PHARMACOPEIA INC, DEF 14A, 2000-03-27

PHARMACOPEIA INC
DEF 14A, 2000-03-27
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

Pharmacopeia, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required

/ / $125 per Exchange Act Rules O-11(c)(l)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[LETTERHEAD]

March 27, 2000

Dear Stockholders:

It is my pleasure to invite you to the Annual Meeting of Stockholders of
Pharmacopeia, Inc., to be held on Wednesday, May 3, 2000 at 9:00 a.m. at The
Doral Forrestal at Princeton, 100 College Road East, Princeton, New Jersey. The
Notice of Annual Meeting and Proxy Statement accompanying this letter describe
the business to be conducted at the meeting.

I hope that you will be able to join us. If you are unable to attend this year's
meeting, you can ensure your representation by completing the enclosed Proxy and
returning it to us promptly.

Thank you for your interest and participation in the affairs of Pharmacopeia.

Sincerely,

/s/ Joseph A. Mollica
-------------------------
Joseph A. Mollica

<PAGE>

PHARMACOPEIA, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2000

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Pharmacopeia, Inc., a Delaware corporation (the "Company"), will be held on May
3, 2000, at 9:00 a.m. local time, at The Doral Forrestal at Princeton, 100
College Road East, Princeton, New Jersey for the following purposes, as more
fully described in the Proxy Statement accompanying this Notice:

1. To elect three directors to the Board of Directors for a term
of three years.

2. To approve an amendment to the Company's 1994 Incentive Stock
Plan to increase the number of shares of Common Stock
authorized for issuance thereunder from 3,700,000 to 4,700,000
shares.

3. To approve an amendment to the Company's 1995 Directors Option
Plan to increase the number of shares of Common Stock
authorized for issuance thereunder from 150,000 to 300,000.

4. To ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
December 31, 2000.

5. To transact such other business as may properly come before
the meeting or any adjournment thereof.

Only stockholders of record at the close of business on March 15, 2000
are entitled to receive notice of and to vote at the meeting.

All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy Card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Stockholders attending the
meeting may vote in person even if they have returned a Proxy Card.

By Order of the Board of Directors,

/s/ Thomas M. Carney
----------------------------------
Thomas M. Carney
Secretary
Princeton, New Jersey
March 27, 2000

<PAGE>

PHARMACOPEIA, INC.

PROXY STATEMENT

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

The enclosed Proxy is solicited on behalf of Pharmacopeia, Inc., a
Delaware corporation (the "Company"), for use at its 2000 Annual Meeting of
Stockholders to be held on May 3, 2000, at 9:00 a.m., local time, or at any
adjournments or postponements thereof, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at The Doral Forrestal at Princeton, 100 College
Road East, Princeton, New Jersey. The Company's principal executive offices are
located at CN5350, Princeton, New Jersey 08543-5350. The Company's telephone
number is (609) 452-3600.

These proxy solicitation materials were mailed on or about March 27,
2000 to all stockholders entitled to vote at the Annual Meeting.

RECORD DATE; OUTSTANDING SHARES

Stockholders of record at the close of business on March 15, 2000 (the
"Record Date"), are entitled to receive notice of and vote at the Annual
Meeting. On the Record Date, 22,839,983 shares of the Company's Common Stock,
$0.0001 par value, were issued and outstanding.

REVOCABILITY OF PROXIES

Proxies given pursuant to this solicitation may be revoked at any time
before they have been used. Revocation will occur by delivering a written notice
of revocation to the Company or by duly executing a proxy bearing a later date.
Revocation will also occur if the individual attends the Annual Meeting and
votes in person.

VOTING AND SOLICITATION

Every stockholder of record on the Record Date is entitled, for each
share held, to one vote on each proposal or item that comes before the Annual
Meeting. Votes cast in person or by proxy at the Annual Meeting will be
tabulated by the Inspector of Election appointed for the Annual Meeting who will
determine whether or not a quorum is present and the results of the votes with
respect to each matter.

The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding on the Record
Date will constitute a quorum. The Inspector of Election will treat abstentions
and broker non-votes as shares that are present for the purpose of determining
the presence of a quorum.

The election of directors will be decided by a plurality of the votes
cast. Accordingly, abstentions and broker non-votes will have no effect on the
outcome of the vote. The approval of the proposed amendments to the 1994
Incentive Stock Plan and 1995 Directors Option Plan and the ratification of the
appointment of Ernst & Young LLP each will require the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy and entitled to vote at the Annual Meeting. Abstentions will be treated as
votes cast with respect to these proposals and therefore, will have the same
effect as a vote against the proposals. Broker non-votes will not be counted as
votes cast with respect to these proposals and therefore, will have no effect on
the outcome of the votes.

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The cost of this solicitation will be borne by the Company. The Company
may reimburse expenses incurred by brokerage firms and other persons
representing beneficial owners of shares in forwarding solicitation material to
beneficial owners. Certain of the Company's directors, officers and regular
employees, without additional compensation, may solicit proxies personally or by
telephone.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Stockholder proposals pursuant to Rule 14a-8 ("Rule 14a-8") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
intended to be presented at the Company's 2001 Annual Meeting must be received
by the Company no later than November 27, 2000 in order that they may be
included in the proxy statement and form of proxy for that meeting. In addition,
in accordance with Rule 14a-4(c) under the Exchange Act, the Company's form of
proxy relating to the 2001 Annual Meeting of Stockholders will confer
discretionary authority to vote at such meeting on matters that are submitted to
the Company outside the processes of Rule 14a-8 after February 11, 2001.

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PROPOSAL ONE:

ELECTION OF DIRECTORS

GENERAL

The Company's Board of Directors is divided into three classes, with
the term of office of one class expiring each year. The Company currently has
eight directors with three directors in Class I, three directors in Class II and
two directors in Class III. The terms of office of Class II directors Frank
Baldino, Jr. and Edith W. Martin expire at the 2000 Annual Meeting. Class II
director James J. Marino was appointed by the Board of Directors on February 8,
2000 and is being nominated for election for a three year term at the 2000
Annual Meeting. The terms of office of Class III directors Paul A. Bartlett and
Charles A. Sanders expire at the 2001 Annual Meeting and the terms of office of
Class I directors Joseph A. Mollica, Gary E. Costley and C. Peter W. Booth
expire at the 2002 Annual Meeting. At the 2000 Annual Meeting, the stockholders
will elect three Class II directors for a term of three years.

Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's three nominees named below. If any of the
nominees of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who is
designated by the present Board of Directors to fill the vacancy. It is not
expected that any of the nominees will be unable or will decline to serve as a
director. However, Dr. Martin has informed the Company that she may not be able
to serve a new three-year term in full because of her other professional and
personal commitments. The Board of Directors nevertheless recommends that the
stockholders vote for re-election of Dr. Martin. If Dr. Martin resigns as a
director before her term expires, the Board of Directors would seek to fill the
vacancy with an appropriately qualified replacement. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.

NOMINEES FOR ELECTION AT THE ANNUAL MEETING

The names of the nominees, and certain information about them, are set
forth below:

DIRECTOR
NAME OF NOMINEE AGE POSITION/PRINCIPAL OCCUPATION SINCE
- ---------------------------------- ------ ------------------------------------------------------------- --------------
<S> <C> <C> <C>
Frank Baldino, Jr. Ph.D. (2) 46 Director; President and Chief Executive Officer of 1996
Cephalon, Inc.
Edith W. Martin, Ph.D. (1) 54 Director; Vice President and Chief Information Officer of 1997
Halliburton Company
James J. Marino 50 Director; Partner, law firm of Dechert Price & Rhoads 2000

</TABLE>

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(1) Member of Audit Committee
(2) Member of Compensation Committee

Dr. Baldino has served as a director of the Company since October 1996.
Dr. Baldino is a founder of Cephalon, Inc., an integrated specialty
biopharmaceutical company and has served as its President and Chief Executive
Officer since 1987. Dr. Baldino is currently a director of Cephalon, Inc.,
ViroPharma, Inc., and certain closely held companies and charitable
organizations.

Dr. Martin has served as a director of the Company since May 1997. Dr.
Martin is Vice President and Chief Information Officer of Halliburton Company,
an engineering services, engineering and construction and energy equipment
company. Dr. Martin is also the President of Advanced Global Technologies, a
private consulting firm in the technology advisory area. Between January 1996
and December 1997, Dr. Martin was the Chief Information Officer and Vice
President of Eastman Kodak Company. Between September 1994 and February 1996,
Dr. Martin

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was the Executive Vice President and Chief Technology Officer of the Student
Loan Marketing Association ("Sallie Mae"). Prior to joining Sallie Mae, Dr.
Martin had been Vice President and Chief Information Officer of the
International Telecommunications Satellite Organization ("INTELSAT") since 1992.
Dr. Martin serves as a director of Information Resources, Inc. and Immunex
Corporation.

Mr. Marino has served as a director of the Company since February 2000.
He has been a partner in the law firm of Dechert Price & Rhoads since 1988. Mr.
Marino currently serves as Chair of the firm's Life Sciences Practice Group and
is the Managing Partner of the firm's Princeton office. He is engaged in the
practice of corporate law with an emphasis on the representation of
technology-based companies.

INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING

The names and certain other information about the directors whose terms
of office continue after the Annual Meeting are set forth below:

DIRECTOR
NAME OF DIRECTOR AGE POSITION/PRINCIPAL OCCUPATION SINCE
- --------------------------------------- ---------- -------------------------------------------- ---------------
<S> <C> <C> <C>
Joseph A. Mollica, Ph.D. 59 Director; Chairman of the Board, President 1994
and Chief Executive Officer of the Company

Gary E. Costley, Ph.D. (2) 56 Director; Chairman of the Board, President 1996
and Chief Executive Officer of
International Multifoods Corporation

Charles A. Sanders, M.D. (2) 68 Director; Chairman of the Board of 1997
Directors and Chief Executive Officer of
Glaxo, Inc. (Retired)

Paul A. Bartlett, Ph.D. (1) 52 Director; Chairman, Department of 1998
Chemistry at the University of California,
Berkeley

C. Peter W. Booth (1) 60 Director; Senior Vice President, Strategy 1998
and Development of Corning Incorporated
(Retired)

</TABLE>

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(1) Member of Audit Committee
(2) Member of Compensation Committee

There is no family relationship between any director, executive officer
or nominee for director of the Company.

Dr. Mollica has served as the Chairman of the Board of Directors and
Chief Executive Officer of the Company since February 1994 and was appointed
President in August 1996. From 1987 to December 1993, Dr. Mollica was employed
initially by the DuPont Company and then by the DuPont Merck Pharmaceutical
Company, most recently as President and Chief Executive Officer. Dr. Mollica is
a Director of USP, Inc., ImPath, Inc., Neurocrine BioSciences, Inc., and Nexell
Therapeutics, Inc.

Dr. Costley has served as a director of the Company since February
1996. Dr. Costley has served as the Chairman of the Board of Directors,
President and Chief Executive Officer of International Multifoods Corporation, a
food company, since January 1997. From May 1995 through January 1997, Dr.
Costley was the Dean of the Babcock Graduate School of Management, Wake Forest
University. For more than five years prior to that time, Dr. Costley held
various management positions with Kellogg Company, most recently as Executive
Vice President. Dr. Costley is currently a Director of International Multifoods
Corporation and Candlewood Hotel Co. Inc.

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Dr. Sanders has served as a director of the Company since July 1997.
From 1992 until his retirement in 1995, Dr. Sanders held the position of
Chairman of the Board of Directors of Glaxo, Inc., where he was also Chief
Executive Officer from 1989 to 1994. Dr. Sanders serves on the Boards of
Directors of Kendle International Inc., Magainin Pharmaceuticals, Scios Inc.,
Staffmark, Inc., Trimeris, Inc., Vertex Pharmaceuticals Incorporated, Biopure
Corporation, and certain closely held companies and charitable organizations.

Dr. Bartlett has served as a director of the Company since January
1998. Dr. Bartlett is also a member of the Company's Scientific Advisory Board.
Dr. Bartlett has been a Professor of Chemistry at the University of California,
Berkeley since 1973 and is the Chairman of the Department of Chemistry at the
University of California, Berkeley.

C. Peter W. Booth was a Director of Molecular Simulations Incorporated
("MSI") from August 1995 until its acquisition by the Company in June 1998, at
which time he became a director of the Company. Mr. Booth served as Senior Vice
President, Strategy and Development of Corning Incorporated ("Corning") from
1991 until his retirement at the end of 1999. Mr. Booth was also a Director of
Samsung Corning Co., Ltd., Corning Asahi Video Co., and The Japan Fund during
1999.

STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table sets forth the beneficial ownership of the
Company's Common Stock as of January 31, 2000 (i) by all persons known to the
Company to be the beneficial owners of more than 5% of the Company's Common
Stock, (ii) by each of the executive officers named in the table under
"Executive Compensation--Summary Compensation Table," (iii) by each director and
nominee for director, and (iv) by all current directors and executive officers
as a group:

APPROXIMATE
PERCENTAGE OF
NUMBER OF TOTAL VOTING
NAME OF PERSON OR ENTITY SHARES (1) POWER
- ----------------------------------------------------------------------- ------------------- -----------------------
<S> <C> <C>
Corning Incorporated
One Riverfront Plaza
Corning, NY 14831.............................................. 2,475,081 (2) 12.17%

Wellington Management Company, LLP
75 State Street
Boston MA 02109................................................. 2,637,600 (3) 12.96%

Brown Capital Management, Inc
809 Cathedral Street
Baltimore, MD 21201............................................. 1,096,100 (4) 5.39%

Joseph A. Mollica................................................. 330,111 (5) 1.61%

John J. Baldwin................................................... 187,653 (6) *

Saiid Zarrabian................................................... 187,445 (7) *

Stephen A. Spearman............................................... 62,788 (8) *

Lewis J. Shuster.................................................. 55,701 *

Bruce C. Myers.................................................... 16,175 (9) *

Frank Baldino, Jr................................................. 15,000 (10) *

</TABLE>

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APPROXIMATE
PERCENTAGE OF
NUMBER OF TOTAL VOTING
NAME OF PERSON OR ENTITY SHARES (1) POWER
- ----------------------------------------------------------------------- ------------------- -----------------------
<S> <C> <C>
Paul A. Bartlett.................................................. 152,818 (11) *

C. Peter W. Booth................................................. 3,334 (12) *

Gary E. Costley................................................... 15,000 (13) *

Edith W. Martin................................................... 8,334 (14) *

Charles A. Sanders................................................ 8,334 (15) *

James J. Marino................................................... 0 *

All Current Directors and Executive Officers as a group
(14 persons)...................................................... 1,052,667 (16) 5.03%

</TABLE>

*LESS THAN ONE PERCENT.

(1) Gives effect to the shares of Common Stock issuable within 60 days of
January 31, 2000 upon the exercise of all options and other rights
beneficially owned by the indicated stockholders on that date. Unless
otherwise indicated, the persons named in the table have sole voting and
sole investment power with respect to all shares shown as being
beneficially owned. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission and includes voting
and investment power with respect to shares.
(2) All data in this Proxy Statement regarding the ownership of the Company's
Common Stock by Corning is based on information provided to the Company
by Corning.
(3) Wellington Management Company LLP filed a Schedule 13G/A with respect to
the Company's Common Stock on February 11, 2000. All data in this Proxy
Statement regarding such ownership is based on such Schedule 13G/A.
(4) Brown Capital Management Inc. filed a Schedule 13G with respect to the
Company's Common Stock on February 10, 2000. All data in this Proxy
Statement regarding such ownership is based on such Schedule 13G.
(5) Includes 15,000 shares held by Dr. Mollica's wife and children, although
Dr. Mollica disclaims beneficial ownership of such shares. Includes
126,665 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(6) Includes 50,831 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(7) Includes 187,001 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(8) Includes 61,664 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(9) Includes 15,624 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(10) Includes 15,000 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(11) Includes 15,318 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(12) Includes 3,334 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(13) Includes 15,000 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(14) Includes 8,334 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(15) Includes 8,334 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.
(16) Includes 573,430 shares of Pharmacopeia Common Stock subject to options
exercisable within 60 days of January 31, 2000.

BOARD MEETINGS AND COMMITTEES

The Board of Directors of the Company held a total of five meetings
during 1999. The standing committees of the Board of Directors are the Audit
Committee and the Compensation Committee.

The Audit Committee's current members are Paul A. Bartlett, C. Peter
W. Booth and Edith W. Martin. This committee is primarily responsible for
approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting principles and its
system of internal accounting controls. The Audit Committee met two times
during 1999.

The Compensation Committee's current members are Frank Baldino, Jr.,
Gary E. Costley and Charles A. Sanders. The Compensation Committee reviews and
recommends to the Board the compensation of all executive officers. The
Compensation Committee met five times during 1999.

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No current director attended fewer than 75% of the aggregate of the
total number of meetings of the Board of Directors (during the period that he or
she served) and the total number of meetings held by all committees of the Board
of Directors on which he or she served (during the period that he or she
served).

BOARD COMPENSATION

Non-employee directors are reimbursed for expenses incurred in
connection with performing their respective duties as directors of the Company.
In addition, the Company has agreed to pay directors Gary E. Costley, C. Peter
W. Booth, Frank Baldino, Jr., Edith W. Martin, James J. Marino, Paul A. Bartlett
and Charles A. Sanders and any other non-employee director who becomes a member
of the Board of Directors for the first time after 1995 a cash fee of $1,500 for
each meeting of the Board of Directors or a committee thereof attended by such
director. In addition, each non-employee director is paid a cash retainer of
$12,000 per year, payable in advance for the year of service immediately
following the Annual Meeting of Stockholders. Each non-employee director
participates in the 1995 Director Stock Option Plan. Each individual who becomes
a non-employee Board member for the first time on or after October 26, 1995 will
automatically be granted an option to purchase 10,000 shares of Common Stock on
the date of his or her election or appointment to the Board of Directors,
provided such individual has not been in the prior employ of the Company.
Thereafter, at each annual stockholders meeting, each non-employee director with
at least six months of service on the Board of Directors who will continue to
serve as a director after such meeting will automatically be granted an option
to purchase 5,000 shares of Common Stock.

EMPLOYMENT AGREEMENTS

Effective November 1, 1997, the Company and Joseph A. Mollica entered
into a three-year employment agreement, subject to extension by mutual
agreement, whereby Dr. Mollica is employed as Chairman of the Board of Directors
and Chief Executive Officer. Pursuant to his agreement, Dr. Mollica is entitled
to receive an annual base salary and is eligible to receive a discretionary
bonus of up to 35% of his base salary. The base salary and bonus percentage may
be adjusted with the approval of the Compensation Committee. In the event the
Company terminates Dr. Mollica's employment without "cause", as defined in his
agreement, the Company will continue to pay as severance benefits his base
salary, bonus and benefits until the earlier to occur of (i) fifteen months
after the date of termination or (ii) Dr. Mollica's obtaining full-time
employment. Also, upon an acquisition of the Company, if the successor acquirer
fails to assume or observe the obligations of the agreement or if Dr. Mollica's
employment is subsequently terminated without cause, Dr. Mollica will be
entitled to full severance benefits.

In June 1993, the Company and John J. Baldwin entered into an agreement
whereby Dr. Baldwin was hired as Vice President of Chemistry. Pursuant to his
agreement, Dr. Baldwin is entitled to receive an annual base salary and is
eligible for an annual bonus of up to 20% of his annual base salary to be
awarded at the discretion of the Board of Directors. The base salary and bonus
percentage may be adjusted with the approval of the Compensation Committee. Also
pursuant to his agreement, the Company agreed to lend Dr. Baldwin $10,000 per
year, up to a maximum of $50,000 at an interest rate equal to the minimum rate
required to avoid imputation of income under applicable tax regulations.
Currently, there are no loans outstanding from the Company to Dr. Baldwin. The
agreement does not specify a term of employment. In the event the Company
terminates Dr. Baldwin's employment without "cause" as defined in his agreement
the Company will pay his annual salary until the earlier to occur of (i) one
year after the date of termination or (ii) Dr. Baldwin's obtaining full-time
employment. In 1998, Dr. Baldwin was appointed Chief Science and Technology
Officer of the Company but has not entered into any amended employment agreement
with the Company.

In November 1995, Saiid Zarrabian entered into an employment agreement
with MSI, a subsidiary of the Company, whereby Mr. Zarrabian was employed as
Chief Operating Officer of MSI. Pursuant to this agreement, Mr. Zarrabian is
entitled to receive an annual base salary and is eligible to receive a bonus.
The base salary and bonus percentage may be adjusted with the approval of the
Compensation Committee. In the event the Company terminates Mr. Zarrabian's
employment without "cause" as defined in his agreement, the Company will
continue to pay as severance benefits his base salary as of 1997 for one year
and COBRA costs until the earlier to occur of (i) eighteen months after the date
of termination and (ii) Mr. Zarrabian receiving such benefits from a successor
employer. Also, upon an acquisition of the Company, if the acquirer does not
offer Mr. Zarrabian a comparable position, Mr. Zarrabian will be entitled to
full severance benefits equal to his base salary as of 1997 for one year and
COBRA

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<PAGE>

costs until the earlier to occur of (i) eighteen months after the date of
termination and (ii) Mr. Zarrabian receiving such benefits from a successor
employer. In 1999, Mr. Zarrabian was appointed Chief Operating Officer of the
Company but has not entered into any amended employment agreement with the
Company.

In June 1996, the Company and Stephen A. Spearman entered into an
agreement whereby Dr. Spearman is employed as Executive Vice President of
Operations. Pursuant to his agreement, Dr. Spearman is entitled to receive an
annual base salary and is eligible for an annual bonus of up to 20% of his
annual base salary to be awarded at the discretion of the Board of Directors.
The base salary and bonus percentage may be adjusted with the approval of the
Compensation Committee. The agreement does not specify a term of employment.

On November 1, 1999, the Company entered into a Disengagement Agreement
and Release with Lewis J. Shuster. The Agreement provided for Mr. Shuster's
employment arrangement with the Company to end effective as of December 31,
1999. A severance payment of $275,000 is to be paid to Mr. Shuster in 24 equal
semi-monthly installments following the termination date. During 1999, Mr.
Shuster was an executive officer of the Company.

In December 1998, Bruce C. Myers entered into an agreement whereby Mr.
Myers was hired as Senior Vice President of Finance, Administration and
Strategic Planning of MSI. Pursuant to his agreement, Mr. Myers is entitled to
receive an annual base salary and is eligible for an annual bonus of up to 30%
of his base salary. The base salary and bonus percentage may be adjusted with
the approval of the Compensation Committee. The agreement does not specify a
term of employment. In the event the Company terminates Mr. Myers' employment
for other than Mr. Myers' misconduct or breach of his obligations to the
Company, the Company will continue to pay as severance benefits his base salary
until the earlier to occur of (i) six months after the date of termination or
(ii) Mr. Myers commencing comparable employment. In 1999, Mr. Myers was
appointed Senior Vice President and Chief Financial Officer of the Company but
has not entered into any amended employment agreement with the Company.

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PROPOSAL TWO:

PROPOSAL TO AMEND THE 1994 INCENTIVE STOCK PLAN TO
INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
THEREUNDER TO 4,700,000 SHARES

The Company's 1994 Incentive Stock Plan, as amended (the "Incentive
Plan") was approved by the Board of Directors and by the stockholders of the
Company in 1994, with a total of 750,000 shares of Common Stock reserved for
issuance under the Incentive Plan. In 1996, 1997, 1998 and 1999, the Board of
Directors and stockholders approved cumulative increases of 2,950,000 shares
authorized for issuance under the Incentive Plan. Subject to stockholder
approval, in February 2000, the Board of Directors approved an additional
increase of 1,000,000 shares authorized for issuance under the Incentive Plan,
increasing the total number of shares of Common Stock authorized for issuance
thereunder from 3,700,000 to 4,700,00 shares. This proposed increase in the
total number of shares of Common Stock available for issuance under the
Incentive Plan equals approximately 4.4% of the total outstanding shares of
Common Stock on the Record Date. A summary description of the Incentive Plan, as
proposed to be amended, is attached as Exhibit A to this Proxy. Said summary is
qualified in its entirety by the proxy covering the shares available for
issuance pursuant to the Incentive Plan, and by the full text of the Incentive
Plan, copies of which may be obtained by the Company's stockholders upon request
of the Office of the Secretary of the Company.

As of January 31, 2000, options to purchase 2,712,764 shares of Common
Stock (net of exercised and terminated options) had been granted under the
Incentive Plan, 619,521 options remained available for future grants and 367,715
options had been exercised.

The Board of Directors believes that this proposed increase in the
number of shares authorized for issuance under the Incentive Plan is in the best
interest of the Company. The Board of Directors believes that this increase will
strengthen the Company's ability to attract and retain individuals with the
desired training, experience and expertise as key employees in a highly
competitive labor market. The Board of Directors also believes that this
increase will allow the Company to furnish additional incentives to key
individuals to promote the Company's financial success and be motivated to
increase shareholder value.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR THE INCREASE IN THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE
INCENTIVE PLAN TO 4,700,000 SHARES OF COMMON STOCK.

- 9 -
<PAGE>

PROPOSAL THREE:

PROPOSAL TO AMEND THE 1995 DIRECTOR STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER TO 300,000 SHARES

The Company's 1995 Director Stock Option Plan (the "Director Plan") was
approved by the Board of Directors and by the stockholders of the Company in
1995, with a total of 150,000 shares of Common Stock reserved for issuance under
the Director Plan. Subject to stockholder approval, in February 2000, the Board
of Directors approved an additional increase of 150,000 shares authorized for
issuance under the Director Plan, increasing the total number of shares of
Common Stock authorized for issuance thereunder from 150,000 to 300,000. This
proposed increase in the total number of shares of Common Stock available for
issuance under the Director Plan equals approximately 0.66% of the total
outstanding shares of Common Stock on the Record Date. A summary description of
the Director Plan, as proposed to be amended, is attached as Exhibit B to this
Proxy. Said summary is qualified in its entirety by the proxy covering the
shares available for issuance pursuant to the Director Plan, and by the full
text of the Director Plan, copies of which may be obtained by the Company's
stockholders upon request of the Office of the Secretary of the Company

As of January 31, 2000, options to purchase 120,000 shares of Common
Stock (net of exercised and terminated options) had been granted under the
Directors Plan, 30,000 options remained available for future grants and no
options had been exercised.

The Board of Directors believes that this proposed increase in the
number of shares authorized for issuance under the Directors Plan is in the best
interest of the Company. The Board of Directors believes that this increase will
provide an adequate reserve of shares for issuance under the Director Plan to
enable the Company to compete successfully with other companies to attract and
retain qualified directors.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR THE INCREASE IN THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE
DIRECTORS PLAN TO 300,000 SHARES OF COMMON STOCK.

- 10 -
<PAGE>

PROPOSAL FOUR:

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Management has selected Ernst & Young LLP ("Ernst & Young"), independent
auditors, to audit the books, records and accounts of the Company for the
current fiscal year ending December 31, 2000.

