Document:

Exhibit
10.5

 

DISENGAGEMENT
AGREEMENT AND RELEASE

 

This Disengagement Agreement and Release (the
“Agreement”) is entered into as of the 31st day of March, 2004, by and between
PHARMACOPEIA, INC., a Delaware corporation (the “Company”), and JOSEPH A.
MOLLICA, (hereinafter, “Dr. Mollica”).

 

BACKGROUND

 

WHEREAS, Dr. Mollica has served as Chairman of the
Board of Directors and Chief Executive Officer of the Company pursuant to the
terms of an Employment Agreement dated as of February 26, 2001, as amended
on May 1, 2003 (the “Employment Agreement”); and

 

WHEREAS, the Company intends to distribute to holders
of its common stock all of the issued and outstanding shares of common stock of
its wholly owned subsidiary, Pharmacopeia Drug Discovery, Inc. (“PDD”) (such distribution,
the “Spin Transaction”); and

 

WHEREAS, immediately upon the completion of the Spin
Transaction (the “Termination Date”), Dr. Mollica will be terminated as an
employee of the Company and will cease to serve as Chairman of the Board of
Directors and Chief Executive Officer of the Company (the “Termination”); and

 

WHEREAS, the Termination is an event covered by
Section 4(a) of the Employment Agreement; and

 

WHEREAS, the parties hereto desire to set forth their
respective rights and obligations with respect to the Termination, and to
clarify the benefits to which Dr. Mollica is entitled pursuant to the
Employment Agreement.

 

 

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:

 

1.             Termination.  The parties hereby agree that Dr. Mollica’s
employment with the Company shall be terminated as of the Termination
Date.  Except as expressly provided in
this Agreement, the Employment Agreement and all rights and obligations of Dr.
Mollica and the Company with respect to Dr. Mollica’s employment with the
Company are duly and effectively terminated as of the Termination Date.  Dr. Mollica acknowledges and agrees that,
except as provided herein, 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 Dr.
Mollica is currently eligible as of the Termination Date.  Dr. Mollica hereby resigns as Chief
Executive Officer, and Chairman of the Board of Directors of the Company and
from all other executive officer positions of the Company effective as of the
Termination Date.  Dr. Mollica also resigns
as a member of the Board of Directors of the Company effective as of the
Termination Date.

 

2.             Severance and Other Payments.

 

(a)           The
Company shall pay to Dr. Mollica all compensation, benefits and professional
and business expenses accrued, but unpaid, up to the Termination Date.  Dr. Mollica shall also be entitled to
receive his accrued or vested benefits and/or account balances under the
Company’s deferred compensation and tax-qualified retirement plans in accordance
with the terms of such plans.

 

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(b)           The
Company shall pay Dr. Mollica on the Termination Date an amount equal to
$107,000, representing Dr. Mollica’s accrued but unused vacation.

 

(c)           As
a severance payment and in lieu of any payments otherwise due under the first
sentence of Section 4(a)(2) of the Employment Agreement, the Company agrees to
pay Dr. Mollica on the Termination Date an amount equal to $1,060,000.

 

(d)           Further,
in lieu of any Incentive Bonuses, as defined in the Employment Agreement, to
which Dr. Mollica otherwise may have become entitled under Section 4(a)(2) of
the Employment Agreement, the Company shall credit to Dr. Mollica on the
Termination Date the amount of $795,000, which will be deferred as bonus
compensation under the Company’s Deferred Compensation Plan in accordance with
and subject to that plan’s terms.

 

(e)           The
Company shall credit to Dr. Mollica an additional bonus in the amount of
$250,000.  Such bonus shall be credited
as follows:  (i) $125,000 on the Termination
Date and (ii) $125,000 upon the employment by PDD of its Chief Executive
Officer who shall succeed Dr. Mollica in such position.  These amounts will be deferred as bonus
compensation under the Company’s Deferred Compensation Plan in accordance with
and subject to that plan’s terms.

