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                                                                   Exhibit 10.18


                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT ("Agreement"), made and entered into as of August
24, 1998 (the "Effective Date"), by and between GENAISSANCE PHARMACEUTICALS,
INC. (the "Corporation"), a Delaware corporation with its principal office at 5
Science Park, New Haven, Connecticut, 06511, and GUALBERTO RUANO ("Executive"),
an individual who resides at 88 Lawrence Street, New Haven, Connecticut 06511.

         WHEREAS, the Corporation and Executive desire to continue their
employment relationship on the terms and conditions set forth herein;

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

         1.   EMPLOYMENT. The Corporation hereby continues the employment of
Executive in the capacity of President and Chief Executive Officer, and, until
the Corporation appoints a permanent Scientific Director, as Interim Scientific
Director, of the Corporation (collectively, the "CEO") during the term of this
Agreement, and Executive hereby accepts such continued employment, on the terms
and conditions hereinafter set forth. Executive represents that his employment
by the Corporation pursuant to this Agreement does not violate any agreement,
covenant or obligation to which he is a party or by which he is bound.

         2.   DUTIES. During the term of this Agreement, Executive shall perform
all duties, consistent with his position as CEO, assigned or delegated to him by
the Board of Directors of the Corporation (the "Board") and normally associated
with the position of CEO, and he shall devote his full business time and best
efforts to the advancement of the interests and business of the Corporation. The
Corporation will use its best efforts to cause Executive to continue to be
elected a member of the Board throughout the Employment Term. Executive will
have complete operating and administrative responsibility and authority over the
Corporation subject to reasonable policies established by the Board. The
Corporation shall provide and maintain an office located in New Haven,
Connecticut, from where Executive may perform his duties.

         3.   TERM. The term of Executive's employment under this Agreement
shall begin on the Effective Date, and shall expire at the close of business on
August 31, 2003, unless extended pursuant to the next sentence hereof or unless
earlier terminated as provided in this Agreement (the "Initial Term"). The term
of Executive's employment under this Agreement shall be automatically extended
for additional one-year terms (each, an "Extended Term") upon the expiration of
the Initial Term or any Extended Term unless either the Corporation or the
Executive delivers to the other, at least 120 days prior to the expiration of
the Initial Term or the then current Extended Term, as the case may be, a
written notice (a "Non-Extension Notice") specifying that the term of the
Executive's employment will not be extended at the end of the Initial Term or
such Extended Term, as the case may be. The period from the Effective Date until
August 31, 2003, or, in the event that the Executive's employment hereunder is
earlier


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terminated or extended as provided in this Agreement, such shorter or longer
period, as the case may be, is hereinafter called the "Employment Term". If the
Executive continues in the full-time employ of the Corporation after the end of
the Employment Term (it being expressly understood and agreed that the
Corporation does not now, nor hereafter shall have, any obligation to continue
the Executive in its employ, whether or not on a full-time basis, after the
Employment Term ends), then the Executive's continued employment by the
Corporation shall, notwithstanding anything to the contrary expressed or implied
herein, be terminable by the Corporation at will.

         4.   COMPENSATION. As compensation for the services to be rendered by
Executive to the Corporation pursuant to this Agreement, the Corporation shall
pay Executive and provide Executive with the following compensation and benefits
which Executive agrees to accept in full satisfaction for his services:

              a.   BASE SALARY. The Corporation shall pay Executive a Base
         Salary, payable in equal installments at such payment intervals as are
         the usual custom of the Corporation, but not less often than monthly,
         at an annual rate of $225,000, less such deductions or amounts to be
         withheld as shall be required by applicable law (the "Base Salary").
         The Base Salary shall be reviewed annually by the Board in the third
         quarter of each fiscal year of the Corporation (commencing with the
         fiscal year ending December 31, 1999) and shall be increased (effective
         as of September 1 in such fiscal year) by such amount, if any, as the
         Board, in its sole discretion, shall determine. Neither the Corporation
         nor the Board may reduce the Base Salary as so increased.

              b.   BONUSES. During the Employment Term, the Corporation shall
         pay Executive the following bonuses:

                   (i)       Upon the Effective Date, the Corporation shall pay
              Executive a cash retention bonus of $150,000 (the "Retention
              Bonus") in recognition of Executive's outstanding contributions to
              the Corporation to date and his willingness in the past to accept
              compensation at a level below that of the prevailing market. The
              Retention Bonus shall be paid in addition to the Base Salary and
              the other bonuses for which provision is hereinafter made.

                   (ii)      During the month of January in each year,
              commencing January, 1999, the Corporation shall pay Executive a
              cash bonus (an "Incentive Bonus") equal to such amount as shall be
              determined by the Board in its sole discretion based upon
              Executive's achievements in meeting the financial and performance
              goals of the Corporation for its most recent fiscal year. Each
              Incentive Bonus shall be paid in addition to the Base Salary and
              the Retention Bonus.

              c.   BENEFITS.

