PENWEST PHARMACEUTICALS CO. SHARE PURCHASE AGREEMENT December 10, 2004

Exhibit 99.1

PENWEST PHARMACEUTICALS CO.

SHARE PURCHASE AGREEMENT

December 10, 2004

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PENWEST PHARMACEUTICALS CO.

SHARE PURCHASE AGREEMENT

     This Share Purchase Agreement (the “Agreement”) is made as of December 10, 2004, by and among Penwest Pharmaceuticals Co., a Washington corporation (the “Company”), with its principal office at ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the persons listed on the Schedule of Purchasers attached hereto as Exhibit A (the “Purchasers”).

Section 1

Authorization and Sale of Shares

1.1 Authorization. The Company has authorized the sale and issuance pursuant to this Agreement of up to 3,125,000 shares of Common Stock, $0.001 par value per share (the “Common Stock”), of the Company (the “Shares”).

1.2 Sale of Shares. Subject to the terms and conditions of this Agreement, the Company agrees to issue and sell to each Purchaser and each Purchaser severally agrees to purchase from the Company the number of Shares set forth opposite such Purchaser’s name on Exhibit A for $11.20 per Share (the “Purchase Price”). The maximum aggregate purchase price payable by the Purchasers to the Company for all of the Shares shall be $35,000,000.

Section 2

Closing Date: Delivery

2.1 Closing Date. The closing of the purchase and sale of the Shares hereunder (the “Closing”) shall be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at or before 10:00 a.m. New York local time, on the date that is two business days after the execution of this Agreement by the Company and the Purchasers, or at such time and place upon which the Company and the Purchasers shall agree. The date of the Closing is hereinafter referred to as the “Closing Date.”

2.2 Delivery. At the Closing, the Company will deliver, or cause to be delivered, to each Purchaser:

          (a) a stock certificate, registered in such Purchaser’s name as shown on Exhibit A, representing the number of Shares purchased by such Purchaser; and

          (b) a certificate from the Company that the representations and warranties made by the Company are true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.

2.3 Purchase Price. The delivery of the Shares pursuant to Section 2.2 shall be made against payment of the purchase price therefor by wire transfer of immediately available funds to the

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Company’s account as designated in writing by the Company in the amount set forth on Exhibit A.

Section 3

Representations and Warranties of the Company

     The Company represents and warrants to the Purchasers as of the date hereof as follows:

3.1 Subsidiaries; Organization and Standing. The Company has no direct or indirect subsidiaries. The Company is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of Washington and is in good standing as a domestic corporation under the laws of said state and has all requisite corporate power and authority to conduct its business as currently conducted and as currently proposed to be conducted as disclosed in the SEC Documents (as defined below). The Company is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to materially and adversely affect the business, properties or financial condition of the Company.

3.2 Corporate Power, Authorization. The Company has all requisite corporate power and has taken all requisite corporate action to execute and deliver this Agreement, to sell and issue the Shares and to carry out and perform all of its obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited with respect to rights of indemnity and contribution by state or federal securities laws or the public policy underlying such laws and (iii) as limited by equitable principles generally. The execution and delivery of this Agreement does not, and the performance of this Agreement and the compliance with the provisions hereof and the issuance, sale and delivery of the Shares will not, conflict with or result in a breach or violation of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien pursuant to the terms of, the Articles of Incorporation or Bylaws of the Company or any statute, law, rule or regulation or any state or federal order, judgment or decree or any indenture, mortgage, lease or other agreement or instrument to which the Company or any of its properties is subject.

3.3 Issuance and Delivery of the Shares. The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable and not subject to any liens or other encumbrances. The Company has duly authorized and reserved for issuance a sufficient number of its authorized but unissued shares of Common Stock for the issuance and delivery of the Shares. The issuance and delivery of the Shares are not subject to preemptive or any other similar rights of the shareholders of the Company.

3.4 SEC Documents; Financial Statements. The Company has filed in a timely manner all documents that the Company was required to file with the Securities and Exchange Commission (the “SEC”) under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as

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amended (the “Exchange Act”), during the twelve (12) months preceding the date of this Agreement (the “SEC Documents”). As of their respective filing dates all SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), as applicable. None of the SEC Documents as of their respective dates contained any untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents (the “Financial Statements”), as of the dates included in the SEC documents, complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied as of the dates included in the SEC Documents and fairly present the consolidated financial position of the Company and any subsidiaries at the dates thereof and the consolidated results of their operations and consolidated cash flows for the periods then ended; provided, however, that the unaudited financial statements are subject to normal recurring year-end adjustments (which in any case will not be material) and do not contain all footnotes required under generally accepted accounting principles. All material agreements that are required to have been filed as exhibits to the SEC Documents under Item 601 of Regulation S-K to which the Company is a party or to which the property or assets of the Company are subject have been filed as exhibits to the SEC Documents.

3.5 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement except for (a) compliance with the securities and blue sky laws in the states in which the Shares are offered and/or sold, (b) the filing of the registration statement and all amendments thereto (the “Registration Statement”) with the SEC as contemplated by Section 7.1 of this Agreement, (c) all required filings with The Nasdaq National Market necessary for the listing of the Shares or (d) those consents, approvals, orders or authorizations of or registrations, qualifications, designations, declarations or filings with, any federal, state, or local governmental authority on the part of the Company that have been obtained and will be in effect as of the Closing Date.

