Document:

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                                                                    EXHIBIT 10.4

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (this "Agreement") dated as of June 25, 2003,
by and among each of the parties listed on the signature pages hereof and those
additional entities that hereafter become parties hereto by executing the form
of Supplement attached hereto as Annex 1, as grantors (collectively, the
"Grantors", and individually, a "Grantor") and WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association in its capacity as administrative
agent for the Lender Group (as defined below) (the "Administrative Agent").

                                    RECITALS

         WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement") by and among Thomas & Betts
Corporation, a Tennessee corporation, as borrower (the "Borrower"), the
Guarantors (as defined therein), the financial institutions party thereto as
lenders (together with any other financial institution which subsequently
becomes a lender thereunder, the "Lenders"), Wachovia Bank, National
Association, as issuing bank (together with any other financial institution
which subsequently becomes an issuing bank thereunder, the "Issuing Banks"),
Wachovia Securities, Inc. as arranger (the "Arranger") and the Administrative
Agent, the Lenders have agreed to make the Current Asset Loans (as defined in
the Credit Agreement) to the Borrower, and to incur Letter of Credit Obligations
(as defined in the Credit Agreement) on behalf of the Borrower;

                  WHEREAS, the Administrative Agent has agreed to act as
administrative agent for the benefit of the Lender Group in connection with the
transactions contemplated by the Credit Agreement; and

         WHEREAS, each Guarantor (as defined in the Credit Agreement) is a
direct or indirect Subsidiary (as defined in the Credit Agreement) of the
Borrower, and each Grantor will realize direct and indirect benefits as a result
of the extensions of credit to the Borrower pursuant to the Credit Agreement;
and

         WHEREAS, it is a condition precedent to the closing of the Credit
Agreement that (i) the Borrower has agreed to grant a continuing Lien (as
defined in the Credit Agreement) on the Collateral (as hereinafter defined) to
secure the Obligations (as defined in the Credit Agreement), (ii) each Grantor
that is a Guarantor has agreed to grant a continuing Lien on the Collateral to
secure its obligations under the Credit Agreement and the other Loan Documents
to which such Guarantor is a party and all of the Obligations of the Borrower
under the Credit Agreement ((i) and (ii) hereinafter, collectively, the "Secured
Obligations"), and (iii) all of the Grantors have agreed to grant the security
interest contemplated by this Agreement;

         NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         SECTION 1.        Defined Terms.

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                  (a)      All capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Credit Agreement. All other
terms contained in this Agreement, unless the context indicates otherwise, have
the meanings provided for by the Code (as defined herein) to the extent the same
are used or defined therein.

                  (b)      "Code" as used in this Agreement, means the Uniform
Commercial Code as the same may, from time to time, be enacted and in effect in
the State of New York; provided, that to the extent that the Code is used to
define any term herein or in any Loan Document and such term is defined
differently in different Articles or Divisions of the Code, the definition of
such term contained in Article or Division 9 shall govern; provided further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of, or remedies with respect to, the
Administrative Agent's or any Lender's Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term "Code" shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority or remedies
and for purposes of definitions related to such provisions.

         SECTION 2. Grant of Security. Each Grantor hereby grants, collaterally
assigns and pledges to the Administrative Agent, for the benefit of the Lender
Group, a security interest in (together with a right of setoff) all of the
following property of such Grantor, whether now owned or hereafter acquired, and
all substitutions therefor and accessions thereto (collectively, the
"Collateral"):

                  (a)      All of such Grantor's right, title and interest with
respect to Accounts (as such term is defined in the Credit Agreement), and any
other "accounts" as defined in the Code (the "Accounts");

                  (b)      All of such Grantor's books and records related to
the Collateral ("Books");

                  (c)      All of such Grantor's right, title, and interest with
respect to any Blocked Accounts ("Deposit Accounts");

                  (d)      All of such Grantor's right, title and interest with
respect to general intangibles including contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, including, without limitation, purchase orders, customer lists, route
lists, infringement claims, computer programs, information contained on computer
disks or tapes, software, literature, reports, catalogs, insurance premium
rebates, tax refunds, and tax refund claims), and any other personal property
other than commercial tort claims, money, Accounts, Deposit Accounts, and
Negotiable Proceeds (as defined below) (the "General Intangibles");

                  (e)      All of such Grantor's right, title and interest with
respect to "inventory," as such term is defined in the Code, wherever located,
and in any event including inventory, merchandise, goods and other personal
property that are held by or on behalf of such Grantor for sale or lease or are
furnished or are to be furnished under a contract of service, goods that are
leased by such Grantor as lessor, or that constitute raw materials, work in
process, finished goods, returned goods, promotional materials or materials or
supplies of any kind, nature or

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description used or consumed or to be used or consumed in the Grantor's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software (the "Inventory");

                  (f)      All of such Grantor's right, title, and interest with
respect to any "supporting obligations" as such term is defined in the Code,
including letters of credit and guaranties issued in support of Accounts,
documents, General Intangibles, or instruments (the "Supporting Obligations");

                  (g)      all of the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance or
commercial tort claims covering any or all of the foregoing, and any and all
Accounts, Books, Deposit Accounts, General Intangibles, Inventory, Supporting
Obligations, Negotiable Proceeds (as defined below), money, deposit accounts, or
other tangible or intangible property resulting from the sale, lease, license,
exchange, collection, or other disposition of any of the foregoing, the proceeds
of any award in condemnation with respect to any of the foregoing property of
the Grantor, any rebates or refunds, whether for taxes or otherwise, and all
proceeds of any such proceeds, or any portion thereof or interest therein, and
the proceeds thereof, and all proceeds of any loss of, damage to or destruction
of the above, whether insured or not insured, and, to the extent not otherwise
included, any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral (the
"Proceeds"); provided, however, notwithstanding anything to the contrary
contained herein, the Collateral shall not include the Excluded Assets.

         SECTION 3. Security for Obligations. This Agreement secures the payment
of the Secured Obligations. Without limiting the generality of the foregoing,
this Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by the Borrower to the Lender Group, or any of
them, but for the fact that they are unenforceable or not allowable due to the
existence of an insolvency proceeding involving the Borrower.

         SECTION 4. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each of the Grantors shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of the duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of the rights hereunder shall not release any of the
Grantors from any of their respective duties or obligations under the contracts
and agreements included in the Collateral, and (c) none of the members of the
Lender Group shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall any
member of the Lender Group be obligated to perform any of the obligations or
duties of any of the Grantors thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.

