-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C0PDs7GyjDReXvyDzPkCik1SywlEucR/wFSIxavj1/tOdr98rg+NZvlNIHe1gHRl 7tbQSgAD7HeDyh4/eKavsg== 0000891020-00-002137.txt : 20001214 0000891020-00-002137.hdr.sgml : 20001214 ACCESSION NUMBER: 0000891020-00-002137 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000929 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENFORD CORP CENTRAL INDEX KEY: 0000739608 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 911221360 STATE OF INCORPORATION: WA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-11488 FILM NUMBER: 787909 BUSINESS ADDRESS: STREET 1: 777 108TH N E STE 2390 CITY: BELLEVUE STATE: WA ZIP: 98004-5193 BUSINESS PHONE: 4254626000 MAIL ADDRESS: STREET 1: 777 108TH N E STE 2390 CITY: BELLEVUE STATE: WA ZIP: 98009 FORMER COMPANY: FORMER CONFORMED NAME: PENWEST LTD DATE OF NAME CHANGE: 19920703 8-K/A 1 v67867e8-ka.txt AMENDMENT TO 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 29, 2000 PENFORD CORPORATION -------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) WASHINGTON ---------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION) 0-11488 91-1221360 ------------------------ -------------------------------- (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) 777-108TH AVENUE N.E., SUITE 2390 BELLEVUE, WASHINGTON 98004-5193 ---------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (425) 462-6000 --------------- --------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) 2 ITEM 2. ACQUISITION OF ASSETS This Amendment No. 1 provides Items 7(a) and 7(b) of the Current Report on Form 8-K dated September 29, 2000, relating to Penford Corporation's acquisition of Starch Australasia Limited, renamed Penford Australia Limited. In accordance with paragraph 4 of Item 7(a) of Form 8-K, the required financial statements and pro forma financial information are being filed with this Amendment No. 1. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired PENFORD AUSTRALIA LIMITED (formerly Starch Australasia Limited) (i) Independent Audit Report for the year ended 30 June 2000 (ii) Audited Consolidated Profit and Loss Statement for the year ended 30 June 2000 (iii) Audited Consolidated Balance Sheet as of 30 June 2000 (iv) Audited Consolidated Statement of Cash Flows for the year ended 30 June 2000 (v) Notes to Consolidated Financial Statements for the year ended 30 June 2000 (b) Pro Forma Financial Information PENFORD CORPORATION (i) Unaudited Pro Forma Consolidated Financial Statements (ii) Unaudited Pro Forma Consolidated Balance Sheet as of August 31, 2000 (iii) Unaudited Pro Forma Consolidated Statement of Income for the year ended August 31, 2000 (iv) Notes to Unaudited Pro Forma Consolidated Financial Statements (c) Exhibits 2.1 Starch Australasia Share Sale Agreement completed as of September 29, 2000 among Penford Holdings Pty Limited, a wholly owned subsidiary of Registrant, and Goodman Fielder Limited 10.1 Amended and Restated Credit Agreement dated as of November 15, 2000 among Penford Corporation and Penford Products Co. as borrowers, and certain commercial lending institutions as lenders, and the Bank of Nova Scotia, as agent for the lenders 10.2 Debenture Trust Deed dated as of November 15, 2000 among Penford Holdings Pty Limited as issuer and ANZ Capel Court Limited as trustee 10.3 Syndicated Facility Agreement dated as of November 15, 2000 among Penford Australia Limited, a wholly owned subsidiary of Penford Holdings Pty Limited, as borrowers, and Australia and New Zealand Banking Group Limited as lender and agent 10.4 Intercreditor Agreement dated as of November 15, 2000 by and among The Bank of Nova Scotia, KeyBank National Association, U.S. National Association and Australia and New Zealand Banking Group Limited 23.1 Consent of Ernst & Young LLP, Independent Auditors 99.1 Press Release dated September 29, 2000* * Previously filed as an exhibit to Form 8-K filed with the Commission by the Registrant on October 13, 2000. 3 INDEPENDENT AUDIT REPORT To the members of Penford Australia Limited (formerly Starch Australasia Limited) SCOPE We have audited the attached financial report, being a special purpose financial report, of Penford Australia Limited for the financial year ended 30 June 2000, consisting of the Profit and Loss Statement, Balance Sheet, Statement of Cash flows and Notes thereon. The company's directors are responsible for the financial report and have determined that the accounting policies used and described in Note 1 to the financial statements which form part of the financial report are appropriate for the purpose for which the financial report is prepared. We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. The financial report has been prepared for inclusion in certain filings under the laws of the United States. We disclaim any assumption of responsibility for any reliance on this audit report or on the financial report to which it relates for any purpose other than that for which it was prepared. Our audit has been conducted in accordance with Australian Auditing Standards, which do not differ in any material respect from auditing standards generally accepted in the United States. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with the accounting policies described in Note 1, so as to present a view which is consistent with our understanding of the company's financial position and performance as represented by the results of its operations and its cash flows. The audit opinion expressed in this report has been formed on the above basis. AUDIT OPINION In our opinion, the financial report of Penford Australia Limited is in accordance with: (a) the Corporations Law including: (i) giving a true and fair view of the company's financial position as at 30 June 2000 and of the performance of the company for the year ended on that date; and (ii) complying with Accounting Standards to the extent disclosed in Note 1, and the Corporations Regulations; and (b) other mandatory professional reporting requirements. Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated operating profit for the year ended 30 June 2000 and the determination of consolidated shareholder's equity of Penford Australia Limited as at 30 June 2000 to the extent indicated in note 29 to the financial statements. Ernst & Young /s/ David N. Balcombe Melbourne Date: 11 December 2000 4 PENFORD AUSTRALIA LIMITED PROFIT AND LOSS STATEMENT
PENFORD AUSTRALIA YEAR ENDED 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - ----------------------- ----- ------------ ---------- $000 $000 OPERATING REVENUE 2 113,771 94,052 ========= ========= OPERATING PROFIT BEFORE INCOME TAX 3,604 1,614 INCOME TAX ATTRIBUTABLE TO OPERATING PROFIT 3 (493) 164 --------- --------- OPERATING PROFIT AFTER INCOME TAX 3,111 1,778 --------- --------- RETAINED PROFITS at the beginning of the financial year 3,484 (2,436) --------- --------- TOTAL AVAILABLE FOR APPROPRIATION 6,595 (658) --------- --------- DIVIDENDS PROVIDED FOR OR PAID - - --------- --------- RETAINED PROFITS at the end of the financial year 6,595 (658) ========= =========
5 PENFORD AUSTRALIA LIMITED BALANCE SHEET
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - --------------- ----- ------------ --------- $ 000 $ 000 CURRENT ASSETS Cash 16,286 9,795 Receivables 4 17,838 14,636 Inventories 5 24,908 20,894 Other 6 523 345 -------- -------- TOTAL CURRENT ASSETS 59,555 45,670 -------- -------- NON-CURRENT ASSETS Investments 7 - 391 Property, plant and equipment 9 57,268 50,463 Intangibles 10 421 421 Future income tax benefit 342 - -------- -------- TOTAL NON-CURRENT ASSETS 58,031 51,275 -------- -------- TOTAL ASSETS 117,586 96,945 -------- -------- CURRENT LIABILITIES Accounts payable 11 12,389 8,918 Borrowings 12 5,885 5,885 Provisions 13 5,335 4,077 -------- -------- TOTAL CURRENT LIABILITIES 23,609 18,880 -------- -------- NON-CURRENT LIABILITIES Accounts payable 14 79,827 70,733 Borrowings 15 3,377 3,377 Provisions 16 4,651 4,613 -------- -------- TOTAL NON-CURRENT LIABILITIES 87,855 78,723 -------- -------- TOTAL LIABILITIES 111,464 97,603 -------- -------- NET ASSETS 6,122 (658) ======== ======== SHAREHOLDERS' EQUITY Share Capital 17 - - Reserves 18 (473) - Retained profits 6,595 (658) -------- -------- TOTAL SHAREHOLDERS' EQUITY 6,122 (658) ======== ========
6 PENFORD AUSTRALIA LIMITED STATEMENT OF CASH FLOWS
PENFORD AUSTRALIA YEAR ENDED 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - ----------------------- ----- ------------ --------- $ 000 $ 000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 84,371 63,812 Sales to group companies 36,570 29,798 Payments to suppliers and employees (109,122) (83,998) Other operating receipts 217 217 Interest paid (1,248) (475) Other operating payments (5,700) (5,700) Income tax paid (1,366) (966) --------- --------- NET CASH FLOWS FROM OPERATING ACTIVITIES 19 3,722 2,688 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (5,938) (4,910) Proceeds from sale of property, plant and equipment 32 24 --------- --------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (5,906) (4,886) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Advances - related parties 16,075 15,314 Borrowings - other 2,062 2,062 Exchange rate effect on non trading intercompany balance 158 - --------- --------- NET CASH FLOWS FROM FINANCING ACTIVITIES 18,295 17,376 NET INCREASE IN CASH HELD 16,111 15,178 Add opening cash brought forward 245 (5,383) Effect of exchange rate changes on the opening balances of cash held in foreign currencies (106) - Effects due to translation of cash flows at transaction date exchange rate 36 - --------- --------- CLOSING CASH CARRIED FORWARD 19 16,286 9,795 ========= =========
7 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS 30 JUNE 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) BASIS OF ACCOUNTING The financial report is a special purpose financial report, which has been prepared in accordance with all the requirements of the Corporations Law, which includes applicable Accounting Standards other than the inclusion of comparatives from the prior year, as such comparatives were not required for the purpose for which the financial report was prepared. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. The financial report has been prepared for inclusion in certain filings under the laws of the United States. Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated operating profit for the year ended 30 June 2000 and the determination of consolidated shareholders' equity attributable to shareholders' of Penford Australia Limited as at 30 June 2000 to the extent indicated in note 29 to the financial statements. The financial statements have been prepared in accordance with the historical cost convention, except for certain assets which are at valuation. (b) CHANGE IN ACCOUNTING POLICIES The accounting policies adopted are consistent with those of the previous year. (c) PRINCIPLES OF CONSOLIDATION The consolidated financial statements are those of the economic entity, comprising Penford Australia Limited (the parent company) and all entities, which Penford Australia Limited controlled from time to time during the year and at the balance sheet date. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. (d) FOREIGN CURRENCIES Translation of foreign currency transactions Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by entities within the consolidated entity that are outstanding at the balance sheet date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. Except for certain specific hedges, all resulting exchange differences arising on settlement or re-statement are brought to account in determining the profit and loss for the financial year. Specific Hedges Where a purchase or sale is specifically hedged, exchange gains or losses on the hedging transaction arising up to the date of purchase or sale are included with the purchase or sale. Exchange gains and losses arising on the hedge transaction after that date are taken to the profit and loss statement. Translation of financial reports of overseas operations All overseas operations are deemed self-sustaining, as each is financially and operationally independent of Penford Australia Limited. The financial reports of overseas operations are translated using the current rate method and any exchange differences are taken directly to the foreign exchange translation reserve. 8 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (e) CASH For the purposes of the statement of cash flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts. (f) TRADE RECEIVABLES Trade receivables are carried at nominal amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable. (g) RECEIVABLES - RELATED PARTIES Amounts (other than trade debts) receivable from related parties are carried at nominal amounts due. (h) INVENTORIES Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: [ ] Raw materials -- weighted average cost basis [ ] Finished goods and work-in-progress -- cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity. (i) RECOVERABLE AMOUNT Non-current assets are not revalued to an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. In determining recoverable amount the expected net cash flows have been discounted to their present value using a market determined risk adjusted discount rate. (j) PROPERTY, PLANT AND EQUIPMENT Cost and valuation Items of property, plant and equipment comprising a class of non-current asset are revalued at the same date on a consistent basis. Where assets have been revalued, the potential effect of the capital gains tax on disposal has not been taken into account in the determination of the revalued carrying amount. Where it is expected that a liability for capital gains tax will arise, this expected amount is disclosed by way of note. Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment, other than freehold land. Major depreciation periods are: 2000 Freehold buildings: 25 to 40 years Plant and equipment: 5 to 20 years 9 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (k) LEASES Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis. Finance leases Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the company are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to profit and loss. (l) INTANGIBLES Goodwill Goodwill is amortised by the straight line method over the period during which benefits are expected to be received. This is taken as being 10 years. Patents The costs of obtaining patents has been capitalised and is being amortised over a ten year period. (m) TRADE PAYABLES Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the company. (n) LOANS AND BORROWINGS All borrowings are carried at the principal amount. Interest is charged as an expense as it accrues. (o) PROVISIONS Dividends payable are recognised when a legal obligation to pay the dividend arises, typically following approval of the dividend at a meeting of shareholders. (p) SHARE CAPITAL Ordinary share capital is recognised at the fair value of the consideration received by the company. 10 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (q) REVENUE RECOGNITION Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Sale of Goods Control of the goods has passed to the buyer. Interest Control of a right to receive consideration for the provision of, or investment in, assets has been attained. Dividends Control of a right to receive consideration for the investment in assets is attained, usually evidenced by approval of the dividend at a meeting of shareholders. (r) EMPLOYEE ENTITLEMENTS Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. Employee entitlements expenses and revenues arising in respect of the following categories: - - Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements; and - - Other types of employee entitlements Are charged against profits on a net basis in their respective categories. (s) INCOME TAX Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised. Where assets are revalued no provision for potential capital gains tax has been made. The income tax expense for the year is calculated using the 36% tax rate, however the deferred tax balances have been adjusted for the decreased corporate tax rate of 34% for the tax year 2000-01 and 30% thereafter. The adjustment recognises that reversal of timing differences will occur within the 2000-01 or later income tax year, at which time tax will be attributed at a lower rate. The corresponding adjustment has been charged to income tax expense. 11 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - --------------- ----- ------------ --------- $ 000 $ 000 2. OPERATING PROFIT The operating profit before income tax is arrived at after charging/(crediting) the following items: Amortisation of non-current assets Goodwill 55 55 Patents 72 72 -------- -------- 127 127 Depreciation of non-current assets Plant and equipment 5,140 4,532 Buildings 324 228 -------- -------- 5,464 4,760 Borrowing costs expensed Interest expense -- Other related parties 1,248 475 -------- -------- Bad and doubtful debts - Trade debtors 16 16 Net loss on disposal of property, plant and equipment 91 90 Operating leases - minimum lease payments 1,210 1,178 Other provisions Provision for employee entitlements 1,337 1,273 Research and development costs 1,584 1,584 Included in the operating profit are the following revenues arising from operating activities: Sales revenue 113,648 94,036 -------- -------- Other revenue 123 16 -------- -------- Operating revenue 113,771 94,052 ======== ========
12 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - --------------- ----- ------------ --------- $ 000 $ 000 3. INCOME TAX The prima facie tax on operating profit differs from the income tax provided in financial statements as follows: Prima facie tax on operating profit 1,240 581 Tax effect of permanent differences Depreciation of buildings 82 82 Depreciation of plant & equipment 127 127 Amortisation of intangible assets 20 20 Non-deductible expenses 22 20 Research and Development incentive (242) (242) Other permanent decreases (141) (141) Over provision of previous year (151) (147) Net loss attributable to change in income tax rate (464) (464) -------- -------- Total income tax provided on operating profit 493 (164) ======== ======== 4. RECEIVABLES (CURRENT) Trade debtors 17,412 14,184 Provision for doubtful debts (97) (66) -------- -------- 17,315 14,118 Other debtors 523 518 -------- -------- 17,838 14,636 ======== ======== (a) Aggregate amounts receivable from related parties: Wholly-owned group -- companies under common control 3,265 2,770 ======== ======== (b) Movement in provision for doubtful debts -- balance at beginning of year 135 86 -- bad and doubtful debts provided for during the year (38) (20) -------- -------- -- balance at end of year 97 66 ======== ========
13 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - --------------- ----- ------------ --------- $ 000 $ 000 5. INVENTORIES (CURRENT) Raw materials and stores - at cost 16,181 14,316 Work-in-progress - at cost 196 196 Finished goods 8,350 6,382 Other inventory 181 - ======= ======= Total inventories at lower of cost and net realisable value 24,908 20,894 ======= ======= 6. OTHER CURRENT ASSETS Prepayments 523 345 ======= ======= 7. INVESTMENTS (NON-CURRENT) INVESTMENTS AT COST COMPRISE: Controlled entities Unlisted shares - 391 ======= ======= 8. INTERESTS IN SUBSIDIARIES Name Country of Percentage of equity incorporation interest held by the consolidated entity % Penford New Zealand Limited (formerly Starch New Zealand Limited) NZ 100 - 391 - - ordinary shares ======= =======
14 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - --------------- ----- ------------ --------- $ 000 $ 000 9. PROPERTY, PLANT AND EQUIPMENT Freehold land: At cost 12,445 12,445 At independent valuation 1998 9(a) 1,372 - --------- ------ 13,817 12,445 --------- ------ Buildings on freehold land At cost 5,831 5,831 Provision for depreciation (446) (446) --------- ------ 5,385 5,385 --------- ------ At independent valuation 1998 9(a) 2,107 - Provision for depreciation (145) - --------- ------ 1,962 - --------- ------ TOTAL LAND AND BUILDINGS 21,164 17,830 --------- ------ Plant and equipment At cost 82,248 70,083 Provision for depreciation (48,861) (39,532) --------- ------ 33,388 30,551 --------- ------ Plant and equipment under construction At cost 2,716 2,082 Provision for depreciation - - --------- ------ 2,716 2,082 --------- ------ TOTAL PLANT AND EQUIPMENT 36,104 32,633 --------- ------ TOTAL PROPERTY, PLANT AND EQUIPMENT 57,268 50,463 ========= ====== Cost 103,426 90,441 Independent valuation 1998 3,293 - --------- ------ 106,719 90,441 Provision for depreciation (49,451) (39,978) --------- ------ TOTAL WRITTEN DOWN AMOUNT 57,268 50,463 ========= ======
(a) Valuations All valuations are estimates of the amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm's length transaction at the valuation date. The company has a policy of revaluing assets every 3 years. The valuation of the New Zealand Land and Buildings was carried out by National Portfolio Strategies. 15 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED - --------------- ----- ------------ --------- $ 000 $ 000 10. INTANGIBLES Goodwill 275 275 Provision for amortisation (275) (275) -------- -------- - - -------- -------- Patents 493 493 Provision for amortisation (72) (72) -------- -------- 421 421 -------- -------- 421 421 ======== ======== 11. ACCOUNTS PAYABLE (CURRENT) Trade creditors 8,189 5,434 Other creditors 4,200 3,484 -------- -------- 12,389 8,918 ======== ======== Aggregate amounts payable to related parties Wholly owned group - companies under common control 1,817 1,662 ======== ======== 12. BORROWINGS (CURRENT) Loan - other 15(a) 5,885 5,885 ======== ======== 13. PROVISIONS (CURRENT) Taxation 3,535 2,558 Employee entitlements 21 1,800 1,519 -------- -------- 5,335 4,077 ======== ========
16 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED $ 000 $ 000 14. ACCOUNTS PAYABLE (NON-CURRENT) Amounts payable to companies under common control 79,827 70,733 ======== ======== 15. BORROWINGS (NON-CURRENT) Loan - other 3,377 3,377 ======== ======== a) Loans-other relate to loans from unrelated parties. Interest is charged monthly at a rate of 0.475% p.a. above the base rate. The base rate is based on either LIBOR of BBSY The loan is secured against raw materials inventory to the same value 16. PROVISIONS (NON-CURRENT) Employee entitlements 21 2,072 2,035 Deferred income tax liability 2,579 2,578 -------- -------- 4,651 4,613 ======== ======== 17. SHARE CAPITAL ISSUED AND PAID UP CAPITAL - - 2 ordinary shares each fully paid - - ======== ======== 18. RESERVES Foreign exchange fluctuation reserve (473) - -------- -------- (473) - ======== ========
17 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED $ 000 $ 000 19. STATEMENT OF CASH FLOWS (a) Reconciliation of the operating profit after tax to the net cash flows from operations Operating profit after tax 3,111 1,778 Depreciation of non-current assets 5,464 4,760 Amortisation of non-current assets 127 127 Net (profit)/loss on disposal of property, plant and equipment 91 90 CHANGES IN ASSETS AND LIABILITIES Trade receivables (1,822) (915) Inventory (2,690) (1,845) Other assets (22) 29 Trade creditors 1 (487) Tax provision (1,677) (1,908) Deferred income tax liability 778 778 Future income tax benefit 26 - Other provisions 335 281 -------- -------- Net cash flow from (used in) operating activities 3,722 2,688 ======== ======== (b) Reconciliation of cash Cash balance comprises: Other provisions 16,286 9,795 -------- -------- Closing cash balance 16,286 9,795 ======== ======== (c) Bank Overdraft Facility The company is part of a set off group containing Goodman Fielder companies.
18 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED $ 000 $ 000 20. EXPENDITURE COMMITMENTS (a) Capital expenditure commitments Estimated capital expenditure contracted for at balance date but not provided for - payable not later than one year 1,380 1,314 ====== ====== (b) Lease expenditure commitments Operating leases (non-cancelable) Minimum lease payments - not later than one year 938 906 - later than one year and not later than five years 2,326 2,322 ------ ------ - aggregate lease expenditure contracted for at balance date 3,264 3,228 ====== ====== 21. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS EMPLOYEE ENTITLEMENTS The aggregate employee entitlement liability is comprised of: Accrued wages, salaries and on costs Provisions (current) 13 1,800 1,519 Provisions (non-current) 16 2,072 2,035 ------ ------ 3,872 3,554 ====== ======
22. CONTINGENT LIABILITIES The company is part of a group guarantee secured in favour of Goodman Fielder. 19 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 23. SUBSEQUENT EVENTS On 29 September 2000, Penford Corporation completed its acquisition of Penford Australia Limited from Goodman Fielder Limited for $98 million in cash. No significant changes are anticipated to the company's management team or principal activities. The sale of Penford Australia Limited provides Penford with new opportunities to develop, manufacture and market specialty carbohydrate-based ingredients for food and paper applications in expanded markets. On 1st November 2000, Starch Australasia Limited changed its name to Penford Australia Limited.
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED 24. REMUNERATION OF DIRECTORS Directors' remuneration Income paid or payable, or otherwise made available, in respect of the financial year, to all directors of Penford Australia Limited, directly or indirectly, from the entity or any related party: - - ====== ====== The number of directors of Penford Australia Limited whose income (including superannuation contributions) falls within the following bands is: 2000 $0 -- $9,999 3 25. AUDITORS' REMUNERATION Amounts received or due and receivable by the auditors of Penford Australia Limited for: - -- an audit or review of the financial statements 19,797 11,000 - -- other services - - ------ ------ 19,797 11,000 ====== ======
20 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 26. RELATED PARTY DISCLOSURES All related party disclosures relate to those parties that were related at 30 June 2000 or during the year then ended. (a) The directors of Penford Australia Limited during the financial year were: Geoffrey Stephenson (resigned 29 September 2000) Ian Glasson (resigned 29 September 2000) Ian Gilmour (resigned 29 September 2000) (b) The following related party transactions occurred during the financial year: (i) Transactions with related parties in wholly-owned group 1. SALES MADE UNDER NORMAL COMMERCIAL TERMS AND CONDITIONS TO COMPANIES UNDER COMMON CONTROL 2. PURCHASES MADE UNDER NORMAL COMMERCIAL TERMS AND CONDITIONS FROM COMPANIES UNDER COMMON CONTROL (ii) Transactions with other related parties NONE (iii) Transactions with the directors of Penford Australia Limited NONE (iv) Transactions with director-related entities NONE (c) The ultimate parent entity of the wholly owned group was Goodman Fielder Limited at 30 June 2000 and Penford Corporation at the date of this report. (d) Equity instruments of directors NONE 21 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 27. SEGMENT INFORMATION a) The consolidated entity operates predominantly in one industry -- manufacturing of starch products. b) GEOGRAPHICAL SEGMENTS
AUSTRALIA NEW ZEALAND ELIMINATION CONSOLIDATED Operating revenue Sales to customers outside 94,052 25,041 (5,322) 113,771 the consolidated entity ----------------------------------------------------------- Total revenue 94,052 25,041 (5,322) 113,771 =========================================================== Segment result 1,614 2,071 (81) 3,604 ========================================== Unallocated expenses - ----------------- Consolidated entity operating 3,604 profit before income tax ================= Segment assets 96,945 20,725 (84) 117,586 ===========================================================
28. FINANCIAL INSTRUMENTS 28(a) TERMS, CONDITIONS AND ACCOUNTING POLICIES The company's accounting policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at the balance date, are as follows:
- --------------------------------------------------------------------------------------------------------- RECOGNISED BALANCE ACCOUNTING POLICIES TERMS AND CONDITIONS FINANCIAL SHEET INSTRUMENTS NOTES - --------------------------------------------------------------------------------------------------------- (i) FINANCIAL ASSETS - --------------------------------------------------------------------------------------------------------- Receivables -- 4 Trade receivables are Credit sales are on 30 days terms. trade carried at nominal amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable. - --------------------------------------------------------------------------------------------------------- Receivables -- 4 Amounts (other than trade As above related parties debts) receivable from related parties are carried at nominal amounts due. - --------------------------------------------------------------------------------------------------------- (ii) FINANCIAL LIABILITIES - --------------------------------------------------------------------------------------------------------- Bank overdrafts Bank overdrafts are Penford Australia Limited is included carried at the principal in the Goodman Fielder set off facility. amount. As such it is only charged interest on the basis of the overall group expense. - ---------------------------------------------------------------------------------------------------------
22 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 28. FINANCIAL INSTRUMENTS (CONT'D)
- --------------------------------------------------------------------------------------------------------- (ii) FINANCIAL LIABILITIES - --------------------------------------------------------------------------------------------------------- Trade creditors 11 Liabilities are recognised Trade liabilities are normally and accruals for amounts to be paid in settled on 60 days terms. the future for goods and services received, whether or not billed to the company. - --------------------------------------------------------------------------------------------------------- 28(a) TERMS, CONDITIONS AND ACCOUNTING POLICIES (CONT'D) - --------------------------------------------------------------------------------------------------------- RECOGNISED BALANCE ACCOUNTING POLICIES TERMS AND CONDITIONS FINANCIAL SHEET INSTRUMENTS NOTES - --------------------------------------------------------------------------------------------------------- Accounts 14 These amounts are This balance represents funding of payable to recognised at the amount operations. It is not directly related parties to be paid in the future interest bearing - -- non current at the principal amount. - --------------------------------------------------------------------------------------------------------- Loans 12,15 These amounts are Interest is charged monthly at a rate recognised at the amount of 0.475% p.a. above the base rate. to be paid in the future The base rate is based on either at the principal amount. LIBOR of BBSY. The loan is secured against raw materials inventory to the same value - --------------------------------------------------------------------------------------------------------- (iii)EQUITY - --------------------------------------------------------------------------------------------------------- Ordinary shares 17 Ordinary share capital is The company is authorised to issue up recognised at the fair value to 2 ordinary shares of $1 each. Details of the consideration of shares issued are set out in note 15. received by the company. - ---------------------------------------------------------------------------------------------------------
28(b) INTEREST RATE RISK All financial assets and financial liabilities, both recognised and unrecognised, are non-interest bearing. 28(c) NET FAIR VALUES The carrying amounts of financial assets and financial liabilities, both recognised and unrecognised, at balance date, approximate their aggregate net fair values. 28(d) CREDIT RISK EXPOSURES The company's maximum exposures to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the balance sheet. CONCENTRATIONS OF CREDIT RISK The company minimises concentrations of credit risk in relation to trade accounts receivable by undertaking transactions with a large number of customers. However the majority of customers are concentrated in Australia. Credit risk in trade receivables is managed in the following ways: - - payment terms are 30 days - - a risk assessment process is used for customers including credit limits and credit reference checks 23 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 29. US GAAP RECONCILIATION PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP Financial statements in the United States are prepared in accordance with US GAAP. In Australia statutory financial statements are prepared in accordance with applicable accounting standards issued by the Australian Accounting Standards Board, the Australian Corporations Law, Schedule 5 to the Corporations Regulations and other mandatory professional reporting requirements (Urgent Issues Consensus Views) collectively referred to as "Australian GAAP." The statement of cash flows, which has been prepared in accordance with Australian GAAP, complies with International Accounting Standards No. 7. The only material differences between Australian GAAP and US GAAP for purposes of the 30 June 2000 financial statements of the Company are as follows: (A) ASSET REVALUATIONS Under Australian GAAP non-current assets may be revalued both upwards and downwards based on directors' valuations. An upwards revaluation is recorded by a credit to the asset revaluation reserve as a component of shareholders' equity and is not taken through the profit and loss account except where a previous revaluation decrement has been recorded for that class of assets through the profit and loss account. An impairment or downwards revaluation is taken through the profit and loss account except where there is a revaluation reserve for that particular class of assets, in which case the decrement may be debited to that asset revaluation reserve, to the extent a credit exists, rather than the profit and loss account. The Company assesses the recoverability of non-current assets by comparing the carrying value to the asset's undiscounted cash flow. To the extent that the asset carrying value exceeds its undiscounted cash flow the asset is written down to that amount. US GAAP does not permit the upward revaluation of such assets. US GAAP requires that an impairment of long-lived assets be recognised through the profit and loss account. Under US GAAP SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," entities, when assessing an asset for impairment, compare the carrying value of the asset or group of assets to the relevant expected cash flow, undiscounted and without interest. If the sum of the undiscounted cash flow is less than the asset carrying value the asset must be written down to "fair value." One method of determining an asset's fair value, in the absence of an active market, is its discounted cash flow. Once impairment is recorded, subsequent recoveries through the profit and loss account are not allowed until the asset is sold. (B) TRANSFER OF ASSETS BETWEEN RELATED PARTIES Australian accounting standards allow for the transfer of assets between related parties to be recorded at fair value. For US GAAP, such transfers must be recorded at historical cost. 24 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 29. US GAAP RECONCILIATION (CONT'D) (C) PROFIT AND LOSS ACCOUNT RECONCILIATION Reconciliation of the consolidated profit and loss accounts determined in accordance with Australian GAAP to profits under U.S. GAAP is as follows:
Year Ended 30 June 2000 A$,000 ------------ Operating profit after income tax as reported under Australian GAAP 3,111 Reconciliation to US GAAP: Depreciation of revalued assets (1) 77 ----- Operating profit after income tax in accordance with U.S. GAAP 3,188 =====
25 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 29. US GAAP RECONCILIATION (CONT'D) (D) SHAREHOLDERS' EQUITY RECONCILIATION Reconciliation of shareholders' equity determined in accordance with Australian GAAP to shareholders' equity under U.S. GAAP is as follows:
As at 30 June 2000 A$,000 ------------ Shareholders' equity in accordance with Australian GAAP 6,122 Reconciliation to US GAAP: Difference of historical cost to carrying amount of assets (2) (3,099) Revaluations made to non-current assets (1) (3,293) Accumulated depreciation on revaluation of assets (1) 129 ------ Adjusted shareholders' equity in accordance with U.S. GAAP (141) ======
(1) Under Australian GAAP non-current assets may be revalued both upwards and downwards based on directors' valuations. Where a non-current asset is revalued, all assets within that class must also be revalued on a consistent basis. The Company revalues its land and buildings approximately every three years. Downward revaluations are taken to the profit and loss account, which is comparable to the treatment of an impairment of an asset under SFAS 121. Under U.S. GAAP, upward revaluations are not recorded. The Company revalued land and buildings at the Auckland plant site in 1998. The revaluations resulted in an increase in the value of land of AUD 1,372,000 and an increase in the value of buildings of AUD 1,921,000. Accumulated depreciation on the revaluation increment of the buildings is AUD 129,000 to 30 June 2000. Depreciation for the year is AUD 76,840 based on a useful life of the buildings of 25 years. The revaluation reserve of the Company was distributed through dividends prior to acquisition. The reversal of the revaluation reserve therefore results in a decrease in retained profits. (2) Australian accounting principles reflect the purchase of assets between 100% related parties at fair value. Under U.S. GAAP, such transfers of assets must be recorded at historical cost. The difference between historical cost and the carrying amount of the assets of AUD 3,099,475 represents an increase in the value of the land in Lane Cove and Tamworth that cannot be recorded under U.S. GAAP. 26 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma consolidated financial statements for Penford Corporation ("Penford") consist of the Unaudited Pro Forma Consolidated Balance Sheet as of August 31, 2000, and the Unaudited Pro Forma Consolidated Statement of Income for the year then ended. These unaudited pro forma financial statements give effect to Penford's acquisition of Starch Australasia Limited, renamed Penford Australia Limited ("PAL" or "Penford Australia"), from Goodman Fielder Limited for $54.5 million (USD) in cash. The acquisition closed on September 29, 2000, and was accounted for as a purchase. The Unaudited Pro Forma Consolidated Balance Sheet combines Penford's historical consolidated balance sheet at August 31, 2000 and Penford Australia's historical balance sheet at June 30, 2000. The Unaudited Pro Forma Consolidated Statement of Income combines Penford's historical results of operations for the year ended August 31, 2000, with Penford Australia's historical results of operations for the year ended June 30, 2000. The unaudited pro forma consolidated financial statements and related notes should be read in conjunction with the audited financial statements and related notes thereto of Penford Australia included in Item 7 (a) herein, and the audited consolidated financial statements and notes of Penford Corporation as previously filed on Form 10-K for the year ended August 31, 2000. The unaudited pro forma consolidated financial statements do not purport to be indicative of the financial position or results of operations which would have actually been reported had the acquisition been consummated on the dates indicated, or which may be reported in the future. 27 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000 (In thousands of US dollars)
Penford PAL Pro Forma Historical(1) Historical(2) Adjustments Pro Forma ------------- ------------- ----------- --------- Assets Current assets: Cash and cash equivalents $- $- $ 7(4) $ 7 Trade accounts receivable 17,530 9,425 26,955 Inventories 10,219 13,493 23,712 Prepaid expenses and other 5,580 567 6,147 -------- -------- -------- -------- Total current assets 33,329 23,485 7 56,821 Property, plant and equipment: Land 5,387 11,464 16,851 Net, plant and equipment 102,666 18,088 120,754 Construction in progress 6,795 1,471 8,266 -------- -------- -------- -------- Net property, plant and equipment 114,848 31,023 - 145,871 Deferred income taxes 11,466 185 11,651 Restricted cash value of life insurance 12,330 12,330 Other assets 3,650 228 3,878 Goodwill 19,459(3) 19,459 -------- -------- -------- -------- $175,623 $ 54,921 $ 19,466 $250,010 ======== ======== ======== ========
28 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000 (In thousands of US dollars)
Penford PAL Pro Forma Historical(1) Historical(2) Adjustments Pro Forma ------------- ------------- ----------- --------- Liabilities and shareholders' equity Current liabilities: Bank overdraft, net $ 313 $ - $ - $ 313 Current portion of long-term debt 2,857 3,188 3,499(6) 9,544 Accounts payable 10,068 6,758 16,826 Accrued liabilities 8,305 975 811(5) 10,091 --------- --------- --------- --------- Total current liabilities 21,543 10,921 4,310 36,774 Long-term debt 47,824 1,829 58,410(4) 104,564 (3,499)(6) Intercompany debt 39,755 (39,755)(3) - Deferred income taxes 21,048 1,294 22,342 Other post-retirement benefits 10,805 10,805 Other liabilities 6,539 1,122 7,661 Shareholders' equity: Common stock 9,392 9,392 Additional paid-in capital 23,129 23,129 Retained earnings 68,100 68,100 Treasury stock (32,757) (32,757) --------- --------- --------- --------- Total shareholders' equity 67,864 - - 67,864 --------- --------- --------- --------- $ 175,623 $ 54,921 $ 19,466 $ 250,010 ========= ========= ========= =========
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements. 29 PENFORD CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (1) The column designated "Penford Historical" reflects the consolidated balance sheet of Penford Corporation as of August 31, 2000. (2) The column designated "PAL Historical" reflects the consolidated balance of Penford Australia Limited (formerly Starch Australasia Limited) as of June 30, 2000. The amount shown under intercompany debt of $39,755 represents the fair value of the net assets assumed in the purchase business combination. This amount differs from the net equity of Penford Australia Limited as shown in the statutory consolidated financial statements as of June 30, 2000, as not all assets and liabilities of Penford Australia Limited were assumed by Penford Corporation in the purchase business combination. (3) Represents the recording of goodwill resulting from the acquisition. The goodwill represents the excess of the purchase price over the net assets acquired at fair value as follows: Purchase price $59,214 Fair value of net assets acquired 39,755 ------- Excess purchase price 19,459 ======= (4) Represents borrowings of $58,410 to finance the purchase price. (5) Represents estimated additional fees and expenses related to the acquisition. (6) Represents current portion of borrowings assumed for the acquisition. 30 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME AS OF AUGUST 31, 2000 (In thousands of US dollars)
Penford PAL Pro Forma Historical(1) Historical(2) Adjustments Pro Forma ------------- ------------- ----------- --------- Sales $ 158,150 $ 71,481 $ - $ 229,631 Cost of sales 114,873 59,504 174,377 ----------- ----------- ----------- ----------- Gross margin 43,277 11,977 - 55,254 Operating expenses 17,202 7,929 973(3) 22,770 (3,334)(6) Research and development expenses 5,359 996 - 6,355 ----------- ----------- ----------- ----------- Income from operations 20,716 3,052 2,361 26,129 Investment income 39 - - 39 Interest expense (4,813) (785) (5,282)(4) (10,880) ----------- ----------- ----------- ----------- Income before income taxes 15,942 2,267 (2,921) 15,288 Income taxes 5,580 310 (1,849)(5) 5,241 1,200 (7) ----------- ----------- ----------- ----------- Net income (loss) $ 10,362 $ 1,957 $( 2,272) $ 10,047 =========== =========== =========== =========== Weighted average common shares outstanding 7,414,435 7,414,435 Net effect of dilutive stock options 350,609 350,609 ----------- ------------ Weighted average common shares and equivalents outstanding 7,765,044 7,765,044 =========== ============ Net income per common share Basic $ 1.40 $ 1.36 =========== ============ Diluted $ 1.33 $ 1.29 =========== ============ Dividends declared per common share $ 0.22 $ 0.22 =========== ============
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements. 31 PENFORD CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (1) The column designated "Penford Historical" reflects the consolidated results of operations of Penford Corporation for the year ended August 31, 2000. (2) The column designated "PAL Historical" reflects the consolidated results operations of Penford Australia Limited (formerly Starch Australasia Limited) for the year ended June 30, 2000. (3) Represents one year of amortization of goodwill based on a period of 20 years. See note (3) to the Unaudited Pro Forma Consolidated Balance Sheet. (4) Represents one year of interest expense at an assumed rate of 8.92% (which represents the average interest rate on Penford Corporation's debt for fiscal year 2000) on borrowings of $58,410 undertaken to purchase Penford Australia. (5) Represents the tax effect at an assumed U.S. statutory rate of 35% on the interest expense recorded under adjustment (4). (6) Represents cost reductions identified as a result of the acquisition of Penford Australia, including the elimination of management fees of $3,585, offset by management's estimate of costs of $251 that would have been incurred for shared services had Penford Australia been separated from the former shareholder. (7) Represents the tax effect at an assumed Australian statutory rate of 36% on the cost increases and reductions recorded under adjustments (6). 32 SIGNATURES: Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PENFORD CORPORATION December 12, 2000 By /s/ Jeffrey T. Cook ----------------- ---------------------- Date Jeffrey T. Cook President and Chief Executive Officer 33 EXHIBIT INDEX ------------- (c) Exhibits 2.1 Starch Australasia Share Sale Agreement completed as of September 29, 2000 among Penford Holdings Pty Limited, a wholly owned subsidiary of Registrant, and Goodman Fielder Limited 10.1 Amended and Restated Credit Agreement dated as of November 15, 2000 among Penford Corporation and Penford Products Co. as borrowers, and certain commercial lending institutions as lenders, and the Bank of Nova Scotia, as agent for the lenders 10.2 Debenture Trust Deed dated as of November 15, 2000 among Penford Holdings Pty Limited as issuer and ANZ Capel Court Limited as trustee 10.3 Syndicated Facility Agreement dated as of November 15, 2000 among Penford Australia Limited, a wholly owned subsidiary of Penford Holdings Pty Limited, as borrowers, and Australia and New Zealand Banking Group Limited as lender and agent 10.4 Intercreditor Agreement dated as of November 15, 2000 by and among The Bank of Nova Scotia, KeyBank National Association, U.S. National Association and Australia and New Zealand Banking Group Limited 23.1 Consent of Ernst & Young LLP, Independent Auditors 99.1 Press Release dated September 29, 2000* * Previously filed as an exhibit to Form 8-K filed with the Commission by the Registrant on October 13, 2000. EX-2.1 2 v67867ex2-1.txt STARCH AUSTRALASIA SHARE SALE AGREEMENT 1 Exhibit 2.1 [BLAKE DAWSON WALDRON LAWYERS LETTERHEAD] STARCH AUSTRALASIA SHARE SALE AGREEMENT GOODMAN FIELDER INGREDIENTS LIMITED PENFORD HOLDINGS PTY LIMITED 28 AUGUST 2000 REF: DTR.RXA.02-1250-2644 2 SHARE SALE AGREEMENT - -------------------------------------------------------------------------------- CONTENTS 1. INTERPRETATION 1 1.1 General definitions 1 1.2 Other definitions 10 1.3 Rules for interpreting this agreement 11 1.4 Business Days 12 1.5 Payments 12 1.6 Vendor's knowledge 12 2. AGREEMENT TO SELL AND BUY THE SHARES 12 2.1 Sale and purchase 12 2.2 Title, property and risk 12 2.3 FIRB approval 13 2.4 Material Adverse Change 13 3. CONDUCT PENDING COMPLETION 14 3.1 Ordinary course of business 14 3.2 Pre-Completion/Completion transactions 14 3.3 Purchaser Entities' Access prior to Completion 15 3.4 Insurance cover 16 4. COMPLETION 16 4.1 Time and place of Completion 16 4.2 Obligations of the Vendor at Completion 16 4.3 Obligations of Purchaser at Completion 17 4.4 Purchaser's obligation to register 18 4.5 Vendor's obligations until registration 18 5. POST COMPLETION ADJUSTMENT 18 5.1 Stocktake 18 5.2 Preparation and delivery of Completion Date Net Asset Statement 19 5.3 Agreed Accounting Principles 19 5.4 Preparation and delivery of the Certificate 19 5.5 Working papers 19 5.6 Access and co-operation 19 5.7 Acceptance of Completion Date Net Asset Statement 19 5.8 Resolving dispute over the results of Completion Date Net Asset Statement 20 5.9 Adjustment 20 5.10 Post Completion audits 21 5.11 Entitlement to Royalty Payments 21 5.12 Due date for Royalty Payments 21 5.13 Statement to be provided with each Royalty Payment 21 5.14 Date and value of sales for calculation of Royalty Payments 21 - -------------------------------------------------------------------------------- i 3 5.15 Records of information in relation to Royalty Payments 22 5.16 Access and co-operation in relation to Royalty Payments 22 5.17 Purchaser's acknowledgment 22 6. WARRANTIES AND INDEMNITY BY VENDOR 22 6.1 Vendor's Warranties 22 6.2 Vendor's Warranty indemnity 23 6.3 Exceptions and qualifications 23 6.4 Purchaser's acknowledgments 25 6.5 Third party claims 26 6.6 Continuing warranties 27 6.7 Waiver of rights by Vendor 27 6.8 Disclosure of breach of Vendor's Warranty 27 7. TAXATION INDEMNITY 27 7.1 Definitions 27 7.2 Vendor's Tax indemnity 28 7.3 Exceptions and Qualifications 28 7.4 Repayment 29 7.5 Disputing Action re Assessment 29 7.6 Taxation returns and correspondence 30 7.7 Taxation audits 30 7.8 Repayments or Overprovisions 31 8. ENVIRONMENTAL INDEMNITY 31 8.1 Definitions 31 8.2 Vendor's Environmental indemnity 31 8.3 Exceptions and qualifications - generally 32 8.4 Exceptions and qualifications - Shell Depot 32 8.5 Plan of Work 33 8.6 Expert determination 33 8.7 Disputing Action re Environmental Issue 34 8.8 Carrying out the Plan of Work 35 8.9 Purchaser's mitigation of Environmental expenses 36 9. WARRANTIES AND INDEMNITY BY PURCHASER 36 9.1 Purchaser's Warranties 36 9.2 Purchaser's indemnity 36 10. LOSSES AND CLAIMS 36 10.1 Mitigation 36 10.2 Indemnity Tax effect 37 10.3 Payment and treatment of Claims against Vendor 37 10.4 Operation of indemnities 37 10.5 Claim under Ancillary Agreement 37 11. AUSTRALIAN SUPERANNUATION 37 ii. 4 11.1 Definitions 37 11.2 Object of clause 11 38 11.3 The Company to cease participating in the Vendor's Fund 38 11.4 Purchaser's Fund 38 11.5 Membership of the Purchaser's Fund 39 11.6 Calculation of Transfer Amount 39 11.7 Obtaining consent to transfer 39 11.8 Consented transfer to Purchaser's Fund 39 11.9 Transfer to other superannuation arrangements 39 11.10 Purchaser must ensure membership in Purchaser's Fund 39 11.11 Transfer Amount to be paid in cheque or cash 39 11.12 Access to records 39 11.13 Purchaser's contributions 40 12. NEW ZEALAND SUPERANNUATION 40 12.1 Definitions 40 12.2 Object of clause 12 40 12.3 The Subsidiary to cease participating in the Vendor's NZ Fund 41 12.4 Purchaser's NZ Fund 41 12.5 Membership of the Purchaser's NZ Fund 41 12.6 Calculation of NZ Transfer Amount 41 12.7 Obtaining consent to transfer 41 12.8 Consented transfer to Purchaser's NZ Fund 41 12.9 Transfer to other superannuation arrangements 41 12.10 Purchaser must ensure membership in Purchaser's NZ Fund 42 12.11 NZ Transfer Amount to be paid in cheque or cash 42 12.12 Access to records 42 12.13 Purchaser's contributions 42 13. RESTRAINT 42 13.1 Definitions 42 13.2 Restraint obligation 43 13.3 Permitted involvement 43 13.4 Reasonableness of restraint 43 13.5 Severability 44 14. TRANSITIONAL SERVICES 44 15. NOTICES 44 15.1 Method of giving notices 44 15.2 Time of receipt 44 15.3 Address of parties 45 16. GENERAL 45 16.1 Governing law 45 16.2 Waiver of rights 45 16.3 Amendment 46 iii. 5 16.4 Counterparts 46 16.5 Further assurance 46 16.6 Operation of this agreement 46 16.7 Costs generally 46 16.8 Stamp duty 46 16.9 No merger 47 16.10 Attorneys 47 16.11 Interest for failure to pay 47 16.12 Interest payable on judgment 47 16.13 Confidentiality 47 SCHEDULES 1 STOCKTAKE PROCEDURES 48 2 ACCOUNTS DATE NET ASSET STATEMENT 49 3 AGREED ACCOUNTING PRINCIPLES 50 4 CERTIFICATE 58 5 PURCHASER'S WARRANTIES 60 6 VENDOR'S WARRANTIES 61 7 DISCLOSURES 70 8 PROPERTY 71 9 PATENTS 73 iv. 6 SHARE SALE AGREEMENT DATE PARTIES GOODMAN FIELDER INGREDIENTS LIMITED ABN 11 000 147 580 (the "VENDOR") PENFORD HOLDINGS PTY LIMITED ACN 094 279 339 a wholly owned subsidiary of Penford Corporation (the "PURCHASER") RECITALS A. The Vendor is the legal and beneficial owner of the Shares. B. The Vendor wishes to sell to the Purchaser and the Purchaser wishes to buy from the Vendor the Shares on the terms and conditions of this agreement. OPERATIVE PROVISIONS 1. INTERPRETATION 1.1 GENERAL DEFINITIONS In this agreement, including the recitals, unless the context otherwise requires: "ACCOUNTS" means the unaudited consolidated profit and loss statement of the Bodies Corporate for the accounting reference period ended on the Accounts Date and the balance sheet of the Bodies Corporate as at the Accounts Date. "ACCOUNTS DATE" means 30 June 2000. "ACCOUNTS DATE NET ASSET STATEMENT" means the unaudited consolidated net asset statement of the Bodies Corporate as at the Accounts Date set out in schedule 2. "ACCOUNTING STANDARDS" means: (a) the accounting standards required under the Corporations Law; (b) if no accounting standard applies under the Corporations Law in relation to an accounting practice, the standards acceptable to the Australian Accounting Research Foundation, including: (i) the Australian Accounting Concepts; and (ii) applicable Australian Accounting Standards; and (c) Urgent Issues Group consensus views. "AFFILIATE" means, in relation to a body corporate: (a) each of the body's related bodies corporate; 7 (b) each of the body's directors; (c) each of the body's substantial shareholders (as that term is defined in section 708(4) of the Corporations Law, assuming the body to be a "company" as defined in section 707(1) of the Corporations Law as in force at the date of this agreement); (d) each person in whom any of the persons identified in paragraphs (a) to (c) above is concerned or interested directly or indirectly (including through any interposed body corporate or other legal entity) whether as trustee, principal, agent, shareholder, unitholder, licensor, licensee or in any other capacity; and (e) each person with whom the body or any of the persons identified in paragraphs (a) to (d) has entered into any license agreement, joint venture agreement, partnership, alliance or other combination which involves the exploitation of a Product or under which the body or any of the persons identified in paragraphs (a) to (d) above shares in economic benefits from the exploitation of a Products. "AGREED ACCOUNTING PRINCIPLES" means the accounting policies and principles as set out in schedule 3 and, to the extent not inconsistent with those accounting policies and principles, the Accounting Standards. "AGREED FORM" means, in relation to any document, the document executed by the relevant parties or the draft of that document agreed by the Principal Parties and, for the purposes of identification, initialled by them. "ANCILLARY AGREEMENT" means each of: (a) each Car Lease Novation Deed; (b) each GF Intellectual Property Transfer Deed; (c) Hi-maize Access Deed; (d) Hi-maize Supply Agreement; (e) Intellectual Property Umbrella Deed; (f) Preferred Supplier Deed; (g) each Supply Agreement; (h) Trade Mark Licence Deed; (i) Transitional Services Agreement; and (j) Umbrella Guarantee and Indemnity. "BEVTECH 1057" means resistant starch product conforming with the Specifications. "BEVTECH 1068" means resistant starch product conforming with the Specifications. 2. 8 "BEVTECH PRODUCT" means resistant starch means the resistant starch ingredient known at the date of this agreement as "Bevtech" resistant starch (including the variants Bevtech 1057 and Bevtech 1068) and manufactured from time to time pursuant to the Patents, including any Improvements. "BNP FACILITY" means the maize purchase facility provided by BNP Pacific (Australia) Limited to the Company. "BODY CORPORATE" means each of the Company and the Subsidiary. "BUSINESS" means, in relation to a Body Corporate, the business, if any, conducted by that Body Corporate as at the date of this agreement. "BUSINESS DAY" means a day on which commercial banks are open for general banking business in New South Wales. "CALCULATION PERIOD" means each of the following periods: (a) the First Period; (b) each financial year from 1 July 2001 to 30 June 2007; and (c) the Last Period. "CAR LEASE NOVATION DEED" means, in respect of each novation deed between Lease Plan Australia Limited ABN 57 006 923 011 or Orix Australia Corporation Limited ABN 79 002 992 681, a GF Group entity and an Employee, a deed in the Agreed Form conditional only on Completion novating the relevant GF Group entity's rights and obligations to the Company. "CERTIFICATE" means the certificate of the Vendor's Auditors in relation to the Completion Date Net Asset Statement and in the form of the certificate set out in schedule 4. "CLAIM" means any claim, demand or cause of action (whether at law, in equity or based on statute). "COMPANY" means Starch Australasia Limited ABN 48 003 780 229. "COMPANY DEBT" means the amount owing by the Company at the Completion Date to the GF Group (but excluding any trading debts arising in the ordinary course of business) as certified by the Vendor to the Purchaser on the Business Day immediately before the Completion Date. "COMPLETION" means completion of the sale and purchase of the Shares under clause 4. "COMPLETION DATE" means the day on which Completion occurs, which will be 29 September 2000 or any other date that is agreed in writing by the Principal Parties. "COMPLETION DATE NET ASSET STATEMENT" means the consolidated net asset statement of the Bodies Corporate as at the Completion Date, prepared, and agreed or determined, in accordance with clause 5. 3. 9 "CONTAMINATED" means: (a) in Australia, that land is affected or degraded by the presence of any chemical or substance not naturally occurring in or above levels naturally occurring in land or groundwater (including any dangerous good, hazardous substance or waste); and (b) in New Zealand, that land is affected or degraded by the presence of any contaminant, as defined in section 2 of the Resource Management Act 1991 (NZ), or hazardous substance, as defined in section 2 of the Hazardous Substances and New Organisms Act 1996 (NZ). "CULTURE-PRO" means the resistant starch ingredient known at the date of this agreement as "Culture-Pro" resistant starch (including the "Culture-Pro" variant conforming with the Specifications) and manufactured from time to time pursuant to the Patents, including any Improvements. "DISCLOSURE" means each disclosure listed in schedule 7. "DISPUTING ACTION" means, in respect of a matter, any action to cause the matter to be withdrawn, reduced, clarified or amended or to avoid, dispute, resist, object to, defend, appeal against, settle or compromise the matter or any adjudication of it. "DUE DILIGENCE MATERIAL" means: (a) all documents listed in the index distributed to the Purchaser with the due diligence CD-ROM on 2 June 2000; (b) all documents listed in the index headed "the Company documents released to Penford as answers to Q&A", dated 28 August 2000; (c) the Information Memorandum; and (d) the document headed "Q&A Record" dated 28 August 2000, copies of which have been signed on behalf of each of the Principal Parties for the purposes of identification on the date of this agreement. "EMPLOYEE" means any person employed as at Completion by a Body Corporate. "ENVIRONMENT": (a) in Australia means all components of the earth, including (i) land, air and water; (ii) any layer of the atmosphere; (iii) any organic or inorganic matter and any living organism; (iv) the aesthetic characteristics of the components of the earth, including appearance, sound, odour, taste and texture; and (v) ecosystems with any combinations of the above; and 4. 10 (b) in New Zealand, has the same meaning as "Environment" in section 2 of the Resource Management Act 1991 (NZ). "ENVIRONMENTAL ASPECT" means the interaction, relationship or impact of a structure, building, operation or activity with the Environment, including for example: (a) impacts of structures, buildings, operations or activities on planning schemes, items of heritage or endangered species; (b) structures, buildings, operations or activities causing or having caused Pollution or Contamination; and (c) structures, buildings, operations or activities otherwise having an adverse effect on the Environment. "ENVIRONMENTAL CLAIM" means any Claim relating to: (a) Contamination or Pollution on or from the Properties; (b) all other Environmental Aspects of or in relation to the Properties and the Business; and (c) any Environmental Law as it applies to the Properties. "ENVIRONMENTAL LAW" includes any common law or statute, regulation, by-law, proclamation or other regulation (whether of a local authority, of a State or of the Commonwealth or New Zealand Parliament), or licence, permit, approval, consent, deed, agreement or condition, issued or made pursuant to any such common law or statute, regulation, by-law, proclamation or other regulation, that has as its object, purpose or effect any one or more of: (a) the protection of the Environment; (b) the prevention, control, abatement or investigation of Pollution or Contamination or their effects; (c) the regulation of waste, dangerous goods or hazardous substances; and (d) the authorisation and control of any Environmental Aspect. "EXCLUDED PRODUCT SALES" means any sale or supply of a Product by a Body Corporate or an Affiliate of a Body Corporate to another Body Corporate or an Affiliate of a Body Corporate if the other Body Corporate or Affiliate does not, and does not intend to, use the Product in a process of manufacture. "FIRB APPROVAL" means the approval referred to in clause 2.4(a). "FIRST PERIOD" means the period from Completion until 30 June 2001. "GF GROUP" means Goodman Fielder and each of its subsidiaries. "GF INTELLECTUAL PROPERTY TRANSFER DEEDS" means the deeds referred to in clause 2(a) and clause 2(b) of the Intellectual Property Umbrella Deed to transfer ownership of certain 5. 11 intellectual property from GF Group entities to the Purchaser immediately after Completion. "GOODMAN FIELDER" means Goodman Fielder Limited ABN 44 000 003 958. "GOVERNMENT AUTHORITY" means: (a) a government or government department or other body; (b) a governmental, semi-governmental or judicial person; or (c) a person (whether autonomous or not) who is charged with the administration of a law. "GST" means: (a) the same as in the GST Law; and (b) any other goods and services tax, or any Tax applying to this transaction in a similar way. "GST LAW" means: (a) in Australia, the same as "GST law" means in A New Tax System (Goods and Services Tax) Act 1999 (Cth); and (b) in New Zealand, the Goods and Services Tax Act 1985 (New Zealand); "HI-MAIZE" means resistant starch product conforming with the Specifications. "HI-MAIZE 1043" means resistant starch product conforming with the Specifications. "HI-MAIZE ACCESS DEED" means a deed in the Agreed Form between Goodman Fielder, Quality Bakers Australia Limited, the Purchaser and the Company for Quality Bakers Australia Limited's and Goodman Fielder's (including GF Group entities) access to the supply of Hi-maize and related resistant starch applications after Completion. "HI-MAIZE PRODUCT" means the resistant starch ingredient known at the date of this agreement as Hi-maize resistant starch (including the variants Hi-maize and Hi-maize 1043) and manufactured from time to time pursuant to the Patents, including any Improvements. "HI-MAIZE SUPPLY AGREEMENT" means an agreement in the Agreed Form between the Company, Goodman Fielder Mills Limited, Quality Bakers Australia Limited and The Uncle Tobys Company Limited for the supply of Hi-maize and related resistant starch applications. "IMPROVEMENT" means any improvement, modification, adaptation, innovation, invention or development in or to or derived wholly or partly from any of the Inventions or Patents: (a) made by or on behalf of the Company or the Purchaser (or any Affiliate of either of them) in its own right or in conjunction with any other party; or 6. 12 (b) licensed to or by the Company or the Purchaser (or any Affiliate of either of them), including all Intellectual Property rights and confidential information of the Company or the Purchaser (or any Affiliate of either of them) or licensed to or by the Company or the Purchaser (or any Affiliate of either of them) relating to any of those things. "INDEPENDENT ACCOUNTANT" under clause 5.8 means an accountant nominated by the President of the Institute of Chartered Accountants in Australia at the request of a Principal Party, or any other person who is agreed in writing by the Principal Parties. "INFORMATION MEMORANDUM" means the information memorandum dated March 2000 relating to the Business. "INTELLECTUAL PROPERTY UMBRELLA DEED" means a deed in the Agreed Form that is conditional only on Completion between the Vendor, Goodman Fielder and the Purchaser under which: (a) the Vendor and Goodman Fielder agree to endeavour to transfer certain interests of the Vendor and Goodman Fielder in certain Co-operative Research Centres to the Purchaser; and (b) Goodman Fielder agrees to execute, and procure that each relevant GF Group entity executes, on Completion the GF Intellectual Property Transfer Deeds and the Trade Mark Licence Deed. "INVENTION" means each of the inventions the subject of one or more of the Patents. "LAST PERIOD" means the period from 1 July 2007 to the 7th anniversary of Completion. "LOSS" means, in relation to any person, a damage, loss, cost, expense or liability suffered or incurred by that person. "MATERIAL ADVERSE CHANGE" means any event (whether considered in isolation or viewed collectively with other events) which occurs between execution of this agreement and Completion which results in a $10 million or greater diminution in the consolidated net assets of the Bodies Corporate (considered collectively) as referenced against the net asset position shown in the Accounts Date Net Asset Statement, but excludes anything: (a) disclosed in a Disclosure; (b) known by (or ought reasonably to be known by) any Purchaser Entity from any source, including its due diligence investigations and knowledge of the industry sector in which the Business operates; (c) which, no later than 4pm (Sydney time) on the Business Day which is 3 Business Days prior to the date of execution of this agreement, is revealed in any information made available to the public by any of the following Government Authorities in Australia or New Zealand: (i) the Australian Securities Commission and the New Zealand Companies Office; (ii) the Australian Stock Exchange and the New Zealand Stock Exchange; 7. 13 (iii) IP Australia and the Intellectual Property Office of New Zealand; (iv) the New South Wales Land Titles Office and the New Zealand Land Titles Office; and (v) local councils in Australia and regional and district councils in New Zealand with authority over any Property; (d) which in substance involves the Purchaser having an opinion different from the Vendor as to the valuation of any asset of the Bodies Corporate as shown in the Accounts Date Net Asset Statement; (e) which is able to be recovered by the Purchaser or a Body Corporate from any third party in accordance with clause 6.5 or in any other manner including: (i) amounts for which it is able to claim a Tax deduction, rebate or credit; and (ii) amounts which it is able to recover from an insurer; (f) arising out of something consented to by the Purchaser under clause 3; or (g) attributable to the acts or omissions of, or on behalf of, a Purchaser Entity. "NZ EMPLOYEE" means any person employed as at Completion by the Subsidiary. "PATENTS" means the patents and patent applications (and any patents granted as a result of those applications) set out in schedule 9 or any one of them or any combination of them, and all patents applied for anywhere after the Completion Date which are based on or derived from any of such patents or patent applications or any Improvements. "PAYMENT THRESHOLD" means: (a) for the First Period, $7.8 million divided by 365 multiplied by the number of days in the First Period; (b) for each financial year from 1 July 2001 to 30 June 2007, $7.8 million; and (c) for the Last Period, $7.8 million divided by 365 multiplied by the number of days in the Last Period. "PENFORD CORPORATION" means Penford Corporation, a corporation duly incorporated in the State of Washington, United States of America of 777 108th Avenue, NE Suite 2390, Bellevue, Washington, 98004, USA. "PERIOD" means a period of 7 years commencing on the Completion Date and terminating on the 7th anniversary of the Completion Date. "POLLUTION" means the release, emission or discharge into the Environment of a substance which directly or indirectly causes or has the potential to cause damage or harm to any aspect of the Environment, and includes: (a) pollution of air; 8. 14 (b) pollution of waters; (c) offensive noise; and (d) pollution of land. "PRINCIPAL PARTIES" means the Vendor and the Purchaser. "PREFERRED SUPPLIER DEED" means a deed in the Agreed Form between the Company and Goodman Fielder for the supply of products by the Company to GF Group entities after Completion. "PRODUCT" means each Hi-maize Product, Bevtech Product and Culture-Pro. "PRODUCT SALES" means gross receipts (excluding GST or any similar Tax applying to the sale of goods) from all sales of Products by a Body Corporate or any Affiliate of a Body Corporate anywhere in the world excluding Excluded Product Sales. "PROPERTY" means in relation to any of the Bodies Corporate, the interests in real property which are held or attributable to the Body Corporate as noted in schedule 8. "PURCHASER'S AUDITORS" means Ernst & Young, LLP (with assistance from the Melbourne office of Ernst & Young, Australia). "PURCHASER ENTITY" means any of the Purchaser, a related body corporate of the Purchaser, and a director, officer, employee or representative of or adviser to the Purchaser or such related body corporate. "PURCHASE PRICE" means $98 million (exclusive of GST) (less the Company Debt) as adjusted under either clause 5 or clause 10.3 or both. "PURCHASER'S WARRANTIES" means the representations and warranties in schedule 5. "RAW MATERIALS" means all materials purchased by a Body Corporate for the Business in respect of which no fabricating or processing or other work has been carried out by the Vendor, Goodman Fielder or a Body Corporate (whether or not those materials are in a raw or processed form) and includes: (a) component parts, raw materials, the Vendor and packaging purchased from third parties; and (b) indirect materials used generally in the Business and not forming or intended to form part of a finished product. "ROYALTY PAYMENT" means, in relation to a Calculation Period, 0.05 x (the value of Product Sales in that Calculation Period less the Payment Threshold). "SHARES" means the 2 fully paid ordinary shares in the Company owned by the Vendor. "SHELL DEPOT" means the land sold by The Shell Company of Australia Limited to Geo. Fielder & Company Limited under a contract for sale of land dated 28 May 1969, which was disclosed to the Purchaser Entity in the Disclosures. 9. 15 "SPECIFICATIONS" has the same meaning as in the Hi-maize Access Deed. "STOCK" means the Raw Materials, work-in-progress and finished stock used or to be used or sold in connection with or as part of the Business wherever located. "SUBSIDIARY" means Starch New Zealand Limited. "SUPPLY AGREEMENT" means an agreement in the Agreed Form for the supply of each of the following specified goods between the Company and the specified parties: (a) glucose, syrup solids and unmodified maize starch - The Uncle Tobys Company Limited ABN 76 000 008 962; (b) wheat flour and gluten - Goodman Fielder Mills Limited ABN 24 000 008 739; and (c) gluten - Quality Bakers Australia Limited ABN 45 004 205 449. "TAX" means any income tax, GST (or other goods and services tax), capital gains tax, superannuation guarantee charge, recoupment tax, land tax, sales tax, payroll tax, fringe benefit tax, group tax, profit tax, interest tax, property tax, undistributed profits tax, withholding tax, municipal rates, stamp duties and other duties, charges, levies and impositions, assessed or charged, or assessable or chargeable, by or payable to any governmental taxation or excise authority (in Australia, New Zealand or elsewhere) and includes any additional tax, interest, penalty, charge, fine, fee or other amount imposed or made on or in relation to a failure to file a relevant return or to pay the relevant tax. "TOTAL PURCHASE PRICE" means the Purchase Price plus all the Royalty Payments. "TRADE MARK LICENCE DEED" means the deed referred to in clause 2(c) of the Intellectual Property Umbrella Deed to license the Purchaser to use certain trade marks of GF Group members. "TRANSITIONAL SERVICES AGREEMENT" means an agreement in the Agreed Form between the Company and GF Group Services Pty Limited ABN 22 003 889 996 for the supply by the GF Group of certain services after Completion. "UMBRELLA GUARANTEE AND INDEMNITY" means an agreement in the Agreed Form between Penford Corporation, the Vendor, Goodman Fielder, GF Australia Limited, Goodman Fielder Mills Limited, Quality Bakers Australia Limited and The Uncle Tobys Company Limited under which Penford Corporation guarantees to the other parties to that agreement the obligations of the Company and the Purchaser under this agreement and (conditional only on Completion) the other Ancillary Agreements. "VENDOR'S AUDITORS" means the Sydney office of Ernst & Young, Australia. "VENDOR'S WARRANTY" means each representation and warranty in schedule 6. 1.2 OTHER DEFINITIONS Certain terms are defined in the remaining clauses of this agreement and (without limitation) clause 1.3(i) applies to those definitions. 10. 16 1.3 RULES FOR INTERPRETING THIS AGREEMENT The following rules apply in interpreting this agreement, except where the context makes it clear that a rule is not intended to apply: (a) headings are for convenience of reference only and do not affect interpretation; (b) a reference to: (i) legislation (including subordinate legislation) is to that legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it; (ii) a document or agreement, or a provision of a document or agreement, is to that document, agreement or provision as amended, supplemented, replaced or novated; (iii) a party to this agreement or to any other document or agreement includes a permitted substitute or a permitted assign of that party; and (iv) a person includes any type of entity or body of persons, whether or not it is incorporated or has a separate legal identity, and any executor, administrator or successor in law of the person. (c) a word denoting the singular number includes the plural number and vice versa; (d) if an example is given of anything (including a right, obligation or concept), such as by saying that it includes something else, the example does not limit the scope of that thing; (e) a word denoting a gender includes all genders; (f) a reference to a recital, clause, schedule or annexure is to a recital, clause, schedule or annexure of or to this agreement; (g) if a word is defined, another part of speech has a corresponding meaning; (h) the word "AGREEMENT" includes an undertaking or other binding arrangement or understanding, whether or not in writing; (i) where an expression is defined anywhere in this agreement, it has the same meaning throughout; (j) a reference to a "RELATED BODY CORPORATE" of a body corporate is to a body corporate which is related to it under section 50 of the Corporations Law as in force at the date of this agreement; (k) a reference to a "SUBSIDIARY" of a body corporate is to: (i) a body corporate which is a subsidiary of it under section 46 of the Corporations Law as in force at the date of this agreement; 11. 17 (ii) a corporation which is a subsidiary of another corporation if that other corporation has appointed or is in a position to appoint a director or directors who are in a position to cast, or control the casting of, more than one half of the maximum number of votes that might be cast at a meeting of the board of directors of the first mentioned corporation; (l) a reference to "DOLLARS" or "$" is to an amount in Australian currency. 1.4 BUSINESS DAYS If the day on or by which a person must do something under this agreement is not a Business Day: (a) if the act involves a payment that is due on demand, the person must do it on or by the next Business Day; and (b) in any other case, the person must do it on or by the previous Business Day. 1.5 PAYMENTS Any payment required to be made by a Principal Party to the other under this agreement must be made in cash, by telegraphic transfer of cleared funds, or by unendorsed bank cheque. 1.6 VENDOR'S KNOWLEDGE In this agreement, a reference to the Vendor's knowledge means the actual knowledge of: (a) the managing director, finance director and company secretary of the Vendor; (b) each director and company secretary of the Bodies Corporate; (c) the general manager, operations manager and senior finance executive of each of the Bodies Corporate; and (d) Brian Nicholson and Dr Ian Brown, such persons having caused reasonable enquiries to be made of relevant officers and employees of the Vendor and the Bodies Corporate. 2. AGREEMENT TO SELL AND BUY THE SHARES 2.1 SALE AND PURCHASE Subject to clauses 2.3 and 2.4, the Vendor as legal and beneficial owner agrees to sell to the Purchaser and the Purchaser agrees to buy from the Vendor the Shares (together with all benefits, rights and entitlements accrued or attaching to the Shares as at Completion) free from any security or third party interest for the Total Purchase Price and otherwise on the terms and conditions of this agreement. 2.2 TITLE, PROPERTY AND RISK The title to, property in and risk of the Shares: 12. 18 (a) until Completion, remains solely with the Vendor; and (b) on and from Completion, passes to the Purchaser. 2.3 FIRB APPROVAL (a) Clause 2 (other than this clause 2.3) of this agreement is conditional on approval being given by, or on behalf of, the Treasurer of the Commonwealth of Australia under the Foreign Acquisitions and Takeovers Act 1975 to the acquisition of the Shares by the Purchaser, either unconditionally, or subject to conditions or requirements which are acceptable to the Purchaser. (b) The Purchaser must promptly make and pursue an application to the Foreign Investment Review Board on behalf of the Federal Treasurer for the approval referred to in clause 2.3(a) and must keep the Vendor informed of its efforts to obtain that approval. The Vendor must, if requested by the Purchaser, provide all reasonable assistance to enable the Purchaser to obtain that approval. (c) For the purposes of clause 2.3(a), the Federal Treasurer will be deemed to have approved the acquisition of the Shares by the Purchaser: (i) if a notice is issued under the Foreign Acquisitions and Takeovers Act 1975 stating that the Commonwealth Government does not object to the acquisition of the Shares; or (ii) if notice of the proposed acquisition of the Shares is given to the Foreign Investment Review Board on behalf of the Federal Treasurer under the Foreign Acquisitions and Takeovers Act 1975 and the Treasurer is, by lapse of time, not empowered to make an order under the Foreign Acquisitions and Takeovers Act 1975 in relation to the acquisition of the Shares. (d) The Purchaser must use its reasonable endeavours to fulfil the condition set out in clause 2.3(a). 2.4 MATERIAL ADVERSE CHANGE (a) Completion is conditional on there being no Material Adverse Change between execution of this agreement and Completion. (b) The Purchaser may elect by written notice to the Vendor to terminate this agreement without liability if a Material Adverse Change occurs between execution of this agreement and Completion. (c) The benefit of the condition in clause 2.4(a) is solely for the Purchaser. The Purchaser may waive the condition in its discretion or subject to such conditions as it considers appropriate, however if the Vendor rejects any such conditions (which it may do in its absolute discretion) clause 2.4(b) is deemed to apply. 13. 19 3. CONDUCT PENDING COMPLETION 3.1 ORDINARY COURSE OF BUSINESS Except with the consent of the Purchaser (which the Purchaser may not unreasonably withhold or delay), between execution of this agreement and Completion the Vendor must procure that the Bodies Corporate: (a) operate the Business in its ordinary course and on a basis consistent with its operation prior to execution of this agreement; (b) do not materially increase the total number of employees of the Bodies Corporate; (c) do not enter any new contract with a term greater than 1 year or incur expenditure in excess of $50,000 that is not currently budgeted for or anticipated in the Disclosures; and (d) do not do any act or execute any agreement or other instrument which will or might reasonably be expected to amount to a breach of any Warranty. 3.2 PRE-COMPLETION/COMPLETION TRANSACTIONS Prior to or at Completion: (a) the Purchaser and the Vendor must enter, and procure that the Company enters, into any transaction necessary to ensure that neither Goodman Fielder nor any GF Group member (except a Body Corporate) has any liability after Completion under: (i) the BNP Facility; and (ii) the guarantee (the "BNP GUARANTEE") provided by Goodman Fielder to BNP Pacific (Australia) Limited in respect of the BNP Facility, except for any breach of the BNP Facility or the BNP Guarantee which has not been disclosed to the Purchaser Entity prior to execution of this agreement; (b) subject to compliance by the Vendor with all applicable laws, the Vendor may effect transactions with the Bodies Corporate so that the Bodies Corporate have no cash at bank as at Completion, including transactions by way of dividend or repayment of any financial accommodation referred to in paragraph (c); (c) the Vendor must procure that: (i) any guarantee provided by a GF Group entity except a Body Corporate in respect of an obligation of a Body Corporate is released; (ii) any credit card or purchase card of a GF Group entity except a Body Corporate used by a Body Corporate is cancelled; (iii) the Company is removed from the offset arrangement between Goodman Fielder and Westpac Banking Corporation Limited in respect of GF Group entity bank accounts; and 14. 20 (iv) the Company is removed from any GF Group GST grouping arrangement; and (d) the Vendor must notify the Purchaser of the amount of the Company Debt on the Business Day immediately before the Completion Date. 3.3 PURCHASER ENTITIES' ACCESS PRIOR TO COMPLETION Until Completion the Vendor must: (a) ensure the Bodies Corporate permit certain Purchaser Entities, being: (i) Ernst & Young LLP; (ii) Ernst & Young Australia, Melbourne office; (iii) Jeffrey Cook; (iv) Keith Fujinaga; (v) Sue Iverson; (vi) Paige Irving (Assistant Corporate Controller); (vii) Greg Horn (General Manager of Penford's Foods Division); (viii) Wally Kunerth (Chief Science Officer); (ix) Mike Patrick (Vice-President Operations of Penford's Foods Division); and (x) Chuck Duthler (Director of Environmental Health & Safety), to have reasonable access during normal business hours to the Businesses including the premises on which the Businesses are conducted, any information in relation to the Businesses (except where to do so would prejudice any legal professional privilege which may attach to the information or disrupt the Businesses) and any personnel employed or engaged in the Businesses; and (b) allow the Purchaser or: (i) Ernst & Young LLP; (ii) Ernst & Young Australia, Melbourne office; (iii) Jeffrey Cook; (iv) Keith Fujinaga; (v) Sue Iverson; and (vi) Paige Irving (Assistant Corporate Controller), to consult the Vendor's Auditors with respect to the Bodies Corporate as the Purchaser reasonably requires, 15. 21 as long as such persons do not unreasonably interfere with the ordinary and proper conduct of the Businesses. 3.4 INSURANCE COVER Until Completion the Vendor will maintain its existing insurance coverage in respect of the Bodies Corporate (as disclosed to the Purchaser Entity prior to execution of this agreement) and, to the extent that any Claim is made against any insurance policy in respect of any Loss suffered or incurred by the Bodies Corporate, the Vendor will cause the proceeds of any such insurance claim to be: (a) paid to the relevant Body Corporate; or (b) if the Loss arises out of an asset that has been damaged or destroyed, used to replace or repair the relevant asset. 4. COMPLETION 4.1 TIME AND PLACE OF COMPLETION Subject to clauses 2.3 and 2.4, Completion is to occur on the Completion Date at 8.00am at the offices of Blake Dawson Waldron, Sydney or at any other time or place agreed by the Principal Parties. 4.2 OBLIGATIONS OF THE VENDOR AT COMPLETION At Completion the Vendor must: (a) deliver or cause to be delivered to the Purchaser: (i) the share certificates in respect of the Shares and the shares held by the Company in the Subsidiary; (ii) an instrument of transfer of the Shares in favour of the Purchaser or its nominee which has been duly executed in blank by the holder and is in registrable form; (iii) the certificate of incorporation of each Body Corporate (and any certificate of incorporation on change of name of any Body Corporate); (iv) any common seal (and any duplicate common seal, share seal or official seal) of each Body Corporate, if available; (v) all available original copies of the constitution of each Body Corporate; (vi) the books of account of each Body Corporate (which are deemed to be delivered at the premises at which they are held); (vii) the minute books and other records of meetings or resolutions of members and directors of each Body Corporate; 16. 22 (viii) all registers of each Body Corporate (including the register of members, register of options, register of directors, registers of directors' shareholdings, register of directors' interests, and register of charges); (ix) a duly completed authority for the alteration of the signatories of each bank account of each Body Corporate in the manner required by the Purchaser by notice before the Completion Date; (x) the written resignations of each director, secretary, auditor and public officer of each Body Corporate in accordance with clause 4.2(b); (xi) one original counterpart of each Ancillary Agreement duly executed by any person who is, before Completion, a member of the GF Group (other than any Ancillary Agreement that before Completion has been so executed and provided to the Purchaser); and (xii) evidence of the resolution referred to in clause 4.3(c)(ii); (b) procure that duly convened meetings of the directors of each Body Corporate (as appropriate) are held and procure at those meetings: (i) for the Company only, the approval of the registration and the registration (subject to payment of stamp duty) of the transfer of the Shares and the issue of a new share certificate for the Shares in name of the transferee; (ii) the appointment as additional directors, secretaries, auditor and public officers of the Body Corporate of the persons nominated by the Purchaser by notice to the Vendor before the Completion Date (and in the case of the Subsidiary, procure the Company to give notice in writing to the Subsidiary appointing as directors of the Subsidiary the persons nominated by the Purchaser); (iii) the retirement of each existing director, secretary, auditor and public officer of the Body Corporate with effect from the end of that meeting; (iv) the revocation of all existing authorities to operate bank accounts; and (v) the transaction of any other business relevant to Completion of which the Purchaser may give reasonable notice to the Vendor prior to the Completion Date; and (c) procure that a special resolution in writing in accordance with section 122 of the Companies Act 1993 (New Zealand) be passed which approves (with effect from the conclusion of Completion) the replacement of the Subsidiary's existing constitution with a new constitution in the form proposed by the Purchaser. 4.3 OBLIGATIONS OF PURCHASER AT COMPLETION At Completion the Purchaser must: (a) subject to receipt by the Purchaser of the Vendors certification under clause 3.2(d), pay all the Purchase Price to the Vendor in respect of the Shares; 17. 23 (b) cause sufficient consents to act to be available to allow each Body Corporate to pass the resolutions required by clause 4.2(b)(ii); (c) cause to be lodged with the Australian Securities and Investments Commission: (i) a notice of disposal (in the standard Australian Securities and Investments Commission form); and (ii) notice of a resolution of the board of Goodman Fielder (evidence of which is to be provided by Goodman Fielder) that the sale transaction contemplated by this agreement is approved, to remove the Company from the deed of cross guarantee entered into by the Company and other GF Group entities pursuant to ASIC Class Order 98/1418; (d) deliver one original counterpart of each Ancillary Agreement to which the Purchaser or any person other than a member of the GF Group is a party, duly executed by that party (including each Car Lease Novation Deed duly executed by Lease Plan Australia Limited) to the Vendor (other than any Ancillary Agreement that before Completion has been so executed and provided to the Vendor); (e) subject to receipt by the Purchaser of the Vendor's certification under clause 3.2(d), discharge the Company Debt by giving a bank cheque for the amount of the Company Debt to Goodman Fielder; (f) the Purchaser must ensure that as at Completion, arrangements are in place so that the transactional bank accounts of the Bodies Corporate are not in default once the GF Group guarantees referred to in clause 3.2(c)(i) are revoked; and (g) do and execute all other acts and documents which this agreement requires the Purchaser to do or execute at Completion. 4.4 PURCHASER'S OBLIGATION TO REGISTER The Purchaser must ensure that registration of the transfer of the Shares takes place as soon as practicable after Completion. 4.5 VENDOR'S OBLIGATIONS UNTIL REGISTRATION After Completion until the Shares are registered in the name of the Purchaser or any nominee, the Vendor must convene and attend general meetings of the Company, vote at those meetings and take all other action as registered holder of the Shares in relation to the Company as the Purchaser may lawfully require from time to time by notice to the Vendor. 5. POST COMPLETION ADJUSTMENT 5.1 STOCKTAKE (a) The Vendor must arrange for a physical stocktake of the Stock to be carried out not more than 2 Business Days before the Completion Date. (b) The Stock must be valued on the basis of the principles in schedule 1. 18. 24 (c) The Vendor must ensure that the Purchaser and the Purchaser's Auditors are given unrestricted access during normal business hours (and subject to usual security and safety requirements) to observe the stocktake. 5.2 PREPARATION AND DELIVERY OF COMPLETION DATE NET ASSET STATEMENT The Vendor must prepare the Completion Date Net Asset Statement in the format of the Accounts Date Net Asset Statement, and deliver it to the Purchaser as soon as practicable after, but no later than 30 Business Days after, Completion. 5.3 AGREED ACCOUNTING PRINCIPLES The Completion Date Net Asset Statement must be prepared and audited in accordance with the Agreed Accounting Principles. 5.4 PREPARATION AND DELIVERY OF THE CERTIFICATE The Vendor must procure that the Vendor's Auditors audit the Completion Date Net Asset Statement for the purpose of preparing the Certificate. The Certificate may only be subject to the qualifications set out in schedule 4 and such other qualifications as may be agreed between the Principal Parties in writing. The Vendor must deliver the Certificate to the Purchaser with the Completion Date Net Asset Statement. 