 

3.             Stock
Options; Restricted Stock.  The
parties acknowledge that pursuant to the Company’s 1994 Incentive Stock Plan
(the “Stock Plan”) and related Stock Option Agreements, Dr. Mollica has been
granted stock options (the “Options”, as set forth on Annex A hereto) to
purchase a total of 690,700 shares of common stock of Pharmacopeia, Inc.
(“Common Stock”), which Options shall be adjusted to reflect the consummation
of the Spin Transaction as set forth on Annex A hereto.  Dr. Mollica has also been granted 5,700
shares of restricted 

 

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Common Stock pursuant to the Stock Plan and related Restricted Stock
Agreement (the “Restricted Stock”), which vest under the terms of the grant on
the Termination Date.  Any unvested
Options which were granted to Dr. Mollica prior to February 26, 2001, after
giving consideration to the effect to the adjustments arising from the Spin
Transaction as set forth on Annex A hereto, shall immediately vest upon the
Termination Date, and shall otherwise remain outstanding in accordance with the
terms of the related Stock Option Agreements. 
The expiration date of the exercise period for such Options shall be the
earlier of (i) thirty (30) days following the second anniversary of the
Termination Date (in the case of the “PDD Options”, as listed on Annex A
hereto, the second anniversary of the date on which Dr. Mollica’s service as an
employee and director of PDD terminates), or (ii) the tenth (10th)
anniversary of the date of grant.  All
other Options shall remain subject to the terms of the applicable Stock Option
Agreements, and shall vest and remain exercisable in accordance with the
“retirement” provisions of Section 8(b)(vii) of the Stock Plan.

 

4.             Benefits.  Dr. Mollica will continue to be eligible to
participate in the Company’s group health (medical and dental) plans as offered
to active employees under the provisions of COBRA, as well as the Company’s
group life insurance plan.  The Company
will pay the premiums under such plans until the second anniversary of the
Termination Date.  As of that date,
Dr. Mollica may, with respect to the group health plans, continue COBRA at
his own cost.  In addition, until the
second anniversary of the Termination Date, the Company will reimburse Dr.
Mollica for the cost of obtaining additional term life insurance in an amount
equal to $1,060,000, subject to a maximum annual reimbursement of $20,000.

 

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5.             Legal
Fees.  The Company agrees to pay the
reasonable legal fees and expenses of Shearman & Sterling in representing
Dr. Mollica with respect to this Agreement and Dr. Mollica’s letter agreement
with PDD executed contemporaneously with this Agreement, in an amount not to
exceed $15,000.

 

6.             Country
Club.  The Company agrees to
transfer to Dr. Mollica, promptly after the Termination Date, the Company’s
membership in the Jasna Polana Country Club, in consideration for a payment by
Dr. Mollica to the Company of $50,000.

 

7.             Non-Competition.  The Company and Dr. Mollica acknowledge and
reaffirm the non-competition agreement and understandings set forth in Section
13 of the Employment Agreement and all of the provisions, terms and conditions
of Section 13 of the Employment Agreement are incorporated by reference
herein.  The parties hereto acknowledge
that Dr. Mollica may serve as a consultant, employee or director of PDD and
that such an engagement will not be deemed a breach of the non-competition
provisions set forth herein.

 

8.             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, Dr. Mollica 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 Dr. Mollica ever
had, now has or hereafter can, shall or may have for, upon or by any reason of
any matter, cause or thing (collectively, “Dr. Mollica Claims”) whatsoever,
occurring up to and including the date Dr. Mollica signs this Agreement, against
the 

 

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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, the Stock Option and Restricted Stock
Agreements referenced in Section 3 hereof. 
Such Dr. Mollica Claims include, but are not limited to, all claims for
breach of contract, wrongful discharge, 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 Protection Act.  Notwithstanding
anything herein to the contrary, such Dr. Mollica 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.  Nothing set forth in this Section 8(a) shall
in any way affect the Company’s obligations to indemnify Dr. Mollica as a
former employee, officer and director of the Company pursuant to the Company’s
Bylaws and Certificate of Incorporation and Section 10 of the Employment
Agreement, or PDD’s obligations under the letter agreement with Dr. Mollica
executed contemporaneously with this Agreement.

