Document:

<PAGE>

                                                                    Exhibit 10.1

                              Termination Agreement

         This Termination Agreement is entered into effective as of the 1st day
of February, 2007 (the "Effective Date"), by and between Anand Baichwal
("Baichwal") and Penwest Pharmaceuticals Co., a Washington corporation
("Penwest").

         WHEREAS, Baichwal and Penwest are parties to a Recognition and
Incentive Agreement, dated as of May 14, 1990, as amended on October 22, 1997
(the "Baichwal Agreement"); and

         WHEREAS, Baichwal and Penwest wish to terminate specified sections of
the Baichwal Agreement in its entirety;

         NOW, THEREFORE, in consideration of the mutual covenants and premises
hereinafter set forth, it is agreed by and between the parties as follows:

1.       Termination of the Incentive Provisions of the Baichwal Agreement.

         Baichwal and Penwest hereby agree that, effective as of the Effective
Date, Section 1 of the Baichwal Agreement and the second paragraph of Section 5
of the Baichwal Agreement (together, the "Incentive Provisions") are terminated
and shall terminate and be of no further force or effect; provided, however,
that Penwest shall remain obligated to pay, and shall pay, to Baichwal the
royalties owed to Baichwal under Section 1 of the Baichwal Agreement with
respect to the one-year period commencing on January 1, 2006. Penwest shall pay
such royalty (the "Post-Termination Royalty"), in accordance with the terms of
the Baichwal Agreement, on or prior to April 30, 2007.

2.       Representations, Warranties and Covenants.

         (a) Baichwal represents and warrants, as of the Effective Date, that
(i) neither the execution and delivery by Baichwal of this Agreement, nor the
consummation by Baichwal of the transactions contemplated hereby, will require
on the part of Baichwal any filing with, or any permit, authorization, consent,
waiver or approval of, any third party, whether pursuant to contract, applicable
law or otherwise; and (ii) no other person or entity has any rights under the
Incentive Provisions of the Baichwal Agreement, including without limitation
rights to royalties, that can not be, and are not hereby being, waived, amended,
released or terminated by Baichwal under this Agreement.

         (b) Penwest represents and warrants, as of the Effective Date, that
neither the execution and delivery by Penwest of this Agreement, nor the
consummation by Penwest of the transactions contemplated hereby, will require on
the part of Penwest any filing with, or any permit, authorization, consent,
waiver or approval of, any third party, whether pursuant to contract, applicable
law or otherwise.

<PAGE>

3.       Consideration.

         In consideration for Baichwal's agreement to terminate the Incentive
Provisions of the Baichwal Agreement hereunder, Baichwal's representations,
warranties and covenants hereunder and Baichwal's release hereunder, Penwest
hereby agrees that, within ten days of the Effective Date, it shall

         (a) pay to Baichwal $770,000 in cash; and

         (b) issue to Baichwal 19,696 shares of common stock of Penwest, $.001
par value per share ("Common Stock"); provided, however, that, notwithstanding
the foregoing to the contrary, Penwest shall have no obligation to issue shares
of Common Stock, and Baichwal shall not be entitled to any shares of Common
Stock, until such time as Baichwal executes and delivers to the Company the
investment representation letter attached hereto as Exhibit A.

4.       Release.

         In connection with the termination of the Incentive Provisions of the
Baichwal Agreement and the payment of the consideration contemplated by Section
3, Baichwal hereby releases, remises, waives, acquits, forever discharges, and
covenants not to sue Penwest and its subsidiaries and affiliates, and each of
their current or former officers, directors, agents, employees, successors,
predecessors, assigns, attorneys, and the heirs, executors, and administrators
of any such released individuals (collectively, "Penwest Releasees"), from any
demands, claims, actions, suits, judgments, damages, losses, or liabilities,
both in law and in equity, federal and state, which did arise or could have
arisen prior to the Effective Date against Penwest Releasees under the Baichwal
Agreement, other than Baichwal's claim for payment of the Post-Termination
Royalty under Section 1 of this Agreement.

5.       Miscellaneous.

         (a) This Agreement constitutes the entire agreement between Baichwal
and Penwest with respect to the subject matter hereof and supersedes any prior
agreements or understandings between Baichwal and Penwest with respect to the
subject matter hereof, including without limitation the Baichwal Agreement. No
amendment or waiver of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by Baichwal and Penwest.

