**Exhibit 10.1**

 

**SEPARATION AGREEMENT AND GENERAL RELEASE**

 

This Separation Agreement and General Release (“Agreement”) is beingentered into as of the last signature date below (the “Effective Date”) by and betweenLeslie Johnston Browne (hereinafter “Dr. Browne”) and Pharmacopeia, Inc.(hereinafter the “Company” or “Pharmacopeia”). Dr. Browne and Pharmacopeia are referred to jointly as the “Parties”or individually as a “Party.”

 

WHEREAS, Dr. Browne was employed by the Companyas its President and Chief Executive Officer pursuant to the terms of anAmended and Restated Employment Agreement dated March 5, 2008 (hereinafterthe “Employment Agreement”).  Capitalizedterms used in this Agreement shall either have the meaning set forth herein orthat set forth in the Employment Agreement;

 

WHEREAS, the Parties desire to set forththeir understandings and mutual agreements with respect to Dr. Browne’sseparation from the Company, Dr. Browne’s benefits and obligationsfollowing his separation from the Company, and all other matters between them;

 

NOW, THEREFORE, in consideration of themutual promises and undertakings contained herein, and intending to be legallybound hereby, the Parties agree as follows:

 

# **Section 1.**              **Separation from Employment**

#  

(a)           Separation Date.  The Company employed Dr. Browne through April 9,2008 (“Separation Date”).  Dr. Browne performed all of his regular dutiesthrough the Separation Date.  The Companywill pay Dr. Browne all compensation and benefits accrued, but unpaid,through the Separation Date.  Effectiveas of the Separation Date, Dr. Browne resigned from the Company’s Board ofDirectors, and also withdrew his nomination for election to the Company’s Boardof Directors to be considered at the Company’s next annual meeting.  Following the Separation Date, Dr. Browneagrees to cooperate reasonably with the Company regarding the transition of hisduties, and to respond to any reasonable requests for information or forassistance on matters as to which he has specific  knowledge, including assistance regarding anylitigation matters.  The Company and Dr. Browneagree that any such cooperation will not unduly interfere with Dr. Browne’sfuture employment or other commitments, and that the Company will reimburse Dr. Brownefor any related and documented out-of-pocket expenses.

 

(b)           Separation Payment.            The Company will pay Dr. Browne$810,261.00 in a lump sum payment (“Separation Payment”), which constitutes apayment of: (i) two (2) times an amount equal to Dr. Browne’sannual Base Salary in effect as of the Separation Date, plus (ii) anamount equivalent to an additional twenty-one (21) days’ Base Salary in effectas of the Separation Date, minus (iii) $22,839.00 paid in April 2008by the Company as an advance with respect to such additional twenty-one (21)days’ Base Salary.  The SeparationPayment will be made within thirty (30) days after the Effective Date.

 

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(c)           Bonus Payment; Accruedand Unused Vacation Pay.  The Companywill pay Dr. Browne a lump sum bonus payment (“Bonus Payment”) in theamount of $67,479.00, which represents a pro rata payment through April 30,2008 for Dr. Browne’s Incentive Bonus for calendar year 2008 based on Dr. Browne’starget bonus as determined by the Board of Directors of the Company (the “Board”)for 2008.  The Bonus Payment will be madewithin thirty (30) days after the Effective Date.  Dr. Browne acknowledges that in April 2008the Company paid him a cash payment for his accrued but unused vacation andtime-off pay in the amount of $40,487.98.

 

(d)           Benefits.  As of the Separation Date, all benefits willbe discontinued (excluding vested benefits) except that the Company willmaintain Dr. Browne’s group medical coverage under the Company’s insuredhealth plan for a period of twenty-four (24) months after the Separation Dateand such coverage will be provided to Dr. Browne at a monthly premium costthat is no greater than the monthly premium cost that is applicable to suchcoverage as of the date hereof, subject to such increases applicable to allother active employees of the Company. The Company will reimburse Dr. Browne up to an aggregate $10,000 for(i) documented legal and tax advisory fees and expenses that he incurs inconnection with the negotiation of this Agreement and (ii) documentedtravel, meals and registration expenditures incurred by the Company or Dr. Browneand related to professional conferences or meetings for which Dr. Browneregistered prior to the Separation Date and which he attends.

