Document:

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                                                                Exhibit 10.12(b)

                       DISENGAGEMENT AGREEMENT AND RELEASE

                  This Disengagement Agreement and Release (the "Agreement") is
entered into as of the 11th day of September, 2000, by and between PHARMACOPEIA,
INC., a Delaware corporation (the "Company"), and SAAID ZARRABIAN (the
"Employee").
                                   BACKGROUND

                  WHEREAS, Employee has served as Chief Operating Officer of
Molecular Simulations, Inc. ("MSI") pursuant to the terms of an Employment
Agreement dated November 30, 1995, as amended October 1, 1997 (the "Employment
Agreement"); and

                  WHEREAS, the Company acquired MSI on June 12, 1998 (the
"Acquisition Date") and assumed the obligations of MSI under the Employment
Agreement; and

                  WHEREAS, Employee has served as a Chief Operating Officer of
the Company since November, 1999; and

                  WHEREAS, the parties have agreed that Employee's employment
arrangement with the Company shall cease effective as of December 31, 2000 (the
"Termination" or "Termination Date") and in connection therewith Employee shall
resign as Chief Operating Officer of the Company effective October 1, 2000; and

                  WHEREAS, the parties hereto desire to set forth their
respective rights and obligations with respect to the Termination;

                  NOW, THEREFORE, in consideration of the covenants and
conditions set forth herein and INTENDING TO BE LEGALLY BOUND HEREBY, the
undersigned parties to this Agreement hereby agree as follows:

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         1.       TERMINATION. The parties hereby agree that the employment
arrangement between Employee and the Company is terminated as of the Termination
Date. Except as expressly provided in this Agreement, the Employment Agreement
and all rights and obligations of Employee and the Company with respect to
Employee's employment with the Company, MSI and their respective affiliates are
duly and effectively terminated as of the Termination Date. Employee
acknowledges and agrees that the Company's obligations under this Agreement
shall replace in their entirety the Company's obligations under the Employment
Agreement and all other incentive compensation arrangements for which Employee
is currently eligible as of the Termination Date. Employee hereby resigns as
Chief Operating Officer of the Company and resigns from all other executive
officer positions of the Company, MSI and their respective affiliates, effective
October 1, 2000. Employee agrees to cooperate with the Company, to report to the
office as reasonably necessary to assist on transitional issues and to perform
such other projects as assigned by Joe Mollica, through the Termination Date. At
the request of the Company's Chief Executive Officer, Employee shall also resign
as a member of the Board of Directors of MSI and the Company's other affiliates,
and in any event shall resign such directorships no later than the Termination
Date.

         2.       SEVERANCE AND OTHER PAYMENTS.

                  (a)      As a severance payment and in lieu of any payments
otherwise due under the Employment Agreement, the Company agrees to pay the
Employee an amount equal to his current annual base salary, Three Hundred
Thirty-six Thousand Dollars ($336,000). This amount shall be paid in equal
biweekly installments pursuant to the Company's normal payroll

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schedule, less normally applicable payroll tax withholdings, commencing on or
before January 31, 2001, unless terminated sooner pursuant to Section 5 hereof.

                  (b)      In addition to the severance payments described in
Section 2(a) above, so long as the employee is not in breech of this agreement,
and as such stays employed through the termination date, Employee shall be
entitled to receive that percentage of his annual Company performance-based
target bonus as is set by the Company's Board of Directors based upon
achievement against established Pharmacopeia 2000 Corporate Objectives (as
defined in Schedule A attached). The amount shall be payable in a lump sum, less
normally applicable payroll tax withholdings, on or about March 1, 2001.

         3.       STOCK OPTIONS. The parties acknowledge that pursuant to
certain Stock Option Agreements, Employee has been granted incentive stock
options to purchase a total of 274,502 shares of common stock of Pharmacopeia,
Inc. As of August 23, 2000, 196,792 of these options are vested, of which 40,000
have been exercised so long as the employee is not in breech of this agreement
and as such stays employed through the termination period, an additional 17,916
options will vest. Employee's options shall be exercisable during the period
specified in the applicable option agreements and shall remain subject to the
terms of those agreements.

         4.       BENEFITS. Employee will continue to be eligible to participate
in the Company's group health plans as offered to active employees under the
provisions of COBRA. The Company will pay the premiums until the earlier of (i)
the end of the twelve (12) month period following the Termination Date, or (ii)
the date upon which Employee is covered by a successor employer's comparable
benefit plans. As of that date, Employee may continue coverage under COBRA at
his own cost. The benefits described in this section are available

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only during the time that Employee is not eligible for comparable health
coverage through another employer. Should Employee obtain such coverage, it is
Employee's obligation to immediately notify Company.

