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EXHIBIT 10.14
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (the "Agreement") is made as of the 10th day
of November, 1997 (the "Effective Date"), between PENFORD CORPORATION, a
Washington corporation (previously known as PENWEST, LTD.) ("Penford"), and
PENWEST PHARMACEUTICALS CO., a Washington corporation ("Penwest").
RECITALS
WHEREAS, the Board of Directors of Penford has determined that it is in
the best interest of Penford and its shareholders to separate the pharmaceutical
division of its business from the food and paper division of its business;
WHEREAS, it is the intention of Penford to contribute to Penwest
certain assets and to assign certain liabilities, to transfer certain technology
to Penwest and to make other arrangements to establish Penwest as a separate
enterprise for the purpose of engaging in research, development and marketing of
novel drug delivery technologies and sale and distribution of pharmaceutical
excipients (the "Pharmaceutical Business");
WHEREAS, Penford and Penwest have determined that it is necessary and
desirable, on the terms and conditions contemplated hereby (i) to cause Penwest
to offer and sell for its own account in the IPO (as defined below) a limited
number of shares of Penwest Common Stock (as defined below), and (ii) for
Penford to distribute to shareholders of Penford the outstanding shares of
Penwest Common Stock held by Penford following the IPO;
WHEREAS, the Distribution (as defined below) is intended to qualify as
a tax-free spin-off under Sections 355 and 368 of the Code (as defined below);
and
WHEREAS, Penford and Penwest have further determined that it is
necessary and desirable to set forth the principal corporate transactions
required to effect the Separation (as defined below), the IPO and the
Distribution and to set forth other agreements that will govern certain other
matters following the Separation, IPO and Distribution;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
made herein, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement and the Exhibits hereto, the
following terms shall have the following meanings:
ACTION: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: affiliate of any Person means a Person that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and polices of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
AGENT: the distribution agent to be appointed by Penford to distribute
to the shareholders of Penford the shares of Penwest Common Stock held by
Penford pursuant to the Distribution.
ANCILLARY AGREEMENTS: all of the agreements, instruments,
understandings, assignments or other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Excipient Supply Agreement, the Services Agreement, the Tax Allocation
Agreement, the Employee Benefits Agreement and the Trademark Assignment.
CLOSING DATE: the first time any shares of Penwest Common Stock are
sold to the Underwriters pursuant to the IPO in accordance with the terms of the
Underwriting Agreement to be entered into between Penwest and the Underwriters.
CODE: the Internal Revenue Code of 1986, as amended.
COLLABORATIVE AGREEMENTS: include the following agreements:
(a) Product Development and Supply Agreement between Penwest,
Ltd., a Washington corporation ("Penwest, Ltd.") and Mylan
Pharmaceuticals, Inc., a West Virginia corporation ("Mylan") dated
August 17, 1994.
(b) Sales and Distribution Agreement between Penwest, Ltd. and
Mylan dated January 3, 1997.
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(c) Product Development and Supply Agreement between Penwest,
Ltd. and Mylan dated August 3, 1995.
(d) Product Development and Supply Agreement between Penwest,
Ltd. and Mylan dated March 22, 1996.
(e) Custom Blending Agreement between Boehringer Ingelheim
Pharmaceuticals, Inc. and Penwest, Ltd. dated November 23, 1994.
(f) Product Development and Supply Agreement between TIMERx
Technologies, a Washington corporation ("TIMERx Technologies") and
Xxxxxxx Urban Development Company ("Xxxxxxx") dated August 30,
1996.
(g) Product Development and Supply Agreement between TIMERx
Technologies and Xxxxxxx dated May 31, 1996.
(h) Heads of Agreement and Development Agreement between TIMERx
Technologies and Xxxxxxx dated September 20, 1995.
(i) Product Development, License and Supply Agreement between
TIMERx Technologies and Sanofi Winthrop International S.A., a
company incorporated under the laws of France dated February 28,
1997, as amended.
(j) The Agreement between Xxxxxx Xxxxxxx Co., Inc. and Leiras OY
dated July 27, 1992.
(k) Letter of Consent between TIMERx Technologies and Leiras OY
dated May 26, 1995.
(l) Letter of Agreement between TIMERx Technologies and Leiras OY
dated May 26, 1995.
(m) Strategic Alliance Agreement between Penwest Pharmaceuticals
Group and Endo Pharmaceuticals Inc., dated September 17, 1997.
COMMISSION: the Securities and Exchange Commission.
CONVEYANCE AND ASSUMPTION INSTRUMENTS: collectively, the various
agreements, instruments and other documents entered into or to be entered into
to effect the transfer, prior to the Closing Date and in the manner contemplated
by this Agreement or any other agreement or document contemplated by this
Agreement or otherwise, of Penwest Assets to Penwest (including, without
limitation, the
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intellectual property rights and other assets described in the Registration
Statement) and the assumption of Penwest Liabilities by Penwest, in both cases
relating to the business of Penwest as described in the Registration Statement.
DISTRIBUTION: the distribution by Penford on a pro rata basis to
holders of Penford Common Stock of all of the outstanding shares of Penwest
Common Stock owned by Penford on the Distribution Date as set forth in Article
IV.
DISTRIBUTION DATE: the date determined pursuant to Section 4.1 on which
the Distribution occurs provided that such date shall occur on or after April 1,
1998.
EMPLOYEE BENEFITS AGREEMENT: the Employee Benefits Agreement between
Penford and Penwest providing for, among other things, participation by Penwest
Employees in certain of the Penford employee benefit plans from the effective
date of the Employee Benefits Agreement through December 31, 1997.
EXCIPIENT SUPPLY AGREEMENT: the Excipient Supply Agreement between
Penford and Penwest pursuant to which Penford will manufacture and supply
exclusively to Penwest, and Penwest will purchase exclusively from Penford, all
of Penwest's requirements for EMDEX and CANDEX.
EMDEX/CANDEX: sugar based (Dextrate) binders.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
GOVERNMENTAL APPROVALS: any notices, reports or other filings to be
made, or any consents, registrations, approvals, permits or authorizations to be
obtained from any Governmental Authority.
GOVERNMENTAL AUTHORITY: any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
IPO: the initial public offering by Penwest of shares of Penwest Common
Stock pursuant to the Registration Statement.
LIABILITIES: any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any Governmental Authority
or any award of any arbitrator of any kind, and those arising under any
contract, commitment or undertaking.
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PENFORD COMMON STOCK: the Common Stock, par value $1.00 per share, of
Penford.
PENFORD MARKET CAPITALIZATION: the number of Penford's fully diluted
shares outstanding (shares of Penford Common Stock outstanding, plus shares of
Penford Common Stock issuable upon exercise of outstanding stock options)
multiplied by the fair market value of Penford Common Stock (which shall equal
the weighted average of the last reported price of Penford Common Stock on the
Nasdaq National Market on the date on which the Penford Common Stock is first
traded on the Nasdaq National Market at a price that does not reflect the value
of the Penwest Common Stock held by Penford as set by the Nasdaq National Market
(the "X Date") and the nineteen (19) trading days immediately following the X
Date.