5.5 WORKING PAPERS Promptly after delivery of the Certificate, the Vendor must procure that the Vendor's Auditors provide access to a copy of the working papers of their audit of the Completion Date Net Asset Statement to the Purchaser's Auditors, and that the Vendor's Auditors are available at all reasonable times before the Acceptance Notification Date (as defined in clause 5.7(a)) to discuss the audit and the working papers with the Purchaser's Auditors. 5.6 ACCESS AND CO-OPERATION After Completion, the Purchaser must provide the Vendor and the Vendor's Auditors with all necessary assistance and information, including giving access during normal business hours to all books and records of the Bodies Corporate, and making available the services of senior executives and staff of any of the Bodies Corporate, to enable the Vendor to prepare and the Vendor's Auditors to audit the Completion Date Net Asset Statement. 5.7 ACCEPTANCE OF COMPLETION DATE NET ASSET STATEMENT (a) Each Principal Party must notify the other whether or not it accepts the Completion Date Net Asset Statement and the Certificate on or before the date (the "ACCEPTANCE NOTIFICATION DATE") which is 10 Business Days after the date on which the Completion Date Net Asset Statement is delivered to the Purchaser. If a Principal Party does not accept any item set out in the Completion Date Net Asset Statement, it must give the other Principal Party full details of its reasons in its notice. 19. 25 (b) If: (i) a Principal Party does not give notice to the other in accordance with clause 5.7(a); or (ii) the aggregate value of all items not accepted by a Principal Party does not exceed $250,000.00, the Principal Party is taken to have accepted the Completion Date Net Asset Statement and Certificate. (c) If a Principal Party advises the other that it does not accept the Completion Date Net Asset Statement and clause 5.7(b)(ii) does not apply, the Principal Parties must use their reasonable endeavours to agree to amendments to the Completion Date Net Asset Statement. If they are unable to agree on the amendments within 10 Business Days after the Acceptance Notification Date, clause 5.8 applies. 5.8 RESOLVING DISPUTE OVER THE RESULTS OF COMPLETION DATE NET ASSET STATEMENT If the Principal Parties are unable to agree to amendments to the Completion Date Net Asset Statement under clause 5.7(c), the disagreement must be referred to the Independent Accountant as an expert for determination (and not for arbitration) and: (a) the Independent Accountant must be required to make the determination within 15 Business Days after being engaged; (b) the Principal Parties must promptly execute whatever reasonable terms of engagement the Independent Accountant requires (including any indemnity); (c) the Principal Parties may make submissions to the Independent Accountant within 2 Business Days of the engagement; (d) the Purchaser must provide the Independent Accountant with access during normal business hours to the books and records of the Bodies Corporate; (e) each Principal Party must provide all such assistance as it is able to provide as reasonably requested by the Independent Accountant; (f) the determination made by the Independent Accountant is final and binding on the Principal Parties and the Completion Date Net Asset Statement and Certificate are taken to be amended accordingly and accepted on the date of the determination; and (g) the Principal Parties must equally bear the costs of the Independent Accountant in making the determination. 5.9 ADJUSTMENT If the amount of net assets shown in the Completion Date Net Asset Statement is: (a) greater than the amount of net assets shown in the Accounts Date Net Asset Statement, the difference must be paid by the Purchaser to the Vendor; and 20. 26 (b) less than the amount of net assets shown in the Accounts Date Net Asset Statement, the difference must be paid by the Vendor to the Purchaser, together with interest at the rate of 8% per annum on the difference (calculated from the Completion Date) within 2 Business Days of the date that the Completion Date Net Asset Statement is accepted or taken to be accepted by the Principal Parties. 5.10 POST COMPLETION AUDITS For the purpose of assisting the Purchaser to comply with any financial reporting obligations to which it may be subject in any jurisdiction (including the United States of America), for a period of 6 months after Completion with respect to the Bodies Corporate, the Vendor must provide, at the Purchaser's cost, the Purchaser and the Purchaser's Auditors with all necessary reasonable assistance and information, including giving access to and making available during normal business hours the services of senior executives and staff of any of the GF Group who, by reason of their past involvement with the Bodies Corporate, may reasonably be able to assist the Purchaser in complying with any such reporting obligations. 5.11 ENTITLEMENT TO ROYALTY PAYMENTS If the amount of Product Sales for a Calculation Period exceeds the Payment Threshold, the Vendor is entitled to receive from the Purchaser, and the Purchaser must pay the Vendor, the Royalty Payment for that Calculation Period. 5.12 DUE DATE FOR ROYALTY PAYMENTS (a) Subject to clauses 5.12(b) and 5.12(c), the Royalty Payment is due on 30 June in each year of the Term and payable by 30 September of that year. (b) The Royalty Payment for the First Period will be payable by 30 September 2001. (c) The Royalty Payment for the Last Period will be payable within 90 days after the 7th anniversary of Completion. 5.13 STATEMENT TO BE PROVIDED WITH EACH ROYALTY PAYMENT With each Royalty Payment, the Purchaser must provide a statement certified by the Purchaser's auditors of Product Sales for the Calculation Period in respect of which the Royalty Payment is paid. The statement must itemise each element of Product Sales as per the definition of that term in clause 1.1 and the date and amount of each sale by each Body Corporate and each Affiliate as per clause 5.14. 5.14 DATE AND VALUE OF SALES FOR CALCULATION OF ROYALTY PAYMENTS For the purposes of this agreement (except where a sale or supply is an Excluded Product Sale): (a) a sale of a Product is taken to have occurred upon the earlier of the receipt by a Body Corporate or an Affiliate of a Body Corporate of payment for that Product, or the date of invoice for that Product; 21. 27 (b) in respect of a Product for which no payment is charged, a sale is taken to have occurred on the date of supply of that Product, such sale being deemed to be at a price that, in the reasonable opinion of the Vendor, the Product would have been sold if the sale had been an arms length transaction conducted on commercial terms; and (c) all foreign currency denominated Product Sales must be translated into Australian dollars at an exchange rate determined in accordance with generally accepted accounting practices including the application of AASB 1012. 5.15 RECORDS OF INFORMATION IN RELATION TO ROYALTY PAYMENTS The Purchaser must keep at its principal trading office in Australia, records and books of account relating to sales of Products giving true and clear particulars for the calculation of Royalty Payments and must at the reasonable request of the Vendor from time to time produce a certificate by the Purchaser's auditors as to the truth and completeness of those records and books of account. 5.16 ACCESS AND CO-OPERATION IN RELATION TO ROYALTY PAYMENTS During, and for a period of 6 months after, the Period, the Purchaser must provide the Vendor and the Vendor's auditors and accountants with all necessary assistance and information, including giving access during normal business hours to all books and records of the Bodies Corporate and Affiliates of the Bodies Corporate, and making available the services of senior executives and staff of any of the Bodies Corporate and Affiliates of the Bodies Corporate, to enable the Vendor to confirm that: (a) the Product Sales are correctly identified and recorded; and (b) any Royalty Payment has been correctly calculated. 5.17 PURCHASER'S ACKNOWLEDGMENT The Purchaser acknowledges the obligations of the the Purchaser and the Company provided for in clause 7 of the Hi-maize Access Deed. The Purchaser must procure that the Company complies with those obligations. The Purchaser's obligations under this clause 5.17 continue notwithstanding Completion. 6. WARRANTIES AND INDEMNITY BY VENDOR 6.1 VENDOR'S WARRANTIES In consideration of the Purchaser entering into this agreement, subject to the other provisions of this agreement, the Vendor represents and warrants to the Purchaser both at the date of this agreement and at the Completion Date (except that where a Vendor's Warranty expressly refers to only one of those dates, that Vendor's Warranty is given only as at that date) that each of the Vendor's Warranties is true and accurate in all material respects by reference to the facts and circumstances applying at the relevant date. The Purchaser has entered into this agreement in reliance on the Vendor's Warranties. 22. 28 6.2 VENDOR'S WARRANTY INDEMNITY Subject to clauses 6.3 and 10, the Vendor indemnifies the Purchaser against any Loss of the Purchaser to the extent that the Loss arises from any breach of any Vendor's Warranty. 6.3 EXCEPTIONS AND QUALIFICATIONS (a) The Vendor is not liable, and the Purchaser must not make a Claim against the Vendor, for any breach of a Vendor's Warranty or under the indemnity in clause 6.2: (i) (DISCLOSURES) if anything to the contrary is: (A) disclosed in a Disclosure; (B) known by (or ought reasonably to be known by) any Purchaser Entity from any source, including its due diligence investigations and knowledge of the industry sector in which the Business operates; or (C) no later than 4pm (Sydney time) on the Business Day which is 3 Business Days prior to the date of execution of this agreement, revealed in any information made available to the public by any of the following Government Authorities in Australia or New Zealand: (I) the Australian Securities Commission and the New Zealand Companies Office; (II) the Australian Stock Exchange and the New Zealand Stock Exchange; (III) IP Australia and the Intellectual Property Office of New Zealand; (IV) the New South Wales Land Titles Office and the New Zealand Land Titles Office; and (V) local councils in Australia and regional and district councils in New Zealand with authority over any Property; (ii) (TIME LIMIT) unless the Purchaser notifies the Vendor in writing of the Claim, giving all particulars of the Claim which are then known to the Purchaser, within 3 months after becoming aware of facts giving rise to the Claim and in any event by 31 December 2001; (iii) (MINIMUM AMOUNT) unless that Claim is for an amount assessed by the Purchaser in good faith to be at least $250,000; (iv) (AGGREGATE MINIMUM AMOUNT) unless the aggregate of all Claims for breach of Vendor's Warranties and under the indemnities in clauses 7.2 and 8.2 is for an amount assessed by the Purchaser in good faith to be at 23. 29 least $1 million and when the aggregate of all such Claims exceeds $1 million they may be recovered by the Purchaser in their entirety and not just in respect of the excess above $1 million; (v) (MAXIMUM LIABILITY) to the extent that that Claim, if successful, would result in the aggregate liability of the Vendor or Goodman Fielder for all Claims previously made by the Purchaser or the Company under this agreement and the GF Intellectual Property Transfer Deeds exceeding half the Purchase Price (assuming all such previous Claims which have not yet been satisfied are successful); (vi) (OTHER DAMAGES) to the extent that the Claim is for any indirect damages, consequential loss, economic loss, or loss of profits or punitive damages, however arising provided that a direct diminution in the value of the Shares or the Company's shares in the Subsidiary will not be so considered; (vii) (LIABILITY OTHERWISE COMPENSATED FOR) to the extent that an amount or Loss in respect of which the Claim is connected has or may be recovered by the Purchaser or a Body Corporate from any third party in accordance with clause 6.5 or in any other manner including: (A) amounts for which it is able to claim a Tax deduction, rebate or credit; (B) amounts provided for in the Purchase Price adjustment referred to in clause 5; and (C) amounts which it is able to recover from an insurer, although the Purchaser may include its (or the Body Corporate's) reasonable recovery costs in its Claim; (viii) (CONSENT BY PURCHASER) arising out of something consented to by the Purchaser under clause 3; (ix) (ACTS OF PURCHASER) to the extent that the Claim is attributable to the acts or omissions of, or on behalf of, a Purchaser Entity; (x) (CHANGE IN OWNERSHIP) once the share, asset or Business to which a Claim relates ceases to be controlled by the Purchaser; (xi) (THIRD PARTY CLAIMS) if there is an actual or potential third party Claim (as defined in clause 6.5(a)) in respect of the Claim and the Purchaser does not comply with clause 6.5 in all material respects in relation to the third party Claim; and (xii) (TAX OR ENVIRONMENTAL INDEMNITY) to the extent that the substance of the Claim is covered by the Vendor's indemnity in clause 7.2 or clause 8.2. (b) (NO DUTY) The Vendor has no duty to disclose any information (including without limitation any fact, matter or circumstance) by reference to a specific Vendor's Warranty and the Purchaser must rely on its own due diligence 24. 30 investigations to determine how any Disclosure may qualify the Vendor's Warranties. (c) (TRADE PRACTICES ACT) To the fullest extent permitted by law, the Purchaser irrevocably waives any right it may have to make a Claim in respect of any contravention of sections 51A, 52 or 53 of the Trade Practices Act 1974 (Cth) or corresponding State or Territory or New Zealand legislation in respect of any statement, representation, conduct or omission by or on behalf of the Vendor or Goodman Fielder which is not expressly contained in this agreement and indemnifies the Vendor against any Loss of the Purchaser to the extent that the Loss arises from the Purchaser making such a Claim. (d) (NO RESCISSION OR TERMINATION) The Purchaser waives any right it would otherwise have to rescind, terminate or refuse to Complete this agreement because of any Vendor's Warranty being untrue or inaccurate. This clause 6.3(d) does not limit the other remedies which the Purchaser has (including a Claim for damages) if any Vendor's Warranty is untrue or inaccurate. (e) (EXCLUSIONS) Without limiting clause 6.3(f), the Vendor makes no representations or warranties in relation to (including without limitation, about the accuracy, completeness or truth of): (i) any estimates, projections, forecasts, plans, budgets or other forward-looking statements, whether in relation to financial matters or anything else; (ii) any Environmental Aspect except for warranties 9.4 to 9.9 in schedule 6; or (iii) the Disclosures, except as expressly set out in this agreement. (f) (NO OTHER WARRANTIES) The Vendor makes no warranties or representations (express or implied) other than the Vendor's Warranties. 6.4 PURCHASER'S ACKNOWLEDGMENTS The Purchaser acknowledges that the Purchaser has had adequate opportunity to: (a) conduct due diligence investigations; (b) undertake, and the Vendor has co-operated with the Purchaser in undertaking, the investigations that the Purchaser has decided, in its absolute discretion, to undertake in relation to Environmental Aspects concerning the Property and the Bodies Corporate and their Businesses; (c) obtain independent legal, financial and technical advice in respect of the purchase of the Shares, the Businesses and the terms of this agreement, the Ancillary Agreements and related documents; and (d) satisfy itself in relation to matters arising from those investigations and advice. 25. 31 6.5 THIRD PARTY CLAIMS (a) (NOTIFICATION) The Purchaser must notify the Vendor of: (i) any actual or potential Claim for breach of a Vendor's Warranty arising as a result of any Claim by a third party against the Purchaser or a Body Corporate; and (ii) any actual or potential Claim which the Purchaser or a Body Corporate may have against a third party for recovery of a Loss which gives rise to a Claim against the Vendor for breach of a Vendor's Warranty, as soon as reasonably practicable after the Purchaser or the Body Corporate becomes aware of the Claim by or against the third party (a "THIRD PARTY CLAIM"). (b) (CONSULTATION) Promptly and before taking any action (including making any admission) in respect of a third party Claim, the Purchaser must consult, and procure the relevant Body Corporate to consult, with the Vendor to ascertain what Disputing Action in respect of the third party Claim, if any, is reasonable and appropriate. (c) (DISPUTING ACTION BY VENDOR) If required by the Vendor by notice to the Purchaser, the Purchaser must and must procure the Body Corporate to: (i) subject to clause 6.5(d), provide reasonable assistance to the Vendor to place itself in a position, and allow the Vendor, to take Disputing Action on behalf of (and in the name of) the Purchaser and the Body Corporate in respect of the third party Claim; and (ii) provide reasonable assistance to the Vendor as the Vendor may reasonably require in order to do so, including giving the Vendor access during normal business hours to the books and records and relevant Purchaser Entities. (d) (PURCHASER CONSENT) The Vendor must not take any Disputing Action in respect of a third party Claim without the consent of the Purchaser. The Purchaser's consent must not be unreasonably refused or delayed. The Purchaser must notify the Vendor of its reasons for any refusal to consent. In determining whether the Purchaser is reasonably refusing its consent, regard must be had to any proposal made by the Vendor to address the Purchaser's reasons. (e) (COSTS) The costs of any Disputing Action in respect of a third party Claim incurred by the Vendor (on its own behalf or on behalf of the Purchaser or a Body Corporate) must be borne by the Vendor. The reasonable costs of the Purchaser in complying with clause 6.5(c) must be paid by the Vendor on demand by the Purchaser. (f) (NO DISPUTING ACTION BY VENDOR) If the Vendor does not give a notice to the Purchaser under clause 6.5(c) within 10 Business Days after the Purchaser's notice under clause 6.5(a), the Purchaser is free to take such action as it sees fit (consistent with its obligations to mitigate its Loss under clause 10). 26. 32 (g) (MITIGATION GENERALLY) This clause 6.5 does not limit clause 10, and clause 10 prevails if there is any inconsistency. 6.6 CONTINUING WARRANTIES The Vendor's Warranties are continuing warranties and do not merge on Completion. They remain in full force and effect notwithstanding Completion until the end of the period specified in clause 6.3(a)(ii). 6.7 WAIVER OF RIGHTS BY VENDOR In respect of the Purchaser (for itself and as trustee for each of the Bodies Corporate and their respective officers, employees and advisers), the Vendor irrevocably waives any rights which it may have had for any misrepresentation or inaccuracy in, or omission of, any information or advice supplied by any of the Bodies Corporate or their respective officers, employees and advisers and relied upon by the Vendor in giving any Vendor's Warranty. 6.8 DISCLOSURE OF BREACH OF VENDOR'S WARRANTY Pending Completion the Vendor must immediately notify the Purchaser of anything which may arise or become known to the Vendor which is or could reasonably be expected to amount to: (a) a breach of, or an inconsistency with, any Vendor's Warranty (subject to clause 6.3); or (b) a Material Adverse Change. 7. TAXATION INDEMNITY 7.1 DEFINITIONS In this agreement, unless the context otherwise requires: "ASSESSMENT" means any assessment, penalty, fine, demand or other document imposing, asserting or indicating an intention to assert any liability issued by a Taxation Authority in respect of Tax of a Body Corporate or of the Purchaser in relation to a Body Corporate. "RELEVANT RATE" means: (a) for Australian resident companies, the rate of tax payable by Australian resident companies on taxable income; and (b) for New Zealand resident companies, the rate of tax payable by New Zealand resident companies on taxable income. "REPAYMENT" means an amount that a Taxable Entity receives from a Taxation Authority in respect of a payment made to the Taxation Authority. "TAXABLE ENTITY" means any of the Purchaser and each of the Bodies Corporate. 27. 33 "TAXATION AUTHORITY" means any authority in Australia, New Zealand or elsewhere which raises, levies or assesses any Tax. "TAX LIABILITY" means any amounts payable by either or both of a Body Corporate and the Purchaser in respect of any Assessment. 7.2 VENDOR'S TAX INDEMNITY Subject to clauses 7.3 and 10, the Vendor indemnifies the Purchaser against any Tax Liability where the Tax Liability arises (in whole or in part, and if in part, to the extent that it arises): (a) as a result of an event or omission which occurred on or before Completion; (b) as a result of or by reference to any income, profits or gains earned, accrued or received on or before Completion; (c) from the disallowance of an income tax deduction claimed before Completion for any expenses, losses or other outgoings incurred on or before Completion; or (d) from the disallowance of a Tax credit or rebate of Tax, such as a dividend rebate, claimed before Completion relating to a matter referred to in paragraph (a), (b) or (c). 7.3 EXCEPTIONS AND QUALIFICATIONS The Vendor is not liable, and the Purchaser must not make a Claim against the Vendor, under the indemnity in clause 7.2: (a) (DISCLOSURES) if the Tax Liability is: (i) disclosed in a Disclosure, including where the Tax Liability is provided for in the Accounts; or (ii) known by (or ought reasonably to be known by) any Purchaser Entity from any source, including its due diligence investigations and knowledge of the industry sector in which the Business operates; (b) (COMPLIANCE WITH OBLIGATIONS) unless the Purchaser complies with its obligations under this clause 7 in all material respects; (c) (TIME LIMIT) unless the Purchaser notifies the Vendor in writing of the Claim within 5 years after Completion; (d) (CHANGE IN LAW) to the extent that the Claim arises from: (i) any amendment to any legislation or legislative provision; (ii) any ruling of any Taxation Authority; (iii) any change in the practice of any relevant Taxation Authority; or (iv) any variation in the rate of Tax charged, levied or imposed, 28. 34 which occurs after Completion (even if it purports to have retrospective effect); (e) (DISPUTING ACTION) if the Purchaser does not comply with clause 7.5 in all material respects in relation to the Assessment; and (f) (OTHER) as stated in clause 6.3(a)(iii), (v), (vi), (vii), (ix) and (x) (the wording of such paragraphs being deemed to be repeated in this clause 7.3). 7.4 REPAYMENT Where: (a) a payment has been made by the Vendor under the indemnity in clause 7.2; and (b) the Taxable Entity receives a Repayment directly related to the payment referred to in clause 7.4(a), the Taxable Entity must within 10 Business Days after receipt, cause an amount to be restored to the Vendor calculated as follows: A = R - (I x T) Where: A is the amount to be restored to the Vendor; R is the amount of the Repayment; I is the amount of the component of the Repayment that is interest on overpaid Tax; and T is the Taxable Entity's Relevant Rate (expressed as a decimal number). 7.5 DISPUTING ACTION RE ASSESSMENT (a) (NOTIFICATION) The Purchaser must notify the Vendor if a Taxable Entity receives any Assessment to which the indemnity in clause 7.2 may apply, giving all particulars of the Assessment which are then known to the Taxable Entity (including a copy of any relevant Assessment or other correspondence from or to a Tax Authority) within 10 Business Days of receipt of the Assessment. (b) (CONSULTATION) Promptly and before taking any action (including making any admission) in respect of the Assessment, the Purchaser must notify, and procure the relevant Taxable Entity to notify, the Vendor to ascertain what Disputing Action in respect of the Assessment, if any, is reasonable and appropriate. (c) (DISPUTING ACTION BY VENDOR) If required by the Vendor by notice to the Purchaser, the Purchaser must and must procure the Taxable Entity to: (i) subject to clause 7.5(d), provide reasonable assistance to the Vendor to place itself in a position, and allow the Vendor, to take Disputing Action on behalf of (and in the name of) the Taxable Entity in respect of the Assessment; and 29. 35 (ii) provide reasonable assistance to the Vendor as the Vendor may reasonably require in order to do so, including by giving the Vendor access during normal business hours to the books and records of the Taxable Entity and relevant Purchaser Entities. (d) (PURCHASER CONSENT) The Vendor must not take any Disputing Action in respect of an Assessment without the consent of the Purchaser. The Purchaser's consent must not be unreasonably refused or delayed. The Purchaser must notify the Vendor of its reasons for any refusal to consent. In determining whether the Purchaser is reasonably refusing its consent, regard must be had to any proposal made by the Vendor to address the Purchaser's reasons. (e) (COSTS) The costs of any Disputing Action in respect of an Assessment incurred by the Vendor (on its own behalf or on behalf of the Purchaser or the Taxable Entity) must be borne by the Vendor. The reasonable costs of the Purchaser in complying with clause 7.5(c) must be paid by the Vendor on demand by the Purchaser. (f) (NO DISPUTING ACTION BY VENDOR) If the Vendor does not give a notice to the Purchaser under clause 7.5(c) within 10 Business Days after the Purchaser's notice under clause 7.5(a), the Purchaser is free to take such action as it sees fit (consistent with its obligations to mitigate its Loss under clause 10). (g) (MITIGATION GENERALLY) This clause 7.5 does not limit clause 10, and clause 10 prevails if there is any inconsistency. 7.6 TAXATION RETURNS AND CORRESPONDENCE The Purchaser must ensure that any Taxation return prepared by or on behalf of any Taxable Entity after the Completion Date, and any communication with a Taxation Authority, that relates in whole or in part to a period prior to Completion is prepared and made: (a) with due care, skill and diligence; and (b) in consultation with the Vendor and with the Vendor's consent (which consent must not be unreasonably refused or delayed) to the extent that the Taxation return or correspondence contains information relating to the period prior to Completion and the Vendor will, to the extent it is able, provide or cause to be provided, assistance to the Purchaser with respect to the preparation of any such Taxation return at the Purchaser's cost. 7.7 TAXATION AUDITS (a) The Principal Parties must co-operate and give each other all reasonable assistance that they are able to provide in connection with any Tax audit of a Taxable Entity after Completion which relates to any period before Completion. (b) The Vendor must pay on demand by the Purchaser all reasonable costs of the Purchaser or any Taxable Entity in connection with that part of the reasonable audit costs associated with any period before Completion. 30. 36 7.8 REPAYMENTS OR OVERPROVISIONS If a Body Corporate receives a Repayment which relates to a period prior to Completion the Purchaser must, within 10 Business Days of such receipt pay to the Vendor an amount calculated in accordance with clause 7.4 (in each case less any amount owing by the Vendor to the Purchaser in respect of the indemnity in clause 7.2). 8. ENVIRONMENTAL INDEMNITY 8.1 DEFINITIONS In this agreement, unless the context otherwise requires: "ENVIRONMENTAL ISSUE" has the meaning given to that term in clause 8.3(a). "INDEPENDENT EXPERT" means, a person agreed to in writing by the Principal Parties, or failing agreement, an accredited site auditor (contaminated land) under the Contaminated Land Management Act 1997 (NSW) appointed by the President of the Australian Contaminated Land Consultants Association Inc at the request of a Principal Party. "PLAN OF WORK" means the plan provided by the Vendor under clause 8.5(b) consented to or taken to be consented to by the Purchaser. "REMEDIATION REQUIREMENT" means: (a) any legally enforceable written direction or order imposed on a Body Corporate under any Environmental Law; or (b) any requirement lawfully imposed by a Government Authority on a Body Corporate as a condition of any consent, licence or authority reasonably required by a Body Corporate for the continuing conduct of its business as it is conducted at the date of this agreement, that requires the clean up or remediation of Contamination or Pollution on or from the Properties. "WORKS" means any works which result from an Environmental Issue. 8.2 VENDOR'S ENVIRONMENTAL INDEMNITY Subject to clauses 8.3, 8.4 and 10, the Vendor indemnifies the Purchaser (for itself and as trustee for each of the Bodies Corporate) against any Loss of the Purchaser or any of the Bodies Corporate arising out of: (a) any Environmental Claim or Remediation Requirement caused by an Environmental Aspect which occurred prior to Completion other than a matter referred to in paragraph (c); (b) any breach of any of warranties 9.4 to 9.9 in schedule 6 (the "ENVIRONMENTAL WARRANTIES"); and (c) any Environmental Claim or Remediation Requirement caused by leaking, prior to Completion, of underground storage tanks at the Shell Depot. 31. 37 8.3 EXCEPTIONS AND QUALIFICATIONS - GENERALLY The Vendor is not liable, and the Purchaser must not make a Claim against the Vendor, under the indemnity in clause 8.2(a) or clause 8.2(b): (a) (DISCLOSURES) if the circumstances which may give rise to the Environmental Claim, Remediation Requirement or the breach of the Environmental Warranties (an "ENVIRONMENTAL ISSUE") are: (i) specifically disclosed in a Disclosure; (ii) known by (or ought reasonably to be known by) any Purchaser Entity from any source, including its due diligence investigations and knowledge of the industry sector in which the Business operates; or (iii) no later than 4pm (Sydney time) on the Business Day which is 3 Business Days prior to the date of execution of this agreement, revealed in any information made available to the public by any of the following Government Authorities in Australia or New Zealand: (A) the New South Wales Land Titles Office and the New Zealand Land Titles Office; and (B) local councils in Australia and regional and district councils in New Zealand with authority over any Property; (b) (BUDGETED EXPENSES) to the extent that any Works to rectify Environmental Issues are included in a Body Corporate's budget (as disclosed in the Disclosures) for a period which expires after Completion; (c) (PLAN OF WORK) to the extent that the Works performed or to be performed pursuant to a Plan of Work have rectified or will rectify the Environmental Issue in all substantial respects; (d) (COMPLIANCE WITH OBLIGATIONS) unless the Purchaser complies with its obligations under this clause 8 in all material respects; (e) (TIME LIMIT) unless the Purchaser notifies the Vendor in writing of the Claim within 4 years after Completion; (f) (CHANGE IN LAW) if the Environmental Issue results from a change in the law after Completion (even if it purports to have retrospective effect); and (g) (OTHER) as stated in clause 6.3(a)(iii), (v), (vi), (vii), (ix), (x) and (xi) (the wording of such paragraphs being deemed to be repeated in this clause 8.3). 8.4 EXCEPTIONS AND QUALIFICATIONS - SHELL DEPOT The Vendor is not liable, and the Purchaser must not make a Claim against the Vendor, under the indemnity in clause 8.2(c): (a) (BUDGETED EXPENSES) to the extent that any Works to rectify Environmental Issues are included in a Body Corporate's budget (as set out in the document with 32. 38 barcode MAR.0033.281 disclosed in the Disclosures) for a period which expires after Completion; (b) (PLAN OF WORK) to the extent that the Works performed or to be performed pursuant to a Plan of Work have rectified or will rectify the Environmental Issue in all substantial respects; (c) (COMPLIANCE WITH OBLIGATIONS) unless the Purchaser complies with its obligations under this clause 8 in all material respects; (d) (CHANGE IN LAW) if the Environmental Issue results from a change in the law after Completion (even if it purports to have retrospective effect); (e) (MAXIMUM LIABILITY) to the extent that the Claim, if successful, would result in the aggregate liability of the Vendor for all Claims previously made by the Purchaser under the indemnity in clause 8.2(c) exceeding $8 million (assuming that all such previous Claims which have not been satisfied are successful); and (f) (OTHER) as stated in clause 6.3(a)(v), (vi), (vii), (ix), (x) and (xi) (the wording of such paragraphs being deemed to be repeated in this clause 8.4). 8.5 PLAN OF WORK (a) The Purchaser must notify the Vendor if the Purchaser or a Body Corporate becomes aware of any circumstance to which the indemnity in clause 8.2 may apply as soon as reasonably practicable after becoming so aware. (b) The Vendor may (subject to clause 8.7) within 2 months of receipt of the Purchaser's notice under clause 8.5(a) provide to the Purchaser a plan outlining Works proposed by the Vendor to address the Environmental Issue and the method and timing of the proposed Works. (c) Within 15 Business Days after receipt of the Vendor's plan (the "CONSENT NOTIFICATION DATE"), the Purchaser must notify the Vendor whether or not the Purchaser consents to the Vendor's plan (which consent must not be unreasonably refused). (d) If the Purchaser does not consent to the Vendor's plan, the Principal Parties must use their reasonable endeavours to agree to amendments to the plan. If they are unable to agree on the amendments within 10 Business Days after the Consent Notification Date, clause 8.6 applies. 8.6 EXPERT DETERMINATION If the Principal Parties are unable to agree to amendments to the Vendor's plan under clause 8.5(d), the dispute must be referred to the Independent Expert as an expert for determination (and not for arbitration) and: (a) the Independent Expert must be required to make the determination within 15 Business Days after being engaged; (b) the Principal Parties must promptly execute whatever reasonable terms of engagement the Independent Expert requires (including any indemnity); 33. 39 (c) the Principal Parties may make submissions to the Independent Expert within 2 Business Days of the engagement; (d) the Purchaser must provide the Independent Expert with full access during normal business hours to the relevant Property and the books and records of the relevant Body Corporate and relevant Purchaser Entities; (e) each Principal Party must provide all such assistance as it is able to provide as reasonably requested by the Independent Expert; (f) the determination made by the Independent Expert is final and binding on the Principal Parties and the Vendor's plan is taken to be amended accordingly and consented to by the Purchaser; and (g) the Principal Parties must equally bear the costs of the Independent Expert in making the determination. 8.7 DISPUTING ACTION RE ENVIRONMENTAL ISSUE (a) (CONSULTATION) Promptly and before taking any action (including making any admission) in respect of an Environmental Issue, the Purchaser must consult, and procure the relevant Body Corporate to consult with, the Vendor to ascertain what Disputing Action in respect of the Environmental Issue, if any, is reasonable and appropriate. (b) (DISPUTING ACTION BY VENDOR) If required by the Vendor by notice to the Purchaser, the Purchaser must and must procure the relevant Body Corporate to: (i) subject to clause 8.7(c), provide reasonable assistance to the Vendor to place itself in a position, and allow the Vendor, to take Disputing Action on behalf of (and in the name of) the Purchaser and the relevant Body Corporate in respect of the Environmental Issue; and (ii) provide reasonable assistance to assist the Vendor as the Vendor may reasonably require in order to do so, including by giving the Vendor access during normal business hours to the relevant Property, the books and records of the Purchaser and the relevant Body Corporate and relevant Purchaser Entities. (c) (PURCHASER CONSENT) The Vendor must not take any Disputing Action in respect of an Environmental Issue without the consent of the Purchaser. The Purchaser's consent must not be unreasonably refused or delayed. The Purchaser must notify the Vendor of its reasons for any refusal to consent. In determining whether the Purchaser is reasonably refusing its consent, regard must be had to any proposal made by the Vendor to address the Purchaser's reasons. (d) (COSTS) The costs of any Disputing Action in respect of an Environmental Issue incurred by the Vendor (on its own behalf or on behalf of the Purchaser or the relevant Body Corporate) must be borne by the Vendor. The reasonable costs of the Purchaser in complying with clause 8.5(b) must be paid by the Vendor on demand by the Purchaser. 34. 40 (e) (NO DISPUTING ACTION BY VENDOR) If the Vendor does not give a notice to the Purchaser under clause 8.7(b) within 20 Business Days after the Purchaser's notice under clause 8.5(a), clause 8.5(b) applies. (f) (EXTENSION FOR VENDOR'S PLAN) If the Vendor gives a notice to the Purchaser under clause 8.7(b) within 20 Business Days after the Purchaser's notice under clause 8.5(a), the period specified in clause 8.5(b) within which the Vendor may provide to the Purchaser the plan of the proposed Works commences upon the conclusion or abandonment by the Vendor of any Disputing Action. 8.8 CARRYING OUT THE PLAN OF WORK (a) (COMMISSIONING OF WORKS) The Vendor must commission the Works set out in the Plan of Work on behalf of, and as agent for, the Purchaser. The Vendor must bear the cost of the Works, and the amount of such costs shall be taken to be a liability of the Vendor for the purposes of clause 6.3(a)(v) or clause 8.4(e) (as the case may be). (b) (COMPLIANCE WITH PLAN OF WORKS) The Vendor must undertake or cause to be undertaken, and the Purchaser must supervise, the Works specified in the Plan of Work materially in accordance with the method and timing set out in the Plan of Work. (c) (REPORTING TO VENDOR) The Purchaser must report to and consult with the Vendor weekly on the progress of the Plan of Work. (d) (PROPER WORKMANSHIP) The Vendor is responsible for ensuring that the Plan of Work is carried out to a good and proper standard of workmanship. (e) (ASSISTANCE TO VENDOR) The Purchaser grants and must procure that the relevant Body Corporate grants to the Vendor and anyone acting on its behalf: (i) a licence to enter upon the relevant Property; (ii) reasonable access to any Purchaser Entity engaged in the Plan of Work; and (iii) reasonable access to any information, document, record or plan relevant to the Plan of Work, in order to do anything required or permitted pursuant to this clause 8, and must ensure that the Purchaser Entities co-operate with the Vendor and give the Vendor all reasonable assistance in this regard. (f) (DISRUPTION) The Purchaser acknowledges that the Works under the Plan of Work may cause some inconvenience to and disruption of a Body Corporate's activities on the relevant Property, but the Vendor is not liable to the Purchaser or the relevant Body Corporate for any Claim arising out of any such inconvenience or disruption. The Purchaser must execute, and procure the relevant Body Corporate to execute, any waiver, release or indemnity reasonably requested by the Vendor to confirm that the Vendor is not so liable. 35. 41 8.9 PURCHASER'S MITIGATION OF ENVIRONMENTAL EXPENSES (a) The Purchaser must take, and must ensure that each Purchaser Entity takes, all reasonable steps necessary to avoid an Environmental Issue arising. (b) Without limiting clause 8.9(a), the Purchaser must not and must ensure that the Company, the Subsidiary and any Purchaser Entity do not request, procure or seek to procure an Environmental Issue or increase or exacerbate the scope of the Works to be carried out as a result of an Environmental Issue. (c) The Purchaser must consult with the Vendor and obtain the Vendor's consent (which consent must not be unreasonably refused or delayed) in relation to any communication with an authority in relation to any Environmental Aspect. (d) This clause 8.9 does not limit clause 10, and clause 10 prevails if there is any inconsistency. 9. WARRANTIES AND INDEMNITY BY PURCHASER 9.1 PURCHASER'S WARRANTIES In consideration of the Vendor entering into this agreement, the Purchaser represents and warrants to the Vendor both at the date of this agreement and at the Completion Date (except that where a Purchaser's Warranty refers to only one of those dates, that Purchaser's Warranty is given only as at that date) that each of the Purchaser's Warranties is true and accurate in all material respects by reference to the facts and circumstances applying at the relevant date. 9.2 PURCHASER'S INDEMNITY Subject to clause 10, the Purchaser indemnifies and agrees to keep indemnified the Vendor against: (a) (PURCHASER'S WARRANTIES) any Loss of the Vendor to the extent that the Loss arises from any breach of any of the Purchaser's Warranties; and (b) (ENVIRONMENTAL CLAIM) any Environmental Claim caused by an Environmental Aspect that occurs after Completion. 10. LOSSES AND CLAIMS 10.1 MITIGATION A party (the "INDEMNIFIED PARTY") indemnified under clause 6.2, 7.2, 8.2 or 9.2 or any other indemnity in this agreement (an "INDEMNITY CLAUSE") must mitigate in accordance with general law any Loss to which the Indemnity Clause applies. If the Indemnified Party mitigates its Loss after the other party (the "INDEMNIFIER") has paid the Indemnified Party under the Indemnity Clause in respect of that Loss, the Indemnified Party must notify the Indemnifier and account to the Indemnifier to the extent of the value of the benefit to the Indemnified Party of that mitigation (less the Indemnified Party's reasonable costs of mitigation) within 2 Business Days after the benefit is received. 36. 42 10.2 INDEMNITY TAX EFFECT (a) In addition to any amount payable under an Indemnity Clause (an "INDEMNITY AMOUNT"), the Indemnifier must pay to the Indemnified Party on demand an additional amount in respect of, or as a result of, the Indemnified Party's receipt or derivation of an Indemnity Amount which places the Indemnified Party in the position it would have been in had the Loss not been incurred and had the Indemnity Amount not been received or derived. In calculating this additional amount, the Indemnifier and the Indemnified Party must take into account any Tax assessable upon or payable by the Indemnified Party and any Tax deduction, rebate or credit which the Indemnified Party may claim. (b) If the Indemnified Party is entitled to an input tax credit or other credit in respect of a cost or expense recoverable under the Indemnity Clause, the amount recoverable under the Indemnity Clause does not include the amount of that input tax credit or other credit. 10.3 PAYMENT AND TREATMENT OF CLAIMS AGAINST VENDOR Any amount paid by the Vendor to the Purchaser under any of clauses 6.2 or 7.2 must be treated for all purposes by the Principal Parties as a reduction in the Purchase Price. 10.4 OPERATION OF INDEMNITIES Each indemnity in this agreement survives the expiry or termination of this agreement. 10.5 CLAIM UNDER ANCILLARY AGREEMENT If any of the Purchaser, a Body Corporate or a related body corporate of the Purchaser (the "PURCHASER'S GROUP") is entitled to make a Claim in respect of a matter against any of the Vendor or Goodman Fielder under this agreement or the GF Intellectual Property Transfer Deeds or any number of them, the Purchaser must ensure that the Purchaser's Group collectively makes only one Claim in respect of the matter. In any event, the Vendor is not liable under this agreement in respect of the matter if and to the extent that any member of the Purchaser's Group has already Claimed in respect of the matter under this agreement or the GF Intellectual Property Transfer Deeds. 11. AUSTRALIAN SUPERANNUATION 11.1 DEFINITIONS In this agreement, including the recitals, unless the context otherwise requires: "COMPLYING SUPERANNUATION FUND" has the meaning given in the Income Tax Assessment Act 1936 (Cth). "PURCHASER'S FUND" means a Complying Superannuation Fund that is identified by the Purchaser for membership by the Employees under clause 11.3. "REGULATOR" means the Australian Securities and Investments Commission and the Australian Prudential Regulatory Authority. 37. 43 "SUPERANNUATION COMMITMENT" means any legal liability (whether arising under an industrial instrument or otherwise) to make contributions to any superannuation or retirement fund, pension scheme or other arrangement which provides employees or their dependants with superannuation or retirement benefits. "TRANSFER AMOUNT" means the accrued benefit entitlements of an Employee who is a member of the Vendor's Fund calculated as at the Completion Date on the basis that the Company has ceased to be an "Associated Employer", and adjusted for any positive or negative earnings from the Completion Date to the Transfer Date, in accordance with the governing rules of the Vendor's Fund. "TRANSFER DATE" means the date of the transfer of the Transfer Amount from the Vendor's Fund. "VENDOR'S FUND" means the Goodman Fielder Superannuation Fund established by the trust deed dated 26 June 1961 (as amended). 11.2 OBJECT OF CLAUSE 11 The parties intend that, subject to any necessary approvals by the trustee of the Vendor's Fund and the trustee of the Purchaser's Fund: (a) until the Completion Date, the Company will continue to contribute and participate in the Vendor's Fund as an "Associated Employer" under the governing rules of that fund; (b) on the Completion Date, the Company will cease to be an "Associated Employer" under the governing rules of the Vendor's Fund; (c) on the Transfer Date, each Employee who is a member of the Vendor's Fund will cease to be a member of the Vendor's Fund; and (d) on the Transfer Date, a Transfer Amount in respect of each Employee who is a member of the Vendor's Fund will be paid by the trustee of the Vendor's Fund in accordance with the governing rules of that fund to the trustee of the Purchaser's Fund. 11.3 THE COMPANY TO CEASE PARTICIPATING IN THE VENDOR'S FUND The Vendor must use its reasonable endeavours to ensure that the Company ceases participating in the Vendor's Fund as "Associated Employers" under the governing rules of that fund effective from the Completion Date. 11.4 PURCHASER'S FUND The Purchaser must, within 90 days after execution of this agreement, identify a Complying Superannuation Fund for membership by the Employees who are members of the Vendor's Fund which will provide benefits in respect of each such Employee from the Completion Date. 38. 44 11.5 MEMBERSHIP OF THE PURCHASER'S FUND The Purchaser must offer each Employee who is a member of the Vendor's Fund membership of the Purchaser's Fund within 90 days after execution of this agreement. 11.6 CALCULATION OF TRANSFER AMOUNT In relation to each Employee who is a member of the Vendor's Fund, as soon as practicable after the Completion Date, the Vendor must use its reasonable endeavours to procure the trustee of the Vendor's Fund to calculate the Transfer Amount of that Employee in accordance with the governing rules of the Vendor's Fund. 11.7 OBTAINING CONSENT TO TRANSFER In relation to each Employee who is a member of the Vendor's Fund, as soon as practicable after the Completion Date, the Purchaser must use its reasonable endeavours to procure the Employee's consent to transfer his or her Transfer Amount to the Purchaser's Fund. 11.8 CONSENTED TRANSFER TO PURCHASER'S FUND The Vendor must use its reasonable endeavours to procure the trustee of the Vendor's Fund to transfer to the trustee of the Purchaser's Fund the Transfer Amount of each Employee who has consented to transfer his or her Transfer Amount to the Purchaser's Fund. 11.9 TRANSFER TO OTHER SUPERANNUATION ARRANGEMENTS In relation to an Employee who is a member of the Vendor's Fund but has not consented to transfer his or her Transfer Amount to the Purchaser's Fund, the Vendor will use its reasonable endeavours to procure the trustee of the Vendor's Fund to transfer the Employee's Transfer Amount to any other superannuation arrangement in accordance with the governing rules of the Vendor's Fund. 11.10 PURCHASER MUST ENSURE MEMBERSHIP IN PURCHASER'S FUND The Purchaser must use its reasonable endeavours to procure the trustee of the Purchaser's Fund to accept the Transfer Amounts into the Purchaser's Fund in respect of the Employees who have consented to the transfer. 11.11 TRANSFER AMOUNT TO BE PAID IN CHEQUE OR CASH The Transfer Amount must be paid by bank cheque or cash unless the trustee of the Vendor's Fund and the trustee of the Purchaser's Fund agree that other assets will be transferred. 11.12 ACCESS TO RECORDS The Vendor must give, and must use its reasonable endeavours to procure that the trustee of the Vendor's Fund gives, the Purchaser and the trustee of the Purchaser's Fund access during normal business hours to the records of the Vendor's Fund which they may reasonably require in order for the Purchaser and the trustee of the Purchaser's Fund to take over responsibility and the administration of the of the superannuation 39. 45 arrangements in respect of the Employees who have consented as contemplated by clause 11.7. 11.13 PURCHASER'S CONTRIBUTIONS The Purchaser must ensure that either the Purchaser or the Company contributes from the Completion Date to the Purchaser's Fund or other nominated superannuation arrangement in respect of each Employee at the rate at which the Company was contributing to the Vendor's Fund immediately before the Completion Date. 12. NEW ZEALAND SUPERANNUATION 12.1 DEFINITIONS In this agreement, including the recitals, unless the context otherwise requires: "EFFECTIVE DATE" means the date upon which the Subsidiary ceases to be a "Participating Company" in the NZ Fund as a result of the Vendor's notice given pursuant to clause 12.3. "NZ TRANSFER AMOUNT" means the accrued benefit entitlements of a NZ Employee who is a member of the NZ Fund calculated as at the Effective Date on the basis that the Subsidiary has ceased to be a "Participating Company" in the NZ Fund as at that date, and adjusted for any positive or negative earnings from the Effective Date to the NZ Transfer Date, in accordance with the governing rules of the NZ Fund. "NZ TRANSFER DATE" means the date of the transfer of the NZ Transfer Amount from the NZ Fund. "NZ FUND" means the Goodman Fielder (NZ) Retirement Plan established by the trust deed dated 19 October 1971. "PURCHASER'S NZ FUND" means a Registered Superannuation Scheme that is identified by the Purchaser for membership by the NZ Employees under clause 12.3. "REGISTERED SUPERANNUATION SCHEME" has the meaning given in the Superannuation Schemes Act 1989 (NZ). 12.2 OBJECT OF CLAUSE 12 The parties intend that, subject to any necessary approvals by the trustee of the NZ Fund and the trustee of the Purchaser's NZ Fund: (a) until the Effective Date, the Subsidiary will continue to contribute and participate in the NZ Fund as a "Participating Company" under the governing rules of that fund; (b) on the Purchaser notifying its own Registered Superannuation Scheme (no later than 90 days after the execution of this agreement) the Vendor will procure that notice is given to the trustee of the NZ Fund that the Subsidiary will cease to be a "Participating Company" under the governing rules of the NZ Fund; 40. 46 (c) on the NZ Transfer Date, each NZ Employee who is a member of the NZ Fund will cease to be a member of the NZ Fund; and (d) on the NZ Transfer Date, a NZ Transfer Amount in respect of each NZ Employee who is a member of the NZ Fund, will be paid by the trustee of the NZ Fund in accordance with the governing rules of that fund to the trustee of the Purchaser's NZ Fund (subject to the consent of each NZ Employee). 12.3 THE SUBSIDIARY TO CEASE PARTICIPATING IN THE VENDOR'S NZ FUND On the Purchaser satisfying its obligations under clause 12.4, the Vendor must procure that notice is given to the trustee of the NZ Fund that the Subsidiary will cease to participate in the Vendor's NZ Fund as a "Participating Company" under the governing rules of that fund effective from the Effective Date. The Vendor will procure that the notice is given in accordance with the relevant rules governing the NZ Fund. 12.4 PURCHASER'S NZ FUND The Purchaser must, as soon as reasonably practicable but no later than 90 days after the execution of this agreement, identify a Registered Superannuation Scheme for membership by the NZ Employees who are members of the NZ Fund which will provide benefits in respect of each such NZ Employee from the Completion Date. 12.5 MEMBERSHIP OF THE PURCHASER'S NZ FUND The Purchaser must offer each NZ Employee who is a member of the NZ Fund membership of the Purchaser's NZ Fund on and from the Effective Date. 12.6 CALCULATION OF NZ TRANSFER AMOUNT In relation to each NZ Employee who is a member of the NZ Fund, the Vendor must use its reasonable endeavours to procure the trustee of the NZ Fund to calculate the Transfer Amount of that NZ Employee in accordance with the governing rules of the NZ Fund. 12.7 OBTAINING CONSENT TO TRANSFER In relation to each NZ Employee who is a member of the NZ Fund, as soon as practicable after the Completion Date, the Purchaser must use its reasonable endeavours to procure the NZ Employee's consent to transfer his or her NZ Transfer Amount to the Purchaser's NZ Fund. 12.8 CONSENTED TRANSFER TO PURCHASER'S NZ FUND The Vendor must use its reasonable endeavours to procure the trustee of the NZ Fund to transfer to the trustee of the Purchaser's NZ Fund the NZ Transfer Amount of each NZ Employee who has consented to transfer his or her NZ Transfer Amount to the Purchaser's NZ Fund. 12.9 TRANSFER TO OTHER SUPERANNUATION ARRANGEMENTS In relation to a NZ Employee who is a member of the NZ Fund but has not consented to transfer his or her NZ Transfer Amount to the Purchaser's NZ Fund, the Vendor will use its reasonable endeavours to procure the trustee of the NZ Fund to transfer the NZ 41. 47 Employee's NZ Transfer Amount to any other superannuation arrangement in accordance with the governing rules of the NZ Fund. 12.10 PURCHASER MUST ENSURE MEMBERSHIP IN PURCHASER'S NZ FUND The Purchaser must use its reasonable endeavours to procure the trustee of the Purchaser's NZ Fund to accept the NZ Transfer Amounts into the Purchaser's NZ Fund in respect of the NZ Employees who have consented to the transfer. 12.11 NZ TRANSFER AMOUNT TO BE PAID IN CHEQUE OR CASH The NZ Transfer Amount must be paid by cheque or cash unless the trustee of the NZ Fund and the trustee of the Purchaser's NZ Fund agree that other assets will be transferred. 12.12 ACCESS TO RECORDS The Vendor must give, and must use its reasonable endeavours to procure that the trustee of the NZ Fund gives, the Purchaser and the trustee of the Purchaser's NZ Fund access during normal business hours to the records of the NZ Fund which they may reasonably require in order for the Purchaser and the trustee of the Purchaser's NZ Fund to take over responsibility and the administration of the superannuation arrangements in respect of the NZ Employees who have consented as contemplated by clause 12.7. 12.13 PURCHASER'S CONTRIBUTIONS The Purchaser must ensure that: (a) the Subsidiary continues to contribute to the NZ Fund in respect of each NZ Employee from the Completion Date up to the Effective Date; and (b) either the Purchaser or the Subsidiary contributes from the Effective Date to the Purchaser's NZ Fund or other nominated superannuation arrangement in respect of each NZ Employee in accordance with the terms of membership of the Purchaser's NZ Fund or other nominated superannuation arrangements accepted by each NZ Employee. 13. RESTRAINT 13.1 DEFINITIONS In this agreement, unless the context otherwise requires: "RESTRAINED BUSINESS" means a business of refining raw material to produce starch and supplying that starch and by-products of the refining process to third parties in direct competition with a Body Corporate. "RESTRAINT AREA" means: (a) any country in which the Bodies Corporate carry on their Businesses during the year preceding the date of this agreement, or if that area is decided to be unenforceable, then; 42. 48 (b) Australia (including the Territory of Christmas Island, Norfolk Island and the Territory of Cocos (Keeling) Islands but not including any other external Territory), New Zealand, Japan and the United States of America, or if that area is decided to be unenforceable, then; (c) Australia (including the Territory of Christmas Island, Norfolk Island and the Territory of Cocos (Keeling) Islands but not including any other external Territory), New Zealand and Japan, or if that area is decided to be unenforceable, then; (d) Australia (including the Territory of Christmas Island, Norfolk Island and the Territory of Cocos (Keeling) Islands but not including any other external Territory) and New Zealand. "RESTRAINT PERIOD" means a period of 3 years from Completion. 13.2 RESTRAINT OBLIGATION Subject to clause 13.3, the Vendor must not, and must procure that each of its related bodies corporate does not, during the Restraint Period in the Restraint Area: (a) operate (whether on its own account or in partnership or by joint-venture) a Restrained Business; or (b) be concerned or interested in (directly or indirectly, or through any interposed body corporate, trust, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant or in any other capacity) a Restrained Business; (c) seek to or persuade any customer or client of any Body Corporate to cease doing business with any Body Corporate; (d) subject to the same exclusions set out in clause 16.13(a) and 16.13(b), disclose to any third party any trade secrets, product information or information of any Body Corporate that is not generally known; or (e) solicit, seek to or induce any person who is, or later becomes, an employee of the Purchaser or any Body Corporate to terminate his or her employment. 13.3 PERMITTED INVOLVEMENT Clause 13.2 does not prevent the Vendor or any of its related bodies corporate from doing anything referred to in clause 13.2(a) or clause 13.2(b) as a consequence of purchasing any company or business that operates, or is concerned or interested in, a Restrained Business as an ancillary part of that company or business, for a transitional period of 12 months after such a purchase. 13.4 REASONABLENESS OF RESTRAINT The Vendor agrees that each of the restraint obligations imposed by clause 13.2 is reasonable in its extent (as to duration and restrained conduct) having regard to the interests of each Principal Party and extends no further (in any respect) than is reasonably necessary and is solely to protect the Purchaser. 43. 49 13.5 SEVERABILITY (a) Each of the covenants, obligations and restrictions set out in this clause 13 are: (i) separate, severable and independent, the validity of each of which must be considered separately; and (ii) not true alternatives but cumulative in effect. (b) If clause 13.2 or any part of it is: (i) wholly or partly void, invalid, or otherwise unenforceable; or (ii) is judged to be beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Bodies Corporate; that clause or part will be deemed eliminated or modified to the extent necessary to make the balance of this agreement and that clause or part enforceable or reasonable, as the case may be. 14. TRANSITIONAL SERVICES The Purchaser acknowledges that, subject to the Transitional Services Agreement, any service provided before Completion either: (a) by the Vendor or any of its related bodies corporate to a Body Corporate; or (b) by a third party to a Body Corporate under an arrangement that is not an agreement between that third party and a Body Corporate, will not be available to the Purchaser or a Body Corporate from Completion. 15. NOTICES 15.1 METHOD OF GIVING NOTICES A notice required or permitted to be given by one party to another under this agreement must be in writing and is treated as being duly given if it is: (a) left at that party's address; (b) sent by pre-paid mail to that party's address; or (c) transmitted by facsimile to that party's address. 15.2 TIME OF RECEIPT A notice given to a party is treated as having been duly given and received: (a) when delivered (in the case of it being left at that party's address); (b) on the third Business Day after posting (in the case of it being sent by pre-paid mail); or 44. 50 (c) on the day of transmission, or the next Business Day after transmission if the date of transmission is not a Business Day, in the case of it being given by facsimile and sent to the facsimile receiver number of that party if no indication is received that the notice has not been received, whether that indication comes from that party or from the operation of facsimile machinery or otherwise. 15.3 ADDRESS OF PARTIES The address of a party is the address set out below or another address of which that party may from time to time give notice to each other party: THE VENDOR: Attention: The Company Secretary Address: Goodman Fielder Ingredients Limited 75 Talavera Road MACQUARIE PARK NSW 2113 Fax Number: (612) 8874 6099 THE PURCHASER: Attention: Sue Iverson Address: c/- Penford Corporation 777 108th Avenue, NE Suite 2390 Bellevue Washington 98004 USA Fax Number: 1 (425) 462 2819 (copied to Guy Sanderson of Baker & McKenzie (612) 9223 7711) 16. GENERAL 16.1 GOVERNING LAW This agreement is governed by the law in force in New South Wales. The parties submit to the non-exclusive jurisdiction of the courts of New South Wales and any courts which may hear appeals from those courts in respect of any proceedings in connection with this agreement. 16.2 WAIVER OF RIGHTS A right may only be waived in writing, signed by the party giving the waiver, and: (a) no other conduct of a party (including a failure to exercise, or delay in exercising, the right) operates as a waiver of the right or otherwise prevents the exercise of the right; (b) a waiver of a right on one or more occasions does not operate as a waiver of that right if it arises again; and 45. 51 (c) the exercise of a right does not prevent any further exercise of that right or of any other right. 16.3 AMENDMENT This agreement can only be amended, supplemented, replaced or novated by another document signed by the parties. 16.4 COUNTERPARTS This agreement may be executed in any number of counterparts and all of those counterparts taken together constitute one and the same instrument. 16.5 FURTHER ASSURANCE Each party must do, sign, execute and deliver and must procure that each of its employees and agents does, signs, executes and delivers, all deeds, documents, instruments and acts reasonably required of it or them by notice from another party to carry out and give full effect to this agreement and the rights and obligations of the parties under it. 16.6 OPERATION OF THIS AGREEMENT (a) This agreement contains the entire agreement between the parties in respect of its subject matter. Any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by this agreement and has no further effect. (b) Any right that a person may have under this agreement is in addition to, and does not replace or limit, any other right that the person may have. (c) Any provision of this agreement which is unenforceable or partly unenforceable is, where possible, to be severed to the extent necessary to make this agreement enforceable, unless this would materially change the intended effect of this agreement. 16.7 COSTS GENERALLY Except to the extent specified in clause 16.8 and elsewhere in this agreement, each party must bear and is responsible for its own costs (including legal costs) and expenses in connection with the negotiation, preparation, execution, completion and carrying into effect of this agreement. 16.8 STAMP DUTY The Purchaser must bear and is responsible for all stamp duty on or in respect of: (a) this agreement; (b) the instrument of transfer referred to in clause 4.2(a)(ii); and (c) any instrument or transaction contemplated by this agreement. 46. 52 16.9 NO MERGER No provision of this agreement merges on or by virtue of Completion. 16.10 ATTORNEYS Where this agreement is executed on behalf of a party by an attorney, that attorney by executing this agreement declares that the attorney has no notice of the revocation of the power of attorney under the authority of which the attorney executes the agreement on behalf of that party. 16.11 INTEREST FOR FAILURE TO PAY If any party fails to pay any amount payable under this agreement on the due date for payment, that party must pay interest from the due date on the amount unpaid at the higher of the rate of 12% or the rate (if any) fixed or payable under a judgment or other thing referred to in clause 16.12(a). 16.12 INTEREST PAYABLE ON JUDGMENT The interest payable under clause 16.11: (a) accrues from day to day from and including the due date for payment up to the actual date of payment, before and, as an additional and independent obligation, after any judgment or other thing into which the liability to pay the amount becomes merged; and (b) may be capitalised by the person to whom it is payable at monthly intervals. 16.13 CONFIDENTIALITY The parties must maintain absolute confidentiality concerning the existence and terms of this agreement and no public announcement or communication relating to the negotiations of the parties or the existence, subject matter or terms of this agreement may be made or authorised by or on behalf of a party without the prior written approval of the other party except that a party may make such disclosures in relation to this agreement as it may in its reasonable discretion think necessary: (a) to its professional advisers, bankers, insurers and insurance brokers, financial advisers and financiers upon those persons undertaking to keep confidential any information so disclosed; or (b) to comply with any applicable law or the requirement of any regulatory body (including any relevant stock exchange). 47. 53 SCHEDULE 1 (clause 5.1) STOCKTAKE PROCEDURES The Stock must be valued at the lower of Cost and NRV, where: "COST" means fully absorbed cost determined in accordance with the principles set out in items 1.4 and 2.4 of schedule 3 except that the standards in the "standard costing" method will be changed only in the case of a variance of at least $250,000 in the aggregate; and "NRV" means the best price or prices recoverable from an arms length purchaser given the condition of the Stock. Any dispute between the Principal Parties arising from the stocktake must be referred on the day of the stocktake to KPMG as an expert for determination (and not for arbitration) and: (a) KPMG must be required to make the determination on the day of the stocktake; (b) the Principal Parties must promptly execute whatever reasonable terms of engagement KPMG requires (including any indemnity); (c) each Principal Party must provide all such assistance as it is able to provide as reasonably requested by KPMG; (d) the determination made by KPMG is final and binding on the Principal Parties; and (e) the Principal Parties must equally bear the costs of KPMG in making the determination. 48. 54 SCHEDULE 2 (clause 1.1) ACCOUNTS DATE NET ASSET STATEMENT
ACCOUNTS COMPLETION DATE DATE A$'000 A$'000 ---------- ---------- ASSETS Trade Debtors 17,399 Inventories 15,646 Other Debtors/Prepayments 1,047 Cash 0 Refer Schedule 3, Note 2, subsection 4 ---------- TOTAL CURRENT ASSETS 34,092 ---------- Fixed Assets 57,268 Shares in Subsidiaries 0 Goodwill/Intangibles 421 Future Income Tax Benefit 342 ---------- TOTAL NON-CURRENT ASSETS 58,031 ---------- TOTAL ASSETS 92,123 ---------- LIABILITIES Overdraft 0 Refer Schedule 3, Note 2, subsection 4 Creditors -12,473 Employee Provisions -1,800 Provision for Income Tax 0 Refer Schedule 3, Note 2, subsection 7 Mark to Market Hedging Contracts 0 Refer Schedule 3, Note 2, subsection 5 ---------- TOTAL CURRENT LIABILITIES -14,273 ---------- Employee Provisions -2,072 Deferred Income Tax Liability -2,388 ---------- TOTAL NON-CURRENT LIABILITIES -4,460 ---------- TOTAL LIABILITIES -18,733 ---------- NET ASSETS 73,390 ----------
49. 55 SCHEDULE 3 (clause 5) AGREED ACCOUNTING PRINCIPLES NOTE 1 - AGREED ACCOUNTING POLICIES AND PRINCIPLES 1. THE COMPANY 1.1 ACCOUNTING POLICIES The Company prepares its financial accounts using policies which are consistent with the Corporations Law and applicable Australian Accounting Standards. 1.2 ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION A sale is recorded when goods have been dispatched to a customer pursuant to a sales order and the associated risks have passed to the carrier or customer. Consignment stocks are placed with customers and sales are recorded in accordance with the relevant agreement with the customer. 1.3 PROCEDURE FOR BAD AND DOUBTFUL DEBTS Customer balances that are deemed uncollectable are written off. Where it is considered economical to do so, the amount of the doubtful debt is passed on to a debt collector for collection. A doubtful debts provision is carried in the accounts, which is comprised of specific doubtful debts, an allowance for credit notes and all debts which have been outstanding for more than 90 days and deemed uncollectable. It is then supplemented with a general provision such that the total provision does not exceed $60,000. The adequacy of this provision is reviewed half-yearly. 1.4 INVENTORY (a) Inventory costing practices A "standard costing" methodology is used where standard costs are set at the beginning of each year and reviewed quarterly. The standards are changed where a variance to the standard is considered material. By-products that are not material in value (all Lane Cove products) are valued at net realisable value. Gluten at Tamworth is considered to be a co-product and therefore wears its share of material and production overhead costs. Off-code products that cannot be sold are written down to material cost. (b) Stock loss provision - Lane Cove A provision for grain shrinkage is maintained at Lane Cove. The shrinkage provision is based on the total ex-grower grain movements in a silo since it was last emptied. It is calculated by multiplying the total value of the ex-grower grain 50. 56 movement by 1%. When the silo is emptied the shrinkage is brought to account and written off the provision. (c) Grain financing facility Raw material subject to the BNP Facility is brought to account as inventory only as it is drawn down ready for use. At all times prior to this the grain remains "off-balance sheet". The financing charge associated with the BNP Facility is booked as an interest expense. (d) Physical stocktake policy and procedures Finished Goods: A perpetual inventory system is maintained. Cyclical counting procedures are in place whereby high-value and fast moving products are counted at least weekly. All stocks are counted at least monthly. Raw Materials: Raw material is counted at least as frequently as at each month-end. Stocktake Variances: Variances re physical versus book are brought to account as profit or loss in the period in which they are identified. (e) Accounting for maintenance and spare parts All maintenance costs are booked to the profit and loss account when they are incurred. Spare part and engineering items are either expensed on purchase if they are individually below $300, or accounted for as engineering stores inventory if they exceed $300 and expensed to the profit and loss account as they are used. 1.5 FIXED ASSET RECOGNITION POLICY INCLUDING DETERMINATION AND REVIEW PROCEDURES Capital expenditure is recorded as assets under construction until it is ready for use. When it is ready for use it is recorded in the asset register and depreciation commences. Procedures are in place to identify obsolete, scrapped and sold assets. The useful lives of assets are determined by the plant managers when they are ready for use and range from 5 to 20 years for most plant and equipment and 40 to 50 years for buildings. Land is not depreciated. Land and buildings are recorded at valuation. Other fixed assets are recorded at cost. Land and buildings valuations are performed by consultants retained by Goodman Fielder at least every 3 years. Valuation amounts are determined using a "going concern" basis. Land and buildings included in the accounts include some holdings which have legally remained owned by Goodman Fielder Mills Limited and Goodman Fielder Limited due to practical issues of formal transfer (see schedule 8). 1.6 INTANGIBLES AND CAPITALISED EXPENSES Purchased Goodwill: amortised over 5 years. Capitalised expenses: depreciated over 10 years. 51. 57 1.7 EMPLOYEE ENTITLEMENTS (a) Wages and Salaries, Annual Leave and Vesting Sick Leave Liabilities for wages and salaries, annual leave and vesting sick leave are recognised and are measured as the amount unpaid at the reporting date at current pay rates plus employment on-costs, with respect to employees' services up to that date. Amounts that will not be paid within the next 12 months are disclosed as non-current liabilities. (b) Long Service Leave A liability for long service leave is recognised, and is measured as the present value of expected future payments to be made with respect to services provided by employees up to the reporting date. The basis used provides for the pro-rata value of long service leave for all employees in excess of 5 years of service plus on-costs. The liability that will be paid within the next 12 months is disclosed as a current liability. (c) Superannuation Employer contributions to employee superannuation funds, principally Goodman Fielder sponsored funds, are charged to the profit and loss account as incurred. (d) Workers' compensation The provision for workers' compensation at the balance date is as per the most recent insurer assessment adjusted for actual wages paid during the year and also adjusted for the expected value of claims made during the period. The movement in the provision is charged to the profit and loss account accordingly. 1.8 LEASES Operating lease payments are charged to profit and loss account in the periods as they are incurred. 1.9 TAXATION Tax expense is recognised as prima facie tax on operating profit, computed at the prevailing corporate tax rate plus or minus permanent differences. Timing differences between accounting and taxation recognition of income and expense items give rise to deferred tax balances described as "Future Income Tax Benefit" or "Deferred Income Tax Liability". These deferred tax balances are stated at balance date at the value corresponding to the tax rate at which they are expected to be realised. 1.10 FOREIGN CURRENCY TRANSACTIONS Foreign currency sales and purchases are hedged and the hedge rate is used to account for these transactions. Foreign currency gains and losses and hedging costs are borne by the Company. Unhedged transactions are brought to account at the rates of exchange applicable on the date of the transaction. 52. 58 2. THE SUBSIDIARY 2.1 ACCOUNTING POLICIES The Subsidiary prepares its financial accounts using policies which are consistent in all material respects with the Corporations Law, applicable Australian Accounting Standards and applicable New Zealand Financial Reporting Standards and Statements of Standard Accounting Practice. 2.2 ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION A sale is recorded when goods have been dispatched to a customer pursuant to a sales order and the associated risks have passed to the carrier or customer. Consignment stocks are placed with customers and sales are recorded in accordance with the relevant agreement with the customer. 2.3 PROCEDURE FOR BAD AND DOUBTFUL DEBTS Customer balances that are deemed uncollectable are written off. Where it is considered economical to do so, the amount of the doubtful debt is passed on to a debt collector for collection. A general doubtful debts provision is maintained at all times. The adequacy of this provision is reviewed regularly. 2.4 INVENTORY (a) Inventory costing practices A "standard costing" methodology is used where standard costs are set at the beginning of each year and reviewed quarterly. The standards are changed where a variance to the standard is considered material. By-products are valued at net realisable value. Off-code products that cannot be sold are written down to material cost. (b) Physical stocktake policy and procedures Finished Goods: A perpetual inventory system is maintained. Cyclical counting procedures are in place whereby fast moving products are counted at least weekly. Others every two weeks. All stocks are counted at least monthly. Raw Materials: Raw material is counted every two weeks except grain which is counted at month-end. Stocktake Variances: Variances re physical versus book are brought to account as profit or loss in the period in which they are identified. (c) Accounting for maintenance and spare parts All maintenance costs are booked to the profit and loss account when they are incurred. Spare part and engineering items are either expensed on purchase if they are individually below NZ$300, or accounted for as engineering stores 53. 59 inventory if they exceed NZ$300 and expensed to the profit and loss account as they are used. 2.5 FIXED ASSET RECOGNITION POLICY INCLUDING DETERMINATION AND REVIEW PROCEDURES Capital expenditure is recorded as assets under construction until it is ready for use. When it is ready for use it is recorded in the asset register and depreciation commences. Procedures are in place to identify obsolete, scrapped and sold assets. Depreciation rates are as per the Subsidiary's "Statement of Accounting Policies" attached to the Subsidiary's Financial Statements unless the estimated useful life of the asset is considered to be materially different to the "Statement of Accounting Policies". Land is not depreciated. Land and buildings are recorded at valuation. Other fixed assets are recorded at cost. Land and buildings valuations are performed by consultants retained by Goodman Fielder at least every 3 years. Valuation amounts are determined using a "going concern" basis. 2.6 EMPLOYEE ENTITLEMENTS (a) Annual and Long Service Leave Liabilities for wages and salaries, annual leave and long service leave are recognised and are measured as the amount that would be paid to the employee if the employee were to resign at the reporting date. Annual leave is disclosed as a current liability and long service leave as a non-current liability. (b) Superannuation Employer contributions to employee superannuation funds, principally Goodman Fielder sponsored funds, are charged to the profit and loss account as incurred. 2.7 LEASES Operating lease payments are charged to profit and loss account in the periods as they are incurred. 2.8 TAXATION Tax expense is recognised as prima facie tax on operating profit, computed at the prevailing corporate tax rate plus or minus permanent differences. Timing differences between accounting and taxation recognition of income and expense items give rise to deferred tax balances described as "Future Income Tax Benefit" or "Deferred Income Tax Liability". These deferred tax balances are stated at balance date at the value corresponding to the tax rate at which they are expected to be realised. 2.9 FOREIGN CURRENCY TRANSACTIONS Foreign currency sales and purchases are hedged and the hedge rate is used to account for these transactions. Foreign currency gains and losses and hedging costs are borne by the Subsidiary. Exchange gains or losses are taken to the profit and loss account as they are realised. Unhedged transactions are brought to account at the rates of exchange applicable on the date of the transaction. 54. 60 3. CONSOLIDATION 3.1 TRANSLATION Subsidiary financial statements are translated based on the principals of the current rate method per AASB1012. Exchange rates are the "month end" rates issued by GF Finance Limited. The source of these rates is the Reuters Mid-Rates on the last Friday of each accounting period. (For the period close corresponding to Completion, 11.00 am will be used.) 3.2 ELIMINATIONS Intra-entity balances and unrealised profits from intra-entity transactions are eliminated in full. The Subsidiary's pre-acquisition share capital and reserve balances are eliminated against the Company's investment in the Subsidiary. 55. 61 NOTE 2 - FURTHER POLICIES APPLICABLE TO THE DETERMINATION OF THE NET ASSETS ADJUSTMENT BETWEEN THE ACCOUNTS DATE NET ASSET STATEMENT AND THE COMPLETION DATE NET ASSET STATEMENT The movement between Accounts Date Net Asset Statement and the Completion Date Net Asset Statement will reflect the continued application of normal accounting principals and practice with the exception of the following one-off adjustments. 4. BANK ACCOUNTS To facilitate the intended cash-free position of the Bodies Corporate at Completion the following adjustments will be effected as at Completion: (a) all outstanding cheques will be added back to creditors; (b) all outstanding deposits will be added back to debtors; and (c) the balance of cash appearing in the bank statement for each account will be cleared via inter-company transfer to GF Finance Limited or GF Finance NZ Limited. (Note: due to the timing of bank processing, some transactions may impact the bank balance subsequent to its clearance to nil via inter-company transfer. Where this occurs, that nominal amount of cash (or overdraft) will be included in the Completion Date Net Asset Statement.) 5. OPEN HEDGING CONTRACTS Immediately prior to closing the books of the Company on the Completion Date, the following will occur: (a) The hedging contracts between the Company and GF Finance Limited will be closed out. GF Finance Limited will issue an inter-company debit or credit note recognising the net payable or receivable resulting from the close out of those contracts. The Company will book the net payable or receivable to the non-trading inter-company account with GF Finance Limited, with a corresponding entry to exchange gain or loss in the profit and loss statement of the Company. (b) Simultaneous with the recognition of the hedge close out, all underlying foreign currency denominated payables and receivables will be "marked to market" based on the "month end" exchange rates prevailing at the Completion Date issued by GF Finance Limited in accordance with item 3.1 of note 1 of this schedule. This will give rise to a corresponding entry to exchange gain or loss in the profit and loss statement of the Company. Any net payable or receivable referred to in paragraph (a) or (b) will be brought to account as either a receivable or payable in the Completion Date Net Asset Statement. 6. BNP FACILITY To the extent that the Purchaser does not replicate the off-balance sheet grain financing arrangements provided to the Company by BNP Australia Limited (including the BNP 56. 62 Facility), the value of the grain under those arrangements on Completion will be brought onto the Completion Date Net Asset Statement at the amount required to discharge all obligations of the Company payable to BNP Australia Limited. 7. PROVISION FOR TAX Balances of provision for Tax were nil in the Accounts Date Net Assets Statement due to the application of grouping arrangements as at 30 June 2000. The Completion Date Net Assets Statement will include a provision for Tax based on the taxable income for the period 1 July 2000 to Completion. 8. REAL PROPERTY There will be no increase in the net assets of the Company as a result of the Company or the Subsidiary acquiring, or acquiring a further interest in, any of the real property referred to in schedule 8. 9. OTHER All balance sheet items not specifically referred to above will be determined in the Completion Date Net Asset Statement on exactly the same basis as in the Accounts Date Net Asset Statement. 57. 63 SCHEDULE 4 (clause 5) CERTIFICATE INDEPENDENT AUDIT REPORT TO THE DIRECTORS OF STARCH AUSTRALASIA LIMITED Terms used in this certificate that are defined in the Share Sale Agreement between Goodman Fielder Ingredients Limited and Penford Australasia Limited have the same meanings in these notes as in that agreement. 1. SCOPE 1.1 We have audited the Completion Date Net Asset Statement, being a special purpose financial report as at the Completion Date. The Completion Date Net Asset Statement includes the economic entity comprising Starch Australia Limited and the entity it controlled at period end: Starch New Zealand Limited. The pre-Completion directors of Starch Australasia Limited are responsible for the preparation and presentation of the Completion Date Net Asset Statement and the information contained therein, and have determined that the basis of accounting used and described in notes 1 and 2 to the Completion Date Net Asset Statement is appropriate. We have conducted an independent audit of the Completion Date Net Asset Statement in order to express an opinion to the directors of Starch Australasia Limited on its preparation and presentation in accordance with the Agreed Accounting Principles described in notes 1 and 2 to the Completion Date Net Asset Statement. No opinion is expressed as to whether the Agreed Accounting Principles used and described in notes 1 and 2 are appropriate to the needs of the parties to the agreement. 1.2 The Completion Date Net Asset Statement has been prepared for the purpose of the Share Sale Agreement dated [INSERT DATE] 2000. We disclaim any assumption of responsibility for any reliance on this report or on the Completion Date Net Asset Statement to which it relates to any person, or for any purpose other than that for which they were prepared. 1.3 Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the Completion Date Net Asset Statement is free of material misstatement and whether it has been prepared in accordance with the Agreed Accounting Principles described in notes 1 and 2 to the Completion Date Net Asset Statement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the Completion Date Net Asset Statement, and the evaluation of Agreed Accounting Principles and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the Completion Date Net Asset Statement is presented fairly in accordance with the Agreed Accounting Principles described in notes 1 and 2 to the Completion Date Net Asset Statement. These policies do not require the application of all Accounting Standards and other professional reporting requirements in Australia. 1.4 The audit opinion expressed in this report has been formed on the above basis. 58. 64 2. AUDIT OPINION In our opinion, the Completion Date Net Asset Statement is properly drawn up to present fairly, in accordance with the Agreed Accounting Principles described in notes 1 and 2 to the Completion Date Net Asset Statement, the financial position of the economic entity as at the Completion Date. [ERNST & YOUNG] Chartered Accountants Date: 59. 65 SCHEDULE 5 (clause 8) PURCHASER'S WARRANTIES 1. THE PURCHASER 1.1 The Purchaser is duly incorporated and validly exists under the law of its place of incorporation. 1.2 The Purchaser is not insolvent and no receiver has been appointed over any part of its assets and no such appointment has been threatened. 1.3 The Purchaser is not in liquidation or official management and no proceedings have been brought or threatened for the purposes of winding up the Purchaser or placing it under official management. 2. DUE AUTHORISATION 2.1 The execution and delivery of this agreement has been properly authorised by all necessary corporate action of the Purchaser. 2.2 The Purchaser has full corporate power and lawful authority to execute and deliver this agreement and to consummate and perform or cause to be performed its obligations under this agreement. 2.3 This agreement constitutes a legal, valid and binding obligation of the Purchaser enforceable in accordance with its terms by appropriate legal remedy. 2.4 This agreement and Completion do not conflict with or result in a breach of or default under any provision of the constitution of the Purchaser or any material term or provision of any agreement or deed or any writ, order or injunction, judgement, law, rule or regulation to which it is a party or is subject or by which it is bound. 3. PURCHASER'S WARRANTIES CONCERNING PURCHASER'S FUND The Purchaser is not aware of anything that would prevent the trustee of the Purchaser's Fund accepting the Employees as members of the Purchaser's Fund or the Transfer Amounts in respect of those employees (including, but not limited to, that the trustee of the Purchaser's Fund has not received a notice from the Regulator directing the trustee of the Purchaser's Fund not to accept contributions from employer-sponsors of the Purchaser's Fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) or, if the trustee of the Purchaser's Fund has received such a notice, it has been revoked). 60. 66 SCHEDULE 6 (clause 6.1) VENDOR'S WARRANTIES 1. THE VENDOR 1.1 The Vendor is duly incorporated and validly exists under the law of its place of incorporation. 1.2 The Vendor is not insolvent and no receiver has been appointed over any part of its assets and no such appointment has been threatened. 1.3 The Vendor is not in liquidation or official management and no proceedings have been brought or threatened for the purposes of winding up the Vendor or placing it under official management. 2. DUE AUTHORISATION 2.1 The execution and delivery of this agreement has been properly authorised by all necessary corporate action of the Vendor. 2.2 The Vendor has full corporate power and lawful authority to execute and deliver this agreement and to consummate and perform or cause to be performed its obligations under this agreement. 2.3 This agreement constitutes a legal, valid and binding obligation of the Vendor enforceable in accordance with its terms by appropriate legal remedy. 2.4 This agreement and Completion do not conflict with or result in a breach of or default under any provision of the constitution of the Vendor or any material term or provision of any agreement or deed or any writ, order or injunction, judgement, law, rule or regulation to which it is a party or is subject or by which it is bound. 3. INFORMATION 3.1 The facts set out in the recitals and in schedule 8 are true, complete and accurate in all respects. 3.2 To the knowledge of the Vendor, as at the date of this agreement there is no information or documents other than the Disclosures and publicly available information which are known to the Vendor or are in the possession of the Vendor and which are material to an assessment by the Purchaser of the assets and liabilities, profits and losses and financial position of the Bodies Corporate as at the date of this agreement, having regard to clause 6.4 and the Purchaser's sophistication and knowledge of the industry sector in which the Business operates. 3.3 All documents, agreements and other instruments included on the due diligence CD-ROM provided to the Purchaser Entity on 2 June 2000 (that are not obviously extracts or masked in any way) are complete and accurate copies of the originals. 61. 67 3.4 To the Vendor's knowledge, the Vendor has provided the Purchaser Entities with all material written information in the Vendor's possession or control in relation to potentially leaking underground storage tanks at the Shell Depot. 4. ACCOUNTS AND FINANCIAL POSITION 4.1 The Accounts have been prepared on the following bases: (a) the Agreed Accounting Principles; and (b) subject to all of the assumptions noted in the Accounts, and accordingly show a true and fair view of the consolidated financial position of the Bodies Corporate as at the Accounts Date. 4.2 To the Vendor's knowledge, all the accounts, books, ledgers and financial and other material records of any kind of each Body Corporate contain no material inaccuracies or discrepancies in relation to the financial, contractual, trading and net asset position of the relevant Body Corporate (as the case may be) at the relevant time. 5. THE BODIES CORPORATE 5.1 Each Body Corporate is duly incorporated. 5.2 Each Body Corporate has full power and authority to own its property and assets and to conduct its Business. 5.3 No Body Corporate has gone into liquidation or passed any resolution that it be wound up and no application for its winding up has been presented. 5.4 To the Vendor's knowledge, no writ of execution exists against any Body Corporate. 