Document:

Exhibit
10.1

September 5, 2007

Eric J. Liebler

 

Dear Eric:

I am pleased to offer you
the following opportunity with Pharmacopeia, Inc.  It is my sincere hope that you will choose to
join our organization, as it is our belief that you possess the ability to make
significant contribution toward our future growth and innovation.  The following will confirm the terms of our
offer of employment to you.

Position/Location:
You will assume the position of Executive Vice President, Corporate Development
(the “Position”), based in our
Cranbury, New Jersey headquarters and in this position will report directly to
Leslie J. Browne, PhD., President and Chief Executive Officer.  The Position shall be part of both
Pharmacopeia’s executive management committee (EMC) and senior management team
(SMT) and shall require you to assume responsibility for duties generally
associated with the Executive Vice President, Corporate Development position.

Compensation:
Your compensation in the Position
will include an annual base salary of $275,000.00, paid semi-monthly at the
rate of $11,458.33 per pay period.  This
will be your base salary until our 2007 Salary Review, effective March 1,
2008.  Any salary increase, due to the
2007 Salary Review, will be prorated to reflect the duration of your service
during the year.

Effective September 17,
2007, or upon your actual start date, whichever is later, you will participate
in our annual management incentive program and will be eligible to earn, at
target, an additional 35% of your base salary based upon the achievement of
corporate and individual objectives.  For
2007, any such additional compensation earned under the program will be
prorated to reflect the duration of your service during the year.

Employment
and Benefits: As an employee of Pharmacopeia, you will
participate in our comprehensive employee benefits package.  We are committed to maintaining a competitive
position in the employment marketplace and in doing so will make available to
you the standard employee benefits package generally provided to employees.
This will include, but is not limited to, health, disability, and life
insurance; participation in our 401(k) retirement plan; vacation benefits; and
participation in our equity compensation plan. 
Additionally, you will be eligible to participate in our Executive Life
and Long Term Disability plans.  Please
find a complete summary of our benefits enclosed for your review.

 

Severance
Provisions: We have provided a separate Severance
Agreement that details our mutual obligations and commitments upon the
termination of your employment.

Stock Option Grant:
Upon joining Pharmacopeia, you will be awarded an option (the “Option”) for
150,000 shares of Pharmacopeia common
stock.  The Option will be memorialized
in an option agreement with standard terms consistent with this letter
agreement and your severance agreement. 
The shares of common stock underlying the Option will vest over a 4-year
period, 25% at the end of the first year and monthly thereafter.  All the shares underlying the Option will be
priced at the per share closing price of Pharmacopeia common stock on the
Nasdaq Global Market on your first day of employment with us.

Relocation Terms:
Pharmacopeia will agree to pay for reasonable and customary expenses associated
with your relocation to the Princeton area. 
Relocation expenses can include the following:

·                  House hunting trips for you and your family

·                  Packing,
moving and storage of your household goods

·                  Closing
costs associated with the sale of your home, including realtors fees

·                  Closing
costs associated with the purchase of a home near corporate headquarters

·                  Travel
expenses associated with the aforementioned

·                  Non-reoccurring,
one-time expenses (automobile registration, utility connection charges etc.)

·                  Tax gross up on applicable,
approved expenses

Upon your acceptance of
this offer, we will establish a budget to cover these costs under which all
expenditures must be approved in advance. 
Should you voluntarily terminate your employment with the company
without “Good Reason” (as that phrase is defined in the Severance Agreement
between you and Pharmacopeia) prior to one (1) year from the date of your
relocation, you will agree to repay to the company all monies paid to you or on
your behalf in association with your relocation.

Vacation: 
You will receive four weeks vacation annually, prorated in 2007 for the
number of months you are employed by Pharmacopeia.

Reimbursement
of Expenses: 
Pharmacopeia will reimburse you for all normal items of travel,
entertainment and other business expenses reasonably incurred by you on behalf
of Pharmacopeia.  Such expenses shall be
documented and submitted to Pharmacopeia in accordance with the reimbursement
policies of Pharmacopeia in effect from time to time.

Attorney
Fees:  Pharmacopeia agrees to pay the
reasonable legal fees you incur in the negotiation and execution of this
agreement, in an amount not to exceed $3,000. 

