Exhibit 10.3
CHANGE IN CONTROL AGREEMENT
     AGREEMENT between Penford Corporation, a Washington corporation (the
“Corporation”), and ___ (the “Executive”), dated as of ___ (the “Effective
Date”).
RECITALS
     A. The Executive is an executive officer or key employee of the Corporation
and an integral part of its management.
     B. The Corporation wishes to assure both itself and the Executive of
continuity of management in the event of any actual or threatened change in
control of the Corporation.
     C. This Agreement is not intended to alter the compensation and benefits
that the Executive could reasonably expect in the absence of the occurrence of a
Change in Control, as defined in this Agreement; consequently, this Agreement
will be operative only upon the Executive’s termination during the term of this
Agreement after the occurrence of a Change in Control.
     NOW, THEREFORE, it is hereby agreed as follows;
     1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below.
          “Average Target Attainment Bonus” shall mean the product of the
Executive’s Target Bonus in the year of the Executive’s termination of
employment multiplied by the average of the percentages of Target Bonuses
attained by the Executive for the three fiscal years preceding the year of the
Executive’s termination of employment in which the Executive was a participant
in the Corporation’s bonus plan administered for executive officers and key
employees for a full fiscal year, or such fewer number of fiscal years in which
the Executive was a participant in such bonus plan for a full fiscal year, or
the Target Bonus for the year of termination if the Executive has not previously
been a participant for a full fiscal year in such bonus plan. The percentages of
Target Bonuses attained shall be computed by including all bonuses paid with
respect to a fiscal year regardless of whether a bonus is paid pursuant to a
plan or awarded on a discretionary basis, but shall not include any bonus paid
in the year of the Executive’s termination of employment or any discretionary
bonus paid which are directly attributable to a Change in Control. For example,
assume the Executive has a Target Bonus in the year of the Executive’s
termination of 50% of Base Salary and with respect to the preceding three fiscal
years was awarded bonuses which represented 80%, 120% and 70%, respectively, of
the Executive’s then applicable Target Bonuses of 35%, 40% and 40%, then the
Average Target Attainment Bonus would be 90% times 50% or 45% of Base Salary.
Management shall maintain a record of the Average Target Attainment Bonuses and
such record shall be reviewed and concurred to by the compensation committee of
the Corporation.

 

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          “Base Salary” shall mean an amount equal to the greater of (i) the
Executive’s annual base salary at the rate in effect on the date of a Change in
Control, or (ii) the Executive’s annual base salary at the rate in effect on the
date of the Executive’s termination of employment, either without regard to any
reduction made in connection with an event constituting Good Reason hereunder.
In either case Base Salary shall be determined prior to any deductions actually
taken from salary including without limitation (1) for salary reductions or
deferrals under any plan of the Corporation, (2) for payments of employee
benefits under any plan of the Corporation which were charged to the Executive,
and (3) for the purchase of stock under any plan of the Corporation.
          “Cause” means a finding by the Board of Directors in good faith that
(i) the Executive’s employment has been terminated for gross misconduct in
connection with the Executive’s position as an officer of the Corporation that
results in demonstrably material injury to the Corporation, or (ii) the
Executive has breached a covenant of the Executive set forth in this Agreement
(if, after written notice by the Corporation to the Executive and a thirty
(30) day opportunity by the Executive to cure during which the Executive does
not cure the condition). For this purpose, bad judgment, negligence and policy
disagreements with the Board of Directors shall not constitute gross misconduct,
nor shall any act or omission of the Executive that was reasonably believed by
the Executive to have been in, and not opposed to, the interests of the
Corporation.
          “Change in Control” shall mean any of the following events:

  (i)   The Corporation is merged, consolidated or reorganized
(“Reorganization”) with another entity and as a result of which less than 50% of
the outstanding voting interests or securities of the surviving or resulting
entity immediately after the Reorganization are owned in the aggregate by the
former shareholders of the Corporation, as the same shall have existed
immediately prior to such Reorganization, in substantially the same proportions
as their ownership before such Reorganization;     (ii)   The Corporation sells
all or “Substantially All” of its assets to another entity that is not a
wholly-owned subsidiary or affiliate of the Corporation, provided that a sale
shall constitute Substantially All of the Corporation’s assets only if the fair
market value of the consideration received for such assets exceeds 50% of the
fair market value of the Corporation’s average total market capitalization
during the twenty (20) trading days ending twenty (20) trading days prior to the
first public announcement of such sale; provided further that the fair market
value of the consideration received and the total market capitalization of the
Corporation shall be as reasonably determined by the Board of Directors in good
faith and that both the Corporation’s stock and any publicly traded
consideration received in a sale shall be valued using the closing price for
such security (y) for the period referenced above in the case of the
Corporation’s stock and (z) the

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      average closing prices for the first twenty (20) trading days after the
Closing of any sale or other transaction in which any publicly traded
consideration is received;     (iii)   Any person, within the meaning of
Sections 3(a)(9), 13(d) or 14(d) (as in effect on the date hereof) of the
Securities and Exchange Act of 1934 (“Exchange Act”) (“Person”), other than any
employee benefit plan then maintained by the Corporation, acquires more than 40%
of the outstanding voting securities of the Corporation (whether, directly,
indirectly, beneficially or of record). For purposes hereof, ownership of voting
securities shall take into account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(1)(i) (as in effect on the date hereof)
pursuant to the Exchange Act; or     (iv)   During any 24 month period,
individuals who constitute the Board of Directors of the Corporation at the
beginning of such period cease for any reason to constitute at least a majority
thereof, unless the election, or nomination for election by the Corporation’s
shareholders, of each new director was approved by the vote of at least
two-thirds of the directors then still in office who were directors of the
Corporation at the beginning of such period; provided that no individual shall
be considered so approved if such individual initially assumed office as a
result of or in connection with an actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors of the
Corporation.