         SECTION 5. Negotiable Proceeds. Each Grantor covenants and agrees with
the Administrative Agent, for the benefit of the Lender Group, that from and
after the date of this Agreement and until the date of termination of this
Agreement in accordance with Section 22 hereof:

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                  (a)      in the event that any Proceeds is evidenced by or
consists of letters of credit, letter of credit rights, instruments, promissory
notes, drafts, and documents (collectively, "Negotiable Proceeds") and if and to
the extent that perfection or priority of the Administrative Agent's security
interest is dependent on or enhanced by possession, the applicable Grantor,
promptly upon the request of the Administrative Agent, shall endorse and deliver
physical possession of such Negotiable Proceeds and all other documents held by
such Grantor in connection therewith to the Administrative Agent; and

                  (b)      such Grantor shall take, upon the reasonable request
of the Administrative Agent, all steps reasonably necessary to grant the
Administrative Agent control of all "transferable records" as defined in each of
the Uniform Electronic Transactions Act and the Electronic Signatures in Global
and National Commerce Act.

                  (c)      if any Grantor retains possession of any instruments
promptly upon the request of the Administrative Agent, such instruments shall be
marked with the following legend: "This writing and the obligations evidenced or
secured hereby are subject to the security interest of Wachovia Bank, National
Association, as the Administrative Agent, for the benefit of the Lender Group".

         SECTION 6. Government Contracts. If any Account arises out of a
contract or contracts with the United States of America or any department,
agency, or instrumentality thereof, the Grantors shall promptly notify the
Administrative Agent thereof in writing and execute any instruments or take any
steps reasonably required by the Administrative Agent in order that all moneys
due or to become due under such contract or contracts shall be assigned to the
Administrative Agent and notice thereof given under the Federal Assignment of
Claims Act or other Applicable Law.

         SECTION 7. Representations, Warranties and Covenants. Each Grantor
hereby represents, warrants and covenants as follows:

                  (a)      The exact legal name of each of the Grantors is set
forth on the signature pages of this Agreement or a supplement hereto. The
Internal Revenue Service taxpayer identification number and the organizational
identification number issued by the state of formation of each Grantor are
listed next to such Grantor's name on Schedule 1 attached hereto.

                  (b)      All of the Inventory of the Grantors, other than
Inventory in transit and Inventory sold in the ordinary course of business, is
located in the continental United States, Puerto Rico or Mexico at the places
specified in Schedules 6.11(a) and (b) to the Credit Agreement. The chief place
of business and chief executive office of each Grantor and the office where each
Grantor keeps records concerning the Accounts is located at the addresses
specified in Schedule 2 attached hereto. None of the Accounts of the Grantors is
evidenced by a promissory note or other instrument, other than a note or other
instrument which has been delivered to the Administrative Agent. Each Grantor
covenants and agrees that it will not change the location of its principal place
of business or chief executive office, or the office where such Grantor keeps
records concerning its Accounts, from the locations identified as such on
Schedule 2, unless, in either case, it complies with the requirements of Section
6.11 of the Credit Agreement and executes any and all documents and authorizes
the filing of any and all Uniform Commercial Code ("UCC") financing statements
that the Administrative Agent reasonably

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requests in connection therewith. Each Grantor further represents and warrants
and agrees that (a) none of the Collateral is subject to any licensing, patent,
royalty, trademark, trade name or copyright agreements with any third parties
which would require any consent of any third party upon sale or disposition
thereof or the payment of any monies to any third party as a precondition of
such sale or other disposition, and (b) the completion of manufacture, sale or
other disposition of any Inventory by the Administrative Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any contract or agreement to which any
Grantor is a party or to which such property is subject.

                  (c)      Schedule 3 attached hereto sets forth a true,
complete and correct list of the name and address of each location at which any
of the Collateral is stored with a reprocessor, warehouseman or other bailee
(together with the name and address of each reprocessor, warehouseman or bailee
with respect thereto).

                  (d)      This Agreement creates a valid security interest in
the Collateral of each of the Grantors, to the extent a security interest
therein can be created under the Code, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken or will have been taken
upon the filing of UCC financing statements listing each Grantor, as a debtor,
and the Administrative Agent, as secured party, in the jurisdictions listed next
to each Grantor's name on Schedule 4 attached hereto, except for any action
necessary to perfect the Administrative Agent's security interest in any
Collateral to the extent a security interest therein is not perfected by the
filing of a financing statement under the Code. Upon the making of such filings,
the Administrative Agent shall have a first priority perfected security interest
in the Collateral of each of the Grantors to the extent such security interest
can be perfected by the filing of a financing statement under the Code.

                  (e)      The parties intend that all of the Collateral shall
remain personal property regardless of the manner of its attachment or
affixation to real property.

                  (f)      Within the twelve (12) month period immediately
preceding the Agreement date, none of the Grantors has purchased any of the
Collateral in a bulk transfer or in a transaction outside the ordinary course of
the business of the applicable seller.

         SECTION 8. Further Assurances.

                  (a)      Each Grantor agrees that from time to time, at its
own expense, such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
that the Administrative Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any of the Collateral. Without limiting the generality
of the foregoing, each Grantor shall: (i) if any Account of any of the Grantors
shall be evidenced by a promissory note or other instrument, deliver and pledge
to the Administrative Agent hereunder such note or instrument or duly indorsed
and accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to the Administrative Agent and (ii) authorize
the filing of such UCC financing or continuation statements, or amendments
thereto, and execute and deliver to the Administrative Agent such other
instruments or notices, as may be necessary or as the

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Administrative Agent may reasonably request, in order to perfect and preserve
the security interest granted or purported to be granted hereby.

                  (b)      Each Grantor authorizes the Administrative Agent to
file, transmit, or communicate, as applicable, UCC financing statements, in-lieu
financing statements and amendments describing the Collateral, in order to
perfect the Administrative Agent's security interest in the Collateral without
such Grantor's signature to the extent permitted by Applicable Law. A photocopy
or other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a UCC financing statement
where permitted by Applicable Law. Each Grantor also hereby ratifies its
authorization for the Administrative Agent to have filed in any jurisdiction any
UCC financing statements, in-lieu of financing statements or amendments thereto
if filed prior to the date hereof. Each Grantor acknowledges that it is not
authorized to file any financing statement or amendment or termination statement
with respect to any financing statement filed in connection with this Agreement
without the prior written consent of the Administrative Agent, subject to such
Grantor's rights under Section 9-509(d)(2) of the Code.

         SECTION 9. Change Name. Each Grantor covenants and agrees that such
Grantor will not, without at least thirty (30) days prior written notice to the
Administrative Agent and subject to any reasonable requirements of the
Administrative Agent in connection therewith, change such Grantor's federal tax
identification number or name or reincorporate or reorganize itself under the
laws of any jurisdiction.

         SECTION 10. Intentionally Omitted.

         SECTION 11. Insurance. The Grantors shall, at their own expense,
maintain insurance with respect to the Collateral in such amounts, against such
risks, in such form and with such insurers, as set forth in the Credit
Agreement.