3.6 No Material Adverse Change. Except as otherwise disclosed in the SEC Documents, since September 30, 2004, there have not been any changes in the business, assets, liabilities, properties, financial condition or operations of the Company from those reflected in the Financial Statements except changes in the ordinary course of business which have not been, either individually or in the aggregate, materially adverse.

3.7 Intellectual Property. The Company owns or possesses sufficient rights to use all patents, patent rights, inventions, trade secrets, know-how, proprietary rights and processes that are necessary for the conduct and proposed conduct of its business as described in the SEC Documents (the “Company’s Proprietary Rights”). The Company believes that there are no third parties who have or will be able to establish rights to any of the Company’s Proprietary Rights, except for (i) the ownership rights of the third party licensors to the Company’s Proprietary Rights which are licensed to the Company by such third party licensors and (ii) the third party licensees of the Company’s Proprietary Rights. To the knowledge of the Company, there is no

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infringement by any third parties of any of the Company’s Proprietary Rights. Except as disclosed in the SEC Documents, the Company has not received any notice of, and has no knowledge of any infringement of or conflict with asserted rights of others with respect to any patent, patent right, invention, trade secret, know-how or other proprietary rights.

3.8 Authorized Capital Stock. All outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and the authorized and outstanding capital stock of the Company conforms, as of the dates for which such information is given, in all material respects to the statements relating thereto contained in the SEC Documents; there is no capital stock outstanding as of such dates other than as described in the SEC Documents. As of November 30, 2004, the authorized capital stock of the Company consists of 60,000,000 shares of Common Stock, of which 18,548,867 shares are outstanding, and 1,000,000 shares of Preferred Stock, $0.001 par value per share, of which 100,000 shares have been designated Series A Junior Participating Preferred Stock, none of which shares are outstanding. Except as disclosed in or contemplated by the SEC Documents and the Financial Statements of the Company and the related notes thereto, the Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations other than options granted under the Company’s stock plan and its employee stock purchase plan. No shareholder of the Company, other than the Purchasers, has any right (which has not been waived or has not expired by reason of lapse of time following notification of the Company’s intent to file the Registration Statement) to require the Company to register the sale of any shares owned by such shareholder under the Securities Act in the Registration Statement.

3.9 Litigation. Except as set forth in the SEC Documents, as of the date hereof, there are no actions, suits, proceedings or investigations pending or, to the best of the Company’s knowledge, threatened against the Company or any of its properties before or by any court or arbitrator or any governmental body, agency or official in which there is the possibility of an adverse decision that (a) would reasonably be expected to have a material adverse effect on the business, properties or financial condition of the Company or (b) would reasonably be expected to impair the ability of the Company to perform its obligations under this Agreement.

3.10 Use of Proceeds. The Company will use the net proceeds from the sale of the Shares to fund the research, development, marketing and commercialization of its products and technologies. The remainder of the net proceeds will be used for general corporate purposes. The Company also may use a portion of the net proceeds, currently intended for general corporate purposes, to acquire or invest in technologies, products or services that complement its business, although the Company has no present plans or commitments and is not currently engaged in any material negotiations with respect to these types of transactions. Pending these uses, the Company intends to invest the net proceeds from this offering in short-term, interest-bearing, investment-grade securities.

3.11 Accountants. Ernst & Young LLP, who will express their opinion with respect to the audited financial statements and schedules to be included as a part of the Registration Statement

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prior to the filing of the Registration Statement, are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.

3.12 Compliance With Other Instruments. The Company is not in violation or default of any provision of its Articles of Incorporation or Bylaws, each as amended to date or, in any material respect, of any provision of any federal or state statute, rule or regulation applicable to the Company. Except as to defaults and violations which individually or in the aggregate would not reasonably be expected to have a material adverse effect on the business, properties or financial condition of the Company, the Company is not in violation or default of any provision of any agreement, license, permit, instrument, judgment, order, writ or decree to which it is a party or by which it is bound.

3.13 Permits. The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business as now being conducted by it and as currently proposed to be conducted as disclosed in the SEC Documents, the lack of which would reasonably be expected to have a material adverse effect on the business, properties or financial condition of the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses, or other similar authority.

3.14 Investment Company. The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

3.15 Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New York local time, on December 10, 2004 the Company shall issue a press release announcing the signing of this Agreement and describing the terms of the transactions contemplated by this Agreement. On December 14, 2004, the Company shall file a Current Report on Form 8-K with the Commission describing the terms of the transactions contemplated by this Agreement and including as an exhibit to such Current Report on Form 8-K this Agreement, in the form required by the Exchange Act.

