exv10w34






Exhibit 10.34




PENWEST PHARMACEUTICALS CO.




Executive Retention Agreement




     THIS EXECUTIVE RETENTION AGREEMENT (this “Agreement”) by and between Penwest Pharmaceuticals
Co., a Washington corporation (the “Company”), and [                    ] (the “Executive”) is made as of
[___] (the “Effective Date”).



     WHEREAS, the Company recognizes that, as is the case with many publicly-held corporations, the
possibility of a change in control of the Company exists and that such possibility, and the
uncertainty and questions which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its shareholders,



     WHEREAS, the Company desires to reinforce and encourage the continued employment and
dedication of the Company’s key personnel without distraction from the possibility of a change in
control of the Company and related events and circumstances, and



     WHEREAS, the Company and the Executive are parties to an Executive Retention Agreement dated
as of [                    ] which is scheduled to expire on December 31, 2008 (the “Prior Agreement”),



     NOW, THEREFORE, as an inducement for and in consideration of the Executive remaining in its
employ, the Company agrees that the Executive shall receive the severance benefits set forth in
this Agreement in the event the Executive’s employment with the Company is terminated under the
circumstances described below in connection with or subsequent to a Change in Control (as defined
below).



     1. Key Definitions.



     As used herein, the following terms shall have the following respective meanings:



          1.1 “Change in Control” means an event or occurrence set forth in any one or more of
subsections (a) through (d) below (including an event or occurrence that constitutes a Change in
Control under one of such subsections but is specifically exempted from another such subsection):




               (a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”)
of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the 1934 Securities Exchange
Act, as amended) 50% or more of the combined voting power of the then-outstanding securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a



 









 







Change in Control: (i) any acquisition directly from the Company (excluding an acquisition
pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into
or exchangeable for common stock or voting securities of the Company, unless the Person exercising,
converting or exchanging such security acquired such security directly from the Company or an
underwriter or agent of the Company), (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iii)
any acquisition by any corporation pursuant to a Business Combination (as defined below) which
complies with clauses (i) and (ii) of subsection (c) of this definition; or



               (b) such time as the Continuing Directors (as defined below) do not constitute a majority of
the Board of Directors of the Company (or, if applicable, the Board of Directors of a successor
corporation to the Company) (the “Board”), where the term “Continuing Director” means at any date a
member of the Board (i) who was a member of the Board on the date of execution of this Agreement or
(ii) who was nominated or elected subsequent to such date by at least a majority of the directors
who were Continuing Directors at the time of such nomination or election or whose election to the
Board was recommended or endorsed by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election; provided, however, that there shall be
excluded from this clause (ii) any individual whose initial assumption of office occurred as a
result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a
person other than the Board; or



               (c) the consummation of a merger, consolidation, reorganization, recapitalization or share
exchange involving the Company or a sale or other disposition of all or substantially all of the
assets of the Company in one or a series of transactions (a “Business Combination”), unless,
immediately following such Business Combination, each of the following two conditions is satisfied:
(i) all or substantially all of the individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors, of the resulting or acquiring
corporation in such Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of the Company’s assets
either directly or through one or more subsidiaries) (such resulting or acquiring corporation is
referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their
ownership of the Outstanding Company Voting Securities immediately prior to such Business
Combination and (ii) no Person (excluding any employee benefit plan (or related trust) maintained
or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or
indirectly, 50% of the combined voting power of the then-outstanding securities of the Acquiring
Corporation entitled to vote generally in the election of directors (except to the extent that such
ownership existed prior to the Business Combination); or



               (d) the liquidation or dissolution of the Company.



          1.2 “Cause” means willful misconduct by the Executive or willful failure by the
Executive to perform his/her responsibilities to the Company (including, without limitation,



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breach by the Executive of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the Executive and the Company),
as determined by the Company, which determination shall be conclusive.




          1.3 “Change in Control Date” means the first date during the Term (as defined in
Section 2) on which a Change in Control occurs. Anything in this Agreement to the contrary
notwithstanding, if (a) a Change in Control occurs, (b) the Executive’s employment with the Company
is terminated prior to the date on which the Change in Control occurs, and (c) it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise
arose in connection with or in anticipation of a Change in Control, then for all purposes of this
Agreement the “Change in Control” shall mean the date immediately prior to the date of such
termination of employment.




          1.4 “Disability” means a condition causing the Executive to be disabled within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and any
regulations promulgated thereunder.




