Exhibit 10.2
SEVERANCE AND SETTLEMENT AGREEMENT AND RELEASE
     This Severance and Settlement Agreement and Release (“Agreement”) is
entered into by and between Penwest Pharmaceuticals Co. (the “Company”) and
Benjamin L. Palleiko (the “Employee”).
     WHEREAS, the parties wish to resolve amicably the Employee’s separation
from the Company and establish the terms of the Employee’s severance
arrangement;
     NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby acknowledged, the Company and the
Employee agree as follows:
     1. Termination Date. The Employee’s date of termination from the Company is
January 21, 2009 (the “Termination Date”). By executing this Agreement, the
Employee hereby resigns, effective as of the Termination Date, from his position
as an officer of the Company.
     2. Consideration. In return for the Employee’s release and other promises
set forth in this Agreement, the Company agrees to provide the Employee with the
following pay and other benefits, referred to herein as “Severance Benefits”:
          (a) The Company agrees to provide severance pay to the Employee in the
form of salary continuation (at the rate of $11,576.92, less all applicable
taxes and withholdings, per regular Company pay period) for a period commencing
on the Effective Date (as defined in Section 19 below) and ending on the date
nine (9) months following the Effective Date (such period being referred to as
the “Severance Period”). The severance pay will be paid to the Employee in
accordance with the Company’s regular payroll practices, with the first payment
to be made no earlier than the Effective Date.
          (b) Upon the Effective Date, (i) the vesting of the options to
purchase 45,500 shares of common stock granted to the Employee on March 13, 2008
shall be accelerated such that as of the Effective Date such options shall be
deemed vested and shall be exercisable for a total of 11,375 shares of common
stock and (ii) the vesting of the options to purchase 19,500 shares of common
stock granted to the Employee on June 11, 2008 shall be accelerated such that as
of the Effective Date such options shall be deemed vested and shall be
exercisable for a total of 4,875 shares of common stock..

 

--------------------------------------------------------------------------------

 

          (c) If the Employee elects to continue group medical insurance
pursuant to the federal COBRA law, then, after the Effective Date, the Company
will pay the Company portion of the Employee’s health and dental insurance
premiums for the Severance Period. Thereafter, the Employee may elect to
continue such coverage under COBRA for the remainder of the COBRA period, with
the Employee paying 100% of the cost of such coverage.
     3. Other Benefits. All employee benefits (other than health and dental
insurance), that the Employee received under Company-provided benefit plans,
programs or practices, including without limitation 401K and Employee Stock
Purchase Plan (“ESPP”), terminated on the Termination Date.
     4. 2008 Bonus. At the next payroll period following the Termination Date,
the Company will pay the Employee a bonus of $36,120 for the 2008 year.
     5. Release. The Employee hereby fully, forever, irrevocably and
unconditionally releases, remises and discharges the Company, and its parents,
subsidiaries, affiliates, successors, assigns, predecessors and present or
former officers, directors, shareholders, agents, employees, attorneys,
fiduciaries, plan administrators, and representatives (collectively “Releasees”)
of and from any and all claims, charges, complaints, demands, actions, causes of
action, suits, rights, debts, sums of money, costs, accounts, reckonings,
covenants, contracts, agreements, promises, doings, omissions, damages,
executions, obligations, liabilities, and expenses (including attorneys’ fees
and costs), of every kind and nature, known or unknown, which the Employee ever
had or now has against any Releasees, including those arising out of the
Employee’s employment with or separation from the Company, through the date of
the Employee’s execution of this Agreement.
     Without limiting the foregoing, the Employee specifically releases and
fully discharges the Releasees of and from any and all claims, demands, causes
of action, and rights, including but not limited to: any alleged violation of
federal, state or local laws prohibiting discrimination on the basis of sex,
race, age, disability, national origin, color, religion, veteran status, marital
status, sexual orientation, and specifically including all claims under the
federal Age Discrimination in Employment Act (ADEA), the Older Workers Benefit
Protection Act, Title VII of the Civil Rights Act of 1964, as amended, the Civil
Rights Act of 1866, the Americans with Disabilities Act of 1990 (ADA), and the
Equal Pay Act of 1963, the Family and Medical Leave Act of 1993; the ERISA,
state family and