5.5 No receiver has been appointed nor, to the Vendor's knowledge, is the appointment of a receiver or receiver and manager threatened, in relation to the whole or any part of the undertaking or assets of any Body Corporate and no event has occurred which entitles any person (other than the Body Corporate) to appoint or seek the appointment by a court of a receiver or receiver and manager. 5.6 The copy of the constitution of each Body Corporate which has been supplied to the Purchaser is a true copy of the constitution of the Body Corporate as the case may be. 5.7 The register of members of each Body Corporate contains a true and accurate record of its members from time to time. 5.8 All statutory books and records of each Body Corporate have been properly kept and are up to date with true and accurate entries and records. 5.9 Each Body Corporate: (a) has complied with all material legal requirements for the filing of material returns, particulars, notices and other documents with all government and regulatory authorities (including any relevant stock exchange); 62. 68 (b) has complied with all material legal requirements in relation to the conduct of its Business in all material respects; and (c) has conducted its Business and its affairs generally in accordance with all material applicable laws, orders, regulations, by-laws and other similar requirements. 5.10 The Business and affairs of each Body Corporate have been conducted in accordance with its constitution. 5.11 The Subsidiary is a wholly owned subsidiary of the Company and there are no other securities issued or agreed to be issued (including options or convertible instruments) in the Subsidiary. 6. DELEGATIONS AND OFFERS 6.1 There are no powers of attorney or other authorities given by any Body Corporate which could authorise any person to deal with the whole or any part of the assets or Business of that Body Corporate (as the case may be). 6.2 No offer, tender, quotation or similar intimation given or made by a Body Corporate or by the Vendor that is still outstanding and relates to the Shares or the Business of any Body Corporate is capable of giving rise to a contract merely by the unilateral act of any third party, other than in the ordinary course of business. 7. THE SHARES 7.1 The Shares are all the issued shares in the capital of the Company. 7.2 The Shares and the shares in the Subsidiary are not encumbered in any way. 7.3 The Shares and the shares in the Subsidiary have been allotted and fully paid up and no moneys are owing to the Company in respect of them. 7.4 There are no agreements, arrangements or understandings in force or securities issued which call for the present or future issue of, or grant to any person the right to require the issue of, any shares or other securities in the Bodies Corporate. 7.5 The shares held by the Company in the Subsidiary are legally and beneficially owned by the Company. 8. BUSINESS AND ASSETS 8.1 Since the Accounts Date, the Business of each Body Corporate has been carried on in the ordinary and usual course and, without limitation, there has not been: (a) any material alteration in the terms of employment of its senior management or employees; (b) any liability or obligation incurred or agreed to be incurred or other assets disposed of or agreed to be disposed of, otherwise than in the usual conduct of the Businesses; (c) any special resolution passed; or 63. 69 (d) any operational expense or item of capital expenditure incurred or agreed to be incurred which is of an unusual nature or abnormal amount having regard to the customary business practices applicable to the industry in which the Bodies Corporate operate. 8.2 Each Body Corporate has good and marketable title to all its property and assets free from any security or third party interest and there is no agreement to give or create any security or third party interest and no Claim has been made by any person to be entitled to an interest of that kind. 8.3 The property and assets of each Body Corporate comprise all of the property and assets used in connection with or necessary for the continuing conduct of its Business including the benefit of any contract used by the Body Corporate in relation to its Business. 8.4 To the Vendor's knowledge, all plant and equipment used in the conduct of the Business of each Body Corporate is in good repair and working condition (consistent with their respective ages and uses). 8.5 No Body Corporate knows or is aware of any claim or circumstances likely to give rise to a claim that its Business breaches or infringes or has breached or infringed any intellectual property right of any third party. 8.6 The Bodies Corporate do not rely on other GF Group entities to provide their information technology and accounting requirements. 9. REAL PROPERTY 9.1 Where a Body Corporate is described as the owner, occupier, lessee or lessor of any Property: (a) the interest of the Body Corporate so described is (or, in the case of Properties where a Body Corporate is described in schedule 8 as the occupier, will be before Completion) free from any security or third party interest including in the case of freehold property free from any subleases, subtenancies or other arrangements where the person has obtained the use or occupation of the Property; (b) the relevant Property comprises all the freehold or leasehold properties owned, used or occupied by the Body Corporate; (c) the use of the Property for the purposes of the Business of the Body Corporate is permitted under the planning statutes and regulations and there have been no contraventions or alleged contraventions of the provisions of these statutes and regulations (excluding any statutes and regulations relating to or covering Environmental Aspects); (d) the Body Corporate has performed and reserved all covenants, conditions, agreements, statutory requirements, by-laws, orders and regulations affecting the Property and the use of the Property does not contravene those instruments; (e) there are no outstanding orders or notices affecting the Property and there are no proposals of any local or other authority (whether involving compulsory acquisition or requisition or otherwise) or any other circumstances known to the 64. 70 Vendor which may result in such order or notice being made or served or which may otherwise affect the Property; and (f) where the Body Corporate has done or caused to be done on any Property any works for which a permit or consent is required, a permit or consent has been obtained and such works were carried out in accordance with that permit or consent. 9.2 Where the interest of a Body Corporate in any Property is leasehold: (a) The lease is a valid, legal and binding obligation in accordance with its terms; (b) the Body Corporate has duly complied with and fulfilled all of its material obligations and duties under the relevant lease; and (c) no event has occurred in relation to the Body Corporate which may be grounds for termination of the relevant lease. 9.3 To the Vendor's knowledge, the Properties are in good condition and repair, fit for the purpose of carrying on the Business conducted there and the real properties are not subject to any material defects or other matters or circumstances which will or may with the lapse of time materially decrease the value of the Properties. 9.4 All information given by or on behalf of the Vendor to Dames & Moore in undertaking the environmental audits and preparing reports included in the Due Diligence Material with respect to Environmental Aspects is true and accurate in all material respects. 9.5 The Company has all necessary licences, easements, leases or agreements to pipe waste from the Tamworth plant to Calala Farm and those licences, easements, leases or agreements will survive the transfer of Shares under this agreement. 9.6 Each Body Corporate has all necessary licences under Environmental Laws. 9.7 The Properties are not Contaminated so as to propose a significant risk of harm to human health or the Environment during the ordinary conduct of the Business immediately before Completion. 9.8 There are no Environmental Claims against any Body Corporate. 9.9 To the Vendor's knowledge, no Body Corporate has Contaminated any land, or caused any Pollution, in contravention of any Environmental Laws. 10. CONTRACTS 10.1 Each Body Corporate has duly complied with all the material obligations and duties that it owes under any material agreement or arrangement to which it is party. 10.2 To the Vendor's knowledge, no event has occurred which may be grounds for termination of any material agreement or arrangement to which a Body Corporate is a party. 65. 71 10.3 No Body Corporate is a party to any agreement or arrangement of which it or, to the Vendor's knowledge, any other party is materially in default or, but for the requirements of notice for lapse of time or both, would be materially in default. 10.4 No Body Corporate is a party to any agreement, arrangement or understanding which contravenes any applicable law in any material respect. 10.5 Every material contract, instrument or other commitment to which any Body Corporate is a party is valid and binding according to its terms. 11. TAXATION 11.1 All Taxation returns required to be made before Completion by any Body Corporate have been made. 11.2 All Taxation returns made by a Body Corporate have been made with true and full disclosure of relevant matters. 11.3 There are no outstanding disputes or questions or demands between any Body Corporate and any Taxation Authority. 11.4 To the Vendor's knowledge, no Body Corporate has any liabilities in respect of unpaid or unassessed Taxes except as provided for in the Accounts. 11.5 To the Vendor's knowledge, no Body Corporate will become subject to any Tax: (a) on or in respect of or by reference to profits, gains or income for any period up to and including the Completion Date; or (b) in respect of any other matter or thing referable to a time prior to, or to any period ending on or before the Completion Date, in excess of the provisions for Tax included in the Accounts. 11.6 The only liabilities for tax of any Body Corporate arising since the Accounts Date are liabilities arising out of the normal business and trading activities of that Body Corporate. 11.7 Each Body Corporate that is required to comply with the provisions of Part IIIAA of the Income Tax Assessment Act 1936 (Cth) has done so and has maintained records of franking debits and franking credits which are sufficient for the purposes of that legislation. The imputation credit account which any Body Corporate is required to maintain under the Income Tax Act 1994 (NZ) has been correctly maintained. 11.8 To the Vendor's knowledge, except in respect of this agreement, and documents or transactions contemplated by this agreement, all taxes payable in respect of every deed, agreement or other document or transaction to which a Body Corporate is or has been a party or by which it derives, has derived or will derive a substantial benefit have been fully paid and (where legislation requires that such deed, agreement or other document be stamped) no such deed, agreement or other document is unstamped or insufficiently stamped. 11.9 All Taxes of whatsoever nature which a Body Corporate has been liable to pay have been paid. 66. 72 11.10 To the Vendor's knowledge, the Company has complied with the GST Law. 11.11 The Subsidiary has complied in all material respects with the provisions of the Income Tax Act 1994 (New Zealand) and the Tax Administration Act 1994 (New Zealand). 11.12 The Subsidiary has made to the Taxation Authority full and true disclosure of all facts necessary for the proper assessment of any and all Tax. 11.13 The terms of supply under each Supply Agreement (including pricing and quantities) are consistent in all material respects with the terms on which the Company has supplied the relevant products to each customer specified in the relevant Supply Agreement in the year immediately preceding the date of this agreement. 12. EMPLOYEES 12.1 To the Vendor's knowledge and except for all claims in relation to workers' compensation, there is no threatened or pending material dispute between any Body Corporate and any group of employees. 12.2 Each Body Corporate has complied in all material respects with all contractual, statutory, legal and fiscal obligations of and in relation to its employment of its employees, including all codes of practice, collective agreements and awards. 12.3 No member of senior management of a Body Corporate has given notice (which has not yet expired) terminating their contract of employment or is under notice of dismissal. 12.4 No Body Corporate is under any actual liability to pay compensation for loss of office or employment or for wrongful dismissal or retirement and no gratuitous payment has been made or promised by a Body Corporate to any ex-officer or ex-employees except as provided for in the Accounts. 12.5 There are no payments due by any Body Corporate in connection with the redundancy of any employee except as provided for in the Accounts. 12.6 There are no retirement or death and disability benefits, share option or share incentive schemes, profit sharing schemes, pension schemes or other pension arrangements, whether legally enforceable or not relating to any Body Corporate in operation or effect, other than the superannuation and employees share and option plans which have been disclosed to the Purchaser Entity in the Due Diligence Materials and there are no unfunded or contingent obligations in respect of any such superannuation fund, retirement benefit scheme or other pension scheme or arrangement. 12.7 There are no specific provisions in any written contracts of employment that provide that the contract cannot be terminated without giving more than 3 months' prior notice. 12.8 The only bonus or incentive schemes in which an Employee is entitled to participate are the bonus or incentive schemes disclosed to the Purchaser Entity in the Due Diligence Materials. 12.9 No Body Corporate has entered into negotiations with any union or group of employees to provide future wage increases which are inconsistent with the enterprise or collective agreements which are in place at Completion. 67. 73 12.10 The Subsidiary is not the subject of any Claim, prosecution or investigation under the Health and Safety in Employment Act 1992 (New Zealand) and to the Vendor's knowledge there is no matter which might give rise to any such Claim, prosecution or investigation. 13. SUPERANNUATION 13.1 The Vendor's Fund is the only superannuation or retirement fund, pension scheme or arrangement to which the Company has a superannuation commitment in relation to the employees of the Company. 13.2 The Company has satisfied its superannuation commitments and has made all payments necessary to avoid incurring any liability to pay the superannuation guarantee charge under the Superannuation Guarantee Charge Act 1992 (Cth) in relation to the employees of the Company. 13.3 The Vendor's Fund is a Complying Superannuation Fund and to the Vendor's knowledge there is no matter that would be likely to result in the Vendor's Fund no longer being a Complying Superannuation Fund. 13.4 Any amendments made to the governing rules of the Vendor's Fund have been validly made. 13.5 The accounts and records of the Vendor's Fund have been kept, are up to date and show a true and fair view of the affairs of the Vendor's Fund. 13.6 The assets of the Vendor's Fund are sufficient to provide the Transfer Amounts of the employees of the Company. 13.7 The NZ Fund is the only superannuation or retirement fund, pension scheme or arrangement to which the Subsidiary has a superannuation commitment in relation to the NZ Employees. 13.8 The NZ Fund is a Registered Superannuation Scheme and there are no material disputes, objections, or appeals with the Government Actuary, the Commissioner of Inland Revenue or any other regulatory body concerning NZ Employees who are members of the NZ Fund and there are no material issues, questions or demands by NZ Employees who are members of the NZ Fund in relation to their entitlements under the NZ Fund. 13.9 The accounts and records of the NZ Fund have been kept, and are up to date and show a true and fair view of the affairs of the NZ Fund in all material respects. 13.10 All contributions required to be made to the NZ Fund by the Subsidiary have been paid to date. 13.11 The assets of the NZ Fund are sufficient to provide the Transfer Amounts of the NZ Employees who are members of the NZ Fund. 14. COMPLIANCE WITH LAW AND ABSENCE OF LITIGATION 14.1 To the Vendor's knowledge there is no material claim, action, proceeding or demand which may give rise to litigation involving: (a) the Vendor (in relation to the Shares or a Body Corporate); or 68. 74 (b) a Body Corporate. 14.2 There is no material unsatisfied judgment, order, arbitral award or decision of any court, tribunal or arbitrator against any Body Corporate or the Vendor or any of the assets of the Bodies Corporate or the Shares. 14.3 The Vendor (in relation to the Shares) and each Body Corporate, do not engage, and have not engaged, in any conduct or practice which is in breach of any applicable trade practices legislation. 14.4 Each Body Corporate holds all material necessary licences (including statutory licences) and consents, authorisations and permits for the proper carrying on of its Business in all its aspects and all of those licences, consents, authorisations and permits: (a) have been fully paid up; (b) have been fully complied with in all material respects; (c) are in full force and effect; (d) to the Vendor's knowledge, are not liable to be revoked or not renewed; and (e) are not subject to any conditions. 14.5 To the Vendor's knowledge, there are no facts or circumstances involving any Body Corporate or its affairs which are likely to result in the revocation of or variation in any material respect of any permit, licence, authority or consent held by it. 14.6 No permit, licence, authority or consent held by any Body Corporate would be adversely affected by, or liable to be terminated revoked or varied in any material respect by reason of, a change in the ownership of any Body Corporate. 69. 75 SCHEDULE 7 (Clause 1.1) DISCLOSURES Each of the following is a Disclosure: 1. SPECIFIC 1.1 On Completion, all insurance, in respect of any Body Corporate including its assets, under any relevant Goodman Fielder global insurance policy will be terminated. 1.2 [INSERT] 2. GENERAL 2.1 The Due Diligence Material. 2.2 All information contained in the slides shown at the management presentations to any Purchaser Entity. 2.3 All other information and data provided or communicated to a Purchaser Entity whether in writing, orally, or in any other manner in the course of: (a) meetings with third parties; (b) tours of any facilities of any Body Corporate; (c) presentations by executives of a Body Corporate, the Vendor or Goodman Fielder to a Purchaser Entity; or (d) any meeting between a Purchaser Entity and an executive of any Body Corporate, the Vendor or Goodman Fielder. 70. 76 SCHEDULE 8 (clause 1.1) PROPERTY
PART 1: FREEHOLD TITLE REFERENCE ADDRESS REGISTERED OWNER Auto-Consol 5824-13 119-121 Carthage Street, 11-15 The Company 1/881132 White Street and 176 Marius A/371305 Street, Tamworth, NSW, Australia 3/873641 B/371305 - --------------------------- ----------------------------------- ------------------------------ 1/712114 119-121 Carthage Street, 11-15 Occupied by the Company but White Street and 176 Marius owned by Goodman Fielder Street, Tamworth,NSW, Australia Limited - to be transferred to the Company before Completion - --------------------------- ----------------------------------- ------------------------------ 1/161043 Calala Farm, Calala Lane & The Company 1/196504 Scott Road, Tamworth NSW, A/164721 Australia 2/162236 3/162236 4/607266 6/999939 5/999939 34/826572 35/826572 36/826572 37/826572 Vol 6605 Fol 139 Book 3834 No 597 Book 3834 No 598 Book 3834 No 599 Book 3834 No 603 - --------------------------- ----------------------------------- ------------------------------ 42/719840 Calala Farm, Calala Lane & Occupied by the Company but Scott Road, Tamworth NSW, owned by Goodman Fielder Australia Limited - to be transferred to the Company before Completion - --------------------------- ----------------------------------- ------------------------------ 11/777128 170 Epping Road, Lane Cove, The Company NSW, Australia - --------------------------- ----------------------------------- ------------------------------ 2116/97 319 Church Street, Onehunga, The Subsidiary 2116/96 Auckland, New Zealand 29B/718 - --------------------------- ----------------------------------- ------------------------------
71. 77
PART 2: LEASEHOLD PROPERTY ADDRESS LESSEE LESSOR TITLE LEASE REFERENCE REGISTRATION NO. - --------------------------- ---------------- ---------------- ------------- ------------------ Southdown, Avondale, The Subsidiary The Crown - - Auckland - --------------------------- ---------------- ---------------- ------------- ------------------
72. 78 SCHEDULE 9 (clause 1.1) PATENTS
INVENTION TITLE SERIAL/APPLICATION NUMBER COUNTRY - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including 657443 Australia Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including 259291 New Zealand Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including Application No. 2147117 Canada Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including Application No. 94903702.2 Europe Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including Application No. 514615/94 Japan Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including Application No. 9603595-1 Singapore Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including Application No. 95-701470 South Korea Resistant Starch - -------------------------------------- --------------------------------- ----------------------- Food Compositions Including Application No. 08/448582 United States of Resistant Starch America - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch And Resistant 660560 Australia Starch Fractions - -------------------------------------- --------------------------------- ----------------------- High Amylose starch and resistant 254014 New Zealand starch fractions - -------------------------------------- --------------------------------- ----------------------- High Amylose starch and resistant 328867 New Zealand starch fractions Divisional of 254014 - granted for hybrid maize seeds - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch and Resistant Starch Fractions Application No. 93915566.9 Europe - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch and Resistant Application No. 93915566.2 Europe Starch Fractions Divisional of Application No. 93925566.9 - pending for hybrid maize seeds - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch and Resistant Application No. 504825/94 Japan Starch Fractions - -------------------------------------- --------------------------------- -----------------------
73. 79
INVENTION TITLE SERIAL/APPLICATION NUMBER COUNTRY - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch and Resistant United States of Starch Fractions 5714600 America - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch and Resistant 5977454 United States of Starch Fractions Divisional of Application No. America 08/374645 (patent 5714600) - granted for hybrid maize seeds - -------------------------------------- --------------------------------- ----------------------- High Amylose Starch and Resistant Application No. 08/967826 United States of Starch Fractions America - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions 293195 New Zealand - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions 37905 Singapore - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions 6060050 United States of America - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions 687253 (under opposition) Australia - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions 3037435 Japan - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions Application No. 2199140 Canada - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions Application No. 95932570.5 Europe - -------------------------------------- --------------------------------- ----------------------- Probiotic Compositions Application No. 97-701668 South Korea - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 20180/97 Australia in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 2249189 Canada in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 97908076.9 Europe in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 532980/97 Japan in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations 331951 New Zealand in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 9804949-7 Singapore in the Gastrointestinal Tract (accepted) - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 98-707461 South Korea in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Alteration of Microbial Populations Application No. 09/155166 United States of in the Gastrointestinal Tract America - -------------------------------------- --------------------------------- -----------------------
74. 80
INVENTION TITLE SERIAL/APPLICATION NUMBER COUNTRY - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial Application No. 97908078.5 Europe Colonisation of the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial Application No. 532982/97 Japan Colonisation of the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Compositions for the delivery and Application No. 331950 New Zealand maintenance of probiotic microorganisms to and in the gastrointestinal tract using resistant starches (formerly entitled "Enhancement of Microbial Colonisation of the Gastrointestinal Tract") - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial Application No. 2249361 Canada Colonisation of the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial Application No. 9804948-9 Singapore Colonisation of the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial Application No. 98-707460 South Korea Colonisation of the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial Application No. 09/155117 United States of Colonisation of the Gastrointestinal America Tract - -------------------------------------- --------------------------------- ----------------------- Enhancement of Microbial 705095 (under opposition) Australia Colonisation of the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of Application No. 705629 (under Australia Resident Microorganisms in the opposition) Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of Application No. 2253364 Canada Resident Microorganisms in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of Application No. 97908077.7 Europe Resident Microorganisms in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of Application No. 532981/97 Japan Resident Microorganisms in the Gastrointestinal Tract - -------------------------------------- --------------------------------- -----------------------
75. 81
INVENTION TITLE SERIAL/APPLICATION NUMBER COUNTRY - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of 331952 New Zealand Resident Microorganisms in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of 65453 Singapore Resident Microorganisms in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of Application No. 98-707462 South Korea Resident Microorganisms in the Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Selection and/or Enhancement of Application No. 09/155115 United States of Resident Microorganisms in the America Gastrointestinal Tract - -------------------------------------- --------------------------------- ----------------------- Improved Microbial Preparations PCT/AU 00/0021 (pending for all PCT States/Regions) - -------------------------------------- --------------------------------- ----------------------- Novel Maize Products 631403 Australia - -------------------------------------- --------------------------------- ----------------------- Starch Sub-Types and Lipid Metabolism Application No. PO6733 Australia - -------------------------------------- --------------------------------- -----------------------
76. 82 EXECUTED as an agreement. SIGNED for GOODMAN FIELDER INGREDIENTS LIMITED under power of attorney in the presence of: /s/ Anthony Pascoe ------------------------------------- Signature of attorney /s/ Ralph Shurland Ashton Anthony Pascoe - ------------------------------------ ------------------------------------- Signature of witness Name Ralph Shurland Ashton 14 August 2000 - ------------------------------------ ------------------------------------- Name Date of power of attorney SIGNED for PENFORD HOLDINGS PTY LIMITED under power of attorney in the presence of: /s/ Guy Sanderson ------------------------------------- Signature of attorney /s/ Ralph Shurland Ashton Guy Sanderson - ------------------------------------ ------------------------------------- Signature of witness Name Ralph Shurland Ashton 25 August 2000 - ------------------------------------ ------------------------------------- Name Date of power of attorney 77. EX-10.1 3 v67867ex10-1.txt AMENDED AND RESTATED CREDIT AGREEMENT 1 Exhibit 10.1 AMENDED AND RESTATED CREDIT AGREEMENT AMONG PENFORD CORPORATION AND PENFORD PRODUCTS CO. AS BORROWERS CERTAIN COMMERCIAL LENDING INSTITUTIONS, AS LENDERS THE BANK OF NOVA SCOTIA, AS ADMINISTRATIVE LENDER AND L/C BANK KEYBANK NATIONAL ASSOCIATION, AS SYNDICATION LENDER U.S. BANK NATIONAL ASSOCIATION, AS DOCUMENTATION LENDER TOTAL COMMITMENT -- $105,000,000 NOVEMBER 15, 2000 2 CONTENTS ARTICLE I. DEFINITIONS..................................................1 1.1 DEFINED TERMS........................................................1 1.2 ACCOUNTING AND FINANCIAL DETERMINATIONS.....................14 1.3 HEADINGS....................................................15 1.4 ADDITIONAL DEFINITION PROVISIONS............................15 ARTICLE II. APPOINTMENT OF BORROWERS' AGENT; JOINT AND SEVERAL LIABILITY...................................................15 2.1 APPOINTMENT OF BORROWERS' AGENT.............................15 2.2 AUTHORIZED REPRESENTATIVES..................................15 2.3 JOINT AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION................................................16 ARTICLE III. THE CREDITS.................................................18 3.1 REVOLVING LOANS.............................................18 3.2 TERM LOAN...................................................19 3.3 LETTER OF CREDIT FACILITY...................................21 3.4 INTEREST AND FEES...........................................23 3.5 INTEREST OPTIONS............................................24 3.6 OTHER PAYMENT TERMS.........................................24 3.7 FUNDING.....................................................25 3.8 PRO RATA TREATMENT..........................................26 3.9 CHANGE OF CIRCUMSTANCES.....................................27 3.10 TAXES ON PAYMENTS...........................................28 3.11 FUNDING LOSS INDEMNIFICATION................................29 ARTICLE IV. LOAN ADMINISTRATION.........................................29 4.1 STATEMENTS..................................................29 i 3 4.2 PAYMENTS....................................................30 ARTICLE V. SECURITY....................................................30 5.1 GRANT OF SECURITY INTEREST..................................30 5.2 PERFECTION; DUTY OF CARE....................................30 5.3 REAL ESTATE COLLATERAL......................................31 ARTICLE VI. REPRESENTATIONS AND WARRANTIES..............................31 6.1 LEGAL STATUS; SUBSIDIARIES..................................31 6.2 DUE AUTHORIZATION; NO VIOLATION.............................32 6.3 GOVERNMENT APPROVAL, REGULATION.............................32 6.5 CORRECTNESS OF FINANCIAL STATEMENTS.........................32 6.6 TAXES.......................................................33 6.7 LITIGATION, LABOR CONTROVERSIES.............................33 6.8 TITLE TO PROPERTY, LIENS....................................33 6.9 ERISA.......................................................33 6.10 OTHER OBLIGATIONS...........................................33 6.11 ENVIRONMENTAL MATTERS.......................................33 6.12 NO BURDENSOME RESTRICTIONS; NO DEFAULTS.....................34 6.13 NO OTHER VENTURES...........................................34 6.14 INSURANCE...................................................34 6.15 FORCE MAJEURE...............................................34 6.16 INTELLECTUAL PROPERTY.......................................34 6.17 CERTAIN INDEBTEDNESS........................................35 6.18 SOLVENCY....................................................35 6.19 CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS..................35 6.20 FISCAL YEAR.................................................35 ii 4 6.21 COMPLIANCE WITH LAW.........................................35 6.22 NO SUBORDINATION............................................36 6.23 TRUTH, ACCURACY OF INFORMATION..............................36 6.24 EXCLUDED PATENTS............................................36 ARTICLE VII. CONDITIONS..................................................36 7.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT...................36 7.2 CONDITIONS OF EACH EXTENSION OF CREDIT......................37 ARTICLE VIII. AFFIRMATIVE COVENANTS.......................................38 8.1 PAYMENTS....................................................38 8.2 ACCOUNTING RECORDS..........................................38 8.3 INFORMATION AND REPORTS.....................................38 8.4 COMPLIANCE..................................................39 8.5 INSURANCE...................................................40 8.6 FACILITIES..................................................40 8.7 TAXES AND OTHER LIABILITIES.................................40 8.8 LITIGATION..................................................41 8.9 NOTICE TO ADMINISTRATIVE LENDER.............................41 8.10 CONDUCT OF BUSINESS.........................................41 8.11 PRESERVATION OF CORPORATE EXISTENCE, ETC....................42 8.12 ACCESS......................................................42 8.13 PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS.............42 8.14 FISCAL YEAR; ACCOUNTING PRACTICES...........................43 8.15 ENVIRONMENTAL...............................................43 8.16 LIENS.......................................................43 8.17 FUTURE SUBSIDIARIES.........................................43 iii 5 8.18 USE OF PROCEEDS.............................................43 8.19 FURTHER ASSURANCES..........................................43 ARTICLE IX. NEGATIVE COVENANTS..........................................44 9.1 LIENS.......................................................44 9.2 INDEBTEDNESS................................................44 9.3 RESTRICTED PAYMENTS, REDEMPTIONS............................45 9.4 MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC...............45 9.5 INVESTMENTS.................................................46 9.6 CHANGE IN NATURE OF BUSINESS................................46 9.7 PLANS.......................................................46 9.8 CANCELLATION OF INDEBTEDNESS OWED TO IT.....................47 9.9 MARGIN REGULATIONS..........................................47 9.10 ENVIRONMENTAL...............................................47 9.11 TRANSACTIONS WITH AFFILIATES................................47 9.12 NEW COLLATERAL LOCATION; NAME CHANGE........................47 9.13 NO SPECULATIVE TRANSACTIONS.................................47 ARTICLE X. FINANCIAL COVENANTS.........................................48 10.1 LEVERAGE RATIO..............................................48 10.2 INTEREST COVERAGE RATIO.....................................48 10.3 FIXED CHARGE COVERAGE RATIO.................................48 10.4 TANGIBLE NET WORTH..........................................48 10.5 CAPITAL EXPENDITURES........................................48 ARTICLE XI. EVENTS OF DEFAULT...........................................49 11.1 EVENTS OF DEFAULT...........................................49 11.2 REMEDIES....................................................51 iv 6 11.3 ADMINISTRATIVE LENDER AS BORROWERS' ATTORNEY................53 ARTICLE XII. ADMINISTRATIVE LENDER.......................................54 ARTICLE XIII. MISCELLANEOUS...............................................54 13.1 NOTICES.....................................................54 13.2 COSTS, EXPENSES, ATTORNEYS' FEES............................54 13.3 INDEMNIFICATION.............................................55 13.4 WAIVERS, AMENDMENTS.........................................56 13.5 SUCCESSORS AND ASSIGNS......................................56 13.6 SETOFF......................................................58 13.7 NO WAIVER; CUMULATIVE REMEDIES..............................59 13.8 ENTIRE AGREEMENT............................................59 13.9 NO THIRD PARTY BENEFICIARIES................................59 13.10 TIME........................................................59 13.11 SEVERABILITY OF PROVISIONS..................................59 13.12 GOVERNING LAW...............................................59 13.13 SUBMISSION TO JURISDICTION..................................59 13.14 WAIVER OF JURY TRIAL........................................60 13.15 COUNTERPARTS................................................60 13.16 CONFIDENTIALITY.............................................60 13.17 OTHER TRANSACTIONS..........................................61 13.18 WASHINGTON STATUTORY NOTICE.................................61 v 7 SCHEDULES I Lenders II Disclosure Schedule III Pricing Schedule EXHIBITS A Note Forms B Notice of Authorized Representatives C Notice of Borrowing D Notice of Conversion or Continuation E Form of Officer's Certificate F List of Excluded Patents G Form of Letter of Credit vi 8 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of November 15, 2000 by and among PENFORD CORPORATION, a Washington corporation, and PENFORD PRODUCTS CO., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), each of the financial institutions from time to time listed on Schedule I attached hereto, as amended from time to time, and THE BANK OF NOVA SCOTIA ("Scotiabank"), as the administrator for Lenders (in such capacity, "Administrative Lender"). RECITALS Borrowers, Administrative Lender and Lenders are parties to that certain Credit Agreement dated September 26, 2000 (as amended by that certain First Amendment to Credit Agreement dated as of October 27, 2000, the "Existing Credit Agreement"). The parties desire to make certain changes to the Existing Credit Agreement and have decided, for ease of reference, to amend and restate the Existing Credit Agreement in its entirety. NOW, THEREFORE, in consideration of the mutual covenants and promises of the parties contained herein, Administrative Lender, Lenders and Borrowers hereby agree as follows: ARTICLE I. DEFINITIONS 1.1 DEFINED TERMS All terms defined above shall have the meanings set forth above. The following terms shall have the meanings set forth below (with all such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCOUNTS" means (i) all "accounts" as defined in the Code and (ii) all presently existing and hereafter arising rights to payment of a monetary obligation, whether or not earned by performance. "ADMINISTRATIVE LENDER'S OFFICE" means (i) initially, Administrative Lender's office designated as such in Schedule I hereto, and (ii) subsequently, such other office designated as such, from time to time, in writing by Administrative Lender to Lenders and Borrowers' Agent. "AFFILIATE" of any Person means any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power: (a) to vote 15% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or 1 9 cause the direction of the management and policies of such Person whether by contract or otherwise. "AGREEMENT" means this Amended and Restated Credit Agreement as amended, modified or supplemented from time to time. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) initially, its office designated as such in Schedule I hereto, and (ii) subsequently, such other office designated as such from time to time in writing by such Lender to Administrative Lender. "APPLICABLE RATE" means, at any date, the lesser of (a) the Highest Lawful Rate or (b) the following: (i) with respect to each Base Rate Loan, a per annum rate equal to the sum of the Alternate Base Rate in effect on such date and the applicable Base Rate Margin; and (ii) with respect to each LIBOR Loan, a per annum rate equal to the sum of (x) LIBOR in effect on the first day of the Fixed Rate Term for such Loan plus (y) the applicable LIBOR Margin in effect on the second Business Day before the first day of such Fixed Rate Term. "ALTERNATE BASE RATE" means, for any day, an interest rate per annum equal to the higher of (a) the rate of interest most recently announced by Scotiabank at its Applicable Lending Office as its base rate for U.S. Dollar loans and (b) the Federal Funds Rate plus 50 basis points. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by Scotiabank in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. "ANZ" means Australia and New Zealand Banking Group Limited ACN 005 357 522. "AUSTRALIAN FACILITIES" means (a) the credit facility provided for in that certain Syndicated Facility Agreement dated November 15, 2000 among Penford Australia, ANZ and certain other lenders named therein and in the "Financing Documents" (as defined in said Syndicated Facility Agreement), as said Syndicated Facility Agreement and each such Financing Document may be amended, modified or supplemented from time to time, and (b) the credit facility provided for in that certain Debenture Trust Deed dated November 15, 2000 between Penford Holdings and ANZ Capel Court Limited ACN 004 768 807 and in the "Transaction Documents" (as defined in said Debenture Trust Deed), as said Debenture Trust Deed and each such Transaction Document may be amended, modified or supplemented from time to time. "AUTHORIZED REPRESENTATIVE" means a person designated as such by Borrowers' Agent in a Notice of Authorized Representatives delivered to Administrative Lender. "AVAILABLE CREDIT" means, at any time, the amount by which the total of the Revolving Loan Commitments is greater than the total of the outstanding principal amount of the Revolving Loans. 2 10 "BANKRUPTCY CODE" means the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, including (unless the context otherwise requires) any rules or regulations promulgated thereunder. "BASE RATE LOAN" means any Loan that bears interest at a fluctuating rate determined by reference to the Alternate Base Rate. "BASE RATE MARGIN" means the number of basis points determined in accordance with Schedule III. "BORROWERS' AGENT" means Parent in its capacity as agent for each Borrower. "BUSINESS DAY" means (a) any day that is not a Saturday, Sunday or other day on which commercial banks are authorized or required to be closed in Portland, Oregon, New York, New York, Seattle, Washington or Atlanta, Georgia and (b) with respect to all notices, determinations, fundings and payments in connection with any LIBOR interest selection or LIBOR Loan, any day on which dealings in U.S. Dollars are carried on in the London interbank market. "CASH EQUIVALENT INVESTMENT" means, at any time: (a) any evidence of indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States government; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc., or (ii) any Lender (or its holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) any Lender; or (d) any repurchase agreement entered into with any Lender (or other commercial banking institution of the stature referred to in clause (c)(i) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c), and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder. "CHANGE IN CONTROL" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of one-third or more of the outstanding shares of voting stock of Borrower. "CHANGE OF LAW" means the adoption of any Governmental Rule, any change in any Governmental Rule or the application or requirements thereof (whether such change occurs in accordance with the terms of such Governmental Rule as enacted, as a result of amendment or otherwise), any change in the interpretation or administration of any 3 11 Governmental Rule by any Governmental Authority, or compliance by any Lender (or any entity controlling a Lender) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority. "CLOSING DATE" means November 15, 2000. "CODE" means the Uniform Commercial Code of the State of Washington, as amended from time to time (including, without limitation, amendments to defined terms). "COLLATERAL" means all of Borrowers' assets, including, without limitation, (a) all Accounts, Rights to Payment, General Intangibles, Records, goods, fixtures, inventory, equipment, money, letter of credit rights, supporting obligations, instruments, chattel paper, deposit accounts, documents, investment property and commercial tort claims; (b) all products, proceeds, rents and profits of the foregoing; and (c) all of the foregoing, whether now owned or existing or hereafter acquired or arising or in which Borrower now has or hereafter acquires any rights, but excluding (i) all outstanding shares of capital stock of Penford Products Co. and Penford Holdings and (ii) the Excluded Patents. "COMMITMENTS" means, with respect to a Lender, such Lender's Revolving Loan Commitment, L/C Commitment and Term Loan Commitment. "COMMODITY CONTRACTS" means commodity options, futures, swaps, and other similar agreements and arrangements designed to provide protection against fluctuations in commodity prices. "CONTAMINANT" means any pollutant, hazardous substance, toxic substance, hazardous waste or other substance regulated or forming the basis of liability under any Environmental Law. "CONTINGENT OBLIGATION" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness or contractual obligation of a partnership or joint venture of which such Person is a general partner or joint venturer or with respect to any Indebtedness or contractual obligation of another Person, if the purpose or intent of such Person in incurring such liability is to provide assurance to the obligee of such Indebtedness or contractual obligation that such Indebtedness or contractual obligation will be paid or discharged, or that any agreement entered into by such other Person relating to such Indebtedness or contractual obligation will be complied with, or that any holder of such Indebtedness or contractual obligation will be protected against loss in respect thereof. Contingent Obligations of a Person include, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of an obligation of another Person, and (b) any liability of such Person for an obligation of another Person through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of a loan, 4 12 advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such obligation or to assure the holder of such obligation against loss, or (v) to supply funds to or in any other manner invest in such other Person (including, without limitation, to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement or liability described under subclauses (i) through (v) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the lesser of (A) the amount payable under such Contingent Obligation (if quantifiable) or (B) the portion of the obligation so guaranteed or otherwise supported. "DEBT" means, without duplication, (a) all obligations of Parent or any Subsidiary for borrowed money and all obligations of Parent or any Subsidiary evidenced by bonds, debentures, notes, bills or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of Parent or any Subsidiary; (c) all obligations of Parent or any Subsidiary as lessee under leases which have been or should be, in accordance with GAAP, recorded as capital leases or are synthetic leases, tax retention operating leases or financing leases; (d) whether or not so included as liabilities in accordance with GAAP, all obligations of Parent or any Subsidiary to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by Parent or any Subsidiary (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by Parent or any Subsidiary or is limited in recourse; and (e) all Contingent Liabilities of Parent or any Subsidiary in respect of any of the foregoing. "DEFAULT" means (i) an Event of Default, (ii) an event or condition that with the giving of notice or the passage of time, or both, would constitute an Event of Default, or (iii) the filing against Borrower of a petition commencing an involuntary case under the Bankruptcy Code. "DISCLOSURE SCHEDULE" means Schedule II attached hereto. "EBITDA" means, as of the end of a fiscal quarter, Parent's consolidated net income after taxes for the twelve months ending with such quarter plus (A) the sum of the amounts for such twelve month period included in determining such net income of (i) interest expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, and (v) extraordinary non-cash losses and charges and other non-recurring non-cash losses and charges; less (B) gains on sales of assets (excluding sales of inventory in the ordinary course of business) and other extraordinary non-cash gains for such twelve month period; provided, however, that until the fiscal quarter ending August 31, 2001, all computations described 5 13 above based on a twelve month period shall be determined on an annualized basis based on results for the period from September 1, 2000 through the end of the quarter as of which the determination is made. "EBITDAR" means, as of the end of a fiscal quarter, the sum of EBITDA plus Rental Expense. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time, including (unless the context otherwise requires) any rules or regulations promulgated thereunder. "ENVIRONMENTAL LAW" means all applicable federal, state and local laws, statutes, ordinances and regulations, and any applicable judicial or administrative interpretation, order, consent decree or judgment, relating to the regulation and protection of the environment. Environmental Laws include but are not limited to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. Section 180 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Section 136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.); the Toxic Substance Control Act, as amended (42 U.S.C. Section 7401 et seq.); the Clean Air Act, as amended (42 U.S.C. Section 740 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251 et seq.); and the Safe Drinking Water Act, as amended (42 U.S.C. Section 300f et seq.), and their state and local counterparts or equivalents and any applicable transfer of ownership notification or approval statutes. "ENVIRONMENTAL LIABILITIES AND COSTS" means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including, without limitation, any thereof arising under any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, and which relate to any violation or alleged violation of an Environmental Law or a Permit, or a Release or threatened Release. "EVENT OF DEFAULT" has the meaning set forth in Section 11.1. "EXCESS CASH FLOW" means, with respect to any fiscal year of Parent, EBITDA for such year, minus (A) cash interest expense paid during such year, (B) cash taxes paid during such year, (C) capital expenditures made during such year permitted under Section 10.5 and not financed with Debt (other than Loans), (D) cash payments during such year of amounts described in Section 9.3 and permitted by Section 9.3, (E) payments made during such year under Section 3.2(b)(ii) and (F) if during such year Borrowers take action under Section 3.1(e), the amount by which the Revolving Loan Commitment on the last day of such 6 14 year (after being reduced by such action) is less than the peak outstanding principal balance of the Revolving Loans during such year. "EXCLUDED PATENTS" means the patents and patent applications listed on Exhibit F. "FEDERAL FUNDS RATE" means, for any day, the weighted average of the per annum rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers as published by the Federal Reserve Bank of New York for such day (or, if such rate is not so published for any day, the average rate quoted to Administrative Lender on such day by three Federal funds brokers of recognized standing selected by Administrative Lender). "FIXED CHARGE COVERAGE RATIO" means, as of the end of a fiscal quarter, the ratio of (i) EBITDAR, less the sum of the following for the twelve month period ending with such quarter (or annualized in the manner described in the definition of EBITDA): all expenses of Parent and the Subsidiaries during such period which were permitted under Sections 9.3 and 10.5 and less cash taxes paid by Parent and the Subsidiaries for the twelve month period ending with such quarter (or annualized in the manner described in the definition of EBITDA) to (ii) the sum of Interest Expense, Rental Expense and scheduled principal payments of Debt for the twelve month period ending with such quarter (or annualized in the manner described in the definition of EBITDA). "FIXED RATE TERM" means a period of one, two, three or six months, as designated by Borrowers' Agent, during which a Loan bears interest determined in relation to LIBOR; provided, however, that no Fixed Rate Term for a Revolving Loan may extend beyond the Revolver Maturity Date, no Fixed Rate Term for any Term Loan may extend beyond the Maturity Date, and if the last day of a Fixed Rate Term is not a Business Day, such term shall be extended to the next succeeding Business Day, or if the next succeeding Business Day falls in another calendar month, such term shall end on the next preceding Business Day. "GAAP" means generally accepted accounting principles as in effect in the United States from time to time, consistently applied. "GENERAL INTANGIBLES" means (i) all "general intangibles" as defined in the Code and (ii) all tax and duty refunds, registered and unregistered patents, trademarks, service marks, copyrights, trade names, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee, choses in action, causes of action and other claims, judgments in favor of Borrower, leasehold interests in equipment, software and payment intangibles. "GOOD FAITH" means honesty in fact in the conduct or transaction concerned, without regard to whether standards that might be deemed commercially reasonable have been observed. 7 15 "GOVERNMENTAL AUTHORITY" means any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Comptroller of the Currency, any central bank or any comparable authority. "GOVERNMENTAL RULE" means any applicable law, rule, regulation, ordinance, order, code, interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "HIGHEST LAWFUL RATE" means, at the particular time in question, the maximum rate of interest which, under applicable law, Lenders are then permitted to charge Borrowers on the applicable Loan, and if the maximum rate changes at any time, the Highest Lawful Rate shall increase or decrease, as the case may be, as of the effective time of each such change, without notice to Borrowers. "INDEBTEDNESS" of any Person means, without duplication, (a) all liabilities of such Person as determined in accordance with GAAP, (b) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (c) all lease obligations of such Person (including, without limitation, operating leases, capital leases, synthetic leases, tax retention operating leases, and financing leases), (d) all Contingent Obligations of such Person, (e) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Stock or Stock Equivalents of such Person with a mandatory repurchase or redemption date of less than ten years from the date of issuance thereof, (f) all obligations secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (g) all liabilities of such Person in connection with the failure to make when due any contribution or payment pursuant to or under any Plan and (h) net liabilities of such Person under all Commodity Contracts, Interest Rate Contracts and Rate Protection Agreements. For purposes of determining the amount of Indebtedness in a circumstance when the creditor has recourse only to specified assets, the amount shall be the lesser of (i) the amount of such obligation or (ii) the fair market value of such assets. "INDEMNITEES" has the meaning set forth in Section 13.3. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 13.3. "INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement of even date herewith among Lenders and ANZ, as amended, modified or supplemented from time to time. 8 16 "INTEREST COVERAGE RATIO" means, as of the end of a fiscal quarter, the ratio of (i) EBITDAR to (ii) the sum of Rental Expense plus Interest Expense. "INTEREST EXPENSE" means, as of the end of a fiscal quarter, Parent's consolidated cash interest expense for the twelve months ending with such quarter; provided, however, that until the end of the fiscal quarter ending August 31, 2001, interest expense shall be determined on an annualized basis based on cash interest expense for the period from September 1, 2000 through the end of the quarter as of which the determination is made. "INTEREST RATE CONTRACTS" means interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance, and other agreements or arrangements designed to provide protection against fluctuations in interest rates. "INVESTMENT" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Obligation of such Person; and (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "L/C BANK" means Scotiabank. "L/C COMMITMENT" means, as to any Lender, the obligation of such Lender to make the payments required under Section 3.3(g) in an aggregate principal amount at any one time outstanding not to exceed the L/C Commitment amount set opposite such Lender's name on Schedule I, as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted pursuant to Section 13.5(c). "LENDERS" means, collectively, each of the financial institutions from time to time listed on Schedule I and L/C Bank, and "LENDER" means any one of the Lenders. "LETTER OF CREDIT" means a standby letter of credit issued by L/C Bank for the benefit of ANZ having substantially the same terms as the draft letter of credit attached hereto as Exhibit G. "LETTER OF CREDIT AGREEMENT" means L/C Bank's standard letter of credit application and documentation modified to such extent, if any, as L/C Bank deems necessary. "LETTER OF CREDIT OBLIGATIONS" means, at any time, all liabilities at such time of Borrowers to L/C Bank with respect to Letters of Credit, whether or not any such liability is contingent. 9 17 "LEVERAGE RATIO" means, as of the end of a fiscal quarter, the ratio of (i) Debt as of the end of such quarter to (ii) EBITDA. "LIBOR" means, for each Fixed Rate Term, the rate per annum (rounded upward if necessary to the nearest whole 1/16 of 1%) and determined pursuant to the following formula: LIBOR = Base LIBOR ------------------------------- 100% - LIBOR Reserve Percentage As used herein, (a) "Base LIBOR" means the average of the rates per annum at which U.S. Dollar deposits are offered to Scotiabank in the London interbank eurocurrency market on the second Business Day prior to the commencement of a Fixed Rate Term at or about 11:00 A.M. (London time), for delivery on the first day of such Fixed Rate Term, for a term comparable to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term shall apply, and (b) "LIBOR Reserve Percentage" means, for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) maintained by a member bank of the Federal Reserve System. "LIBOR LOAN" means any Loan that bears interest with reference to LIBOR. "LIBOR MARGIN" means the number of basis points determined in accordance with Schedule III. "LIEN" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), security interest, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement or the interest of a lessor under a capital lease, synthetic lease, tax retention operating lease, financing lease or any lease having substantially the same economic effect as a conditional sale, title retention agreement or similar arrangement. "LOAN" means an advance made by a Lender pursuant to any of Sections 3.1, 3.2 or 3.3(g). "LOAN DOCUMENTS" means this Agreement, the Notes, each Letter of Credit Agreement, each Rate Protection Agreement and each other agreement, note, deed of trust, mortgage, notice, document, contract or instrument to which Borrower now or hereafter is a party and that is required by Lender in connection with the Obligations. 10 18 "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the condition (financial or otherwise), business, performance, operations or properties of Borrower, (b) the ability of Borrower to perform its obligations under the Loan Documents, or (c) the rights and remedies of any Lender or Administrative Lender under the Loan Documents. "MATURITY DATE" means the earlier of October 31, 2005 or the due date determined pursuant to Section 11.2. "NOTE" means a promissory note executed by Borrowers in favor of a Lender evidencing Loans, substantially in one of the forms attached as Exhibit A hereto. "NOTICE OF AUTHORIZED REPRESENTATIVES" has the meaning set forth in Section 2.2. "NOTICE OF BORROWING" has the meaning set forth in Section 3.1(c). "NOTICE OF CONVERSION OR CONTINUATION" has the meaning set forth in Section 3.5(c). "OBLIGATIONS" means all of Borrowers' obligations under the Loan Documents, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including, without limitation, all interest that accrues after the commencement of any case or proceeding by or against Borrower under the Bankruptcy Code, whether or not allowed in such case or proceeding, and the obligations of Borrowers to Scotiabank under that certain $5,000,000 Demand Promissory Note dated November 15, 2000, as amended, modified, restated or supplemented from time to time. "OBLIGOR" means any of Borrower or any other Person (other than Administrative Lender or any Lender) obligated under, or otherwise a party to, any Loan Document. "ORGANIC DOCUMENTS" means, relative to any Obligor, as applicable, its certificate or articles of incorporation, its by-laws, its partnership agreement, its certificate of partnership, and all shareholder agreements, voting trusts and similar arrangements applicable to any of the authorized shares of capital stock or partnership interests of such Obligor. "PARENT" means Penford Corporation, a Washington corporation. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Title IV of ERISA. "PENFORD AUSTRALIA" means Penford Australia Limited ACN 003 780 229. "PENFORD HOLDINGS" means Penford Holdings Pty. Ltd. ACN 094 279 339. "PERMIT" means any permit, approval, authorization, license, variance or permission required from a Governmental Authority under an applicable Governmental Rule. 11 19 "PERMITTED LIENS" means (a) Liens arising by operation of law for taxes, assessments or governmental charges not yet due; (b) statutory Liens of mechanics, materialmen, shippers, warehousemen, carriers, and other similar persons for services or materials arising in the ordinary course of business for which payment is not yet due; (c) nonconsensual Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (d) Liens for taxes or statutory Liens of mechanics, materialmen, shippers, warehousemen, carriers and other similar persons for services or materials that are due but are being contested in good faith and by appropriate and lawful proceedings promptly initiated and diligently conducted and for which reserves satisfactory to Administrative Lender have been established; (e) Liens listed on the Disclosure Schedule and any replacement Lien for such Liens to the extent the Indebtedness secured thereby is refinanced or otherwise replaced as contemplated by Section 9.2(c); (f) Liens granted in the Loan Documents; (g) zoning restrictions, easements, rights of way, survey exceptions, encroachments, covenants, licenses, reservations, leasehold interests, restrictions on the use of real property or minor irregularities incident thereto which do not in the aggregate materially detract from the value or use of the property or assets of Borrower or impair, in any material manner, the use of such property for the purposes for which such property is held by Borrower; (h) the interests of lessors or lessees of property leased pursuant to leases permitted hereunder; (i) Liens of a depository institution arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of setoff, or similar rights and remedies as to deposit accounts or other funds maintained with such institution, provided that (X) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by Borrower in excess of those set forth by regulations promulgated by any Government Authority, and (Y) such deposit account is not intended by Borrower to provide collateral to the depository institution; (j) judgment Liens to the extent the existence of such Liens is not an Event of Default under Section 11.1(g); and (k) purchase money Liens upon or in any property of Borrower and used by Borrower in the ordinary course of business and Liens to secure capital leases if, in each case, the incurrence of such Indebtedness is permitted by Section 9.2; provided, however, that: (X) any such Lien is created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including, without limitation, the cost of construction and the reasonable fees and expenses relating to such Indebtedness) of the property subject thereto, (Y) the principal amount of the Indebtedness secured by such Lien does not exceed such cost, and (Z) such Lien does not extend to or cover any other property other than such item of property, any improvements on such item, and the proceeds from the disposition of such items. "PERSON" means an individual, partnership, corporation (including, without limitation, a business trust), joint stock company, limited liability company, trust, unincorporated association, joint venture or other entity, or a Governmental Authority. "PLAN" means an employee benefit plan, as defined in Section 3(3) of ERISA, which Parent or any Subsidiary maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. 12 20 "RATABLE PORTION" or "RATABLY" means, with respect to any Lender, the quotient obtained by dividing (i) the total of such Lender's Commitments by (ii) the Total Commitments, and at all times when the Total Commitments are zero, means, with respect to any Lender, the quotient obtained by dividing item (i) by item (ii) immediately before the Total Commitments became zero. "RATE PROTECTION AGREEMENT" means any Interest Rate Contract, Commodity Contract or foreign exchange agreement entered into by Borrower in which the counterparty is a Lender. "RECORDS" means all of Borrowers' present and future records and books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files, electronically stored data and other data, together with the tapes, disks, diskettes, drives and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower with respect to the foregoing maintained with or by any other Person). "RELEASE" means, as to any Person, any unpermitted spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the environment and any "release" as defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.). "REMEDIAL ACTION" means all actions required to clean up, remove, prevent or minimize a Release or threat of Release or to perform pre-remedial studies and investigations and post-remedial monitoring and care. "RENTAL EXPENSE" means, as of the end of a fiscal quarter, Parent's consolidated rental expense for the twelve months ending with such quarter. "REQUIRED LENDERS" shall have the meaning attributed to such term in the Intercreditor Agreement. "REVOLVER MATURITY DATE" means the earlier of October 31, 2003 or the due date pursuant to Section 11.2. "REVOLVING LOAN" means a Loan made by a Lender pursuant to Section 3.1. "REVOLVING LOAN COMMITMENT" means, as to any Lender, the obligation of such Lender to advance credit under Section 3.1 in an aggregate principal amount at any one time outstanding not to exceed the Revolving Loan Commitment amount set opposite such Lender's name on Schedule I, as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted pursuant to Section 13.5(c). 13 21 "RIGHTS TO PAYMENT" means all Accounts, General Intangibles (except Excluded Patents), contract rights, chattel paper, documents, instruments, letters of credit, bankers acceptances and guaranties, and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Accounts and other Collateral, and shall include without limitation, (a) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (b) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (c) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Accounts or other Collateral, including without limitation, returned, repossessed and reclaimed goods, and (d) deposits by and property of account debtors or other persons securing the obligations of account debtors, moneys, securities, credit balances, deposits, deposit accounts and other property of Borrower now or hereafter held or received by or in transit to Administrative Lender, any Lender or any of their Affiliates or at any other depository or other institution from or for the account of Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise. "STOCK" means shares of capital stock, beneficial or partnership interests, participations or other equivalents (regardless of how designated) of or in a corporation or other entity, whether voting or nonvoting, and includes, without limitation, common stock and preferred stock. "STOCK EQUIVALENTS" means all securities convertible into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any Stock, whether or not presently convertible, exchangeable or exercisable. "SUBSIDIARY" means any Person required by GAAP to be included in the consolidated financial reporting of Parent. "TANGIBLE NET WORTH" means the total of Parent's shareholders' equity, plus Debt subordinated in writing to the Obligations on terms acceptable to Administrative Lender in favor of the prior payment in full in cash of the Obligations, less consolidated intangible assets. "TERM LOAN" means a Loan made by a Lender pursuant to Section 3.2. "TERM LOAN COMMITMENT" means, as to any Lender, the obligation of such Lender to advance credit under Section 3.2 in an aggregate principal amount at any one time outstanding not to exceed the Term Loan Commitment amount set opposite such Lender's name on Schedule I, as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted pursuant to Section 13.5(c). "TRANCHE" means a collective reference to LIBOR Loans which have identical Fixed Rate Terms that begin on the same date and end on the same later date. 14 22 "TOTAL COMMITMENTS" means the total of all Commitments of all Lenders. "U.S. SUBSIDIARY" means a Subsidiary having its principal place of business in the United States. 1.2 ACCOUNTING AND FINANCIAL DETERMINATIONS Any accounting term used in this Agreement that is not specifically defined herein shall have the meaning customarily given to it under GAAP, and all accounting determinations and computations under any Loan Document shall be made, and all financial statements required to be delivered under any Loan Document shall be prepared, in accordance with GAAP applied in the preparation of the financial statements referred to in Section 6.5. 1.3 HEADINGS Headings in this Agreement and each of the other Loan Documents are for convenience of reference only and are not part of the substance hereof or thereof. 1.4 ADDITIONAL DEFINITION PROVISIONS Whenever the terms "herein," "hereof," "hereto," "hereunder," "therein," "thereof," "thereto," "thereunder," and similar terms contained in this Agreement or any Loan Document refer to this Agreement or other Loan Document, such terms refer to the whole of this Agreement or other Loan Document and not to any particular section, paragraph or provision. All other terms contained in this Agreement that are not defined herein shall, unless the context indicates otherwise, have the meanings provided in the Code to the extent such terms are defined therein. ARTICLE II. APPOINTMENT OF BORROWERS' AGENT; JOINT AND SEVERAL LIABILITY 2.1 APPOINTMENT OF BORROWERS' AGENT In order to facilitate and insure prompt and accurate communication among Borrowers and Lenders and to insure the efficient and effective distribution of proceeds of the Loans, each Borrower hereby appoints Parent as its agent to perform the functions of Borrowers' Agent under the Loan Documents, to take such actions and make such elections on such Borrower's behalf as are delegated to Borrowers' Agent in the Loan Documents and for the following purposes: (i) communicating to and receiving communications from Administrative Lender and Lenders; (ii) receiving all proceeds of the Loans and making all decisions regarding the distribution of such proceeds among Borrowers as Borrowers' Agent, in the sole exercise of its discretion, deems fair and appropriate; and (iii) making all decisions and elections with respect to requests for advances of credit and election of interest options. 15 23 2.2 AUTHORIZED REPRESENTATIVES On the Closing Date, and from time to time subsequent thereto at Borrowers' Agent's option, Borrowers' Agent shall deliver to Administrative Lender a notice in the form of Exhibit B attached hereto, which designates by name one or more Authorized Representatives and includes each of their respective specimen signatures (each, a "Notice of Authorized Representatives"). Administrative Lender shall be entitled to rely conclusively on the authority of each person designated as an Authorized Representative in the most current Notice of Authorized Representatives delivered by Borrowers' Agent to Administrative Lender, to request borrowings, to select interest rate options hereunder, and to give to Administrative Lender such other notices as are specified herein as being made through an Authorized Representative, until such time as Borrowers' Agent has delivered to Administrative Lender, and Administrative Lender has actual receipt of, a new Notice of Authorized Representatives. Administrative Lender shall have no duty or obligation to Borrowers to verify the authenticity of any signature appearing on any Notice of Borrowing, Notice of Conversion or Continuation or any other notice from an Authorized Representative or to verify the authenticity of any person purporting to be an Authorized Representative giving any telephonic notice permitted hereby. 2.3 JOINT AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION (a) Each Borrower states and acknowledges that: (i) pursuant to this Agreement, Borrowers desire to utilize their borrowing potential on a consolidated basis to the same extent possible if they were merged into a single corporate entity; (ii) it has determined that it will benefit specifically and materially from the advances of credit contemplated by this Agreement; (iii) it is both a condition precedent to the obligations of Lenders hereunder and a desire of Borrowers that each Borrower execute and deliver to Lenders this Agreement; and (iv) Borrowers have requested and bargained for the structure and terms of the credit contemplated by this Agreement. (b) Each Borrower hereby irrevocably and unconditionally: (i) agrees that it is jointly and severally liable to Lenders for the full and prompt payment of the Obligations and the performance by each Borrower of its obligations hereunder in accordance with the terms of the Loan Documents; (ii) agrees to fully and promptly perform all of its obligations under the Loan Documents with respect to each advance of credit hereunder as if such advance had been made directly to it; and (iii) agrees as a primary obligation to indemnify Lenders on demand for and against any loss incurred by Lenders (other than a loss arising from Lenders' willful misconduct or gross negligence) as a result of any of the obligations of any one or more of Borrowers under the Loan Documents being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, whether or not known to Lenders or any other Person, the amount of such loss being the amount which Lenders would otherwise have been entitled to recover from any one or more of Borrowers. Each Borrower hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with each other Borrower with respect to the payment and performance 16 24 of all of the Obligations. If and to the extent that any Borrower fails to make any payment with respect to the Obligations as and when due or to perform any of its obligations in accordance with the terms of the Loan Documents, then in each such event the other Borrowers will make such payment with respect to, or perform, such obligations. (c) The joint and several liability of each Borrower for the Obligations shall be absolute and unconditional irrespective of and shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations. Without limiting the generality of the foregoing, the obligations of each Borrower shall not be discharged or impaired or otherwise affected by: (i) any change in the manner, place or terms of payment or performance and/or any change or extension of the time of payment or performance of, renewal or alteration of, any Obligation, any security therefor, or any liability incurred directly or indirectly in respect thereof, or any rescission of, or amendment, waiver or other modification of, or any consent to departure from any Loan Document, including any increase in the Obligations resulting from the extension of additional credit to any Borrower; (ii) any sale, exchange, release, surrender, realization upon any property at any time pledged or mortgaged to secure any of the Obligations, and/or any offset against, or failure to perfect, or continue the perfection of, any lien in any such property, or delay in the perfection of any such lien, or any amendment or waiver of or consent to departure from any other guaranty for any of the Obligations; (iii) the failure of Lenders to assert any claim or demand or to enforce any right or remedy against any Borrower or any other Person under the provisions of any Loan Document; (iv) any settlement or compromise of any Obligation, any security therefor or any liability incurred directly or indirectly in respect thereof, and any subordination of the payment of any part thereof to the payment of any obligation (whether due or not) of any other Borrower to creditors of such other Borrower other than any other Borrower; (v) any manner of application of any collateral for the Obligations or proceeds thereof, to any of the Obligations, or any manner of sale or other disposition of any such collateral for all or any of the Obligations or any other assets of any Borrower; (vi) any change, restructuring or termination of the existence of any Borrower; or 17 25 (vii) any other agreement or circumstance of any nature whatsoever that might in any manner or to any extent vary the risk of any Borrower, or that might otherwise at law or in equity constitute a defense available to, or a discharge of, the obligations of any Borrower, or a defense to, or discharge of, any Borrower or any other Person relating to any of the Obligations. (d) The joint and several liability of Borrowers shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower. (e) It is the intent of each Borrower that the indebtedness, obligations and liability hereunder of no one of them be subject to challenge on any basis. Accordingly, as of the date hereof, the liability of each Borrower under the Loan Documents, together with all of its other liabilities to all Persons as of the date hereof and as of any other date on which a transfer is deemed to occur by virtue of this Agreement, calculated in an amount sufficient to pay its probable net liabilities (including contingent liabilities) as the same become absolute and matured ("Dated Liabilities") is, and is to be, less than the amount of the aggregate of a fair valuation of its property as of such corresponding date ("Dated Assets"). To this end each Borrower hereby (i) grants to and recognizes in each other Borrower, ratably, rights of subrogation and contribution in the amount, if any, by which the Dated Assets of such Borrower, but for the aggregate of subrogation and contribution in its favor recognized herein, would exceed the Dated Liabilities of such Borrower or, as the case may be (ii) acknowledges receipt of and recognizes its right to subrogation and contribution ratably from each of the other Borrowers in the amount, if any, by which the Dated Liabilities of such Borrower, but for the aggregate of subrogation and contribution in its favor recognized herein, would exceed the Dated Assets of such Borrower. In recognizing the value of the Dated Assets and the Dated Liabilities, it is understood that Borrowers will recognize, to at least the same extent of their aggregate recognition of liabilities hereunder, their rights to subrogation and contribution hereunder. It is a material objective of this Section that each Borrower recognizes rights to subrogation and contribution rather than be deemed to be insolvent (or in contemplation thereof) by reason of its joint and several obligations hereunder. ARTICLE III. THE CREDITS 3.1 REVOLVING LOANS (a) On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make loans (each a "Revolving Loan") to Borrowers from time to time until the Revolver Maturity Date in an aggregate amount not to exceed at any time outstanding such Lender's Revolving Loan Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Loan in excess of such Lender's Ratable Portion of the Available Credit. Borrowers may from time to time borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all the limitations, terms 18 26 and conditions contained herein. The Revolving Loans of each Lender shall be evidenced by a Note payable to the order of such Lender. (b) If at any time the Available Credit is negative, Borrowers, without demand or notice, shall immediately repay that portion of the Revolving Loans necessary to cause the Available Credit to be zero. Borrowers shall repay the outstanding principal balance of the Revolving Loans, together with all accrued and unpaid interest and related fees on the Revolver Maturity Date. (c) Borrowers' Agent, through an Authorized Representative, shall request each advance of a Revolving Loan by giving Administrative Lender irrevocable notice or telephonic notice (confirmed promptly in writing), in the form of Exhibit C attached hereto (each, a "Notice of Borrowing"), which specifies, among other things: (i) the aggregate principal amount of the requested advances (which aggregate amount must be a minimum of $500,000 and in integral multiples of $100,000 if the advances are to be Base Rate Loans and a minimum of $1,000,000 and in integral multiples of $500,000 if the advances are to be LIBOR Loans); (ii) the proposed date of borrowing, which shall be a Business Day; and (iii) whether such advance is to be a Base Rate Loan or a LIBOR Loan. Each such Notice of Borrowing must be received by Administrative Lender not later than (x) 9:00 A.M. (Portland time) at least one Business Day prior to the date of borrowing if a Base Rate Loan or (y) at least three Business Days prior to the date of borrowing if a LIBOR Loan. Administrative Lender shall promptly notify each Lender of the contents of each Notice of Borrowing and of the amount of the advance to be made by such Lender no later than 1:00 P.M. (Portland time) on the Business Day of receipt for Base Rate Loans and 1:00 P.M. (Portland time) the Business Day after receipt with respect to LIBOR Loans. (d) From time to time on any Business Day, Borrowers may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Revolving Loans; provided, however, that (i) each voluntary partial prepayment of Base Rate Loans must be in a minimum of $500,000 and in integral multiples of $100,000, or, if less, the entire principal amount of the Base Rate Loans and (ii) each voluntary partial prepayment of LIBOR Loans must be in a minimum of $1,000,000 and in integral multiples of $500,000, or, if less, the entire principal amount of a Tranche; provided, further, that any prepayment of a LIBOR Loan shall be subject to the provisions of Section 3.11. (e) From time to time on any Business Day, Borrowers may permanently reduce the aggregate Revolving Loan Commitments by giving at least five Business Days prior notice to Administrative Lender of the amount of such aggregate reduction; provided that any partial aggregate reduction shall be in a minimum amount of $5,000,000 and in an integral 19 27 multiple of $1,000,000. Each such reduction shall reduce ratably the respective Revolving Loan Commitments of the Lenders. 3.2 TERM LOAN (a) On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make in a single advance on the Closing Date a term loan (each a "Term Loan") to Borrowers in the amount of such Lender's Term Loan Commitment. The Term Loan of each Lender shall be evidenced by a Note payable to the order of such Lender. (b) On the Maturity Date, Borrowers shall repay the unpaid principal amount of each Term Loan, and prior thereto, Borrowers (i) shall, on the last day of each February, May, August and November beginning May 31, 2001 repay the outstanding principal balance of the Term Loans, or, if less, make a scheduled repayment of the aggregate outstanding principal amount of the Term Loans as follows: (A) before September 1, 2001, the aggregate amount of each payment shall be $1,538,462; and (B) after September 1, 2001, the aggregate amount of each payment shall be $2,307,692; (ii) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of the Term Loans; provided, however, that (A) any such prepayment shall be made among the Term Loans having the same Fixed Rate Term, if applicable; (B) no such prepayment of any LIBOR Loan may be made on any day other than the last day of the Fixed Rate Term for such Loan; (C) all such voluntary prepayments shall require at least three but no more than five Business Days' prior written notice to Administrative Lender; and (D) all such voluntary partial prepayments shall be in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000; (iii) shall, within twelve months of receipt of any proceeds from the sale of Borrower's or any U.S. Subsidiary's assets (other than the sale of inventory in the ordinary course), prepay the outstanding principal amount of the Terms Loans by an amount equal to such proceeds less the portion thereof reinvested during such twelve month period in assets of like kind to the assets sold; (iv) shall, within twelve months of receipt by Borrower or any U.S. Subsidiary of any insurance or condemnation proceeds, prepay the outstanding principal amount of the Term Loans by an amount equal to such proceeds less the portion thereof utilized in the repair or replacement of the affected property; (v) shall, upon receipt of net cash proceeds of Debt by Parent or any U.S. Subsidiary (other than proceeds of Loans and Debt described in Section 9.2(d)), prepay the outstanding principal amount of the Term Loans by an amount equal to such proceeds; 20 28 (vi) shall, upon receipt of net cash proceeds of any issuance of Stock or Stock Equivalent by Parent or any Subsidiary (other than proceeds not exceeding $1,000,000 in any fiscal year from the exercise of options granted to directors or employees), prepay the outstanding principal amount of the Term Loans by an amount equal to such proceeds multiplied by that fraction the numerator of which is the then outstanding principal balance of the Term Loans and the denominator of which is the then outstanding principal balance of the Term Loans and all terms loans provided for in the Australian Facilities; and (vii) shall, within (90) days after the last day of each fiscal year of Parent, prepay the outstanding principal amount of the Term Loans by an amount equal to 50% of the Excess Cash Flow for the immediately preceding fiscal year of Parent multiplied by that fraction the numerator of which is the then outstanding principal balance of the Term Loans and the denominator of which is the then outstanding principal balance of the Term Loans and all terms loans provided for in the Australian Facilities. Each prepayment of Term Loans made pursuant to any of clauses (ii) through (vii) shall be applied in the inverse order of the scheduled repayments of Term Loans set forth in clause (i) and shall be applied ratably among the Term Loans. Each prepayment of any Term Loans made pursuant to this Section shall be without premium or penalty, except for any funding loss indemnification required by Section 3.11. No amounts paid or prepaid with respect to Term Loans may be reborrowed. 3.3 LETTER OF CREDIT FACILITY (a) On the terms and subject to the conditions contained in this Agreement, on the Closing Date, the L/C Bank shall issue and deliver to ANZ a Letter of Credit in the amount of $10,000,000 and having an expiry date of November 14, 2001. Within fifteen Business Days before the expiry date of a Letter of Credit (or such shorter period as is acceptable to ANZ), L/C Bank shall issue and deliver to ANZ a replacement Letter of Credit in exchange for the expiring Letter of Credit unless: (i) any order, judgment or decree of any Governmental Authority or arbitrator of which the L/C Bank is aware shall purport by its terms to enjoin or restrain the L/C Bank from issuing such Letter of Credit or any Governmental Rule applicable to the L/C Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Bank shall prohibit, or request that the L/C Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Bank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the L/C Bank is not otherwise compensated) not in effect on the date hereof or result in any loss, cost or expense which (A) was not applicable, in effect or known to the L/C Bank on the Closing Date and which the L/C Bank in 21 29 Good Faith deems material to it, and (B) the reimbursement of which is not provided for hereunder; (ii) after giving effect to the issuance of such Letter of Credit, the Letter of Credit Obligations exceed an amount equal to $10,000,000; or (iii) fees due in connection therewith have not been paid. None of the Lenders (other than the Lender that is the L/C Bank) shall have any obligation to issue any Letters of Credit. (b) In no event shall the expiry date of any Letter of Credit fall after the Maturity Date. (c) Prior to the issuance of each Letter of Credit, Borrowers' Agent shall have delivered to the L/C Bank, if requested by the L/C Bank, a Letter of Credit Agreement, signed by Borrowers, and such other documents or items as L/C Bank may require pursuant to the terms thereof. (d) Immediately upon the issuance by the L/C Bank of a Letter of Credit, the L/C Bank shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed irrevocably and unconditionally to have purchased and received from the L/C Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Ratable Portion, in such Letter of Credit and the obligations of Borrowers with respect thereto (including, without limitation, all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty pertaining thereto. (e) In determining whether to pay under any Letter of Credit, the L/C Bank shall not have any obligation relative to Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the L/C Bank under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put the L/C Bank under any resulting liability to any other Lender. (f) If the L/C Bank makes any payment under any Letter of Credit, Borrowers shall reimburse the L/C Bank on demand for the amount thereof, except to the extent L/C Bank receives payment of such amount pursuant to Section 3.3(g). (g) If the L/C Bank makes any payment under any Letter of Credit, the L/C Bank shall promptly notify Administrative Lender, who shall promptly notify each Lender, and each Lender shall promptly and unconditionally pay to Administrative Lender for the account of the L/C Bank the amount of such Lender's Ratable Portion of such payment in same day funds (and upon receipt, Administrative Lender shall promptly pay the same to the L/C Bank), but in no event shall the aggregate of all such payments by a Lender exceed such 22 30 Lender L/C Commitment. Each such payment, when made by a Lender to Administrative Lender, shall be deemed to be and shall constitute a Base Rate Loan by such Lender to Borrowers payable on demand. The Base Rate Loans shall be made as contemplated in the preceding sentence notwithstanding Borrowers' failure to satisfy the conditions set forth in Section 7.2. If Administrative Lender so notifies a Lender before 10:00 A.M. (Portland time) on any Business Day, such Lender shall make available to Administrative Lender for the account of the L/C Bank its Ratable Portion of the amount of such payment by 1:00 P.M. (Portland time) on such Business Day in same day funds. If and to the extent such Lender does not make its Ratable Portion of such payment available to Administrative Lender for the account of the L/C Bank, such Lender agrees to repay to Administrative Lender for the account of such L/C Bank on demand such amount together with interest thereon, for each day from such date until the date such amount is repaid to Administrative Lender for the account of the L/C Bank, at the Federal Funds Rate. The failure of any Lender to make available to Administrative Lender for the account of the L/C Bank its Ratable Portion of any such payment shall not relieve any other Lender of its obligation hereunder, but no Lender shall be responsible for the failure of any other Lender to make available to Administrative Lender for the account of the L/C Bank such other Lender' s Ratable Portion of any such payment. (h) The obligations of Lenders to make payments to Administrative Lender for the account of the L/C Bank with respect to Letters of Credit are irrevocable and not subject to any qualification or exception whatsoever. 