          “CIC Amount” shall have the meaning set forth in Annex B.
          “Compensation Period” shall have the meaning set forth in Annex B.
          “Disability” shall mean, to the extent such term is not defined in an
Employment Agreement, if any, a physical or mental condition as a result of
which the Executive has been approved for benefits under a Corporation-sponsored
long-term disability plan, policy or arrangement in which the Executive
participates.
          “Employment Agreement” shall mean a written offer letter or employment
between the Executive and the Corporation, if any, covering the terms and
conditions of employment with the Corporation.
          “Good Reason” shall exist under any of the following conditions (if,
after written notice by the Executive to the Corporation and a thirty (30)day
opportunity by the Corporation to cure during which the Corporation does not
cure the condition):

  (i)   The Executive’s most significant duties, responsibilities or authority
held, prior to the date of the Change in Control or at any time after the date
of the Change in Control are reduced or

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      diminished in other than an immaterial manner without the Executive’s
written consent;     (ii)   Either (A) the Executive’s Base Salary or Target
Bonus are reduced by the Corporation from the levels in effect immediately prior
to a Change in Control without the Executive’s written consent, or (B) the
Executive’s health, welfare and other benefits referred to in Paragraph 6 are
denied or modified in a manner different than changes applicable to other
executive officers of the Corporation or any controlling entity without the
Executive’s written consent, and (C) the aggregate effect of all such
reductions, denials and modifications (including any increases in compensation,
bonuses, or benefits) represents more than an immaterial reduction to the
Executive’s overall compensation package in existence prior to the Change in
Control;     (iii)   The Corporation violates the material terms of this
Agreement, or the Executive’s Employment Agreement, if any;     (iv)   The
Executive is required to relocate his or her principal place of employment to a
location which is more than 50 miles from both his principal place of employment
and his principal residence prior to the announcement of an agreement or
transaction that results in a Change in Control (for avoidance of doubt the
principal place or employment and principal residence for the Executive shall be
set forth on Annex B hereto and shall be updated from time to time, provided
that the failure to so update shall not preclude this provision from being
applicable); or     (v)   There is a liquidation, dissolution, consolidation or
merger of the Corporation or transfer or sale of all or a Substantially All (as
defined above) of its assets, unless a successor (by merger, consolidation or
otherwise) to which all or Substantially All of its assets have been transferred
or sold has assumed (either by operation of law or otherwise) all duties and
obligations of the Corporation under this Agreement and any Employment
Agreement, if any.

          “Outplacement Period” shall have the meaning set forth in Annex B.
          “Target Bonus” shall mean an amount equal to the target bonus payable
to the Executive under the Corporation’s annual incentive bonus plan in effect
for the fiscal year of the Executive’s termination of employment, or other
fiscal years specifically referenced in this Agreement, without regard, to any
reduction made in connection with an event constituting Good Reason hereunder.

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          “Termination of the Executive’s Employment” shall (a) mean
(i) termination by the Corporation of the employment of the Executive for any
reason other than Cause, death, or Disability; or (ii) termination by the
Executive of his or her employment for Good Reason in the absence of
circumstances that constitute Cause; and (b) shall be interpreted in a manner
consistent with the term “separation from service” under Section 409A(a)(2)(i)
of the Internal Revenue Code of 1986, as amended (“Code”).
          “Waiver and Release Agreement” shall mean the written waiver and
release agreement attached hereto as Annex A, which the Executive must execute
on or within forty-five (45) days after his last day of employment in favor of
the Corporation, and not thereafter revoke, in order to be entitled to receive
any payments or benefits under paragraphs 4, 5, 6 and 7 of this Agreement.
     2. Term of Agreement. This Agreement shall remain in effect until
terminated by the Corporation in accordance with this paragraph or, if a Change
in Control occurs prior to such termination by the Corporation, until the
obligations of the Corporation pursuant to this Agreement have been fulfilled.
This Agreement shall terminate one year after the date the Corporation gives the
Executive written notice of the termination of this Agreement; except that if a
Change in Control occurs prior to the termination date, this Agreement shall
remain in effect with respect to all rights accruing as a result of the
occurrence of the Change in Control.
     3. Termination of Employment. If, during the term of this Agreement, there
is a Termination of the Executive’s Employment within twenty-four (24) months
after a Change in Control, then the Executive shall receive the compensation and
benefits described in paragraphs 4, 6 and 7. Section 5 shall apply upon a Change
in Control with or without a Termination of the Executive’s Employment.
Notwithstanding the foregoing, a termination shall not have occurred under this
Agreement if, in connection with a Change in Control, the Executive terminates
employment with the Corporation and becomes an employee of the acquiring or
controlling entity or one of its affiliates which succeeds to the business of
the Corporation under terms and conditions that would not give rise to Good
Reason had employment with the Corporation continued.
     4. Compensation. Subject to the provisions of paragraphs 3, 10 and 13, the
Executive shall have the right to receive the CIC Amount (as defined in Annex
B)) during the Compensation Period (as defined in Annex B). Fifty percent (50%)
of the CIC Amount shall be payable within thirty (30) days after Termination of
the Executive’s Employment and the remaining fifty percent (50%) of the CIC
Amount shall be paid in equal monthly installments over the Compensation Period.
In addition, the Executive shall be paid his or her prorated Target Bonus for
the fiscal year in which the Executive was terminated within thirty (30) days
after Termination of the Executive’s Employment. The prorated Target Bonus shall
be determined by multiplying the Target Bonus by a fraction the numerator of
which shall be the number of full or partial months that the Executive was
employed during the fiscal year in which the Termination of the Executive’s
Employment occurred. To the extent a bonus for the fiscal year prior to the year
in which the Termination of the Executive’s Employment occurs has not been paid
at the time of the Termination of the Executive’s Employment, such bonus as
determined in good faith and consistently with prior practice shall be paid to
the Executive not later than the time such bonuses were generally paid in the
prior year. Notwithstanding the foregoing, if necessary to

