BY THE STOCKHOLDERS OF POZEN INC.
                                   POZEN INC.
                          2001 LONG TERM INCENTIVE PLAN
                                    ARTICLE I
     1.1 The purpose of the POZEN Inc. Long Term Incentive Plan (the "Plan") is
to provide long-term incentive compensation to Eligible Executives (as defined
below) of POZEN Inc. and/or its subsidiaries (the "Company") who make
substantial contributions to the success of the Company, to provide a means for
such Eligible Executives to participate in such success, and to assist in
attracting and retaining the highest quality individuals in key executive
     1.2 Subject to approval by the stockholders of the Company, the Plan shall
become effective as of July 25, 2001 and shall continue until December 31, 2006,
unless extended by reapproval of the stockholders obtained no later than the
first stockholders' meeting that occurs in the fifth year following the year in
which the stockholders previously approved the Plan or unless earlier terminated
by the Company pursuant to the terms of the Plan. No Awards (as defined below)
shall be made pursuant to the Plan after its termination date, provided that
Awards granted prior to the termination date may extend and be paid beyond that
     1.3 The Plan is intended to secure the full deductibility of incentive
awards payable to the Senior Officers (as defined below) pursuant to the Plan.
All compensation payable under this Plan to Senior Officers is intended to be
deductible by the Company under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code").
                                   ARTICLE II
The following words and phrases shall have the respective meanings set forth
below (unless the context indicates otherwise).
     2.1 "Award" shall mean the stated cash amount(s) to which a Participant
will be entitled upon achievement of targets based on Performance Goals
established at the time the Award is granted.
     2.2 "Change of Control" shall mean the occurrence of any of the following:
         (i) Any "person" (as such term is used in sections 13(d) and 14(d) of
     the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
     (other than the Company or any trustee or fiduciary holding securities
     under an employee benefit plan of
     the Company) becomes a "beneficial owner" (as defined in Rule 13d-3 under
     the Exchange Act), directly or indirectly, of securities of the Company
     representing 50% or more of the voting power of the then outstanding
     securities of the Company; provided that a Change of Control shall not be
     deemed to occur as a result of a transaction in which the Company becomes a
     subsidiary of another corporation and in which the stockholders of the
     Company, immediately prior to the transaction, will beneficially own,
     immediately after the transaction, shares entitling such stockholders to
     more than 50% of all votes to which all stockholders of the parent
     corporation would be entitled in the election of directors (without
     consideration of the rights of any class of stock to elect directors by a
     separate class vote); or
         (ii) The consummation of (a) a merger or consolidation of the Company
     with another corporation where the stockholders of the Company, immediately
     prior to the merger or consolidation, will not beneficially own,
     immediately after the merger or consolidation, shares entitling such
     stockholders to more than 50% of all votes to which all stockholders of the
     surviving corporation would be entitled in the election of directors
     (without consideration of the rights of any class of stock to elect
     directors by a separate class vote), (b) a sale or other disposition of all
     or substantially all of the assets of the Company, or (c) a liquidation or
     dissolution of the Company.
     2.3 "Committee" shall mean the Compensation Committee of the Company's
Board of Directors, as the same from time to time may be constituted, provided
that the committee shall consist solely of two (2) or more individuals,
appointed by the Board to administer the Plan, who are "outside directors" to
the extent required by and within the meaning of Section 162(m) of the Code, as
amended from time to time.
     2.4 "Disability" shall mean, with respect to an Eligible Executive who is a
Participant in the Plan, that a qualified medical doctor mutually acceptable to
the Company and the Eligible Executive or the Eligible Executive's personal
representative shall have certified in writing that: (i) the Eligible Executive
is unable because of medically determinable physical or mental disability to
perform substantially all of the duties of the Eligible Executive's employment
with the Company for more than one hundred eighty (180) calendar days measured
from the last full day of work; or (ii) by reason of mental or physical
disability, it is unlikely that the Eligible Executive will be able, within one
hundred eighty (180) calendar days, to resume substantially all business duties
and responsibilities in which the Eligible Executive was previously engaged and
otherwise discharge the Eligible Executive's duties as an employee of the
     2.5 "Eligible Executive" shall mean an employee of the Company who is
approved by the Committee, from time to time, for participation in the Plan.
     2.6 "Employer"" shall mean the Company or a subsidiary of the Company by
whom the Participant is employed at the time in question.
     2.7 "Senior Officer" shall mean an officer within the meaning of Section
162(m) of the Code or any other officer designated by the Committee for purposes
of exempting distributions under the Plan from Section 162(m)(3) of the Code.
