xxxxxxx Co., Inc., a Washington corporation
(the "Pharmaceuticals Company"), and the change of the name of the
Pharmaceuticals Company to Penwest Pharmaceuticals Co.;
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Penford Corporation Restatement and Exchange Agreement
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(b) the distribution by the Company to its shareholders of
the outstanding Common Stock of the Pharmaceuticals Company (the
"Spin-off");
(c) the entering into of the following agreements between the
Company and the Pharmaceuticals Company in connection with the Spin-off
(collectively, the "Inter-Company Agreements"): (i) a service agreement
pursuant to which the Company will, on an interim basis, provide the
Pharmaceuticals Company with certain general corporate services after
the Spin-off; (ii) an excipient supply agreement pursuant to which the
Company will manufacture and supply exclusively to the Pharmaceuticals
Company all of the Pharmaceuticals Company's EMDEX and CANDEX
requirements; (iii) an employee benefits agreement pursuant to which
the Company will, for a specified period of time, permit employees of
the Pharmaceuticals Company to continue to be covered under certain of
the Company's employee benefit plans; (iv) a tax allocation agreement
pursuant to which, as long as the Pharmaceuticals Company participates
in the Company's consolidated return, the Pharmaceuticals Company will
be required to pay to the Company, or will be entitled to receive from
the Company, the Pharmaceuticals Company's allocable portion of
consolidated federal or state income tax liability or credits; and (v)
a separation agreement between the Company and the Pharmaceuticals
Company setting forth the agreements of the parties with respect to the
separation of the pharmaceuticals business from the Company's food and
paper business and the Spin-off; and
(d) the Penwest Guarantee.
In order to permit the Transactions, the Company now requests the following
amendment and restatement of the Note Agreements and waivers and consents in
connection therewith, and, based on the representations and warranties of the
Company herein set forth and subject to the terms and conditions herein
provided, the Purchasers are willing to enter into such amendment and
restatement and to extend such waivers and consents.
Section 1.2. Description of Old Notes. Pursuant to the Original Note
Agreements, the Company issued and sold to the Purchasers $20,000,000 aggregate
original principal amount of its 7.93% Senior Notes due November 30, 1992 (the
"Old Notes").
Section 1.3. Description of New Notes. (a) The Company will authorize
the issue in exchange for the Old Notes of $14,285,600 aggregate principal
amount of its Adjustable Rate Senior Notes due November 30, 1992 (the "New
Notes"), to be dated the date of issue, to bear interest from such date at the
rate of 8.43% per annum (subject to adjustment as set forth in paragraph (b) of
this Section), payable at maturity, to be expressed to mature on November 30,
2002, and to be substantially in the form attached hereto as Exhibit A. Interest
on the New Notes shall be computed on the basis of a 360-day year of twelve
30-day months. If the date on which a payment shall be due is not a Business
Day, then the payment date shall be the next Business Day. The Notes are not
subject to prepayment or redemption at the option of the Company prior to their
expressed maturity dates except on the terms and conditions and in the amounts
and with the premium, if any, set forth in Section 2 of this Agreement. The term
"New Notes" or
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Penford Corporation Restatement and Exchange Agreement
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"Notes" as used herein shall include each New Note delivered pursuant to this
Agreement and the separate agreements with the other purchasers named in
Schedule I. You and the other purchasers named in Schedule I are hereinafter
sometimes referred to as the "Purchasers".
(b) In the event the Indebtedness to Consolidated Capitalization Ratio
exceeds 62% as at the end of any fiscal quarter of the Company, the interest
rate borne by the Notes shall be increased to 8.93% per annum, commencing with
the first interest payments to become due 60 days or more after the end of such
fiscal period and applicable to the calculation of the entire semiannual
interest payment then due.
(c) The New Notes shall bear interest on overdue principal (including
any overdue required or optional prepayment of principal) and premium, if any,
and (to the extent legally enforceable) on any overdue installment of interest
at the rate of interest otherwise then borne by the New Notes plus 2% per annum
after the date due, whether by acceleration or otherwise, until paid.
Section 1.4. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth:
(a) you hereby agree with the Company as follows:
(i) You waive any Default or Event of Default under
Sections 5.9, 5.10 and 5.13 hereof arising solely from the
Transactions;
(ii) The Spin-off will not constitute a Restricted
Payment for purposes of Section 5.9 hereof, provided that the
Spin-off is completed by November 1, 1998;
(iii) None of the Transactions will constitute a
disposition of assets for purposes of Section 5.10 hereof,
provided that the Spin-off is completed by November 1, 1998;
and
(iv) None of the Inter-Company Agreements will
constitute a transaction or arrangement with any Affiliate for
purposes of Section 5.13 hereof; and
(b) the Company agrees to issue to you in exchange for the
Old Notes held by you, and you agree to surrender such Old Notes to the
Company in exchange therefor and for payment of accrued interest on the
Old Notes to and including the Closing Date, New Notes in the principal
amount set forth opposite your name on Schedule I hereto in a principal
amount equal to the unpaid principal amount of such Old Notes on the
Closing Date hereafter mentioned.
Delivery of the New Notes will be made at the offices of Xxxxxxx and
Xxxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, against surrender of
Old Notes in the same principal
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Penford Corporation Restatement and Exchange Agreement
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amount as the New Notes at 10:00 A.M., Chicago, Illinois, time, on August 28,
1998 or such earlier date as may be determined by not less than five Business
Days' prior written notice from the Company to the Purchasers (the "Closing
Date").
The New Notes delivered to you on the Closing Date will be delivered to
you in the form of a registered Note or registered Notes to be acquired by you
in the form attached hereto as Exhibit A, for the full amount to be acquired by
you (in the denominations specified by you in Schedule I), registered in your
name or in the name of your nominee, all as you may specify at any time prior to
the date fixed for delivery.
Section 1.5. Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into similar agreements with
the other Purchasers under which such other Purchasers agree to acquire from the
Company the principal amount of New Notes set forth opposite such Purchasers'
name in Schedule I, and your obligation and the obligations of the Company
hereunder are subject to the execution and delivery of the similar agreement by
the other Purchasers. This Agreement and said similar agreements with the other
Purchasers are herein collectively referred to as the "Agreements". The
obligations of each Purchaser shall be several and not joint and no Purchaser
shall be liable or responsible for the acts of any other Purchaser.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments. The Company agrees that on November
30 in each year, commencing November 30, 1998 and ending November 30, 2001, both
inclusive, it will prepay and apply and there shall become due and payable on
the aggregate principal indebtedness evidenced by the Notes an amount equal to
the lesser of (i) $2,857,200 or (ii) the principal amount of the Notes then
outstanding. The entire remaining principal amount of the Notes shall become due
and payable on November 30, 2002. No premium shall be payable in connection with
any required prepayment made pursuant to this Section 2.1. For purposes of this
Section 2.1, any prepayment of less than all of the outstanding Notes pursuant
to Section 2.2 shall be deemed to be applied first, to the amount of principal
scheduled to remain unpaid on November 30, 2002, and then to the remaining
scheduled principal payments in inverse chronological order.
Section 2.2. Optional Prepayment With Premium. In addition to the
payments required by Section 2.1, upon compliance with Section 2.3 the Company
shall have the privilege of prepaying the outstanding Notes on any interest
payment date, either in whole or in part (but if in part then in a minimum
aggregate principal amount of $100,000) by payment of the principal amount of
the Notes, or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, together with a premium equal to the Make-Whole Amount,
determined as of five business days prior to the date of such prepayment
pursuant to this Section 2.2.
Section 2.3. Notice of Optional Prepayments. The Company will give
notice of any prepayment of the Notes pursuant to Section 2.2 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (i) such date, (ii) the principal amount of
the holder's Notes to be prepaid on such date, (iii) that a premium may be
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Penford Corporation Restatement and Exchange Agreement
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payable, (iv) the date when such premium will be calculated, (v) the estimated
premium, together with a reasonably detailed computation of such estimated
premium, and (vi) the accrued interest applicable to the prepayment. Such notice
of prepayment shall also certify all facts, if any, which are conditions
precedent to any such prepayment. Notice of prepayment having been so given, the
aggregate principal amount of the Notes specified in such notice, together with
accrued interest thereon and the premium, if any, payable with respect thereto
shall become due and payable on the prepayment date specified in said notice.
Not later than two business days prior to the prepayment date specified in such
notice, the Company shall provide each holder of a Note written notice of the
premium, if any, payable in connection with the prepayment of such Note and,
whether or not any premium is payable, a reasonably detailed computation of the
Make-Whole Amount applicable to such prepayment.
Section 2.4. Application of Prepayments. All partial prepayments shall
be applied on all outstanding Notes ratably in accordance with the unpaid
principal amounts thereof.
Section 2.5. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes regarding the place or manner of
payment of the Notes, in the case of any Note owned and registered in accordance
with Section 9.1 by you or by any subsequent Institutional Holder which has
given written notice to the Company requesting that the provisions of this
Section 2.5 shall apply, the Company will punctually pay when due the principal
thereof, interest thereon and premium, if any, due with respect to said
principal, without any presentment thereof, directly to you, to your nominee or
to such subsequent Institutional Holder at your address or your nominee's
address set forth in Schedule I hereto or such other address as you or such
subsequent Institutional Holder may from time to time designate in writing to
the Company or, if a bank account with a United States bank is designated for
you or your nominee on Schedule I hereto or in any written notice to the Company
from you or from any such subsequent Institutional Holder, the Company will make
such payments in immediately available funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account in any
United States bank as you or any such subsequent Institutional Holder may from
time to time direct in writing.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit B are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchasers. You represent, and in
entering into this Agreement the Company understands, that you are an Accredited
Investor and acquiring the Notes for the purpose of investment and not with a
view to the distribution thereof, and that you have no present intention of
selling, negotiating or otherwise disposing of the Notes; it being understood,
however, that the disposition of your property shall at all times be and remain
within your control. You further represent that at least one of the following
statements is an accurate
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Penford Corporation Restatement and Exchange Agreement
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representation as to each account (an "Account") in which the Old Notes to be
surrendered by you for cancellation are held and for which the Notes being
acquired by you are being acquired:
(a) the Account is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
benefit plan, treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the
amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds 10% of the total
reserves and liabilities of such general account (exclusive of separate
account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with your state of domicile; or
(b) the Account is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed
to the Company in writing pursuant to this paragraph (b), no employee
benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund.
As used in this Section 3.2, the terms "employee benefit plan" and
"separate account" shall have the respective meanings assigned to such terms in
Section 3 of ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. Your obligation to acquire the Notes on the
Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:
(a) Guaranty Agreement. The Guaranty Agreement substantially
in the form attached hereto as Exhibit C shall have been duly executed
and delivered by the Guarantor and shall be in full force and effect.
(b) Intercreditor Agreement. The Intercreditor Agreement
substantially in the form attached hereto as Exhibit D shall have been
duly executed and delivered by the parties thereto and shall be in full
force and effect.