3.16 Private Placement. Neither the Company nor any person acting on the Company’s behalf has sold or offered to sell or solicited any offer to buy any of the Shares by means of any form of general solicitation or advertising. Neither the Company nor any person acting on the Company’s behalf has, directly or indirectly, at any time within the past six months, made any offer or sale of any security or solicitation of any offer to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under Regulation D under the Securities Act in connection with the offer and sale by the Company of the Shares as contemplated hereby or (ii) cause the offering of the Shares (the “Offering”) to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or shareholder approval provisions, including, without limitation, under the rules and regulations of any Trading Market (as defined below). The Company is not a United States real property holding corporation within the meaning of the Foreign Investment in Real Property Tax Act of 1980. “Trading Market” means the NASDAQ National Market or any other eligible market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted.

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3.17 Form S-3 Eligibility. The Company is eligible to register the Shares for resale by the Purchasers using Form S-3 promulgated under the Securities Act.

3.18 Listing and Maintenance Requirements. The Company has not, in the two years preceding the date hereof, received notice (written or oral) from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is in compliance with all such listing and maintenance requirements.

3.19 Application of Takeover Protections. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not impose any restriction on any Purchaser, or create in any party (including any current shareholder of the Company) any rights, under any share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provisions under the Company’s charter documents or the laws of its state of incorporation.

3.20 Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary for a company (i) in the businesses and location in which the Company is engaged, (ii) with the resources of the Company and (iii) with products at a similar stage of development as the Company. The Company has not received any written notice that the Company will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

3.21 Non-Public Information. The Company has not, to the Company’s knowledge, provided the Purchasers with any material non-public information in connection with the Offering other than information relating to the transactions contemplated by this Agreement which information shall be disclosed in a press release issued on December 10, 2004 in accordance with Section 3.15.

3.22 Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity with respect to the Company) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Purchaser or any of their respective representatives or agents to the Company in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Purchaser’s purchase of the Shares. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement has been based on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

3.23 Foreign Corrupt Practices. Since January 1, 2001, neither the Company, nor any director, officer, agent, employee or other person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity;

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(ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of in any material respect any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

3.24 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. There is and has been no failure on the part of the Company or any of the Company’s directors or executive officers, in their capacities as such, to comply in all material respects with any provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as in effect at the applicable time, and the rules and regulations promulgated in connection therewith, including Section 402 thereof related to loans and Sections 302 and 906 thereof related to certifications.

3.25 Internal Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with the general or specific authorizations of the Company’s management, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with general or specific authorization of the Company’s management and (iv) the recorded accountability for assets and liabilities of the Company is compared with the existing assets and liabilities of the Company at reasonable intervals and appropriate action is taken by the Company with respect to any differences.

Section 4

Representations, Warranties and Covenants of the Purchasers

     Each Purchaser hereby severally represents and warrants to the Company, effective as of the date hereof, as follows:

4.1 Power; Authorization. (i) Such Purchaser has all requisite corporate or other power and capacity and has taken all requisite corporate or other action to execute and deliver this Agreement, to purchase the Shares to be purchased by it and to carry out and perform all of its obligations under this Agreement; and (ii) this Agreement constitutes the legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights generally, (b) as limited with respect to rights of indemnity and contribution by state or federal securities laws or the public policy underlying such laws and (c) as limited by equitable principles generally.

4.2 Investment Experience. Such Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act. Such Purchaser has received and reviewed the SEC Documents, is aware of the Company’s business affairs and financial condition and has had access to and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares being acquired on the date hereof. Such Purchaser has such business and financial experience as is required to permit it to protect its own interests in connection with the purchase of such Shares. Such Purchaser’s financial condition is such that

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it is able to bear the risk of holding such Shares for an indefinite period of time and the risk of loss of its entire investment.

4.3 Investment Intent. Such Purchaser is purchasing the Shares being acquired on the date hereof for its own account as principal, for investment purposes only, and not with a present view to, or for, the resale distribution thereof, in whole or in part, within the meaning of the Securities Act or any state securities laws. Purchaser understands that its acquisition of such Shares has not been registered under the Securities Act or registered or qualified under any state law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of such Purchaser’s investment intent as expressed herein. Such Purchaser has completed or caused to be completed the Purchaser Questionnaire attached hereto as Exhibit B-2 for use in the Registration Statement, and the responses provided therein shall be true and correct as of the Closing Date. Except as contemplated by this Agreement, such Purchaser has no present agreement, undertaking, arrangement, obligation or commitment providing for the disposition of the Shares. Any Purchaser that is a corporation or other entity represents that it has not been organized, reorganized or recapitalized specifically for the purpose of investing in the Shares. Purchaser has, in connection with its decision to purchase the Shares, relied solely upon the SEC Documents, the documents attached as appendices thereto and the representations and warranties of the Company contained herein. Such Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act, and the rules and regulations promulgated thereunder and applicable state securities laws.

4.4 Registration or Exemption Requirements. Such Purchaser further acknowledges, understands and agrees that the Shares being acquired on the date hereof may not be resold or otherwise transferred unless (i) they are registered or such registration is not required, and (ii) if the transfer is pursuant to an exemption from registration other than Rule 144 under the Securities Act and, if the Company shall so request in writing, an opinion of counsel reasonably satisfactory to the Company is obtained to the effect that the transaction is so exempt; provided, however, that no opinion shall be required with respect to a transfer to a transferee that is a Qualifying Holder (as defined in Section 7.3) under clause (i) or (ii) of the definition of Qualifying Holder. The Company shall affix a legend to the certificate(s) evidencing the Shares to the foregoing effect.