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meet the requirements of subparagraphs (2)(A)(i) and (B)(i) of Code
Section 409A(a)(2), the compensation that would normally be paid during the
first six (6) months after the Termination of the Executive’s Employment shall
not be paid to an Executive who is a specified employee (as defined in Code
Section 409A(a)(2)(B)(i)) until the six-month anniversary of the Termination of
the Executive’s Employment (or, if earlier, the date of his or her death). If
such a delay is required, the aggregate compensation for the first six months
after the Termination of the Executive’s Employment shall be paid in a single
lump sum on (or as soon as practicable after) the six-month anniversary, after
which time the compensation shall be paid at the same time and in the same
manner as it was paid immediately prior to the Executive’s termination until the
end of the Compensation Period.
     5. Equity. All stock options, restricted stock, restricted stock units and
other equity based rights and interests outstanding immediately prior to the
Change in Control shall become vested immediately prior to the Change in Control
and shall be exercisable, transferable, payable or otherwise available in
accordance with the plan, grant, agreement or other instrument setting forth the
Executive’s rights.
     6. Benefits. Subject to the provisions in Paragraphs 3, 10, and 13, accrued
vacation through the date of Termination of the Executive’s Employment shall be
paid within thirty (30) days of the effective date of the Waiver and Release
Agreement. The Executive, his or her dependents, beneficiaries and/or estate
shall continue during the Compensation Period to be entitled to all benefits
under medical, dental, life insurance and similar plans (except for any
disability plan) that are in effect on the Executive’s termination date. If by
reason of a plan provision, adverse tax consequences to the Corporation or the
Executive, law or government regulation or third-party contractual restriction
the Executive, his or her dependents, beneficiaries and/or estate cannot receive
or participate in a benefit, then the Corporation shall, to the extent
necessary, pay or provide for payment of such benefit or a reasonably equivalent
benefit to the Executive, his or her dependents, beneficiaries and/or estate in
the same amount and manner as they would have been provided by the relevant plan
provided by the Corporation prior to the Executive’s termination date (e.g.,
through the payment by the Corporation of a portion of COBRA premiums).
Notwithstanding the foregoing, if the Executive is employed by another employer,
the Corporation shall not provide any medical, dental, life insurance or similar
benefit to the extent a comparable benefit is provided by the other employer.
The participation of the Executive in the Penford Corporation Retirement Plan,
the Penford Corporation 401(k) Plan or any other plan described in Code Section
401(a) shall terminate after the Executive’s termination date in accordance with
the terms of such plans and the Corporation shall not be obligated to provide
equivalent benefits. Notwithstanding the foregoing, to the extent necessary to
meet the requirements of subparagraphs (2)(A)(i) and (B)(i) of Code
Section 409A(a)(2), the benefits that would normally be provided under this
paragraph 6 (including treatment of the Executive as having not terminated
employment for purposes of continued health and welfare benefits or cash
payments in lieu thereof) during the first six (6) months of the Compensation
Period shall not be provided to an Executive who is a specified employee (as
defined in Code Section 409A(a)(2)(B)(i)) until the six-month anniversary of
such Executive’s Termination of Employment (or, if earlier, the date of his or
her death). If such a delay is required, the Executive will not be treated as
having continued employment during the first six months of the Compensation
Period until the six-month anniversary of the Executive’s Termination of
Employment. Also on such six-month anniversary, the Executive will receive a
lump sum cash