(c) Closing Certificate of the Company. You shall have
received a certificate dated the Closing Date, signed by the President,
a Vice President or the Corporate Director of Finance of the Company,
the truth and accuracy of which shall be a condition to your obligation
to acquire the Notes proposed to be delivered to you and to the effect
that (i) the representations and warranties of the Company set forth in
Exhibit B hereto are true and correct on and with respect to the
Closing Date, (ii) the Company has
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Penford Corporation Restatement and Exchange Agreement
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performed all of its obligations hereunder which are to be performed on
or prior to the Closing Date, and (iii) no Default or Event of Default
has occurred and is continuing.
(d) Closing Certificate of the Guarantor. You shall have
received a certificate dated the Closing Date, signed by the President,
a Vice President or the Corporate Director of Finance of the Guarantor,
the truth and accuracy of which shall be a condition to your obligation
to acquire the Notes proposed to be delivered to you and to the effect
that the representations and warranties of the Guarantor set forth in
the Guaranty Agreement hereto are true and correct on and with respect
to the Closing Date.
(e) Legal Opinions. You shall have received from Xxxxxxx and
Xxxxxx, who are acting as your special counsel in this transaction, and
from Xxxxx & Xxxxx, counsel for the Company and the Guarantor, their
respective opinions dated the Closing Date, in form and substance
satisfactory to you, and covering the matters set forth in Exhibits E
and F, respectively, hereto.
(f) Related Transactions. The Company shall have consummated
the exchange of the entire principal amount of the New Notes for the
Old Notes pursuant to this Agreement and the other Agreements referred
to in Section 1.3. This shall also be a condition to the Company's
obligation to deliver any New Notes pursuant to this Agreement or the
other Agreements.
(g) Amendment Fee and Accrued Interest. Each Purchaser shall
have received a fee equal to 0.25% of the unpaid principal amount of
the Old Notes held by such Purchaser and accrued interest on the Old
Notes held by such Purchaser through and including the Closing Date.
(h) Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to you and your special counsel, and
you shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection
with the consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the Company
fails to tender to you the Notes to be issued to you on such date or if the
conditions specified in Section 4.1 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in Section 4.1 have not been
fulfilled, you may waive compliance by the Company with any such condition to
such extent as you may in your sole discretion determine. Nothing in this
Section 4.2 shall operate to relieve the Company of any of its obligations
hereunder or to waive any of your rights against the Company.
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Penford Corporation Restatement and Exchange Agreement
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SECTION 5. COMPANY COVENANTS.
From and after the date of this Agreement and continuing so long as any
amount remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in full force and effect, and will cause each Subsidiary to preserve and
keep in full force and effect, its corporate existence and all licenses and
permits necessary to the proper conduct of its business; provided, however, that
the foregoing shall not prevent any transaction permitted by Section 5.10.
Section 5.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as are customary for
corporations of established reputation engaged in the same or a similar business
and owning and operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws. The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any part of the property or
business of the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any property of the
Company or such Subsidiary; provided, however, that the Company or such
Subsidiary shall not be required to pay any such tax, assessment, charge, levy,
account payable or claim if (i) the validity, applicability or amount thereof is
being contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any property of the Company or such Subsidiary
or any material interference with the use thereof by the Company or such
Subsidiary, and (ii) the Company or such Subsidiary shall set aside on its
books, reserves deemed by it to be adequate with respect thereto. The Company
will promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is subject
including, without limitation, the Occupational Safety and Health Act of 1970,
as amended, ERISA and all laws, ordinances, governmental rules and regulations
relating to environmental protection in all applicable jurisdictions, the
violation of which could materially and adversely affect the properties,
business, prospects, profits or condition of the Company and its Subsidiaries or
would result in any Lien not permitted under Section 5.8.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.
Section 5.5. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially
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Penford Corporation Restatement and Exchange Agreement
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changed from the general nature of the business engaged in by the Company and
its Subsidiaries on the date of this Agreement.
Section 5.6. Consolidated Tangible Net Worth. The Company will not
permit Consolidated Tangible Net Worth at any time to be less than (i)
$40,000,000 plus (ii) 50% of GAAP Net Income (without giving effect to any
losses) for each Fiscal Quarter beginning on or after May 31, 1998 plus (iii)
75% of the Net Equity Proceeds from any equity offering by the Company or any of
its Subsidiaries after May 31, 1998.
Section 5.7. Indebtedness. The Company will not at any time permit:
(a) the Indebtedness to Consolidated Capitalization Ratio to
exceed the following levels at any time during the periods set forth
below:
(i) While the Penwest Guarantee is in effect:
PERIOD RATIO
to August 31, 1999 0.65 to 1.00
from August 31, 1999
to August 31, 2000 0.62 to 1.00
from August 31, 2000
to August 31, 2001 0.52 to 1.00
on and after
August 31, 2001 0.50 to 1.00
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Penford Corporation Restatement and Exchange Agreement
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(ii) After the Penwest Guarantee is released:
PERIOD RATIO
to November 30, 1998 0.62 to 1.00
from November 30, 1998
to August 31, 1999 0.60 to 1.00
from August 31, 1999
to August 31, 2000 0.57 to 1.00
from August 31, 2000
to August 31, 2001 0.52 to 1.00
on and after
August 31, 2001 0.50 to 1.00
(b) its Leverage Ratio to exceed the following levels:
PERIOD RATIO
to August 31, 1999 3.75 to 1.00
from August 31, 1999
to August 31, 2000 3.25 to 1.00
on and after
August 31, 2000 2.75 to 1.00
(c) its Interest/Rental Expense Coverage Ratio to fall below
3.0 to 1.0.
(d) the aggregate principal amount of all Indebtedness of
Subsidiaries (excluding such Indebtedness as constitutes a Penford
Products Obligation, as defined in the Intercreditor Agreement) at any
time to exceed 10% of the sum of the principal amount of all
Indebtedness and Consolidated Net Worth.
Section 5.8. Limitation on Liens. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any property for
the purpose of subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree to acquire,
or permit any Subsidiary to acquire, any property or assets upon conditional
sales agreements or other title retention devices, except:
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Penford Corporation Restatement and Exchange Agreement
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(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided payment thereof is not at the time required by
Section 5.3;
(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured provided that the
aggregate amount of such judgments or awards shall not exceed
$5,000,000;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection with
worker's compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens) and
Liens to secure the performance of bids, tenders or trade contracts, or
to secure statutory obligations, surety or appeal bonds or other Liens
of like general nature incurred in the ordinary course of business and
not in connection with the borrowing of money; provided in each case,
the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings;
(d) existing survey exceptions or encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties ("Encumbrances") or future Encumbrances, which are
necessary for the conduct of the activities of the Company and its
Subsidiaries or which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which do not
in any event materially impair their use in the operation of the
business of the Company and its Subsidiaries;
(e) Liens securing Indebtedness of a Subsidiary to the
Company or to another Subsidiary;
(f) Liens existing as of the date of this Agreement and
reflected on Annex B to Exhibit B to this Agreement; and
(g) Liens incurred after the Closing Date given to secure the
payment of the purchase price incurred in connection with the
acquisition of fixed assets useful and intended to be used in carrying
on the business of the Company or a Subsidiary, including Liens
existing on such fixed assets at the time of acquisition thereof or at
the time of acquisition by the Company or a Subsidiary of any business
entity then owning such fixed assets, whether or not such existing
Liens were given to secure the payment of the purchase price of the
fixed assets to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition, provided that
(i) the Lien shall attach solely to the fixed assets acquired or
purchased, (ii) at the time of acquisition of such fixed assets, the
aggregate amount remaining unpaid on all Indebtedness secured by Liens
on such fixed assets whether or not assumed by the Company or a
Subsidiary shall
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Penford Corporation Restatement and Exchange Agreement
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not exceed the total purchase price at the time of acquisition of such
fixed assets, and (iii) all such Indebtedness shall have been incurred
within the applicable limitations provided in Section 5.7.
Section 5.9. Restricted Payments. The Company will not except as
hereinafter provided:
(a) Declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class (except dividends or
other distributions payable solely in shares of capital stock of the
Company);
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class
or any warrants, rights or options to purchase or acquire any shares of
its capital stock (other than in exchange for or out of the net cash
proceeds to the Company from the substantially concurrent issue or sale
of other shares of capital stock of the Company or warrants, rights or
options to purchase or acquire any shares of its capital stock); or
(c) Make any other payment or distribution, either directly
or indirectly or through any Subsidiary, in respect of its capital
stock;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such other
payments or distributions being herein collectively called "Restricted
Payments"), if after giving effect thereto any Event of Default shall have
occurred and be continuing or the aggregate amount of Restricted Payments made
during the period from and after August 31, 1997 to and including the date of
the making of the Restricted Payment in question, would exceed the sum of (x)
$6,500,000 plus (y) 75% of Consolidated Net Income for such period, computed on
a cumulative basis for said entire period (or if such Consolidated Net Income is
a deficit figure, then minus 100% of such deficit) plus the net proceeds from
the issuance or sale of common stock after August 31, 1997 other than proceeds
from an issuance or sale of common stock described in paragraph (b) of this
Section 5.9; provided, that the foregoing limitations shall not apply to any
payment of dividends to the Company by a Subsidiary.
The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 90 days after the date of declaration
thereof.
For the purposes of this Section 5.9, the amount of any Restricted
Payment declared, paid or distributed in property shall be deemed to be the
greater of the book value or fair market value (as determined in good faith by
the Board of Directors of the Company) of such property at the time of the
making of the Restricted Payment in question.
Section 5.10. Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Subsidiary to, (i) consolidate with or
be a party to a merger with any other corporation or (ii) sell, lease or
otherwise dispose of all or any substantial part (as defined
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Penford Corporation Restatement and Exchange Agreement
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in paragraph (d) of this Section 5.10) of the assets of the Company and
its Subsidiaries; provided, however, that:
(1) any Subsidiary may merge or consolidate with or into the
Company or any Subsidiary so long as in any merger or consolidation
involving the Company, the Company shall be the surviving or continuing
corporation;
(2) any Subsidiary may merge or consolidate with any other
corporation if the surviving or continuing corporation (i) is a United
States corporation and (ii) is a Subsidiary;
(3) the Company may consolidate or merge with any other
corporation if (i) the surviving or continuing corporation is the
Company or if not, the surviving or continuing corporation (A) is a
United States corporation, (B) concurrently with the consummation of
such merger or consolidation assumes in writing all obligations of the
Company under the Agreement and the obligation to pay all outstanding
Notes and delivers a copy thereof to all holders of such Notes, and
(ii) at the time of such consolidation or merger and after giving
effect thereto no Default or Event of Default shall have occurred and
be continuing; and
(4) any Subsidiary may sell, lease, transfer or otherwise
dispose of all or any substantial part of its assets to the Company or
any other Subsidiary.
(b) The Company will not permit any Subsidiary to issue or sell any
shares of stock of any class (including as "stock" for the purposes of this
Section 5.10, any warrants, rights or options to purchase or otherwise acquire
stock or other Securities exchangeable for or convertible into stock) of such
Subsidiary to any Person other than the Company or a Wholly-owned Subsidiary,
except for the purpose of qualifying directors, or except in satisfaction of the
validly pre-existing preemptive rights of minority shareholders in connection
with the simultaneous issuance of stock to the Company and/or a Subsidiary
whereby the Company and/or such Subsidiary maintain their same proportionate
interest in such Subsidiary.