3.4 INTEREST AND FEES (a) INTEREST. The outstanding principal balance of each Loan shall bear interest at the Applicable Rate. The foregoing notwithstanding, the rate of interest applicable at all times during the continuation of an Event of Default shall be a fluctuating rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the Alternate Base Rate in effect from time to time, plus 300 basis points. All fees, expenses and other amounts not paid when due shall bear interest (from the date due until paid) at the rate set forth in the preceding sentence. (b) LETTER OF CREDIT FEE. On the last day of each February, May, August and November beginning November 30, 2000, Borrowers shall pay to Administrative Lender, for the ratable benefit of Lenders, a fee equal to the face amount of the outstanding Letters of Credit multiplied by 25% of an amount equal to the LIBOR Margin in effect on the date such fee is payable. In addition, upon the occurrence of any amendment, extension, issuance or other activity with respect to any Letter of Credit, Borrowers shall pay to L/C Bank a fee determined in accordance with L/C Bank's standard fees and charges then in effect for such activity. (c) CLOSING FEE. Before the Closing Date, Borrowers paid to Administrative Lender, for the ratable benefit of Lenders, a closing fee of $787,500. 23 31 (d) COMMITMENT FEE. Borrowers shall pay to Administrative Lender, for the account of each Lender, for the period commencing on the Closing Date and continuing through the Revolver Maturity Date, a commitment fee at the per annum rate set forth in Schedule III on such Lender's Ratable Portion of the amount by which the Revolving Loan Commitments are greater than the average daily outstanding balance of the Revolving Loans. Such commitment fees shall be payable by Borrowers in arrears on the last day of each February, May, August and November beginning November 30, 2000 and on the Revolver Maturity Date. (e) ADMINISTRATIVE LENDER'S AND L/C BANK'S FEES. Borrowers shall pay to Administrative Lender, for Administrative Lender's own account, and to L/C Bank, for L/C Bank's own account, the fees set forth in that certain fee letter from Scotiabank to Parent dated August 29, 2000. (f) COMPUTATION AND PAYMENT. All interest and per annum fees shall be computed on the basis of a 360-day year, actual days elapsed, except interest on Base Rate Loans shall be computed on the basis of a 365/366-day year. Interest on Base Rate Loans shall be payable monthly, in arrears, on the last day of each month beginning November 30, 2000, on the Revolver Maturity Date (with respect to Revolving Loans) and on the Maturity Date. Interest on LIBOR Loans shall be paid on the last day of each Fixed Rate Term, on the Revolver Maturity Date (with respect to Revolving Loans) and on the Maturity Date. 3.5 INTEREST OPTIONS (a) ELECTION. Subject to the requirement that each LIBOR Loan be in a minimum amount of $1,000,000 and in integral multiples of $500,000 and each Base Rate Loan be in a minimum amount of $500,000 and in integral multiples of $100,000 and the limitation in Section 3.5(b) regarding the number of Tranches outstanding at any time, (i) except as otherwise provided herein, at any time when a Default is not continuing Borrowers' Agent may convert all or any portion of a Base Rate Loan to a LIBOR Loan for a Fixed Rate Term designated by Borrowers' Agent, and (ii) at any time Borrowers' Agent may convert all or a portion of a LIBOR Loan at the end of the Fixed Rate Term applicable thereto to a Base Rate Loan or, if no Default is continuing, to a LIBOR Loan for a new Fixed Rate Term designated by Borrowers' Agent. If Borrowers' Agent has not made the required interest rate conversion or continuation election prior to the last day of any Fixed Rate Term, such LIBOR Loan shall be converted to a Base Rate Loan. (b) MAXIMUM NUMBER OF TRANCHES. At no time shall there be more than ten Tranches outstanding at any time. (c) NOTICE TO ADMINISTRATIVE LENDER. Borrowers' Agent shall request each interest rate conversion or continuation by giving Administrative Lender irrevocable notice or telephonic notice (confirmed promptly in writing), in the form of Exhibit D attached hereto (a "Notice of Conversion or Continuation"), that specifies, among other things: (i) the Loan to which such Notice of Conversion or Continuation applies; (ii) the principal amount 24 32 that is the subject of such conversion or continuation; (iii) the proposed date of such conversion or continuation, which shall be a Business Day; and (iv) if such Notice pertains to a LIBOR Loan, the length of the applicable Fixed Rate Term. Any such Notice of Conversion or Continuation must be received by Administrative Lender not later than (i) 9:00 A.M. (Portland time) at least one Business Day prior to the effective date of any Alternate Base Rate interest selection, and (ii) at least three Business Days prior to the effective date of any LIBOR interest selection. Administrative Lender shall promptly notify each Lender of the contents of each such Notice of Conversion or Continuation, or if timely notice is not received from Borrowers' Agent prior to the last day of any Fixed Rate Term, of the automatic conversion of such LIBOR Loan to a Base Rate Loan. 3.6 OTHER PAYMENT TERMS (a) AUTOMATIC DEBIT. Administrative Lender may, and Borrowers hereby authorize Administrative Lender to, instruct any Lender to debit any deposit account of Borrower with such Lender for all payments of principal, interest, fees and other amounts due under the Loan Documents as they become due (and Borrowers hereby authorize each Lender to follow any such instruction from Administrative Lender). (b) PLACE AND MANNER. Borrowers shall make all payments due to each Lender under the Loan Documents by payment to Administrative Lender at Administrative Lender's Office, for the account of such Lender, in lawful money of the United States and in same day or immediately available funds by 11:00 A.M. (Portland time) on the date due. Administrative Lender shall promptly disburse to each Lender at such Lender's Applicable Lending Office each such payment received by Administrative Lender for such Lender no later than 2:00 P.M. (Portland time) on the Business Day received if received by 11:00 A.M. (Portland time), or if received later, by 2:00 P.M. (Portland time) on the next Business Day. (c) DATE. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be. (d) APPLICATION OF PAYMENTS. All payments under the Loan Documents (including prepayments) shall be applied first to unpaid fees, costs and expenses then due and payable under the Loan Documents, second to accrued interest then due and payable under the Loan Documents and finally to reduce the principal amount of the outstanding Obligations. (e) FAILURE TO PAY ADMINISTRATIVE LENDER. Unless Administrative Lender shall have received notice from Borrowers' Agent at least one Business Day prior to the date on which any payment is due to Lenders hereunder that Borrowers will not make such payment in full, Administrative Lender may assume that Borrowers have made such payment in full to Administrative Lender on such date and Administrative Lender may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent Borrowers shall not have made such 25 33 payment in full to Administrative Lender, such Lender shall repay to Administrative Lender on demand the amount distributed to such Lender together with interest thereon, for each day from the date distributed until the date repaid, at the Federal Funds Rate. A certificate of Administrative Lender submitted to any Lender with respect to any amounts owing by such Lender under this Section shall be presumptive evidence of such amounts. 3.7 FUNDING (a) LENDER FUNDING AND DISBURSEMENT. Each Lender shall, by 11:00 A.M. (Portland time) on the date of each borrowing under Section 3.1, make available to Administrative Lender at Administrative Lender's Office, in same day or immediately available funds, such Lender's Ratable Portion thereof. After Administrative Lender's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article VII, Administrative Lender will promptly disburse such funds in same day or immediately available funds to Borrowers. Unless otherwise directed by Borrowers' Agent in writing, Administrative Lender shall disburse the proceeds of each borrowing to Borrowers by deposit to any demand deposit account maintained by Parent with a Lender, which account is designated by Borrowers' Agent in a notice to Administrative Lender. (b) LENDER FAILURE TO FUND. Unless Administrative Lender receives notice from a Lender on or before the date of any borrowing hereunder that such Lender will not make available to Administrative Lender such Lender's Ratable Portion thereof, Administrative Lender may assume that such Lender has made such portion available to Administrative Lender on the date of such borrowing in accordance with Section 3.7(a), and Administrative Lender may, in reliance upon such assumption, make available to Borrowers (or otherwise disburse) on such date a corresponding amount. If any Lender does not make the amount of its Ratable Portion of any borrowing available to Administrative Lender on the date of such borrowing, such Lender shall pay to Administrative Lender, on demand, interest which shall accrue on such amount until made available to Administrative Lender at a rate equal to the daily Federal Funds Rate. A certificate of Administrative Lender submitted to any Lender with respect to any amounts owing under this Section shall be presumptive evidence of such amounts. If any Lender's Ratable Portion of any borrowing is not in fact made available to Administrative Lender by such Lender within three Business Days after the date of such borrowing, Borrowers shall pay to Administrative Lender, on demand, an amount equal to such Ratable Portion together with interest thereon, for each day from the date such amount was made available to Borrowers until the date such amount is repaid to Administrative Lender, at the rate of interest then applicable thereto. (c) LENDERS' OBLIGATIONS SEVERAL. The obligation of each Lender hereunder is several. The failure of any Lender to make available its Ratable Portion of any borrowing shall not relieve any other Lender of its obligation hereunder to do so on the date requested, but no Lender shall be responsible for the failure of any other Lender to make available the Ratable Portion to be funded by such other Lender. 26 34 3.8 PRO RATA TREATMENT (a) BORROWINGS. Each Loan shall be made or shared among Lenders ratably. (b) SHARING OF PAYMENTS, ETC. Except as otherwise provided herein, each payment of principal, interest or fees shall be made or shared among Lenders ratably. If any Lender obtains any payment (whether voluntary, involuntary, through the exercise of any right of setoff or otherwise) on account of a Loan in excess of its Ratable Portion of payments on the Loans obtained by all Lenders, such Lender ("Purchasing Lender") shall forthwith purchase from the other Lenders sufficient participations to cause the Purchasing Lender's interest in the Loans to be in the same proportionate relationship with all Loans as before such payment was received; provided, however, that if all or any portion of such excess payment is thereafter recovered from the Purchasing Lender, the purchased participation shall be rescinded and each other Lender shall repay to the Purchasing Lender (i) the purchase price to the extent of such recovery together with (ii) an amount equal to such other Lender's ratable share (according to the proportion of (A) the amount of such other Lender's required repayment to (B) the total amount so recovered from the Purchasing Lender) of any interest or other amount paid or payable by the Purchasing Lender in respect of the total amount so recovered. Borrowers agree that any Purchasing Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if the Purchasing Lender were the direct creditor of Borrowers in the amount of such participation. 3.9 CHANGE OF CIRCUMSTANCES (a) INABILITY TO DETERMINE RATE. If Administrative Lender at any time determines that adequate and reasonable means do not exist for ascertaining LIBOR, or the Required Lenders determine at any time that LIBOR does not accurately reflect the cost to Lenders of making or maintaining LIBOR interest rates hereunder, then Administrative Lender shall give telephonic notice (promptly confirmed in writing) to Borrowers' Agent and each Lender of such determination. If such notice is given and until such notice has been withdrawn in writing by Administrative Lender, no LIBOR interest option may be selected by Borrowers' Agent and each LIBOR Loan, subsequent to the end of the Fixed Rate Term applicable thereto, shall become a Base Rate Loan. (b) ILLEGALITY: TERMINATION OF COMMITMENT. Notwithstanding any other provisions herein, if any Change of Law shall make it unlawful for any Lender (i) to make a LIBOR interest rate available, or (ii) to maintain LIBOR interest rates hereunder, then, in the former event, any obligation of such Lender to make available such unlawful LIBOR interest rate shall be suspended until such time as it is once again lawful to make such rate available, and in the latter event, any such unlawful LIBOR interest rate then outstanding shall be converted so that interest is determined in relation to the Alternate Base Rate pursuant to the terms of this Agreement; provided, however, if any such Change in Law shall permit a LIBOR interest rate until the expiration of the Fixed Rate Term relating thereto, then such permitted LIBOR interest rate shall continue as such until the end of such Fixed Rate Term. 27 35 If as a result of this Section a LIBOR interest rate is converted to a lower interest rate, Borrowers shall pay to each Lender immediately upon demand such amount or amounts as may be necessary to compensate such Lender for any loss in connection therewith. (c) CHARGES: ILLEGALITY. Upon the occurrence of any event described in Section 3.9(b), Borrowers shall pay to each Lender, within five days after demand, such amount or amounts as may be necessary to compensate such Lender for any fines, fees, charges, penalties or other amounts payable by such Lender as a result thereof and that are attributable to LIBOR interest rates made available to Borrowers hereunder. In determining which amounts payable by any Lender and/or losses incurred by any Lender are attributable to LIBOR interest rates made available to Borrowers hereunder, any reasonable allocation made by any Lender among its operations shall, in the absence of manifest error, be conclusive and binding upon Borrowers. (d) INCREASED LIBOR LOAN COSTS, ETC. Borrowers shall reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBOR Loans which results from any Change of Law after the Closing Date. Such Lender shall promptly notify Administrative Lender and Borrowers' Agent in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by Borrowers directly to such Lender within five days of Borrowers' Agent's receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on Borrowers. (e) CAPITAL REQUIREMENTS. If any Lender determines that any Change of Law regarding capital adequacy which occurs after the Closing Date has or shall have the effect of reducing the rate of return on the capital of such Lender (or any entity controlling such Lender) as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such entity would have achieved but for such Change of Law (taking into consideration such Lender's or such entity's policies with respect to capital adequacy), by an amount reasonably deemed by such Lender to be material, then from time to time, within fifteen days after demand by such Lender (with a copy to Administrative Lender), Borrowers shall pay to such Lender or such entity such additional amounts as shall compensate such Lender or such entity for such reduction. Any request by a Lender under this Section shall set forth the basis of the calculation of such additional amounts and shall, in the absence of manifest error, be conclusive and binding on Borrowers for all purposes. 3.10 TAXES ON PAYMENTS (a) PAYMENTS FREE OF TAXES. All payments made by Borrowers under the Loan Documents shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, 28 36 charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (except taxes based on the overall net income imposed on Administrative Lender or any Lender by any Governmental Authority located in the United States) (with all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings being hereinafter referred to herein as "Taxes"). If any Taxes are required to be withheld from any amounts payable to Administrative Lender or any Lender under the Loan Documents, the amounts so payable to Administrative Lender or such Lender shall be increased to the extent necessary to yield to Administrative Lender or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in the Loan Documents. Whenever any Taxes are payable by Borrowers, as promptly as possible thereafter, Borrowers' Agent shall send to Administrative Lender for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by Borrowers showing payment thereof. If Borrowers fail to pay any Taxes when due to the appropriate taxing authority or Borrowers' Agent fails to remit to Administrative Lender the required receipts or other required documentary evidence, Borrowers shall indemnify Administrative Lender and Lenders for any incremental taxes, interest or penalties that may become payable by Administrative Lender or any Lender as a result of any such failure. This Section shall survive the payment in full and performance of all of Borrowers' other Obligations. (b) WITHHOLDING EXEMPTION CERTIFICATES. Each Lender agrees that it will deliver to Borrowers' Agent and Administrative Lender, upon the reasonable request of Borrowers' Agent or Administrative Lender, either (i) a statement that it is incorporated under the laws of the United States of America or a state thereof, or (ii) if it is not so incorporated, two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. 3.11 FUNDING LOSS INDEMNIFICATION If any portion of a LIBOR Loan is repaid before the last day of the Fixed Rate Term applicable thereto (whether through voluntary prepayment, acceleration or otherwise), or if Borrowers fail to borrow the full amount of a requested LIBOR Loan set forth in any Notice of Borrowing or to convert or continue at the LIBOR interest option any portion of a Loan in accordance with a Notice of Conversion or Continuation (in either event, whether as a result of the failure to satisfy any applicable conditions or otherwise), Borrowers shall pay to Administrative Lender, for the ratable benefit of Lenders, an amount equal to the present value (calculated in accordance with this Section) of interest for the unexpired portion of such Fixed Rate Term on the portion of the Loan so repaid or the Fixed Rate Term specified in such Notice, at a per annum rate equal to the excess, if any, of (a) the rate applicable to such LIBOR Loan or proposed LIBOR Loan minus (b) the rate of interest obtainable by Administrative Lender upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date approximating the last 29 37 Business Day of such Fixed Rate Term. The present value of such additional interest will be calculated by discounting the amount of such interest for each day in the unexpired portion of such Fixed Rate Term at a per annum interest rate equal to the interest rate determined pursuant to clause (b) of the preceding sentence, and by adding all such amounts for all such days during such period. The determination by Administrative Lender of such amount shall, in the absence of manifest error, be conclusive and binding on Borrowers for all purposes. This Section shall survive the payment in full and performance of all of Borrowers' other Obligations. ARTICLE IV. LOAN ADMINISTRATION 4.1 STATEMENTS From time to time, Administrative Lender may render to Borrowers' Agent a statement setting forth the balance in the loan account(s) maintained by Administrative Lender for Borrowers pursuant to this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Administrative Lender but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and conclusively binding upon Borrowers as an account stated except to the extent that Administrative Lender receives a notice from Borrowers' Agent of any specific exceptions thereto within thirty days after the date such statement has been mailed by Administrative Lender. Until such time as Administrative Lender shall have rendered to Borrowers' Agent a written statement as provided above, the balance in the loan account(s) shall be presumptive evidence of the amounts due and owing to Lenders by Borrowers. 4.2 PAYMENTS All amounts due under any of the Loan Documents shall be payable to such account as Administrative Lender may designate from time to time. Borrowers shall make all payments due hereunder free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations any Lender is required to surrender or return such payment or proceeds to any person or entity for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by such Lender. Borrowers hereby indemnify and hold Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section shall remain effective notwithstanding any contrary action which may be taken by any Lender in reliance upon such payment or proceeds. This Section shall survive the payment in full and performance of all of Borrowers' other Obligations. 30 38 ARTICLE V. SECURITY 5.1 GRANT OF SECURITY INTEREST Borrowers hereby grant to Administrative Lender, for the benefit of and on behalf of Lenders, a security interest in all of the Collateral as security for the full and prompt payment in cash and performance of the Obligations. 5.2 PERFECTION; DUTY OF CARE (a) Until all the Obligations have been fully satisfied and paid in cash, Borrowers shall perform all steps requested by Administrative Lender to perfect, maintain and protect Administrative Lender's security interest in the Collateral, including, without limitation, (i) executing and filing financing and continuation statements in form and substance satisfactory to Administrative Lender, and (ii) delivering all Collateral in which Administrative Lender's security interest may be perfected by possession together with such indorsements as Administrative Lender may request. Borrowers hereby authorize Administrative Lender to execute and file UCC financing statements signed only by Administrative Lender, except to the extent prohibited by law. (b) Administrative Lender shall have the right at all times, and from time to time, to contact Borrowers' account debtors to verify Rights to Payment. (c) Borrowers shall pay or cause to be paid all taxes, assessments and governmental charges levied or assessed or imposed upon or with respect to the Collateral or any part thereof; provided, however, Borrowers shall not be required to pay any tax if the validity and/or amount thereof is being contested in good faith and by appropriate and lawful proceedings promptly initiated and diligently conducted of which Borrowers' Agent has given prior notice to Administrative Lender and for which appropriate reserves have been established and so long as levy and execution have been and continue to be stayed. If Borrowers fail to pay or so contest and reserve for such taxes, assessments and governmental charges, Administrative Lender may (but shall not be required to) pay the same and add the amount of such payment to the principal of the Revolving Loans. (d) In order to protect or perfect the security interest granted under the Loan Documents, Administrative Lender may discharge any Lien that is not a Permitted Lien or bond the same, pay for any insurance that Borrowers have failed to maintain as required by this Agreement, maintain guards, pay any service bureau, or obtain any record and add the same to the principal of the Revolving Loans. (e) Administrative Lender shall have no duty of care with respect to the Collateral, except to exercise reasonable care with respect to the Collateral in its custody, but shall be deemed to have exercised reasonable care if such property is accorded treatment either (i) substantially equal to that which it accords its own property or (ii) as Borrowers' Agent requests in writing, provided that no failure to comply with any such request nor any 31 39 omission to do any such act requested by Borrowers' Agent shall be deemed a failure to exercise reasonable care. Administrative Lender's failure to take steps to preserve rights against any parties or property shall not be deemed to be a failure to exercise reasonable care with respect to the Collateral in its custody. 5.3 REAL ESTATE COLLATERAL As additional security for the full and prompt payment in cash and performance of the Obligations, Borrowers have executed and delivered to Administrative Lender certain deeds of trust and mortgages creating Liens for the benefit of Administrative Lender and Lenders on certain of Borrowers' real property. Borrowers shall execute and deliver such further mortgages and deeds of trust as Administrative Lender reasonably requests for the purpose of granting and perfecting a first priority Lien for the benefit of Lenders in each parcel of real estate owned or leased by Borrower. ARTICLE VI. REPRESENTATIONS AND WARRANTIES Borrower makes the following representations and warranties to Administrative Lender and Lenders, subject to the exceptions set forth on the Disclosure Schedule, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the performance and payment in full, in cash, of all Obligations: 6.1 LEGAL STATUS; SUBSIDIARIES Borrower and each Subsidiary is a corporation validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform the Obligations and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. Except as otherwise disclosed in Section 6.1 of the Disclosure Schedule, Borrower has no Subsidiaries other than those which it is permitted to acquire in accordance with Section 9.4 and does not otherwise own or hold, directly or indirectly, any capital stock or equity security of, or any equity interest in, any Person. 6.2 DUE AUTHORIZATION; NO VIOLATION The execution, delivery and performance by each Obligor of the Loan Documents executed or to be executed by it are within such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene such Obligor's Organic Documents; (b) contravene any contractual restriction or Governmental Rule binding on or affecting such Obligor; or (c) result in, or require the creation or imposition of, any Lien on any Obligor's or Subsidiary's properties, except Liens for the benefit of Lenders. 32 40 6.3 GOVERNMENT APPROVAL, REGULATION No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for the due execution, delivery or performance by any Obligor of the Loan Documents to which it is a party. Neither Borrower nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. Neither Borrower nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, Regulation G, U or X of the Board of Governors of the Federal Reserve System 6.4 VALIDITY, ENFORCEABILITY The Loan Documents executed by each Obligor will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of such Obligor enforceable in accordance with their respective terms. 6.5 CORRECTNESS OF FINANCIAL STATEMENTS The financial statements of Parent and each Subsidiary dated as of May 31, 2000 heretofore delivered by Borrowers' Agent to Administrative Lender, (a) present fairly the financial condition and results of operations of Parent and the Subsidiaries; (b) disclose all liabilities of Parent and the Subsidiaries that are required to be reflected or reserved against under GAAP, whether liquidated or unliquidated, fixed or contingent; and (c) have been prepared in accordance with GAAP consistently applied. Except as disclosed to Administrative Lender pursuant to Section 8.3, since the date of such financial statements there has been no change or changes that have resulted in a Material Adverse Effect. 6.6 TAXES Borrower and each Subsidiary has filed, or caused to be filed, all federal, state, local and foreign tax returns required to be filed by it, and has paid, or caused to be paid, all taxes as are shown on such returns, or on any assessment received by it, to the extent that such taxes have become due, except as otherwise contested in good faith. Borrower has set aside proper amounts on its books, determined in accordance with GAAP, for the payment of all taxes for the years that have not been audited by the respective tax authorities and for taxes being contested by it. 6.7 LITIGATION, LABOR CONTROVERSIES There is no pending or, to the knowledge of Borrower, threatened litigation, action, proceeding, or labor controversy affecting Parent or any Subsidiary, or any of their respective 33 41 properties, businesses, assets or revenues, which could have a Material Adverse Effect. As of the Closing Date, neither Borrower nor any Subsidiary is a party to, and has no obligations under, any collective bargaining agreement. 6.8 TITLE TO PROPERTY, LIENS Borrower and each Subsidiary has good, indefeasible, and merchantable title to and ownership of the Collateral, free and clear of all Liens, except Permitted Liens. 6.9 ERISA Borrower and each Subsidiary is in compliance in all material respects with the applicable provisions of ERISA. Neither Borrower nor any Subsidiary has violated any provision of any Plan maintained or contributed to by it in a manner that could result in a Material Adverse Effect. No "reportable event" (as defined in Title IV of ERISA) has occurred and is continuing with respect to any Plan initiated by it. 6.10 OTHER OBLIGATIONS Neither Borrower nor any Subsidiary is in default with respect to any Debt in excess of $2,000,000 or any of its material contractual obligations. 6.11 ENVIRONMENTAL MATTERS Borrower and each Subsidiary is in compliance in all material respects with all Environmental Laws applicable to it, other than such noncompliance as in the aggregate could not have a Material Adverse Effect. Neither Borrower nor any Subsidiary has received notice that it is the subject of any federal or state investigation evaluating whether any Remedial Action is needed, except for such notices received that in the aggregate do not refer to Remedial Actions that could result in a Material Adverse Effect. There have been no Releases by Borrower or a Subsidiary that could result in a Material Adverse Effect. 6.12 NO BURDENSOME RESTRICTIONS; NO DEFAULTS (a) Neither Borrower nor any Subsidiary is a party to any contractual obligation the compliance with which could have a Material Adverse Effect or the performance of which, either unconditionally or upon the happening of an event, will result in the creation of a Lien (other than Permitted Liens) on its property or assets. (b) No facts or circumstances exist which would constitute a breach of any obligation, representation or warranty of Borrower hereunder if this Agreement were in effect immediately prior to Borrower's execution hereof. (c) There is no Governmental Rule the compliance with which by Borrower or any Subsidiary could have a Material Adverse Effect. 34 42 6.13 NO OTHER VENTURES Neither Borrower nor any Subsidiary is engaged in any joint purchasing arrangement, joint venture or partnership with any other Person. 6.14 INSURANCE All current policies of insurance of any kind or nature owned by or issued to Borrower and the Subsidiaries, including, without limitation, policies of fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation and employee health and welfare insurance, are in full force and effect and are of a nature and provide such coverage as is sufficient and as is customarily carried by companies of its size and character. Neither Borrower nor any Subsidiary has any reason to believe that it will be unable to comply with Section 8.5. 6.15 FORCE MAJEURE Neither Borrower's nor any Subsidiary's business or properties is currently suffering from the effects of any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), other than those the consequences of which in the aggregate could not have a Material Adverse Effect. 6.16 INTELLECTUAL PROPERTY Borrower and each Subsidiary owns or licenses or otherwise has the right to use all material licenses, Permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations and other intellectual property rights and General Intangibles that are necessary for the operation of its businesses, without infringement upon or conflict with the rights of any other Person with respect thereto, including, without limitation, all trade names. No slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by Borrower or any Subsidiary infringes upon or conflicts with any rights owned by any other Person, which infringement or conflict could have a Material Adverse Effect, and no claim or litigation regarding any of the foregoing is pending or, to its knowledge, threatened, the existence of which could have a Material Adverse Effect. No patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to its knowledge, proposed, other than those the consequences of which in the aggregate could not have a Material Adverse Effect. 6.17 CERTAIN INDEBTEDNESS The Disclosure Schedule identifies as of the Closing Date all Indebtedness of Parent and the Subsidiaries which is either (a) Debt or (b) incurred outside of the ordinary course of the business. 35 43 6.18 SOLVENCY Each Obligor has received consideration that is the reasonably equivalent value of the obligations and liabilities that it has incurred to Lenders. Each Obligor is not insolvent as defined in any applicable state or federal statute, nor will it be rendered insolvent by the execution and delivery of this Agreement or the other Loan Documents. No Obligor intends to, nor does it believe that it will, incur debts beyond its ability to pay them as they mature. Each Obligor has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage. 6.19 CHIEF EXECUTIVE OFFICE AND OTHER LOCATIONS Borrower's chief executive office and principal place of business is set forth in Section 6.19 of the Disclosure Schedule. Borrower's books and records are located at its chief executive office, and the only other offices and/or locations where it keeps the Collateral (except for inventory which is in transit) or conducts any of its business are set forth in Section 6.19 of the Disclosure Schedule. 6.20 FISCAL YEAR Parent's fiscal year ends on August 31. 6.21 COMPLIANCE WITH LAW Borrower and each Subsidiary is in compliance with all Governmental Rules and law, except where the failure to do so could not have a Material Adverse Effect. 6.22 NO SUBORDINATION There is no agreement, indenture, contract or instrument to which any Obligor is a party or by which it or any Subsidiary may be bound that requires the subordination in right of payment of any of its obligations subject to this Agreement to any other obligation of it. 6.23 TRUTH, ACCURACY OF INFORMATION All factual information furnished to Administrative Lender and Lenders in connection with the Loan Documents is accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the information furnished, in light of the circumstances under which furnished, not misleading. 6.24 EXCLUDED PATENTS The Excluded Patents relate solely to starch co-polymers. The Excluded Patents will not be necessary, used or useful in the generation of more than two percent of Parent's consolidated revenue in any fiscal year. 36 44 ARTICLE VII. CONDITIONS 7.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT The obligation of Lenders to extend any credit contemplated by this Agreement and of L/C Bank to issue any Letter of Credit is subject to the fulfillment to Administrative Lender's satisfaction of all of the following conditions: (a) DOCUMENTATION. Administrative Lender shall have received, in form and substance satisfactory to it, each of the following duly executed: (i) this Agreement, the Notes and such mortgages, deeds of trust and other security instruments as Administrative Lender may require; (ii) from each Obligor, a certificate of its secretary or assistant secretary dated as of the Closing Date as to: (A) resolutions of its board of directors then in full force and effect authorizing the execution, delivery and performance of each of the Loan Documents to be executed by it; (B) its Organic Documents, a copy of each of which is attached; and (C) the incumbency and signatures of those of its officers authorized to act with respect to the Loan Documents to be executed by it; (iii) with respect to each Obligor: (A) from the Secretary of State (or other appropriate governmental official) of its jurisdiction of its incorporation, a good standing certificate or certificate of existence, as applicable, and a certified copy of its filed Organic Documents; and (B) a certificate of good standing as a foreign corporation in each jurisdiction described in Section 6.1; (iv) a Notice of Authorized Representatives, the initial Notice of Borrowing and a disbursement direction letter; (v) the opinion of Preston Gates & Ellis LLP, counsel to Borrowers, as to such matters as Administrative Lender and each Lender shall reasonably require; and (viii) such other documents as Administrative Lender and each Lender may require. (b) FINANCIAL CONDITION. There is no event or circumstance that could have a Material Adverse Effect. (c) FEES AND EXPENSES. Borrowers shall have paid all fees and invoiced costs and expenses then due pursuant to the terms of this Agreement. (d) INSURANCE. Borrowers' Agent shall have delivered to Administrative Lender evidence of the insurance coverage, including loss payable endorsements, required pursuant to Section 8.5. 37 45 7.2 CONDITIONS OF EACH EXTENSION OF CREDIT The obligation of each Lender to make any credit available under the Loan Documents (including any Loan being made by such Lender on the Closing Date) shall be subject to the further conditions precedent that: (a) the following statements shall be true on the date such credit is advanced, both before and after giving effect thereto and to the application of the proceeds therefrom, and the acceptance by Borrowers' Agent of the proceeds of such credit shall constitute a representation and warranty by Borrowers that on the date such credit is advanced such statements are true: (i) the representations and warranties of Borrowers contained in the Loan Documents are correct in all material respects on and as of such date as though made on and as of such date or, as to those representations and warranties limited by their terms to a specified date, were correct in all material respects on and as of such date; (ii) no Default is continuing or would result from the credit being advanced; and (iii) no "Potential Event of Default" (as defined in the Australian Facilities) exists. (b) advancing such credit on such date does not violate any Governmental Rule and is not enjoined, temporarily, preliminarily or permanently; (c) Administrative Lender shall have received such additional documents, information and materials as any Lender, through Administrative Lender, may reasonably request; and (d) no event or circumstance exists that could have a Material Adverse Effect. ARTICLE VIII. AFFIRMATIVE COVENANTS Borrower covenants that so long as Lenders remain committed to extend credit to Borrower pursuant to the terms hereof and until performance and payment in full, in cash, of all Obligations, Borrower shall: 8.1 PAYMENTS Pay all principal, interest, fees and other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein. 38 46 8.2 ACCOUNTING RECORDS Keep, and cause each Subsidiary to keep, accurate books and records of its financial affairs sufficient to permit the preparation of financial statements therefrom in accordance with GAAP. 8.3 INFORMATION AND REPORTS Provide to Administrative Lender all of the following, in form and detail reasonably satisfactory to Administrative Lender and with sufficient copies for distribution to all Lenders: (i) as soon as available but not later than 120 days after and as of the end of each fiscal year of Parent, a copy of the annual unqualified audit report for such fiscal year for Parent and the Subsidiaries, including therein consolidated balance sheets of Parent and the Subsidiaries as of the end of such fiscal year and consolidated statements of earnings and cash flow of Parent and the Subsidiaries for such fiscal year, in each case certified in a manner acceptable to Administrative Lender by Ernst & Young or any other independent public accountants acceptable to Administrative Lender, together with a report from such accountants to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default that has occurred and is continuing, or, if they have become aware of such Default, describing such Default and the steps, if any, of which they are aware being taken to cure it; (ii) as soon as available but not later than 60 days after and as of the end of each of Parent's first three fiscal quarters, nor later than 120 days after and as of the end of each of Parent's fourth fiscal quarters, consolidated and consolidating balance sheets of Parent and the Subsidiaries as of the end of such fiscal quarter and consolidated and consolidating statements of earnings and cash flow of Parent and the Subsidiaries for such fiscal quarter and for fiscal year-to-date, together with a comparison of Parent's financial condition for such quarter and year-to-date with the corresponding quarter and year-to-date in Parent's immediately preceding fiscal year; (iii) contemporaneously with the delivery of each financial statement required hereby, a certificate of Parent's principal financial officer substantially in the form of Exhibit E attached hereto (A) certifying that such financial statements fairly present in all material respects Parent's balance sheet as of the end of such quarter/year and income and cash flow for such quarter/year and year-to-date (subject to normal year-end adjustments), (B) stating that no Default existed at any time during the period covered by such statement, except for those events or conditions, if any, described in such certificate in reasonable detail together with a statement of any action taken or proposed to be taken with respect thereto, and (C) setting forth the calculations required to establish compliance by Borrowers with the covenants set forth in Article X; 39 47 (iv) not later than November 1 of each year beginning November 1, 2001, or sooner if available, Borrowers' Agent shall furnish to Administrative Lender detailed projections setting forth Parent's projected consolidated income and cash flow for Parent's current fiscal year and for each of Parent's fiscal years through August 31, 2005 and Parent's projected consolidated balance sheet as of the end of each such fiscal year, together with a certificate of Parent's principal financial officer setting forth the assumptions on which such projections are based; (v) promptly after the sending or filing thereof, copies of all reports which Borrower sends to any of its securityholders, and all reports and registration statements which Parent or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (vi) not later than December 31, 2000, or sooner if available, a copy of Parent's consolidated balance sheet as of immediately after Penford Holdings' acquisition of Penford Australia, as audited by Ernst & Young, together with sufficient detail to identify all intangible assets included in such balance sheet and a certificate of Parent's principal financial officer setting forth the calculation necessary to determine Tangible Net Worth as of the date of such balance sheet; and (vii) from time to time such other information as Administrative Lender may reasonably request. 8.4 COMPLIANCE Comply in all material respects, and cause each Subsidiary to comply in all material respects, with all Governmental Rules, contractual obligations, commitments, instruments, licenses, Permits and franchises, other than such noncompliance the consequences of which in the aggregate could not have a Material Adverse Effect. 8.5 INSURANCE (a) Maintain, and cause each Subsidiary to maintain, insurance with insurance companies reasonably acceptable to Administrative Lender with respect to its properties and business (including business interruption and extra expense endorsements) against such casualties and contingencies and of such types, with such deductibles and in such amounts as is customary in the case of similar businesses. With respect to the insurance maintained by Borrower: (i) such insurance shall contain a lender's loss payable endorsement acceptable to Administrative Lender and shall name Administrative Lender as an additional named insured; (ii) the policies or a certificate thereof signed by the insurer shall be delivered to Administrative Lender within five Business Days after the issuance or renewal of the policies to Borrower; (iii) each such policy shall provide that such policy may not be amended (except to increase coverage) or canceled without thirty days prior notice to Administrative Lender; and (iv) at least five days before the expiration of a policy, Borrowers' Agent shall deliver to Administrative Lender a binder (or other evidence reasonably acceptable to 40 48 Administrative Lender) indicating that such policy has been renewed or that a substitute for such policy will be issued effective upon the expiration of such policy. If Borrowers' Agent fails to comply with the foregoing, Administrative Lender may (but shall not be required to) procure such insurance and add the cost thereof to the Revolving Loans. (b) Maintain, and cause each Subsidiary to maintain, in full force and effect such liability and other insurance with respect to its activities as is customary in the case of similar businesses or as may be reasonably required by Administrative Lender. Such liability insurance maintained by Borrower shall name Administrative Lender as an additional insured with respect to the activities of Borrower and shall be provided by insurer(s) reasonably acceptable to Administrative Lender. 8.6 FACILITIES Keep, and cause each Subsidiary to keep, all properties useful or necessary to its business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such property shall be fully and efficiently preserved and maintained. 8.7 TAXES AND OTHER LIABILITIES Pay and discharge, and cause each Subsidiary to pay and discharge, when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation Federal and state income taxes and state and local property taxes and assessments, except such as Borrower may in good faith contest or as to which a bona fide dispute may arise, and for which Borrowers have made provision for adequate reserves in accordance with GAAP. 8.8 LITIGATION Promptly give notice in writing to Administrative Lender of any litigation pending or threatened against Borrower or any Subsidiary with a claim in excess of $2,000,000 in the aggregate for Parent and all Subsidiaries. 8.9 NOTICE TO ADMINISTRATIVE LENDER (a) Promptly (but in no event more than two Business Days after the occurrence of each such event or matter) cause Borrowers' Agent to give notice to Administrative Lender in reasonable detail of: (i) the occurrence of any Default; (ii) any termination or cancellation of any insurance policy which Borrower or any Subsidiary is required to maintain, unless such policy is replaced without any break in coverage with an equivalent or better policy; (iii) any uninsured or partially uninsured loss or losses through liability or property damage, or through fire, theft or any other cause affecting the property of Borrower or any Subsidiary in excess of an aggregate of $2,000,000 during any twelve month period; (iv) any change in the Organic Documents of Parent or any Subsidiary; (v) the occurrence of any adverse 41 49 development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7 or the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7 together with copies of all documentation relating thereto; or (vi) the occurrence of any event that could have a Material Adverse Effect. (b) As soon as possible and in any event within ten days after Borrower knows or has reason to know that any "reportable event" (as defined in Title IV of ERISA) that triggers an obligation to file a notice with the PBGC with respect to any Plan has occurred, cause Borrowers' Agent to deliver to Administrative Lender a statement of the President or principal financial officer of Parent setting forth details as to such reportable event and the action which Borrowers propose to take with respect thereto, together with a copy of the notice of such reportable event to the PBGC. (c) Promptly, upon receipt (but in no event more than ten Business Days after receipt) of a notice by Borrower, any Affiliate of Borrower or any administrator of any Plan that the PBGC has instituted proceedings to terminate a Plan or to appoint a trustee to administer a Plan, cause Borrowers' Agent to provide to Administrative Lender a copy of such notice. 8.10 CONDUCT OF BUSINESS Except as otherwise permitted by this Agreement, (a) conduct, and cause each Subsidiary to conduct, its business in the ordinary course and (b) use, and cause each Subsidiary to use, its reasonable efforts in the ordinary course and consistent with past practice to (i) preserve its business and the goodwill and business of the customers, advertisers, suppliers and others with whom it has business relations and (ii) keep available the services and goodwill of its present employees. 8.11 PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each Subsidiary to preserve and maintain, (i) all licenses, Permits, governmental approvals, rights, privileges, franchises and General Intangibles necessary for the conduct of its business, and (ii) its corporate existence and rights (charter and statutory), except to the extent that the failure to do so could not have a Material Adverse Effect. 8.12 ACCESS (a) At any reasonable time and from time to time upon at least two Business Days prior notice from Lender (unless a Default shall have occurred and be continuing, in which case no prior notice is necessary), permit Lender and/or any of Lender's agents or representatives, to (i) examine and make copies of and abstracts from Borrower's and each Subsidiary's records and books of account, (ii) visit Borrower's properties, (iii) discuss Borrower's and each Subsidiary's affairs, finances and accounts with any of its officers or directors who may then be reasonably available, (iv) communicate directly with Borrower's 42 50 independent certified public accountants, (v) arrange for verification of Borrower's Rights to Payment under reasonable procedures directly with the obligors thereon or by other methods, and (vi) examine and inspect Borrower's and each Subsidiary's assets. Borrower shall authorize its independent certified public accountants to disclose to Lender any and all financial statements and other information of any kind, including, without limitation, copies of any management letter, work papers or the substance of any oral information that such accountants may have with respect to the business, financial condition, results of operations or other affairs of Borrower and each Subsidiary. (b) Borrower shall execute and deliver at the request of Administrative Lender such instruments as may be necessary for Administrative Lender or any Lender to obtain such information concerning the business of Borrower as Administrative Lender or any Lender may require from accountants, service bureaus or others having custody of or maintaining records or assets of Borrower, provided that the foregoing shall not (and is not intended to) require Borrower to take any action that would constitute a waiver of Borrower's attorney/client privilege with any of Borrower's attorneys. 8.13 PERFORMANCE AND COMPLIANCE WITH OTHER COVENANTS Perform and observe, and cause each Subsidiary to perform and observe, all the terms, covenants and conditions required to be performed and observed by it under its contractual obligations (including, without limitation, to pay all rent and other charges payable under any lease and all debts and other obligations as the same become due), and do all things necessary to preserve and to keep unimpaired its rights under such contractual obligations, other than such failures the consequences of which in the aggregate could not have a Material Adverse Effect. 8.14 FISCAL YEAR; ACCOUNTING PRACTICES Notify Administrative Lender at least 30 days in advance of any action it intends to take to change (i) its fiscal year or (ii) its method of accounting, or any accounting practice used by it, or the application of GAAP in a manner inconsistent with the financial statements previously delivered by it to Administrative Lender. 8.15 ENVIRONMENTAL (a) Promptly give notice to Administrative Lender upon obtaining knowledge of (i) any claim, injury, proceeding, investigation or other action, including a request for information or a notice of potential environmental liability, by or from any Governmental Authority or any third-party claimant that could result in Borrower or any Subsidiary incurring Environmental Liabilities and Costs that could have a Material Adverse Effect or (ii) the discovery of any Release at, on, under or from any real property, facility or equipment owned or leased by Borrower or a Subsidiary in excess of reportable or allowable standards or levels under any applicable Environmental Law, or in any manner or amount that could 43 51 result in Borrower or any Subsidiary incurring Environmental Liabilities and Costs that could have a Material Adverse Effect. (b) Upon discovery of the presence on any property owned or leased by Borrower or a Subsidiary of any Contaminant that reasonably could be expected to result in Environmental Liabilities and Costs that could have a Material Adverse Effect, take all Remedial Action required by applicable Environmental Law. 8.16 LIENS Keep the Collateral free and clear of all Liens, except Permitted Liens. 8.17 FUTURE SUBSIDIARIES Upon any Person becoming a Subsidiary after the Closing Date, notify Administrative Lender of such event, and execute and deliver, and cause such Subsidiary to execute and deliver, such additional Loan Documents as Administrative Lender may reasonably require, including, without limitation, security agreements, guaranties and pledge agreements. 8.18 USE OF PROCEEDS Use the proceeds of the Loans solely for Borrowers' general working capital and corporate purposes. 8.19 FURTHER ASSURANCES At Administrative Lender's request at any time and from time to time, duly execute and deliver, and cause each Subsidiary to execute and deliver, such further agreements, documents and instruments, and do or cause to be done such further acts as may reasonably be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Loan Documents, at Borrowers' expense. Administrative Lender may at any time and from time to time request a certificate from Borrowers' Agent representing that all conditions precedent to the advancement of credit contained herein are satisfied. In the event of such request by Administrative Lender, each Lender may cease to make any further advancements of credit until Administrative Lender has received such certificate and Administrative Lender has determined that such conditions are satisfied. ARTICLE IX. NEGATIVE COVENANTS Borrower covenants that so long as Lenders remain committed to extend credit to Borrower pursuant to the terms hereof and until performance and payment in full, in cash, of all Obligations, Borrower will not: 44 52 9.1 LIENS Create or suffer to exist, or permit any U.S. Subsidiary to create or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign any right to receive income, except Permitted Liens. 9.2 INDEBTEDNESS Create or suffer to exist, or permit any Subsidiary to create or suffer to exist, any Indebtedness, except the following to the extent that after giving effect to the incurrence thereof no Default exists: (a) the Obligations; (b) current liabilities in respect of taxes, assessments and governmental charges or levies incurred, or liabilities for labor, materials, inventory, services, supplies and rentals incurred, or for goods or services purchased, in the ordinary course of business consistent with past practice and industry practice in respect of arm's length transactions; (c) Indebtedness outstanding on the Closing Date and referenced on Section 6.17 of the Disclosure Schedule and all renewals, extensions, refinancing or refunding of such Indebtedness in a principal amount which does not exceed the principal amount outstanding immediately before such refinancing, together with all prepayment fees, penalties and expenses in respect of the Indebtedness being renewed, extended, refinanced or refunded, provided each such renewal, extension, refinancing or refunding is on terms and conditions no less favorable to the creditors than the Indebtedness being renewed, extended, refinanced or refunded; (d) Debt subordinated in writing to the Obligations on terms acceptable to Administrative Lender in favor of the prior payment in full in cash of the Obligations; (e) Indebtedness under Rate Protection Agreements permitted under Section 9.13; (f) Indebtedness of a U.S. Subsidiary owed to Borrower or to another U.S. Subsidiary; and (g) purchase money Indebtedness to finance the purchase of fixed assets (including equipment); provided that (i) the total of all such Indebtedness shall not exceed an aggregate principal amount of $10,000,000 at any one time outstanding (in addition to any such Indebtedness referred to in Section 9.2(c)); (ii) such Indebtedness when incurred shall not exceed the purchase price of the assets financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing. 45 53 9.3 RESTRICTED PAYMENTS, REDEMPTIONS Do any of the following at any time if after giving effect to any such action a Default is continuing or would be caused by such action: (a) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account or in respect of any of its Stock or Stock Equivalents except (i) dividends paid to Borrower or (ii) dividends paid by Parent solely in Stock or Stock Equivalents of Parent; or (b) purchase, redeem or otherwise acquire for value any of Parent's Stock or Stock Equivalents. 9.4 MERGERS, STOCK ISSUANCES, SALE OF ASSETS, ETC. (a) Merge or consolidate with, or permit any Subsidiary to merge or consolidate with, any Person or acquire all or substantially all of the Stock or Stock Equivalents of any Person; provided any Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, or have its stock otherwise acquired by Parent or any other Subsidiary located in the United States or any other Subsidiary having its principal place of business in the same country as such Subsidiary; (b) Acquire all or substantially all, or permit any Subsidiary to acquire all or substantially all of (i) the assets of any Person or (ii) the assets constituting the business of a division, branch or other unit operation of any Person; provided any Subsidiary may acquire all or substantially all of the assets of (or the assets constituting the business of a division, branch or other unit operation of) any other Subsidiary located in the United States or any other Subsidiary having its principal place of business in the same country as such Subsidiary; or (c) Sell, convey, transfer, lease or otherwise dispose of, or permit any Subsidiary to sell, convey, transfer, lease or otherwise dispose of, any of its assets or any interest therein to any Person, or permit or suffer any other Person to acquire any interest in any of its assets, except (i) Permitted Liens, (ii) as otherwise permitted under item (a) or (b) above, or (iii) the sale or disposition of inventory in the ordinary course of business and/or assets which have become obsolete or are replaced in the ordinary course of business. 9.5 INVESTMENTS Make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Closing Date and identified in Section 9.5 of the Disclosure Schedule; (b) Cash Equivalent Investments; (c) without duplication, Investments permitted as Indebtedness pursuant to Section 9.2; (d) without duplication, Investments permitted as Capital Expenditures pursuant to Section 10.5; (e) an Investment by Parent in Colorado Sweet Gold LLC which does not exceed $10,000,000, of which not more than $5,000,000 46 54 may be in cash payable before the first anniversary of the closing of such Investment; (f) in the ordinary course of business, Investments by Borrower in any Subsidiary, or by any such Subsidiary in any of its subsidiaries, by way of contributions to capital or loans or advances; and (g) other Investments in an aggregate amount at any one time not to exceed $5,000,000 minus any losses on such Investments; provided, however, that (i) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (ii) no Investment otherwise permitted by item (f) or (g) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing. 9.6 CHANGE IN NATURE OF BUSINESS Directly or indirectly engage, or permit any Subsidiary to directly or indirectly engage, in any business activity other than its current business activity. 9.7 PLANS (a) Adopt or become obligated to contribute to, or permit any U.S. Subsidiary to adopt or become obligated to contribute to, any Plan subject to Title IV or any multi-employer Plan or any other Plan subject to Section 412 of the Internal Revenue Code (except for any such Plan listed on the Disclosure Schedule on the Closing Date), (b) establish or become obligated with respect to, or permit any U.S. Subsidiary to establish or become obligated to contribute to, any new welfare benefit Plan, or modify any existing welfare benefit Plan, which is reasonably likely to result in an increase of the present value of future liabilities for post-retirement life insurance and medical benefits, or (c) establish or become obligated to contribute to, or permit any U.S. Subsidiary to establish or become obligated to contribute to, any new unfunded pension Plan, or modify any existing unfunded pension Plan, which is reasonably likely to result in an increase in the present value of future unfunded liabilities under all such plans. 9.8 CANCELLATION OF INDEBTEDNESS OWED TO IT Cancel, or permit any Subsidiary to cancel, any claim or Indebtedness owed to it except for legitimate business purposes in the reasonable judgment of Borrower and in the ordinary course of business. 9.9 MARGIN REGULATIONS Use, or permit any Subsidiary to use, the proceeds of any Loan to purchase or carry any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System). 47 55 9.10 ENVIRONMENTAL Permit any lessee or any other Person to dispose of any Contaminant by placing it in or on the ground or waters of any property owned or leased by Borrower or any Subsidiary, except in material compliance with Environmental Law or the terms of any Permit or other than those which in the aggregate could not have a Material Adverse Effect. 9.11 TRANSACTIONS WITH AFFILIATES Enter, or permit any Subsidiary to enter, into any transaction directly or indirectly with or for any Affiliate of Borrower except in the ordinary course of business on a basis no less favorable to such Affiliate than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of Borrower involving assets that are not material to the business and operations of Borrower or the Subsidiaries. 9.12 NEW COLLATERAL LOCATION; NAME CHANGE Open any new location or change its name, or permit any U.S. Subsidiary to do so, unless (i) Borrowers' Agent gives Administrative Lender (a) 30 days prior notice of the intended name change, (b) 30 days prior notice of the intended opening of such new location, and (ii) Borrowers execute and Borrowers' Agent delivers to Administrative Lender such agreements, documents and instruments as Administrative Lender deems reasonably necessary or desirable to protect its interests in the Collateral, including, without limitation, UCC-1 financing statements. 9.13 NO SPECULATIVE TRANSACTIONS Engage in, or permit any Subsidiary to engage in, any Commodity Contract or Interest Rate Contract, except (i) on terms consistent with prior practice or (ii) one or more Rate Protection Agreements on terms reasonably acceptable to Administrative Lender. ARTICLE X. FINANCIAL COVENANTS 10.1 LEVERAGE RATIO As of the end of each fiscal quarter, Parent shall maintain a Leverage Ratio not greater than: (i) 2.75:1 as of fiscal quarters ending on or before May 31, 2002; (ii) 2.5:1 as of fiscal quarters ending after May 31, 2002 and before June 1, 2003; and (iii) 2:1 as of fiscal quarters ending after May 31, 2003. 10.2 INTEREST COVERAGE RATIO As of the end of each fiscal quarter, Parent shall maintain an Interest Coverage Ratio not less than 3:1. 48 56 10.3 FIXED CHARGE COVERAGE RATIO As of the end of each fiscal quarter, Parent shall maintain a Fixed Charge Coverage Ratio not less than 1:1. 10.4 TANGIBLE NET WORTH Parent will not permit its Tangible Net Worth as of the end of any fiscal quarter to be less than the total of (i) an amount equal to the greater of $43,950,000 or 90% of Parent's Tangible Net Worth immediately after Penford Holdings' acquisition of Penford Australia, plus (ii) 50% of the sum of Parent's consolidated net income for each fiscal quarter since the Closing Date (exclusive of any fiscal quarter in which Parent's consolidated net income is less than zero), plus (iii) an amount equal to the proceeds of any Stock or Stock Equivalent issued by Parent or any Subsidiary after the Closing Date. 10.5 CAPITAL EXPENDITURES Parent shall not make, nor permit any Subsidiary to make, capital expenditures, including, without limitation, capital leases, synthetic leases, tax retention operating leases, and financing leases, at any time, except in an amount not in excess of $20,000,000 in any fiscal year of Parent in the aggregate for Parent and the Subsidiaries. The foregoing limitation shall not apply to expenditures made to repair, modify or replace any fixed asset or improvement damaged or destroyed by or as a result of any insurable event or condemnation to the extent that the aggregate amount of all such expenditures does not exceed the net amount of the insurance and condemnation proceeds payable to Borrowers and Subsidiaries with respect to such insurable event or condemnation (including such proceeds applied to the reduction of the Revolving Loans pursuant to the terms of any of the Loan Documents). ARTICLE XI. EVENTS OF DEFAULT 11.1 EVENTS OF DEFAULT The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: (a) any Obligor shall fail to pay when due any amount payable under any of the Loan Documents within five days after the due date therefor; (b) any financial statement or certificate furnished to Administrative Lender or any Lender in connection with, or any representation or warranty made by any Obligor under any of the Loan Documents shall prove to be false or misleading in any material respect when furnished or made; (c) Borrowers or Borrowers' Agent shall fail to provide any certificate, report or other information which it is required to provide pursuant to Section 8.3 or Section 8.9 on the date specified in Section 8.3 or Section 8.9; provided that unless Borrowers and Borrowers' 49 57 Agent have previously failed to provide any required certificate, report or other information by the required date on two prior occasions within the preceding 12 months such failure shall be considered an Event of Default only if Borrowers and Borrowers' Agent fail to provide such certificate, report or other information within five Business Days (two Business Days with respect to Section 8.9(a)) of the earlier of (i) the date Borrower has knowledge of the failure to so provide such certificate, report or other information, or (ii) the date Administrative Lender, at the request of a Lender, notifies Borrowers' Agent of such failure; (d) any default by Borrowers in the performance of or compliance with any obligation, agreement or other provision contained in Sections 5.2(a), 8.5, 8.10, 8.11, 8.12, 8.14, 8.16, 8.17, 9.1, 9.2, 9.3, 9.4, 9.5, 9.6 and 9.12 and contained in Article X; (e) any default by any Obligor in the performance of or compliance with any obligation, agreement or other provision contained in any Loan Document (other than those referred to in subsections (a) through (d) above) for 30 days after notice thereof has been given to Borrowers' Agent by Administrative Lender; (f) any breach(es) by any Obligor or Subsidiary in the payment or performance of any other obligation(s) under the terms of any contract(s) or instrument(s) (other than any of the Loan Documents) evidencing Indebtedness in excess of $2,000,000 in the aggregate if such breach(es) has/have not been cured to the satisfaction of the affected creditor(s) or waived by such creditor(s) within any applicable cure period provided under the contract(s) or instrument(s), or the occurrence of any "Event of Default" (as defined under either of the Australian Facilities); (g) any judgment(s) or order(s) for the payment of money in excess of $2,000,000 in the aggregate shall be rendered against one or more Obligors and Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgment or order; or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of any such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (h) any Obligor or Subsidiary shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally be unable to or fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; any Obligor or Subsidiary shall file a voluntary petition in bankruptcy, or seek to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Code, or under any state or other Federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or other Federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against any Obligor or Subsidiary and is not dismissed, stayed or vacated within 60 days thereafter; any Obligor or Subsidiary shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary bankruptcy petition; any Obligor or Subsidiary shall be adjudicated a bankrupt, or an order for relief shall be entered by any court 50 58 of competent jurisdiction under the Bankruptcy Code or any other applicable state or Federal law relating to bankruptcy, reorganization or other relief for debtors; or any Obligor or Subsidiary shall take any corporate action authorizing, or in furtherance of, any of the foregoing; (i) if any of the following events occur: (1) any Plan incurs any "accumulated funding deficiency" (as defined in ERISA) whether waived or not, (2) Parent or any Affiliate of Parent engages in any "prohibited transaction" (as defined in ERISA), (3) any Plan is terminated, (4) a trustee is appointed by an appropriate United States district court to administer any Plan, or (5) the PBGC institutes proceedings to terminate any Plan or to appoint a trustee to administer any Plan; (j) the dissolution or liquidation of any Obligor or Subsidiary, or any Obligor or Subsidiary or its directors or stockholders shall take action seeking to effect the dissolution or liquidation of any Obligor or Subsidiary; (k) any Change in Control; (l) any draw on a Letter of Credit; or (m) any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; any Obligor shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document. 11.2 REMEDIES (a) During the continuance of any Event of Default (other than an Event of Default referred to in Section 11.1(h)), Administrative Lender may, with the consent of the Required Lenders, or shall, upon instructions from the Required Lenders, by notice to Borrowers' Agent, (i) terminate the obligations of Lenders to extend any further credit under any of the Loan Documents, and (ii) declare all or any part of the Obligations to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrowers, and/or take such enforcement action as is permitted under this Section 11.2. Upon the occurrence or existence of any Event of Default described in Section 11.1(h), immediately and without notice, (A) the obligations, if any, of Lenders to extend any further credit under any of the Loan Documents shall automatically cease and terminate, and (B) all indebtedness of Borrowers under the Loan Documents shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrowers. Immediately after taking any action under this Section 11.2, Administrative Lender shall notify each Lender of such action. 51 59 (b) During the continuance of an Event of Default, Administrative Lender, in addition to any other rights and remedies contained in the Loan Documents, shall have all of the rights and remedies of a secured party under the Code and all other applicable law, all of which rights and remedies shall be cumulative and nonexclusive to the extent permitted by law. Administrative Lender may cause the Collateral to remain on Borrower's premises, at Borrowers' expense, pending sale or other disposition thereof. Administrative Lender shall have the right to conduct such sales on Borrower's premises or elsewhere, at Borrowers' expense, on such occasion(s) as Administrative Lender may see fit, and Borrowers, at Administrative Lender's request, will, at Borrowers' expense, assemble the Collateral and make it available to Administrative Lender at such place(s) as Administrative Lender may reasonably designate from time to time. Any sale, lease or other disposition by Administrative Lender of the Collateral, or any part thereof, may be for cash or other value. Borrowers shall execute and deliver, or cause to be executed and delivered, such instruments, documents, assignments, deeds, waivers, certificates and affidavits and take such further action as Administrative Lender shall reasonably require in connection with such sale, and Borrower hereby constitutes Administrative Lender as its attorney-in-fact to execute any such instrument, document, assignment, deed, waiver, certificate or affidavit on behalf of Borrower and in its name. At any sale of the Collateral, the Collateral to be sold may be sold in one lot as an entirety or in separate lots as Administrative Lender may determine. Administrative Lender shall not be obligated to make any sale of any Collateral if it determines not to do so, regardless of the fact that notice of sale was given. Administrative Lender may, without notice or publication, adjourn any public or private sale or cause the sale to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which it is so adjourned. In case any sale of Collateral is made on credit or for future delivery, the Collateral so sold may be retained by Administrative Lender until the sale price is paid, but Administrative Lender shall not incur any liability if any purchaser fails to pay for any Collateral so sold and, in case of any such failure, such Collateral may be sold again. At any public sale, any Lender (i) may bid for or purchase the Collateral offered for sale free (to the extent permitted by law) from any rights of redemption, stay or appraisal on the part of Borrower with respect to the Collateral, (ii) make payment on account thereof by using any claim then due and payable to such Lender from Borrower as a credit against the purchase price, and (iii) upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to Borrower therefor. Borrowers acknowledge that portions of the Collateral may be difficult to preserve and dispose of and may be subject to complex maintenance and management; accordingly, Administrative Lender shall have the widest possible latitude in the exercise of its rights and remedies hereunder. (c) Administrative Lender is hereby granted a license and right to use, without charge upon the occurrence and during the continuance of an Event of Default and until the Obligations are fully and finally paid in cash, Borrowers' labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, advertising material, General Intangibles and any other property of a similar nature in completing the production, advertising for sale and sale of any Collateral. 52 60 (d) Any notice required to be given by Administrative Lender with respect to any of the Collateral, which notice is given pursuant to Section 13.1 and deemed received pursuant to Section 13.1 at least five Business Days before a sale, lease, disposition or other intended action by Administrative Lender with respect to any of the Collateral, shall constitute fair and reasonable notice to Borrowers of any such action. A public sale in the following fashion shall be conclusively presumed to be reasonable: (i) the sale is held in a county where any part of the Collateral is located or in which Borrower has a place of business; (ii) the sale is conducted by auction, but it need not be by a professional auctioneer; (iii) any Collateral is sold as is and without any preparation for sale; and (iv) Borrowers' Agent is given notice of such public sale pursuant to the preceding sentence. (e) Upon the occurrence and during the continuance of an Event of Default, Administrative Lender shall have, with respect to Rights to Payment, all rights and powers to: (i) direct any and all account debtors to make all payments in respect of the Rights to Payment directly to Administrative Lender or otherwise demand payment of any or all of the Rights to Payment; (ii) enforce payment of any or all of the Rights to Payment by legal proceedings or otherwise; (iii) exercise Borrower's rights and remedies with respect to any actions or proceedings brought to collect a Right to Payment; (iv) sell or assign any Right to Payment upon such terms, for such amount and at such time or times as Administrative Lender deems advisable; (v) settle, adjust, compromise, extend or renew a Right to Payment; (vi) discharge or release any Right to Payment; and (vii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy or any similar document against an account debtor, and to otherwise exercise the rights granted herein. (f) Administrative Lender shall have no obligation (i) to preserve any rights to the Collateral against any Person, (ii) to make any demand upon or pursue or exhaust any rights or remedies against Borrowers or others with respect to payment of the Obligations, (iii) to pursue or exhaust any rights or remedies with respect to any of the Collateral or any other security for the Obligations, or (iv) to marshal any assets in favor of Borrower or any other Person against or in payment of any or all of the Obligations. (g) Borrowers recognize that federal and/or state securities and other laws may limit the flexibility desired to achieve an otherwise commercially reasonable disposition of Collateral, and in the event of potential conflict between such laws and what in other circumstances might constitute commercial reasonableness, it is intended that consideration of such laws will prevail over attempts to achieve such commercial reasonableness. In connection with any sale or other disposition of Collateral, compliance by Administrative Lender with the written advice of its counsel concerning the potential effect of any such law will not be cause for Borrower, or any other Person, to claim that such sale or other disposition was not commercially reasonable. (h) Borrowers shall pay to Administrative Lender (for distribution to Lenders, as appropriate), on demand and as part of the Obligations, all costs and expenses, including court costs and costs of sale, incurred by Administrative Lender or any Lender in exercising 53 61 any of its rights or remedies hereunder, and all costs and expenses incurred in connection with any review of any part of the Collateral. 11.3 ADMINISTRATIVE LENDER AS BORROWERS' ATTORNEY Borrower hereby appoints Administrative Lender or any other Person whom Administrative Lender may designate, as Borrower's attorney, with power during the continuation of an Event of Default: to indorse Borrower's name on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into Administrative Lender's possession; to sign Borrower's name on any invoice or bill of lading relating to any Right to Payment, on drafts against customers, on schedules and assignments of Rights to Payment, on notices of assignment, financing statements and other public records, and on notices to customers; to notify the post office authorities to change the address for delivery of Borrower's mail to an address designated by Administrative Lender; to receive, open and process all mail addressed to Borrower; to ask for, demand, sue for, collect, receive, receipt and give aquittance for any and all moneys due or to become due with respect to any Collateral; to settle, compromise, prosecute or defend any action, claim or proceeding with respect to Collateral; to sell, assign, pledge, transfer and make any agreement with respect to or otherwise deal with the Collateral; and to do all things necessary to perfect Administrative Lender's security interest in the Collateral, to preserve and protect the Collateral and to otherwise carry out this Agreement; provided, however, that nothing contained in this Section 11.3 will be construed as requiring or obligating Administrative Lender to take any action. Provided Administrative Lender acts in a reasonable manner, Borrower ratifies and approves all acts of such attorney, and neither Administrative Lender nor the attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law. This power being coupled with an interest is irrevocable until the Obligations have been fully satisfied and indefeasibly paid in cash or the financing arrangements between Administrative Lender and Borrowers are terminated, whichever shall later occur. ARTICLE XII. ADMINISTRATIVE LENDER The Intercreditor Agreement sets forth certain provisions with respect to the appointment and duties of the Administrative Lender and the Administrative Lender's relationship with the Lenders. No Lender identified as a "Syndication Lender" or "Documentation Lender" shall have any right, power, obligation, liability, responsibility or duty under this Agreement in such capacity. Each Lender acknowledges that it has not relied on and will not rely on any Lender identified as a "Syndication Lender" or "Documentation Lender" in deciding to enter into this Agreement or in taking or not taking any action hereunder. 54 62 ARTICLE XIII. MISCELLANEOUS 13.1 NOTICES Except as specified otherwise herein, all notices, requests and demands which any party is required or may desire to give to any other party under this Agreement must be in writing. Each notice to be given to Administrative Lender or any Lender shall be addressed to Administrative Lender and each Lender at its address or fax number set forth as the "Address for Notices" for Administrative Lender or such Lender in Schedule I hereto, or to such other address or fax number as Administrative Lender or any Lender may designate for itself by notice to all other parties. Each notice to be given to Borrowers' Agent or Borrower shall be addressed to Borrowers' Agent at the following address or fax number: To Borrowers' Agent: Penford Corporation 777 108th Avenue N.E. Suite 2390 Bellevue, Washington 98004 Attn: Chief Executive Officer Fax: (425) 462-2819 or to such other address or fax number as Borrowers' Agent may designate for itself by notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) three Business Days following deposit in the United States mails, with first class postage prepaid, (b) the next Business Day after such notice was delivered to a regularly scheduled overnight delivery, or (c) upon receipt of notice given by fax, mailgram, telegram, telex, or personal delivery. 13.2 COSTS, EXPENSES, ATTORNEYS' FEES Borrowers shall pay immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (whether incurred at the trial or appellate level, in an arbitration or administrative proceeding, in bankruptcy (including, without limitation, any adversary proceeding, contested matter or motion) or otherwise), incurred by Administrative Lender and/or any Lender in connection with (a) the negotiation and preparation of the Loan Documents, (b) the enforcement, preservation or protection (or attempted enforcement, preservation or protection) of Administrative Lender's and/or any Lender's rights (except in a dispute solely between Lenders), including, without limitation, periodic collateral examinations, and/or the collection of any amounts which become due under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, and including any of the foregoing incurred in connection with any bankruptcy proceeding relating to Borrower. If legal action is required to enforce the terms of any Loan Document, the prevailing party will be entitled to reasonable attorneys' fees and costs incurred therein, whether incurred at arbitration, trial, on appeal, in a bankruptcy proceeding, or otherwise. 55 63 13.3 INDEMNIFICATION (a) To the fullest extent permitted by law, Borrowers hereby agree to protect, indemnify, defend and hold harmless each of Administrative Lender and Lenders and each of their respective officers, directors, shareholders, employees, agents, attorneys and Affiliates (collectively, "Indemnitees") from and against any liabilities, losses, damages or expenses of any kind or nature and from any suits, claims or demands (including in respect of or for reasonable attorneys' fees (whether incurred at the trial or appellate level, in an arbitration or administrative proceeding, in bankruptcy (including, without limitation, any adversary proceeding, contested matter or motion) or otherwise) and other expenses, including the allocated costs and expenses of internal counsel) arising on account of or in connection with any matter or thing or action or failure to act by Indemnitees, or any of them, arising out of or relating to any Loan Document, including without limitation any use by Borrower of any proceeds of credit advanced, except to the extent such liability arises from the willful misconduct or gross negligence of the Indemnitees (collectively, the "Indemnified Liabilities"). (b) Upon receiving knowledge of any suit, claim or demand asserted by a third party that Administrative Lender and/or any Lender believes is covered by this indemnity, such Indemnitee shall give Borrowers' Agent notice of the matter and an opportunity to defend it, at Borrowers' sole cost and expense, with legal counsel satisfactory to such Lender. Such Lender may also require Borrowers to defend the matter. Any failure or delay of such Lender to notify Borrowers' Agent of any such suit, claim or demand shall not relieve Borrowers of their obligations under this Section, but shall reduce such obligations to the extent of any increase in those obligations caused solely by an unreasonable failure or delay in providing such notice. Borrowers may not settle or otherwise compromise any claim with respect to any Indemnified Liability unless the settlement includes an unconditional release of the Indemnitee from all liability on claims that are the subject of such settlement and may not settle or otherwise compromise any claim with respect to any Indemnified Liability, other than a claim for money damages, without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld. (c) If and to the extent that the foregoing undertaking may be unenforceable for any reason Borrowers shall make the maximum contribution permissible under applicable law to the payment and satisfaction of each of the Indemnified Liabilities. (d) This Section shall survive the payment in full and performance of all of Borrowers' other Obligations. 13.4 WAIVERS, AMENDMENTS Any term, covenant, agreement or condition of any Loan Document may be amended or waived if such amendment or waiver is in writing and is signed by the Required Lenders (or by Administrative Lender with written consent of the Required Lenders), Borrowers' Agent and any other party thereto; provided, however, that any amendment, waiver or 56 64 consent which affects the rights or duties of Administrative Lender or L/C Bank must be in writing and be signed also by the affected Administrative Lender or L/C Bank; and provided further, that any amendment, waiver or consent which effects any of the following changes must be in writing and signed by all Lenders (or by Administrative Lender with the written consent of all Lenders): (a) increases the maximum amount of credit available hereunder; (b) extends the maturity date of any Loan; (c) reduces the principal of, or interest (including default rate interest) on, any Loan or any fees or other amounts payable for the account of Lenders hereunder; (d) postpones or conditions any date fixed for any payment of the principal of, or interest on, any Loan or any fees or other amounts payable for the account of Lenders hereunder; (e) waives or amends this Section 13.4; (f) amends the definition of Required Lenders or any provision of this Agreement requiring approval of the Required Lenders or some other specified amount of Lenders; (g) increases or decreases the Commitment or the Ratable Portion of any Lender (other than through an assignment under Section 13.5); (h) waives any of the conditions set forth in Article VII; (i) releases any material Collateral; (j) amends any of the draw conditions of a Letter of Credit set forth in Section 3.3(a) or (k) amends any guaranty of the Obligations (or releases any guarantor of is obligations thereunder. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. 13.5 SUCCESSORS AND ASSIGNS (a) BINDING EFFECT. The Loan Documents shall be binding upon and inure to the benefit of Borrowers, Administrative Lender, Lenders, all future holders of the Notes and their respective successors and permitted assigns, except that Borrower may not assign or transfer any of its rights or obligations under any Loan Document without the prior written consent of Administrative Lender and each Lender. All references in this Agreement to any Person shall be deemed to include all successors and assigns of such Person. (b) PARTICIPATIONS. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other financial institutions ("Participants") participating interests in any obligation owing to such Lender under the Loan Documents, provided Lender does so in compliance with the terms of the Intercreditor Agreement. In the event of any such sale, (i) such Lender's obligations under the Loan Documents to the other parties to the Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible for the performance thereof, (iii) such Lender shall remain the holder of all Notes for all purposes under this Agreement, and (iv) Borrowers, Borrowers' Agent and Administrative Lender shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. Participants shall have no rights under the Loan Documents except as provided below. No Lender shall sell any participating interest under which the Participant shall have any right to vote on any amendment, consent or waiver of any Loan Document; provided, however, that any agreement under which any Lender sells a participating interest to a Participant may require the selling Lender to obtain the consent of such Participant in 57 65 order for such Lender to agree or consent to any amendment of a type specified in items (a)-(k) of Section 13.4. No agreement under which any Lender sells a participating interest to a Participant may permit the Participant to transfer, pledge, assign, sell participations in or otherwise encumber its participating interest. If any amount outstanding under the Loan Documents is due and unpaid, each Participant shall have all the rights of a "Lender" under Section 13.6 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents; provided, however, that such rights of setoff shall be subject to the obligation of such Participant to share with Lenders, and Lenders agree to share with such Participant, as provided in Section 3.8(b). Borrowers also agree that any Lender which has transferred all or part of its interests in the Obligations to one or more Participants shall, notwithstanding any such transfer, be entitled to the full benefits accorded such Lender under Section 3.9, as if such Lender had not made such transfer. Without limiting the foregoing, no Participant shall be entitled to costs, expenses or attorneys' fees under Section 13.2 or Section 13.3. (c) ASSIGNMENTS. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time, sell and assign to any Lender, any Affiliate of a Lender or any other bank or financial institution (individually, an "Assignee") all or any portion of its rights and obligations under the Loan Documents (such a sale and assignment to be referred to herein as an "Assignment"), provided Lender does so in compliance with the terms of the Intercreditor Agreement and provided that in the absence of a Default, Borrowers' Agent has consented to any such Assignment which is not to a Lender or an Affiliate of a Lender, which consent will not be unreasonably withheld. Each assigning Lender ("Assignor") shall, notwithstanding an Assignment of all of its rights and obligations under the Loan Documents, nevertheless be entitled to the indemnification rights contained in Section 13.3 for any events, acts or omissions occurring before the effective date of its Assignment. Each Assignment shall be deemed to amend Schedule I hereto to the extent necessary to reflect the addition of each Assignee and the resulting adjustment of Commitments. On or prior to the effective date of any Assignment, Borrowers, at their own expense, shall execute and deliver to Administrative Lender, in exchange for each surrendered Note of the Assignor, a new Note to the order of the Assignee thereunder (with each new Note to be in an amount equal to the applicable Commitment assumed by such Assignee) and, if the Assignor has retained Commitment(s) hereunder, new Note(s) to the order of the Assignor (with each new Note to be in an amount equal to the applicable Commitment retained by the Assignor). Any Note surrendered by the Assignor shall be returned by Administrative Lender to Borrowers' Agent marked "Exchanged". (d) REGISTER. Administrative Lender shall maintain at Administrative Lender's Office a record of each Assignment and a register for the recordation of the names and addresses of Lenders and the Commitments of each Lender from time to time. The entries in the register shall be conclusive and binding for all purposes, absent manifest error, and Borrowers, Administrative Lender and Lenders may treat each entity whose name is recorded in the register as a Lender hereunder for all purposes of this Agreement. The register shall be 58 66 available for inspection by Borrowers' Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) REGISTRATION. Upon its receipt of an executed Assignment Agreement as contemplated by the Intercreditor Agreement executed by an Assignor and an Assignee (and, in the case of an Assignee that is not then a Lender or an Affiliate of a Lender, by Borrowers' Agent and Administrative Lender) together with payment by such Assignee to Administrative Lender of a registration and processing fee of $3,500, Administrative Lender shall (i) promptly accept such Assignment Agreement and (ii) on the effective date of such Assignment record the information contained therein in the Register and give notice of such acceptance and recordation to Lenders and Borrowers' Agent. Administrative Lender may, from time to time at its election, prepare and deliver to Lenders and Borrowers' Agent a revised Schedule I reflecting the names, addresses and respective Commitments of all Lenders then parties hereto. (f) FEDERAL RESERVE BANK. Notwithstanding the foregoing provisions of this Section, any Lender may at any time pledge or assign all or any portion of such Lender's rights under this Agreement and the other Loan Documents to a Federal Reserve Bank; provided, however, that no such pledge or assignment will release such Lender from such Lender's obligations hereunder or under any other Loan Document. 13.6 SETOFF In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with the prior consent of Administrative Lender (which consent will not be unreasonably withheld) but without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable law, during the continuance of an Event of Default to setoff and apply against any indebtedness, whether matured or unmatured, of Borrower to such Lender any amount owing from such Lender or any Affiliate thereof to Borrower at any time during the continuation of an Event of Default. This right of setoff may be exercised by such Lender against Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of Borrower or against anyone else claiming through or against Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of setoff shall not have been exercised by such Lender prior to the occurrence of an Event of Default. Each Lender agrees promptly to notify Borrower after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. 13.7 NO WAIVER; CUMULATIVE REMEDIES No failure on the part of Administrative Lender or any Lender to exercise, and no delay in exercising, any right, power, privilege or remedy under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, 59 67 privilege or remedy preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. The rights and remedies under the Loan Documents are cumulative and not exclusive of any rights, powers, privileges and remedies that may otherwise be available to Administrative Lender or any Lender. 13.8 ENTIRE AGREEMENT The Loan Documents constitute the entire agreement among Borrowers, Administrative Lender and Lenders with respect to the Loans and the Letters of Credit and supersede all prior negotiations, communications, discussions, correspondence and agreements concerning the subject matter hereof. 13.9 NO THIRD PARTY BENEFICIARIES This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party. 13.10 TIME Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents. 13.11 SEVERABILITY OF PROVISIONS If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement. 13.12 GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. 13.13 SUBMISSION TO JURISDICTION EACH OF BORROWER, ADMINISTRATIVE LENDER AND LENDERS HEREBY: (A) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF WASHINGTON AND THE FEDERAL COURTS OF THE UNITED STATES FOR THE WESTERN DISTRICT OF WASHINGTON FOR THE PURPOSE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS; (B) AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH 60 68 COURTS; (C) IRREVOCABLY WAIVES (TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW) ANY OBJECTION WHICH IT NOW OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY OF THE FOREGOING COURTS, AND ANY OBJECTION ON THE GROUND THAT ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM; AND (D) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PERMITTED BY LAW. 13.14 WAIVER OF JURY TRIAL EACH OF BORROWER, ADMINISTRATIVE LENDER AND LENDERS, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS OR EVENTS REFERENCED HEREIN OR THEREIN OR CONTEMPLATED HEREBY OR THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND/OR ANY OTHER OF THE LOAN DOCUMENTS. A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT. 13.15 COUNTERPARTS This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. Delivery of an executed signature page of this Agreement by fax shall be effective as delivery of a manually executed counterpart hereof. 13.16 CONFIDENTIALITY Lenders shall hold all non-public information (which has been identified as such by Borrowers' Agent) obtained pursuant to the requirements of this Agreement in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure to any of their examiners, Affiliates, outside auditors, counsel and other professional advisors in connection with this Agreement or as reasonably required by any bona fide transferee, participant or assignee or as required or requested by any Governmental Authority or pursuant to legal process; provided, however, that (a) unless specifically prohibited by applicable law or court order, each Lender shall notify Borrowers' Agent of any request by any Governmental Authority (other than any such request in connection with an examination 61 69 of the financial condition of such Lender by such Governmental Authority) for disclosure of any such non-public information prior to disclosure of such information, (b) prior to any such disclosure pursuant to this Section, each Lender shall require any such bona fide transferee, participant and assignee receiving a disclosure of non-public information to agree in writing (i) to be bound by this Section and (ii) to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this Section, and (c) except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, no Lender shall be obligated or required to return any materials furnished by Borrower or any Subsidiary. 13.17 OTHER TRANSACTIONS Nothing contained herein shall preclude Administrative Lender or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with Borrower or any of its Affiliates in which Borrower or such Affiliate is not restricted by any Loan Document from engaging with any other Person. 13.18 WASHINGTON STATUTORY NOTICE ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. [INTENTIONALLY LEFT BLANK] 62 70 IN WITNESS WHEREOF, this Credit Agreement has been duly executed as of the date first written above. PENFORD CORPORATION PENFORD PRODUCTS CO. By: /s/ Keith T. Fujinaga By: /s/ Keith T. Fujinaga Title: Assistant Secretary Title: Assistant Secretary THE BANK OF NOVA SCOTIA U.S. BANK NATIONAL ASSOCIATION By: /s/ Patrik G. Norris By: /s/ James R. Farmer Title: Director Title: Vice President KEYBANK NATIONAL ASSOCIATION By: /s/ Thomas A. Crandell Title: Senior Vice President 71 SCHEDULE I THE BANK OF NOVA SCOTIA REVOLVING LOAN COMMITMENT: $20,952,000 (38.0945455%) TERM LOAN COMMITMENT $15,238,000 (38.0950000%) L/C COMMITMENT $ 3,810,000 (38.1000000%) ----------- TOTAL COMMITMENT $40,000,000 INITIAL RATABLE PERCENTAGE 38.0952381% Applicable Lending Office: - ------------------------- The Bank of Nova Scotia Corporate Banking 888 S.W. 5th Avenue, Suite 750 Portland, Oregon 97204-2078 Attn: Patrik G. Norris Telephone: (503) 222-3148 Fax: (503) 222-5502 Address for Notices: - ------------------- The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Ms. Hilma Gabbidon Telephone: (404) 877-1558 Fax: (404) 888-8998 Wiring Instructions: - ------------------- The Bank of Nova Scotia, New York Agency ABA#026002532, for further credit to account # 0610232, Portland Loan Servicing, Ref.: Penford Corporation 1 72 KEYBANK NATIONAL ASSOCIATION REVOLVING LOAN COMMITMENT: $17,024,000 (30.9527273%) TERM LOAN COMMITMENT $12,381,000 (30.9525000%) L/C COMMITMENT $ 3,095,000 (30.9500000%) ----------- TOTAL COMMITMENT $32,500,000 INITIAL RATABLE PERCENTAGE 30.9523810% Applicable Lending Office: - ------------------------- KeyBank National Association Large Corporate Group 601 108th Avenue NE, 5th Floor Bellevue, Washington 98009 Attn: Ms. Mary K. Young Telephone: (425) 709-4580 Fax: (425) 709-4587 Address for Notices: - ------------------- KeyBank National Association Large Corporate Group 601 108th Avenue NE, 5th Floor Bellevue, Washington 98009 Attn: Ms. Mary K. Young Telephone: (425) 709-4580 Fax: (425) 709-4587 Wiring Instructions: - ------------------- KeyBank National Association ABA#125000574 for further credit to account #01500163, Seattle, Washington Ref.: Penford Corporation 2 73 U. S. BANK NATIONAL ASSOCIATION REVOLVING LOAN COMMITMENT: $17,024,000 (30.9527273%) TERM LOAN COMMITMENT $12,381,000 (30.9525000%) L/C COMMITMENT $ 3,095,000 (30.9500000%) ----------- TOTAL COMMITMENT $32,500,000 INITIAL RATABLE PERCENTAGE 30.9523810% Applicable Lending Office: - ------------------------- U.S. Bank National Association 1420 Fifth Avenue, Eleventh Floor Seattle, Washington 98101 Attn: James Farmer Telephone: (206) 587-5237 Fax: (206) 334-3654 Address for Notices: - ------------------- U.S. Bank National Association 1420 Fifth Avenue, Eleventh Floor Seattle, Washington 98101 Attn: James Farmer Telephone: (206) 587-5237 Fax: (206) 334-3654 Wiring Instructions: - ------------------- U.S. Bank National Association ABA#125000105 for further credit to account #00340012160600 Attn: Lynn Lawrence, Commercial Loan Servicing Center -- West PL-7 CLSC Customer: Penford Corporation AFS Number: 6799589966 3 74 SCHEDULE II DISCLOSURE SCHEDULE Existing Liens: Exceptions to Representations and Warranties: Subsidiaries: Existing Debt and Indebtedness Incurred Outside Ordinary Course: Locations: Existing Investments: Existing Plans: 1 75 SCHEDULE III PRICING SCHEDULE Level I Level II Level III ------------------------------- ------------- -------------- ------------- Base Rate Margin 50bps 75bps 100bps ------------------------------- ------------- -------------- ------------- LIBOR Margin 175bps 200bps 225bps ------------------------------- ------------- -------------- ------------- Commitment Fee 30bps 35bps 40bps ------------------------------- ------------- -------------- -------------