 

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(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 Dr. Mollica signs this Agreement against Dr. Mollica and
his estate and legal representatives and hereby releases, acquits and forever
absolutely discharges Dr. Mollica and his estate and legal representatives of
and from all of the foregoing, except with respect to the obligations of Dr.
Mollica 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, liability, contract, controversy, agreement,
promise, damage judgment, demand or claim relating to, arising under or arising
in connection with any breach by Dr. Mollica of this Agreement.

 

9.             Unknown
Claims.  Both Dr. Mollica and
Company understand that the release of claims described in Section 8 above
covers claims which they know about and those they may not know about.

 

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.

 

10.           Agreement
Not to Sue.  The parties promise
never to file a lawsuit asserting any of the claims that are released in
Section 8 above.  If either does so, and
the action 

 

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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.

 

11.           Further
Acknowledgments.  Dr. Mollica
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 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.

 

12.           Company
Property.  Dr. Mollica 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 (other than
personal copies of documents not containing any confidential or proprietary
information) of same, provided that Dr. Mollica will be entitled to
retain such property to the extent reasonably necessary in connection with Dr.
Mollica’s service as a consultant, employee or director of PDD.

 

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13.           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 and Dr. Mollica may reveal such terms
to his accountants, legal counsel and immediate family members.  In addition, Dr. Mollica agrees not to make
any statement to any third party (other than Dr. Mollica’s accountants and
attorneys) regarding the Company or its affiliates that is derogatory or
reasonably expected to be detrimental to the Company or its affiliates other
than as may be required by applicable law or to enforce this Agreement or to
defend against a claim related thereto. 
The Company agrees not to make any statement to any third party
regarding Dr. Mollica that is derogatory or reasonably expected to be
detrimental to Dr. Mollica other than as may be required by applicable law or
to enforce this Agreement or to defend against a claim related thereto.  In the event this covenant of
confidentiality is breached, the Company and Dr. Mollica will have and may
pursue legal remedies for any damage arising from a breach of this
provision.  Any press release or other
public disclosure relating to the contents of this Agreement or Dr. Mollica’s
termination of employment shall be in a form mutually agreed to between the
Company and Dr. Mollica.

 

14.           Acknowledgment
of Consideration.  Dr. Mollica
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 Dr. Mollica by the Company to cause him to agree to the
terms of this Agreement.

 

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15.           No
Mitigation.  The Company agrees that
Dr. Mollica will not be required to mitigate any payments or benefits from the
Company under this Agreement or otherwise by seeking alternative employment,
nor will any payments or benefits from the Company be reduced by any amounts or
benefits received in connection with any such alternative employment.

 

16.           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.

 

17.           Entire
Agreement, Etc.  This Agreement,
Sections 4(g), 10, 13 and 14 of the Employment Agreement (which are
incorporated herein by reference) and the Stock Plan and related Stock Option
and Restricted Stock Agreements represent the entire understanding between the
parties, and supersede any prior understanding, agreement, practice or
contract, oral or written, between the Dr. Mollica and the Company relating to
Dr. Mollica’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.

 

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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/ James J. Marino

  	
   

  
	
   

  	
   

  	
  James J. Marino

  
	
   

  	
   

  	
  Chair, Corporate Governance Committee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Joseph A. Mollica

  	
  (L.S.)

  
	
   

  	
  JOSEPH A. MOLLICA

  
					

 

11Exhibit 10.1

 

TRANSITION SERVICES
AGREEMENT

 

THIS TRANSITION SERVICES AGREEMENT (this
“Agreement”) is dated as of this 30th day of April, 2004, by and between PHARMACOPEIA, INC., a Delaware corporation
(“Pharmacopeia”), and ACCELRYS INC.,
a Delaware corporation and a wholly owned subsidiary of Pharmacopeia
(Pharmacopeia and Accelrys Inc. are referred to herein collectively as
“Accelrys”), on the one hand, and PHARMACOPEIA
DRUG DISCOVERY, INC., a Delaware corporation (“PDD”), on the other
hand.  Each of Accelrys and PDD is
sometimes hereinafter referred to as a “Party” and together as the “Parties.”