(c) The Company will not sell, transfer or otherwise dispose of any
shares of stock of any Subsidiary (except to qualify directors) or any
Indebtedness of any Subsidiary, and will not permit any Subsidiary to sell,
transfer or otherwise dispose of (except to the Company or a Wholly-owned
Subsidiary) any shares of stock or any Indebtedness of any other Subsidiary,
unless:
(1) simultaneously with such sale, transfer, or disposition,
all shares of stock and all Indebtedness of such Subsidiary at the time
owned by the Company and by every other Subsidiary shall be sold,
transferred or disposed of as an entirety;
(2) the Board of Directors of the Company shall have
determined, as evidenced by a resolution thereof, that the proposed
sale, transfer or disposition of said shares of stock and Indebtedness
is in the best interests of the Company;
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Penford Corporation Restatement and Exchange Agreement
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(3) said shares of stock and Indebtedness are sold,
transferred or otherwise disposed of to a Person, and on terms
reasonably deemed by the Board of Directors to be adequate and
satisfactory;
(4) the Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Subsidiary not being
simultaneously disposed of; and
(5) such sale or other disposition does not involve a
substantial part (as hereinafter defined) of the assets of the Company
and its Subsidiaries.
(d) As used in this Section 5.10, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of the Company
and its Subsidiaries if the book value of such assets, when added to the book
value of all other assets sold, leased or otherwise disposed of by the Company
and its Subsidiaries (other than in the ordinary course of business) during the
12-month period ending with the date of such sale, lease or other disposition,
exceeds 10% of Total Assets, determined as of the end of the immediately
preceding fiscal year; provided, however, that assets shall not be deemed to be
sold, leased or otherwise disposed of for purposes of making the computations
required by the preceding provisions of this paragraph to the extent that the
proceeds therefrom shall, within 180 days of such sale, lease or disposition
thereof by the Company or its Subsidiary, as the case may be, either (i) be used
to purchase capital assets for use in the business of the Company and its
Subsidiaries, or (ii) applied to reduce Indebtedness of the Company or its
Subsidiaries.
Section 5.11. Guaranties. The Company will not, and will not permit any
Subsidiary to, become or be liable in respect of any Guaranty except (i)
Guaranties by the Company which are limited in amount to a stated maximum dollar
exposure; (ii) Guaranties which constitute Guaranties of obligations incurred by
any Subsidiary in compliance with the provisions of this Agreement; or (iii)
Guaranties of the Company and its Subsidiaries existing as of the date of this
Agreement and reflected on Annex B to Exhibit B hereto.
Section 5.12. Repurchase of Notes. Neither the Company nor any
Subsidiary or Affiliate, directly or indirectly, may repurchase or make any
offer to repurchase any Notes unless an offer has been made to repurchase Notes,
pro rata, from all holders of the Notes at the same time and upon the same
terms. In case the Company repurchases or otherwise acquires any Notes, such
Notes shall immediately thereafter be cancelled and no Notes shall be issued in
substitution therefor. Without limiting the foregoing, upon the repurchase or
other acquisition of any Notes by the Company, any Subsidiary or any Affiliate
(or upon the agreement of the Company, any Subsidiary or any Affiliate to
purchase or otherwise acquire any Notes), such Notes shall no longer be
outstanding for purposes of any section of this Agreement relating to the taking
by the holders of the Notes of any actions with respect hereto, including,
without limitation, Section 6.3, Section 6.4 and Section 7.1.
Section 5.13. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate (including, without limitation, the purchase
from, sale to or exchange of property with, or the
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Penford Corporation Restatement and Exchange Agreement
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rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate.
Section 5.14. Multiemployer Plan Liability and Termination of Pension
Plans. The Company will not and will not permit any Subsidiary to withdraw from
any Multiemployer Plan if such withdrawal could result in withdrawal liability
(as described in Part 1 of Subtitle E of Title IV of ERISA) which could
materially and adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole. The Company and any Subsidiary will not permit any employee benefit
plan maintained by it to be terminated if such termination could result in the
imposition of a Lien on any property of the Company or any Subsidiary pursuant
to Section 4068 of ERISA.
Section 5.15. Reports and Rights of Inspection. The Company will keep,
and will cause each Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of,
or in relation to, the business and affairs of the Company or such Subsidiary,
in accordance with GAAP consistently applied (except for changes disclosed in
the financial statements furnished to you pursuant to this Section 5.15 and
concurred in by the independent public accountants referred to in Section
5.15(b) hereof), and will furnish to you so long as you are the holder of any
Note and to each other Institutional Holder of the then outstanding Notes (in
duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any
event within 60 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
(1) consolidated balance sheets of the Company and
its Subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated
figures for the fiscal year then most recently ended,
(2) consolidated statements of income of the Company
and its Subsidiaries for such quarterly fiscal period and for
the portion of the fiscal year ending with such quarterly
fiscal period, in each case setting forth in comparative form
the consolidated figures for the corresponding periods of the
preceding fiscal year, and
(3) consolidated and consolidating statements of
cash flows of the Company and its Subsidiaries for the portion
of the fiscal year ending with such quarterly fiscal period,
setting forth in comparative form the consolidated figures for
the corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Company;
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Penford Corporation Restatement and Exchange Agreement
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(b) Annual Statements. As soon as available and in any event
within 120 days after the close of each fiscal year of the Company,
copies of:
(1) consolidated balance sheets of the Company and
its Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income and retained
earnings and cash flows of the Company and its Subsidiaries
for such fiscal year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied
by a report thereon of a firm of independent public accountants of
recognized national standing selected by the Company to the effect that
the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the end of the fiscal year being reported on and the
consolidated results of the operations and cash flows for said year in
conformity with GAAP and that the examination of such accountants in
connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such
tests of the accounting records and such other auditing procedures as
said accountants deemed necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Subsidiary and upon written request any
annual management letter received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to stockholders generally and of
each regular or periodic report, and any registration statement or
prospectus filed by the Company or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency;
(e) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Plan; (ii)
the institution of any steps by the Company, any ERISA Affiliate, the
PBGC or any other person to terminate any Plan in a distress
termination under Section 4041(c) of ERISA or an involuntary
termination under Section 4042 of ERISA; (iii) the institution of any
steps by the Company or any ERISA Affiliate to withdraw from any
Multiemployer Plan if such withdrawal could result in withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of ERISA)
which could materially and adversely affect the properties, business,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole; (iv) a transaction which is prohibited
under Section 406 of ERISA and which is not exempt under Section 408 of
ERISA in connection with any Plan if such prohibited transaction could
result in liability which could materially and adversely affect the
properties, business, prospects or condition (financial or otherwise)
of the Company and its
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Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
Subsidiaries taken as a whole; (v) any material increase in the
contingent liability of the Company or any Subsidiary with respect to
any post-retirement welfare liability; or (vi) the commencement or
threatened (in writing) commencement of legal proceedings by the
Internal Revenue Service, the Department of Labor or the PBGC with
respect to any of the foregoing;
(f) Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of Section
5.6 through Section 5.14 at the end of the period covered by the
financial statements then being furnIshed, and (ii) whether there
existed as of the date of such financial statements and whether, to the
best of such officer's knowledge, there exists on the date of the
certificate or existed at any time during the period covered by such
financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action the Company
is taking and proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and stating further whether, in making
their audit, such accountants have become aware of any Default or Event
of Default under any of the terms or provisions of this Agreement
insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or
event then exists, specifying the nature and period of existence
thereof; and
(h) Requested Information. With reasonable promptness, such
other data and information as you or any such Institutional Holder may
reasonably request.
Without limiting the foregoing, the Company will permit you, so long as you are
the holder of any Note, and each Institutional Holder of the then outstanding
Notes (or such Persons as either you or such Institutional Holder may
designate), to visit and inspect, under the Company's guidance, any of the
properties of the Company or any Subsidiary, to examine all of their books of
account, financial records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances and
accounts with their respective officers, employees, and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss with you the finances and affairs of the Company and its Subsidiaries)
all at such reasonable times and as often as may be reasonably requested. You
agree and any subsequent holder of any Note shall be deemed to agree to keep
confidential any information made available to you pursuant to such a visit or
inspection, provided that you may disclose any such information (i) as may be
appropriate in connection with enforcing compliance with the terms and
conditions of this Agreement or the Notes, (ii) as has become generally
available to the public, (iii) as may be required in any report, statement or
testimony submitted to
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Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
or required by any municipal, state, or Federal regulatory body, agency,
authority or commission having or claiming to have jurisdiction over you, (iv)
as may be necessary in connection with the sale of the Notes to any prospective
bona fide purchaser, (v) to the National Association of Insurance Commissioners
(or any successor agency thereto), or (vi) to any entity utilizing such
information to rate or classify your debt or equity Securities or to report to
the public concerning the industry of which you are a part.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any
Note when the same shall have become due and such default shall
continue for more than five Business Days; or
(b) Default shall occur in the making of any required
prepayment on any of the Notes as provided in Section 2.1; or
(c) Default shall occur in the making of any other payment of
the principal of any Note or premium, if any, thereon at the expressed
or any accelerated maturity date or at any date fixed for prepayment;
or
(d) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on (i) the Credit Agreement and such
default shall continue beyond the period of grace, if any, allowed with
respect thereto or (ii) any other Indebtedness (other than the Notes)
of the Company or any Subsidiary in an aggregate amount in excess of
$5,000,000 and such default shall continue beyond the period of grace,
if any, allowed with respect thereto; or
(e) Default or the happening of any event shall occur under
(i) the Credit Agreement and such Default or event shall continue for a
period of time sufficient to permit the acceleration of the maturity of
any Indebtedness of the Company or any Subsidiary outstanding
thereunder, or (ii) any other indenture, agreement or other instrument
under which Indebtedness of the Company or any Subsidiary may be issued
and such default or event shall continue for a period of time
sufficient to permit the acceleration of the maturity of any
Indebtedness of the Company or any Subsidiary outstanding thereunder in
an aggregate amount in excess of $5,000,000; or
(f) Default shall occur in the observance or performance of
any covenant or agreement contained in Section 5.5 through Section 5.7
and Section 5.9 through Section 5.14; or
(g) Default shall occur in the observance or performance of
any other provision of this Agreement which is not remedied within 30
days after the earlier of
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Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
(i) the day on which the Company first obtains knowledge of such
default, or (ii) the day on which written notice thereof is given to
the Company by the holder of any Note; or
(h) Any representation or warranty made by the Company herein
or made by the Guarantor in the Guaranty Agreement, or made by the
Company or the Guarantor in any statement or certificate furnished by
the Company or the Guarantor in connection with the consummation of the
issuance and delivery of the Notes or furnished by the Company pursuant
hereto or by the Guarantor pursuant to the Guaranty Agreement, is
untrue in any material respect as of the date of the issuance or making
thereof; or
(i) Final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 is or are outstanding against the
Company or any Subsidiary or against any property or assets of either
and any one of such judgments has remained unpaid, unvacated, unbonded
or unstayed by appeal or otherwise for a period of 30 days from the
date of its entry; or
(j) A custodian, liquidator, trustee or receiver is appointed
for the Company or any Subsidiary or for the major part of the property
of either and is not discharged within 90 days after such appointment;
or
(k) The Company or any Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or the Company or any
Subsidiary applies for or consents to the appointment of a custodian,
liquidator, trustee or receiver for the Company or such Subsidiary or
for the major part of the property of either; or
(l) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Subsidiary and, if instituted against the
Company or any Subsidiary, are consented to or are not dismissed within
90 days after such institution.