 

--------------------------------------------------------------------------------

 

medical leave laws and any federal or state wage payment laws, including the
Fair Labor Standards Act and the New York and Connecticut Wage Payment Laws, to
the extent permitted by law; any other federal, state (including New York and
Connecticut) or local civil or human rights laws; any public policy, contract,
tort or common law obligation, including but not limited to breach of express or
implied contract or of an implied covenant of good faith and fair dealing,
negligent or intentional infliction of emotional distress; any claim of
retaliation, any claim for compensation, bonus, incentive pay, vacation pay,
sick pay, expense reimbursement other than for those expenses already submitted
but not yet reimbursed, or other payments or benefits; and any obligation for
costs, fees or other expenses.
     Covenant Not to Sue. The Employee has not and will not commence any action,
lawsuit, or other legal proceeding against the Company or file any complaint
with any federal, state, or local agency against the Company relating to any
claim arising before the Employee’s execution of this Agreement; except that
Employee may challenge in court the knowing and voluntary nature of Employee’s
waiver of any claim he may have, if any, under the Age Discrimination in
Employment Act, as amended by the Older Workers Benefit Protection Act, and that
Employee may file a claim for workers’ compensation benefits for injury or
illness (excluding retaliation claims) and/or a claim for unemployment
compensation benefits. To the extent that Employee has pending any other action,
lawsuit, or legal proceeding against the Releasees, or any of them, relating to
any claim arising before the execution of this Agreement, Employee agrees that
such action, lawsuit, or other legal proceeding will be immediately withdrawn
with prejudice. Nothing in this Agreement, however, prevents the Employee from
filing a charge or complaint, or participating in any investigation or
proceeding before a federal or state agency, but the Employee understands and
acknowledges that he will not be able to recover any monetary benefits in
connection with any such claim, charge or proceeding, and hereby expressly
waives and disclaims his right to recover any relief, remedies, or amounts,
including costs and attorney’s fees.
     6. Return of Company Property. As further consideration for this Agreement,
the Company will release the cell phone number issued to the Employee and
support the Employees efforts to obtain the number through the vendor of the
Employee’s choice. Except for the foregoing, the Employee confirms that he will
return to the Company, prior to the expiration of the revocation period
contemplated by Section 18(c) and the Effective Date, all Company property and
equipment in his possession or control, including, but not limited to, all keys,
files, records (and copies thereof), computer hardware, software and printers,
wireless handheld devices, cell phones, pagers, and

 

--------------------------------------------------------------------------------

 

Company identification, and that he will leave intact all electronic Company
documents, including, but not limited to, those which he developed or helped
develop during his employment.
     7. Non-Admissions. The Employee understands and agrees that neither the
negotiation, undertaking nor signing of this Agreement constitutes or operates
as an acknowledgement or admission of liability, wrongdoing or violation of law
on the part of the Company.
     8. No Claim for Compensation. The Employee acknowledges and represents
that, except as provided in Section 4 above, he has received all compensation,
including all salary, wages, vacation pay, bonuses, overtime pay, awards and all
other forms of compensation that is, was, or may be due to him and no additional
compensation is owed to the Employee by the Company.
     9. No Claim for Benefits. The Employee acknowledges and represents that he
received all non-monetary benefits, including all leaves of absence, insurance
coverage, and any other benefits or rights to benefits to which he was entitled,
that he was not and has not been denied any benefits to which he is, was, or may
be entitled, and that no additional benefits are owed to the Employee by the
Company.
     10. Validity. Should any provision of this Agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid,
excluding the release language, the validity of the remaining parts, terms, or
provisions shall not be affected thereby and said illegal and invalid part, term
or provision shall be deemed not to be a part of this Agreement. If any portion
of the release language were declared unenforceable for any reason, the
Company’s obligation to provide any remaining consideration under this Agreement
shall cease.
     11. Confidentiality. To the extent permitted by law, the Employee
understands and agrees that the terms and contents of this Agreement, and the
contents of the negotiations and discussions resulting in this Agreement, shall
be maintained as confidential by the Employee, and may not be disclosed to any
person other (a) than the Employee’s attorney(s) and/or tax advisor(s) and/or
immediate family only to the extent that said individuals first agree to
maintain the information as confidential, or (b) as required by law.
     12. Non-Disparagement. The Employee understands and agrees that as a
condition for payment to him of the Severance Benefits, he shall not make any
false, disparaging or derogatory statements in public or private to any person
or entity, including without limitation, any media outlet or any past, present
or future employee, supplier, customer or stockholder of the Company regarding
the Company, any affiliated company, or any of the Company’s past or present
directors, officers, employees, agents, or representatives or regarding the
Company’s business affairs