PENWEST ASSETS:
(a) any and all assets that are expressly contemplated by the
Penwest Contracts or this Agreement or any other agreement or document
contemplated by this Agreement (or any Schedule hereto or thereto) as assets to
be transferred to Penwest;
(b) any assets reflected in Penwest's balance sheet dated
September 30, 1997 as assets of Penwest, subject to any dispositions of such
assets subsequent to the date of such balance sheet; and
(c) any and all assets owned or held immediately prior to the
Closing Date by Penford that are used primarily in the Pharmaceutical Business.
The intention of this clause (c) is only to rectify any inadvertent omission of
transfer or conveyance of any assets that, had the parties given specific
consideration to such asset as of the date hereof, would have otherwise been
classified as a Penwest Asset. No asset shall be deemed to be a Penwest Asset
solely as a result of this clause (c) if such asset is within the category or
type of asset expressly covered by the subject matter of an Ancillary Agreement.
PENWEST COMMON STOCK: the Common Stock, par value $0.001 per share, of
Penwest.
PENWEST CONTRACTS: the following contracts and agreements to which
Penford is a party or by which its assets are bound, whether or not in writing:
(a) any supply or vendor contracts or agreements that relate
primarily to the Pharmaceutical Business;
(b) the Collaborative Agreements;
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(c) any contract or agreement entered into by Penford or Penwest
that relates primarily to the Pharmaceutical Business;
(d) any contract or agreement entered into by Penford or Penwest
with any federal, state and local government that relates primarily to the
Pharmaceutical Business;
(e) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary Agreements to be
assigned to Penwest; and
(f) any guarantee, indemnity, representation, warranty or other
Liability of Penford in respect of any other Penwest Contract, any Penwest
Liability or the Pharmaceutical Business.
PENWEST EMPLOYEES: Penwest Employees include Penwest's current
employees and any other employees who are hired by Penwest prior to the
Distribution Date.
PENWEST MARKET CAPITALIZATION: the number of Penwest's fully diluted
shares outstanding (shares of Penwest Common Stock outstanding, plus shares of
Penwest Common Stock issuable upon exercise outstanding stock options)
multiplied by the fair market value of the Penwest Common Stock (which shall
equal the weighted average of the last reported price of Penwest Common Stock on
the Nasdaq National Market on the X Date and the nineteen (19) trading days
immediately following such X Date.
PENWEST LIABILITIES:
(a) any and all Liabilities that are expressly contemplated by
this Agreement or any other agreement or document contemplated by this Agreement
or otherwise (or the Schedules hereto or thereto) as Liabilities to be assumed
by Penwest;
(b) all Liabilities (other than taxes based on, or measured by
reference to, net income), including any Liabilities related to Penwest
Employees and product Liabilities, primarily relating to, arising out of or
resulting from:
(i) the operation of the Pharmaceutical Business, as
conducted at any time prior to, on or after the Closing Date (including any
Liability relating to, arising out of or resulting from any act or failure to
act or any statement made by any director, officer, employee, agent or
representatives (whether or not such act or failure to act or statement is or
was within such Person's authority); or
(ii) any Penwest Assets (including any Penwest Contracts);
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in any such case whether arising before, on or after the Closing Date;
(c) all Liabilities, excluding any intercompany indebtedness
forgiven pursuant to Section 2.5 of this Agreement, reflected as liabilities or
obligations of Penwest in its balance sheet, subject to any discharge of such
Liabilities subsequent to the date of such balance sheet.
PERSON: an individual, a general or limited partnership, a corporation,
a trust, a joint venture, an unincorporated organization, a limited liability
entity, any other entity and any Governmental Authority.
PROSPECTUS: each preliminary, final or supplemental prospectus forming
a part of the Registration Statement.
RECORD DATE: the close of business on the date to be determined by the
Penford Board of Directors as the record date for determining shareholders of
Penford entitled to receive shares of Penwest Common Stock.
REGISTRATION STATEMENT: Registration Statement on Form S-1 to be filed
under the Securities Act, pursuant to which 2,875,000 shares of Penwest Common
Stock to be issued in the IPO will be registered, together with all amendments
thereto.
SECURITIES ACT: the Securities Act of 1933, as amended.
SEPARATION: the transfer of the Penwest Assets to Penwest and the
assumption by Penwest of the Penwest Liabilities, all as more fully described in
this Agreement or any other agreement or document contemplated by this Agreement
or otherwise.
SERVICES AGREEMENT: the Services Agreement between Penford and Penwest
providing for, among other things, the provision by Penford to Penwest of
certain administrative and other services on a transitional basis.
SUBSIDIARY: Subsidiary of any Person means any corporation or other
organization whether incorporated or unincorporated of which at least a majority
of the securities or interests having by the terms thereof ordinary voting power
to elect at least a majority of the board of directors or other performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
provided, however, that no Person that is not directly or indirectly
wholly-owned by any other Person shall be a Subsidiary of such other Person
unless such other Person controls, or has the right, power or ability to
control, that Person.
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TAX ALLOCATION AGREEMENT: the Tax Allocation Agreement between Penford
and Penwest, providing for, among other things, the allocation of liabilities
with respect to federal, state and local income taxes and the procedures for
filing returns with respect to such taxes.
TRADEMARK ASSIGNMENT: the Trademark Assignment between Penford and
Penwest, providing for, among other things the assignment by Penford to Penwest
of certain trademarks and related rights.
UNDERWRITERS: the managing underwriters for the IPO.
UNDERWRITING AGREEMENT: the underwriting agreement to be entered into
between Penwest and the Underwriters with respect to the IPO.
ARTICLE II
THE SEPARATION
2.1 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES.
(a) Penford hereby assigns, transfers, conveys and delivers to
Penwest, and Penwest hereby accepts from Penford, all of Penford's right, title
and interest in all Penwest Assets.
(b) Penwest hereby assumes and agrees faithfully to perform and
fulfill all the Penwest Liabilities, in accordance with their respective terms.
Penwest shall be responsible for all Penwest Liabilities, regardless of when or
where such liabilities arose or arise, or whether the facts on which they are
based occurred prior to or subsequent to the date hereof, regardless of where or
against whom such liabilities are asserted or determined (including any Penwest
Liabilities arising out of claims made by Penford's or Penwest's respective
shareholders, directors, officers, employees, agents, Subsidiaries or Affiliates
against Penford or Penwest) or whether asserted or determined prior to the date
hereof.
(c) In the event that any time or from time to time (whether
prior to or after the Distribution Date), any party hereto, shall receive or
otherwise possess any asset that is allocated to any other Person pursuant to
this Agreement or any Ancillary Agreement, such party shall promptly transfer,
or cause to be transferred, such asset to the Person so entitled thereto. Prior
to any such transfer, the Person receiving or possessing such asset shall hold
such asset in trust for any such other Person.