4.5 Certain Trading Limitations. Each Purchaser agrees that beginning on the date hereof until the earlier to occur of (a) 90 days from the Closing Date and (b) the effective date of the Registration Statement, it will not enter into any Short Sales. For purposes of this Section 4.5, a “Short Sale” by a Purchaser means a sale of Common Stock that is marked as a short sale and that is executed at a time when such Purchaser has no equivalent offsetting long position in the Common Stock. For purposes of determining whether a Purchaser has an equivalent offsetting long position in the Common Stock, all Common Stock that would be issuable upon exercise in full of all options then held by such Purchaser (assuming that such options were then fully exercisable, notwithstanding any provisions to the contrary, and giving effect to any exercise price adjustments scheduled to take effect in the future) shall be deemed to be held long by such Purchaser.

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4.6 Pledge Arrangements. Notwithstanding anything to the contrary herein, the Company acknowledges and agrees that a Purchaser may from time to time pledge or grant a security interest in some or all of the Shares in connection with a bona fide margin agreement or other loan or financing arrangement secured by the Shares, provided that such pledge or grant of a security interest is consistent with all applicable laws, rules and regulations, including all applicable securities laws (a “Bona Fide Pledge Arrangement”). If required under the terms of such Bona Fide Pledge Arrangement, such Purchaser may transfer pledged or secured Shares to the pledgees or secured parties thereunder, provided that such transfer is consistent with all applicable laws, rules and regulations, including all applicable securities laws. A Bona Fide Pledge Arrangement would not be subject to approval of the Company and no legal opinion of the pledgee, secured party or pledgor shall be required in order to effectuate such Bona Fide Pledge Arrangement or to transfer pledged shares pursuant to such Bona Fide Pledge Arrangement. Further, the Purchaser shall not be required hereunder to notify the Company of a Bona Fide Pledge Agreement. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Shares may reasonably request in connection with the inclusion of the pledgee or secured party in the prospectus contemplated by Section 7, through a prospectus supplement or otherwise.

Section 5

Conditions to Closing of Purchasers

     Each Purchaser’s obligation to purchase the Shares at the Closing is, at the option of such Purchaser, subject to the fulfillment or waiver as of the Closing Date of the following conditions:

5.1 Representations and Warranties. The representations and warranties made by the Company in Section 3 hereof shall be true and correct in all material respects when made (other than those qualified as to materiality, which shall be true and correct when made), and shall be true and correct in all material respects on the Closing Date (other than those qualified as to materiality, which shall be true and correct on the Closing Date) with the same force and effect as if they had been made on and as of said date.

5.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects.

5.3 Blue Sky. The Company shall have obtained all necessary blue sky law permits and qualifications, or secured exemptions therefrom, required by any state or foreign or other jurisdiction for the offer and sale of the Shares.

5.4 Legal Opinion. The Purchasers shall have received a legal opinion of ▇▇▇▇▇▇▇ Coie LLP, Washington counsel to the Company, with respect to the matters set forth on Exhibit C-1 and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ LLP, corporate counsel to the Company, with respect to the matters set forth on Exhibit C-2.

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5.5 Nasdaq Qualification. The Shares shall be duly authorized for listing by The Nasdaq National Market, subject to official notice of issuance, to the extent required by the rules of The Nasdaq National Market.

5.6 Absence of Litigation. No proceeding challenging this Agreement or the transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted or be pending before any court, arbitrator, governmental body, agency or official.

5.7 No Governmental Prohibition. The sale of the Shares by the Company shall not be prohibited by any law or governmental order or regulation.

Section 6

Conditions to Closing of Company

     The Company’s obligation to sell and issue the Shares at the Closing is, at the option of the Company, subject to the fulfillment or waiver as of the Closing Date of the following conditions:

6.1 Representations and Warranties. The representations made by the Purchasers in Section 4 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of such date.

6.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Purchasers on or prior to the Closing Date shall have been performed or complied with in all material respects.

6.3 Blue Sky. The Company shall have obtained all necessary blue sky law permits and qualifications, or secured exemptions therefrom, required by any state for the offer and sale of the Shares.

6.4 Nasdaq Qualification. The Shares to be issued shall be duly authorized for listing by The Nasdaq National Market, subject to official notice of issuance, to the extent required by the rules of The Nasdaq National Market.

6.5 Absence of Litigation. No proceeding challenging this Agreement or the transactions contemplated hereby, or seeking to prohibit, alter, prevent or materially delay the Closing, shall have been instituted or be pending before any court, arbitrator, governmental body, agency or official.

6.6 No Governmental Prohibition. The sale of the Shares by the Company shall not be prohibited by any law or governmental order or regulation.

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Section 7

Affirmative Covenants of the Company

          (a) The Company shall use its best efforts to prepare and file the Registration Statement with the SEC under the Securities Act to register the resale of the Shares by the Purchasers no later than 30 days after the Closing Date.