Confidentiality:  Due to the nature of your responsibilities,
you will be required to execute the Pharmacopeia’s Proprietary Information and
Inventions Agreement upon commencement of your employment with us.  We
enclose a copy of that agreement for your review.

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Consideration
and Response Times: We would appreciate a response to
this offer no later than September 6, 2007.

Start
Date: We will mutually agree to a start date and propose
it to be September 17, 2007.

This letter supersedes
any prior or contrary representations that may have been made by Pharmacopeia,
Inc.  The terms of this offer may be
amended only in a writing signed by you and an authorized officer of
Pharmacopeia.  This offer is subject to
satisfactory documentation with respect to your identification and right to
work in the United States.  Please sign
and return one copy of the letter.

We look forward to your
participation as a member of the Pharmacopeia team and your involvement in what
we are confident represents an exciting and professionally rewarding venture.

	
  

  	
  On Behalf of

  	
   

  	
   

  
	
   

  	
  Pharmacopeia, Inc.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
    /s/ BRIAN M. POSNER

  	
   

  	
   

  
	
   

  	
  Brian M. Posner, CPA, MBA

  	
   

  	
   

  
	
   

  	
  Executive Vice President, Chief Financial Officer
  and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signed and agreed by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
    /s/ ERIC J. LIEBLER

  	
   

  	
  September 6,
  2007

  	
   

  
	
   

  	
  Eric J. Liebler

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 3Exhibit
10.2

SEVERANCE AGREEMENT

This
SEVERANCE AGREEMENT (the “Agreement”)
is made and entered into as of the 6th day of September, 2007, by and between PHARMACOPEIA, INC., a Delaware corporation (hereinafter, the “Company”),
and Eric J. Liebler, an individual (hereinafter, “Employee”).

RECITALS

WHEREAS,
Employee shall be employed by the Company the capacity of Executive Vice
President, Corporate Development of the Company, pursuant to a Letter Agreement
between the Company and Employee, dated September 5, 2007 (the “Letter
Agreement”).

WHEREAS, the Company desires to provide
certain benefits and payments to Employee in the event of the termination of
Employee’s employment with the Company.

WHEREAS, Employee desires to accept such
benefits and payments on the terms and subject to the conditions set forth in
this Agreement.

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

1.             TERMINATION
AND EFFECT OF TERMINATION.  Employee’s
employment hereunder is AT WILL and may be terminated at any time by the
Company for any reason.  In the event of
termination of Employee’s employment, the Company shall have no liability to
Employee for compensation or benefits except as specified in this Section 1 or
as required by the Company’s benefits policy.

(a)           Termination
By The Company For Cause. 
Employee’s employment may be terminated by the Company for Cause (as
defined below) at any time upon delivery of written notice to Employee.  Upon such a termination, the Company shall
have no obligation to Employee other than the payment of all accrued, but
unpaid, base salary and any unpaid expenses or expense reimbursements prior to
the effective date of such termination. 
For purposes of this Agreement, “Cause” means the occurrence of any one
or more of the following events or conditions:

(i)            any gross failure on the part of
Employee (other than by reason of disability as provided in Section 1(e) below)
to faithfully and professionally carry out Employee’s duties or to comply with
any other material provision of this Agreement, which failure continues for
thirty (30) days after written notice detailing such failure is delivered by
the Company; provided, that the Company shall not be required to provide such
notice in the event that such failure (A) is not susceptible to remedy or (B)
relates to the same type of acts or omissions as to which notice has been given
on a prior occasion;

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

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

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

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

(vi)          any wanton or willful dereliction of duties by Employee.

(b)           Involuntary Termination By The
Company Without Cause. 
The Company may involuntarily terminate Employee’s employment under this
Agreement at any time without Cause upon delivery of written notice to
Employee.  Subject to the provisions of
Section 1(g) hereof (concerning a termination in connection with a Change in
Control (as defined in Section 1(g)), if Employee’s employment is terminated
involuntarily by the Company without Cause pursuant to this Section 1(b), the
Company shall:

(i)             
pay Employee all compensation and benefits accrued, but unpaid, up to
the effective date of termination of Employee’s employment; 

(ii)            
pay Employee, within thirty (30) days after the effective date of
termination of Employee’s employment, a lump sum amount equal to twelve (12)
months of Employee’s base salary in effect as of the effective date of
termination of Employee’s employment;