                   (i)       Executive shall be entitled to participate, to the
              extent he is eligible, in all group insurance programs, health,
              medical, dental, and disability plans, and other employee benefit
              plans which the Corporation may hereafter in


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              its sole and absolute discretion make available generally to its
              employees (other than any incentive compensation or equity
              ownership plan), but the Corporation shall not be required to
              establish or maintain any such program or plan.

                   (ii)      Executive shall be entitled to four (4) weeks paid
              vacation during each calendar year. Such vacation may be taken at
              such time or times as is reasonably consistent with the
              Corporation's vacation policies and the performance by Executive
              of his duties and responsibilities hereunder. Up to two weeks of
              unused vacation time in any year may be carried over and used in
              the subsequent year.

                   (iii)     Executive shall be entitled to participate in the
              Corporation's 1993 Stock Option Plan (the "Plan") and the
              Corporation shall use its best efforts to cause the Board or the
              applicable committee of the Board to grant Executive an option,
              having a ten-year term, to purchase 100,000 shares of the
              Corporation's common stock at an exercise price per share equal to
              $1.25 (the "Option"). The Option shall vest ratably over a
              36-month period during the Employment Term, with accelerated
              vesting in the event of Executive's death or permanent disability
              or the termination of this Agreement for other than For Cause or
              its breach by Executive or his exercise of his rights under
              Section 11(g). The Option shall be set forth in a separate
              agreement embodying the grant of the Option which shall be
              otherwise in the form stipulated in the Plan..

                   (iv)      The Corporation shall purchase and throughout the
              Employment Term pay the premiums for a $1,000,000 policy of term
              life insurance insuring the life of Executive (subject to his
              meeting the suitability requirements of the insurer). Executive
              shall be the owner of such policy and entitled to all of the
              rights of ownership including designation of the beneficiary
              thereof.

                   (v)       Throughout the Employment Term, the Corporation, at
              its expense, shall furnish an automobile to Executive (owned or
              leased by the Corporation) commensurate with his position as CEO
              and shall reimburse Executive for reasonable maintenance,
              operating and insurance expenses incurred in the use of such
              automobile in connection with business activities conducted on
              behalf of the Corporation.

                   (vi)      Subject to reasonable guidelines adopted by the
              Board, throughout the Employment Term, the Corporation shall pay
              (A) the costs of dues for membership in professional organizations
              whose activities are reasonably related to the business of the
              Corporation, and (B) the initiation fee and monthly dues for
              Executive's membership in one private club that offers luncheon
              and dinner eating facilities.

                   (vii)     The Corporation, at its expense, shall provide
              Executive with a policy of long-term disability insurance with
              reasonable limits and continue to provide to Executive all other
              fringe benefits that are presently being provided to


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              Executive or such comparable or additional fringe benefits of the
              same general type and quality as the Corporation may provide in
              the future to its executive employees.

              d.   SEVERANCE BENEFIT. If the Employment Term expires as a result
         of the Corporation delivering a Non-Extension Notice to Executive, then
         upon the expiration of the Employment Term, the Corporation shall be
         obligated to pay Executive the applicable amounts specified in Section
         12(a) unless such Notice is delivered by the Corporation within twelve
         (12) months following a change in Control (as hereinafter defined), in
         which event the Corporation shall be obligated to pay Executive the
         applicable amounts specified in Section 12(b).

         5.   BUSINESS EXPENSES. The Corporation shall pay, or reimburse
Executive for, the reasonable and necessary business expenses of Executive
incurred in the performance of his duties hereunder, subject to reasonable
documentation thereof and the reasonable rules and regulations of the
Corporation relating thereto.

         6.   INVENTIONS AND IMPROVEMENTS. Executive acknowledges, covenants and
agrees that the Corporation shall be the sole owner of all the fruits and
proceeds of Executive's services hereunder, including but not limited to all
writings, inventions, discoveries, designs, systems, processes or other
improvements relating to the business or products of the Corporation, whether or
not patentable, registerable, or copyrightable, which Executive may, alone or
with others, conceive, create, develop, produce or make during the Employment
Term or as a result of his employment with the Corporation (collectively, the
"Invention"), free and clear of any claims by Executive of any kind or character
whatsoever other than Executive's rights to compensation hereunder. Executive
agrees that he shall disclose each of the Inventions promptly and completely to
the Corporation, and shall, at the request of the Board, execute such
assignments, certificates or other instruments as the Board from time to time
deems necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend the Corporation's right, title and interest in or to any or
all of the Inventions.