         SECTION 12. Transfers and Other Liens. The Grantors shall not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except Inventory in the ordinary
course of business and other Collateral as expressly otherwise permitted by the
Credit Agreement, or (ii) create or permit to exist any Lien, security interest,
option or other charge or encumbrance upon or with respect to any of the
Collateral of any of the Grantors, except for Permitted Liens or as otherwise
permitted by the Credit Agreement. The inclusion of proceeds in the Collateral
shall not be deemed to constitute the Administrative Agent's consent to any sale
or other disposition of any of the Collateral except as expressly permitted in
this Agreement or the other Loan Documents.

         SECTION 13. Administrative Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Administrative Agent its
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, at such time as an Event of Default
has occurred and is continuing under the Credit Agreement, to take any action
and to execute any instrument which the Administrative Agent may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:

                  (a)      to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in connection with the Accounts or any other Collateral of
such Grantor;

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                  (b)      to receive and open all mail addressed to such
Grantor and to notify postal authorities to change the address for the delivery
of mail to such Grantor to that of the Administrative Agent as provided in any
Blocked Account Agreement;

                  (c)      to receive, indorse, and collect any drafts or other
instruments, documents, Negotiable Proceeds in connection therewith;

                  (d)      to file any claims or take any action or institute
any proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral of such Grantor or otherwise to
enforce the rights of the Administrative Agent with respect to any of the
Collateral;

                  (e)      to repair, alter, or supply goods, if any, necessary
to fulfill in whole or in part the purchase order of any Person obligated to
such Grantor in respect of any Account of such Grantor; and

                  (f)      to use any labels, patents, trademarks, tradenames,
URLs, domain names, industrial designs, copyrights, advertising matter or other
industrial and intellectual property rights, in advertising for sale and selling
Inventory and other Collateral and to collect any amounts due under Accounts or
Negotiable Proceeds of such Grantor.

         SECTION 14. Administrative Agent May Perform. Upon the occurrence of an
Event of Default, the Administrative Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the
Administrative Agent incurred in connection therewith shall be payable, jointly
and severally, by the Grantors.

         SECTION 15. Administrative Agent's Duties. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon the Administrative Agent to
exercise any such powers. Except for the safe custody of any Collateral in its
actual possession and the accounting for moneys actually received by it
hereunder, the Administrative Agent shall have no duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral. The Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any Collateral in its actual possession if such Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property. Each reference herein to any right granted to, benefit conferred upon
or power exercisable by the "Administrative Agent" shall be a reference to the
Administrative Agent for the ratable benefit of the Lender Group, and each
action taken or right exercised hereunder shall be deemed to have been so taken
or exercised by the Administrative Agent for the ratable benefit of the Lender
Group.

         SECTION 16. Remedies. Upon the occurrence and during the continuance of
an Event of Default:

                  (a)      The Administrative Agent may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein, in
the other Loan Documents, or otherwise available to it, all the rights and
remedies of a secured party on default under the Code in effect in the State of
New York at that time or any other applicable jurisdiction. Without limiting the
generality of the foregoing, each Grantor expressly agrees that in any such
event the

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Administrative Agent without demand of performance or other demand,
advertisement or notice of any kind (except a notice specified below of time and
place of public or private sale or as expressly required by the Credit
Agreement) to or upon any of the Grantors or any other Person (all and each of
which demands, advertisements and notices are hereby expressly waived to the
maximum extent permitted by the Code and other Applicable Law), may take
immediate possession of the Collateral and (i) require the Grantors to, and each
Grantor hereby agrees that it will at its own expense and upon request of the
Administrative Agent forthwith, assemble all or part of the Collateral as
directed by the Administrative Agent and make it available to the Administrative
Agent at one or more locations where such Grantor regularly maintains Inventory
and (ii) without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Administrative Agent may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' notice to any of the Grantors
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Administrative
Agent shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Administrative Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.

                  (b)      The Administrative Agent is hereby granted a license
or other right to use, without charge, each Grantor's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks and advertising matter, URLs, domain names, industrial designs,
other industrial or intellectual property or any property of a similar nature,
whether owned by any of the Grantors or with respect to which any of the
Grantors have rights under license, sublicense or other agreements, as it
pertains to the Collateral, in preparing for sale, advertising for sale and
selling any Collateral, and each Grantor's rights under all licenses and all
franchise agreements shall inure to the benefit of the Administrative Agent.

                  (c)      Any cash held by the Administrative Agent or any
member of the Lender Group as Collateral and all cash proceeds received by the
Administrative Agent or any member of the Lender Group in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Administrative Agent, be held by the
Administrative Agent as collateral for, and/or then or at any time thereafter be
applied in whole or in part by the Administrative Agent against, all or any part
of the Secured Obligations in such order as may be set forth in the Credit
Agreement. Any surplus of such cash or cash proceeds held by the Administrative
Agent and remaining after payment in full of all the Secured Obligations shall
be delivered to the Grantors.

                  (d)      Each Grantor hereby acknowledges that the Secured
Obligations arose out of a commercial transaction, and agrees that if an Event
of Default shall occur the Administrative Agent shall have the right to an
immediate writ of possession without notice of a hearing. The Administrative
Agent shall have the right to the appointment of a receiver for the properties
and assets of each of the Grantors, and each Grantor hereby consents to such
rights and such appointment and hereby waives any objection such Grantors may
have thereto or the right to have a bond or other security posted by the
Administrative Agent.

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                  (e)      Neither the Administrative Agent nor any member of
the Lender Group shall be liable or responsible in any way for the safekeeping
of any of the Collateral or for any loss or damage thereto (except the
Administrative Agent for reasonable care in the custody thereof while any
Collateral is in the Administrative Agent's actual possession and except the
Administrative Agent or a member of the Lender Group for its willful misconduct
or gross negligence) or for any diminution in the value thereof, or for any act
or default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at each Grantor's sole risk.

                  (f)      Neither the Administrative Agent nor any member of
the Lender Group shall be under any obligation to marshal any assets in favor of
any Grantor or any other Person or against or in payment of any or all of the
Obligations.

         SECTION 17. Remedies Cumulative. Each right, power, and remedy of the
Administrative Agent as provided for in this Agreement or in the other Loan
Documents or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power, or remedy provided for in this Agreement or in the other
Loan Documents or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by the Administrative
Agent, of any one or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by the Administrative Agent of any or all
such other rights, powers or remedies.

         SECTION 18. Expenses. The Grantors shall, upon demand, pay to the
Administrative Agent, jointly and severally, the amount of any and all
reasonable out-of-pocket expenses, including, without limitation, the fees and
expenses of its counsel incurred and of any experts and agents, which the
Administrative Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or, upon an
Event of Default, the sale of, collection from, or other realization upon, any
of the Collateral in accordance with this Agreement and the other Loan
Documents, (iii) the exercise or enforcement of any of the rights of the
Administrative Agent hereunder or (iv) the failure by any of the Grantors to
perform or observe any of the provisions hereof.