(iii)           
pay  Employee, within thirty (30)
days after the effective date of termination of Employee’s employment, a lump
sum pro rata portion of Employee’s target incentive bonus for the calendar year
in which Employee’s employment is terminated as provided in this Section 1(b),
such portion to be based on the number of full months for which Employee was
employed  during the year of  termination;

(iv)          maintain Employee’s group medical
coverage until the earlier of (A) the end of a period of twelve (12) months
following the effective date of such termination, or (B) until such time as
comparable medical coverage is obtained by Employee; and

(v)           allow all vested options or other
incentive securities to be exercised pursuant to the terms of the option
agreement or other agreements under which such options or other incentive
securities were granted.

(c)           Termination By Employee
For Good Reason.  

(i)            Benefits.  Employee may terminate Employee’s employment
under this Agreement for Good Reason (as defined below) upon the provision of
advance written notice to the Company specifying in reasonable detail the
events or conditions upon which Employee is basing such termination.  Employee must give such notice within ninety
(90) days after the event that gives rise to Good Reason.  The Company will be given the opportunity,
but shall have no obligation, to “cure” such events or conditions within thirty
(30) days after the provision by Employee of such notice.  Subject to the provisions of Section 1(g)
hereof (concerning a termination in connection with a Change in Control), if
the Company elects in a written notice to Employee not to cure such events or
conditions or otherwise fails to so cure such events or conditions within such
thirty (30) day period, Employee may terminate his employment with the Company
for Good Reason pursuant to this Section 1(c) within thirty (30) days after the
expiration of the “cure” period.  In the
event of such termination, the Company shall:

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(A)          pay Employee all compensation and
benefits accrued, but unpaid, up to the effective date of termination of
Employee’s employment;

(B)           pay Employee, within thirty (30) days
after the effective date of termination of Employee’s employment, a lump sum
amount equal to twelve (12) months of Employee’s base salary in effect as of
the effective date of termination of Employee’s employment;

(C)           pay Employee, within thirty (30) days
after the effective date of termination of Employee’s employment, a lump sum
pro rata portion of Employee’s target incentive bonus for the calendar year in
which Employee’s employment is terminated as provided in this Section 1(c),
such portion to be based on the number of full months for which Employee was
employed during the year of termination;

(D)          maintain Employee’s group medical
coverage until the earlier of (A) the end of 
a period of twelve (12) months following the effective date of such
termination, or (B) until such time as comparable medical coverage is obtained
by Employee; and

(E)           allow all vested options or other
incentive securities to be exercised pursuant to the terms of the option
agreement or other agreements under which such options or other incentive
securities were granted.

(ii)           Definition of “Good Reason.” For
purposes of this Agreement, “Good Reason” means any one or more of the
following events or conditions:

(A)          a material diminution in Employee’s
base compensation (other than such a reduction applicable generally to substantially
all employees of the Company) (for this purpose, a “material diminution” means
a reduction by more than twenty percent (20%) in Employee’s annual base salary
as in effect on the date of this Agreement or as the same may be increased from
time to time after such date and prior to the delivery of such notice);

(B)           a material diminution in Employee’s
authority, duties or responsibilities from those in effect on the date of this
Agreement (for this purpose, a “material diminution” includes any change in the
reporting relationship between the Employee and the Chief Executive Officer
(CEO)); a material change in the geographic location at which Employee must
perform services (for this purpose, a “material change” means a change to a
location more than fifty (50) miles from Employee’s principal office location
on the date of this Agreement); or

(C)           any other action or inaction that
constitutes a material breach by the Company of this Agreement or the Letter
Agreement.

(d)           Termination By Employee
Without Good Reason (Voluntary Resignation).  Employee may voluntarily resign Employee’s
position and terminate Employee’s employment under this Agreement without Good
Reason at any time.  Upon such a
termination, the Company shall have no obligation to pay compensation and
provide benefits to Employee other than the payment of all accrued and unpaid
base salary and any other unpaid expenses or expense reimbursements prior to
the effective date of such termination.