         7.   NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.

              a.   Executive acknowledges that, in and as a result of his
         employment by the Corporation, he will be making use of, acquiring
         and/or adding to the Corporation's Confidential Information (as
         hereinafter defined). As a material inducement to the Corporation to
         enter into this Agreement and to pay Executive the compensation and
         benefits set forth in this Agreement, Executive covenants and agrees
         that he shall not, at any time during or following the term of this
         Agreement, directly or indirectly divulge or disclose for any purposes
         whatsoever, any Confidential Information that has been obtained by, or
         disclosed to, him as a result of his employment with the Corporation.
         For purposes of this Agreement, "Confidential Information" means,
         collectively, all confidential matters and materials of the
         Corporation, including without limitation, the Corporation's
         proprietary information, inventions, trade secrets, knowledge, data,
         know-how, intellectual property, systems, procedures, manuals, pricing
         policies, operational


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         methods and information relating to the Corporation's products,
         processes, formulae, business plans, marketing plans and strategies,
         pricing strategies, customer lists, or other subject matters pertaining
         to the business and/or financial affairs of the Corporation.
         "Confidential Information" shall not include any information that is in
         the public domain during the period of Executive's service to the
         Corporation other than as a result of disclosure by Executive in
         violation of this Agreement.

              b.   If Executive is required by a court of competent jurisdiction
         or other tribunal (by oral questions, interrogatories, requests for
         information or documents, subpoena, civil investigation demand or
         similar process) to disclose any Confidential Information, Executive
         may disclose such Information to such tribunal without liability
         hereunder, PROVIDED, THAT Executive first provides the Corporation with
         notice of any such requirement(s) as promptly as practicable, but in
         any case with sufficient timeliness to enable the Corporation to seek
         an appropriate protective order and/or waive its compliance with the
         relevant provisions of this Agreement.

         8.   COVENANTS AGAINST COMPETITION.

              a.   In view of the unique value to the Corporation of the
         services of Executive and because of the Confidential Information to be
         obtained by or disclosed to Executive, as herein above set forth, and
         as a material inducement to the Corporation to enter into this
         Agreement and to pay to Executive the compensation and benefits set
         forth in this Agreement, Executive covenants and agrees that during
         Executive's employment and for a period of one year after he ceases to
         be employed by the Corporation for any reason, he will not, except as
         otherwise authorized by this Agreement, compete in the field of
         pharmacogenomics with the Corporation or any affiliate of the
         Corporation, solicit the Corporation's customers or the customers of
         any of its affiliates in the field of pharmacogenomics, or directly or
         indirectly solicit for employment any of the Corporation's employees.

              b.   For the purposes of this Agreement:

                   (i)       The term "compete" means engaging in the same or
              any similar business as the Corporation or any of its affiliates
              in any manner whatsoever, including without limitation as a
              proprietor, partner, investor, shareholder, member, director,
              officer, employee, consultant, independent contractor or
              otherwise, within any geographic area in which the Corporation's
              products are offered or distributed;

                   (ii)      The term "affiliate," when used in reference to any
              Person (as hereinafter defined), means any other Person that
              directly or indirectly through one or more intermediaries
              controls, is controlled by, or is under common control with the
              first such Person; and

                   (iii)     The term "customers" means all Persons to whom the
              Corporation or any of its affiliates has provided any product or
              service, whether or not for


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              compensation, within a period of two (2) years prior to the time
              Executive ceases to be employed by the Corporation.

              c.   None of the provisions of this Section 8 shall prohibit
         Executive from investing in securities listed on a national securities
         exchange or actively traded over-the-counter so long as such
         investments are not greater than five percent (5%) of the outstanding
         securities of any issuer of the same class or issue.

         9.   REASONABLENESS OF RESTRICTIONS.

              a.   Executive has carefully read and considered the provisions of
         Section 7 and Section 8, and, having done so, agrees that:

                   (i)       The restrictions set forth in Section 7 and Section
              8, including but not limited to the time period, scope and
              geographical area of restriction, are fair and reasonable and are
              reasonably required for the protection of the good will and other
              legitimate business interests of the Corporation and its
              affiliates, officers, directors, shareholders, and other
              employees;

                   (ii)      Executive has received adequate consideration for
              such obligations; and

                   (iii)     Such obligations do not prevent Executive from
              earning a livelihood.

              b.   If, notwithstanding the foregoing, any of the provisions of
         Section 7 or Section 8 shall be held to be invalid or unenforceable,
         the remaining provisions thereof shall nevertheless continue to be
         valid and enforceable as though the invalid and unenforceable parts had
         not been included therein. If any provision of Section 7 or Section 8
         relating to the time period and/or the areas of restriction and/or
         related aspects shall be declared by a court of competent jurisdiction
         to exceed the maximum restrictiveness such court deems reasonable and
         enforceable, the time period and/or areas of restriction and/or related
         aspects deemed reasonable and enforceable by the court shall become and
         thereafter be the maximum restriction in such regard, and the
         restriction shall remain enforceable to the fullest extent deemed
         reasonable by such court.