For purposes of this Pricing Schedule, the following terms have the following meanings: "LEVEL I" applies on any day after the Reporting Date if, on such day, the applicable Leverage Ratio is less than or equal to 2:1. "LEVEL II" applies on any day after the Reporting Date if, on such day, the applicable Leverage Ratio is greater than 2:1 and less than or equal to 2.5:1. "LEVEL III" applies until the Reporting Date and on any day thereafter if, on such day, the applicable Leverage Ratio is greater than 2.5:1. "REPORTING DATE" means the first Business Day after the receipt by Administrative Lender of the certificate required by Section 8.3(iii) for Parent's fiscal quarter ending May 31, 2001. For purposes of this Pricing Schedule, the Leverage Ratio shall be calculated once every fiscal quarter based on the financial information most recently reported pursuant to Section 8.3 of the Agreement; provided, however, that the Leverage Ratio shall not be computed on the financial information most recently reported pursuant to Section 8.3 until the later of the fifth day of the month after receipt of such information or five Business Days after the receipt thereof and if the most recent report required pursuant to Section 8.3 has not been delivered, or if Administrative Lender reasonably objects to the accuracy of such report within five Business Days after the receipt thereof, the next higher Level from the Level then in effect shall apply until such time as the delinquent report is delivered or Administrative Lender's objections are resolved to Administrative Lender's reasonable satisfaction. 1 76 EXHIBIT A TO AMENDED AND RESTATED CREDIT AGREEMENT FORMS OF PROMISSORY NOTES 1 77 REVOLVING LOANS PROMISSORY NOTE $_______________ November 15, 2000 FOR VALUE RECEIVED, the undersigned, PENFORD CORPORATION, a Washington corporation, and PENFORD PRODUCTS CO., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), hereby jointly and severally promise to pay to the order of __________________________ ("Lender") on the Revolver Maturity Date, or at such earlier time as is provided in that certain Amended and Restated Credit Agreement among Borrowers, The Bank of Nova Scotia (as Administrative Lender) and the lenders named therein dated as of November 15, 2000, (as further amended, modified or supplemented from time to time, the "Credit Agreement"), the principal sum of _______________ Dollars ($_____________), or such lesser amount as shall equal the aggregate outstanding principal balance of all Revolving Loans made by Lender to Borrowers pursuant to the Credit Agreement. This promissory note is one of the promissory notes referred to in, and subject to the terms of, the Credit Agreement. Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. Borrowers further promise to pay interest on the outstanding principal balance hereof at the interest rates, and payable on the dates, set forth in the Credit Agreement. All payments of principal and interest hereunder shall be made to Administrative Lender in lawful money of the United States and in same day or immediately available funds. Lender is authorized but not required to record the date and amount of each advance made hereunder, the date and amount of each payment of principal and interest hereunder, and the resulting unpaid principal balance hereof, in Lender's internal records, and any such recordation shall be prima facie evidence of the accuracy of the information so recorded; provided however, that Lender's failure to so record such amounts shall not limit or otherwise affect Borrower's obligations hereunder and under the Credit Agreement to repay the principal hereof and interest hereon. Borrowers shall pay all costs of collection, including reasonable attorneys' fees (whether incurred at the trial or appellate level, in an arbitration or administrative proceeding, in bankruptcy (including, without limitation, any adversary proceeding, contested matter or motion) or otherwise). No delay or failure on the part of Lender to exercise any of its rights hereunder shall be deemed a waiver of such rights or any other right of Lender nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of such rights or any other right on any future occasion. Borrowers and every surety, indorser and guarantor 1 78 of this Note waive presentment, demand, protest, notice of intention to accelerate, notice of acceleration, notice of nonpayment and all other notices of every kind, and agree that their liability under this Note shall not be affected by any renewal, postponement or extension in the time of payment hereof, by any indulgence granted by any holder hereof with respect hereto, or by any release or change in any security for the payment of this Note, and they hereby consent to any and all renewals, extensions, indulgences, releases or changes, regardless of the number of such renewals, extensions, indulgences, releases or changes. The Credit Agreement provides, among other things, for acceleration (which in certain cases shall be automatic) of the maturity hereof upon the occurrence of certain stated events, in each case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrowers. Borrowers' obligations evidenced by this promissory note are secured by the collateral described in the Loan Documents. The Loan Documents describe the rights of Administrative Lender, Lender and any other holder hereof with respect to the collateral. In the event of any conflict between the terms of this promissory note and the terms of the Credit Agreement, the terms of the Credit Agreement shall control. This promissory note shall be governed by and construed in accordance with the laws of the State of Washington. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. PENFORD CORPORATION By: --------------------------------------- Title: ------------------------------------ PENFORD PRODUCTS CO. By: --------------------------------------- Title: ------------------------------------ 2 79 TERM LOAN PROMISSORY NOTE $_______________ November 15, 2000 FOR VALUE RECEIVED, the undersigned, PENFORD CORPORATION, a Washington corporation, and PENFORD PRODUCTS CO., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), hereby jointly and severally promise to pay to the order of __________________________ ("Lender") the principal sum of _______________ Dollars ($_____________) as follows: (A) on the last day of each February, May, August and November beginning May 31, 2001 repay the outstanding principal balance, or, if less, make a principal payment as follows: (i) before September 1, 2001, the amount of each payment shall be $_______; and (ii) after September 1, 2001, the amount of each payment shall be $________; (B) make additional principal payments in the amounts and on the dates set forth in that certain Amended and Restated Credit Agreement among Borrowers, The Bank of Nova Scotia (as Administrative Lender) and the lenders named therein dated as of November 15, 2000, (as further amended, modified or supplemented from time to time, the "Credit Agreement") and (C) the outstanding principal balance, together with all accrued and unpaid interest and related fees, on the Maturity Date. This promissory note is one of the promissory notes referred to in, and subject to the terms of, the Credit Agreement. Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. Borrowers further promise to pay interest on the outstanding principal balance hereof at the interest rates, and payable on the dates, set forth in the Credit Agreement. All payments of principal and interest hereunder shall be made to Administrative Lender in lawful money of the United States and in same day or immediately available funds. Lender is authorized but not required to record the date and amount of each advance made hereunder, the date and amount of each payment of principal and interest hereunder, and the resulting unpaid principal balance hereof, in Lender's internal records, and any such recordation shall be prima facie evidence of the accuracy of the information so recorded; provided however, that Lender's failure to so record such amounts shall not limit or otherwise affect Borrower's obligations hereunder and under the Credit Agreement to repay the principal hereof and interest hereon. Borrowers shall pay all costs of collection, including reasonable attorneys' fees (whether incurred at the trial or appellate level, in an arbitration or administrative proceeding, in bankruptcy (including, without limitation, any adversary proceeding, contested matter or 1 80 motion) or otherwise). No delay or failure on the part of Lender to exercise any of its rights hereunder shall be deemed a waiver of such rights or any other right of Lender nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of such rights or any other right on any future occasion. Borrowers and every surety, indorser and guarantor of this Note waive presentment, demand, protest, notice of intention to accelerate, notice of acceleration, notice of nonpayment and all other notices of every kind, and agree that their liability under this Note shall not be affected by any renewal, postponement or extension in the time of payment hereof, by any indulgence granted by any holder hereof with respect hereto, or by any release or change in any security for the payment of this Note, and they hereby consent to any and all renewals, extensions, indulgences, releases or changes, regardless of the number of such renewals, extensions, indulgences, releases or changes. The Credit Agreement provides, among other things, for acceleration (which in certain cases shall be automatic) of the maturity hereof upon the occurrence of certain stated events, in each case without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrowers. Borrowers' obligations evidenced by this promissory note are secured by the collateral described in the Loan Documents. The Loan Documents describe the rights of Administrative Lender, Lender and any other holder hereof with respect to the collateral. In the event of any conflict between the terms of this promissory note and the terms of the Credit Agreement, the terms of the Credit Agreement shall control. This promissory note shall be governed by and construed in accordance with the laws of the State of Washington. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. PENFORD CORPORATION By: --------------------------------------- Title: ------------------------------------ PENFORD PRODUCTS CO. 2 81 By: --------------------------------------- Title: ------------------------------------ 3 82 EXHIBIT B TO AMENDED AND RESTATED CREDIT AGREEMENT NOTICE OF AUTHORIZED REPRESENTATIVES The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Ms. Hilma Gabbidon AND The Bank of Nova Scotia 888 S.W. 5th Avenue, Suite 750 Portland, Oregon Attn: Patrik G. Norris Reference is made to that certain Amended and Restated Credit Agreement among Penford Corporation, a Washington corporation, Penford Products Co., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), The Bank of Nova Scotia (as Administrative Lender) and the lenders named therein dated as of November 15, 2000, (as further amended, modified or supplemented from time to time, the "Credit Agreement"). Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. Borrowers' Agent hereby represents to Administrative Lender that the following persons are the Authorized Representatives, as defined in the Credit Agreement, and that the signatures opposite their names are their true signatures: Name and Office Signature --------------------- ---------------------------- --------------------- ---------------------------- --------------------- ---------------------------- 1 83 --------------------- ---------------------------- --------------------- ---------------------------- Administrative Lender is authorized to rely on this Notice of Authorized Representatives until such time, if any, as Borrowers' Agent has delivered to Administrative Lender, and Administrative Lender has received, a duly executed Notice of Authorized Representatives in substitution hereof. This Notice of Authorized Representatives cancels and supersedes any Notice of Authorized Representatives at any time prior to the date hereof delivered by Borrowers' Agent to Administrative Lender. IN WITNESS WHEREOF, Borrowers' Agent hereby confirms that it has caused this Notice of Authorized Representatives to be duly executed as of ______________. PENFORD CORPORATION, Borrowers' Agent By: --------------------------------------- Title: ------------------------------------ 2 84 EXHIBIT C TO AMENDED AND RESTATED CREDIT AGREEMENT NOTICE OF BORROWING The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Ms. Hilma Gabbidon AND The Bank of Nova Scotia 888 S.W. 5th Avenue, Suite 750 Portland, Oregon Attn: Patrik G. Norris Reference is made to that certain Amended and Restated Credit Agreement among Penford Corporation, a Washington corporation, Penford Products Co., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), The Bank of Nova Scotia (as Administrative Lender) and the lenders named therein dated as of November 15, 2000, (as further amended, modified or supplemented from time to time, the "Credit Agreement"). Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. 1. Pursuant to Section 3.1 of the Credit Agreement, Borrowers' Agent, on behalf of Borrowers, hereby requests Revolving Loans upon the following terms: (a) The aggregate principal amount is to be $___________. (b) The date of borrowing is to be _________. (c) $________ of the Loans are to be Base Rate Loans, and $________ of the Loans are to be LIBOR Loans with a Fixed Rate Term of ______ month(s). 2. Borrowers' Agent, on behalf of Borrowers, hereby certifies to Administrative Lender and Lenders that, on the date of this Notice of Borrowing and after giving effect to the requested disbursement (including the use of the proceeds thereof): 1 85 (a) Borrowers' representations and warranties in the Loan Documents are correct in all material respects as if made on the date hereof; (b) no Default is continuing or would result from the requested Loans being made; and (c) no event or circumstance exists that could have a Material Adverse Effect. The party signing below on behalf of Borrowers' Agent is an Authorized Representative and has caused this Notice of Borrowing to be duly executed on behalf of Borrowers as of ______________. PENFORD CORPORATION, Borrowers' Agent By: --------------------------------------- Title: ------------------------------------ 2 86 EXHIBIT D TO AMENDED AND RESTATED CREDIT AGREEMENT NOTICE OF CONVERSION OR CONTINUATION The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Ms. Hilma Gabbidon AND The Bank of Nova Scotia 888 S.W. 5th Avenue, Suite 750 Portland, Oregon Attn: Patrik G. Norris Reference is made to that certain Amended and Restated Credit Agreement among Penford Corporation, a Washington corporation, Penford Products Co., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), The Bank of Nova Scotia (as Administrative Lender) and the lenders named therein dated as of November 15, 2000, (as further amended, modified or supplemented from time to time, the "Credit Agreement"). Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. 1. Pursuant to Section 3.5 of the Credit Agreement, Borrowers' Agent, on behalf of Borrowers, hereby requests [the continuation of all or part of outstanding LIBOR Loans with Fixed Rate Terms ending on ___________] [the conversion of all or part of its outstanding Base Rate Loans], as follows: (a) The Loans to which this Notice applies are $_______ of Revolving Loans and $_________ of the Term Loan. (b) The effective date of continuation and/or conversion is to be _________ . (c) The aggregate amount of [said outstanding LIBOR Loans that are Revolving Loans to be continued as] [said outstanding Base Rate Loans that are Revolving Loans to be converted to] LIBOR Loans, and each requested Fixed Rate Term, are: 1 87 Amount Fixed Rate Term $ __________ months -------------- $ __________ months -------------- (d) The aggregate amount of [said outstanding LIBOR Loans that are part of the Term Loan to be continued as] [said outstanding Base Rate Loans that are part of the Term Loan to be converted to] LIBOR Loans, and each requested Fixed Rate Term, are: Amount Fixed Rate Term $ __________ months -------------- $ __________ months -------------- (e) The aggregate amount of said outstanding LIBOR Loans that are Revolving Loans to be continued as Base Rate Loans is $___________. The aggregate amount of said outstanding LIBOR Loans that are part of the Term Loan to be continued as Base Rate Loans is $___________. 2. Borrowers' Agent, on behalf of Borrowers, hereby certifies to Administrative Lender and Lenders that, on the date of this Notice of Conversion or Continuation, no Default has occurred and is continuing. The party signing below on behalf of Borrowers' Agent is an Authorized Representative and has caused this Notice of Conversion or Continuation to be duly executed on behalf of Borrowers as of _____________. PENFORD CORPORATION, Borrowers' Agent By: --------------------------------------- Title: ------------------------------------ 2 88 EXHIBIT E TO AMENDED AND RESTATED CREDIT AGREEMENT OFFICER'S CERTIFICATE The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street N.E., Suite 2700 Atlanta, Georgia 30308 Attn: Ms. Hilma Gabbidon AND The Bank of Nova Scotia 888 S.W. 5th Avenue, Suite 750 Portland, Oregon Attn: Patrik G. Norris This certificate is furnished pursuant to Section 8.3 of that certain Amended and Restated Credit Agreement among Penford Corporation, a Washington corporation, Penford Products Co., a Delaware corporation, (each individually referred to as "Borrower" and both collectively referred to as "Borrowers"), The Bank of Nova Scotia (as Administrative Lender) and the lenders named therein dated as of November 15, 2000, (as further amended, modified or supplemented from time to time, the "Credit Agreement"). Capitalized terms used herein shall have the respective meanings assigned to them in the Credit Agreement. The undersigned hereby certifies that: (1) the financial statements of Parent attached hereto for the [quarter] [year] ending _________________, ____ were prepared in accordance with GAAP and fairly present in all material respects consolidated and consolidating balance sheets of Parent and the Subsidiaries as of the end of such [quarter] [year] and consolidated and consolidating statements of earnings and cash flow of Parent and the Subsidiaries for such [quarter] [year] and year-to-date (subject to normal year end adjustments and without notes); (2) [no Default existed at any time during such [quarter] [year]] [no Default existed at any time during such [quarter] [year] except for the events described below and a 1 89 detailed statement of the action which Borrowers [have taken] [propose to take] with respect to each such event is set forth the description of such event below]; and (3) the calculation demonstrating Borrowers' compliance with the covenants set forth in Article X is attached hereto. Dated:__________, ____. ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------ 2 90 EXHIBIT F TO AMENDED AND RESTATED CREDIT AGREEMENT LIST OF EXCLUDED PATENTS SEE ATTACHED LIST 1 91 EXHIBIT G TO AMENDED AND RESTATED CREDIT AGREEMENT [TYPE ON SCOTIABANK LETTERHEAD] Irrevocable Standby Letter of Credit Date of Issue: _______________ No. ____________ ------------- Beneficiary: Applicants: - ----------- ---------- Australia and New Zealand Banking Penford Corporation Group Limited ACN 005 357 522 Penford Products Co. 20 Martin Place, 13th Floor Suite 2390 Sydney, NSW, Australia 2000 777 -- 108th Avenue NE Attn: Michelle Burke Bellevue, WA 98004-5193 Expiry Date: ______________ Amount Available: USD 10,000,000.00 - ----------- ---------------- Ten Million and 00/100's US Dollars Dear Sir(s) or Madam(s) We hereby issue in your favor our Irrevocable Standby Letter of Credit which is available by your draft drawn at sight on us and presented at our office at 888 SW Fifth Avenue, Suite 750 Portland, OR 97204-2021 Attn: Patrik G. Norris, not later than the Expiry Date set forth above, unless this Letter of Credit is terminated earlier in accordance with the provisions hereof or unless extended in accordance with the terms hereof. A draft drawn under this Letter of Credit must be marked "drawn under The Bank of Nova Scotia Irrevocable Standby Letter of Credit No. ________ dated _____________" and must be presented together the original of this Letter of Credit and all amendments hereto together with either a Drawing Certificate purportedly signed by your authorized officer and typed on your letterhead in the form of Exhibit A attached hereto or the statement referenced below. It is a condition of this Letter of Credit that it is deemed to be automatically extended without amendment for a period of 364 days from the current expiry date hereof, or any future expiry date, unless at least sixty days before any expiry date we notify you at the above listed address that we elect not to consider this Letter of Credit renewed for any such additional period. In no event shall this Letter of Credit have an expiry date later than October 31, 2005. Any claims received after such date will not be entertained by us. If we send such a nonrenewal notice, you may draw at any time prior to the then current expiry date, but not sooner than fifteen days before the then current expiry date, up to the full amount then available hereunder, with presentation of your draft drawn on us at sight and the original of this Letter of Credit and all amendments thereto, accompanied by your statement, purportedly signed by your authorized officer, on your letterhead stating: 92 "Australia and New Zealand Banking Group Limited ACN 005 357 522 has received The Bank of Nova Scotia's notice of nonrenewal under Letter of Credit No.______ and has not, as of the date of our draft hereunder, received an extension of said Letter of Credit or a replacement Letter of Credit in a form acceptable to us." We hereby engage with you that a draft drawn and presented in compliance with the terms of this Letter of Credit will be duly honored upon presentation to us. Multiple draws are not permitted. Except so far as is otherwise expressly stated herein, this credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce, Paris, Publication No. 500 and engages us in accordance with the terms thereof. The Bank of Nova Scotia By: --------------------------------------- Title: ------------------------------------ -2- 93 EXHIBIT A TO LETTER OF CREDIT DRAWING CERTIFICATE This drawing certificate is delivered pursuant to that certain Irrevocable Standby Irrevocable Letter of Credit No. _______ dated ________________ issued by The Bank of Nova Scotia for the account of Penford Corporation and Penford Products Co. ("Letter of Credit"). Australia and New Zealand Banking Group Limited ACN 005 357 522 ("ANZ") hereby certifies to The Bank of Nova Scotia, as the issuer of the Letter of Credit, that either: (1) an "Event of Default" (as defined in one of the Australian Facilities) other than a payment default exists and this Drawing Certificate is being given with the consent of the "Required Lenders" (as defined in the Intercreditor Agreement); or (2) a payment default exists under one of the Australian Facilities. Executed as of __________________. Australia and New Zealand Banking Group Limited ACN 005 357 522 By: --------------------------------------- Title: ------------------------------------ EX-10.2 4 v67867ex10-2.txt DEBENTURE TRUST DEED 1 Exhibit 10.2 PENFORD HOLDINGS PTY LIMITED ('ISSUER') ANZ CAPEL COURT LIMITED ('TRUSTEE') DEBENTURE TRUST DEED CREATING THE PENFORD DEBENTURE TRUST MINTER ELLISON Lawyers Minter Ellison Building 44 Martin Place SYDNEY NSW 2000 DX 117 Sydney Telephone (02) 9210 4444 Facsimile (02) 9235 2711 Reference AMN/RCA:10890732 2 TABLE OF CONTENTS 1. INTERPRETATION........................................................1 1.1 Definitions...................................................1 1.2 Interpretation...............................................11 1.3 Calculation of amounts.......................................12 2. DECLARATION, TERM AND NAME OF TRUST..................................12 2.1 Declaration of Trust.........................................12 2.2 Term.........................................................12 3. TRUSTEE..............................................................12 3.1 Appointment of Trustee.......................................12 3.2 General powers...............................................13 3.3 Authority of Trustee.........................................14 3.4 Instructions of Debenture Holders............................14 3.5 No obligation to investigate authority.......................15 3.6 Notification to Debenture Holders............................15 3.7 Notification to Trustee......................................16 3.8 Exoneration..................................................16 3.9 Delegation and appointment of attorneys......................16 3.10 Dealings between the Issuer and Trustee......................17 3.11 Independent investigation of credit..........................17 3.12 Exercise of powers by corporate trustee......................17 3.13 Trustee as a Debenture Holder................................18 3.14 Indemnity to Trustee.........................................18 3.15 No monitoring................................................18 3.16 Recognition of Transaction Documents.........................19 3.17 Agent........................................................19 4. DISTRIBUTION OF RECOVERED FUNDS......................................20 4.1 Money to be distributed on receipt...........................20 4.2 Money held or to be held in suspense account.................20 4.3 Manner of distribution.......................................20 4.4 No objection.................................................21 4.5 Repayment to Trustee.........................................21 4.6 Distributions amongst Debenture Holders......................22 4.7 Adjustments between Debenture Holders........................22 4.8 Payments from Debenture Holder to the Trustee................23 4.9 Suspense account.............................................23 5. DEBENTURE HOLDERS....................................................23 5.1 Rights and obligations of Debenture Holders..................23 5.2 Trustee: exercise of discretion..............................23 6. CREATION, ISSUE AND REDEMPTION OF DEBENTURES.........................24 6.1 Issue of Debentures..........................................24 6.2 Issue Notice.................................................24 6.3 Surrender and redemption of Debentures.......................24 6.4 Notices to Trustee...........................................25 6.5 Cancellation.................................................25 6.6 Transfer of Debentures.......................................25 7. RESTRICTIONS ON DEBENTURES...........................................26 i 3 7.1 Limitation on Issue Notices..................................26 7.2 Minimum principal amount.....................................27 8. REGISTERS AND CERTIFICATES...........................................27 8.1 Register.....................................................27 8.2 Conclusiveness of Register...................................27 8.3 Certificates.................................................28 8.4 Execution of Debenture Certificates..........................28 8.5 Register available for inspection............................28 9. FUNDING PERIODS......................................................28 9.1 Funding Notice...............................................28 9.2 Selection of Funding Periods.................................28 9.3 Funding Periods: restrictions................................28 9.4 Failure to select Funding Period.............................29 10. INTEREST.............................................................29 11. REPAYMENT OF PRINCIPAL AMOUNT........................................29 11.1 Repayment....................................................29 11.2 Mandatory repayments.........................................29 11.3 Final repayment..............................................30 12. REPRESENTATIONS AND WARRANTIES.......................................30 12.1 Representations and warranties...............................30 12.2 Representations and warranties repeated......................34 13. REPORTING OBLIGATIONS AND ACCESS.....................................34 13.1 Notices to the Agent.........................................34 13.2 Accounts and other information...............................35 13.3 Preparation and form of Accounts and reports.................36 13.4 Giving access to Secured Property............................37 13.5 Investigating Accountants....................................37 13.6 Confidentiality..............................................37 14. GENERAL AND FINANCIAL OBLIGATIONS....................................38 14.1 Positive obligations.........................................38 14.2 Negative obligations.........................................40 15. EVENTS OF DEFAULT....................................................42 15.1 Events of Default............................................42 15.2 Effect of Event of Default...................................45 16. INCREASED COSTS......................................................46 16.1 Increased costs..............................................46 16.2 Method of calculation........................................46 17. ILLEGALITY...........................................................46 18. FEES.................................................................47 19. COSTS AND EXPENSES...................................................47 20. TAXES................................................................48 20.1 Issuer to pay Taxes..........................................48 ii 4 20.2 Fines and penalties..........................................48 20.3 Goods and Services Tax.......................................48 20.4 Deduction or withholding required............................49 21. GENERAL INDEMNITY....................................................49 22. DEFAULT INTEREST.....................................................50 22.1 Default interest.............................................50 22.2 Interest following judgment..................................50 22.3 Capitalisation...............................................50 23. REPLACEMENT OF TRUSTEE...............................................51 23.1 Retirement...................................................51 23.2 Removal......................................................51 23.3 Further assurance by retiring Trustee........................51 24. REVOCATION AND AMENDMENT OF TRUST DEED...............................52 25. NOTICES..............................................................52 25.1 Requirements.................................................52 25.2 Effect.......................................................52 25.3 Deemed receipt...............................................53 25.4 Notice provisions in other Transaction Documents.............53 26. TRUSTEE'S LIMITATION OF LIABILITY PROTECTION.........................53 26.1 Capacity of Trustee..........................................53 26.2 No personal liability........................................53 26.3 Exclusion....................................................53 27. PRESERVING THE TRUSTEE'S AND DEBENTURE HOLDERS' POWERS...............54 27.1 Preservation.................................................54 27.2 No obligation to exercise rights or give consent.............54 27.3 Consent and waivers..........................................54 27.4 Powers.......................................................54 27.5 Choice of securities and Guarantees..........................54 27.6 Indemnities generally........................................55 27.7 Moratorium legislation.......................................55 28. OTHER PROVISIONS.....................................................55 28.1 Payments and receipts in foreign currency....................55 28.2 Further assurances...........................................55 28.3 Notification from Issuer.....................................56 28.4 Trustee and Debenture Holders may set off....................56 28.5 Issuer must not set off......................................56 28.6 Surplus proceeds.............................................57 28.7 Applying receipts............................................57 28.8 Notices or demands as evidence...............................57 28.9 Severability.................................................57 28.10 Variation of this document...................................58 28.11 Authorised Officers and communications.......................58 28.12 Assignment...................................................58 28.13 The Trustee or a Debenture Holder may disclose information...58 28.14 Certain notices or demands...................................58 28.15 If due date not a Business Day...............................59 iii 5 28.16 Severability.................................................59 28.17 Governing law and jurisdiction...............................59 28.18 Attorneys....................................................59 28.19 Counterparts.................................................59 SCHEDULE 1 -- FORM OF DEBENTURE...............................................60 SCHEDULE 2 -- ISSUE NOTICE....................................................63 SCHEDULE 3 -- FUNDING NOTICE..................................................64 SCHEDULE 4 -- APPLICABLE MARGIN...............................................65 SCHEDULE 5 -- REPAYMENT OF PRINCIPAL AMOUNT...................................66 iv 6 DEBENTURE TRUST DEED DEED dated 2000 BETWEEN PENFORD HOLDINGS PTY LIMITED ACN 094 279 339 of 170 Epping Road, Lane Cove, NSW 2066 ('ISSUER') AND ANZ CAPEL COURT LIMITED ACN 004 768 807 of Level 2, 20 Martin Place, Sydney, NSW 2000 in its capacity as debenture trustee of the Penford Debenture Trust (in this capacity, 'TRUSTEE') RECITALS A. The Issuer intends to issue Australian dollar interest bearing debentures under this document. B. The Issuer has agreed to enter into this document in order to make provision for the appointment of a trustee for Debenture Holders. C. The Trustee has agreed for the consideration expressed in this document to act as trustee of the trusts created by this document, on the terms contained in this document. 1. INTERPRETATION 1.1 DEFINITIONS In this document, unless the contrary intention appears, the following words and expressions have the meanings indicated. 'ACCOUNTING STANDARDS' means, in respect of a company, generally accepted accounting principles and practices consistently applied in the country of incorporation of that company, including any domestically accepted international accounting standards. 'ACCOUNTS' means profit and loss accounts, balance sheets, cash flow statements and statements, reports (including auditors' reports and directors' reports) and notes attached to, or intended to be read with, any of them. 'AGENT' means ANZ or any other person appointed pursuant to the Intercreditor Agreement to do the things specified in clause 3.17(a). 'ANZ' means Australia and New Zealand Banking Group Limited ACN 005 357 522. 'APPLICABLE MARGIN' means the applicable margin determined in accordance with Schedule 4. 'ATTORNEY' means an attorney appointed under a Transaction Document. 7 'AUTHORISATION' includes: (a) any consent, authorisation, registration, filing, agreement, notarisation, certificate, permission, licence, approval or exemption from, by or with a Public Authority; or (b) in relation to anything which is prohibited or restricted by law if a Public Authority takes certain action within a specified period, the expiry of that period without the Public Authority taking that action. 'AUTHORISED OFFICER' means: (a) in respect of the Issuer, any director or secretary of the Issuer or any person appointed by the Issuer and notified in writing to the Trustee and Agent from time to time to act as an Authorised Officer for the purposes of the Transaction Documents. (The notice must be signed by the company secretary or a director of the Issuer and be given to the Trustee and the Agent with a specimen signature of the person); and (b) in respect of the Trustee, the Agent or a Debenture Holder, a person holding or acting in the office of director, chief executive or secretary or whose title includes the word 'Manager', 'President' or 'Vice-President' or a person performing the functions of any of those offices, any duly appointed attorney of the Trustee or any person appointed by, respectively, the Trustee, or a Debenture Holder from time to time to act as an Authorised Officer for the purposes of the Transaction Documents and notified in writing to the Issuer, the Trustee and the Agent. 'BANK BILL RATE' means, for a period: (a) the average bid rate which is shown at approximately 10.15am on page 'BBSY' on the Reuters Monitor System on the first day of that period for bank accepted Bills having a term equal or approximately equal to that period; (b) if: (i) it is not possible for any reason for the Agent to determine the Bank Bill Rate under paragraph (a); or (ii) in the Agent's opinion, the basis on which the rate referred to in paragraph (a) is calculated has changed adversely to Debenture Holders, the Bank Bill Rate will be the average, rounded upwards if necessary to four decimal places and expressed as a yield percentage per annum, of the bid rates quoted by each Reference Bank at or about 10.30am on that day (or such number of Reference Banks as provide quotes to the Agent at that time on that day), for bank accepted Bills having a term as described above, as conclusively determined in good faith by the Agent; or (c) if it is not possible for any reason for the Agent to determine the Bank Bill Rate under paragraphs (a) or (b) above, the Bank Bill Rate will be the rate determined by the Agent in good faith to be its cost of funds for that period. 2 8 'BILL' means a bill of exchange as defined in the Bills of Exchange Act 1909 (Cth), but does not include a cheque. 'BUSINESS DAY' means a weekday on which banks are open for general banking business in Sydney. 'COLLATERAL SECURITY' means any Security Interest, Guarantee or other document or agreement at any time created or entered into as security for any Secured Money including, but not limited to, any Security Interest, Guarantee or other document or agreement that: (a) the Trustee is a party to; or (b) is given for the benefit of the Trustee, in its capacity as trustee of the Trust, or otherwise on behalf of the Debenture Holders but does not include the Letter of Credit. 'CONTESTED TAX' means a Tax assessed as payable by the Issuer where the Issuer: (a) is diligently contesting the Tax in good faith and in accordance with proper procedures and laws; (b) is not required by applicable law to pay the Tax before the contest has been decided; and (c) has set aside sufficient reserves of liquid assets to pay the Tax and any fine, penalty, interest or other cost payable if the contest is unsuccessful. 'CURRENT FINANCIAL INFORMATION' means, at any time, the latest Accounts, reports and other financial information provided by the Issuer to the Agent under this document. 'DEBENTURE' means a debenture issued by the Issuer strictly in accordance with this document. 'DEBENTURE CERTIFICATE' means a certificate issued under clause 8. 'DEBENTURE HOLDER' means, at any time, any person who at that time is entered on the Register as holding a Debenture. 'DEBENTURE HOLDER DEBT' means, in relation to a Debenture Holder on any given day, the aggregate face value of Debentures held by the Debenture Holder on that day as determined by clause 1.3, whether owing to the Debenture Holder directly, or beneficially or as trustee or agent, or in any other capacity. 'DEFAULT RATE' has the meaning given to it in clause 22 (Default interest). 'DERIVATIVE TRANSACTION' means any agreement or transaction which is: (a) a futures contract (including a futures contract as defined in the Corporations Law); or 3 9 (b) a 'Specified Transaction' as defined in the 1992 ISDA Master Agreement or a 'Transaction' as defined in the 1996 ISDA Equity Derivatives Definitions (both as published by the International Swaps and Derivatives Association, Inc.), or any other agreement or transaction of a similar nature or effect to any of the above. 'DOLLARS' and '$' means Australian dollars. 'ENVIRONMENT' means the physical and radiative factors of the surroundings of persons including the land, waters, atmosphere, climate, sound, odours, taste, electromagnetism, radioactivity, the biological factors of animals and plants and the social factor of aesthetics. 'ENVIRONMENTAL LAW' means a law regulating or otherwise relating to the Environment, including any law relating to land or water use, planning, building, heritage, coastal protection, water catchments, pollution, noise, smell, soil or ground water contamination, soil conservation, nature conservation, chemicals, waste, use of dangerous goods or hazardous substances, public and occupational health and safety, noxious trades or any other aspect of protection of the Environment or any person or property. 'ENVIRONMENTAL LIABILITY' means any obligation or Loss under an Environmental Law imposed on the Issuer (or any of its officers), the Trustee (or any of its officers), the Agent (or any of its officers), a Debenture Holder (or any of its officers), or any occupier of a Property, as a result of activities carried on during the ownership or occupation of the Property by any person at any time. 'EVENT OF DEFAULT' means each event specified in clause 15.1 (Events of Default). 'EXTERNAL ADMINISTRATOR' means an administrator, receiver, receiver and manager, trustee, provisional liquidator, liquidator or any other person (however described) holding or appointed to an analogous office or acting or purporting to act in an analogous capacity. 'FINANCIAL INDEBTEDNESS' means any actual or contingent debt or other monetary liability arising in respect of money borrowed or raised or any financial accommodation provided, including in respect of any: (a) Bill, bond, debenture, note or similar instrument; or (b) acceptance, endorsement or discounting arrangement; or (c) Guarantee; (d) trade or vendor financing or deferred purchase price (for more than 90 days) of any asset or service; (e) a lease constituting, or accounted for in a similar way to, a finance lease or capitalised lease under Accounting Standards; (f) obligation to deliver goods or other property or provide services paid for in advance by any Trustee or in relation to any other financing transaction; 4 10 (g) redemption of any preference shares or acquisition of redeemable preference shares; or (h) Derivative Transaction. 'FUNDING NOTICE' means a notice given in accordance with clause 9.1 of this document. 'FUNDING PERIOD' means, in relation to a Debenture, the period (if any) selected for that Debenture in the Funding Notice in respect of that Debenture or the period otherwise determined under this document. 'GST' has the meaning given in the GST Law. 'GST LAW' means A New Tax System (Goods and Services Tax) Act 1999. 'GUARANTEE' means a guarantee, indemnity, letter of credit, letter of comfort or any other obligation or irrevocable offer (whatever it is called and whatever its nature): (a) to provide funds (whether by the advance or payment of money, the purchase of or subscription for shares or other securities, the purchase of assets or services, or otherwise) for the payment or discharge of; (b) to indemnify any person against the consequences of default in the payment of; or (c) to be responsible for, an obligation or monetary liability of another person, a dividend, distribution, capital or premium on shares, debenture or other interests, or the solvency or financial condition of another person. 'INSOLVENCY' of a person includes: (a) the Winding Up of the person; (b) the appointment of an External Administrator to the person; (c) any composition, compromise, arrangement, merger, amalgamation, reconstruction, administration, assignment for the benefit of creditors or insolvency of, by, or adversely affecting the person and any procedure which is equivalent or analogous in any jurisdiction; and (d) the death or permanent incapacity of the person. 'INTELLECTUAL PROPERTY' means any intellectual or industrial property including: (a) any patent, trade mark (whether registered or common law), trade name, copyright, registered design, trade secret, confidential information, know-how or computer program; and (b) any licence or other right to use or to grant the use of or to be the registered owner or user of any of them. 5 11 'INTERCREDITOR AGREEMENT' has the meaning given in the US Credit Agreement. 'INTEREST RATE' means the Bank Bill Rate plus the Applicable Margin. 'ISSUE DATE' means a date on which debentures are or are to be issued under this document. 'ISSUE NOTICE' means a notice given in accordance with clause 6.2 of this document. 'ISSUER PARTY' means the Issuer and each Subsidiary of the Issuer. 'LEASE' means any arrangement whereby an asset may be used or managed by a person other than the owner. It includes a sub-lease, lease of a lease, management agreement or licence. 'LETTER OF CREDIT' has the meaning given to it in the US Credit Agreement. 'LEVERAGE RATIO' has the meaning given to it in the US Credit Agreement. 'LOSS' means a loss, claim, action, damage, liability, cost, charge, expense, penalty, compensation, fine, outgoing or payment suffered, paid or incurred. 'MATERIAL ADVERSE EFFECT' means a material adverse effect on: (a) the effectiveness of, or the ability of the Issuer to observe its obligations under, a Transaction Document; (b) the market value or marketability of any asset the subject of a Collateral Security; or (c) the financial condition or business of the Issuer. 'MATERIAL DOCUMENT' means: (a) the sale agreement dated 29 August 2000 for the Purchase; (b) the 'Hi-maize Supply Agreement' dated 29 August 2000 between PAL, Goodman Fielder Mills Limited, Quality Bakers Australia Limited and The Uncle Tobys Company Limited; (c) the 'Hi-maize Access Deed' dated 29 August 2000 between the Issuer, PAL, Quality Bakers Australia Limited and Goodman Fielder Limited; and (d) the letter of offer dated 26 September 2000 by BNP Pacific (Australia) Limited to PAL. 'PAL' means Penford Australia Limited ACN 003 780 229 (formerly Starch Australasia Limited). 'PENFORD SECURITY TRUST' means the trust established by the Penford Security Trust Deed. 6 12 'PENFORD SECURITY TRUST DEED' means the security trust deed described as such between PAL and the Trustee dated on or about the date of this document. 'PERMITTED FINANCIAL INDEBTEDNESS' means Financial Indebtedness permitted under the Financing Documents and the facility for $12 million granted to the Borrower by BNP Pacific (Australia) Limited pursuant to the letter of offer dated 20 September 2000. 'PERMITTED SECURITY INTEREST' means, in relation to a person: (a) a Collateral Security over any of the person's assets; (b) a Security Interest over any of the person's assets to which the Trustee (acting on the instructions of the Debenture Holders) has consented, such consent not to be unreasonably withheld or delayed. It does not include a Security Interest to which the Trustee has consented on one or more conditions if those conditions are not complied with; and (c) a lien or charge arising by operation of law in the ordinary course of the person's ordinary business. It does not include a lien or charge that secures debts overdue for more than 10 Business Days or debts for more than $50,000. 'POTENTIAL EVENT OF DEFAULT' means any event, thing or circumstance which with the giving of notice or passage of time or both would become an Event of Default. 'POWER' means any right, power, discretion or remedy of the Trustee, a Debenture Holder, a Receiver or an Attorney under any Transaction Document or applicable law. 'PRINCIPAL AMOUNT' in respect of a Debenture means the face value of the Debenture less all amounts of principal repaid. 'PROPERTY' means all real property leased, occupied, used in relation to or necessary for its business or owned by any Issuer Party at any time. 'PROPORTION' means, in relation to a Debenture Holder, at any time the proportion of the Debenture Holder Debt for that Debenture Holder at that time to the aggregate of the Total Debenture Holder Debt at that time. 'PUBLIC AUTHORITY' includes the Crown, any government and any governmental, semi-governmental, public, administrative, regulatory or judicial entity. It includes a Minister, a statutory corporation, a self-regulatory organisation or supervisory authority established by statute and any stock or futures exchange. 'PURCHASE' means the purchase by the Issuer of PAL. 'RECEIVER' means a receiver or receiver and manager appointed under a Collateral Security. 'RECORDS' means all the information which relates in any way to a specified person's business or any transaction entered into by the person, whether the information is recorded electronically, magnetically or otherwise. 'REFERENCE BANK' means each of the Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation, and any other bank 7 13 appointed as a Reference Bank, in addition to or in place of any of them, by agreement between the Issuer and the Trustee (acting on the instructions of the Debenture Holders). 'REGISTER' means the register of Debentures and Debenture Holders to be maintained by the Trustee under this document. 'RELATED ENTITY' of an entity means an entity which is related to the first entity under section 50 of the Corporations Law. 'RELEVANT DOCUMENT' means a Transaction Document or a Material Document. 'REQUIRED LENDERS' has the meaning given to it in the Intercreditor Agreement. 'SECURED MONEY' means: (a) all money that the Issuer now owes or in the future may come to owe, actually or contingently, for any reason, to one or more of the Debenture Holders or to any combination of Debenture Holders in connection with any Debenture; and (b) all money that the Issuer now owes or in the future may come to owe, actually or contingently, for any reason under a Transaction Document including, but not limited to, all moneys expressed to be 'Secured Money'. It includes any amount which the Issuer owes a Debenture Holder under a Transaction Document if one or more facts become known or events occur. This includes any amount which may arise under or in relation to an obligation, document or agreement existing at that time, and any amount which may arise out of or in relation to circumstances existing, foreseeable or contemplated at that time. Where the Issuer would have owed money but for its Insolvency, it will be taken still to owe that money. 'SECURED PROPERTY' means all property the subject of a Collateral Security. 'SECURITY' means: (a) any Security Interest or Guarantee given to the Trustee as security for the payment of the Secured Money; (b) any other Security Interest which the Trustee is given as trustee of the Trust; or (c) any document which the Issuer and the Trustee agree is a Security. 'SECURITY INTEREST' means a mortgage, charge, lien or pledge or any other right by way of security (including a right of set-off in respect of a deposit or a right to retain funds the subject of a flawed deposit arrangement) of a creditor to have its claims satisfied before other creditors with or from the proceeds of any asset. 'STARCH NEW ZEALAND LIMITED' means Starch New Zealand Limited a duly incorporated company having its registered office at Auckland and having the company number AK163345. 8 14 'SUBSCRIBER' means a person who agrees under a Subscription Agreement to subscribe for Debentures. 'SUBSCRIPTION AGREEMENT' means any document designated by the Trustee and the Issuer as a subscription agreement for the purposes of this document. 'SUBSIDIARY' of an entity means an entity that is: (a) a subsidiary of the first entity under section 46 of the Corporations Law; or (b) a subsidiary of, or otherwise controlled by, the first entity under any Accounting Standard in Australia. 'TAX' means a tax, levy, duty or charge (and associated penalty or interest) imposed by a Public Authority. It includes stamp duty and other taxes of a similar nature, income tax, withholding tax, GST and transaction taxes and duties, but does not include tax on the overall net income of the Trustee or a Debenture Holder. 'TERMINATION DATE' means the maturity date specified in a Debenture Certificate or any earlier date on which the Secured Money becomes due and payable under this document or another Transaction Document. 'TOTAL DEBENTURE HOLDER DEBT' means, on any given day, the sum of all Debenture Holder Debts on that day. 'TRANCHE 1 DEBENTURE' means a Debenture in respect of which it is stated on the Debenture Certificate to be a Tranche 1 Debenture. 'TRANCHE 2 DEBENTURE' means a Debenture in respect of which it is stated on the Debenture Certificate to be a Tranche 2 Debenture. 'TRANSACTION DOCUMENT' means each of: (a) this document and any Debentures; (b) the Subscription Agreement; (c) the fixed and floating charge granted by the Issuer in favour of the Trustee over its present and future assets in New South Wales and Victoria; (d) the future asset charge granted by the Issuer in favour of the Trustee over its future assets outside New South Wales and Victoria and over its present assets in the Australian Capital Territory and the Northern Territory; (e) the fixed and floating charge granted by PAL in favour of the Trustee over its present and future assets in New South Wales and Victoria; (f) the fixed and floating charge granted by PAL in favour of the Trustee over its present assets outside New South Wales and Victoria limited to $3,000,000; (g) the future asset charge granted by PAL in favour of the Trustee over its future assets outside New South Wales and Victoria and over its present assets in the Australian Capital Territory and the Northern Territory; 9 15 (h) the fixed and floating charge granted by Starch New Zealand Limited in favour of the Trustee over all its present and future assets; (i) the guarantee and indemnity from PAL on account of the Issuer in favour of the Trustee; (j) the guarantee and indemnity from Starch New Zealand Limited on account of the Issuer in favour of the Trustee; (k) the real property mortgages from each of PAL and Starch New Zealand Limited over all real property owned by them; (l) a Collateral Security; (m) a document that the Issuer and the Trustee (acting on the instructions of the Debenture Holders) agree is a Transaction Document; and (n) a document entered into or given under or in connection with, or for the purpose of amending or novating, any Transaction Document. 'TRUST' means the trust established under this document. 'TRUSTEE' means ANZ Capel Court Limited and any other party appointed as trustee of the Trust in accordance with clause 23 of this document. 'TRUST FUND' means: (a) the amount held by the Trustee under clause 2.1 (Declaration of Trust); (b) each Security; and (c) any other property acquired or held by the Trustee as trustee of the Trust, including: (i) the benefit of any representation, warranty, undertaking or covenant; (ii) any property representing the proceeds of sale or enforcement of any property forming part of the Trust Fund; (iii) any property representing the proceeds of any insurance claims payable to the Trustee in that capacity; and (iv) any property into which any other property forming part of the Trust Fund is converted or invested and the property representing the proceeds of any such property. 'US CREDIT AGREEMENT' means the Amended and Restated Credit Agreement dated as of 15 November 2000 between Penford Corporation, Penford Products Co., certain commercial lending institutions and The Bank of Nova Scotia. 10 16 'WINDING UP' includes: (a) dissolution, liquidation, provisional liquidation and bankruptcy; and (b) any analogous or equivalent procedure in any jurisdiction. 1.2 INTERPRETATION Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise: (a) the singular includes the plural and the converse; and (b) one gender includes all genders; and (c) other grammatical forms of defined words or expressions have corresponding meanings; and (d) a reference to a party to this document includes that party's successors and permitted substitutes or assigns; and (e) a reference to a document or agreement includes that document or agreement as amended, novated, supplemented or replaced from time to time except to the extent prohibited by a Transaction Document; and (f) a reference to any thing includes the whole or any part of that thing and a reference to a group of things or persons includes each thing or person in that group; and (g) references to clauses, schedules and annexures are references to clauses of and schedules and annexures to this document; and (h) references to 'persons' or words implying natural persons include bodies corporate, joint ventures, partnerships, trusts, associations, unincorporated bodies and Public Authorities; and (i) references to 'entities' include entities as defined for any purpose under Accounting Standards; and (j) an example does not limit what else might be included. Mentioning anything after 'include', 'includes' or 'including' does not limit what else might be included; and (k) a reference to time is a reference to Sydney time; and (l) an Event of Default subsists until it has been waived in writing by the Trustee (acting on the instructions of the Debenture Holders) or remedied to the satisfaction of the Trustee (acting on the instructions of the Debenture Holders); and (m) 'writing' and cognate expressions includes a facsimile transmission, any electronic communication that can be printed in hard copy and any means of reproducing words in a tangible and permanently visible form; and 11 17 (n) 'dollars' and '$' refer to Australian currency; and (o) a reference to an agreement includes any legally enforceable arrangement, understanding, undertaking or representation whether or not in writing; and (p) a reference to 'property' or an 'asset' includes a reference to any right or interest in, or right to use, property or assets, to future property or assets, to things in action and to intangible property or assets; and (q) a reference to any legislation or statutory instrument or regulation is construed in accordance with the Acts Interpretation Act 1901 (Cth) or the equivalent State legislation, as applicable. 1.3 CALCULATION OF AMOUNTS (a) In determining the amount of the Secured Money owed to a Debenture Holder, the Trustee will rely on the most recent certificate from the applicable Debenture Holder, which certificate will, in the absence of manifest error, be prima facie evidence of the facts stated in it. The Trustee is under no obligation to enquire about the accuracy, validity or genuineness of such a certificate and will be under no obligation to the Issuer or any Debenture Holder if it acts in accordance with this document or a Transaction Document in reliance on such a certificate. (b) This clause 1.3 is for the benefit of the Trustee and the Debenture Holders only. The Issuer may not seek to rely on anything contemplated by this clause to reduce, abrogate, repudiate or otherwise lessen its obligations under this document or any other Transaction Document. 2. DECLARATION, TERM AND NAME OF TRUST 2.1 DECLARATION OF TRUST (a) The Trustee declares that it holds the sum of $10, and will hold the Trust Fund, on trust for the Debenture Holders on the terms of this document. (b) The Trust will be known as the 'Penford Debenture Trust'. 2.2 TERM The Trust commences on the date of this document and, unless determined earlier, ends on the day immediately before the date which is 80 years from the date of this document. 3. TRUSTEE 3.1 APPOINTMENT OF TRUSTEE The Trustee is appointed to act as trustee of the Trust Fund for the Debenture Holders in connection with the Transaction Documents. 12 18 3.2 GENERAL POWERS The Trustee has, in addition to the powers otherwise conferred under this document or on trustees by law, the following powers: (a) to distribute, in accordance with clause 4, money received: (i) by the Trustee under a Transaction Document; and (ii) from the Issuer in connection with any Transaction Document or Debentures; and (iii) from a Debenture Holder in accordance with clause 4.8; and (b) to exercise all powers and discretions conferred on the Trustee under a Transaction Document; and (c) to open any account or accounts with any bank or banks and to operate by and in all usual ways any such account or accounts; and (d) to give effectual receipts and discharges for any moneys received by or on behalf of the Trustee or otherwise relating to any of the acts, matters and things provided for in this document; and (e) to take such action as it thinks fit for the adequate protection of any part or parts of the Trust Fund; and (f) to take and to act on the written opinion of an attorney-at-law or counsel practising in any country where the Trust Fund or any part thereof may for the time being be invested in relation to: (i) the interpretation or effect of this document or any other document or statute; or (ii) the administration of the Trust, without being liable to any Debenture Holder in respect of any act done by the Trustee in accordance with such opinion, provided that nothing in this provision will: (iii) prohibit or impede the Trustee from applying to any court if it thinks fit; or (iv) permit the Trustee to act in a manner inconsistent with the directions of the Debenture Holders; and (g) to take and to act on any written direction of all Debenture Holders without being liable to any Debenture Holder in respect of any act done by the Trustee in accordance with any such direction; and 13 19 (h) to permit any asset of the Trust to be held or registered in the name of any nominee of the Trustee and to deposit assets, securities and documents belonging or related to the Fund with any person; and (i) generally to exercise or to concur in exercising all the powers and discretions contained in this document or otherwise by law conferred notwithstanding that the Trustee or (if more than one person is the Trustee) any person being a Trustee or any person being a director or shareholder of the Trustee (being a company): (i) has or may have a direct or personal interest in the mode or result of exercising such power or discretion; or (ii) may benefit either directly or indirectly as a result of the exercise of any such power or discretion, and notwithstanding that the Trustee for the time being is the sole Trustee; and (j) to exercise all powers and discretions which: (i) are incidental to any of the powers or discretions specified above; or (ii) all Debenture Holders direct the Trustee to exercise. 3.3 AUTHORITY OF TRUSTEE The Trustee is authorised to: (a) enter into, and exercise those Powers expressly given to the Trustee under, the Transaction Documents together with any reasonably incidental rights, powers, discretions or remedies; and (b) take any action necessary or appropriate to give effect to the instructions given to it by the Debenture Holders. The Trustee has no responsibilities or duties except those expressed in the Transaction Documents. 3.4 INSTRUCTIONS OF DEBENTURE HOLDERS (a) In exercising its Powers under the Transaction Documents, the Trustee must act in accordance with the instructions (if any) of the Debenture Holders. (b) In the absence of any such instructions, or where the provision concerning a Power does not specify that the Trustee must act on the instructions of the Debenture Holders, the Trustee may (but is not obliged to) act as it thinks fit in the best interests of the Debenture Holders. (c) Despite the above, the Trustee is not obliged to take any action under the Transaction Documents until it is first indemnified to its satisfaction: (i) out of the Trust Fund under clause 3.14 (Indemnity to Trustee); or 14 20 (ii) by each Debenture Holder rateably in accordance with its Proportion (to the extent the Trustee has not been indemnified by a Debenture Holder under the Transaction Documents or under paragraph (i)), against any Loss it believes it will suffer, pay or incur in taking that action (other than in its capacity as a Debenture Holder). (d) Despite any other provision of this document or any provision of a Transaction Document, the Trustee must not: (i) give a final release or discharge of any Transaction Document; or (ii) demand repayment of money secured by or owing under a Transaction Document (other than costs, fees or expenses payable to the Trustee under this document or a Transaction Document); or (iii) agree to amend or permit the amendment of any Transaction Document; or (iv) otherwise commence enforcement action in relation to a Transaction Document, without the prior written consent or instructions of the Debenture Holders. (e) Despite any other provision of this document or any provision of a Transaction Document, but subject to clause 6.1(a), the Trustee must not consent to the issue of Debentures by the Issuer without the prior written consent or instructions of the Debenture Holders. (f) Any action taken by the Trustee in accordance with this clause, or pursuant to instructions given to the Trustee by the Debenture Holders, is binding on each Debenture Holder and each Debenture Holder authorises the Trustee to give any consent and do any other matter or thing necessary or appropriate to give effect to the instructions. (g) Where there is more than one Debenture Holder, the Trustee can rely on separate consents or instructions provided by Debenture Holders given at different times. 3.5 NO OBLIGATION TO INVESTIGATE AUTHORITY No person dealing with the Trustee need enquire whether instructions have been given to the Trustee by the Agent or the Debenture Holders or as to the terms of any instructions. 3.6 NOTIFICATION TO DEBENTURE HOLDERS The Trustee agrees promptly to notify each Debenture Holder of each Event of Default of which the Trustee has actual knowledge. The Trustee will not be taken to have knowledge unless the Trustee has received written notice of the Event of Default from the Agent, a Debenture Holder or the Issuer. 15 21 3.7 NOTIFICATION TO TRUSTEE Each Debenture Holder agrees to promptly notify the Trustee of an Event of Default of which the Debenture Holder has actual knowledge. 3.8 EXONERATION (a) Neither the Trustee nor any of its directors, officers, employees, agents or attorneys is responsible to the Issuer, the Agent or any Debenture Holder: (i) because the Issuer or any other person (other than the Trustee) fails to perform its obligations under a Transaction Document; or (ii) for the solvency or financial condition of the Issuer; or (iii) because any statement, representation or warranty in a Transaction Document is incorrect or misleading except to the extent caused by the fraud, gross negligence or breach of trust by the Trustee; or (iv) for the effectiveness, genuineness, validity, enforceability, admissibility in evidence or sufficiency of any Transaction Document or any certificate, report, document or other instrument executed or delivered in connection with a Transaction Document except to the extent caused by the fraud, gross negligence of, or breach of trust by, the Trustee; or (v) for acting in accordance with the instructions of the Debenture Holders, or for refraining, (in accordance with the instructions of the Debenture Holders) from exercising a right, power or discretion; or (vi) for any action taken or omitted by any of them in connection with a Transaction Document, except to the extent caused by its fraud, gross negligence or breach of trust. (b) The Trustee is not responsible to any person because a Debenture Holder fails to observe its obligations under any Transaction Document. (c) A Debenture Holder instructing the Trustee(in such capacity an 'INSTRUCTING DEBENTURE HOLDER') is not responsible to any other Debenture Holder for any loss, claim or liability suffered because of any notice or instruction issued by the Instructing Debenture Holder to the Trustee. (d) In relation to any Transaction Document, the Trustee may rely on any communication or instrument believed by it to be genuine and correct and to have been signed or sent by an Authorised Officer of the sender or, if otherwise required, by the proper person and may rely, as to legal or other professional matters, on opinions and statements of any legal or professional advisers selected or approved by it. 3.9 DELEGATION AND APPOINTMENT OF ATTORNEYS (a) The Trustee may delegate from time to time and at any time to any person any of the obligations, functions, duties, rights and powers or discretions under this 16 22 document or any Transaction Document on such terms and conditions (including power to sub-delegate) as the Trustee thinks fit. The Trustee is not liable for any action taken or omitted to be taken by any such person except to the extent that it is proven that the person appointed was unqualified to perform the task delegated to them. (b) The Trustee may from time to time appoint one or more attorneys under a power or powers of attorney: (i) to act jointly or severally; and (ii) with or without power for any such attorney to delegate; and (iii) in relation to a specific transaction or class of transactions or generally; and (iv) in a particular place or in any place, to execute any document or to do any act or to receive notice, money or other property in respect of the Trust Fund or in respect of the exercise of any power conferred on the Trustee by this document or a Transaction Document or by law, whether or not the Trustee has disclosed to any such attorney or any person dealing with such attorney that in respect of the power to be so delegated it is acting as trustee. 3.10 DEALINGS BETWEEN THE ISSUER AND TRUSTEE The Trustee (without having to account to any Debenture Holder) may generally engage in any kind of business with the Issuer as if it were not the Trustee and may accept fees or other consideration from the Issuer for services in connection with the Trust and otherwise without having to account for the same to any Debenture Holder. 3.11 INDEPENDENT INVESTIGATION OF CREDIT The Trustee is entitled to assume, and will in all cases assume, that each Debenture Holder: (a) has, independently and without reliance on the Trustee or any other Debenture Holder, and based on such documents and information as it has deemed appropriate, made its own investigation into the affairs of the Issuer, and any other party to a Transaction Document; and (b) will, independently without reliance on the Trustee or any other Debenture Holder and based on such documents and information as it deems appropriate at the time, continue to make its own analysis and decisions as to the taking or not taking of action under any Transaction Document or any Debentures. 3.12 EXERCISE OF POWERS BY CORPORATE TRUSTEE Every Trustee which is a corporation or company may exercise or concur in exercising any discretion or power hereby conferred on the Trustee by a resolution of such corporation or company or by a resolution of its board of directors or governing body or may delegate the right and power to exercise or to concur in exercising any such 17 23 discretion or power to a representative appointed for the purpose by its board of directors or governing body. 3.13 TRUSTEE AS A DEBENTURE HOLDER (a) Subject to paragraph (b), the Trustee in its capacity as a Debenture Holder has the same rights and powers under each Transaction Document as any other Debenture Holder. It may exercise them as if it were not acting as trustee of the Trust. (b) Despite any other provision of this document, unless there is Secured Money owing to the Trustee, the Trustee is not required to give its consent or instructions in its capacity as a Debenture Holder in relation to any matter or thing and a reference in a Transaction Document to any matter or thing requiring the consent of all of the Debenture Holders will be construed as all of the Debenture Holders other than the Trustee unless and until any Secured Money becomes owing to the Trustee. 3.14 INDEMNITY TO TRUSTEE (a) Each Debenture Holder severally indemnifies the Trustee (to the extent not reimbursed by the Issuer), rateably in its Proportion (as at the time of the event occasioning the relevant Loss) against any Loss which the Trustee (other than in its capacity as a Debenture Holder) may sustain or incur directly or indirectly under or in relation to a Transaction Document. This indemnity survives termination of this document or redemption of any Debentures. (b) No Debenture Holder is liable under paragraph (a) for any of the above to the extent that the Loss arises from the Trustee's fraud, gross negligence, wilful misconduct or breach of trust. 3.15 NO MONITORING (a) The Trustee is not required to keep itself informed as to the compliance by the Issuer with any Transaction Document or any other document or agreement or to inspect any property or the Records of the Issuer. (b) The Trustee is under no obligation: (i) to monitor or to review the financial or other condition of the Issuer or to investigate any matters or to make any inquiries with respect to the Issuer; or (ii) to provide any factual or other information to a Debenture Holder (other than to pass on information received by the Trustee on request by a Debenture Holder) including, without limitation, with respect to the financial or other condition of the Issuer, or the possible or likely occurrence of an Event of Default, except as expressly stated in this document. 18 24 3.16 RECOGNITION OF TRANSACTION DOCUMENTS (a) The Issuer or any Debenture Holder may request the Trustee to approve a document or agreement as a Transaction Document for the purposes of this document. (b) If the Issuer or a Debenture Holder requests the Trustee to approve an agreement or document as a Transaction Document, that person shall: (i) provide the Trustee with a copy of the document or agreement; (ii) provide its request in writing; and (iii) provide any additional information requested by the Trustee. (c) If the Issuer and the Debenture Holders agree, the Trustee may approve any document or agreement as a Transaction Document for the purposes of this document. If the Trustee approves a document or agreement as a Transaction Document for the purposes of this document, the Trustee shall issue a certificate to the Agent and the Issuer certifying that the document or agreement named in the certificate is a Transaction Document for the purposes of this document. 3.17 AGENT (a) Each Debenture Holder appoints the Agent as its agent to exercise all its Powers and rights and to do all things it is entitled to do under this document except the giving of a notice under clause 3.17(d). (b) Despite any other provision in this document, for as long as there is an Agent: (i) no Debenture Holder may separately exercise any right or Power under this document; nor (ii) may the Trustee act on agreement, directions, consent or instructions given to it directly by any Debenture Holder. (c) Where under this document or any other Transaction Document, except under clause 3.17(d), the agreement, direction, consent or instructions of the Debenture Holders is required, the Trustee may rely on a written statement from the Agent that such agreement, direction, consent or instructions (as the case may be) has been provided. The Trustee will not be liable to any Debenture Holder if it acts in accordance with such a written statement from the Agent. The Debenture Holders must communicate all such agreements, directions, consents and instructions to the Agent unless the Agent has been removed and a new agent has not been appointed. (d) The Debenture Holders may, with the agreement of the Required Lenders, by notice in writing given by each Debenture Holder remove the Agent and appoint another person as agent. Such appointment shall be effective from the time of receipt by the Trustee of such notice. 19 25 (e) The Trustee need not enquire into the appointment by the Debenture Holders of ANZ as agent nor into the appointment of any other person as Agent in place of ANZ or into the term of any such appointment. 4. DISTRIBUTION OF RECOVERED FUNDS 4.1 MONEY TO BE DISTRIBUTED ON RECEIPT All money received by the Trustee: (a) under a Transaction Document (including, but not limited to, proceeds of enforcement action); or (b) from the Issuer in connection with any Transaction Document or Debenture; or (c) from a Debenture Holder in accordance with clause 4.8, other than money: (i) placed to the credit of a suspense account or which the Trustee considers, acting on the reasonable instructions of the Debenture Holders, ought to be placed to the credit of a suspense account: (A) in order to preserve rights to prove in the bankruptcy or Insolvency of any person; or (B) because the Trustee or the Debenture Holders, reasonably consider that the money may have to be repaid under any law relating to insolvency; or (ii) which the Trustee is entitled to retain under the terms of this document including, without limitation, any fees, costs or charges payable to the Trustee, must be distributed by the Trustee in accordance with clause 4.3 as soon as practicable after the Trustee receives it. 4.2 MONEY HELD OR TO BE HELD IN SUSPENSE ACCOUNT Money referred to in clause 4.1(i) must be distributed by the Trustee in accordance with clause 4.3 as soon as practicable after: (a) the Trustee determines, acting on the reasonable instructions of the Debenture Holders, that the money no longer needs to be held in a suspense account; or (b) the Debenture Holders direct the Trustee to distribute the money. 4.3 MANNER OF DISTRIBUTION Money referred to in clauses 4.1 and 4.2 which the Trustee is obliged to distribute and which has not previously been distributed ('RECOVERED FUNDS') must be distributed by the Trustee as follows: 20 26 (a) first, by payment to the trustee of the Penford Security Trust of that amount of the whole of the money to be distributed that bears the same proportion to the total amount of the money that the First Priority Money as defined in the Penford Security Trust Deed bears to the aggregate of the First Priority Money as defined in the Penford Security Trust Deed and the Secured Money (under this document); (b) second, towards satisfaction of all costs, charges and expenses incurred by the Trustee (other than in its capacity as a Debenture Holder) in or incidental to the exercise or attempted exercise of any right, power or discretion conferred under a Transaction Document; and (c) third, towards satisfaction of any costs, charges and expenses incurred in connection with any receivership of property secured by a Collateral Security; and (d) fourth, towards payment to the Trustee of any money due to it in its capacity as Trustee under any Transaction Document; and (e) fifth, subject to clause 4.6 and any written direction from the Debenture Holders to the contrary (whether contained in an agreement or otherwise), rateably based on its Proportion, towards payment to each Debenture Holder of that part of the Secured Money owed to it; (f) sixth, by payment to the trustee of the Penford Security Trust of the amount of the Second Priority Money as defined in the Penford Security Trust Deed; and (g) to the extent of any remainder after payment of all of the Secured Money, to the Issuer (except to the extent that the Trustee may be obliged to pay an amount at law or pursuant to a Transaction Document to another person such as a subsequent secured creditor), or in any other order as the Trustee and the Debenture Holders agree. If another order is agreed, the Trustee will notify the Issuer. 