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payment equal to the value of any health and welfare benefits that could not be
provided during such six months. After the six-month anniversary, these benefits
under this paragraph 6 will continue through the end of the Compensation Period.
     7. Outplacement Services. Subject to compliance with Paragraphs 3, 10 and
13, the Corporation shall pay for the cost of senior executive-level
outplacement services for the Executive for the Outplacement Period (defined in
Annex B). Outplacement services shall be provided by such executive outplacement
firm selected by the Executive and reasonably approved by the Corporation. The
Executive shall commence utilization of such senior executive-level outplacement
services within ninety (90) days following his or her termination date.
     8. Effect of Death. In the event of death of the Executive during the
Compensation Period, the compensation that would otherwise have been paid to the
Executive under this Agreement shall be paid to the Executive’s estate. Coverage
of any dependents under any plan described in paragraph 6 shall continue for the
Compensation Period as though the Executive had remained alive. Nothing in this
paragraph shall affect any other payments by the Corporation due in respect of
the Executive’s death.
     9. Section 280G Tax Payment.
     (a) Impact of Section 280G. Except as otherwise provided in Annex B and
notwithstanding any other provisions of this Agreement, if the aggregate
“present value” (as defined in Section 280G(d)(4) of the Code) of all “parachute
payments” (as defined in Section 280G(b)(2) of the Code) made to or for the
benefit of the Executive under this Agreement equals or exceeds three times the
Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), such
that a deduction would not be allowed to the Company under Section 280G for all
or any part of such payments, or if the payments made hereunder would cause the
Executive to be liable for tax under Section 4999 of the Code then the parachute
payments under this Agreement shall be reduced so that the aggregate present
value of such payments shall total one hundred dollars ($100.00) less than three
times the base amount. The purpose of such reduction is to ensure that the
payments to the Executive will not constitute a parachute payment within the
meaning of Section 280G(b)(2) of the Code, that the Company will be entitled to
the maximum deduction for all amounts paid under this Agreement, and that the
Executive will not be subject to tax under Section 4999 of the Code. The
Executive shall have the right to receive the benefit of any amendments to
Section 280G of the Code that increase the amount that may be received without
loss of the deduction to the Company.
     (b) Opinion of Counsel. In the event of any change in, or further
interpretation of, Sections 280G or 4999 of the Code and the regulations
promulgated thereunder, the Executive shall be entitled by written notice to the
Corporation to request an opinion of tax counsel regarding the application of
such change in any of the foregoing, and the Corporation shall use its best
efforts to cause such opinion to be rendered as promptly as practicable. All
fees and expenses of tax counsel incurred in connection with this Agreement
shall be borne by the Corporation.

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     10. Waiver and Release. As a condition to receiving any payments and
benefits under paragraphs 4, 6 and 7 hereunder, the Executive shall execute (and
not later revoke) the Waiver and Release Agreement on or within thirty (30) days
after written request. The Corporation shall have no obligation to make any
payments or provide any benefits to the Executive hereunder unless and until the
effective date of the Waiver and Release Agreement, as defined therein.
     11. Corporation’s Setoff Rights. The payments and benefits made or provided
to the Executive or to the Executive’s spouse or other beneficiary under this
Agreement shall be subject to setoff by the Corporation by the amount of any
claim of the Corporation against the Executive or the Executive’s spouse or
other beneficiary for any debt or obligation of the Executive or the Executive’s
spouse or other beneficiary to the Corporation.
     12. No Mitigation. The Executive shall have no duty to seek employment
following termination of employment or otherwise to mitigate damages. The
amounts or benefits payable or available to the Executive, the Executive’s
spouse or other beneficiary under this Agreement shall not be reduced by any
amount the Executive may earn or receive from employment with another employer
or from any other source.
     13. Impact on Existing Severance and Benefit Plans. Payments or benefits
under this Agreement are in lieu of any payments or benefits to which the
Executive may be entitled under any other separation plan or policy of the
Corporation, and shall be coordinated with the Executive’s Employment Agreement,
if any, such that the Executive shall receive the maximum amount of separation
pay available under either agreement, but shall not receive any duplication of
benefits. No provision in this Agreement shall be construed to reduce or impair
the Executive’s rights and benefits under such retirement or welfare plans,
policies or arrangements. Payments and benefits provided under paragraphs 4, 5,
6 or 7, however, shall not be considered eligible compensation, nor shall the
period attributable to such payments or benefits be considered eligible service,
under any retirement or welfare plan, policy or arrangement maintained by the
Corporation.
     14. Non-Competition, Non-Solicitation, Non-Disparagement and
Confidentiality. The Executive agrees that:
     (a) During the Executive’s employment with the Corporation and during the
Compensation Period, the Executive shall not, either directly or indirectly be
employed by or otherwise engaged by or have any equity interest (other than
ownership of 2% or less of the outstanding stock of any entity listed on the New
York or American Stock Exchange or any other recognized stock exchange or
included in the National Association of Securities Dealers Automated Quotation
System) in any business that is directly competitive with any business in which
the Corporation or any of its subsidiaries was involved or had under active
consideration immediately prior to the Change in Control and in which the
Executive was engaged during his or her employment prior to a termination.
     (b) During the Executive’s employment with the Corporation and during the
Compensation Period, the Executive shall not, either directly or indirectly

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  (i)   hire, offer to hire, entice away or in any other manner persuade or
attempt to persuade any officer, employee, consultant or agent of the
Corporation or any of its subsidiaries to alter or discontinue his or her
relationship with Corporation or its subsidiaries, other than general
advertisements not targeted at employees of the Corporation or its subsidiaries;
    (ii)   solicit, divert, or in any other manner persuade or attempt to
persuade any supplier of the Corporation or any of its subsidiaries to alter or
discontinue its relationship with the Corporation or any of its subsidiaries; or
    (iii)   solicit, divert, take away or attempt to solicit, divert or take
away any customers of the Corporation or its subsidiaries.