     2.8  "Participant" means any Eligible Executive to whom an Award has been
granted pursuant to this Plan.
     2.9  "Performance Cycle" shall mean the period of time over which
Performance Goals for an Award may be calculated and may consist of a portion of
a year, a single year, a stated number of years, or otherwise, as determined by
the Committee for each Award at the time such Award is granted.
     2.10 "Performance Goals" shall be objectively determinable and shall mean
specified levels of, growth in, or achievement of one or more of the following:
stock price, execution of strategic initiatives, earnings per share, net
earnings, operating earnings, return on assets, stockholder return, return on
equity, growth in assets, unit volume, sales, market share, scientific goals,
pre-clinical or clinical goals, regulatory approvals, or strategic business
criteria consisting of one or more objectives based on meeting specified revenue
goals, market penetration goals, geographic business expansion goals, cost
targets, goals relating to acquisitions or divestitures, or strategic
     2.11 "Performance Ratios" shall mean target levels of performance of
certain Performance Goals specified in an Award. Performance Goals may include a
threshold level of performance below which no payment will be made under the
Award, levels of performance at which specified percentages of the target amount
under the Award will be paid, and a maximum level of performance above which no
additional amount will be paid under the Award.
                                   ARTICLE III
     3.1  Each Eligible Executive who is approved by the Committee, from time to
time, shall be eligible for participation in the Plan.
     3.2  No Participant or other employee of the Company shall at any time have
a right to participate in the Plan, despite having previously participated in
the Plan.
                                   ARTICLE IV
      Selection of Participants, Grant of Awards and Administration of Plan
     4.1  The Committee shall determine, from time to time, those Eligible
Executives who are to be granted Awards pursuant to the Plan.
     4.2  The Plan shall be administered by the Committee, and the Committee
shall (1) construe and interpret the Plan, and (2) make such reasonable rules
and regulations for the administration of the Plan as it deems advisable. Any
determination by the Committee in administering, interpreting or construing the
Plan in accordance with this Article shall be final, binding and conclusive for
all purposes and upon all interested persons.
                                    ARTICLE V
                          Award Determination; Payment
     5.1 Subject to the provisions below, the maximum amount payable under a
single Award granted to a Participant shall not exceed $1,000,000.
     5.2 The Committee shall, in its sole discretion, approve or establish in
writing the objective compensation formula or standard for each Award. The
Committee shall establish in writing (i) the Performance Goals that must be met,
(ii) the Performance Cycle during which the Performance Goals must be met, (iii)
the threshold, target and maximum amounts that may be paid if the Performance
Ratios for a Performance Goal are met, and (iv) any other conditions that the
Committee deems appropriate and consistent with the Plan and Section 162(m) of
the Code. The Performance Goals may relate to the Participant's business unit or
the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall establish the Performance
Goals in writing either before the beginning of the Performance Cycle or during
a period ending no later than the earlier of (i) 90 days after the beginning of
the Performance Cycle or (ii) the date on which 25% of the Performance Cycle has
been completed, or such other date as may be required or permitted under
applicable regulations under Section 162(m) of the Code. The Performance Goals
shall satisfy the requirements for "qualified performance-based compensation,"
including the requirement that the achievement of the Performance Goals be
substantially uncertain at the time they are established and that the
Performance Goals be established in such a way that a third party with knowledge
of the relevant facts could determine whether and to what extent the Performance
Goals have been met. The Committee shall have the discretion, as to each
Participant, to reduce the amount of an Award that would otherwise be paid or to
determine that no portion should be paid, but shall not have discretion to
increase the amount that is payable under an Award.
     5.3 If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the
Performance Goals unsuitable, the Committee may in its discretion modify such
Performance Goals or the related minimum Performance Ratio, in whole or in part,
as the Committee deems appropriate and equitable, except where such action would
result in the loss of the otherwise available exemption of the Award under
Section 162(m) of the Code. In the case of an Award to a Senior Officer, in
determining financial results, items whose exclusion from consideration will
increase the Award shall only have their effects excluded if they constitute
"extraordinary" or "unusual" events or items under generally accepted accounting
principles and all such events and items shall be excluded. The Committee shall
also adjust performance calculations to exclude the unanticipated effect on
financial results of changes in the Code, or other tax laws, and the regulations
     5.4 Subject to the provisions of Sections 5.5 and 5.6, a Participant shall
be entitled to receive payment under an Award as soon as practicable after the
end of the Performance Cycle, or if such Performance Cycle extends over a stated
number of years and the Award so provides, as soon as practicable after the
Performance Goal(s) or Performance Ratios (as applicable), as specified in the
Award, have been achieved. The Committee shall certify and announce the results
for each Performance Cycle, or portion thereof (as applicable), to any affected
promptly following the end of such Performance Cycle or achievement of any
Performance Ratio thereunder, as applicable.