4.4 NO OBJECTION The Issuer must not: (a) direct the Trustee to distribute or deal with Recovered Funds in any particular manner other than as set out in clause 4.3 (except to the extent that the Issuer is entitled to receive the relevant funds); or (b) object to any distribution on the grounds that Recovered Funds were not distributed in the manner required by clause 4.3(d) unless the distribution is other than towards repayment of the Secured Money. 4.5 REPAYMENT TO TRUSTEE If all or any part of the relevant recovery or payment to any Debenture Holder is subsequently rescinded or must otherwise be restored to the Issuer under any law or paid to any other person, then the relevant Debenture Holder shall immediately pay the relevant amount to the Trustee for the account of the Issuer or the other person and no 21 27 release or discharge or cancellation or redemption of Debentures or any Transaction Document given or made on the faith of that repayment shall have any force or effect. 4.6 DISTRIBUTIONS AMONGST DEBENTURE HOLDERS (a) Prior to making a distribution to Debenture Holders under clause 4.3(e), the Trustee must notify the Agent that it intends to make a distribution to the Debenture Holders under that clause including: (i) particulars of the amount of the proposed distribution and the method by which the distribution to Debenture Holders was calculated, including (but not limited to) details of any priority arrangement and its effect; and (ii) details of proposed distributions to each of the Debenture Holders. Each Debenture Holder must promptly on request by the Trustee provide the information the Trustee requires to give the notices specified above. (b) If no Debenture Holder objects to the amount of the distribution within five Business Days of the Trustee giving notice of intended distribution, then the Trustee may distribute the relevant part of the Recovered Funds despite any other provision of any Transaction Document. After any distribution in accordance with clause 4.3, neither the Trustee nor the Issuer will thereafter be liable to any Debenture Holder if the amount of any given distribution is subsequently shown to be incorrect. (c) If a Debenture Holder has reasonable grounds to believe that a notice provided under paragraph (a) of the amount of the distribution to a Debenture Holder is incorrect, it may by notice in writing to the Trustee and the Agent within five Business Days of the Trustee giving notice of intended distribution, object to the proposed distribution ('OBJECTION'). The Trustee must provide a copy of each Objection to each Debenture Holder. The Debenture Holder must negotiate in good faith to resolve the Objection. Neither the Trustee nor the Issuer will have any obligation or liability in respect of the resolution of an Objection. (d) The Debenture Holder must advise the Trustee in writing of the resolution of any Objection. That advice must direct the Trustee as to how it should make a distribution to Debenture Holders under clause 4.3(e). (e) If an Objection is resolved by way of court proceedings, the Trustee is entitled to rely on, and will make a distribution to Debenture Holders under clause 4.3(e) in accordance with, an order made by any court appearing to have competent jurisdiction in relation to the Objection. 4.7 ADJUSTMENTS BETWEEN DEBENTURE HOLDERS Where, after a distribution has been made under clause 4.3, it is subsequently discovered that the distribution was shared between the Debenture Holders in incorrect proportions, the Debenture Holders agree to make such payments and adjustments as are necessary to ensure that each Debenture Holder obtains its correct entitlement. Neither the Trustee nor the Issuer will have any liability to be involved in the process. 22 28 4.8 PAYMENTS FROM DEBENTURE HOLDER TO THE TRUSTEE Where a Debenture Holder receives money in connection with a Transaction Document from any source (other than money distributed to it by the Trustee in accordance with clause 4.3) after the first occurrence of an Event of Default (or such other date as all Debenture Holders may agree and notify the Trustee in writing), that Debenture Holder must notify each other Debenture Holder and must, unless all other Debenture Holders notify the Trustee otherwise, immediately pay all of the money received to the Trustee to enable it to be distributed in accordance with clause 4.3. 4.9 SUSPENSE ACCOUNT (a) The Trustee may credit money received from the enforcement of a Security or from a Issuer Party under a Security to a suspense account. The Trustee may keep the money in that account for as long as, and at whatever interest rate, the Trustee thinks fit. The Trustee may apply the money (including interest) in accordance with clause 4.1 (Money to be distributed on receipt) whenever the Trustee thinks fit. (b) If the Secured Money has been fully and finally paid or discharged and the Trustee is satisfied that such payment or discharge is not liable to be set aside, avoided or reversed, then the balance standing to the credit of the suspense account and any accrued interest must be paid to or for the account of the Issuer for distribution to the persons entitled to it and no Debenture Holder will have any further liability in relation to it. 5. DEBENTURE HOLDERS 5.1 RIGHTS AND OBLIGATIONS OF DEBENTURE HOLDERS (a) The Debentures of each Debenture Holder will confer on it the benefit of the obligations (including the warranties) of the Trustee and the Issuer under this document. (b) Each Debenture Holder will be bound by the terms of this document. (c) The Trustee may hold Debentures in its personal capacity. (e) A Debenture Holder must not take any enforcement action or institute proceedings against any Issuer Party under any Transaction Document except in accordance with terms of any agreement between all Debenture Holders. 5.2 TRUSTEE: EXERCISE OF DISCRETION (a) If the Debenture Holders instruct the Trustee to exercise any of its rights, powers or discretions under a Transaction Document and the Trustee fails within a reasonable time to do so, then the Debenture Holders may act in place of the Trustee. (b) Any action taken by the Trustee in accordance with this document will be binding on all Debenture Holders. 23 29 6. CREATION, ISSUE AND REDEMPTION OF DEBENTURES 6.1 ISSUE OF DEBENTURES (a) Subject to this document and the satisfaction of all conditions precedent under the Subscription Agreement with ANZ entered into on or about the date of this document having been satisfied, the Issuer may at any time without the consent of the Trustee, create and issue Debentures to ANZ as specified in that Subscription Agreement. (b) An issue of Debentures occurs by execution of the Debenture Certificate and noting of the issue in the Register acting on the instructions of the Debenture Holders. (c) The Issuer may not issue Debentures other than pursuant to paragraph (a) without the consent of the Trustee acting on the instructions of the Debenture Holders. (d) The Issuer must use the net proceeds received from the issue of Debentures only for working capital and other general corporate purposes, including permitted capital expenditures, and for other purposes approved by the Debenture Holders. 6.2 ISSUE NOTICE The Issuer must if it wishes to issue Debentures, give an Issue Notice to the relevant Subscriber and the Trustee. An Issue Notice is irrevocable and must be: (a) in the form set out in schedule 2; (b) duly completed and signed by an Authorised Officer of the Issuer; and (c) delivered to the Subscriber and Trustee on a Business Day no later than 11.00am 3 Business Days before the proposed Issue Date (unless the Subscriber agrees otherwise). The Issue Date specified in an Issue Notice must be a Business Day. 6.3 SURRENDER AND REDEMPTION OF DEBENTURES (a) On the Termination Date of a Debenture: (i) the Issuer must pay to the Trustee for the account of the relevant Debenture Holder all of the Secured Money in respect of the Debenture; and (ii) the Trustee will apply that payment rateably among the relevant Debenture Holders according to their Proportion; and (iii) a Debenture Holder must, on receiving payment of all of its Secured Money, surrender for cancellation all of its Debentures. 24 30 (b) On giving not less than 5 Business Days' prior notice to the Agent and all Debenture Holders, the Issuer may redeem all or any Debentures before the Termination Date, provided that such redemption is made rateably among the Debenture Holders according to their Proportion. Unless the Trustee agrees otherwise, redemption of Debentures under this clause must be a minimum amount of $1,000,000 and an integral multiple of $100,000. A Debenture Holder is not obliged to accept redemption of its Debentures if after such a redemption the amount of Secured Money owed to it exceeds its Debenture Holder Debt. Any early redemption notice given by the Issuer under this clause is irrevocable and the Issuer is bound to redeem in accordance with the notice. If any Debenture is redeemed other than on the last day of its current Funding Period, the Issuer indemnifies the relevant Debenture Holder for any Loss the Debenture Holder suffers, incurs or makes as a result of the redemption occurring on a date other than the last day of the relevant Funding Period. Any Debenture which is redeemed by the Issuer must be cancelled and the Issuer must give notice to the Trustee of the cancellation of the Debenture within five Business Days after its cancellation. 6.4 NOTICES TO TRUSTEE As soon as practicable after each issue of Debentures, the Issuer must notify the Trustee and the Agent of the face value of Debentures issued and the names of the relevant Debenture Holders. 6.5 CANCELLATION (a) Other than pursuant to clause 6.3, no Debentures may be cancelled or redeemed unless the relevant Debenture Holder confirms to the Trustee and the Issuer that all Secured Money actually and contingently owing to the relevant Debenture Holder has been fully and finally repaid and satisfied. (b) If a Debenture Holder has advised the Trustee and the Issuer of the matters referred to in paragraph (a), the Issuer must: (i) immediately cancel any Debenture which it redeems; and (ii) give notice to the Trustee and the Agent of the cancellation of any Debenture within five Business Days after its cancellation. 6.6 TRANSFER OF DEBENTURES (a) A Debenture Holder may not transfer, assign or otherwise deal with its Debentures except pursuant to the terms of the Intercreditor Agreement. (b) A transfer of Debentures will only be effective if it: (i) complies with the provisions of the Intercreditor Agreement and this document; and (ii) is signed by the transferor, the transferee and the Trustee; and 25 31 (iii) is delivered to the place of the Register for registration; and (iv) is accompanied by: (A) the Debenture Certificate for the Debentures to be transferred; or (B) if the Debenture Certificate for the Debentures to be transferred is unable to be produced for any reason: (I) a statutory declaration from the Debenture Holder transferring the Debentures stating that the Debenture Certificate is unable to be produced and setting out the reason as to why it cannot be produced; and (II) an undertaking and/or security, in form and substance reasonably satisfactory to Issuer, from the Debenture Holder transferring the Debentures indemnifying the Issuer in respect of any liability associated with the Debenture Certificate which is unable to be produced. If, on receiving a statutory declaration given by a Debenture Holder in accordance with paragraph (B)(i), the Trustee is able to confirm that the name of the Debenture Holder that is transferring the Debentures appears on the Register as the holder of the Debentures to be transferred, then this will be sufficient evidence to prove the title of that Debenture Holder and the right of that Debenture Holder to transfer the Debentures. (c) The Trustee will, if satisfied that a transfer complies with paragraph (b) and, if necessary, after delivering the undertaking and/or security referred to in paragraph (b)(iv)(B)(II) to the Issuer, register the transfer and enter the transferee's name in the Register as the Debenture Holder entitled to the Debentures comprised in the transfer and notify the Issuer of such registration. (d) On a transfer being registered, the Issuer will issue a new Debenture Certificate or Debenture Certificates to the transferee in respect of the Debentures transferred. 7. RESTRICTIONS ON DEBENTURES 7.1 LIMITATION ON ISSUE NOTICES The Issuer must not give an Issue Notice if the issue of any Debentures referred to in it would cause a breach of, or otherwise not comply with the requirements of, this document or the Subscription Agreement. 26 32 7.2 MINIMUM PRINCIPAL AMOUNT The principal amount of each Debenture must be a minimum of $1,000,000 and an integral multiple of $100,000 or such lesser amount as agreed between the Trustee and the Issuer. 8. REGISTERS AND CERTIFICATES 8.1 REGISTER The Trustee will keep or cause to be kept a register of Debentures and, to the extent that it has been notified of the relevant information, enter in the Register: (a) the names and addresses of the persons to whom Debentures have been issued or transferred from time to time and a description of the Debentures held by them respectively; and (b) the date on which the name of each person was entered in the Register as a Debenture Holder; and (c) the date on which any Debenture Holder ceased to hold Debentures; and (d) the date of any issue of Debentures; and (e) the principal amount of the Debentures on issue. 8.2 CONCLUSIVENESS OF REGISTER (a) Subject to paragraph (d), the Register will be prima facie evidence of the identity of Debenture Holders and will prevail over any register or other records kept by the Issuer to the extent of any inconsistency. The onus of proving the Register to be incorrect rests with the person challenging it. (b) Subject to paragraph (d), a person whose name is entered on the Register as the holder of a Debenture will remain a Debenture Holder until removal of that name by the Trustee regardless of whether or not: (i) the Debenture is or proves to have been void, invalid or was improperly issued; or (ii) the Debenture has been redeemed, repaid or cancelled. (c) Subject to paragraph (d), the Debenture Holders whose names appear from time to time on the Register are to be regarded as the beneficial owners of the Debentures on issue which are registered in their respective names. Except as required by law, neither the Trustee nor the Issuer will recognise (even when having notice) any other interest in any Debenture. (d) Debentures issued in contravention of this document or of any other Transaction Document to which the Trustee is a party has no force or effect, whether or not its details are entered in the Register. 27 33 8.3 CERTIFICATES The Issuer must issue to each Debenture Holder, in respect of Debentures held by it, a certificate substantially in the form of schedule 1 (or any other form which the Issuer, all Debenture Holders and the Trustee approve). 8.4 EXECUTION OF DEBENTURE CERTIFICATES A Debenture Certificate must be executed by the Issuer: (a) under its common seal in the presence of 2 directors or a director and company secretary; (b) by the signature of two directors or a director and company secretary; or (c) by the signature of its duly constituted attorney. 8.5 REGISTER AVAILABLE FOR INSPECTION The Trustee must ensure that the Register is open for inspection by a Debenture Holder on reasonable notice during the hours of 9:00am to 5:00pm on each Business Day. 9. FUNDING PERIODS 9.1 FUNDING NOTICE The Issuer must give a Funding Notice to the Agent no later than 11.00am: (a) in the case of the first Funding Period, 3 Business Days before the commencement of the first Funding Period; or (b) in all other cases, 3 Business Days before the end of a Funding Period, unless the Subscriber agrees otherwise. A Funding Notice is irrevocable and must be: (a) in the form set out in schedule 3; and (b) duly completed and signed by an Authorised Officer of the Issuer. 9.2 SELECTION OF FUNDING PERIODS Funding Periods selected by the Issuer must have a term of: (a) 1, 2 or 3 months; or (b) any other period required under this document. 9.3 FUNDING PERIODS: RESTRICTIONS Despite the above: 28 34 (a) a Funding Period must not extend beyond the Termination Date; (b) if a Funding Period would otherwise end on a day which is not a Business Day, it will be extended to the next Business Day in the same calendar month or, if none, the preceding Business Day; and (c) if a Funding Period of a number of months commences on a date in a month and there is no corresponding date in the month in which it is to end, it will end on the last Business Day of the latter month. 9.4 FAILURE TO SELECT FUNDING PERIOD If the Issuer fails to select a Funding Period complying with this document, the Agent may select a Funding Period which ensures compliance. 10. INTEREST The Issuer must pay to each Debenture Holder interest on the Principal Amount of each Debenture held by the Debenture Holder. Interest is payable at the Interest Rate. Interest accrues daily and is payable on the last day of each Funding Period. 11. REPAYMENT OF PRINCIPAL AMOUNT 11.1 REPAYMENT The Issuer must repay the Principal Amount by paying to the Debenture Holders the amounts specified in column 2 of the table in Schedule 5 on the corresponding dates specified in column 1 of that table. The amounts referred to in this clause are in addition to the payment referred to in clause 11.2. 11.2 MANDATORY REPAYMENTS In addition to the repayments provided for in clause 11.1, the Issuer must reduce the Principal Outstanding by paying to the Debenture Holders the following: (a) 100% of the net cash proceeds received by an Issuer Party from asset sales (other than the sale of inventory in the ordinary course of business) which is not reinvested within 12 months from receipt of such proceeds by the Issuer Party, within 12 months of receipt of such proceeds; (b) 100% of insurance proceeds and proceeds received by an Issuer Party from a Public Authority in respect of any compulsory resumption or acquisition by the Public Authority of any Secured Property, not utilised within 12 months for the repair or replacement of the affected property, within 12 months of receipt of such proceeds; (c) 100% of the net cash proceeds from the issuance of any new debt (excluding borrowings under revolving credit) by an Issuer Party, upon receipt of such proceeds; 29 35 (d) an amount equal to the proportion of the net cash proceeds of any issuance of Stock or Stock Equivalent by Penford Corporation or any Subsidiary (other than proceeds not exceeding US$1,000,000 in any fiscal year from the exercise of options granted to directors or employees) that the Total Debenture Holder Debt bears to the aggregate of the Total Debenture Holder Debt and the outstanding principal balance of the Term Loans, upon receipt of such net cash proceeds; and (e) an amount equal to the proportion of 50% of the Excess Cash Flow for the immediately preceding fiscal year of Penford Corporation that the Debenture Holder Debt bears to the aggregate of the Debenture Holder Debt and the outstanding principal balance of the Term Loans, within 90 days after the last day of each fiscal year of Penford Corporation. In this clause 11.2, 'STOCK', 'STOCK EQUIVALENT', 'TERM LOANS' and 'EXCESS CASH FLOW' have the meaning given to them in the US Credit Agreement. 11.3 FINAL REPAYMENT On the Termination Date, the Issuer must pay to the Debenture Holders, any part of the Principal Amount then outstanding. 12. REPRESENTATIONS AND WARRANTIES 12.1 REPRESENTATIONS AND WARRANTIES The Issuer represents and warrants to the Trustee and the Debenture Holders in respect of each Issuer Party that: (a) (REGISTRATION) it is properly registered and validly exists; (b) (POWER) it has the power and the right to carry on its business, and to enter into and exercise its rights and perform its obligations under each Relevant Document to which it is a party; (c) (CORPORATE AUTHORISATION) it has taken the necessary corporate action to authorise its entry into and performance of each Relevant Document to which it is party (as well as each transaction contemplated by each such Relevant Document); (d) (RELEVANT DOCUMENTS) each Relevant Document to which it is a party is (subject to its stamping and registration, where applicable) valid, binding and enforceable against it in accordance with its terms; (e) (COLLATERAL SECURITIES) subject to payment of stamp duty and registration, each Collateral Security is an effective Security Interest having the priority contemplated in it; (f) (CONFLICTS) its execution and performance of each Relevant Document to which it is a party does not and will not: 30 36 (i) conflict with or violate any law, judgment, ruling, order, document or agreement that binds it (including its constituent documents); (ii) result in a Security Interest (other than under a Collateral Security) being created on, or crystallising over, any of its assets; or (iii) result in a default under any agreement relating to any of its Financial Indebtedness; (g) (AUTHORISATIONS OBTAINED) each Authorisation which is: (i) necessary for the execution, delivery or performance by it, or the validity or enforceability, of the Relevant Documents to which it is party; (ii) necessary for the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security; or (iii) material to the conduct by it of its business, has been obtained and is in full force and effect; (h) (COMPLIANCE WITH LAWS) it has complied with all laws and Authorisations applicable to it or its business where failure to do so would have or be likely to have a Material Adverse Effect; (i) (SOLVENCY) it is solvent and there are reasonable grounds to expect that, on execution of each Transaction Document to which it is a party, it will continue to be able to pay all its debts as and when they become due and payable; (j) (NO DEFAULT UNDER MATERIAL DOCUMENT) it is not in default of a material obligation under any Material Document or any document relating to its Financial Indebtedness and nothing has occurred which is or would (with the giving of notice or passage of time or both) constitute an event of default (however described) under any such document; (k) (LITIGATION) (except as described in writing to the Trustee and accepted in writing by the Trustee acting on the instructions of the Debenture Holders) no litigation or administrative, arbitration or other proceeding or action (including any action by a Public Authority) is current or pending or, to its knowledge, is likely or threatened which, if adversely determined, would have or be likely to have a Material Adverse Effect; (l) (INFORMATION ACCURATE) all information provided by it to the Trustee, the Agent, a Debenture Holder or a party to a Subscription Agreement in connection with the Transaction Documents and the Material Documents is accurate in all material respects and not deficient, misleading or deceptive in any material respect (whether by its inclusion or by the omission of other information); (m) (COPIES OF DOCUMENTS): 31 37 (i) all copies of documents provided by it to the Trustee, the Agent or a Debenture Holder are true and complete and the original documents are in full force and effect; and (ii) the copies of the Material Documents provided to the solicitors for the Trustee contain all of the terms of the agreements between the parties to those documents and there are no other documents or arrangements in existence in respect of those Material Documents that have not been disclosed in writing to the Agent; (n) (DISCLOSURE OF FACTS) all material facts or circumstances known to it and which under reasonable business practice may affect the decision of the Trustee, a Debenture Holder or any party to the Subscription Agreement to enter into this transaction have been disclosed by it to those persons; (o) (OWNERSHIP OF ASSETS) subject to any trust which is expressly disclosed in the Transaction Documents and to any Permitted Security Interest, it is the sole legal and beneficial owner of the Secured Property the subject of each Collateral Security given by it; (p) (ASSETS FREE OF SECURITY INTERESTS) its assets are free of any Security Interest other than any Permitted Security Interest; (q) (FINANCIAL INDEBTEDNESS) it has no Financial Indebtedness other than Permitted Financial Indebtedness; (r) (NO EVENT OF DEFAULT) no Event of Default has occurred and is subsisting and no Potential Event of Default has occurred and is subsisting: (i) at the date of this document and the date of the first issue of Debentures; or (ii) thereafter, which is not disclosed in writing to the Agent; (s) (ACCOUNTS) the most recent Accounts, except Accounts referred to in clause 13.2(c), of the Issuer provided to the Trustee, a Debenture Holder or a party to the Subscription Agreement: (i) give a true and fair view of the Issuer's state of affairs as at the date to which the Accounts relate and the results of the Issuer's operations during the period covered by the Accounts; (ii) contain proper and adequate provisions for and fully disclose all of the actual and contingent liabilities of the Issuer as at the date to which the Accounts relate; and (iii) were prepared in accordance with Accounting Standards, except for any departures from those standards which are disclosed in the Accounts; (t) (NO CHANGE IN FINANCIAL POSITION) there has been no change in the Issuer's state of affairs or operations since the date to which the Accounts referred to in 32 38 paragraph (s) (Accounts) were prepared which would have or be likely to have a Material Adverse Effect; (u) (OWN ENQUIRIES) it has relied on its own investigations and enquiries regarding the transactions contemplated by the Transaction Documents and has not relied on any information, advice or opinion (including information, advice or opinions regarding interest rates, Derivative Transactions or exchange rates) given or offered by or on behalf of the Trustee, the Agent, a Debenture Holder or a party to the Subscription Agreement even if in answer to any enquiry by or for it; (v) (TAXATION) it has complied with all Tax laws in all jurisdictions in which it is subject to Taxes and has paid all Taxes due and payable by it, other than Contested Taxes the non-payment of which would not have or be likely to have a Material Adverse Effect; (w) (INSURANCE) it has complied with its obligations in the Transaction Documents to insure and maintain insurance; (x) (INTELLECTUAL PROPERTY) it owns, or has the right and licence to use, all Intellectual Property necessary for the conduct of its business; (y) (ENVIRONMENTAL LAWS): (i) it has not incurred any Environmental Liability which it has not disclosed in writing to the Trustee which could have a Material Adverse Effect; and (ii) all Authorisations required under any Environmental Law relating to the occupation, use and development of each Property have been obtained, are in full force and effect and have been and are being complied with where non-compliance would have a Material Adverse Effect and such occupation, use and development otherwise complies with all Environmental Laws where non-compliance would have a Material Adverse Effect; (z) (CORPORATE BENEFIT) its entry into the transactions contemplated by the Relevant Documents is in its best interests and for its benefit; (aa) (NO TRUSTEE) it is not a trustee of any trust other than as specified in any Transaction Document; (bb) (RELATED ENTITIES) it does not have any Related Entities, other than those previously notified by it in writing to the Agent; (cc) (NO IMMUNITY) neither it nor any of its assets is immune from suit or execution; and (dd) (NATIVE TITLE) it is not: (i) as at the date of this document and the date of the first issue of Debentures, aware of any actual or potential native title claim in relation to any Property; or 33 39 (ii) thereafter, aware of any actual or potential native title claim in relation to any Property which if it were successful would have a Material Adverse Effect. 12.2 REPRESENTATIONS AND WARRANTIES REPEATED Each representation and warranty in this document: (a) is repeated, with reference to the facts and circumstances at the time on each Issue Date; and (b) applies in its current form when repeated, despite any contrary disclosure by the Issuer or any other person, unless the Trustee (acting on the instructions of the Debenture Holders) agrees to waive it. 13. REPORTING OBLIGATIONS AND ACCESS 13.1 NOTICES TO THE AGENT The Issuer must notify the Agent, with reasonable details, as soon as it becomes aware of any one or more of the following in respect of each Issuer Party: (a) (EVENT OF DEFAULT) an Event of Default or Potential Event of Default and (if applicable) the steps taken or proposed to be taken to remedy it; (b) (SUBSIDIARY) the Issuer Party acquiring or intending to acquire a Subsidiary; (c) (ACQUISITION OF REAL PROPERTY) the acquisition by any Issuer Party of any interest in relation to real property (other than a Lease for a term (including options) of less than 3 years); (d) (LITIGATION) any litigation or administrative, arbitration or other proceeding or action (including any action by a Public Authority) against any Issuer Party which is current or pending or, to its knowledge, likely or threatened which: (i) if adversely determined, would have or be likely to have a Material Adverse Effect; or (ii) involves a claim or claims for an amount in aggregate in excess of $1,000,000 or its equivalent; (e) (ENVIRONMENTAL MATTERS) any breach or potential breach of any Environmental Law or of any complaint or the issuing of any proceedings or notice or requirements against or on any Issuer Party in respect of, or which may result in, any Environmental Liability or alleged contravention of any Environmental Law which would have or be likely to have a Material Adverse Effect; (f) (COMPULSORY ACQUISITION) any proposal by a Public Authority to compulsorily acquire assets of any Issuer Party the subject of a Collateral Security where the acquisition would have or be likely to have a Material Adverse Effect; 34 40 (g) (MATERIAL DOCUMENTS) any: (i) material notice given or received under; (ii) material default or dispute under; (iii) termination or rescission of; or (iv) event or circumstance which entitles a party to terminate or rescind, a Material Document; (h) (PUBLIC AUTHORITIES) any material notice to or from, or material correspondence with, a Public Authority in relation to any Issuer Party or its assets the subject of a Collateral Security, including under any Environmental Law; (i) (AUTHORISATIONS) any proposal by a Public Authority to revoke or materially amend any Authorisation: (i) necessary for the execution, delivery, or performance by any Issuer Party, or the validity or enforceability, of a Relevant Document; (ii) necessary for the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security; or (iii) material to the conduct by any Issuer Party of its business; (j) (CONSTITUENT DOCUMENTS) any change to any Issuer Party's constituent documents; (k) (NATIVE TITLE) any native title claim being proposed or made in respect of any of the Secured Property; or (l) (MATERIAL ADVERSE EFFECT) any event or circumstance which has or is likely to have a Material Adverse Effect. 13.2 ACCOUNTS AND OTHER INFORMATION The Issuer must give the following to the Agent: (a) (ANNUAL ACCOUNTS) the audited consolidated annual Accounts of it and of each of its Subsidiaries as soon as possible after its annual balance date (and, at the latest, 120 days after that date); (b) (QUARTERLY ACCOUNTS) the consolidated and unconsolidated quarterly Accounts of it and of each of its Subsidiaries as soon as possible but at the latest 60 days after the end of each of its first three fiscal quarters and 120 days after the end of its fourth fiscal quarter; (c) (MONTHLY ACCOUNTS) the monthly consolidated and unconsolidated management Accounts of PAL and of each of its Subsidiaries including: 35 41 (i) balance sheet and profit and loss statements incorporating a divisional break-up; (ii) monthly cashflow statements and projections; and (iii) a comparison of actual results with previous budget and projections, in the form currently prepared by PAL; (d) (OTHER FINANCIAL INFORMATION) whatever other financial information a Debenture Holder reasonably requires, within 75 days after the end of each month during the first 3 months after the date of this document and within 60 days after the end of each month thereafter; (e) (FINANCIAL PROJECTIONS) before 1 November in each year beginning 1 November 2001, detailed projections setting out Penford Corporation's projected consolidated income and cashflow for the current fiscal year and for each fiscal year until 31 August 2005 and a projected consolidated balance sheet as of the end of each such fiscal year for Penford Corporation together with a certificate from Penford Corporation's principal financial officer setting forth the assumptions on which such projections are based; (f) (CERTIFICATE OF COMPLIANCE) each certificate (where applicable) detailed in the US Credit Agreement; (g) (REPORTS, CIRCULARS) promptly, copies of all material documents which each Issuer Party issues to its members, any stock exchange or its creditors generally as soon as they are issued; (h) (AUTHORISED OFFICERS) promptly, notice of any change to its Authorised Officers (which notice must be signed by the secretary or a director of the Issuer and must contain a specimen signature of each new Authorised Officer) and, if requested, evidence of the Authorised Officers' authority; (i) (INSURANCE) on request, current certificates and other documents in respect of each Issuer Party's insurance policies; and (j) (OTHER INFORMATION) whatever other information the Trustee, the Agent or a Debenture Holder reasonably requests about any Issuer Party's state of affairs or any Secured Property. 13.3 PREPARATION AND FORM OF ACCOUNTS AND REPORTS All Accounts, except monthly Accounts referred in clause 13.2(c), and reports provided by the Issuer must: (a) be prepared and, if applicable, audited by a reputable and suitably qualified accountant in accordance with Accounting Standards and all applicable laws; (b) be certified by 2 directors of each entity to which they relate as an accurate and complete statement of the financial position of such entity; and 36 42 (c) at the time of delivery, give a true and fair view of the state of affairs of the entity or entities to which they relate or give an explanation of any divergence between the Accounts or reports and a true and fair view, as at the date on which, and for the period in respect of which, the Accounts or reports are prepared. 13.4 GIVING ACCESS TO SECURED PROPERTY The Issuer must in respect of each Issuer Party: (a) ensure that its business, financial records and are available for inspection upon reasonable notice and at reasonable times by the Trustee, the Agent, each Debenture Holder and persons acting on their behalf; and (b) allow the Trustee, each Debenture Holder and persons acting on their behalf to inspect and to take copies of or extracts from those business and financial records and give reasonable assistance to them. 13.5 INVESTIGATING ACCOUNTANTS The Trustee may at any time after the occurrence of an Event of Default or Potential Event of Default appoint accountants ('INVESTIGATING ACCOUNTANTS') to investigate the affairs and financial position of the Issuer provided the Investigating Accountants agree with the Issuer to be bound by the same confidentiality requirements that apply under clause 13.6. The Issuer: (a) unconditionally authorises the Investigating Accountants to take the action which is reasonably necessary or desirable for the investigation. This does not include the power to manage the Issuer's business; (b) agrees to give the Investigating Accountants all reasonable assistance for that purpose; and (c) unconditionally authorises the Investigating Accountants to disclose to the Trustee, the Agent and each Debenture Holder and their respective advisers all information and documentation in connection with the investigation. The Issuer must pay the costs and expenses of the investigations immediately on demand by the Trustee. 13.6 CONFIDENTIALITY Confidential information provided to the Trustee, the Agent or a Debenture Holder by the Issuer or to the Issuer by the Trustee or a Debenture Holder may not be disclosed to any person except: (a) with the prior consent of the party providing the information; (b) if required by law or any Public Authority or pursuant to any administrative guideline or policy (even if it does not have the force of law) which the person disclosing the information customarily complies with; (c) in connection with any action contemplated or legal proceedings taken relating to any Transaction Document; 37 43 (d) if the information is generally and publicly available; (e) to the auditors, legal advisers or other consultants in confidence of the Issuer, Trustee, the Agent or Debenture Holder; or (f) if permitted under a Transaction Document. 14. GENERAL AND FINANCIAL OBLIGATIONS 14.1 POSITIVE OBLIGATIONS The Issuer must, and must ensure that each Issuer Party (unless the Trustee (acting on the instructions of the Debenture Holders) otherwise consents): (a) (CARRY ON BUSINESS) carry on its business in the ordinary course; (b) (AUTHORISATIONS) obtain, renew and maintain (and provide to the Agent as soon as practicable after reasonable request copies of) all Authorisations that are necessary or advisable for the proper and efficient conduct of its business where a failure to do so would have a Material Adverse Effect and for: (i) the execution, delivery and performance by it, and the validity and enforceability, of each Relevant Document; and (ii) the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security, to which it is a party; (c) (MAINTAIN BOOKS) maintain proper and adequate books and records in accordance with Accounting Standards and the requirements of all laws; (d) (MAINTAIN STANDING) maintain: (i) its registration in the place of its registration as at the date of this document; and (ii) its good standing, and ensure that it remains entitled to carry on business and own property in all applicable jurisdictions; (e) (MAINTAIN INSURANCE) comply with its obligations to insure and maintain insurance in the Transaction Documents; (f) (MAINTAIN INTELLECTUAL PROPERTY) maintain, preserve and protect all Intellectual Property material to its business in accordance with prudent business practice; (g) (MAINTAIN PHYSICAL ASSETS) maintain its physical assets useful or necessary to its business subject to a Collateral Security in a good state of repair, fair wear 38 44 and tear excepted, and replace such assets whenever necessary for the proper and efficient conduct of its business; (h) (SECURED PROPERTY): (i) remedy any defect in its or the Trustee's title to the Secured Property; and (ii) protect and defend the Secured Property; (i) (AVOID ENVIRONMENTAL LIABILITY): (i) take whatever action the Trustee (acting on the instructions of the Debenture Holders) reasonably requires to avoid any Environmental Liability; (ii) maintain procedures to monitor its compliance with Environmental Laws; (j) (ACQUISITION OF SUBSIDIARY) if it creates or acquires a Subsidiary after the date of this document (with or without the Trustee's consent): (i) immediately cause the Subsidiary to execute (and do all things necessary to give effect to) any Collateral Security required by the Trustee, including a Guarantee and a Collateral Security over all of its assets; and (ii) provide, in relation to the Subsidiary, any information or document, which the Trustee reasonably requests, to the Trustee in form and substance acceptable to the Trustee; (k) (PAY TAXES) pay when due all Taxes (other than Contested Taxes unless the failure to pay would have or be likely to have a Material Adverse Effect) assessed, levied or imposed on it or its assets the subject of a Collateral Security; (l) (EVENTS OF DEFAULT) as soon as practicable after request by the Trustee or the Agent, provide the Trustee and the Agent with a certificate signed by 2 of its directors certifying that to the best of their knowledge and belief no Event of Default or Potential Event of Default has occurred and is subsisting; (m) (MATERIAL DOCUMENTS): (i) comply with the material terms of; and (ii) take all reasonable action, and all action reasonably required by the Trustee, to enforce, each Material Document to which it is a party; (n) (COMPLY WITH LAWS) comply with all material laws and Authorisations and with the mandatory requirements of any Public Authority in respect of the Secured Property; 39 45 (o) (RECTIFY PHYSICAL DEFECTS) immediately: (i) rectify each material defect in the repair or condition of the Secured Property reasonably required by the Trustee (acting on the instructions of the Debenture Holders); and (ii) take any action reasonably required by the Trustee (acting on the instructions of the Agent) to implement or take account of the recommendations or results of any environmental audit or site assessment carried out in relation to the Secured Property; and (p) (ENVIRONMENTAL SITE ASSESSMENT) if the Trustee (acting on the instructions of the Debenture Holders) reasonably requests it, promptly give the Trustee an environmental site assessment or environmental audit report on the matters the Trustee specifies. The report must be prepared by an environmental consultant reasonably acceptable to the Trustee and the Issuer must pay for the report. 14.2 NEGATIVE OBLIGATIONS The Issuer must not, and must ensure that each Issuer Party does not, without first obtaining the consent of the Trustee (acting on the instructions of the Debenture Holders), which consent must not be unreasonably withheld or delayed: (a) (NATURE OF BUSINESS) do anything to change materially the nature of its business; (b) (SECURITY INTEREST) (i) create or permit to exist a Security Interest, other than a Permitted Security Interest, over any of the Secured Property or attempt or agree to do so; or (ii) if the creation of a Security Interest cannot by law be restricted, create such a Security Interest over any of the Secured Property without using its best endeavours to provide that the holder of the Security Interest first enters into a deed of priority in form and substance reasonably acceptable to the Trustee (acting on the instructions of the Debenture Holders); (c) (ACQUISITION SUBJECT TO SECURITY INTEREST) acquire an asset which is subject to a Security Interest or which becomes the subject of a Security Interest (other than a Collateral Security) upon its acquisition; (d) (LEASES) grant a Lease over any of its assets other than at arms' length and for market consideration except to an Issuer Party; (e) (DISPOSALS OF ASSETS) dispose of an asset or attempt or agree to do so except: (i) in the ordinary course of its ordinary business and on arms' length terms; 40 46 (ii) where the asset is no longer required for its business and the disposal is on arms' length terms; (iii) to an Issuer Party which has given Collateral Security; (iv) where the value of the asset is less than $1,000,000 or its equivalent and the aggregate value of all assets so disposed of by the Issuer Parties in any 12 month period in reliance on this exception is less than $2,000,000 or its equivalent; or (v) under a Permitted Security Interest; (f) (NO FURTHER SHARES) issue any further shares other than in the case of an Issuer Party which has given Collateral Security; (g) (NO MERGER) merge or consolidate with another entity; (h) (ARM'S LENGTH TRANSACTIONS) subject to any Transaction Document, enter into any transaction other than on arm's lengths terms with any person other than a Subsidiary of the Issuer or Penford Corporation or Penford Products Co.; (i) (TITLE RETENTION) acquire assets which would otherwise become Secured Property on title retention terms except in the ordinary course of its day-to-day trading; (j) (FINANCIAL ACCOMMODATION) lend or provide financial accommodation to any person, except that: (i) it may: (A) subject to paragraph (l) (deposit), deposit money with a bank, unless the bank is not a Debenture Holder and the Issuer Party owes Financial Indebtedness to the bank; or (B) allow its customers to acquire goods or services on extended terms, in the ordinary course of its day-to-day trading; and (ii) it may lend or provide financial accommodation to an Issuer Party which has given Collateral Security; (k) (GUARANTEES) give any Guarantee other than under the Transaction Documents; (l) (DEPOSIT) deposit money with a person if the money is not repayable until satisfaction of an obligation owed to the person; (m) (PARTNERSHIP) enter into any partnership or joint venture; (n) (SUBSIDIARY) after the date of this document, create or acquire any Subsidiary unless it complies with clause 14.1(j); 41 47 (o) (MATERIAL DOCUMENTS): (i) (A) materially vary, amend or change or agree to any material variation, amendment or change in (other than an assignment or transfer by a sub-lessee to another party of the same or better reputation and credit standing); (B) terminate or rescind; or (C) waive any material requirement of, any Material Document; or (ii) do or permit, or fail to do, any act which would render any Material Document liable to forfeiture or cancellation or to be otherwise prejudiced; (p) (CONSTITUENT DOCUMENTS) change its constituent documents in any way; or (q) (FINANCIAL YEAR) change its financial year except to be consistent with Penford Corporation's financial year which is 31 August. 15. EVENTS OF DEFAULT 15.1 EVENTS OF DEFAULT An Event of Default occurs if any one or more of the following occurs: (a) (NON-PAYMENT) the Issuer fails to pay any of the Secured Money payable by it within 5 days after the due date for payment; (b) (INCORRECT FINANCIAL STATEMENTS) a financial statement or certificate provided by the Issuer to the Trustee, the Agent or a Debenture Holder is untrue, incorrect or misleading in any material way; (c) (OTHER OBLIGATION NOT COMPLIED WITH) subject to paragraphs (a) and (b), an Issuer Party fails to comply with any obligation under a Transaction Document and, if in the opinion of the Trustee the failure is capable of remedy, it continues unremedied for 15 Business Days after the failure; (d) (INCORRECT STATEMENT OR REPRESENTATION) a statement, representation or warranty made by or on behalf of an Issuer Party in a Transaction Document, or in a document provided in connection with a Transaction Document, is untrue, incorrect or misleading in a material respect when made or repeated; (e) (CROSS DEFAULT - FINANCIAL INDEBTEDNESS) Financial Indebtedness of an Issuer Party: (i) becomes due and payable, or capable of being declared due and payable, before its due date; or (ii) is not paid when due or within any applicable grace period; 42 48 (f) (CROSS DEFAULT - TRANSACTION DOCUMENT) an event of default (however described) occurs under any Transaction Document; (g) (CROSS DEFAULT - MATERIAL DOCUMENT) if an Issuer Party which is a party to a Material Document fails to comply with any material obligation under it or an event of default by it (however described) after the expiry of any applicable grace period occurs under it which would have a Material Adverse Effect; (h) (CROSS DEFAULT - US CREDIT AGREEMENT) an 'Event of Default' (as defined in the US Credit Agreement); (i) (CROSS DEFAULT - PENFORD SECURITY TRUST DEED) an 'Event of Default' (as defined in the Penford Security Trust Deed); (j) (JUDGMENT) a judgment is obtained against an Issuer Party for an amount which together with other outstanding judgments against the Issuer Party exceed $1,000,000 or its equivalent and which in each case have not been stayed within 10 Business Days of the date of the judgment; (k) (SECURITY INTEREST) any Security Interest over an asset of an Issuer Party is enforced or becomes enforceable; (l) (INSOLVENCY) an Issuer Party: (i) is insolvent within the meaning of section 95A of the Corporations Law; (ii) is taken to have failed to have complied with a statutory demand under section 459F of the Corporations Law; or (iii) must be presumed by a court to be insolvent under section 459C of the Corporations Law; (m) (GROUNDS FOR WINDING UP) a circumstance specified in section 461 of the Corporations Law occurs with respect to an Issuer Party; (n) (WINDING UP) (i) an order is made for the Winding Up of an Issuer Party; (ii) proceedings are commenced or an application is made for the Winding Up of an Issuer Party and not withdrawn or dismissed within 10 Business Days; or (iii) an effective resolution is passed or a meeting is summoned or convened to consider a resolution for the Winding Up of an Issuer Party, except with the consent of the Trustee (acting on the instructions of the Debenture Holders); 43 49 (o) (EXTERNAL ADMINISTRATOR) an External Administrator is appointed to an Issuer Party or any of its assets or any step is taken to do so or an Issuer Party requests such appointment; (p) (ENFORCEMENT PROCEEDINGS) execution or distress takes place or is attempted or an order to execute a judgment (however described) is made against an Issuer Party or any of its assets; (q) (CREDITORS) an Issuer Party stops or suspends payment to creditors generally or enters into an arrangement, assignment or composition with or for the benefit of its creditors generally or any class of them or proposes to do so; (r) (DEREGISTRATION) a step is taken under section 601AA, 601AB or 601AC of the Corporations Law to cancel the registration of an Issuer Party; (s) (ANALOGOUS EVENT) anything analogous or having a similar effect to an event listed in paragraphs (m) - (r) above occurs; (t) (INVESTIGATION) a person is appointed under any legislation to investigate any part of the affairs of an Issuer Party and that investigation in the opinion of the Trustee (acting on the instructions of the Debenture Holder) would have or be likely to have a Material Adverse Effect; (u) (BUSINESS STOPPED OR CHANGED) an Issuer Party stops or threatens to stop carrying on its business or a material part of it or substantially changes the nature of its business without the consent of the Trustee (acting on the instructions of the Debenture Holders); (v) (CAPITAL REDUCTION AND FINANCIAL ASSISTANCE) an Issuer Party: (i) takes action to reduce its share capital (other than by redeeming redeemable preference shares) or to buy back its shares; or (ii) passes a resolution of the type referred to in section 254N(1) or 260B of the Corporations Law, or a meeting to consider such a resolution is summoned or convened, without the consent of the Trustee (acting on the instructions of the Debenture Holders); (w) (AUTHORISATION) any Authorisation which is: (i) necessary for the execution, delivery or performance by the Issuer, or the validity or enforceability, of a Relevant Document; (ii) material to the conduct by an Issuer Party of its business; or (iii) necessary for the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security, is not obtained or maintained on terms acceptable to the Trustee (acting on the instructions of the Debenture Holders) or is revoked without being replaced within 10 Business Days; 44 50 (x) (UNENFORCEABILITY): (i) all or any material part of any Relevant Document is terminated, void, avoided, illegal, invalid, unenforceable or limited in its effect; or (ii) any party has the right to terminate, rescind or avoid all or part of any Relevant Document, or any party other than the Trustee, the Agent or a Debenture Holder so alleges; (y) (CHANGE OF CONTROL) there is any change in shareholding or change in control of an Issuer Party; (z) (CHANGE IN CONSTITUENT DOCUMENTS) an Issuer Party changes its constituent documents in a material respect without the consent of the Trustee (acting on the instructions of the Agent); (aa) (ACTION BY PUBLIC AUTHORITIES OR BREACHES OF LAW OR OF AUTHORISATION): (i) any Public Authority takes any action; (ii) there is any claim or requirement of substantial expenditure or alteration of activity under, or breach of, any law; or (iii) there is any breach of any Authorisation, which the Trustee declares (acting on the instructions of the Debenture Holders) would have or be likely to have a Material Adverse Effect or any circumstance arises which may give rise to any such action, claim, requirement or breach; (bb) (APPROPRIATION): (i) all or a material part of the assets of an Issuer Party are compulsorily acquired by a Public Authority or a Public Authority orders the sale or divestiture of those assets; or (ii) a Public Authority gives notice to the Issuer Party to do so; (cc) (MATERIAL ADVERSE EFFECT) an event or series of events (whether related or not) occurs which the Trustee declares (acting on the instructions of the Debenture Holders) would have or be likely to have a Material Adverse Effect; or (dd) (LETTER OF CREDIT) if a replacement Letter of Credit is not issued prior to 5 Business Days before the expiry of the then current Letter of Credit. 15.2 EFFECT OF EVENT OF DEFAULT (a) If an Event of Default occurs, the Trustee (acting on the instructions of the Debenture Holders) may by notice to the Issuer declare that the Secured Money is immediately due and payable. 45 51 (b) On receipt of a notice under paragraph (a), the Issuer must immediately pay the Secured Money to the Trustee. 16. INCREASED COSTS 16.1 INCREASED COSTS If a Debenture Holder determines in good faith that, as a result of the introduction or commencement of, or an amendment to, or a change in or in the interpretation or administration by any Public Authority of: (a) any law (including in relation to Tax), order, treaty or official policy, directive or request; or (b) any prudential or other requirement or guideline of any central bank or other Public Authority, (each an 'INCREASED COSTS EVENT') there is any direct or indirect: (c) increase in the cost to the Debenture Holder of providing, funding or maintaining financial accommodation or otherwise performing its obligations under any Transaction Document; and/or (d) reduction in the effective return to the Debenture Holder in connection with the Transaction Documents, then the Debenture Holder must promptly notify the Agent, who must in turn notify the Issuer ('INCREASED COSTS NOTICE'), and the Issuer must within 15 days pay to the Trustee (on account of the Debenture Holder) on demand from time to time any additional amounts which the Debenture Holder certifies are necessary to compensate the Debenture Holder for the increased cost or reduction in return. The notification by the Debenture Holder must state in reasonable detail the reasons for the Increased Costs Event and the additional amount required to compensate the Debenture Holder. This clause applies to an Increased Costs Event even if it does not have the force of law provided that compliance with its subject matter is customary practice for responsible bankers or financial institutions in the applicable country. 16.2 METHOD OF CALCULATION In determining amounts payable under this clause, a Debenture Holder may use averaging and attribution methods commonly used by the Debenture Holder or any other reasonable averaging or attribution method. 17. ILLEGALITY If any introduction of or change in a law, regulation or an official directive or request which has the force of law or compliance with which is in accordance with the practice of responsible bankers or a change in its interpretation or administration after the date of this document makes it unlawful or impossible for a Debenture Holder to procure, fund, 46 52 provide or maintain funding or otherwise observe its obligations under the Transaction Documents: (a) the Debenture Holder must use reasonable endeavours to provide its funding by some alternative means (including transferring its rights and obligations to another financial institution acceptable to the Issuer); and (b) if the Debenture Holder advises the Trustee that no alternative means are available, the Trustee must use reasonable endeavours to arrange a transfer of the relevant Debenture Holder's rights and obligations in accordance with the requirements of the Intercreditor Agreement (either to another Debenture Holder or another transferee); and (c) if a transfer cannot be arranged within 20 Business Days, the relevant Debenture Holder may, by notice to the Issuer require that the Issuer prepay (on the last day before the illegality or impossibility arises or the Business Day following 10 Business Days after delivery of the notice, whichever is the later), the Debenture Holder's Secured Money. 18. FEES The Issuer must pay such fees to the Trustee as are agreed from time to time between the Issuer and the Trustee. 19. COSTS AND EXPENSES Subject to agreement between the parties, the Issuer must immediately pay on demand all costs and expenses of the Trustee, the Agent, a Debenture Holder, a Receiver and an Attorney relating to or in connection with: (a) the negotiation, preparation, execution, delivery, registration and completion of, payment of Taxes on, and provision of funding under, any Transaction Document; (b) any variation or discharge of any Transaction Document; (c) the exercise, enforcement, protection or waiver, or attempted exercise, enforcement or protection, of any Power; (d) obtaining or receiving payment of any of the Secured Money and, in the case of the Trustee, its distribution; (e) an Event of Default or Potential Event of Default; (f) the giving by it of a consent or approval in connection with the Transaction Documents; (g) any enquiry by any Public Authority concerning the Issuer or any of its Related Entities, the issue of Debentures or the involvement of the Trustee in the Transaction Documents; (h) maintaining, preserving or protecting the Secured Property; 47 53 (i) surveying, valuing, inspecting or reporting on the Secured Property; and (j) obtaining advice from a professional person or consultant about any matter of concern to the Trustee, the Agent, a Debenture Holder, a Receiver or an Attorney in connection with a Transaction Document, including any legal costs and expenses (on a full indemnity basis), any professional consultant's fees and the costs (calculated on a time employed basis) of in-house legal counsel. All costs and expenses under paragraphs (a), (b), (d), (f), (g), (h), (i) and (j) will be reasonable unless paragraphs (c) or (e) also apply. Nothing in this clause shall make the Issuer liable to pay any costs or expenses to the extent that such costs and expenses are recoverable by the claimant or its representatives as an input credit under GST Law. 20. TAXES 20.1 ISSUER TO PAY TAXES The Issuer must pay, or immediately on demand reimburse the Trustee, the Agent or a Debenture Holder, for, all Taxes which may be payable or determined to be payable by the Trustee, the Agent or Debenture Holder (as the case may be) and which are paid in connection with any Transaction Document or a payment, receipt, supply of goods or services or other transaction contemplated by or carried out under or pursuant to any Transaction Document, including Taxes passed onto the Trustee, the Agent or a Debenture Holder by another financial institution or supplier of goods and services. 20.2 FINES AND PENALTIES The Issuer must pay all fines and penalties for late payment or non-payment of the Taxes referred to in clause 20.1 (Issuer to pay Taxes) except where the Issuer places the Trustee, the Agent or Debenture Holder in cleared funds to make the payment not less than 5 Business Days prior to the due date and the Trustee, the Agent or Debenture Holder fails to make the payment. 20.3 GOODS AND SERVICES TAX (a) Notwithstanding any other provision in this document, any amount payable to the Trustee or a Debenture Holder under this document does not include any GST. Terms defined in the GST Law have the same meaning in this clause 20.3. (b) To the extent that any supply under or in connection with this document, by the Trustee or a Debenture Holder constitutes a taxable supply pursuant to GST Law, the consideration payable will automatically be increased to include an additional amount on account of GST and the Trustee or the Debenture Holder (as the case may be) will provide the Issuer with an appropriate tax invoice for the amount of the GST prior to demanding payment from the Issuer. That amount will be the product of the value of the consideration for the supply and the prevailing GST rate. 48 54 20.4 DEDUCTION OR WITHHOLDING REQUIRED If the Issuer must deduct or withhold Taxes from a payment to the Trustee, it must: (a) make that deduction and/or withholding, pay to the appropriate Public Authority the full amount deducted and/or withheld as required by law and give the Trustee a receipt for the payment; and (b) increase its payment to the Trustee to an amount which will result in the Trustee receiving (after deduction or withholding of any Taxes in respect of the increased payment) the full amount which it would have received if no deduction or withholding had been required. 21. GENERAL INDEMNITY The Issuer must immediately indemnify the Trustee, the Agent and each Debenture Holder on demand against any Loss by the Trustee, the Agent or Debenture Holder (and, in the case of paragraph (f) below, any of its officers) in respect of any of the following: (a) the Issuer failing to issue any Debentures which it has requested a party subscribe for pursuant to an Issue Notice not being made for any reason including any failure by the Issuer to fulfil any condition precedent contained in this document, but excluding any default by the Debenture Holder or Trustee; (b) the occurrence of any Potential Event of Default or Event of Default; (c) the exercise or attempted exercise by the Trustee, the Agent or Debenture Holder of any Power; (d) any prepayment of all or part of any Debentures whether or not it is permitted under the Transaction Documents; (e) any payment required under a Transaction Document not being made on its due date; (f) any Environmental Liability; (g) the Trustee, the Agent or Debenture Holder acting in good faith on any notice or communication from, or genuinely believed to be from, the Issuer; and (h) reliance by the Trustee, the Agent or Debenture Holder on information supplied by or on behalf of the Issuer which proves to be a misrepresentation or to be misleading or deceptive, including: (i) all reasonable legal costs and expenses in connection with the above on a full indemnity basis; and 49 55 (j) any Loss (including loss of profit) by the Trustee, the Agent or Debenture Holder in terminating, reversing or varying any agreement (including a Derivative Transaction), in repaying amounts obtained to fund the subscription for Debentures or in re-deploying or re-investing any funds held or contracted for, other than any Loss arising from the gross negligence or fraud of the Trustee, the Agent or a Debenture Holder. 22. DEFAULT INTEREST 22.1 DEFAULT INTEREST (a) The Issuer must immediately on demand pay to the Trustee or Debenture Holder (as the case may be) interest on any of the Secured Money which is due and payable by it and not paid. (b) Interest payable under paragraph (a) is calculated: (i) up to the date of actual payment from and including the due date or, in the case of an amount payable by way of reimbursement or indemnity, the date of disbursement or Loss, if earlier ('CALCULATION DATE'); and (ii) at the rate ('DEFAULT RATE') determined by the Trustee or Debenture Holder (as the case may be) as at the Calculation Date and then at monthly intervals, as the higher of: (A) if the Issuer's liability is the subject of a judgment or order, the rate payable under that judgment or order; and (B) the sum of the Applicable Margin, the Bank Bill Rate for Bills having a term of 1 month and 2% per annum. 22.2 INTEREST FOLLOWING JUDGMENT If the Issuer's liability under a Transaction Document is the subject of a judgment or order, the obligation to pay interest under this clause is an obligation separate from the judgment or order and will subsist despite the making of the judgment or order. 22.3 CAPITALISATION Interest payable under this clause that has not been paid may be capitalised by the Trustee or Debenture Holder at intervals of not less than 1 month as determined by the Trustee or Debenture Holder from time to time. Capitalised interest will itself bear interest at the Default Rate from the date of capitalisation up to and including the date of actual payment. 50 56 23. REPLACEMENT OF TRUSTEE 23.1 RETIREMENT (a) The Trustee may retire as Trustee by giving to the Issuer, the Agent and each Debenture Holder not less than 20 Business Days' notice (or a lesser period if agreed by the Issuer) of its intention to do so. No retirement takes effect unless a trustee ('SUCCESSOR TRUSTEE') approved by the Debenture Holders has been appointed to succeed the Trustee. If no Successor Trustee has been appointed within 20 Business Days after the notice of retirement, then the Trustee may on behalf of the Debenture Holders appoint a Successor Trustee who accepts the appointment. (b) On appointment of a Successor Trustee, the Trustee will be discharged from its rights, power and obligations and the Successor Trustee will become the 'Trustee' for the purposes of each Transaction Document and will have all the rights and powers, and be subject to all of the obligations, of the Trustee in each Transaction Document. (c) Any release referred to in paragraph (b) will be without prejudice to any liability for breach or default by the Trustee prior to the appointment of the Successor Trustee. 23.2 REMOVAL The Debenture Holders are entitled, at any time and from time to time: (a) to remove any Trustee on giving 20 Business Days' notice to the Trustee; and (b) with the consent of the Trustee and the Issuer, to appoint any person or persons as an additional trustee of the Trust ('ADDITIONAL TRUSTEE'). For this purpose, the Trustee and the Issuer will be deemed to have consented to the appointment if they have not responded to a request for consent from the Debenture Holders within 20 Business Days of receipt of the requests. The Additional Trustee will become a 'Trustee' for the purposes of this document and will have all the rights and powers, and be subject to all of the obligations, of the Trustee in each Transaction Document; and (c) to appoint any person or persons ('NEW TRUSTEE') as a new trustee of the Trust in place of any Trustee who resigns or ceases to be a Trustee by operation of law, or pursuant to removal by the Debenture Holders. The New Trustee will become the Trustee for the purposes of this document and will have all the rights and powers, and be subject to all of the obligations, of the Trustee in each Transaction Document. 23.3 FURTHER ASSURANCE BY RETIRING TRUSTEE A retiring or removed Trustee (or in the case of the appointment of an Additional Trustee, the pre-existing Trustee) agrees (without cost to it) to execute and to do everything else necessary or appropriate in its reasonable opinion to transfer the Trust Fund into the name of the new Trustee and to ensure that all public registers record the new Trustee as a trustee of the Trust Fund. 51 57 24. REVOCATION AND AMENDMENT OF TRUST DEED The Trustee for the time being may, with the consent of the Debenture Holders and the Issuer, at any time and from time to time, by deed revoke, add to or vary all or any of the trusts, powers, discretions, terms and conditions contained in this document (as previously varied) provided that the rule known as the rule against perpetuities is not infringed. 25. NOTICES 25.1 REQUIREMENTS A notice, approval, consent or other communication ('NOTICE') in connection with a Transaction Document: (a) must be given by an Authorised Officer of the relevant party; and (b) must be in writing; and (c) must be left at the address of the addressee, or sent by prepaid ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee or sent by facsimile to the facsimile number of the addressee at: (i) in the case of the Issuer: Address: 170 Epping Road, Lane Cove, NSW 2066 Attention: Frank Ianns / Keith Fujinaga Facsimile: (02) 9418 7830; (ii) in the case of the Trustee: Address:Level 2, 20 Martin Place, Sydney, NSW 2000 Attention: Ms Kirsten Ludlow Facsimile: (02) 9227 1031; (iii) in the case of the Agent: Address: Level 13, 20 Martin Place, Sydney, NSW 2000 Attention: Ms Michelle Burke Facsimile: (02) 9227 1334; and (iii) in the case of a Debenture Holder, to the address or facsimile number notified by that Debenture Holder to the Trustee, or if the addressee notifies another address or facsimile number, then to that address or facsimile number. 25.2 EFFECT Unless a later time is specified in it, a Notice takes effect from the time it is received. 52 58 25.3 DEEMED RECEIPT A Notice is taken to be received: (a) in the case of a posted Notice, on the third Business Day after posting for domestic mail and seventh Business Day after posting for international mail; and (b) in the case of facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient, but if the delivery or receipt is on a day which is not a business day in the place of delivery or receipt or is after 4.00pm (addressee's time), it is taken to be received at the commencement of business on the next day which is a business day in that place. 25.4 NOTICE PROVISIONS IN OTHER TRANSACTION DOCUMENTS This clause does not limit any provision for the giving of Notices contained in any other Transaction Document. 26. TRUSTEE'S LIMITATION OF LIABILITY PROTECTION 26.1 CAPACITY OF TRUSTEE Subject to clause 26.3, the Trustee enters into this document and each other Transaction Document only in its capacity as trustee of the Trust and in no other capacity. A liability arising under or in connection with any Transaction Document can be enforced against the Trustee only to the extent to which it can be satisfied out of property of the Trust out of which the Trustee is actually indemnified for the liability. This limitation of the Trustee's liability applies notwithstanding any other provision of this document (other than clause 26.3) and extends to all liabilities and obligations of the Trustee in any way connected with any representation, warranty, conduct, omission, agreement or transaction related to any Transaction Document. 26.2 NO PERSONAL LIABILITY Subject to clause 26.3, the parties may not sue the Trustee personally or seek the appointment of a liquidator, administrator, receiver or similar person to the Trustee or prove in any liquidation, administration or arrangement of or affecting the Trustee. 26.3 EXCLUSION The provisions of this clause shall not apply to any obligation or liability of the Trustee to the extent that it is not satisfied because under this document or by operation of law there is a reduction in the extent, or an extinguishment, of the Trustee's right of indemnity out of the assets of the Trust, as a result of the Trustee's fraud, gross negligence, wilful misconduct or breach of trust. 53 59 27. PRESERVING THE TRUSTEE'S AND DEBENTURE HOLDERS' POWERS 27.1 PRESERVATION (a) The fact that the Trustee or a Debenture Holder exercises, does not exercise, or delays the exercise of, any Power does not affect, or constitute a representation in relation to, the Power or any other Power. (b) Without limiting paragraph (a), the fact that the Trustee or a Debenture Holder exercises a Power does not prevent it from exercising that Power again. (c) Unless expressly provided in a Transaction Document, no Power nor any Transaction Document merges in, adversely affects or is adversely affected by any other Power or Transaction Document or any Security Interest, judgment or remedy which the Trustee or a Debenture Holder (or anyone claiming through it) may have or obtain. 27.2 NO OBLIGATION TO EXERCISE RIGHTS OR GIVE CONSENT The Trustee or a Debenture Holder may: (a) exercise or not exercise any Power; (b) give or not give its consent; and (c) make or not make a decision, under the Transaction Documents or in relation to the Trust in its absolute discretion unless a Transaction Document expressly provides otherwise. A consent given by the Trustee or a Debenture Holder subject to conditions does not take effect until the conditions are complied with to the satisfaction of the Trustee or a Debenture Holder (acting on the instructions of the Debenture Holders). 27.3 CONSENT AND WAIVERS A consent or waiver by the Trustee or a Debenture Holder is effective only if in writing. 27.4 POWERS (a) The Powers provided by the Transaction Documents are cumulative and not exclusive of any other rights, powers, discretions or remedies provided by law. (b) Where a Power under the Transaction Documents is inconsistent with a Power at law, the Transaction Documents prevail to the extent permitted by law. A Power at law is not inconsistent with the Transaction Documents merely because it is more extensive than a similar Power in the Transaction Documents or because there is no similar Power in the Transaction Documents. 27.5 CHOICE OF SECURITIES AND GUARANTEES The Trustee or a Debenture Holder need not resort to any Security Interest, Guarantee or any other Power before resorting to any other of them. 54 60 27.6 INDEMNITIES GENERALLY (a) Each indemnity in the Transaction Documents: (i) is absolute and unconditional; (ii) is a continuing obligation despite any settlement of account or the occurrence of any other thing; (iii) must be discharged without set-off, deduction, abatement, counterclaim, suspension or deferment; (iv) constitutes a separate and independent obligation of the party giving the indemnity from its other obligations under the Transaction Documents; and (v) survives termination of any Transaction Document. (b) It is not necessary for the Trustee or a Debenture Holder to incur an expense or make a payment before enforcing a right of indemnity conferred by a Transaction Document. 27.7 MORATORIUM LEGISLATION A moratorium does not apply to a Transaction Document or the recovery of the Secured Money except if: (a) the Trustee or a Debenture Holder to whom the obligation is owed agrees in writing that it does; or (b) it cannot be excluded by law. 28. OTHER PROVISIONS 28.1 PAYMENTS AND RECEIPTS IN FOREIGN CURRENCY If for any reason the Trustee receives or recovers any amount ('PAID AMOUNT') under or in relation to a Transaction Document in a currency other than the currency in which it is payable under the Transaction Document ('AGREED CURRENCY'), the amount which the Trustee will be taken to have received or recovered for the purposes of the Transaction Documents will be the Agreed Currency amount to which the Trustee could have converted the Paid Amount, in accordance with its normal procedures, at the time of the receipt or recovery less the costs of the conversion. 28.2 FURTHER ASSURANCES The Issuer must, at the Issuer's cost, do whatever the Trustee reasonably requires to: (a) secure more satisfactorily the Secured Property to the Trustee (including by executing a legal or statutory mortgage over any real property or other Secured Property the subject of a fixed charge); or 55 61 (b) enable the better exercise of any Power, or both and use its reasonable efforts to make anyone else who has an interest in the Secured Property or claims under or in trust for the Issuer do the same. 28.3 NOTIFICATION FROM ISSUER If the Issuer is required under this document to notify the Trustee about anything, it must do so in writing. 28.4 TRUSTEE AND DEBENTURE HOLDERS MAY SET OFF Without any demand or prior notice, the Trustee or a Debenture Holder may, if an Event of Default is subsisting, set off and apply indebtedness it owes to the Issuer (whatever the currency) against any money owing to it by the Issuer under a Transaction Document: (a) whether the amount owed by the Trustee or Debenture Holder is owed alone or with any other person; and (b) whether or not the amount owed by the Trustee or Debenture Holder is immediately payable. The Issuer irrevocably authorises the Trustee and each Debenture Holder (as the case may be) to do anything necessary (including to sign any document and effect appropriate currency exchanges) for that purpose. If the Trustee or a Debenture Holder exercises any right of set-off, it will thereafter give notice of such exercise to the Issuer. If a Debenture Holder exercises any right of set off, such Debenture Holder ('PURCHASING DEBENTURE HOLDER') shall immediately purchase from the other Debenture Holders sufficient Debentures to cause its Proportion to remain the same as it was before such set off was exercised provided, however, that if any portion of such set off amount is later recovered from the Purchasing Debenture Holder, the purchase of the Debentures shall be rescinded and each other Debenture Holder shall repay to the Purchasing Debenture Holder: (a) the purchase price to the extent of such recovery; and (b) an amount equal to such other Debenture Holder's rateable share (according to the proportion of (A) the amount of such other Debenture Holder's required repayment to (B) the total amount so recovered from the Purchasing Debenture Holder) of any interest or other amount paid or payable by the Purchasing Debenture Holder in respect of the total amount so recovered. The Issuer agrees that any Purchasing Debenture Holder may, to the fullest extent permitted by law, exercise all its rights of set off against the Issuer. 28.5 ISSUER MUST NOT SET OFF The Issuer may not (either directly or indirectly) claim, exercise or attempt to exercise a right of set-off or counterclaim against the Trustee or a Debenture Holder (whether the 56 62 right is the Issuer's or any other person's) or any other right which might have the effect of reducing the Secured Money. 28.6 SURPLUS PROCEEDS If surplus money remains in the hands of the Trustee or an External Administrator after payment of all the Secured Money (and satisfaction of any obligation ranking in priority to the Secured Money or secured by a Security Interest): (a) no trust arises over that surplus money; and (b) that surplus money does not carry interest and the Trustee or External Administrator must promptly following satisfaction, pay it to an account in the name of the Issuer (whether or not opened by the Trustee or External Administrator for that purpose) and notify the Issuer of such payment. The Trustee or External Administrator is then no longer liable for the surplus money. 28.7 APPLYING RECEIPTS Subject to clause 4.3, the Trustee may apply or appropriate money received to reduce the Secured Money in the order, and to satisfy whatever part of the Secured Money, the Trustee sees fit. 28.8 NOTICES OR DEMANDS AS EVIDENCE Subject to any contrary provision in the Transaction Documents, a notice or certificate from or demand by the Trustee to the Issuer stating: (a) that a specified sum of money is owing or payable under a Transaction Document; (b) that an Event of Default has occurred; or (c) any other fact or determination relevant to the rights or obligations of the Trustee, a Debenture Holder or a Issuer Party under a Transaction Document, is admissible in proceedings and is prima facie evidence of the matters stated except if there is manifest error. 28.9 SEVERABILITY (a) A construction of this document that results in all provisions being enforceable and effective is to be preferred to a construction that does not. (b) If, despite the application of paragraph (a), a provision of this document is illegal, unenforceable or ineffective, then the provision will be inoperative, but only to the extent to which, and during such time as, it is illegal, unenforceable or ineffective and the remainder of this document will continue in force. 57 63 28.10 VARIATION OF THIS DOCUMENT (a) Subject to paragraph (b), a variation of this document must be in writing and signed by or on behalf of the Issuer and the Trustee (acting on the instructions of the Required Lenders). (b) The Trustee (acting on the instructions of the Required Lenders) may unilaterally vary any provision of this document which does not vary the obligations or rights of the Issuer under the Transaction Documents. 28.11 AUTHORISED OFFICERS AND COMMUNICATIONS The Issuer irrevocably authorises the Trustee to rely on: (a) a certificate by any person purporting to be a director or secretary of the Issuer as to the identity and signatures of its Authorised Officers. The Issuer warrants that those persons have been authorised to give notices and communications under or in connection with the Transaction Documents; and (b) any notice or other document contemplated by any Transaction Document which bears the purported signature (whether given by facsimile or otherwise) of an Authorised Officer of the Issuer. 28.12 ASSIGNMENT The Trustee may only assign or otherwise deal with its rights and benefits under any Transaction Document if it obtains the prior consent of the Debenture Holders. A Debenture Holder may only assign or otherwise deal with its rights and benefits under any Transaction Document in accordance with the provisions of the Intercreditor Agreement. The Issuer may not assign or otherwise deal with its rights and benefits under this document, any Debenture Certificate and under any Transaction Document without obtaining the consent of the Trustee (acting on the instructions of the Debenture Holders). 28.13 THE TRUSTEE OR A DEBENTURE HOLDER MAY DISCLOSE INFORMATION The Trustee or a Debenture Holder may disclose to a potential assignee or participant any information about the Issuer or a Transaction Document which it considers necessary on the basis that the potential assignee or participant agrees to treat the information confidentially. 28.14 CERTAIN NOTICES OR DEMANDS A certificate signed by an Authorised Officer of the Trustee, the Agent or a Debenture Holder stating: (a) that a specified sum of money is owing or payable (or both) under a Transaction Document; or (b) that an Event of Default has occurred; or 58 64 (c) something relevant to the rights or obligations of the Trustee, the Agent, a Debenture Holder, or the Issuer under a Transaction Document, is admissible in proceedings and is prima facie evidence of the matters stated except if there is manifest error. 28.15 IF DUE DATE NOT A BUSINESS DAY If anything should be done under this document on a day that is not a Business Day, then it must be done on the previous Business Day. 28.16 SEVERABILITY (a) A construction of this document that results in all provisions being enforceable is to be preferred to a construction that does not so result. (b) If, despite the application of paragraph (a), a provision of this document is illegal or unenforceable: (i) and it would be legal and enforceable if a word or words were omitted, that word or those words are severed; and (ii) in any other case, the whole provision is severed, and the remainder of this document continues in force. 28.17 GOVERNING LAW AND JURISDICTION (a) This document is governed by the laws of New South Wales. (b) Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales. Each party waives any right it has to object to an action being brought in those courts, including by claiming that the action has been brought in an inconvenient forum or that those courts do not have jurisdiction. (c) Without preventing any other mode of service, any document in an action (including, without limitation, any writ or summons or other originating process or any third or other party notice) may be served on any party by being delivered to or left for that party at its address for service of notices under clause 25. 28.18 ATTORNEYS Each attorney signing this document under a power of attorney certifies, by the attorney's signature, that the attorney has no notice of the revocation of the power of attorney. 28.19 COUNTERPARTS This document may be executed in any number of counterparts. 59 65 SCHEDULE 1 -- FORM OF DEBENTURE DEBENTURE Tranche [1 or 2] Debenture Serial number [insert number ] PENFORD HOLDINGS PTY LIMITED ACN 094 279 339 of 170 Epping Road, Lane Cove, NSW 2066 ('ISSUER') DEBENTURE HOLDER ISSUE FACE MATURITY DATE NAME AND DATE VALUE ADDRESS [insert name and address] [insert date ] $[ ] 31 October 2005 THIS DEBENTURE is issued pursuant to the debenture trust deed ('DEBENTURE TRUST DEED') dated [ ] between the Issuer and ANZ Capel Court Limited ACN 004 768 807 ('TRUSTEE'). It is issued with the benefit of and subject to the Debenture Trust Deed and the conditions endorsed on this Debenture Certificate. Definitions in the Debenture Trust Deed apply to this Debenture Certificate and: 'FACE VALUE' means, in relation to this Debenture Certificate, the face value specified above. THIS IS TO CERTIFY that: (a) the person whose name and address is set out above and described as 'Debenture Holder' is the registered holder of Debenture issued by the Issuer; and (b) the Issuer: (i) acknowledges its indebtedness to the Debenture Holder for the Face Value; (ii) promises to pay to the Debenture Holder interest on the Face Value on the terms of the Debenture Trust Deed; (iii) promises to pay an amount equal to the Face Value to the Debenture Holder on the maturity date specified above or, if earlier, as required by a Transaction Document; and (iv) promises to pay the Debenture Holder all Secured Money to the Debenture Holder at the times and in the manner specified in the Transaction Documents; and (c) the Issuer must pay all amounts in relation to this Debenture Certificate or referred to above in immediately available funds without set-off or counterclaim and without deduction for Taxes or otherwise (except any compulsory deduction for Taxes) in the manner specified in the Transaction Documents; and 60 66 (d) subject to the provisions of any Transaction Document, the Debenture may be assigned or transferred with the written consent of the Trustee. CONDITIONS 1. BOTH PARTIES TO SIGN TRANSFER Every instrument of transfer must be signed by the transferor and the transferee. The transferor remains the owner of the Debenture until the name of the transferee is entered in the Register for that Debenture. 2. REGISTRATION REQUIREMENTS FOR TRANSFERS (a) Every instrument of transfer must comply with the provisions of clause 6.6(b) of the Debenture Trust Deed. (b) If the Trustee is satisfied that a transfer complies with paragraph (a), it will enter the transferee's name in the Register as the Debenture Holder entitled to the Debenture comprised in the transfer. The Issuer will then issue a new Debenture Certificate or Debenture Certificates to the transferee. (c) Subject to the Debenture Trust Deed, the contents of the Register are conclusive as to the identity of Debenture Holders. 3. REPLACEMENT DEBENTURE CERTIFICATE (a) If a Debenture Certificate is worn out or defaced then upon its production to the Issuer, the Issuer may cancel it and may issue a new Debenture Certificate in its place. (b) If: (i) a Debenture Certificate is lost or if the Issuer does not receive satisfactory proof of destruction of a Debenture Certificate; and (ii) the Trustee confirms in writing that the applicant for the new Debenture Certificate is a Debenture Holder, then the Issuer will issue a new Debenture Certificate to the person entitled to the lost or destroyed Debenture Certificate provided that the applicant for the new Debenture Certificate agrees to pay the reasonable costs and expenses of the Issuer in issuing the new certificate. The Issuer must notify the Trustee of the issue of each new Debenture Certificate within five Business Days of its issue. (c) An entry as to the issue of the new Debenture Certificate will be made in the Register. The new Debenture Certificate will indicate that it is issued as a replacement certificate. (d) The person entitled must pay to the Issuer $10.00 for any new Debenture Certificate issued under this condition 3. 4. DEFAULT INTEREST 61 67 If the Issuer does not pay any amount payable under this Debenture Certificate ('UNPAID AMOUNT') on the day on which it is due, then: (a) the Issuer must pay on demand interest on the Unpaid Amount at the Default Rate; and (b) any interest under paragraph (a) which has not been paid is capitalised on the first day of each calendar month (or such other dates as the Debenture Holder determines). It then bears interest itself under this condition at the rate referred to in paragraph (a). 5. DEBENTURE HOLDER BOUND By executing this Debenture Certificate the Debenture Holder covenants for the benefit of the Trustee and the Issuer to be bound by the provisions of the Debenture Trust Deed. EXECUTED as a deed. DATED insert date SIGNED SEALED and DELIVERED by ) [insert attorney's name] as attorney for ) PENFORD HOLDINGS PTY LIMITED under power of ) attorney dated [insert date] ) in the presence of ) - -------------------------------------------- ------------------------------- Signature of witness Attorney - -------------------------------------------- Name of witness (print) SIGNED SEALED and DELIVERED by ) [insert attorney's name] as attorney for ) [INSERT DEBENTURE HOLDER'S ) NAME] under power of attorney dated ) [insert date] in the presence of ) - -------------------------------------------- ------------------------------- Signature of witness Attorney - -------------------------------------------- Name of witness (print) 62 68 SCHEDULE 2 - ISSUE NOTICE TO BE ON ISSUER'S LETTERHEAD Date: To: [Subscriber] [Address] And ANZ Capel Court Limited Level 2, 20 Martin Place SYDNEY NSW 2000 We refer to clause 6 of the Debenture Trust Deed dated [ ] 2000 ('DEBENTURE TRUST DEED'). Terms used in this notice which are defined in the Debenture Trust Deed have the meanings so defined. 1. We give you irrevocable notice that we wish to issue debentures in an amount of $[ ] on [ ] ('ISSUE DATE') 2. Particulars of the debentures are as follows:
FACE VALUE FUNDING PERIOD ------------------ -------------------- [ ] [ ] [ ] [ ] [ ] [ ]
3. We request that the proceeds of subscription for debentures be remitted to account number [ ] at [ ] [INSERT ALTERNATIVE INSTRUCTIONS, IF REQUIRED]. 4. We represent and warrant that: (a) [(except as disclosed in paragraph (c))] the representations and warranties in the Debenture Trust Deed are true as though they had been made at the date of this Issue Notice and the Issue Date specified above in respect of the facts and circumstances then subsisting; (b) [(except as disclosed in paragraph (c))] no Event of Default or Potential Event of Default is subsisting or will result from the issue of the Debenture; [and] (c) details of the exceptions to paragraphs (a) and (b) are as follows: [ ], and we [have taken][propose] the following remedial action: [ ]. We acknowledge that inclusion of a statement under paragraph (c) will not prejudice your rights under the Debenture Trust Deed, including under clause 15 of the Debenture Trust Deed, or affect the operation of clause 12.2 of the Debenture Trust Deed. For and on behalf of PENFORD HOLDINGS PTY LIMITED - ------------------------------------- Authorised Officer 63 69 SCHEDULE 3 - FUNDING NOTICE TO BE ON ISSUER'S LETTERHEAD Date: To: [Agent] And [ ] [Address] We refer to clause 9 of the Debenture Trust Deed dated [ ] 2000 ('DEBENTURE TRUST DEED'). Terms used in this notice which are defined in the Debenture Trust Deed have the meanings so defined: 1. We give you irrevocable notice that the next Funding Period for the following Debentures is as follows:
DEBENTURE DEBENTURE HOLDER CERTIFICATE NO. FUNDING PERIOD ------------------- ------------------- ---------------------------- [ ] [ ] [ ] [ ] [ ] [ ]
2. We represent and warrant that: (a) [(except as disclosed in paragraph (c))] the representations and warranties in the Debenture Trust Deed are true as though they had been made at the date of this Funding Notice and the Funding Date specified above in respect of the facts and circumstances then subsisting; (b) [(except as disclosed in paragraph (c))] no Event of Default or Potential Event of Default is subsisting; [and] (c) details of the exceptions to paragraphs (a) and (b) are as follows: [ ], and we [have taken][propose] the following remedial action: [ ]. We acknowledge that inclusion of a statement under paragraph (c) will not prejudice your rights under the Debenture Trust Deed, including under clause 15 of the Debenture Trust Deed, or affect the operation of clause 12.2 of the Debenture Trust Deed. For and on behalf of PENFORD HOLDINGS PTY LIMITED - -------------------------------- Authorised Officer 64 70 SCHEDULE 4 - APPLICABLE MARGIN (CLAUSE 1.1) TRANCHE 1 DEBENTURES The Applicable Margin shall be the rate per annum set out in the table below opposite the applicable Level for such quarter.
