RESTATED ARTICLES OF INCORPORATION
OF
PENWEST, LTD.

     Pursuant to RCW 23B.10.070 these Restated Articles of Incorporation are submitted for filing:

     1. The name of the corporation is PENWEST, LTD.

     2. The Restated Articles are as follows:

ARTICLE I
NAME

     The name of the corporation (the “Corporation”) is PENWEST, LTD.

ARTICLE II
REGISTERED OFFICE AND AGENT

     The address of the registered office of the Corporation is 520 Pike Street, 26th Floor, Seattle, Washington 98101, and the name of the registered agent at such address is C T CORPORATION SYSTEM.

ARTICLE III
PURPOSE

     The purpose of the Corporation is to create the maximum continuing rate of value growth through long-term profit on invested capital and the growth of that capital.

     To accomplish this purpose, the Board of Directors, management and employees of the Corporation will strive to:

 

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Properly select business opportunities versus risk;

 

 

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Develop and maintain strategic direction for all business segments;

 

 

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Develop and maintain superior management and organizational structures;

 

 

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Encourage employee involvement in the business process;

 

 

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Provide all employees the opportunity of a value growth environment of good employment, training, advancement and recognition of their achievements;

 

 

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Create market understanding of the intrinsic values so created:

 

 

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Conduct its business legally and ethically within the free enterprise system

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as a responsible corporate citizen.

     In carrying out this purpose, the Corporation is authorized to engage in any lawful act or activity for which corporations may be organized under the Washington Business Corporation Act.

ARTICLE IV
SHARES

     1. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 30,000,000 shares to be divided into two classes consisting of 29,000,000 shares of common stock of the par value of $1.00 per share (hereinafter designated “Common Stock”) and 1,000,000 shares of preferred stock of the par value of $1.00 per share (hereinafter designated “Preferred Stock”). The Common Stock shall have one (1) vote for each share. The Preferred Stock shall have such full or limited or absence of voting powers and designations, preferences, limitations and relative rights as shall be stated and expressed in the resolution or resolutions of the Board of Directors of the Corporation providing for the issue of such shares of Preferred Stock subject to the following limitations: (a) no share of Preferred Stock shall have voting powers in excess of one (1) vote per share; provided, however, if the Preferred Stock is convertible into Common Stock as of a record date on which a matter is submitted to a vote of the holders of Common Stock, then such shares of Preferred Stock may, in the resolution providing for the issue of such shares and subject to any restrictions or conditions set forth in the resolution, be granted the right to vote the number of shares of Common Stock which would be issued upon such conversion as of the record date; and (b) no shares of Preferred Stock shall be given a preference over the Common Stock in the event of any liquidation, dissolution, winding up, merger or consolidation of an amount greater than the per share fair market value of the consideration received upon the issuance of the shares of Preferred Stock as reasonably determined in good faith by the Board of Directors of the Corporation plus accrued but unpaid dividends.

     The Preferred Stock may be issued in one or more series of stock and each such series, subject to the limitations set forth above, may have such designations, preferences, limitations and relative rights as shall be stated and expressed in a resolution or resolutions providing for the issue of such Preferred Stock adopted by the Board of Directors pursuant to the authority hereby granted.

     The Preferred Stock may have voting powers, designations, preferences, limitations and relative rights that negate or supersede the provisions of Article VIII hereof (so long as the resolution or resolutions adopting the same are approved by the unanimous vote of the Board of Directors).

     2. The shares of stock of the Corporation may be issued by the Corporation from time to time for such consideration, not less than the par value thereof except as otherwise provided by law, as from time to time may be fixed by the Board of Directors of the Corporation; and all issued shares of the capital stock of the Corporation shall be deemed fully paid and non-assessable and the holders of such shares shall not be liable thereunder to the Corporation or to its creditors.

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     3. No shareholder of the Corporation shall have any preemptive right to acquire additional shares of stock or securities convertible into shares of stock of the Corporation.

ARTICLE V
DURATION

     The existence of the Corporation is to be perpetual.

ARTICLE VI
PAYMENT FOR CORPORATE DEBTS

     The private property of the shareholders shall not be subject to the payment of corporate debts to any extent whatsoever.

ARTICLE VII
CERTAIN DEFINITIONS

     For purposes of these Articles, the following defined terms shall have the meanings set forth below. All references in these Articles to statutes, rules or regulations shall include a reference to said statutes, rules or regulations as currently in effect or hereafter amended.

     (a) The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Securities Exchange Act of 1934.

     (b) The term “Beneficial Owner” and correlative terms shall have the meanings ascribed to them in Rule 13d-3 and related interpretive releases promulgated and issued under the Securities Exchange Act of 1934. Without limitation, any shares of Voting Stock of the Corporation which any Related Person has the right to vote or to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed “Beneficially Owned” by such Related Person.

     A person shall be a Beneficial Owner of any Voting Stock:

          (1) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

          (2) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or

          (3) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

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     (c) The term “Board of Directors” or the “Board” means the group of individuals elected by the shareholders as directors of the Corporation or appointed by the directors to fill a vacancy on the Board.

     (d) The term “Continuing Director” shall mean, with respect to any proposed Major Transaction, a director who was a member of the Board of Directors of the Corporation immediately prior to the time that any Related Person involved in the proposed Major Transaction acquired 20% or more of the outstanding shares of Voting Stock of the Corporation.

     (e) The term “Disinterested Director” means any member of the Board of Directors who is unaffiliated with any Interested Shareholder and/or Substantial Shareholder and was a member of the Board prior to the time that any Interested Shareholder or Substantial Shareholder became an Interested Shareholder or Substantial Shareholder, and any successor of a Disinterested Director who is unaffiliated with any Interested Shareholder or Substantial Shareholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board.

     (f) The term “Fair Market Value” means (i) in the case of stock, the Market Price, and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith.

     (g) The term “Interested Shareholder” shall mean any person (other than the Corporation or any Subsidiary) who or which:

          (1) is the Beneficial Owner, directly or indirectly, of 5% or more of the voting power of the outstanding Voting Stock; or

          (2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the Beneficial Owner, directly or indirectly, of five percent (5%) or more of the voting power of the then outstanding Voting Stock; or

          (3) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were, at any time within the two-year period immediately prior to the date in question, beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

     (h) The term “Major Transaction” shall mean (1) any merger or consolidation of the Corporation or a Subsidiary with or into a Related Person, (2) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or other security device, of all or any Substantial Part of the assets of the Corporation (including without limitation any securities of a Subsidiary) or of a Subsidiary, to a Related Person, (3) any merger or consolidation of a Related Person with or into the Corporation or a Subsidiary, (4) any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to the Corporation or a Subsidiary, (5) the issuance of any securities of the Corporation or a Subsidiary to a Related Person, (6) the acquisition by the Corporation or a Subsidiary of any securities of a Related Person, (7) any reclassification of Voting Stock of the Corporation, or any recapitalization involving Voting Stock of the Corporation, proposed by a Related Person within

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five years after such Related Person became a Related Person, (8) any loan or other extension of credit by the Corporation or a Subsidiary to a Related Person or any guarantees by the Corporation or a Subsidiary of any loan or other extension of credit by any person to a Related Person, and (9) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Major Transaction.

     (i) The term “Market Price” means: the last closing sale price immediately preceding the time in question of a share of the stock in question on the Composite Tape for New York Stock Exchange-Listed Stocks, or if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or if such stock is not listed on any such exchange, the last closing bid quotation with respect to a share of such stock immediately preceding the time in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use (or any other system of reporting or ascertaining quotations then available), or if such stock is not so quoted, the fair market value at the time in question of a share of such stock as determined by the Board in good faith.

     (j) The term “other consideration to be received” shall, for the purposes of subparagraph 1(d)(1) of Article VIII, include without limitation Voting Stock of the Corporation retained by its existing public shareholders in the event of a Major Transaction which is a merger or consolidation in which the Corporation is the surviving corporation.

     (k) The term “Outside Director” shall mean, with respect to any proposed Major Transaction, a director who is not (1) an officer or employee of the Corporation or of any Subsidiary or any relative of an officer or employee, (2) a Related Person or an officer, director or employee, Associate or Affiliate of a Related Person, or a relative of any of the foregoing, or (3) a person having a direct or indirect material business relationship with the Corporation or any Subsidiary.

     (l) The term “Related Person” shall mean any individual, corporation, partnership or other person or entity and each member of any “person” as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934 which, together with its Affiliates and Associates, or other members of such “person” and any other person or entity with which it or its Affiliates or Associates has any agreement, arrangement, or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Voting Stock of the Corporation, is the Beneficial Owner of 20% or more in the aggregate of the outstanding shares of Voting Stock of the Corporation, and any Affiliate, Associate or member of such “person,” or any such other persons or entities.

     (m) The term “Subsidiary” means any corporation or other entity of which a majority of any class of equity security is beneficially owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definitions of Interested Shareholder and Substantial Shareholder set forth in paragraphs (g) and (o) of this Article VII, the term “Subsidiary” shall mean only a corporation of which a majority of the voting power of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation.

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     (n) The term “Substantial Part” shall mean more than ten percent (10%) of the total assets of the person or entity in question, as of the end of its most recent fiscal year ending prior to the time the determination is being made.