A representative of Ernst & Young is expected to be available at the Annual
Meeting to make a statement if such representative desires to do so and to
respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
AND RATIFICATION OF SUCH selection. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.

- 11 -
<PAGE>

OTHER INFORMATION REGARDING THE COMPANY

PERFORMANCE GRAPH

The following is a line graph comparing the cumulative total return to
stockholders of Pharmacopeia Common Stock from December 5, 1995 (the date of
Pharmacopeia's initial public offering) through December 31, 1999 with the
cumulative total return over such period of (i) the Nasdaq Stock Market (U.S.
Companies) Index and (ii) the Dow Jones Biotechnology Industry Group Index. The
information contained in the Performance Graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
filing under the Securities Act of 1933, as amended (the "Securities Act"), or
Exchange Act , except to the extent that Pharmacopoeia specifically incorporated
it by reference to any such filing.

12/05/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PHARMACOPEIA, INC. $100.00 $151.56 $121.09 $100.00 $ 59.38 $141.44
DOW JONES BIOTECHNOLOGY INDUSTRY GROUP INDEX $100.00 $108.21 $122.84 $129.22 $169.53 $284.73
NASDAQ MARKET INDEX $100.00 $ 99.63 $123.81 $151.45 $213.61 $376.74

</TABLE>

- 12 -
<PAGE>

EXECUTIVE COMPENSATION

COMPENSATION TABLES

SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation awarded to, earned by or paid to the Chief Executive Officer and
each of the other five most highly compensated executive officers of
Pharmacopeia (the "Named Executive Officers") for services rendered to
Pharmacopeia in each of the last three fiscal years:

LONG TERM
ANNUAL COMPENSATION
COMPENSATION (1) AWARDS (2)
--------------------------------------- ---------------------------------------------------

RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($) AWARDS OPTIONS ($)
($)(3)
- ------------------------------ ------ ---------------- ------------ ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Mollica...... 1999 450,000 210,375 -- 55,000
President and Chief 1998 397,917 135,000 -- 50,000
Executive Officer 1997 362,833 140,000 -- 50,000

John J. Baldwin......... 1999 254,167 80,000 -- 20,000
Chief Science and 1998 249,333 45,000 -- 15,000
Technology Officer 1997 241,083 50,000 -- 20,000

Saiid Zarrabian....... 1999 278,875 160,000 -- 70,000
Chief Operating Officer 1998 218,333 40,000 -- 30,000
1997 187,000 177,800 -- 31,947(5)

Stephen A. Spearman... 1999 254,167 80,000 -- 35,000
Executive Vice 1998 248,750 55,000 -- 15,000
President, Operations - 1997 234,167 60,000 -- 15,000 31,582(5)
Pharmacopeia Laboratories

Lewis J. Shuster.......... 1999 271,250 110,000 -- 25,000
President and Chief 1998 212,500 52,000 -- 22,000
Operating
Officer - Pharmacopeia 1997 199,008 50,000 -- 20,000
Laboratories

Bruce C. Myers.......... 1999 213,333 125,000 -- 20,000
Senior Vice President 1998 12,273(4) -- -- 50,000
and Chief Financial Officer 1997 -- -- -- --

</TABLE>

(1) The value of certain perquisites or personal benefits is not included
in the amounts disclosed because it did not exceed for any Named
Executive Officer the lesser of either $50,000 or 10% of total annual
salary and bonus reported for the Named Executive Officer.
(2) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payments to any Named Executive Officer in
1997, 1998 or 1999.
(3) During 1997, 1998 and 1999 no shares of restricted Common Stock were
awarded or sold to the Named Executive Officers. As of December 31,
1999, Dr. Mollica held 202,400 shares of restricted Common Stock with
an aggregate value of $4,579,300, Dr. Baldwin held 135,750 shares of
restricted Common Stock with an aggregate value of $3,071,343.75. Mr.
Zarrabian, Dr. Spearman, Mr. Shuster and Mr. Myers held no restricted
Common Stock.
(4) Mr. Myers became employed by the Company in December 1998.
(5) Represents relocation expenses.

- 13 -
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth each grant of
stock options made during the year ended December 31, 1999 to each of the Named
Executive Officers:

% OF TOTAL
OPTIONS GRANTED POTENTIAL REALIZABLE
OPTIONS TO EMPLOYEES IN VALUE AT ASSUMED ANNUAL
GRANTED FISCAL YEAR EXERCISE EXPIRATION RATE OF STOCK
NAME (1) PRICE DATE APPRECIATION FOR OPTION
TERM(2)
- ------------------------- ---------- ------------------ ---------- ------------- ---------------------------
5% 10%
----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Mollica 55,000 4.10% $8.88 5/28/09 $306,704 $ 777,671

John J. Baldwin 20,000 1.49% $8.88 5/28/09 111,529 282,789

Saiid Zarrabian 25,000 1.86% $8.88 5/28/09 139,411 353,487
45,000 3.36% $15.19 11/16/09 429,810 1,089,223

Stephen A. Spearman 35,000 2.61% $8.88 5/28/09 195,175 494,881

Lewis J. Shuster 25,000 1.86% $8.88 1/30/00 7,250 14,750

Bruce C. Myers 20,000 1.49% $8.88 5/28/09 111,529 282,789

</TABLE>

(1) The listed options become exercisable as follows: one-fourth of the total
number of shares subject to the options are exercisable one year from the
grant date and an additional one forty-eighth of the total number of shares
are exercisable each full month thereafter based on the optionee's
continuing to be employed by the Company.
(2) Potential realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date of
grant until the end of the ten-year option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES. The following table sets forth for each of the Named Executive Officers
options exercised during 1999 and the fiscal year-end value of unexercised
options.

SHARES
ACQUIRED VALUE NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ON REALIZED UNEXERCISED MONEY OPTIONS AT YEAR-END
NAME EXERCISE ($)(1) OPTIONS AT YEAR-END ($)(1)
---------------------- ------------- ---------- ------------------------------------- --------------------------------

Exercisable Unexercisable Exercisable Unexercisable
------------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Mollica -- -- 116,977 113,023 $ 984,576 $ 1,217,224

John J. Baldwin -- -- 47,081 40,419 375,153 429,510

Saiid Zarrabian -- -- 185,126 89,376 3,736,395 867,229

Steven A. Spearman -- -- 56,665 58,335 162,843 620,107

Lewis J. Shuster 300 $5,819 119,008 0 1,863,994 0

Bruce C. Myers -- -- 12,500 57,500 171,063 788,088

</TABLE>

(1) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise price.

- 14 -
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE

The following is a report of the Compensation Committee (the "Committee")
of the Board of Directors of the Company describing the compensation policies
and rationale applicable to the Company's executive officers with respect to the
compensation paid to such executive officers for the year ended December 31,
1999. The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be incorporated by reference into any
future filing under the Securities Act or the Exchange Act, except to the extent
that the Company specifically incorporates it by reference into any such filing.

The Committee reviews and approves the Company's executive compensation
policies. The following is the report of the Committee describing the
compensation policies and rationales applicable to the Company's executive
officers with respect to the compensation paid to such executive officers for
the fiscal year ended December 31, 1999.

COMPENSATION PHILOSOPHY

The Company's philosophy in setting its compensation policies for
executive officers is to maximize stockholder value over time. The primary goal
of the Company's executive compensation program is therefore to closely align
the interests of the executive officers with those of the Company's
stockholders. To achieve this goal, the Company seeks to offer its executive
officers competitive compensation based upon their performance, and the
performance of the Company. The executive compensation program is designed to
attract and retain executive talent that contributes to the Company's long-term
success, to reward the achievement of the Company's short-term and long-term
strategic goals, to recognize and reward individual contributions to the
Company's performance, and to link executive officer compensation and
stockholder interests through equity-based plans. The Company currently uses
three integrated components -- Base Salary, Variable Annual Incentives and
Long-Term Incentives -- to meet these goals.

BASE SALARY

The base salary component of the total compensation is designed to
compensate executives competitively within the industry. The Committee reviewed
and approved fiscal 1999 base salaries for the Chief Executive Officer and other
executive officers. Base salaries were established by the Committee based upon
competitive compensation data, and the executive's job responsibilities, level
of experience, individual performance and contribution to the business.
Executive officer base salaries have been targeted at or above the average rates
paid by competitors in similar size companies to enable the Company to attract,
motivate, reward and retain highly skilled executives. In order to evaluate the
Company's competitive posture in the industry, the Committee reviewed and
analyzed the compensation packages, including base salary levels, offered by
other biotechnology and pharmaceutical companies. The competitive information
was obtained from surveys prepared by consulting companies or industry
associations (e.g., the Radford Biotechnology Compensation survey, the Top Five
Data Services Report on Executive Compensation in the Biopharmaceutical Industry
and the Culpepper Survey on the Software Industry). In making base salary
decisions, the Committee exercised its discretion and judgment based upon these
factors. No specific formula was applied to determine the weight of each factor.

- 15 -
<PAGE>

VARIABLE ANNUAL INCENTIVES

Variable incentive bonuses for executive officers are intended to reflect
the Committee's belief that a portion of the compensation of each executive
officer should be contingent upon the performance of the Company as well as the
individual contribution of each executive officer. To carry out this philosophy,
the Company has implemented a compensation policy (the "Compensation Policy")
which compensates officers in the form of annual bonuses that are paid in cash.
The Committee established target bonuses for each executive officer relative to
the officer's base salary. The Compensation Policy is intended to motivate and
reward executive officers by directly linking the amount of any cash bonus to
specific Company-based performance targets and specific individual-based
performance evaluations. The Company-based performance goals are tied to
different indicators of the Company's performance, such as achievement of
revenue, research and development, and other operating objectives. These
Company-based performance goals vary from year to year and are somewhat
subjective in nature. The individual officer's performance goals are taken into
account and are tied to different indicators of the individual officer's
performance (such as having achieved a research and development project
milestone) and, except in the case of the Chief Executive Officer, are based
upon the evaluation of the Chief Executive Officer. The Chief Executive
Officer's achievement of individual performance goals is determined by the
Committee. The Committee evaluates the achievement level of the Company's annual
goals and approves a performance rating relative to the goals. At the beginning
of each year, the Company's objectives are assigned a relative weighting factor
to assist in the priority setting and subsequent evaluation of performance
against objectives that is conducted at the end of the year. This evaluation is
subjective and is influenced by the Committee's perception of the importance of
the various corporate goals. The aggregate amount of the bonus pool can range
from 50-150% of the total individual target amounts based upon achievement of
individual goals, provided that if less than 80% of the annual Company
objectives are met no bonus amounts will be paid. The Committee believes that
the Company's Compensation Policy provides an excellent link between the
Company's performance and the incentives paid to executives.

LONG-TERM INCENTIVES

The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the Company's 1994
Incentive Stock Plan and the opportunity to purchase stock under the 1995
Employee Stock Purchase Plan (the "Purchase Plan"). The Company's Board of
Directors believes that stock options provide the Company's executive officers
with the opportunity to purchase and maintain an equity interest in the Company
and to share in the appreciation of the value of the Company's Common Stock. The
Board believes that stock options directly motivate an executive to maximize
long-term stockholder value. The options also utilize vesting periods (generally
four years) that encourage key executives to continue in the employ of the
Company. All options granted to executive officers to date have been granted at
the fair market value of the Company's Common Stock on the date of grant. The
Board considers the grant of each option subjectively, considering factors such
as the individual performance of the executive officer and the anticipated
contribution of the executive officer to the attainment of the Company's
long-term strategic performance goals. Long-term incentives granted in prior
years are also taken into consideration. The Compensation Committee has not yet
made a determination with respect to long-term incentive grants based on 1999
performance.

The Company established the Purchase Plan both to encourage employees to
continue in the employ of the Company and to motivate employees through
ownership interest in the Company. Under the Purchase Plan, employees, including
officers, may have up to 10% of their earnings

- 16 -
<PAGE>

withheld for purchases of Common Stock on certain dates specified by the Board.
The price of Common Stock purchased will be equal to 85% of the lower of the
fair market value of the Common Stock on the date of commencement of
participation in each six-month offering period or on each specified purchase
date.

CHIEF EXECUTIVE OFFICER COMPENSATION

The compensation of the Chief Executive Officer is reviewed annually on
the same basis as discussed above for all executive officers. Dr. Mollica's base
salary for 1999 was set at $450,000. Dr. Mollica's base salary was established
in part by comparing the base salaries of chief executive officers at other
biotechnology and pharmaceutical companies of similar size. In 1999, Dr. Mollica
was granted options to purchase 55,000 shares of Common Stock based on 1998
performance and based upon the other factors described above. The Compensation
Committee has not yet made a determination with respect to option grants to Dr.
Mollica based on 1999 performance. Under the Compensation Policy, Dr. Mollica
received a $210,375 bonus for 1999 performance. Dr. Mollica's total compensation
was based on the Company's accomplishments and his contribution thereto,
including (i) the Company achieving profitability for a full year for the first
time, (ii) continued growth in the Company's drug discovery services and
software business segments, (iii) successfully reducing the Company's internally
funded drug discovery activities and transitioning to more funded drug discovery
collaborations and services, (iv) executing the continued integration of the
Company's drug discovery services and software businesses, including managing
through certain changes in the Company's executive management, and (v)
developing and beginning to implement a five-year strategic plan for the
Company.

Section 162(m)

The Board has considered the potential future effects of Section 162(m) of
the Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the executive officers named in the proxy statement, unless
compensation is performance-based. The Company has adopted a policy that, where
reasonably practicable, the Company will seek to qualify the variable
compensation paid to its executive officers for an exemption from the
deductibility limitations of Section 162(m).

