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                                                                    Exhibit 10.5

                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT, made and entered into as of February 8, 2000
(the "EFFECTIVE DATE"), by and between Lexicon Genetics Incorporated, a Delaware
corporation (hereafter "COMPANY"), and Julia Gregory (hereafter "EXECUTIVE"), an
individual and resident of New York, New York.

                              W I T N E S S E T H:

     WHEREAS, Company wishes to secure the services of the Executive subject to
the terms and conditions hereafter set forth; and

     WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth;

     NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:

     1. EMPLOYMENT. During the Employment Period (as defined in Section 4
hereof), the Company shall employ Executive, and Executive shall serve, as
Executive Vice President and Chief Financial Officer of the Company. Executive's
principal place of employment shall be at the Company's principal corporate
offices in The Woodlands, Texas, or at such other location for the Company's
principal corporate offices during the Employment Period.

     2. DUTIES AND RESPONSIBILITIES OF EXECUTIVE.

          (a) During the Employment Period, Executive shall devote her services
     full time to the business of the Company and its Affiliates (as defined
     below), and perform the duties and responsibilities assigned to her by the
     Chief Executive Officer ("CEO") or Board of Directors (the "BOARD") of the
     Company to the best of her ability and with reasonable diligence. Executive
     agrees to cooperate fully with the Board, CEO and other executive officers
     of the Company, and not to engage in any activity which conflicts with or
     interferes with the performance of her duties hereunder. During the
     Employment Period, Executive shall devote her best efforts and skills to
     the business and interests of Company, do her utmost to further enhance and
     develop Company's best interests and welfare, and endeavor to improve her
     ability and knowledge of Company's business, in an effort to increase the
     value of her services for the mutual benefit of the parties hereto. During
     the Employment Period, it shall not be a violation of this Agreement for
     Executive to (1) serve on corporate, civic, or charitable boards or
     committees (except for boards or committees of a Competing Business (as
     defined in Section 11)), (2) deliver lectures, fulfill teaching or speaking
     engagements, or (3) manage personal investments; provided that such
     activities do not materially interfere with performance of Executive's
     responsibilities under this Agreement.

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          For purposes of this Agreement, "AFFILIATE" means any entity which
     owns or controls, is owned or controlled by, or is under common ownership
     or control with, the Company.

          (b) Executive represents and covenants to Company that she is not
     subject or a party to any employment agreement, noncompetition covenant,
     nondisclosure agreement, or any similar agreement, covenant, understanding,
     or restriction that would prohibit Executive from executing this Agreement
     and fully performing her duties and responsibilities hereunder, or would in
     any manner, directly or indirectly, limit or affect the duties and
     responsibilities that may now or in the future be assigned to Executive
     hereunder.

     3. COMPENSATION.

          (a) During the Employment Period, the Company shall pay to Executive
     an annual base salary of $200,000 in consideration for her services under
     this Agreement, payable on a pro rata basis in not less than monthly
     installments, in conformity with the Company's customary payroll practices
     for executive salaries. Executive's base salary shall be subject to review
     at least annually, and such salary may be increased (but shall not be
     decreased), depending upon the performance of the Company and Executive,
     upon the recommendation of the Compensation Committee of the Board (the
     "COMPENSATION COMMITTEE"). All salary, bonus and other compensation
     payments hereunder shall be subject to all applicable payroll and other
     taxes.

          (b) As promptly as practicable after the end of each calendar year
     during the Employment Period, the Compensation Committee shall determine
     whether Executive is entitled to a bonus based on the attainment of
     performance goals during the calendar year then ended (the "BONUS YEAR").
     For each Bonus Year during the Employment Period (including the Bonus Year
     commencing on the Effective Date and ending on December 31, 2000), the
     Compensation Committee shall establish certain performance goals for the
     Company and the Executive and a targeted annual bonus amount (the amount of
     which annual target bonus shall be within the sole discretion of the
     Compensation Committee). The target bonus shall be paid to Executive within
     60 days after the end of the applicable Bonus Year (whether or not
     Executive continues to be employed by the Company following the end of the
     Bonus Year to which such bonus relates, provided that Executive was
     employed by the Company for the full Bonus Year) based on the extent to
     which the performance goals and objectives for the Bonus Year have been
     achieved. The full amount of the target bonus shall be paid if
     substantially all of the designated performance goals and objectives have
     been achieved for the Bonus Year; if not, the Compensation Committee, in
     its discretion exercised in good faith, may award a target bonus to
     Executive in an amount less than the full target bonus for that Bonus Year.
     The Compensation Committee may also award additional bonuses or other
     compensation to Executive at any time in its complete discretion.

     4. TERM OF EMPLOYMENT. Executive's initial term of employment with the
Company under this Agreement shall be for the period beginning on the Effective
Date and ending at midnight (CST) on December 31, 2001, unless Notice of
Termination pursuant to Section 7

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is given by either the Company or Executive to the other party. The Company and
Executive shall each have the right to give Notice of Termination at will, with
or without cause, at any time, subject to the terms and conditions of this
Agreement regarding the rights and duties of the parties upon termination of
employment. The term of employment hereunder ending on December 31, 2001, shall
be referred to herein as the "INITIAL TERM OF EMPLOYMENT." On December 31, 2001
and on December 31st of each succeeding year (each such date being referred to
as a "RENEWAL DATE"), this Agreement shall automatically renew and extend for a
period of one (1) additional year (a "RENEWAL TERM") unless written notice of
non-renewal is delivered from one party to the other at least sixty (60) days
prior to the relevant Renewal Date or, alternatively, the parties may mutually
agree to voluntarily enter into a new employment agreement at any time. The
period from the Effective Date through the date of Executive's termination of
employment at any time for whatever reason shall be referred to herein as the
"EMPLOYMENT PERIOD."

     5. BENEFITS. Subject to the terms and conditions of this Agreement, during
the Employment Period, Executive shall be entitled to the following:

          (a) REIMBURSEMENT OF BUSINESS EXPENSES. The Company shall pay or
     reimburse Executive for all reasonable travel, entertainment and other
     expenses paid or incurred by Executive in performing her business
     obligations hereunder. Executive shall provide substantiating documentation
     for expense reimbursement requests as reasonably required by the Company.