         (b) This Agreement and the Baichwal Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.

         (c) In all respects other than as specifically provided in this
Agreement, the Baichwal Agreement shall remain in full force and effect and is
hereby ratified and affirmed.

         (d) This Agreement and any disputes hereunder shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule that would
cause the application of laws of any jurisdiction other than those of the State
of New York.

                                      -2-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed, and have executed this Agreement, as of the date first specified
above.

                                   LICENSOR:

                                   ANAND BAICHWAL

                                   /s/ Anand Baichwal
                                   ---------------------------------------------

                                   Address:

                                   LICENSEE:

                                   PENWEST PHARMACEUTICALS CO.

                                   By: /s/ Jennifer Good
                                       -----------------------------------------
                                   Title: Jennifer Good, Chief Executive Officer

                                      -3-

<PAGE>

                                    Exhibit A

                        Investment Representation Letter

Penwest Pharmaceuticals Co.
39 Old Ridgebury Road
Suite 11
Danbury, CT 06810-5120

         Re:  Issuance of Shares of Common Stock of Penwest Pharmaceuticals Co.
              -----------------------------------------------------------------

Dear Sirs:

         In order to induce Penwest Pharmaceuticals, Co. (the "Company") to
issue to the undersigned 19,696 shares (the "Shares") of common stock, par value
$0.001 per share, of the Company (the "Common Stock"), pursuant to Section 3(b)
of that certain Termination Agreement, dated February 1, 2007, between the
Company and the undersigned, the undersigned hereby represents, warrants and
covenants to the Company as follows:

         1.       The undersigned is acquiring the Shares for his own account
for investment only, and not with a view to, or for sale in connection with any
distribution of the Shares in violation of the Securities Act of 1933, as
amended, (the "Securities Act"), or any rule or regulation under the Securities
Act.

         2.       The undersigned has had such opportunity as he has deemed
adequate to obtain from representatives of the Company such information as is
necessary to permit the undersigned to evaluate the merits and risks of his
acquisition of the Shares.

         3.       The undersigned has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Shares and to make an informed investment decision with
respect to such acquisition.

         4.       The undersigned can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.

         5.       The undersigned understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act; (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 or otherwise
may not be available for at least one year and even then will not be available
unless a public market then exists for the Common Stock, adequate information
concerning the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and (iv) there is now no registration
statement on file with the Securities and Exchange Commission with respect to
any stock of the Company and the Company has no obligation or current intention
to register the Shares under the Securities Act.

<PAGE>

         6.       A legend substantially in the following form will be placed on
the certificates represented the Shares:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended, and
                  may not be sold, transferred or otherwise disposed of in the
                  absence of an effective registration statement under such Act
                  or an opinion of counsel satisfactory to the corporation to
                  the effect that such registration is not required."

         7.       The Company agrees that (a) no opinion of counsel shall be
required in connection with a transfer of the Shares made in accordance with
Rule 144 under the Securities Act, (b) the legend referenced in Section 6 shall
be removed from the certificates representing any Shares, at the request of the
undersigned, at such time as the Shares become eligible for resale pursuant to
Rule 144(k) under the Securities Act, and (c) the Company shall use reasonable
efforts to cause its transfer agent to promptly issue new certificates for the
Shares without legend following a transfer under clause (a) or a request for
removal under clause (b). The Company also agrees that it shall use reasonable
efforts to file with the Securities and Exchange Commission in a timely manner
all reports and other documents required to be filed by the Company under the
Securities Exchange Act of 1934, as amended.

         8.       The foregoing representations and warrants are true as of the
date of this Investment Representation Letter and shall be true as of the date
the Company issues the Shares to the undersigned. If such representations and
warranties shall not be true in any respect prior to such date, the undersigned
will give prompt written notice of such fact to the Company.

         This Investment Representation Letter shall be binding upon and inure
to the benefit of the Company and the undersigned and their successors and
assigns.

         This Investment Representation Letter shall be construed and enforced
in accordance with and governed by the laws of the State of New York without
giving effect to the principles of conflicts of laws thereof.