2.2 TERMINATION OF AGREEMENTS. Except as otherwise provided or
contemplated in this Agreement, Penwest and Penford hereby terminate any and all
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agreements, arrangements, commitments or understandings, whether or not in
writing, between Penwest and Penford, effective as of the Closing Date;
provided, however, to the extent any such agreement, arrangement, commitment or
understanding is inconsistent with any Ancillary Agreement such termination
shall be effective as of the date of effectiveness of the applicable Ancillary
Agreement. No such terminated agreement, arrangement, commitment or
understanding (including any provision thereof which purports to survive
termination) shall be of any further force or effect after the Closing Date (or,
to the extent contemplated by the proviso to the immediately preceding sentence,
after the effective date of the applicable Ancillary Agreement). Each party
shall, at the reasonable request of any other party, take, or cause to be taken,
such other actions as may be necessary to effect the foregoing.
2.3 DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION OF
LIABILITIES. In furtherance of the assignment, transfer and conveyance of
Penwest Assets and the assumption of Penwest Liabilities set forth in Section
2.1(a) and (b), simultaneously with the execution and delivery hereof or as
promptly as practicable thereafter, (i) each of Penford and Penwest shall
execute and deliver such bills of sale, stock powers, certificates of titles,
assignments of contracts and other instruments of transfer, conveyance and
assignment as and to the extent necessary to evidence the transfer, conveyance
and assignment of all of Penford's right, title and interest in and to the
Penwest Assets to Penwest and (ii) Penwest shall execute and deliver to Penford
such bills of sale, stock powers, certificates of title, assumptions of
contracts and other instruments of assumption as and to the extent necessary to
evidence the valid and effective assumption of the Penwest Liabilities by
Penwest.
2.4 ANCILLARY AGREEMENTS. Each of Penford and Penwest will execute and
deliver all Ancillary Agreements to which it is a party which agreement will
become effective upon the Closing Date, including but not limited to:
(a) the Excipient Supply Agreement;
(b) the Services Agreement;
(c) the Tax Allocation Agreement;
(d) the Employee Benefits Agreement; and
(e) the Trademark Assignment.
2.5 FORGIVENESS OF INTERCOMPANY DEBT. Effective immediately prior to
the Closing Date, Penford hereby forgives all existing remaining intercompany
indebtedness owed by Penwest to Penford in order to provide an appropriate
level of working capital and equity at Penwest as it is established as a
separate stand alone company. Each of Penford and Penwest shall execute any
documents and instruments necessary or appropriate to confirm such loan
forgiveness. Penford and Penwest agree that Penford shall treat the loan
forgiveness as a contribution to the capital of Penwest in constructive
exchange for Penwest Common Stock, provided that no additional
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shares of Penwest Common Stock shall be issued or issuable in connection with or
as a result of such contributions.
2.6 CONSENTS. Each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
agreements or the making of any filings or applications contemplated by this
Agreement will satisfy the provisions of any or all applicable agreements or the
requirements of any or all applicable laws or judgments, it being agreed and
understood that the party to which any assets were or are transferred shall bear
the economic and legal risk that any necessary consents or approvals are not
obtained or that any requirements of laws or judgments are not complied with.
Notwithstanding the foregoing, the parties shall use reasonable best efforts to
obtain all consents and approvals, to enter into all agreements and to make all
filings and applications which may be required for the consummation of the
transactions contemplated by this Agreement or any other agreement or document
contemplated by this Agreement or otherwise, including, without limitation, all
applicable regulatory filings or consents under federal or state laws and all
necessary consents, approvals, agreements, filings and applications.
2.7 REPRESENTATIONS OR WARRANTIES. Each of the parties hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise, making
any representations or warranties with respect to any assets of such party,
except that Penford represents and warrants to the best of its knowledge that
the delivery of all Penwest Assets transferred or being transferred to Penwest
pursuant to this Agreement or any other Conveyance and Assumption Instruments
has vested or will vest good title to such assets in Penwest free and clear of
all material liens, mortgages, pledges, security interests, restrictions, prior
assignments, encumbrances and claims of any kind or nature whatsoever affecting
such assets.
2.8 COLLABORATIVE AGREEMENTS. In the event that any transfer of
Penford's rights to Penwest under any of the Collaborative Agreements would
violate or is found to violate the terms of, or result in the loss of rights or
imposition of penalty under, any Collaborative Agreement covered thereby, or
would not be effective subsequent to the Distribution Date, such transfer shall
be deemed null and void and, in lieu thereof, (i) Penford shall retain all
rights and fulfill any obligations, at Penwest's expense, it may have to any
third party under any such Collaborative Agreement, it being understood that to
the extent practicable, Penwest shall fulfill such obligations on Penford's
behalf, (ii) Penford shall pay over to Penwest any royalty or other payments it
may receive from any third party pursuant to any such Collaborative Agreement
and (iii) at the request and expense of Penwest Penford shall use all reasonable
best efforts to arrange for the grant by the applicable third party of
comparable rights to Penwest.
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ARTICLE III
THE IPO AND ACTIONS PENDING THE IPO
3.1 TRANSACTIONS PRIOR TO THE IPO.
(a) Subject to the conditions specified in Section 3.3, Penford
and Penwest shall use their reasonable best efforts to consummate the IPO. Such
actions shall include, but not necessarily be limited to, those specified in
this Section 3.1.
(b) Penwest shall file the Registration Statement, and such
amendments or supplements thereto, as may be necessary in order to cause the
same to become and remain effective as required by law or by the Underwriters,
including, but not limited to, filing such amendments to the Registration
Statement as may be required by the Underwriting Agreement, the Commission or
federal or state securities laws. Penford and Penwest shall also cooperate in
preparing, filing with the Commission and causing to become effective a
registration statement registering the Penwest Common Stock under the Exchange
Act, and any registration statements or amendments thereof which are required to
reflect the establishment of, or amendments to, any employee benefit and other
plans necessary or appropriate in connection with the Separation, the IPO, the
Distribution or the other transactions contemplated by this Agreement or any
other agreement or document contemplated by this Agreement or otherwise.
(c) Penwest and Penford shall enter into the Underwriting
Agreement, in form and substance reasonably satisfactory to them and shall
comply with its obligations thereunder.
(d) Penford and Penwest shall consult with each other and the
Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.
(e) Penwest shall use its reasonable best efforts to take all
such action as may be necessary or appropriate under state securities and blue
sky laws of the United States (and any comparable laws under any foreign
jurisdictions) in connection with the IPO.
(f) Penwest shall prepare, file and use reasonable best efforts
to seek to make effective, an application for listing of the Penwest Common
Stock issued in the IPO on the Nasdaq National Market, subject to official
notice of issuance.