     (o) The term “Substantial Shareholder” shall mean any person (other than the Corporation or any Subsidiary) who or which:

          (1) is the Beneficial Owner, directly or indirectly, of 40% or more of the voting power of the outstanding Voting Stock; or

          (2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the Beneficial Owner, directly or indirectly, of 40% or more of the voting power of the then outstanding Voting Stock; or

          (3) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Substantial Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

     (p) The term “Voting Stock” shall mean all Common Stock and any other shares entitled to vote for the election of Directors of the Corporation.

     (q) For the purposes of determining whether a person is an Interested Shareholder or a Substantial Shareholder pursuant to paragraphs (g) and (o) of this Article VII, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph (b) of this Article VII, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

ARTICLE VIII
HIGHER THAN MAJORITY VOTE OF SHAREHOLDERS REQUIRED
IN THE EVENT OF CERTAIN TRANSACTIONS

     1. Subject to the provisions of any series of Preferred Stock which may at the time be outstanding, any Major Transaction shall require the affirmative vote of the holders of not less than 80% of the outstanding Voting Stock of the Corporation, which shall include the affirmative vote of at least 50% of the outstanding Voting Stock held by shareholders other than the Related Person involved in such Major Transaction; provided, however, that such voting requirement shall not be applicable if:

          (a) The Major Transaction was approved by the Board either (i) prior to the Related Person involved in the Major Transaction having become a Related Person, or (ii) after such Related Person became such but only if the Related Person has sought and obtained the unanimous approval by the Board of such Related Person’s acquisition of 20% or more of the outstanding shares of Voting (b) Stock prior to such acquisition being consummated; or

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          (c) The Major Transaction involves solely the Corporation and a Subsidiary none of whose stock is Beneficially Owned by a Related Person (other than Beneficial Ownership arising solely because of control of the Corporation); provided that each shareholder of the Corporation receives the same type of consideration in such transaction in proportion to his stock holdings; or

          (d) Prior to becoming a Related Person, such Related Person made a tender offer for Voting Stock which (i) conformed in all respects to federal laws and regulations governing such a transaction whether or not the Corporation or such stock was then regulated by or registered under said laws, (ii) committed such Related Person to take all shares tendered if it took any shares, and (iii) resulted in such Related Person acquiring at least 75% of the shares of each class of Voting Stock held by persons other than such Related Person; or

          (e) All the following conditions are satisfied:

               (1) The cash or Fair Market Value of the property, securities or other consideration to be received per share (as adjusted for stock splits, stock dividends, reclassification of shares into a lesser number and similar events) by holders of Common Stock of the Corporation in the Major Transaction is not less than the higher of (i) the highest per share price (including brokerage commissions, soliciting dealer’s fees, dealer-management compensation, and other expenses, including, but not limited to, costs of newspaper advertisements, printing expenses and attorneys’ fees, paid by such Related Person in acquiring any of its holdings of the Corporation’s Common Stock or (ii) an amount which bears the same or a greater percentage relationship to the Market Price of the Corporation’s Common Stock immediately prior to the announcement of such Major Transaction as the highest per share price determined in (i) above bears to the Market Price of the Corporation’s Common Stock immediately prior to the commencement of acquisition of the Corporation’s Common Stock by such Related Person; and

               (2) After becoming a Related Person and prior to the consummation of such Major Transaction, (i) such Related Person shall not have acquired any shares of stock, directly or indirectly, from the Corporation or a Subsidiary (except upon conversion of convertible securities acquired by it prior to becoming a Related Person or upon compliance with the provisions of this Article VIII or as a result of a pro rata stock dividend or stock split) and (ii) such Related Person shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Corporation or a Subsidiary, or made any major changes in the Corporation’s business or equity capital structure without the unanimous vote of the members of the Board then in office; and

               (3) A proxy statement responsive to the requirements of the Securities Exchange Act of 1934, whether or not the Corporation is then subject to such requirements, shall be mailed to all shareholders of the Corporation for the purpose of soliciting shareholder approval of such Major Transaction and shall contain at the front thereof, in a prominent place any recommendations as to the advisability (or inadvisability) of the Major Transaction which the Continuing Directors, or any Outside Directors, may choose to state.

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     2. The Board of Directors of the Corporation shall have the power and duty to determine for the purposes of this Article VIII, on the basis of information known to the Corporation, whether (a) any corporation, person or other entity “Beneficially Owns,” directly or indirectly, more than twenty percent (20%) of the shares of the Voting Stock, (b) any corporation, person or other entity is an Affiliate or Associate of another and (c) any proposed sale, lease, exchange or other disposition of part of the assets of the Corporation or any of its Affiliates involves a Substantial Part of the assets of the Corporation or such Affiliate, provided that assets involved in any single transaction or series of related transactions having an aggregate fair market value of more than fifteen percent (15%) of the total consolidated assets of the Corporation and its Affiliates shall always be deemed to constitute a “Substantial Part” for purposes of this Article VIII. Any such determination made in good faith shall be conclusive and binding for all purposes of this Article VIII.

     3. Nothing contained in this Article VIII shall be construed to relieve any Related Person from any fiduciary obligation imposed by law.

ARTICLE IX
RESTRICTIONS ON SHARE REPURCHASES AND OTHER TRANSACTIONS

     1. Any purchase by the Corporation of shares of Voting Stock from an Interested Shareholder, other than pursuant to an offer to the holders of all of the outstanding shares of the same class of Voting Stock as those so purchased, at a per share price in excess of the Market Price at the time of such purchase of the shares so purchased, shall require the affirmative vote of the holders of that amount of the voting power of the Voting Stock equal to the sum of (i) the voting power of the shares of Voting Stock of which the Interested Shareholder is the Beneficial Owner and (ii) a majority of the voting power of the remaining outstanding shares of Voting Stock, voting together as a single class.

     2. In addition to any affirmative vote required by law or these Articles of Incorporation:

          (a) any merger or consolidation of the Corporation or any Subsidiary with (1) any Interested Shareholder or (2) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate of an Interested Shareholder; or

          (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market value of $2,000,000 or more; or

          (c) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary having an aggregate Fair Market Value of $2,000,000 or more to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof); or

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          (d) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or

          (e) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any Subsidiary or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder;

shall require either (a) the approval of a majority of the Disinterested Directors or (b) the affirmative vote of the holders of that amount of voting power of the Voting Stock equal to the sum of (1) the voting power of the shares of Voting Stock of which the Interested Shareholder is the Beneficial Owner and (2) a majority of the voting power of the remaining outstanding shares of Voting Stock, voting together as a single class; provided, however, that no such vote shall be required for (i) the purchase by the Corporation of shares of Voting Stock from an Interested Shareholder unless such vote is required by Section 1 of this Article IX, (ii) any transaction with an Interested Shareholder who is also a Related Person as defined in Article VII and to which the provisions of Article VIII apply and are complied with, or (iii) any transaction with an Interested Shareholder who has Beneficially Owned all his shares of Voting Stock for two years or more.

     3. At any election of directors of the Corporation on or after the date on which any Substantial Shareholder becomes a Substantial Shareholder, and until such time as there is no longer any Substantial Shareholder, there shall be cumulative voting for election of directors so that any holder of shares of Voting Stock entitled to vote in such election shall be entitled to as many votes as shall equal the number of directors to be elected multiplied by the number of votes to which such shareholder’s shares would be entitled except for the provisions of this Section 3, and such shareholder may cast all of such votes for a single director, or distribute such votes among as many candidates as such shareholder sees fit. In any such election of directors, one or more candidates for the Board may be nominated by a majority of the Disinterested Directors and by any person who is the Beneficial Owner of 1% or more of the outstanding shares of Voting Stock. With respect to any candidates nominated by a majority of the Disinterested Directors or by any person who is the Beneficial Owner of 1% or more of the outstanding shares of Voting Stock, there shall be included in any proxy statement or other communication with respect to such election to be sent to holders of shares of Voting Stock by the Corporation during the period in which there is a Substantial Shareholder, at the expense of the Corporation, descriptions and other statements of or with respect to such candidates submitted by them or on their behalf, which shall receive equal space, coverage and treatment as is received by candidates nominated by the Board or management of the Corporation provided that such information is received on a timely basis and complies with applicable federal and state securities laws.

     4. It shall be the duty of any Interested Shareholder:

          (a) to give or cause to be given written notice to the Corporation, immediately upon becoming an Interested Shareholder, of such person’s status as an Interested Shareholder

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and of such other information as the Corporation may reasonably require with respect to identifying all owners and amount of ownership of the outstanding Voting Stock of which such Interested Shareholder is a Beneficial Owner, and

          (b) to notify the Corporation promptly in writing of any change in the information provided in subparagraph (a) of this Section 4; provided, however, that the failure of an Interested Shareholder to comply with the provisions of this Section 4 shall not in any way be construed to prevent the Corporation from enforcing the provisions of Sections 1 through 3 of this Article IX.

     5. A majority of the Disinterested Directors of the Corporation shall have the power and duty to determine for the purposes of this Article IX, on the basis of information known to them after reasonable inquiry, (a) whether a person is an Interested Shareholder or a Substantial Shareholder, (b) the number of shares of Voting Stock Beneficially Owned by any person, (c) whether a person is an Affiliate or an Associate of another person and (d) whether a transaction or a series of transactions constitutes one of the transactions specified in Section 2 hereof. The good faith determination of a majority of the Disinterested Directors shall be conclusive and binding for all purposes of this Article IX.

