**Exhibit10.28**

 

**EMPLOYMENT AGREEMENT OF MARK J. EMKJER**

 

This **EMPLOYMENTAGREEMENT** (the “Agreement”) is made and entered into as of the 3rdday of December, 2002, by and between **PHARMACOPEIA,INC.,** a Delaware corporation (hereinafter, the “Company”), and **Mark J. Emkjer,** an individual (hereinafter,“Employee”).

 

**RECITALS**

 

**WHEREAS,**the Company desires to employ Employee to render services in the capacity ofExecutive Vice President of the Company and President of Accelrys Inc., awholly owned subsidiary of the Company (“Accelrys”), on the terms set forth inthis Agreement; and

 

**WHEREAS,**Employee desires to render services in the capacity of Executive Vice Presidentof the Company and President of Accelrys on the terms set forth in thisAgreement;

 

**NOW,THEREFORE,** in consideration of their mutual promises andintending to be legally bound, the parties agree as follows:

 

**1.   EMPLOYMENT.**

 

**(a)  Title; Location.**  The Company hereby employs Employee asExecutive Vice President of the Company and President of Accelrys upon theterms and conditions set forth in this Agreement, and Employee hereby acceptssuch employment.  Employee will be basedin San Diego, California and will report initially to Joseph A. Mollica, Ph.D.,Chairman of the Board, President and Chief Executive Officer of the Company;provided, that if Dr. Mollica is no longer employed by the Company, Employeewill report to the then current Chief Executive Officer of the Company.

 

**(b)  Duties and Responsibilities.**  Employee’s duties, powers and responsibilitiesin such capacity shall be those which are customary for such position, as maybe determined from time to time by the Board of Directors of the Company (the“Board”) and the Chief Executive Officer of the Company.  Employee agrees to perform and dischargesuch duties well and faithfully and to be subject to the supervision anddirection of the Board and of the Chief Executive Officer of the Company.

 

**(c)  No Conflicts.**  Employee’s position under this Agreement isa full-time position.  Employee agrees todevote Employee’s full business time, effort, attention and energies to thisposition.  Employee will not render anyprofessional services or engage in any activity that might be competitive with,adverse to the best interest of, or create the appearance of a conflict ofinterest with, the Company.  Employeeagrees to abide by the policies, rules and regulations of the Company as theymay be amended from time to time.

 

**(d)  No Other Agreement.**  Employee represents and warrants the he/sheis not bound by any employment, consulting, noncompetition, confidentiality,finders, marketing or other agreement or arrangement that would, or mightreasonably be expected to, prohibit or restrict Employee in any manner fromperforming his/her duties and obligations hereunder.

 

**2.   TERM.**  Employee’s employment hereunder shallcommence on December 9, 2002 and shall continue until terminated in accordancewith Section 4 of this Agreement.

 

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**3.   COMPENSATION.**  As compensation for Employee’s servicesunder this Agreement:

 

**(a)  Starting Bonus. **As soon as practicable,but in no event later than thirty (30) days, after the commencement ofEmployee’s employment hereunder as provided in Section 2 above, the Companywill pay Employee a starting bonus of Seventy-Five Thousand Dollars($75,000.00) in cash.

 

**(b)  Base Salary.**  The Company will pay Employee an initialbase salary of Three Hundred Twenty-Five Thousand Dollars ($325,000.00) peryear (“Base Salary”), to be paid semi-monthly in equal installments at the rateof Thirteen Thousand Five Hundred Forty-One Dollars and Sixty-Seven Cents($13,541.67), less normally applicable payroll deductions.  Employee’s Base Salary will be subject toannual review and adjustment by the Board or a duly appointed committeethereof, in either case in its sole discretion.

 

**(c)  Incentive Bonus.**  Employee shall participate in the Company’smanagement incentive plan, which currently provides for an annual bonus payablebased on the financial performance of, and attainment of certain strategic milestonesby, the Company and on the performance of the participating employee.  If payable, such annual bonus would becalculated as a target percentage of Employee’s then current Base Salary.  The Company and Employee agree thatEmployee’s initial bonus target percentage will be eighty-four and sixty-twohundredths percent (84.62%).  Suchamounts payable to Employee under this plan or any other bonus program shall bereferred to herein as the “Incentive Bonus.” The Incentive Bonus for any year will be paid on or about March 31 ofthe following year, provided Employee is employed by or receiving severancepayments from the Company or its successor on that date.