(e)           Disability.  If Employee becomes disabled for more than
one hundred eighty (180) days in any twelve (12) month period, the Company
shall have the right to terminate Employee’s employment without further
liability upon written notice to Employee. 
Without limiting the generality of the foregoing, Employee shall be
deemed disabled for purposes of this Agreement either (i) if Employee 

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is deemed disabled for
purposes of any long-term disability insurance policy paid for by the Company
and at the time in effect, or (ii) if in the exercise of the Company’s reasonable
judgment, due to accident, mental or physical illness, or any other reason,
Employee cannot perform Employee’s duties. 
In the event the Company shall terminate Employee due to disability, as
described above, Employee shall be entitled to receive only those benefits
provided under the Company’s Long Term Disability Plan, and Employee’s stock
options and other incentive compensation grants will be treated under the
applicable Disability section of the 2004 Stock Incentive Plan (as amended, the
“2004 Plan”) or any other stock option or incentive compensation plan of the
Company under which they were granted.  

(f)            Death.  In the event of the death of Employee, this
Agreement shall automatically terminate and any obligation to continue to pay
compensation and benefits shall cease as of the date of Employee’s death,
except for the payment of all accrued, but unpaid, base salary and any other
unpaid expenses or expense reimbursements prior to the date of death.  In the event of Employee’s death, Employee’s stock
options and other incentive compensation grants shall be treated under the
applicable Death section of the 2004 Plan or any other stock option or
incentive compensation plan of the Company under which they were granted.

(g)           Change In Control Termination.

(i)            Benefits.  In the event Employee’s employment under this
Agreement is terminated by the Company involuntarily without Cause or Employee
terminates Employee’s employment with the Company for Good Reason (as defined
in Section 1(c) above), in either case at any time during the period commencing
two (2) months before and ending twelve (12) months after the occurrence of a
Change in Control, the Company shall:

(A)          pay Employee all compensation and
benefits accrued, but unpaid, up to the effective date of termination of
Employee’s employment;

(B)           pay Employee, within thirty (30) days
after the effective date of termination of Employee’s employment, a lump sum
amount equal to eighteen (18) months Employee’s base salary in effect as of the
effective date of Employee’s termination of employment;

(C)           pay Employee, within thirty (30) days
after the effective date of termination of Employee’s employment, a lump sum
amount equal to one hundred and fifty percent (150%) of Employee’s target
incentive bonus;

(D)          maintain Employee’s group medical
coverage until the earlier of  the end of
a period of eighteen (18) months following the effective date of termination,
or (B) such time as comparable medical coverage is obtained by Employee.  

Anything
contained in this Section to the contrary notwithstanding, Employee shall not
be entitled to any of the benefits set forth in this Section 1(g)(i) if
Employee either resigns and terminates such employment voluntarily (other than
for Good Reason, as described above) or is terminated by the Company for Cause.

For
purposes of Section 1(g) hereof, the term “Company” shall include any
Acquiring Company (as defined below), and all obligations of the Company under
such Section shall be assumed by any Acquiring Company.

(ii)           Stock Options.  In the event Employee’s employment under this
Agreement is terminated by the Company involuntarily without Cause or Employee
terminates his employment with the Company for Good Reason, in either case at
any time during the period 

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commencing
two (2) months before and ending twelve (12) months after the occurrence of a
Change in Control:

(A)          notwithstanding anything to the
contrary contained in the 2004 Plan or any other stock option or incentive
compensation plan of the Company, any unvested stock options or other incentive
securities which were granted to Employee during the term of this Agreement
under the 2004 Plan or any such other stock option or incentive compensation
plan shall immediately vest on the date of such termination of Employee’s employment,
the expiration date of the exercise period for such options or other securities
shall be the earlier of (1) one (1) year following the date of termination, or
(2) the expiration of the term of the option, and the Company shall take all
actions necessary or advisable to give effect to this Section 1(g)(ii)(A); and

(B)           all vested options or other incentive
securities held by Employee which were issued pursuant to the 2004 Plan or any
such other plan shall be exercisable pursuant to the terms of the stock option
agreement or other agreement(s) under which the options or other incentive
securities were granted, and the Company shall take all actions necessary or
advisable to give effect to this Section 1(g)(ii)(B).

Anything
contained in this Section to the contrary notwithstanding, Employee shall not
be entitled to any of the benefits set forth in this Section 1(g)(ii) if
Employee either resigns and terminates such employment voluntarily (other than
for Good Reason, as described above) or is terminated by the Company for Cause.

(iii)          Definition Of “Change in
Control.”  The definition
of “Change in Control” set forth in the 2004 Plan is incorporated, and
made a part hereof, by reference.