ARTICLE X
ELECTION OF DIRECTORS

     1. The number of directors of the Corporation shall be specified in the Bylaws, and such number may from time to time be increased or decreased in such manner as may be prescribed in the Bylaws, provided the number of directors of the Corporation shall not be less than seven (7).

     2. Directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, as nearly equal in number as possible. Those of the first class shall be elected for a term of office to expire at the first annual meeting of shareholders after their election, those of the second class shall be elected for a term of office to expire at the second annual meeting of shareholders after their election, and those of the third class shall be elected for a term of office to expire at the third annual meeting of shareholders after their election. Thereafter, the class of directors then being elected shall be elected to hold office for a term of office to expire at the third succeeding annual meeting of shareholders after their election. Each director shall hold office for the term for which elected and until such director’s successor shall have been elected and qualified.

     3. At a meeting of shareholders called expressly for that purpose, any director, any class of directors, or the entire Board of Directors may be removed from office as a director at any time (a) for cause by the shareholders entitled to elect such director if the number of votes cast to remove the director exceeds the number of votes cast not to remove the director, and if cumulative voting is then in effect, then a director may not be removed if the number of votes sufficient to elect such director is voted against the director’s removal, or (b) without cause by the affirmative vote which satisfies the requirements of Article XI applicable to an amendment, modification, or repeal of certain of these Articles.

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     4. Vacancies in the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled only by the affirmative vote of a majority of the remaining directors then in office, though less than a quorum, or by the sole remaining director. The term of a director elected to fill a vacancy shall expire at the next annual meeting of shareholders at which directors are elected. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

     5. All corporate powers shall be exercised by the Board of Directors except as otherwise provided by law or these Articles of Incorporation.

     6. Except as otherwise provided in these Articles of Incorporation, shareholders of the Corporation shall not have the right to cumulate votes in the election of directors.

ARTICLE XI
RESTRICTIONS ON CERTAIN AMENDMENTS

     The provisions set forth in this Article XI and in Articles III, VII, VIII, IX, X and XVII herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of not less than 80% of the outstanding shares of Voting Stock of the Corporation, subject to the provisions of any series of Preferred Stock which may at the time be outstanding, provided, however, that if there is a shareholder of the Corporation which is a Related Person, such 80% vote must include the affirmative vote of at least 50% of the outstanding Voting Stock held by shareholders other than the Related Person.

ARTICLE XII
POWERS OF DIRECTORS

     The directors shall have power to make and to alter or amend the Bylaws and shall have all such other powers as they may be afforded by applicable law.

ARTICLE XIII
LIMITATION OF LIABILITY

     To the fullest extent permitted by the Washington Business Corporation Act as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for conduct as a director. Any amendments to or repeal of this Article XIII shall not adversely affect any right or protection of a director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

ARTICLE XIV
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

     1. The Corporation shall have the following powers:

          (a) The Corporation may indemnify and hold harmless to the fullest extent not prohibited by applicable law each person who was or is made a party to or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or

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threatened action, suit or other proceeding, whether civil, criminal, derivative, administrative or investigative, by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation or, being or having been such a director, officer, employee or agent, he or she is or was serving at the request of the Corporation as a director, officer, employee, agent, trustee, or in any other capacity of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action or omission in an official capacity or in any other capacity while serving as a director, officer, employee, agent, trustee or in any other capacity, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually or reasonably incurred or suffered by such person in connection therewith. Such indemnification may continue as to a person who has ceased to be a director, officer, employee or agent of the Corporation and shall inure to the benefit of his or her heirs and personal representatives.

          (b) The Corporation may pay expenses incurred in defending any such proceeding in advance of the final disposition of any such proceeding; provided, however, that the payment of such expenses in advance of the final disposition of a proceeding shall be made to or on behalf of a director, officer, employee or agent only upon delivery to the Corporation of an undertaking, by or on behalf of such director, officer, employee or agent, to repay all amounts so advanced if it shall ultimately be determined that such director, officer, employee or agent is not entitled to be indemnified under this Article XIV or otherwise, which undertaking may be unsecured and may be accepted without reference to financial ability to make repayment.

          (c) The Corporation may enter into contracts with any person who is or was a director, officer, employee or agent of the Corporation in furtherance of the provisions of this Article XIV and may create a trust fund, grant a security interest in property of the Corporation, or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article XIV.

          (d) If the Washington Business Corporation Act (the “Act”) is amended in the future to expand or increase the power of the Corporation to indemnify, to pay expenses in advance of final disposition, to enter into contracts, or to expand or increase any similar or related power, then, without any further requirement of action by the shareholders or directors of the Corporation, the powers described in this Article XIV shall be expanded and increased to the fullest extent permitted by the Act, as so amended.

          (e) No indemnification shall be provided under this Article XIV to any such person if the Corporation is prohibited by the nonexclusive provisions of the Act or other applicable law as then in effect from paying such indemnification. For example, no indemnification shall be provided to any director in respect of any proceeding, whether or not involving action in his or her official capacity, in which he or she shall have been finally adjudged to be liable on the basis of intentional misconduct or knowing violation of law by the director, or from conduct of the director in violation of Section 23B.08.310 of the Act, or that the director personally received a benefit in money, property or services to which the director was not legally entitled.

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     2. The Corporation shall indemnify and hold harmless any person who is or was a director or officer of the Corporation, and pay expenses in advance of final disposition of a proceeding, to the full extent to which the Corporation is empowered.

     3. The Corporation may, by action of its Board of Directors from time to time, indemnify and hold harmless any person who is or was an employee or agent of the Corporation, and pay expenses in advance of final disposition of a proceeding, to the full extent to which the Corporation is empowered, or to a lesser extent which the Board of Directors may determine.

     4. The rights to indemnification and payment of expenses in advance of final disposition of a proceeding conferred by or pursuant to this Article XIV shall be contract rights.

     5. A director, officer, employee or agent (“claimant”) shall be presumed to be entitled to indemnification and/or payment of expenses under this Article XIV upon submission of a written claim (and, in an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition, where the undertaking in subsection 1(b) above has been delivered to the Corporation) and thereafter the Corporation shall have the burden of proof to overcome the presumption that the claimant is so entitled.

     If a claim under this Article XIV is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for expenses incurred in defending a proceeding in advance of its final disposition, in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the Corporation (including its board of directors, its shareholders or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of expenses to the claimant is proper in the circumstances nor an actual determination by the Corporation (including its board of directors, its shareholders or independent legal counsel) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses shall be a defense to the action or create a presumption that the claimant is not so entitled.

     6. The right to indemnification and payment of expenses in advance of final disposition of a proceeding conferred in this Article XIV shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the articles of incorporation, bylaws, agreement, vote of shareholders or disinterested directors or otherwise.

     7. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee, agent or trustee of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Act.

     8. Any repeal or modification of this Article XIV shall not adversely affect any right of any person existing at the time of such repeal or modification.

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     9. If any provision of this Article XIV or any application thereof shall be invalid, unenforceable or contrary to applicable law, the remainder of this Article XIV, or the application of such provision to persons or circumstances other than those as to which it is held invalid, unenforceable or contrary to applicable law, shall not be affected thereby and shall continue in full force and effect.

     10. For purposes of this Article XIV, applicable law shall at all times be construed as the applicable law in effect at the date indemnification may be sought, or the law in effect at the date of the action, omission or other event giving rise to the situation for which indemnification may be sought, whichever is selected by the person seeking indemnification. As of the date hereof, applicable law shall include Section 23B.08.500 through .600 of the Act.

ARTICLE XV
MERGERS, SHARE EXCHANGES, AND OTHER TRANSACTIONS

     Except as otherwise expressly provided in these Articles, a merger, share exchange, sale of substantially all of the Corporation’s assets, or dissolution must be approved by the affirmative vote of a majority of the Corporation’s outstanding shares entitled to vote, or if separate voting by voting groups is required, then by not less than a majority of all the votes entitled to be cast by that voting group.

ARTICLE XVI
CORPORATION’S ACQUISITION OF ITS OWN SHARES

     The Corporation may purchase, redeem, receive, take or otherwise acquire, own and hold, sell, lend, exchange, transfer or otherwise dispose of, pledge, use and otherwise deal with and in its own shares. As a specific modification of Section 231B.06.310 of the Act, pursuant to the authority in Section 23B.02.020(5)(c) of the Act to include provisions related to the management of the business and the regulation of the affairs of the Corporation, shares of the Corporation’s stock acquired by it pursuant to this Article XVI shall be considered “Treasury Stock” and so held by the Corporation. The shares so acquired by the Corporation shall not be considered as authorized and unissued but rather as authorized, issued, and held by the Corporation. The shares so acquired shall not be regarded as canceled or as a reduction to the authorized capital of the Corporation unless specifically so designated by the Board of Directors in an amendment to these Articles. The provisions of this Article XVI do not alter or effect the status of the Corporation’s acquisition of its shares as a “distribution” by the Corporation as defined in Section 23B.01.400(6) of the Act, nor alter or effect the limitations on distributions by the Corporation as set forth in Section 23B.06.400 of the Act. Any shares so acquired by the Corporation, unless otherwise specifically designated by the Board of Directors, at the time of acquisition, shall be considered on subsequent disposition as transferred rather than reissued. Nothing in this Article XVI limits or restricts the right of the Corporation to resell or otherwise dispose of any of its shares previously acquired for such consideration and according to such procedures as established by the Board of Directors.

