EXHIBIT 10.20
[PENFORD CORPORATION LOGO]
TRANSITION AGREEMENT
This Transition Agreement ("Agreement") is entered into by Jeffrey T.
Cook ("Cook") and Penford Corporation ("Penford"), a Washington corporation.
RECITALS
A. Cook, a valued employee, has advised Penford that he will resign as
Chief Executive Officer ("CEO") and President for personal reasons, which
include his decision not to move his family when the corporate headquarters
relocates out of Washington. Penford and Cook wish to enter into this Agreement
to set forth the terms of Cook's separation from Penford and to facilitate the
effective transition of Cook's duties to a new CEO.
B. For the purposes of this Agreement, "Affiliates" means any entity or
entities currently existing or subsequently organized or formed that directly or
indirectly control, are controlled by or are under common control of Penford or
the persons who control Penford, whether through the ownership of voting
securities, by contract or otherwise.
AGREEMENTS
The parties agree as follows:
1. TRANSITION. Effective January 3, 2002, a new CEO accepted the position with
Penford. As set forth more fully below, Cook will remain with Penford as
President and will assist in facilitating an effective transition of
responsibilities.
2. COMPENSATION. Cook will retain his base compensation of $350,000 while
serving as President of the Company. In addition, he will be eligible for all
benefits, which he previously received as President and CEO, except as provided
in this Agreement. Cook's bonus compensation will be modified as follows: Cook's
bonus for the first four months of the current fiscal year, September 1 through
December 31, 2001 shall be $81,585 (70% of base salary for one-third of a year)
and shall be paid no later than January 31, 2002. Commencing January 1, 2002,
Cook's target bonus potential will be adjusted to fifty percent (50%) of his
base compensation. His bonus for the remainder of the current and next fiscal
year will be based on
goals developed with the new CEO and Compensation Committee of the Board
primarily related to Cook's role in accomplishing a successful transition.
Except as provided above, any such bonus payment is at the sole discretion of
the Compensation Committee of the Penford Board of Directors, and the amount of
any such payment shall be determined and paid in the same manner it is provided
to others, based on Penford designated group and individual participation levels
and goals. Cook agrees and understands that such group and individual
participation levels and goals are subjective in nature, vary between individual
participants, and are subject to change by Penford. Excluding the $81,585 bonus
identified above, Cook agrees that Penford's failure to pay a bonus under this
provision or failure to fund a bonus at any specific level, shall not constitute
a material breach of this Agreement or form a basis for rescission of this
Agreement, provided any such decision is made in good faith and is supported by
legitimate business reasons. Cook will retain his current level of benefits and
employee perquisites until the termination of his employment, unless those
benefits or perquisites are changed for other executive level employees.
3. EARLY TERMINATION. Penford has encouraged Cook to remain as President of the
Company to assist in a transition, but recognizes that this may not meet Cook's
personal goals. Therefore, either Cook or Penford may terminate their employment
relationship at any time and for any reason. In any event, Cook shall be
guaranteed his base salary through July 3, 2002, in addition to Severance
described in Section 6.
4. BOARD/SHAREHOLDER FUNCTIONS. The parties recognize that it can be difficult
to attract and retain a CEO, if a former CEO will play an active role on the
Board. In light of that, Cook agrees that he will resign from service on the
Board of Directors, if requested to do so by a two-thirds (2/3) vote of the
other Board Members. Cook agrees that prior to his termination of employment he
will vote his shares of Penford Common Stock in accordance with any
recommendation of the Board of Directors. The provision applies only to the
31,833 shares of Penford Common Stock currently owned by Cook, any shares in
Cook's 401k account, and any option shares Cook subsequently exercises.
5. CONSULTING CONTRACT. Penford wishes to avail itself of Cook's long history
with and knowledge of Penford and its industry. If Cook complies with the other
provisions of this Agreement he shall be offered a consulting contract for
eighteen (18) months after he terminates employment, unless terminated for
cause. The total amount of the contract will be $100,000 which will be paid
quarterly. The services requested will not interfere with his ability to obtain
or retain other employment, nor will they require him to relocate. Penford will
reimburse Cook for any ordinary expenses in connection with his consulting
services.
