Exhibit 10.2
INVESTOR RIGHTS AGREEMENT
          This Investor Rights Agreement (this “Agreement”) is made and entered
into as of April 7, 2010, by and between Penford Corporation, a Washington
corporation (the “Company”), and Zell Credit Opportunities Master Fund, L.P.
(the “Investor”).
          This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof between the Company and the Investor (the “Purchase
Agreement”).
          The Company and the Investor hereby agree as follows:
     1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement will have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
have the respective meanings set forth in this Section 1:
          “Advice” has the meaning set forth in Section 2.7.
          “Convertible Preferred Shares” means the shares of Convertible
Preferred Stock issued or issuable to the Investor pursuant to the Purchase
Agreement.
          “Conversion Shares” means the shares of Common Stock issued or
issuable upon conversion of the Convertible Preferred Stock.
          “Effective Date” means, as to a Registration Statement, the date on
which such Registration Statement is first declared effective by the Commission.
          “Effectiveness Date” means (a) with respect to the Registration
Statement required to be filed under Section 2.1(a), the earlier of: (a)(i) the
fifth Trading Day following the date on which the Company is notified by the
Commission that the initial Registration Statement will not be reviewed or is no
longer subject to further review and comments and (ii) the 150th day following
the Closing Date; and (b) with respect to any additional Registration Statements
that may be required pursuant to Section 2.1(b), the earlier of (i) the 150th
day following (x) if such Registration Statement is required because the
Commission shall have notified the Company in writing that certain Registrable
Securities were not eligible for inclusion on a previously filed Registration
Statement, the date or time on which the Commission shall indicate as being the
first date or time that such Registrable Securities may then be included in a
Registration Statement, or (y) if such Registration Statement is required for a
reason other than as described in (x) above, the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement(s) is required; and (ii) the fifth Trading Day following the date on
which the Company is notified by the Commission that such additional
Registration Statement will not be reviewed or is no longer subject to further
review and comments.
          “Effectiveness Period” has the meaning set forth in Section 2.1(a).
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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          “Filing Date” means (a) with respect to the Registration Statement
required to be filed under Section 2.1(a), the 45th day following the Closing
Date; and (b) with respect to any additional Registration Statements that may be
required pursuant to Section 2.1(b), the 45th day following (x) if such
Registration Statement is required because the Commission shall have notified
the Company in writing that certain Registrable Securities were not eligible for
inclusion on a previously filed Registration Statement, the date or time on
which the Commission shall indicate as being the first date or time that such
Registrable Securities may then be included in a Registration Statement, or
(y) if such Registration Statement is required for a reason other than as
described in (x) above, the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement(s) is required.
          “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.
          “Indemnified Party” has the meaning set forth in Section 2.4(c).
          “Indemnifying Party” has the meaning set forth in Section 2.4(c).
          “Losses” has the meaning set forth in Section 2.4(a).
          “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
          “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
          “Registrable Securities” means: (i) the Conversion Shares and (ii) any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event, or any conversion price
adjustment with respect to any of the securities referenced in (i) above.
          “Registration Statement” means the registration statement required to
be filed in accordance with Section 2.1(a) and any additional registration
statement(s) required to be filed under Section 2.1(b), including (in each case)
the Prospectus, amendments and supplements to such registration statements or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference therein.
          “Rule 144” means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

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          “Rule 415” means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
          “Rule 424” means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
          “Securities Act” means the Securities Act of 1933, as amended.
     2. Registration.
          2.1. Filing of Registration.
          (a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415, on Form S-1 or if eligible, Form S-3 (or on such other form
appropriate for such purpose). Such Registration Statement shall contain (except
if otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) the “Plan of Distribution”
attached hereto as Annex A. The Company shall cause such Registration Statement
to be declared effective under the Securities Act as soon as possible but, in
any event, no later than its Effectiveness Date, and shall use its reasonable
best efforts to keep the Registration Statement continuously effective under the
Securities Act until the date which is the earlier of (i) such time as all of
the Registrable Securities covered by such Registration Statement have been
publicly sold by the Holders, or (ii) seven years after its Effective Date
provided as all of the Registrable Securities covered by such Registration
Statement may be sold by all Holders pursuant to Rule 144 without any
limitations as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”).
          (b) If for any reason the Commission does not permit all of the
Registrable Securities to be included in the Registration Statement filed
pursuant to Section 2.1(a), or for any other reason any outstanding Registrable
Securities by the Holders are not then covered by an effective Registration
Statement, then the Company shall prepare and file by the Filing Date for such
Registration Statement, an additional Registration Statement covering the resale
of all Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415, on Form S-1 or if eligible, Form S-3 (or on such other form
appropriate for such purpose). Each such Registration Statement shall contain
(except if otherwise required pursuant to written comments received from the
Commission upon a review of such Registration Statement) the “Plan of
Distribution” attached hereto as Annex A. The Company shall cause each such
Registration Statement to be declared effective under the Securities Act as soon
as possible but, in any event, by its Effectiveness Date, and shall use its
reasonable best efforts to keep such Registration Statement continuously
effective under the Securities Act during the entire Effectiveness Period.