TRANCHE 1 DEBENTURES LEVEL APPLICABLE MARGIN IN BASIS POINTS ---------- --------------------------------- Level I 175 Level II 200 Level III 225
In this Schedule: "LEVEL I" applies on any day after the Reporting Date if, on such day, the applicable Leverage Ratio is less than or equal to 2:1. "LEVEL II" applies on any day after the Reporting Date if, on such day, the applicable Leverage Ratio is greater than 2:1 and less than or equal to 2.5:1. "LEVEL III" applies until the Reporting Date and on any day thereafter if, on such day, the applicable Leverage Ratio is greater than 2.5:1. Levels I, II and III shall be determined in the manner specified in Schedule III of the US Credit Agreement and 'Reporting Date' has the meaning given in that Schedule. TRANCHE 2 DEBENTURES The Applicable Margin is equal to 35 basis points. 65 71 SCHEDULE 5 -- REPAYMENT OF PRINCIPAL AMOUNT (CLAUSE 11)
DATE PRINCIPAL AMOUNT TO BE REPAID ------------------- ----------------------------- 31 May 2001 $1,845,562.38 31 August 2001 $1,845,562.38 30 November 2001 $2,768,345.49 28 February 2002 $2,768,345.49 31 May 2002 $2,768,345.49 31 August 2002 $2,768,345.49 30 November 2002 $2,768,345.49 28 February 2003 $2,768,345.49 31 May 2003 $2,768,345.49 31 August 2003 $2,768,345.49 30 November 2003 $2,768,345.49 28 February 2004 $2,768,345.49 31 May 2004 $2,768,345.49 31 August 2004 $2,768,345.49 30 November 2004 $2,768,345.49 28 February 2005 $2,768,345.49 31 May 2005 $2,768,345.49 31 August 2005 $2,768,337.81
66 72 EXECUTED as a deed. SIGNED SEALED and DELIVERED by ) Renu Gupta ) as attorney for PENFORD HOLDINGS PTY LIMITED ) under power of attorney dated 13 November ) 2000 ) in the presence of ) /s/ Andrew Nafranowicz /s/ Renu Gupta - -------------------------------------------- -------------------------------------------- Signature of witness Attorney Andrew Nafranowicz - -------------------------------------------- Name of witness (print) SIGNED SEALED and DELIVERED by ANZ CAPEL ) ANZ CAPEL COURT LIMITED by its Attorney. . COURT LIMITED by its Attorney . . . ) Mark Fitzpatrick. . . . . . . . . . . . Mark Fitzpatrick. . . . . . . . . . ) and I, the said Attorney, state that I who is personally known to me ) have not received any notice of the ) revocation of the Power of Attorney dated ) 15/11/00 under which this document is ) executed ) /s/ Andrew Nafranowicz /s/ Mark Fitzpatrick - -------------------------------------------- -------------------------------------------- Signature of witness
67 EX-10.3 5 v67867ex10-3.txt SYNDICATED FACILITY AGREEMENT 1 Exhibit 10.3 PENFORD AUSTRALIA LIMITED ('BORROWER') AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ('AGENT') EACH PARTY NAMED IN SCHEDULE 1 (EACH A 'PARTICIPANT') SYNDICATED FACILITY AGREEMENT MINTER ELLISON Lawyers Minter Ellison Building 44 Martin Place SYDNEY NSW 2000 DX 117 SYDNEY Telephone (02) 9210 4444 Facsimile (02) 9235 2711 Reference AMN/RCA:10890732 2 TABLE OF CONTENTS 1. INTERPRETATION......................................................................1 1.1 Definitions.................................................................1 1.2 Interpretation.............................................................10 1.3 Bill Facility references...................................................11 1.4 Calculations on daily basis................................................12 1.5 Subsisting Events of Default...............................................12 1.6 Certified copies of documents..............................................12 1.7 Things required to be done on a Business Day...............................12 2. BILL FACILITY......................................................................12 3. OVERDRAFT FACILITY.................................................................13 3.1 Conditions precedent to drawing under Overdraft Facility...................13 3.2 Overdraft Account..........................................................13 3.3 Payment of interest on overdraft...........................................13 3.4 Repayment and redrawing....................................................13 3.5 Fees and charges...........................................................13 3.6 Termination of Overdraft Facility..........................................13 4. THE PARTICIPANTS...................................................................14 4.1 Participation in Bill Facility.............................................14 4.2 Obligations and rights several only........................................14 5. PURPOSE............................................................................14 6. CONDITIONS PRECEDENT...............................................................14 6.1 Conditions precedent to first Drawing......................................14 6.2 Conditions precedent to all Drawings.......................................15 6.3 Waiver.....................................................................15 7. DRAWDOWN NOTICES AND ROLLOVER NOTICES..............................................16 7.1 Drawdown Notices...........................................................16 7.2 Rollover Notices...........................................................16 8. RESTRICTIONS ON DRAWINGS...........................................................16 8.1 Limitation on Drawdown Notices and Rollover Notices........................16 8.2 Minimum principal amount...................................................16 8.3 Maximum number of Drawings.................................................16 9. FUNDING PERIODS....................................................................16 9.1 Selection of Funding Periods...............................................16 9.2 Funding Periods: restrictions..............................................17 9.3 Failure to select Funding Period...........................................17 10. DRAWING............................................................................17 10.1 Notifying Participants.....................................................17 10.2 Preparation of Bills.......................................................17 10.3 Authority of Participants to sign Bills....................................18 10.4 Restrictions on use of Bills...............................................18 10.5 Notification of Discount Rate..............................................18 10.6 Acceptance and discounting.................................................18 10.7 Indemnity and cash cover...................................................19 10.8 Participant as holder......................................................19
3 10.9 Variation of procedures....................................................19 10.10 Netting off................................................................19 11. FINAL REPAYMENT....................................................................19 12. PREPAYMENTS........................................................................20 12.1 Prepayment.................................................................20 12.2 Partial prepayment.........................................................20 12.3 Additional amounts due.....................................................20 12.4 Allocation among Participants..............................................20 12.5 Limitation on prepayments..................................................20 13. CANCELLATION/REDUCTION OF COMMITMENTS..............................................20 13.1 Termination Date...........................................................20 13.2 Cancellation by Borrower during Commitment Period..........................21 13.3 Cancellation of Commitments on cancellation of Total Commitment............21 14. PAYMENTS...........................................................................21 14.1 Payments to be on a Business Day...........................................21 14.2 Manner of payment..........................................................21 14.3 Amounts payable on demand..................................................21 14.4 Deduction or withholding required..........................................21 14.5 GST........................................................................22 14.6 Distribution by Agent......................................................22 14.7 Anticipatory payments......................................................22 14.8 Insufficient payments......................................................22 14.9 Payments and receipts in foreign currency..................................22 15. SHARING OF PAYMENTS................................................................23 16. REPRESENTATIONS AND WARRANTIES.....................................................23 16.1 Representations and warranties.............................................23 16.2 Representations and warranties repeated....................................27 17. REPORTING OBLIGATIONS AND ACCESS...................................................27 17.1 Notices to the Agent.......................................................27 17.2 Accounts and other information.............................................28 17.3 Preparation and form of Accounts...........................................30 17.4 Giving access to records and land..........................................30 17.5 Investigating Accountants..................................................30 18. GENERAL AND FINANCIAL OBLIGATIONS..................................................31 18.1 Positive obligations.......................................................31 18.2 Negative obligations.......................................................33 19. EVENTS OF DEFAULT..................................................................35 19.1 Events of Default..........................................................35 19.2 Effect of Event of Default.................................................38 20. INCREASED COSTS....................................................................39 20.1 Increased costs............................................................39 20.2 Method of calculation......................................................39 21. ILLEGALITY.........................................................................39
ii 4 22. FEES...............................................................................40 22.1 Commitment fee.............................................................40 22.2 Rollover fee...............................................................40 22.3 Fees non-refundable........................................................40 23. COSTS AND EXPENSES.................................................................40 24. TAXES..............................................................................41 24.1 Borrower to pay Taxes......................................................41 24.2 Fines and penalties........................................................41 25. GENERAL INDEMNITY..................................................................42 26. DEFAULT INTEREST...................................................................42 26.1 Default interest...........................................................42 26.2 Interest following judgment................................................43 26.3 Capitalisation.............................................................43 27. AGENT..............................................................................43 28. ASSIGNMENT AND SUBSTITUTION........................................................43 28.1 By Borrower................................................................43 28.2 By Participants............................................................43 28.3 Substitution...............................................................44 28.4 Transferor released from obligations.......................................45 28.5 Sub-participation, securitisation and credit derivative permitted..........45 28.6 Disclosure of information..................................................45 28.7 Change of Funding Office...................................................45 28.8 Assignment of Overdraft Facility...........................................45 29. NOTICES............................................................................45 29.1 How given..................................................................45 29.2 Effect.....................................................................46 29.3 Deemed receipt.............................................................46 29.4 Notice provisions in other Financing Documents.............................46 30. CONFIDENTIALITY....................................................................47 31. PRESERVING THE FINANCIERS' POWERS..................................................47 31.1 Preservation...............................................................47 31.2 No obligation to exercise rights or give consent...........................47 31.3 Powers.....................................................................48 31.4 Choice of securities and Guarantees........................................48 31.5 Indemnities generally......................................................48 31.6 Consent and waivers........................................................48 31.7 Avoidance of transaction...................................................48 31.8 Moratorium legislation.....................................................49 32. OTHER PROVISIONS...................................................................49 32.1 Notification from Borrower.................................................49 32.2 Financiers may set off.....................................................49 32.3 Borrower may not set off...................................................50 32.4 Notices or demands as evidence.............................................50 32.5 Severability...............................................................50 32.6 Entire agreement...........................................................51 32.7 Variation of agreement.....................................................51
iii 5 32.8 Authorised Officers and communications.....................................51 32.9 Communications and payments through Agent..................................51 32.10 Conflict...................................................................51 32.11 Term of obligations........................................................51 32.12 Suspense account...........................................................51 32.13 Governing law, jurisdiction and service of process.........................52 32.14 Appointment of attorney....................................................52 32.15 Attorneys appointed under this document - general provisions...............52 32.16 Attorneys..................................................................52 32.17 Counterparts...............................................................53 SCHEDULE 1 - PARTICIPANTS...................................................................54 SCHEDULE 2 - CONDITIONS PRECEDENT TO FIRST DRAWING..........................................55 SCHEDULE 3 - DRAWDOWN NOTICE................................................................56 SCHEDULE 4 - ROLLOVER NOTICE................................................................57 SCHEDULE 5 - SUBSTITUTION CERTIFICATE.......................................................58 SCHEDULE 6 - VERIFICATION CERTIFICATE.......................................................62 SCHEDULE 7 - APPLICABLE MARGIN AND COMMITMENT FEE...........................................65 iv
6 SYNDICATED FACILITY AGREEMENT AGREEMENT dated 2000 BETWEEN PENFORD AUSTRALIA LIMITED ACN 003 780 229 of 170 Epping Road, Lane Cove, NSW 2066 (formerly Starch Australasia Limited) ('BORROWER') AND AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 of Level 13, 20 Martin Place, Sydney, NSW 2000 ('AGENT') AND EACH PARTY NAMED IN SCHEDULE 1 (each a 'PARTICIPANT') RECITAL This document sets out the terms on which the Participants agree to provide a revolving syndicated bill acceptance and discount facility to the Borrower and the Agent agrees to provide an overdraft facility to the Borrower. It also contains provisions governing the relationship between the Agent and the Participants. AGREEMENT 1. INTERPRETATION 1.1 DEFINITIONS In this document: 'ACCOUNTING STANDARDS' means, in respect of a company, generally accepted accounting principles and practices consistently applied in the country of incorporation of that company, including any domestically accepted international accounting standards. 'ACCOUNTS' means profit and loss accounts, balance sheets, cash flow statements and statements, reports (including auditors' reports and directors' reports) and notes attached to, or intended to be read with, any of them. 'ANZ' means Australia and New Zealand Banking Group Limited ACN 005 357 522. 'ANZ'S REFERENCE RATE' means, on a particular day, the rate ANZ has most recently published in the Australian Financial Review before that day as its reference rate, or if no such rate is published, the rate determined from time to time by ANZ to be its reference rate. 'APPLICABLE MARGIN' means the applicable margin determined in accordance with Schedule 7. 'ATTORNEY' means an attorney appointed under a Financing Document. 7 'AUTHORISATION' includes: (a) any consent, authorisation, registration, filing, agreement, notarisation, certificate, permission, licence, approval or exemption from, by or with a Public Authority; or (b) in relation to anything which is prohibited or restricted by law if a Public Authority takes certain action within a specified period, the expiry of that period without the Public Authority taking that action. 'AUTHORISED OFFICER' means: 'AUTHORISED OFFICER' means: (a) in respect of the Borrower, any director or secretary of the Borrower or any person appointed by the Borrower and notified in writing to the Agent from time to time to act as an Authorised Officer for the purposes of the Financing Documents. (The notice must be signed by the company secretary or a director of the Borrower and be given to the Agent with a specimen signature of the person); and (b) in respect of a Financier, a person holding or acting in the office of director, chief executive or secretary or whose title includes the word 'Manager', 'President' or 'Vice-President' or a person performing the functions of any of those offices or any person appointed by a Financier from time to time to act as an Authorised Officer for the purposes of the Financing Documents and notified in writing to the Agent (in the case of a Participant) or the Borrower and the Participants (in the case of the Agent). 'AVAILABLE COMMITMENT' means, in relation to a Participant, the Participant's Commitment less the amount of its participation in the Outstanding Bill Amount. 'BANK BILL RATE' means, for a period: (a) the average bid rate which is shown at approximately 10.15am on page 'BBSY' on the Reuters Monitor System on the first day of that period for bank accepted Bills having a term equal or approximately equal to that period; (b) if: (i) it is not possible for any reason for the Agent to determine the Bank Bill Rate under paragraph (a); or (ii) in the Agent's opinion, the basis on which the rate referred to in paragraph (a) is calculated has changed adversely to the Participants, the Bank Bill Rate will be the average, rounded upwards if necessary to four decimal places and expressed as a yield percentage per annum, of the bid rates quoted by each Reference Bank at or about 10.30am on that day (or such number of Reference Banks as provide quotes to the Agent at that time on that day), for bank accepted Bills having a term as described above, as conclusively determined in good faith by the Agent; or 2 8 (c) if it is not possible for any reason for the Agent to determine the Bank Bill Rate under paragraphs (a) or (b) above, the Bank Bill Rate will be the rate determined by the Agent in good faith to be its cost of funds for that period. 'BILL' means a bill of exchange as defined in the Bills of Exchange Act 1909 (Cth), but does not include a cheque. 'BILL FACILITY' means the revolving syndicated bill acceptance and discount facility agreed to be provided to the Borrower by the Participants under clause 2. 'BORROWER PARTY' means Penford Holdings and each of its Subsidiaries. 'BUSINESS DAY' means a week day on which banks are open for general banking business in Sydney. 'COLLATERAL SECURITY' means each present or future Security Interest, Guarantee or other document or agreement created or entered into as security (directly or indirectly) for the payment of the Secured Money or the performance by the Borrower of any of its obligations to a Financier under the Financing Documents but does not include the Letter of Credit. 'COMMITMENT' means, in relation to a Participant, the amount so specified in Schedule 1 or in a Substitution Certificate, as cancelled or varied under this document or a Substitution Certificate. 'COMMITMENT PERIOD' means the period starting on the date of this document and ending on the Termination Date. 'CONTESTED TAX' means a Tax assessed as payable by the Borrower or a Subsidiary of a Borrower where the Borrower or Subsidiary: (a) is diligently contesting the Tax in good faith and in accordance with proper procedures and laws; (b) is not required by applicable law to pay the Tax before the contest has been decided; and (c) has set aside sufficient reserves of liquid assets to pay the Tax and any fine, penalty, interest or other cost payable if the contest is unsuccessful. 'CURRENT FINANCIAL INFORMATION' means, at any time, the latest Accounts, reports and other financial information provided by the Borrower to the Agent under this document. 'DEFAULT RATE' has the meaning given to it in clause 26 (Default interest). 'DERIVATIVE TRANSACTION' means any agreement or transaction which is: (a) a futures contract (including a futures contract as defined in the Corporations Law); or (b) a 'Specified Transaction' as defined in the 1992 ISDA Master Agreement or a 'Transaction' as defined in the 1996 ISDA Equity Derivatives Definitions (both as published by the International Swaps and Derivatives Association, Inc.), 3 9 or any other agreement or transaction of a similar nature or effect to any of the above. 'DISCOUNT RATE' means the Bank Bill Rate plus the Applicable Margin. 'DOLLARS' and '$' means Australian dollars. 'DRAWDOWN DATE' means a date on which a Drawing is or is to be made. 'DRAWDOWN NOTICE' means a notice given in accordance with clause 7 (Drawdown Notices and Rollover Notices). 'DRAWING' means a provision of financial accommodation to the Borrower under the Bill Facility (including pursuant to a Rollover Notice). Financial accommodation having the same Funding Period and Drawdown Date constitutes one Drawing. 'ENVIRONMENT' means the physical and radiative factors of the surroundings of persons including the land, waters, atmosphere, climate, sound, odours, taste, electromagnetism, radioactivity, the biological factors of animals and plants and the social factor of aesthetics. 'ENVIRONMENTAL LAW' means a law regulating or otherwise relating to the Environment, including any law relating to land or water use, planning, building, heritage, coastal protection, water catchments, pollution, noise, smell, soil or ground water contamination, soil conservation, nature conservation, chemicals, waste, use of dangerous goods or hazardous substances, public and occupational health and safety, noxious trades or any other aspect of protection of the Environment or any person or property. 'ENVIRONMENTAL LIABILITY' means any obligation or Loss under an Environmental Law imposed on a Borrower Party (or any of its officers), a Financier (or any of its officers), the Agent (or any of its officers) or any occupier of a Property, as a result of activities carried on during the ownership or occupation of the Property by any person at any time. 'ESTABLISHMENT FEE' has the meaning given in the Subscription Agreement. 'EVENT OF DEFAULT' means each event specified in clause 19.1 (Events of Default). 'EXTERNAL ADMINISTRATOR' means an administrator, receiver, receiver and manager, trustee, provisional liquidator, liquidator or any other person (however described) holding or appointed to an analogous office or acting or purporting to act in an analogous capacity. 'FACILITIES' means the Bill Facility and the Overdraft Facility granted to the Borrower under this document. 'FINANCIAL INDEBTEDNESS' means any actual or contingent debt or other monetary liability arising in respect of money borrowed or raised or any financial accommodation provided, including in respect of any: (a) negotiable or financial instrument or a discounting arrangement; 4 10 (b) Guarantee; (c) trade or vendor financing or deferred purchase price (for more than 90 days) of any asset or service; (d) a lease constituting, or accounted for in a similar way to, a finance lease or capitalised lease under Accounting Standards; (e) obligation to deliver goods or other property or provide services paid for in advance by any financier or in relation to any other financing transaction; (f) redemption of any preference shares or acquisition of redeemable preference shares; or (g) Derivative Transaction. 'FINANCIER' means the Agent or a Participant. 'FINANCING DOCUMENT' means each of: (a) this document; (b) the Security Trust Deed; (c) the fixed and floating charge granted by the Borrower in favour of the Security Trustee over all its present and future assets other than assets in the Australian Capital Territory and the Northern Territory; (d) the fixed and floating charge granted by the Borrower in favour of the Security Trustee over all its present and future assets in the Australian Capital Territory and the Northern Territory; (e) the fixed and floating charge granted by Penford Holdings in favour of the Security Trustee over all its present and future assets; (f) the fixed and floating charge granted by Starch New Zealand Limited in favour of the Security Trustee over all its present and future assets; (g) the guarantee and indemnity from Penford Holdings on account of the Borrower in favour of the Security Trustee; (h) the guarantee and indemnity from Starch New Zealand Limited on account of the Borrower in favour of the Security Trustee; (i) real property mortgages from each of the Borrower and Starch New Zealand Limited over all real property owned by them; (j) a Collateral Security; (k) a document that the Borrower and the Agent agree is a Financing Document; and 5 11 (l) a document entered into or given under or in connection with, or for the purpose of amending or novating, any Financing Document. 'FUNDING OFFICE' means, in respect of a Participant, the office so specified in Schedule 1 or in a Substitution Certificate or such other office as it may specify to the Agent under clause 28.7 (Change of Funding Office). 'FUNDING PERIOD' means, in relation to a Drawing, the term selected for that Drawing under clause 9 (Funding Periods). 'GROUP' means Penford Corporation and its Subsidiaries. 'GST' has the meaning given in A New Tax System (Goods and Services Tax) Act 1999. 'GUARANTEE' means a guarantee, indemnity, letter of credit, letter of comfort or any other obligation or irrevocable offer (whatever it is called and whatever its nature): (a) to provide funds (whether by the advance or payment of money, the purchase of or subscription for shares or other securities, the purchase of assets or services, or otherwise) for the payment or discharge of; (b) to indemnify any person against the consequences of default in the payment of; or (c) to be responsible for, an obligation or monetary liability of another person, a dividend, distribution, capital or premium on shares, stock or other interests, or the solvency or financial condition of another person. 'INSOLVENCY' of a person includes: (a) the Winding Up of the person; (b) the appointment of an External Administrator to the person; (c) any composition, compromise, arrangement, merger, amalgamation, reconstruction, administration, assignment for the benefit of creditors or insolvency of, by, or adversely affecting the person and any procedure which is equivalent or analogous in any jurisdiction; and (d) the death or permanent incapacity of the person. 'INTELLECTUAL PROPERTY' means any intellectual or industrial property including: (a) any patent, trade mark (whether registered or common law), trade name, copyright, registered design, trade secret, confidential information, know-how or computer program; and (b) any licence or other right to use or to grant the use of or to be the registered owner or user of any of them. 'INTERCREDITOR AGREEMENT' has the meaning given in the US Credit Agreement. 6 12 'LEASE' means any arrangement whereby an asset may be used or managed by a person other than the owner. It includes a licence. 'LENDER' has the meaning given to it in the US Credit Agreement. 'LETTER OF CREDIT' has the meaning given to it in the US Credit Agreement. 'LEVERAGE RATIO' has the meaning given to it in the US Credit Agreement. 'LOSS' means a loss, claim, action, damage, liability, cost, charge, expense, penalty, compensation, fine, outgoing or payment suffered, paid or incurred. 'MATERIAL ADVERSE EFFECT' means a material adverse effect on: (a) the effectiveness of, or the ability of any Borrower Party to observe its obligations under, a Relevant Document; (b) the market value or marketability of any asset the subject of a Collateral Security; or (c) the financial condition or business of any Borrower Party. 'MATERIAL DOCUMENT' means each of the following: (a) the Sale Agreement; (b) the 'Hi-maize Supply Agreement' dated 29 August 2000 between the Borrower, Goodman Fielder Mills Limited, Quality Bakers Australia Limited and The Uncle Tobys Company Limited; (c) the 'Hi-maize Access Deed' dated 29 August 2000 between Penford Holdings, the Borrower, Quality Bakers Australia Limited and Goodman Fielder Limited; and (d) the letter of offer dated 26 September 2000 by BNP Pacific (Australia) Limited to the Borrower; 'OUTSTANDING BILL AMOUNT' means, at any time, the aggregate principal amount of all then outstanding Drawings. 'OVERDRAFT ACCOUNT' means the account with ANZ under which overdraft financial accommodation is made available to the Borrower under the Overdraft Facility. 'OVERDRAFT FACILITY' means the overdraft facility agreed to be provided to the Borrower by ANZ under clause 3. 'OVERDRAFT LIMIT' means $3,000,000 or such other amount as the Agent and the Borrower may agree from time to time. 'PARTICIPANT' means each party listed in Schedule 1 and any person that executes a Substitution Certificate as 'Incoming Participant' (on the substitution taking effect). 7 13 'PENFORD DEBENTURE TRUST DEED' means the debenture trust deed between Penford Holdings and ANZ Capel Court Limited ACN 004 768 807 dated on or about the date of this document. 'PENFORD HOLDINGS' means Penford Holdings Pty Limited ACN 094 279 339. 'PENFORD SECURITY TRUST' means the security trust created under the Security Trust Deed. 'PERMITTED FINANCIAL INDEBTEDNESS' means Financial Indebtedness permitted under the Financing Documents and the facility for $12,000,000 granted to the Borrower by BNP Pacific (Australia) Limited pursuant to the letter of offer dated 26 September 2000. 'PERMITTED SECURITY INTEREST' means, in relation to a person: (a) a Collateral Security over any of the person's assets; (b) a Security Interest over any of the person's assets to which the Agent (acting on the instructions of the Required Lenders) has consented, such consent not to be unreasonably withheld or delayed. It does not include a Security Interest to which the Agent has consented on one or more conditions if those conditions are not complied with; and (c) a lien or charge arising by operation of law in the ordinary course of the person's ordinary business. It does not include a lien or charge that secures debts overdue for more than 10 Business Days or debts for more than $50,000. 'POTENTIAL EVENT OF DEFAULT' means any event, thing or circumstance which with the giving of notice or passage of time or both would become an Event of Default. 'POWER' means any right, power, discretion or remedy of a Financier, a Lender, a Receiver or an Attorney under any Financing Document or applicable law. 'PROPERTY' means all real property leased, occupied, used in relation to or necessary for its business or owned by any Borrower Party at any time. 'PUBLIC AUTHORITY' includes the Crown, any government and any governmental, semi-governmental, public, administrative, regulatory or judicial entity. It includes a Minister, a statutory corporation, a self-regulatory organisation or supervisory authority established by statute and any stock or futures exchange. 'PURCHASE' means the purchase by Penford Holdings of all the issued shares in the Borrower. 'RECEIVER' means a receiver or receiver and manager appointed under a Collateral Security. 'REFERENCE BANK' means each of the Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation, and any other bank appointed as a Reference Bank, in addition to or in place of any of them, by agreement between the Borrower and the Agent (acting on the instructions of the Required Lenders). 8 14 'RELATED ENTITY' of an entity means an entity which is related to the first entity under section 50 of the Corporations Law. 'RELEVANT DOCUMENT' means a Financing Document or a Material Document. 'REQUIRED LENDERS' has the meaning given in the Intercreditor Agreement. 'ROLLOVER DATE' means the last day of a Funding Period. 'ROLLOVER NOTICE' means a notice given in accordance with clause 7 (Drawdown Notices and Rollover Notices). 'SALE AGREEMENT' means the sale agreement dated 29 August 2000 between Goodman Fielder Ingredients Limited ACN 000 147 580 and Penford Holdings in respect of the Purchase; 'SECURED MONEY' means, at any time, all money (in whatever currency) that the Borrower is at that time liable (actually, prospectively or contingently) to pay to any Financier on any account and in any way whatever under or in connection with a Financing Document (including by way of principal, interest, fees, costs, charges, expenses, Guarantee obligations or damages and money which the Borrower would be liable to pay but for its Insolvency). 'SECURED PROPERTY' means all property the subject of a Collateral Security. 'SECURITY INTEREST' means a mortgage, charge, lien or pledge or any other right by way of security (including a right of set-off in respect of a deposit or a right to retain funds the subject of a flawed deposit arrangement) of a creditor to have its claims satisfied before other creditors with or from the proceeds of any asset. 'SECURITY TRUST DEED' means the security trust deed dated on or about the date of this document between the Borrower and the Security Trustee creating the security trust known as the 'Penford Security Trust'. 'SECURITY TRUSTEE' means ANZ Capel Court Limited ACN 004 768 807. 'STARCH NEW ZEALAND LIMITED' means Starch New Zealand Limited a duly incorporated company having its registered office at Auckland and having the company number AK163345. 'SUBSCRIPTION AGREEMENT' has the meaning given in the Penford Debenture Trust Deed. 'SUBSIDIARY' of an entity means an entity that is: (a) a subsidiary of the first entity under section 46 of the Corporations Law; or (b) a subsidiary of, or otherwise controlled by, the first entity under any Accounting Standard in Australia. 'SUBSTITUTION CERTIFICATE' means a substitution certificate substantially in the form of Schedule 5 or another form agreed to by the Agent (on the instructions of the Required Lenders). 9 15 'TAX' means a tax, levy, duty or charge (and associated penalty or interest) imposed by a Public Authority. It includes stamp duty and other taxes of a similar nature, income tax, withholding tax, GST and transaction taxes and duties, but does not include tax on the overall net income of a Financier. 'TERMINATION DATE' means 31 October 2003 or any earlier date on which the Secured Money becomes due and payable under this document. 'TOTAL AVAILABLE COMMITMENT' means the sum of the Available Commitments of the Participants. 'TOTAL COMMITMENT' means $19,193,857 as cancelled or reduced under this document. 'US CREDIT AGREEMENT' means the Amended and Restated Credit Agreement dated as of 15 November 2000 between Penford Corporation, Penford Products Co., certain commercial lending institutions and The Bank of Nova Scotia. 'WHOLLY-OWNED SUBSIDIARY' of a body corporate means another body corporate that is: (a) a wholly owned subsidiary of the first within the meaning of the Corporations Law; and (b) not a trustee of any trust. 'WINDING UP' includes: (a) dissolution, liquidation, provisional liquidation and bankruptcy; and (b) any analogous or equivalent procedure in any jurisdiction. 1.2 INTERPRETATION In this document: (a) the singular includes the plural and vice versa; (b) one gender includes all genders; (c) other grammatical forms of defined words or expressions have corresponding meanings; (d) a reference to a party to this document includes that party's successors and permitted substitutes and assigns; (e) a reference to a document or agreement includes that document or agreement as amended, novated, supplemented or replaced from time to time except to the extent prohibited by a Financing Document; (f) a reference to any thing includes the whole or any part of that thing and a reference to a group of things or persons includes each thing or person in that group; 10 16 (g) references to clauses, schedules and annexures are references to clauses of and schedules and annexures to this document; (h) references to 'persons' or words implying natural persons include bodies corporate, joint ventures, partnerships, trusts, associations, unincorporated bodies and Public Authorities; (i) references to 'entities' include entities as defined for any purpose under Accounting Standards; (j) a reference to time is a reference to Sydney time; (k) a reference to any legislation or statutory instrument or regulation is construed in accordance with the Acts Interpretation Act 1901 (Cth) or the equivalent State legislation, as applicable; (l) 'including' and cognate expressions indicate what is included without limiting what may be included; (m) a reference to an agreement includes any legally enforceable arrangement, understanding, undertaking or representation whether or not in writing; (n) a reference to a Borrower Party includes a reference to the party both in its own right and as trustee. Without limitation, where a Borrower incurs an obligation, it incurs the obligation both in its own right and as trustee; (o) a reference to 'property' or an 'asset' includes a reference to any right or interest in, or right to use, property or assets, to future property or assets, to things in action and to intangible property or assets; and (p) headings are inserted for convenience and do not affect the interpretation of this document. No provision or expression is to be construed against a party on the basis that the party (or its advisers) was responsible for the drafting of this document. 1.3 BILL FACILITY REFERENCES In this document: (a) a reference to 'repayment' or 'prepayment' (and like expressions) means, in relation to all or part of a Drawing, payment to the Agent of the aggregate face value of the Bills comprised in the Drawing; (b) a reference to 'principal' or 'principal amount' means, in relation to a Drawing, the aggregate face value of the outstanding Bills comprised in the Drawing; (c) a reference to an 'outstanding' Bill is to a Bill which has been accepted or discounted (or both) under this document and in respect of which the Borrower has not paid the face amount or provided cash cover under this document (whether or not that Bill has matured or has been presented for payment or paid on presentation by a Financier). A reference to an 'outstanding' Drawing has a corresponding meaning; and 11 17 (d) a reference to the drawing, acceptance, endorsement or other dealing of or with a Bill is to be interpreted by reference to the Bills of Exchange Act 1909 (Cth). 1.4 CALCULATIONS ON DAILY BASIS All interest, amounts in the nature of interest (including discount amounts) and fees under this document will be calculated on a daily basis and a year of 365 days. 1.5 SUBSISTING EVENTS OF DEFAULT An Event of Default or Potential Event of Default is 'subsisting' under this document if it has not been either: (a) remedied to the satisfaction of the Agent (acting on the instructions of the Required Lenders); or (b) waived by the Agent (acting on the instructions of the Required Lenders). 1.6 CERTIFIED COPIES OF DOCUMENTS Where a copy of a document to be provided under this document is required to be certified, the certification must: (a) be by a director or secretary of the Borrower; (b) confirm that the copy is a true and complete copy; (c) confirm that the document has not been amended or revoked; and (d) unless this document otherwise provides or the Agent otherwise agrees, be dated no earlier than 5 Business Days before the date by which the copy must be provided. The Agent may require any copy of a document provided or to be provided to it under this document to be certified. 1.7 THINGS REQUIRED TO BE DONE ON A BUSINESS DAY If anything (other than the making of a payment) is required by this document to be done on or by a day which is not a Business Day, then it must be done on or by the next following Business Day, except as otherwise provided for in clause 9.2. 2. BILL FACILITY Subject to this document, the Participants grant to the Borrower a revolving bill acceptance and discount facility under which the Borrower may obtain Drawings in Dollars during the Commitment Period in an aggregate principal amount not exceeding the Total Available Commitment. 12 18 3. OVERDRAFT FACILITY 3.1 CONDITIONS PRECEDENT TO DRAWING UNDER OVERDRAFT FACILITY ANZ agrees to continue to make an Overdraft Facility available up to the Overdraft Limit if: (a) ANZ is satisfied that the conditions precedent in clause 6 are satisfied; and (b) the Overdraft Account has been opened in accordance with ANZ's procedures, including the signing of such documents as ANZ requires. ANZ may waive any one or more of these conditions. 3.2 OVERDRAFT ACCOUNT (a) ANZ may debit to the Overdraft Account any money due to ANZ by the Borrower under this document or otherwise. (b) Despite anything else in this document, any debit balance in the Overdraft Account is repayable by the Borrower on demand by ANZ at any time. 3.3 PAYMENT OF INTEREST ON OVERDRAFT The Borrower must pay to ANZ, interest by reference to the daily balance outstanding at ANZ's Reference Rate plus the Applicable Margin per annum monthly in arrears on the first Business Day of each month, accruing daily and commencing on the first day the overdraft is used. Interest will be debited to the Overdraft Account monthly in arrears. 3.4 REPAYMENT AND REDRAWING The Borrower may at any time repay and redraw any advance under the Overdraft Facility. 3.5 FEES AND CHARGES The Borrower must pay all fees and charges in respect of the Overdraft Account as agreed from time to time. 3.6 TERMINATION OF OVERDRAFT FACILITY (a) If a Lender exercises a put option or a call option under Section 6 of the Intercreditor Agreement, the Agent will, unless otherwise instructed by the Required Lenders, as soon as practicable give a notice to the Borrower terminating the Overdraft Facility on the date specified in the notice. (b) On the termination date specified in the notice: (i) the Total Commitment will be increased by $3,000,000 and each Participant's Commitment will be increased pro rata; and 13 19 (ii) the Borrower must drawdown such amount under the Bill Facility as is necessary to repay the amount outstanding under the Overdraft Facility and that amount will be applied for that purpose. (c) The Borrower must sign all documents and do all things necessary to give effect to the provisions of this clause 3.6. 4. THE PARTICIPANTS 4.1 PARTICIPATION IN BILL FACILITY Each Participant will participate through its Funding Office in each Drawing in the proportion which its Available Commitment at the time of the Drawing bears to the Total Available Commitment at that time. 4.2 OBLIGATIONS AND RIGHTS SEVERAL ONLY The obligations and rights of each Participant under this document are several. As a result: (a) if a Participant does not carry out its obligations, this does not relieve any other Participant of its obligations; (b) a Participant is not responsible for the obligations of another Participant, or those of the Agent; and (c) subject to the Financing Documents, each Participant may separately enforce its rights under each Financing Document. 5. PURPOSE The Borrower must use the net proceeds of Drawings only for working capital and other general corporate purposes, including permitted capital expenditures, and for purposes approved by the Required Lenders. A Financier may, but is under no obligation to, monitor whether the proceeds are actually applied in accordance with this clause. 6. CONDITIONS PRECEDENT 6.1 CONDITIONS PRECEDENT TO FIRST DRAWING The obligations of each Participant under this document, including the obligation to provide its participation in the first Drawing, are subject to: (a) the Agent first receiving, in form and substance satisfactory to it and its lawyers: (i) the items listed in Schedule 2; 14 20 (ii) a certified copy of the corporate capital and ownership structure of the Group following the Purchase; (iii) the Sale Agreement and related documentation, including but not limited to, financial information, legal opinions, information regarding tax and accounting issues, environmental matters, litigation and material contracts; (iv) any other information or document which the Agent reasonably requests in relation to the Borrower, the Purchase, any assets of the Borrower, any other condition precedent or any Relevant Document; (b) the Agent satisfying itself that there has not been and that there will not be any event or circumstance which has or is likely to have a Material Adverse Effect; (c) the Agent satisfying itself in relation to the assets acquired in respect of the Purchase; and (d) the Agent satisfying itself that the Establishment Fee has been paid. 6.2 CONDITIONS PRECEDENT TO ALL DRAWINGS The obligation of each Participant to provide its participation in each Drawing is subject to the further conditions precedent that: (a) (DRAWDOWN NOTICE OR ROLLOVER NOTICE) the Agent has received a properly completed and duly executed Drawdown Notice or Rollover Notice in respect of the Drawing; (b) (NO DEFAULT) no Event of Default or Potential Event of Default is subsisting at the date of the relevant Drawdown Notice or Rollover Notice or at the relevant Drawdown Date or will result from the provision of the Drawing; (c) (AVAILABILITY OF FUNDS) provision of the Drawing will not cause the Total Available Commitment to be exceeded; (d) (REPRESENTATIONS AND WARRANTIES) each representation and warranty by each Borrower Party in the Financing Documents is true and correct and is neither misleading nor deceptive as at the date of the relevant Drawdown Notice or Rollover Notice and at the relevant Drawdown Date as though it had been made on and as of that date; and (e) (AUTHORISATIONS) all Authorisations necessary for the Drawing have been obtained. 6.3 WAIVER The conditions precedent in clauses 6.1 and 6.2 are for the benefit of the Agent and the Participants only. They may only be waived by the Agent (on the instructions of the Required Lenders) and only by notice to the Borrower. 15 21 7. DRAWDOWN NOTICES AND ROLLOVER NOTICES 7.1 DRAWDOWN NOTICES If the Borrower wishes to draw down any of the Total Available Commitment, it must give a Drawdown Notice to the Agent. A Drawdown Notice is irrevocable and must be: (a) in the form set out in Schedule 3; (b) duly completed and signed by an Authorised Officer of the Borrower; and (c) delivered to the Agent on a Business Day no later than 11.00am 3 Business Days before the proposed Drawdown Date (unless the Agent agrees otherwise). The Drawdown Date specified in a Drawdown Notice must be a Business Day. 7.2 ROLLOVER NOTICES If the Borrower wishes to roll over any outstanding Drawing, it must give a Rollover Notice to the Agent in respect of the Drawing. A Rollover Notice is irrevocable and must be: (a) in the form set out in Schedule 4; (b) duly completed and signed by an Authorised Officer of the Borrower; and (c) delivered to the Agent no later than 11.00am 3 Business Days before the Rollover Date for the Drawing (unless the Agent agrees otherwise). 8. RESTRICTIONS ON DRAWINGS 8.1 LIMITATION ON DRAWDOWN NOTICES AND ROLLOVER NOTICES A Drawdown Notice or Rollover Notice must not be given if a Drawing requested in it would cause a breach of, or otherwise not comply with the requirements of, this document. 8.2 MINIMUM PRINCIPAL AMOUNT The principal amount of each Drawing must be a minimum of $1,000,000 and an integral multiple of $500,000 or, if less, the Total Available Commitment. 8.3 MAXIMUM NUMBER OF DRAWINGS There must be no more than 7 Drawings outstanding at any one time. 9. FUNDING PERIODS 9.1 SELECTION OF FUNDING PERIODS Funding Periods selected by the Borrower must have a term of: 16 22 (a) 1, 2 or 3 months; or (b) any other period required under this document or to which the Agent agrees. 9.2 FUNDING PERIODS: RESTRICTIONS Despite the above: (a) a Funding Period must not extend beyond the Termination Date; (b) Funding Periods must be selected so that the Outstanding Bill Amount does not at any time exceed the Total Commitment; (c) if a Funding Period would otherwise end on a day which is not a Business Day, it will be extended to the next Business Day in the same calendar month or, if none, the preceding Business Day; and (d) if a Funding Period of a number of months commences on a date in a month and there is no corresponding date in the month in which it is to end, it will end on the last Business Day of the latter month. 9.3 FAILURE TO SELECT FUNDING PERIOD If the Borrower fails to select a Funding Period complying with this document, the Agent may select a Funding Period which ensures compliance. 10. DRAWING 10.1 NOTIFYING PARTICIPANTS (a) The Agent must promptly notify each Participant of the contents of each Drawdown Notice and Rollover Notice and the amount of the Participant's participation in each Drawing requested in the notice. (b) If a Drawdown Notice or Rollover Notice is received by the Agent after 3.00pm on a Business Day, it is not required to notify each Participant under this clause until the following Business Day. 10.2 PREPARATION OF BILLS Where a Drawing is requested under a Drawdown Notice or Rollover Notice, and all conditions precedent to the provision of the Drawing have been satisfied, each Participant must prepare Bills complying with the following requirements: (a) each Bill must: (i) be in a form acceptable to the Participant; (ii) name the Borrower as drawer; 17 23 (iii) name the Participant as acceptor and be payable to the Borrower or order and be endorsed in blank by the Borrower; (iv) be expressed to be payable at the Funding Office of the Participant or at another office of the Participant specified by the Participant with the agreement of the Agent and the Borrower; (v) have a face value of $1,000,000 or such other amount as determined by the Participant; and (vi) have a term equal to the Funding Period of that Drawing; and (b) the aggregate face value of the Bills to be prepared by and drawn on the Participant must be equal to the Participant's participation in the Drawing. 10.3 AUTHORITY OF PARTICIPANTS TO SIGN BILLS The Borrower for valuable consideration irrevocably authorises each Participant and each Authorised Officer of each Participant severally and in its name to complete, sign and/or endorse each Bill to be drawn by the Borrower under this document and to deliver the Bill in accordance with this document. 10.4 RESTRICTIONS ON USE OF BILLS Until it is required to be dealt with under clause 10.6 (Acceptance and discounting), each Bill prepared under this document must be kept in safe custody by the Participant signing it and must not be used or dealt with. 10.5 NOTIFICATION OF DISCOUNT RATE (a) No later than 11.30am on each Drawdown Date, the Agent must determine and notify the Borrower and each Participant of the Discount Rate for the Funding Period of each Drawing to be provided on that Drawdown Date. (b) Notification under this clause may be by telephone. 10.6 ACCEPTANCE AND DISCOUNTING Subject to this document, on the Drawdown Date on which a Drawing is to be provided under this document, each Participant must: (a) pay any stamp duty or other taxes of a similar nature chargeable on the Bills prepared by it for the purpose of the Drawing; (b) accept those Bills; and (c) discount or arrange for the discounting of those Bills at the applicable Discount Rate and in accordance with its normal procedures and, subject to clause 10.10 (Netting off), pay the proceeds after deduction of: (i) the commitment fee payable under clause 22.1 (Commitment fee); 18 24 (ii) any other amount then due by the Borrower to the Participant or to the Agent on account of the Participant under this document; and (iii) any applicable stamp duty, other taxes of a similar nature and financial institutions duty, to the Agent no later than 12.00 noon on the Drawdown Date. On receipt the Agent must promptly pay those proceeds in accordance with the Borrower's directions. 10.7 INDEMNITY AND CASH COVER (a) The Borrower indemnifies each Participant against, and must immediately pay each Participant on demand the amount of, any liability the Participant incurs as acceptor of a Bill under this document other than liability arising from the gross negligence or wilful default of the Participant. (b) Subject to clause 10.10 (Netting off), the Borrower must, by 12.00 noon on each day on which a Bill falls due for payment, pay to the Agent (who will in turn account to the relevant Participant for) an amount equal to the face value of the Bill. 10.8 PARTICIPANT AS HOLDER As between each Participant and the Borrower, the Borrower is primarily liable in respect of any Bill accepted by the Participant. The liability of the Borrower with respect to a Bill will not be taken to have been discharged by reason of the Participant becoming the holder of the Bill on, before or after its maturity. 10.9 VARIATION OF PROCEDURES The Agent may (with the agreement of the Required Lenders) vary any of the times at or by which any thing is to be done under this clause to ensure the effective operation of the procedures contemplated by it. 10.10 NETTING OFF Only the net amount as between: (a) the amount payable on any Rollover Date by the Borrower to the Agent on account of a Participant; and (b) the amount which that Participant is obliged on the Rollover Date to make available on account of the Borrower, need be paid by the Borrower or made available by that Participant, as the case may be. 11. FINAL REPAYMENT On the Termination Date, the Borrower must pay all of the Outstanding Bill Amount to the Agent on account of the Participants. 19 25 12. PREPAYMENTS 12.1 PREPAYMENT (a) The Borrower may prepay all or part of the Outstanding Bill Amount if they give not less than 20 Business Days' notice ('PREPAYMENT NOTICE') to the Agent. A Prepayment Notice is irrevocable and the Borrower must make the prepayment in accordance with the notice. (b) The Agent must promptly notify the Participants on receiving a Prepayment Notice. 12.2 PARTIAL PREPAYMENT If a prepayment is of part only of the Outstanding Bill Amount, then: (a) unless the Agent otherwise agrees, the prepayment must be a minimum of $1,000,000 and an integral multiple of $100,000; and (b) the Borrower must specify in the Prepayment Notice each Drawing to which the prepayment applies. 12.3 ADDITIONAL AMOUNTS DUE (a) Clause 25 (General indemnity) applies to any prepayment of all or part of the Outstanding Bill Amount despite the fact that the Borrower is permitted to make it. (b) Any interest or fees accrued on any amount repaid early under this document must be paid at the time of the prepayment. 12.4 ALLOCATION AMONG PARTICIPANTS A prepayment of all or part of a Drawing will be applied rateably in reduction of the respective participations of all of the Participants in that Drawing. 12.5 LIMITATION ON PREPAYMENTS The Borrower may not prepay all or part of the Outstanding Bill Amount except in accordance with this document. 13. CANCELLATION/REDUCTION OF COMMITMENTS 13.1 TERMINATION DATE The Total Commitment will be automatically cancelled on the Termination Date. 20 26 13.2 CANCELLATION BY BORROWER DURING COMMITMENT PERIOD (a) During the Commitment Period the Borrower may cancel all or part of the undrawn Total Commitment by giving not less than 15 Business Days' prior notice to the Agent. Any such notice is irrevocable. (b) A partial cancellation must (unless the Agent otherwise agrees) be a minimum amount of $1,000,000 and an integral multiple of $100,000. (c) The Agent must promptly notify each Participant of any notice received under this clause and the amount of the Participant's Commitment which is cancelled. 13.3 Cancellation of Commitments on cancellation of Total Commitment The Commitment of each Participant will be permanently and rateably reduced on and by the amount of any cancellation of the Total Commitment. 14. PAYMENTS 14.1 PAYMENTS TO BE ON A BUSINESS DAY If a payment under a Financing Document falls due on a day that is not a Business Day, it must be paid on the preceding Business Day. 14.2 MANNER OF PAYMENT All payments to be made by the Borrower under a Financing Document must be made at or before 12.00 noon on the due date to an account specified by the Agent. Payments must be made in Dollars, in immediately available funds, and free of any set-off, counterclaim or, subject to clause 14.4 (Deduction or withholding required), deduction or withholding. 14.3 AMOUNTS PAYABLE ON DEMAND Any amount which is not expressed by a Financing Document to be payable on a specified date is payable immediately on demand by the Agent. 14.4 DEDUCTION OR WITHHOLDING REQUIRED If the Borrower must deduct or withhold Taxes from a payment to a Financier, it must: (a) make that deduction and/or withholding, pay to the appropriate Public Authority the full amount deducted and/or withheld as required by law and give the Financier a receipt for the payment; and (b) increase its payment to the Financier to an amount which will result in the Financier receiving (after deduction or withholding of any Taxes in respect of the increased payment) the full amount which it would have received if no deduction or withholding had been required. 21 27 14.5 GST The amounts set out in the Financing Documents have been calculated without regard to GST. If GST is or becomes payable in respect of any supply made by a Financier under or in connection with the Facilities or the Financing Documents, the payment for that supply shall be increased by the amount necessary so that that Financier actually receives what it would have been entitled to receive if there had not been GST in respect of that supply. The Borrower indemnifies each Financier against any Loss due to it failing to receive the amount of the increase in the payment. 14.6 DISTRIBUTION BY AGENT Subject to clause 32.12 (Suspense account), the Agent must promptly distribute amounts received on account of the Participants among the Participants according to their respective entitlements. 14.7 ANTICIPATORY PAYMENTS (a) The Agent may assume that a party ('PAYER') due to make a payment ('ASSUMED PAYMENT') on account of another party ('RECIPIENT') has made or will make that payment when due unless the Payer notifies the Agent at least 1 Business Day before the due date that the Payer will not be making the payment. (b) In reliance on that assumption, the Agent may make available to the Recipient on the due date an amount equal to the Assumed Payment. (c) If the Payer does not in fact make the Assumed Payment, the Recipient must immediately repay the amount to the Agent on demand. The Payer remains liable to make the Assumed Payment but, until the Recipient repays the amount, the Payer's liability will be to the Agent in its own right. (d) If the Payer is the Borrower, any interest on the amount of the Assumed Payment accruing before recovery will belong to the Agent. (e) If the Payer is a Participant, the Participant must pay interest on the amount of the Assumed Payment at the rate determined by the Agent, in line with its usual practice, for advances of similar duration to financial institutions of the standing of the Participant. 14.8 INSUFFICIENT PAYMENTS If an amount received by the Agent is insufficient to discharge the obligations of the Borrower to the Financiers at that time, the Agent may apply that amount to reduce the Secured Money in the order, and to satisfy whatever part of the Secured Money, the Agent (acting on the instructions of the Required Lenders) sees fit. The application will override any appropriation made by the Borrower. 14.9 PAYMENTS AND RECEIPTS IN FOREIGN CURRENCY If for any reason a Financier receives or recovers any amount under or in relation to a Financing Document in a currency other than Dollars ('FOREIGN CURRENCY Amount'), the amount which the Financier will be taken to have received or recovered for the 22 28 purposes of the Financing Documents will be the Dollar amount to which the Financier could have converted the Foreign Currency Amount in accordance with its normal procedures, at the time of the receipt or recovery less the costs of the conversion. 15. SHARING OF PAYMENTS If a Participant receives or recovers (whether by direct payment, set-off or otherwise) an amount in respect of any sum due under a Financing Document in respect of the Bill Facility otherwise than by distribution by the Agent: (a) the Participant must immediately notify the Agent and (unless the Agent otherwise directs) pay that amount to the Agent; (b) the receipt or recovery will be treated as a payment to the Participant on behalf of the Agent on account of the Secured Money and must be applied accordingly; (c) the amount owed to the Participant is not reduced by the receipt or recovery except to the extent of any distribution subsequently received by the Participant under the Financing Documents; (d) without prejudice to paragraph (c), the Borrower must immediately indemnify the Participant on demand against a payment made by the Participant under paragraph (a) to the extent that the Borrower's liability has been discharged by the receipt or recovery; and (e) if all or part of the receipt or recovery must subsequently be refunded or restored by the Participant, each party to which any part of the receipt or recovery was distributed must repay to that Participant its proportionate share of the amount to be refunded or restored, together with an equivalent proportion of any interest which the Participant is obliged to pay on the amount to be refunded or restored. 16. REPRESENTATIONS AND WARRANTIES 16.1 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to each Financier, in respect of each Borrower Party (unless the context otherwise indicates) that: (a) (REGISTRATION) it is properly registered and validly exists; (b) (POWER) it has the power and the right to carry on its business, and to enter into and exercise its rights and perform its obligations under each Relevant Document to which it is a party; (c) (CORPORATE AUTHORISATION) it has taken the necessary corporate action to authorise its entry into and performance of each Relevant Document to which it is party (as well as each transaction contemplated by each such Relevant Document); 23 29 (d) (RELEVANT DOCUMENTS) each Relevant Document to which it is a party is (subject to its stamping and registration, where applicable) valid, binding and enforceable against it in accordance with its terms; (e) (COLLATERAL SECURITIES) subject to payment of stamp duty and registration, each Collateral Security is an effective Security Interest having the priority contemplated in it; (f) (CONFLICTS) its execution and performance of each Relevant Document to which it is a party does not and will not: (i) conflict with or violate any law, judgment, ruling, order, document or agreement that binds it (including its constituent documents); (ii) result in a Security Interest (other than under a Collateral Security) being created on, or crystallising over, any of its assets; or (iii) result in a default under any agreement relating to any of its Financial Indebtedness; (g) (AUTHORISATIONS OBTAINED) each Authorisation which is: (i) necessary for the execution, delivery or performance by it, or the validity or enforceability, of the Relevant Documents to which it is party; (ii) necessary for the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security; or (iii) material to the conduct by it of its business, has been obtained and is in full force and effect; (h) (COMPLIANCE WITH LAWS) it has complied with all laws and Authorisations applicable to it or its business where failure to do so would have or be likely to have a Material Adverse Effect; (i) (SOLVENCY) it is solvent and there are reasonable grounds to expect that, on execution of each Financing Document to which it is a party, it will continue to be able to pay all its debts as and when they become due and payable; (j) (NO DEFAULT UNDER MATERIAL DOCUMENT) it is not in default of a material obligation under any Material Document or any document relating to its Financial Indebtedness and nothing has occurred which is or would (with the giving of notice or passage of time or both) constitute an event of default (however described) under any such document; (k) (LITIGATION) (except as described in writing to the Agent and accepted in writing by the Agent acting on the instructions of the Required Lenders) no litigation or administrative, arbitration or other proceeding or action (including any action by a Public Authority) is current or pending or, to its knowledge, is likely or threatened which, if adversely determined, would have or be likely to have a Material Adverse Effect; 24 30 (l) (INFORMATION ACCURATE) all information provided by it to any Financier or the Agent in connection with the Financing Documents and Material Documents is accurate in all material respects and not deficient, misleading or deceptive in any material respect (whether by its inclusion or by the omission of other information); (m) (COPIES OF DOCUMENTS) (i) all copies of documents provided by it to any Financier or the Agent are true and complete and the original documents are in full force and effect; and (ii) the copies of the Material Documents provided to the solicitors for the Agent contain all of the terms of the agreements between the parties to those documents and there are no other documents or arrangements in existence in respect of those Material Documents that have not been disclosed in writing to the Agent; (n) (DISCLOSURE OF FACTS) all material facts or circumstances known to the Borrower and which under reasonable business practice may affect the decision of each Financier to enter into this transaction have been disclosed by the Borrower to the Agent; (o) (OWNERSHIP OF ASSETS) subject to any trust which is expressly disclosed in the Financing Documents and to any Permitted Security Interest, it is the sole legal and beneficial owner of the Secured Property the subject of each Collateral Security given by it; (p) (ASSETS FREE OF SECURITY INTERESTS) its assets are free of any Security Interest other than any Permitted Security Interest; (q) (FINANCIAL INDEBTEDNESS) it has no Financial Indebtedness other than Permitted Financial Indebtedness; (r) (NO EVENT OF DEFAULT) no Event of Default has occurred and is subsisting and no Potential Event of Default has occurred and is subsisting: (i) at the date of this document; or (ii) thereafter, which is not disclosed in writing to the Agent. (s) (ACCOUNTS) the most recent Accounts, except Accounts referred to in clause 17.2(c), of the Borrower provided to the Agent: (i) give a true and fair view of the state of affairs of it and of each of its Subsidiaries as at the date to which the Accounts relate and the results of the operations of it and of each of its Subsidiaries during the period covered by the Accounts; (ii) contain proper and adequate provisions for and fully disclose all of the actual and contingent liabilities of it and of each of its Subsidiaries as at the date to which the Accounts relate; and 25 31 (iii) were prepared in accordance with Accounting Standards, except for any departures from those standards which are disclosed in the Accounts; (t) (NO CHANGE IN FINANCIAL POSITION) there has been no change in the state of affairs or operations of each Borrower Party since the date to which the Accounts referred to in paragraph (s) (Accounts) were prepared which would have or be likely to have a Material Adverse Effect; (u) (OWN ENQUIRIES) it has relied on its own investigations and enquiries regarding the transactions contemplated by the Financing Documents and has not relied on any information, advice or opinion (including information, advice or opinions regarding interest rates, Derivative Transactions or exchange rates) given or offered by or on behalf of any Financier or the Agent even if in answer to any enquiry by or for it; (v) (TAXATION) it has complied with all Tax laws in all jurisdictions in which it is subject to Taxes and has paid all Taxes due and payable by it, other than Contested Taxes the non-payment of which would not have or be likely to have a Material Adverse Effect; (w) (INSURANCE) it has complied with its obligations in the Financing Documents to insure and maintain insurance; (x) (INTELLECTUAL PROPERTY) it owns, or has the right and licence to use, all Intellectual Property necessary for the conduct of its business; (y) (ENVIRONMENTAL LAWS): (i) it has not incurred any Environmental Liability which it has not disclosed in writing to the Agent which could have a Material Adverse Effect; and (ii) all Authorisations required under any Environmental Law relating to the occupation, use and development of each Property have been obtained, are in full force and effect and have been and are being complied with where non-compliance would have a Material Adverse Effect and such occupation, use and development otherwise complies with all Environmental Laws where non-compliance would have a Material Adverse Effect; (z) (CORPORATE BENEFIT) its entry into the transactions contemplated by the Relevant Documents is in its best interests and for its benefit; (aa) (NO TRUSTEE) it is not a trustee of any trust other than as specified in any Financing Document; (bb) (RELATED ENTITIES) it does not have any Related Entities, other than those previously notified by it in writing to the Agent; (cc) (NO IMMUNITY) neither it nor any of its assets is immune from suit or execution; and 26 32 (dd) (NATIVE TITLE) it is not: (i) as at the date of this document, aware of any actual or potential native title claim in relation to any Property; or (ii) thereafter, aware of any actual or potential native title claim in relation to any Property which if it were successful would have a Material Adverse Effect. 16.2 REPRESENTATIONS AND WARRANTIES REPEATED Each representation and warranty in this document: (a) is repeated, with reference to the facts and circumstances at the time, on each day until the Secured Money has been finally paid in full; and (b) applies in its current form when repeated, despite any contrary disclosure by a Borrower or any other person, unless the Agent (acting on the instructions of the Required Lenders) agrees to waive it. 17. REPORTING OBLIGATIONS AND ACCESS 17.1 NOTICES TO THE AGENT The Borrower must notify the Agent, with reasonable details, as soon as it becomes aware of any one or more of the following in respect of each Borrower Party: (a) (EVENT OF DEFAULT) an Event of Default or Potential Event of Default and (if applicable) the steps taken or proposed to be taken to remedy it; (b) (SUBSIDIARY) the Borrower Party acquiring or intending to acquire a Subsidiary; (c) (ACQUISITION OF REAL PROPERTY) the acquisition by any Borrower Party of any interest in relation to real property (other than a Lease for a term (including options) of less than 3 years); (d) (LITIGATION) any litigation or administrative, arbitration or other proceeding or action (including any action by a Public Authority) against any Borrower Party which is current or pending or, to its knowledge, likely or threatened which: (i) if adversely determined, would have or be likely to have a Material Adverse Effect; or (ii) involves a claim or claims for an amount in excess of $1,000,000 or its equivalent; (e) (ENVIRONMENTAL MATTERS) any breach or potential breach of any Environmental Law or of any complaint or the issuing of any proceedings or notice or requirements against or on any Borrower Party in respect of, or which may result in, any Environmental Liability or alleged contravention of any 27 33 Environmental Law which would have or be likely to have a Material Adverse Effect; (f) (COMPULSORY ACQUISITION) any proposal by a Public Authority to compulsorily acquire assets of any Borrower Party the subject of a Collateral Security where the acquisition would have or be likely to have a Material Adverse Effect; (g) (MATERIAL DOCUMENTS) any: (i) material notice given or received under; (ii) material default or dispute under; (iii) termination or rescission of; or (iv) event or circumstance which entitles a party to terminate or rescind, a Material Document; (h) (PUBLIC AUTHORITIES) any material notice to or from, or material correspondence with, a Public Authority in relation to any Borrower Party or its assets the subject of a Collateral Security, including under any Environmental Law; (i) (AUTHORISATIONS) any proposal by a Public Authority to revoke or materially amend any Authorisation: (i) necessary for the execution, delivery, or performance by any Borrower Party, or the validity or enforceability, of a Relevant Document; (ii) necessary for the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security; or (iii) material to the conduct by any Borrower Party of its business; (j) (CONSTITUENT DOCUMENTS) any change to any Borrower Party's constituent documents; (k) (NATIVE TITLE) any native title claim being proposed or made in respect of any Property; or (l) (MATERIAL ADVERSE EFFECT) any event or circumstance which has or is likely to have a Material Adverse Effect. 17.2 ACCOUNTS AND OTHER INFORMATION The Borrower must give the following to the Agent (with, in the case of the items referred to in paragraphs (a)-(e) and (g), sufficient copies for the Participants): (a) (ANNUAL ACCOUNTS) the audited consolidated annual Accounts of it and of each of its Subsidiaries as soon as possible after its annual balance date (and, at the latest, 120 days after that date); 28 34 (b) (QUARTERLY ACCOUNTS) the consolidated and unconsolidated quarterly Accounts of it and of each of its Subsidiaries as soon as possible but at the latest 60 days after the end of each of its first three fiscal quarters and 120 days after the end of its fourth fiscal quarter; (c) (MONTHLY ACCOUNTS) the monthly consolidated and unconsolidated management Accounts of it and of each of its Subsidiaries including: (i) balance sheet and profit and loss statements incorporating a divisional break-up; (ii) monthly cashflow statements and projections; and (iii) a comparison of actual results with previous budget and projections, in the form currently prepared by the Borrower; (d) (OTHER FINANCIAL INFORMATION) whatever other financial information the Agent reasonably requires, within 75 days after the end of each month during the first 3 months after the date of this document and within 60 days after the end of each month thereafter; (e) (FINANCIAL PROJECTIONS) before 1 November in each year beginning 1 November, 2001, detailed projections setting out Penford Corporation's projected consolidated income and cashflow for the current fiscal year and for each fiscal year until 31 August 2005 and a projected consolidated balance sheet as of the end of each such fiscal year for Penford Corporation together with a certificate from Penford Corporation's principal financial officer setting forth the assumptions on which such projections are based; (f) (CERTIFICATE OF COMPLIANCE) each certificate (where applicable) detailed in the US Credit Agreement; (g) (REPORTS, CIRCULARS) promptly, copies of all material documents which each of the Borrower and its Subsidiaries issues to its members, any stock exchange or its creditors generally as soon as they are issued; (h) (AUTHORISED OFFICERS) promptly, notice of any change to its Authorised Officers (which notice must be signed by the secretary or a director of the Borrower and must contain a specimen signature of each new Authorised Officer) and, if requested by the Agent, evidence of the Authorised Officers' authority; (h) (PROFORMA CONSOLIDATED BALANCE SHEET) on or before 31 December 2000, a proforma consolidated and consolidating balance sheet of the Group following the Purchase, reflecting purchase price accounting adjustments as of the date of the Purchase; (i) (INSURANCE) on request, current certificates and other documents in respect of each of its and its Subsidiaries' insurance policies; and (j) (OTHER INFORMATION) whatever other information the Agent reasonably requests about its or any of its Subsidiaries' state of affairs or the Secured Property. 29 35 17.3 PREPARATION AND FORM OF ACCOUNTS All Accounts, except Accounts referred to in clause 17.2(c), given to the Agent must: (a) be prepared and, if applicable, audited by a reputable and suitably qualified accountant (who must be acceptable to the Agent) in accordance with Accounting Standards and all applicable laws; (b) be certified by 2 directors of each entity to which they relate as an accurate and complete statement of the financial position of the entity (except that, if the Accounts relate to more than one entity and the entities have a common parent or one entity is the parent of the other, it will suffice if the Accounts are certified by 2 directors of the parent); and (c) at the time of delivery, give a true and fair view of the state of affairs of the entity or entities to which they relate or give an explanation of any divergence between the Accounts and a true and fair view, as at the date on which, and for the period in respect of which, the Accounts are prepared. 17.4 GIVING ACCESS TO RECORDS AND LAND The Borrower must in respect of each Borrower Party: (a) ensure that its business, financial records and property are available for inspection upon reasonable notice at reasonable times by the Agent and persons acting on the Agent's behalf; and (b) allow the Agent and persons acting on the Agent's behalf to inspect and to take copies of or extracts from its business and financial records and give reasonable assistance to them. 17.5 INVESTIGATING ACCOUNTANTS The Agent may at any time after the occurrence of an Event of Default or Potential Event of Default appoint accountants ('INVESTIGATING ACCOUNTANTS') to investigate the affairs and financial position of the Borrower provided the Investigating Accountants agree with the Borrower to be bound by the same confidentiality requirements that apply under clause 30. The Borrower: (a) unconditionally authorises the Investigating Accountants to take the action which is reasonably necessary or desirable for the investigation. This does not include the power to manage the Borrower's business; (b) agrees to give the Investigating Accountants all reasonable assistance for that purpose; and (c) unconditionally authorises the Investigating Accountants to disclose to the Agent and its advisers all information and documentation in connection with the investigation, and must ensure that each of its Subsidiaries does the same. The Borrower must pay the costs and expenses of the investigations immediately on demand by the Agent. 30 36 18. GENERAL AND FINANCIAL OBLIGATIONS 18.1 POSITIVE OBLIGATIONS The Borrower must, and must ensure that each Borrower Party (unless the Agent, on the instructions of the Required Lenders, otherwise consents): (a) (CARRY ON BUSINESS) carry on its business in the ordinary course; (b) (AUTHORISATIONS) obtain, renew and maintain (and provide to the Agent as soon as practicable after reasonable request copies of) all Authorisations that are necessary or advisable for the proper and efficient conduct of its business where a failure to do so would have a Material Adverse Effect and for: (i) the execution, delivery and performance by it, and the validity and enforceability, of each Relevant Document; and (ii) the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security, to which it is a party; (c) (MAINTAIN BOOKS) maintain proper and adequate books and records in accordance with Accounting Standards and the requirements of all laws; (d) (MAINTAIN STANDING) maintain: (i) its registration in the place of its registration as at the date of this document; and (ii) its good standing, and ensure that it remains entitled to carry on business and own property in all applicable jurisdictions; (e) (MAINTAIN INSURANCE) comply with its obligations to insure and maintain insurance in the Financing Documents; (f) (MAINTAIN INTELLECTUAL PROPERTY) maintain, preserve and protect all Intellectual Property material to its business in accordance with prudent business practice; (g) (MAINTAIN PHYSICAL ASSETS) maintain its physical assets useful or necessary to its business subject to a Collateral Security in a good state of repair, fair wear and tear excepted, and replace such assets whenever necessary for the proper and efficient conduct of its business; (h) (SECURED PROPERTY): (i) remedy any defect in its or the Agent's title to the Secured Property; and 31 37 (ii) protect and defend the Secured Property; (i) (AVOID ENVIRONMENTAL LIABILITY) take whatever action the Agent (acting on the instructions of the Required Lenders) reasonably requires to avoid any Environmental Liability; (j) (ACQUISITION OF SUBSIDIARY) if it creates or acquires a Subsidiary after the date of this document (with or without the Agent's consent): (i) immediately cause the Subsidiary to execute (and do all things necessary to give effect to) any Collateral Security required by the Agent, including a Guarantee and a Collateral Security over all of its assets; and (ii) provide, in relation to the Subsidiary, any information or document, including, but not limited to the items referred to in Schedule 2, which the Agent reasonably requests, to the Agent in form and substance acceptable to the Agent; (k) (PAY TAXES) pay when due all Taxes (other than Contested Taxes unless the failure to pay would have or be likely to have a Material Adverse Effect) assessed, levied or imposed on it or its assets; (l) (EVENTS OF DEFAULT) as soon as practicable after request by the Agent, provide the Agent with a certificate signed by 2 of its directors certifying that to the best of their knowledge and belief no Event of Default or Potential Event of Default has occurred and is subsisting; (m) (MATERIAL DOCUMENTS): (i) comply with the material terms of; and (ii) take all reasonable action, and all action reasonably required by the Agent, to enforce, each Material Document to which it is a party; (n) (COMPLY WITH LAWS) comply with all material laws and Authorisations and with the mandatory requirements of any Public Authority in respect of the Secured Property; (o) (RECTIFY PHYSICAL DEFECTS) immediately: (i) rectify each material defect in the repair or condition of the Secured Property reasonably required by the Agent (acting on the instructions of the Required Lenders); and (ii) take any action reasonably required by the Agent (acting on the instructions of the Required Lenders) to implement or take account of the recommendations or results of any environmental audit or site assessment carried out in relation to the Secured Property; 32 38 (p) (ENVIRONMENTAL SITE ASSESSMENT) if the Agent (acting on the instructions of the Required Lenders) reasonably requests it, promptly give the Agent an environmental site assessment or environmental audit report on the matters the Agent specifies. The report must be prepared by an environmental consultant reasonably acceptable to the Agent and the Borrower must pay for the report; and (q) (ASSIST WITH SYNDICATION) assist with the syndication of the Bill Facility and, if requested by the Agent to do so, provide or assist in the preparation of an information memorandum for provision to prospective participants. 18.2 NEGATIVE OBLIGATIONS The Borrower must not and must ensure that each of its Subsidiaries does not, without first obtaining the consent of the Agent (acting on the instructions of the Required Lenders): (a) (NATURE OF BUSINESS) do anything to materially change the nature of its business; (b) (SECURITY INTEREST) (i) create or permit to exist a Security Interest, other than a Permitted Security Interest, over any of its assets or attempt or agree to do so; or (ii) if the creation of a Security Interest cannot by law be restricted, create such a Security Interest over any of the Secured Property without using its best endeavours to provide that the holder of the Security Interest first enters into a deed of priority in form and substance reasonably acceptable to the Agent (acting on the instructions of the Required Lenders); (c) (ACQUISITION SUBJECT TO SECURITY INTEREST) acquire an asset which is subject to a Security Interest or which becomes the subject of a Security Interest (other than a Collateral Security) on its acquisition; (d) (LEASES) grant a Lease over any of its assets other than at arms' length and for market consideration except to a Borrower Party; (e) (DISPOSALS OF ASSETS) dispose of an asset or attempt or agree to do so except: (i) in the ordinary course of its ordinary business and on arms' length terms; (ii) where the asset is no longer required for its business and the disposal is on arms' length terms; (iii) to a Borrower Party which has given the Collateral Security; (iv) where the value of the asset is less than $1,000,000 or its equivalent and the aggregate value of all assets so disposed of by the Borrower Party in any 12 month period in reliance on this exception is less than $2,000,000 or its equivalent; or 33 39 (v) under a Permitted Security Interest; (f) (NO FURTHER SHARES) issue any further shares other than in the case of a Borrower Party which has given Collateral Security; (g) (NO MERGER) merge or consolidate with another entity; (h) (ARM'S LENGTH TRANSACTIONS) subject to any Financing Document, enter into any transaction other than on arm's length terms with any person other than a Borrower Party or Penford Corporation or Penford Products Co.; (i) (TITLE RETENTION) acquire assets which would otherwise become Secured Property on title retention terms except in the ordinary course of its day-to-day trading; (j) (FINANCIAL ACCOMMODATION) lend or provide financial accommodation to any person, except that: (i) it may: (A) subject to paragraph (n) (deposit), deposit money with a bank, unless the bank is not a Financier and the Borrower Party owes Financial Indebtedness to the bank; or (B) allow its customers to acquire goods or services on extended terms, in the ordinary course of its day-to-day trading; and (ii) it may lend or provide financial accommodation to a Borrower Party which has given Collateral Security; (k) (GUARANTEES) give any Guarantee other than under the Financing Documents; (l) (DEPOSIT) deposit money with a person if the money is not repayable until satisfaction of an obligation owed to the person; (m) (PARTNERSHIP) enter into any partnership or joint venture; (n) (SUBSIDIARY) after the date of this document, create or acquire any Subsidiary unless it complies with clause 18.1(j); (o) (MATERIAL DOCUMENTS): (i) (A) materially vary, amend or change or agree to any material variation, amendment or change in (other than an assignment or transfer by a sub-lessee to another party of the same or better reputation and credit standing); (B) terminate or rescind; or (C) waive any material requirement of, 34 40 any Material Document; or (ii) do or permit, or fail to do, any act which would render any Material Document liable to forfeiture or cancellation or to be otherwise prejudiced; (p) (CONSTITUENT DOCUMENTS) change its constituent documents in any way; or (q) (FINANCIAL YEAR) change its financial year except to be consistent with Penford Corporation's financial year which ends on 31 August. 