(g) Penwest shall participate in the preparation of materials and
presentations as the Underwriters shall deem necessary or desirable.
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(h) Penwest shall pay all third party costs, fees and expenses
relating to the IPO, all of the reimbursable expenses of the Underwriters
pursuant to the Underwriting Agreement, and all of the costs of producing,
printing, mailing and otherwise distributing the Prospectus, and shall reimburse
Penford for any such costs, fees and expenses to the extent paid by Penford.
3.2 PROCEEDS OF THE IPO. The IPO will be a primary offering of Penwest
Common Stock and the net proceeds of the IPO will be retained by Penwest.
3.3 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as
practicable after the date of this Agreement, the parties hereto shall use their
reasonable best efforts to satisfy the following conditions to the consummation
of the IPO. The obligations of the parties to consummate the IPO shall be
conditioned on the satisfaction of the following conditions:
(a) The Registration Statement shall have been filed and declared
effective by the Commission, and there shall be no stop-order in effect with
respect thereto.
(b) The actions and filings with regard to state securities and
blue sky laws of the United States shall have been taken and, where applicable,
have become effective or been accepted.
(c) The Penwest Common Stock to be issued in the IPO shall have
been accepted for listing on the Nasdaq National Market, subject to official
notice of issuance.
(d) Penwest and Penford shall have entered into the Underwriting
Agreement and all conditions to the obligations of Penwest and the Underwriters
shall have been satisfied or waived.
(e) Immediately following the IPO, Penford shall "control"
Penwest within the meaning of Sections 355 and 368 of the Code, and all other
conditions to permit the Distribution to qualify as a tax-free distribution to
Penford, Penwest and Penford's shareholders shall, to the extent applicable as
of the time of the IPO, be satisfied and there shall be no event or condition
that is likely to cause any of such conditions not to be satisfied as of the
time of the Distribution or thereafter.
(f) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Separation or the IPO or any of the other transactions
contemplated by this Agreement or any other agreement or document contemplated
by this Agreement or otherwise shall be in effect.
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(g) Such other actions as the parties hereto may, based upon the
advice of counsel, reasonably request to be taken prior to the Separation and
the IPO in order to assure the successful completion of the Separation and the
IPO and the other transactions contemplated by this Agreement or any other
agreement or document contemplated by this Agreement or otherwise shall have
been taken.
(h) This Agreement shall not have been terminated.
(i) A pricing committee of Penford directors designated by the
Board of Directors of Penford shall have determined that the terms of the IPO
are acceptable to Penford.
ARTICLE IV
THE DISTRIBUTION
4.1 THE DISTRIBUTION.
(a) Subject to Section 4.3 hereof, on or prior to the
Distribution Date, Penford will deliver to the Agent for the benefit of holders
of record of Penford Common Stock on the Record Date, a single stock
certificate, endorsed by Penford in blank, representing all of the outstanding
shares of Penwest Common Stock then owned by Penford, and shall cause the
transfer agent for the shares of Penford Common Stock to instruct the Agent to
distribute on the Distribution Date the appropriate number of such shares of
Penwest Common Stock to each such holder or designated transferee or transferees
of such holder.
(b) Subject to Section 4.4 hereof, each holder of Penford Common
Stock on the Record Date (or such holder's designated transferee or transferees)
shall be entitled to receive, in the Distribution, a number of shares of Penwest
Common Stock equal to the number of outstanding shares of Penwest Common Stock
owned by Penford on the Record Date multiplied by a fraction, the numerator of
which is the number of shares of Penford Common Stock held by such holder on the
Record Date, and the denominator of which is the number of shares of Penford
Common Stock outstanding on the Record Date.
(c) Penwest and Penford, as the case may be, will provide to the
Agent all share certificates and any information required in order to complete
the Distribution on the basis specified above.
4.2 ACTIONS PRIOR TO THE DISTRIBUTION.
(a) Penford and Penwest shall prepare and mail, prior to the
Distribution Date, to the holders of Penford Common Stock, such information
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concerning Penwest, its business, operations and management, the Distribution
and such other matters as Penford and Penwest shall reasonably determine and as
may be required by law. Penford and Penwest, as may be appropriate, will prepare
and to the extent required under applicable law, will file with the Commission
any such documentation which Penford determines are necessary or desirable to
effectuate the Distribution and Penford and Penwest shall each use its
reasonable best efforts to obtain all necessary approvals from the Commission
with respect thereto.
(b) In addition to their respective obligations under Section
4.2(a) above, Penford and Penwest shall take all other actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States in connection with the Distribution.
(c) Penford and Penwest shall use their reasonable best efforts
to cause the conditions set forth in Section 4.3 to be satisfied and to effect
the Distribution on the Distribution Date.
(d) Penwest shall prepare and file, and shall use its reasonable
best efforts to have approved, an application for the listing of the Penwest
Common Stock to be distributed in the Distribution on the Nasdaq National
Market.
4.3 CONDITIONS TO DISTRIBUTION. Penford shall have the sole discretion
to determine the date of consummation of the Distribution at any time prior to
the date six months after the Closing Date. Following the date six months after
the Closing Date, Penford shall be obligated to effect the Distribution as
promptly as practicable, subject to the satisfaction, or waiver by the Penford
Board of Directors in its sole discretion, of the conditions set forth below.
(a) A private letter ruling from the Internal Revenue Service
(the "Private Letter Ruling") shall have been obtained, and shall continue in
effect, or a written opinion from Ernst & Young LLP shall have been delivered,
in either case to the effect that, among other things, the Distribution will
qualify as a tax-free distribution for federal income tax purposes under
Sections 355 and 368 of the Code, and such ruling or opinion shall be in form
and substance satisfactory to Penford in its sole discretion.
(b) Any material Governmental Approvals and consents necessary to
consummate the Distribution shall have been obtained and shall be in full force
and effect.
(c) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Distribution shall be in effect and no other event outside
the
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control of Penford shall have occurred or failed to occur that prevents the
consummation of the Distribution.
(d) The transactions contemplated hereby shall be in compliance
with applicable federal and state securities laws.
(e) Each of Penwest and Penford shall have received such
consents, and shall have received executed copies of such agreements or
amendments of agreements, as they shall deem necessary in connection with the
completion of the transactions contemplated by this Agreement or any other
agreement or document contemplated by this Agreement or otherwise.
(f) All action and other documents and instruments deemed
necessary or advisable in connection with the transactions contemplated hereby
shall have been taken or executed, as the case may be, in form and substance
satisfactory to Penford and Penwest.
(g) No material adverse change shall have occurred with respect
to the business or financial condition of Penford since August 31, 1997, or
Penwest since September 30, 1997, which would, in the reasonable judgment of the
Penford Board of Directors, make approval of the Distribution inadvisable.
The foregoing conditions are for the sole benefit of Penford and shall not give
rise to or create any duty on the part of Penford or the Penford Board of
Directors to waive or not waive any such condition.