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          (c) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement, except in the case
of an amendment that does not concern a Holder, without affording the Holders
the opportunity to review and comment on the same as required by Section 2.2(a)
hereof, the Company shall not be deemed to have satisfied this clause (i)), or
(ii) a Registration Statement is not declared effective by the Commission on or
prior to its required Effectiveness Date, or (iii) after its Effective Date,
without regard for the reason thereunder or efforts therefore, such Registration
Statement ceases for any reason to be effective and available to the Holders as
to all Registrable Securities to which it is required to cover at any time prior
to the expiration of its Effectiveness Period for more than an aggregate of 15
calendar days (which need not be consecutive) in any 12-month period (any such
failure or breach being referred to as an “Event,” and for purposes of clauses
(i) or (ii) the date on which such Event occurs, or for purposes of clause
(iii) the date which such 15 calendar day-period is exceeded, being referred to
as “Event Date”), then in addition to any other rights the Holders may have
hereunder or under applicable law: (x) on each such Event Date the Company shall
pay to each Holder an amount in cash, as partial liquidated damages and not as a
penalty, equal to 0.5% of the aggregate Investment Amount paid by such Holder
for Shares pursuant to the Purchase Agreement; and (y) on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been
cured by such date) until the applicable Event is cured, the Company shall pay
to each Holder an amount in cash, as partial liquidated damages and not as a
penalty, equal to 0.5% of the aggregate Investment Amount paid by such Holder
for Shares pursuant to the Purchase Agreement. If the Company fails to pay any
partial liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 15%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro-rata basis for any portion of a month prior to the
cure of an Event, except in the case of the first Event Date.
          (d) Each Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as Annex B (a “Selling
Holder Questionnaire”). The Company shall not be required to include the
Registrable Securities of a Holder in a Registration Statement until such Holder
furnishes to the Company a fully completed Selling Holder Questionnaire.
          2.2. Registration Procedures.
          In connection with the Company’s registration obligations hereunder,
the Company shall:
               (a) Not less than four Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto, the Company shall furnish to each Holder at the address specified by
such Holder in its Selling Holder Questionnaire copies of the “Selling
Shareholders” section of such document, the “Plan of Distribution” and any risk
factor contained in such document that addresses specifically this transaction
or the Selling Shareholders, as proposed to be filed which documents will be
subject to the review of such Holder. The Company shall not file a Registration
Statement, any Prospectus or any amendments or supplements thereto in which the
“Selling Shareholder”

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section thereof differs from the disclosure received from a Holder in its
Selling Holder Questionnaire (as amended or supplemented).
          (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for its Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale by the
Holders under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible to any comments received from
the Commission with respect to each Registration Statement or any amendment
thereto and, as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating to
such Registration Statement that would not result in the disclosure to the
Holders of material and non-public information concerning the Company; and
(iv) comply in all material respects with the provisions of the Securities Act
and the Exchange Act with respect to the Registration Statements and the
disposition of all Registrable Securities covered by each Registration
Statement.
          (c) Notify the Holders as promptly as reasonably possible (and, in the
case of (i)(A) below, not less than three Trading Days prior to such filing and,
in the case of (v) below, not less than three Trading Days prior to the
financial statements in any Registration Statement becoming ineligible for
inclusion therein) and (if requested by any such Person) confirm such notice in
writing no later than one Trading Day following the day (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a “review” of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to
each of the Holders that pertain to the Holders as a Selling Shareholder or to
the Plan of Distribution, but not information which the Company believes would
constitute material and non-public information); and (C) with respect to each
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to a Registration Statement
or Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or