19. EVENTS OF DEFAULT 19.1 EVENTS OF DEFAULT An Event of Default occurs if any one or more of the following occurs: (a) (NON-PAYMENT) a Borrower fails to pay any of the Secured Money payable by it within 5 days after the due date for payment; (b) (INCORRECT FINANCIAL STATEMENTS) a financial statement or certificate provided by a Borrower Party to the Agent or a Participant is untrue, incorrect or misleading in any material way; (c) (OTHER OBLIGATION NOT COMPLIED WITH) subject to paragraphs (a) and (b), any Borrower Party fails to comply with any obligation under a Financing Document and, if in the opinion of the Agent the failure is capable of remedy, it continues unremedied for 15 Business Days after the failure; (d) (INCORRECT STATEMENT OR REPRESENTATION) a statement, representation or warranty made by or on behalf of any Borrower Party in a Financing Document, or in a document provided in connection with a Financing Document, is untrue, incorrect or misleading in a material respect when made or repeated; (e) (CROSS DEFAULT - FINANCIAL INDEBTEDNESS) Financial Indebtedness of any Borrower Party: (i) becomes due and payable, or capable of being declared due and payable, before its due date; or (ii) is not paid when due or within any applicable grace period; (f) (CROSS DEFAULT - FINANCING DOCUMENT) an event of default (however described) occurs under any Financing Document; (g) (CROSS DEFAULT - MATERIAL DOCUMENT) if a Borrower Party which is a party to a Material Document fails to comply with any material obligation under it or an event of default by it (however described) after the expiry of any applicable grace period occurs under it which would have a Material Adverse Effect; 35 41 (h) (CROSS DEFAULT - US CREDIT AGREEMENT) an 'Event of Default' (as defined in the US Credit Agreement); (i) (CROSS DEFAULT - PENFORD DEBENTURE TRUST DEED) an 'Event of Default' (as defined in the Penford Debenture Trust Deed); (j) (JUDGMENT) judgment is obtained against a Borrower Party for an amount which together with other outstanding judgments against the Borrower Party exceed $1,000,000 or its equivalent and which in each case have not been stayed within 10 Business Days of the date of the judgment; (k) (SECURITY INTEREST) any Security Interest over an asset of a Borrower Party is enforced or becomes enforceable; (l) (INSOLVENCY) a Borrower Party: (i) is insolvent within the meaning of section 95A of the Corporations Law; (ii) is taken to have failed to have complied with a statutory demand under section 459F of the Corporations Law; or (iii) must be presumed by a court to be insolvent under section 459C of the Corporations Law; (m) (GROUNDS FOR WINDING UP) a circumstance specified in section 461 of the Corporations Law occurs with respect to any Borrower Party; (n) (WINDING UP) (i) an order is made for the Winding Up of any Borrower Party; (ii) proceedings are commenced or an application is made for the Winding Up of any Borrower Party and not withdrawn or dismissed within 10 Business Days; or (iii) an effective resolution is passed or a meeting is summoned or convened to consider a resolution for the Winding Up of any Borrower Party, except with the consent of the Agent (acting on the instructions of the Required Lenders); (o) (EXTERNAL ADMINISTRATOR) an External Administrator is appointed to any Borrower Party or any of its assets or any step is taken to do so or any Borrower Party or Related Entity requests such appointment; (p) (ENFORCEMENT PROCEEDINGS) execution or distress takes place or is attempted or an order to execute a judgment (however described) is made against any Borrower Party or any of its assets; 36 42 (q) (CREDITORS) any Borrower Party stops or suspends payment to creditors generally or enters into an arrangement, assignment or composition with or for the benefit of its creditors generally or any class of them or proposes to do so; (r) (DEREGISTRATION) a step is taken under section 601AA, 601AB or 601AC of the Corporations Law to cancel the registration of any Borrower Party; (s) (ANALOGOUS EVENT) anything analogous or having a similar effect to an event listed in paragraphs (m) - (r) above occurs; (t) (INVESTIGATION) a person is appointed under any legislation to investigate any part of the affairs of any Borrower Party and that investigation in the opinion of the Agent (acting on the instructions of the Required Lenders) would have or be likely to have a Material Adverse Effect; (u) (BUSINESS STOPPED OR CHANGED) a Borrower Party stops or threatens to stop carrying on its business or a material part of it or substantially changes the nature of its business without the consent of the Agent (acting on the instructions of the Required Lenders); (v) (CAPITAL REDUCTION AND FINANCIAL ASSISTANCE) a Borrower Party: (i) takes action to reduce its share capital (other than by redeeming redeemable preference shares) or to buy back its shares; or (ii) passes a resolution of the type referred to in section 254N(1) or 260B of the Corporations Law, or a meeting to consider such a resolution is summoned or convened, without the consent of the Agent (acting on the instructions of the Required Lenders); (w) (AUTHORISATION) any Authorisation which is: (i) necessary for the execution, delivery or performance by a Borrower Party, or the validity or enforceability, of a Relevant Document; (ii) material to the conduct by a Borrower Party of its business; or (iii) necessary for the effectiveness as a Security Interest (with the priority contemplated in it) of each Collateral Security, is not obtained or maintained on terms acceptable to the Agent (acting on the instructions of the Required Lenders) or is revoked without being replaced within 10 Business Days; (x) (UNENFORCEABILITY): (i) all or any material part of any Relevant Document is terminated, void, avoided, illegal, invalid, unenforceable or limited in its effect; or (ii) any party has the right to terminate, rescind or avoid all or part of any Relevant Document, 37 43 or any party other than a Financier or the Agent so alleges; (y) (CHANGE OF CONTROL) there is any change in shareholding or change in control of the Borrower; (z) (CHANGE IN CONSTITUENT DOCUMENTS) any Borrower Party changes its constituent documents in a material respect without the consent of the Agent (acting on the instructions of the Required Lenders); (aa) (ACTION BY PUBLIC AUTHORITIES OR BREACHES OF LAW OR OF AUTHORISATION) (i) any Public Authority takes any action; (ii) there is any claim or requirement of substantial expenditure or alteration of activity under, or breach of, any law; or (iii) there is any breach of any Authorisation, which the Agent declares (acting on the instructions of the Required Lenders) would have or be likely to have a Material Adverse Effect or any circumstance arises which may give rise to any such action, claim, requirement or breach; or (bb) (APPROPRIATION) (i) all or a material part of the assets of a Borrower Party are compulsorily acquired by a Public Authority or a Public Authority orders the sale or divestiture of those assets; or (ii) a Public Authority gives notice to a Borrower Party to do so; or (cc) (MATERIAL ADVERSE EFFECT) an event or series of events (whether related or not) occurs which the Agent declares (acting on the instructions of the Required Lenders) would have or be likely to have a Material Adverse Effect; or (dd) (LETTER OF CREDIT) if a replacement Letter of Credit is not issued prior to 5 Business Days before the expiry of the then current Letter of Credit. 19.2 EFFECT OF EVENT OF DEFAULT (a) If an Event of Default occurs, the Agent (on the instructions of the Required Lenders) may by notice to the Borrower: (i) declare that the Secured Money is immediately due and payable; (ii) cancel the whole or any part of the Total Commitment with immediate effect; or (iii) do both. The Agent may do any of the above even though Bills accepted and discounted under this document remain outstanding on that date. 38 44 (b) On receipt of a notice under paragraph (a)(i), the Borrower must immediately pay the Secured Money (including the Outstanding Bill Amount) to the Agent. 20. INCREASED COSTS 20.1 INCREASED COSTS If a Participant determines in good faith that, as a result of the introduction or commencement of, or an amendment to, or a change in or in the interpretation or administration by any Public Authority of: (a) any law (including in relation to Tax), order, treaty or official policy, directive or request; or (b) any prudential or other requirement or guideline of any central bank or other Public Authority, (each an 'INCREASED COSTS EVENT') there is any direct or indirect: (c) increase in the cost to the Participant of providing, funding or maintaining financial accommodation or otherwise performing its obligations under any Financing Document; and/or (d) reduction in the effective return to the Participant in connection with the Financing Documents, then the Participant must promptly notify the Agent, who must in turn notify the Borrower ('INCREASED COSTS NOTICE'), and the Borrower must within 15 days pay to the Agent (on account of the Participant) on demand from time to time any additional amounts which the Participant certifies are necessary to compensate the Participant for the increased cost or reduction in return. The notification by the Participant must state in reasonable detail the reasons for the Increased Costs Event and the additional amount required to compensate the Participant. This clause applies to an Increased Costs Event even if it does not have the force of law provided that compliance with its subject matter is customary practice for responsible bankers or financial institutions in the applicable country. 20.2 METHOD OF CALCULATION In determining amounts payable under this clause, a Participant may use averaging and attribution methods commonly used by the Participant or any other reasonable averaging or attribution method. 21. ILLEGALITY If any introduction of or change in a law, regulation or an official directive or request which has the force of law or compliance with which is in accordance with the practice of responsible bankers or a change in its interpretation or administration after the date of this document makes it unlawful or impossible for a Participant to procure, fund, 39 45 provide or maintain funding or otherwise observe its obligations under the Financing Documents: (a) the Participant must use reasonable endeavours to provide its funding by some alternative means (including transferring its rights and obligations to another financial institution acceptable to the Borrower); and (b) if the Participant advises the Agent that no alternative means are available, the Agent must use reasonable endeavours to arrange a transfer of the relevant Participant's rights and obligations in accordance with the requirements of the Intercreditor Agreement (either to another Participant or another transferee); and (c) if a transfer cannot be arranged within 20 Business Days, the relevant Participant may, by notice to the Borrower require that the Borrower prepay (on the last day before the illegality or impossibility arises or the Business Day following 10 Business Days after delivery of the notice, whichever is the later), the Participant's participation in the Outstanding Bill Amount. 22. FEES 22.1 COMMITMENT FEE The Borrowers must pay to the Agent a commitment fee determined in accordance with Schedule 7 on the average daily balance of the unused portion of each Participant's Commitment and of the Overdraft Facility. The fee is payable quarterly in arrears on the last days of February, May, August and November and on the Termination Date. 22.2 ROLLOVER FEE The Borrower must pay to the Agent on account of the Participants a rollover fee of $20 for each Drawing which is rolled over pursuant to a Rollover Notice. 22.3 FEES NON-REFUNDABLE All fees payable under this document are non-refundable. 23. COSTS AND EXPENSES Subject to agreement between the parties, the Borrower must immediately pay on demand all costs and expenses of each Financier, the Agent, a Receiver and an Attorney relating to or in connection with: (a) the negotiation, preparation, execution, delivery, registration and completion of, payment of Taxes on, and drawdown of amounts under, any Financing Document; (b) any variation or discharge of any Financing Document; (c) the exercise, enforcement, protection or waiver, or attempted exercise, enforcement or protection, of any Power; 40 46 (d) obtaining or receiving payment of any of the Secured Money and its distribution; (e) an Event of Default or Potential Event of Default; (f) the giving by it of a consent or approval in connection with the Financing Documents; (g) any enquiry by any Public Authority concerning a Borrower Party, the use of the Facilities or the involvement of the Financier in the Financing Documents; (h) maintaining, preserving or protecting the Secured Property; (i) surveying, valuing, inspecting or reporting on the Secured Property; and (j) obtaining advice from a professional person or consultant about any matter of concern to the Financier, the Agent, a Receiver or an Attorney in connection with a Financing Document; and including any legal costs and expenses (on a full indemnity basis), any professional consultant's fees and the costs (calculated on a time employed basis) of in-house legal counsel. All costs and expenses under paragraphs (a), (b), (d), (f), (g), (h), (i) and (j) will be reasonable unless paragraphs (c) or (e) also apply. Nothing in this clause shall make the Issuer liable to pay any costs or expenses to the extent that such costs and expenses are recoverable by the claimant or its representative as an input credit under GST Law. 24. TAXES 24.1 BORROWER TO PAY TAXES The Borrower must pay, or immediately on demand reimburse each Financier, for, all Taxes which may be payable or determined to be payable by that Financier and which are paid in connection with any Financing Document or a payment, receipt, supply of goods or services or other transaction contemplated by or carried out under or pursuant to any Financing Document, including Taxes passed onto that Financier by another financial institution or supplier of goods and services. 24.2 FINES AND PENALTIES The Borrower must pay all fines and penalties for late payment or non-payment of the Taxes referred to in clause 24.1 (Borrower to pay Taxes) except where the Borrower places the Agent in cleared funds to make the payment not less than 5 Business Days prior to the due date and the relevant Financier fails to make the payment. 41 47 25. GENERAL INDEMNITY The Borrower must immediately indemnify each Financier on demand against any Loss by the Financier (and, in the case of paragraph (g) below, any of its officers) in respect of any of the following: (a) a Drawing required by a Drawdown Notice or a Rollover Notice not being made for any reason including any failure by the Borrower to fulfil any condition precedent contained in this document, but excluding any default by the Financier; (b) the occurrence of any Potential Event of Default or Event of Default; (c) the exercise or attempted exercise by the Financier of any Power; (d) any prepayment of all or part of a Drawing; (e) any payment required under a Financing Document not being made on its due date; (f) any Environmental Liability; (g) the Financier acting in good faith on any notice or communication from, or genuinely believed to be from, a Borrower Party; and (h) reliance by the Financier on information supplied by or on behalf of a Borrower Party which proves to be a misrepresentation or to be misleading or deceptive, including: (i) all reasonable legal costs and expenses in connection with the above on a full indemnity basis; and (j) any Loss (including loss of profit) by the Financier in terminating, reversing or varying any agreement (including a Derivative Transaction), in repaying amounts obtained by the Financier to fund a Facility or in re-deploying or re-investing any funds held or contracted for, other than any Loss arising from the gross negligence or fraud of the Agent or a Participant. 26. DEFAULT INTEREST 26.1 DEFAULT INTEREST (a) The Borrower must immediately on demand pay to the Agent interest on any of the Secured Money which is due and payable by them and not paid. The interest is to be paid to the Agent on account of the party to which the money is owed. (b) Interest payable under paragraph (a) is calculated: 42 48 (i) up to the date of actual payment from and including the due date or, in the case of an amount payable by way of reimbursement or indemnity, the date of disbursement or Loss, if earlier ('CALCULATION DATE'); and (ii) at the rate ('DEFAULT RATE') determined by the Agent as at the Calculation Date and then at monthly intervals, as the higher of: (A) if the Borrower Party's liability is the subject of a judgment or order, the rate payable under that judgment or order; and (B) the sum of the Applicable Margin, the Bank Bill Rate for Bills having a term of 1 month, and 2% per annum. 26.2 INTEREST FOLLOWING JUDGMENT If a Borrower's liability under a Financing Document is the subject of a judgment or order, the obligation to pay interest under this clause is an obligation separate from the judgment or order and will subsist despite the making of the judgment or order. 26.3 CAPITALISATION Interest payable under this clause that has not been paid may be capitalised by the Agent at intervals of not less than 1 month as determined by the Agent from time to time. Capitalised interest will itself bear interest at the Default Rate from the date of capitalisation up to and including the date of actual payment. 27. AGENT (a) The Intercreditor Agreement sets forth certain provisions with respect to the appointment and duties of the Agent and the Agent's relationship with the Participants. (b) The Participants may, with the agreement of the Required Lenders, by notice in writing given by each Participant remove the Agent and appoint another person as Agent. Such appointment shall be effective from the time the outgoing Agent receives such notice. 28. ASSIGNMENT AND SUBSTITUTION 28.1 BY BORROWER The Borrower may not assign or otherwise deal with their rights under this document without the consent of the Agent (acting on the instructions of the Required Lenders). 28.2 BY PARTICIPANTS A Participant may assign or otherwise deal with its rights and benefits under the Financing Documents: (a) only pursuant to the terms of the Intercreditor Agreement; and 43 49 (b) if it notifies the Borrower and the Agent; (c) if all necessary prior Authorisations are obtained; and (d) if in the case of a transfer of obligations: (i) the transfer is effected by a substitution in accordance with this document; and (ii) if the substitution relates to part only of a Participant's participation in the Bill Facility, it must (whether alone or combined with other substitutions effected under this clause at or about the same time) result in both the substituting Participant and the incoming Participant having a Commitment which is not less than $5,000,000 and an integral multiple of $1,000,000; and (iii) the Borrower has consented to the substitution (which consent will not be unreasonably withheld and will be taken to have been given if no response is received within 15 Business Days of request for the consent). 28.3 SUBSTITUTION (a) A Participant may only substitute another financial institution for its participation in the Bill Facility in accordance with the provisions of the Intercreditor Agreement. (b) If a Participant wishes to substitute another financial institution for all or part of its participation in the Bill Facility, it and the proposed substitute must execute and deliver to the Agent 5 counterparts of a Substitution Certificate. (c) Subject to paragraph (d), on receipt of the Substitution Certificate, the Agent must (if it is satisfied that the substitution complies with this clause 28) promptly: (i) notify the Borrower and the other Participants; (ii) countersign in the place of delivery of the certificate the counterparts on behalf of all other parties to this document; (iii) enter the substitution in a register kept by it (which will be conclusive evidence of the fact of the substitution); and (iv) retain one counterpart and deliver the others to the substituting Participant, the incoming Participant and the Borrower. (d) Each party to this document for valuable consideration irrevocably authorises each of the Agent and its Authorised Officers separately to execute each Substitution Certificate on its behalf. (e) Unless the Agent otherwise agrees, no substitution may be made while a Drawdown Notice or Rollover Notice is current. 44 50 28.4 TRANSFEROR RELEASED FROM OBLIGATIONS The Participant will be released from any obligations transferred by it under clause 28.2 (By Participants) on the transfer taking effect. 28.5 SUB-PARTICIPATION, SECURITISATION AND CREDIT DERIVATIVE PERMITTED Nothing in this clause 28 prevents: (a) a Participant granting by way of sub-participation (being the entry by the Participant into contractual relations with a person in relation to the Financing Documents without conferring any rights under the Financing Documents) of all or part of the Participant's rights under the Financing Documents; or (b) a Participant transferring all or part of its rights under a Financing Document (by way of an equitable assignment) to a securitisation vehicle established by the Participant provided the Participant remains as the financier on record and the Borrower is notified of the securitisation; or (c) a Participant entering into a credit derivative in relation to its participation in the Bill Facility. 28.6 DISCLOSURE OF INFORMATION Subject to clause 30 (Confidentiality), a Participant and the Agent may disclose to the Participant's potential assignee or transferee, or to any person proposing to enter into contractual arrangements (including sub-participations) with that Participant in relation to the Financing Documents, any information about the Borrower as the Participant or the Agent wishes. 28.7 CHANGE OF FUNDING OFFICE A Participant may at any time change its Funding Office by notifying the Agent and the Borrower of the address and facsimile number of its new Funding Office. 28.8 ASSIGNMENT OF OVERDRAFT FACILITY ANZ may only assign or otherwise deal with its rights and benefits under the Overdraft Facility in accordance with the provisions of the Intercreditor Agreement. 29. NOTICES 29.1 HOW GIVEN A notice, request, demand, approval, consent or other communication ('NOTICE') given by a party in connection with a Financing Document: (a) must be given by an Authorised Officer of the party; (b) must be in writing and in English; and 45 51 (c) must be left at the address of the addressee, or sent by prepaid ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee or sent by facsimile to the facsimile number of the addressee at: (i) in the case of the Borrower: Address: 170 Epping Road, Lane Cove, NSW 2066 Attention: Frank Ianns / Keith Fujinaga Facsimile: (02) 9418 7830; (ii) in the case of the Agent: Address: Level 13, 20 Martin Place, Sydney, NSW 2000 Attention: Ms Michelle Burke Facsimile: (02) 9227 1334; (iii) in the case of the Required Lenders, to the addresses or facsimile numbers specified in Schedule 1 of the US Credit Agreement; and (iv) in the case of a Participant, to its Funding Office address or facsimile number as specified in column 2 of Schedule 1 or in a Substitution Certificate, or if the addressee notifies another address or facsimile number, then to that address or facsimile number. 29.2 EFFECT Unless a later time is specified in it, a Notice takes effect from the time it is received. 29.3 DEEMED RECEIPT A Notice is taken to be received: (a) in the case of a posted Notice, on the third Business Day after posting for domestic mail and seventh Business Day after posting for international mail; and (b) in the case of facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient, but if the delivery or receipt is on a day which is not a business day in the place of delivery or receipt or is after 4.00pm (addressee's time), it is taken to be received at the commencement of business on the next day which is a business day in that place. 29.4 NOTICE PROVISIONS IN OTHER FINANCING DOCUMENTS This clause does not limit any provision for the giving of Notices contained in any other Financing Document. 46 52 30. CONFIDENTIALITY Confidential information provided to a Financier by the Borrower or to the Borrower by a Financier may not be disclosed to any person except: (a) with the prior consent of the party providing the information; (b) if required by law or any Public Authority or pursuant to any administrative guideline or policy (even if it does not have the force of law) which the person disclosing the information customarily complies with; (c) in connection with any action contemplated or legal proceedings taken relating to any Financing Document; (d) if the information is generally and publicly available; (e) to the auditors, legal advisers or other consultants in confidence of a Financier or the Borrower; (f) to a potential substitute Participant or sub-participant or to any other person who is considering entering into contractual relations with a Financier or Receiver in connection with the Financing Documents subject to that person undertaking in writing to observe this clause and the Agent giving prior notice to the Borrower; or (g) if permitted under a Financing Document. 31. PRESERVING THE FINANCIERS' POWERS 31.1 PRESERVATION (a) The fact that a Financier exercises, does not exercise, or delays the exercise of, any Power does not affect, or constitute a representation in relation to, the Power or any other Power. (b) Without limiting paragraph (a), the fact that a Financier exercises a Power does not prevent the Financier from exercising that Power again. (c) Unless expressly provided in a Financing Document, no Power nor any Financing Document merges in, adversely affects or is adversely affected by any other Power or Financing Document or any Security Interest, judgment or remedy which a Financier (or anyone claiming through it) may have or obtain. 31.2 NO OBLIGATION TO EXERCISE RIGHTS OR GIVE CONSENT Each Financier may: (a) exercise or not exercise any Power; (b) give or not give its consent; and (c) make or not make a decision, 47 53 under a Financing Document in its absolute discretion unless the Financing Document expressly provides otherwise. A consent given by a Financier subject to conditions does not take effect until the conditions are complied with to the satisfaction of the Financier. 31.3 POWERS (a) The Powers provided by the Financing Documents are cumulative and not exclusive of any other rights, powers, discretions or remedies provided by law. (b) Where a Power under the Financing Documents is inconsistent with a Power at law, the Financing Documents prevail to the extent permitted by law. A Power at law is not inconsistent with the Financing Documents merely because it is more extensive than a similar Power in the Financing Documents or because there is no similar Power in the Financing Documents. 31.4 CHOICE OF SECURITIES AND GUARANTEES No Financier need resort to any Security Interest, Guarantee or any other Power before resorting to any other of them. 31.5 INDEMNITIES GENERALLY (a) Each indemnity in the Financing Documents: (i) is absolute and unconditional; (ii) is a continuing obligation despite any settlement of account or the occurrence of any other thing; (iii) must be discharged without set-off, deduction, abatement, counterclaim, suspension or deferment; (iv) constitutes a separate and independent obligation of the party giving the indemnity from its other obligations under the Financing Documents; and (v) survives termination of any Financing Document. (b) It is not necessary for a Financier to incur an expense or make a payment before enforcing a right of indemnity conferred by a Financing Document. 31.6 CONSENT AND WAIVERS A consent or waiver by any Financier in relation to the Financing Documents is effective only if in writing. 31.7 AVOIDANCE OF TRANSACTION If any payment or other transaction relating to the Secured Money is void, voidable, unenforceable or defective or is claimed to be so (each an 'AVOIDANCE OF PAYMENT') and that claim is upheld or settled then: 48 54 (a) the liability of the Borrower under each Financing Document and each Power will be what it would have been but for the Avoidance of Payment; and (b) the Borrower must immediately execute all documents and do all other things necessary or required by the Agent to restore each Financier to the position it was in immediately before the Avoidance of Payment (including reinstating any Financing Document), even if a Financier knew or ought to have known that the payment or transaction was void, voidable, unenforceable or defective. 31.8 MORATORIUM LEGISLATION A moratorium does not apply to a Financing Document or the recovery of the Secured Money unless: (a) the Agent agrees in writing that it does; or (b) it cannot be excluded by law. 32. OTHER PROVISIONS 32.1 NOTIFICATION FROM BORROWER If the Borrower is required under a Financing Document to notify a Financier about anything, it must do so in writing. 32.2 FINANCIERS MAY SET OFF Without any demand or prior notice, a Financier may, if an Event of Default is subsisting, set off and apply indebtedness it owes to the Borrower (whatever the currency) against any money owing to it by the Borrower under any Financing Document: (a) whether the amount owed by the Financier or the Borrower is owed either alone or with any other person; and (b) whether or not the amount owed by the Financier or the Borrower is immediately payable. The Borrower irrevocably authorises each Financier to do anything necessary (including to sign any document and effect appropriate currency exchanges) for that purpose. If a Financier exercises any right of set-off, it will thereafter give notice of such exercise to the Borrower. If a Financier exercises a right of set off, such Financier ('PURCHASING FINANCIER) shall immediately purchase from the other Financiers sufficient participations in the Outstanding Bill Amount to cause the Purchasing Financier's interest in the Outstanding Bill Amount to be the same as it was before such set off was exercised provided, however, that if any portion of such set off amount is later recovered from the 49 55 Purchasing Financier, the purchase of the participation shall be rescinded and each other Financier shall repay to the Purchasing Financier: (a) the purchase price to the extent of such recovery; and (b) an amount equal to such other Financier's rateable share (according to the proportion of (A) the amount of such other Financier's required repayment to (B) the total amount so recovered from the Purchasing Financier) of any interest or other amount paid or payable by the Purchasing Financier in respect of the total amount so recovered. The Borrower agrees that any Purchasing Financier may, to the fullest extent permitted by law, exercise all its rights of set off against the Borrower. 32.3 BORROWER MAY NOT SET OFF The Borrower may not (either directly or indirectly) claim, exercise or attempt to exercise a right of set-off or counterclaim against a Financier (whether the right is the Borrower's or any other person's) or any other right which might have the effect of reducing the Secured Money. 32.4 NOTICES OR DEMANDS AS EVIDENCE A notice or certificate from or demand by the Agent stating: (a) that a specified sum of money is owing or payable under a Financing Document; (b) that an Event of Default has occurred; or (c) any other fact or determination relevant to the rights or obligations of a Financier or a Borrower Party under a Financing Document, is taken to be correct unless the contrary is proved. 32.5 SEVERABILITY (a) A construction of a Financing Document that results in all provisions being enforceable is to be preferred to a construction that does not. (b) If, despite the application of paragraph (a), a provision of a Financing Document is illegal or unenforceable: (i) and it would be legal, enforceable and not have a contrary meaning if words were omitted, then those words are omitted; and (ii) in any other case, the whole provision is severed, and the remainder of the Financing Document continues in force. If the provision subsequently becomes legal and enforceable, the provision will be reinstated. 50 56 32.6 ENTIRE AGREEMENT The Financing Documents contain all the terms on which the Facilities are or will be provided and supersede all prior communications. 32.7 VARIATION OF AGREEMENT A variation of a Financing Document must be in writing and signed by or on behalf of each party to it. 32.8 AUTHORISED OFFICERS AND COMMUNICATIONS The Borrower irrevocably authorises each Financier to rely on: (a) a certificate by any person purporting to be a director or secretary of the Borrower as to the identity and signatures of its Authorised Officers. The Borrower warrants that those persons have been authorised to give notices and communications under or in connection with the Financing Documents; and (b) any notice or other document contemplated by any Financing Document which bears the purported signature (whether given by facsimile or otherwise) of an Authorised Officer of the Borrower. 32.9 COMMUNICATIONS AND PAYMENTS THROUGH AGENT Unless otherwise expressly provided in a Financing Document, all communications between the Borrower and a Participant concerning, and all payments under, the Financing Documents are to be with or through the Agent. 32.10 CONFLICT If the terms of this document conflict with another Financing Document, the terms of this document prevail. 32.11 TERM OF OBLIGATIONS Each obligation of the Borrower in the Financing Documents continues from the date of the relevant document until the Secured Money is fully and finally repaid. 32.12 SUSPENSE ACCOUNT (a) The Agent may credit money received in or towards satisfaction of the Secured Money (including dividends received in any Insolvency) to a suspense account. The Agent may keep the money in that account for as long as, and at whatever interest rate, the Agent thinks fit. The Agent may apply the money (including interest) to reduce the Secured Money whenever it thinks fit. (b) If the Secured Money has been fully and finally paid or discharged and the Agent is satisfied that such payment or discharge is not liable to be set aside, avoided or reversed, then the balance standing to the credit of the suspense account and any accrued interest will be paid to or for the account of the Borrower and no Financier will have any further liability in relation to it. 51 57 32.13 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS (a) This document is governed by the laws of New South Wales. (b) Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales. Each party waives any right it has to object to an action being brought in those courts, including by claiming that the action has been brought in an inconvenient forum or that those courts do not have jurisdiction. (c) Without preventing any other mode of service, any document in an action or process may be served on any party by being delivered to or left for that party at its address for service of notices under this document. 32.14 APPOINTMENT OF ATTORNEY The Borrower for valuable consideration irrevocably appoints the Agent and each Authorised Officer of the Agent separately as its attorney to do any one or more of the following on the Borrower's behalf and in the name of the Borrower or the attorney on the occurrence of an Event of Default: (a) anything which the Borrower must do under a Financing Document or under law in connection with a Financing Document; (b) anything which, in the opinion of the attorney, gives effect to a Power or its exercise; (c) anything which the attorney considers necessary or expedient for giving effect to or perfecting any Financing Document; and (d) prove in the Insolvency of any Borrower Party, including executing any documents, and the Borrower agrees to ratify anything done by an attorney under this appointment. 32.15 ATTORNEYS APPOINTED UNDER THIS DOCUMENT - GENERAL PROVISIONS (a) An Attorney may delegate its powers (including the power to delegate) to any person for any period and may revoke the delegation. (b) Each appointment of attorney under this document by a Borrower is made to secure the performance by the Borrower of the Borrower's obligations under each Financing Document to which it is party. 32.16 ATTORNEYS Each attorney signing this document under a power of attorney certifies, by the attorney's signature, that the attorney has no notice of the revocation of the power of attorney. 52 58 32.17 COUNTERPARTS This document may be executed in any number of counterparts. 53 59 SCHEDULE 1 - PARTICIPANTS
NAME OF PARTICIPANT FUNDING OFFICE COMMITMENT - ------------------- -------------- ---------- Australia and New Zealand Banking Level 13, 20 Martin Place, $19,193,857 as Group Limited Sydney, NSW 2000 adjusted from time to time pursuant to the Facsimile: (02) 9227 1334 Intercreditor Attention: Ms Michelle Burke Agreement
54 60 SCHEDULE 2 - CONDITIONS PRECEDENT TO FIRST DRAWING (CLAUSE 6.1(a)(i)) The following is the list of items referred to in clause 6.1: (a) (VERIFICATION CERTIFICATES) a verification certificate from each Borrower Party in the form of Schedule 6 and attaching the documents referred to in the certificate, duly completed and dated not earlier than 2 Business Days prior to the first Drawdown Date; (b) (FINANCING DOCUMENTS) each Financing Document, properly executed and, if applicable, in registrable form together with, if applicable: (i) all things (including documents) necessary to pay any Taxes on and register the Financing Document; and (ii) sufficient same day funds to enable the payment of any Taxes chargeable on it; (c) (MATERIAL DOCUMENTS) a certified copy of each Material Document properly executed, registered and having had all Taxes paid on it (as applicable); (d) (DOCUMENTS OF TITLE) all title deeds relating to real property owned by each Borrower Party; (e) (INSURANCE) evidence that all insurance required by the Financing Documents is in place; (f) (SEARCHES AND ENQUIRIES) the results of all searches and enquires required by the Agent with respect to the Borrower and the Secured Property; (g) (FINANCIAL ASSISTANCE) evidence satisfactory to the Agent that all conditions and requirements under section 260B of the Corporations Law have been complied with; (h) (FIRB) certified copies of the application to and approval from the Australian Treasurer in relation to the acquisition by Penford Holdings of the Borrower; (i) (LETTER OF CREDIT) the Letter of Credit; (j) (LEGAL OPINION) a legal opinion issued by Baker & McKenzie in relation to the enforceability of the Financing Documents governed by Australian law; (k) (LEGAL OPINION) a legal opinion issued by KPMG Legal New Zealand in relation to the enforceability of the Financing Documents governed by New Zealand law; and (l) (INTERCREDITOR AGREEMENT) the Intercreditor Agreement. 55 61 SCHEDULE 3 - DRAWDOWN NOTICE (CLAUSE 7.1) Date: [ ] To: Australia and New Zealand Banking Group Limited Level 9 20 Martin Place Sydney, NSW 2000 Attention: Ms Michelle Burke SYNDICATED FACILITY AGREEMENT DATED [ ] 2000 ('FACILITY AGREEMENT') 1. We give you irrevocable notice that we wish to draw an amount of $[ ] in aggregate on [ ] 20[ ] ('DRAWDOWN DATE'). 2. Particulars of each Drawing required are as follows:
FACE VALUE FUNDING PERIOD ---------- -------------- [ ] [ ]
3. We request that the proceeds of each Drawing be remitted to account number [ ] at [ ] [INSERT ALTERNATIVE INSTRUCTIONS, IF REQUIRED]. 4. We represent and warrant that: (a) [(except as disclosed in paragraph (c))] the representations and warranties in the Facility Agreement are true as though they had been made at the date of this Drawdown Notice and the Drawdown Date specified above in respect of the facts and circumstances then subsisting; (b) [(except as disclosed in paragraph (c))] no Event of Default or Potential Event of Default is subsisting or will result from the provision of the Drawing/s; [and] (c) details of the exceptions to paragraphs (a) and (b) are as follows: [ ], and we [have taken][propose] the following remedial action: [ ]. We acknowledge that inclusion of a statement under paragraph (c) will not prejudice the rights of the Financiers under the Facility Agreement, including under clauses 6.2 (Conditions precedent to all Drawings) and 19 (Events of Default), or affect the operation of clause 16.2 (Representations and warranties repeated). Expressions defined in the Facility Agreement have the same meaning in this Drawdown Notice. For and on behalf of PENFORD AUSTRALIA LIMITED - ---------------------------------- Authorised Officer Name: Title: 56 62 SCHEDULE 4 - ROLLOVER NOTICE (CLAUSE 7.2) Date: [ ] To: Australia and New Zealand Banking Group Limited Level 9 20 Martin Place Sydney, NSW 2000 Attention: Ms Michelle Burke SYNDICATED FACILITY AGREEMENT DATED [ ] 2000 ('FACILITY AGREEMENT') 1. We give you irrevocable notice that we wish to redraw an amount of $[ ] in aggregate on [ ] 20[ ] ('ROLLOVER DATE'). 2. Particulars of each Drawing required are as follows:
FACE VALUE FUNDING PERIOD ---------- -------------- [ ] [ ]
3. We represent and warrant that: (a) [(except as disclosed in paragraph (c))] the representations and warranties in the Facility Agreement are true as though they had been made at the date of this Rollover Notice and the Rollover Date specified above in respect of the facts and circumstances then subsisting; (b) [(except as disclosed in paragraph (c))] no Event of Default or Potential Event of Default is subsisting or will result from the provision of the Drawing/s; [and] (c) details of the exceptions to paragraphs (a) and (b) are as follows: [ ], and we [have taken][propose] the following remedial action: [ ]. We acknowledge that inclusion of a statement under paragraph (c) will not prejudice the rights of the Financiers under the Facility Agreement, including under clauses 6.2 (Conditions precedent to all Drawings) and 19 (Events of Default), or affect the operation of clause 16.2 (Representations and warranties repeated). Expressions defined in the Facility Agreement have the same meaning in this Rollover Notice. For and on behalf of PENFORD AUSTRALIA LIMITED - ----------------------------------- Authorised Officer Name: Title: 57 63 SCHEDULE 5 - SUBSTITUTION CERTIFICATE (CLAUSE 28.3) BETWEEN [ ] ('INCOMING PARTICIPANT') AND [ ] ('SUBSTITUTING PARTICIPANT') AND AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 of Level 9, 20 Martin Place, Sydney, NSW 2000 ('AGENT') for itself and on behalf of each other party to the Financing Documents to which the Substituting Participant is a party. RECITALS A. The Substituting Participant, the Agent, Penford Australia Limited ACN 003 780 229 and others are party to a syndicated facility agreement dated [ ] ('FACILITY AGREEMENT'). B. The Incoming Participant wishes to assume [part][all] of the participation of the Substituting Participant in the Bill Facility. AGREEMENT 1. INTERPRETATION 1.1 DEFINITIONS In this Certificate, expressions defined in the Facility Agreement have the same meaning and: 'SUBSTITUTED PARTICIPATION' means $[ ] of the [Available] Commitment of the Substituting Participant [and $[ ] of its participation in the Outstanding Bill Amount]. 'SUBSTITUTION DATE' means [the date of countersignature of this Certificate by the Agent or [ ], whichever is the later] or [SPECIFY DATE OR DATES AS APPROPRIATE]. 1.2 INTERPRETATION Clause 1.2 (Interpretation) of the Facility Agreement applies to this Certificate. 2. SUBSTITUTION 2.1 RELEASE OF SUBSTITUTING PARTICIPANT The Substituting Participant ceases to be entitled to and bound by its rights and obligations as a Participant under the Financing Documents [TO THE EXTENT TO WHICH THEY RELATE TO THE SUBSTITUTED PARTICIPATION - INSERT IF ONLY PART OF COMMITMENT ASSUMED] with effect from and including the Substitution Date, but remains entitled to and bound by rights and obligations which accrue up to the Substitution Date. 58 64 2.2 ASSUMPTION BY INCOMING PARTICIPANT With effect from and including the Substitution Date: (a) the Incoming Participant and each of the parties to the Financing Documents assume obligations towards each other and acquire rights against each other which are identical to the rights and obligations which cease under clause 2.1 (Release of Substituting Participant) (except so far as the obligations assumed and rights acquired relate to the identity of or location of the Incoming Participant); and (b) the Incoming Participant is entitled to the benefit of each Financing Document as a Participant with [a/an] [Available] Commitment [and participation in the Outstanding Bill Amount] equal to the Substituted Participation. 3. INDEPENDENT ASSESSMENT BY INCOMING PARTICIPANT Without limiting the generality of clause 2 (Substitution), the Incoming Participant agrees and acknowledges that it has independently investigated the status, business and financial condition of the Borrower. In particular, it has not relied, and will not rely, on any other Financier in that respect. 4. PAYMENTS From and including the Substitution Date, the Agent will make all payments due under the Financing Documents in relation to the Substituted Participation to the Incoming Participant. The Substituting Participant and the Incoming Participant will make directly between themselves any payments and adjustments as they may agree with respect to accrued interest, fees, costs and other amounts attributable to the Substituted Participation prior to the Substitution Date. 5. OUTSTANDING BILLS (a) The Incoming Participant is taken to have accepted any outstanding Bills accepted by the Substituting Participant included in the Substituted Participation. The Incoming Participant must on demand unconditionally indemnify the Substituting Participant against any liabilities of the Substituting Participant as acceptor of the Bills. (b) The indemnity of the Borrower in clause 10.7 (Indemnity and cash cover) of the Facility Agreement extends to any liability of the Incoming Participant under this clause. 6. WARRANTY Each of the Substituting Participant and the Incoming Participant represents and warrants to the other parties that clause 28.2 (By Participants) of the Facility Agreement has been complied with in relation to the Incoming Participant. 7. NOTICES The Funding Office and address for notices of the Incoming Participant is as follows: 59 65
ADDRESS FACSIMILE ATTENTION ------- --------- --------- [ ] [ ] [ ]
8. LAW This Certificate is governed by the laws of [ ]. SIGNED in SUBSTITUTING PARTICIPANT SIGNED by [ ] ) as attorney for [SUBSTITUTING PARTICIPANT] ) under power of attorney dated ) [ ] ) in the presence of ) - -------------------------------------------- ------------------------------- Signature of witness - -------------------------------------------- Name of witness (print) INCOMING PARTICIPANT SIGNED by [ ] ) as attorney for [INCOMING PARTICIPANT] under ) power of attorney dated ) [ ] ) in the presence of ) - -------------------------------------------- ------------------------------- Signature of witness - -------------------------------------------- Name of witness (print) 60 66 AGENT Countersigned by an Authorised Officer of the Agent for itself and on behalf of the other parties to the Financing Documents: - ------------------------------------- Authorised Officer of Agent Dated: ------------------------------- 61 67 SCHEDULE 6 - VERIFICATION CERTIFICATE (ITEM (a) OF SCHEDULE 2) To: Australia and New Zealand Banking Group Limited Level 9 20 Martin Place Sydney, NSW 2000 Attention: Ms Michelle Burke I, [INSERT NAME] am [a director][the secretary] of Penford Australia Limited ACN 003 780 229 ('COMPANY'). This certificate is given to you in your own right and as agent for the Participants. I refer to the syndicated facility agreement ('FACILITY AGREEMENT') to be entered into on or about the date of this certificate between Australia and New Zealand Banking Group Limited ACN 005 357 522, the Company and others. Expressions defined in the Facility Agreement have the same meaning in this Certificate. I CERTIFY as follows: 1. DOCUMENTS Attached to this certificate are true, complete and up-to-date copies of each of the following: (a) CONSTITUENT DOCUMENTS: the constituent documents and certificate of registration of the Company in force today and as at the time the meetings referred to in paragraph 1(d) were held (marked 'A'); (b) POWER OF ATTORNEY: a duly executed power of attorney granted by the Company authorising execution of the Financing Documents to which it is a party (marked 'B'); (c) OFFICERS: those forms lodged or to be lodged with the Australian Securities & Investments Commission in accordance with section 205B or 601CV of the Corporations Law, which evidence the appointment and date of appointment of the current officers of the Company (marked 'C'); and (d) MINUTES: an extract of minutes of a meeting of the directors of the Company approving execution of the Financing Documents to which it is a party, the granting of the power of attorney referred to in paragraph (b) above and the appointment of the Authorised Officers referred to in paragraph 6 below (marked 'D'). 62 68 2. NO REVOCATION AND OBSERVANCE OF FORMALITIES Each of the: (a) power of attorney referred to in paragraph 1(b); and (b) resolutions contained in the minutes referred to in paragraph 1(d); and (c) documents referred to in paragraphs 1(a) and (c), is in full force and effect and has not been revoked or suspended. Nor has it been amended or modified. All provisions in the Corporations Law and the constitution of the Company relating to the declaration of directors' interests and the powers of interested directors to vote were duly observed at or before the meeting referred to in paragraph 1(d). There are no Authorisations necessary or desirable to be obtained by the Company in connection with the execution, delivery, performance, validity or enforceability of the Financing Documents to which it is party which have not been obtained. 3. CORPORATE AUTHORISATION (a) At a meeting of the board of directors of the Company, resolutions were duly passed to: (i) authorise the Company to enter into the Financing Documents; (ii) authorise and direct the execution by the Company of the power of attorney referred to in paragraph 1(b) as a deed; and (iii) appoint the persons listed in paragraph 6 as the Authorised Officers of the Company. (b) It was also resolved at that meeting that entering into the Financing Documents is in the Company's best interests and for its benefit. (c) The resolutions referred to in paragraphs (a) and (b) were duly passed at a properly convened and properly held meeting of duly appointed directors of the Company at which a quorum of directors entitled to vote was present and acting. (d) All provisions in the Corporations Law and the constitution of the Company relating to the declaration of directors' interests and the powers of interested directors to vote were duly observed at or before the meeting referred to in paragraphs (a) and (b). 4. SOLVENCY DECLARATION The Company is able to pay all of its debts as and when they become due and payable and there are no grounds for suspecting that it will not continue to be able to do so after entering into the Financing Documents (and incurring any other liability which it proposes to incur around the time it enters into them). 63 69 5. FINANCIAL ASSISTANCE RESOLUTION The entry by the Company into the transaction evidenced by the Financing Documents is permitted under section 260A of the Corporations Law because the financial assistance has been approved by shareholders under section 260B of the Corporations Law, and all other requirements under section 260B have been complied with. Attached as annexure 'A' is an extract of the minutes of the general meeting of the Company resolving to provide the financial assistance. 6. AUTHORISED OFFICERS The following are the signatures of the Authorised Officers of the Company:
NAME POSITION SIGNATURE ---- -------- --------- [ ] [ ] [ ]
Signed: - -------------------------------------------------- Director/Secretary - -------------------------------------------------- Name in full (please print) DATED: [ ] 64 70 SCHEDULE 7 - APPLICABLE MARGIN AND COMMITMENT FEE (CLAUSES 1.1 AND 22.1) The Applicable Margin shall be the rate per annum set forth in the table below opposite Leverage Ratio.
LEVEL APPLICABLE MARGIN BASIS COMMITMENT FEE APPLICABLE MARGIN BASIS POINTS POINTS FOR BILL FACILITY FOR OVERDRAFT FACILITY - -------------- --------------------------- ---------------- -------------------------------- Level I 175 30 50 Level II 200 35 75 Level III 225 40 100
In this Schedule: "LEVEL I" applies on any day after the Reporting Date if, on such day, the applicable Leverage Ratio is less than or equal to 2:1. "LEVEL II" applies on any day after the Reporting Date if, on such day, the applicable Leverage Ratio is greater than 2:1 and less than or equal to 2.5:1. "LEVEL III" applies until the Reporting Date and on any day thereafter if, on such day, the applicable Leverage Ratio is greater than 2.5:1. Levels I, II and III shall be determined in the manner specified in Schedule III of the US Credit Agreement and 'Reporting Date' has the meaning given in that Schedule. 65 71 EXECUTED as an agreement BORROWER SIGNED SEALED AND DELIVERED ) by Renu Gupta ) as attorney for PENFORD AUSTRALIA LIMITED ) under power of attorney ) dated 13/11/2000 ) in the presence of ) /s/ Andrew Nafranowicz /s/ Renu Gupta - ----------------------------------------------- -------------------------------------------- Signature of witness Andrew Nafranowicz - ----------------------------------------------- Name of witness (print) AGENT SIGNED SEALED and DELIVERED by AUSTRALIA AND ) AUSTRALIA AND NEW ZEALAND BANKING GROUP NEW ZEALAND BANKING GROUP LIMITED by its ) LIMITED by its Agent . . . Janet Mullins Agent . . . Janet Mullins. . . . . . . . . . ) pursuant to the terms of the Deed Poll dated ) 14 November 2000 in the presence of ) ) /s/ Andrew Nafranowicz /s/ Janet Mullins - ----------------------------------------------- -------------------------------------------- Signature of witness PARTICIPANTS SIGNED SEALED and DELIVERED by AUSTRALIA AND ) AUSTRALIA AND NEW ZEALAND BANKING GROUP NEW ZEALAND BANKING GROUP LIMITED by its ) LIMITED by its Agent . . . .Janet Mullins Agent . . . Janet Mullins. . . . . . . . . . ) pursuant to the terms of the Deed Poll dated ) 14 November 2000 in the presence of ) ) /s/ Andrew Nafranowicz /s/ Janet Mullins - ----------------------------------------------- -------------------------------------------- Signature of witness
66 EX-10.4 6 v67867ex10-4.txt INTERCREDITOR AGREEMENT 1 Exhibit 10.4 INTERCREDITOR AGREEMENT THIS INTERCREDITOR AGREEMENT is entered into as of November 15, 2000 by and among THE BANK OF NOVA SCOTIA ("Scotiabank"), KEYBANK NATIONAL ASSOCIATION ("KeyBank"), U.S. NATIONAL ASSOCIATION ("US Bank") and AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 ("ANZ") (each individually referred to as a "Lender" and all collectively referred to as "Lenders," and Scotiabank, KeyBank and US Bank each individually referred to as a "US Lender" and collectively referred to as "US Lenders"). RECITALS The US Lenders have entered into the US Facility with the US Borrowers, and ANZ has entered into the Australian Facilities with the Australian Borrowers. The Lenders desire to administer the US Facility and the Australian Facilities as if they were a single credit facility with Scotiabank acting as the administrator for the Lenders with respect to the US Facility and ANZ acting as the administrator for the Lenders with respect to the Australian Facilities. Further, the Lenders desire to grant certain rights to each other with respect to the Facilities. NOW, THEREFORE, in consideration of the mutual covenants and promises of the parties contained herein, Lenders hereby agree as follows: SECTION 1. DEFINITIONS All terms defined above shall have the meanings set forth above. The following terms shall have the meanings set forth below (with all such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ADMINISTRATIVE LENDER" means, with respect to the US Facility, Scotiabank acting as administrator thereunder for the Lenders, and with respect to the Australian Facilities, ANZ acting as administrator thereunder for the Lenders. "ASSIGNMENT AGREEMENT" shall have the meaning attributed to such term in Section 5.2. "AUD" means Australian Dollars. "AUSTRALIAN BORROWERs" means Penford Holdings, Penford Australia and Starch New Zealand Limited. "AUSTRALIAN COMMITMENTS" means the total Commitments to extend credit in AUD under the Australian Facilities. 1 2 "AUSTRALIAN FACILITIES" means the Australian Revolver Facility and the Australian Term Facility. "AUSTRALIAN REVOLVER FACILITY" means the credit facility provided for in that certain Syndicated Facility Agreement dated November 15, 2000 among Penford Australia, ANZ and certain other lenders named therein and in the "Financing Documents" (as defined in said Syndicated Facility Agreement), as said Syndicated Facility Agreement and each such Financing Document may be amended, modified or supplemented from time to time, provided, however, that in no event shall "Australian Revolver Facility" include the Letter of Offer Facilities. "AUSTRALIAN TERM FACILITY" means the credit facility provided for in that certain Debenture Trust Deed dated November 15, 2000 between Penford Holdings and ANZ Capel Court Limited ACN 004 768 807 and in the "Transaction Documents" (as defined in said Debenture Trust Deed), as said Debenture Trust Deed and each such Transaction Document may be amended, modified or supplemented from time to time. "BORROWER" means any US Borrower or Australian Borrower. "COMMITMENTS" means, with respect to each Lender, its commitments to advance credit and extend other financial accommodations under the Loan Documents. "FACILITIES" means the Australian Facilities and the US Facility. "LETTER OF CREDIT" shall have the meaning attributed to such term in the Amended and Restated Credit Agreement referenced in the definition of "US Facility." "LETTER OF OFFER FACILITIES" means all credit facilities and services extended to one or more Australian Borrowers described in the "Letters of Offer" (as defined in the Syndicated Facility Agreement referenced in the definition of "Australian Revolver Facility"). "LOAN DOCUMENTS" means this Agreement and all agreements, notes, instruments and documents evidencing the Facilities. "PERCENTAGE" means, with respect to a Lender, the percentage set forth opposite such Lender's name below, as adjusted from time to time to reflect changes resulting from one or more assignments by such Lender pursuant to Section 5.2:
LENDER PERCENTAGE ------ ---------- Scotiabank 30.7692308% KeyBank 25.0% US Bank 25.0% ANZ 19.2307692%
"PENFORD AUSTRALIA" means Penford Australia Limited ACN 003 780 229. 2 3 "PENFORD HOLDINGS" means Penford Holdings Pty. Ltd. ACN 094 279 339. "PERSON" means an individual, partnership, corporation (including, without limitation, a business trust), joint stock company, limited liability company, trust, unincorporated association, joint venture or other entity, or any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "REQUIRED LENDERS" means any Lender or Lenders not in default of its/their obligations under the Loan Documents ("Non-Defaulting Lenders") having more than 85% of the Percentages of all Non-Defaulting Lenders; provided, however, that with respect to the matters identified in Section 3 as requiring the consent of all Lenders, "Required Lenders" means all Lenders. "US$" means US Dollars. "US BORROWERS" means Penford Corporation, a Washington corporation, and Penford Products Co., a Delaware corporation. "US FACILITY" means the credit facilities advanced by the US Lenders to the US Borrowers under that certain Amended and Restated Credit Agreement dated November 15, 2000, as amended, modified or supplemented from time to time and in the "Loan Documents" (as defined in said Amended and Restated Credit Agreement). SECTION 2. ADMINISTRATIVE LENDER 2.1 APPOINTMENT AND ACTIONS (a) Each Lender hereby appoints Scotiabank as Administrative Lender with respect to the US Facility and ANZ as Administrative Lender with respect to the Australian Facilities and authorizes each Administrative Lender to perform the functions of Administrative Lender provided for in this Agreement. With respect to the Loan Documents evidencing the US Facility, Scotiabank shall perform the functions provided in such documents to be performed by the "Administrative Lender." With respect to the Loan Documents evidencing the Australian Facilities, ANZ shall perform the functions provided in such documents to be performed by the "Agent." (b) Each Lender authorizes each Administrative Lender to act on behalf of such Lender under the Loan Documents and, in the absence of other written instructions from the Required Lenders received from time to time by Administrative Lender (with respect to which Administrative Lender agrees that it will comply, except as otherwise provided in this Section 2 or as otherwise advised by counsel), to exercise such powers thereunder as are specifically delegated to, or required of Administrative Lender by the terms thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies 3 4 (which indemnity shall survive any termination of this Agreement) Administrative Lender ratably in accordance with its Percentage from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against Administrative Lender (in its capacity as an Administrative Lender) in any way relating to or arising out of the Loan Documents, including reasonable attorneys' fees (whether incurred at the trial or appellate level, in an arbitration proceeding, in bankruptcy (including, without limitation, any adversary proceeding, contested matter or motion) or otherwise), and as to which Administrative Lender is not reimbursed by Borrowers; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from Administrative Lender's gross negligence or willful misconduct. Administrative Lender shall not be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of any Loan Document, unless it is indemnified to its satisfaction. If any indemnity in favor of Administrative Lender shall be or become, in Administrative Lender's determination, inadequate, Administrative Lender may call for additional indemnification from Lenders and cease to do the acts in issue until such additional indemnity is given. 2.2 RELIANCE BY ADMINISTRATIVE LENDER Administrative Lender shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, fax, or telex) or telephonic notice believed by it in good faith to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person, and upon advice and statements of legal counsel (including any Borrower's counsel), independent accountants and other experts selected by Administrative Lender with reasonable care. As to any matters not expressly provided for by this Agreement, Administrative Lender shall not be required to take any action or exercise any discretion, but shall be required to act or to refrain from acting upon instructions of the Required Lenders and shall in all cases be fully protected by Lenders in acting, or in refraining from acting, under any Loan Document in accordance with the instructions of the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all Lenders. 2.3 EXCULPATION Neither Administrative Lender nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under any Loan Document, or in connection therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor for the creation, perfection or priority of any liens, charges or encumbrances purported to be created by any Loan Document, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by Borrowers 4 5 of their obligations under any Loan Document. Any such inquiry which may be made by Administrative Lender shall not obligate it to make any further inquiry or to take any action. Administrative Lender shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which Administrative Lender believes to be genuine and to have been presented by a proper Person. 2.4 SUCCESSOR An Administrative Lender may resign as such at any time upon at least 30 days prior notice to the other Lenders and to Penford Corporation. If an Administrative Lender at any time shall resign, the Required Lenders may appoint another Lender as a successor Administrative Lender which shall thereupon become Administrative Lender. If no successor Administrative Lender shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Lender's giving notice of resignation, then the retiring Administrative Lender may, on behalf of Lenders, appoint a successor Administrative Lender, which shall be one of Lenders or a commercial banking institution having a combined capital and surplus of at least US$500,000,000. Upon the acceptance of any appointment as Administrative Lender by a successor Administrative Lender, such successor Administrative Lender shall give Penford Corporation notice of such acceptance, shall be entitled to receive from the retiring Administrative Lender such documents of transfer and assignment as such successor Administrative Lender may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Lender, and the retiring Administrative Lender shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Lender's resignation as Administrative Lender, the provisions of this Agreement and any indemnity and expense reimbursement provision of the Loan Documents shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Lender. 2.5 LOANS BY ADMINISTRATIVE LENDER An Administrative Lender shall have the same rights and powers with respect to (x) loans and other financial accommodations made by it or any of its affiliates under the Loan Documents and (y) the promissory notes and other evidence of indebtedness under the Loan Documents held by it or any of its affiliates as any other Lender and may exercise the same as if it were not Administrative Lender. An Administrative Lender and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with any Borrower or any subsidiary or affiliate of any Borrower as if it were not an Administrative Lender. 2.6 CREDIT DECISIONS Each Lender acknowledges that it has, independently of Administrative Lenders and each other Lender, and based on such Lender's review of the financial information of Borrowers, the Loan Documents (the terms and provisions of which being satisfactory to 5 6 such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend credit under the Loan Documents and to enter into this Agreement. Each Lender also acknowledges that it will, independently of Administrative Lenders and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under any Loan Document. 2.7 COPIES, ETC. Administrative Lender shall give prompt notice to each Lender of each notice or request required or permitted to be given to Administrative Lender by any Borrower pursuant to the terms of any Loan Document (unless concurrently delivered to Lenders). Administrative Lender will distribute to each Lender each document or instrument received for its account and copies of all other communications received by Administrative Lender from Borrowers for distribution to Lenders in accordance with the terms of the Loan Documents. SECTION 3. WAIVERS, AMENDMENTS AND CONSENTS Any term, covenant, agreement or condition of any Loan Document may be amended or waived and any consent with respect thereto given if such amendment, waiver or consent is in writing and is signed by the Required Lenders (or by Administrative Lender with written consent of the Required Lenders); provided, however, that any amendment, waiver or consent which affects the rights or duties of Administrative Lender or of any Lender acting as an issuer of a letter of credit, must be in writing and be signed also by the affected Administrative Lender or Lender; and provided further, that any amendment, waiver or consent which effects any of the following changes must be in writing and signed by all Lenders (or by Administrative Lender with the written consent of all Lenders): (a) increases the maximum amount of credit available under any Loan Document; (b) extends the maturity date of any loan or other extension of credit under any Loan Document; (c) reduces the principal of, or interest (including default rate interest) on, any loan or any fees or other amounts payable for the account of Lenders under any Loan Document; (d) postpones or conditions any date fixed for any payment of the principal of, or interest on, any loan or any fees or other amounts payable for the account of Lenders under any Loan Document; (e) increases or decreases the commitment or the ratable portion thereof of any Lender (other than through an assignment by such Lender permitted under Section 5 or 6); (f) waives any of the conditions to advancement of credit set forth in any Loan Document; (g) releases any material collateral securing any obligation of any Borrower; (h) amends any of the draw conditions of any letter of credit issued by any US Lender with respect to the Australian Facilities; or (i) amends any guaranty of the obligations of any Borrower under any Loan Document (or releases any guarantor of its obligations thereunder). 6 7 SECTION 4. ENFORCEMENT OF RIGHTS All rights and remedies of the Lenders under the Loan Documents and under the Letter of Offer Facilities shall be enforced only by each Administrative Lender (with respect to that portion of the Facilities for which it is the Administrative Lender) with the consent of or upon instructions from the Required Lenders, provided that ANZ may draw against the Letter of Credit without the consent of the Required Lenders to the extent the terms of the Letter of Credit permit ANZ to draw against it without the consent of the Required Lenders. SECTION 5. PARTICIPATIONS AND ASSIGNMENTS 5.1 PARTICIPATIONS Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other financial institutions ("Participants") participating interests in any obligation owing to such Lender under any Loan Document. In the event of any such sale, (i) such Lender's obligations under the Loan Documents to the other parties to the Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible for the performance of its obligations under the Loan Documents, (iii) such Lender shall, for all purposes under the Loan Documents, remain the holder of any promissory note, debenture or other evidence of indebtedness under the Loan Documents, and (iv) Borrowers, Lenders and Administrative Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. Participants shall have no rights under the Loan Documents except as provided below. No Lender shall sell any participating interest under which the Participant shall have any right to vote on any amendment or waiver of any Loan Document; provided, however, that any agreement under which any Lender sells a participating interest to a Participant may require the selling Lender to obtain the consent of such Participant in order for such Lender to agree or consent to any action described in any of items (a) -- (i) of Section 3. No agreement under which any Lender sells a participating interest to a Participant may permit the Participant to transfer, pledge, assign, sell participations in or otherwise encumber its participating interest. If any amount outstanding under the Loan Documents is due and unpaid, a Participant may have and exercise set off rights to the extent the applicable Loan Document so provides. 5.2 ASSIGNMENTS Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time, sell and assign to any Lender, any affiliate of a Lender or any other bank or financial institution (individually, an "Assignee") all or any percentage portion of its rights and obligations under the Loan Documents as a whole, but not selected portions thereof or differing percentages regarding different portions thereof, (such a sale and assignment to be referred to herein as an "Assignment") pursuant to an Assignment and Assumption Agreement in the form of Exhibit A attached hereto (an "Assignment Agreement") executed by each Assignee and such assignor Lender (an "Assignor"), together 7 8 with such ancillary assignment documents as may be required by the various Loan Documents to the extent such ancillary assignment documents do not conflict with the Assignment Agreement; provided, however, that: (i) each Assignment shall be in a minimum amount equivalent to US$5,000,000; (ii) if the Assignment is not an assignment of Assignor's entire Commitments, Assignor maintains minimum Commitments equivalent to US$5,000,000; and (iii) each Assignment which is not to an Assignee which, immediately before such Assignment is a Lender or an affiliate thereof, shall be made only with the written consent of all Lenders, which consents shall not be unreasonably withheld, and (to the extent required by the applicable Loan Documents) Borrowers' consent. Assignor shall deliver a fully executed Assignment Agreement to each Administrative Lender. Upon the later of (i) delivery to Administrative Lenders of an executed Assignment Agreement with the requisite consents and payment of any fees payable to Administrative Lenders under the terms of the Loan Documents or (ii) the effective date provided in the Assignment Agreement, (A) each Assignee thereunder shall be a Lender with Commitments as set forth in such Assignment Agreement and shall have the rights, duties and obligations of a Lender, (B) the Assignor thereunder shall be a Lender with Commitments as set forth in such Assignment Agreement, or, if the Assignor's Commitments have been reduced to zero, the Assignor shall cease to be a Lender (except to the extent that the Assignor is entitled to any indemnification rights as provided in the Loan Documents), and (C) each Administrative Lender shall make such entries in its records of the Loan Documents as is necessary to evidence the effect of such assignment. 5.3 REGISTER Scotiabank (or its successor as Administrative Lender for the US Facility) shall maintain a copy of each fully executed Assignment Agreement and a register for the recordation of the names and addresses of Lenders and the Percentage of each Lender from time to time. The entries in the register shall be conclusive and binding for all purposes, absent manifest error. The register shall be available for inspection by any Lender at any reasonable time and from time to time upon reasonable prior notice. SECTION 6. OPTIONS 6.1 CALL OPTIONS ANZ hereby grants to each US Lender the option to acquire from ANZ by assignment an interest in the Australian Facilities equal to such US Lender's Percentage. Each US Lender hereby grants to ANZ the option to acquire from such US Lender by assignment an interest in the US Facility equal to ANZ's Percentage multiplied by such US Lender's Percentage. 6.2 PUT OPTIONS Upon notice from ANZ to the US Lenders, each US Lender shall acquire from ANZ by assignment an interest in the Australian Facilities equal to such US Lender's Percentage. 8 9 Upon notice from a US Lender to ANZ, ANZ shall acquire from such US Lender by assignment an interest in the US Facility equal to ANZ's Percentage multiplied by such US Lender's Percentage. 6.3 PRICE The purchase price for each assigned interest acquired under Section 6.1 or Section 6.2 shall be the par value of all principal, interest and fees included in such assigned interest. Acquired interests in the US Facility shall be paid for in US$, and acquired interests in the Australian Facilities shall be paid for in AUD. 6.4 EXERCISE MECHANICS (a) Any Lender desiring to exercise its rights under either Section 6.1 or Section 6.2 shall do so by giving the other Lenders notice of such exercise ("Exercise Notice"). Each transfer of an assigned interest under either Section 6.1 or Section 6.2 shall be implemented by means of an Assignment Agreement. An acquisition shall be closed within 10 days after delivery of the Exercise Notice by the selling and buying Lenders executing and exchanging counterparts of and Assignment Agreement and any other relevant assignment documents and the buying Lender paying to the selling Lender the purchase price in same day or immediately available funds. The relevant Percentages of the Lenders with respect to an acquisition shall be determined by Scotiabank as of the day immediately before the day such acquisition is closed. (b) A Lender may exercise its rights under either Section 6.1 or Section 6.2 only at one time and only with respect to all of the interests which it is entitled to purchase or sell. If an option is exercised under Section 6.1, then the corresponding option right under Section 6.2 shall expire, and if an option is exercised under Section 6.2, then the corresponding option right under Section 6.1 shall expire. If ANZ desires to exercise its rights under either Section 6.1 or Section 6.2, it must do so simultaneously with respect to all US Lenders. (c) The rights set forth in this Section 6 may be exercised notwithstanding any provision in the Loan Documents (including Section 5.2) requiring that an assignment by a Lender be in a minimum amount or minimum percentage. SECTION 7. CURRENCY FLUCTUATIONS As of June 30 and December 31 of each year and more frequently if in Scotiabank's judgment events warrant (each a "Valuation Date"), Scotiabank shall determine the value of the AUD relative to the US$ and the change in such relative value since November 15, 2000 ("Closing Date") based on conversion factors determined by Scotiabank to be reasonable. If as of a Valuation Date the Australian Commitments (expressed in US$) are either (a) less than the Australian Commitments would be if expressed in US$ based on the relative value of the AUD and the US$ as of the Closing Date (said difference being the "Negative 9 10 Commitment Differential") or (b) at least US$2,000,000 more than the Australian Commitments would be if expressed in US$ based on the relative value of the AUD and the US$ as of the Closing Date (the amount of said difference in excess of US$2,000,000 being the "Positive Commitment Differential"), then the Commitments under the Australian Revolver Facility shall be adjusted by the amount of AUD necessary to eliminate the Negative or Positive Commitment Differential as of such Valuation Date, but in no event shall such Commitments (expressed in AUD) exceed the AUD amount of such Commitments on the Closing Date. SECTION 8. MISCELLANEOUS 8.1 NOTICES All notices, requests and demands which any party is required or may desire to give to any other party under this Agreement must be in writing. Each notice shall be addressed to each Lender at its address or fax number set forth as the "Address for Notices" in Schedule I hereto, or to such other address or fax number as any Lender may designate for itself by notice to all other Lenders. Each such notice, request and demand shall be deemed given or made as follows: (a) the second business day after such notice was delivered to a regularly scheduled overnight delivery, or (b) upon receipt of notice given by fax, mailgram, telegram, telex, or personal delivery. 8.2 SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and inure to the benefit of Lenders and their respective permitted successors and assigns. 8.3 ENTIRE AGREEMENT This Agreement constitutes the entire agreement among Lenders with respect to the subject matter hereof and supersedes all prior negotiations, communications, discussions, correspondence and agreements concerning the subject matter hereof. In the event of any conflict between the terms of this Agreement and any other Loan Document, the terms of this Agreement shall control. 8.4 NO THIRD PARTY BENEFICIARIES This Agreement is made and entered into for the sole protection and benefit of the Lenders and their respective permitted successors and assigns, and no other person or entity (including Borrowers) shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement. 8.5 SEVERABILITY OF PROVISIONS If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity 10 11 without invalidating the remainder of such provision or any remaining provisions of this Agreement. 8.6 GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. 8.7 SUBMISSION TO JURISDICTION EACH LENDER HEREBY: (A) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF WASHINGTON AND THE FEDERAL COURTS OF THE UNITED STATES FOR THE WESTERN DISTRICT OF WASHINGTON FOR THE PURPOSE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT; (B) AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURTS; (C) IRREVOCABLY WAIVES (TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW) ANY OBJECTION WHICH IT NOW OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY OF THE FOREGOING COURTS, AND ANY OBJECTION ON THE GROUND THAT ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM; AND (D) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PERMITTED BY LAW. 8.8 WAIVER OF JURY TRIAL EACH LENDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS OR EVENTS REFERENCED HEREIN OR CONTEMPLATED HEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS WRITTEN EVIDENCE OF THE WAIVER OF THE RIGHT TO TRIAL BY JURY AND THE CONSENT TO TRIAL BY COURT. 8.9 COUNTERPARTS This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed 11 12 original for all purposes. Delivery of an executed signature page of this Agreement by fax shall be effective as delivery of a manually executed counterpart hereof. 12 13 IN WITNESS WHEREOF, this Intercreditor Agreement has been duly executed as of the date first written above. THE BANK OF NOVA SCOTIA KEYBANK NATIONAL ASSOCIATION By: /s/ Patrik G. Norris By: /s/ Thomas A. Crandell Title: Director Title: Senior Vice President U.S. BANK NATIONAL ASSOCIATION AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED By: /s/ James R. Farmer By: /s/ Ralph Terence Allen Title: Vice President Title: Associate Director 14 CONSENT OF BORROWERS The undersigned hereby acknowledge receipt of the foregoing and consent to the provisions thereof. Dated: as of November 15, 2000 PENFORD CORPORATION PENFORD PRODUCTS CO. By: /s/ Keith T. Fujinaga By: /s/ Keith T. Fujinaga Title: Assistant Secretary Title: Assistant Secretary PENFORD HOLDINGS PTY. LTD. PENFORD AUSTRALIA LIMITED By: /s/ Keith T. Fujinaga By: /s/ Susan M. Iverson Title: Assistant Secretary Title: Director STARCH NEW ZEALAND LIMITED By: /s/ Keith T. Fujinaga Title: Director 15 SCHEDULE I ADDRESS FOR NOTICES The Bank of Nova Scotia Corporate Banking 888 S.W. 5th Avenue, Suite 750 Portland, Oregon, USA 97204-2078 Attn: Patrik G. Norris Fax: (503) 222-5502 KeyBank National Association Large Corporate Group 601 108th Avenue NE, 5th Floor Bellevue, Washington 98009 Attn: Ms. Mary K. Young Fax: (425) 709-4587 U.S. Bank National Association 1420 Fifth Avenue, Eleventh Floor Seattle, Washington, USA 98101 Attn: James Farmer Fax: (206) 334-3654 Australian and New Zealand Banking Group Limited Level 9 20 Martin Place Sydney, NSW, Australia 2000 Attn: Michelle Burke Fax: 612-9227-1332 16 EXHIBIT A TO INTERCREDITOR AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is entered into as of ____________, between ___________________ ______________________ ("Assignor") and ________________________ ("Assignee"). WHEREAS, Assignor is a Lender under that certain Intercreditor Agreement among The Bank of Nova Scotia, U.S. Bank National Association, KeyBank National Association and Australian and New Zealand Banking Group Limited ACN 005 357 522 dated as of November 15, 2000 (as further amended, modified or supplemented from time to time, the "Intercreditor Agreement") and has Commitments outstanding under one or both Facilities. Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Intercreditor Agreement. WHEREAS, it is the intention of Assignor and Assignee that (a) Assignor assign to Assignee [all] [a portion] of Assignor's rights and obligations under the Facilities, (b) Assignee assume all such assigned rights and obligations of Assignor, and (c) Assignor be released therefrom. NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: 1. Assignment. Effective on the Effective Date (as defined in Section 3 hereof), Assignor, without recourse and without representation or warranty (except as expressly provided in Section 6 hereof), hereby assigns to Assignee ___________% of Assignor's share of the Commitments on the Effective Date (which percentage represents a total of US$_________ and AUD _________ of Commitments) and all of Assignor's other rights and obligations under the Loan Documents attributable to such share of the Commitments ("Assigned Rights and Obligations"). 2. Assumption. Effective on the Effective Date, Assignee hereby accepts the foregoing assignment of, and hereby assumes from Assignor all of, the Assigned Rights and Obligations. 3. Effectiveness. This assignment and assumption shall be effective on the later of _____________________ or delivery to Administrative Lenders of an executed copy of this Agreement with the consent of all Lenders and, to the extent required by the Loan Documents, the consent of one or more Borrowers (the "Effective Date"). 1 17 4. Payments on Effective Date. In consideration of the assignment by Assignor to, and the assumption by Assignee of, the Assigned Rights and Obligations, on the Effective Date: (a) Assignee shall pay to Assignor the principal amount of all loans made by Assignor pursuant to the Loan Documents that are attributable to the Assigned Rights and Obligations and outstanding on the Effective Date; (b) each of Assignor and Assignee shall pay to the other such amounts (if any) as are specified in any written agreement or exchange of letters between them; and (c) Assignee shall pay to Administrative Lenders any assignment processing and recordation fees required by the Loan Documents. 5. Allocation and Payment of Interest and Fees. (a) Administrative Lenders shall pay to Assignee all interest, commitment fees and other amounts not constituting principal that are paid by or on behalf of Borrowers pursuant to the Loan Documents and are attributable to the Assigned Rights and Obligations ("Borrower Amounts") which accrue on and after the Effective Date. If Assignor receives or collects any such Borrower Amounts, Assignor shall promptly pay them to Assignee. (b) Administrative Lenders shall pay to Assignor all Borrower Amounts that accrue before the Effective Date. If Assignee receives or collects any such Borrower Amounts, Assignee shall promptly pay them to Assignor. 6. Representations and Warranties. (a) Each of Assignor and Assignee represents and warrants to the other party as follows: (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this Agreement; (ii) the making and performance of this Agreement and all documents required to be executed and delivered by it pursuant hereto do not and will not violate any law or regulation applicable to it; (iii) this Agreement has been duly executed and delivered by, and constitutes a legal, valid and binding obligation of, it, enforceable in accordance with its terms; and (iv) all approvals, authorizations or other actions by, or filings with, any governmental authority necessary for the validity or enforceability of its obligations under this Agreement have been made or obtained. (b) Assignor represents and warrants to Assignee that Assignor owns the Assigned Rights and Obligations, free and clear of all liens or other encumbrances. (c) Assignee represents and warrants to Assignor as follows: (i) Assignee has made and shall continue to make its own independent investigation of the financial condition, affairs and creditworthiness of Borrowers, and the value of any collateral now or hereafter securing any of the obligations, indebtedness, liabilities or undertakings under the Loan Documents, in connection with Assignee's assumption of the Assigned Rights and Obligations; and (ii) Assignee has received a copy of the Loan Documents and such other documents, financial statements and information as Assignee deems appropriate to make its own credit analysis and decision to enter into this Agreement. 2 18 7. No Assignor Responsibility. Assignor makes no representation or warranty and assumes no responsibility to Assignee for: (a) the execution by any party other than Assignor, or the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of the Loan Documents; (b) any representations, warranties, recitals or statements made in the Loan Documents or in any financial statement or other statement, instrument, report, certificate or any other document made or furnished or made available by or on behalf of Borrowers to Assignor or Assignee in connection with the Loan Documents and the transactions contemplated thereby; (c) the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or the existence or possible existence of any default or event of default under the Loan Documents; or (d) the accuracy or completeness of any information provided to Assignee, whether by Assignor or by or on behalf of Borrowers. Assignor shall have no initial or continuing duty or responsibility to make any investigation of the financial condition, affairs or creditworthiness of Borrowers, or the value of any collateral, in connection with the assignment of the Assigned Rights and Obligations hereunder, or to provide Assignee with any credit or other information with respect thereto, whether coming into Assignor's possession before the date hereof or at any time or times thereafter. 8. Assignee Bound By Loan Documents. Effective on the Effective Date, Assignee: (a) shall be deemed to be a party to and a "Lender" under the Intercreditor Agreement; (b) agrees to be bound by the Loan Documents to the same extent as it would have been if it had been an original Lender party thereto; and (c) agrees to perform in accordance with their respective terms all obligations which are required under the Loan Documents to be performed by it as a Lender. Assignee appoints and authorizes Administrative Lenders to take such actions as Administrative Lender on Assignee's behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Lenders by the terms thereof, together with such powers as are reasonably incidental thereto. 9. Assignor Released From Loan Documents. Effective on the Effective Date, Assignor shall be released from the Assigned Rights and Obligations; provided, however, that Assignor shall retain all of its rights to indemnification under the Loan Documents for any events, acts or omissions occurring before the Effective Date. 10. New Notes. On or promptly after the Effective Date, Borrowers, Administrative Lenders, Assignor and Assignee shall make appropriate arrangements so that new promissory notes or other appropriate evidences of indebtedness (collectively, "Notes") executed by Borrowers, dated as of the Effective Date and in the amount of the share of [Assignor and] Assignee in the loans evidenced thereby after giving effect to this Agreement, are issued to [Assignor and] Assignee, in exchange for the surrender by Assignor [and Assignee] to Borrowers of any outstanding Notes from Borrowers evidencing such loans, marked "Exchanged." 11. General. 3 19 (a) This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior and current understandings and agreements, whether written or oral (other than with respect to any fees payable as provided in Section 4 hereof). (b) No term or provision of this Agreement may be amended, waived or terminated orally, but only by an instrument signed by the parties hereto. (c) This Agreement may be executed in one or more counterparts. Each set of executed counterparts shall be an original. Executed counterparts may be delivered by facsimile transmission. (d) Assignor may at any time and from time to time grant to others pursuant to the Loan Documents assignments of or participations in all or part of Assignor's share of the total Commitments, but not with respect to the Assigned Rights and Obligations. (e) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither Assignor nor Assignee may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other. The preceding sentence shall not limit the right of Assignee to grant to others assignments of or participations in all or part of the Assigned Rights and Obligations to the extent permitted by the terms of the Loan Documents. (f) All payments to Assignor or Assignee hereunder shall, unless otherwise specified by the party entitled thereto, be made in US$ with respect to the US Facility and AUD with respect to the Australian Facilities, in immediately available funds, and to the address or account specified on the signature pages of this Agreement. The address of Assignee for notice purposes under the Loan Documents shall be as specified on the signature pages of this Agreement. (g) If any provision of this Agreement is held invalid, illegal or unenforceable, the remaining provisions hereof will not be affected or impaired in any way. (h) Each party shall bear its own expenses in connection with the preparation and execution of this Agreement. (i) This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. 4 20 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ASSIGNOR: By: --------------------------------- Title: ------------------------------ Assignor's Payment Instructions: Assignor's Notice Instructions: - ------------------------------------ ------------------------------------ - ------------------------------------ ------------------------------------ - ------------------------------------ ------------------------------------ ABA No.: Attn: ---------------------------- ------------------------------- Account No.: Ref: ------------------------ -------------------------------- Attn: Telephone: ( ) ------------------------------- --- -------------------- Ref.: Facsimile: ( ) ------------------------------- --- -------------------- ASSIGNEE: By: --------------------------------- Title: ------------------------------ Assignee's Payment Instructions: Assignee's Notice Instructions: - ------------------------------------ ------------------------------------ - ------------------------------------ ------------------------------------ - ------------------------------------ ------------------------------------ ABA No.: Attn: ---------------------------- ------------------------------- Account No.: Ref: ------------------------ -------------------------------- 5 21 Attn: Telephone: ( ) ------------------------------- --- -------------------- Ref.: Facsimile: ( ) ------------------------------- --- -------------------- CONSENT OF LENDERS AND BORROWERS [INSERT SIGNATURE PROVISIONS FOR EACH OF THE LENDERS AND EACH BORROWER WHOSE CONSENT IS REQUIRED] 6 EX-23.1 7 v67867ex23-1.txt CONSENT OF ERNST & YOUNG LLP 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement (Form S-8, No. 33-58799) pertaining to the Penford Corporation 1994 Stock Option Plan and to the incorporation by reference in the Registration Statement (Form S-8, No. 33-88946) pertaining to the Penford Corporation Savings and Stock Option Ownership Plan of our report dated 25 August 2000 with respect to the consolidated financial statements of Penford Australia Limited as of and for the year ended 30 June 2000, which report appears in the Form 8-K of Penford Corporation dated 12 December 2000. Our report dated 25 August 2000 contains an explanatory paragraph that states that accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States. The application of accounting principles generally accepted in the United States would have affected results of operations for the year ended 30 June 2000 and shareholders' equity as of 30 June 2000 to the extent summarized in Note 29 to the consolidated financial statements of Penford Australia Limited. /s/ Ernst & Young Melbourne, Australia 12 December 2000 -----END PRIVACY-ENHANCED MESSAGE-----