         SECTION 19. Possession Until Default. Until an Event of Default shall
occur and be continuing, except as otherwise provided in this Agreement, the
Credit Agreement or other Loan Documents, the Grantors shall have the right to
possession and enjoyment of the Collateral for the purpose of conducting the
ordinary course of their respective businesses, subject to and upon the terms
hereof and of the Credit Agreement and other Loan Documents.

         SECTION 20. Amendments; Etc. No waiver of any provision of this
Agreement, and no consent to any departure by any of the Grantors herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
amendment of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by the Administrative Agent and each of the
Grantors to which such amendment applies.

         SECTION 21. Addresses for Notices. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered to
the Administrative Agent at

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its address specified in the Credit Agreement, and to any of the Grantors at
their respective addresses set forth in the Credit Agreement, or, as to any
party, at such other address as shall be designated by such party in a written
notice to the other party.

         SECTION 22. Continuing Security Interest: Assignments under Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the Secured
Obligations (other than any Obligations then outstanding in respect of Bank
Products and any contingent indemnity obligations) have been paid in full in
cash or otherwise satisfied to the satisfaction of the Lender Group and the
expiration or termination of the obligation of the Lender Group to extend credit
pursuant to the Credit Agreement, (ii) be binding upon each of the Grantors, and
their respective successors and assigns, and (iii) inure to the benefit of, and
be enforceable by, the Administrative Agent, and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), any
Lender may, in accordance with the provisions of the Credit Agreement, assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of the
Current Asset Commitments and the Current Asset Loans owing to it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise. Upon
payment in full in cash, or other satisfaction to the satisfaction of the Lender
Group, of the Secured Obligations (other than any Obligations then outstanding
in respect of Bank Products and any contingent indemnity obligations) and all
other amounts payable under this Agreement and the expiration or termination of
the obligation of the Lenders to extend credit pursuant to the Credit Agreement,
the security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Grantors or any other Person entitled thereto. No
transfer or renewal, extension, assignment or termination of this Agreement or
of the Credit Agreement, any other Loan Document, or any other instrument or
document executed and delivered by the Borrower or any of the Grantors to the
Administrative Agent nor any additional Advances made by any Lender to the
Borrower, nor the taking of further security, nor the retaking or re-delivery of
the Collateral to the Grantors, or any of them, by the Administrative Agent, nor
any other act of the Lender Group, or any of them, shall release any of the
Grantors from any obligation, except a release or discharge executed in writing
by the Administrative Agent with respect to such obligation or payment of such
obligation or upon payment in full in cash, or other satisfaction to the
satisfaction of the Lender Group, of the Secured Obligations (other than any
Obligations then outstanding in respect of Bank Products and any contingent
indemnity obligations) and all other amounts payable under this Agreement and
the expiration or termination of the obligation of the Lenders to extend credit
pursuant to the Credit Agreement. The Administrative Agent shall not by any act,
delay, omission or otherwise, be deemed to have waived any of its rights or
remedies hereunder, unless such waiver is in writing and signed by the
Administrative Agent and then only to the extent therein set forth. A waiver by
the Administrative Agent of any right or remedy on any occasion shall not be
construed as a bar to the exercise of any such right or remedy which the
Administrative Agent would otherwise have had on any other occasion.

         SECTION 23. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, including,
without limitation, Sections 5-1401 and 5-1402 of the New York General
Obligations Law and Section 327(b) of the New York Civil Practice Laws and Rules
and without reference to the conflict or choice of law principles thereof except
to the extent that the validity or perfection of the security interest

                                      -10-
<PAGE>

hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York.

         SECTION 24. New Subsidiaries. Pursuant to Section 6.20 of the Credit
Agreement, any new Domestic Subsidiary (whether by acquisition, creation or
designation) is required to enter into this Agreement by executing and
delivering in favor of the Administrative Agent an instrument in the form of
Annex 1 attached hereto. Upon the execution and delivery of Annex 1 by such new
Domestic Subsidiary, such Domestic Subsidiary shall become a Grantor hereunder
with the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any instrument adding an additional Grantor as a party
to this Agreement shall not require the consent of any Grantor hereunder. The
rights and obligations of each Grantor hereunder shall remain in full force and
effect notwithstanding the addition of any new Grantor hereunder.

         SECTION 25. Miscellaneous.

                  (a)      This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
Delivery of an executed counterpart of this Agreement by facsimile shall be
equally as effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
facsimile also shall deliver an original executed counterpart of this Agreement
but the failure to deliver an original executed counterpart shall not affect the
validity, enforceability and binding effect of this Agreement.

                  (b)      Any provision of this Agreement which is prohibited
or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.

                  (c)      To the extent that the terms and conditions of this
Agreement shall be inconsistent or conflict with the terms and conditions of the
Pledge Agreements with respect to any of the Collateral covered thereby, the
terms and conditions of the Pledge Agreements shall control.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -11-
<PAGE>

         IN WITNESS WHEREOF, each of the Grantors and the Administrative Agent
has caused this Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.

GRANTORS:                    THOMAS & BETTS CORPORATION,
                             a Tennessee corporation

                             By:    /s/ Thomas C. Oviatt
                                -----------------------------------------
                             Name:  Thomas C. Oviatt
                             Title: Vice President - Treasurer

                             THOMAS & BETTS
                             INTERNATIONAL, INC., a Delaware
                             corporation

                             By:    /s/ John P. Murphy
                                 ----------------------------------------
                             Name:  John P. Murphy
                             Title: Vice President and Treasurer

                             AUGAT EUROPE, INC.,
                             a Delaware corporation

                             By:    /s/ John P. Murphy
                                 ----------------------------------------
                             Name:  John P. Murphy
                             Title: Vice President and Treasurer

                             THOMAS & BETTS EUROPE, INC.,
                             a Delaware corporation

                             By:    /s/ John P. Murphy
                                 ----------------------------------------
                             Name:  John P. Murphy
                             Title: Vice President and Treasurer

                             THOMAS & BETTS CARIBE INC.,
                             a Delaware corporation

                             By:    /s/ John P. Murphy
                                 ----------------------------------------
                             Name:  John P. Murphy
                             Title: Vice President and Treasurer

ADMINISTRATIVE               WACHOVIA BANK, NATIONAL
AGENT:                       ASSOCIATION, as Administrative Agent

                             By:    /s/ W. Eugene Wilson
                                -----------------------------------------
                             Name:  W. Eugene Wilson
                             Title: Director