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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
          (d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
          (e) Furnish to each Holder, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto and all exhibits
to the extent requested by such Person (including those previously furnished)
promptly after the filing of such documents with the Commission.
          (f) Promptly deliver to each Holder, without charge, as many copies of
each Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
          (g) Prior to any public offering of Registrable Securities, register
or qualify such Registrable Securities for offer and sale under the securities
or Blue Sky laws of all jurisdictions within the United States, to keep each
such registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statements and cause all Registrable
Securities to be listed on each securities exchange or other market on which
shares of Common Stock are listed or traded.
          (h) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to the Registration Statements, which certificates
shall be free, to the extent permitted by the Purchase Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may request.
          (i) Upon the occurrence of any event contemplated by
Section 2.2(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the affected Registration
Statements or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, no Registration
Statement nor any Prospectus will contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
          2.3. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and

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expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
Trading Market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
          2.4. Indemnification.
          (a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, investment advisors, partners, members and
employees of each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable costs of preparation and reasonable attorneys’ fees) and
expenses (collectively, “Losses”), as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 2.2(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
an Advice or an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of the Advice or the amended or supplemented
Prospectus the misstatement or omission giving rise to such Loss would have been
corrected. The Company shall notify the Holders promptly of the institution,

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threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
          (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon: (x) such Holder’s failure
to comply with the prospectus delivery requirements of the Securities Act or
(y) any untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent that,
(1) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement (it being understood that the
Holder has approved Annex A hereto for this purpose), such Prospectus or such
form of Prospectus or in any amendment or supplement thereto or (2) in the case
of an occurrence of an event of the type specified in Section 2.2(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of an Advice or an amended or
supplemented Prospectus, but only if and to the extent that following the
receipt of the Advice or the amended or supplemented Prospectus the misstatement
or omission giving rise to such Loss would have been corrected. In no event
shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
          An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably

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satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
          All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
          (d) Contribution. If a claim for indemnification under Section 2.4(a)
or 2.4(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 2.4(c), any reasonable attorneys’ or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
          The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 2.4(d), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by

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which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
          The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
          2.5. No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in a Registration Statement other than the
Registrable Securities, and the Company shall not during the Effectiveness
Period enter into any agreement providing any such right to any of its security
holders.
          2.6. Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
Registration Statement.
          2.7. Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 2.2(c), such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
          2.8. Piggy-Back Registrations. If at any time there is not an
effective Registration Statement covering all of the Registrable Securities and
the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.

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     3. Information and Observer Rights.
          3.1. Delivery of Financial Statements. The Company shall deliver to
Investor:
          (a) as soon as practicable, but in any event within seventy five
(75) days after the end of each fiscal year of the Company, (i) a balance sheet
as of the end of such year, (ii) statements of income and of cash flows for such
year, and (iii) a statement of shareholders’ equity as of the end of such year,
all such financial statements audited and certified by independent public
accountants of nationally recognized standing;
          (b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, unaudited statements of income and of cash flows for such
fiscal quarter, and an unaudited balance sheet and a statement of shareholders’
equity as of the end of such fiscal quarter, all prepared in accordance with
GAAP (except that such financial statements may (i) be subject to normal
year-end audit adjustments and (ii) not contain all notes thereto that may be
required in accordance with GAAP); and
          (c) such other information relating to the financial condition,
business, prospects, or corporate affairs of the Company as Investor may from
time to time reasonably request; provided, however, that the Company shall not
be obligated under this Section 3.1 to provide information that the Company
reasonably determines in good faith to be material and nonpublic, a trade secret
or confidential information unless the Investor agrees to enter into an
agreement protecting the confidentiality and restricting the use of such
information.
If, for any period, the Company has any subsidiary whose accounts are
consolidated with those of the Company, then in respect of such period the
financial statements delivered pursuant to the foregoing sections shall be the
consolidated and consolidating financial statements of the Company and all such
consolidated subsidiaries.
The Company’s obligation to deliver financial statements pursuant to
Sections 3.1(a) and (b) shall be deemed to be satisfied by timely filing of
reports containing such financial statements with the Securities and Exchange
Commission.
          3.2. Inspection. At any time that the director entitled to be elected
by the holders of the Cumulative Preferred Stock is not then serving as a
director of the Company, the Company shall permit Investor or its agent or
representative, at Investor’s expense, to visit and inspect the Company’s
properties; examine its books of account and records; and discuss the Company’s
affairs, finances, and accounts with its officers, during normal business hours
of the Company as may be reasonably requested by the Investor; provided,
however, that the Company shall not be obligated pursuant to this Section 3.2 to
provide access to any information that it reasonably and in good faith considers
to be a trade secret or confidential information unless the Investor or its
agent or representative agrees to enter into a confidentiality agreement in
customary form.