         10.  REMEDIES FOR BREACH OF EXECUTIVE'S COVENANTS OF NON-DISCLOSURE AND
NON-COMPETITION. Executive recognizes and agrees that the Corporation's remedy
at law for any breach of Section 7 or Section 8 would be inadequate, and he
agrees that, for breach of such provisions, the Corporation shall, in addition
to such other remedies as may be available to it at law or in equity or as
provided in this Agreement, be entitled to injunctive relief and to enforce its
rights by an action for specific performance.

         11.  TERMINATION.


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              a.   In the event that Executive dies during the Employment Term,
         this Agreement shall terminate upon his death, upon which event
         Executive's legal representatives shall be entitled to receive, and the
         Corporation shall pay or cause to be paid to Executive's legal
         representatives, any Base Salary and other compensation or benefits
         accrued but as yet unpaid on the date of Executive's death.

              b.   If during the Employment Term, Executive is prevented from
         performing the duties or fulfilling responsibilities of his employment
         under this Agreement by reason of any incapacity or disability for a
         continuous period of six (6) months, as determined by an independent
         qualified physician selected by the Corporation and reasonably
         acceptable to Executive (or his representative), then the Corporation
         may, upon thirty (30) days prior written notice to Executive, terminate
         Executive's employment hereunder, but Executive shall continue to be
         eligible to receive any benefits to which he may be entitled under the
         terms of any long-term disability plan or insurance policy maintained
         by the Corporation for its employees. In the event of such incapacity
         or disability, the Corporation shall continue to pay full compensation
         to Executive in accordance with the terms of this Agreement until the
         date of such termination.

              c.   The Corporation may, upon written notice to Executive,
         terminate Executive's employment hereunder For Cause; provided that the
         Corporation shall first provide the Executive with an opportunity to
         discuss any proposed termination with the Board. For purposes of this
         Agreement, the term "For Cause" shall mean:

                   (i)       A willful and material breach by Executive of his
              duties hereunder which Executive fails to cure within thirty (30)
              days after receipt of written notice;

                   (ii)      Executive's conviction of any felony, or of a
              lesser crime having its predicate element fraud, dishonesty or
              misappropriation of property of Corporation;

                   (iii)     Executive's engaging in bad faith or gross
              negligence in the performance of his duties under this Agreement
              as determined in good faith by the Board;

                   (iv)      Executive's engaging in chronic alcoholism, drug
              addiction or substance abuse which has interfered with the
              performance of his duties under this Agreement; and/or

                   (v)       Executive's perpetration of any act or omission
              which submits the Corporation to criminal liability, unless such
              act or omission was directly approved by resolution of the Board.

         In the event of termination For Cause of Executive's employment,
Executive's right to receive compensation and other benefits hereunder (other
than any Base Salary accrued but as yet unpaid on the effective date of such
termination) shall terminate on the


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effective date of such termination, and Executive shall not be entitled to any
severance payments or benefits pursuant to Section 12.

              d.   The Corporation may, at any time, for reason other than For
         Cause, elect, by majority vote of the Board, to terminate Executive's
         employment upon thirty (30) days written notice to Executive. In the
         event of such termination for reason other than For Cause, the
         Corporation shall be obligated to pay Executive the applicable amounts
         specified in Section 12(a); provided that if a Change of Control (as
         hereinafter defined) has occurred within the preceding 12 months, then
         the Corporation shall be obligated to pay the amounts specified in
         Section 12(b) rather than the amounts specified in Section 12(a).

              e.   Executive may, at his option, upon thirty (30) days written
         notice to the Corporation, terminate his employment hereunder, if: the
         Corporation, without Executive's express written consent, demotes him
         to a position and/or assigns him duties inconsistent with the position
         and/or duties described in Sections 1 or 2. Upon any termination by
         Executive under this Section 11(e), the Corporation shall be obligated
         to pay Executive the applicable amounts specified in Section 12(a);
         provided that if a Change of Control (as hereinafter defined) has
         occurred within the preceding 12 months, then the Corporation shall be
         obligated to pay the amounts specified in Section 12(b) rather than the
         amounts specified in Section 12(a).

              f.   Executive may, at his option, upon thirty (30) days written
         notice to the Corporation, terminate his employment hereunder for Good
         Reason (as hereinafter defined) following a Change of Control of the
         Corporation. Upon any termination by Executive under this Section
         11(f), the Corporation shall be obligated to pay Executive the amounts
         specified in Section 12(b).

              g.   Executive may, at his option, upon six (6) months prior
         written notice to the Corporation, terminate his employment hereunder.
         In the event of a voluntary termination of his employment by the
         Executive pursuant to this Section 11(g), Executive's rights to receive
         compensation and other benefits (other than any Base Salary accrued but
         as yet unpaid on the effective date of such termination) shall
         terminate on the effective date of such termination, and Executive
         shall not be entitled to any severance payments or benefits pursuant to
         Section 12.