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ARTICLE XVII
SPECIAL SHAREHOLDER MEETINGS

     Special meetings of the shareholders of the Corporation for any purpose or purposes may be called at any time by the Board of Directors, or by a committee of the Board of Directors which has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in the bylaws of the Corporation, include the power to call such meeting, but such special meetings may not be called by any other person or persons.

ARTICLE XVIII
INCORPORATOR

     The name and address of the incorporator are: Edmund O. Belsheim, Jr., Two Union Square, 601 Union Street, Seattle, Washington 98101.

     Dated: November 10, 1995.

 

 

 

 

 

 

 

 

 

/s/ Jeffrey T. Cook  

 

 

Jeffrey T. Cook 

 

 

Vice President and Chief Financial Officer 

 

 

 

 

 

ARTICLES OF AMENDMENT
OF
PENFORD CORPORATION

(Series A 15.0% Cumulative Non-Voting Non-Convertible Preferred Stock)

     Pursuant to the provisions of Chapter 23B.10 and Section 23B.06.020 of the Revised Code of Washington, the undersigned officer of Penford Corporation (the “Corporation”), a corporation organized and existing under the laws of the State of Washington, does hereby submit for filing these Articles of Amendment to its Restated Articles of Incorporation, as amended:

     FIRST: The name of the Corporation is Penford Corporation.

     SECOND: 100,000 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A 15.0% Cumulative Non-Voting Non-Convertible Preferred Stock”.

     The preferences, limitations, voting powers and relative rights of the Series A 15.0% Cumulative Non-Voting Non-Convertible Preferred Stock are as follows:

DESIGNATION

Section 1. Designation. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Series A 15.0% Cumulative Non-Voting Non-Convertible Preferred Stock” (the “Series A Preferred Stock “). The number of shares constituting such series shall be 100,000. The Series A Preferred Stock shall have a par value per share of $1.00 and the liquidation preference of the Series A Preferred Stock shall be as set forth in Section 5.

Section 2. Ranking. The Series A Preferred Stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution, rank (i) on a parity with each class or series of preferred stock established after the Effective Date by the Corporation the terms of which expressly provide that such class or series will rank on a parity with the Series A Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Corporation (collectively referred to as “Parity Securities “) and (ii) senior to the Corporation’s Common Stock and each other class or series of capital stock outstanding or established after the Effective Date by the Corporation the terms of which do not expressly provide that it ranks on a parity with or senior to the Series A Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Corporation (collectively referred to as “Junior Securities”). The Corporation has the right to authorize and/or issue additional shares or classes or series of Junior Securities without the consent of the Holders, but such consent is required for the authorization or issuance of Parity Securities pursuant to Section 9.

Section 3. Definitions. As used herein with respect to Series A Preferred Stock:

     (a) “Accrued Dividend Rate” shall be equal to 9% per annum.

     (b) “Articles of Amendment” means these Articles of Amendment relating to the Series A Preferred Stock, as it may be amended from time to time.

     (c) “Articles of Incorporation” means the Corporation’s Articles of Incorporation, as they may be amended from time to time.

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     (d) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

     (e) “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.

     (f) “Cash Dividend Rate” shall be equal to 6% per annum unless increased pursuant to Section 10(b).

     (g) “Capital Lease” means any lease of Property, which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.)

     (h) “Capitalized Lease Obligation” means, for any Person, the amount of the liability shown on the balance sheet of such Person in respect of a Capital Lease determined in accordance with GAAP..

     (i) “Common Stock” means the common stock, par value $1.00 per share, of the Corporation.

     (j) “EBITDA” with respect to the Corporation means, with reference to any period, Net Income from continuing operations for such period plus the sum of all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) federal, state, and local income taxes for such period, (c) depreciation of fixed assets and amortization of intangible assets for such period, plus cash distributions received from Joint Ventures not otherwise included in Net Income, plus (minus) any non-cash losses (gains) but only to the extent such losses (gains) have not become a cash loss (or gain), plus non-cash stock compensation charges incurred in such period, plus (minus) (d) any extraordinary or nonrecurring losses (gains) (including any cash losses related to the unwinding of existing interest rate hedging arrangements), plus (e) the aggregate amount of all severance charges incurred by the Corporation in such fiscal quarters, provided the aggregate amount of such charges that are added to EBITDA pursuant to this clause (e) shall not exceed $2,500,000 during the term of that certain Third Amended and Restated Credit Agreement among the Corporation, Bank of Montreal and Bank of America National Association dated April 7, 2010, plus (f) the amount of all non-cash charges incurred as a result of the accounting treatment of interest rate hedging arrangements, minus (g) the amount of all non-cash gains resulting from the accounting treatment of interest rate hedging arrangements, in each case relating solely to continuing operations.

     (k) “Effective Date” means the date on which shares of the Series A Preferred Stock are first issued.

     (l) “GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

     (m) “Holder” means the Person in whose name the shares of the Series B Preferred Stock are registered, which may be treated by the Corporation as the absolute owner of the shares of Series B Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.

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     (n) “Indebtedness” means for any Person (without duplication) (a) all indebtedness of such Person for borrowed money, whether current or funded, or secured or unsecured, (b) all indebtedness for the deferred purchase price of Property or services, (c) all indebtedness 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 a default are limited to repossession or sale of such Property), (d) all indebtedness secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of Property subject to such mortgage or Lien, (e) all obligations under leases which shall have been or must be, in accordance with GAAP, recorded as Capital Leases in respect of which such Person is liable as lessee, (f) any indebtedness, whether or not assumed, secured by Liens on Property acquired by such Person at the time of acquisition thereof, (g) any shares which are expressed to be redeemable, (h) any liability in respect of any guarantee or indemnity for any of the items referred to above, and (i) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness; it being understood that the term “Indebtedness” shall not include (x) trade payables arising in the ordinary course of business, (y) the Preferred Stock, and (z) any liabilities with respect to any post-retirement benefits under a Welfare Plan.

     (o) “Interest Expense” means, with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capitalized Lease Obligations and all amortization of debt discount and expense) of the Corporation and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.

     (p) “Joint Venture” means an entity for which ownership, control and/or profits and losses are shared by the Corporation or any Subsidiary with a third party pursuant to a written agreement

     (q) “Junior Securities” means the Common Stock and any other class or series of stock or other equity securities of the Corporation (including warrants, options, or other rights to acquire such stock or other equity securities) the terms of which expressly provide that it ranks junior to the Series A Preferred Stock as to dividend rights, redemption rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.

     (r) “Lien” means any mortgage, lien, security interest, pledge, charge or encumbrance of any kind in respect of any Property, including the interests of a vendor or lessor under any conditional sale, Capital Lease or other title retention arrangement..

     (s) “Liquidation Event” means (i) any liquidation, dissolution or winding up of the Corporation; (ii) any acquisition of the Corporation by means of merger or other form of corporate or other reorganization in which outstanding shares of the Corporation are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring corporation or other entity or its Subsidiary or other affiliate (other than a transaction resulting in ownership of more than 50% of the equity of the acquiring corporation or other entity by the persons who are stockholders of the Corporation immediately prior to such transaction), or (iii) a sale, lease or exchange of all or substantially all of the assets of the Corporation.

     (t) “Net Income” means, with reference to any period, the net income (or net loss) of the Corporation and its Subsidiaries for such period computed on a consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or net loss) of any Person accrued prior to the date it becomes a Subsidiary of, or has merged into or consolidated with, the Corporation or another Subsidiary, and (b) the net income (or net loss) of any Person (other than a Subsidiary) in which the Corporation or any of its Subsidiaries has a equity interest in, except to the

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extent of the amount of dividends or other distributions actually paid to the Corporation or any of its Subsidiaries during such period.

     (u) “Original Issue Date” means the date on which shares of Series A Preferred Stock are first issued.

     (v) “Original Issue Price” means $400.00 per share of Series A Preferred Stock.

     (w) “Parity Securities” means any class or series of stock or other equity securities of the Corporation (including warrants, options, or other rights to acquire such stock or other equity securities) (other than Series A Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Series A Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

     (x) “Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof.

     (y) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series A Preferred Stock.

     (z) “Property” means, as to any Person, all types of real, personal, tangible, intangible or mixed property owned by such Person whether or not included in the most recent balance sheet of such Person and its Subsidiaries under GAAP.

     (aa) “Subsidiary” means, as to any particular parent corporation or organization, any other corporation or organization more than 50% of the outstanding Voting Stock of which is at the time directly or indirectly owned by such parent corporation or organization or by any one or more other entities which are themselves Subsidiaries of such parent corporation or organization, provided, however, that a Joint Venture shall not be considered a Subsidiary. Unless otherwise expressly noted herein, the term “Subsidiary” means a Subsidiary of the Corporation or of any of its direct or indirect Subsidiaries.