In approving the amount and form of compensation for the Company's
executive officers, the Committee will continue to consider all elements of the
cost to the Company of providing such compensation, including the potential
impact of Section 162(m).

Respectfully submitted by:
COMPENSATION COMMITTEE

Gary E. Costley
Frank Baldino, Jr.
Charles A. Sanders

- 17 -
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

On the basis of reports and representations submitted by or on behalf
of the directors, executive officers and ten percent stockholders of the
Company, all Forms 3, 4 and 5 showing ownership of and change of ownership in
the Company's equity securities during 1999 were timely filed with the
Securities and Exchange Commission as required by Section 16 (a) of the Exchange
Act.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee during 1999 were Gary E.
Costley, Frank Baldino, Jr. and Charles A. Sanders. No such member of the
Compensation Committee was a former or current officer or employee of the
Company.

CERTAIN TRANSACTIONS

James J. Marino, one of the Company's directors, who was appointed
effective as of February 2000, is a partner at Dechert Price & Rhoads, a law
firm that the Company has retained in 1999 and 2000.

The Company and Dr. Paul A. Bartlett are parties to a consulting agreement
pursuant to which Dr. Bartlett receives annual compensation of $75,000 plus
$1,000 for each consulting day served in excess of 25 days. The current term of
the agreement expires in March 2001. In 1999, the Company paid Dr. Bartlett
$75,000 pursuant to the consulting agreement.

OTHER MATTERS

The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy Card to vote the shares they represent as
the Board of Directors may recommend.

BY ORDER OF THE BOARD OF DIRECTORS

Princeton, New Jersey
Dated: March 27, 2000

- 18 -
<PAGE>

EXHIBIT A

DESCRIPTION OF THE 1994 PHARMACOPEIA INCENTIVE STOCK PLAN

GENERAL. Pharmacopeia's 1994 Incentive Stock Plan (the "Incentive
Plan") was initially adopted by the Board of Directors on April 20, 1994 and
initially approved by the stockholders on February 25, 1995. The Incentive Plan
authorizes the grant of stock options, stock appreciation rights and stock
purchase rights. Options granted under the Incentive Plan may be either
"incentive stock options" as defined in Section 422 of the Code, or nonstatutory
stock options, as determined by the Administrator (defined below). A total of
750,000 shares of Pharmacopeia Common Stock was initially reserved for issuance
under the Incentive Plan. In 1996, 1997, 1998 and 1999, the Board of Directors
and stockholders approved cumulative increases of 2,950,000 shares authorized
for issuance under the Incentive Plan, increasing the number of shares of
Pharmacopeia Common Stock authorized for issuance thereunder from 750,000 to
3,700,000 shares. Stockholder approval is now being sought for amendments of the
Incentive Plan to increase by 1,000,000 the number of shares authorized for
issuance under the Incentive Plan to 4,700,000. The Board of Directors believes
that the proposed amendment increasing the number of shares reserved for
issuance under the Incentive Plan is in the best interests of Pharmacopeia. The
proposed increase will strengthen the Company's ability to attract and retain
individuals with the desired training, experience and expertise as key employees
in a highly competitive labor market. This increase will also allow the Company
to furnish additional incentives to key individuals to promote the Company's
financial success and be motivated to increase shareholder value.

PURPOSE. The general purpose of the Incentive Plan is to attract and
retain the best available personnel, to provide additional incentive to
employees and consultants and to promote the success of Pharmacopeia's business.

ADMINISTRATION. The "Primary Committee" administers the Incentive Plan
for all employees subject to Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Primary Committee consists of two or more
non-employee directors appointed by the Board of Directors. With respect to all
other participants in the Incentive Plan, the Board of Directors may either
administer the Incentive Plan or appoint a committee (the "Secondary Committee")
from among its members, including the Primary Committee, to administer the
Incentive Plan. A subcommittee of the Primary Committee or the Secondary
Committee which has been approved by the Board of Directors may be delegated
those administrative functions under the Incentive Plan which have been
authorized to be performed by the Primary or Secondary Committee, as the case
may be. The Board of Directors, Primary Committee, Secondary Committee or an
approved subcommittee thereof, as applicable, are collectively referred to
herein as the "Administrator". Subject to the other provisions of the Incentive
Plan, the Administrator has the authority to: (i) grant options and rights; (ii)
interpret the Incentive Plan; (iii) select the persons to whom options and
rights are to be granted; (iv) determine the number of shares to be made subject
to each option and right; (v) prescribe, amend and rescind rules and regulations
relating to the Incentive Plan; (vi) prescribe the terms and conditions of each
option and right (including the exercise price, whether an option will be
classified as an incentive stock option or a nonstatutory stock option and the
provisions of the stock option or stock purchase agreement to be entered into
between Pharmacopeia and the grantee); and (vii) to make all other
determinations deemed necessary or advisable for the administration of the
Incentive Plan. All decisions, interpretations and other actions of the
Administrator shall be final and binding on all holders of options and on all
persons deriving their rights therefrom.

ELIGIBILITY. The Incentive Plan provides that options and rights may be
granted to Pharmacopeia's employees and consultants (as such terms are defined
in the Incentive Plan). Incentive

A-1
<PAGE>

stock options may be granted only to employees. At January 31, 1999,
approximately 519 employees of Pharmacopeia were eligible to participate in the
Incentive Plan, as proposed to be amended. It is not possible to state at this
time whether a particular executive officer, all current executive officers as a
group, a particular nominee for director or all non-executive officers as a
group will be granted Options under the Incentive Plan or the benefit or value
of such Options, since these matters will be determined by the Administrator
based on each participant's level of responsibility, compensation and
contribution to Pharmacopeia's success. As of January 31, 2000, Pharmacopeia had
granted options pursuant to the Incentive Plan to purchase an aggregate of
3,804,334 shares at exercise prices ranging from $0.48 to $39.75 per share. (For
information regarding options granted under the Incentive Plan to certain
Pharmacopeia Named Executive Officers of Pharmacopeia, see "Executive
Compensation" in the Proxy Statement). As of that date, Pharmacopeia had also
granted options pursuant to the Incentive Plan to the following groups or
persons: all current executive officers as a group had received options to
purchase 900,280 shares at exercise prices ranging from $1.24 to $21.50 per
share and all current employees, including all current officers who are not
executive officers, as a group, had received options under the Incentive Plan to
purchase 2,712,764 shares at exercise prices ranging from $0.48 to $39.75 per
share. The closing price of Pharmacopeia Common Stock as reported on the Nasdaq
National Market for January 31, 2000 was $38.00.

SECTION 162(m) LIMITATIONS. Section 162(m) of the Code limits the
deductibility of compensation paid to certain executive officers of
Pharmacopeia. To maximize Pharmacopeia's deduction attributable to options
granted to such persons, the Incentive Plan requires that no participant may
receive options, separately exercisable stock appreciation rights and stock
purchase rights for more than 400,000 shares of Pharmacopeia Common Stock in any
one year.

TERMS AND CONDITIONS OF OPTIONS. Each option granted under the
Incentive Plan is evidenced by a written stock agreement between the optionee
and Pharmacopeia and is subject to the following terms and conditions:

(a) EXERCISE PRICE. The Administrator determines the exercise price of
an option to purchase shares of Pharmacopeia Common Stock at the time the option
is granted. The exercise price under an incentive stock option must not be less
than 100% of the fair market value of the Pharmacopeia Common Stock on the date
the option is granted and the exercise price of a nonstatutory stock option must
not be less than 85% of the fair market value of the Pharmacopeia Common Stock
on the date the option is granted. However, any optionee who owns more than 10%
of the combined voting power of all classes of outstanding stock of Pharmacopeia
(a "10% Stockholder") is not eligible for the grant of an option unless the
exercise price of the option is at least 110% of the fair market value of the
Pharmacopeia Common Stock on the date of grant. Generally, the fair market value
shall be the closing sale price for such stock on the date of determination (or
the mean of the bid and asked prices, if no sales were reported) as quoted on
the Nasdaq National Market as reported in THE WALL STREET JOURNAL.

(b) FORM OF CONSIDERATION. The means of payment for shares issued upon
exercise of an option is specified in each option agreement and generally may be
made by cash, check, money order, promissory note, certain other shares of
Pharmacopeia Common Stock owned by the optionee, delivery of an exercise notice
together with irrevocable instructions to a broker to deliver the exercise price
to Pharmacopeia from the sale or loan proceeds (a "cashless exercise"), delivery
of an irrevocable subscription agreement which requires full payment within
twelve months, any combination of the foregoing methods, or any other
consideration to the extent permitted under applicable law.

(c) TERM OF THE OPTION. Each stock option agreement will specify the
type of option, the term of the option and the date when the option is to become
exercisable. However, the term of an option

A-2
<PAGE>

granted under the Incentive Plan will be no longer than ten years from the date
of grant in the case of an incentive stock option and ten years and one day in
the case of a nonstatutory stock option. Moreover, in the case of an option
granted to a 10% Stockholder, the term of an incentive stock option will be for
no more than five years from the date of grant and the term of a nonstatutory
stock option will be no more than five years and one day from the date of grant.

(d) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. If an
optionee's employment or consulting relationship terminates for any reason
(other than death or permanent disability), the optionee may exercise his or her
option, but only within thirty days (or such other period of time as is
determined by the Administrator) from the date of such termination, and only to
the extent that the optionee was entitled to exercise it at the date of such
termination (and in no event later than the expiration of the term of such
option as set forth in the option agreement). To the extent that the optionee
was not entitled to exercise an option at the date of such termination, and to
the extent that the optionee does not exercise such option (to the extent
otherwise so entitled) within the time permitted, the option shall terminate.

(e) PERMANENT DISABILITY AND DEATH. If an optionee is unable to
continue employment or consulting with Pharmacopeia as a result of disability
(as defined in Section 22(e)(3) of the Code) or death, then all his or her
options under the Incentive Plan shall expire within six months after the date
of termination of the optionee's employment or consulting relationship (or such
other period of time determined by the Administrator) but in no event later than
the expiration of the term of such option as set forth in the option agreement.
The optionee, executor or other legal representative of the optionee may
exercise all or part of his or her option at any time before such expiration
date to the extent that such option was exercisable at the time of termination
of employment. To the extent that the options were not exercisable at the date
of such termination, and to the extent that the options are not exercised (to
the extent otherwise permissible) within the time permitted, the options shall
terminate.

(f) MISCONDUCT. If an optionee's employment or consultancy terminates
due to misconduct, all outstanding options terminate immediately. Misconduct as
defined in the Incentive Plan includes, but is not limited to, (i) acts of
fraud, embezzlement or dishonesty, (ii) unauthorized use or disclosure of
confidential information or trade secrets of Pharmacopeia or (iii) other
intentional acts of misconduct by the optionee that harm Pharmacopeia.

(g) VALUE LIMITATION. If the aggregate fair market value of all shares
of Pharmacopeia Common Stock subject to an optionee's incentive stock options
which are exercisable for the first time during any calendar year exceeds
$100,000, the excess options shall be treated as nonstatutory stock options.

NONTRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. During a
participant's lifetime, his or her options and rights shall be exercisable only
by the participant and shall not be transferable other than by will or laws of
descent and distribution.

STOCK APPRECIATION RIGHTS. A stock appreciation right granted in
connection with an option entitles the optionee to exercise the stock
appreciation right by surrendering to Pharmacopeia unexercised the corresponding
portion of the related option. In exchange, the optionee receives from
Pharmacopeia an amount equal to the excess of the fair market value of the
Pharmacopeia Common Stock covered by the surrendered portion of the related
option on the date of surrender of the related option over the exercise price of
the related option. When a stock appreciation right granted in connection with
an option is exercised, the related option, to the extent surrendered, ceases to
be exercisable. A stock appreciation right granted in connection with an option
remains exercisable until, and expires no later than, the date on which the
related option ceases to be exercisable or expires.

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With respect to employees subject to Section 16 of the Exchange Act,
the Administrator may grant limited stock appreciation rights in connection with
an option. The limited stock appreciation rights may only be exercised upon the
occurrence of a hostile take-over (as defined by the Incentive Plan). In the
event of a hostile take-over, each limited stock appreciation right that has
been held for at least six months may be exercised for thirty days after the
hostile take-over for a cash distribution equal to the excess of (i) the
take-over price for the shares subject to the related option over (ii) the
aggregate exercise price payable for such shares.

Pharmacopeia's obligation arising upon the exercise of a stock
appreciation right may be paid in Pharmacopeia Common Stock or in cash, or any
combination thereof, as the Administrator may determine.

STOCK PURCHASE RIGHTS. A stock purchase right gives the purchaser a
period of no longer than six months from the date of grant to purchase
Pharmacopeia Common Stock. A stock purchase right is accepted by the execution
of a restricted stock purchase agreement between Pharmacopeia and the purchaser,
accompanied by the payment of the purchase price for the shares. Unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall give Pharmacopeia a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment or consulting relationship
with Pharmacopeia for any reason (including death or disability). The purchase
price for any shares repurchased by Pharmacopeia shall be the original price
paid by the purchaser. The repurchase option lapses at a rate determined by the
Administrator.

STOCK WITHHOLDING. The Administrator may allow participants in the
Incentive Plan to satisfy their withholding obligations, if applicable, by
either electing to have a certain number of shares of stock which would then be
received pursuant to the exercise of the option or the vesting of such shares
withheld by Pharmacopeia or by delivering to Pharmacopeia the number of shares
of stock required to be withheld.