              h.   For purposes of this Agreement, the term "Good Reason" means,
         during the twelve (12) month period following a Change of Control,
         without Executive's express written consent, the occurrence of any of
         the following circumstances:

                   (i)       the assignment to Executive of any duties
              inconsistent (except in the nature of a promotion) with the
              position in the Corporation that he held immediately prior to the
              Change of Control or substantial adverse alteration in the nature
              or status of his position or


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              responsibilities or the conditions of his employment from those in
              effect immediately prior to the Change of Control;

                   (ii)      a reduction by the Corporation in Executive's
              annual Base Salary as in effect on the date hereof, as the same
              may be increased from time to time; or

                   (iii)     the failure by the Corporation to continue in
              effect any material compensation or benefit plan in which
              Executive participates immediately prior to the Change of Control
              unless an equitable arrangement (embodied in an ongoing substitute
              or alternative plan) has been made with respect to such plan, or
              the failure by the Corporation to continue Executive's
              participation therein (or in such substitute or alternative plan)
              on a basis not materially less favorable, both in terms of the
              amount of benefits provided and the level of his participation
              relative to other participants, than existed immediately prior to
              the Change of Control.

              i.   For purposes of this Agreement, a "Change of Control" shall
         be deemed to have occurred if:

                   (i)       Any Person or any two or more Persons acting as a
              group (but excluding the Corporation and any subsidiary of the
              Corporation and any employee benefit plan sponsored or maintained
              by the Corporation or any such subsidiary), and all affiliates of
              such Person or Persons, who shall directly or indirectly acquire
              beneficial ownership of securities of the Corporation in one or
              more transactions, or series of transactions, such that, following
              such transaction or transactions, such Person or Persons or group
              and their affiliates beneficially own securities of the
              Corporation representing (A) prior to the occurrence of an Initial
              Public Offering (as hereinafter defined), fifty percent (50%) or
              more of the combined voting power of the Corporation's then
              outstanding securities, and (b) at any time thereafter,
              thirty-five percent (35%) or more of the combined voting power of
              the Corporation's then outstanding securities. For the purposes of
              this clause, a subsidiary of the Corporation shall mean a
              corporation all of whose securities having voting power are
              beneficially owned by the Corporation;

                   (ii)      Any Person or Persons acquires or agrees to acquire
              all or substantially all of the assets of the corporation through
              a purchase of assets but excluding any such acquisition by a
              corporation all of whose securities having voting power are
              beneficially owned by the Corporation;

                   (iii)     As a result of a contested election, the
              individuals who were directors of the Corporation immediately
              before the election ceased to constitute a majority of the Board;
              or


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                   (iv)      The Corporation enters into any agreement pursuant
              to which it is not the surviving constituent corporation in any
              merger or other business combination.

              j.   For purposes of this Agreement, the term "Person" means any
         individual, corporation, association, partnership, limited partnership,
         limited liability company, limited liability partnership, organization,
         business, joint venture, sole proprietorship, governmental agency,
         entity or subdivision or other entity of any kind or nature.

              k.   (i) Subject to paragraph (m) of this Section 11, upon a
         voluntary termination by Executive of his employment pursuant to
         Section 11(e) or Section 11(f), or upon termination of such employment
         by the Corporation pursuant to Section 11(d) or upon the expiration of
         the Employment Term as a result of the Corporation's delivering a
         Non-Extension Notice to Executive, Executive shall have the right to
         require the Corporation to repurchase all of the shares of capital
         stock of the Corporation owned by him at the date of any such
         termination or expiration (the "Shares") at their Fair Market Value as
         of the date upon which the Executive exercises such right. The
         Executive shall have a period of one (1) year after the date of such
         termination or expiration to exercise such right which shall be
         exercisable by delivering a written notice of exercise to the principal
         office of the Corporation, to the attention of the Board. The purchase
         of the Shares shall take place at the principal office of the
         Corporation at 10:00 a.m., local time, on a date no later than the
         later of (i) thirty (30) days after determination of the Fair Market
         Value of the Shares in accordance with the provisions of this
         Agreement, or (ii) sixty (60) days after the Corporation's receipt of
         such notice. At the closing, Executive shall transfer the Shares to the
         Corporation, and the Corporation shall pay the Fair Market Value
         thereof by certified or bank cashier's check(s) or by wire transfer of
         funds; PROVIDED, THAT the Corporation may, if prohibited from making
         such payment in cash by any applicable law, pay the Fair Market Value
         in a combination of cash in an amount of no less than half of such Fair
         Market Value (to the extent permitted by such law) and the remainder by
         means of an unsecured promissory note of the Corporation bearing
         interest at the Prime Rate, payable in equal monthly installments of
         interest and principal over three (3) years, in a principal amount
         equal to the Fair Market Value less the amount of the cash payment. Any
         such note shall contain commercially reasonable provisions. Executive
         shall execute and deliver such instruments of transfer as the
         Corporation may reasonably request in order to effect such transfer.