 

WHEREAS, the Parties
have entered into a Master Separation and Distribution Agreement (the
“Distribution Agreement”) pursuant to which Pharmacopeia has agreed to
distribute to its stockholders all of the outstanding shares of common stock of
PDD (the “Distribution”);

 

WHEREAS,
Pharmacopeia and Accelrys Inc., on the one hand, and PDD, on the other hand,
have historically provided or shared, and currently provide or share, certain
services to or with each other;

 

WHEREAS, in
recognition of the historic and current relationship between the businesses,
PDD is interested in receiving certain services from Accelrys, and Accelrys is
interested in providing such services to PDD, during a transition period
commencing on the date of the Distribution (the “Distribution Date”); and

 

WHEREAS, in
recognition of the historic and current relationship between the businesses,
Accelrys also is interested in receiving certain limited services from PDD, and
PDD is interested in providing such services to Accelrys, during such
transition period;

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements, and upon the terms, and
subject to the conditions, hereinafter set forth, the Parties hereby agree as
follows:

 

Article 1                SERVICES

 

1.1.          Provision of Services.  During the Transition Period (as defined
below), subject to the terms and conditions of this Agreement, (a) Accelrys
agrees to provide to PDD and PDD agrees to receive from Accelrys the services
described in Exhibit A hereto (each, an “Accelrys Service” and together, the
“Accelrys Services”), and (b) PDD agrees to provide to Accelrys and Accelrys
agrees to receive from PDD the services described in Exhibit B hereto (each, a
“PDD Service and together, the “PDD Services”).  Each Accelrys Service and PDD Service (as applicable, a
“Service”) shall be provided in good faith and at a level and quality
comparable to that performed by Accelrys or PDD, as applicable, prior to the
date of this Agreement, unless the Parties otherwise agree in writing.  Each of Exhibit A and Exhibit B hereto is
incorporated into and constitutes a part of this Agreement.

 

1.2.          Consideration for Services.

 

a.     In consideration of the mutual covenants, agreements,
undertakings, representations and warranties of the Parties set forth in the
various agreements entered into in connection with the Distribution, including,
without limitation, the Distribution Agreement and the agreements referenced
therein, Accelrys and PDD expressly agree that, except to the extent
specifically set forth in Exhibit A hereto, no fee shall be payable by PDD to
Accelrys in exchange for or in consideration of the provision by Accelrys of
any Accelrys Service and no fee shall be payable by Accelrys to PDD in exchange
for or in consideration of the provision by PDD of any PDD Service.

 

 

b.     The Parties also agree to the Service acquisition and funding
arrangements set forth on Exhibit C hereto, which is incorporated into and
constitutes a part of this Agreement.

 

1.3.          Access.  Each of PDD and Accelrys will make available
to the other Party all information and materials reasonably requested by such
other Party to enable it to provide the Accelrys Services and the PDD Services,
respectively.  Each of PDD and Accelrys
will provide the other Party with reasonable access, upon reasonable prior
notice, to its premises to the extent necessary for the purpose of providing
the relevant Services.

 

1.4.          Independent Contractors.  In performing any service on behalf of the
other Party, each of PDD and Accelrys will act under this Agreement solely as
an independent contractor, and not as an agent of the Party for which the
applicable Services are performed.

 

1.5.          Additional Resources Resulting From
Changes in Business.  If it is
necessary for either Accelrys or PDD to increase staffing or acquire equipment
or make any investments or capital expenditures to accommodate an increase in
the use of any Service beyond the level of use of such Service prior to the
Distribution Date, as a result of an increase in volume of the business or a
change in the manner in which the business is being conducted, such Party will
inform the other Party in writing of such increase in staffing level, equipment
acquisitions, investments or capital expenditures before any such cost or
expense is incurred.  Upon mutual
agreement of the Parties acting in good faith as to the necessity of any such
increase, the Party to receive such Service will advance to the Party to
provide the Service an amount equal to the actual costs and expenses to be
incurred in connection therewith.  If
such mutual agreement is not reached, the obligation of the Party required
hereunder to furnish or cause to be furnished such Service will be limited to
the level of use of such Service in effect prior to the proposed increase.

