<PAGE>   1



                              EMPLOYMENT AGREEMENT

     EMPLOYEE AGREEMENT, dated as of December 31, 1996, by and between
XENOMETRIX, INC., a Delaware corporation (the "Corporation"), and STEPHEN J.
SULLIVAN (the "Employee").

                                  WITNESSETH:

     WHEREAS, the Corporation desires to employ the Employee and the Employee
desires to be employed by the Corporation as its Chief Executive Officer, all
pursuant to the terms and conditions hereinafter set forth; and

     WHEREAS, the Employee recognizes that the Corporation is at this point in
its development dependent upon his capabilities, that its products during its
first years of operation may be few in number and limited in scope, and that
the imposition of the restrictions set forth below upon the Employee and other
key employees and advisors may be essential to the success of the Corporation
and the livelihood of the Employee's associates in the Corporation;

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, it is agreed as follows:

     1. EMPLOYMENT; DUTIES.

        (a) The Corporation engages and employs the Employee, and the Employee
hereby accepts engagement and employment, as the Chief Executive Officer of the
Corporation.  During the Employment Period (as hereinafter defined), the
Employee shall have responsibility for overall direction of the Corporation and
performing such other services and duties, consistent with the office of Chief
Executive Officer, as he may from time to time be reasonably requested to
perform by the Board of Directors of the Corporation (the "Board").  In
performing his duties hereunder, the Employee shall report directly to the
Board of Directors of the Corporation.  The Employee will also serve as a
director of the Corporation without additional compensation during the
Employment Period (as defined below).

        (b) During the Employment Period, the Employee shall devote his full
time and best efforts to the business and affairs of the Corporation.
Notwithstanding the foregoing, the Employee shall be permitted to serve on the
board of directors of commercial and charitable organizations and to make
investments which are not related to the business and affairs of the
Corporation for which he may receive compensation, so long as such activities
or investments do not interfere with the performance of the 

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Employee's duties and obligations hereunder.  Employee and Board of Directors
will periodically review such outside commitments to insure that such
commitments do not interfere with the Employee's duties with the Corporation.

     2. TERM.

     The term of employment under this Agreement shall be for a period
commencing not later than February 10, 1997 and continuing through the third
anniversary of such date.  The term of employment referred to in this Section
2, together with any extensions thereof shall be referred to herein
collectively as the "Employment Period."

     3. COMPENSATION AND BENEFITS.

     As compensation for the performance of his duties on behalf of the
Corporation, the Employee shall be compensated as follows:

        (a) During the period commencing not later than February 10, 1997 and
ending one year from such date (the "Initial Period"), the Corporation shall
pay or cause to be paid to the Employee a base salary at an annual rate of
$225,000, payable in substantially equal installments in accordance with the
Corporation's usual practice.  The Employee's annual salary for any subsequent
periods contemplated hereunder, shall be reviewed by the Board of Directors not
less often than annually and the Board of Directors shall grant increases
thereof based on the performance of the Corporation and the Employee's relative
contribution to that performance.  The annual base salary payable in any year
pursuant to this Agreement is hereinafter known as the "Annual Salary."  Any
increase in Annual Salary or other compensation shall in no way limit or reduce
any other obligation of the Corporation hereunder.  The Corporation shall
withhold all applicable federal, state and local taxes, social security and
workers'' compensation contributions and such other amounts as may be required
by law or agreed upon by the parties with respect to the compensation payable
to the Employee pursuant to this Section 3(a).

        (b) In addition to the Annual Salary, Employee shall be entitled to
receive as annual incentive compensation a cash bonus pursuant to a bonus plan,
the terms and payment of which shall be mutually agreed upon by the Board of
Directors and the Employee; provided that, such bonus shall be (i) not less
than $33,750 for the Initial Period and (ii) up to thirty percent (30%) of the
Annual Salary, based on the achievement of performance goals established by the
Board of Directors, for the duration of the Employment Period.

        (c) The Corporation shall reimburse the Employee for all reasonable
expenses incurred by the Employee in furtherance of the business and affairs of
the Corporation, including reasonable travel and entertainment, against receipt
by the Corporation of appropriate vouchers or other proof of the Employee's
expenditures and 


                                     2.
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otherwise in accordance with such policies and procedures as may from time to
time be adopted by the Board.