Section 6.2. Notice to Holders. When any Event of Default described in
the foregoing Section 6.1 has occurred, or if the holder of any Note or of any
other evidence of Funded Debt or Current Debt of the Company gives any notice or
takes any other action with respect to a claimed default, the Company agrees to
give notice within three business days of such event to all holders of the Notes
then outstanding.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of Section 6.1 has happened and is
continuing, any holder of any Note may, and when any Event of DeFault described
in paragraphs (d) through (i), inclusive, of said Section 6.1 has happened and
is continuing, the holder or holders of 25% or more of the principal amount of
Notes at the time outstanding may, by notice to the Company, declare the entire
principal and all interest accrued on all Notes to be, and all Notes shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are
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Penford Corporation Restatement and Exchange Agreement
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hereby expressly waived. When any Event of Default described in paragraphs (j),
(k) or (l) of Section 6.1 has occurred, then all outstanding Notes shall
immediately become due and payable without presentment, demand or notice of any
kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Company will forthwith pay to the holders of the Notes
the entire principal and interest accrued on the Notes and, to the extent not
prohibited by applicable law, an amount as liquidated damages for the loss of
the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole
Amount, determined as of the date on which the Notes shall so become due and
payable. No course of dealing on the part of the holder or holders of any Notes
nor any delay or failure on the part of any holder of Notes to exercise any
right shall operate as a waiver of such right or otherwise prejudice such
holder's rights, powers and remedies. The Company further agrees, to the extent
permitted by law, to pay to the holder or holders of the Notes all costs and
expenses incurred by them in the collection of any Notes upon any default
hereunder or thereon, including reasonable compensation to such holder's or
holders' attorneys for all services rendered in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of Section 6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (i), inclusive, of Section 6.1, the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with the Company, rescind and annul such declaration and the consequences
thereof, provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under Section 6.3) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to Section 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holders of more than 50% in aggregate principal
amount of outstanding Notes; provided that without the written consent of the
holders of all of the Notes then outstanding, no such amendment or waiver shall
be effective
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Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
(i) which will change the time of payment (including any prepayment required by
Section 2.1) of the prinCipal of or the interest on any Note or change the
principal amount thereof or change the rate of interest thereon, or (ii) which
will change any of the provisions with respect to optional prepayments, or (iii)
which will change the percentage of holders of the Notes required to consent to
any such amendment or waiver of any of the provisions of this Section 7 or
Section 6.
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of Notes (irrespective of the amount
of Notes then owned by it) shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with respect thereto. The Company will not, directly or indirectly, pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as consideration for or as an
inducement to entering into by any holder of Notes of any waiver or amendment of
any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently offered, on the same terms, ratably to the holders
of all Notes then outstanding.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Accredited Investor" shall have the meaning set forth in Rule 501(a)
of Regulation D as promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended.
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company, (iii) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary, or (iv) who is an
officer or director of the Company or any of its Subsidiaries. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
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Penford Corporation Restatement and Exchange Agreement
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"Bank" shall mean The Bank of Nova Scotia.
"Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday for banks in the States of Washington or Iowa.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Lease Liabilities" shall mean all monetary obligations of
the Company and its Subsidiaries under any leasing or similar arrangement which,
in accordance with GAAP, would be classified as capitalized leases, and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidated Current Debt" shall mean all Current Debt of the Company
and its Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company
and its Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Net Income" for any period shall mean the gross revenues
of the Company and its Subsidiaries for such period less all expenses and other
proper charges (including taxes on income), determined on a consolidated basis
after eliminating earnings or losses attributable to outstanding Minority
Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Subsidiary accrued prior
to the date it became a Subsidiary;
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Penford Corporation Restatement and Exchange Agreement
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(d) net earnings and losses of any corporation (other than a
Subsidiary), substantially all the assets of which have been acquired
in any manner by the Company or any Subsidiary, realized by such
corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a
Subsidiary) with which the Company or a Subsidiary shall have
consolidated or which shall have merged into or with the Company or a
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received by
the Company or such Subsidiary in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary which
for any reason is unavailable for payment of dividends to the Company
or any other Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities
of the Company or any Subsidiary; and
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been made
from income arising during such period.
"Consolidated Net Worth" shall mean the consolidated net worth of the
Company and its Subsidiaries, as reflected in the consolidated financial
statements of the Company and its Subsidiaries.
"Consolidated Tangible Net Worth" shall mean the consolidated net worth
of the Company and its Subsidiaries (if any) less (unless otherwise deducted in
determining consolidated net worth) the aggregate amount of any intangible
assets of the Company and its Subsidiaries, including, without limitation,
deferred financing and organizational costs (net of amortization), goodwill,
franchises, licenses, patents, trademarks, trade names, copyrights, service
marks and brand names, all as reflected in the consolidated financial statements
of the Company and its Subsidiaries.
"Contingent Liability" shall mean any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
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Penford Corporation Restatement and Exchange Agreement
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indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be calculated in accordance with
GAAP; provided, however, that the Contingent Liability of the Company or any
Subsidiary under any guarantee of any Person's obligation under a revolving
credit facility shall be deemed to be the amount of the borrowing then
outstanding under such facility plus any interest accrued thereon and any other
charges then due under such facility.
"Credit Agreement" shall mean the Credit Agreement dated as of July 2,
1998, among the Company, Penford Products and the Bank, as Agent for the Lenders
named therein, as the same may be amended from time to time.
"Current Debt" of any Person shall mean as of the date of any
determination thereof (i) all Indebtedness of such Person for borrowed money
other than Funded Debt of such Person and (ii) Guaranties by such Person of
Current Debt of others.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"EBITDA" shall mean, for any period of four Fiscal Quarters, the
earnings from continuing operations of the Company and its Subsidiaries (as
reflected in their consolidated financial statements) before interest expense,
taxes, depreciation and amortization, calculated on a rolling four Fiscal
Quarter basis, but excluding any historical one time non-recurring charges and
the charges incurred by the Company in connection with the divestiture of
Penwest.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Exchange Act Reports" shall have the meaning specified in paragraph
4(b) of Exhibit B hereto.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year.
"Fiscal Year" shall mean any period of twelve consecutive calendar
months ending on August 31; references to a Fiscal Year with a number
corresponding to any calendar year (e.g.,
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Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
the "1997 Fiscal Year") refer to the Fiscal Year ending on the August 31
occurring during such calendar year.
"Funded Debt" of any Person shall mean all Indebtedness of such Person
in each case having a final maturity of one or more than one year from the date
of origin thereof (or which is renewable or extendible at the option of the
obligor for a period or periods more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not the
obligation to make such payments shall constitute a current liability of the
obligor under GAAP.
"GAAP" shall mean generally accepted accounting principles at the time
in the United States.
"GAAP Net Income" shall mean the consolidated net income of the Company
and its Subsidiaries, determined in accordance with GAAP.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the outstanding principal amount of such Indebtedness for
borrowed money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Guaranty Agreement" shall mean the Guaranty Agreement of the Guarantor
substantially in the form attached hereto as Exhibit C.
"Guarantor" shall mean Penford Products.
"Indebtedness" of any Person shall mean, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
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Penford Corporation Restatement and Exchange Agreement
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(b) all obligations of such Person as lessee under leases
which have been or should be, in accordance with GAAP, recorded as
Capitalized Lease Liabilities;
(c) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(d) whether or not so included as liabilities in accordance
with GAAP, all indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse; and
(e) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, (i) obligations of a Subsidiary to the
Company or a Wholly-Owned Subsidiary shall not be considered Indebtedness and
(ii) the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer to the extent that either (x) such Person is directly obligated
for such Indebtedness, or (y) that such Indebtedness is a Contingent Liability
of such Person.
"Indebtedness to Consolidated Capitalization Ratio" means the ratio of
(i) the principal amount of all Indebtedness of the Company and its Subsidiaries
(if any) to (ii) the sum of the principal amount of all Indebtedness and
Consolidated Net Worth.
"Institutional Holder" shall mean any insurance company, bank, savings
and loan association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA) or other institutional investor or
financial institution.
"Intercompany Agreements" shall have the meaning set forth in Section
1.1.
"Intercreditor Agreement" shall mean the Intercreditor Agreement
substantially in the form attached hereto as Exhibit D.
"Interest/Rental Expense Coverage Ratio" shall mean, for any period of
four consecutive Fiscal Quarters, the ratio of (i) the sum of the EBITDA and
Personal Property Rental Expense of the Company and its Subsidiaries for such
period to (ii) the sum of their interest expense and Personal Property Rental
Expense.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
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Penford Corporation Restatement and Exchange Agreement
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"Leverage Ratio" shall mean, for any period of four consecutive Fiscal
Quarters, the ratio of (i) the sum of the Indebtedness of the Company and its
Subsidiaries as of the end of such period to (ii) the sum of the EBITDA of the
Company and its Subsidiaries for such period.
"Lien" shall mean any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), charge against or interest in property to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan Agreement" shall mean the Loan Agreement dated as of July 2,
1998, between Penwest and the Bank, as the same may be amended from time to
time.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (i) the aggregate present value
as of the date of such prepayment of each dollar of principal being prepaid
(taking into account the application of such prepayment required by Section 2.1)
and the amount of interest (exclusive of interest accrued to the date of
prepayment) that would have been payable in respect of such dollar if such
prepayment had not been made, determined by discounting such amounts at the
Reinvestment Rate from the respective dates on which they would have been
payable, over (ii) 100% of the principal amount of the outstanding Notes being
prepaid. If the Reinvestment Rate is equal to or higher than the interest rate
then borne by any Note, the Make-Whole Amount as to such Note shall be zero. For
purposes of any determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean 0.50% plus the arithmetic mean
of the yields for the two columns under the heading "Week Ending"
published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the Weighted Average Life to Maturity of the principal
of the Notes being prepaid (taking into account the application of such
prepayment required by Section 2.1). If no maturity exactly corresponds
to such WeiGhted Average Life to Maturity, yields for the two published
maturities most closely corresponding to such Weighted Average Life to
Maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in
each of such relevant periods to the nearest month. For the purposes of
calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount
shall be used.
"Statistical Release" shall mean the then most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System and
which establishes yields on actively traded U.S. Government Securities
adjusted to constant maturities or, if such statistical release is not
published at the time of any determination hereunder, then such other
reasonably comparable index which shall be designated by the holders of
66-2/3% in aggregate principal amount of the outstanding Notes.