                   (ii)      As used herein, the term "Fair Market Value" means
              the fair market value agreed upon by the Corporation and Executive
              or determined by an appraiser selected jointly by the Corporation
              and Executive but at the Corporation's expense. If the Corporation
              and Executive cannot agree on such Value or such an appraiser
              within 30 days after the occurrence of the event requiring such
              determination, then the Corporation shall appoint one appraiser,
              at its expense, and Executive shall appoint one appraiser, at his
              expense, both of whom shall be experienced in the appraisal of
              companies engaged in businesses similar to the business then
              conducted by the Corporation. If either the Corporation or
              Executive fail to appoint such an appraiser within 15 days after
              the lapse


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              of such 30-day period, then the appraiser appointed by the party
              who does appoint an appraiser shall make the appraisal of the Fair
              Market Value and such appraisal shall govern. If two appraisers
              are appointed, then the average of the appraisals rendered by such
              appraisers shall be considered the Fair Market Value; provided
              that if the higher appraisal reflects a value that is greater than
              120% of the lower appraisal, then the two appraisers shall jointly
              appoint a third appraiser (experienced in the appraisal of similar
              businesses), or if they fail to do so, the manager of the
              principal office of the American Arbitration Association in
              Hartford County in the State of Connecticut shall make such
              appointment. The Corporation shall pay of the expenses of such
              third arbitrator. The average of the two appraisals closest in
              value among the three appraisals rendered by such appraisers shall
              be considered the Fair Market Value. Each appraisal report shall
              be rendered in writing and shall be signed by the appraiser
              rendering such report. The Corporation and Executive shall use
              reasonable efforts to cause each appraiser to render its or his
              appraisal report within 30 days after the date of appointment.

                   (iii)     As used herein, "Prime Rate" means the prime rate
              of interest from time to time published in the "Money Rates"
              column of the Wall Street Journal, Eastern edition.

              l.   In the event of termination or expiration of Executive's
         employment other than for death, Executive shall resign from all
         positions held in the Corporation, including without limitation any
         position as a director, officer, agent, trustee or consultant of the
         Corporation or any affiliate of the Corporation.

              m.   Notwithstanding the foregoing, paragraph (k) of this Section
         11 shall have no further force or effect upon the consummation of a
         firm commitment underwritten public offering of shares of common stock
         of the Corporation registered under the Securities Act of 1933, as
         amended (an "Initial Public Offering").

         12.  SEVERANCE PAYMENTS.

              a.   Subject to Section 13, if the Corporation terminates
         Executive's employment pursuant to Section 11(d), and the Board vote
         with respect to such termination does not occur within twelve (12)
         months following a Change of Control, or if Executive terminates his
         employment pursuant to Section 11(e), and such termination does not
         occur within twelve (12) months following a Change of Control, or if
         the Employment Term expires as a result of the Corporation's delivering
         a Non-Extension Notice to Executive and such Notice is not delivered
         within twelve (12) months following a Change of Control, the parties
         recognize and agree that actual damages due Executive would be
         difficult if not impossible to ascertain and agree that, in lieu of any
         other rights to which Executive may be entitled, the Corporation shall
         pay Executive, as severance pay or as liquidated damages, or both,
         Executive's Base Salary, as in effect at the time of such termination
         or expiration for a period of twelve (12) calendar months following the
         date of such termination or expiration, such payments to be made in the
         same manner in which such salary payments were made to Executive
         immediately prior to the date of such termination or expiration.


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              b.   Subject to Section 13, if the Corporation terminates
         Executive's employment pursuant to Section 11(d), and the Board vote
         with respect to such termination occurs within the twelve (12) months
         following a Change of Control, or if Executive terminates his
         employment pursuant to Section 11(e) and such termination occurs within
         twelve (12) months following a Change of Control, or if the Employment
         Term expires as a result of the Corporation's delivering a
         Non-Extension Notice to Executive within twelve (12) months following a
         Change of Control, or if Executive terminates his employment for Good
         Reason following a Change of Control pursuant to Section 11(f), the
         parties recognize and agree that actual damages to Executive would be
         difficult if not impossible to ascertain and agree that, in lieu of any
         other rights to which Executive may be entitled, the Corporation shall
         pay Executive, as severance pay or as liquidated damages, or both, upon
         the effective date of such termination or expiration a lump sum equal
         to three hundred percent (300%) of Executive's annual Base Salary as in
         effect at the time of such termination or expiration. Such payment
         shall be made within thirty (30) days after such termination or
         expiration date.