(iv)          Definition Of “Acquiring
Company.”  For purposes of
Section 1(g) of this Agreement, an “Acquiring Company” shall mean the
resulting or surviving corporation, or the company issuing cash or securities
(or its ultimate parent company), in a merger, sale, asset purchase, or
assignment of all or substantially all of the Company’s assets, consolidation
or share exchange involving the Company, or the successor corporation to the
Company (whether in any such transaction or otherwise).

2.             GENERAL RELEASE.  Notwithstanding anything in this Agreement to
the contrary, no payments shall be made or benefits provided by the Company
under Section 1unless Employee executes and does not revoke a general release
in favor of the Company and its affiliates, and its and their respective
officers, employees and directors.  A
form of general release is attached hereto as Exhibit A.

3.             CERTAIN EXCISE TAX PROVISIONS.  Notwithstanding anything herein to the
contrary:

(a)           Additional Payment.  In the event that (i) any payments or
benefits received or to be received by Employee in connection with Employee’s
employment with the Company (or termination thereof), whether under this
Agreement or otherwise (the “Total Payments”), would subject Employee to
the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986,
as amended (the “Code”) (such tax, the “Excise Tax”), and (ii)
the amount of  total “parachute payment”
as defined in Section 280G(b) of the Code to be paid to the Employee is equal
to or greater than 110 percent (110%) of 2.99 times the Employee’s “base amount”
as defined in Section 280G(b)(3) of the Code (the “Safe Harbor Amount”),
then the Company shall pay Employee in cash an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Employee after deduction of
any Excise Tax upon the Total Payments and any federal, state and local income
tax and Excise Tax upon the Gross-Up Payment 

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shall be equal to the
Total Payments.  Such payments shall be
made by the Company to Employee within thirty (30) days of Employee’s taxable
year next following Employee’s taxable year in which Employee remits the
related taxes.

(b)           Reduced Payments.  In the event that (i) the Total Payments
would subject Employee to the Excise Tax, and (ii) the amount of the total “parachute
payment” as defined in Section 280G(b) of the Code to be paid to Employee is
less than 110% of the Safe Harbor Amount, then, only to the extent necessary to
eliminate the imposition of the Excise Tax, such payments and benefits shall be
reduced, in the order and of the type, mutually agreed to by Employee and the
Company.

(c)           Determinations.  All determinations required to be made,
including whether any of the Total Payments will be subject to the Excise Tax
and the amounts of such Excise Tax, shall be made by the Company’s regular
auditors (the “Accounting Firm”). 
The Accounting Firm shall provide detailed supporting calculations both
to the Company and to Employee within 10 days after a request for such
determinations are made by Employee or the Company.  Any such determination by the Accounting Firm
shall be binding upon the Company and Employee. 
For purposes of making any determination hereunder, Employee shall be
deemed to pay Federal, state and local income taxes at the highest marginal
rates applicable to Employee as of the date of the determination.

4.             SECTION
409A.  This Agreement is
intended to meet the requirements of the short-term deferral exemption under
section 409A of the Code.  However, if
required by section 409A and if Employee is a “specified employee” of a
publicly traded corporation under section 409A of the Code, payment of any
amount under this Agreement shall be delayed for a period of six (6) months
after separation from service, as required by section 409A of the Code.  The accumulated postponed amount shall be
paid in a lump sum payment within ten (10) days after the end of the six
(6)-month period.  If Employee dies
during the postponement period prior to payment of the postponed amount, the
amounts withheld on account of section 409A shall be paid to the personal
representative of Employee’s estate within sixty (60) days after the date of
Employee’s death.  The determination of “specified
employees” shall be made by the Compensation Committee of the Board of
Directors of the Company in accordance with section 409A of the Code and the
regulations issued thereunder.

5.             NON-COMPETITION;
NON-SOLICITATION.

(a)           Restrictions.  Employee shall not, during the course of
Employee’s employment with the Company or for a period of twelve (12) months
thereafter, directly or indirectly:

(i)            be employed by, engaged in or
participate in the ownership, management, operation or control of, or act in
any advisory or other capacity (including as an individual, principal, agent
employee, consultant or otherwise) 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 any of the
foregoing, Employee may make solely passive investments in any Competing Entity
the common stock of which is “publicly-held” and of which Employee shall not
own or control, directly or indirectly, in the aggregate securities which
constitute 5% or more of the voting power of such Competing Entity;

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

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

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(iv)          solicit for employment, or advise or recommend to any other
person or entity that he, she or it 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.