SECURITY AGREEMENT

<PAGE>

                                   SCHEDULE 1
                                       TO
                               SECURITY AGREEMENT

  FEDERAL TAXPAYER IDENTIFICATION NUMBER, ORGANIZATIONAL IDENTIFICATION NUMBER

THOMAS & BETTS CORPORATION
         FEIN:             22-1326940
         State of Incorp:  Tennessee
         Org. Id. Number:  0307723

THOMAS & BETTS INTERNATIONAL, INC.
         FEIN:             22-1916639
         State of Incorp:  Delaware
         Org. Id. Number:  0658122

AUGAT EUROPE, INC.
         FEIN:             62-1683551
         State of Incorp:  Delaware
         Org. Id. Number:  2724936

THOMAS & BETTS EUROPE, INC.
         FEIN:             62-1683552
         State of Incorp:  Delaware
         Org. Id. Number:  2724942

THOMAS & BETTS CARIBE INC.
         FEIN:             66-0275302
         State of Incorp:  Delaware
         Org. Id. Number:  0701921

<PAGE>

                                   SCHEDULE 2
                                       TO
                               SECURITY AGREEMENT

               PRINCIPAL PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICE

THOMAS & BETTS CORPORATION
8155 T& B Boulevard
Memphis, TN  38138

THOMAS & BETTS INTERNATIONAL, INC.
250 Lillard Drive
Sparks, NV  89434

AUGAT EUROPE, INC.
8155 T& B Boulevard
Memphis, TN  38138

THOMAS & BETTS EUROPE, INC.
8155 T& B Boulevard
Memphis, TN  38138

THOMAS & BETTS CARIBE INC.
P.O. Box 4058 - Plant D
Cabo-Caribe Industrial Park
Lot 34-32
Vega, Baja, Puerto Rico  00694

<PAGE>

                                   SCHEDULE 3
                                       TO
                               SECURITY AGREEMENT

                                BAILEE LOCATIONS

                                     None.

<PAGE>

                                   SCHEDULE 4
                                       TO
                               SECURITY AGREEMENT

                            UCC FILING JURISDICTIONS

THOMAS & BETTS CORPORATION                 Tennessee Secretary of State

THOMAS & BETTS INTERNATIONAL, INC.         Delaware Secretary of State

AUGAT EUROPE, INC.                         Delaware Secretary of State

THOMAS & BETTS EUROPE, INC.                Delaware Secretary of State

THOMAS & BETTS CARIBE INC.                 Delaware Secretary of State
                                           Puerto Rico Secretary of State

<PAGE>

                          Annex 1 to Security Agreement
                               Form of Supplement

                  Supplement No. __ (this "Supplement") dated as of _______ to
                  the Security Agreement dated as of June 25, 2003 (as amended,
                  restated, supplemented or otherwise modified from time to
                  time, the "Security Agreement") by each of the parties listed
                  on the signature pages thereto and those additional entities
                  that thereafter become parties thereto (each a "Grantor") and
                  Wachovia Bank, National Association, in its capacity as
                  administrative agent for the Lender Group (as defined in the
                  Credit Agreement described below) (the "Administrative
                  Agent").

                                   WITNESSETH:

         WHEREAS, Thomas & Betts Corporation, a Tennessee corporation, as
borrower (the "Borrower"), the Guarantors (as defined therein), the financial
institutions party thereto as lenders (together with any other financial
institution which subsequently becomes a lender thereunder, the "Lenders"),
Wachovia Bank, National Association, as issuing bank (together with any other
financial institution which subsequently becomes an issuing bank thereunder, the
"Issuing Banks"), Wachovia Securities, Inc. as arranger (the "Arranger") and the
Administrative Agent are parties to that certain Credit Agreement dated as of
June 25, 2003 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"); and

         WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security Agreement, and if
not defined therein, in the Credit Agreement; and

         WHEREAS, the Grantors have entered into the Security Agreement in order
to induce the Lender Group to extend credit to the Borrower under the Credit
Agreement; and

         WHEREAS, pursuant to provisions of Section 6.20 of the Credit
Agreement, new Domestic Subsidiaries of the Borrower (whether by acquisition,
creation, or designation) must execute and deliver to the Administrative Agent
certain Loan Documents and Security Documents, including, without limitation,
the Security Agreement, and the execution of the Security Agreement by the
undersigned new Grantor or Grantors (collectively, the "New Grantor") may be
accomplished by the execution of this Supplement in favor of the Administrative
Agent for the ratable benefit of the Lender Group;

         NOW, THEREFORE, for and in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the New Grantor hereby agrees as follows:

         SECTION 1. In accordance with Section 24 of the Security Agreement, the
New Grantor, by its signature below, becomes a `Grantor' under the Security
Agreement with the same force and effect as if originally named therein as a
`Grantor' and the New Grantor hereby (a) agrees to all of the terms and
provisions of the Security Agreement applicable to it as a `Grantor' thereunder
and (b) represents and warrants that the representations and warranties

<PAGE>

made by it as a `Grantor' thereunder are true and correct on and as of the date
hereof. In furtherance of the foregoing, the New Grantor, as security for the
payment and performance in full of the Secured Obligations, does hereby grant,
assign, and pledge to the Administrative Agent, for the ratable benefit of the
Lender Group, a security interest in and security title to all Collateral (as
defined in the Security Agreement) of the New Grantor, and all additions thereto
and replacements thereof and all other property of the New Grantor whether now
or hereafter created, acquired or reacquired, to secure the full and prompt
payment of the Secured Obligations, including, without limitation, any interest
thereon, plus attorneys' fees and expenses if the Obligations represented by the
Security Agreement are collected by law, through an attorney-at-law, or under
advice therefrom. Schedule 1, "Federal Taxpayer Identification Number,
Organizational Identification Number" Schedule 2, "Principal Place of
Business/Chief Executive Office," Schedule 3, "Bailee Locations," and Schedule
4, "UCC Filing Jurisdictions" attached hereto supplement Schedule 1, Schedule 2,
Schedule 3, and Schedule 4 to the Security Agreement and shall be deemed a part
thereof for all purposes of the Security Agreement. Each reference to a
`Grantor' in the Security Agreement shall be deemed to include the New Grantor.
The Security Agreement is incorporated herein by reference.

         SECTION 2. The New Grantor represents and warrants to the
Administrative Agent and the other members of the Lender Group that this
Supplement has been duly executed and delivered by the New Grantor and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).

         SECTION 3. This Supplement may be executed in multiple counterparts,
each of which shall be deemed to be an original, but all such separate
counterparts shall together constitute but one and the same instrument. Delivery
of a counterpart hereof by facsimile transmission shall be effective as delivery
of a manually executed counterpart hereof.

         SECTION 4. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.

         SECTION 5. This Supplement shall be construed and interpreted in
accordance with the internal laws of the State of New York including, without
limitation, Section 5-1401 and 5-1402 of the New York General Obligations Law
and Section 327(b) of the New York Civil Practice Laws and Rules.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -2-

<PAGE>

         IN WITNESS WHEREOF, the New Grantor has duly executed this Supplement
to the Security Agreement as of the day and year first above written.