          1.5 “Good Reason” means the occurrence, without the Executive’s written consent, of
any of the following events or circumstances:




               (a) the assignment to the Executive of duties inconsistent in any material respect with the
Executive’s position (including status, offices, titles and reporting requirements), authority or
responsibilities in effect immediately prior to the earliest to occur of (i) the Change in Control
Date, (ii) the date of the execution by the Company of the initial written agreement or instrument
providing for the Change in Control or (iii) the date of the adoption by the Board of a resolution
providing for the Change in Control (with the earliest to occur of such dates referred to herein as
the “Measurement Date”), or any other action or omission by the Company which results in a material
diminution in such position, authority or responsibilities; or



               (b) a change by the Company in the location at which the Executive performs his/her principal
duties for the Company to a new location that increases the distance which the Executive commutes
to a distance that is 35 miles greater than the distance of the Executive’s commute immediately
prior to the Measurement Date.


Notwithstanding the occurrence of any event or circumstance set forth in clauses (a) or (b) above,
such occurrence shall not be deemed to constitute Good Reason if, prior to the Date of Termination
specified in the Notice of Termination (each as defined in Section 3.2(a)) given by the Executive
in respect thereof, such event or circumstance has been fully corrected and the Executive has been
reasonably compensated for any losses or damages resulting therefrom (provided that such right of
correction by the Company shall only apply to the first Notice of Termination for Good Reason given
by the Executive).




     2. Term of Agreement. This Agreement, and all rights and obligations of the parties
hereunder, shall take effect upon the Effective Date and shall expire upon the first to occur of
(a) the expiration of the Term (as defined below) if a Change in Control has not occurred during
the



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Term, (b) the termination of the Executive’s employment with the Company prior to the Change
in Control Date, (c) the date 12 months after the Change in Control Date, if the Executive is still
employed by the Company as of such later date, or (d) the fulfillment by the Company of all of its
obligations under this Agreement if the Executive’s employment with the Company terminates within
12 months following the Change in Control Date. “Term” shall mean the period commencing as of the
Effective Date and continuing in effect through December 31, 2011.



     3. Employment Status; Termination Following Change in Control.



          3.1 Not an Employment Contract. The Executive acknowledges that this Agreement does
not constitute a contract of employment or impose on the Company any obligation to retain the
Executive as an employee and that this Agreement does not prevent the Executive from terminating
employment at any time. If the Executive’s employment with the Company terminates for any reason
and subsequently a Change in Control shall occur, the Executive shall not be entitled to any
benefits hereunder except as otherwise provided pursuant to Section 1.3.




          3.2 Notice of Termination of Employment.




               (a) If the Change in Control Date occurs during the Term, any termination of the Executive’s
employment by the Company or by the Executive within 12 months following the Change in Control Date
(other than due to the death of the Executive) shall be communicated by a written notice to the
other party hereto (the “Notice of Termination”), given in accordance with Section 9. Any Notice
of Termination shall specify the effective date of the employment termination (the “Date of
Termination”). The Date of Termination set forth in such Notice of Termination shall not be less
than 30 days or more than 60 days after the date of delivery of such Notice of Termination, except
in the case of termination by the Company for Cause in which case such termination may be effective
immediately.



               (b) If the Executive seeks to terminate his/her employment with the Company for Good Reason,
then the Notice of Termination shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment. Any Notice of Termination
for Good Reason given by the Executive must be given within 30 days of the first occurrence of the
event(s) or circumstance(s) which constitute(s) Good Reason.



     4. Benefits to Executive. If the Change in Control Date occurs during the Term and
the Executive’s employment is terminated by the Company (other than for Cause, Disability or death)
or by the Executive for Good Reason within 12 months following the Change in Control Date, then the
Executive shall be entitled to the following benefits:



               (a) Compensation.



                    (i) The Company shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination (A) the Executive’s base salary through the Date of Termination and (B) the amount
of any compensation previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay,



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in each case to the extent not previously paid (the sum of the amounts described in this
subsection (i) shall be hereinafter referred to as the “Accrued Obligations”);



                    (ii) The Company shall pay to the Executive an amount equal to [150%/200%] of the sum of (x)
the highest annual base salary of the Executive during the period of the Executive’s employment
with the Company and (y) the highest annual bonus of the Executive during the period of the
Executive’s employment with the Company, including for this purpose the target annual bonus of the
Executive for the calendar year during which the Date of Termination occurs, over a period (the
“Payment Period”) that is equal in length to [24 months for the Chief Executive Officer] [18 months
for all other Executives] and commences on the Date of Termination, which amount shall be paid to
the Executive in installments, in accordance with the Company’s regular payroll practices;



