Document:

Exhibit 10.26

 

SEVERANCE AGREEMENT FOR BRIAN M. POSNER

 

This SEVERANCE AGREEMENT
(the “Agreement”) is made and entered into as of the 8th day of February, 2005,
by and between PHARMACOPEIA DRUG DISCOVERY, INC.,
a Delaware corporation (hereinafter, the “Company”), and Brian M. Posner, an individual (hereinafter, “Employee”).

 

RECITALS

 

WHEREAS, the Company desires to provide certain
benefits and payments to Employee in the event of the termination of his
employment with the Company within a specified transition period; and

 

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. 
ACKNOWLEDGEMENT.  Employee’s
acknowledges that his employment with the Company 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 herein or as required by the Company’s benefits
policies or applicable law.

 

2.  TERMINATION OF EMPLOYMENT
DURING TRANSITION PERIOD. 
Notwithstanding anything in this Agreement to the contrary, in the event
that Employee’s employment with the Company is terminated by the Company
involuntarily without Cause (as defined in Section 3 below), during the
period that begins on the date of the start of a new CFO and ends on the one
year anniversary of that date, in lieu of any other payments or benefits to
which Employee may be entitled, the Company shall, upon the occurrence of such
termination:

 

(a) 
Accrued and Unpaid Compensation and Benefits.  Pay Employee all base salary earned, but not
yet paid, as soon as reasonably practicable and shall provide benefits accrued,
but not yet provided, up to the effective date of termination in accordance
with the terms of any applicable plan;

 

(b) 
Base Salary. 
Continue to pay Employee each month an amount equal to one twelfth
(1/12) of Employee’s annual base salary in effect as of the date of this
Agreement, which the parties acknowledge is One Hundred Sixty Thousand Dollars
($160,000) per year (“Base Salary”), for a period of six (6) months or until
the occurrence of any circumstance or event that would constitute Cause under Section 3;

 

(c)  Medical Coverage.  Maintain Employee’s group medical coverage
for a period of twelve (12) months following the effective date of such
termination, provided, that such
coverage shall end when Employee obtains comparable coverage from another
employer and, provided further, that coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), shall commence, if applicable, upon the
expiration of such twelve (12)-month period;

 

(d) 
Outplacement Services.  Provide executive outplacement assistance
services from an organization selected by the Company, up to a maximum value of
$10,000; and

 

(e)  Equity Compensation.  Notwithstanding anything to the contrary
contained in the Company’s 2004 Stock Incentive Plan (the “2004 Plan”), in any
other stock incentive plan of the

 

 

Company or in the
Pharmacopeia, Inc. 1994 Incentive Stock Plan (the “Pharmacopeia 1994 Plan”),
take all such actions as are necessary or advisable to ensure that the
expiration date of the exercise period for all options or other awards made or
granted to Employee under the 2004 Plan, any such other Company plan or the
Pharmacopeia 1994 Plan, as of the date of Employee’s termination, shall be the
earlier of (1) six (6) months following the date of Employee’s termination or
(2) the expiration of the term of such award.

 

Anything contained in
this Section to the contrary notwithstanding, Employee shall not be
entitled to any of the benefits or payments set forth in this Section 2 if
Employee either resigns and terminates such employment voluntarily or is
terminated by the Company for Cause.

 

For purposes of this Section 2,
the term the “Company” shall include the resulting or surviving corporation, or
the company issuing cash or securities (or its ultimate parent company), in a
business combination involving the Company, or the successor corporation to the
Company (whether in any such transaction or otherwise), and all obligations of
the Company under this Section 2 shall be assumed by any such corporation
or company.

 

3.  TERMINATION BY THE COMPANY FOR CAUSE.  In the event that Employee’s employment is
terminated by the Company for Cause, 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 6 below) to
faithfully and professionally carry out Employee’s duties or to comply with the
other material provisions 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 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;

 

(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 reasonable lawful written direction of
the Company; or

 

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

 

The existence of any of the foregoing events or conditions shall be
determined by the Company in the exercise of its reasonable judgment.

 

4.  TERMINATION
BY EMPLOYEE  In the event that
Employee voluntarily resign his position and terminates his employment with the
Company, the Company shall have no obligation to pay compensation and provide
benefits to Employee other than (i) the payment of all accrued and unpaid base

 

2

 

salary, (ii) providing the benefits accrued, but not yet provided, up
to the effective date of termination in accordance with the terms of any
applicable plan, (iii) the payment of any other unpaid expenses or expense
reimbursements prior to the effective date of such termination and (iv)
post-termination benefits required by law.