4.4 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, Penford shall direct the Agent to determine the number of whole shares and
fractional shares of Penwest Common Stock allocable to each holder of record of
Penford Common Stock as of the Record Date, to aggregate all such fractional
shares and sell the whole shares obtained thereby in open-market transactions in
the Agent's sole discretion as to when, how, through which broker-dealer and at
what price to make such sales, and to cause to be distributed to each such
holder or for the benefit of each such holder, in lieu of any fractional share,
such holder's ratable share of the proceeds of such sale, after making
appropriate deductions of the amount required to be withheld for federal income
tax purposes and after deducting an amount equal to all brokerage charges,
commissions and transfer taxes attributed to such sale. Penford and the Agent
shall use their reasonable best efforts to aggregate the shares of Penford
Common Stock that may be held by any holder of record thereof through more than
one account in determining the fractional share allocable to such holder.
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ARTICLE V
ACKNOWLEDGEMENT OF MATERIAL FACTS
5.1 ORGANIZATION. Penford and Penwest acknowledge that each is duly
organized, validly existing and in good standing under the laws of the State of
Washington, with requisite corporate power to own their properties and assets
and to carry on their respective businesses as presently conducted or
contemplated.
ARTICLE VI
MISCELLANEOUS LIABILITIES AND INDEMNIFICATION
6.1 PENWEST LIABILITIES; INDEMNIFICATION. Penwest shall indemnify,
defend and hold harmless Penford from and against any and all Liabilities
arising out of or resulting from any of the following items (without
duplication):
(a) the employment of Penwest Employees;
(b) the business of Penwest and the Penwest Assets;
(c) purchase orders, accounts payable, accrued compensation and
other accrued Penwest Liabilities and other agreements which relate to the
business of Penwest and the Penwest Assets; and
(d) any misstatement or omission of a material fact other than
misstatements or omissions with respect to Penford based on information supplied
in writing by Penford in any documents or filings prepared for purposes of
compliance or qualification under applicable securities laws in connection with
the Separation, IPO or Distribution and related transactions, including, without
limitation, the Registration Statement.
6.2 PENFORD LIABILITIES; INDEMNIFICATION. Penford shall indemnify,
defend and hold harmless Penwest from and against any and all Liabilities
arising out of or resulting from any of the following items (without
duplication):
(a) the business of Penford and the Liabilities not assumed by
Penwest under the terms of this Agreement or any other agreement or document
contemplated by this Agreement; and
(b) any misstatement or omission of a material fact with respect
to Penford based on information supplied in writing by Penford in any documents
or filings prepared for purposes of compliance or qualification under applicable
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securities laws in connection with the Separation, IPO or Distribution and
related transactions, including, without limitation, the Registration Statement.
6.3 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) If any Person entitled to indemnification hereunder (an
"Indemnitee") shall receive notice or otherwise learn of the assertion by a
Person (including any Governmental Authority) of any claim or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which any party (an "Indemnifying Party") may be
obligated to provide indemnification to such Indemnitee pursuant to Section 6.1
or 6.2, or any other Section of this Agreement or any other agreement or
document contemplated by this Agreement or otherwise, such Indemnitee shall give
such Indemnifying Party written notice thereof within twenty (20) days after
becoming aware of such Third Party Claim. Any such notice shall describe the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the
failure of any Indemnitee or other Person to give notice as provided in this
Section 6.3(a) shall not relieve the Indemnifying Party of its obligations under
this Article VI, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnitee in accordance with Section 6.3(a)
(or sooner, if the nature of such Third Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether the
Indemnifying Party will assume responsibility for defending such Third Party
Claim, which election shall specify any reservations or exceptions. After notice
from an Indemnifying Party to an Indemnitee of its election to assume the
defense of a Third Party Claim, such Indemnitee shall have the right to employ
separate counsel and to participate in (but not control) the defense,
compromise, or settlement thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnitee except as set forth in Section 6.3(c).
(c) If an Indemnifying Party elects not to assume responsibility
for defending a Third Party Claim, or fails to notify an Indemnitee of its
election as provided in Section 6.3(b), such Indemnitee may defend such Third
Party Claim at the cost and expense (including allocated costs of in-house
counsel and other personnel) of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the
defense of the Third Party Claim in accordance with the terms of this Agreement,
no Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.
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(e) No Indemnifying Party shall consent to entry of any judgment
or enter into any settlement of the Third Party Claim without the consent of the
Indemnitee if the effect thereof is to permit any injunction, declaratory
judgment, other order or other nonmonetary relief to be entered, directly or
indirectly, against any Indemnitee.
6.4 TAX LIABILITIES. Notwithstanding the provisions of Sections 6.1
and 6.2, all tax Liabilities relating to the business of Penwest and the Penwest
Assets including, without limitation, income taxes, franchise taxes, sales
taxes, use taxes, payroll taxes and employment taxes, shall be assumed by the
party to whom the Liability has been allocated in the Tax Allocation Agreement.
6.5 ADDITIONAL MATTERS.
(a) Any claim on account of a Liability which does not result
from a Third Party Claim shall be asserted by written notice given by the
Indemnitee to the Indemnifying Party. Such Indemnifying Party shall have a
period of thirty (30) days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such thirty
(30)-day period, such Indemnifying Party shall be deemed to have refused to
accept responsibility to make payment. If such Indemnifying Party does not
respond within such thirty (30)-day period or rejects such claim in whole or in
part, such Indemnitee shall be free to pursue such remedies as may be available
to such party as contemplated by this Agreement.
(b) In the event of payment by or on behalf of any Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have the right, defense or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim or against any other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense (including allocated costs of
in-house counsel and other personnel) of such Indemnifying Party, in prosecuting
any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party is
not a named defendant, if either the Indemnitee or Indemnifying Party shall so
request, the parties shall endeavor to substitute the Indemnifying Party for the
named defendant. If such substitution or addition cannot be achieved for any
reason or is not requested, the named defendant shall allow the Indemnifying
Party to manage the Action as set forth in this Section and the Indemnifying
Party shall fully indemnify the named defendant against all costs of defending
the Action (including court costs, sanctions imposed by a court, attorneys'
fees, experts' fees and all other
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external expenses, and the allocated costs of in-house counsel and other
personnel), the costs of any judgment or settlement, and the cost of any
interest or penalties relating to any judgment or settlement.
6.6 REMEDIES CUMULATIVE. The remedies provided in this Article VI
shall be cumulative and shall not preclude assertion by an Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
7.1 PROVISION OF CORPORATE RECORDS. Upon Penwest's request, Penford
shall arrange as soon as practicable following the Effective Date for the
delivery to Penwest of existing corporate records in the possession of Penford
relating to the business of Penwest or assets to be transferred to Penwest,
together with all active agreements and active litigation files relating to the
businesses of Penwest, except to the extent such items are already in the
possession of Penwest. Such records shall be the property of Penwest but shall
be available to Penford for review and duplication until Penford shall notify
Penwest in writing that such records are no longer of use to Penford.