 

(e)           No Other Payments;Withholdings.  Except as described inthis Section 1 and Section 2 hereof, Dr. Browne is not entitledto any other compensation, severance, benefits, or other benefits or paymentsin connection with his employment or the separation of his employment with the Company.  The Company shall make all legally requiredwithholdings and deductions from any of the payments to be made to Dr. Browneunder this Agreement in accordance with the Company’s current withholdingpractices.   Dr. Browne agrees topay all legally required taxes with respect to any of the payments to be madeto him by the Company under this Agreement (other than employer-paid taxes suchas FICA), and he shall be responsible for obtaining his own independent taxadvice.

 

**Section 2.**              **Stock Options**

 

After the Separation Date, the Company will allow all vested options topurchase Company stock held by Dr. Browne as of the Separation Date to beexercisable pursuant to the terms of the stock option agreement(s) underwhich the options were granted.  For theavoidance of doubt, the Company confirms that Dr. Browne has the rightpursuant to the terms of such stock option agreement(s) to exercise suchvested options for the remainder of their respective original 10-year termsunder such stock option agreement(s).  Alisting of Dr. Brown’s outstanding stock options and termination dates isattached hereto as Exhibit A.

 

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**Section 3.****              Complete GeneralRelease of Claims**

 

In consideration of the terms and conditions ofthis Agreement and the Employment Agreement, and for other good and valuableconsideration, the receipt of which is hereby acknowledged, Employee on behalfof himself and his heirs, executors, administrators, and assigns, hereby releasesand discharges the Company and its subsidiaries, divisions, affiliates andparents, and their respective past, current and future officers, directors,employees, agents, and/or owners, and their respective successors, and assignsand any other person or entity claimed to be jointly or severally liable withthe Company or any of the aforementioned persons or entities (collectively the “ReleasedParties”) from any and all manner of actions and causes of action, suits,debts, dues, accounts, bonds, covenants, contracts, agreements, judgments,charges, claims, and demands whatsoever (“Claims”) which Employee and hisheirs, executors, administrators, and assigns have, had, or may hereafter have,against the Released Parties or any of them arising out of or by reason of anycause, matter, or thing whatsoever from the beginning of the world to the datehereof.  This General Release of Claimsincludes, without limitation, any and all matters relating to Employee’semployment by the Company and the cessation thereof, and any and all mattersarising under any federal, state, or local statute, rule, or regulation, orprinciple of contract law or common law, including but not limited to, theFamily and Medical Leave Act of 1993, asamended, 29 U.S.C. §§2601 etseq., Title VII of the Civil Rights Act of 1964, asamended, 42 U.S.C. §§ 2000 etseq., the Age Discriminationin Employment Act of 1967, asamended, 29 U.S.C. §§ 621 etseq. (the “ADEA”), the Americans with Disabilities Act of 1990, asamended, 42 U.S.C. §§ 12101 etseq., the Worker Adjustmentand Retraining Notification Act of 1988, asamended, 29 U.S.C. §§2101 etseq., Employee Retirement Income Security Act of 1974, asamended, 29 U.S.C. §§ 1001 etseq. (“ERISA”), the NewJersey Law Against Discrimination, N.J.S.A. 10:15-1, etseq., theNew Jersey Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to 19-8, theNew Jersey Wage and Hour Act, N.J.S.A. 34-11-56a etseq., and anyother equivalent or similar federal, state, or local statute; provided,however, that Employee does not release or discharge the Released Parties from (i) anyof the Company’s obligations to him under (or his right to enforce) this Agreement,(ii) any vested or accrued benefits to which he may be entitled under anyemployee benefit plan or program of the Company, and (iii) any coveragethat Dr. Browne has under existing or future director and officerinsurance policies procured by the Company. It is understood that nothing in this General Release is to be construedas an admission on behalf of the Released Parties of any wrongdoing withrespect to Employee, any such wrongdoing being expressly denied.