6. ADDITIONAL PAYMENTS AND BENEFITS.
A. SEVERANCE. Penford shall pay Cook severance in the total amount of
$500,000, less deductions and withholding. Said severance shall be payable
monthly and the payments shall begin within the first month after the expiration
of the 7-day revocation period set forth in Exhibit A, attached hereto. Payment
shall be net of required withholding. It is agreed and acknowledged that payment
under this Section 6, in whole or in part, constitutes full and
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adequate consideration for the covenants, obligations and waiver and release by
Cook set forth in this Agreement and that Penford would not be required to make
any part of this payment, except as required in this Agreement. As a condition
of receipt of the Severance, Cook must execute a Full Release of Claims in the
form attached as Exhibit A within twenty-one (21) days after his last date of
employment.
B. COBRA. Should Cook elect COBRA coverage under Penford's medical benefits
plan, Penford will reimburse Cook for premiums paid by Cook for such coverage
for a period of eighteen (18) months following the termination of Cook's
employment or until Cook has obtained other employment that provides medical
benefits, whichever comes first. Cook shall be solely responsible for the timely
payment of all COBRA premiums, should he elect COBRA, and for seeking
reimbursement from Penford for premiums that are reimbursable under this
Agreement. Penford may, at its option, extend Company coverage for all or a
portion of the eighteen (18) months without requiring Cook to elect COBRA.
C. OUTPLACEMENT SERVICES. Penford shall reimburse Cook for costs he incurs
for job search services provided by an established consultant in the field in an
amount not to exceed $14,000. The costs must be incurred within twelve (12)
months of termination of employment to be reimbursable.
D. ACCELERATION OF VESTING. If Cook remains with Penford through July 3,
2002, on the final day of Cook's employment with Penford, any unvested shares of
Penford stock for which Cook then holds an option shall immediately vest. Such
stock options may be exercised in accordance with the terms and conditions of
the Penford Stock Option Plan[s] and any applicable granting documents. If Cook
is terminated without cause prior to that time, he shall also be entitled to the
foregoing accelerated vesting. If Cook is terminated with cause, he shall not be
entitled to accelerated vesting.
7. PENFORD PROPERTY. Cook represents and warrants that at the end of his
employment he will promptly turn over to Penford all files, memoranda, records,
keys, credit cards, manuals and other documents, including electronically
recorded documents and data, and physical property that Cook received from
Penford or its employees or that Cook generated in the course of Cook's
employment with Penford. Cook will be responsible for all fees and costs
connected with the transfer. Cook may retain awards, mementos and other property
of a personal nature. Upon the termination of Cook's employment, Penford shall
sign over to Cook the title to Cook's company car.
8. WAIVER AND RELEASE.
A. Cook expressly waives, releases and acknowledges satisfaction of all
claims of any kind against Penford, its Affiliates, subsidiaries and related
entities, their predecessors, successors and assigns, and their present and
former shareholders, directors, officers, employees, agents and attorneys, in
their individual and representative capacities (collectively "Released
Parties"). This release is comprehensive and includes all claims (including
claims to attorneys' fees), damages, causes of action or disputes, whether known
or unknown, based upon acts or
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omissions occurring prior to the execution of this Agreement. This release
includes, but is not limited to any action arising under common law or under any
federal, state, or local statute or ordinance. This release includes, but is not
limited to tort claims, claims for wrongful discharge, contract breach,
violation of the Age Discrimination in Employment Act, the Americans with
Disabilities Act, Title VII of the Civil Rights Act, or the Washington Law
Against Discrimination. Cook expressly waives any rights under the Change of
Control Agreement, dated October 24, 1995. That agreement shall be considered
null and void. Excluded from this release are indemnification rights, Cook's
rights under the Penford Corporation Supplemental Executive Retirement Plan, as
restated September 1, 2001, claims Cook may have with regard to vested benefits
under ERISA, workers' compensation claims or any other claim that cannot be
lawfully released in this Agreement.
B. Cook represents and warrants that he is the sole and exclusive owner of
all respective claims, demands and causes of action, and that no other party has
any right, title or interest whatsoever in any of the matters referred to
herein, and there has been no assignment, transfer, conveyance or other
disposition by Cook of any matters referred to herein.
9. CONFIDENTIAL INFORMATION.
A. Cook will maintain the confidentiality of all confidential information
Cook has regarding the Released Parties, including without limitation nonpublic
information regarding finances, employees, former employees, customers, computer
codes, plans, processes, marketing, strategies, formulas, vendors, products and
services. Cook will not disclose or use such information, either directly or
indirectly. Cook further represents and warrants that he has not disclosed,
either directly or indirectly, or used in any way confidential or proprietary
information of the Released Parties, except as authorized by the Released
Parties. This Agreement supplements the obligations Cook has under law and under
the Proprietary Information Agreement attached as Exhibit B, which is
incorporated herein by reference.