          (b) The Company shall pay all Registration Expenses (as defined below) in connection with any registration, qualification or compliance hereunder, and each Purchaser shall pay all Selling Expenses (as defined below) and other expenses that are not Registration Expenses relating to the Shares resold by such Purchaser. Registration Expenses shall mean all expenses, except for Selling Expenses, incurred by the Company in complying with the registration provisions herein described, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration. Selling Expenses shall mean all selling commissions, underwriting fees and stock transfer taxes applicable to the Shares and all fees and disbursements of counsel for any Purchaser.

          (c) In the case of the registration effected by the Company pursuant to these registration provisions, the Company will use its reasonable best efforts to: (i) cause the Registration Statement to become effective as soon as practicable after the filing thereof but in any event within 90 days after the Registration Statement is filed by the Company, subject to receipt of necessary information from the Purchasers after prompt request from the Company to the Purchasers to provide such information; (ii) keep such registration effective until the earlier (such date being referred to as the “Registration Termination Date”) of (A) the second anniversary of the Closing Date, or (B) such date as all of the Shares have been resold by the original Purchasers thereof; (iii) prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement; (iv) furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Purchaser from time to time may reasonably request; (v) cause all Shares registered as described herein to be listed on each securities exchange and quoted on each quotation service on which similar securities issued by the Company are then listed or quoted; (vi) provide a transfer agent and registrar for all Shares registered pursuant to the Registration Statement; (vii) to comply with all applicable rules and regulations of the SEC; and (viii) file the documents required of the Company and maintain requisite blue sky clearance in (A) all jurisdictions in which any of the Shares are originally sold and (B) all other states reasonably specified in writing by a Purchaser, provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any state in which it is not now so qualified or has not so consented. After the Registration Termination Date, the Company

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shall be entitled to withdraw the Registration Statement and the Purchasers shall have no further right to offer or sell any of the Shares pursuant to the Registration Statement.

          (d) With a view to making available to the Purchasers the benefits of Rule 144 promulgated under the Securities Act (“Rule 144”) and any other rule or regulation of the SEC that may at any time permit a Purchaser to sell Shares to the public without registration or pursuant to a registration on Form S-3, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) the second anniversary of the date hereof or (B) such date as all of the Shares shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) furnish to any Purchaser upon request, as long as the Purchaser owns any Shares, (A) a written statement by the Company that it is in compliance with the reporting requirements of the Securities Act and the Exchange Act, (B) a copy of the most recent annual or quarterly report of the Company, and (C) such other information as may be reasonably requested in order to avail any Purchaser of any rule or regulation of the SEC that permits the selling of any such Shares without registration or pursuant to such Form S-3.

          (e) Notwithstanding anything in this Agreement to the contrary, if the Company shall furnish to the selling Purchasers a certificate signed by the Chief Executive Officer or the Chief Financial Officer of the Company stating that the Board of Directors of the Company has made the good faith and reasonable determination (i) that continued use by the selling Purchasers of the Registration Statement for purposes of effecting offers or sales of Shares pursuant thereto would require, under the Securities Act, premature disclosure in the Registration Statement (or the prospectus relating thereto) of material, nonpublic information concerning the Company, its business or prospects or any proposed material transaction involving the Company, (ii) that such premature disclosure would be materially adverse to the Company, its business or prospects or any such proposed material transaction or would make the successful consummation by the Company of any such material transaction significantly less likely and (iii) that is therefore desirable to suspend the use by the Purchasers of such Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Shares pursuant thereto, then the right of the selling Purchasers to use the Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Shares pursuant thereto shall be suspended. Notwithstanding the foregoing, the Company shall not under any circumstances be entitled to exercise its right to suspend the use of the Registration Statement more than on more than three occasions during any 12-month period or for more than 30 days per such occasion. Each Purchaser hereby covenants and agrees that it will not sell any Shares pursuant to the Registration Statement during the periods the Registration Statement is withdrawn or the ability to sell thereunder is suspended as set forth in this Section 7.1(e).

          (f) If the Company does not file the Registration Statement with the SEC on or prior to the date 30 days after the Closing Date (the “Filing Deadline Date”) then in addition to any other rights the Purchasers may have hereunder or under applicable law: (x) on the seventh day after the Filing Deadline Date, if the Company shall not have filed the Registration Statement with the SEC prior to such seventh day, the Company shall pay to each Purchaser an amount in cash, as liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase price paid by such Purchaser pursuant to this Agreement for any Shares then held by

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such Purchaser; and (y) on the seventh day of each month thereafter, if the Company has not filed the Registration Statement with the SEC prior to such seventh day, the Company shall pay to each Purchaser an amount in cash, as liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase price paid by such Purchaser pursuant to this Agreement for any Shares then held by such Purchaser; provided, however, that in no event shall the Company be required hereunder to pay to any Purchaser in the aggregate an amount that exceeds 6.0% of the aggregate purchase price paid by such Purchaser for such Purchaser’s Shares.