NEW GRANTOR:                                [Name of New Grantor]

                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________<PAGE>
                                                                     Exhibit 4.1

 THIS ADDITIONAL INVESTMENT RIGHT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS ADDITIONAL INVESTMENT RIGHT HAVE NOT BEEN REGISTERED UNDER THE
 SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH ADDITIONAL INVESTMENT
    RIGHT AND THE SHARES OF COMMON STOCK ISSUABLE PURSUANT TO THE ADDITIONAL
    INVESTMENT RIGHT ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS
                                 NOT REQUIRED.

 THIS ADDITIONAL INVESTMENT RIGHT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS ADDITIONAL INVESTMENT RIGHT ARE SUBJECT TO THE RESTRICTIONS ON
  TRANSFER SET FORTH IN SECTIONS 3 AND 11 OF THIS ADDITIONAL INVESTMENT RIGHT

                           PENWEST PHARMACEUTICALS CO.

                           ADDITIONAL INVESTMENT RIGHT

Additional Investment Right No. [INSERT#]              Dated:  August [__], 2003

Penwest Pharmaceuticals Co., a Washington corporation (the "Company"), hereby
certifies that, for value received, [NAME OF HOLDER] or its registered assigns
(the "Holder"), is entitled to purchase from the Company up to a total of
[NUMBER OF SHARES] shares of common stock, $0.001 par value per share (the
"Common Stock"), of the Company (each such share as adjusted from time to time
as provided in Section 9, an "Investment Right Share" and all such shares, the
"Investment Right Shares") at an exercise price equal to $26.00 (as adjusted
from time to time as provided in Section 9, the "Exercise Price"), at any time
and from time to time from and after the earlier of (such earlier date being
referred to herein as the "Trigger Date") (i) the date 90 days after the Closing
Date and (ii) the date the Registration Statement is first declared effective
(the "Effective Date"), and through and including the 60th Trading Day following
the Effective Date (the "Expiration Date"), subject to the terms and conditions
set forth herein. This additional investment right (this "Additional Investment
Right") is one of a series of similar additional investment rights issued
pursuant to that certain Securities Purchase Agreement, dated as of the date
hereof, by and among the Company and the Purchasers identified therein (the
"Securities Purchase Agreement"). All such additional investment rights are
referred to herein, collectively, as the "Additional Investment Rights."

      1. DEFINITIONS. Capitalized terms that are not otherwise defined herein
have the meanings given to such terms in the Securities Purchase Agreement.

      2. REGISTRATION OF ADDITIONAL INVESTMENT RIGHT. The Company shall register
this Additional Investment Right, upon records to be maintained by the Company
for that purpose

                                      -1-
<PAGE>
(the "Additional Investment Right Register"), in the name of the Holder (which
shall include the initial Holder or, as the case may be, any registered assignee
to which this Additional Investment Right is permissibly assigned hereunder from
time to time). The Company may deem and treat the registered Holder as the
absolute owner of this Additional Investment Right for the purpose of any
exercise hereof, any distribution in respect hereof and for all other purposes,
absent actual notice to the contrary.

      3. TRANSFERS. This Additional Investment Right shall not be sold or
transferred unless either (i) it first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the
Securities Act. In addition, the Holder acknowledges and agrees that this
Additional Investment Right may not be assigned or transferred in whole or in
part except (i) to an Affiliate (as defined below) of the Holder, (ii) to any
other Purchaser or (iii) to any Affiliates of any other Purchaser.
Notwithstanding the foregoing, if the assignment or transfer is to an Affiliate
of the Holder no registration or opinion of counsel shall be required and the
Company shall register any such assignment or transfer of all or any portion of
this Additional Investment Right in the Additional Investment Right Register,
upon (i) surrender of this Additional Investment Right, with the Form of
Assignment attached hereto duly completed and signed, and (ii) delivery by the
transferee of a written statement to the Company certifying that the transferee
is an Affiliate of the Holder and an "accredited investor" as defined in Rule
501(a) under the Securities Act and making the representations and
certifications as set forth in Section 4 of the Securities Purchase Agreement,
in each case, to the Company at its address specified in the Securities Purchase
Agreement. Upon any such registration or transfer, a new additional investment
right to purchase Common Stock, in substantially the form of this Additional
Investment Right (any such new additional investment right, a "New Additional
Investment Right"), evidencing the portion of this Additional Investment Right
so transferred shall be issued to the transferee and a New Additional Investment
Right evidencing the remaining portion of this Additional Investment Right not
so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Additional Investment Right by the transferee shall be
deemed the acceptance by such transferee of all of the rights and obligations in
respect of the New Additional Investment Right that the Holder has in respect of
this Additional Investment Right. For the purposes of this Section 3,
"Affiliate" means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act.

      4. EXERCISE AND DURATION OF ADDITIONAL INVESTMENT RIGHT.

            (a) This Additional Investment Right shall be exercisable by the
registered Holder at any time and from time to time on or after the Trigger Date
and through and including the Expiration Date. At 6:30 P.M., New York time on
the Expiration Date, the portion of this Additional Investment Right not
exercised prior thereto shall be and become void and of no value and this
Additional Investment Right shall be terminated and no longer outstanding;
provided, however, that the Expiration Date shall be extended for each day
following the Effective Date that (i) the Registration Statement is not
effective or (ii) the Company has

                                      -2-
<PAGE>
suspended sales under the Registration Statement pursuant to Section 7.1(e) of
the Securities Purchase Agreement.

            (b) The Holder may exercise this Additional Investment Right by
delivering to the Company (with copies to its counsel) in accordance with the
notice provisions of this Additional Investment Right (i) an exercise notice, in
the form attached hereto (the "Exercise Notice"), completed and duly signed, and
(ii) payment of the Exercise Price for the number of Investment Right Shares as
to which this Additional Investment Right is being exercised, and the date such
items are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an "Exercise Date;" provided, however, that in the event
that the Holder is exercising the Additional Investment Right in full, the
Holder shall also surrender this Additional Investment Right to the Company
within a reasonable time after delivery of the Exercise Notice delivered to the
Company. The delivery by (or on behalf of) the Holder of the Exercise Notice and
the applicable Exercise Price as provided above shall constitute the Holder's
certification to the Company that its representations contained in Section 4 of
the Securities Purchase Agreement are true and correct as of the Exercise Date
as if remade in their entirety (or, in the case of any assignee Holder that is
not a party to the Securities Purchase Agreement, such assignee Holder's
certification to the Company that such representations are true and correct as
to such assignee Holder as of the Exercise Date). The Holder shall not be
required to deliver the original Additional Investment Right in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice shall have
the same effect as cancellation of the original Additional Investment Right and
issuance of a New Additional Investment Right evidencing the right to purchase
the remaining number of Investment Right Shares, and the Company shall reflect
such deemed cancellation and issuance on the Additional Investment Right
Register.