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Penford Corporation Restatement and Exchange Agreement
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"Weighted Average Life to Maturity" of the principal amount of
the Notes being prepaid shall mean, as of the time of any determination
thereof, the number of years obtained by dividing the then Remaining
Dollar-Years of such principal by the aggregate amount of such
principal. The term "Remaining Dollar-Years" of such principal shall
mean the amount obtained by (i) multiplying (x) the remainder of (1)
the amount of principal of the Notes that would have become due on each
scheduled payment date if such prepayment had not been made, less (2)
the amount of principal on the Notes scheduled to become due on such
date after giving effect to such prepayment and the application thereof
in accordance with the provisions of Section 2.1, by (y) the number of
years (calculated to the nearest one-twelfth) which will eLapse between
the date of determination and such scheduled payment date, and (ii)
totalling the products obtained in (i).
"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Company and/or one or more of its Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests constituting preferred
stock at the voluntary or involuntary liquidating value of such preferred stock,
whichever is greater, and by valuing Minority Interests constituting common
stock at the book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such common stock
required by the foregoing method of valuing Minority Interests in preferred
stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Net Equity Proceeds" shall mean, with respect to any issuance by the
Company or any Subsidiary of any equity securities, the gross consideration
received by or for the account of the issuer minus underwriting and brokerage
commissions, discounts and fees and other professional fees and expenses
relating to such issuance that are payable by the issuer.
"New Notes" or "Notes" shall have the meaning set forth in Section 1.3.
"Old Notes" shall have the meaning set forth in Section 1.2.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Penford Products" shall mean Penford Products Co., a Delaware
corporation.
"Penford Products Obligation" shall have the meaning specified in the
Intercreditor Agreement.
"Penwest" shall mean Penwest Pharmaceuticals Co., a Washington
corporation.
"Penwest Guarantee" shall mean the guarantees by the Company and
Penford Products of that certain $15,000,000 revolving term credit facility
provided by Scotiabank to Xxxxxxx.
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Xxxxxxx Corporation Restatement and Exchange Agreement
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"Person" shall mean any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Personal Property Rental Expense" shall mean the expense for the
rental or lease of furniture, fixtures and equipment, including without
limitation leases of rail cars.
"Pharmaceuticals Company" shall have the meaning set forth in Section
1.1.
"Plan" shall mean a "pension plan," as such term is defined in Section
3(2)(A) of ERISA, which is a defined benefit plan, established or maintained by
the Company or any ERISA Affiliate or as to which the Company or any ERISA
Affiliate contributed or is a member or otherwise may have any liability.
"PTE" shall have the meaning set forth in Section 3.2.
"Purchasers" shall have the meaning set forth in Section 1.3.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or sublessee under a
lease of real or personal property, but shall be exclusive of any amounts
required to be paid by the Company or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes
and similar charges. Fixed rents under any so-called "percentage leases" shall
be computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.
"Reportable Event" shall have the same meaning as in Section 4043(b) of
ERISA other than a Reportable Event as to which the provision of 30 days' notice
to the PBGC is waived under applicable regulations; provided, however, that the
loss of qualification of a Plan and the failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA shall constitute a
Reportable Event regardless of the issuance of any waiver of the reporting
requirement by the PBGC.
"Restricted Investments" shall mean all Investments other than
Investments described in the following subparagraphs (a) through (g):
(a) Investments by the Company and its Subsidiaries in
property to be used in, and receivables arising from the sale of goods
and services in, the ordinary course of business of the Company and its
Subsidiaries;
(b) Investments by the Company and its Subsidiaries in and to
Subsidiaries, including any Investment in a corporation which, after
giving effect to such Investment, will become a Subsidiary;
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Penford Corporation Restatement and Exchange Agreement
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(c) Investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of
America, the payment or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case,
maturing in three years or less from the date of acquisition thereof;
(d) Investments in securities maturing within three years
from the date of acquisition thereof, issued by a municipality located
in the United States which are, at the time of acquisition thereof by
the Company or a Subsidiary, accorded one of the top two rating
classifications by Standard & Poor's Corporation, Xxxxx'x Investors
Service, Inc. or other nationally recognized credit rating agency of
similar standing;
(e) Investments in certificates of deposit or banker's
acceptances maturing within one year from the date of issuance thereof,
issued by a bank or trust company organized under the laws of either
the United States, Canada, Japan or a country located in Western Europe
and having capital, surplus and undivided profits aggregating at least
$100,000,000;
(f) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the
Company or any Subsidiary, is accorded one of the top two rating
classifications of Standard & Poor's Corporation, Xxxxx'x Investors
Service, Inc. or other nationally recognized credit rating agency of
similar standing; and
(g) other Investments of the Company and/or its Subsidiaries
existing as of the date of this Agreement which are described in Annex
B to Exhibit B to this Agreement.
In valuing any Investments for the purposes of this Agreement, such
Investments shall be taken at the original cost thereof, without allowance for
any subsequent write-offs or appreciation or depreciation therein, but less any
amount repaid or recovered on account of capital or principal.
For purposes of this definition, at any time when a corporation becomes
a Subsidiary, all Investments of such corporation at such time shall be deemed
to have been made by such corporation, as a Subsidiary, at such time.
"Scotiabank" shall mean The Bank of Nova Scotia.
"Security" shall have the same meaning as in Section 2(a)(1) of the
Securities Act of 1933, as amended.
"Spin-off" shall have the meaning set forth in Section 1.1.
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Penford Corporation Restatement and Exchange Agreement
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"Stockholders' Equity" shall mean the sum of capital stock, premium
(exclusive of any premium arising by virtue of any appraisal or revaluation of
any assets) and retained earnings of the Company.
The term "subsidiary" shall mean as to any particular parent
corporation any corporation of which more than 50% (by number of votes) of the
Voting Stock shall be beneficially owned, directly or indirectly, by such parent
corporation. The term "Subsidiary" shall mean a subsidiary of the Company.
"Total Assets" shall mean as of the date of any determination thereof
the total amount of all assets of the Company and its Subsidiaries (less
depreciation, depletion and other properly deductible valuation reserves).
"Transaction" and "Transactions" shall have the meanings set forth in
Section 1.1.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Funded Debt and Current
Debt shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.
Section 8.2. Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with GAAP,
to the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at
its principal office a register for the registration and transfer of the Notes
(hereinafter called the "Note Register") and the Company will register or
transfer or cause to be registered or transferred as hereinafter provided any
Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of
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Penford Corporation Restatement and Exchange Agreement
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transfer duly executed by the registered holder of such Note or its attorney
duly authorized in writing.
The Person in whose name (or in whose nominee's name) any registered
Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes of this Agreement. Payment of or on account of the
principal, premium, if any, and interest on any registered Note shall be made to
or upon the written order of such Person.
Section 9.2. Exchange of Notes. At any time and from time to time, upon
not less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section 9.1,
this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office,
the Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note for the same aggregate principal amount as the
then unpaid principal amount of the Note so surrendered, or Notes in the
denomination of $50,000 or any amount in excess thereof as such holder shall
specify, dated as of the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer. For a period of three years after the
Closing Date, the Company may require representations, an opinion of counsel or
other documentation reasonable to verify that any transfer of a Note is not in
violation of the registration requirements of the Securities Act of 1933, as
amended or similar state securities laws; provided that the Company shall
reimburse or pay directly any out-of-pocket expenses incurred by any Holder of a
Note in connection with the compliance by such Holder with the requirements of
this sentence.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchasers or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company; provided, that upon request by the Company such owner shall verify the
authority of any such authorized officer by the delivery to the Company of a
certificate to such effect from senior officials of such owner who have
supervisory responsibility of such officer.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-
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Penford Corporation Restatement and Exchange Agreement
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pocket expenses in connection with the preparation, execution and delivery of
this Agreement and the transactions contemplated hereby, including but not
limited to the reasonable charges and disbursements of Xxxxxxx and Xxxxxx, your
special counsel, duplicating and printing costs and charges for shipping the
Notes, adequately insured to you at your home office or at such other place as
you may designate, and all such expenses relating to any amendment, waivers or
consents pursuant to the provisions hereof, including, without limitation, any
amendments, waivers, or consents resulting from any work-out, renegotiation or
restructuring relating to the performance by the Company of its obligations
under this Agreement and the Notes. The Company also agrees that it will pay and
save you harmless against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement or the Notes,
whether or not any Notes are then outstanding. The Company agrees to protect and
indemnify you against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement. You represent that you have not
engaged any broker or finder in connection with the negotiation, execution or
delivery of this Agreement.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall
be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Company at 000-000xx Xxxxxx X.X., Xxxxx 0000,
Xxxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxxxx X. Xxxx or to such other
address as the Company may in writing designate to you or to a subsequent holder
of the Note initially issued to you; provided, however, that a notice to you by
overnight air courier shall only be effective if delivered to you at a street
address designated for such purpose in Schedule I, and a notice to you by
facsimile communication shall only be effective if made by confirmed
transmission to you at a telephone number designated for such purpose in
Schedule I, or, in either case, as you or a subsequent holder of any Note
initially issued to you may designate to the Company in writing.
Section 9.7. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to your benefit
and to the benefit of your successors and assigns, including each successive
holder or holders of any Notes.
Section 9.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto,
-33-
38
Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
whether or not in connection with the Closing Date, shall survive the closing
and the delivery of this Agreement and the Notes.
Section 9.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 9.10. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with Washington
law.
Section 9.11. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
Section 9.12. Oral Agreements. Oral agreements or oral commitments to
loan money, extend credit, or to forbear from enforcing repayment of a debt are
not enforceable under Washington law.
-34-
39
Penford Corporation Restatement and Exchange Agreement
(1992 Note Agreements)
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
PENFORD CORPORATION
By /s/ Xxxxxx X. Breed
Name: Xxxxxx X. Breed
Title: Corporate Director of Finance
Accepted as of August 1, 1998.
UNITED OF OMAHA LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxxxxxx Xx.
Name: Xxxxx X. Xxxxxxxx Xx.
Title: First Vice President
MUTUAL OF OMAHA INSURANCE COMPANY
By /s/ Xxxxx X. Xxxxxxxx Xx.
Name: Xxxxx X. Xxxxxxxx Xx.
Title: First Vice President
UNITED WORLD LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxxxxxx Xx.
Name: Xxxxx X. Xxxxxxxx Xx.
Title: Authorized Signer
COMPANION LIFE INSURANCE COMPANY
By /s/ Xxxxx X. Xxxxxxxx Xx.
Name: Xxxxx X. Xxxxxxxx Xx.
Title: Assistant Treasurer
By /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Assistant Treasurer
AMERICAN REPUBLIC INSURANCE COMPANY
By /s/ X. X. Xxxxxxx
Name: X. X. Xxxxxxx
Title: Senior Vice President,
Investments
FARMERS AND TRADERS LIFE INSURANCE
COMPANY
By /s/ Xxxxx X. X'Xxxxxxx, Xx.
Name: Xxxxx X. X'Xxxxxxx, Xx.