7.2 Indemnification and Contribution.

          (a) The Company agrees to indemnify and hold harmless each selling Purchaser, each of its directors, officers, members, agents, employees and each person who controls the Purchaser within the meaning of the Securities Act (a “Purchaser Indemnified Person”) from and against any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) to which such Purchaser Indemnified Person may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon, (X) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement or prospectus or (Y) the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus or any form of prospectus or supplement thereto, in light of the circumstances under which they were made), and the Company will, as incurred, reimburse such Purchaser Indemnified Person for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable to a Purchaser Indemnified Person in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or omission made in such Registration Statement, preliminary prospectus or prospectus, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Purchaser Indemnified Person specifically for use in the Registration Statement, (ii) the failure of the selling Purchaser related to such Purchaser Indemnified Person to comply with the covenants and agreements contained in Section 8.3 hereof, or (iii) any untrue statement in any prospectus that is corrected in any subsequent prospectus that was delivered to the Purchaser related to such Purchaser Indemnified Person prior to the pertinent sale or sales by such Purchaser.

          (b) Each Purchaser, severally and not jointly, agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement and each person who controls the Company within the meaning of the Securities Act (a “Company Indemnified Person”) from and against any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) to which the Company may become subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement or prospectus, or any omission or alleged omission to state a material fact required to be stated therein or necessary to

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make the statements therein not misleading (in the case of any prospectus or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Purchaser specifically for use in the Registration Statement, provided, however, that no Purchaser shall be liable to a Company Indemnified Person in any such case for any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact included in any prospectus which statement or omission has been corrected, in writing, by such Purchaser and delivered to the Company before the sale from which such loss occurred, or (ii) the delivery by the Purchaser of a prospectus (the “Previous Prospectus”) containing an untrue statement or omission that was corrected by the Company by delivery to the Purchaser prior to the pertinent sale or sales by the Purchaser of (X) a subsequent prospectus not containing such untrue statement or omission and (Y) a written notice advising the Purchaser to terminate use of the Previous Prospectus, and each Purchaser, severally and not jointly, will, as incurred, reimburse such Company Indemnified Person for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided that each Purchasers’ obligations pursuant to this Section 7.2(b) shall be limited to the net proceeds received by the Purchaser from the sale of the Shares under the Registration Statement.

          (c) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 7.2, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, and, subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person and the indemnifying person shall have been notified thereof, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall wish, to assume at its expense the defense thereof, with counsel reasonably satisfactory to the indemnified person. After notice from the indemnifying person to such indemnified person of the indemnifying person’s election to assume the defense thereof, the indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate in the reasonable judgment of the indemnified person for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person. No indemnifying party, in the defense of any such claim or litigation shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, and no indemnified party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld, conditioned or delayed.

          (d) If the indemnification provided for in this Section 7.2 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party,

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contribute to the amount paid or payable by such indemnified party as result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or a Purchaser on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claim, damages, or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the net amount received by the Purchaser from the sale of the Shares to which such loss relates exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers’ obligations in this subsection (d) to contribute are several in proportion to their respective sales of Shares to which such loss relates and not joint.

          (e) The obligations of the Company and the Purchasers under this Section 7.2 shall be in addition to any liability which the Company and the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company or any Purchaser within the meaning of the Act.

7.3 Restrictions on Transferability. None of the rights of any Purchaser under this Agreement shall be transferred or assigned to any person unless (a) such person is a Qualifying Holder (as defined below), and (b) such person agrees to become a party to, and bound by, all of the terms and conditions of, this Agreement by duly executing and delivering to the Company an instrument of adherence in the form prescribed by the Company. For purposes of this Section 7.3, the term “Qualifying Holder” shall mean, with respect to any Purchaser, (i) any partner thereof, (ii) any corporation, partnership controlling, controlled by, or under common control with, such Investor or any partner thereof, or (iii) up to two other direct transferees from such Purchaser. None of the rights of any Purchaser under this Agreement shall be transferred or assigned to any person (including, without limitation, a Qualifying Holder) that acquires Shares in the event that and to the extent that such person is eligible to resell such Shares pursuant to Rule 144(k) of the Securities Act.

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Section 8

Restrictions on Transferability of Shares:

8.1 Securities Law Transfer Restrictions. No Purchaser shall sell, assign, pledge, transfer or otherwise dispose of or encumber any of the Shares, except (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to an available exemption from registration under the Securities Act and applicable state securities laws and, if requested by the Company, upon delivery by such Purchaser of an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer is exempt from registration under the Securities Act and applicable state securities laws; provided that no such opinion shall be requested for any transfer of the Shares that is exempt from such registration under Rule 144 under the Securities Act. Any transfer or purported transfer of the Shares in violation of this Section 8.1 shall be voidable by the Company. The Company shall not register any transfer of the Shares in violation of this Section 8.1. The Company may, and may instruct any transfer agent for the Company, to place such stop transfer orders as may be required on the transfer books of the Company in order to ensure compliance with the provisions of this Section 8.1.

8.2 Restrictive Legend. Each certificate representing the 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 SHARE PURCHASE AGREEMENT DATED DECEMBER 10, 2004 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 8.2 may be removed from a certificate in accordance with Section 8.3.