         5.       NON-COMPETITION. The Employee shall not, for a one (1) year
period commencing on the Termination Date, directly or indirectly, (a) be
employed by, engaged in or participate in the ownership, management, operation
or control of, or act in any advisory or other capacity for, any Competing
Entity which conducts its business within the Territory (as the terms Competing
Entity and Territory are hereinafter defined); provided, however, that
notwithstanding the foregoing, the Employee may make solely passive investments
in any Competing Entity the common stock of which is "publicly held" and of
which the Employee shall not own or control, directly or indirectly, in the
aggregate securities which constitute 5% or more of the voting rights or equity
ownership of such Competing Entity; (b) solicit or divert any business or any
customer from the Company or assist any person, firm or corporation in doing so
or attempting to do so; (c) cause or seek to cause any person, firm or
corporation to refrain from dealing or doing business with the Company or assist
any person, firm or corporation in doing so; or (d) solicit for employment, or
advise or recommend to any other person that they employ or solicit for
employment or retention as an employee or consultant, any person who is an
employee of, or exclusive consultant to, the Company. The Company's obligation
to make payments pursuant to Section 2 above shall terminate in the event that,
and at such time as, Employee is in breach of his obligation not to compete as
set forth in this Section 5.

                  For purposes of this Section 5, the term "Competing Entity",
shall mean any entity which is presently or hereafter engaged in the business of
providing to third parties products or services for pre-clinical drug discovery
or chemical development which (i) include

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the outlicensing of small molecule libraries, the undertaking of drug candidate
screening, and/or related drug optimization activities, (ii) utilize
combinatorial chemistry or high-throughput screening technologies in offering
pre-clinical drug discovery services, (iii) engage in the development, marketing
or sale of software programs which use molecular simulation or analysis to
predict chemical or biological activities, or (iv) engage in the development,
marketing or sale of software programs that store, manage or analyze chemical or
biological information. The term "Territory" shall mean North America, Europe
and Japan. Notwithstanding anything in the above to the contrary, Employee may
engage in the activities Set forth in Section 5(a) hereof with the prior written
consent of the Company, which consent shall not be unreasonably withheld. In
determining whether a specific activity by the Employee for a Competing Entity
shall be permitted, the Company will consider, among other things, the nature
and scope of (i) the duties to be performed by Employee, and (ii) the business
activities of the Competing Entity at the time of Employee's proposed engagement
by such entity.

                  Employee acknowledges and agrees that the covenants set forth
in this Section are reasonable and necessary in all respects for the protection
of Company's legitimate business interests (including without limitation
Company's confidential, proprietary information and trade secrets and client
good-will, which represents a significant portion of Company's net worth and in
which Company has a property interest). Employee acknowledges and agrees that,
in the event that he breaches any of the covenants set forth in this Section,
Company shall be irreparably harmed and shall not have an adequate remedy at
law, and, therefore, in the event of such a breach, Company shall be entitled to
injunctive relief, in addition to (and not exclusive of) any other remedies
(including monetary damages) to which Company may be entitled under law.

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If any covenant set forth in this Section 5 is deemed invalid or unenforceable
for any reason, it is the Parties' intention that such covenants be equitably
reformed or modified to the extent necessary (and only to such extent to) render
it valid and enforceable in all respects. In the event that the time period and
geographic scope referenced above is deemed unreasonable, overbroad, or
otherwise invalid, it is the Parties' intention that the enforcing court shall
reduce or modify the time period and/or geographic scope to the extent necessary
(and only to such extent necessary) to render such covenants reasonable, valid,
and enforceable in all respects.

         6.       RELEASES. Subject to and conditioned upon the full performance
by each of the parties of its obligations under this Agreement:

                  (a)      In exchange for the benefits received under this
Agreement, to which he may not otherwise be entitled, Employee hereby agrees not
to pursue or further any action, cause of action, right, suit, debt,
compensation, expense, liability, contract, controversy, agreement, promise,
damage judgment, demand or claim whatsoever at law or in equity whether known or
unknown which Employee ever had, now has or hereafter can, shall or may have
for, upon or by any reason of any matter, cause or thing (collectively,
"Employee Claims") whatsoever, occurring up to and including the date Employee
signs this Agreement, against the Company, its successors, assigns, partners,
representatives and affiliates and all of their respective employees, agents,
officers and directors (the "Company Parties") and hereby releases, acquits and
forever absolutely discharges the Company Parties of and from all of the
foregoing, except with respect to the obligations of the Company set forth in
this Agreement, including but not limited to stock option agreements referenced
in paragraph 3. Such Employee Claims include, but are not limited to, all claims
for breach of contract, wrongful discharge,

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impairment of economic opportunity, intentional infliction of emotional harm,
defamation or other torts, or claims under any applicable federal, state or
local law, including any and all federal, state and local employment and
anti-discrimination laws, including without limitation the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil
Rights Act of 1964, the California Labor and Civil Code, the California Fair
Employment and Housing Law, the New Jersey Law Against Discrimination and the
New Jersey Conscientious Employee Protection Act. Notwithstanding anything
herein to the contrary, such Employee Claims will under no circumstances include
any action, cause of action, right, suit, debt, compensation, expense,
liability, contract, controversy, agreement, promise, damage judgment, demand or
claim relating to, arising under or arising in connection with any breach by the
Company of this Agreement.

