Pharmacopeia Drug Discovery, Inc. Incentive Compensation Plan




PharmacopeiaDrug Discovery, Inc.




This plan is designed to provide Pharmacopeia Drug Discovery, Inc.(Pharmacopeia) employees with an incentive to achieve the Company’s annualcorporate objectives.


Corporate Objectives


Major objectives for each year will be established by the Board ofDirectors


Evaluation of Corporate Performance


The Compensation Committee will evaluate corporate performance againsteach objective as follows:


Description of Performance


Performance Rating


Made significant progress toward achieving the objective


0 to 94%


Achieved objective


95 to 105%


Exceeded objective


106 to 150%


Outstanding achievement


151 to 200%



OverallCorporate Rating and Bonus Pool


An overall corporate rating will be determined by multiplying each goal’sweighting by each goal’s performance rating.


Determinationof the Bonus Pool


The Compensation Committee will determine the bonus pool.  The bonus pool will be based upon the overallcorporate rating multiplied by the salaries of bonus eligible employeesmultiplied by their individual bonus targets.


Bonus Pool Allocation


The Compensation Committee shall annually review and approve bonusawards for the CEO and his executive direct reports.  For payment of bonuses to the CEO and hisdirect reports, a minimum overall corporate performance rating of 70% must beachieved.  For all other employees, the CEOwill review and approve the allocations of the bonus pool based upon theachievement of overall corporate performance and the contribution of each groupto the corporate objectives.


Determination of Individual Bonuses


Each employee has individual goals for each year.  These relate directly to the corporategoals.  Individual bonuses will be basedon the overall corporate rating, the achievement of each




objective, individual performance for both teams and departments, andbonus eligibility.  Each of these factorswill impact any bonus awards.  The CompensationCommittee may also consider individual discretionary bonus payments forexceptional individual or team performance.




•                  Bonuspayments, if awarded, will be distributed in March of the subsequent year.


•                  Employeesmust be actively employed on the day the bonus payout is distributed in orderto receive that bonus payout.


•                  Newhires are eligible for the Incentive Program after completion of 90 days ofemployment, and bonus payments will be prorated for the year’s length ofservice.


•                  Employeesmust have attended all mandatory training and acknowledged compliance with allpolicies and required SOPs in order to receive the bonus payout.


•                  Managersmust have completed performance reviews for all of their employees in order toreceive the bonus payout.


•                  Bonuseligibility will be prorated for any time during the year that an employee ison a Performance Improvement Plan or under any formal disciplinary action.  In addition, an employee will be ineligibleto receive a bonus if they are on a Performance Improvement Plan or under anyformal disciplinary action at the time of bonus payout.


•                  Pharmacopeiareserves the right to modify this plan at any time.


Adopted by Compensation Committee of the Board of Directors February 24,2005