 

The Company and Employeeagree that, based on Employee’s initial Base Salary and bonus target percentageset forth above, Employee’s target bonus for the year 2003 will be up to TwoHundred Seventy-Five Thousand Dollars ($275,000.00).  Irrespective of whether the Company attains its financial and/orstrategic goals for 2003, and (except as provided below) irrespective ofEmployee’s individual performance for such year, the Company will be obligatedto pay to Employee a guaranteed bonus for the year 2003 of not less than OneHundred Thirty-Seven Thousand Five Hundred Dollars ($137,500.00); provided, thatthe Company shall not be obligated to pay such bonus if, on or prior toDecember 31, 2003, (i) Employee’s employment is terminated by the Company forCause (as defined in Section 4(a) below) or (ii) Employee voluntarilyterminates his employment with the Company without Good Reason (as defined inSection 4(c) below).

 

**(d)  Stock Options.**  On, or as soon as practicable after, thedate hereof, the Company will grant Employee the option to purchase Two HundredFifty Thousand (250,000) shares of the Company’s common stock (the “Option”),at a per share exercise price equal to the closing price of the Company’scommon stock on the NASDAQ Stock Market on the date of grant.  Twenty-five percent (25%) of the Option willvest on the first anniversary of the date of grant.  Thereafter, one forty-eighth (1/48) of the Option will vest eachmonth, commencing with the first month following the first anniversary of thisAgreement.  The Option will be grantedpursuant to, and will be subject to all of the terms and conditions of, theCompany’s 1994 Incentive Stock Option Plan and a stock option agreement in theCompany’s customary form to be entered into by the Company and Employee.

 

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**4.   TERMINATION AND EFFECT OF TERMINATION.**  Employee’s employment hereunder is **AT WILL** and may be terminated at any timeby the Company for any reason.  In theevent of termination of Employee’s employment, the Company shall have noliability to Employee for compensation or benefits except as specified in thisSection 4 or as required by the Company’s benefits policy.

 

**(a)  Termination by the Company for Cause.**  Employee’s employment may be terminated bythe Company for Cause at any time upon delivery of written notice toEmployee.  Upon such a termination, theCompany shall have no obligation to Employee other than the payment of allaccrued, but unpaid, Base Salary and any unpaid expenses or expensereimbursements prior to the effective date of such termination.  For purposes of this Agreement, “Cause”means the occurrence of any one or more of the following events or conditions:

 

(i)  any gross failure on the part of Employee(other than by reason of disability as provided in Section 4(e) below) tofaithfully and professionally carry out Employee’s duties or to comply with anyother material provision of this Agreement, which failure continues for thirty(30) days after written notice detailing such failure is delivered by theCompany; provided, that the Company shall not be required to provide suchnotice in the event that such failure (A) is not susceptible to remedy or(B) relates to the same type of acts or omissions as to which notice has beengiven on a prior occasion;

 

(ii)  Employee’s dishonesty (which shall includewithout limitation any misuse or misappropriation of the Company’s assets), orother willful misconduct (including without limitation any conduct on the partof Employee intended to or likely to injure the business of the Company);

 

(iii)  Employee’s conviction of any felony or ofany other crime involving moral turpitude, whether or not relating toEmployee’s employment;

 

(iv)  Employee’s insobriety or use of drugs,chemicals or controlled substances either (A) in the course of performingEmployee’s duties and responsibilities under this Agreement, or (B) otherwiseaffecting the ability of Employee to perform the same;

 

(v)  Employee’s failure to comply with a lawfulwritten direction of the Company or the Board; or

 

(vi)  any wanton or willful dereliction of dutiesby Employee.

 

The existence of any of the foregoing events orconditions shall be determined by the Company in the exercise of its reasonablejudgment.