     (c) At all times during the Executive’s employment with the Corporation and
during and after the Compensation Period, the Executive will not divulge or
appropriate to the Executive’s own use or the use of others any secret or
confidential information or knowledge pertaining to the business of the
Corporation, or any of its subsidiaries, obtained during his employment by the
Corporation or any of its subsidiaries; provided that this provision shall not
apply to information that is or becomes publicly available without breach by the
Executive.
     (d) At all times during the Executive’s employment with the Corporation and
during and after the Compensation Period, the Executive will not publicly
disparage the Corporation or its subsidiaries or any of their respective
directors, officers or employees. At all times, the Corporation will not
publicly disparage the Executive and will direct its officers and directors to
not publicly disparage the Executive.
     (e) The Corporation and the Executive agree that the provisions of this
paragraph 14 do not impose an undue hardship on the Executive and are not
injurious to the public; that this provision is necessary to protect the
business of the Corporation and its subsidiaries; that the nature of the
Executive’s responsibilities with the Corporation have provided the Executive
with access to confidential information that is valuable and confidential to the
Corporation and its subsidiaries; that the Corporation would not enter into this
Agreement if the Executive did not agree to the provisions of this paragraph 14;
that the scope of this paragraph 14 is reasonable in terms of length of time and
geographical scope; and that adequate consideration supports this paragraph 14.
In the event that a court determines that the geographical scope of this
provision in unreasonably broad or the length of time is unreasonably long, the
Executive agrees that such Court should narrow such provision to the extent
necessary to make it reasonable and enforce the provision as narrowed. Nothing
in this Agreement restricts the Executive from responding to process of law. In
such a circumstance, the Executive must immediately notify the Corporation of
such process in order to enable the Corporation to seek protective relief if
appropriate.
     (f) The Executive’s entitlement to benefits under this Agreement is
conditioned upon the Executive’s compliance with the provisions of this
paragraph 14.
     15. Arbitration of All Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the City of Chicago in accordance with the laws of the State of Washington by
three arbitrators, one of whom shall be

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appointed by the Corporation, one of whom shall be appointed by the Executive
and one of whom shall be appointed by the first two arbitrators. The arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall be
as provided in this paragraph. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. In the
event that it shall be necessary or desirable for the Executive to retain legal
counsel or incur other costs and expenses in connection with the enforcement of
the Executive’s rights under this Agreement, the Corporation shall pay the
Executive’s reasonable attorneys’ fees and costs and expenses in connection with
such enforcement (including the enforcement of any arbitration award in court),
regardless of the final outcome, unless the arbitrators shall determine that
under the circumstances recovery by the Executive of any such fees, costs and
expenses would be unjust. Notwithstanding any other provisions of this Agreement
regarding dispute resolution, including this paragraph 15, the Executive agrees
that Executive’s violation of any provision of paragraph 14 of this Agreement
(“Restrictive Covenants”) would cause the Corporation irreparable harm which
would not be adequately compensated by monetary damages and that an injunction
may be granted by any court or courts having jurisdiction, restraining the
Executive from violation of the terms of this Agreement, upon any breach or
threatened breach of the Executive of the obligations set forth in any of the
Restrictive Covenants. The preceding sentence shall not be construed to limit
the Corporation from any other relief or damages to which it may be entitled as
a result of the Executive’s breach of any provision of this Agreement, including
Restrictive Covenants.
     16. Indemnification and Insurance. All rights to indemnification by the
Corporation now existing in favor of the Executive as provided in the Articles
of Incorporation or Bylaws of the Corporation shall continue in full force and
effect, and the Corporation shall also advance expenses for which
indemnification may ultimately be claimed as such expenses are incurred to the
fullest extent permitted under applicable law. After a Change in Control, the
Corporation shall not amend its Articles of Incorporation or Bylaws or any
agreement in any manner which adversely affects the rights of the Executive to
indemnification thereunder. Any provision contained herein notwithstanding, this
Agreement shall not limit or reduce any rights of the Executive to
indemnification pursuant to applicable law. In addition, the Corporation will
maintain directors’ and officers’ liability insurance, or purchase “tail
coverage,” for a period of at least six years for acts and omissions of the
Executive through the date on which the Executive’s employment is terminated,
providing coverage comparable to the coverage in effect immediately prior to the
Change in Control.
     17. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail, or delivered by a nationally recognized overnight
delivery service, postage or charges prepaid, to the Executive at the last
address he has filed in writing with the Corporation and to the Corporation at
its principal executive offices.
     18. Assignment. Neither the Corporation nor the Executive may assign this
Agreement or any rights, duties or obligations hereunder to any third party
other than by operation of law or merger, consolidation, reorganization or sale
of the Corporation, without the other party’s consent. The Corporation’s rights,
duties and obligations under this Agreement shall be binding obligations of any
successor in interest to the Corporation to the fullest extent