7.2 ACCESS TO INFORMATION. From and after the Effective Date, Penford
shall afford to Penwest and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable best
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information
(collectively, "Information") within Penford's possession relating to the
businesses of Penwest, insofar as such access is reasonably required by Penwest.
Penwest shall afford to Penford and its authorized accountants, counsel and
other designated representatives reasonable access (including using reasonable
best efforts to give access to persons or firms possessing Information) and
duplicating rights during normal business hours to Information within Penwest's
possession relating to the business of Penwest prior to the Distribution or to
the business of Penford, insofar as such access is reasonably required by
Penford. Information may be requested under this Article VII for, without
limitation, audit, accounting, claims, litigation and tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations and for
performing the transactions contemplated in this Agreement or any other
agreement or document contemplated by this Agreement or otherwise.
7.3 PENWEST SECURITIES FILINGS. For a period of three years following
the Effective Date, each of Penwest and Penford shall provide to the other,
promptly following such time at which such documents shall be filed with the
Commission,
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copies of all documents which shall be filed by either Penwest or Penford, as
the case may be, with the Commission pursuant to the periodic and interim
reporting requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder.
7.4 PRODUCTION OF WITNESSES. At all times from and after the Effective
Date, each of Penford and Penwest shall use reasonable best efforts to make
available to the other, upon written request, its officers, directors, employees
and agents as witnesses to the extent that such persons may reasonably be
required, in connection with legal, administrative or other proceedings in which
the requesting party may from time to time be involved.
7.5 REIMBURSEMENT. Except to the extent otherwise contemplated by any
Ancillary Agreement, a party providing information to the other party under this
Article VII shall be entitled to receive from the recipient, upon the
presentation of invoices therefor, payments for such amounts, relating to
supplies, disbursements and other out-of-pocket expenses, as may be reasonably
incurred in providing such information.
7.6 RETENTION OF RECORDS. For a period of six (6) years following the
Effective Date, each of Penford and Penwest shall retain all Information
relating to the other as of the Effective Date, except as otherwise required by
law or set forth in an Ancillary Agreement or except to the extent that such
Information is in the public domain or in the possession of the other party.
7.7 CONFIDENTIALITY. Subject to any contrary requirement of law and
the right of each party to enforce its rights hereunder in any legal action,
each party shall keep strictly confidential, and shall cause its employees and
agents to keep strictly confidential, any Information of or concerning the other
party which it or any of its agents or employees may acquire pursuant to, or in
the course of performing its obligations under, any provisions of this Agreement
or any Ancillary Agreement; provided, however, that such obligation to maintain
confidentiality shall not apply to Information which (i) at the time of
disclosure was in the public domain or (ii) was received by the receiving party
from a third party who did not receive such Information from the disclosing
party under an obligation of confidentiality.
ARTICLE VIII
COVENANTS
8.1 NASDAQ NATIONAL MARKET LISTING. Penwest hereby agrees to use its
reasonable best efforts to effect and maintain the listing of the Penwest Common
Stock on the Nasdaq National Market.
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8.2 ANCILLARY AGREEMENTS. The parties agree that they shall comply
with and provide all services and take any and all actions required to be
provided or taken by the terms of any and all of the Ancillary Agreements
following the Closing Date.
8.3 SHARING OF UTILITIES
(a) Penford agrees that Penwest shall be entitled to use and
consume, in an amount reasonably required, at Penwest's Cedar Rapids facility
certain utilities consisting of natural gas, electricity and steam from
Penford's Cedar Rapids facility. Any material change in the provision of such
utilities shall require six (6) months prior notice.
(b) In connection with the sharing of utilities as described in
Section 8.3(a), Penwest will reimburse Penford for its consumption of such
utilities based on Penford's total cost (including maintenance) for each item
and Penwest's fraction of the total consumption.
(c) Penford will submit a monthly invoice to Penwest of all
amounts owed by Penwest to Penford with respect to utilities consumed by Penwest
pursuant to Section 8.3(a). The charges will be due when billed and shall be
paid no later than thirty (30) days from the date of billing.
8.4 NON-COMPETITION
(a) From the Effective Date to the longer of (i) five years or
(ii) the termination of the Excipient Supply Agreement, neither Penford nor any
of its Affiliates shall, directly or indirectly, manufacture, market, sell or
distribute for inclusion in any pharmaceutical or nutritional product (including
vitamins, minerals and cofactors, but excluding foods) any product having the
same or substantially the same form, composition or applications as EMDEX or
CANDEX or any similar sugar- based product. From the Effective Date to the
longer of (i) five years or (ii) the termination of the Excipient Supply
Agreement, neither Penwest nor any of its Affiliates shall, directly or
indirectly, manufacture, market, sell or distribute for inclusion in any foods
product any product having the same or substantially the same form, composition
or applications as EMDEX or CANDEX or any similar sugar- based product.
(b) For a period of five years from the Effective Date, Penford
shall not directly or indirectly recruit or solicit any employee of Penwest, or
induce or attempt to induce any employee of Penwest to terminate his or her
employment with, or otherwise cease his or her relationship with, Penwest. For a
period of five years from the Effective Date, Penwest shall not directly or
indirectly recruit or solicit any employee of Penford, or induce or attempt to
induce any employee of Penford to
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terminate his or her employment with, or otherwise cease his or her relationship
with, Penford.
(c) If any restriction set forth in Sections 8.4 (a) or (b) is
found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(d) The restrictions contained in this Section 8.4 are necessary
for the protection of the respective businesses and goodwill of Penwest and
Penford and are considered by Penford and Penwest to be reasonable for such
purpose. Penford and Penwest agree that any breach of this Section 8.4 is likely
to cause Penwest or Penford, as the case may be, substantial and irrevocable
damage and therefore, in the event of any such breach, Penwest or Penford, as
the case may be, in addition to such other remedies which may be available,
shall be entitled to specific performance and other injunctive relief.
8.5 STOCK OPTIONS.
Prior to the Distribution Date, Penford shall (i) amend its stock plans
to provide that, for purposes of such stock plans, the term employee shall
include all Penwest Employees as of the Record Date, (ii) amend each Penford
stock option held by a Penwest Employee as of the Record Date to provide that
the option will continue to vest for so long as the Penwest Employee remains an
employee of Penwest and (iii) effective as of the Distribution Date, make an
adjustment to the exercise price of each Penford stock option outstanding as of
the Record Date and make an adjustment to the number of shares of Penford Common
Stock under each Penford stock option outstanding as of the Record Date. The
adjustment to the exercise price of such stock option shall be applied by
multiplying the exercise price of the option by a fraction, the numerator of
which shall equal the Penford Market Capitalization and the denominator of which
shall equal the sum of the Penford Market Capitalization and the Penwest Market
Capitalization. The adjustment in the number of shares of Penford Common Stock
shall be applied by multiplying the number of shares of Penford Common Stock
under each Penford stock option as of the Record Date by a fraction, the
numerator of which shall equal the sum of the Penford Market Capitalization and
Penwest Market Capitalization and the denominator of which shall equal the
Penford Market Capitalization. Thus, a holder of an option to purchase one share
of Penford Common Stock at an exercise price of $10 per share shall have the
exercise price of the option reduced from $10 per share to $6.66 per share
(i.e., $10 x 200,000,000/300,000,000 = $6.66 and number of shares increased by
1.5 (i.e. 1 x 300,000,000/200,000,000 = 1.5)).