 

**(b)  Involuntary Termination by the Companywithout Cause.** The Company may involuntarily terminate Employee’s employment under thisAgreement at any time without Cause upon delivery of written notice toEmployee.  Subject to the provisions ofSection 4(g) hereof (concerning termination in connection with a Change ofControl (as defined in such Section 4(g)), if Employee’s employment isterminated involuntarily by the Company without Cause pursuant to this Section4(b), the Company shall:

 

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(i)  pay Employee all compensation and benefitsaccrued, but unpaid, up to the effective date of termination;

 

(ii)  continue to pay Employee each month anamount equal to one twelfth (1/12) of Employee’s annual Base Salary in effectas of the effective date of termination, for a period of twelve (12) months oruntil the occurrence of any circumstance or event that would constitute Causeunder Section 4(a) above;

 

(iii)  if such termination is after December 31,2003, pay Employee an amount in cash equal to the amount obtained bymultiplying (x) Employee’s target bonus percentage in effect as of theeffective date of termination (expressed as a decimal) times Employee’s annualBase Salary in effect as of such date of termination, by (y) a fraction ofwhich (I) the numerator is the number of full months for which Employee wasemployed during the year of termination and (II) the denominator is twelve(12), such amount to be payable in equal monthly installments during the periodEmployee is receiving payments under clause (ii) of this Section 4(b); and

 

(iv)  maintain Employee’s group medical coverageduring the period Employee is receiving payments under clause (ii) of thisSection 4(b).

 

The payments in clauses (ii) and (iii) above shallcontinue until twelve (12) months from the date of termination.

 

**(c)  Termination by Employee for Good Reason.**  Employee may terminate his/her employmentunder this Agreement for Good Reason upon the provision of advance writtennotice to the Company specifying in reasonable detail the events or conditionsupon which Employee is basing such termination.  The Company will be given the opportunity, but shall have noobligation, to “cure” such events or conditions within thirty (30) days afterthe provision by Employee of such notice. Subject to the provisions of Section 4(g) hereof (concerning terminationin connection with a Change of Control), if the Company elects in a writtennotice to Employee not to cure such events or conditions or otherwise fails toso cure such events or conditions within such thirty (30) day period, Employeemay terminate his/her employment with the Company for Good Reason pursuant tothis Section 4(c) and in the event of such termination, the Company shall:

 

(i)  pay Employee all compensation and benefitsaccrued, but unpaid, up to the effective date of termination;

 

(ii)  continue to pay Employee each month anamount equal to one twelfth (1/12) of Employee’s annual Base Salary in effectas of the effective date of termination, for a period of twelve (12) months oruntil the occurrence of any circumstance or event that would constitute Causeunder Section 4(a) above;

 

(iii)  if such termination is after December 31,2003, pay Employee an amount in cash equal to the amount obtained bymultiplying (x) Employee’s target bonus percentage in effect as of theeffective date of termination (expressed as a decimal) times Employee’s annualBase Salary in effect as of such date of termination, by (y) a fraction ofwhich (I) the numerator is the number of full months for which Employee was

 

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employed during the year of termination and (II) thedenominator is twelve (12), such amount to be payable in equal monthlyinstallments during the period Employee is receiving payments under clause (ii)of this Section 4(c); and

 

(iv)  maintain Employee’s group medical coverageduring the period Employee is receiving payments under clause (ii) of thisSection 4(c).

 

###### The payments in clauses (ii) and (iii) above shallcontinue until twelve (12) months from the date of termination.

 

###### For purposes of this Agreement, Good Reason means anyone or more of the following events or conditions:

 

(A)  the Company’s breach of any of the materialterms of this Agreement;

 

(B)  the Company’s requiring Employee, withouthis/her consent, to relocate from his/her residence or to commute more thanfifty (50) miles from the offices of Accelrys at which he was principallyemployed on December 9, 2002;

 

(C)  a material diminution in Employee’s title,duties or responsibilities or conditions of his/her employment from those ineffect on December 9, 2002; or

 

(D)  a reduction in Employee’s annual Base Salaryas in effect on December 9, 2002 or as the same may be increased from time totime after such date and prior to the delivery of such notice (other than sucha reduction applicable generally to other senior executives of the Company).