ADJUSTMENT UPON CHANGE IN CAPITALIZATION. Subject to any required
action by the stockholders of Pharmacopeia, in the event that the stock of
Pharmacopeia is changed by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other increase or decrease in the
number of issued shares of Pharmacopeia Common Stock effected without receipt of
consideration by Pharmacopeia, appropriate proportional adjustments will be made
in the number and class of shares of stock under the Incentive Plan, the number
of shares of stock subject to any option or right outstanding under the
Incentive Plan, and the exercise price of any such outstanding option or right.
Any such adjustment will be made by the Administrator, whose determination shall
be conclusive.

MERGER OR ASSET SALE. In connection with any merger, or sale of all or
substantially all of the assets of Pharmacopeia, each outstanding option may be
assumed or an equivalent option substituted by a successor corporation. If the
successor corporation does not assume the option or substitute a substantially
equivalent option, each option will become fully exercisable for a period of
time determined by the Administrator. All options not exercised before the
merger or asset sale will terminate, if not substituted for or assumed. Any
option assumed or substituted for will automatically become fully exercisable if
an optionee's employment or consultancy ends within eighteen months after the
merger or asset sale. Such option will expire at the end of its term or one year
after the involuntary termination, whichever is earlier. In addition, any
repurchase option on Pharmacopeia Common Stock will terminate and the stock will
fully vest upon a merger or asset sale unless the repurchase options are
assigned to the successor corporation. Any such repurchase option assigned in
the merger or asset sale will end and the shares subject to the repurchase
option will immediately vest in full if the optionee's employment or consultancy
ends within eighteen months of the merger or asset sale.

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CHANGE IN CONTROL. The Administrator has the discretion to make any
outstanding option fully or partially exercisable upon a change in control, or
condition making any outstanding option fully exercisable on the involuntary
termination of an optionee's employment or consultancy within eighteen months of
the date of the change in control. In addition, the Administrator has the
discretion with respect to stock purchase rights to terminate any repurchase
option and vest the Pharmacopeia Common Stock to which the repurchase option
relates upon a change in control or upon the involuntary termination of an
optionee's employment or consultancy within eighteen months of the date of the
change in control. A change in control means (i) certain changes in the
composition of Pharmacopeia's Board of Directors over a three year period, or
(ii) the acquisition of more than half of the beneficial ownership of
Pharmacopeia by any person or group accomplished by a tender offer which the
Board of Directors does not recommend the stockholders accept.

AMENDMENTS, SUSPENSIONS AND TERMINATION OF THE INCENTIVE PLAN. The
Board of Directors may amend, suspend or terminate the Incentive Plan at any
time; provided, however, that stockholder approval is required for any amendment
which (i) materially increases the number of shares under the Incentive Plan,
(ii) materially increases the maximum number of shares allowed for grants to any
participant, (iii) materially changes the class of persons eligible to receive
grants of options or rights, or (iv) materially increases the benefits to
participants under the Incentive Plan. In any event, the Incentive Plan will
terminate automatically in 2004.

FEDERAL INCOME TAX CONSEQUENCES

INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% stockholder of Pharmacopeia. Pharmacopeia is entitled to a deduction in the
same amount as the ordinary income recognized by the optionee.

NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes ordinary taxable income generally measured by
the excess of the then fair market value of the shares over the exercise price.
Any taxable income recognized in connection with an option exercise by an
employee of Pharmacopeia is subject to tax withholding by Pharmacopeia.
Pharmacopeia is entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Upon a disposition of such shares by the
optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as provided above, is
treated as long-term or short-term capital gain or loss, depending on the
holding period.

STOCK APPRECIATION RIGHTS. No income will be recognized by a recipient
in connection with the grant of a stock appreciation right. When the stock
appreciation right is exercised, the recipient generally will be required to
include as taxable ordinary income in the year of exercise an amount equal to
the sum of the amount of cash received and the fair market value of any
Pharmacopeia Common Stock received on the exercise. In the case of a recipient
who is also an employee, any income recognized on

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exercise of a stock appreciation right will constitute wages for which
withholding will be required. Pharmacopeia will be entitled to a tax deduction
in the same amount. If the optionee receives Pharmacopeia Common Stock upon the
exercise of a stock appreciation right, any gain or loss on the subsequent sale
of such stock will be treated in the same manner as discussed above under
"Nonstatutory Stock Options."

STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in
the same manner as discussed above under "Nonstatutory Stock Options." However,
restricted stock is generally purchased upon the exercise of a stock purchase
right. At the time of purchase, restricted stock is subject to a "substantial
risk of forfeiture" within the meaning of Section 83 of the Code. As a result,
the purchaser will not recognize ordinary income at the time of purchase.
Instead, the purchaser will recognize ordinary income on the dates when a stock
ceases to be subject to a substantial risk of forfeiture. The stock will
generally cease to be subject to a substantial risk of forfeiture when it is no
longer subject to Pharmacopeia's right to repurchase the stock. At such times,
the purchaser will recognize ordinary income measured as the difference between
the purchase price and the fair market value of the stock on the date the stock
is no longer subject to a substantial risk of forfeiture.

The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period by timely filing an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code. In such event, the ordinary income
recognized, if any, is measured as the difference between the purchase price and
the fair market value of the stock on the date of purchase, and the capital gain
holding period commences on such date. The ordinary income recognized by a
purchaser who is an employee will be subject to tax withholding by Pharmacopeia.
Different rules may apply if the purchaser is also an officer, director, or 10%
stockholder of Pharmacopeia.

The foregoing is only a summary of the effect of federal income
taxation upon optionees, holders of stock purchase rights, and Pharmacopeia with
respect to the grant and exercise of options and stock purchase rights under the
Incentive Plan. It does not purport to be complete, and does not discuss the tax
consequences of the employee's or consultant's death or the provisions of the
income tax laws of any municipality, state or foreign country in which the
employee or consultant may reside.

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EXHIBIT B

DESCRIPTION OF THE 1995 PHARMACOPEIA DIRECTOR STOCK OPTION PLAN

GENERAL. Pharmacopeia's 1995 Director Option Plan (the "Director Plan")
was initially adopted by the Board of Directors (the "Board") on October 6, 1995
and initially approved by the stockholders on October 26, 1995. The Director
Plan authorizes the grant of nonstatutory stock options to non-employee
directors. A total of 150,000 shares of Pharmacopeia Common Stock was initially
reserved for issuance under the Director Plan. Stockholder approval is now being
sought for amendment of the Director Plan to increase by 150,000 the number of
shares authorized for issuance under the Director Plan to 300,000. The Board
believes that the proposed amendment increasing the number of shares reserved
for issuance under the Director Plan is in the best interests of Pharmacopeia.
The proposed increase will provide an adequate reserve of shares for issuance
under the Director Plan necessary to enable Pharmacopeia to compete successfully
with other companies to attract and retain non-employee directors in a
competitive market.

PURPOSE. The general purpose of the Director Plan is to attract and retain
the best available non-employee directors, to provide additional incentive to
such individuals and to promote the success of Pharmacopeia's business.

ADMINISTRATION. The Board administers the Director Plan. The Board has the
authority to (i) interpret the Director Plan; (ii) prescribe, amend and rescind
rules and regulations relating to the Director Plan; and (iii) to make all other
determinations deemed necessary or advisable for the administration of the
Director Plan. All decisions, interpretations and other actions of the Board
shall be final and binding on all holders of options and on all persons deriving
their rights therefrom.

ELIGIBILITY. The Director Plan provides that options will be granted to
Pharmacopeia's non-employee directors as follows:

- Each non-employee director shall be granted an option to
purchase 10,000 shares on the date such individual first
becomes a director, and

- Each non-employee director shall be granted an option to
purchase 5,000 shares on the date of each annual
stockholders' meeting, provided the individual has
served as a non-employee director for at least six
months prior to the date of the meeting.

As of January 31, 2000, Pharmacopeia had granted options pursuant to the
Director Plan to purchase an aggregate of 120,000 shares at exercise prices
ranging from $10.06 to $26.75 per share. The closing price of Pharmacopeia
Common Stock as reported on the NASDAQ National Market for January 31, 2000 was
$38.00 per share.

TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Director
Plan is evidenced by a written stock agreement between the optionee and
Pharmacopeia and is subject to the following terms and conditions:

(a) EXERCISE PRICE. The exercise price of an option issued under the
Director Plan shall be equal to 100% of the fair market value of the shares on
the date the option is granted. Generally, the fair market value shall be the
closing sale price for such shares on the date of determination (or the mean of
the bid and asked prices, if no sales were reported) as quoted on the NASDAQ
National Market as reported in THE WALL STREET JOURNAL.

(b) FORM OF CONSIDERATION. The means of payment for shares issued upon
exercise of an option is specified in each option agreement and generally may be
cash, check, money order, certain other shares of Pharmacopeia Common Stock
owned by the optionee, delivery of an exercise notice together with irrevocable
instructions to a broker to deliver the exercise price to Pharmacopeia from the
sale proceeds (a

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<PAGE>

"cashless exercise") or any combination of the foregoing methods.

(c) TERM OF THE OPTION. The term of an option granted under the Director
Plan shall be ten years from the date of grant. Options issued under the
Director Plan shall become exercisable in three equal annual installments,
beginning on the first anniversary of the date of grant; provided the optionee
continues to serve on the Board.

(d) TERMINATION OF SERVICE. If an optionee's service on the Board
terminates for any reason (other than death or permanent disability), the
optionee may exercise his or her option, but only within 12 months from the date
of such termination, and only to the extent that the optionee was entitled to
exercise it at the date of such termination (and in no event later than the
expiration of the term of such option as set forth in the option agreement). To
the extent that the optionee was not entitled to exercise an option at the date
of such termination, and to the extent that the optionee does not exercise such
option (to the extent otherwise so entitled) within the time permitted, the
option shall terminate.

(e) PERMANENT DISABILITY AND DEATH. If an optionee is unable to continue
to serve on the Board as a result of permanent disability or death, then all his
or her options under the Director Plan shall immediately become fully vested.

NONTRANSFERABILITY OF OPTIONS. During an optionee's lifetime, his or her
options shall be exercisable only by the optionee and shall not be transferable
other than by will or laws of descent and distribution.

ADJUSTMENT UPON CHANGE IN CAPITALIZATION. In the event that the stock of
Pharmacopeia is changed by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other increase or decrease in the
number of issued shares of Pharmacopeia Common Stock effected without receipt of
consideration by Pharmacopeia, appropriate proportional adjustments will be made
in the number and class of shares of stock under the Director Plan, the number
of shares of stock subject to any option outstanding under the Director Plan,
and the exercise price of any such outstanding option. Any such adjustment will
be made by the Board, whose determination shall be conclusive.

MERGER OR ASSET SALE. In connection with any merger, or sale of all or
substantially all of the assets of Pharmacopeia, each outstanding option shall
become fully exercisable immediately prior to the merger or sale. Each such
option may be assumed or an equivalent option substituted by a successor
corporation. All options not exercised before the merger or asset sale will
terminate, if not substituted for or assumed.

CHANGE IN CONTROL. Any outstanding option shall become fully exercisable
immediately prior to a change in control. Each such option shall remain
exercisable until the expiration of the option term, the termination of the
option or the surrender of the option in connection with a hostile take-over, as
defined in the Plan. A change in control means (i) certain changes in the
composition of the Board over a three year period, or (ii) the acquisition of
more than half of the beneficial ownership of Pharmacopeia by any person or
group accomplished by a tender offer which the Board does not recommend the
stockholders accept.

Upon the occurrence of a hostile take-over, each option that has been
held for at least six months may be surrendered within 30 days of the hostile
take-over. An optionee who surrenders an option will receive a cash distribution
in an amount equal to the excess of (i) the aggregate take-over price for the
shares subject to the option over (ii) the aggregate exercise price payable for
such shares.

AMENDMENTS, SUSPENSIONS AND TERMINATION OF THE DIRECTOR PLAN. The Board
may amend, suspend or terminate the Director Plan at any time; provided,
however, that stockholder approval is required for certain amendments. In any
event, the Director Plan will terminate automatically in 2005.

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FEDERAL INCOME TAX CONSEQUENCES

An optionee does not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. Upon exercise, the optionee recognizes
ordinary taxable income generally measured by the excess of the then fair market
value of the shares over the exercise price. Pharmacopeia is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Upon a disposition of such shares by the optionee, any difference between the
sale price and the fair market value of the shares on the date of exercise is
treated as long-term or short-term capital gain or loss, depending on the
holding period.

The foregoing is only a summary of the effect of federal income taxation
upon optionees and Pharmacopeia with respect to the grant and exercise of
options under the Director Plan. It does not purport to be complete, and does
not discuss the tax consequences of the optionee's death or the provisions of
the income tax laws of any municipality, state or foreign country in which the
optionee may reside.

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Appendix I

PHARMACOPEIA, INC.
1994 INCENTIVE STOCK PLAN
(as amended and restated as of October 6, 1995)

1. PURPOSES OF THE PLAN. The purposes of this Incentive Stock Plan are
to attract and retain the best available personnel, to provide additional
incentive to the Employees and Consultants of Pharmacopeia, Inc. (the "Company")
and to promote the success of the Company's business.

Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Plan Administrator and as
reflected in the terms of the written option agreement. The Plan Administrator
also has the discretion to grant Stock Purchase Rights.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "BOARD" shall mean the Board of Directors of the Company.

(b) "CHANGE IN CONTROL" shall mean a change in ownership or control
of the Company effected through either of the following transactions:

(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Company), of beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's shareholders which the Board does not
recommend such shareholders to accept, or

(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or
nomination was approved by the Board.

(d) "COMMON STOCK" shall mean the Common Stock of the Company.

<PAGE>

(e) "COMPANY" shall mean Pharmacopeia, Inc., a Delaware corporation.