                    (iii) for the Payment Period, or for such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to provide benefits to
the Executive and the Executive’s family at least equal to those which would have been provided to
them if the Executive’s employment had not been terminated, in accordance with the applicable
benefit plans and programs in which the Executive participated immediately prior to the Measurement
Date (e.g., life insurance or medical, health and accident or disability plan) or, if more
favorable to the Executive and his/her family, in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies; provided,
however, that if the Executive becomes reemployed with another employer and is eligible to receive
a particular type of benefits (e.g., health insurance benefits) from such employer on terms at
least as favorable to the Executive and his/her family as those being provided by the Company, then
the Company shall no longer be required to provide those particular benefits to the Executive and
his/her family; and



                    (iv) to the extent not previously paid or provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to be paid or provided or which the Executive
is eligible to receive following the Executive’s termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated companies.



               (b) Stock Acceleration. Each outstanding option to purchase shares of Common Stock of
the Company held by the Executive shall become immediately exercisable in full and shares of Common
Stock of the Company received upon exercise of any options will no longer be subject to a right of
repurchase by the Company, and each outstanding restricted stock award shall be deemed to be fully
vested and will no longer be subject to a right of repurchase by the Company.



     5. Taxes.



               (a) Notwithstanding any other provision of this Agreement, except as set forth in paragraph
(b) below, in the event that the Company undergoes a “Change in Ownership or Control” (as defined
below), the Company shall not be obligated to provide to the Executive a portion of any “Contingent
Compensation Payments” (as defined below) that the Executive would otherwise be entitled to receive
to the extent necessary to eliminate any “excess



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parachute payments” (as defined in Section 280G(b)(1) of the Code) for the Executive. For
purposes of this Section 5, the Contingent Compensation Payments so eliminated shall be referred to
as the “Eliminated Payments” and the aggregate amount (determined in accordance with Treasury
Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the Contingent Compensation
Payments so eliminated shall be referred to as the “Eliminated Amount.”



               (b) Notwithstanding the provisions of paragraph (a), no such reduction in Contingent
Compensation Payments shall be made if (i) the Eliminated Amount (computed without regard to this
sentence) exceeds (ii) 110% of the aggregate present value (determined in accordance with Treasury
Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the amount of any
additional taxes that would be incurred by the Executive if the Eliminated Payments (determined
without regard to this sentence) were paid to him/her (including, state and federal income taxes on
the Eliminated Payments, the excise tax imposed by Section 4999 of the Code payable with respect to
all of the Contingent Compensation Payments in excess of the Executive’s “base amount” (as defined
in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in
Contingent Compensation Payments pursuant to this Section 5(b) shall be referred to as an
“Override.” For purpose of this paragraph, if any federal or state income taxes would be
attributable to the receipt of any Eliminated Payment, the amount of such taxes shall be computed
by multiplying the amount of the Eliminated Payment by the maximum combined federal and state
income tax rate provided by law.



               (c) For purposes of this Section 5 the following terms shall have the following respective
meanings:



                    (i) “Change in Ownership or Control” shall mean a change in the ownership or effective control
of the Company or in the ownership of a substantial portion of the assets of the Company determined
in accordance with Section 280G(b)(2) of the Code.



                    (ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in the nature of
compensation that is made or made available (under this Agreement or otherwise) to a “disqualified
individual” (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning
of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.



               (d) Any payments or other benefits otherwise due to the Executive following a Change in
Ownership or Control that could reasonably be characterized (as determined by the Company) as
Contingent Compensation Payments (the “Potential Payments”) shall not be made until the dates
provided for in this Section 5(d). Within 30 days after each date on which the Executive first
becomes entitled to receive (whether or not then due) a Contingent Compensation Payment relating to
such Change in Ownership or Control, the Company shall determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which Potential Payments
constitute Contingent Compensation Payments, (ii) the Eliminated Amount and (iii) whether the
Override is applicable. Within 30 days after delivery of such notice to the Executive, the
Executive shall deliver a response to the Company (the “Executive Response”) stating either (A)
that he/she agrees with the Company’s