 

1.6.          Cooperation.  The Parties will use good faith efforts to
reasonably cooperate with each other in all matters relating to the provision
and receipt of Services.  Such cooperation
will include seeking or applying for all consents, licenses or approvals
necessary to permit each Party to perform its obligations hereunder.  The Parties will, for a period of five years
after the Distribution Date, maintain documentation supporting the information
contained in the Exhibits hereto and cooperate with each other in making such
information available as needed, subject to appropriate confidentiality
requirements.

 

1.7.          Disclaimer of Warranty.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
THE SERVICES TO BE PROVIDED UNDER THIS AGREEMENT ARE FURNISHED AS IS, WHERE IS,
WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.

 

Article 2                TERM OF SERVICES

 

2.1.          Transition Period; Early
Termination.  The provision of
Services will commence on the Distribution Date and will terminate no later
than the first anniversary of the Distribution Date (such period being referred
to herein as the “Transition Period”), unless earlier terminated by the Party
receiving the Service(s) or extended by mutual written agreement of the
Parties.  In this connection, any
Service may be cancelled or reduced in amount or scope by the recipient of the
Service upon its provision of advance written notice thereof to the Service
provider.

 

Article 3                LIABILITIES

 

3.1.          Consequential and Other Damages.  No provider of any Service hereunder will be
liable to any person, whether in contract, tort (including negligence and
strict liability) or otherwise, but excluding gross negligence, willful
misconduct or bad faith, in connection with the provision of any

 

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Service pursuant to this
Agreement, for any special, indirect, incidental or consequential damages
whatsoever which in any way arise out of, relate to or are a consequence of the
performance or nonperformance by such Service provider hereunder or the
provision of, or failure to provide, any Service hereunder, including with respect
to loss of profits, business interruptions or claims of customers (other than,
with respect to customers, the Service recipient in its capacity as a customer
of the Service provider).

 

3.2.          Limitation of Liability.  Except as set forth in this Agreement
(including, without limitation, Exhibits A and C hereto), the liability of any
provider of Services with respect to this Agreement or any act or failure to
act in connection herewith (including, but not limited to, the performance or
breach hereof, but excluding gross negligence, willful misconduct or bad faith
in connection with the provision of or failure to provide any Service pursuant
to this Agreement), or from the sale, delivery, provision or use of any Service
provided under or covered by this Agreement, whether in contract, tort
(including negligence and strict liability) or otherwise, will be limited to
the obligation to re-perform the Service as contemplated by Section 3.3 below.

 

3.3.          Obligation To Re-perform.  In the event of any breach of this Agreement
by any provider of Services with respect to the provider’s obligation hereunder
to provide any Service (which breach such Service provider can reasonably be
expected to remedy through the re-performance of the Service in a commercially
reasonable and timely manner), the Service provider will promptly correct in
all material respects such breach or re-perform in all material respects such
Service, subject to Section 3.2, at the request of the recipient of the Service
and at the expense of the Service provider. 
To be effective, any such request by a recipient of Services must be in
a written notice that specifies in reasonable detail the particular error,
defect or breach and be delivered to the Service provider no more than sixty
(60) days from the date such Service was provided.  Notwithstanding anything to the contrary contained in this
Agreement (including, without limitation, this Section 3.3 and Section 3.2
above), nothing contained in this Agreement shall be construed to limit PDD’s
ability to utilize the Services Fund to secure Services or acquire assets under
the circumstances set forth in Exhibit C hereto

 