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8.6 REGISTRATION RIGHTS.
(a) REGISTRATION OF SHARES. In the event that the Distribution
has not occurred by September 30, 1998, upon the request of Penford, Penwest
shall file with the SEC, as promptly as practicable, a resale registration
statement (the "Resale Registration Statement"). Penford shall have the right to
request up to three Resale Registration Statements, provided that Penwest shall
have no obligation to file any such resale registration statement on or prior to
a ninety (90) day period following the filing of any other registration
statement by Penwest. Penwest shall use its reasonable best efforts to cause
each Resale Registration Statement to be declared effective by the SEC as soon
as practicable. If a Resale Registration Statement shall be withdrawn before
effectiveness, it shall not be counted against Penford's right to request three
registrations.
(b) LIMITATIONS ON REGISTRATION RIGHTS.
(i) Penwest may, by written notice to Penford, for a period
of up to 45 days from the date of written notice, delay the filing or
effectiveness of any of the Resale Registration Statements in the event that (1)
Penwest is engaged in any activity or transaction that Penwest desires to keep
confidential for business reasons, (2) the Penwest Board of Directors determines
in good faith that the disclosure of such information would be detrimental to
Penwest, and (3) the Penwest Board of Directors determines in good faith that
the public disclosure requirements imposed on Penwest under the Securities Act
in connection with any such Resale Registration Statement would require
disclosure of such activity or transaction.
(ii) If Penwest delays a Resale Registration Statement,
Penwest shall, as promptly as practicable following the termination of the
circumstances which entitled Penwest to do so, take such actions as may be
necessary to file or reinstate the effectiveness of a Resale Registration
Statement. If as a result thereof the prospectus included in a Resale
Registration Statement has been amended to comply with the requirements of the
Securities Act, Penwest shall enclose such revised prospectus with the notice to
Penford given pursuant to this paragraph (ii), and Penford shall make no offers
or sales of shares pursuant to a Resale Registration Statement other than by
means of such revised prospectus.
(c) REGISTRATION PROCEDURES.
(i) In connection with the filing by Penwest of a Resale
Registration Statement, Penwest shall furnish to Penford as many copies of the
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act as Penford shall reasonably request for the
purpose of effecting the plan of distribution set forth therein.
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(ii) Penwest shall use its best efforts to register or
qualify the Penwest Common Stock covered by a Resale Registration Statement
under the securities laws of such states as Penford shall reasonably request;
provided, however, that Penwest shall not be required in connection with this
paragraph (ii) to qualify as a foreign corporation or execute a general consent
to service of process in any jurisdiction.
(iii) If Penwest has delivered preliminary or final
prospectuses to Penford and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, Penwest shall promptly
notify Penford and, if requested by Penwest, Penford shall immediately return
all prospectuses to Penwest. Penwest shall promptly provide Penford with revised
prospectuses.
(iv) At the request of Penford, Penwest shall sign an
underwriting agreement in customary form with managing underwriters selected by
Penford, and shall cooperate with such managing underwriters in all reasonable
respects to facilitate the distribution contemplated by Penford, including
without limitation making available the books, records and personnel of Penwest
for the purpose of the underwriters' "due diligence" and providing customary
legal opinions and auditors' comfort letters.
(v) Each of Penwest and Penford shall share in equal
amounts the expenses incurred by Penwest in complying with its obligations under
this Section 8.6, including all registration and filing fees, exchange listing
fees, fees and expenses of counsel for Penwest, and fees and expenses of
accountants for Penwest, but excluding (A) any brokerage fees, selling
commissions or underwriting discounts incurred by Penford in connection with
sales under a Resale Registration Statement and (B) the fees and expenses of any
counsel retained by Penford.
(d) If Penwest begins preparations to file a registration
statement for sale of securities on a form in which common stock held by Penford
may be included, Penwest shall notify Penford in writing at least thirty (30)
days before filing the registration statement and shall include therein any
Penwest Common Stock that Penford requested to be included.
(e) REQUIREMENTS OF PENFORD. Penwest shall not be required to
include any Penwest Common Stock owned by Penford in a Resale Registration
Statement unless:
(i) Penford furnishes to Penwest in writing such
information regarding Penford as Penwest may reasonably request in writing in
connection with the Resale Registration Statement or as shall be required in
connection therewith by the SEC or any state securities law authorities;
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(ii) Penford shall have provided to Penwest its written
agreement:
(A) to indemnify Penwest and each of its directors and
officers against, and hold Penwest and each of its directors and officers
harmless from, any losses, claims, damages, expenses or liabilities (including
reasonable attorneys fees) to which Penwest or such directors and officers may
become subject by reason of any statement or omission in the Resale Registration
Statement made in reliance upon, or in conformity with, any written statement by
Penford furnished pursuant to this Section 8.6(e); and
(B) to report to Penwest sales made pursuant to the
Resale Registration Statement.
(f) Penwest agrees to indemnify and hold harmless Penford against
any losses, claims, damages, expenses or liabilities to which Penford may become
subject by reason of any untrue statements of a material fact contained in the
Resale Registration Statement or any omission to state therein a fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon information furnished to Penwest in writing by or on
behalf of Penford for use in the Resale Registration Statement. Penwest shall
have the right to assume the defense and settlement of any claim or suit for
which Penwest may be responsible for indemnification under this Section 8.6(f).
(g) ASSIGNMENT OF RIGHTS. Penford may not assign any of its
rights under this Section 8.6.
8.7 MUTUAL ASSURANCES.
(a) In addition to the actions specifically provided for
elsewhere in this Agreement or any other agreement or document contemplated by
this Agreement or otherwise, Penford and Penwest agree to cooperate with respect
to the implementation of this Agreement or any other agreement or document
contemplated by this Agreement or otherwise, and to execute such further
documents and instruments as may be necessary to consummate and make effective
the transactions contemplated by this Agreement or any other agreement or
document contemplated by this Agreement or otherwise;
(b) Penford and Penwest shall arrange, attend and participate in
joint meetings with corporate collaborators, suppliers, customers and others to
the extent necessary to assure the orderly transition of the business and assets
contemplated hereby, provided that nothing herein shall be deemed to obligate
either Penford or
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Penwest to take any action or reach any understandings which may violate any
applicable laws.