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8.3 Transfer of Shares After Registration. Each Purchaser hereby covenants with the Company not to make any sale of the Shares except either (i) in accordance with the Registration Statement, in which case such Purchaser covenants to comply with the requirement of delivering a current prospectus, or (ii) pursuant to an available exemption from registration under the Securities Act and applicable state securities laws and, if requested by the Company, upon delivery by such Purchaser of an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer is exempt from registration under the Securities Act and applicable state securities laws; provided that no such opinion shall be requested for any transfer of Shares that is exempt from such registration under Rule 144 under the Securities Act. Such Purchaser further acknowledges and agrees that such Shares are not transferable on the books of the Company pursuant to the Registration Statement unless the certificate submitted to the Company’s transfer agent evidencing such Shares is accompanied by a separate certificate executed by an officer of, or other person duly authorized by, such Purchaser in the form attached hereto as Exhibit D.

8.4 Purchaser Information. Each Purchaser covenants that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding such Purchaser or such Purchaser’s “Plan of Distribution” and of any sale of the Shares by such Purchaser.

Section 9

Miscellaneous

9.1 Waivers and Amendments. The terms of this Agreement may be waived or amended with the written consent of the Company and each Purchaser.

9.2 Brokers and Finders. Other than Banc of America Securities LLC and its subagents, each of the parties hereto hereby represents there are no brokers or finders entitled to compensation in connection with the sale of the Shares to the Purchasers.

9.3 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed 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 this Agreement), 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 the Purchasers hereby waive all rights to trial by jury.

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9.4 Survival. The representations, warranties, covenants and agreements made in this Agreement shall survive any investigation made by the Company or the Purchasers and the Closing.

9.5 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties to this Agreement. Except as provided in Section 7.3, notwithstanding the foregoing, no Purchaser shall assign this Agreement without the prior written consent of the Company.

9.6 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects thereof.

9.7 Notices, etc. All notices and other communications required or permitted under this Agreement shall be effective upon receipt and shall be in writing and may be delivered in person, by telecopy, overnight delivery service or registered or certified United States mail addressed to the Company at its address set forth below or the Purchasers at their respective addresses set forth at the beginning of this Agreement or on Exhibit A or at such other address as the Company or the Purchasers shall have furnished to the other party in writing. All notices and other communications shall be effective upon the earlier of actual receipt thereof by the person to whom notice is directed or (i) in the case of notices and communications sent by personal delivery or telecopy, one business day after such notice or communication arrives at the applicable address or was successfully sent to the applicable telecopy number, (ii) in the case of notices and communications sent by overnight delivery service, at noon (local time) on the second business day following the day such notice or communication was sent, and (iii) in the case of notices and communications sent by United States mail seven days after such notice or communication shall have been deposited in the United States mail.

           Notices to the Company shall be addressed

9.8 Severability of this Agreement. If any provision of this Agreement 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.

9.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

9.10 Further Assurances. Each party to this Agreement shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as the other party hereto may reasonably

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request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

9.11 Expenses. The Company and each such Purchaser shall bear its own expenses incurred on its behalf with respect to this Agreement and the transactions contemplated hereby, including fees of legal counsel.

9.12 Currency. All references to “dollars” or “$” in this Agreement shall be deemed to refer to United States dollars.

9.13 Replacement of Shares. If any certificate or instrument evidencing any of the Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued, in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested, and upon satisfaction by the Purchaser of any requirements of the Company’s transfer agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares.

9.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to seek specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence.

9.15 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Each Purchaser represents that the decision of each Purchaser to purchase Shares pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or of the Subsidiary which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any other Purchaser (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment hereunder. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

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     The foregoing agreement is hereby executed as of the date first above written.

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Purchaser Signature Page

     By its execution and delivery of this signature page, the undersigned Purchaser hereby joins in and agrees to be bound by the terms and conditions of the Share Purchase Agreement dated as of December    , 2004 (the “Purchase Agreement”) by and among Penwest Pharmaceuticals Co. and the Purchasers (as defined therein), as to the number of Shares set forth below, and authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.

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Exhibit A

Exhibit B

INSTRUCTION SHEET FOR PURCHASER

(to be read in conjunction with the entire
Share Purchase Agreement)

1. Complete and execute the Purchaser Signature Page. The Agreement must be executed by an individual authorized to bind the Purchaser.

2. Exhibit B-1 — Stock Certificate Questionnaire:

Provide the information requested by the Stock Certificate Questionnaire;

3. Exhibit B-2 — Registration Statement Questionnaire:

Provide the information requested by the Registration Statement Questionnaire.

4. Exhibit B-3 /B-4 — Purchaser Certificate:

Provide the information requested by the Certificate for Individual Purchasers (B-3) or the Certificate for Corporate, Partnership, Trust, Foundation and Joint Purchasers (B-4), as applicable.

5. Return, via facsimile, the signed Share Purchase Agreement including the properly completed Exhibits B-1 through B-4, to:

6. After completing instruction number five (5) above, deliver the original signed Share Purchase Agreement including the properly completed Exhibits B-1 through B-4 to:

(i) must deliver a current prospectus, and annual and quarterly reports of the Company to the buyer (prospectuses, and annual and quarterly reports may be obtained from the Company at the Purchaser’s request); and

(ii) must send a letter in the form of Exhibit D to the Company and the Company’s transfer agent so that the Shares may be properly transferred.

Exhibit B-1

PENWEST PHARMACEUTICALS CO.