(b)           Effect On The Company’s
Obligations.  The Company’s
obligation to make payments and provide the other benefits pursuant to Section
1 above shall terminate in the event that, and at such time as, Employee is in
material breach of Employee’s obligations set forth in Section 5(a) above.

(c)           Definitions.  For purposes of this Section 5:

(i)            “Competing Entity” means any entity which is
presently or hereafter principally engaged in any business of the type or
character engaged in or proposed to be engaged in by the Company from time to
time during Employee’s term of employment under this Agreement, including
without limitation, any business engaged in the discovery and development of
human therapeutic products for any of the same targets and for indications as
products the Company had in development or was marketing at any time during
Employee’s term of employment under this Agreement.

(ii)           “Territory” means 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. 
Further, in determining whether a specific activity by 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.

(d)           Acknowledgement.  Employee acknowledges and agrees that the
covenants set forth in this Section 5 are reasonable and necessary in all
respects for the protection of the Company’s legitimate business interests
(including, without limitation, the Company’s confidential, proprietary
information and trade secrets and client good-will, which represents a
significant portion of the Company’s net worth and in which the Company has a
property interest).  Employee
acknowledges and agrees that, in the event that Employee breaches any of the
covenants set forth in this Section 5, the Company shall be irreparably harmed
and shall not have an adequate remedy at law; and, therefore, in the event of
such a breach, the Company shall be entitled to injunctive relief, in addition
to (and not exclusive of) any other remedies (including monetary damages) to
which the Company may be entitled under law. 
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) to render such covenants reasonable, valid and enforceable
in all respects.

6.             ARBITRATION.  Any and all disputes between the parties
(except actions to enforce the provisions of Section 5 of this Agreement)
arising under or relating to this Agreement or any other dispute arising
between the parties, including claims arising under any employment
discrimination laws, may be adjudicated and resolved exclusively through
binding arbitration before the American Arbitration Association pursuant to the
American Arbitration Association’s then-in-effect National Rules for the 

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Resolution of Employment
Disputes (hereinafter, “Rules”). 
The initiation and conduct of any arbitration hereunder shall be in
accordance with the Rules and, unless expressly required by law, each side
shall bear its own costs and counsel fees in such arbitration.  Any arbitration hereunder shall be conducted
in Princeton, New Jersey or at such other location as mutually agreed by the
parties.  Any arbitration award shall be
final and binding on the parties.  The
arbitrator shall have no authority to depart from, modify, or add to the
written terms of this Agreement.  The
arbitration provisions of this Section 5 shall be interpreted according to, and
governed by, the Federal Arbitration Act, 9 U.S.C. § 1 et  seq.,
and any action pursuant to such Act to enforce any rights hereunder shall be
brought exclusively in any United States District Court in the State of New
Jersey.  The parties consent to the
jurisdiction of (and the laying of venue in) any such court.

7.             NOTICES.  For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

	
  

  	
  (a)

  	
   

  	
  If to the Company, to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Pharmacopeia, Inc.

  
	
   

  	
   

  	
   

  	
  3000 Eastpark Blvd.

  
	
   

  	
   

  	
   

  	
  Cranbury, NJ 08512

  
	
   

  	
   

  	
   

  	
  Attn.: General Counsel

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
   

  	
  If to Employee, to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Eric J. Liebler

  

 

or to such other address as a party hereto shall designate
to the other party by like notice, provided that notice of a change of address
shall be effective only upon receipt thereof.

8.             WITHHOLDING TAXES.  All payments under this Agreement shall be
made subject to applicable tax withholding, and the Company shall withhold from
any payments under this Agreement all federal, state and local taxes as the
Company is required to withhold pursuant to any law or governmental rule or
regulation.  Except as specifically
provided otherwise in this Agreement, Employee shall bear all expense of, and
be solely responsible for, all federal, state and local taxes due with respect
to any payment received under this Agreement.

9.             WAIVER.  The waiver by the Company or Employee of any
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach by Employee or the Company, as applicable, of any provision of this Agreement.

