Document:

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                                                                    Exhibit 10.1

[Penwest LOGO]

777 108th Avenue N.E.
Suite 2390
Bellevue, WA
98004-5193
(206) 462-6000
Fax (206) 462-2819

                               ROYALTY AGREEMENT

     This Agreement will serve to confirm existing understandings and agreements
between PENWEST, LTD., a Delaware corporation, and its subsidiaries including
without limitation the Edward Mendell Co., Inc., a Washington corporation
("MENDELL"), (hereinafter collectively referred to as "PENWEST") and JOHN N.
STANIFORTH (hereinafter referred to as "CONSULTANT").

                                    Recitals

     PENWEST has previously agreed to pay royalties to CONSULTANT in recognition
of the patents developed by CONSULTANT for TIMERx, and by execution of this
Agreement to provide for the payment of royalties for the sale of other products
which utilize patents for which CONSULTANT is named as an investor.

                                   Agreement

     The parties agree as follows:

     1) DEFINITION.

     "Cause" shall mean (i) continued failure by CONSULTANT to perform his
duties (except as a direct result of the CONSULTANT's incapacity due to physical
or mental illness) for a period of at least six (6) months after receiving
written notification from PENWEST identifying the manner in which the CONSULTANT
has failed to perform his duties; (ii) engaging in conduct, which in the opinion
of a majority of the Board of Directors of PENWEST is materially injurious to
PENWEST; or (iii) conviction of the CONSULTANT of a misdemeanor involving moral
turpitude or any felony.

     "Net Sales" shall mean the aggregate revenue generated from the sales or
licenses of the Products sold by PENWEST, less all discounts, adjustments,
returns and allowances and all charges for freight, insurance, taxes, custom
duties, commissions and similar items.

     "Patents" shall mean the patents relating to TIMERx for which CONSULTANT is
named as an inventor and which are listed and identified on Exhibit 1 and any
other patents for which CONSULTANT is named as an inventor and which are
utilized in Products (as defined below).

     "Products" shall mean any products or goods sold or licensed by PENWEST
which utilize any of the Patents as listed in Exhibit 1.

     2) ROYALTIES. Within One Hundred Twenty (120) days after the end of each of
its fiscal years PENWEST shall pay to CONSULTANT as a royalty a sum equal to
one-half of one percent (.005) of the Net Sales of the Products covered by this
Agreement.

     3) EFFECTIVE DATE AND TERM. The effective date of this Agreement shall be
as of the date of this Agreement and shall continued for the life of the Patents
covered by this Agreement.

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In the event CONSULTANT is terminated for "Cause" payment of royalties to
Consultant shall terminate as of the end of the PENWEST fiscal year in which
such termination process occurs.

     4) SEVERABILITY. If any provision of this Agreement is unenforceable or
illegal, the remainder of this Agreement shall remain in full force and effect.
If any one or more of the provisions contained in this Agreement shall be held
to be excessively broad as to duration, geographical scope, activity or
subject, such provision shall be construed by limiting and reducing it so as to
be enforceable to the extent compatible with the applicable law.

     5) GOVERNING LAW. This Agreement shall be deemed a contract made, executed,
delivered and performed in the State of Washington, U.S.A. and shall be governed
by the laws of the State of Washington. The Federal and State courts sitting in
King County, Washington, Washington shall have exclusive jurisdiction over all
controversies which may arise under or in relation to this Agreement, especially
with respect to the execution, interpretation, breach, enforcement, or
compliance thereof. The parties further agree and consent to service,
jurisdiction, and venue of such courts for any litigation arising from this
Agreement, and waive any other venue to which they might be entitled by virtue
of domicile, habitual residence or otherwise.

     6) AMENDMENT. This Agreement constitutes the entire Agreement of the
parties, and may be altered or amended or any provision hereof waived only by an
agreement in writing signed by the party against whom enforcement of any
alteration, amendment or waiver is sought. No waiver by either party of any
breach of this Agreement shall be considered as a waiver of any subsequent
breach.

     7) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns, but none of the benefits of the Agreement shall be assigned without the
written consent of the other party.

     8) AUTHORITY. The persons executing this Agreement represent and warrant
that they are authorized to execute this Agreement on behalf of the party for
whom they sign.