                  (b)      The Company hereby agrees not to pursue or further
any action, cause of action, right, suit, debt, compensation, expense,
liability, contract, controversy, agreement, promise, damage judgment, demand or
claim whatsoever at law or in equity whether known or unknown which the Company
ever had, now has or hereafter can, shall or may have for, upon or by any reason
of any matter, cause or thing, (collectively, "Company Claims") whatsoever
occurring up to and including the date Employee signs this Agreement against
Employee and hereby releases, acquits and forever absolutely discharges Employee
of and from all of the foregoing, except with respect to the obligations of
Employee set forth in this Agreement. Notwithstanding anything herein to the
contrary, such Company Claims will under no circumstances include any action,
cause of action, right, suit, debt, compensation, expense,

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liability, contract, controversy, agreement, promise, damage judgment, demand or
claim relating to, arising under or arising in connection with any breach by
Employee of this Agreement.

         7.       UNKNOWN CLAIMS. Both Employee and Company understand that the
release of claims described in Section 7 above covers claims which they know
about and those they may not know about. The parties waive all rights under
Section 1542 of the California Civil Code, which the parties have read and
understand, and which provides as follows:

                           SECTION 1542. A general release does not extend to
                           claims which the creditor does not know or suspect to
                           exist in his favor at the time of executing the
                           release, which if known by him must have materially
                           affected his settlement with debtor.

                  The parties acknowledge that they are assuming the risk that
the facts may turn out to be different from what they believe them to be and the
parties agree that this release shall be in all respects effective and not
subject to termination or rescission because of such mistaken belief.

         8.       AGREEMENT NOT TO SUE. The parties promise never to file a
lawsuit asserting any of the claims that are released in Section 7 above. If
either does so, and the action is found to be barred in whole or part by this
Agreement, the party asserting the claim found to be barred by this Agreement
agrees to pay the reasonable attorneys' fees and costs, or the portions thereof,
incurred by the party released hereby in defending against the Claim(s) which
are barred by this Agreement.

         9.       FURTHER ACKNOWLEDGMENTS. Employee further acknowledges that
(a) by this Agreement, the Company has advised him in writing that he should
consult with an attorney prior to executing this Agreement, (b) he has had the
opportunity to read, review and consider all

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of the provisions of this Agreement, (c) he understands its provisions and its
final and binding effect on him, (d) he is entering into this Agreement freely,
voluntarily, and without duress or coercion, and (e) he understands that he has
twenty-one (21) days from the date of distribution of this Agreement to review
and consider its provisions and he has an additional seven (7) days following
his execution of this Agreement to revoke this Agreement and this Agreement
shall not become effective or enforceable until the revocation period has
expired.

         10.      COMPANY PROPERTY. Employee warrants that he has returned to
the Company; or will return to the Company on or before the Termination Date,
all property belonging to the Company, which is in his possession or under his
control, including without limitation, all credit cards, computers,
telecommunications equipment, keys and all documents and files of any nature
whatsoever, including any and all copies of same.

         11.      CONFIDENTIALITY . The parties hereto agree that the terms and
conditions of this Agreement are confidential and further agree that they shall
not divulge the terms of this Agreement to third parties generally, except as
required by applicable law or to enforce this Agreement or to defend against a
claim related thereto and except that the Company may reveal such terms to its
accountants, legal counsel and directors. In addition, Employee agrees not to
make any statement to any third party (other than Employee's accountants and
attorneys) regarding the Company or its affiliates other than in connection with
an employment opportunity or as may be required by applicable law or to enforce
this Agreement or to defend against a claim related thereto and the Company
agrees not to make any statement to any third party regarding Employee other
than as may be required by applicable law or to enforce this Agreement or to
defend against a claim related thereto other than the fact that Employee was an

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employee of the Company during the relevant time period. In the event this
covenant of confidentiality is breached, the Company and Employee will have and
may pursue legal remedies for any damage arising from a breach of this
provision. Prior to any press release or other public disclosure relating to the
contents of this Agreement, the Company shall confer with Employee on the
contents of any such disclosure. Notwithstanding the foregoing, the Company
shall be under no obligation to reach agreement with Employee on the contents of
any such public announcement or disclosure required by applicable law, rule or
regulation, including, but not limited to, any public announcement or disclosure
required by federal or state securities laws, rules or regulations.

         12.      ACKNOWLEDGMENT OF CONSIDERATION. Employee acknowledges that
the only consideration that he has received for executing this Agreement is the
consideration recited above and that no other promise, inducement, threat,
agreement or understanding of any kind or description has been made with or to
Employee by the Company to cause him to agree to the terms of this Agreement.

         13.      GOVERNING LAW; JURISDICTION. The Parties acknowledge and agree
that because the Company's headquarters is located in New Jersey, this Agreement
will be finalized in New Jersey and a substantial portion of this Agreement is
to be performed in New Jersey, the substantive laws of the State of New Jersey
will govern the enforcement of this Agreement, without regard to its choice of
law rules. The parties further agree and consent to the jurisdiction of the
federal and state courts in New Jersey over any action to enforce this
Agreement.