          (b) BENEFITS. Executive shall be entitled to and shall receive all
     other benefits and conditions of employment available generally to
     executives of the Company pursuant to Company plans and programs,
     including, but not limited to, group health insurance benefits, dental
     benefits, life insurance benefits, disability benefits, and pension and
     retirement benefits. The Company shall not be obligated to institute,
     maintain, or refrain from changing, amending, or discontinuing, any such
     employee benefit program or plan, so long as such actions are similarly
     applicable to covered executives generally.

          Notwithstanding the previous paragraph, Company shall provide
     Executive with long-term disability ("LTD") insurance coverage, at no cost
     to Executive, that provides income replacement benefits to Executive, if
     she should incur a long-term disability covered under such policy, in an
     amount at least equal to 60% of her base salary at the time of such
     disability, which benefits shall begin after a waiting period that does not
     exceed six months. The income replacement benefits described in the
     previous sentence shall remain payable at least until Executive attains the
     age of 65 provided that she remains unable to perform the essential
     functions of her occupation during such period. To the extent that the
     Company's LTD policy which covers employees generally does not provide
     sufficient coverage to Executive, as described in the previous sentence,
     Company agrees to purchase a supplemental LTD policy for Executive from a
     reputable insurer and to pay the premiums on Executive's behalf during the
     Employment Period.

          Notwithstanding the first paragraph of this Section 5(b), the Company
     shall pay for term life insurance coverage on Executive's life, with the
     beneficiary(ies) thereof designated

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     by Executive, with a death benefit in an amount not less than twice
     Executive's base salary (pursuant to Section 3(a)) as such base salary is
     set on each January 1 during the Employment Period. Upon request, Executive
     agrees to take any physical exams, and to provide such information, which
     are reasonably necessary or appropriate to secure or maintain such term
     life insurance coverage.

          (c) PAID VACATION. Executive shall be entitled to a paid annual
     vacation of three (3) weeks. Vacation time may be accumulated and carried
     over by Executive into any subsequent year(s); provided, however, Executive
     shall not be permitted to accumulate more than six (6) weeks of accrued and
     unused vacation. In addition, the Executive shall be allowed up to five (5)
     days each year to attend professional continuing education meetings or
     seminars; provided that attendance at such meetings or seminars shall be
     planned for minimum interference with the Company's business.

          (d) RELOCATION AND INTERIM HOUSING AND TRAVEL EXPENSES. The Company
     shall pay or reimburse Executive all reasonable expenses paid or incurred
     by Executive for the relocation of Executive's household belongings from
     Executive's home in New York to a home in The Woodlands, Texas area. In
     addition, the Company shall pay or reimburse Executive all reasonable
     expenses paid or incurred by Executive pending such relocation for a period
     of up to six (6) months from the Effective Date for (1) temporary living
     accommodations in The Woodlands, Texas area and (2) reasonable airfare for
     up to twelve roundtrip (12) flights from Houston, Texas to New York, New
     York. Executive shall provide substantiating documentation for expense
     reimbursement requests as reasonably required by the Company. During the
     first year of employment, the Executive will also be entitled to an
     additional fifteen (15) days of non-paid leave for personal use.

     6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
compensation and benefits for periods after the date on which her employment
with the Company and its Affiliates (as defined in Section 2) terminates for
whatever reason (the "TERMINATION DATE") shall be determined in accordance with
this Section 6.

          (a) ACCRUED SALARY AND VACATION PAYMENTS. Executive shall be entitled
     to the following payments under this Section 6(a) regardless of the reason
     for termination, in addition to any payments or benefits to which the
     Executive is entitled under the terms of any employee benefit plan or the
     provisions of Section 6(b):

               (1) her accrued but unpaid salary through her Termination Date;
          and

               (2) her accrued but unpaid vacation pay for the period ending on
          her Termination Date in accordance with Section 5(c) above.

          (b) SEVERANCE PAYMENTS.

               (1) At any time prior to a Change in Control (as defined below),
          in the event that (A) Executive's employment hereunder is terminated
          by the Company at

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          any time for any reason except (i) for Cause (as defined below) or
          (ii) due to Executive's death or Disability (as defined below), or (B)
          Executive terminates her own employment hereunder for Good Reason (as
          defined below), then, in either such event, Executive shall be
          entitled to receive, and the Company shall be obligated to pay,
          Executive's base salary under Section 3(a) (without regard to any
          bonuses or extraordinary compensation) then being paid to her on the
          Termination Date as salary continuation (pursuant to the Company's
          normal payroll procedures) for a period equal to six (6) consecutive
          months following the Termination Date; provided that if such
          termination occurs within twelve (12) months of the Effective Date,
          Executive shall be entitled to receive, and the Company shall be
          obligated to pay, Executive's base salary under Section 3(a) (without
          regard to any bonuses or extraordinary compensation) then being paid
          to her on the Termination Date as salary continuation (pursuant to the
          Company's normal payroll procedures) for a period equal to twelve (12)
          consecutive months following the Termination Date. In the event of
          Executive's death during such salary continuation period, the Company
          shall pay the sum of the present value of all remaining payments
          (using a 5% discount rate) in a single payment to Executive's
          surviving spouse, if any, or if there is no surviving spouse, to
          Executive's estate within 60 days of her death. Such severance
          payments shall be subject to Sections 10 and 11 hereof.

               Prior to a Change in Control, in the event that Executive's
          employment is terminated through notice of non-renewal as of the end
          of the Initial Term of Employment (pursuant to Section 4) or any
          one-year Renewal Term, Executive shall be entitled to receive, and the
          Company shall be obligated to pay, Executive's base salary under
          Section 3(a) (without regard to any bonuses or extraordinary
          compensation) then being paid to her on the Termination Date as salary
          continuation (pursuant to the Company's normal payroll procedures) for
          each month following her Termination Date, not to exceed six months,
          that Executive is (A) not in violation of the confidential
          information, non-competition and other covenants of Sections 10 and 11
          hereof and (B) not employed by another employer, as determined by the
          Company.