     (bb) “Voting Stock” of any Person means capital stock or other equity interests of any class or classes (however designated) having ordinary power for the election of directors or other similar governing body of such Person, other than stock or other equity interests having such power only by reason of the happening of a contingency.

     (cc) “Welfare Plan” means a “welfare plan” as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto.

Section 4. Dividends.

     (a) General Obligation. Holders of Series A Preferred Stock shall be entitled to receive, on each share of Series A Preferred Stock out of funds legally available therefor, cumulative cash dividends (“Cash Dividends”) at the Cash Dividend Rate and cumulative additional dividends (“Accrued Dividends”) at the Accrued Dividend Rate, in each case on (i) the Original Issue Price per share of Series A Preferred Stock plus (ii) the amount of all accrued and unpaid dividends thereon. All such dividends shall begin to accrue and be cumulative from the Original Issue Date and shall accrue on a daily basis. Cash Dividends shall be payable quarterly in arrears on last day of February, May, August and November of each year (each, a “Dividend Payment Date”), commencing on March 31, 2010. The Corporation shall

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declare and pay Cash Dividends in immediately available funds on each Dividend Payment Date to the extent there are funds legally available therefor. If the Corporation may not legally pay a Cash Dividend on a Dividend Payment Date, the Corporation will pay all or a portion of the Cash Dividends at the earliest time it may legally do so and will use best efforts to satisfy any conditions necessary to pay the full amount of Cash Dividends as soon as practicable. Accrued Dividends may be paid on a Dividend Payment Date or accrue and accumulate at the discretion of the Corporation. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment date on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement.

     Dividends that are payable on Series A Preferred Stock shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Series A Preferred Stock on any date prior to a Dividend Payment Date, and for the initial dividend payment, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed.

     Cash Dividends and Accrued Dividends will accrue and accumulate whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The date on which the Corporation initially issues any share of Series A Preferred Stock will be deemed to be its “Original Issue Date” regardless of the number of times transfer of such share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such share. To the extent not paid on each Dividend Payment Date, all dividends which have accrued on each share of Series A Preferred Stock shall be accumulated and shall remain accumulated and unpaid dividends with respect to such share until paid.

     (b) Distribution of Partial Dividend Payments. If at any time the Corporation declares less than the total amount of dividends then accrued with respect to the Series A Preferred Stock, such dividends will be payable to the holders of the Series A Preferred Stock, ratably in proportion to the number of shares of Series A Preferred Stock held by each such holder on the date such dividends were declared.

Section 5. Liquidation.

     (a) Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, each holder of Series A Preferred Stock will be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Original Issue Price of all Series A Preferred Stock held by such holder, plus all accrued and unpaid dividends (including Cash Dividends and Accrued Dividends) thereon (regardless of whether any dividends are actually declared) to the date full payment of such specified preferential amount is made to the holders thereof.

     (b) Insufficient Funds. If upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the cash and other property available for distribution to the stockholders of the Corporation (the “Distributable Funds”) shall be insufficient to permit the payment to the holders of Series A Preferred Stock of the full preferential amount set forth in Section 5(a), then the Distributable Funds shall be distributed to the holders of Series A Preferred Stock, ratably in proportion to the number of shares of Series A Preferred Stock held by each such holder on the date of liquidation, dissolution or winding up of the Corporation.

     (c) Remaining Funds. If any of the Distributable Funds shall remain after the payment to the holders of Series A Preferred Stock of the full preferential amount set forth in Section 5(a), and the

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corresponding amounts payable with respect to any Parity Securities have been paid in full, then such remainder shall be distributed ratably to the holders of Junior Securities.

     (d) Notice. The Corporation will mail written notice of any proposed liquidation, dissolution or winding up, not less than 30 days prior to approving any such action, to each record holder of Series A Preferred Stock.

     (e) Merger, Consolidation and Sale of Assets. For purposes of this Section 5, the merger or consolidation of the Corporation with any other corporation or other entity in which the Corporation is not the surviving entity or a Liquidation Event shall constitute a liquidation, dissolution or winding up of the Corporation.

Section 6. Redemption.

     (a) Mandatory Redemption. Unless earlier redeemed, the Corporation shall redeem all outstanding shares of Series A Preferred Stock on the seventh anniversary of the Original Issue Date, at a per share redemption price equal to the sum of: (i) the Original Issue Price of a share of Series A Preferred Stock plus (ii) any accrued and unpaid dividends (including Cash Dividends and Accrued Dividends) thereon (regardless of whether any dividends are actually declared) to, but excluding, the date of such redemption.

     The redemption price for any shares of Series A Preferred Stock shall be payable in immediately available funds on the redemption date to the Holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. If the funds of the Corporation legally available for redemption of shares of Series A Preferred Stock are insufficient to redeem the total number of outstanding shares of Series A Preferred Stock to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of shares of Series A Preferred Stock ratably among the Holders of the shares to be redeemed based upon the aggregate number of shares of Series A Preferred Stock held by each such Holder. At any time, and from time to time, thereafter when additional funds of the Corporation are legally available for the redemption of shares of capital stock, such funds shall immediately be used to redeem additional shares of Series A Preferred Stock and the Corporation will use best efforts to satisfy any conditions necessary to pay the full amount of the redemption price of all outstanding shares of Series A Preferred Stock as soon as practicable.

     (b) Optional Redemption. The Corporation may not redeem any shares of the Series A Preferred Stock prior to the second anniversary of the Original Issue Date. On or after the second anniversary of the Original Issue Date, the Corporation, at its option, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Series A Preferred Stock at the time outstanding, upon notice given as provided in Section 11(d), at a per share redemption price equal to the sum of (i) the Original Issue Price of a share of Series A Preferred Stock and (ii) any accrued and unpaid dividends (including Cash Dividends and Accrued Dividends) thereon (regardless of whether any dividends are actually declared) to, but excluding, the date of such redemption. The redemption price for any shares of Series A Preferred Stock shall be payable in immediately available funds on the redemption date to the Holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent.

     (c) Notice of Redemption. Notice of every redemption of shares of Series A Preferred Stock shall be given in accordance with Section 11(d). Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Each notice of redemption given to a Holder shall state: (1) the redemption date; (2) the number of shares of Series A Preferred Stock to be redeemed and, if less than all the shares held by such Holder are to be redeemed, the number of such shares to be redeemed

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from such Holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

     (d) Effectiveness of Redemption. Upon payment of the full redemption price of a share of Series A Preferred Stock, such share shall no longer be deemed outstanding and all rights with respect to such share shall cease and terminate. If fewer than all the shares of Series A Preferred Stock represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the Holder thereof.

     (e) Status of Redeemed Shares. Shares of Series A Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Series A Preferred Stock may be reissued only as shares of a series of Preferred Stock other than Series A Preferred Stock).

Section 7. Conversion Rights. The Series A Preferred Stock shall not be convertible into Common Stock or any other securities of the Corporation.

Section 8. Election of Director. As long as any shares of Series A Preferred Stock remain outstanding, the Holders of shares of Series A Preferred Stock voting separately as a single class, to the exclusion of all other classes of the Corporation’s capital stock, and with each share of Series A Preferred Stock entitled to one vote, shall be entitled to elect one (1) director to serve on the Corporation’s Board of Directors until his or her successor is duly elected by the Holders of the Series A Preferred Stock or he or she is removed from office by the Holders of the Series A Preferred Stock. Any director elected as provided in the immediately preceding sentence may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of the Holders of a majority of the shares of Series A Preferred Stock outstanding given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of such stockholders, and any vacancy of such director (due to removal, resignation or otherwise) may be filled only by the Holders of a majority of the shares of Series A Preferred Stock outstanding a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of such stockholders. Except as otherwise provided herein and as otherwise required by law, the Series A Preferred Stock shall have no voting rights.

Section 9. Protective Provisions.

     So long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, directly or indirectly (by amendment, merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent) of the Holders of at least a majority of the then outstanding shares of Series A Preferred Stock:

     (a) authorize, create or issue any additional equity securities that rank senior or pari passu to the Series A Preferred Stock (including, for the avoidance of doubt, additional shares of Series A Preferred Stock or authorized but unissued equity securities or equity securities held in treasury, that rank senior or pari passu to the Series A Preferred Stock), or reclassify Junior Securities to rank senior or pari passu to the Series A Preferred Stock in right of payment;

     (b) amend these Articles of Amendment or the Articles of Amendment for the Corporation’s Series B Voting Convertible Preferred Stock, the Corporation’s Restated Articles of Incorporation or Bylaws, in any such case, in a manner that would alter or change the powers, preferences, privileges or rights of the Series A Preferred Stock or adversely affect the rights, preferences or privileges of the Series A Preferred Stock;

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     (c) consummate a Liquidation Event, unless a distribution of cash proceeds to the Holders of shares of Series A Preferred Stock in an aggregate amount equal to the Original Issue Price for each share of Series A Preferred Stock outstanding plus all accrued and unpaid dividends (including Cash Dividends and Accrued Dividends) thereon (whether or not declared) occurs upon the consummation of such Liquidation Event;

     (d) declare or pay any dividends or distributions, whether in cash, stock or property, to the holders of Common Stock or other Junior Securities or Parity Securities of the Corporation;

