<PAGE>
EXHIBIT 10.1
SEVERANCE AND SETTLEMENT AGREEMENT AND RELEASE
This
AGREEMENT is entered into by and between Penwest Pharmaceuticals
Co.
(the "Company") and Tod R. Hamachek (the
"Employee").
WHEREAS,
the parties wish to resolve amicably the Employee's separation
from the Company and establish the terms of
the Employee's severance
arrangement;
NOW,
THEREFORE, in consideration of the promises and conditions set
forth
herein, the sufficiency of which is hereby
acknowledged, the Company and the
Employee agree as follows:
1.
Resignation Date. The Employee's effective date of resignation from
the
Company as Chief Executive Officer and
Chairman of the Board of Directors and as
a member of the Board of Directors is
February 14, 2005 (the "Resignation
Date").
2.
Monetary Consideration. In return for the execution of this
Agreement
and the agreements of the Employee
hereunder,
(a) The Company shall pay the Employee eighteen (18) months of
base
salary ($594,000) less all applicable state
and federal taxes as severance pay.
This severance pay will be paid to the
Employee in accordance with the Company's
regular payroll practices, with the first
payment to be paid on the later of (i)
the eighth (8th) day after execution of
this Agreement and (ii) March 4, 2004.
Notwithstanding the foregoing, if, as of
December 31, 2005, the payment to the
Employee of the severance payment
contemplated hereby would be deemed "deferred
compensation" under Section 409A of the
Internal Revenue Code of 1986, as
amended, and subject the Employee to an
excise tax thereunder, then, on or prior
to December 31, 2005, the Company shall pay
to the Employee in one lump sum an
amount equal to the balance of the
severance pay then owing to the Employee. The
Employee shall not be paid a bonus for
fiscal year 2004; and
(b) If the Employee elects to continue group medical insurance
pursuant to the federal "COBRA" law, 29
U.S.C. Section 1161 et seq., then the
Company shall pay all premium costs for
such COBRA continuation for a period of
eighteen (18) months.
3. Equity
Consideration. Upon the effectiveness of this Agreement, the
vesting schedule of all options to purchase
the Company's common stock
("Options") held by the Employee shall be
accelerated in full. Subject to the
terms of the Company's stock incentive
plans under which the Options were
granted and the option agreements
evidencing the Options, the Options shall
remain exercisable until the earlier of (a)
the date the Options expire by their
terms and (b) February 14, 2007.
4.
Release. In consideration of the payment of the severance
benefits
contemplated by Section 2, the equity
consideration contemplated by Section 3
and the other consideration provided to the
Employee hereunder, which the
Employee acknowledges he would not
otherwise be entitled to receive, the
Employee hereby fully, forever, irrevocably
and unconditionally releases,
remises and discharges the Company, its
officers, directors, stockholders,
corporate
<PAGE>
affiliates, subsidiaries, parent companies,
agents and employees (each in their
individual and corporate capacities), all
employee benefit plans and plan
fiduciaries (hereinafter, the "Released
Parties") from any and all claims,
charges, complaints, demands, actions,
causes of action, suits, rights, debts,
sums of money, costs, accounts, reckonings,
covenants, contracts, agreements,
promises, doings, omissions, damages,
executions, obligations, liabilities, and
expenses (including attorneys' fees and
costs), of every kind and nature which
the Employee ever had or now has against
the Released Parties, including but not
limited to, any and all claims arising out
of the Employee's employment with
and/or separation from the Company,
including, but not limited to, all
employment discrimination claims under
Title VII of the Civil Rights Act of
1964, 42 U.S.C. Section 2000e et seq., the
Age Discrimination in Employment Act,
29 U.S.C. Section 621 et seq., the
Americans With Disabilities Act of 1990, 42
U.S.C., Section 12101 et seq., the
Connecticut Human Rights and Opportunities
Act, Conn. Gen. Stat. Section 46A-51 et
seq., the Connecticut Equal Pay Law,
Conn. Gen. Stat. Section 31-75 et seq.,
Conn. Gen. Stat. Section 38a-543, all
claims arising out of the Family and
Medical Leave Act, 29 U.S.C. Section 2601
et seq., the Fair Credit Reporting Act, 15
U.S.C. Section 1681 et seq., the
Employee Retirement Income Security Act of
1974 ("ERISA"), 29 U.S.C. Section
1001 et seq., the Connecticut Family and
Medical Leave Law, Conn. Gen. Stat.
Section 31-51kk et seq., the Connecticut
Whistleblower Protection Law, Conn.
Gen. Stat. Section 31-51m, all as amended,
all common law claims including, but
not limited to, actions in tort, defamation
and breach of contract; all claims
to any non-vested ownership interest in the
Company, contractual or otherwise,
including but not limited to claims to
stock or stock options; and any claim or
damage arising out of the Employee's
employment with or separation from the
Company (including a claim for retaliation)
under any common law theory or any
federal, state or local statute or
ordinance not expressly referenced above,
excepting any vested amounts to which the
Employee is entitled under the
Company's Savings Plan, the Penwest
Pharmaceuticals Co. Supplemental Executive
Retirement Plan and the Penwest
Pharmaceuticals Co. Deferred Compensation Plan,
the express obligations of the Company to
the Employee under this Agreement and
the obligations of the Company to the
Employee under Article VIII of the
Company's Amended and Restated By-laws or
any applicable insurance policy; and,
provided, however, that nothing in this
Agreement prevents the Employee from
filing, cooperating with, or participating
in any proceeding before the EEOC or
a state Fair Employment Practices Agency
(except that the Employee acknowledges
that he may not be able to recover any
monetary benefits in connection with any
such claim, charge or proceeding). As of
the date of execution of this
Agreement, the Board of Directors of the
Company does not have actual knowledge
of any conduct of the Employee as a result
of which the Board of Directors
expects a legal claim by the Company
against the Employee to arise.
5. Company
Car. The Employee shall either (a) immediately return the car
leased by the Company and the Employee
under the Motor Vehicle Lease Agreement
dated October 30, 2002 (the "Lease") among
Weeks Automobile