               (2) At any time after a Change in Control (as defined below), in
          the event that (A) Executive's employment hereunder is terminated by
          the Company at any time for any reason except (i) for Cause (as
          defined below) or (ii) due to Executive's death or Disability (as
          defined below), or (B) Executive terminates her own employment
          hereunder for Good Reason (as defined below in this Section 6(c)),
          then, in either such event, Executive shall be entitled to receive,
          and the Company shall be obligated to pay, Executive's base salary
          under Section 3(a) (without regard to any bonuses or extraordinary
          compensation except as provided below in this paragraph) then being
          paid to her on the Termination Date as salary continuation (pursuant
          to the Company's normal payroll procedures) for a period equal to
          twelve (12) consecutive months following the Termination Date, plus an
          additional single sum payment equal to one-half of Executive's target
          bonus (pursuant to Section 3(b)) for the Bonus Year in which the
          termination occurred, which bonus shall be payable within 30 days from

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          the Termination Date. In the event of Executive's death during such
          salary continuation period, the Company shall pay the sum of the
          present value of all remaining payments in a single payment (using a
          5% discount rate) to Executive's surviving spouse, if any, or if there
          is no surviving spouse, to Executive's estate within 60 days of her
          death.

               After a Change in Control, in the event that the Company
          terminates Executive's employment through notice of nonrenewal as of
          the end of the Initial Term of Employment (pursuant to Section 4) or
          any one-year Renewal Term, Executive shall be entitled to receive, and
          the Company shall be obligated to pay, Executive's base salary under
          Section 3(a) (without regard to any bonuses or extraordinary
          compensation) then being paid to her on the Termination Date as salary
          continuation (pursuant to the Company's normal payroll procedures) for
          a period of six (6) consecutive months following the Termination Date.

               (3) Except as otherwise specifically provided in this Section
          6(b), severance payments shall be in addition to, and shall not reduce
          or offset, any other payments that are due to Executive from the
          Company (or any other source) or under any other agreements, except
          that severance payments hereunder shall offset any severance benefits
          otherwise due to Executive under any severance pay plan or program
          maintained by the Company that covers its employees generally. The
          provisions of this Section 6(b) shall supersede any conflicting
          provisions of this Agreement but shall not be construed to curtail,
          offset or limit Executive's rights to any other payments, whether
          contingent upon a Change in Control (as defined below) or otherwise,
          under this Agreement or any other agreement, contract, plan or other
          source of payment.

               (4) A "CHANGE IN CONTROL" of the Company shall be deemed to have
          occurred if any of the following shall have taken place: (A) any
          "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
          Securities Exchange Act of 1934 (the "Exchange Act")) other than
          Gordon Cain and his Affiliates (defined below), taken together, is or
          becomes the "beneficial owner" (as defined in Rule 13d-3 under the
          Exchange Act, or any successor provisions thereto), directly or
          indirectly, of securities of the Company representing thirty-five
          percent (35%) or more of the combined voting power of the Company's
          then-outstanding voting securities; (B) the approval by the
          stockholders of the Company of a reorganization, merger, or
          consolidation, in each case with respect to which persons who were
          stockholders of the Company immediately prior to such reorganization,
          merger, or consolidation do not, immediately thereafter, own or
          control more than fifty percent (50%) of the combined voting power
          entitled to vote generally in the election of directors of the
          reorganized, merged or consolidated Company's then outstanding
          securities in substantially the same proportion as their ownership of
          the Company's outstanding voting securities prior to such
          reorganization, merger or consolidation; (C) a liquidation or
          dissolution of the Company or the sale of all or substantially all of
          the Company's assets; (D) in the event any person is elected by the
          stockholders

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          of the Company to the Board who has not been nominated for election by
          a majority of the Board or any duly appointed committee thereof; or
          (E) following the election or removal of directors, a majority of the
          Board consists of individuals who were not members of the Board two
          (2) years before such election or removal, unless the election of each
          director who is not a director at the beginning of such two-year
          period has been approved in advance by directors representing at least
          a majority of the directors then in office who were directors at the
          beginning of the two-year period. The Board, in its discretion, may
          deem any other corporate event affecting the Company to be a "Change
          in Control" hereunder.

               An "AFFILIATE" of Gordon Cain shall include (1) any person or
          entity directly or indirectly controlling or controlled by or under
          direct or indirect common control with Gordon Cain, (2) any spouse,
          immediate family member or relative of Gordon Cain, (3) any trust in
          which Gordon Cain or any person described in clause (2) above has a
          beneficial interest, and (4) any trust established by Gordon Cain or
          any person described in clause (2) above, whether or not such person
          has a beneficial interest in such trust. For purposes of this
          definition of "Affiliate," the term "control" means the power to
          direct the management and policies of a person, directly or through
          one or more intermediaries, whether through the ownership of voting
          securities by contract, or otherwise.

               (5) "DISABILITY" means a permanent and total disability which
          entitles Executive to disability income payments under the Company's
          long-term disability plan or policy as then in effect which covers
          Executive pursuant to Section 5(b). If Executive is not covered under
          the Company's long-term disability plan or policy at such time for
          whatever reason or under a supplemental LTD policy provided by the
          Company, then the term "Disability" hereunder shall mean a "permanent
          and total disability" as defined in Section 22(e)(3) of the Code and,
          in this case, the existence of any such Disability shall be certified
          by a physician acceptable to both the Company and Executive. In the
          event that the parties are not able to agree on the choice of a
          physician, each shall select a physician who, in turn, shall select a
          third physician to render such certification. All costs relating to
          the determination of whether Executive has incurred a Disability shall
          be paid by the Company.

               (6) "CODE" means the Internal Revenue Code of 1986, as amended.
          References in this Agreement to any Section of the Code shall include
          any successor provisions of the Code or its successor.

               (7) "CAUSE" means a termination of employment directly resulting
          from (1) the Executive having engaged in intentional misconduct
          causing a material violation by the Company of any state or federal
          laws, (2) the Executive having engaged in a theft of corporate funds
          or corporate assets or in a material act of fraud upon the Company,
          (3) an act of personal dishonesty taken by the Executive that was
          intended to result in personal enrichment of the Executive at the
          expense of the Company, (4) Executive's final conviction (or the entry
          of a plea of nolo contendere

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          or equivalent plea) in a court of competent jurisdiction of a felony,
          or (5) a breach by the Executive during the Employment Period of the
          provisions of Sections 9, 10, and 11 hereof, if such breach results in
          a material injury to the Company. For purposes of this definition of
          "Cause", the term "Company" shall mean the Company or any of its
          Affiliates (as defined in Section 2).