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          3.3. Termination of Information Rights. The provisions of this
Section 3 shall terminate and be of no further force or effect at any time that
there are no shares of Cumulative Preferred Stock issued or outstanding.
     4. Preemptive Right. In the event the Company proposes to offer or sell any
equity securities of the Company, or any other security convertible into, or any
option, warrant or right to acquire, such equity securities (collectively “New
Securities”), in any transaction other than (A) a bona fide firm commitment
underwritten public offering or (B) the issuance of compensatory stock options
to employees of the Company in the ordinary course of business, issued pursuant
to a valid equity plan of the Company, the Company shall first offer such New
Securities to Investor as follows:
          (a) Prior to any issuance of New Securities, the Company shall give
notice (the “Offer Notice”) to Investor, stating (A) its bona fide intention to
offer such New Securities, (B) the number of such New Securities to be offered,
and (C) the price and terms, if any, upon which it proposes to offer such New
Securities.
          (b) By notification to the Company within 20 days after the Offer
Notice is given, Investor may elect to purchase or otherwise acquire, at the
price and on the terms specified in the Offer Notice, up to that portion of such
New Securities which equals the proportion that the Common Stock issued and
held, or issuable (directly or indirectly) upon conversion and/or exercise, as
applicable, of any security convertible into, or any option, warrant or right to
acquire, Common Stock, then held by Investor bears to the total Common Stock of
the Company held by all Company shareholders in the aggregate.
          (c) If all New Securities referred to in the Offer Notice are not
elected to be purchased or acquired as provided in Section 4(b), the Company
may, during the 90-day period following the expiration of the period provided in
Section 4(b), offer and sell the remaining unsubscribed portion of such New
Securities to any Person at a price not less than, and upon terms no more
favorable to the offeree than, those specified in the Offer Notice. If the
Company does not enter into an agreement for the sale of the New Securities
within such period, or if such agreement is not consummated within 30 days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such New Securities shall not be offered unless first reoffered to
Investor in accordance with this Section 4.
     5. Miscellaneous.
          5.1. Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

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          5.2. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this Section 5.2, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of no less than 85% in interest of the then outstanding
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of certain Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates.
          5.3. Notices. All notices and other communications provided for or
permitted hereunder shall be made pursuant to the provisions for such notices
and communications set forth in Section 5.4 of the Purchase Agreement.
          5.4. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. The Investor and each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement and other agreements delivered pursuant to the Purchase Agreement.
          5.5. Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
          5.6. Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Washington, without regard to the principles of conflicts of law thereof. Each
party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in King County, Washington (the “Washington
Courts”) for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any Washington Court, or
that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any Proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions of this
Agreement, then the prevailing party in such

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Proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
          5.7. Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
          5.8. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
          5.9. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
          5.10. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES TO FOLLOW]

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          IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first written above.

                  ZELL CREDIT OPPORTUNITIES MASTER FUND, L.P.    
 
                By: Zell Credit Opportunities (GenPar), L.L.C.         Its:
General Partner    
 
           
 
  By:   /s/ Philip G. Tinkler
 
   
 
  Name:   Philip G. Tinkler    
 
  Its:   Vice President    
 
                PENFORD CORPORATION    
 
           
 
  By:   /s/ Thomas D. Malkoski    
 
           
 
  Name:   Thomas D. Malkoski    
 
  Title:   President and Chief Executive Officer    

 

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Annex A
Plan of Distribution
     The Selling Shareholders and any of their pledgees, donees, transferees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Shareholders may use any one or more of
the following methods when selling shares:

•   ordinary brokerage transactions and transactions in which the broker-dealer
solicits investors;

•   block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;

•   purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;

•   an exchange distribution in accordance with the rules of the applicable
exchange;

•   privately negotiated transactions;

•   to cover short sales made after the date that this Registration Statement is
declared effective by the Commission;

•   broker-dealers may agree with the Selling Shareholders to sell a specified
number of such shares at a stipulated price per share;

•   a combination of any such methods of sale; and

•   any other method permitted pursuant to applicable law.