 

To the best of the Company’s knowledge, as of the Separation Date theCompany was not aware of any facts or circumstances that could give rise to anyclaim or cause of action that the Company may have against Dr. Browne.

 

The Company hereby agrees to provide Dr. Browne with a reasonableopportunity to review and provide reasonable comments on any press releaseissued after the last signature date below that names Dr. Browne and relatesto or discusses his separation from the Company.  Dr. Browne acknowledges that he reviewedthe press release issued by the Company on April 10, 2008 related to hisseparation from the Company and the related Report on Form 8-K.

 

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Dr. Browne represents and warrants that he fully understands theterms of this General Release, and that he knowingly and voluntarily, of hisown free will, without any duress, being fully informed, and after duedeliberation, accepts its terms and signs below as his own free act.  Except as otherwise provided herein, Dr. Browneunderstands that as a result of executing this General Release, he will nothave the right to assert that the Company or any other of the Released Partiesunlawfully terminated his employment or violated any of his rights inconnection with his employment or otherwise.

 

**Section 4.****              Covenant Not toSue**

 

Dr. Browne agrees and covenants not to file, initiate, or join anylawsuit (either individually, with others, or as part of a class), in anyforum, pleading, raising, or asserting any Claim(s) barred or released by Section 3of this Agreement.  If he does so, andthe action is found to be barred in whole or in part by this Agreement, Dr. Browneagrees to pay the attorneys’ fees and costs, or the proportions thereof,incurred by the applicable Released Party in defending against those Claimsthat are found to be barred by Section 3 of this Agreement.  Nothing in this Section 4 precludes Dr. Brownefrom challenging the validity of the release in Section 3 under therequirements of the Age Discrimination in Employment Act, and Dr. Browneshall not be responsible for reimbursing the attorneys’ fees and costs of theReleased Parties in connection with such a challenge to the validity of therelease.  Dr. Browne, however,acknowledges that the release in Section 3 applies to all Claims that hehas under the Age Discrimination in Employment Act, and that, unless therelease is held to be invalid, all of Dr. Browne’s Claims under that Actshall be extinguished by execution of this Agreement.

 

**Section 5.****              Acknowledgments**

 

Dr. Browne is hereby advised to consult with counsel beforeexecuting this Agreement.  Dr. Brownehereby acknowledges and understands that he has the right to consider thisAgreement, including the General Release contained in Section 3, for aperiod of twenty-one (21) days prior to execution.  Dr. Browne further acknowledges andunderstands that for seven (7) days following his execution of thisAgreement, Dr. Browne may revoke this Agreement by providing writtennotice to the Company as provided in Section 11 hereof.  This Agreement shall not become effective orenforceable until the seven-day revocation period has expired withoutrevocation, and Dr. Browne shall not be eligible for benefits under thisAgreement in the event of a revocation.

 

**Section 8.****              Public Disclosureof Agreement**

 

Dr. Browne acknowledges that the Companyintends to file this Agreement in its entirety with the U.S. Securities andExchange Commission as an exhibit to a public report of the Company madepursuant to the Federal securities laws. Dr. Browne further acknowledges that all of the terms andconditions of this Agreement will become generally available to the public as aresult of such filing.

 

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**Section 9.**              **Confidential Information/Non-Competition**

 

Dr. Browne acknowledges that he remainsbound by the Confidential Information and Non-Competition provisions in theEmployment Agreement (Sections 10 and 11 of the Employment Agreement) inaccordance with their terms.  In order toassure that Dr. Browne does not inadvertently breach any term or conditionof such Confidential Information and Non-Competition provisions, the Companyhereby agrees to respond to any written request from Dr. Browne within areasonable period of the Company’s receipt of such request, and answer withinsuch period any question posed by Dr. Browne, that is intended to obtainassurance that any proposed action or activity that may be undertaken by Dr. Browneshall not violate or breach such provisions. The failure of the Company to so respond to any such request or questionshall be deemed to represent the Company’s approval and acquiescence of Dr. Browne’srequest, and the Company shall be estopped from claiming that such undertakingviolates or breaches such provisions.