B. Cook agrees to keep the financial terms of this Agreement confidential,
and will not disclose any information concerning its financial terms to anyone
other than Cook's spouse, legal counsel and/or financial advisors, who will be
informed of and bound by this confidentiality clause. This provision is not
intended to restrict Cook from making disclosures as may be required by law or
disclosing terms that have already been publicly disclosed by Penford.
10. COVENANT NOT TO COMPETE. For a period expiring twenty-four (24) months after
his termination of employment, Cook shall not: (1) directly, indirectly or
otherwise, own, manage, operate, control, serve as a consultant to, be employed
by, participate in or be connected, in any manner, with the ownership,
management, operation or control of any business that competes with Penford or
any of its Affiliates or that is engaged in any type of business that, during
the past twelve months, Penford has or had active plans to develop; (2) hire,
offer to hire, entice away or in any other manner persuade or attempt to
persuade any officer, employee or agent of Penford or any of its Affiliates to
alter or discontinue his or her relationship with Penford or its affiliate or to
do any act that is inconsistent with the interests of Penford or any of its
Affiliates; (3) directly or indirectly solicit, divert, take away or attempt to
solicit, divert or
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take away any customers or business of Penford or any of its Affiliates; or (4)
directly or indirectly solicit, divert, or in any other manner persuade or
attempt to persuade any supplier of Penford or any of its Affiliates to alter or
discontinue its relationship with Penford or any of its Affiliates. Businesses
that are deemed to compete with Penford include, without limitation, businesses
engaged in the manufacture or distribution of starch-based specialty chemicals
and food ingredients. Notwithstanding Cook's obligations under this Section 10,
Cook shall be entitled to own, as a passive investor, up to five percent (5%) of
any publicly traded company without violating this provision. This provision is
in addition to any obligation Cook has under his Proprietary Information
Agreement.
Penford and Cook agree that the provisions of this Section 10 do not impose
an undue hardship on Cook and are not injurious to the public; that these
provisions are necessary to protect the business of Penford and its Affiliates;
that Penford would not enter into this Agreement, if Cook did not agree to the
provisions of this Section 10; that the scope of this Section 10 is reasonable
in terms of length of time and geographic scope; and that adequate consideration
supports this Section 10, including consideration herein.
11. REVIEW AND REVOCATION PERIOD. Penford hereby advises Cook to obtain counsel
to assist in assessing this offer and will provide reimbursement, with proper
documentation, up to three thousand dollars ($3,000). This offer shall remain
open until twenty-one (21) days following delivery of this offer, after which it
shall expire. Cook has a period of seven (7) days from the date upon which he
executes and delivers this Agreement to revoke his acceptance of this Agreement.
If Cook decides to rescind this Agreement, he is required to deliver within
seven (7) days from execution and delivery of this Agreement a notice addressed
to the undersigned representative of Penford revoking Cook's acceptance of this
Agreement. Such notice must be by personal delivery or certified mail, return
receipt requested, and shall be deemed delivered when received by Penford. The
effective date of this Agreement shall be the eighth day after the execution and
delivery of this executed Agreement by Cook to the representative of Penford set
forth below, provided that Cook has not revoked acceptance or rescinded the
Agreement. This Agreement shall not be effective unless Cook duly executes and
delivers this Agreement in accordance with the terms herein and no revocation or
rescission occurs within seven (7) days after Cook's acceptance.
12. SEVERABILITY. If any provision of this Agreement shall be held invalid,
illegal or unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be construed liberally in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction over such matters shall have the power to reform
such provision to the extent necessary for such provision to be enforceable
under applicable law.
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13. KNOWING AND VOLUNTARY AGREEMENT. Cook warrants and represents that he has
carefully read this Agreement; knows its contents; has had an opportunity to
discuss it and its effects with his attorney; understands that he is giving up
all claims, damages or disputes as set forth in Section 8 of this Agreement,
including claims, damages and disputes under the Age Discrimination in
Employment Act; has been afforded ample and adequate opportunity to review and
analyze this entire Agreement; understands its contents and its final and
binding effect; has twenty-one (21) days to consider this Agreement before he
signed it; has seven (7) days to revoke this Agreement after he signs it; and
has signed it as his free and voluntary act.
14. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding between
Cook and Penford and supersedes any prior Agreements or understandings, express
or implied, pertaining to the terms of Cook's employment with Penford and the
termination of the employment relationship, except for the Proprietary
Information Agreement (Exhibit B); any and all of Cook's stock or stock option
agreements or grants; and the Penford Corporation Supplement Executive
Retirement Plan, as restated September 1, 2001; each of which expressly survive
this Agreement and are incorporated herein except as modified hereunder. Cook
acknowledges that in executing this Agreement, Cook does not rely upon any
representation or statement by any representative of Penford or any of the
Released Parties concerning the subject matter of this Agreement, except as
expressly set forth in the text of the Agreement.
15. LITIGATION. This Agreement will be governed by the laws of the State of
Washington, excluding its choice of law provisions. In the event of litigation
pertaining to this Agreement or the termination of Cook's employment with
Penford to the extent permitted by law, the prevailing party shall be entitled
to its costs of litigation, including reasonable attorney's fees. All disputes
hereunder shall be heard in a court of competent jurisdiction in King County,
Washington. Cook agrees and acknowledges that Cook's violation of the provisions
of Sections 9 and 10 of the Agreement would cause Penford or its Affiliates
irreparable harm for which there would be no adequate remedy at law. Cook agrees
that Penford will have the right (in addition to any other rights and remedies
Penford or its Affiliates may have) to obtain injunctive relief to restrain any
breach or threatened breach of Sections 9 and 10 of the Agreement or otherwise
specifically to enforce performance by Cook of his obligations under Sections 9
and 10 of the Agreement. Cook agrees that Penford or its Affiliates will not be
obligated to post bond or other security in seeking such relief. Cook further
agrees that any profits made in violation of Sections 9 and 10 of this Agreement
shall be held in constructive trust for the benefit of Penford or its
Affiliates, as applicable.
16. NOTICES. Any notice required or permitted to be given hereunder shall be in
writing, and shall be given by certified mail, return receipt requested, by
courier or by personal delivery addressed as follows, unless otherwise
designated in writing. Notices to Penford shall be addressed to Penford
Corporation, Attention: Chief Executive Officer, 777 108th Avenue NE, Suite
2390, Bellevue, WA 98004. Notices to Cook shall be addressed to Jeffrey T. Cook,
6775 W. Mercer Way, Mercer Island, WA 98040. Any such notice shall be deemed to
have been received on the day of delivery, if it is a business day and otherwise
on the next business day.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
17th day of January, 2002.
PENFORD CORPORATION.
/s/ William G. Parzybok, Jr. /s/ Jeffrey T. Cook
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By Chairman of Board Jeffrey T. Cook
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EXHIBIT A
In consideration for the severance payment described in paragraph 6A of the
Transition Agreement executed by Cook on January 17, 2002, Cook expressly
waives, releases and acknowledges satisfaction of all claims of any kind against
Penford, its Affiliates, subsidiaries and related entities, their predecessors,
successors and assigns, and their present and former shareholders, directors,
officers, employees, agents and attorneys, in their individual and
representative capacities (collectively "Released Parties"). This release is
comprehensive and includes all claims (including claims to attorneys' fees),
damages, causes of action or disputes, whether known or unknown, based upon acts
or omissions occurring prior to the execution of this Agreement. This release
includes, but is not limited to any action arising under common law or under any
federal, state, or local statute or ordinance. This release includes, but is not
limited to tort claims, claims for wrongful discharge, contract breach,
violation of the Age Discrimination in Employment Act, the Americans with
Disabilities Act, Title VII of the Civil Rights Act, or the Washington Law
Against Discrimination. Cook expressly waives any rights under the Change of
Control Agreement, dated October 24, 1995. That agreement shall be considered
null and void. Excluded from this release are indemnification rights, Cook's
rights under the Penford Corporation Supplemental Executive Retirement Plan, as
restated September 1, 2001, claims Cook may have with regard to vested benefits
under ERISA, workers' compensation claims or any other claim that cannot be
lawfully released in this Agreement.
Cook is hereby advised to review this release with an attorney prior to
executing and delivering it to Penford. Cook agrees and acknowledges that he has
been given a period of twenty-one (21) days to review and consider this release.
Cook may execute this release any time before expiration of the twenty-one (21)
days, in which case he shall waive the remainder of the consideration period.
Cook acknowledges in executing this release that he has had all required notices
and waiting periods set forth in the Older Worker's Benefit Protection Act. Cook
also acknowledges that he is entitled to revoke this release for a period of
seven (7) days after its execution. If not timely revoked, this release will be
effective.
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