     (e) redeem or repurchase any Common Stock or other Junior Securities or Parity Securities of the Corporation; or

     (f) incur, obtain commitments for, or guarantee any Indebtedness (i) at any time that the Corporation is prevented (by contract, applicable law, or otherwise) from paying the Cash Dividend, or (ii) if on a pro-forma basis (taking into account the incurrence or guarantee of such Indebtedness) the Corporation’s Indebtedness-to-EBITDA ratio as of and for the trailing twelve-month period ended as of the then-most-recent fiscal quarter would exceed 3.0, except in the case of clause (ii) where (A) such new Indebtedness is incurred solely to pay down or refinance then-outstanding Indebtedness within the final 13 months of the term of the outstanding Indebtedness, (B) the principal amount of such new Indebtedness is equal to or less than the remaining principal balance of the Indebtedness being paid down or refinanced, and (C) the terms of the new Indebtedness are no more restrictive than the terms of the Indebtedness being paid down or refinanced with respect to the ability of the Corporation to pay dividends on and redeem the Series A Preferred Stock. For purposes of calculating the Indebtedness-to-EBITDA ratio referred to above in this paragraph, (x) the amount of any unfunded commitments for Indebtedness will count as Indebtedness, (y) drawdowns on commitments that were entered into without violating the covenant set forth in this Section 7(f) will be permitted, and (z) new Indebtedness used to pay down or refinance existing Indebtedness will be counted on a net basis (giving effect to such pay-down or refinance).

Section 10. Events of Noncompliance.

     (a) Definition. An Event of Noncompliance shall be deemed to have occurred if:

     (i) the Corporation fails to pay on any Dividend Payment Date the full amount of the Cash Dividend then accrued on the Series A Preferred Stock, whether or not such payment is legally permissible or is prohibited by any agreement to which the Corporation is subject;

     (ii) the Corporation fails to make any redemption payment with respect to the Series A Preferred Stock which it is obligated to make hereunder, whether or not such payment is legally permissible or is prohibited by any agreement to which the Corporation is subject;

     (iii) the Corporation breaches or otherwise fails to perform or observe any other covenant or agreement set forth herein or in the Purchase Agreement; or

     (iv) the Corporation makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered adjudicating the Corporation bankrupt or insolvent; or any order for relief with respect to the Corporation is entered under the Federal Bankruptcy Code; or the Corporation petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Corporation or of any substantial part of the assets of the Corporation, or commences any proceeding relating to the Corporation under any bankruptcy, reorganization, arrangement,

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insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Corporation and either (a) the Corporation by any act indicates its approval thereof, consent thereto or acquiescence therein or (b) such petition, application or proceeding is not dismissed within 60 days.

     (b) Consequences of Certain Events of Noncompliance.

     (i) If an Event of Noncompliance has occurred and continues without waiver or cure for a period of 30 days, the Cash Dividend Rate on the Series A Preferred Stock shall increase immediately by an increment of two percentage point(s). Thereafter, until such time as no Event of Noncompliance exists, the Cash Dividend Rate shall increase automatically at the end of each succeeding 90-day period by an additional increment of two percentage point(s). Any increase of the Cash Dividend Rate resulting from the operation of this paragraph shall terminate as of the close of business on the date on which no Event of Noncompliance exists, subject to subsequent increases pursuant to this paragraph.

     (ii) If an Event of Noncompliance of the type described in Section 10(a)(ii) has occurred, the number of directors constituting the Corporation’s Board of Directors shall, at the request of a majority of the Series A Preferred Stock then outstanding, be increased by such number which shall constitute a minimum majority of the Corporation’s Board of Directors, and the holders of Series A Preferred Stock shall have the special right, voting separately as a single class (with each Share being entitled to one vote) and to the exclusion of all other classes of the Corporation’s stock, to elect individuals to fill such newly created directorships, to fill any vacancy of such directorships and to remove any individuals elected to such directorships. The special right of the holders of Series A Preferred Stock to elect members of the Board of Directors may be exercised at the special meeting called pursuant to this Section 10(b)(ii), at any annual or other special meeting of stockholders or, to the extent and in the manner permitted by applicable law, pursuant to a written consent in lieu of a stockholders meeting.

     At any time when such special right has vested in the holders of Series A Preferred Stock, a proper officer of the Corporation shall, upon the written request of the holder(s) of at least a majority of the Series A Preferred then outstanding, addressed to the secretary of the Corporation, call a special meeting of the holders of Series A Preferred Stock for the purpose of electing a director pursuant to this Section 10(b)(ii). Such meeting shall be held at the earliest legally permissible date at the principal office of the Corporation, or at such other place designated by the holders of at least a majority of the Series A Preferred Stock then outstanding. If such meeting has not been called by a proper officer of the Corporation within 10 days after personal service of such written request upon the secretary of the Corporation or within 20 days after mailing the same to the secretary of the Corporation at its principal office, then the holder(s) of at least a majority of the Series A Preferred Stock then outstanding may designate in writing one of their number to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meetings of stockholders and shall be held at the Corporation’s principal office, or at such other place designated by the holder(s) of at least a majority of the Series A Preferred Stock then outstanding. Any holder of Series A Preferred Stock so designated shall be given access to the stock record books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to this subparagraph.

     At any meeting or at any adjournment thereof at which the holders of Series A Preferred Stock have the special right to elect directors, the presence, in person or by proxy, of the holder(s)

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of a majority of the Series A Preferred Stock then outstanding shall be required to constitute a quorum for the election or removal of any directors by the holders of the Series A Preferred Stock exercising such special right. The vote of a majority of such quorum shall be required to elect or remove any such director. Any director so elected by the holders of Series A Preferred Stock shall continue to serve as a director until the expiration of the remaining period of the full term for which such director has been elected.

     (iii) If any Event of Noncompliance exists, each Holder of Series A Preferred Stock shall also have any other rights which such Holder is entitled to under any contract or agreement at any time and any other rights which such Holder may have pursuant to applicable law.

Section 11. Miscellaneous.

     (a) Registration of Transfer. The Corporation will keep at its principal office a register for the registration of Series A Preferred Stock. Upon the surrender of any certificate representing Series A Preferred Stock at such place, the Corporation will, at the request of the record Holder of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of Series A Preferred Stock represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of Series A Preferred Stock as is requested by the Holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

     (b) Replacement. Upon receipt of an affidavit of the registered Holder of the loss, theft, destruction or mutilation of any certificate evidencing Series A Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity of such Holder or, in the case of any such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Series A Preferred Stock represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

     (c) Amendment and Waiver. No amendment, modification or waiver will be binding or effective with respect to any provision of these Articles of Amendment without the prior written consent of the Holders of at least a majority of the shares of the Series A Preferred Stock outstanding at the time such action is taken; provided, that no such amendment, modification or waiver can alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect the Holders thereof adversely without the prior written consent of each such Holder.

     (d) Notices. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered personally or mailed certified mail, return receipt requested, postage prepaid or delivered by overnight courier service and will be deemed to have been given upon delivery, if delivered personally, three days after mailing it, if mailed, or one business day after timely delivery to the courier, if delivered by overnight courier service (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such Holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated in writing, by such Holder).

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     THIRD: The date of adoption of these Articles of Amendment is April 6, 2010.

     FOURTH: These Articles of Amendment to the Restated Articles of Incorporation, as amended, were duly adopted by the Board of Directors of the Corporation.

     FIFTH: No shareholder action was required.

     EXECUTED this 6th day of April, 2010.

 

 

 

 

 

 

PENFORD CORPORATION
 

 

 

By:  

/s/ Thomas D. Malkoski  

 

 

 

Name:  

Thomas D. Malkoski  

 

 

 

Title:  

President and Chief Executive Officer 

 

 

 

 

 

 

 

ARTICLES OF AMENDMENT
OF
PENFORD CORPORATION

(Series B Voting Convertible Preferred Stock)

     Pursuant to the provisions of Chapter 23B.10 and Section 23B.06.020 of the Revised Code of Washington, the undersigned officer of Penford Corporation (the “Corporation”), a corporation organized and existing under the laws of the State of Washington, does hereby submit for filing these Articles of Amendment to its Restated Articles of Incorporation, as amended:

     FIRST: The name of the Corporation is Penford Corporation.

     SECOND: 100,000 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Voting Convertible Preferred Stock”.

     The preferences, limitations, voting powers and relative rights of the Series B Voting Convertible Preferred Stock are as follows:

DESIGNATION

Section 1. Designation. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Series B Voting Convertible Preferred Stock” (the “Series B Preferred Stock “). The number of shares constituting such series shall be 100,000. The Series B Preferred Stock shall have a par value per share of $1.00.

Section 2. Ranking. The Series B Preferred Stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution, rank on parity with the Common Stock..

Section 3. Definitions. Unless the context or use indicates another meaning or intent, the following terms shall have the following meanings, whether used in the singular or the plural:

     (a) “Articles of Amendment” means the Articles of Amendment of Penford Corporation dated April 6, 2010.

     (b) “Articles of Incorporation” means the Restated Articles of Incorporation of the Corporation, as amended.

     (c) “Board of Directors” means the board of directors of the Corporation or any committee thereof duly authorized to act on behalf of such board of directors.