 

**Section 10.****            No Admission OfWrongdoing**

 

Nothing in this Agreement constitutes or should be construed toconstitute an admission or evidence of any liability or fault or wrongdoing onthe part of any Party.

 

**Section 11.****            Notice**

 

Any notice, request, or other communication required or permitted to bedelivered under this Agreement must be in writing and will be consideredreceived as of the date delivered if delivered in person, on the next businessday if sent by a nationally recognized overnight courier service, and on thesecond business day if mailed by registered mail, return receipt requested,postage prepaid.  If to Dr. Browne,the notice, request, or other communication must be addressed and sent to Dr. Browneat his most recent residential address as then on file with the Company (or atsuch other address provided by Dr. Browne to the Company in accordancewith this Section).  If to the Company,the notice, request, or other communication must be addressed to Pharmacopeia Inc.,P.O. Box 5350 Princeton, NJ 08543-5350, Attention: General Counsel or tosuch other address as the Company furnishes to Dr. Browne in accordancewith this Section.

 

**Section 12.****            Governing Law**

 

This Agreement shall be governed by and construed in accordance with thelaws of the State of New Jersey, irrespective of the principles of conflicts oflaw applicable therein.

 

**Section 13.****            Arbitration**

 

The Parties acknowledge that they remainbound by the Arbitration provision in the Employment Agreement, and that suchprovision shall also apply to any and all disputes 

 

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between the parties (except actions toenforce Section 9 of this Agreement) arising under or relating to thisAgreement.

 

**Section 14.****            Enurement andAssignment**

 

This Agreement shall bind and inure to the benefit of the successorsand assigns of the Company, and the heirs, executors, or personalrepresentatives of Dr. Browne.  ThisAgreement may not be assigned by Dr. Browne.  This Agreement may be assigned to anysuccessor in interest to the Company and Dr. Browne hereby consents tosuch assignment.

 

**Section 15.**            **Waiver**

 

The waiver by either Party of any breach of any provision of thisAgreement shall not operate or be construed as a waiver of any subsequentbreach.

 

**Section 16.****            Severability**

 

In the event that any section, paragraph or term of this Agreementshall be determined to be invalid or unenforceable by any competent authorityor tribunal for any reason, the remainder of this Agreement shall be unaffectedthereby and shall remain in full force and effect, and any such section,paragraph, or term shall be deemed modified to the extent necessary to make itenforceable.

 

**Section 17.****            Entire Agreement;Prior Agreements; Amendment**

 

This Agreement, the Indemnity Agreement dated January 25, 2005between the Company and Dr. Browne and the stock option agreementsreferred to in Section 2 contain the entire agreement of the Parties withrespect to the subject matter hereof and supersedes any and all prior orcontemporaneous agreements, oral or written. This Agreement supersedes the Employment Agreement except for the Confidentiality,Non-Competition, Arbitration and any other provisions that have beenincorporated herein and which remain in full force.  This

 

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Agreement may not be changed, altered, or otherwise amended except bymutual agreement in writing signed by the Parties.

 

THE UNDERSIGNED, INTENDING TO BE LEGALLY BOUND BY THE FOREGOING TERMS,HEREBY APPLY THEIR SIGNATURES VOLUNTARILY AND WITH FULL UNDERSTANDING OF THETERMS OF THIS AGREEMENT AND EXECUTE THIS AGREEMENT AS OF THE DATES SET FORTHBELOW.