STOCK CERTIFICATE QUESTIONNAIRE

     Pursuant to Section 4.3 of the Agreement, please provide us with the following information:

Exhibit B-2

PENWEST PHARMACEUTICALS CO.

REGISTRATION STATEMENT QUESTIONNAIRE

     In connection with the Registration Statement, please provide us with the following information regarding the Purchaser.

     1. Please state your organization’s name exactly as it should appear in the Registration Statement:

     2. Have you or your organization had any position, office or other material relationship within the past three years with the Company or its affiliates?

                             Yes                                        No

     If yes, please indicate the nature of any such relationship below:

     3. Are you the beneficial owner of any other securities of the Company?

                             Yes                                        No

     If yes, please describe the nature and amount of such ownership.

     4. Have you made or are you aware of any arrangements relating to the distribution of the shares of the Company pursuant to the Registration Statement?

                             Yes                                        No

     If yes, please describe the nature and amount of such arrangements.

Exhibit B-3

PENWEST PHARMACEUTICALS CO.

CERTIFICATE FOR INDIVIDUAL PURCHASERS

     If the investor is an individual Purchaser (or married couple) the Purchaser must complete, date and sign this Certificate.

CERTIFICATE

     I certify that the representations and responses below are true and accurate:

     In order for the Company to offer and sell the Shares in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each category applicable to you as an investor in the Company.

     —      (1) A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000;

     —      (2) A natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person’s spouse in excess of $300,000, in each of those years, and has a reasonable expectation of reaching the same income level in the current year;

     —      (3) An executive officer or director of the Company.

     Set forth in the space provided below the state(s), if any, in the U.S. in which you maintained your residence during the past two years and the dates during which you resided in each state:

Exhibit B-4

PENWEST PHARMACEUTICALS CO.

CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS

     If the investor is a corporation, partnership, trust, pension plan, foundation, joint purchaser (other than a married couple) or other entity, an authorized officer, partner, or trustee must complete, date and sign this Certificate.

CERTIFICATE

     The undersigned certifies that the representations and responses below are true and accurate:

     (a) The investor has been duly formed and is validly existing and has full power and authority to invest in the Company. The person signing on behalf of the undersigned has the authority to execute and deliver the Share Purchase Agreement on behalf of the Purchaser and to take other actions with respect thereto.

     (b) Indicate the form of entity of the undersigned:

—     Limited Partnership

—     General Partnership

—     Corporation

—     Revocable Trust (identify each grantor and indicate under what circumstances the trust is revocable by the grantor): .

(Continue on a separate piece of paper, if necessary.)

—     Other type of Trust (indicate type of trust and, for trusts other than pension trusts, name the grantors and beneficiaries):

(Continue on a separate piece of paper, if necessary.)

—     Other form of organization (indicate form of organization (

     (c) Indicate the approximate date the undersigned entity was formed:

     (d) In order for the Company to offer and sell the Shares in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each category applicable to you as an investor in the Company.

     Please set forth in the space provided below the (i) states, if any, in the U.S. in which you maintained your principal office during the past two years and the dates during which you maintained your office in each state, (ii) state(s), if any, in which you are incorporated or otherwise organized and (iii) state(s), if any, in which you pay income taxes.

Dated:                                                 , 2004

                                                                                                                                      
Name of investor

                                                                                                                                      
Signature and title of authorized officer, partner or trustee

Exhibit C-1

OPINION OF COMPANY WASHINGTON COUNSEL

Exhibit C-2

OPINION OF COMPANY CORPORATE COUNSEL

     (a) The consummation by the Company of the transactions herein contemplated do not conflict with, violate or breach any of the terms and provisions, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, or any lease, contract or other agreement or instrument to which the Company is a party which is filed by the Company as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, filed as of March 10, 2004, and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, filed as of August 8, 2004 (each an “SEC Exhibit” and together, the “SEC Exhibits”), or any order, writ or decree of any court or governmental agency or body having jurisdiction over the Company or over any of its properties or operations and specifically naming the Company and known to such counsel; provided however, that no opinion need be rendered concerning state or foreign securities laws, Blue Sky laws or any other laws other than United States federal laws and the state laws of the Commonwealth of Massachusetts;

     (b) This Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company according to its terms, except to the extent that they may be subject to or affected by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws relating to or affecting the rights of creditors generally, (ii) statutory or decisional law concerning recourse by creditors to security in the absence of notice or hearing, (iii) duties and standards imposed on creditors and parties to contracts, including, without limitation, requirements of good faith, reasonableness and fair dealing, (iv) general equitable principles and (v) other customary qualifications (it being recognized that in giving this opinion counsel will rely on the opinions delivered by ▇▇▇▇▇▇▇ Coie, LLP with respect to corporate power and authority, due authorization and non-contravention); and

     (c) The shareholders of the Company have no preemptive rights which have been granted to the Company pursuant to the SEC Exhibits; and

     (d) Based in part on the representations of the Purchasers in Section 4 of this Agreement, the offer and sale of the Shares is exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended.

Exhibit D

PURCHASER’S CERTIFICATE OF SUBSEQUENT SALE

To: [Transfer agent name and address]

     Attention:                                             

     The undersigned, the Purchaser or an officer of, or other person duly authorized by the Purchaser, hereby certifies that

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