 

5.  GENERAL
RELEASE.  Notwithstanding anything in this Agreement to
the contrary, no payments shall be made or benefits provided by the Company
under Section 2 prior to the execution by Employee at the time of
termination of a general release in favor of the Company and its affiliates,
and its and their respective officers, employees and directors, substantially
in the form attached hereto as Exhibit I.

 

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

 

7.  NON-COMPETITION; NON-SOLICITATION.

 

(a)  Restrictions.  Employee shall not, during the course of
Employee’s employment with the Company or for a period of six (6) 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

 

(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 2 above shall terminate in
the event that, and at such time as, Employee is in breach of Employee’s
obligations set forth in Section 7(a) above.

 

(c)  Definitions.  For purposes of this Section 7:

 

(i) “Competing Entity” means any entity which is presently or hereafter
engaged in any business of the type or character engaged in by the Company or
any of its subsidiaries including, without limitation, (A) the business of
providing to third parties products or services for pre-clinical drug discovery
or chemical development which (x) include the outlicensing of small molecule
libraries, the undertaking of drug candidate screening, and/or related drug
optimization activities, or (y) utilize combinatorial chemistry or
high-throughput screening technologies in offering pre-clinical drug discovery
services or (B) any business which is otherwise competitive with a business
conducted by the Company or any of its subsidiaries; and

 

3

 

(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 11(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 (A) the duties to be performed by Employee and (B) 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 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, 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 11 is deemed invalid or
unenforceable for any reason, it is the parties’ intention that such covenants
be equitably reformed or modified to the extent necessary (and only to such
extent) to render it valid and enforceable in all respects.  In the event that the time period and
geographic scope referenced above is deemed unreasonable, overbroad, or
otherwise invalid, it is the parties’ intention that the enforcing court shall
reduce or modify the time period and/or geographic scope to the extent
necessary (and only to such extent necessary) to render such covenants
reasonable, valid and enforceable in all respects.

 

8.  ARBITRATION.  Any and all disputes between the parties
(except actions to enforce the provisions of Section 11 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, shall 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
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 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.

 

9.  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
Drug Discovery, Inc.

3000
Eastpark Blvd.

Cranbury,
NJ  08512

Attn.:                 General Counsel

 

4

 

(b)                                 If
to Employee, to:

 

Brian
M. Posner

 

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.

 

10.  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.

 

11.  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.

 

12.  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.

 

13.  ENTIRE AGREEMENT;
AMENDMENTS.  This
Agreement, including the recitals and Exhibits (which are a part hereof),
together with the applicable bylaws and policies of the Company, constitutes
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 Executive Vice
President, Human Resources of the Company.

 

14.  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.

 

15.  GOVERNING LAW.  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.

 

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

 

5

 

	
   

  	
  PHARMACOPEIA
  DRUG DISCOVERY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leslie J.
  Browne, PhD

  	
   

  
	
   

  	
   

  	
  Leslie J.
  Browne, Ph.D.

  
	
   

  	
   

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Brian M. Posner

  	
   

  
	
   

  	
   

  	
  Brian M. Posner

  

 

6

 

EXHIBIT I

 

General Release

 

IN CONSIDERATION OF the terms and conditions contained
in the Severance Agreement, dated as of the 8th day of February, 2005, (the “Severance
Agreement”) by and between Brian M. Posner (“Employee”) and Pharmacopeia Drug
Discovery, Inc. (the “Company”), and for other good and valuable consideration,
the receipt of which is hereby acknowledged, Employee on behalf of himself and
his 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 Pennsylvania Human Relations Act, as  amended, 43
P.S. §§ 955 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 him under the Severance Agreement, and (ii) any vested benefits
to which he 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 he fully
understands the terms of this General Release, that he is hereby advised to
consult with legal counsel before signing, and that he knowingly and
voluntarily, of his own free will, without any duress, being fully informed,
and after due deliberation, accepts its terms and signs below as his own free
act. Except as otherwise provided herein, Employee understands that as a result
of executing this General Release, he will not have the right to assert that
the Company or any other of the Released Parties unlawfully terminated his
employment or violated any of his rights in connection with his employment or
otherwise.