Title: Vice President-Investments
-35-
40
SCHEDULE I
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS ACQUIRED
UNITED OF OMAHA LIFE INSURANCE COMPANY $8,928,500
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: 4-Investment Loan Administration
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Penford Corporation, Adjustable Rate Senior Notes due 2002, PPN 707051 A# 5,
principal, premium or interest") to:
Chase Manhattan Bank
ABA #000-000-000
Private Income Processing
for credit to: United of Omaha Life Insurance Company
Account Number 900-0000000
a/c G07097
PPN: 707051 A# 5
Interest Amount: ____________________________________________
Principal Amount: ___________________________________________
Notices
All notices of payments, on or in respect of the Notes and written confirmation
of each such payment, corporate actions and reorganization notifications to:
The Chase Manhattan Bank
4 New York Xxxxx-00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Investment Processing-J. Pipperato
a/c: G07097
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the indenture) to be addressed as
first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
SCHEDULE I
(to Restatement and Exchange Agreement)
41
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS ACQUIRED
MUTUAL OF OMAHA INSURANCE COMPANY $3,214,260
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: 4-Investment Loan Administration
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Penford Corporation, Adjustable Rate Senior Notes due 2002, PPN 707051 A# 5,
principal, premium or interest") to:
Chase Manhattan Bank
ABA #000-000-000
Private Income Processing
for credit to: Mutual of Omaha Insurance Company
Account Number 900-0000000
a/c G07096
PPN: 707051 A# 5
Interest Amount: ____________________________________________
Principal Amount: ___________________________________________
Notices
All notices of payments, on or in respect of the Notes and written confirmation
of each such payment, corporate actions and reorganization notifications to:
The Chase Manhattan Bank
4 New York Xxxxx-00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Investment Processing-J. Pipperato
a/c: G07096
All other notices and communications (i.e., quarterly/annual reports, tax
filings, modifications, waivers regarding the indenture) to be addressed as
first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
I-2
42
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS ACQUIRED
COMPANION LIFE INSURANCE COMPANY $714,280
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Investment Division
Telefacsimile: (000) 000-0000
Confirmation: (000) 000-0000
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
Companion Life Insurance Company
x/x Xxx Xxxx xx Xxx Xxxx (ABA #0210-0001-8)
Account Number 111566 Income Collection
Attention: P&I Department
For Payment on: Penford Corporation, Adjustable Rate Senior Notes due
2002, PPN 707051 A# 5
Interest Amount: ____________________________________________
Principal Amount:_____________________________________________
Payable Date: _______________________________________________
CLICO
Notices
All notices of payment, on or in respect of the Notes and written confirmation
of each such payment, to:
Companion Life Insurance Company
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Investment Securities Accounting
with duplicate notice to:
Companion Life Insurance Company
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, Xxx Xxxx 00000-0000
Attention: Financial Division
All notices and communications other than those in respect to payments to be
addressed as first provided above
I-3
43
with duplicate notice to:
Companion Life Insurance Company
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, Xxx Xxxx 00000-0000
Attention: Financial Division
Name of Nominee in which Notes are to be issued: HARE & CO.
Taxpayer I.D. Number for HARE & CO.: 00-0000000
I-4
44
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS ACQUIRED
AMERICAN REPUBLIC INSURANCE COMPANY $714,280
P. X. Xxx Xxx
Xxx Xxxxxx, Xxxx 00000
Attention: X. X. Xxxxxxx
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Penford Corporation, Adjustable Rate Senior Notes due 2002, PPN 707051 A# 5,
principal, premium or interest") to:
Norwest Bank Iowa, N.A. (ABA #073-000-228)
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
for credit to: American Republic Insurance Company
Account Number 045671
For Payment on: Penford Corporation, Adjustable Rate Senior Notes
due 2002, PPN 707051 A# 5
Interest Amount: [$_________]
Principal Amount: [$_________]
Payable Date: [Payment Date]
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
I-5
45
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS ACQUIRED
UNITED WORLD LIFE INSURANCE COMPANY $357,140
c/o Mutual of Omaha Insurance Company
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Investment Division
Telefacsimile: (000) 000-0000
Confirmation: (000) 000-0000
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Penford Corporation, Adjustable Rate Senior Notes due 2002, PPN 707051 A# 5,
principal, premium or interest") to:
FirsTier Bank-Omaha (ABA #1040-0002-9)
00xx xxx Xxxxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
for credit to: United World Life Insurance Company
Account Number 000-0-000
For Payment on: Penford Corporation, Adjustable Rate Senior Notes due
2002, PPN 707051 A# 5
Interest Amount: ____________________________________________
Principal Amount: ___________________________________________
Payable Date: _______________________________________________
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed: Attention: Investments/Securities Accounting.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 00-0000000
I-6
46
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS ACQUIRED
FARMERS AND TRADERS LIFE INSURANCE COMPANY $357,140
000 Xxxxx Xxxxxx, P. O. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. X'Xxxxxxx, Xx.
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Penford Corporation, Adjustable Rate Senior Notes due 2002, PPN 707051 A# 5,
principal, premium or interest") to:
US TR NYC (ABA #021-001318)
Account Number 00000000
Attention: Collection Department
for credit to: Farmers and Traders Life Insurance Company
Account Number 898280
For Payment on: Penford Corporation, Adjustable Rate Senior Notes due
2002, PPN 707051 A# 5
Interest Amount: [$_________]
Principal Amount: [$_________]
Payable Date: [Payment Date]
Notices
All notices with respect to payments and written confirmation of each such
payment, to be addressed as follows:
Xxxxxx & Company
P. X. Xxx 000, Xxxx Xxxxxx Xxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
For the account of: Farmers and Traders Life Insurance Company
Account Number 898280
Name of Nominee in which Notes are to be issued: Xxxxxx and Company
Taxpayer I.D. Number: 00-0000000
I-7
47
PENFORD CORPORATION
Adjustable Rate Senior Note
Due November 30, 2002
No.
____________, 19__
$
Penford Corporation, a Washington corporation (the "Company"), for
value received, hereby promises to pay to
or registered assigns
on the thirtieth day of November, 2002
the principal amount of
DOLLARS ($___________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 8.43% per annum from the date hereof until maturity, or at such other
rate as may be determined from time to time in accordance with Section 1.3(b) of
the Restatement and Exchange Agreements (as hereinafter defined), payable
semiannually on the thirtieth day of each May and November in each year
(commencing on November 30, 1998) and at maturity. The Company agrees to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the rate of interest
then borne by such Note plus 2.0% per annum after the due date, whether by
acceleration or otherwise, until paid. Both the principal hereof and interest
hereon are payable at the principal office of the Company in Bellevue,
Washington in coin or currency of the United States of America which at the time
of payment shall be legal tender for the payment of public and private debts.
This Note is one of the Company's $14,285,600 aggregate principal
amount Adjustable Rate Senior Notes due November 30, 2002 (the "Notes") issued
or to be issued under and pursuant and subject to the terms and provisions of
the separate Restatement and Exchange Agreements, each dated as of August 1,
1998 (the "Restatement and Exchange Agreements"), entered into by the Company
with the original Purchasers therein referred to. This Note and the holder
hereof are entitled equally and ratably with the holders of all other Notes
outstanding under the Restatement and Exchange Agreements to all the benefits
provided for thereby or referred to therein. Reference is hereby made to the
Restatement and Exchange Agreements for a statement of such rights and benefits.
EXHIBIT A
(to Restatement and Exchange Agreement)
48
This Note and the other Notes outstanding under the Restatement and
Exchange Agreements may be declared due prior to their expressed maturity dates
and certain prepayments are required to be made thereon, all in the events, on
the terms and in the manner and amounts as provided in the Restatement and
Exchange Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Restatement and Exchange Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
PENFORD CORPORATION
By__________________________________
Its
A-2
49
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Annex A attached hereto states the name of each of
the Company's Subsidiaries, its jurisdiction of incorporation and the percentage
of its Voting Stock owned by the Company and/or its Subsidiaries. The Company
and each Subsidiary has good and marketable title to all of the shares it
purports to own of the stock of each Subsidiary, free and clear in each case of
any Lien. All such shares have been duly issued and are fully paid and
non-assessable.
2. Corporate Organization and Authority. The Company, and each
Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted; and
(c) is duly licensed or qualified and is in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary.
3. Compliance with Law. Neither the Company nor any Subsidiary (a) is
in violation of any law, ordinance, franchise, governmental rule or regulation
to which it is subject; or (b) has failed to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of its
property or to the conduct of its business, which violation or failure to obtain
would materially adversely affect the business, prospects, profits, properties
or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole, or impair the ability of the Company to perform its obligations
contained in the Agreements or the Notes. Neither the Company nor any Subsidiary
is in default with respect to any order of any court or governmental authority
or arbitration board or tribunal.
4. Financial Statements. (a) The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of August 31 in each of the years
1992 to 1997, both inclusive, and the statements of income and retained earnings
and changes in financial position or cash flows for the fiscal years ended on
said dates, each accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Ernst & Young, have been prepared in
accordance with GAAP consistently applied except as therein noted, are correct
and complete and present fairly the financial position of the Company and its
Subsidiaries as of such dates and the results of their operations and changes in
their financial position or cash flows for such periods.
EXHIBIT B
(to Restatement and Exchange Agreement)
50
(b) Since August 31, 1997, except as set forth in the Company's Form
10-K Annual Report filed November 26, 1997, 10-Q Quarterly Reports filed January
14, 1998, April 3, 1998, July 10, 1998 (copies of which have been furnished to
the Purchasers), pursuant to Section 13 of the Securities Exchange Act of 1934
(the "Exchange Act Reports"), there has been no change in the condition,
financial or otherwise, of the Company and its consolidated Subsidiaries as
shown on the consolidated balance sheet as of such date except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse.
5. Indebtedness. Annex B attached hereto correctly describes all
Current Debt, Funded Debt and Capitalized Leases of the Company and its
Subsidiaries outstanding on August 24, 1998.
6. Full Disclosure. Neither the financial statements referred to in
paragraph 4 hereof nor the Agreements or any other written statement furnished
by the Company to you in connection with the negotiation of the sale of the
Notes, contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein or herein not misleading.
There is no fact peculiar to the Company or its Subsidiaries which the Company
has not disclosed to you in writing which materially affects adversely nor, so
far as the Company can now foresee, will materially affect adversely the
properties, business, prospects, profits or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole.
7. Pending Litigation. Except as set forth in the Exchange Act
Reports, there are no proceedings pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary in any court or before any
governmental authority or arbitration board or tribunal which involve the
possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Company and its
Subsidiaries.
8. Title to Properties. The Company and each Subsidiary has good and
marketable title in fee simple (or its equivalent under applicable law) to all
material parcels of real property which it purports to own, and has good title
to all the other material items of property which it purports to own, including
that reflected in the most recent balance sheet referred to in paragraph 4
hereof, except as sold or otherwise disposed of in the ordinary course of
business and except for Liens permitted by the Agreements.
9. Patents and Trademarks. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks, copyright,
licenses and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, without any known conflict with the
rights of others.
10. Sale is Legal and Authorized. The delivery of the New Notes and
compliance by the Company with all of the provisions of the Agreements and the
New Notes --
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order
of any court or governmental authority or agency and will not conflict
with or result in any breach of any
B-2
51
of the terms, conditions or provisions of, or constitute a default
under the Certificate of Incorporation or By-laws of the Company or any
indenture or other agreement or instrument to which the Company is a
party or by which it may be bound or result in the imposition of any
Liens or encumbrances on any property of the Company; and
(c) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Certificate of Incorporation or By-laws
of the Company or otherwise which action has not been taken), executed
and delivered by the Company and the Agreements and the Notes
constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable in accordance with their
respective terms.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. Neither the Company nor any Subsidiary is in default in the payment
of principal or interest on any Funded Debt or Current Debt or is not in default
under any instrument or instruments or agreements under and subject to which any
Funded Debt or Current Debt has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
12. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of the
Agreements or the Notes or compliance by the Company with any of the provisions
of the Agreements or the Notes.