     9) TITLES AND HEADINGS. Titles and headings to sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.

     IN WITNESS WHEREOF, PENWEST and CONSULTANT have executed this Agreement on
the 25th day of September, 1992.

PENWEST, LTD.                                    John N. Staniforth

By /s/ Robert G. Widmaier                        By /s/ John N. Staniforth
   ----------------------------                     ----------------------------

Title Vice President and Chief                   Title
      Innovation Officer                               -------------------------
      -------------------------

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                                 **Exhibit 1**

                              PATENTS CO-AUTHORED
                               BY J.N. STANIFORTH

 1)  Directly compressible sustained release excipient.

 2)  Sustained release excipient and tablet formulation.

 3)  Compressible sustained release solid dosage forms.

 4)  EPO Application No. 89309518.2; filed September 19, 1989.

 5)  Australian Patent Application No. 43057/89

 6)  Japanese Patent Application No. 1-510135

 7)  Irish Patent Application No. 2968/89

 8)  Canadian Patent Application No. 611,700

 9)  Verapamil Tablet Application, Serial No. 736,031 & EPO PCT Applications.

10)  2 U.S. Applications on Bi-modal release.<PAGE>
                                                                    Exhibit 10.2
[Penwest Logo]

777 108th Avenue N.E.
Suite 2390
Bellevue, WA
98004-6000
(206) 462-6000
Fax (206) 462-2819

                        CONFIDENTIALITY, CONSULTING AND
                            NONCOMPETITION AGREEMENT

     This Agreement will serve to confirm existing understandings and agreements
between PENWEST, LTD., a Delaware corporation, and its subsidiaries including
without limitation the Edward Mendell Co., Inc., a Washington corporation
("MENDELL"), (hereinafter collectively referred to as "PENWEST") and JOHN N.
STANIFORTH (hereinafter referred to as "CONSULTANT").

                                    Recitals

     PENWEST is willing to retain CONSULTANT and to disclose certain information
to CONSULTANT relating to pharmaceutical excipients, control release and
sustained release technology for the purpose of evaluating this technology and
its market potential in the areas of food, pharmaceuticals, agriculture and
paper chemicals (the "Field of Interest").

     PENWEST believes that in the course of such undertaking it will be
necessary to disclose certain information (the "Confidential Information") to
CONSULTANT which is confidential and proprietary to PENWEST.

     CONSULTANT is willing to perform consulting services in the Field of
Interest and acknowledges the proprietary rights of PENWEST to its Confidential
Information.

                                   Agreement

     The parties agree as follows:

     1) DEFINITION. "Confidential Information" as used herein is defined as that
information which is disclosed by PENWEST to CONSULTANT and which is either at
the time of disclosure or within thirty (30) days thereafter reduced to writing
and designated CONFIDENTIAL.

     2) EXCLUSIONS. Confidential Information disclosed by PENWEST will be
treated as confidential by CONSULTANT unless the information:

        (ii)   was known to CONSULTANT;

        (ii)   was in the public domain through no fault of CONSULTANT;

        (iii)  becomes part of the public domain through no fault of
               CONSULTANT; or

        (iv)   is hereafter obtained in good faith by CONSULTANT from a third
               party having bona fide rights to furnish such information
               without violating the proprietary rights of PENWEST or any other
               person.

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     3) TERMS AND RESTRICTIONS ON CONFIDENTIAL INFORMATION. CONSULTANT agrees to
treat the Confidential Information disclosed to him under confidence for a
period of five (5) years from the date of receipt of the information. CONSULTANT
will limit his disclosure of the Confidential Information to those employees or
others subject to his control or direction who are required to have such
Confidential Information in the performance of their duties and all such
employees or other persons shall be made aware of the terms of this Agreement.
In the event of a breach of the Agreement by an employee or other person under
the direction or control of CONSULTANT, CONSULTANT shall be liable for such
breach. This Agreement is not intended to and does not place a restriction on
any disclosure of Confidential Information by CONSULTANT which CONSULTANT is
legally required to make.

     4) CONSULTING SERVICES. CONSULTANT shall make himself available at mutually
agreeable times and places for consultation in the Field of Interest for the
equivalent of thirty-seven (37) days per year.