3.4.          Release and Indemnity.  Except as specifically set forth in this
Agreement, PDD hereby releases Accelrys and each of Accelrys’ employees,
agents, officers and directors (collectively, the “Accelrys Indemnitees”), and
PDD hereby agrees to jointly and severally indemnify, defend and hold harmless
the Accelrys Indemnitees, from and against any and all claims, demands,
complaints, liabilities, losses, damages, costs and expenses arising from or
relating to the use of any Service provided by Accelrys which is incurred or
suffered by PDD or any other person using such Service on PDD’s behalf.  Except as specifically set forth in this
Agreement, Accelrys hereby releases PDD and each of PDD’s employees, agents,
officers and directors (collectively, the “PDD Indemnitees” and together with
the Accelrys Indemnitees, the “Indemnitees”), and Accelrys hereby agrees to
jointly and severally indemnify, defend and hold harmless the PDD Indemnitees,
from and against any and all claims, demands, complaints, liabilities, losses,
damages, costs and expenses arising from or relating to the use of any Service
provided by PDD which is incurred or suffered by Accelrys or any other person
using such Service on Accelrys’ behalf.

 

3.5.          Indemnification Procedures.  The provisions of Section 4.6 of the
Distribution Agreement shall apply to Third Party Claims (as defined in the
Distribution Agreement) arising inconnection with this Agreement; and all other
disputes shall be resolved in accordance with Section 5.7 hereof.

 

Article 4                TERMINATION

 

4.1.          Termination.

 

3

 

a.     The obligation of a
provider of a Service, with respect to any Service to be provided under this
Agreement, shall terminate on the earlier to occur of (a) the last date of the
Transition Period or (b) the date on which the provision of such Service has
terminated or been canceled pursuant to Article 2 or Section 4.2 hereof.

 

b.     The Parties may extend the
Transition Period by mutual written agreement.

 

c.     This Agreement shall
terminate when both Parties have no further obligation to provide any Services
hereunder.

 

4.2.          Breach of Agreement.  Subject to Article 3, if a Party causes or
suffers to exist any material breach of any of its material obligations under
this Agreement, and that Party does not cure such default in all material
respects within thirty (30) days after receiving written notice thereof from the
non-breaching Party, the non-breaching Party may terminate this Agreement,
including the provision of Services pursuant hereto, immediately by providing
written notice of termination to the breaching Party.

 

4.3.          Effect of Termination.  Sections 4.1 and 4.2, this Section 4.3 and
Article 3 and 5 will survive any termination of this Agreement.

 

Article 5                MISCELLANEOUS

 

5.1.          Definitions.  All capitalized terms used but not otherwise
defined herein will have the meanings ascribed to them in the Distribution Agreement.

 

5.2.          Force Majeure.  In the event that the performance of this
Agreement or of an obligation under this Agreement is prevented, restricted or
interfered with by reason of any cause not within the control of the prevented
Party, and which could not by reasonable diligence have been avoided by the
prevented Party, the prevented Party, upon the giving of prompt notice to the
other Party as to the nature and probable duration of the event, will be
excused from its performance to the extent and for the duration of the
prevention, restriction or interference, provided that the prevented Party uses
reasonable commercial efforts to avoid or remove the cause of non-performance
and continues performance under this Agreement whenever and to the extent the cause
or causes are removed.  For the purpose
of this Section 5.2, but without limiting its generality, the following are not
within the control of a Party: acts of God; acts or omissions of a governmental
agency or body; mechanical failures or breakdowns; power failures or
fluctuations; compliance with requests, recommendations, rules, regulations or
orders of any governmental authority or any officer, department, agency, or
instrument thereof; explosion; civil disorder; flood; storm; earthquake; fire;
war; insurrection; riot; accidents; quarantine restrictions; work stoppages
(including strikes or lockouts); shortages of labor; differences with workmen;
embargoes; delays or failures in transportation; and acts of a similar nature.  In the event such a curtailment by either
Party continues in whole or in part, then a recipient of a Service may arrange
for temporary provision of the Services until the provider of the Service can
resume provision of the applicable Services.

 

5.3.          Conflicting Documents.  To the extent that any documents issued in
connection with the provision of the Services contains terms or conditions that
are in conflict with, or derogate from, this Agreement, they will be null and
void and the terms of this Agreement will control.