         14.      ENTIRE AGREEMENT, ETC. This Agreement represents the entire
understanding between the parties, and there are no agreements or understandings
which have

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not been set forth herein. This Agreement supersedes any prior understanding,
agreement, practice or contract, oral or written, between the Employee and the
Company relating to Employee's employment or compensation. This Agreement may
not be modified except by written instrument signed by all parties. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but which together shall constitute one and the same instrument. This
Agreement shall be binding upon the parties' heirs, executors, administrators,
successors, and assigns.

                  IN WITNESS WHEREOF, and INTENDING TO BE LEGALLY BOUND HEREBY,
the undersigned have executed this Disengagement Agreement as of the date first
written above.

                                  PHARMACOPEIA, INC.

                                  By:  /s/ Joseph A. Mollica

                                     /s/ Saiid Zarrabian                  (L.S.)
                                     -------------------------------------
                                     SAIID ZARRABIAN<PAGE>

                                                                   Exhibit 10.23

                               PHARMACOPEIA, INC.

                             2000 STOCK OPTION PLAN

1.       PURPOSE OF THE PLAN

         The purpose of the Plan is to promote the long term financial success
of Pharmacopeia, Inc., its Subsidiaries and Affiliates, and to materially
increase shareholder value by: (i) providing performance related incentives that
motivate superior performance on the part of the Company's Employees and
Consultants, (ii) providing the Company's Employees and Consultants with the
opportunity to acquire an ownership interest in the Company, and to thereby
acquire a greater stake in the Company and a closer identity with it; and (iii)
enabling the Company to attract and retain the services of Employees and
Consultants of outstanding ability and upon whose judgment, interest and special
effort the successful conduct of the Company's operations is largely dependent.

2.       DEFINITIONS

         2.1.     "Act" means the Securities Exchange Act of 1934, as amended.

         2.2.     "Affiliate" means any entity other than the Subsidiaries in
which the Company has a substantial direct or indirect equity interest, as
determined by the Board.

         2.3.     "Award" means an award of Options, SARs, or Restricted Stock
or any combination thereof.

         2.4.     "Award Share" means any share of Common Stock issued upon the
exercise of an Option or SAR, or issued pursuant to an Award of Restricted
Stock.

         2.5.     "Board" means the Board of Directors of the Company.

         2.6.     "Change of Control" shall mean, following the effective date
of this Plan, the occurrence of any of the following events:

                  2.6.1.   the acquisition in one or more transactions by any
"Person" (as such term is used for purposes of Section 13(d) or Section 14(d) of
the Act") but excluding, for this purpose, the Company or its Subsidiaries or
any employee benefit plan of the Company or its Subsidiaries, of "Beneficial
Ownership" (within the meaning of Rule 13d-3 under the Act) of fifty percent
(50%) or more of the combined voting power of the Company's then outstanding
voting securities (the "Voting Securities");

                  2.6.2.   the individuals who, as of the effective date of the
Plan, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders, of any new
director was approved by a vote of at least a majority of the Incumbent

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Board, such new director shall be considered as a member of the Incumbent Board,
and provided further that any reductions in the size of the Board that are
instituted voluntarily by the Incumbent Board shall not constitute a Change of
Control, and after any such reduction the "Incumbent Board" shall mean the Board
as so reduced;

                  2.6.3.   a merger or consolidation involving the Company if
the shareholders of the Company, immediately before such merger or
consolidation, do not own, directly or indirectly, immediately following such
merger or consolidation, more than fifty percent (50%) of the combined voting
power of the outstanding Voting Securities of the corporation resulting from
such merger or consolidation or a complete liquidation or dissolution of the
Company or a sale or other disposition of all or substantially all of the assets
of the Company; or

                  2.6.4.   acceptance by shareholders of the Company of shares
in a share exchange if the shareholders of the Company, immediately before such
share exchange, do not own, directly or indirectly, immediately following such
share exchange, more than fifty percent (50%) of the combined voting power of
the outstanding Voting Securities of the corporation resulting from such share
exchange.

         2.7.     "Code" means the Internal Revenue Code of 1986, as amended.

         2.8.     "Committee" means the committee designated by the Board to
administer the Plan under Section 4.

         2.9.     "Common Stock" means the common stock of the Company, or such
other class or kind of shares or other securities resulting from the application
of Section 9.

         2.10.    "Company" means Pharmacopeia, Inc., a Delaware corporation, or
any successor corporation.

         2.11.    "Consultant" means a key consultant or advisor to the Company
or any of its Subsidiaries or Affiliates who is not an Employee.

         2.12.    "Disability" means a medically-determinable condition of a
permanent nature which, as determined by the Committee, renders a Participant
incapable of fulfilling the duties and responsibilities that the Participant was
performing for the Company, its Subsidiaries and Affiliates immediately prior to
the on-set of such condition.

         2.13.    "Employee" means an employee of the Company, a Subsidiary or
an Affiliate.