     The Selling Shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
     Broker-dealers engaged by the Selling Shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
     The Selling Shareholders may from time to time pledge or grant a security
interest in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
shareholders to include the pledgee, transferee or other successors in interest
as selling shareholders under this prospectus.

 

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     Upon the Company being notified in writing by a Selling Shareholder that
any material arrangement has been entered into with a broker-dealer for the sale
of Common Stock through a block trade, special offering, exchange distribution
or secondary distribution or a purchase by a broker or dealer, a supplement to
this prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Shareholder and of
the participating broker-dealer(s), (ii) the number of shares involved,
(iii) the price at which such the shares of Common Stock were sold, (iv)the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In addition,
upon the Company being notified in writing by a Selling Shareholder that a donee
or pledgee intends to sell more than 500 shares of Common Stock, a supplement to
this prospectus will be filed if then required in accordance with applicable
securities law.
     The Selling Shareholders also may transfer the shares of Common Stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.
     The Selling Shareholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be “underwriters” within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the Selling Shareholder and/or the purchasers. Each
Selling Shareholder has represented and warranted to the Company that it
acquired the securities subject to this registration statement in the ordinary
course of such Selling Shareholder’s business and, at the time of its purchase
of such securities such Selling Shareholder had no agreements or understandings,
directly or indirectly, with any person to distribute any such securities.
     The Company has advised each Selling Shareholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission. If a Selling Shareholder uses this
prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Shareholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Shareholders in connection with resales of their respective shares under this
Registration Statement.
     The Company is required to pay all fees and expenses incident to the
registration of the shares, but the Company will not receive any proceeds from
the sale of the Common Stock. The Company has agreed to indemnify the Selling
Shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

 

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Annex B
PENFORD CORPORATION
Selling Securityholder Notice and Questionnaire
The undersigned beneficial owner of capital stock of PENFORD CORPORATION (the
“Company”) understands that the Company has filed or intends to file with the
Securities and Exchange Commission (the “Commission”) a Registration Statement
for the registration and resale of the Registrable Securities, in accordance
with the terms of the Investor Rights Agreement, dated as of
                                        , 2010 (the “Investor Rights
Agreement”), among the Company and the Investor named therein. A copy of the
Investor Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the Investor Rights
Agreement.
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE

          1.   Name.
 
       
 
  (a)   Full Legal Name of Selling Securityholder
 
       
 
       
 
       
 
  (b)   Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities Listed in Item 3 below are held:
 
       
 
       
 
       
 
  (c)   Full Legal Name of Natural Control Person (which means a natural person
who directly or indirectly alone or with others has power to vote or dispose of
the securities covered by the questionnaire):
 
       
 
       
 
        2.   Address for Notices to Selling Securityholder:

 
 
 
     Telephone:
 
     Fax:
 
     Contact Person:
 

 

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3. Beneficial Ownership of Registrable Securities:
Type and Principal Amount of Registrable Securities beneficially owned:
 
 
 
4. Broker-Dealer Status:

  (a)   Are you a broker-dealer?

Yes o      No o

  Note: If yes, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

  (b)   Are you an affiliate of a broker-dealer?

Yes o      No o

  (c)   If you are an affiliate of a broker-dealer, do you certify that you
bought the Registrable Securities in the ordinary course of business, and at the
time of the purchase of the Registrable Securities to be resold, you had no
agreements or understandings, directly or indirectly, with any person to
distribute the Registrable Securities?

Yes o      No o

  Note: If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.
Except as set forth below in this Item 5, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.
Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:
 
 

 

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6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has had
any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.
State any exceptions here:
 
 
The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof and prior to the Effective Date for the Registration Statement.
By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

                      Dated:           Beneficial Owner:    
 
 
 
             
 
 
                   
 
          By:                          
 
              Name:    
 
              Title:    

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
[               ]