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enforceable by law. No interest of the Executive (or the Executive’s spouse or
other beneficiary), nor any right to receive any payment or distribution
hereunder, shall be subject to sale, transfer, assignment, pledge, attachment or
garnishment or otherwise be assigned or encumbered, and any attempt to do so
shall be void. No such interest or right shall be taken, voluntarily or
involuntarily, for the satisfaction of the obligations or debts of, or other
claims against, the Executive (or the Executive’s spouse or other beneficiary),
including claims for alimony, child support, separate maintenance and claims in
bankruptcy.
     19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of Washington.
     20. Amendments. This Agreement may not be changed, waived or discharged
orally, but only by an instrument in writing, signed by the party against which
enforcement of such change, waiver or discharge is sought.
     21. Successors. This Agreement shall extend to and be binding upon the
Corporation, its successors and assigns. For purposes of this Agreement, unless
the context otherwise requires, references to the Corporation shall include its
subsidiaries.
     22. Severability. In the event that any provision of this Agreement shall
be determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect.
     23. Headings. The headings of the paragraphs in this Agreement are solely
for convenience or reference and shall not control the meaning or interpretation
of any provision of this Agreement.
     24. Entire Agreement. This Agreement including Annexes A and B constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, between the parties
with respect to such subject matter.
[SIGNATURE PAGE TO FOLLOW]

11

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.

              PENFORD CORPORATION
 
       
 
  By    
 
       
 
  Title    
 
       
 
             
 
      [Executive’s Name]

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ANNEX A
PENFORD CORPORATION
WAIVER AND RELEASE AGREEMENT
     In consideration for the pay and benefits to be provided to me by Penford
Corporation (the “Corporation”) under the terms of paragraphs 4, 6 or 7 of the
Penford Corporation Change in Control Agreement entered into between me and the
Corporation, dated ___, ___ (the “Agreement”), I hereby acknowledge, understand
and agree under this agreement (the “Release”) to the following:

1.   In consideration of the foregoing, including, without limitation, payment
to me of the determined amounts under the Agreement, I hereby release the
Corporation and all of its partners, affiliates, parents, predecessors,
successors, assigns, officers, members, directors, trustees, employees,
shareholders, agents, administrators, representatives, attorneys, insurers or
fiduciaries, past, present or future (collectively, the “Released Parties”) from
any claims, actions, causes of action, demands, obligations or damages of any
kind arising from my employment and the separation of that employment that I
ever had or now have upon or by reason of any matter, cause or thing, up to and
including the day on which I sign this Release (the “Claims”).   2.   The Claims
I am waiving include, but are not limited to, my selection for termination,
claims of wrongful discharge, Claims for the payment of any salary, wages,
bonuses or commissions, Claims under common law or any federal or state statute,
include Claims under Title VII of the Civil Rights Act of 1964, as amended;
Claims under the Americans with Disabilities Act; Claims under the Age
Discrimination in Employment Act (“ADEA”); all Claims under the Fair Labor
Standards Act; Claims under the National Labor Relations Act; all Claims under
the Family and Medical Leave Act; Claims relating to the Corporation’s
intellectual property, confidential and proprietary information and trade
secrets; Claims of misrepresentation or detrimental reliance, Claims for
severance pay (other than for the separation pay and benefits payable under the
Agreement), Claims based on breach of contract, defamation, intentional
infliction of emotional distress, tort, personal injury, invasion of privacy,
violation of public policy, negligence or any other Claim for any type of
relief, whether federal, state or local, whether statutory, regulatory or common
law or otherwise. This Release does not apply to any Claims directly related to
the enforcement of the Agreement, Claims which I may make under state workers’
compensation or unemployment laws and/or any Claims I cannot waive as a matter
of law.   3.   I intend this Release to be binding on my successors and I
specifically (i) waive any applicable law (and confirm that I have no Claim
under any law providing rights to employees) and (ii) agree not to file or
continue any Claim in respect of matters covered by this Release. I further
agree never to institute any suit, complaint, proceeding, grievance or action of
any kind at law, in equity, or otherwise in any court of the United States or in
any state, or in any administrative agency of the United States or any state,

A-1

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    county or municipality, or before any other tribunal, public or private,
against the Corporation arising from or relating to my employment with or my
termination of employment from the Corporation and/or any other occurrences to
the date of this Release, other than a Claim challenging the validity of this
Release under the ADEA.

4.   I am further waiving my right to receive money or other relief in any
action instituted by me or on my behalf by any person, entity or governmental
agency. Nothing in this Release shall limit the rights of any governmental
agency or your right of access to, cooperation or participation with any
governmental agency, including without limitation, the United States Equal
Employment Opportunity Commission. I further agree to waive my rights under any
other statute or regulation, state or federal, which provides that a general
release does not extend to Claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which if known to him
must have materially affected his settlement with the debtor.   5.   I further
acknowledge and agree that if I breach the provisions of paragraph 2, 3 or 4
above, then (i) the Corporation shall be entitled to apply for and receive an
injunction to restrain any such breach, (ii) the Corporation shall not be
obligated to continue payment of any pay or benefits described in paragraph 4 of
the Agreement, (iii) I shall be obligated to pay to the Corporation its costs
and expenses in enforcing this Release and defending against such lawsuit
(including court costs, expenses and reasonable legal fees), and (iv) as an
alternative to (iii), at the Corporation’s option, I shall be obligated upon
demand to repay to the Corporation all but $1,000.00 of the pay and benefits
paid or made available to me pursuant to paragraph 4 of the Agreement. I further
agree that the foregoing covenants in this paragraph 5 shall not affect the
validity of this Release and shall not be deemed to be a penalty or a
forfeiture.   6.   In further consideration of the promises made by the
Corporation in this Release, I specifically waive and release the Corporation
from all Claims I may have as of the date I sign this Release arising under the
ADEA. I further agree that:

  (a)   My waiver of rights under this Release is knowing and voluntary and in
compliance with the Older Workers Benefit Protection Act of 1990 (“OWBPA”);    
(b)   I understand the terms of this Release;     (c)   The consideration
offered by the Corporation under the Agreement in exchange for the signing of
this Release represents consideration over and above that to which I would
otherwise be entitled, and that the consideration would not have been provided
had I not signed or agreed in advance to sign this Release;     (d)   The
Corporation is hereby advising me in writing to consult with an attorney at my
own expense prior to executing this Release;     (e)   The Corporation has given
me a period of at least forty-five (45) days within which to consider this
Release;

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  (f)   Following my execution of this Release, I have seven (7) days in which
to revoke this Release by written notice. An attempted revocation not actually
received by the Corporation prior to the revocation deadline will not be
effective;     (g)   This entire Release shall be void and of no force and
effect if I choose to so revoke, and if I choose not to so revoke this Release
shall then become effective and enforceable; and     (h)   This Section 6 does
not waive rights or claims that may arise under the ADEA after the date I sign
this Release. To the extent barred by the OWBPA, the covenant not to sue
contained in Section 3 does not apply to Claims under the ADEA that challenge
the validity of this Release.

7.   To revoke this Release, I must send a written statement of revocation by
registered or certified mail, or delivered by a nationally recognized overnight
delivery service, postage or charges prepaid, to the Corporation at its
principal executive offices. The revocation must be received no later than 5:00
p.m. on the seventh day following my execution of this Release. If I do not
revoke, the eighth day following my acceptance will be the “effective date” of
this Release.   8.   I agree to cooperate fully with the Corporation, other
Corporation affiliates, and their legal counsel in connection with any disputes
arising out of matters with which I was directly or indirectly involved while
serving as an employee of the Corporation. This cooperation shall include, but
shall not be limited to, meeting with, and providing information to, the
Corporation and its legal counsel, maintaining the confidentiality of any past
or future privileged communications with the Corporation legal counsel (outside
and in-house counsel), and making myself available to testify truthfully by
affidavit, in depositions, or in any other forum on behalf of the Corporation.
The foregoing shall be reasonable and shall not interfere unreasonably with my
then employment. If and to the extent that the Corporation shall require my
assistance pursuant to this Section 8 after the Compensation Period as defined
in the Agreement, the Corporation shall pay me $250 per hour for such services.

[SIGNATURE PAGE TO FOLLOW]

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     I acknowledge that I remain bound by, and reaffirm my intention to comply
with, continuing obligations under any agreements between myself and the
Corporation, as presently in effect, including, but not limited to, my
confidentiality obligations.
* * *
     BY SIGNING THIS RELEASE, I ACKNOWLEDGE THAT: I HAVE READ THIS RELEASE AND
UNDERSTAND ITS TERMS; I HAVE HAD THE OPPORTUNITY TO REVIEW THIS RELEASE WITH
LEGAL OR OTHER PERSONAL ADVISORS OF MY OWN CHOICE; I UNDERSTAND THAT BY SIGNING
THIS RELEASE I AM RELEASING THE RELEASED PARTIES OF ALL CLAIMS AGAINST THEM; I
HAVE BEEN GIVEN AT LEAST TWENTY-ONE DAYS TO CONSIDER THE TERMS AND EFFECT OF
THIS RELEASE; AND I VOLUNTARILY AGREE TO ITS TERMS.
SIGNED this _____________ day of _________________, 20___.
                                                                                
                    the Executive

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Tier I — CEO and CFO
CHANGE IN CONTROL AGREEMENT
ANNEX B
SPECIFIC PROVISIONS APPLICABLE
TO
___ (“Executive”)
     This Annex B is attached to a Change in Control Agreement between Penford
Corporation and the undersigned Executive and contain specific provisions
applicable to the Executive:
     “CIC Amount” shall mean an amount equal to the product of the sum of the
Executive’s Base Salary plus the Executive’s Average Target Attainment Bonus,
times 2.5.
     “Compensation Period” shall mean the period between the Executive’s
termination date and thirty (30) months after such termination date.
     “Outplacement Period” shall mean a period of twelve (12) months.
     “Termination of the Executive’s Employment” shall also include:
(iii) termination by written notice from the Executive during the thirty
(30) day period beginning on the one-year anniversary of the date of the Change
in Control, provided that the Executive shall not have been previously
terminated by the Corporation for Cause or terminated his or her employment
without Good Reason.
The following shall apply in lieu of Paragraph 9 of the attached Change in
Control Agreement.
9. Section 280G Tax Payment.
     (b) Excise Tax. If any payment made or benefit provided to the Executive
under paragraphs 4, 5, 6 or 7 (a “Termination Payment”) is subject to an excise
tax under Section 4999 of the Code (the “Excise Tax”), the Corporation (or
successor) shall pay an additional amount to the Executive in a single sum (the
“Gross-Up Payment”), so that the net amount of the Termination Payment received
by the Executive is not reduced by the Excise Tax (or by any interest penalties
or additions thereto required to be paid by the Executive).
     (c) Gross-Up Payment. The Gross-Up Payment shall be an amount equal to the
sum of (i) the Excise Tax (plus any interest, penalties or additions thereto
required to be paid by the Executive) on the Termination Payment and (ii) the
additional Excise Tax and additional federal, state and other income taxes (plus
any interest, penalties or additions on all such amounts required to be paid by
the Executive) owing on the amount received under clause (i) and owing