10.          SEVERABILITY.  The parties have carefully reviewed the
provisions of this Agreement and agree that they are fair and equitable.  However, in light of the possibility of
differing interpretations of law and changes of circumstances, the parties
agree that in the event that any section, paragraph or term of this Agreement
shall be determined to be invalid or unenforceable by any competent authority
or tribunal for any reason, the remainder of this Agreement shall be unaffected
thereby and shall remain in full force and effect.  Moreover, if any of the provisions of this
Agreement is determined by a court of competent jurisdiction to be excessively
broad as to duration, activity, geographic application or subject, it shall be
construed by limiting or reducing it to the extent legally permitted so as to
be enforceable to the extent compatible with then applicable law.

 8
 

 

11.          SUCCESSORS
AND ASSIGNS.  This Agreement shall
bind and inure to the benefit of the successors and assigns of the Company and
the heirs, executors or personal representatives of Employee.  This Agreement may not be assigned by
Employee.  This Agreement may be assigned
to any successor in interest to the Company (including by way of merger,
consolidation or reorganization, or by way of any assignment of all or
substantially all of the Company’s assets, business or properties), and
Employee hereby consents to such assignment.

12.          ENTIRE AGREEMENT;
AMENDMENTS.  This
Agreement, the Letter Agreement and the applicable bylaws and policies of the
Company, constitute the entire Agreement between the parties hereto and there
are no other understandings, agreements or representations, expressed or
implied.  This Agreement supersedes any
and all prior or contemporaneous agreements, oral or written, concerning Employee’s
employment and compensation.  This Agreement
may be amended only in writing signed by Employee and the Chief Executive
Officer or the General Counsel of the Company.

13.          COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

14.          GOVERNING LAW; FORUM
SELECTION.  This Agreement
shall be governed by and construed in accordance with the laws (other than
conflicts of laws principles) of the State of New Jersey applicable to
contracts executed in and to be performed entirely within such State.  The parties consent to jurisdiction and
laying of venue in the state and federal courts of New Jersey for purposes of
resolving disputes under this Agreement.

15.          COMPLIANCE WITH LAW.  This Agreement is intended to comply with the
requirements of section 409A of the Code, and specifically, with the short term
deferral exemption of section 409A, and shall in all respects be administered
in accordance with section 409A.  Notwithstanding
anything in the Agreement to the contrary, distributions may only be made under
the Agreement upon an event and in a manner permitted by section 409A of the
Code or an applicable exemption.  All
payments to be made upon a termination of employment under this Agreement may
only be made upon a “separation from service” under section 409A.  For purposes of section 409A of the Code, the
right to a series of payments under this Agreement shall be treated as a right
to a series of separate payments.  All
reimbursements and in-kind benefits provided under this Agreement shall be made
or provided in accordance with the requirements of section 409A of the Code,
including, where applicable, the requirement that (a) any reimbursement shall
be for expenses incurred during Employee’s lifetime (or during a shorter period
of time specified in this Agreement), (b) the amount of expenses eligible for
reimbursement, or in-kind benefits provided, during a calendar year may not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other calendar year, (c) the reimbursement of an eligible
expense will be made on or before the last day of the calendar year following
the year in which the expense is incurred, and (d) the right to reimbursement
or in-kind benefits is not subject to liquidation or exchange for another
benefit.

 9
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set
forth above.

	
  

  	
   

  	
  PHARMACOPEIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Stephen C. Costalas

  
	
   

  	
   

  	
   

  	
  Stephen C. Costalas, Esq.

  
	
   

  	
   

  	
   

  	
  Executive Vice President,

  
	
   

  	
   

  	
   

  	
  General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
  /s/ Eric J. Liebler

  
	
   

  	
   

  	
   

  	
   

  	
  Eric J. Liebler

  
							

 

 10

 