               (8) "GOOD REASON" means the occurrence of any of the following
          events without Executive's express written consent:

                    (A) Any reduction in Executive's base salary unless such
               reduction is specifically agreed to in writing by Executive,
               provided that, in either event, Executive specifically terminates
               her employment for Good Reason hereunder within 120 days from the
               date that she has actual notice of such reduction; or

                    (B) Before or after a Change in Control, any breach by the
               Company of any material provision of this Agreement, provided
               that Executive specifically terminates her employment for Good
               Reason hereunder within 120 days from the date that she has
               actual notice of such material breach; or

                    (C) Only following a Change in Control, any of the following
               events will constitute Good Reason, provided that Executive
               specifically terminates her employment for Good Reason hereunder
               within 12 months following her receipt of actual notice of an
               event listed below:

                         (i) the failure by the Company or its successor to
                    expressly assume and agree to continue and perform this
                    Agreement in the same manner and to the same extent that the
                    Company would be required to perform if such Change in
                    Control had not occurred;

                         (ii) Executive's duties or responsibilities for the
                    Company or its successor are materially reduced; or

                         (iii) the Company or its successor fails to continue in
                    effect any pension, medical, health-and-accident, life
                    insurance, or disability income plan or program in which
                    Executive was participating at the time of the Change in
                    Control (or plans providing Executive with substantially
                    similar benefits), or the taking of any action by the
                    Company or its successor that would adversely affect
                    Executive's participation in or materially reduce her
                    benefits under any such plan that was enjoyed by her
                    immediately prior to the Change in Control, unless the
                    Company or its successor provides a replacement plan with
                    substantially similar benefits.

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               Notwithstanding the preceding provisions of this Section 6(b)(8),
          if Executive desires to terminate her employment for Good Reason, he
          shall first give written notice of the facts and circumstances
          providing the basis for Good Reason to the Board or the Compensation
          Committee, and allow the Company thirty (30) days from the date of
          such notice to remedy, cure or rectify the situation giving rise to
          Good Reason to the reasonable satisfaction of Executive.

     7. NOTICE OF TERMINATION. Any termination by the Company or the Executive
shall be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, the term "NOTICE OF TERMINATION" means a written
notice that indicates the specific termination provision of this Agreement
relied upon and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.

     8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate the
amount of any payment provided for under this Agreement by seeking other
employment or in any other manner.

     9. CONFLICTS OF INTEREST.

          (a) In keeping with her fiduciary duties to Company, Executive hereby
     agrees that she shall not become involved in a conflict of interest, or
     upon discovery thereof, allow such a conflict to continue at any time
     during the Employment Period. Moreover, Executive agrees that she shall
     immediately disclose to the Board any facts which might involve a conflict
     of interest that has not been approved by the Board.

          (b) Executive and Company recognize and acknowledge that it is not
     possible to provide an exhaustive list of actions or interests which may
     constitute a "conflict of interest." Moreover, Company and Executive
     recognize there are many borderline situations. In some instances, full
     disclosure of facts by the Executive to the Board may be all that is
     necessary to enable Company to protect its interests. In others, if no
     improper motivation appears to exist and Company's interests have not
     demonstrably suffered, prompt elimination of the outside interest may
     suffice. In other serious instances, it may be necessary for the Company to
     terminate Executive's employment for Cause (as defined in Section 6(b)).
     The Board reserves the right to take such action as, in its good faith
     judgment, will resolve the conflict of interest.

          (c) Executive hereby agrees that any direct or indirect interest in,
     connection with, or benefit from any outside activities, particularly
     commercial activities, which interest might adversely affect the Company or
     any of its Affiliates (as defined in Section 2), involves a possible
     conflict of interest. Circumstances in which a conflict of interest on the
     part of Executive would or might arise, and which must be reported
     immediately to the Board, include, but are not limited to, any of the
     following:

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               (1) Ownership by the Executive and her immediate family members
          of more than a two percent (2%) interest, on an aggregated basis, in
          any lender, supplier, contractor, customer or other entity with which
          Company or any of its Affiliates does business;

               (2) Misuse of information, property or facilities to which
          Executive has access in a manner which is demonstrably and materially
          injurious to the interests of Company or any of its Affiliates,
          including its business, reputation or goodwill; or

               (3) Materially trading in products or services connected with
          products or services designed or marketed by or for the Company or any
          of its Affiliates.

     10. CONFIDENTIAL INFORMATION.

          (a) NON-DISCLOSURE OBLIGATION OF EXECUTIVE. For purposes of this
     Section 10, all references to Company shall mean and include its Affiliates
     (as defined in Section 2). Executive hereby acknowledges, understands and
     agrees that all Confidential Information, as defined in Section 10(b),
     whether developed by Executive or others employed by or in any way
     associated with Executive or Company, is the exclusive and confidential
     property of Company and shall be regarded, treated and protected as such in
     accordance with this Agreement. Executive acknowledges that all such
     Confidential Information is in the nature of a trade secret. Failure to
     mark any writing confidential shall not affect the confidential nature of
     such writing or the information contained therein.

          (b) DEFINITION OF CONFIDENTIAL INFORMATION. The term "CONFIDENTIAL
     INFORMATION" shall mean information, whether or not originated by
     Executive, which is used in Company's business and (1) is proprietary to,
     about or created by Company; (2) gives Company some competitive business
     advantage or the opportunity of obtaining such advantage, or the disclosure
     of which could be detrimental to the interests of Company; (3) is
     designated as Confidential Information by Company, known by the Executive
     to be considered confidential by Company, or from all the relevant
     circumstances considered confidential by Company, or from all the relevant
     circumstances should reasonably be assumed by Executive to be confidential
     and proprietary to Company; or (4) is not generally known by non-Company
     personnel. Such Confidential Information includes, but is not limited to,
     the following types of information and other information of a similar
     nature (whether or not reduced to writing or designated as confidential):

               (1) Work product resulting from or related to the research,
          development or production of the programs of the Company including,
          without limitation, the Human Gene Trap(TM) database, OmniBank(R),
          homologous recombination, DNA sequencing, phenotypic analysis, drug
          target validation and drug discovery;

               (2) Internal Company personnel and financial information, vendor
          names and other vendor information (including vendor characteristics,
          services and agreements), purchasing and internal cost information,
          internal service and

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          operational manuals, and the manner and methods of conducting
          Company's business;

               (3) Marketing, partnering and business and development plans,
          price and cost data, price and fee amounts, pricing and billing
          policies, quoting procedures, marketing techniques and methods of
          obtaining business, forecasts and forecast assumptions and volumes,
          and future plans and potential strategies of the Company which have
          been or are being discussed; and

               (4) Business acquisition and other business opportunities.