 

**(d)  Termination by Employee without GoodReason (Voluntary Resignation).**  Employee may voluntarily resign his position and terminate hisemployment under this Agreement without Good Reason at any time.  Upon such a termination, the Company shallhave no obligation to pay compensation and provide benefits to Employee otherthan the payment of all accrued, but unpaid, Base Salary and any other unpaidexpenses or expense reimbursements prior to the effective date of suchtermination.

 

**(e) Disability.**  If Employee becomes disabled formore than one hundred eighty (180) days in any twelve (12) month period, theCompany shall have the right to terminate Employee’s employment without furtherliability upon written notice to Employee. Without limiting the generality of the foregoing, Employee shall bedeemed disabled for purposes of this Agreement either (i) if Employee is deemeddisabled for purposes of any long-term disability insurance policy paid for bythe Company and at the time in effect, or (ii) if in the exercise of theCompany’s reasonable judgment, due to accident, mental or physical illness, orany other reason, Employee cannot perform Employee’s duties.  In the event the Company shall terminate Employeedue to disability, as described above, Employee shall be entitled to receivethe benefits set forth in Section 4(b) (i.e., as if Employee were terminated bythe Company without Cause), reduced by the amount of any disability plan orinsurance benefit paid.

 

**(f)  Death.**  In the event of the death of Employee, thisAgreement shall automatically terminate and any obligation to continue to paycompensation and benefits shall cease as of the

 

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date of death, except for the payment of all accrued,but unpaid, Base Salary and any other unpaid expenses or expense reimbursementprior to the date of death.

 

**(g)  Change of Control Termination.**

 

**(i)  Benefits. **In the event (x) Employee’s employment underthis Agreement is terminated by the Company involuntarily without Cause at anytime during the period commencing two (2) months before and ending twelve (12)months after the occurrence of a Change of Control, or (y) Employee terminateshis employment with the Company for Good Reason at any time during the periodcommencing two (2) months before and ending twelve (12) months after theoccurrence of a Change of Control, the Company shall:

 

(A) pay Employee allcompensation and benefits accrued, but unpaid, up to the effective date oftermination;

 

(B) pay Employee a lumpsum in cash equal to one (1) times Employee’s annual Base Salary in effect asof the effective date of termination;

 

(C) if such terminationis after December 31, 2003, pay Employee a lump sum in cash equal to the amountobtained by multiplying (x) Employee’s target bonus percentage in effect as ofthe effective date of termination (expressed as a decimal) times Employee’sannual Base Salary in effect as of such date of termination, by (y) a fractionof which (I) the numerator is the number of full months for which Employee wasemployed during the year of termination and (II) the denominator is twelve(12); and

 

(D) maintain Employee’sgroup medical coverage for a period of twelve (12) months after the effectivedate of termination.

 

Anything contained in this Section 4(g)(i) to thecontrary notwithstanding, Employee shall not be entitled to any of the benefitsset forth in this Section 4(g)(i) if:

 

(x)  the Company, including without limitationany Acquiring Company (as defined below), offers Employee a position whichwould not provide Employee with Good Reason to terminate his employment asprovided in clauses (B), (C) or (D) of the definition of Good Reason in Section4(c) above; or

 

(y)  Employee resigns and terminates suchemployment voluntarily (other than for Good Reason) or is terminated by theCompany (including without limitation any Acquiring Company) for Cause.

 

For purposes of Sections 4(g)(i) and (ii) hereof, theterm the “Company” shall include any Acquiring Company (as defined below) andall obligations of the Company under such Section shall be assumed by anyAcquiring Company.

 

**(ii)  Stock Options.**  In the event (x) Employee’s employment underthis Agreement is terminated by the Company involuntarily without Cause at anytime during the period

 

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commencing two (2) months before and ending eighteen(18) months after the occurrence of a Change of Control or (y) Employeeterminates his employment with the Company for Good Reason at any time duringthe period commencing two (2) months before and ending eighteen (18) monthsafter the occurrence of a Change of Control:

 

(A)notwithstanding anything to the contrary contained in the Company’s 1994Incentive Stock Option Plan (the “1994 Plan”) or any other stock option plan ofthe Company, any unvested stock options which were granted to Employee duringthe term of this Agreement under the 1994 Plan or any such other stock optionplan shall immediately vest upon the date of termination of Employee’semployment, the expiration date of the exercise period for such options shall be the earlier of (1) one (1) yearfollowing the date of termination or (2) the expiration of the term of theoption, and the Company shall take all actions necessary or advisable to giveeffect to this Section 4(g)(ii)(A); and

 

(B)all vested options held by Employee which were issued pursuant to the 1994 Planor any such other plan shall be exercisable pursuant to the terms of the stockoption agreement(s) under which the options were granted, and the Company shalltake all actions necessary or advisable to give effect to this Section4(g)(ii)(B).