 

Employee further represents and warrants that he has
not filed, and will not initiate, or cause to be initiated on his 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 his behalf 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 he may revoke such execution. In
the event of revocation, Employee must

 

7

 

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, I hereby set my hand
below:

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Brian M. Posner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  	
   

  
				

 

NOTARIZATION

 

	
  State
  of                                                             

  	
  )

  	
   

  
	
  County of

  	
                                                   

  	
  )

  	
   

  	
  ss.

  
					

 

On this                     day
of                                    in
the year 2004 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

  

 

8Exhibit 10.27

 

[PHARMACOPEIA DRUG DISCOVERY, INC.
LETTERHEAD]

 

[DATE]

 

[OPTIONEE]

[OPTIONEE’S
ADDRESS]

 

Re:                               Incentive Stock Option Award Notice

 

Dear
[NAME OF OPTIONEE]:

 

Pursuant to the Pharmacopeia Drug Discovery, Inc.
2004 Stock Incentive Plan (the “Plan”), the Plan’s administrative committee
(the “Committee”) hereby grants to you an incentive stock
option (“Option”) to purchase [NUMBER] shares of common stock, par value $0.01, (“Common Stock”)
of Pharmacopeia Drug Discovery, Inc. (the “Company”) at a price of $[exercise price] (“Exercise Price”)
per share, effective [GRANT DATE]
(the “Grant Date”).  However, to the
extent the Option fails to satisfy any requirement of section 422(d) of
the Internal Revenue Code of 1986, the Option shall be treated as a non-qualified
stock option and shall be subject to the terms and conditions of the Award
Notice applicable to the contemporaneous grant of a non-qualified stock option
to you, if any.

 

This
Option is subject to the applicable terms and conditions of the Plan, which are
incorporated herein by reference, and in the event of any contradiction,
distinction or differences between this letter and the terms of the Plan, the
terms of the Plan will control.  All
capitalized terms used herein, not otherwise defined herein, shall have the
meanings set forth in the Plan.

 

VESTING
AND EXERCISE PERIOD

 

Subject
to your continued employment with the Company and the other provisions of this
Award Notice, on the following dates, you will be entitled to exercise this
Option as follows:

 

One fourth of the shares of Common Stock subject to
the Option shall be vested and exercisable on the first anniversary of the
Grant Date;

 

An additional 1/48th of the shares
subject to the Option shall be vested and exercisable on the same day of the
month (or the last day of the month if there is no such date) as the Grant Date
in each of the next 36 months thereafter;

 

Shares that become exercisable will remain available
for purchase until the tenth anniversary of the Grant Date.

 

 

EFFECTS
OF TERMINATION ON VESTING AND EXERCISE

 

Retirement

 

Your Option will continue to vest in accordance with
the schedule above until the date which is three years following the date
of your Retirement, provided that you do not violate any applicable non-competition,
non-disparagement, non-solicitation or confidentiality requirement or similar
restrictive covenant with the Company (collectively, the “Restrictive Covenants”)
during that three-year period.

 

If your employment is terminated due to your
Retirement, you will be permitted, prior to the Expiration Date, to the extent
the Option is exerciseable, to exercise the Option until the third anniversary
of your Retirement, provided you have not violated any applicable Restrictive
Covenants.  To the extent the Option is
exercised more than ninety days following your Retirement, the Option will be
treated as a non-qualified stock option and will no longer be entitled to
treatment as an incentive stock option subject to Section 422 of the
Code.  The Option shall immediately
terminate in full upon violation of any Restrictive Covenants and in any event
to the extent not exercised during the applicable period.

 

Death
or Disability

 

If your employment with the Company terminates prior
to the Expiration Date due to your death or Disability, this Option will vest
fully and will remain exercisable by you, your personal representative or the
persons who acquire the right to exercise this Option by bequest or inheritance
until the earlier of the end of the twelve-month period immediately following
your death or Disability, or the Expiration Date.  To the extent the Option is exercised more
than ninety days following your death, the Option will be treated as a
non-qualified stock option and will no longer be entitled to treatment as an
incentive stock option subject to Section 422 of the Code.  This Option shall terminate in full to the
extent not exercised within such period.

 

Termination
for Cause

 

If your employment with the Company is terminated
for Cause (as determined by the Committee), then the entire unexercised portion
of this Option shall terminate on such date.