(c) Penford and Penwest agree to take any reasonable actions
necessary in order for the Distribution to qualify as a tax-free distribution
pursuant to Sections 355 and 368 of the Code.
(d) Penford and Penwest agree that they shall not take any action
which could reasonably be expected to prevent the Distribution from qualifying
as a tax-free distribution within the meaning of Sections 355 and 368 of the
Code or any other transaction contemplated by this Agreement or any other
agreement or document contemplated by this Agreement or otherwise which is
intended by the parties to be tax-free from failing so to qualify. Without
limiting the foregoing, after the Closing Date and on or prior to the
Distribution Date, Penwest shall not issue or grant, directly or indirectly, any
shares of Penwest Common Stock or any rights, warrants, options or other
securities to purchase or acquire (whether upon conversion, exchange or
otherwise) any shares of Penwest Common Stock (whether or not then exercisable,
convertible or exchangeable).
ARTICLE IX
TERMINATION
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Distribution Date by the mutual consent of Penford and
Penwest.
9.2 OTHER TERMINATION. This Agreement shall terminate if the
Distribution Date shall not have occurred on or prior to December 31, 1998.
9.3 EFFECT OF TERMINATION.
(a) In the event of any termination of this Agreement prior to
the Closing Date, no party to this Agreement (or any of its directors or
officers) shall have any Liability or further obligation to any other party.
(b) In the event of any termination of this Agreement on or after
the Closing Date, only the provisions of Article IV will terminate and the other
provisions of this Agreement or any agreement or document contemplated by this
Agreement or otherwise shall remain in full force and effect.
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ARTICLE X
MISCELLANEOUS
10.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Washington.
10.2 CONSTRUCTION. Each provision of this Agreement shall be
interpreted in a manner to be effective and valid to the fullest extent
permissible under applicable law. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions of
this Agreement which shall remain in full force and effect.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
10.4 EXHIBITS. Exhibits to this Agreement shall be deemed to be an
integral part hereof, and schedules or exhibits to such Exhibits shall be deemed
to be an integral part thereof.
10.5 AMENDMENTS; WAIVERS. This Agreement may be amended or modified
only in a writing executed on behalf of Penford and Penwest. No waiver shall
operate to waive any further or future act and no failure to object of
forbearance shall operate as a waiver.
10.6 NOTICES. Notices hereunder shall be effective if given in writing
and delivered or mailed, postage prepaid, by registered or certified mail to:
Penford Corporation
000-000xx Xxxxxx XX
Xxxxx 0000
Xxxxxxxx, XX 00000-0000
Attention: The President
or to:
Penwest Pharmaceuticals Co.
0000 Xxxxx 00
Xxxxxxxxx, XX 00000-0000
Attention: The President
10.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, provided that this Agreement and the rights and obligations
contained herein
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or in any exhibit or schedule hereto shall not be assignable, in whole or in
part, without the prior written consent of the parties hereto and any attempt to
effect any such assignment without such consent shall be void.
10.8 PUBLICITY. Prior to the Distribution, each of Penwest and Penford
shall consult with each other prior to issuing any press releases or otherwise
making public statements with respect to the IPO, the Distribution or any of the
other transactions contemplated hereby and prior to making any filings with any
Governmental Authority with respect thereto.
10.9 EXPENSES. Except as expressly set forth in this Agreement or in
any other agreement or document contemplated by this Agreement or otherwise,
whether or not the IPO or the Distribution is consummated, all third party fees,
costs and expenses paid or incurred in connection with the Distribution will be
paid by Penford.
10.10 HEADINGS. The article, section and paragraph headings contained
in this Agreement and in the Ancillary Agreements are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or any Ancillary Agreement.
10.11 ARBITRATION. Any dispute, controversy or claim arising out of or
in connection with this Agreement or any of the Ancillary Agreements (including
any questions of fraud or questions concerning the validity and enforceability
of this Agreement or any of the Ancillary Agreements or any of the rights herein
and therein conveyed), shall be determined and settled by arbitration in
Seattle, Washington, pursuant to the rules then in effect of the American
Arbitration Association as modified by this paragraph. Any award rendered shall
be final and conclusive upon the parties and a judgment thereon may be entered
in any court having competent jurisdiction. The party submitting such dispute
shall give written notice to that effect to the other party, stating the dispute
to be arbitrated and the name and address of a person designated to act as
arbitrator on its behalf. Within fifteen (15) days after such notice, the other
party shall give written notice to the first party stating the name and address
of a person designated to act as an arbitrator on its behalf. In the event that
the second party shall fail to notify the first party of its designation of an
arbitrator within the time specified, then the first party shall request the
American Arbitration Association to appoint a second arbitrator. The two
arbitrators so chosen shall meet within fifteen (15) days after the second
arbitrator has been appointed to appoint a third arbitrator. If the two
arbitrators are unable to agree on the appointment of a third arbitrator within
such fifteen (15) day period, either party may request the American Arbitration
Association to appoint a third arbitrator. Each arbitrator appointed hereunder
shall be independent of the parties and either party may disqualify an
arbitrator who is or is affiliated with a supplier, customer or competitor of
either party without the consent of the other party. Each
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arbitrator shall be reasonably knowledgeable regarding the area or areas in
dispute. The arbitrators shall follow substantive rules of law and the Federal
Rules of Evidence, require the parties to conduct discovery pursuant to the
rules then in effect under the Federal Rules of Civil Procedure in an
expeditious manner, cause testimony to be transcribed, and make an award
accompanied by findings of fact and a statement of reasons for the decision. All
costs and expenses, including attorney's fees, of all parties incurred in any
dispute which is determined and/or settled by arbitration pursuant to this
paragraph shall be borne by the party determined to be liable in respect of such
dispute; provided, however, that if complete liability is not assessed against
only one party, the parties shall share the total costs in proportion to their
respective amounts of liability so determined. Except where clearly prevented by
the area in dispute, both parties agree to continue performing their respective
obligations under this Agreement while the dispute is being resolved. Each
party, and the arbitrators, shall use their best efforts, subject to reasonable
prosecution of the arbitration, court order and disclosure required under
securities laws, to keep the subject matter of the arbitration and confidential
information of each party confidential, and the arbitrators are authorized to
impose such protective orders as they may deem appropriate for such purpose.
10.12 ENTIRE AGREEMENT. This Agreement contains the full understanding
of the parties with respect to the subject matter hereof and supersedes all
prior understandings and writings relating thereto. No waiver, alteration or
modification of any of the provisions hereof shall be binding unless made in
writing and signed by the parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PENFORD CORPORATION
By: /s/ XXXXXXX X. XXXX
-----------------------
Xxxxxxx X. Xxxx
Title: Vice President, Finance and
Chief Financial Officer
PENWEST PHARMACEUTICALS CO.
By: /s/ XXX X. XXXXXXXX
----------------------
Xxx X. Xxxxxxxx
Title: Chairman of the Board and
Chief Executive Officer
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