     5) IMPROVEMENTS AND INVENTIONS. CONSULTANT will promptly and fully disclose
to PENWEST in writing, any and all improvements and inventions in the Field of
Interest which are conceived or made by CONSULTANT, solely or with others,
during the period of this Agreement and within six months thereafter which arise
out of or result from the services CONSULTANT has rendered to PENWEST or derive
from confidential technical information which CONSULTANT has received from or
developed for PENWEST. CONSULTANT will assist PENWEST and its nominees in all
ways, during and subsequent to the terms of this Agreement, in obtaining Letters
Patent for such inventions in any country where PENWEST may desire. CONSULTANT
will, for example, execute applications for Letters Patent, execute appropriate
patent assignments, and execute any other documents which, in PENWEST's opinion,
are necessary to secure or otherwise preserve its rights. It is clearly
understood that your interest in all such inventions is and shall remain the
sole and exclusive property of PENWEST without any further compensation to
CONSULTANT aside from the terms of compensation set forth in paragraph 7. The
preparation and filing of patent applications, assignments and all other
documents, as well as the conduct of proceedings incident to securing and
enforcing patents covering such inventions, shall be solely at the expense of
PENWEST.

     6) OWNERSHIP OF CREATIVE WORKS. All writing, drawings, photographs, models,
sound recordings, audiovisual records, and other creative works prepared by
CONSULTANT in furtherance of CONSULTANT's consulting hereunder shall be deemed
to have been prepared for PENWEST and shall be considered as works made for hire
and all rights comprised in the copyright thereof shall be owned by PENWEST.

     7) COMPENSATION. CONSULTANT shall be compensated at the rate of LSTG 12,500
per year payable in two equal semiannual installments on mutually agreeable
dates, subject to periodic review, plus reimbursement of reasonable
out-of-pocket expenses for travel, provided that the nature of such expenses are
preapproved by PENWEST and the actual expenses are supported by itemized
documentation and do not exceed US $3,000 per trip or US $25,000 per year,
subject to periodic review. Expenses for travel MUST be submitted on a timely
basis each quarter for reimbursement.

     8) NONCOMPETITION. For the term of this Agreement and for a period of
two (2) years thereafter CONSULTANT will not provide consulting services or
otherwise be engaged or involved, directly or indirectly, by Forum Chemicals
Limited and/or Forum Holdings, Ltd. (jointly and severally "Forum"), their
respective affiliated companies, or any business or other enterprise which
produces or is performing research or development for products which in the good
faith judgment of PENWEST directly compete with or will directly compete with
products produced by or in the research and development stage for PENWEST except
for lactose. PENWEST covenants that it will give due and fair consideration to
any request by CONSULTANT to waive this

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Agreement not to compete as to specific enterprises especially where the
potential competition is in the good faith judgment of PENWEST not likely to
have an adverse effect on PENWEST.

     9. EFFECTIVE DATE AND TERM. The effective date of this Agreement shall be
as of September 1, 1992 and the initial term of this Agreement shall expire as
of August 31, 1993. This Agreement shall be automatically renewed and extended
for successive terms of one year each, unless either party shall notify the
other not more than 60 nor less than 30 days prior to the expiration of the then
current term in writing of the desire to terminate this Agreements.

     10. REMEDIES/BREACH

     (i) In the event of CONSULTANT's breach of this Agreement, PENWEST shall
have the right to: a) demand the immediate return of all Confidential
Information; b) recover its actual damages incurred by reason of such breach,
including, without limitation, its attorneys fees and costs of any suit; and/or
c) obtain injunctive relief to prevent such breach or to otherwise enforce the
terms of this Agreement.

     (ii) CONSULTANT and PENWEST specifically agree that CONSULTANT's breach of
the noncompetition provisions of this Agreement and/or the terms restricting
CONSULTANT's disclosure and use of Confidential Information would result in harm
to PENWEST for which there is no adequate remedy at law. CONSULTANT therefore
agrees that PENWEST shall be entitled to INJUNCTIVE relief from any such
violation of the foregoing provisions and THAT NO BOND SHALL BE REQUIRED.