 

Anything contained in this Section 4(g)(ii) to thecontrary notwithstanding, Employee shall not be entitled to any of the benefitsset forth in this Section 4(g)(ii) if:

 

(x)  the Company, including without limitationany Acquiring Company, offers Employee a position which would not provideEmployee with Good Reason to terminate his employment as provided in clauses(B), (C) or (D) of the definition of Good Reason in Section 4(c) above; or

 

(y)  Employee resigns and terminates suchemployment voluntarily (other than for Good Reason) or is terminated by theCompany (including without limitation any Acquiring Company) for Cause.

 

**(iii)  Definition of “Change of Control.”**  For purposes of this Agreement, a “Change ofControl” of the Company shall mean the occurrence of any of the followingevents or circumstances:

 

(A) any “person” (withinthe meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,as amended (the “Exchange Act”)), including a “group” within the meaning ofsuch Section 13(d) but excluding the Company and any of its subsidiaries andany employee benefit plan sponsored or maintained by the Company or anysubsidiary thereof (a “Person”), shall become the “beneficial owner” (asdefined in Rule 13d-3 under the Exchange Act), directly or indirectly, ofsecurities of the Company representing fifty percent (50%) or more of thecombined voting power of the Company’s then outstanding securities entitled tovote generally in the election of directors (“Company Voting Securities”); or

 

(B) the consummation of amerger or consolidation of the Company, or the acceptance by the stockholdersof the Company of shares in a share exchange, where the Persons who

 

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were the beneficialowners of Company Voting Securities, outstanding immediately prior to suchmerger, consolidation or share exchange, do not beneficially own, directly orindirectly, immediately after such merger, consolidation or share exchange,securities representing more than fifty percent (50%) of the combined votingpower of the then outstanding Company Voting Securities or voting securities ofthe Acquiring Company in such merger, consolidation or share exchange, insubstantially the same proportions as their ownership of the Company VotingSecurities immediately prior to such merger, consolidation or share exchange;or

 

(C) a completeliquidation or dissolution of the Company; or

 

(D) a sale, exchange orother disposition or transfer (in one transaction or a series of relatedtransactions) of all or substantially all of the assets of the Company;provided, that a Change of Control shall not be deemed to have occurred where(x) the Company sells, exchanges or otherwise disposes or transfers all orsubstantially all of its assets to another corporation which is beneficiallyowned, directly or indirectly, immediately following such transaction by theholders of Company Voting Securities in substantially the same proportions astheir ownership of the Company Voting Securities immediately prior to suchtransaction and (y) such corporation expressly assumes this Agreement; or

 

(E) such time as theContinuing Directors (as defined below) do not constitute at least a majorityof the Board of Directors of the Company (or, if applicable, of a successor tothe Company), where the term “Continuing Director” means at any date a memberof the Board who was (x) a member of the Board on the date of this Agreement or(y) nominated or elected subsequent to such date by at least a majority of thedirectors who were Continuing Directors at the time of such nomination orelection or whose election to the Board was recommended or endorsed by at leasta majority of the directors who were Continuing Directors at the time of suchnomination or election (it being understood that no individual whose initialassumption of office occurred as a result of an actual or threatened electioncontest with respect to the election or removal of directors or other actual orthreatened solicitation of proxies or consents by or on behalf of a Personother than the Board shall be a Continuing Director).

 

**(iv)  Definition of “Acquiring Company.” **For purposes of Section 4of this Agreement, an “Acquiring Company” shall mean the resulting or survivingcorporation, or the company issuing cash or securities (or its ultimate parentcompany), in a merger, consolidation or share exchange involving the Company,or the successor corporation to the Company (whether in any such transaction orotherwise).