(f) "CONSULTANT" shall mean (i) any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services and (ii) any non-employee member of the
Board (other than an individual serving as a member of the Primary Committee).

(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant, as applicable. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Company; provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute,

(h) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.

(j) "HOSTILE TAKE-OVER" shall mean a change in ownership of the
Company effected through the following transaction:

(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's shareholders which the Board does not
recommend such shareholders to accept, and

(ii) more than fifty percent (50%) of the securities so
acquired are accepted from persons other than Section 16 Insiders.

(k) "INCENTIVE STOCK OPTION" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

(l) "INVOLUNTARY TERMINATION" shall mean the termination of the
service of any individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by the
Company for reasons other than Misconduct, or

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<PAGE>

(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Company which materially reduces
his or her level of responsibility, (B) a reduction in his or her level
of compensation (including base salary, fringe benefits and
participation in corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Company without the individual's consent.

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

(n) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an Incentive Stock Option.

(o) "OPTION" shall mean a stock option granted pursuant to the Plan.

(p) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.

(q) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.

(r) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424 of the Code.

(s) "PLAN" shall mean this 1994 Incentive Stock Plan.

(t) "PLAN ADMINISTRATOR" shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Plan with respect to one or more classes of eligible persons,
to the extent such entity is carrying out its administrative functions under the
Plan with respect to the persons under its jurisdiction.

(u) "PRIMARY COMMITTEE" shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Plan with
respect to Section 16 Insiders.

(v) "PURCHASER" shall mean an Employee or Consultant who exercises a
Stock Purchase Right.

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<PAGE>

(w) "SECONDARY COMMITTEE" shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Plan with respect to
eligible persons other than Section 16 insiders.

(x) "SECTION 12(g) REGISTRATION DATE" shall mean .the first date on
which the Common Stock is registered under Section 12(g) of the Exchange Act.

(y) "SECTION 16 INSIDER" shall mean an officer or director of the
Company subject to the short-swing profit liabilities of Section 16 of the
Exchange Act.

(z) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.

(aa) "STOCK PURCHASE RIGHT" shall mean a right to purchase Common
Stock pursuant to the Plan or the right to receive a bonus of Common Stock for
past services.

(bb) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424 of the Code.

(cc) "TAKE-OVER PRICE" shall mean the GREATER of (i) the fair market
value per Share on the date the Option is surrendered to the Company in
connection with a Hostile Take-Over or (ii) the highest reported price per Share
paid by the tender offeror in effecting such Hostile Take-Over. However, if the
surrendered option is an Incentive Stock Option, the Take-Over Price shall not
exceed the clause (i) price per Share.

(dd) "TAXES" shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Nonstatutory Stock Options
or unvested shares of Common Stock in connection with the exercise of those
options or the vesting of those shares.

3. STOCK SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of Shares under the Plan is 750,000(1) shares of
Common Stock. The Shares may be authorized, but unissued, or reacquired
Common Stock.

(b) No one person participating in the Plan may receive Options,
separately exercisable stock appreciation rights and Stock Purchase Rights for
more than 400,000 Shares per calendar year during the term of the Plan beginning
with the 1995 calendar year.

(c) If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full or if an
Option is cancelled in accordance with the cancellation-regrant provisions of
the Plan, then the unpurchased Shares which were subject thereto shall, unless
the Plan shall have been terminated, become available

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1 Reflects the 1-for-2 reverse stock split effected on October 6, 1995.

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<PAGE>

for future option grant or sale under the Plan. Notwithstanding any other
provision of the Plan, shares issued upon exercise of Options or Stock Purchase
Rights (whether or not these shares are later repurchased by the Company) shall
not become available for future grant or sale under the Plan. In addition,
should the exercise price of an Option be paid with Shares or should Shares
otherwise issuable under the Plan be withheld by the Company in satisfaction of
the withholding taxes incurred in connection with the exercise of an Option or
the vesting of Shares issued under Stock Purchase Rights, then the number of
Shares available for issuance under the Plan shall be reduced by the gross
number of shares for which the Option is exercised or which vest under the Stock
Purchase Right, and not by the net number of Shares issued to the holder of such
Option or Share issuance.

4. ADMINISTRATION OF THE PLAN.

(a) PROCEDURE. The Plan shall be administered as follows:

(i) The Primary Committee shall have sole and exclusive
authority to administer the Nan with respect to Section 16 Insiders. No
non-employee Board member shall be eligible to serve on the Primary
Committee if such individual has, during the twelve (12)-month period
immediately preceding the date of his or her appointment to the Primary
Committee or (if shorter) the period commencing with the Section 12(g)
Registration Date and ending with the date of his or her appointment to
the Primary Committee, received an Option grant, Stock Purchase Right
or direct stock issuance under the Plan or any other stock option,
stock appreciation, stock bonus or other stock plan of the Company (or
any Parent or Subsidiary) other than pursuant to the 1995 Director
Option Plan.

(ii) Administration of the Plan with respect to all other
persons eligible to participate in the Plan may, at the Board's
discretion, be vested in the Primary Committee or a Secondary
Committee, or the Board may retain the power to administer the Plan
with respect to all such persons. The members of the Secondary
Committee may be Board members who are Employees eligible to receive
Option grants, stock purchase right or direct stock issuances under the
Plan Or any stock option, stock appreciation, stock bonus or other
stock plan of the Company (or any Parent or Subsidiary).

(iii) Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may
also at any time terminate the functions of any Secondary Committee and
reassume all powers and authority previously delegated to such
committee.

(b) POWERS OF THE PLAN ADMINISTRATOR. Subject to the provisions of
the Plan, the Plan Administrator shall have the authority, in its discretion:
(i) to grant Incentive Stock Options, Nonstatutory Stock Options or Stock
Purchase Rights; (ii) to determine the exercise price per Share of Options or
Stock Purchase Rights to be granted, which exercise price shall be determined in
accordance with Section 7 of the Plan; (iii) to determine the Employees or

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<PAGE>

Consultants to whom, and the time or times at which, Options or Stock Purchase
Rights shall be granted and the number of Shares to be represented by each
Option or Stock Purchase Right; (iv) to interpret the Plan; (v) to prescribe,
amend and rescind rules and regulations relating to the Plan; (vi) to determine
the terms and provisions of each Option and Stock Purchase Right granted (which
need not be identical) and, with the consent of the holder thereof, modify or
amend any provisions (including provisions relating to exercise price) of any
Option or Stock Purchase Right; (vii) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option or Stock Purchase Right previously granted by the Plan Administrator; and
(viii) to make all other determinations deemed necessary or advisable for the
administration of the Plan.

(c) EFFECT OF PLAN ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Plan Administrator shall be final and
binding on all Optionees, Purchasers and any other holders of any Options or
Stock Purchase Rights granted under the Plan.

5. ELIGIBILITY.

(a) Options and Stock Purchase Rights may be granted to Employees
and Consultants, provided that Incentive Stock Options may only be granted to
Employees. An Employee or Consultant who has been granted an Option or Stock
Purchase Right may, if such Employee or Consultant is otherwise eligible, be
granted additional Option(s) or Stock Purchase Right(s).

(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate fair market
value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options.

(c) For purposes of Section 5(b), Options shall be taken into
account in the order in which they were granted, and the fair market value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.

(d) The Plan shall not confer upon any Optionee or holder of a Stock
Purchase Right any right with respect to continuation of employment by or the
rendition of services to the Company, nor shall it interfere in any way with his
or her right or the Company's right to terminate his or her employment or
services at any time, with or without cause.

6. TERM OF PLAN.

(a) The Plan became effective upon its adoption by the Board. The
Plan was amended and restated by the Board on October 6, 1995 in connection with
the initial public offering of the Company. The restatement became effective on
the Section 12(g) Registration

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<PAGE>

Date. The provisions of the restatement of the Plan shall apply only to Options
and Stock Purchase Rights granted under the Plan from and after the effective
date of the restatement. All Options and Stock Purchase Rights issued and
outstanding under the Plan immediately prior to the effective date of the
restatement shall continue to be governed by the terms and conditions of the
Plan (and the instrument evidencing each such Option and Stock Purchase Right)
as in effect on the date each such Option and Stock Purchase Right was
previously granted, and nothing in the restatement shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such Options and
Stock Purchase Rights with respect to the acquisition of Shares thereunder.

(b) The Plan shall continue in effect for a term of ten (10) years
from the date of its initial adoption by the Board unless sooner terminated
under Section 14 of the Plan.

7. EXERCISE PRICE AND CONSIDERATION.

(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option or Stock Purchase Right shall be such price as
is determined by the Plan Administrator, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall
be no less than 110% of the fair market value per Share on the date of
grant.

(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the fair market value per Share on
the date of grant.

(ii) In the case of a Nonstatutory Stock Option or a Stock
Purchase Right

(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of
the fair market value per Share on the date of grant.

(B) granted to any person, the per Share exercise price
shall be no less than 85% of the fair market value per Share on the
date of grant.

(b) The fair market value shall be determined by the Plan
Administrator in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the mean
of the bid and asked prices (or the closing price per share if the Common Stock
is listed on the National Association of Securities Dealers Automated

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<PAGE>

Quotation ("NASDAQ") National Market System of the Common Stock for the date in
question, as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the NASDAQ System) or, in the event the Common Stock is
listed on a stock exchange, the fair market value per Share shall be the closing
price on such exchange on the date in question, as reported in the Wall Street
Journal.

(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, including the method of payment,
shall be determined by the Plan Administrator and may consist entirely of:

(i) cash;

(ii) check (personal, cashier's or certified);

(iii) money order;

(iv) promissory note;

(v) other Shares of Common Stock held for the requisite period
necessary to avoid a charge to the Company's earnings for financial
reporting purposes and having a fair market value on the date of
exercise of the Option or Stock Purchase Right equal to the aggregate
exercise price of the Shares as to which the Option or Stock Purchase
Right is being exercised;

(vi) delivery of a properly executed exercise notice together
with irrevocable instructions to a Company-designated broker to
promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price.

(vii) delivery of an irrevocable subscription agreement for the
Shares which irrevocably obligates the Optionee to take and pay for the
Shares not more than twelve months after the date of delivery of such
subscription agreement;

(viii) or any combination of such methods of payment; or

(ix) such other consideration and method of payment for the
issuance of Shares to the extent permitted under Sections 152 and 153
of the General Corporation Law of Delaware.

8. OPTIONS.

(a) TERM OF OPTION. The term of each Incentive Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. The term of each Option that
is not an Incentive Stock Option shall be ten (10) years and one (1) day from
the date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Option granted to an

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<PAGE>

Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, (i) if the Option is an Incentive Stock
Option, the term of the Option shall be five (5) years from the date of grant
thereof or such shorter time as may be provided in the Stock Option Agreement,
or (ii) if the Option is a Nonstatutory Stock Option, the term of the Option
shall be five (5) years and one (1) day from the date of grant thereof or such
other term as may be provided in the Stock Option Agreement.

(b) EXERCISE OF OPTION.

(i) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Plan Administrator, including
performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may ac authorized by the Plan Administrator, consist of
any consideration and method of payment allowable under Section 7 of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. In the
event that the exercise of an Option is treated in part as the exercise of an
Incentive Stock Option and in part as the exercise of a Nonstatutory Stock
Option pursuant to Section 5(b), the Company shall issue a separate stock
certificate evidencing the Shares treated as acquired upon exercise of an
Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option and shall
identify each such certificate accordingly in its stock transfer records. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.

Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(ii) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the
event of termination of an Optionee's Continuous Status as an Employee
or Consultant (as the case may be), such Optionee may, but only within
thirty (30) days (or such other period of time as is determined by the
Plan Administrator) after the date of such termination (but in no event
later than the date of expiration of the term of such Option as set
forth in the

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<PAGE>

Option Agreement) exercise the Option to the extent that such Employee
or Consultant was entitled to exercise it at the date of such
termination. To the extent that such Employee or Consultant was not
entitled to exercise the Option at the date of such termination, or if
such Employee or Consultant does not exercise such Option (which such
Employee or Consultant was entitled to exercise) within the time
specified herein, the Option shall terminate.

(iii) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 8(b)(ii) above, in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of such
Employee's or Consultant's total and permanent disability (as defined
in Section 22(e)(3) of the Code), such Employee or Consultant may, but
only within six (6) months (or such other period of time as is
determined by the Plan Administrator) from the date of such termination
(BUT in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), exercise the Option to
the extent such Employee or Consultant was entitled to exercise it at
the date of such termination. To the extent that such Employee or
Consultant was not entitled to exercise the Option at the date of
termination, or if such Employee or Consultant does not exercise such
Option (which such Employee or Consultant was entitled to exercise)
within the time specified herein, the Option shall terminate.

(iv) DEATH OF OPTIONEE. In the event of the death of an
Optionee:

(A) during the term of the Option who is at the time of his
or her death an Employee or Consultant of the Company and who shall
have been in Continuous Status as an Employee or Consultant since the
date of grant of the Option, the Option may be exercised, at any time
within six (6) months (or such other period of time as is determined by
the Plan Administrator) following the date of death (but in no event
later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would
have accrued had the Optionee continued living and remained in
Continuous Status as an Employee or Consultant six (6) months (or such
other period of time as is determined by the Plan Administrator) after
the date of death; or

(B) within thirty (30) days (or such other period of time
as is determined by the Plan Administrator) after the termination of
Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months (or such other period of
time as is determined by the Plan Administrator) following the date of
death (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent of the right to exercise
that had accrued at the date of termination.

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<PAGE>

(v) MISCONDUCT. Should the Optionee's Continuous Status as an
Employee or Consultant be terminated for Misconduct, then all
outstanding Options held by the Optionee shall terminate immediately
and cease to be outstanding.