/s/ Anand Baichwal                                  February 1, 2007
-----------------------------------     ----------------------------------------
Anand Baichwal                          Date<PAGE>

                                                                    Exhibit 10.2

                              Termination Agreement

         This Termination Agreement is entered into effective as of the 1st day
of February, 2007 (the "Effective Date"), by and between John N. Staniforth
("Staniforth") and Penwest Pharmaceuticals Co., a Washington corporation
("Penwest").

         WHEREAS, Staniforth and Penwest are parties to a Royalty Agreement,
dated as of September 25, 1992 (the "Royalty Agreement");

         WHEREAS, on March 12, 2003, Staniforth and Penwest terminated the
Royalty Agreement as applicable to Penwest's ProSolv technology pursuant to the
terms of a Royalty Termination Agreement dated as of March 12, 2003; and

         WHEREAS, Staniforth and Penwest wish to terminate the Royalty Agreement
in its entirety;

         NOW, THEREFORE, in consideration of the mutual covenants and premises
hereinafter set forth, it is agreed by and between the parties as follows:

1.       Termination of Royalty Agreement.

         Staniforth and Penwest hereby agree that, effective as of the Effective
Date, the Royalty Agreement is terminated and shall terminate and be of no
further force or effect; provided, however, that Penwest shall remain obligated
to pay, and shall pay, to Staniforth the royalties owed to Staniforth under
Section 2 of the Royalty Agreement with respect to the one-year period
commencing on January 1, 2006. Penwest shall pay such royalty (the
"Post-Termination Royalty"), in accordance with the terms of the Royalty
Agreement, on or prior to April 30, 2007.

2.       Representations, Warranties and Covenants.

         (a) Staniforth represents and warrants, as of the Effective Date, that
(i) neither the execution and delivery by Staniforth of this Agreement, nor the
consummation by Staniforth of the transactions contemplated hereby, will require
on the part of Staniforth any filing with, or any permit, authorization,
consent, waiver or approval of, any third party, whether pursuant to contract,
applicable law or otherwise; and (ii) no other person or entity has any rights
under the Royalty Agreement, including without limitation rights to royalties,
that can not be, and are not hereby being, waived, amended, released or
terminated by Staniforth under this Agreement.

         (b) Penwest represents and warrants, as of the Effective Date, that
neither the execution and delivery by Penwest of this Agreement, nor the
consummation by Penwest of the transactions contemplated hereby, will require on
the part of Penwest any filing with, or any permit, authorization, consent,
waiver or approval of, any third party, whether pursuant to contract, applicable
law or otherwise.

<PAGE>

3.       Consideration.

         In consideration for Staniforth's agreement to terminate the Royalty
Agreement hereunder, Staniforth's representations, warranties and covenants
hereunder and Staniforth's release hereunder, Penwest hereby agrees that, within
ten days of the Effective Date, it shall

         (a) pay to Staniforth $770,000 in cash; and

         (b) issue to Staniforth 19,696 shares of common stock of Penwest, $.001
par value per share ("Common Stock"); provided, however, that, notwithstanding
the foregoing to the contrary, Penwest shall have no obligation to issue shares
of Common Stock, and Staniforth shall not be entitled to any shares of Common
Stock, until such time as Staniforth executes and delivers to the Company the
investment representation letter attached hereto as Exhibit A.

4.       Release.

         In connection with the termination of the Royalty Agreement and the
payment of the consideration contemplated by Section 3, Staniforth hereby
releases, remises, waives, acquits, forever discharges, and covenants not to sue
Penwest and its subsidiaries and affiliates, and each of their current or former
officers, directors, agents, employees, successors, predecessors, assigns,
attorneys, and the heirs, executors, and administrators of any such released
individuals (collectively, "Penwest Releasees"), from any demands, claims,
actions, suits, judgments, damages, losses, or liabilities, both in law and in
equity, federal and state, which did arise or could have arisen prior to the
Effective Date against Penwest Releasees under the Royalty Agreement, other than
Staniforth's claim for payment of the Post-Termination Royalty under Section 1
of this Agreement.