      5. DELIVERY OF INVESTMENT RIGHT SHARES.

            (a) As soon as practicable after the exercise of this Additional
Investment Right (but in no event later than three Trading Days after the
Exercise Date) in whole or in part, the Company, at its expense, will cause to
be issued in the name of, and delivered to, the Holder, or as the Holder (upon
payment by the Holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of full Investment Right Shares to
which the Registered Holder shall be entitled upon such exercise.

            (b) This Additional Investment Right is exercisable either in its
entirety or, from time to time, for a portion of the Investment Right Shares.
Upon surrender of this Additional Investment Right following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New
Additional Investment Right evidencing the right to purchase the remaining
number of Investment Right Shares.

      6. CHARGES, TAXES AND EXPENSES. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Additional Investment Right shall
be made without charge to the Holder for any transfer agent fee or other
incidental expense in respect of the issuance of such certificates, all of which
expenses shall be paid by the Company; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any

                                      -3-
<PAGE>
transfer involved in the registration of any certificates for Investment Right
Shares or any Additional Investment Right. The Holder shall be responsible for
all other tax liability that may arise as a result of holding or transferring
this Additional Investment Right or receiving Investment Right Shares upon
exercise hereof.

      7. REPLACEMENT OF ADDITIONAL INVESTMENT RIGHT. If this Additional
Investment Right is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Additional
Investment Right, a New Additional Investment Right, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and, if requested by the Company, customary and reasonable
indemnity. If the Holder seeks a New Additional Investment Right under such
circumstances, it shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third party costs as the Company may
prescribe.

      8. RESERVATION OF INVESTMENT RIGHT SHARES. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the
purpose of enabling it to issue Investment Right Shares upon exercise of this
Additional Investment Right as herein provided, the number of Investment Right
Shares which are then issuable and deliverable upon the exercise in full of this
Additional Investment Right, free from preemptive rights or any other contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 9). The Company covenants that all
Investment Right Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized and issued, fully paid and nonassessable. Each of
the Company and the Holder will take all such action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.

      9. CERTAIN ADJUSTMENTS. The Exercise Price and number of Investment Right
Shares issuable upon exercise of this Additional Investment Right are subject to
adjustment from time to time as set forth in this Section 9.

            (a) Stock Dividends and Splits. If the Company, at any time while
this Additional Investment Right is outstanding, (i) pays a stock dividend on
its Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides outstanding shares of
Common Stock into a larger number of shares of Common Stock, or (iii) combines
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then in each such case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution; provided,

                                      -4-
<PAGE>
however, that if such record date shall have been fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Exercise Price shall be recomputed accordingly as of the close of business
on such record date and thereafter the Exercise Price shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividends or
distributions. Any adjustment pursuant to clauses (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.

            (b) Number of Investment Right Shares. Simultaneously with any
adjustment to the Exercise Price pursuant to paragraph (a) of this Section, the
number of Investment Right Shares that may be purchased upon exercise of this
Additional Investment Right shall be increased or decreased proportionately, so
that after such adjustment the aggregate Exercise Price payable hereunder for
the increased or decreased number of Investment Right Shares shall be the same
as the aggregate Exercise Price in effect immediately prior to such adjustment.

            (c) Pro Rata Distributions. If the Company, at any time while this
Additional Investment Right is outstanding, distributes to holders of Common
Stock (i) evidence of its indebtedness, (ii) any security (other than a
distribution of Common Stock covered by the preceding paragraph), (iii) rights
or warrants to subscribe for or purchase any security, or (iv) any other asset
(other than regular cash dividends paid out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles) (in each
case, "Distributed Property"), then, upon any exercise of the Additional
Investment Right that occurs after the record date fixed for determination of
shareholders entitled to receive such distribution, the Holder shall be entitled
to receive, in addition to the Investment Right Shares otherwise issuable upon
such exercise (if applicable), the kind and amount of Distributed Property which
the Holder would have been entitled to receive had this Additional Investment
Right been exercised on the date of such event and had the Holder thereafter,
during the period from the date of such event to and including the Exercise
Date, retained any such securities receivable during such period, giving
application to all adjustments called for during such period under this Section
9 with respect to the rights of the Holder.

            (d) Fundamental Transactions. If there shall occur any
reorganization, recapitalization, reclassification, consolidation or merger
involving the Company in which the Common Stock is converted into or exchanged
for securities, cash or other property (other than a transaction covered by
subsections 9(a) or 9(c)) (collectively, a "Fundamental Transaction"), then,
following such Fundamental Transaction, the Holder shall receive upon exercise
hereof the kind and amount of securities, cash or other property which the
Holder would have been entitled to receive pursuant to such Fundamental
Transaction if such exercise had taken place immediately prior to such
Fundamental Transaction. In any such case, appropriate adjustment (as determined
in good faith by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of the Holder, to the end that the provisions set forth in
this Section 9 (including provisions with respect to changes in and other
adjustments of the Exercise Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities, cash or other property
thereafter deliverable upon the exercise of this Additional Investment Right
(the "Alternative Consideration"). The aggregate Exercise Price for this
Additional Investment Right will not be

                                      -5-
<PAGE>
affected by any such Fundamental Transaction, but the Company shall apportion
such aggregate Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Additional Investment Right following such
Fundamental Transaction. At the Holder's request, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new Additional Investment Right consistent with the foregoing provisions and
evidencing the Holder's right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (d) and insuring that the Additional Investment Right (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

            (e) Calculations. All calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company; provided that such
shares, upon disposition to a third party, shall then be considered outstanding.

            (f) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 9, the Company at its expense will, at the written
request of the Holder, promptly compute such adjustment in accordance with the
terms of this Additional Investment Right and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Investment Right Shares or other securities issuable
upon exercise of this Additional Investment Right (as applicable), describing
the transactions giving rise to such adjustments and showing in reasonable
detail the facts upon which such adjustment is based, and deliver a copy of each
such certificate to the Holder.

            (g) Notice of Corporate Events. If, while this Additional Investment
Right is outstanding, the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including, without limitation, any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any subsidiary of
the Company, (ii) authorizes or approves, enters into any agreement
contemplating or solicits shareholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the
affairs of the Company, then the Company shall deliver to the Holder a notice
describing the material terms and conditions of such transaction, at least 10
Trading Days prior to the applicable record or effective date on which a person
or entity would need to hold Common Stock in order to participate in or vote
with respect to such transaction; provided, however, that the failure to deliver
such notice or any defect therein shall not affect the validity of the corporate
action required to be described in such notice.