13. Taxes. All tax returns required to be filed by the Company or any
Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective properties, income or franchises,
which are shown to be due and payable in such returns have been paid. For all
taxable years ending on or before August 31, 1994, the Federal income tax
liability of the Company and its Subsidiaries has been satisfied and either the
period of limitations on assessment of additional Federal income tax has expired
or the Company and its Subsidiaries have entered into an agreement with the
Internal Revenue Service closing conclusively the total tax liability for the
taxable year. The Company does not know of any proposed additional tax
assessment against it for which adequate provision has not been made on its
accounts, and no material controversy in respect of additional Federal or state
income taxes due since said date is pending or to the knowledge of the Company
threatened. The provisions for taxes on the books of the Company and each
Subsidiary are adequate for all open years, and for its current fiscal period.
14. Use of Proceeds. None of the transactions contemplated in the
Agreements will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant thereto,
including, without limitation, Regulations T, U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the Company nor
any Subsidiary owns or intends to carry or purchase any "margin stock" within
the meaning of said Regulation U. None of the proceeds from the sale of the
Notes will be used
B-3
52
to purchase, or refinance any borrowing the proceeds of which were used to
purchase, any "security" within the meaning of the Securities Exchange Act of
1934, as amended.
15. Private Offering. Neither the Company, directly or indirectly, nor
any agent on its behalf, has offered or will offer the Notes or any similar
Security or has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or will approach
or negotiate in respect of the Notes or any similar Security with any Person
other than the Purchasers. Neither the Company, directly or indirectly, nor any
agent on its behalf, has offered or will offer the Notes or any similar Security
or has solicited or will solicit an offer to acquire the Notes or any similar
Security from any Person so as to bring the issuance and sale of the Notes
within the provisions of Section 5 of the Securities Act of 1933, as amended.
16. ERISA. The consummation of the transactions provided for in the
Agreements and compliance by the Company with the provisions thereof and the
Notes issued thereunder will not involve any nonexempt prohibited transaction
with respect to any Plan as to which the Company is a party-in-interest within
the meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended. Each Plan complies in all material respects with all applicable
statutes and governmental rules and regulations, and (a) no Reportable Event has
occurred and is continuing with respect to any Plan, (b) neither the Company nor
any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or
instituted steps to do so which has or would result in withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) which could materially
and adversely affect the properties, business, prospects, profits or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole
and (c) no steps have been instituted to terminate any Plan in a distress
termination under Section 4041(c) of ERISA or a termination instituted by the
PBGC under Section 4042 of ERISA. No condition exists or event or transaction
has occurred in connection with any Plan which could result in the incurrence by
the Company or any ERISA Affiliate of any material liability, fine or penalty.
No Plan maintained by the Company or any ERISA Affiliate, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA nor does the present value of all benefits vested under all
Plans exceed, as of the last annual valuation date, the value of the assets of
the Plans allocable to such vested benefits by an amount greater than $1,000,000
in the aggregate. Neither the Company nor any ERISA Affiliate has any contingent
liability with respect to any post-retirement "welfare benefit plan" (as such
term is defined in ERISA) except as has been disclosed to the Purchasers.
17. Compliance with Environmental Laws. Neither the Company nor any
Subsidiary is in material violation of any applicable Federal, state, or local
laws, statutes, rules, regulations or ordinances relating to public health,
safety or the environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or ground water, to the
withdrawal or use of ground water, to the use, handling or disposal of
polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, crude oil or any fraction thereof, or other
hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances which violation could have
a material adverse effect on the business, prospects, profits, properties or
condition (financial or otherwise) of the
B-4
53
Company and its Subsidiaries, taken as a whole. The Company does not know of any
material liability or class of liability of the Company or any Subsidiary under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.).
B-5
54
SUBSIDIARIES OF THE COMPANY
NAME STATE OF INCORPORATION OWNERSHIP
Penford Products Co. Delaware 100%
Penford Export Corporation Virgin Islands 100%
ANNEX A
(to Exhibit B)
55
DESCRIPTION OF DEBT, LEASES,
INVESTMENTS, GUARANTIES AND LIENS
(As of August 24, 1998)
1. Current Debt: None other than as disclosed in No. 2 and No. 5 below.
2. Funded Debt:
Seafirst Overnight Borrowings $3,566,000
The Bank of Nova Scotia,
Keybank National Association
U.S. Bank National Association Credit Agreement $34,000,000
Seafirst 9.55% unsecured Note $420,000
United of Omaha Life Insurance
Co. (among others) 7.93% Senior Notes $14,285,600
Principal Mutual Life Insurance 7.59% Series A Senior Notes $10,000,000
Co. (among others) 8.35% Series B Senior Notes $10,000,000
3. Capital Leases: None
4. Investments:
Note Receivable from Xxx X. Xxxxxxxx $1,215,000
Penford Products Co. 100% outstanding stock
Penford Export Corporation 100% outstanding stock
5. Guaranties:
(a) The Penwest Guarantee, by Penford Corporation and Penford
Products, of an amount up to a maximum of $18,000,000.
(b) The co-borrowing by Penford Products Co. and Penford
Corporation under the Credit Agreement with The Bank of Nova Scotia,
KeyBank National Association and U.S. Bank National Association.
6. Liens: None
ANNEX B
(to Exhibit B)
56
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Xxxxxxx and Xxxxxx, special counsel to the
Purchasers, called for by Section 4.1 of the Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in
good standing under the laws of the State of Washington and has the
corporate power and the corporate authority to execute and deliver the
Agreements and to issue the Notes.
2. The Agreements have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding contract of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, and the Notes being
delivered on the date hereof have been duly executed and delivered by
the Company and constitute the legal, valid and binding obligations of
the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreements do not, under existing
law, require the registration of the Notes under the Securities Act of
1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
The opinion of Xxxxxxx and Xxxxxx shall also state that the opinion of
Xxxxx & Gates is satisfactory in scope and form to Xxxxxxx and Xxxxxx and that,
in their opinion, the Purchasers are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Xxxxxxx and
Xxxxxx may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Certificate of Incorporation certified by, and a certificate
of good standing of the Company from, the Secretary of State of the State of
Washington, the By-laws of the Company and the General Corporation Law of the
State of Washington. The opinion of Xxxxxxx and Xxxxxx is limited to the laws of
the State of Washington and the Federal laws of the United States. Xxxxxxx and
Xxxxxx may rely on the opinion of Xxxxx & Gates as to all matters of Washington
law.
With respect to matters of fact upon which such opinion is based,
Xxxxxxx and Xxxxxx may rely on appropriate certificates of public officials and
officers of the Company and upon
EXHIBIT E
(to Restatement and Exchange Agreement)
57
representations of the Company and the Purchasers delivered in connection with
the issuance and sale of the Notes.
E-2
58
FORM OF CLOSING OPINION
OF COUNSEL TO THE COMPANY AND THE GUARANTOR
August __, 1998
To the Parties Listed on
the Attached Schedule
Re: Penford Corporation
Ladies and Gentlemen:
We have acted as counsel for Penford Corporation, a Washington
corporation ("Penford"), and Penford Products Co., a Delaware corporation
("Products"), in connection with the preparation of the separate Restatement and
Exchange Agreements, each dated as of August 1, 1998 between Penford and the
Purchasers listed on Schedule I thereto relating to the amendment, restatement
and exchange of certain Note Agreements dated as of November 1, 1992
(collectively, the "Restatement Agreements").
In so acting, we have examined the following documents, instruments and
certificates:
(1) The Restatement Agreements.
(2) Adjustable Rate Senior Note dated August 28, 1998 in the
stated principal amount of $8,928,000 made by Penford payable to United
of Omaha Life Insurance Company or registered assigns.
(3) Adjustable Rate Senior Note dated August 28, 1998 in the
stated principal amount of $3,214,260 made by Penford payable to Mutual
of Omaha Insurance Company or registered assigns.
(4) Adjustable Rate Senior Note dated August 28, 1998 in the
stated principal amount of $714,280, made by Penford payable to Hare &
Co. or registered assigns.
(5) Adjustable Rate Senior Note dated August 28, 1998 in the
stated principal amount of $714,280, made by Penford payable to
American Republic Insurance Company or registered assigns.
(6) Adjustable Rate Senior Note dated August 28, 1998 in the
stated principal amount of $357,140, made by Penford payable to United
World Life Insurance Company or registered assigns.
EXHIBIT F
(to Restatement and Exchange Agreement)
59
(7) Adjustable Rate Senior Note dated August 28, 1998 in the
stated principal amount of $357,140, made by Penford payable to Xxxxxx
and Company or registered assigns.
(8) Guaranty Agreement dated as of August 1, 1998 (the
"Guaranty") made by Penford Products Co. ("Products").
(9) A Certificate of Existence/Authorization, dated August
25, 1998, issued with respect to Penford by the Secretary of State of
the State of Washington.
(10) A Certificate issued by the Secretary of State of the
State of Delaware dated August 24, 1998, issued with respect to the
good standing of Products.
(11) An Officer's Certificate, dated as of August 28, 1998, of
the Corporate Director of Finance of Penford with respect to certain
factual matters.
(12) An Officer's Certificate, dated as of August 28, 1998, of
the Vice President and Assistant Secretary of Products with respect to
certain factual matters.
(13) A Certificate of Secretary of Penford, dated as of August
28, 1998.
(14) A Certificate of Secretary of Products, dated as of
August 28, 1998.
(15) The Articles of Incorporation of Penford together with
all amendments thereto, certified as of August 25, 1998 by the
Secretary of State of the State of Washington.
(16) The Bylaws of Penford together with all amendments
thereto.
(17) The Restated Certificate of Incorporation of Products
together with all amendments thereto, certified as of August 24, 1998
by the Secretary of State of the State of Delaware.
(18) The Bylaws of Products together with all amendments
thereto.
(19) Originals or copies certified to our satisfaction of such
other corporate records of Penford and Products, and certificates of
public officials and officers of Penford and Products, as we have
deemed necessary as a basis for the opinions expressed below.
For the purposes of this letter, the documents listed above are
referred to individually as a Document and collectively as the "Documents"; the
Documents listed as items (1) through (8) above are sometimes referred to
individually as a "Credit Document" and collectively as the "Credit Documents".
Items (11) and (12) above are referred to as the "Officer's Certificates". As to
questions of fact material to our opinions, we have relied without independent
verification solely on the Credit Documents and the other documents, instruments
and certificates submitted
F-2
60
to us. However, whenever our opinions relate to our "knowledge," by the use of
terms such as "to our knowledge," with your permission, the facts upon which
such opinions are based are solely those contained in the Officer's Certificates
and those in the conscious awareness of attorneys in this firm who are actively
involved in the legal representation of the Penford or Products.