          (c) EXCLUSIONS FROM CONFIDENTIAL INFORMATION. The term "CONFIDENTIAL
     INFORMATION" shall not include information publicly known other than as a
     result of a disclosure by Executive in breach of Section 10(a), and the
     general skills and experience gained during Executive's work with the
     Company which Executive could reasonably have been expected to acquire in
     similar work with another company.

          (d) COVENANTS OF EXECUTIVE. As a consequence of Executive's
     acquisition or anticipated acquisition of Confidential Information,
     Executive shall occupy a position of trust and confidence with respect to
     Company's affairs and business. In view of the foregoing and of the
     consideration to be provided to Executive, Executive agrees that it is
     reasonable and necessary that Executive make the following covenants:

               (1) At any time during the Employment Period and within ten (10)
          years after the Employment Period, Executive shall not disclose
          Confidential Information to any person or entity, either inside or
          outside of Company, other than as necessary in carrying out duties on
          behalf of Company, without obtaining Company's prior written consent
          (unless such disclosure is compelled pursuant to court order, subpoena
          or deposition notice, and at which time Executive gives notice of such
          proceedings to Company), and Executive will take all reasonable
          precautions to prevent inadvertent disclosure of such Confidential
          Information. This prohibition against Executive's disclosure of
          Confidential Information includes, but is not limited to, disclosing
          the fact that any similarity exists between the Confidential
          Information and information independently developed by another person
          or entity, and Executive understands that such similarity does not
          excuse Executive from abiding by her covenants or other obligations
          under this Agreement.

               (2) At any time during or after the Employment Period, Executive
          shall not use, copy or transfer Confidential Information other than as
          necessary in carrying out her duties on behalf of Company, without
          first obtaining Company's prior written consent, and will take all
          reasonable precautions to prevent inadvertent use, copying or transfer
          of such Confidential Information. This prohibition against Executive's
          use, copying, or transfer of Confidential Information includes, but is
          not limited to, selling, licensing or otherwise exploiting, directly
          or indirectly, any products or services (including databases, written
          documents and software in any form) which

<PAGE>   12

          embody or are derived from Confidential Information, or exercising
          judgment in performing analyses based upon knowledge of Confidential
          Information.

          (e) RETURN OF CONFIDENTIAL MATERIAL. Executive shall promptly turn
     over to the person designated by the Board or CEO all originals and copies
     of materials containing Confidential Information in the Executive's
     possession, custody, or control upon request or upon termination of
     Executive's employment with Company. Executive agrees to attend a
     termination interview with the person or persons designated by the Board or
     CEO in the Company's offices for a reasonable time period. The purposes of
     the termination interview shall be (1) to confirm turnover of all
     Confidential Information, (2) discuss any questions Executive may have
     about her continuing obligations under this Agreement, (3) answer questions
     related to her duties and on-going projects to allow a temporary or
     permanent successor to obtain a better understanding of the employment
     position, (4) confirm the number of any outstanding stock options, or other
     long-term incentive awards, and their vested percentages and other terms
     and conditions, and (5) any other topics relating to the business affairs
     of Company or its Affiliates as determined by the Company.

          (f) INVENTIONS. Any and all inventions, products, discoveries,
     improvements, copyrightable or patentable works or products, trademarks,
     service marks, ideas, processes, formulae, methods, designs, techniques and
     trade secrets (collectively hereinafter referred to as "INVENTIONS") made,
     developed, conceived or resulting from work performed by Executive (alone
     or in conjunction with others, during regular hours of work or otherwise)
     while he is employed by Company and which may be directly or indirectly
     useful in, or related to, the business of Company (including, without
     limitation, research and development activities of Company), or which are
     made using any equipment, facilities, Confidential Information, materials,
     labor, money, time or other resources of Company, shall be promptly
     disclosed by Executive to the person or persons designated by the Board or
     CEO, shall be deemed Confidential Information for purposes of this
     Agreement, and shall be Company's exclusive property. Executive shall, upon
     Company's reasonable request during or after the Employment Period, execute
     any documents and perform all such acts and things which are necessary or
     advisable in the opinion of Company to cause issuance of patents to, or
     otherwise obtain recorded protection of right to intellectual property for,
     Company with respect to Inventions that are to be Company's exclusive
     property under this Section 10, or to transfer to and vest in Company full
     and exclusive right, title and interest in and to such Inventions;
     provided, however, that the expense of securing any such protection of
     right to Inventions shall be borne by Company. In addition, during or after
     the Employment Period, Executive shall, at Company's expense, reasonably
     assist the Company in any reasonable and proper manner in enforcing any
     Inventions which are to be or become Company's exclusive property hereunder
     against infringement by others. Executive shall keep confidential and will
     hold for Company's sole use and benefit any Invention that is to be
     Company's exclusive property under this Section 10 for which full recorded
     protection of right has not been or cannot be obtained.

          (g) PROPERTY RIGHTS. In keeping with her fiduciary duties to Company,
     Executive hereby covenants and agrees that during her Employment Period,
     and for a period of three

<PAGE>   13

     (3) months following her Termination Date, Executive shall promptly
     disclose in writing to Company any and all Inventions, which are conceived,
     developed, made or acquired by Executive, either individually or jointly
     with others, and which relate to, or are useful in, the business, products
     or services of Company including, without limitation, research and
     development activities of the Company, or which are made using any
     equipment, facilities, Confidential Information, material, labor, money,
     time or other resources of the Company. In consideration for her employment
     hereunder, Executive hereby specifically sells, assigns and transfers to
     Company all of her worldwide right, title and interest in and to all such
     Inventions.