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Tier I — CEO and CFO
on the amount received under this clause (ii). The Gross-Up Payment shall be
determined at the expense of the Corporation by a nationally recognized firm of
certified public accountants selected by the Corporation. The Gross-Up Payment
shall be based on the following assumptions:

  (i)   All payments and benefits making up the Termination Payment shall be
deemed “parachute payments” within the meaning of Section 280G(b)(2) of the
Code, and all “excess parachute payments” shall be deemed to be subject to the
Excise Tax, except to the extent that independent tax counsel selected by the
Corporation opines that such payments or benefits are not subject to the Excise
Tax.     (ii)   The Executive shall be deemed to pay federal, state and other
income taxes at the highest marginal rate of taxation applicable to the
Executive for the applicable calendar year.

     (d) Payment of Gross-Up. An estimated Gross-Up Payment shall be made to the
Executive no later than thirty (30) business days following the effective date
of the Waiver and Release Agreement as defined therein. In the event the
estimated Gross-Up Payment is less than the amount actually due to the Executive
under this paragraph 9, the amount of any shortfall shall be paid to the
Executive within ten (10) business days after the determination of the
shortfall. Any overpayment, or amount refunded to the Executive resulting from
an overpayment of the Gross-Up Payment, shall be paid to the Corporation within
ten (10) business days after the determination of the overpayment or receipt of
the refund.
     (e) Opinion of Counsel. In the event of any change in, or further
interpretation of, sections 280G or 4999 of the Code and the regulations
promulgated thereunder, the Executive shall be entitled by written notice to the
Corporation to request an opinion of tax counsel regarding the application of
such change in any of the foregoing, and the Corporation shall use its best
efforts to cause such opinion to be rendered as promptly as practicable. All
fees and expenses of tax counsel incurred in connection with this Agreement
shall be borne by the Corporation.
[SIGNATURE PAGE TO FOLLOW]

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Tier I — CEO and CFO
     The execution of this Annex B to the Change in Control Agreement is hereby
acknowledged this ___day of ___, 2006.

              PENFORD CORPORATION
 
       
 
  By    
 
       
 
  Title    
 
       
 
             
 
      [Executive’s Name]

     Principal Residence:
     Principal Place of Employment:
Executive agrees to promptly notify the Corporation of any change in his or her
principal residence or principal place of employment.

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Tier II — 30 or 24 months
CHANGE IN CONTROL AGREEMENT
ANNEX B
SPECIFIC PROVISIONS APPLICABLE
TO
___ (“Executive”)
     This Annex B is attached to a Change in Control Agreement between Penford
Corporation and the undersigned Executive and contains specific provisions
applicable to the Executive:
     “CIC Amount” shall mean an amount equal to the product of the sum of the
Executive’s Base Salary plus the Executive’s Average Target Attainment Bonus,
times 2.0.
     “Compensation Period” shall mean the period between the Executive’s
termination date and twenty-four (24) months after such termination date.
     “Outplacement Period” shall mean a period of six (6) months.
     The execution of this Annex B to the Change in Control Agreement is hereby
acknowledged this ___ day of ___, 2006.

              PENFORD CORPORATION
 
       
 
  By    
 
       
 
  Title    
 
       
 
             
 
      [Executive’s Name]

     Principal Residence:
     Principal Place of Employment:
Executive agrees to promptly notify the Corporation of any change in his or her
principal residence or principal place of employment.

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Tier III — 12 months
ANNEX B
SPECIFIC PROVISIONS APPLICABLE
TO
___ (“Executive”)
     This Annex B is attached to a Change in Control Agreement between Penford
Corporation and the undersigned Executive and contains specific provisions
applicable to the Executive:
     “CIC Amount” shall mean an amount equal to the product of the sum of the
Executive’s Base Salary plus the Executive’s Average Target Attainment Bonus.
     “Compensation Period” shall mean the period between the Executive’s
termination date and twelve (12) months after such termination date.
     “Outplacement Period” shall mean a period of six (6) months.
     The execution of this Annex B to the Change in Control Agreement is hereby
acknowledged this ___day of ___, 2006.

              PENFORD CORPORATION
 
       
 
  By    
 
       
 
  Title    
 
       
 
             
 
      [Executive’s Name]

     Principal Residence:
     Principal Place of Employment:
Executive agrees to promptly notify the Corporation of any change in his or her
principal residence or principal place of employment.

B-1