        (d) The Employee shall be entitled to the number of paid vacation days
in each calendar year determined by the Corporation from time to time for its
officers, but not less than two weeks in any calendar year.  The Employee shall
also be entitled to all paid holidays given to the Corporation's officers.

        (e) The Corporation shall make available to the Employee and his
dependents such retirement, life insurance, health insurance and disability
benefits as the Corporation makes available to its other officers.

        (f) The Employee shall be entitled to a stock option grant for the
purchase of one hundred thousand (100,000) shares of the Corporation's Common
Stock, with an exercise price equal to the average of the high and low trade
prices of the Company's Common Stock as reported on the NASDAQ Small Cap Market
System on the date of grant.  These options will expire ten (10) years after
the date of grant and become exercisable as follows:  (i) 25,000 shares one
year after the grant date, (ii) 50,000 shares two years after the grant date,
(iii) 75,000 shares three years after the grant date, and (iv) in full four
years after the grant date.  To the extent permitted by applicable governmental
regulation, such options will be Incentive Stock Options, as defined by the
Internal Revenue Code of 1986, as amended.

        (g) Employee will be entitled to be reimbursed for the reasonable
expenses of two (2) round trips per month to Lake Forest, Illinois from
Boulder, Colorado.  The Employee will also be entitled to receive up to $800
per month as reimbursement for living expenses for a residence in Boulder,
Colorado while Employee is living in Lake Forest, Illinois.

        (h) The Employee will be entitled to be reimbursed for reasonable
relocation expenses if Employee elects to relocate to Boulder, Colorado or in
the vicinity thereof.

     4. NON-COMPETITION.

        (a) The Employee understands and recognizes that his services to the
Corporation are special and unique and agree that, during the term of this
Agreement and for a period of two (2) years from the date of termination of his
employment hereunder, he shall not in any manner, directly or indirectly, on
behalf of himself or any person, firm, partnership, joint venture, corporation
or other business entity (a "Person"), enter into or engage in any business
competitive with the Corporation's business, proposed business or research
activities, either as an individual for his own account, or as a partner, joint
venture, executive, agent, consultant, sales or marketing person, officer,
director or 

                                     3.
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shareholder (other than passive investments of not more than five percent (5%)
of the outstanding shares of, or any other equity interest in, any company or
entity listed or traded on a national securities exchange or an interest in a
partnership for which the Employee does not exercise control over investment
decisions of such partnership) of a Person operating or selling or intending to
operate or sell in the areas of business and within the product markets listed
in Schedule I attached hereto, within the geographic area of the Corporation's
business.  Schedule I hereto shall be amended from time to time upon agreement
by the parties hereto to take into account additional areas of business and
product markets in which the Corporation may become engaged.

        (b) During the term of this Agreement and for two (2) years thereafter,
the Employee shall not, directly or indirectly, without the prior written
consent of the Corporation interfere with the business of the Corporation by
soliciting, attempting to solicit, inducing or otherwise causing any employee
of the Corporation to terminate his or her employment in order to become an
employee, consultant or independent contractor to or for any competitor of the
Corporation.

        (c) In the event that the Employee breaches any provisions of this
Section 4 or there is a threatened breach, then, in addition to any other
rights which the Corporation may have, the Corporation shall be entitled,
without the posting of a bond or other security, to injunctive relief to
enforce the restrictions contained herein.  In the event that an actual
proceeding is brought in equity to enforce the provisions of this Section 4,
the Employee shall not urge as a defense that there is an adequate remedy at
law nor shall the Corporation be prevented from seeking any other remedies
which may be available.

     5. TERMINATION.

        (a) DEATH OR RETIREMENT.  The Employee's employment hereunder shall
terminate upon his death or retirement.

        (b) DISABILITY.  If, as a result of the Employee's incapacity due to
physical or mental illness ("Disability"), the Employee shall have been absent
from his duties hereunder for ninety (90) consecutive business days, and within
thirty (30) days after written Notice of Termination (as hereinafter defined)
is given shall not have returned to the performance of his duties hereunder on
a full-time basis, the Corporation may terminate the Employee's employment
hereunder.