 

**(h)  Deductibility of Payments. **It is the intention ofEmployee and of the Company that no payments by the Company to or for thebenefit of Employee under this Agreementor any other agreement or plan, if any, pursuant to which Employee is entitledto receive payments or benefits shall be nondeductible to the Company by reasonof the operation of Section 280G of the Internal Revenue Code of 1986, asamended (the “Code”), relating to parachute payments or any like statutory orregulatory provision.  Accordingly, andnotwithstanding any other provision of this Agreement or any such agreement orplan, if by reason of the operation of said Section 280G or any like statutoryor regulatory provision, any such payments exceed the amount which can bededucted by the Company, such payments shall be reduced to the maximum amountwhich can be

 

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deducted by the Company.  To the extent that payments exceeding such maximum deductibleamount have been made to or for the benefit of Employee, such excess paymentsshall be refunded to the Company with interest thereon at the applicable Federalrate determined under Section 1274(d) of the Code, compounded annually, or atsuch other rate as may be required in order that no such payments shall benondeductible to the Company by reason of the operation of said Section 280G orany like statutory or regulatory provision. To the extent that there is more than one method of reducing thepayments to bring them within the limitations of said Sections 280G or any likestatutory or regulatory provision, Employee shall determine which method shallbe followed; provided that if Employee fails to make such determination withinforty-five (45) days after the Company has given notice of the need for suchreduction, the Company may determine the method of such reduction in its solediscretion.

 

**(i)  Liquidated Damages. **Employee acknowledges thatany payments and benefits resulting from a termination of Employee’s employmentunder Section 4(b), (c) or (g) of this Agreement are in lieu of any and allclaims that Employee may have against the Company or any Acquiring Company(other than benefits under the Company’s employee benefit plans that by theirterms survive termination of employment, benefits under the Consolidated Omnibus Budget Reconciliation Actof 1985, as amended, and rights to indemnification under certainindemnification arrangements for officers of the Company), and representliquidated damages (and not a penalty). The Company may request that Employee confirm such acknowledgment inwriting prior to, and as a condition to, receipt of such payments and benefits.

 

**5.  VACATION AND HOLIDAY.**  Employee shall be entitled to vacation eachyear, which initially shall be four week per year and thereafter shall be inaccordance with the Company’s standard vacation policy, and to those holidaysobserved by the Company.  As anessential employee of the Company, Employee shall schedule vacation and holidayobservances so as not to interfere with the performance of Employee’s dutieshereunder.

 

**6.**  **HEALTHINSURANCE; LIFE INSURANCE; OTHER FRINGE BENEFITS.**  Employee shall be entitled to the benefit ofsuch group medical, accident and long-term disability insurance and otherfringe benefits and tax qualified retirement plans as the Company shall makeavailable from time to time to its other similarly situated senior employees.

 

**7.**  **PROFESSIONALAND BUSINESS EXPENSES.** Employee will be reimbursed in accordance with the Company’s policy andprocedure for the reasonable costs of properly documented professional andbusiness related travel expenses required in the course of Employee’semployment.  The Company will also payfor appropriate professional dues and memberships, which must be approved inadvance by the Chief Executive Officer.

 

**8.  TAXES.**  Employee will be responsible for the paymentof any tax liability incurred as a result of this Agreement.  The Company may withhold tax on any paymentsor benefits provided to Employee as required by law or regulation.

 

**9.**  **CONFIDENTIALINFORMATION.**  Except asreasonably necessary to perform Employee’s duties hereunder, Employee agreesnot to reveal to any other person or entity or use for Employee’s own benefitany confidential information of or about the Company or its operations, bothduring and after Employee’s employment under this Agreement, including withoutlimitation marketing plans, financial information, key personnel, employees’capabilities, salaries and benefits, customer lists,

 

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pricing and cost structures, operation methods and any otherinformation not available to the public, without the Company’s prior writtenconsent.  Employee also agrees toexecute the Company’s Invention and Non-Disclosure Agreement, which is attachedhereto and made a part hereof.