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determination pursuant to the preceding sentence, in which case he/she shall indicate, if
applicable, which Contingent Compensation Payments, or portions thereof (the aggregate amount of
which, determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor
provision, shall be equal to the Eliminated Amount), shall be treated as Eliminated Payments or (B)
that he/she disagrees with such determination, in which case he/she shall set forth (i) which
Potential Payments should be characterized as Contingent Compensation Payments, (ii) the Eliminated
Amount, (iii) whether the Override is applicable, and (iv) which (if any) Contingent Compensation
Payments, or portions thereof (the aggregate amount of which, determined in accordance with
Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall be equal to the
Eliminated Amount, if any), shall be treated as Eliminated Payments. In the event that the
Executive fails to deliver an Executive Response on or before the required date, the Company’s
initial determination shall be final and the Contingent Compensation Payments that shall be treated
as Eliminated Payments shall be determined by the Company in its absolute discretion. If the
Executive states in the Executive Response that he/she agrees with the Company’s determination, the
Company shall make the Potential Payments to the Executive within three business days following
delivery to the Company of the Executive Response (except for any Potential Payments which are not
due to be made until after such date, which Potential Payments shall be made on the date on which
they are due). If the Executive states in the Executive Response that he/she disagrees with the
Company’s determination, then, for a period of 60 days following delivery of the Executive
Response, the Executive and the Company shall use good faith efforts to resolve such dispute. If
such dispute is not resolved within such 60-day period, such dispute shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction. The Company shall, within three business days following delivery to the Company of
the Executive Response, make to the Executive those Potential Payments as to which there is no
dispute between the Company and the Executive regarding whether they should be made (except for any
such Potential Payments which are not due to be made until after such date, which Potential
Payments shall be made on the date on which they are due). The balance of the Potential Payments
shall be made within three business days following the resolution of such dispute. Subject to the
limitations contained in paragraphs (a) and (b) hereof, the amount of any payments to be made to
the Executive following the resolution of such dispute shall be increased by amount of the accrued
interest thereon computed at the prime rate announced from time to time by The Wall Street Journal,
compounded monthly from the date that such payments originally were due.



               (e) The provisions of this Section 5 are intended to apply to any and all payments or benefits
available to the Executive under this Agreement or any other agreement or plan of the Company under
which the Executive receives Contingent Compensation Payments.



     6. Payments subject to Section 409A.



               (a) Subject to this Section 6, payments or benefits under Section 4 shall begin only upon the
date of a “separation from service” of the Executive (determined as set forth below) which occurs
on or after the termination of the Executive’s employment. The



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following rules shall apply with respect to distribution of the payments and benefits, if any,
to be provided to the Executive under Section 4, as applicable:



                    (i) It is intended that each installment of the payments and benefits provided under Section 4
shall be treated as a separate “payment” for purposes of Section 409A of the Code and the guidance
issued thereunder (“Section 409A”). Neither the Company nor the Executive shall have the right to
accelerate or defer the delivery of any such payments or benefits except to the extent specifically
permitted or required by Section 409A.



                    (ii) If, as of the date of the “separation from service” of the Executive from the Company,
the Executive is not a “specified employee” (within the meaning of Section 409A), then each
installment of the payments and benefits shall be made on the dates and terms set forth in Section
4.



                    (iii) If, as of the date of the “separation from service” of the Executive from the Company,
the Executive is a “specified employee” (within the meaning of Section 409A), then:



                            (1) Each installment of the payments and benefits due under Section 4 that, in accordance with
the dates and terms set forth herein, will in all circumstances, regardless of when the separation
from service occurs, be paid within the Short-Term Deferral Period (as hereinafter defined) shall
be treated as a short-term deferral within the meaning of Treasury Regulation Section
1.409A-1(b)(4) to the maximum extent permissible under Section 409A. For purposes of this
Agreement, the “Short-Term Deferral Period” means the period ending on the later of the
15th day of the third month following the end of the Executive’s tax year in which the
separation from service occurs and the 15th day of the third month following the end of
the Company’s tax year in which the separation from service occurs; and



                            (2) Each installment of the payments and benefits due under Section 4 that is not described in
Section 6(a)(iii)(1) and that would, absent this subsection, be paid within the six-month period
following the “separation from service” of the Executive from the Company shall not be paid until
the date that is six months and one day after such separation from service (or, if earlier, the
Executive’s death), with any such installments that are required to be delayed being accumulated
during the six-month period and paid in a lump sum on the date that is six months and one day
following the Executive’s separation from service and any subsequent installments, if any, being
paid in accordance with the dates and terms set forth herein; provided, however,
that the preceding provisions of this sentence shall not apply to any installment of payments and
benefits if and to the maximum extent that that such installment is deemed to be paid under a
separation pay plan that does not provide for a deferral of compensation by reason of the
application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an
involuntary separation from service). Any installments that qualify for the exception under
Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of the
Executive’s second taxable year following his taxable year in which the separation from service
occurs.