          If during the Employment Period, Executive creates any original work
     of authorship or other property fixed in any tangible medium of expression
     which (1) is the subject matter of copyright (including computer programs)
     and (2) directly relates to Company's present or planned business,
     products, or services, whether such property is created solely by Executive
     or jointly with others, such property shall be deemed a work for hire, with
     the copyright automatically vesting in Company. To the extent that any such
     writing or other property is determined not to be a work for hire for
     whatever reason, Executive hereby consents and agrees to the unconditional
     waiver of "moral rights" in such writing or other property, and to assign
     to Company all of her right, title and interest, including copyright, in
     such writing or other property.

          Executive hereby agrees to (1) assist Company or its nominee at all
     times in the protection of any property that is subject to this Section 10,
     (2) not to disclose any such property to others without the written consent
     of Company or its nominee, except as required by her employment hereunder,
     and (3) at the request of Company, to execute such assignments,
     certificates or other interests as Company or its nominee may from time to
     time deem desirable to evidence, establish, maintain, perfect, protect or
     enforce its rights, title or interests in or to any such property.

          (h) EMPLOYEE PROPRIETARY INFORMATION AGREEMENT. The provisions of this
     Section 10 shall not supersede the Employee Proprietary Information
     Agreement (the "Proprietary Agreement") between Employee and the Company
     (or any other agreement of similar intent) which shall remain in full force
     and effect and, moreover, this Agreement, the Proprietary Agreement and any
     such other similar agreement between the parties shall be construed and
     applied as being mutually consistent to the full extent possible.

          (i) REMEDIES. In the event of a breach or threatened breach of any of
     the provisions of this Section 10, Company shall be entitled to an
     injunction ordering the return of all such Confidential Information and
     Inventions, and restraining Executive from using or disclosing, for her
     benefit or the benefit of others, in whole or in part, any Confidential
     Information or Inventions. Executive further agrees that any breach or
     threatened breach of any of the provisions of this Section 10 would cause
     irreparable injury to Company, for which it would have no adequate remedy
     at law. Nothing herein shall be construed as prohibiting Company from
     pursuing any other remedies available to it for any such breach or
     threatened breach, including the recovery of damages.

<PAGE>   14

     11. AGREEMENT NOT TO COMPETE. All references in this Section 11 to
"COMPANY" shall mean and include its Affiliates (as defined in Section 2).

          (a) PROHIBITED EXECUTIVE ACTIVITIES. Executive agrees that except in
     the ordinary course and scope of her employment hereunder during the
     Employment Period, Executive shall not while employed by Company and for a
     period of six (6) months following her Termination Date, within the
     continental United States:

               (1) Directly or indirectly engage or invest in, own, manage,
          operate, control or participate in the ownership, management,
          operation or control of, be employed by, associated or in any manner
          connected with, or render services or advice to, any Competing
          Business (as defined below); provided, however, Executive may invest
          in the securities of any enterprise with the power to vote up to two
          percent (2%) of the capital stock of such enterprise (but without
          otherwise participating in the activities of such enterprise) if such
          securities are listed on any national or regional securities exchange
          or have been registered under Section 12(g) of the Securities Exchange
          Act of 1934;

               (2) Directly or indirectly, either as principal, agent,
          independent contractor, consultant, director, officer, employee,
          employer, advisor (whether paid or unpaid), stockholder, partner or in
          any other individual or representative capacity whatsoever, either for
          her own benefit or for the benefit of any other person or entity,
          solicit, divert or take away, any customers, clients, or business
          acquisition or other business opportunities of Company; or

               (3) Directly or indirectly, either as principal, agent,
          independent contractor, consultant, director, officer, employee,
          advisor (whether paid or unpaid), stockholder, partner or in any other
          individual or representative capacity whatsoever, either for her own
          benefit or for the benefit of any other person or entity, either (A)
          hire, attempt to hire, contact or solicit with respect to hiring any
          employee of Company, (B) induce or otherwise counsel, advise or
          encourage any employee of Company to leave the employment of Company,
          or (C) induce any distributor, representative or agent of Company to
          terminate or modify its relationship with Company.

               "COMPETING BUSINESS" means any individual, business, firm,
          company, partnership, joint venture, organization, or other entity
          whose products or services compete in whole or in part, at any time
          during the Employment Period with the products or services (or planned
          products and services) of Company including, without limitation,
          genomics research, development and products including, without
          limitation, the Human Gene Trap(TM) database, OmniBank(R), homologous
          recombination, DNA sequencing, phenotypic analysis, drug target
          validation and drug discovery.

<PAGE>   15

         Notwithstanding anything to the contrary in this Section 11(a),
         subsequent to the Termination Date, nothing herein shall prohibit or
         limit Executive's ability to directly or indirectly engage or invest
         in, own, manage, operate, control or participate in the ownership,
         management, operation or control of, be employed by, associated or in
         any manner connected with or render services or advice to an investment
         bank, financial advisory firm, or other firm primarily engaged in the
         financial services industry.

          (b) ESSENTIAL NATURE OF NON-COMPETE OBLIGATION. It is acknowledged,
     understood and agreed by and between the parties hereto that the covenants
     made by Executive in this Section 11 are essential elements of this
     Agreement and that, but for the agreement of the Executive to comply with
     such covenants, Company would not have entered into this Agreement.

          (c) NECESSITY AND REASONABLENESS OF NON-COMPETE OBLIGATION. Executive
     hereby specifically acknowledges and agrees that:

               (1) Company has expended and will continue to expend substantial
          time, money and effort in developing its business;

               (2) Executive will, in the course of her employment, be
          personally entrusted with and exposed to Confidential Information (as
          defined in Section 10);

               (3) Company, during the Employment Period and thereafter, will be
          engaged in its highly competitive business in which many firms,
          including Company, compete;

               (4) Executive could, after having access to Company's financial
          records, contracts, and other Confidential Information and know-how
          and, after receiving training by and experience with the Company,
          become a competitor;

               (5) Company will suffer great loss and irreparable harm if
          Executive terminates her employment and enters, directly or
          indirectly, into competition with Company;

               (6) The temporal and other restrictions contained in this Section
          11 are in all respects reasonable and necessary to protect the
          business goodwill, trade secrets, prospects and other reasonable
          business interests of Company;

               (7) The enforcement of this Agreement in general, and of this
          Section 11 in particular, will not work an undue or unfair hardship on
          Executive or otherwise be oppressive to her; it being specifically
          acknowledged and agreed by Executive that she has activities and other
          business interests and opportunities which will provide her adequate
          means of support if the provisions of this Section 11 are enforced
          after the Termination Date; and

<PAGE>   16

               (8) the enforcement of this Agreement in general, and of this
          Section 11 in particular, will neither deprive the public of needed
          goods or services nor otherwise be injurious to the public.