     (iii) The foregoing remedies for breach shall be cumulative and shall be in
addition to any other remedy available at law or in equity.

     11. SEVERABILITY. If any provision of this Agreement is unenforceable or
illegal, the remainder of this Agreement shall remain in full force and effect.
If any one or more of the provisions contained in this Agreement shall be held
to be excessively broad as to duration, geographical scope, activity or subject,
such provision shall be construed by limiting and reducing it so as to be
enforceable to the extent compatible with the applicable law.

     12. GOVERNING LAW. This Agreement shall be deemed a contract made,
executed, delivered and performed in the State of Washington, U.S.A. and shall
be governed by the laws of the State of Washington. The Federal and State courts
sitting in King County, Washington shall have exclusive jurisdiction over all
controversies which may arise under or in relation to this Agreement, especially
with respect to the execution, interpretation, breach, enforcement, or
compliance thereof. The parties further agree and consent to service,
jurisdiction, and venue of such courts for any litigation arising from this
Agreement, and waive any other venue to which they might be entitled by virtue
of domicile, habitual residence or otherwise.

     13. AMENDMENT. This Agreement constitutes the entire Agreement of the
parties, and may be altered or amended or any provision hereof waived only by an
agreement in writing signed by the party against whom enforcement of any
alteration, amendment or waiver is sought. No waiver by either party or any
breach of this Agreement shall be considered as a waiver of any subsequent
breach.

     14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns, but none of the benefits of this Agreement shall be assigned
without the written consent of the other party.

     15. AUTHORITY. The persons executing this Agreement represent and warrant
that they are authorized to execute this Agreement on behalf of the party for
whom they sign.

                                       3
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     16. TITLES AND HEADING. Titles and headings to sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.

     IN WITNESS, WHEREOF, PENWEST and CONSULTANT have executed this Agreement on
the 25th day of September, 1992.

                                         PENWEST, LTD.

                                         By  /s/ Robert G. Widmaier
                                             ---------------------------------

                                         Title  Vice President and Chief
                                                Innovation Officer
                                                ------------------------------

                                          John N. Staniforth

                                          /s/ John N. Staniforth
                                          ------------------------------------

                                          Title
                                                ------------------------------

                                       4
<PAGE>
[Penwest LOGO]

Robert G. Widmaier, Ph.D.
Vice President and
Chief Innovation Officer
777 108th Avenue N.E.
Suite 2390
Bellevue, WA
98004-5193
(206) 462-6000
Fax (206) 462-2819

                           September 25, 1992

Mr. John Staniforth
High Trees
1700 Bloomfield Road
Bath BA 1 7AT
ENGLAND

                      RE: INVENTIONS NOT FUNDED BY PENWEST

Dear John:

     We have this day executed a CONFIDENTIALITY, CONSULTING AND NONCOMPETITION
AGREEMENT ("Consulting Agreement") and a ROYALTY AGREEMENT. This letter will set
forth our Agreement relating to inventions or other intellectual property having
potential commercial application which you develop through research which is not
funded by PENWEST, LTD. or any of its subsidiaries (collectively "PENWEST") and
which is not covered by Section 5 and 6 of the Consulting Agreement.

     You agree that you will present a written summary of any such research to
and in a form acceptable to the Chief Innovation Officer of PENWEST (CIO) or
such other individual designated by the CIO or Chief Executive Officer of
PENWEST. PENWEST shall have sixty (60) days from the receipt of such research in
which to make an initial review and determine whether such research warrants
further review by PENWEST.

     If PENWEST determines that it is interested in further review and/or
development it shall so advise you in writing and proceed to negotiate in good
faith and enter into a written agreement which shall include without limitation
terms and conditions for any further research and/or development which may be
required or advisable, and for your compensation which may be in the form of a
royalty or other mutually agreeable arrangement. You also agree to negotiate
such an agreement in good faith.

     If no agreement is executed within six months after PENWEST has advised you
of its initial interest, or if PENWEST subsequently advises you in writing that
it is no longer interested in utilizing such research than you may present such
research to other parties or otherwise exploit your research.

                              Very truly yours,

                              /s/ Robert G. Widmaier

                              Robert G. Widmaier, Ph.D.

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