        (c) CAUSE.  The Corporation may terminate the Employee's employment
hereunder for "Cause."  For purposes of this Agreement, "Cause" shall mean (i)
the willful engaging by the Employee in gross misconduct materially injurious
to the Corporation, (ii) the will full and material violation by the Employee
of the provisions of 


                                     4.
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Section 4 hereof or of the Proprietary Agreement or (iii) the willful and
material violation by the Employee of any provision of this Agreement, other
than Section 4 hereof or of the Proprietary Agreement, which is not cured by
the Employee within fifteen (15) days after written notice thereof from the
Corporation.  For purposes of this paragraph, no act, or failure to act, on the
Employee's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Corporation. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a copy of a
resolution, duly adopted by the Board of Directors at a meeting of the Board of
Directors called and held (after five (5) days' notice to the Employee of such
meeting and an opportunity for him, together with his counsel, to be heard
before the Board of Directors at such meeting) for the purposes of finding that
in the good faith opinion of the Board of Directors the Employee was guilty of
conduct set forth above in clauses (i), (ii) or (iii) of this Section 5(c).

        (d) CHANGE OF DUTIES.  Any assignment of the Employee of duties which
are inconsistent with the Employee's status as Chief Executive Officer of the
Corporation or are a substantial reduction in the nature or the status of the
Employee's responsibilities may be treated by him as a termination pursuant to
Section 5(f).

        (e) SALE OF ASSETS.  In the event of the sale of all or substantially
all of the Corporation, or a sale of all or substantially all of the assets of
the Corporation, the Employee may treat his employment as having been
terminated pursuant to Section 5(f) herein.

        (f) OTHER TERMINATION BY THE CORPORATION.  Notwithstanding the
foregoing provisions, the Corporation may terminate the Employee's employment
hereunder at any time, subject to the provisions of Section 6(d) hereof.

        (g) Voluntary Termination by the Employee.  Notwithstanding the
foregoing provisions, the Employee may terminate his employment hereunder at
any time upon three months' written notice to the Corporation, subject to the
provisions of Section 6(c) hereof.

        (h) NOTICE OF TERMINATION.  Any termination by the Corporation pursuant
to paragraphs (b), (c) or (d) above or by the Employee pursuant to paragraph
(e) above shall be communicated by a written Notice of Termination.  For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provisions in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment under
the provision so indicated.


                                     5.
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        (i) DATE OF TERMINATION.  "Date of Termination" shall mean (i) if the
Employee's employment is terminated as a result of the Employee's incapacity
due to physical or mental illness, thirty (30) days after Notice of Termination
is duly given (provided that the Employee shall not have returned to the
performance of his duties on a full-time basis during such thirty (30) day
period), (ii) the date of the Employee's death or retirement or, (iii) if the
Employee terminates his employment or his employment is terminated for any
other reason, the date on which a Notice of Termination is duly given.

     6. COMPENSATION UPON TERMINATION OR DURING DISABILITY.

        (a) If the Employee's employment shall be terminated due to death, the
Employee's estate or other legal representative shall be entitled to receive
any accrued but unpaid annual salary installments and any accrued reimbursable
expenses (to the extent provided in Section 3(c) hereof).  In addition, the
Employee's estate shall be entitled to receive a payment for (i) any accrued
but unused vacation days and (ii) a pro rata portion of any cash bonus due
pursuant to Section 3(b) hereof.  In the event of the Employee's death, rights
and benefits of the Employee under employee benefit and fringe benefit plans
and programs of the Corporation will be determined in accordance with the terms
and provisions of such plans and programs.

        (b) During any period that the Employee fails to perform his duties
hereunder due to Disability, the Employee shall continue to receive his full
Annual Salary until the Employee's employment is terminated pursuant to Section
5(b) hereof.  After termination due to Disability, the Employee shall be paid
disability benefits in accordance with any long term disability plan of the
Corporation then in effect.  In the event of the Employee's disability as
determined above, rights and benefits of the Employee under employee benefit
and fringe benefit plans and programs of the Corporation will be determined in
accordance with the terms and provisions of such plans and programs.

        (c) If the Employee's employment shall be terminated for Cause or if
the Employee shall terminate his employment pursuant to Section 5(g) hereof,
the Corporation shall pay the Employee any accrued but unpaid Annual Salary
installments and any accrued reimbursable expenses (to the extent provided in
Section 3(c) hereof) only through the Date of Termination and the Corporation
shall have no further obligations to the Employee under this Agreement.  Any
rights and benefits the Employee may have under employee benefit plans and
programs of the Corporation will be determined in accordance with the terms of
such plans and programs.