              c.   Except as set forth in this Section 12 or as otherwise
         required by law, Executive shall not be entitled to any severance
         payments or employee benefits under this Agreement after termination or
         expiration of Executive's employment, except that if Executive is
         entitled to severance payments under Section 12(a) or Section 12(b), or
         if Executive's employment is terminated as a result of incapacity or
         disability, during the eighteen (18) month period (or such longer
         period which does not exceed twenty-four (24) months as may be provided
         by applicable law) following any termination or expiration of
         Executive's employment hereunder, the Corporation shall reimburse
         Executive for out-of-pocket health insurance expenses for himself and
         his spouse or children, if any, incurred by Executive pursuant to COBRA
         (Consolidated Omnibus Budget Reconciliation Act of 1986). If Executive
         elects not to maintain health insurance pursuant to COBRA, the
         Corporation is under no obligation to reimburse Executive for his
         otherwise elected coverage. Executive shall give the Corporation prompt
         notice of his re-employment.

         13.  MAXIMUM SEVERANCE PAYMENTS.

              a.   Anything else contained in this Agreement to the contrary
         notwithstanding, if any payment or benefit received or to be received
         by Executive (whether payable pursuant to the terms of this Agreement
         or any other plan, arrangement or agreement with the Corporation, its
         successors, any other Person whose actions result in a Change of
         Control or any Tax Affiliate (as hereinafter defined) (collectively,
         with the payments and benefits pursuant to this Agreement if deemed to
         be paid pursuant to a Change of Control, the "Total Payments")) is
         determined by Tax Advisor (as hereinafter defined) (i) to be an "excess
         parachute payment" (in whole or in part) for purposes of Section 280G
         of the Code (as hereinafter defined) and (ii) not to be deductible (in
         whole or in part) by the Corporation, a Tax Affiliate or other Person
         making such payment or providing such benefit as a result of Section
         280G of the Code, then payments and benefits received or to be received
         by Executive pursuant to Section 12 shall be reduced


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<PAGE>


         (but to not less than zero) until the Total Payments are fully
         deductible notwithstanding Section 280G of the Code. For purposes of
         the limitation set forth in this Section 13, (a) no portion of the
         Total Payments the receipt of which Executive, in the determination of
         Tax Advisor, shall have effectively waived prior to the date which is
         fifteen (15) days following termination or expiration of his employment
         and prior to the earlier of (1) the date of constructive receipt
         thereof and (2) the date of payment thereof shall be taken into
         account; and (b) any reduction in the payments and benefits received or
         to be received by Executive pursuant to Section 12 shall be made first
         to cash payments due to Executive in the inverse order of the dates on
         which they would be payable to Executive and then to other benefits due
         to Executive in the inverse order of the dates on which they would be
         received by Executive, except to the extent that such payments and
         benefits, in the determination of Tax Advisor, are reasonable
         compensation within the meaning of Section 280G of the Code. The
         determination of Tax Advisor as to the deductibility of the Total
         Payments shall be completed not later than forty-five (45) days
         following Executive's termination of employment, and such termination
         shall be communicated in writing to the Corporation, with a copy to
         Executive, within such forty-five (45) day period. The determination of
         Tax Advisor as to the deductibility of the Total Payments shall be
         deemed to be conclusive and binding on the Corporation and Executive
         and shall not be subject to the arbitration provisions of Section 24.
         The Corporation shall pay the fees and other costs of Tax Advisor in
         connection with its performance of its duties hereunder.

              b.   For purposes of this Agreement:

                   (i)       The term "Code" means the Internal Revenue Code of
              1986, as amended;

                   (ii)      The term "Tax Advisor" means the Corporation's
              independent auditors; and

                   (iii)     The term "Tax Affiliate" means any corporation
              affiliated (or which, as a result of the completion of the
              transactions causing a Change of Control, will become affiliated)
              with the Corporation within the meaning of Section 1504 of the
              Code.

         14.  WAIVER. A party's failure to insist on compliance or enforcement
of any provision of this Agreement shall not affect the validity or
enforceability or constitute a waiver of future enforcement of that provision or
of any other provision of this Agreement by that party or any other party.

         15.  GOVERNING LAW. This Agreement shall in all respects be subject to,
and governed by, the laws of the State of Connecticut.

         16.  SEVERABILITY. The invalidity or unenforceability of any provision
in the Agreement shall not in any way affect the validity or enforceability of
any other provision and


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<PAGE>


this Agreement shall be construed in all respects as if such invalid or
unenforceable provision had never been in the Agreement.

         17.  NOTICE. Any and all notices required or permitted herein shall be
in writing and shall be deemed to have been duly given (a) when delivered if
delivered personally, (b) on the fifth day following the date of deposit in the
United States mail if sent first class, postage prepaid, by registered or
certified mail, or (c) one day after delivery to a nationally recognized
overnight courier service. The parties' respective addresses for such notices
shall be those set forth following their respective signatures below, or such
other address or addresses as either party may hereafter designate in writing to
the other.

