exv10w2






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.







 









 








          “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.







11









 








          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.







12









 








          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






13









 







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]




14









 





          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	 	 






 









 





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.



 









 





     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.



 









 





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:



 




 









 






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:


 



 




 









 





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:




[               ]