 

### **10.**  **NON-COMPETITION;NON-SOLICITATION.**

 

### **(a)  Restrictions.**  Employee shall not, during the course ofEmployee’s employment with the Company and for a period of twelve (12) monthsafter such termination, directly or indirectly:

 

#### (i) be employed by, engaged in or participate in theownership, management, operation or control of, or act in any advisory or othercapacity (including as an individual, principal, agent employee, consultant orotherwise) for, any Competing Entity which conducts its business within theTerritory (as the terms Competing Entity and Territory are hereinafterdefined); provided, however, that notwithstanding any of the foregoing,Employee may make solely passive investments in any Competing Entity the commonstock of which is “publicly held” and of which Employee shall not own orcontrol, directly or indirectly, in the aggregate securities which constitute5% or more of the voting power of such Competing Entity;

 

#### (ii) solicit or divert any business or any customer orknown prospective customer from the Company or assist any person or entity in doingso or attempting to do so;

 

#### (iii) cause or seek to cause any person or entity torefrain from dealing or doing business with the Company or assist any person orentity in doing so; or

 

#### (iv) solicit for employment, or advise or recommend toany other person or entity that he, she or it employ or solicit for employmentor retention as an employee or consultant, any person who is an employee of, orexclusive consultant to, the Company.

 

**(b)  Effect on the Company’s Obligations.**  The Company’s obligation to make paymentsand provide the other benefits pursuant to Section 4 above shall terminate inthe event that, and at such time as, Employee is in breach of Employee’sobligations set forth in Section 10(a) above.

 

**(c)  Definitions.** For purposes of this Section 10:

 

(i) “Competing Entity”means any entity which is presently or hereafter engaged in any business of thetype or character engaged in by the Company or any of its subsidiariesincluding, without limitation, (A) the business of providing to third partiesproducts or services for pre-clinical drug discovery or chemical developmentwhich (x) include the outlicensing of small molecule libraries, the undertakingof drug candidate screening, and/or related drug optimization activities, or(y) utilize combinatorial chemistry or high-throughput screening technologiesin offering pre-clinical drug discovery services; (B) the business ofdeveloping, marketing or selling software programs which use molecularsimulation or analysis to predict chemical or biological activities; (C) thebusiness of developing, marketing or selling software programs that store,manage or analyze chemical or biological information or (D) any business whichis otherwise competitive with a business conducted by the Company or any of itssubsidiaries; and

 

(ii) “Territory”means North America, Europe and Japan.

 

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Notwithstanding anythingin the above to the contrary, Employee may engage in the activities set forthin Section 10(a) hereof with the prior written consent of the Company, whichconsent shall not be unreasonably withheld. Further, in determining whether a specific activity by Employee for aCompeting Entity shall be permitted, the Company will consider, among otherthings, the nature and scope of (A) the duties to be performed by Employee and(B) the business activities of the Competing Entity at the time ofEmployee’s proposed engagement by such entity.

 

**(d)  Acknowledgement.**  Employee acknowledges and agrees that thecovenants set forth in this Section are reasonable and necessary in allrespects for the protection of the Company’s legitimate business interests(including without limitation the Company’s confidential, proprietaryinformation and trade secrets and client good-will, which represents asignificant portion of the Company’s net worth and in which the Company has aproperty interest).  Employeeacknowledges and agrees that, in the event that Employee breaches any of thecovenants set forth in this Section, the Company shall be irreparably harmedand shall not have an adequate remedy at law; and, therefore, in the event ofsuch a breach, the Company shall be entitled to injunctive relief, in additionto (and not exclusive of) any other remedies (including monetary damages) towhich the Company may be entitled under law. If any covenant set forth in this Section 10 is deemed invalid orunenforceable for any reason, it is the parties’ intention that such covenantsbe equitably reformed or modified to the extent necessary (and only to suchextent to) render it valid and enforceable in all respects.  In the event that the time period andgeographic scope referenced above is deemed unreasonable, overbroad, orotherwise invalid, it is the parties’ intention that the enforcing court shallreduce or modify the time period and/or geographic scope to the extentnecessary (and only to such extent necessary) to render such covenantsreasonable, valid and enforceable in all respects.