 

Resignation
or Other Reasons

 

If your employment with the Company is terminated
for any other reason, including resignation, prior to the Expiration Date,
vesting in the Option will cease immediately. 
This Option, to the extent it is exerciseable upon your termination of
employment, will remain exerciseable by you or your personal representative, as
applicable, until the later of the end of the 
ninety-day period immediately following your termination of employment
or the Expiration Date.  This Option
shall terminate in full to the extent not exercised within such period.

 

 

CHANGE
IN CONTROL

 

Notwithstanding anything in this Notice to the
contrary, upon a Change in Control, (1) if the Option is assumed
and substituted with an Option of equivalent value by an acquiror, the
substituted awards shall vest in full if your employment is terminated for any
reason other than Cause or your voluntary termination within eighteen (18)
months following the date of the Change In Control, (2) if the Option is not assumed and
substituted with an Option of equivalent value by an acquiror in accordance
with the terms of the Plan, then upon a Change in Control, the Option shall immediately
become 100% vested and exercisable.

 

EXERCISING
OPTIONS

 

Upon exercise of any portion of the Option and
before delivery of the shares of Common Stock, full payment for shares of
Common Stock purchased upon the exercise shall be paid within three days of the
date of exercise and shall be made in cash, or, with the Consent of the
Committee, (a) in whole or in part in shares of Common Stock that have
been held by you for at least six months and have an aggregate Fair Market
Value equal to the aggregate Exercise Price, or (b) in cash received from
a broker-dealer whom you have authorized to sell all or a portion of the Common
Stock covered by the Option.

 

An
Option shall be exercised by you by giving written notice of exercise to the
Company at the Company’s office in Princeton, New Jersey, Attention: Albert N.
Essilfie.  Such notice of exercise must
include a statement of the number of vested Options to be exercised and a
statement of preference as to the manner in which payment to the Company shall
be made, as described above.  Such notice
shall be deemed to have been given when hand-delivered, telecopied or mailed,
first class postage prepaid, and shall be irrevocable once given.

 

As
promptly as is reasonably practicable after the exercise of the Option and the
satisfaction of any applicable taxes, as determined by the Company, a
certificate for the shares of Common Stock issuable on the exercise of the
Option shall be delivered to you or your personal representative, heir or
legatee.

 

The Option may not be
transferred, assigned or pledged by you otherwise than by will or the laws of
descent and distribution or be exercised other than by the Optionee or, in the
case of your death, by your personal representative, heir or legatee.

 

If you dispose of any shares
of Common Stock acquired upon the exercise of this Option within two years from
the Grant Date or one year after such shares were acquired pursuant to the
exercise of this Option, you must notify the Company in writing of such
disposition.  Any notice required
hereunder must be given within 30 days of such disposition.

 

 

GOVERNING
TERMS

 

The
terms of this Award Notice, and any sale, purchase or exercise of any shares
subject to the Option granted by this Award Notice shall be governed by the
terms of the Pharmacopeia Drug Discovery, Inc. Insider Trading Policy (“Policy”)
previously provided or enclosed with this Award Notice, and incorporated by
reference herein.  By executing this
Award Notice, you acknowledge having received and carefully read the Policy,
and you agree to be bound by the terms of the Policy, as interpreted and
amended from time to time by the Company.

 

The
construction and interpretation of any provision of this Option or the Plan
shall be final and conclusive when made by the Committee.

 

Nothing
in this letter shall confer on you the right to continue in the employment or
service of the Company or interfere in any way with the right of the Company to
terminate your employment or service at any time.

 

The Committee may at any
time unilaterally amend this Award Notice; provided, however, (i) no
Option may be repriced, replaced, regranted through cancellation, or modified
without shareholder approval if the effect would be to reduce the exercise
price for the shares underlying the Option, and (ii) that any amendment
which, in the opinion of the Committee, is adverse to you will require your
consent.

 

You
should sign and return a copy of this letter to Albert N. Essilfie.  Your acknowledgement must be returned within
ninety (90) days, otherwise, this Option will lapse and become null and void.

 

Very
truly yours,

 

 

	
   

  	
   

  
	
  [COMMITTEE MEMBER (or if granted to
  non-executive officer, Secondary Committee member)]

  

 

Enclosure

 

Acknowledged
and Accepted

 

	
   

  	
   

  	
   

  	
   

  
	
  [OPTIONEE]

  	
  Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}]]