 

5.4.          Notices.  All notices or other communications
hereunder will be deemed to have been duly given and made if in writing and if
served by personal delivery upon the Party for whom it is intended, if
delivered by registered or certified mail, return receipt requested, by Federal
Express or by other “overnight” courier service, or if sent by fax, provided
that the fax is promptly confirmed by telephone confirmation thereof, to the
person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such person:

 

4

 

	
  If to
  Pharmacopeia or Accelrys Inc., to:

  	
  If to PDD,
  to:

  
	
   

  	
   

  
	
   

  	
  Accelrys,
  Inc.

  	
   

  	
  Pharmacopeia
  Drug Discovery, Inc.

  
	
   

  	
  9685
  Scranton Road

  	
   

  	
  P.O. Box
  5350

  
	
   

  	
  San Diego,
  CA 92121

  	
   

  	
  Princeton,
  NJ  08543

  
	
   

  	
  Attention:  Chief Operating Officer 

  	
   

  	
  Attention:  Chief Operating Officer

  
	
   

  	
  Phone:(858)
  799-5000

  	
   

  	
  Phone:(609)
  452-3651

  
	
   

  	
  Fax
  No.:  (858) 799-5475

  	
   

  	
  Fax
  No.:  (609) 452-3672

  

 

5.5.          Entire Agreement.  The agreement of the Parties, which is
comprised of this Agreement and the Exhibits hereto, sets forth the entire
agreement and understanding among the Parties and supersedes any prior
agreement or understanding, written or oral, relating to the subject matter of
this Agreement.

 

5.6.          Assignment; Binding Effect;
Severability.  Neither Party may
assign its rights or obligations under this Agreement absent the express,
written consent of the other Party. 
Notwithstanding the above, either Party may, without such consent, assign
this Agreement and its rights and obligations hereunder in connection with the
transfer or sale of all or substantially all of its business or the business
unit to which this Agreement pertains, or in the event of its merger,
consolidation, change in control or similar transaction.  The provisions of this Agreement are
severable and, in the event that any one or more provisions are deemed illegal
or unenforceable, the remaining provisions will remain in full force and effect
unless the deletion of such provision will cause this Agreement to become
materially adverse to any Party, in which event the Parties will use reasonable
efforts to arrive at an accommodation which best preserves for the Parties the
benefits and obligations of the offending provision.

 

5.7.          Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, ITS RULES OF
CONFLICT OF LAWS NOTWITHSTANDING.

 

5.8.          Dispute Resolution and Arbitration.

 

a.     Negotiation.  In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to, this Agreement or the transactions contemplated hereby, including, without limitation, any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any agreement relating to the use or lease of real property if any third party is a party to such controversy, dispute or claim) (collectively, “Agreement Disputes”), the Agreement Dispute shall be negotiated in good faith for a reasonable period of time by the Chief Operating Officer of each party (or the equivalent thereof), provided that such reasonable period of time shall not exceed 15 days from the time the Parties began such negotiations.  Should there be no resolution of an Agreement Dispute within a reasonable period of time by such officers of the Parties, the Agreement Dispute shall be negotiated in good faith for a reasonable period of time by the Chief Executive Officers of the Parties, or their respective designees, provided that such reasonable period of time shall not, unless otherwise agreed by the Parties in writing, exceed 10 days from the time the Chief Executive Officers of the Parties, or their respective designees, began such negotiations; provided further that in the event of any arbitration in accordance with Section 5.8(b) hereof, the Parties shall not assert the defenses of statute of limitations and laches arising for the period beginning after the date the Parties began negotiations hereunder, and any

 

5

 

contractual time period or deadline under this Agreement shall not be deemed to have passed until such Agreement Dispute has been resolved.
 