     (d) “Common Stock” means the common stock, par value $1.00 per share, of the Corporation.

     (e) “Corporation” means Penford Corporation, a Washington corporation.

     (f) “Effective Date” means the date on which shares of the Series B Preferred Stock are first issued.

     (g) “Holder” means the Person in whose name the shares of the Series B Preferred Stock are registered, which may be treated by the Corporation as the absolute owner of the shares of Series B

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Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.

     (h) “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

     (i) “Purchasers” has the meaning set forth in the preamble of the Securities Purchase Agreement.

     (j) “Securities Purchase Agreement” means that certain Securities Purchase Agreement dated April 7, 2010 by and between the Corporation and the investor named therein.

Section 4. Dividends.

     (a) If the Board of Directors declares and pays a cash dividend in respect of any shares of Common Stock, then the Board of Directors shall declare and pay to the Holders of the Series B Preferred Stock a cash dividend in an amount per share of Series B Preferred Stock equal to the product of (i) the per share dividend declared and paid in respect of each share of Common Stock and (ii) the number of shares of Common Stock into which such share of Series B Preferred Stock is then convertible.

     (b) Dividends payable pursuant to Section 4(a) shall be payable on the same date that dividends are payable to holders of shares of Common Stock, and no dividends shall be payable to holders of shares of Common Stock unless the full dividends contemplated by Section 4(a) are paid at the same time in respect of the Series B Preferred Stock. Each dividend will be payable to Holders of record as they appear in the records of the Corporation at the close of business on the same record date, which with respect to dividends payable pursuant to Section 4(a), shall be the same day as the record date for the payment of the corresponding dividends to the holders of shares of Common Stock.

     (c) Dividends on the Series B Preferred Stock are non-cumulative. If the Board of Directors does not declare a dividend on the Series B Preferred Stock in respect of any dividend period, the Holders will have no right to receive any dividend for such dividend period, and the Corporation will have no obligation to pay a dividend for such dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Series B Preferred Stock or the Common Stock or any other class or series of the Corporation’s preferred stock.

     (d) If the Conversion Date with respect to any share of Series B Preferred Stock is prior to the record date for the payment of any dividend on the Common Stock, the Holder of such share of Series B Preferred Stock will not have the right to receive any corresponding dividends on the Series B Preferred Stock. If the Conversion Date with respect to any share of Series B Preferred Stock is after the record date for any declared dividend and prior to the payment date for that dividend, the Holder thereof shall receive that dividend on the relevant payment date if such Holder was the Holder of record on the record date for that dividend.

Section 5. Liquidation.

     (a) In the event the Corporation voluntarily or involuntarily liquidates, dissolves or winds up, the Holders of shares of Series B Preferred Stock at the time of such event shall be entitled to participate in such liquidating distribution based on the amount payable to holders of Common Stock at the same time that distributions of assets are made to the holders of the Common Stock. Holders of the Series B Preferred Stock shall participate in such distributions on a basis as if each share of Series B Preferred Stock had been converted, immediately prior to such liquidating distribution, into the number of shares of

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Common Stock at the then applicable Conversion Rate.

     (b) The Corporation’s Business Combination (as defined herein) will not constitute its liquidation, dissolution or winding up.

Section 6. No Redemption. The Series B Preferred Stock shall not be redeemable either at the Corporation’s option or at the option of Holders at any time.

Section 7. Conversion Right.

     (a) Subject to and upon compliance with the provisions of this Section 7, a Holder of any share or shares of Series B Preferred Stock shall have the right, at its option, at any time prior to the ten-year anniversary of the Effective Date, to convert all or any portion of such Holder’s outstanding Series B Preferred Stock, subject to the conditions described below, into the number of fully paid and non-assessable shares of Common Stock initially at a conversion rate of ten (10) shares of Common Stock per share of Series B Preferred Stock (the “Conversion Rate”). Such Holder shall surrender to the Corporation such shares of Series B Preferred Stock to be converted in accordance with the provisions of Section 7(e). If any issued and outstanding shares of Series B Preferred Stock have not been converted prior to the ten-year anniversary of the Effective Date, such shares shall be automatically converted into shares of Common Stock at the then-effective Conversion Rate on the date of such ten-year anniversary.

     (b) In connection with the conversion of any shares of Series B Preferred Stock, no fractional shares of Common Stock shall be issued, but the Corporation shall pay a cash adjustment in respect of any fractional interest in an amount equal to the fractional interest multiplied by the Closing Price on a day during which trading in securities generally occurs on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on the principal other United States national or regional securities exchange on which the Common Stock is then listed. If more than one share of Series B Preferred Stock shall be surrendered for conversion by the same Holder at the same time, the number of full shares of Common Stock issuable on conversion of those shares of Series B Preferred Stock shall be computed on the basis of the total number of shares of Series B Preferred Stock so surrendered.

     (c) Except as set forth in these Articles of Amendment or in the Investor Rights Agreement (as such term is defined in the Securities Purchase Agreement), a Holder of Series B Preferred Stock is not entitled to any rights of a Holder of shares of Common Stock until that Holder has converted its Series B Preferred Stock, and only to the extent the Series B Preferred Stock are deemed to have been converted to shares of Common Stock in accordance with the provisions of this Section 7.

     (d) The Corporation shall, prior to issuance of any shares of Series B Preferred Stock hereunder, and from time to time as may be necessary, reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of Series B Preferred Stock, such number of its duly authorized Common Stock as shall from time to time be sufficient to effect the conversion of all shares of Series B Preferred Stock then outstanding into such Common Stock at any time. The Corporation covenants that all shares of Common Stock which may be issued upon conversion of Series B Preferred Stock shall upon issue be fully paid and nonassessable and free from all liens and charges and, except as set forth in Section 7(e)(i), taxes with respect to the issue thereof. The Corporation further covenants that, if at any time the shares of Common Stock shall be listed on the New York Stock Exchange or any other national securities exchange or quoted on an automated quotation system, the Corporation shall, if permitted by the rules of such exchange or automated quotation system, list and keep listed or quoted, so long as the Common Stock shall be so listed or quoted on such exchange or automated quotation system, all Common Stock issuable

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upon conversion of the Series B Preferred Stock. Before the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the shares of Series B Preferred Stock, the Corporation shall comply with all applicable federal and state laws and regulations.

     (e) The procedure to exercise the conversion right is set forth below:

     (i) In order to convert shares of Series B Preferred Stock, a Holder must surrender to the Corporation at its principal office or at the office of the transfer agent of the Corporation, as may be designated by the Board of Directors, the certificate or certificates for the shares of Series B Preferred Stock to be converted accompanied by a written notice stating that the Holder of Series B Preferred Stock elects to convert all or a specified whole number of those shares in accordance with this Section 7(e) and specifying the name or names in which the Holder wishes the certificate or certificates for the shares of Common Stock to be issued (a “Conversion Notice”). In case the notice specifies that the shares of Common Stock are to be issued in a name or names other than that of the Holder of Series B Preferred Stock, the notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in that name or names. Other than those transfer taxes payable pursuant to the preceding sentence, the Corporation shall pay any documentary, stamp or similar issue or transfer taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of the shares of Series B Preferred Stock.

     (ii) As promptly as practicable after the surrender of the certificate or certificates for the shares of Series B Preferred Stock in accordance with Section 7(e)(i), the receipt of the Conversion Notice and payment of all required transfer taxes, if any, or the demonstration to the Corporation’s satisfaction that those taxes have been paid, the Corporation shall issue and shall deliver or cause to be issued and delivered to such Holder, or to such other person on such Holder’s written order, (a) certificates representing the number of validly issued, fully paid and non-assessable full shares of Common Stock to which the Holder of the Series B Preferred Stock being converted, or the Holder’s transferee, shall be entitled, (b) if less than the full number of Series B Preferred Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares of Series B Preferred Stock evidenced by the surrendered certificate or certificates, less the number of shares being converted, and (c) any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in Section 7(b).

     (iii) Each conversion shall be deemed to have been made at the close of business on the date of giving the notice and of surrendering the certificate or certificates representing the shares of the Series B Preferred Stock to be converted (the “Conversion Date”) so that the rights of the Holder thereof as to the Series B Preferred Stock being converted shall cease except for the right to receive the number of fully paid and non-assessable shares of Common Stock at the Conversion Rate (subject to adjustment in accordance with the provisions of Section 8), and, if applicable, the person entitled to receive shares of Common Stock shall be treated for all purposes as having become the record Holder of those shares of Common Stock at that time.

Section 8. Adjustment of Conversion Rate; Distributions.

     (a) Stock Dividends and Distributions. If the Corporation shall, at any time or from time to time after the Effective Date while any shares of Series B Preferred Stock are outstanding, issue Common Stock as a dividend or distribution to all or substantially all of the holders of Common Stock, then the Conversion Rate in effect immediately prior to the close of business on the record date fixed for the determination of stockholders entitled to receive such dividend or distribution shall be adjusted by

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multiplying such Conversion Rate by a fraction:

     (i) the numerator of which shall be the sum of (x) the total number of shares of Common Stock outstanding at the close of business on such Distribution Record Date and (y) the total number of shares of Common Stock constituting such dividend or other distribution; and

     (ii) the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on such Distribution Record Date.