(vi) The Plan Administrator shall have the discretion,
exercisable either at the time an Option is granted or at any time
while the Option remains outstanding, to:

(A) extend the period of time for which the Option is to
remain exercisable following the Optionee's termination of Continuous
Status as an Employee or Consultant from the period otherwise in effect
for that Option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event later than the
date of expiration of the term of such Option as set forth in the
Option Agreement, and/or

(B) permit the Option to be exercised, during the
applicable post-service exercise period, not only to the extent the
Optionee was entitled to exercise the Option at the date of termination
but also with respect to one or more additional Shares for which the
Optionee would have been entitled to exercise the Option had the
Optionee continued in service.

(c) The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding Options under the Plan and to grant
in substitution new options covering the same or different number of Shares but
with an exercise price per share based on the fair market value per Share on the
new grant date.

9. STOCK APPRECIATION RIGHTS.

(a) The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

(b) The following terms shall govern the grant and exercise of
tandem stock appreciation rights:

(i) One or more Optionees may be granted the right, exercisable
upon such terms as the Plan Administrator may establish, to elect
between the exercise of the underlying Option for Shares and the
surrender of that Option in exchange for a distribution from the
Company in an amount equal to the excess of (A) the fair market value
(on the Option surrender date) of the number of Shares for which the
surrendered Option (or surrendered portion thereof) is at the time
exercisable over (B) the aggregate exercise price payable for such
Shares.

(ii) No such Option surrender shall be effective unless it is
approved by the Plan Administrator. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be
made in Shares valued at fair market value on the

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<PAGE>

Option surrender date, in cash, or partly in Shares and partly in cash,
as the Plan Administrator shall at its sole discretion deem
appropriate.

(iii) If the surrender of an Option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the
Optionee had wider the surrendered Option (or surrendered portion
thereof) on the Option surrender date and may exercise such rights at
any time prior to the LATER of (A) five (5) business days after the
receipt of the rejection notice or (B) the last day on which the Option
is otherwise exercisable in accordance with the terms of the Option
Agreement evidencing such Option, but in no event may such rights be
exercised more than ten (10) years after the Option grant date.

(i) One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding Options.

(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more Options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30) day period following
such Hostile Take-Over) to surrender each such Option to the Company,
to the extent the Option is at the time exercisable for vested Shares.
In return for the surrendered Option, the Optionee shall receive a cash
distribution from the Company in an amount equal to the excess of (A)
the Take-Over Price of the Shares which each surrendered Option (or
surrendered portion thereof) is at the time exercisable over (B) the
aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the Option
surrender date.

(iii) Neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such Option
surrender and cash distribution.

(iv) The balance of the Option (if any) shall continue in full
force and effect in accordance with the Option Agreement evidencing
such option.

10. STOCK PURCHASE RIGHTS.

(a) RIGHTS TO PURCHASE. After the Plan Administrator determines that
it will offer an Employee or Consultant a Stock Purchase Right, it shall deliver
to the offeree a stock purchase agreement or stock bonus agreement, as the case
may be, setting forth the terms, conditions and restrictions relating to the
offer, including the number of Shares which such person shall be entitled to
purchase, and the time within which such person must accept such offer, which
shall in no event exceed six (6) months from the date upon which the Plan
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be

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<PAGE>

accepted by execution of a stock purchase agreement or stock bonus agreement in
the form determined by the Plan Administrator.

(b) ISSUANCE OF SHARES. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Plan Administrator
may require that the Purchaser make adequate provision for any Federal and State
withholding obligations of the Company as a condition to the Purchaser
purchasing such Shares.

(c) REPURCHASE OPTION. Unless the Plan Administrator determines
otherwise, the stock purchase agreement or stock bonus agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the Purchaser's service with the Company for any reason
(including death or disability). If the Plan Administrator so determines, the
purchase price for shares repurchased may be paid ~y cancellation of any
indebtedness of the Purchaser to the Company. The repurchase option shall lapse
at such rate as the Plan Administrator may determine.

(d) OTHER PROVISIONS. The stock purchase agreement or stock bonus
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Plan Administrator.

11. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. The
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee or Purchaser, only by the Optionee or Purchaser.

12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER OR CHANGE IN
CONTROL.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Stock Purchase Right and the
number of shares of Common Stock for which Options, separately exercisable stock
appreciation rights and Stock Purchase Rights may be issued to any one person
per calendar year, as well as the price per share of Common Stock covered by
each such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common STOCK effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Plan
Administrator, whose determination in that respect shall be final, binding and
conclusive.

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<PAGE>

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, all Options and Stock Purchase Rights
will terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Plan Administrator. The Plan Administrator may,
in the exercise of its sole discretion in such instances, declare that all
Options shall terminate as of a date fixed by the Plan Administrator and give
each Optionee the right to exercise any Option held as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable.

(i) In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into
another corporation (a "Corporate Transaction"), all Options shall be
assumed or equivalent options shall be substituted by the successor
corporation or a parent or subsidiary of such successor corporation. In
the event that such successor corporation refuses to assume all Options
or to substitute equivalent options, Optionees shall have the right to
exercise Options held by them as to all of the Optioned Stock,
including Shares as to which such Options would not otherwise be
exercisable. If an Option becomes fully exercisable in lieu of
assumption or substitution in the event of a Corporate Transaction, the
Plan Administrator shall notify the Optionee that the Option shall be
fully exercisable for a period of time determined by the Plan
Administrator from the date of such notice, and the Option will
terminate upon the expiration of such period. For purposes of this
paragraph, an Option granted under the Plan shall be deemed to be
assumed if, following the Corporate Transaction, the Option confers the
right to purchase, for each Share of Optioned Stock subject to the
Option immediately prior to such sale of assets or merger, the
consideration (whether stock, cash or other securities or property)
received in the Corporate Transaction by holders of Common Stock for
each Share held on the effective date of the transaction (and, if such
holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in; the
Corporate Transaction was not solely Common Stock of the successor
corporation or its parent, the Plan Administrator may, with the consent
of the successor corporation and the Optionee, provide for the per
share consideration to be received upon exercise of the Option to be
solely Common Stock of the successor corporation or its parent equal in
fair market VALUE (determined as set forth in Section 7(b) hereof) to
the per share consideration received by holders of Common Stock in the
Corporate Transaction.

(ii) Any Options which are assumed or substituted in the
Corporate Transaction shall automatically accelerate and become
exercisable for all the Optioned Stock then subject to the Options, in
the event the Optionee's Continuous Status as an Employee or Consultant
should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such
Corporate Transaction. Any Options so accelerated shall remain
exercisable for fully-vested shares until the EARLIER of (A) the
expiration of the term of such Option as set forth in the Option

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<PAGE>

Agreement or (B) the expiration of the one (1)-year period measured
from the effective date of the Involuntary Termination.

(iii) All of the Company's outstanding repurchase options under
Stock Purchase Rights shall terminate automatically, and all the shares
of Common stock subject to those terminated options shall immediately
vest in full, in the event of any Corporate Transaction, except to the
extent those repurchase options are assigned to the successor
corporation (or parent thereof) in connection with such Corporate
Transaction.

(iv) Any repurchase options that are assigned in the Corporate
Transaction shall automatically terminate, and all the Shares subject
to those terminated options shall immediately vest in full, in the
event the Purchaser's Continuous Status as an Employee or Consultant
should subsequently terminate `by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such
Corporate Transaction.

(d) Change in Control.

(i) The Plan Administrator shall have the discretion,
exercisable either at the time the Option is granted or at any time
while the Option remains outstanding, to (A) provide for the automatic
acceleration of one or more outstanding Options upon the occurrence of
a Change in Control or (B) condition any such Option acceleration upon
the subsequent Involuntary Termination of the Optionee's Continuous
status as an Employee or Consultant within eighteen (18) months
following the effective date of such Change in Control. Any Options
accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the option
term.

(ii) The Plan Administrator shall have the discretion,
exercisable either at the time a Stock Purchase Right is granted or at
any time while the Company's repurchase option remains outstanding, to
(A) provide for the automatic termination of one or more outstanding
repurchase options and the immediate vesting of the Shares subject to
those rights upon the occurrence of a Change in Control or (B)
condition any such accelerated vesting upon the subsequent Involuntary
Termination of the Purchaser's Continuous Status as an Employee or
Consultant within eighteen (18) months following the effective date of
such Change in Control.

(e) Incentive Stock Options. The portion of any Incentive Stock
Option accelerated in connection with a Corporate Transaction or Change in
Control shall remain exercisable as an Incentive Stock Option only to the extent
the applicable One Hundred Thousand Dollar ($100,000) limitation is not
exceeded. To the extent such dollar limitation is exceeded, the portion of such
option shall be exercisable as a Nonstatutory Stock Option under the Federal tax
laws.

(f) No Other Adjustments. Except as expressly provided or authorized
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into or

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<PAGE>

exercisable for shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option.

13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Plan Administrator makes the determination granting such Option or
Stock Purchase Right. Notice of the determination shall be given to each
Employee or Consultant to whom an Option or Stock Purchase Right is so granted
within a reasonable time after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 18 of the
Plan:

(i) any material increase in the number of Shares subject to the
Plan or the maximum number of Shares for which any one person may be
granted Options, stock appreciation rights and Stock Purchase Rights,
other than in connection with an adjustment under Section 12 of the
Plan;

(ii) any material change in the designation of the class of
persons eligible to be granted Options and Stock Purchase Rights; or

(iii) any material increase in the benefits accruing to
participants under the Plan.

(b) Shareholder Approval. If any amendment requiring shareholder
approval under Section 14(a) of the Plan is made, such shareholder approval
shall be solicited as described in Section 18 of the Plan.

(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options or Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Purchaser (as the case may be)
and the Plan Administrator, which agreement must be in writing and signed by the
Optionee or Purchaser (as the case may be) and the Company.

15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Rights unless the
exercise of such Option or Stock Purchase Rights and the issuance and delivery
of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the

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<PAGE>

requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

As a condition to the exercise of an Option or Stock Purchase Rights,
the Company may require the person exercising such Option or Stock Purchase
Rights to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.

16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

17. Option, Stock Purchase and Stock Bonus Agreements. Options shall be
evidenced by written option agreements in such form as the Plan Administrator
shall approve. Upon the exercise of Stock Purchase Rights, the Purchaser shall
sign a stock purchase agreement or stock bonus agreement in such form as the
Plan Administrator shall approve.

18. Shareholder Approval.

(a) Any required approval of the shareholders of the Company shall
be solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder.

(b) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 18(a) hereof, then the Company shall, at or prior to
the first annual meeting of shareholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:

(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information which would be required (if
proxies to be voted with respect to approval or disapproval of the Plan
or amendment were then being solicited) by the rules and regulations in
effect under Section 14(a) of the Exchange Act at the time such
information is furnished; and

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<PAGE>

(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to
in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.

19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and Purchaser, during the period for which such Optionee or
Purchaser has one or more Options or Stock Purchase Rights outstanding, copies
of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options or Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information.

20. Tax Withholding.

(a) The Company's obligation to deliver Shares of Common Stock upon
the exercise of Options or stock appreciation rights or Stock Purchase Rights or
upon the issuance or vesting of such shares under the Plan shall be subject to
the satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements.

(b) The Plan Administrator may, in its discretion, provide any or
all holders of Nonstatutory Stock Options or unvested Shares under the Plan with
the right to use Shares in satisfaction of all or part of the Taxes incurred by
such holders in connection with the exercise of their Options or the vesting of
their Shares. Such right may be provided to any such holder in either or both of
the following formats:

(i) Stock Withholding: The election to have the Company
withhold, from the Shares otherwise issuable upon the exercise of such
Nonstatutory Stock Option or the vesting of such Shares, a portion of
those Shares with an aggregate fair market value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.

(ii) Stock Delivery: The election to deliver to the Company, at
the time the Nonstatutory Stock Option is exercised or the Shares vest,
one or more Shares previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the
Taxes) with an aggregate fair market value equal to the percentage of
the Taxes (not to exceed one hundred percent (100%)) designated by the
holder.

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<PAGE>

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 1

Pursuant to the power reserved to it in Section 14 of the Pharmacopeia,
Inc. 1994 Incentive Stock Plan, as amended (the "Plan"), the Board of Directors
of Pharmacopeia, Inc. hereby amends the Plan as follows:

1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:

"Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of shares under the Plan is 1,250,000 shares of Common
Stock. The Shares may be authorized, but unissued, or reacquired Common Stock."

2. This Amendment No. 1 to the Plan shall be effective only after
approval of a majority of the Company's stockholders as set forth in Section 14.

To record the adoption of this Amendment No. 1, the Company has caused
its authorized officers to affix its corporation name and seal as of this 3rd
day of June, 1996.

CORPORATE SEAL PHARMACOPEIA, INC.

Attest: /s/ Lewis J. Shuster By: /s/ Joseph A. Mollica
-------------------- ---------------------
Lewis J. Shuster, Joseph A. Mollica,
Assistant Secretary Chairman of the Board and Chief Executive
Officer

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 2

"'Plan Administrator' shall mean the particular entity, whether the
Board, the Primary Committee, the Secondary Committee, or a subcommittee
thereof, which is authorized to administer the Plan with respect to one or
more classes of eligible persons, to the extent such entity is carrying out
its administrative functions under the Plan with respect to the persons under
its jurisdiction. A subcommittee of the Primary Committee or the Secondary
Committee which has been approved by the Board may be delegated those
administrative functions under the Plan

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<PAGE>

which have been authorized to be performed hereunder by the Primary or
Secondary Committee, as the case my be."