                                      -6-
<PAGE>
      10. PAYMENT OF EXERCISE PRICE. The Holder shall pay the Exercise Price in
immediately available funds.

      11. TRANSFER OF INVESTMENT RIGHT SHARES, RESTRICTIVE LEGEND.

            (a) The Investment Right Shares shall upon issuance be subject to
the restrictions on transfer set forth in Section 8 of the Securities Purchase
Agreement.

            (b) Each certificate representing Investment Right Shares shall bear
substantially the following legends (in addition to any legends required under
applicable securities laws):

            THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
            INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
            SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN
            THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.

            ADDITIONALLY THE TRANSFER OF THE SHARES REPRESENTED BY THIS
            CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN THE
            SECURITIES PURCHASE AGREEMENT DATED AUGUST __, 2003 BETWEEN THE
            COMPANY AND THE ORIGINAL PURCHASER, AND NO TRANSFER OF SHARES SHALL
            BE VALID OR EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL
            SUBSEQUENT HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND
            BY CERTAIN OF THE TERMS OF THE AGREEMENT, INCLUDING SECTIONS 8.1 AND
            8.3 OF THE AGREEMENT. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO
            COST BY WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS
            CERTIFICATE TO THE SECRETARY OF THE COMPANY.

            The legends contained in this Section 11 may be removed from a
certificate in accordance with Section 8.3 of the Securities Purchase Agreement.

      12. FRACTIONAL SHARES. The Company shall not be required to issue or cause
to be issued fractional Investment Right Shares on the exercise of this
Additional Investment Right. If any fraction of an Investment Right Share would,
except for the provisions of this Section, be issuable upon exercise of this
Additional Investment Right, the number of Investment Right Shares to be issued
will be rounded up to the nearest whole share.

      13. NOTICES. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given

                                      -7-
<PAGE>
and effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number of the
recipient of such notice specified in the Securities Purchase Agreement prior to
6:30 p.m. (New York local time) on a Trading Day, (ii) the next Trading Day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number of the recipient of such notice specified in
the Securities Purchase Agreement on a day that is not a Trading Day or later
than 6:30 p.m. (New York time) on any Trading Day, (iii) the Trading Day
following the date of deposit with a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address and facsimile numbers for such notices or
communications shall be as set forth in the Securities Purchase Agreement.

      14. ADDITIONAL INVESTMENT RIGHT AGENT. The Company shall serve as
Additional Investment Right agent under this Additional Investment Right. Upon
30 days' notice to the Holder, the Company may appoint a new Additional
Investment Right agent. Any corporation into which the Company or any new
Additional Investment Right agent may be merged or any corporation resulting
from any consolidation to which the Company or any new Additional Investment
Right agent shall be a party or any corporation to which the Company or any new
Additional Investment Right agent transfers substantially all of its corporate
trust or shareholder services business shall be a successor Additional
Investment Right agent under this Additional Investment Right without any
further act. Any such successor Additional Investment Right agent shall promptly
cause notice of its succession as additional investment right agent to be mailed
(by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Additional Investment Right Register.

      15. MISCELLANEOUS.

            Subject to the restrictions on transfer set forth on the first page
hereof and in Section 3 hereof, this Additional Investment Right may be assigned
by the Holder. This Additional Investment Right may not be assigned by the
Company except to a successor of the Company in the event of a Fundamental
Transaction. This Additional Investment Right shall be binding on and inure to
the benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Additional Investment Right
shall be construed to give to any person or entity other than the Company and
the Holder any legal or equitable right, remedy or cause of action under this
Additional Investment Right. This Additional Investment Right may be amended
only in writing signed by the Company and the Holder, or their respective
successors and assigns.

            (a) The Company will not, by amendment of its governing documents or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Additional Investment Right, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any Investment Right Shares above the amount
payable therefor on such exercise, (ii) will take all such action as

                                      -8-
<PAGE>
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Investment Right Shares on the
exercise of this Additional Investment Right, and (iii) will not close its
shareholder books or records in any manner which interferes with the timely
exercise of this Additional Investment Right.

            (b) All questions concerning the construction validity, enforcement
and interpretation of this Additional Investment Right shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
Each party hereby irrevocable submits to the exclusive jurisdiction of the state
and federal courts sitting in the city of New York, Borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The Company and Holder hereby
waive all rights to trial by jury.

            (c) The headings herein are for convenience only, do not constitute
a part of this Additional Investment Right and shall not be deemed to limit or
affect any of the provisions hereof.

            (d) If any provision of this Additional Investment Right shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

            (e) This Additional Investment Right and the Securities Purchase
Agreement constitute the full and entire understanding and agreement between the
parties with regard to the subjects thereof.

      IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.

                                               PENWEST PHARMACEUTICALS CO.

                                               By: ____________________

                                               Name: __________________

                                      -9-
<PAGE>
                             FORM OF EXERCISE NOTICE

      To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Additional Investment Right)

To:  Penwest Pharmaceuticals Co.

      The undersigned is the Holder of Additional Investment Right No. _______
(the "Additional Investment Right") issued by Penwest Pharmaceuticals Co., a
Washington corporation (the "Company"). Capitalized terms used herein and not
otherwise defined have the respective meanings set forth in the Additional
Investment Right.

1.    The Additional Investment Right is currently exercisable to purchase a
      total of ______________ Investment Right Shares.

2.    The undersigned Holder hereby exercises its right to purchase
      _________________ Investment Right Shares pursuant to the Additional
      Investment Right.

3.    The Holder shall pay the sum of $____________ to the Company in accordance
      with the terms of the Additional Investment Right.

4.    Pursuant to this exercise, the Company shall deliver to the Holder
      _______________ Investment Right Shares in accordance with the terms of
      the Additional Investment Right.

5.    Following this exercise, the Additional Investment Right shall be
      exercisable to purchase a total of ______________ Investment Right Shares.

Dated:_______________, _____

Name of Holder:

(Print) ________________________________

By: ___________________________________

Name: _________________________________

Title: ________________________________

(Signature must conform in all respects to name of holder as specified on the
face of the Additional Investment Right)

                                      -10-
<PAGE>
                               FORM OF ASSIGNMENT

 [To be completed and signed only upon transfer of Additional Investment Right]

      FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _____________________________ the right represented by the within
Additional Investment Right to purchase ____________ shares of Common Stock of
Penwest Pharmaceuticals Co. to which the within Additional Investment Right
relates and appoints ________________ attorney to transfer said right on the
books of Penwest Pharmaceuticals Co. with full power of substitution in the
premises.

Dated:_______________, _____

________________________________

(Signature must conform in all respects to name of holder as specified on the
face of the Additional Investment Right)

________________________________
Address of Transferee

________________________________

________________________________

In the presence of:

________________________________

                                      -11-

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