          (d) JUDICIAL MODIFICATION. Executive agrees that if an arbitrator
     (pursuant to Section 21) or a court of competent jurisdiction determines
     that the length of time or any other restriction, or portion thereof, set
     forth in this Section 11 is overly restrictive and unenforceable, the
     arbitrator or court shall reduce or modify such restrictions to those which
     it deems reasonable and enforceable under the circumstances, and as so
     reduced or modified, the parties hereto agree that the restrictions of this
     Section 11 shall remain in full force and effect. Executive further agrees
     that if an arbitrator or court of competent jurisdiction determines that
     any provision of this Section 11 is invalid or against public policy, the
     remaining provisions of this Section 11 and the remainder of this Agreement
     shall not be affected thereby, and shall remain in full force and effect.

     12. REMEDIES. In the event of any pending, threatened or actual breach of
any of the covenants or provisions of Section 9, 10, or 11, it is understood and
agreed by Executive that the remedy at law for a breach of any of the covenants
or provisions of these Sections may be inadequate and, therefore, Company shall
be entitled to a restraining order or injunctive relief from any court of
competent jurisdiction, in addition to any other remedies at law and in equity.
In the event that Company seeks to obtain a restraining order or injunctive
relief, Executive hereby agrees that Company shall not be required to post any
bond in connection therewith. Should a court of competent jurisdiction or an
arbitrator (pursuant to Section 21) declare any provision of Section 9, 10, or
11 to be unenforceable due to an unreasonable restriction of duration or
geographical area, or for any other reason, such court or arbitrator is hereby
granted the consent of each of the Executive and Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of Sections 9, 10, and 11 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with Section 9, 10, or 11, Company shall be entitled to all equitable and legal
remedies, including, but not limited to, injunctive relief and compensatory
damages.

     13. DEFENSE OF CLAIMS. Executive agrees that, during the Employment Period
and for a period of two (2) years after her Termination Date, upon request from
the Company, he will cooperate with the Company and its Affiliates in the
defense of any claims or actions that may be made by or against the Company or
any of its Affiliates that affect her prior areas of responsibility, except if
Executive's reasonable interests are adverse to the Company or Affiliates in
such claim or action. To the extent travel is required to comply with the
requirements of this Section 13, the Company shall, to the extent possible,
provide Executive with notice at least 10 days prior to the date on which such
travel would be required. The Company agrees to promptly pay or reimburse
Executive upon demand for all of her reasonable travel and other direct expenses
incurred, or to be reasonably incurred, to comply with her obligations under
this Section 13.

<PAGE>   17

     14. DETERMINATIONS BY THE COMPENSATION COMMITTEE.

          (a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control (as
     defined in Section 6(b)), any question as to whether and when there has
     been a termination of Executive's employment, the cause of such
     termination, and the Termination Date, shall be in the first instance
     determined by the Compensation Committee in its discretion exercised in
     good faith and, in the event Executive disagrees with such determination,
     such dispute shall be resolved pursuant to Section 21.

          (b) COMPENSATION. Prior to a Change in Control (as defined in Section
     6(b)), any question regarding salary, bonus and other compensation payable
     to Executive pursuant to this Agreement shall be determined by the
     Compensation Committee in its discretion exercised in good faith.

     15. WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and deduct from
any benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other employee deductions made with
respect to Company's employees generally, and (c) any advances made to Executive
and owed to Company.

     16. NONALIENATION. The right to receive payments under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, her dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.

     17. INCOMPETENT OR MINOR PAYEES. Should the Board determine that any
person to whom any payment is payable under this Agreement has been determined
to be legally incompetent or is a minor, any payment due hereunder may,
notwithstanding any other provision of this Agreement to the contrary, be made
in any one or more of the following ways: (a) directly to such minor or person;
(b) to the legal guardian or other duly appointed personal representative of the
person or estate of such minor or person; or (c) to such adult or adults as
have, in the good faith knowledge of the Board, assumed custody and support of
such minor or person; and any payment so made shall constitute full and complete
discharge of any liability under this Agreement in respect to the amount paid.

     18. SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to Section 21), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be

<PAGE>   18

reformed, it shall be deemed ineffective and deleted herefrom without affecting
any other provision of this Agreement.

     19. TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.

     20. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.

     21. ARBITRATION.

          (a) ARBITRABLE MATTERS. If any dispute or controversy arises between
     Executive and the Company relating to (1) this Agreement in any way or
     arising out of the parties' respective rights or obligations under this
     Agreement or (2) the employment of Executive or the termination of such
     employment, then either party may submit the dispute or controversy to
     arbitration under the then-current Commercial Arbitration Rules of the
     American Arbitration Association (AAA) (the "RULES"); provided, however,
     the Company shall retain its rights to seek a restraining order or
     injunctive relief pursuant to Section 12. Any arbitration hereunder shall
     be conducted before a single arbitrator unless the parties mutually agree
     that the arbitration shall be conducted before a panel of three
     arbitrators. The arbitrator shall be selected (from lists provided by the
     AAA) through mutual agreement of the parties, if possible. If the parties
     fail to reach agreement upon appointment of the arbitrator within twenty
     (20) days following receipt by one party of the other party's notice of
     desire to arbitrate, then within five (5) days following the end of such
     20-day period, each party shall select one arbitrator who, in turn, shall
     within five (5) days select a third arbitrator who shall be the single
     arbitrator hereunder. The site for any arbitration hereunder shall be in
     Harris County or Montgomery County, Texas, unless otherwise mutually agreed
     by the parties, and the parties hereby waive any objection that the forum
     is inconvenient.