         2.14.    "Fair Market Value" means, on any given date:

                  2.14.1.  if the Common Stock is listed on an established stock
exchange or exchanges, the closing price of Common Stock on the principal
exchange on which it is traded on such date, or if no sale was made on such date
on such principal exchange, on the last preceding day on which the Common Stock
was traded;

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                  2.14.2.  if the Common Stock is not then listed on an
exchange, but is quoted on NASDAQ or a similar quotation system, the closing
price per share for the Common Stock as quoted on NASDAQ or similar quotation
system on such date;

                  2.14.3.  if the Common Stock is not then listed on an exchange
or quoted on NASDAQ or a similar quotation system, the value, as determined in
good faith by the Committee.

         2.15.    "Misconduct" means the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company (or any Subsidiary or Affiliate), or any other intentional misconduct by
such person adversely affecting the business or affairs of the Company (or any
Subsidiary or Affiliate) in a material manner. The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which the Company (or
any Subsidiary or Affiliate) may consider as grounds for the dismissal or
discharge of any Participant or other person in the service of the Company (or
any Subsidiary).

         2.16.    "Option" means the right, granted from time to time under the
Plan, to purchase Common Stock for a specified period of time at a stated price.
Options are not intended to be incentive stock options under Section 422 of the
Code.

         2.17.    "Participant" means an Employee or Consultant who is
designated by the Committee as eligible to participate in the Plan and who
receives an Award under this Plan.

         2.18.    "Performance Goal" means a goal that has been established by
the Committee and that must be met by the end of a Performance Period. The
Committee shall have sole discretion to determine the specific targets within
each category of Performance Goals, and whether such Performance Goals have been
achieved.

         2.19.    "Performance Period" means the time period during which
Performance Goals must be met.

         2.20.    "Plan" means the Pharmacopeia, Inc. 2000 Stock Option Plan
herein set forth, as amended from time to time.

         2.21.    "Restricted Stock" means Common Stock awarded by the Committee
under Section 8 of the Plan.

         2.22.    "Restriction Period" means the period during which Restricted
Stock awarded under the Plan is subject to forfeiture.

         2.23.    "SAR" means the right to receive, in cash or in Common Stock,
as determined by the Committee, the increase in the Fair Market Value of the
Common Stock underlying the SAR from the date of grant to the date of exercise.

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         2.24.    "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company (or any subsequent
parent of the Company) if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.

3.       ELIGIBILITY

         Any Employee who is not a "covered employee" within the meaning of
Section 162(m) of the Code, who is not subject to Section 16 of the Act and who
is designated by the Committee as eligible to participate in the Plan, or any
Consultant who is designated by the Committee as eligible to participate in the
Plan, shall be eligible to receive an Award under the Plan.

4.       ADMINISTRATION

         4.1.     The Committee shall be made up of one or more Board members.
Members of the Committee shall be appointed by and hold office at the pleasure
of the Board. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.

         4.2.     The Plan shall be administered by the Committee, which shall
have full power to interpret and administer the Plan, and full authority to act
in selecting the eligible Employees and Consultants to whom Awards may be
granted, in determining the times at which such Awards may be granted, in
determining the time and the manner in which Options may be exercised, in
determining the amount of Awards that may be granted, in determining the terms
and conditions of Awards that may be granted under the Plan and the terms of
agreements which will be entered into with Participants (which terms shall not
be inconsistent with the terms of the Plan). The Committee also shall have the
power to establish different terms and conditions with respect to the granting
of the same type of Award to different Participants (regardless of whether the
Awards are granted at the same time or at different times).

         4.3.     The Committee shall have the power to accelerate the
exercisability or vesting of any Award, and to determine under Section 10 the
effect, if any, of a Change of Control of the Company upon outstanding Awards.

         4.4.     The Committee shall have the power to adopt regulations for
carrying out the Plan and to make changes in such regulations as it shall, from
time to time, deem advisable. The Committee shall have the full and final
authority in its sole discretion to interpret the provisions of the Plan and to
decide all questions of fact arising in the application of the Plan's
provisions, and to make all determinations necessary or advisable for the
administration of the Plan. Any interpretation by the Committee of the terms and
provisions of the Plan and the administration thereof, and all action taken by
the Committee, shall be final, binding, and conclusive for all purposes and upon
all Participants.

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         4.5.     Members of the Committee shall receive such compensation for
their services as may be determined by the Board. All expenses and liabilities
which members of the Committee incur in connection with the administration of
the Plan shall be paid by the Company. The Committee may, with the approval of
the Board, employ attorneys, consultants, accountants and other service
providers. The Committee, the Board, the Company and the Company's officers
shall be entitled to rely upon the advice and opinions of any such person. No
member of the Committee or the Board shall be personally liable for any action,
determination or interpretation made with respect to the Plan and all members of
the Committee and the Board shall be fully protected by the Company in respect
of any such action, determination or interpretation in the manner provided in
the Company's bylaws.

5.       SHARES OF STOCK SUBJECT TO THE PLAN

         5.1.     Subject to adjustment as provided in Section 9, the total
number of shares of Common Stock available for Awards under the Plan shall be
750,000 shares.