5.       Miscellaneous.

         (a) This Agreement constitutes the entire agreement between Staniforth
and Penwest with respect to the subject matter hereof and supersedes any prior
agreements or understandings between Staniforth and Penwest with respect to the
subject matter hereof, including without limitation the Royalty Agreement. No
amendment or waiver of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by Staniforth and Penwest.

         (b) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns.

         (c) This Agreement and any disputes hereunder shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule that would
cause the application of laws of any jurisdiction other than those of the State
of New York.

                                      -2-

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed, and have executed this Agreement, as of the date first specified
above.

                                   LICENSOR:

                                   JOHN N. STANIFORTH

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

                                   Address:

                                   LICENSEE:

                                   PENWEST PHARMACEUTICALS CO.

                                   By: /s/ Jennifer Good
                                       -----------------------------------------
                                   Title: Jennifer Good, Chief Executive Officer

                                      -3-

<PAGE>

                                 Exhibit A

                        Investment Representation Letter

Penwest Pharmaceuticals Co.
39 Old Ridgebury Road
Suite 11
Danbury, CT 06810-5120

         Re:  Issuance of Shares of Common Stock of Penwest Pharmaceuticals Co.
              -----------------------------------------------------------------

Dear Sirs:

         In order to induce Penwest Pharmaceuticals, Co. (the "Company") to
issue to the undersigned 19,696 shares (the "Shares") of common stock, par value
$0.001 per share, of the Company (the "Common Stock"), pursuant to Section 3(b)
of that certain Termination Agreement, dated February 1, 2007, between the
Company and the undersigned, the undersigned hereby represents, warrants and
covenants to the Company as follows:

         1.       The undersigned is acquiring the Shares for his own account
for investment only, and not with a view to, or for sale in connection with any
distribution of the Shares in violation of the Securities Act of 1933, as
amended, (the "Securities Act"), or any rule or regulation under the Securities
Act.

         2.       The undersigned has had such opportunity as he has deemed
adequate to obtain from representatives of the Company such information as is
necessary to permit the undersigned to evaluate the merits and risks of his
acquisition of the Shares.

         3.       The undersigned has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Shares and to make an informed investment decision with
respect to such acquisition.

         4.       The undersigned can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.

         5.       The undersigned understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act; (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 or otherwise
may not be available for at least one year and even then will not be available
unless a public market then exists for the Common Stock, adequate information
concerning the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and (iv) there is now no registration
statement on file with the Securities and Exchange Commission with respect to
any stock of the Company and the Company has no obligation or current intention
to register the Shares under the Securities Act.

<PAGE>

         6.       A legend substantially in the following form will be placed on
the certificates represented the Shares:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended, and
                  may not be sold, transferred or otherwise disposed of in the
                  absence of an effective registration statement under such Act
                  or an opinion of counsel satisfactory to the corporation to
                  the effect that such registration is not required."

         7.       The Company agrees that (a) no opinion of counsel shall be
required in connection with a transfer of the Shares made in accordance with
Rule 144 under the Securities Act, (b) the legend referenced in Section 6 shall
be removed from the certificates representing any Shares, at the request of the
undersigned, at such time as the Shares become eligible for resale pursuant to
Rule 144(k) under the Securities Act, and (c) the Company shall use reasonable
efforts to cause its transfer agent to promptly issue new certificates for the
Shares without legend following a transfer under clause (a) or a request for
removal under clause (b). The Company also agrees that it shall use reasonable
efforts to file with the Securities and Exchange Commission in a timely manner
all reports and other documents required to be filed by the Company under the
Securities Exchange Act of 1934, as amended.

         8.       The foregoing representations and warrants are true as of the
date of this Investment Representation Letter and shall be true as of the date
the Company issues the Shares to the undersigned. If such representations and
warranties shall not be true in any respect prior to such date, the undersigned
will give prompt written notice of such fact to the Company.

         This Investment Representation Letter shall be binding upon and inure
to the benefit of the Company and the undersigned and their successors and
assigns.

         This Investment Representation Letter shall be construed and enforced
in accordance with and governed by the laws of the State of New York without
giving effect to the principles of conflicts of laws thereof.

/s/ John N. Staniforth                                1 February, 2007
-------------------------------------       ------------------------------------
John N. Staniforth                          Date

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