     5.5 Unless otherwise provided herein, each Award granted under the Plan
shall be forfeited and canceled in all respects, and no cash shall be delivered
or paid to the Participant thereof, in the event that the Performance Goal(s)
for such Award are not attained or the Performance Ratio(s) attained for such
Award are not at least equal to the minimum Performance Ratio(s) stated in the
     5.6 If a Participant ceases to be employed by, or provide service to, the
Company during a Performance Cycle, or if other conditions established by the
Committee are not met, the Participant's Award, to the extent not earned as of
the date of such cessation of employment or service, shall be forfeited. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate. The Committee may provide that an Award
shall be payable, in whole or in part, in the event of the Participant's death
or Disability during the Performance Cycle, or under other circumstances
consistent with the regulations and rulings under Section 162(m) of the Code.
     5.7 Notwithstanding any other provisions of this Plan to the contrary, in
the event that a Participant's employment or engagement with the Company is
terminated for cause, as determined by the Committee, or if the Participant
breaches the terms of any confidentiality, inventions and/or non-competition
agreement between the Participant and the Company, such Participant shall
immediately forfeit all Awards granted to Participant and shall forfeit all
rights whatsoever the Participant may have to receive any payments under Awards
granted under this Plan; provided, however, that such Participant shall not be
required to repay any amounts previously received pursuant to Awards granted
under this Plan.
     5.8 Nothing contained in this Article V or elsewhere in this Plan shall
eliminate, impair or otherwise affect the right of the Employer to terminate or
change the employment of any Eligible Executive at any time, and the grant of an
Award to any such Eligible Executive shall not be deemed to, and shall not,
result in any agreement, expressed or implied, by the Employer to retain such
person in any specific position or in its employ for the duration of the
Performance Cycle with respect to such Award or for any other period.
                                   ARTICLE VI
                        Change in Control of the Company
     Unless the Committee determines otherwise or unless otherwise provided in a
particular Award, upon the occurrence of a Change of Control during any
Performance Cycle, notwithstanding any other provision of this Plan to the
contrary, all Awards (to the extent not previously paid) shall be paid at their
target value, or in such other amounts as the Committee may determine. Such
payment shall be made within sixty (60) days following the consummation of the
transaction constituting the Change of Control.
                                   ARTICLE VII
                           Adjustments to Common Stock
     To the extent that any Awards issued under the Plan are based, in whole or
in part, on the common stock, par value $0.001 per share, of the Company (the
"Common Stock"), the terms of such Awards shall be adjusted by the Committee, to
the extent the Committee determines such adjustments are necessary or
appropriate, to reflect any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization or event, or any
distribution to holders of shares of the Common Stock other than a normal cash
dividend. Any such adjustments determined by the Committee shall be final,
binding and conclusive.
                                  ARTICLE VIII
                            Nonalienation of Benefits
     Neither the Award nor any other right or benefit under this Plan shall be
subject to anticipation, alienation, sale, assignment, transfer, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge the same shall be void and shall not be recognized or
given effect by the Company.
                                   ARTICLE IX
                              Certificates of Award
     The Company shall execute and deliver to each Participant to whom an Award
is granted a certificate, in the form prescribed by the Committee, evidencing
such Award and stating the date thereof and cash amount that is the subject of
the Award.
                                   ARTICLE IX
                  Amendment, Suspension or Termination of Plan
     The Plan shall terminate on December 31, 2006, unless the Plan is
terminated earlier by the Board of Directors of the Company or is extended by
the Board with the approval of the stockholders. Subject to the foregoing, the
Board of Directors of the Company may amend, suspend or terminate this Plan in
whole or in part at any time, provided that, except as expressly provided in
this Plan, no such amendment, suspension or termination shall materially and
adversely affect the rights of the holder of any Award then outstanding unless
such holder consents.
                                    ARTICLE X
     10.1 The Plan, and all agreements hereunder, shall be governed by and
construed in accordance with the laws of the State of Delaware.
     10.2 The Company shall have the right to deduct from all payments under the
Plan any Federal, state or local income and employment taxes required by law to
be withheld with respect to such payments.
     10.3 Except where otherwise indicated by the context, any masculine term
used herein also shall include the feminine, the plural shall include the
singular, and the singular shall include the plural.
     10.4 In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
     10.5 All costs of implementing and administering the Plan shall be borne by
the Company.
     10.6 All obligations of the Company under the Plan shall be binding upon
and inure to the benefit of any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.