         5.2.     Any shares issued hereunder may consist, in whole or in part,
of authorized and unissued shares or treasury shares. Any shares issued by the
Company through the assumption or substitution of outstanding grants from an
acquired company shall not reduce the number of shares of Common Stock available
for Awards under the Plan. If any shares subject to any Award granted hereunder
are forfeited or such Award otherwise terminates without the issuance of such
shares or the payment of other consideration in lieu of such shares, the shares
subject to such Award, to the extent of any such forfeiture or termination,
shall again be available for Awards under the Plan.

6.       OPTIONS

         The grant of Options shall be subject to the following terms and
conditions:

         6.1.     OPTION GRANTS: Any Option granted under the Plan shall be
evidenced by a written agreement executed by the Company and the Participant,
which agreement shall conform to the requirements of the Plan and may contain
such other provisions not inconsistent with the terms of the Plan as the
Committee shall deem advisable.

         6.2.     NUMBER OF SHARES: The Committee shall specify the number of
shares of Common Stock subject to each Option.

         6.3.     OPTION PRICE: The price per share at which Common Stock may be
purchased upon exercise of an Option shall be as determined by the Committee.

         6.4.     TERM OF OPTION AND VESTING: The Committee shall specify when
an Option may be exercisable and the terms and conditions applicable thereto.
The term of an Option shall in no event be greater than 10 years. The right to
exercise an Option or the underlying shares of Common Stock obtained upon the
exercise of an Option may be subject to a vesting schedule or

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the attainment of Performance Goals as determined by the Committee and set forth
in the applicable stock option agreement.

         6.5.     EXERCISE OF OPTION AND PAYMENT OF OPTION PRICE: An Option may
be exercised only for a whole number of shares of Common Stock. The Committee
shall establish the time and the manner in which an Option may be exercised. The
option price of the shares of Common Stock received upon the exercise of an
Option shall be paid in full in cash at the time of the exercise or, with the
consent of the Committee, in whole or in part in Common Stock held by the
Participant for at least 6 months and valued at their Fair Market Value on the
date of exercise. With the consent of the Committee, the option price may also
be paid in full by the delivery of a properly executed exercise notice, together
with irrevocable instructions to a Company-designated broker to promptly deliver
to the Company the amount of sale or loan proceeds required to pay the exercise
price.

         6.6.     TERMINATION BY DEATH OR DISABILITY: If a Participant's
employment with or service to the Company, a Subsidiary or Affiliate terminates
by reason of death or as a result of the Participant's Disability, any
unexercised Option granted to the Participant may thereafter be exercised (to
the extent such Option was exercisable at the time of the Participant's death or
Disability or to a greater extent permitted by the Committee) by the Participant
(or where appropriate, the Participant's transferee, personal representative,
heir or legatee), for, in the case of a Participant's death, a period of one
year (or such other period as specified by the Committee), or in the case of a
Participant's Disability, a period of six months (or such other period as
specified by the Committee), from the date of death or termination due to
Disability, as applicable, or until the expiration of the stated term of the
Option, whichever period is shorter.

         6.7.     TERMINATION FOR MISCONDUCT: If a Participant's employment with
or service to the Company, a Subsidiary or Affiliate terminates for Misconduct,
unless otherwise determined by the Committee, any Options granted to the
Participant which are unexercised shall terminate on the date of such
termination, or notice of such termination, if earlier.

         6.8.     RETIREMENT: The Committee shall have the discretion at the
time an Option is granted to an Employee to provide that if the Participant's
employment is terminated for reasons other than Misconduct after the Participant
has attained age 55 and completed five years of service with the Company, a
Subsidiary or Affiliate:

                  6.8.1.   The Option shall continue to vest for up to three
years following such termination of employment according to the same vesting
schedule as then in effect under the Option, provided that such continued
vesting will not extend beyond the original date of expiration of the Option,
and/or

                  6.8.2.   The Participant will have a period of up to three
years after such termination of employment to exercise the Option, provided such
exercise period will not extend beyond the original date of expiration of the
Option.

                                      -7-
<PAGE>

         6.9.     OTHER TERMINATION: If a Participant's employment with or
service to the Company, a Subsidiary or Affiliate terminates for any reason
other than death, Disability, Retirement under Section 6.8 or Misconduct, any
unexercised Option granted to the Participant may thereafter be exercised (to
the extent such Option was exercisable at the time of the Participant's
termination or to a greater extent permitted by the Committee) by the
Participant (or, where appropriate, the Participant's transferee, personal
representative, heir or legatee) for a period of ninety days (or such other
period as specified by the Committee), from the date of termination, or until
the expiration of the stated term of the Option, whichever period is shorter.

7.       STOCK APPRECIATION RIGHTS

         The grant of SARs shall be subject to the following terms and
conditions:

         7.1.     GRANT OF SARS: Any SAR granted under the Plan shall be
evidenced by a written agreement executed by the Company and the Participant,
which agreement shall conform to the requirements of the Plan and may contain
such other provisions not inconsistent with the terms of the Plan as the
Committee shall deem advisable. The base price of an SAR shall be the Fair
Market Value of the Common Stock on the date of grant.

         7.2.     TANDEM SARS: An SAR granted under the Plan may be granted in
tandem with all or a portion of a related Option. An SAR granted in tandem with
an Option may be granted either at the time of the grant of the Option or at a
time thereafter during the term of the Option and shall be exercisable only to
the extent that the related Option is exercisable. The base price of an SAR
granted in tandem with an Option shall be the option price under the related
Option.