        (d) If the Employee's employment shall be terminated by the Corporation
pursuant to Section 5(d), (e) or (f) hereof then the Corporation shall continue
to pay the Employee his regular salary through the earlier of (i) the date
which is one (1) year after the Date of Termination or (ii) one (1) year after
the expiration of the 

                                     6.
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Employment Period; provided, however, that the Corporation's obligation to pay
such salary shall terminate at such time as the Employee commences any
alternative full-time employment.  Notwithstanding the foregoing, the
Corporation will only be obligated to reimburse the Employee for reimbursable
expenses (to the extent provided in Section 3(c) hereof) accrued through the
Date of Termination.  The Employee shall also be entitled to receive a payment
for (i) any accrued but unused vacation days and (ii) a pro rata portion of any
cash bonus due pursuant to Section 3(b) hereof.  If the Employee's employment
shall be terminated by the Corporation pursuant to Section 5(d), (e) or (f)
hereof, and if the Employee shall be ineligible to participate in any of the
Corporation's fringe benefit plans or arrangements as a result of his ceasing
to be an employee of the Corporation, then the Corporation shall arrange to
provide the Employee with substantially equivalent benefits as if he remained
employed by the Corporation until the earlier of (i) one (1) year after the
Date of Termination or (ii) one (1) year after the expiration of the Employment
Period at no additional expense to the Employee.

        (e) If the Employee's employment is terminated due to retirement, the
Employee shall be entitled to receive accrued but unpaid Annual Salary
installments and any accrued reimbursable expenses (to the extent provided in
Section 3(c) hereof).

     7. NOTICES.

     Any notice or other communication under this Agreement shall be in writing
and shall be deemed to have been given:  (i) when delivered personally against
receipt therefor; (ii) one day after being sent by Federal Express or similar
overnight delivery; or (iii) three (3) days after being mailed registered or
certified mail, postage prepaid, return receipt requested, to the Employee at
such address as the Employee shall provide to the Corporation or to the
Corporation at the following address:

        Xenometrix, Inc.
        2425 N. 55th Street
        Boulder, Colorado  80301
        Attn.:  Chief Executive Officer

or to such other address or person as either party may have furnished to the
other in writing in accordance herewith.

     8. RENEWAL OF AGREEMENT.

     Upon expiration of the term of this Agreement, this Agreement may be
renewed for additional one (1) year periods by the mutual written agreement of
the parties hereto.

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     9. SEVERABILITY OF PROVISIONS.

     If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provisions shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law
and the remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provision shall be deemed dependent
upon any other covenant or provision unless so expressed herein.

     10. ENTIRE AGREEMENT; MODIFICATION.

     This Agreement contains the entire agreement of the parties relating to
the subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein.  No modification of this Agreement shall be
valid unless made in writing and signed by the parties hereto.  This Agreement
supersedes any previous terms of employment between the Corporation and
Employee and any previous employment contractual terms are terminated as of the
date hereof.

     11. BINDING EFFECT.

     The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, the Corporation, its successors and assigns, and
upon the employee and his legal representatives.  This Agreement constitutes a
personal service agreement, and the performance of the Employee's obligations
hereunder may not be transferred or assigned by the Employee.

     12. NON-WAIVER.

     The failure of either party to insist upon the strict performance of any
of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and
said terms, conditions and provisions shall remain in full force and effect.
No waiver of any term or condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.

     13. GOVERNING LAW.

     This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Colorado without regard to principles
of conflict of laws.


                                     8.
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     14. HEADINGS.

     The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.

                                     9.
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
                       
                                          XENOMETRIX, INC.



                                          By:    /s/ Edson D. deCastro 
                                                -----------------------
                                          Its:  Chief Executive Officer
                                                -----------------------



                                          STEPHEN J. SULLIVAN    
                                                                 
                                                                 
                                          /s/ Stephen J. Sullivan




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                                   SCHEDULE I

     Development manufacture or sale of in vitro and in vivo toxicity,
mutagenicity or carcinogenicity diagnostic products marketed to the
pharmaceutical, chemical, consumer products and environmental companies that
test new chemical entities or test for environmental contaminants.