     An adjustment made pursuant to this Section 8(a) shall become effective immediately prior to the opening of business on the day following the Distribution Record Date fixed for such determination. If any dividend or distribution of the type described in this Section 8(a) is declared but not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate which would then be in effect if such dividend or distribution had not been declared. “Distribution Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).

     (b) Subdivisions, Combinations, Reclassifications and Splits. If the Corporation shall, at any time or from time to time after the Effective Date while any shares of Series B Preferred Stock are outstanding, subdivide, combine, reclassify or split its outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, the Conversion Rate in effect immediately prior to the opening of business on the day following the day upon which such subdivision, combination, reclassification or split becomes effective shall be adjusted by multiplying such Conversion Rate by a fraction:

     (i) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the opening of business on the day following the day such subdivision, combination, reclassification or split becomes effective; and

     (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to the opening of business on the day that such subdivision, combination, reclassification or split becomes effective.

     An adjustment made pursuant to this Section 8(b) shall become effective immediately prior to the opening of business on the day following the day upon which such subdivision, reclassification, split or combination becomes effective.

     (c) Issuances of Purchase Rights. If the Corporation shall, at any time or from time to time after the Effective Date while any shares of Series B Preferred Stock are outstanding, issue rights or warrants to all or substantially all holders of its outstanding Common Stock (including pursuant to an shareholder rights plan) entitling them to subscribe for or purchase Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, the Holders of shares of Series B Preferred Stock shall be entitled receive such rights or warrants as though such Holders were the holders of the number of shares of Common Stock into which their shares of Series B Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this Corporation entitled to receive such distribution.

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     (d) Distributions of Assets. If the Corporation shall, at any time or from time to time after the Effective Date while any shares of Series B Preferred Stock are outstanding, by dividend or otherwise, distribute to all or substantially all of the holders of its outstanding shares of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Corporation is the continuing corporation and the shares of Common Stock are not changed or exchanged), shares of its capital stock, evidences of the Corporation’s indebtedness or other assets or property, including securities (including capital stock of any subsidiary of the Corporation) but excluding (i) dividends or distributions of Common Stock referred to in Section 8(a), (ii) any rights or warrants referred to in Section 8(c), (iii) dividends and distributions paid exclusively in cash referred to in Section 4 and (iv) dividends and distributions of stock, securities or other property or assets (including cash) in connection with a Business Combination to which Section 9 applies (such capital stock, evidence of its indebtedness, other assets or property or securities being distributed hereinafter in this Section 8(d) called the “Distributed Assets”), then, in each such case, the Holders of shares of Series B Preferred Stock shall be entitled receive such Distributed Assets as though such Holders were the holders of the number of shares of Common Stock into which their shares of Series B Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this Corporation entitled to receive such distribution.

     (e) Whenever successive adjustments to the Conversion Rate are called for pursuant to this Section 8, such adjustments shall be made as may be necessary or appropriate to effectuate the intent of this Section 8 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors. The Corporation shall be entitled to make such additional increases in the Conversion Rate, in addition to those required by Sections 8(a) and (b), if the Board of Directors determines that it is advisable in order that any dividend or distribution of Common Stock or subdivision, reclassification or combination of Common Stock or any event treated as such for United States federal income tax purposes, shall not be taxable to the holders of Common Stock for United States federal income tax purposes or to diminish any such tax.

     (f) Whenever an adjustment in the Conversion Rate with respect to the Series B Preferred Stock is required, the Corporation shall promptly send to each Holder of Series B Preferred Stock a certificate of the Chief Financial Officer of the Corporation (or such person having similar responsibilities), stating the adjusted Conversion Rate determined as provided herein and setting forth in reasonable detail such facts as shall be necessary to show the reason for and the manner of computing such adjustment.

Section 9. Consolidation or Merger of the Corporation.

     (a) In the case of the following events (each, a “Business Combination”): (i) any recapitalization, reclassification or change of the Common Stock, other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of subdivision or a combination; (ii) a consolidation, merger or binding share exchange of the Corporation with another Person; (iii) a sale, conveyance or lease to another corporation of all or substantially all of the property and assets of the Corporation; or (iv) a statutory share exchange; in each case, as a result of which holders of Common Stock are entitled to receive stock, other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for Common Stock, the Corporation or the successor or purchasing corporation, as the case may be, shall provide that the Holders of Series B Preferred Stock will be entitled thereafter to convert such Series B Preferred Stock into the kind and amount of stock, other securities or other property or assets (including cash or any combination thereof) which such Holder of Series B Preferred Stock would have owned or been entitled to receive upon such Business Combination had such shares been converted into Common Stock immediately prior to such Business Combination. If holders of Common Stock have the opportunity to elect the form of consideration to be received in such Business Combination, the Corporation will make adequate provision

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whereby the Holders of the Series B Preferred Stock shall have a reasonable opportunity to determine the form of consideration into which all of the Series B Preferred Stock, treated as a single class, shall be convertible from and after the effective date of such Business Combination. Such determination shall be based on the weighted average of elections made by the Holders of the Series B Preferred Stock who participate in such determination, shall be subject to any limitations to which all of the holders of Common Stock are subject, such as pro rata reductions applicable to any portion of the consideration payable in such Business Combination, and shall be conducted in such a manner as to be completed by the date which is the earliest of (i) the deadline for elections to be made by holders of Common Stock, and (ii) two business days prior to the anticipated effective date of the Business Combination. The Corporation shall provide notice of the opportunity to determine the form of such consideration, as well as notice of the determination made by the Holders of the Series B Preferred Stock (and the weighted average of elections), by issuing a press release or providing other appropriate notice, and by providing a copy of such notice to the Board of Directors. If the effective date of the Business Combination is delayed beyond the initially anticipated effective date, the Holders of the Series B Preferred Stock shall be given the opportunity to make subsequent similar determinations in regard to such delayed effective date. The documents governing the rights of such securities shall provide for adjustments of the Conversion Rate and pass-through of dividends and distributions which shall be as nearly equivalent as may be practicable to such provisions provided for in Section 8 and Section 4. If, in the case of any such Business Combination, the stock or other securities and assets receivable thereupon by a holder of shares of Common Stock includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such Business Combination, then such documents governing the rights of such securities shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Series B Preferred Stock as the Board of Directors shall reasonably consider necessary by reason of the foregoing.

     (b) The Corporation shall cause notice of the execution of such documents governing the rights of such securities to be mailed to each Holder of Series B Preferred Stock, at the address of such Holder as it appears on the Register, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such documents governing the rights of such securities.

     (c) The above provisions of this Section 9 shall similarly apply to successive Business Combinations. The Corporation shall not become a party to any Business Combination unless its terms are consistent in all material respects with the provisions of this Section 9. None of the provisions of this Section 9 shall affect the right of a Series B Preferred Stockholder to convert its shares of Series B Preferred Stock into Common Stock prior to the effective date of a Business Combination.

Section 10. Voting Rights. The Holder of each share of Series B Preferred Stock shall have the right to one vote for each share of Common Stock into which such share of Series B Preferred Stock could then be converted at the then applicable Conversion Rate. With respect to such vote and except as otherwise expressly provided herein or as required by applicable law, each Holder of Series B Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any meeting of shareholders in accordance with the Bylaws of the Corporation and shall be entitled to vote, together with holders of Common Stock as a single class, with respect to any matter upon which holders of Common Stock have the right to vote. Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series B Preferred Stock held by each Holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

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Section 11. Miscellaneous.

     (a) Registration of Transfer. The Corporation will keep at its principal office a register for the registration of Series B Preferred Stock. Upon the surrender of any certificate representing Series B Preferred Stock at such place, the Corporation will, at the request of the record Holder of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of Series B Preferred Stock represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of Series B Preferred Stock as is requested by the Holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.

     (b) Replacement. Upon receipt of an affidavit of the registered Holder of the loss, theft, destruction or mutilation of any certificate evidencing Series B Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity of such Holder or, in the case of any such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Series B Preferred Stock represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

     (c) Amendment and Waiver. No amendment, modification or waiver will be binding or effective with respect to any provision of these Articles of Amendment without the prior written consent of the Holders of at least a majority of the shares of the Series B Preferred Stock outstanding at the time such action is taken; provided, that no such amendment, modification or waiver can alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect the Holders thereof adversely without the prior written consent of each such Holder.

     (d) Notices. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered personally or mailed certified mail, return receipt requested, postage prepaid or delivered by overnight courier service and will be deemed to have been given upon delivery, if delivered personally, three days after mailing it, if mailed, or one business day after timely delivery to the courier, if delivered by overnight courier service (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such Holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated in writing, by such Holder).

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     THIRD: The date of adoption of these Articles of Amendment is April 6, 2010.

     FOURTH: These Articles of Amendment to the Restated Articles of Incorporation, as amended, were duly adopted by the Board of Directors of the Corporation.

     FIFTH: No shareholder action was required.

     EXECUTED this 6th day of April, 2010.

 

 

 

 

 

 

PENFORD CORPORATION
 

 

 

By:  

/s/ Thomas D. Malkoski  

 

 

 

Name:  

Thomas D. Malkoski  

 

 

 

Title:  

President and Chief Executive Officer 

 

[As Filed: 04-09-2010]