In rendering the opinions expressed below in this letter, we have
assumed with your permission and without independent verification:
(i) the genuineness of all signatures, the authenticity of all
documents, instruments and certificates submitted to us as originals or
copies, and the exact conformity with the executed originals of all
documents, instruments and certificates submitted to us as copies;
(ii) that each Document has been duly executed and delivered
by or on behalf of all persons and entities (other than Penford or
Products) that are signatories thereto and that in each case such
execution and such delivery have been pursuant to all requisite power
and authority, corporate and otherwise;
(iii) that the execution and delivery by each Purchaser of
each Document to which it is a party, and the performance by Purchasers
of all of its obligations under each Document to which it is a party,
have been duly authorized by all necessary corporate and other action;
(iv) that each Document to which any person (other than
Penford or Products) is a party constitutes a valid and binding
obligation of such person, enforceable against such person in
accordance with its terms;
(v) that neither the execution and delivery by Penford or
Products of any Credit Document to which it is a party, nor the
performance by Penford or Products of its obligations under any Credit
Document to which it is a party, contravenes, or is rendered invalid,
not binding or unenforceable under any law other than the laws of the
State of Washington, the General Corporation Law of Delaware and the
Federal laws of the United States;
(vi) that each Purchaser is an entity duly organized and
validly existing under the laws of its jurisdiction of organization and
is in good standing under such laws;
(vii) that all parties have negotiated the transaction, and
will exercise their rights and remedies, under the Credit Documents and
applicable law, in good faith and with fair dealing and in a
commercially reasonable manner;
(viii) that all parties have no notice of any defense against
the enforcement of the Credit Documents;
F-3
61
(ix) that there has not been any mutual mistake of fact or
misunderstanding; and
(x) that there are no agreements or understandings among the
parties, written or oral, and there is no usage of trade or course of
prior dealing among the parties that would, in either case, define,
supplement or qualify the terms of the Credit Documents.
We are qualified to practice law in the State of Washington, and we do
not express any opinions in this letter concerning any laws other than the laws
of the State of Washington, the General Corporation Law of the State of Delaware
and the Federal laws of the United States of America. However, we express no
opinion in this letter as to statutes, ordinances, administrative decisions,
rules and regulations of counties, cities, towns, municipalities, special
political subdivisions (whether created or enacted through federal, state or
regional action) and the like, and decisions and interpretations thereof. As
used in opinion paragraph 6 below, the term "Material Agreement" means any
agreement or instrument listed as an exhibit to Penford's 10-K report filed
pursuant to the Securities Exchange Act of 1934 for the fiscal year ended August
31, 1997 and the three 10-Q reports for the three subsequent quarters.
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, we are of the opinion that:
1. Penford is a corporation duly incorporated and validly
existing under the laws of the State of Washington and is duly
authorized to transact business in the corporate form in the State of
Washington. Penford has all requisite corporate power and corporate
authority to execute and perform the Restatement Agreements, to issue
the Notes and to carry on the business described in Penford's most
recent 10-K report.
2. Products is a corporation duly incorporated under the
laws of the State of Delaware and is in good standing and has a legal
corporate existence in Delaware. Products is duly qualified to do
business as a foreign corporation and is in good standing in the states
of Idaho, Iowa, Colorado and Washington. All outstanding shares of
Products are owned of record by Penford.
3. The execution and performance by Penford of the
Restatement Agreements have been duly authorized by all necessary
corporate action. The Restatement Agreements have been duly executed
and delivered by Penford, and constitute the legal, valid and binding
obligations of Penford, enforceable against Penford in accordance with
their respective terms.
4. The execution and performance by Penford of the Notes
have been duly authorized by all necessary corporate action. The Notes
have been duly executed and delivered by Penford, and constitute the
legal, valid and binding obligations of Penford, enforceable against
Penford in accordance with their respective terms.
5. No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with any State of
Washington or United States Federal
F-4
62
governmental body, is necessary for the valid execution and delivery of
the Restatement Agreements or the issuance of the Notes.
6. The issuance and sale of the Notes and the execution,
delivery and performance by Penford of the Restatement Agreements do
not result in any breach of any of the provisions of, or constitute a
default under or result in the creation or imposition of any Lien (as
that term is defined in Section 8.1 of the Restatement Agreements) upon
any of the property of Penford pursuant to the provisions of the
Articles of Incorporation or Bylaws of Penford or any Material
Agreement.
7. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 3.2 of the
Restatement Agreements, the issuance, sale and delivery of the Notes
under the circumstances contemplated by the Restatement Agreements do
not require the registration of the Notes under the Securities Act of
1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
8. The execution and performance by Products of the Guaranty
have been duly authorized by all necessary corporate action. The
Guaranty has been duly executed and delivered by Products, and
constitutes the legal, valid and binding obligation of Products,
enforceable against Products in accordance with its terms.
The opinions expressed above are subject to the following
qualifications:
A. The validity and enforceability of obligations, and the
availability of rights and remedies, under the Credit Documents are
subject to and may be limited by (i) bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance or transfer,
preference, receivership, moratorium and similar laws now or hereafter
in effect relating to or affecting creditors' rights generally, (ii)
general principles of equity (including, but not limited to, concepts
of materiality, reasonableness, good faith and fair dealing and
principles that may limit the availability of specific performance or
injunctive or other equitable relief), whether such validity or
enforceability of obligations or availability of rights and remedies is
considered in an action or proceeding in equity or at law.
B. As to the opinion expressed in paragraph 6 above relating
to Material Agreements, we express no opinion in this letter as to, (a)
financial covenants or similar provisions in Material Agreements which
require financial calculations or determinations to ascertain
compliance, (b) provisions in such agreements or instruments which
relate to the occurrence or existence of any material adverse change or
event or similar concept or (c) patrol or other extrinsic evidence
bearing on the interpretation or construction of such agreements or
instruments. In addition, if any Material Agreements are governed by
the laws of a jurisdiction other than the State of Washington, then,
with your permission, our opinion as to the Material Agreements
expressed in paragraph 6 above is based solely upon the plain meaning
of the language in such agreements and instruments without
F-5
63
regard to interpretation or construction that might be indicated by the
laws governing such agreements and instruments.
C. Although we express no opinion as to the effect of any
fraudulent conveyance or transfer laws, we call to your attention that
such laws may be implicated by certain aspects of the transaction
contemplated by the Credit Documents, including, without limitation,
the guarantee by Products of liability for the obligations of Penford
under the Credit Documents. Such liability, and security interests
securing such liability, could be rendered unenforceable by the
application of fraudulent conveyance or transfer laws. The effect of
any fraudulent conveyance or transfer laws depends upon the solvency
and adequacy of capital of, and other factual matters relating to,
Products after giving effect to the transactions contemplated by the
Credit Documents. We have not undertaken any investigations or
verification of, and we express no opinion as to, any such factual
matters.
D. We express no opinion as to:
(i) the effect of the law of any jurisdiction, other
than the State of Washington and the United States, in which
enforcement of any Credit Document may be sought which limits
the rates of interest legally chargeable or collectible;
(ii) any provisions in any Credit Document pertaining
to jurisdiction, venue or choice of law; and
(iii) any other provisions in the Credit Documents
insofar as such provisions purport (A) to require amendments,
modifications or waivers of any provisions of the Credit
Documents to be in writing, (B) to provide that any person or
entity (1) may have rights to release, exculpation, indemnity
or contribution, (2) may have rights to forfeiture or the
payment of any sum as liquidated damages, late charges or
prepayment premiums, to the extent such sum constitutes a
penalty, (3) may have rights to any increase in any rate of
interest upon delinquency in payment or the occurrence of a
default, to the extent such increase constitutes a penalty,
(4) may pursue inconsistent remedies or (5) waives any right,
remedy or defense, including without limitation the right to a
trial by jury and the right to appeal; or (C) to allow
Purchasers to charge interest on interest.
E. We call to your attention that:
(i) under the laws of the State of Washington, any
provision in an agreement requiring a party to pay another
party's attorneys' fees and costs in any action to enforce the
provisions of such agreement will be construed to entitle the
prevailing party in any such action, whether or not such party
is the party specified in such agreement, to be awarded its
reasonable attorneys' fees, costs and necessary disbursements;
F-6
64
(ii) the courts of the State of Washington may
consider extrinsic evidence (both oral and written) of
circumstances surrounding the Credit Documents to ascertain
the intent of the parties thereto in using the language set
forth in the Credit Documents, regardless of whether or not
the language set forth in the Credit Documents is plain and
unambiguous on its face and regardless of any statement by the
parties thereto in the Credit Documents that the Credit
Documents constitute an integrated expression of the agreement
of the parties thereto, and such courts may incorporate
additional or supplementary terms into the Credit Documents.
F. We express no opinion as to any matters whatsoever relating
to:
(i) the adequacy of consideration for the
indebtedness evidenced by the Credit Documents;
(ii) the accuracy or completeness of any information
furnished to any party;
(iii) the accuracy or completeness of any
representations made by any party;
(iv) the financial status of any party; and
(v) the ability of any party to meet its obligations
under the Credit Documents.
This letter is furnished to you pursuant to Section 4.1(e) of the
Restatement Agreements, and is intended solely for your benefit and may not be
used or relied upon by you for any other purpose, or be quoted or delivered to,
or used or relied upon by any other person or entity for any purpose, in each
case without our prior written consent, provided, however, participants in or
assignees of the Credit Documents ("Additional Reliance Parties") may rely on
our opinions expressed herein, subject to the following understandings: (a) this
opinion is based solely on our examination of the Credit Documents, and in
reliance on the assumptions and qualifications contained herein, and on the law
in effect on the date hereof, (b) this opinion is rendered solely as of the date
hereof, (c) we have not reviewed the nature or documentation of any Additional
Reliance Parties' right, title, or interest in, to, or under the Credit
Documents, and we have not been advised of the identity, nature, nationality or
other characteristics of the Additional Reliance Parties, and our opinions are
further qualified to the extent of the consequences that would be revealed by an
examination and knowledge thereof, (d) the definition of "Purchaser" or
"Purchasers" as used in this opinion does not include any Additional Reliance
Parties, and (e) none of the Additional Reliance Parties shall become clients of
our firm based upon any reliance by them on this letter.
The opinions expressed above are rendered as of the date of this
letter. We expressly disclaim any obligation to update this letter or otherwise
to advise you of any matters (including, but not limited to, any subsequently
enacted, published or reported laws, rules, regulations or
F-7
65
judicial decisions having retroactive effect) which may come to our attention
after the date of this letter and which affect any of the opinions expressed in
this letter.
Nothing contained in this opinion shall be deemed to constitute a
waiver of the attorney-client privilege between this firm and Penford and
Products.
Very truly yours,
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66
SCHEDULE
United of Omaha Life Insurance Company
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Mutual of Omaha Insurance Company
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Companion Life Insurance Company
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
United World Life Insurance Company
c/o Mutual of Omaha Insurance Company
Mutual of Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
American Republic Insurance Company
P. X. Xxx Xxx
Xxx Xxxxxx, Xxxx 00000
Farmers and Traders Life Insurance Company
000 Xxxxx Xxxxxx, X. X. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000