         7.3.     EXERCISE OF AN SAR: An SAR shall entitle the Participant to
surrender unexercised the SAR (or any portion of such SAR) and to receive a
payment equal to the excess of the Fair Market Value of the shares of Common
Stock covered by the SAR on the date of exercise over the base price of the SAR.
Such payment may be in cash, in shares of Common Stock, in shares of Restricted
Stock, or any combination thereof, as the Committee shall determine. Upon
exercise of an SAR issued in tandem with an Option or lapse thereof, the related
Option shall be canceled automatically to the extent of the number of shares of
Common Stock covered by such exercise, and such shares shall no longer be
available for purchase under the Option. Conversely, if the related Option is
exercised, or lapses, as to some or all of the shares of Common Stock covered by
the grant, the related SAR, if any, shall be canceled automatically to the
extent of the number of shares of Common Stock covered by the Option exercise.

         7.4.     OTHER APPLICABLE PROVISIONS: SARs shall be subject to the same
terms and conditions applicable to Options as stated in sections 6.4, 6.6, 6.7,
6.8 and 6.9.

8.       RESTRICTED STOCK

         An Award of Restricted Stock is a grant by the Company of a specified
number of shares of Common Stock to the Participant, which shares are subject to
forfeiture upon the

                                      -8-
<PAGE>

happening of specified events or upon the Participant's and/or Company's failure
to achieve Performance Goals established by the Committee. A grant of Restricted
Stock shall be subject to the following terms and conditions:

         8.1.     GRANT OF RESTRICTED STOCK AWARD. Any Restricted Stock granted
under the Plan shall be evidenced by a written agreement executed by the Company
and the Participant, which agreement shall conform to the requirements of the
Plan, and shall specify (i) the number of shares of Common Stock subject to the
Award, (ii) the Restriction Period applicable to each Award, (iii) the events
that will give rise to a forfeiture of the Award, (iv) the Performance Goals, if
any, that must be achieved in order for the restriction to be removed from the
Award, (v) the extent to which the Participant's right to receive Common Stock
under the Award will lapse if the Performance Goals, if any, are not met, and
(vi) whether the Restricted Stock is subject to a vesting schedule. The
agreement may contain such other provisions not inconsistent with the terms of
the Plan as the Committee shall deem advisable.

         8.2.     DELIVERY OF RESTRICTED STOCK. Upon determination of the number
of shares of Restricted Stock to be granted to the Participant, the Committee
shall direct that a certificate or certificates representing the number of
shares of Common Stock be issued to the Participant with the Participant
designated as the registered owner. The certificate(s) representing such shares
shall be legended as to restrictions on the sale, transfer, assignment, or
pledge of the Restricted Stock during the Restriction Period and deposited by
the Participant, together with a stock power endorsed in blank, with the
Company.

         8.3.     DIVIDEND AND VOTING RIGHTS. Unless otherwise determined by the
Committee, during the Restriction Period, the Participant shall have all of the
rights of a shareholder, including the right to vote the shares of Restricted
Stock and receive dividends and other distributions, provided that distributions
in the form of Common Stock shall be subject to the same restrictions as the
underlying Restricted Stock.

         8.4.     RECEIPT OF COMMON STOCK. At the end of the Restriction Period,
the Committee shall determine, in light of the terms and conditions set forth in
the Restricted Stock agreement, the number of shares of Restricted Stock with
respect to which the restrictions imposed hereunder shall lapse. The Restricted
Stock with respect to which the restrictions shall lapse shall be converted to
unrestricted Common Stock by the removal of the restrictive legends from the
Restricted Stock. Thereafter, Common Stock equal to the number of shares of the
Restricted Stock with respect to which the restrictions hereunder shall lapse
shall be delivered to the Participant (or, where appropriate, the Participant's
legal representative). The Committee may, in its sole discretion, modify or
accelerate the vesting and delivery of shares of Restricted Stock.

         8.5.     TERMINATION OF SERVICE. Unless otherwise determined by the
Committee, if a Participant's employment or service with the Company, a
Subsidiary or an Affiliate terminates for any reason, any unvested Restricted
Stock shall be forfeited.

                                      -9-
<PAGE>

9.       ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

         In the event of a reorganization, recapitalization, stock split,
spin-off, split-off, split-up, stock dividend, issuance of stock rights,
combination of shares, merger, consolidation or any other change in the
corporate structure of the Company affecting Common Stock, or any distribution
to shareholders other than a cash dividend, the Committee shall make appropriate
adjustment in the number and kind of shares authorized for use under the Plan
and any adjustments to outstanding Awards as it determines appropriate. The
adjustments to outstanding Awards shall include, but not be limited to, the
number of shares covered, the respective prices, limitations, and/or Performance
Goals applicable to the outstanding Awards. No fractional shares of Common Stock
shall be issued pursuant to such an adjustment. The Fair Market Value of any
fractional shares resulting from adjustments pursuant to this Section shall,
where appropriate, be paid in cash to the Participant. The determinations and
adjustments made by the Committee pursuant to this Section 9 shall be
conclusive.