To record the adoption of this Amendment No. 2, the Company has caused
its authorized officers to affix its corporation name and seal this
_______________ day of __________________, 1997.

CORPORATE SEAL PHARMACOPEIA, INC.

Attest: /s/ Lewis J. Shuster By: /s/ Joseph A. Mollica
-------------------- ---------------------
Lewis J. Shuster, Joseph A. Mollica,
Secretary Chairman of the Board, President and Chief
Executive Officer

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 3

1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:

"Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of shares under the Plan is 1,750,000 shares of Common
Stock. The Shares may be authorized, but unissued, or reacquired Common Stock."

2. This Amendment No. 3 to the Plan shall be effective only after
approval of a majority of the Company's stockholders as set forth in Section 14.

To record the adoption of this Amendment No. 3, the Company has caused
its authorized officers to affix its corporation name and seal this ____ day of
____________, 1997.

CORPORATE SEAL PHARMACOPEIA, INC.

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<PAGE>

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 4

1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:

"Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of shares under the Plan is 2,250,000 shares of
Pharmacopeia Common Stock. The Shares may be authorized, but unissued, or
reacquired Pharmacopeia Common Stock."

2. This Amendment No. 4 to the Plan shall be effective only after
approval of a majority of Pharmacopeia's stockholders as set forth in Section
14.

To record the adoption of this Amendment No. 4, Pharmacopeia has caused
its authorized officers to affix its corporation name and seal as of this _____
day of ______, 1998.

CORPORATE SEAL PHARMACOPEIA, INC.

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 5

1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:

"Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of shares under the Plan is 2,750,000 shares of
Pharmacopeia Common Stock. The Shares may be authorized, but unissued, or
reacquired Pharmacopeia Common Stock."

2. This Amendment No. 5 to the Plan shall be effective only after
approval of a majority of Pharmacopeia's stockholders as set forth in Section 14
and upon consummation of the merger

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<PAGE>

of Micro Acquisition Corporation, a wholly-owned subsidiary of Pharmacopeia,
with and into Molecular Simulations Incorporated.

To record the adoption of this Amendment No. 5, Pharmacopeia has caused
its authorized officers to affix its corporation name and seal as of this _____
day of ______, 1998.

CORPORATE SEAL PHARMACOPEIA, INC.

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 6

1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:

"Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of shares under the Plan is 3,700,000 shares of
Pharmacopeia Common Stock. The Shares may be authorized, but unissued, or
reacquired Pharmacopeia Common Stock."

2. This Amendment No. 6 to the Plan shall be effective only after
approval of a majority of Pharmacopeia's stockholders as set forth in Section
14.

To record the adoption of this Amendment No. 6, Pharmacopeia has caused
its authorized officers to affix its corporation name and seal as of this _____
day of ______, 1999.

CORPORATE SEAL PHARMACOPEIA, INC.

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<PAGE>

PHARMACOPEIA, INC. 1994 INCENTIVE STOCK PLAN

Amendment No. 7

1. The first sentence of Section 3(a) is hereby amended and restated to
read as follows:

"Subject to the provisions of Section 12 of the Plan, the
maximum aggregate number of shares under the Plan is 4,700,000 shares of
Pharmacopeia Common Stock. The Shares may be authorized, but unissued, or
reacquired Pharmacopeia Common Stock."

2. This Amendment No. 7 to the Plan shall be effective only after
approval of a majority of Pharmacopeia's stockholders as set forth in Section
14.

To record the adoption of this Amendment No. 7, Pharmacopeia has caused
its authorized officers to affix its corporation name and seal as of this _____
day of ______, 2000.

CORPORATE SEAL PHARMACOPEIA, INC.

Attest: /s/ Thomas M. Carney By: /s/ Joseph A. Mollica
-------------------- ---------------------
Thomas M. Carney, Joseph A. Mollica,
Secretary Chairman of the Board, President
and Chief Executive Officer

- 23 -

<PAGE>

Appendix II

PHARMACOPEIA, INC.
1995 DIRECTOR OPTION PLAN

ARTICLE ONE

GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

This 1995 Director Option Plan is intended to promote the
interests of Pharmacopeia, Inc., a Delaware corporation, by providing the
non-employee members of the Board with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.

Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.

II. ADMINISTRATION OF THE PLAN

The terms of each option grant (including the timing and
pricing of the option grant) shall be determined by the express terms of the
Plan, and neither the Board nor any committee of the Board shall exercise any
discretionary functions with respect to option grants made pursuant to the Plan.

III. ELIGIBILITY

The individuals eligible to receive option grants under the
Plan shall be (i) those individuals who are first elected or appointed as
non-employee Board members on or after the Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders, and (ii)
those individuals who continue to serve as non-employee Board members after one
or more Annual Stockholders Meetings beginning with the 1996 Annual Meeting. A
non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
option grant under the Plan at the time he or she first becomes a non-employee
Board member, but shall be eligible to receive periodic option grants under the
Plan upon his or her continued service as a non-employee Board member following
one or more Annual Stockholders Meetings.

A-1
<PAGE>

IV. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall initially not exceed
150,000 shares.

B. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent the options
expire or terminate for any reason prior to exercise in full. Shares subject to
any option or portion thereof surrendered in accordance with Article Two and all
shares issued under the Plan, whether or not those shares are subsequently
repurchased by the Corporation pursuant to its repurchase rights under the Plan,
shall reduce on a share-for-share basis the number of shares of Common Stock
available for subsequent issuance under the Plan. In addition, should the
exercise price of an option under the Plan be paid with shares of Common Stock,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock issued to the
holder of such option.

C. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
option grants are to be subsequently made per Eligible Director and (iii) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments to the outstanding options shall be made by
the Board and shall be final, binding and conclusive.

A-2
<PAGE>

ARTICLE TWO

OPTION GRANT PROGRAM

I. OPTION TERMS

A. GRANT DATES. Option grants shall be made on the dates
specified below:

1. Each Eligible Director who is first elected or
appointed as a non-employee Board member on or after the Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 10,000 shares of Common Stock.

2. On the date of each Annual Stockholders Meeting,
beginning with the 1996 Annual Meeting, each individual who is to continue to
serve as an Eligible Director after such meeting, shall automatically be
granted, whether or not such individual is standing for re-election as a Board
member at that Annual Meeting, a Non-Statutory Option to purchase an additional
5,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months prior to the date of such
Annual Meeting. There shall be no limit on the number of such 5,000-share option
grants any one Eligible Director may receive over his or her period of Board
service.

B. EXERCISE PRICE.

1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.

2. The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the forms
specified below:

(i) cash or check made payable to the
Corporation,

(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or

(iii) through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable

A-3
<PAGE>

Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.

Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

C. OPTION TERM. Each option shall have a term of ten (10)
years measured from the option grant date.

D. EXERCISE OF OPTIONS. Each option shall become exercisable
in a series of three (3) equal and successive annual installments over the
Optionee's period of continued service as a Board member, with the first such
installment to become exercisable upon the Optionee's completion of one (1) year
of Board service measured from the option grant date.

E. EFFECT OF TERMINATION OF BOARD SERVICE. The following
provisions shall govern the exercise of any options held by the Optionee at the
time the Optionee ceases to serve as a Board member:

(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.

(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than the
number of shares for which the option is exercisable at the time of the
Optionee's cessation of Board service.

(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following such
cessation of Board service, be exercised for all or any portion of such
shares as fully-vested shares.

(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be
outstanding for any shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's cessation of
Board service, terminate and cease to be outstanding, to the extent it
is not exercisable on the date of such cessation of Board service.

A-4
<PAGE>

F. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, an option may be assigned
in accordance with the terms of a Qualified Domestic Relations Order. The
assigned option may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to such Qualified Domestic Relations
Order. The terms applicable to the assigned option (or portion thereof) shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. Immediately following the
consummation of the Corporate Transaction, each option shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

B. In connection with any Change in Control, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each option held by him or her for a period of at least six (6) months. The
Optionee shall in return be entitled to a cash distribution from the Corporation
in an amount equal to the excess of (i) the Take-Over Price of the shares of
Common Stock at the time subject to the surrendered option (whether or not the
option is otherwise at the time exercisable for those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval of the Board or any committee of the Board shall be
required in connection with such option surrender and cash distribution.

A-5
<PAGE>

D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same.

E. The grant of options under the Plan shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.

A-6
<PAGE>

ARTICLE THREE

MISCELLANEOUS

I. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan was adopted by the Board on October 6, 1995 and
approved by the stockholders on October 26, 1995. The Plan shall become
effective on the Effective Date, and options may be granted under the Plan from
and after such date.

B. The Plan shall terminate upon the EARLIEST of (i) October
5, 2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued or cancelled pursuant to the exercise or cash-out of the
options under the Plan or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all option
grants and unvested stock issuances outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of the
documents evidencing such grants or issuances.

II. AMENDMENT OF THE PLAN

The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, (i) the
Plan, together with the option grants outstanding thereunder, may not be amended
at intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations and (ii) no such amendment or modification shall adversely affect
the rights and obligations with respect to options at the time outstanding under
the Plan unless the Optionee consents to such amendment or modification. In
addition, the Board shall not, without the approval of the Corporation's
stockholders, (i) materially increase the maximum number of shares issuable
under the Plan or the number of shares for which options may be granted to each
Eligible Director, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) materially modify the
eligibility requirements for Plan participation or (iii) materially increase the
benefits accruing to Plan participants.

III. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

IV. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any option
under the Plan and the issuance of any shares of Common Stock upon the exercise
of any option shall be subject

A-7
<PAGE>

to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options granted
under it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

V. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee any right
to continue in service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove the Optionee from the Board at any time in
accordance with the provisions of the applicable law.

A-8
<PAGE>

APPENDIX

The following definitions shall be in effect under the Plan:

A. BOARD shall mean the Corporation's Board of Directors.

B. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, or

C. CODE shall mean the Internal Revenue Code of 1986, as amended.

D. COMMON STOCK shall mean the Corporation's common stock.

E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those immediately prior to
such transaction; or

A-9

<PAGE>

(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.

F. CORPORATION shall mean Pharmacopeia, Inc., a Delaware corporation.

G. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.

H. EFFECTIVE DATE shall mean the date on which the Underwriting
Agreement is executed and the initial public offering price of the Common Stock
is established.

I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Plan.

J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
which serves as the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.

L. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:

(i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires

A-10
<PAGE>

beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept, AND

(ii) more than fifty percent (50%) of the securities
so acquired are accepted from persons other than Section 16 Insiders.

M. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

N. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

O. OPTIONEE shall mean any person to whom an option is granted under
the Plan.

P. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

Q. PERMANENT DISABILITY shall mean the inability of the Optionee to
perform his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

R. PLAN shall mean the Corporation's 1995 Director Option Plan, as set
forth in this document.

S. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).

T. SECTION 16 INSIDERS shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

U. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.

V. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

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<PAGE>

W. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over.

X. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

PHARMACOPEIA, INC. 1995 DIRECTOR OPTION PLAN

Amendment No. 1

Pursuant to the power reserved to it in Article Three, Section II of
the Pharmacopeia, Inc. 1995 Director Option Plan, as amended (the "Plan"), the
Board of Directors of Pharmacopeia, Inc. hereby amends the Plan as follows:

1. Article One, Section IV(A) is hereby amended and restated to read as
follows:

"The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall initially not exceed
300,000 shares."

2. This Amendment No. 1 to the Plan shall be effective only after
approval of a majority of Pharmacopeia's stockholders as set forth in Article
Three, Section II.

To record the adoption of this Amendment No. 1, Pharmacopeia has caused
its authorized officers to affix its corporation name and seal as of this _____
day of ______, 2000.

CORPORATE SEAL PHARMACOPEIA, INC.

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<PAGE>

- Please Detach and Mail in the Envelope Provided -
- ------------------------------------------------------------------------------

PROXY

PHARMACOPEIA, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of PHARMACOPEIA, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated March 7, 2000, and hereby appoints Joseph A.
Mollica and Bruce C. Myers, and each of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2000 Annual Meeting of
Stockholders of PHARMACOPEIA, INC. to be held on May 3, 2000 at 9:00 a.m.
local time, at The Doral Forrestal at Princeton, Princeton, New Jersey and at
any adjournment or adjournments thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:

<PAGE>

PLEASE SIGN, DATE, AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!

PHARMACOPEIA, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS

MAY 3, 2000

- Please Detach and Mail in the Envelope Provided -
- ------------------------------------------------------------------------------

PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE USING DARK INK ONLY. /X/

1. ELECTION OF DIRECTORS: / /

FOR all nominees listed below (except as indicated)

IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:

NOMINEES:
Frank Baldino, Jr.
Edith W. Martin
James J. Marino

2. Approval Of Amendment To 1994 Incentive Stock Plan To Increase To 4,700,000
The Number Of Shares Authorized For Issuance Thereunder.

FOR / / AGAINST / / ABSTAIN / /

3. Approval Of Amendment To 1995 Directors Option Plan To Increase To 300,000
The Number Of Shares Authorized For Issuance Thereunder.

FOR / / AGAINST / / ABSTAIN / /

4. Ratification Of The Appointment Of Ernst & Young LLP As The Company's
Independent Auditors For The Fiscal Year Ending December 31, 2000.

FOR / / AGAINST / / ABSTAIN / /

and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO
THE 1994 INCENTIVE STOCK PLAN, FOR THE AMENDMENT TO THE 1995 DIRECTORS OPTION
PLAN, TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.

SIGNATURE ________________________________ DATED: __________________, 2000.
(SIGNATURE IF HELD JOINTLY)

(This Proxy should be marked, dated and signed by the stockholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.)