         18.  ASSIGNMENT. This Agreement, together with any amendments hereto,
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, assigns, heirs, executors, and legal and personal
representatives, except that the rights and benefits of Executive under this
Agreement may not be assigned without the prior written consent of the
Corporation. Without limiting the generality of the foregoing, this Agreement
shall be binding upon and inure to the benefit of any corporation with which or
into which the Corporation or its successors may be merged or which may succeed
to its assets or business.

         19.  AMENDMENTS. This Agreement may be amended at any time by mutual
consent of the parties hereto, with any such amendment to be invalid unless in
writing and signed by the Corporation and Executive.

         20.  ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding by and between Executive and the Corporation with respect to the
employment of Executive and supersedes all existing agreements between the
Corporation and Executive with respect to such employment. No representations,
promises, agreements, or understandings, written or oral, relating to the
employment of Executive by the Corporation not contained herein shall be of any
force or effect. Without limiting the generality of the foregoing, that certain
Employment Agreement, dated as of February, 1997, between the Corporation and
Executive (as heretofore amended) is hereby terminated and shall be of no
further force or effect.

         21.  REFERENCES TO GENDER AND NUMBER TERMS. In construing this
Agreement, feminine or number pronouns shall be substituted for those masculine
in form and vice versa, and plural terms shall be substituted for singular and
singular for plural in any place in which the context so requires.

         22.  COUNTERPARTS; HEADINGS; SECTIONS. This Agreement may be executed
in multiple counterparts, each of which shall be considered to have the force
and effect of any original but all of which taken together shall constitute but
one and the same instrument. The various headings in this Agreement are inserted
for convenience only and are not part of the Agreement. All references to
"Sections" and "paragraphs" in this Agreement refer to the various corresponding
sections and paragraphs of this Agreement.


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<PAGE>


         23.  SURVIVAL. The covenants and agreements contained in Sections 6
through 12 shall survive any termination or expiration of this Agreement and the
termination of Executive's employment hereunder.

         24.  ARBITRATION. Executive and the Corporation will submit any
disputes arising under this Agreement to an arbitration panel conducting a
binding arbitration in Hartford, Connecticut, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on the date
of such arbitration (the "Rules"), and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof; PROVIDED, HOWEVER, that nothing herein shall impair the Corporation's
right to seek equitable relief for breach or threatened breach of Section 7 or
Section 8. The award of the arbitrators shall be final and shall be the sole and
exclusive remedy between the parties regarding any claims, counterclaims, issue
or accounting presented to the arbitration panel. The parties hereto further
agree that the arbitration panel shall consist of one (1) person mutually
acceptable to the Corporation and Executive, PROVIDED that if the parties cannot
agree on an arbitrator within fifteen (15) days of filing a notice of
arbitration, the arbitration panel shall consist of three (3) persons, one
selected by the Corporation, one selected by Executive (or his representative)
and one selected by the arbitrators so selected by the parties hereto, or if the
parties hereto cannot agree, selected by the manager of the principal office of
the American Arbitration Association in Hartford County in the State of
Connecticut. All fees and expenses of the arbitration, including a transcript if
either party requests, shall be borne equally by the parties. If Executive
prevails as to any material issue presented in the arbitration, the entire cost
of such proceedings (including, without limitation, Executive's reasonable
attorney's fees) shall be borne by the Corporation. If Executive does not
prevail as to any material issue, each party will pay for the fees and expenses
of its own attorneys, experts, witnesses, and preparation and presentation of
proofs and post-hearing briefs (unless the party prevails on a claim for which
attorney's fees are recoverable under the Rules). Any action to enforce or
vacate the arbitrator's award shall be governed by the federal Arbitration Act,
if applicable, and otherwise by applicable state law. If either the Corporation
or Executive pursues any claim, dispute or controversy against the other in a
proceeding other than the arbitration provided for herein, the responding party
shall be entitled to dismissal or injunctive relief regarding such action and
recovery of all costs, losses and attorney's fees related to such action.


                       THE NEXT PAGE IS THE SIGNATURE PAGE


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<PAGE>


         IN WITNESS WHEREOF, the Corporation and Executive have duly executed
this Agreement as of the day and year first above written.


                                  CORPORATION:

                                  GENAISSANCE PHARMACEUTICALS, INC.

                                  By: /s/ Kevin Rakin
                                     -------------------------------
                                     Name: Kevin Rakin
                                     Its   Executive Vice President

                                  Address for Notice Purposes:
                                  5 Science Park
                                  Suite 2103
                                  New Haven, CT 06511

                                  EXECUTIVE:

                                  /s/ GUALBERTO RUANO
                                  ----------------------------------
                                  GUALBERTO RUANO
                                  Address for Notice Purposes:
                                  88 Lawrence Street
                                  New Haven, CT 06511


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