 

### **11.  ARBITRATION.**  Any and all disputes between the parties(except actions to enforce the provisions of Section 10 of this Agreement)arising under or relating to this Agreement or any other dispute arisingbetween the parties, including claims arising under any employmentdiscrimination laws, shall be adjudicated and resolved exclusively throughbinding arbitration before the American Arbitration Association pursuant to theAmerican Arbitration Association’s then-in-effect National Rules for theResolution of Employment Disputes (hereinafter, “Rules”).  The initiation and conduct of anyarbitration hereunder shall be in accordance with the Rules and, unlessexpressly required by law, each side shall bear its own costs and counsel feesin such arbitration.  Any arbitrationhereunder shall be conducted in Princeton, New Jersey or at such other locationas mutually agreed by the parties.  Anyarbitration award shall be final and binding on the parties.  The arbitrator shall have no authority todepart from, modify, or add to the written terms of this Agreement.  The arbitration provisions of this Sectionshall be interpreted according to, and governed by, the Federal ArbitrationAct, 9 U.S.C. § 1 et seq., and any action pursuant to such Act toenforce any rights hereunder shall be brought exclusively in any United StatesDistrict Court in the State of New Jersey. The parties consent to the jurisdiction of (and the laying of venue in)any such court.

 

### **12.  WAIVER.**  The waiver by the Company of any breach ofany provision of this Agreement shall not operate or be construed as a waiverof any subsequent breach by Employee of any provision of this Agreement.

 

### **13.**  **SEVERABILITY.**  The parties have carefully reviewed theprovisions of this Agreement and agree that they are fair and equitable.  However, in light of the possibility ofdiffering interpretations of law and changes of circumstances, the partiesagree that in the event that any section, paragraph or term of this Agreementshall be determined to be invalid or unenforceable by any competent authorityor

 

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tribunal for any reason, the remainder of this Agreement shall beunaffected thereby and shall remain in full force and effect.  Moreover, if any of the provisions of thisAgreement is determined by a court of competent jurisdiction to be excessivelybroad as to duration, activity, geographic application or subject, it shall beconstrued by limiting or reducing it to the extent legally permitted so as tobe enforceable to the extent compatible with then applicable law.

 

### **14.**  **SUCCESSORSAND ASSIGNS.**  ThisAgreement shall bind and inure to the benefit of the successors and assigns ofthe Company and the heirs, executors or personal representatives ofEmployee.  This Agreement may not beassigned by Employee.  This Agreementmay be assigned to any successor in interest to the Company (including by wayof merger, consolidation or reorganization, or by way of any assignment of allor substantially all of the Company’s assets, business or properties), andEmployee hereby consents to such assignment.

 

### **15.**  **ENTIREAGREEMENT; AMENDMENTS.** This Agreement, including the recitals (which are a part hereof),together with the applicable bylaws and policies of the Company, constitutesthe entire Agreement between the parties hereto and there are no otherunderstandings, agreements or representations, expressed or implied.  This Agreement supersedes any and all prioror contemporaneous agreements, oral or written, concerning Employee’s employmentand compensation.  This Agreement may beamended only in writing signed by Employee and the Chief Executive Officer orExecutive Vice President, Human Resources of the Company.

 

### **16.**  **GOVERNINGLAW.**  This Agreementshall be governed by and construed in accordance with the laws (other thanconflicts of laws principles) of the State of New Jersey applicable tocontracts executed in and to be performed entirely within such State.

 
| Dated as of this 3rd  day of December, 2002. |   |                    |
|----------------------------------------------|--------|-------------------------|
|                                         |   |                    |
|                                         |   | **PHARMACOPEIA,  INC.** |
|                                         |   |                    |
|                                         |   |                    |
|                                         |   | By:                     | /s/ Joseph A. Mollica, Ph.D. |   |
|                                         |   |                    | Joseph A. Mollica, Ph.D. |
|                                         |   |                    | Chairman of the Board, President  and Chief Executive Officer |
|                                         |   |                    |   |
|                                         |   |                    |   |
|                                         |   |                    | /s/ Mark J. Emkjer |   |
|                                         |   |                    | Mark J. Emkjer |
|                                         |   |                    | 18357 Calle Stellina  Rancho Santa Fe, CA  92091 |

 

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