EXHIBIT A

General Release

IN
CONSIDERATION OF the terms and conditions contained in the Severance
Agreement, dated as of the 6th day of September, 2007, (the “Severance
Agreement”) by and between Eric J. Liebler (“Employee”) and Pharmacopeia, Inc.
(the “Company”), and for other good and valuable consideration, the receipt of
which is hereby acknowledged, Employee on behalf of Employee and his  or
her heirs, executors,
administrators, and assigns, releases and discharges the Company and its
subsidiaries, divisions, affiliates and parents, and their respective past,
current and future officers, directors, employees, agents, and/or owners, and
their respective successors, and assigns and any other person or entity claimed
to be jointly or severally liable with the Company or any of the aforementioned
persons or entities (collectively the “Released Parties”) from any and all
manner of actions and causes of action, suits, debts, dues, accounts, bonds,
covenants, contracts, agreements, judgments, charges, claims, and demands
whatsoever (“Claims “) which Employee and his heirs, executors, administrators,
and assigns have, had, or may hereafter have, against the Released Parties or
any of them arising out of or by reason of any cause, matter, or thing
whatsoever from the beginning of the world to the date hereof.  This General Release of Claims includes,
without limitation, any and all matters relating to Employee’s employment by
the Company and the cessation thereof, and any and all matters arising under
any federal, state, or local statute, rule, or regulation, or principle of
contract law or common law, including but not limited to, the Family and
Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq., Title VII of
the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000 et seq., the Age
Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq.
(the “ADEA”), the Americans with Disabilities Act of 1990, as amended, 42
U.S.C. §§ 12101 et seq., the Worker Adjustment and Retraining Notification
Act of 1988, as amended, 29 U.S.C. §§2101 et seq., Employee Retirement Income
Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq. (“ERISA”), the New
Jersey Law Against Discrimination, N.J.S.A. 10:15-1, et seq., the New Jersey
Conscientious Executive Protection Act, N.J.S.A. 34:19-1 to 19-8, the New
Jersey Wage and Hour Act, N.J.S.A. 34-11-56a, et seq., and any other equivalent
or similar federal, state, or local statute; provided, however, that Employee
does not release or discharge the Released Parties from (i) any of the Company’s
obligations to Employee under the Severance Agreement, and (ii) any vested
benefits to which Employee may be entitled under any employee benefit plan or
program subject to ERISA.  It is
understood that nothing in this General Release is to be construed as an
admission on behalf
of the Released Parties of any wrongdoing with respect to Employee, any such
wrongdoing being expressly denied.

Employee
represents and warrants that Employee fully understands the terms of this
General Release, that Employee is hereby advised to consult with legal counsel
before signing, and that Employee knowingly and voluntarily, of Employee’s own
free will, without any duress, being fully informed, and after due
deliberation, accepts its terms and signs below as Employee’s own free
act.  Except as otherwise provided
herein, Employee understands that as a result of executing this General
Release, Employee will not have the right to assert that the Company or any
other of the Released Parties unlawfully terminated Employee’s employment or
violated any of Employee’s rights in connection with Employee’s employment or otherwise.

Employee
further represents and warrants that Employee has not filed, and will not
initiate, or cause to be initiated on Employee’s behalf any complaint, charge,
claim, or proceeding against any of the Released Parties before any federal,
state, or local agency, court, or other body relating to any claims barred or
released in this General Release thereof, and will not voluntarily participate
in such a proceeding.  However, nothing
in this General Release shall preclude or prevent Employee from filing a claim,
which challenges the validity of this General Release solely with respect to
Employee’s waiver of any losses arising under the ADEA. Employee shall not
accept any relief obtained on Employee’s behalf

 A-1
 

 

by any
government agency, private party, class, or otherwise with respect to any
claims covered by this General Release.

Employee
may take twenty-one (21) days to consider whether to execute this General
Release.  Upon Employee’s execution of
this General Release, Employee will have seven (7) days after such execution
in which Employee may revoke such execution.  In the
event of revocation, Employee must present written notice of such revocation to
the Company’s Chief Executive Officer. 
If seven (7) days pass without receipt of such notice of revocation,
this General Release shall become binding and effective on the eighth (8th) day
after the execution hereof (the “Effective Date”).

INTENDING TO BE LEGALLY BOUND, Employee hereby sets
Employee’s hand below:

	
   

  	
   

  	
   

  
	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dated:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

*              *              *

 

NOTARIZATION

	
  State of

  	
   

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  County of

  	
   

  	
   

  	
  )

  	
  ss.

  	
   

  
							

 

On this             
day of                       
in the year            before
me, the undersigned, personally appeared                                                                   ;
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same in his capacity as an individual,
and that by his signature on the instrument he executed such instrument, and
that such individual made such appearance before the undersigned.

 

	
  

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  

 

 A-2

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