b.     Arbitration.  If after such reasonable period such representatives are unable to settle such Agreement Dispute (and in any event, unless otherwise agreed in writing by the Parties, after 60 days have elapsed from the time the Parties began such negotiations), such Agreement Dispute shall be determined, at the request of either Party, by arbitration conducted in New York City, before and in accordance with the then-existing International Arbitration Rules of the American Arbitration Association (the “Rules”).  In any dispute between the Parties, the number of arbitrators shall be one.  Any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. Section 10(a) as in effect on the date hereof).  If the Parties are unable to agree on an arbitrator, the arbitrator shall be selected in accordance with the Rules.  Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate or as to the interpretation of enforceability of this Section 5.8(b) shall be determined by the arbitrator.  In resolving any dispute, the Parties intend that the arbitrator apply the substantive laws of the State of Delaware, without regard to the choice of law principles thereof.  The Parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable.  The Parties agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to enforcement of or entry of judgment upon such award, by any court of competent jurisdiction, including the Supreme Court of the State of New York, New York County, or the United States District Court for the Southern District of New York.  The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, including, without limitation, monetary damages, specific performance and all other forms of legal and equitable relief; provided, however, that the arbitrator shall not be entitled to award punitive damages.  Without limiting the provisions of the Rules, unless otherwise agreed in writing by or among the relevant Parties or permitted by this Agreement, the Parties shall keep confidential all matters relating to the arbitration or the award, provided, such matters may be disclosed (A) to the extent reasonably necessary in any proceeding brought to enforce the award or for entry of a judgment upon the award and (B) to the extent otherwise required by law.  Notwithstanding Article 32 of the Rules, the Party other than the prevailing Party in the arbitration shall be responsible for all of the costs of the arbitration, including legal fees and other costs specified by such Article 32.  Nothing contained herein is intended to or shall be construed to prevent any Party, in accordance with Article 22(3) of the Rules or otherwise, from applying to any court of competent jurisdiction for interim measures or other provisional relief in connection with the subject matter of any Agreement Disputes.
 
c.     Continuity of Service and Performance.  Unless otherwise agreed in writing, the Parties will continue to provide services and honor all other commitments under this Agreement during the course of dispute resolution pursuant to the provisions of this Agreement with respect to all matters not subject to such dispute, controversy or claim.
 

5.9.          Execution in Counterparts.  This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, and all of which
will constitute one and the same agreement.

 

6

 

5.10.        No Third Party Beneficiaries.  Nothing in this Agreement, express or
implied, is intended to or will (a) confer on any person other than the Parties
hereto and their respective successors or permitted assigns any rights
(including third party beneficiary rights), remedies, obligations or
liabilities under or by reason of this Agreement, or (b) constitute the Parties
hereto as partners or as participants in a joint venture.  This Agreement will not provide third
parties with any remedy, claim, liability, reimbursement, cause of action or
other right in excess of those existing without reference to the terms of this
Agreement.

 

5.11.        Headings.  The headings preceding the text of the
sections and subsections hereof are inserted solely for convenience of reference,
and will not constitute a part of this Agreement, nor will they affect its
meaning, construction or effect.

 

5.12.        Amendment and Waiver.  The Parties may by mutual agreement amend
this Agreement in any respect, and any Party, as to such Party, may (a) extend
the time for the performance of any of the obligations of any other Party, (b)
waive any inaccuracies in representations by any other Party, (c) waive
compliance by any other Party with any of the agreements contained herein and
performance of any obligations by such other Party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such Party
of any of its obligations under this Agreement.  To be effective, any such amendment or waiver must be in writing
and be signed by the Party against whom enforcement of the same is sought.

 

7

 

IN WITNESS
WHEREOF, the Parties have caused this Agreement to be duly executed the day and
year first above written.

 

	
  PHARMACOPEIA, INC.

  	
   

  	
  PHARMACOPEIA
  DRUG DISCOVERY, INC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ John J.
  Hanlon

  	
   

  	
  /s/ Joseph
  A. Mollica, Ph.D.

  	
   

  
	
  Signature

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John J.
  Hanlon

  	
   

  	
  Joseph A.
  Mollica, Ph.D.

  	
   

  
	
  Printed Name

  	
   

  	
  Printed Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Chief
  Financial Officer

  	
   

  	
  President
  and Chief Executive Officer

  	
   

  
	
  Title

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCELRYS INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Mark J.
  Emkjer

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Mark J.
  Emkjer

  	
   

  	
   

  
	
  Printed Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  President
  and Chief Executive Officer

  	
   

  	
   

  
	
  Title

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