10.      CHANGE OF CONTROL OF THE COMPANY

         Upon a Change of Control, all outstanding Awards shall be immediately
fully vested and exercisable unless such Awards are assumed by the successor
corporation, and substituted with Awards involving the common stock of the
successor corporation, with the terms and conditions of the substituted Awards
being no less favorable than the Awards granted by the Company.

11.      EFFECTIVE DATE, TERMINATION AND AMENDMENT

         The Plan shall become effective on the date of its adoption by the
Board. The Plan shall remain in full force and effect until the earlier of 10
years from the date of its adoption by the Board, or the date it is terminated
by the Board. The Board shall have the power to amend, suspend or terminate the
Plan at any time, provided that no such amendment shall be made without
shareholder approval to the extent such approval is required by any applicable
law or the rules of a stock exchange or NASDAQ. Termination of the Plan pursuant
to this Section 11 shall not affect Awards outstanding under the Plan at the
time of termination.

12.      TRANSFERABILITY

         Awards may not be pledged, assigned or transferred for any reason
during the Participant's lifetime, and any attempt to do so shall be void and
the relevant Award shall be forfeited.

13.      GENERAL PROVISIONS

         13.1.    NO EMPLOYMENT RIGHTS. Nothing contained in the Plan, or any
Award granted pursuant to the Plan, shall confer upon any Employee any right
with respect to continuance of employment by the Company, a Subsidiary or
Affiliate or upon any Consultant any right with respect to continued service for
the Company, a Subsidiary or Affiliate nor interfere in any way

                                      -10-
<PAGE>

with the right of the Company, a Subsidiary or Affiliate to terminate the
employment or service of any Employee or Consultant at any time.

         13.2.    TRANSFER OF EMPLOYMENT. For purposes of this Plan, a transfer
of employment between the Company and its Subsidiaries and Affiliates shall not
be deemed a termination of employment.

         13.3.    PAYMENT OF TAXES. The Company shall have the power to
withhold, or require a Participant to remit to the Company, all taxes required
to be paid in connection with any Award, the exercise thereof and the transfer
of shares of Common Stock pursuant to this Plan. The Company's power to withhold
a portion of the cash or Common Stock received pursuant to an Award, or require
that the Participant remit the applicable taxes shall extend to all applicable
Federal, state, local or foreign withholding taxes. In the case of the exercise
of Options, the Company shall have the right to retain the shares of Common
Stock to be paid pursuant to the exercise of the Option, until the Company
determines that the applicable withholding taxes have been satisfied.

         13.4.    RESTRICTIONS ON SHARES. The Award Shares shall be subject to
restrictions on transfer pursuant to applicable securities laws and such other
agreements as the Committee shall deem appropriate and shall bear a legend
subjecting the Award Shares to those restrictions on transfer in accordance with
the applicable Award. The certificates shall also bear a legend referring to any
restrictions on transfer arising hereunder or under any other applicable law,
regulation, rule or agreement.

         13.5.    REQUIREMENTS OF LAW. The Plan and each Award under the Plan
shall be subject to the requirement that if at any time the Committee shall
determine that (a) the listing, registration or qualification of the Award
Shares upon any securities exchange or under any state or federal law, (b) the
consent or approval of any government regulatory body or (c) an agreement by the
recipient of an Award with respect to the disposition of the Award Shares is
necessary or desirable as a condition of, or in connection with, the Plan or the
granting of such Award or the issue or purchase of the Award Shares thereunder,
the Award may not be consummated in whole or in part until such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.

         13.6.    AMENDING OF AWARDS. The Committee may amend any outstanding
Awards to the extent it deems appropriate. Such amendment may be made by the
Committee without the consent of the Participant, except in the case of
amendments adverse to the Participant, in which case the Participant's consent
is required to any such amendment.

         13.7.    NO SHAREHOLDER RIGHTS. A Participant shall have no rights as a
shareholder with respect to shares of Common Stock subject to an Award unless
and until certificates for the Award Shares are issued to the Participant.

                                      -11-
<PAGE>

         13.8.    CHANGES IN CURRENT LAW. A citation to any law, regulation or
rule herein shall be construed to be a citation to the most recent version of,
or successor to, any such law, regulation or rule.

         13.9.    HEADINGS. Section headings are included only for ease of
reference. Headings are not intended to constitute substantive provisions of the
Plan and shall not be used to interpret the scope of this Plan or the rights or
obligations of the Company in any way.

         13.10.   GOVERNING LAW. To the extent that Federal laws do not
otherwise control, the Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of the State of Delaware and
construed accordingly.

                                      -12-
<PAGE>

                  To record the adoption of the Plan, Pharmacopeia, Inc. has
caused its authorized officers to affix its corporate name and seal this 11th
day of October, 2000.

                                           PHARMACOPEIA, INC.

Attest:

/s/ Salma Cuadrado                         By: /s/ Bruce C. Myers
--------------------------------------        ----------------------------------

                                      -13-

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