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               (b) The determination of whether and when a separation from service of the Executive from the
Company has occurred shall be made and in a manner consistent with, and based on the presumptions
set forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this Section 6(b),
“Company” shall include all persons with whom the Company would be considered a single employer
under Section 414(b) and 414(c) of the Code.



               (c) All reimbursements and in-kind benefits provided under the Agreement shall be made or
provided in accordance with the requirements of Section 409A to the extent that such reimbursements
or in-kind benefits are subject to Section 409A.



     7. Release. The obligation of the Company to make the payments and provide the
benefits to the Executive under Section 4(a)(ii) and Section 4(a)(iii) is conditioned upon the
Executive signing a release of claims, in a customary and reasonable form requested by the Company
(the “Executive Release”), within such period of time as the Company may specify following the Date
of Termination. The Company shall not be obligated to make any payments to the Executive under
Section 4(a)(ii) and Section 4(a)(iii) until the Executive Release has become effective in
accordance with its terms; provided that at such time as the Executive Release becomes effective,
the Company shall promptly pay to the Executive any payments that would otherwise have been made to
the Executive between the Date of Termination and date on which the Executive Release becomes
effective.



     8. Successors.



          8.1 Successor to Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and agree to perform this Agreement to the
same extent that the Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness
of any succession shall be a breach of this Agreement and shall constitute Good Reason if the
Executive elects to terminate employment, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, “Company” shall mean the Company as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this Agreement, by
operation of law or otherwise.




          8.2 Successor to Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to the Executive or his/her family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or administrators of
the Executive’s estate.




     9. Notice. All notices, instructions and other communications given hereunder or in
connection herewith shall be in writing. Any such notice, instruction or communication shall be
sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii)
prepaid via a reputable nationwide overnight courier service, in each case addressed to the



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Company, at 39 Old Ridgebury Road, Suite 11, Danbury, Connecticut 06810, and to the Executive
at the Executive’s address indicated on the signature page of this Agreement (or to such other
address as either the Company or the Executive may have furnished to the other in writing in
accordance herewith). Any such notice, instruction or communication shall be deemed to have been
delivered five business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or other communication
hereunder using any other means, but no such notice, instruction or other communication shall be
deemed to have been duly delivered unless and until it actually is received by the party for whom
it is intended.



     10. Miscellaneous.



          10.1 Employment by Subsidiary. For purposes of this Agreement, the Executive’s
employment with the Company shall not be deemed to have terminated solely as a result of the
Executive continuing to be employed by a wholly-owned subsidiary of the Company.




          10.2 Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.




          10.3 Injunctive Relief. The Company and the Executive agree that any breach of this
Agreement by the Company is likely to cause the Executive substantial and irrevocable damage and
therefore, in the event of any such breach, in addition to such other remedies which may be
available, the Executive shall have the right to specific performance and injunctive relief.




          10.4 Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the internal laws of the State of Connecticut, without regard
to conflicts of law principles.




          10.5 Waivers. No waiver by the Executive at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of
that or any other provision at any subsequent time.




          10.6 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original but both of which together shall constitute one and the same
instrument.




          10.7 Tax Withholding. Any payments provided for hereunder shall be paid net of any
applicable tax withholding required under federal, state or local law.




          10.8 Entire Agreement. This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto in respect of the subject
matter contained herein; and any prior agreement of the parties hereto in respect of


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the subject matter contained herein is hereby terminated and cancelled, including the Prior
Agreement which is hereby terminated as of the Effective Date.




          10.9 Amendments. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Executive.




          10.10 Executive’s Acknowledgements. The Executive acknowledges that he/she: (a) has
read this Agreement; (b) has been represented in the preparation, negotiation, and execution of
this Agreement by legal counsel of the Executive’s own choice or has voluntarily declined to seek
such counsel; (c) understands the terms and consequences of this Agreement; and (d) understands
that the law firm of Wilmer Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company
in connection with this Agreement and is not acting as counsel for the Executive.




          10.11 Section 409A. This Agreement is intended to comply with the provisions of
Section 409A and the Agreement shall, to the extent practicable, be construed in accordance
therewith. The Company makes no representation or warranty and shall have no liability to the
Executive or any other person if any provisions of this agreement are determined to constitute
deferred compensation subject to Section 409A and do not satisfy an exemption from, or the
conditions of, Section 409A.




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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first set forth above.



	 	 	 	 	 	 	 
	 	 	PENWEST PHARMACEUTICALS CO.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

W. James O’Shea
	 	 
	 

	 	Title:
	 	Chairman of the Compensation	 	 
	 

	 	 	 	Committee of the Board of Directors	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 






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