 

--------------------------------------------------------------------------------

 

or financial condition. The Company agrees that it shall instruct the Company’s
directors and officers, not to make any false, disparaging or derogatory
statements in public or private regarding the Employee to any person or entity,
including without limitation, any media outlet or any past, present, future or
potential employer of the Employee.
     13. Post-Termination Confidentiality Obligation. The Employee acknowledges
and reaffirms his obligation to keep confidential and not to disclose or use any
and all non-public information concerning the Company which he acquired during
the course of his employment with the Company, including but not limited to
business and marketing plans and strategy, financial information, product
information, technical information and personnel data. The Employee further
acknowledges and confirms his continuing obligations to the Company pursuant to
the terms of the Proprietary Information Agreement he signed on June 12, 2006 at
the inception of his employment, which agreement remains in full force and
effect.
     14. Agreed Upon Statement. The Company agrees that the Employee will have
the right to review any public release or filing to be issued by the Company,
regarding the Employee’s employment or termination.
     15. Entire Agreement; Amendment. This Agreement contains and constitutes
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof and cancels all previous oral or written
negotiations, agreements, commitments, and writings in connection therewith.
This Agreement may not be abandoned, supplemented, changed or modified in any
manner, orally or otherwise, except by an instrument in writing of concurrent or
subsequent date signed by the Employee and a duly authorized representative of
the Company.
     16. Applicable Law; Successors. This Agreement shall be governed by the
laws of the State of Connecticut, without regard to its conflict of law
provisions, and is binding upon and shall inure to the benefit of the parties
and their respective agents, assigns, heirs, executors, successors and
administrators.
     17. Employment Termination Program. In accordance with the Age
Discrimination in Employment Act, as amended by the Older Workers Benefit
Protection Act, the Company provides to the Employee the information on the
attached Schedule A.
     18. Employee Acknowledgments and Representations. The Employee understands,
acknowledges, represents and agrees that:
          (a) the Employee has been given forty five (45) days to consider this
Agreement and any changes to the Agreement, whether material or otherwise, do
not restart or otherwise affect the original 45 day consideration period;

 

--------------------------------------------------------------------------------

 

          (b) the Company has advised the Employee to consult with any attorney
of his own choosing and at his own cost prior to signing this Agreement;
          (c) the Employee may revoke this Agreement during a period of seven
(7) days after his execution of this Agreement by delivering the Employee’s
written revocation within the seven (7) day period to Susanne Donohue, 39 Old
Ridgebury Road, Suite 11, Danbury, Ct 06810;
          (d) the Employee has read this Agreement and fully understands and
agrees with all the terms and conditions of this Agreement;
          (e) the Employee would not receive the Severance Benefits except for
executing and abiding by the terms of this Agreement;
          (f) by signing this Agreement, the Employee waives any right to bring
or maintain a lawsuit or make any other legal claims against any Releasees as
described in this Agreement with respect to any rights or claims, known or
unknown, that arose prior to the Employee’s execution of this Agreement;
          (g) the Employee freely and voluntarily assents to all of the terms
and conditions of this Agreement and signs his name of the Employee’s own free
act.
     19. Effective Date. This Agreement shall not be effective or enforceable
until the eighth (8th) calendar day after the date of execution by the Employee
if this Agreement is not revoked by the Employee in accordance with Paragraph 19
(“Effective Date”).
     IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written below.

         
/s/ Benjamin L. Palleiko
 
Benjamin L. Palleiko
      January 28, 2009 
Date
 
       
/s/ Jennifer L. Good
 
By Penwest Pharmaceuticals Co.
      January 30, 2009 
Date