 

 
| /s/ Leslie Johnston Browne |                      | May 7, 2008 |
|----------------------------|---------------------------|-------------|
| Leslie Johnston Browne     |                      | Dated       |
|                       |                      |        |
|                       |                      |        |
| PHARMACOPEIA, INC.         |                      |        |
|                       |                      |        |
|                       |                      |        |
| /s/ Joseph A. Mollica      |                      | May 8, 2008 |
| By:                        | Joseph A. Mollica         |        | Dated |
| Title:                     | Chairman of the Board and |        |   |
|                       | Interim President and     |        |   |
|                       | Chief Executive Officer   |        |   |

 

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** **

Exhibit A

 
|                    | **Pharmacopeia, Inc.** |       |
|-------------------------|-----------------------------|------------|
| ***Closing Statement*** | PO  Box 5350                | ** ** |
| ** **              | Princeton,  NJ 08543-5350   |       |
|                    |                        |       |
| ** **              |                        |       |
| **Termination Date:**   | **4/9/2008**                |       |   |
|                    |                        |
| **Leslie Browne**       |                        |
|                         |                             |            |  |

 

**Exercisable Options**

 
| ** ** | ** ** | **Grant** | ** ** | **Plan/** | ** ** | ** **         | ** ** | **Shares**  | ** ** | **Shares**    | ** ** | **Shares**      | ** ** | **Vesting**        | ** ** | **Total** | ** **   | **Last Date**   | ** ** |
|------------|------------|-----------|------------|-----------|------------|--------------------|------------|-------------|------------|---------------|------------|-----------------|------------|--------------------|------------|-----------|--------------|----------------------|------------|
| **Number** | ** ** | **Date**  | ** ** | **Type**  | ** ** | **Price ($)** | ** ** | **Granted** | ** ** | **Exercised** | ** ** | **Exercisable** | ** ** | **Stop Date** | ** ** | **Price** | ** **   | **To Exercise** | ** ** |
|       |       |      |       |      |       |               |       |        |       |          |       |            |       |               |       |      |         |                 |       |
| 00005176   |       | 03/01/06  |       | 2004/ISO  |       | 4.7500             |       | 23,440.00   |       | 0.00          |       | 0.00            |       | 4/9/2008           |       | $         | 0.00         |                 |       |   |
| 00005336   |       | 03/01/06  |       | 2004/NQ   |       | 4.7500             |       | 51,561.00   |       | 0.00          |       | 39,061.00       |       | 4/9/2008           |       | $         | 185,539.75   |                 | 03/01/16   |   |
| 00005348   |       | 02/28/07  |       | 2004/ISO  |       | 4.6700             |       | 23,151.00   |       | 0.00          |       | 0.00            |       | 4/9/2008           |       | $         | 0.00         |                 |       |   |
| 00005349   |       | 02/28/07  |       | 2004/NQ   |       | 4.6700             |       | 76,849.00   |       | 0.00          |       | 25,000.00       |       | 4/9/2008           |       | $         | 116,750.00   |                 | 02/28/17   |   |
| 00005105   |       | 08/09/04  |       | 2004/NQ   |       | 5.2000             |       | 223,080.00  |       | 0.00          |       | 198,080.00      |       | 4/9/2008           |       | $         | 1,030,016.00 |                 | 08/09/14   |   |
| 00005104   |       | 08/09/04  |       | 2004/ISO  |       | 5.2000             |       | 76,920.00   |       | 0.00          |       | 76,920.00       |       | 4/9/2008           |       | $         | 399,984.00   |                 | 08/09/14   |   |
| 00005527   |       | 02/25/08  |       | 2004/ISO  |       | 3.8400             |       | 25,141.00   |       | 0.00          |       | 0.00            |       | 4/9/2008           |       | $         | 0.00         |                 |       |   |
| 00005528   |       | 02/25/08  |       | 2004/NQ   |       | 3.8400             |       | 74,859.00   |       | 0.00          |       | 0.00            |       | 4/9/2008           |       | $         | 0.00         |                 |       |   |
|       |       |      |       | TOTALS    |       |               |       | 575,001.00  |       | 0.00          |       | 339,061.00      |       |               |       | $         | 1,732,289.75 |                 |       |   |

 

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