          (b) SUBMISSION TO ARBITRATION. The party submitting any matter to
     arbitration shall do so in accordance with the Rules. Notice to the other
     party shall state the question or questions to be submitted for decision or
     award by arbitration. Notwithstanding any provision of this Section 21,
     Executive shall be entitled to seek specific performance of the Executive's
     right to be paid during the pendency of any dispute or controversy arising
     under this Agreement. In order to prevent irreparable harm, the arbitrator
     may grant temporary or permanent injunctive or other equitable relief for
     the protection of property rights.

          (c) ARBITRATION PROCEDURES. The arbitrator shall set the date, time
     and place for each hearing, and shall give the parties advance written
     notice in accordance with the Rules. Any party may be represented by
     counsel or other authorized representative at any hearing.

<PAGE>   19
     The arbitration shall be governed by the Federal Arbitration Act, 9
     U.S.C.Sections 1 et. seq. (or its successor). The arbitrator shall apply
     the substantive law (and the law of remedies, if applicable) of the State
     of Texas to the claims asserted to the extent that the arbitrator
     determines that federal law is not controlling.

          (d) COMPLIANCE WITH AWARD.

               (1) Any award of an arbitrator shall be final and binding upon
          the parties to such arbitration, and each party shall immediately make
          such changes in its conduct or provide such monetary payment or other
          relief as such award requires. The parties agree that the award of the
          arbitrator shall be final and binding and shall be subject only to the
          judicial review permitted by the Federal Arbitration Act.

               (2) The parties hereto agree that the arbitration award may be
          entered with any court having jurisdiction and the award may then be
          enforced as between the parties, without further evidentiary
          proceedings, the same as if entered by the court at the conclusion of
          a judicial proceeding in which no appeal was taken. The Company and
          the Executive hereby agree that a judgment upon any award rendered by
          an arbitrator may be enforced in other jurisdictions by suit on the
          judgment or in any other manner provided by law.

          (e) COSTS AND EXPENSES. Each party shall pay any monetary amount
     required by the arbitrator's award, and the fees, costs and expenses for
     its own counsel, witnesses and exhibits, unless otherwise determined by the
     arbitrator in the award. The compensation and costs and expenses assessed
     by the arbitrator and the AAA shall be split evenly between the parties
     unless otherwise determined by the arbitrator in the award. If court
     proceedings to stay litigation or compel arbitration are necessary, the
     party who opposes such proceedings to stay litigation or compel
     arbitration, if such party is unsuccessful, shall pay all associated costs,
     expenses, and attorney's fees which are reasonably incurred by the other
     party as determined by the arbitrator.

     22. BINDING EFFECT; THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors, personal representatives, successors and permitted
assigns hereunder, but otherwise this Agreement shall not be for the benefit of
any third parties.

     23. ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.

     24. SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the intention
of the parties hereto, the respective rights and obligations of said parties,
including, but not limited to, the rights

<PAGE>   20

and obligations set forth in Sections 6 through 14 and 21 hereof, shall survive
any termination or expiration of this Agreement.

     25. WAIVER OF BREACH. No waiver by either party hereto of a breach of any
provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.

     26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Company and its Affiliates (as defined in Section 2), and
upon any successor to the Company following a Change in Control (as defined in
Section 6(b)); provided, however, any such assignment by the Company shall not
relieve Company of its obligations hereunder unless such successor to the
Company has fully and expressly assumed the obligations of the Company to the
Executive under this Agreement. Any reference herein to "Company" shall mean the
Company as first written above, as well as any successor or successors thereto.

     This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of her rights, duties or obligations
hereunder without the consent of the Board. Any attempt by the Executive to
assign, delegate or otherwise transfer this Agreement, any portion hereof, or
her rights, duties or obligations hereunder without the prior approval of the
Board shall be deemed void and of no force and effect.

     27. NOTICES. Notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly received (a) when delivered in person or
sent by facsimile transmission, (b) on the first business day after it is sent
by air express overnight courier service, or (c) on the third business day
following deposit in the United States mail, registered or certified mail,
return receipt requested, postage prepaid and addressed, to the following
address, as applicable:

          (1)  If to Company, addressed to:

               Lexicon Genetics Incorporated
               4000 Research Forest Drive
               The Woodlands, Texas 77381
               Attention:  Corporate Secretary

          (2)  If to Executive, addressed to the address set forth below her
               name on the execution page hereof;

or to such other address as either party may have furnished to the other party
in writing in accordance with this Section 27.

     28. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall

<PAGE>   21

together constitute one and the same instrument. Each counterpart may consist of
a copy hereof containing multiple signature pages, each signed by one party, but
together signed by both parties hereto.

     29. EXECUTIVE ACKNOWLEDGMENT; NO STRICT CONSTRUCTION. The Executive
represents to Company that she is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that she has read the
Agreement and that she understands its terms and conditions. The parties hereto
agree that the language used in this Agreement shall be deemed to be the
language chosen by them to express their mutual intent, and no rule of strict
construction shall be applied against either party hereto. Executive also
represents that she is free to enter into this Agreement including, without
limitation, that she is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with her duties under
this Agreement. Executive acknowledges that she has had the opportunity to
consult with counsel of her choice, independent of Employer's counsel, regarding
the terms and conditions of this Agreement and has done so to the extent that
she, in her unfettered discretion, deemed to be appropriate.

     30. SUPERSEDING AGREEMENT. This Employment Agreement shall supersede any
prior employment agreement entered into between the Company and Executive.

<PAGE>   22


     IN WITNESS WHEREOF, the Executive has hereunto set her hand, and Company
has caused this Agreement to be executed in its name and on its behalf, to be
effective as of the Effective Date first above written.


                                       EXECUTIVE:



                                       Signature: /s/ Julia Gregory
                                                  -----------------------------
                                                      Julia Gregory

                                       Date:          February 8, 2000
                                            -----------------------------------

                                       Address for Notices:

                                       240 East 39th Street, Apt. 37G
                                       New York, New York 10016


                                       LEXICON GENETICS INCORPORATED


                                       By: /s/ Arthur T. Sands, M.D., Ph.D.
                                           ------------------------------------
                                           Arthur T. Sands, M.D., Ph.D.
                                           President and Chief Executive Officer

                                       Date:          February 8, 2000
                                            ------------------------------------