<PAGE>
 
                             EMPLOYMENT AGREEMENT

          Agreement dated as of May 1, 1999 effective as of May 1, 1999 (the
"Effective Date"), by and between Interneuron Pharmaceuticals, Inc., a Delaware
corporation having a place of business at One Ledgemont Center, 99 Hayden
Avenue, Suite 200, Lexington, Massachusetts 02421 (the "Corporation"), and Glenn
L. Cooper, M.D.,  an individual residing at 4 Trail Side Circle, Sudbury,
Massachusetts, ("CEO").

                                  WITNESSETH:

          WHEREAS, the Corporation desires to continue to employ the CEO as
President , Chief Executive Officer and Director, and the CEO desires to be
employed by the Corporation as President, Chief Executive Officer and Director,
all pursuant to the terms and conditions hereinafter set forth:

          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 CEO, and the CEO hereby
accepts engagement and employment, as Chief Executive Officer and President, to
direct, supervise and have responsibility for the daily operations of the
Corporation, including, but not limited to: (i) directing and supervising the
business and research and development efforts of the Corporation; (ii) managing
the other executives and personnel of the Corporation; (iii) evaluating,
negotiating, structuring and implementing business transactions with the
Corporation's licensees,, customers and suppliers; (iv) attending meetings of
the Board of Directors of the Corporation; and performing such other services
and duties as the Board of Directors of the Corporation shall determine.

          (b)  The CEO shall perform his duties hereunder from the Corporation's
executive offices in Massachusetts or such other locations as the CEO and
Corporation may agree, provided, however, that the CEO acknowledges and agrees
that the performance by the CEO of his duties hereunder may require significant
domestic and international travel by the CEO.

          (c)  The CEO shall devote his best efforts and entire working time and
 attention to the proper discharge of his duties and responsibilities under this
Agreement.

     2.   TERM
          ----

          The CEO's employment hereunder shall be for a term of three (3) years
commencing on May 1, 1999 and continuing through the third anniversary of such
date.
<PAGE>
 
     3.   COMPENSATION
          ------------

          (a)  As compensation for the performance of his duties under this
               Agreement, the CEO shall be compensated as follows:

               (i)   The Corporation shall pay the CEO an annual base salary
                     ("Base Salary") of Three Hundred FiftyThousand Dollars
                     ($350,000), payable in accordance with the usual payroll
                     period of the Corporation, subject to an annual review;

               (ii)  The Corporation shall pay the CEO bonuses pursuant to the
                     Corporation's annual Senior Executive Bonus Plan as
                     approved by the Board of Directors or the Compensation
                     Committee of the Board of Directors;

               (iii) The CEO shall be eligible to receive options to purchase
                     shares of the Corporation's common stock, $.001 par value
                     ("Common Stock"), under the Corporation's 1994 Long-term
                     Incentive Plan, or such other option plans as may be in
                     effect at any time during the term of this Agreement, as
                     may be granted from time to time by the Compensation
                     Committee of the Board of Directors;

               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 and any plans pursuant to which such
compensation is generated or as agreed upon by the parties with respect to the
compensation payable to the CEO pursuant to section 3(a) hereof.

          (b)  The Corporation shall reimburse the CEO for all normal, usual and
necessary expenses incurred by the CEO 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
CEO's expenditures and otherwise in accordance with such Expense Reimbursement
Policy as may from time to time be adopted by the Board of Directors of the
Corporation.

          (c)  The CEO shall be, during the term of this Agreement, entitled to
               vacations of not less than four (4) weeks per annum.

          (d)  The Corporation shall make available to the CEO and his
               dependents, such medical, disability, life insurance and such
               other health benefits as the Corporation makes available to its
               senior officers and directors. The CEO's life insurance coverage
               shall not be less than $1,000,000.

                                      -2-
<PAGE>
 
     4.   NON-COMPETITION
          ---------------

          (a)  The CEO understands and recognizes that his services to the
Corporation are special and unique and agrees that, during the term of this
Agreement and, unless such termination is by the CEO pursuant to 6(a)(iii) below
and provided the Corporation is not in material default to CEO on any of its
obligations under this Agreement, for a period of one (l) year 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 ("Person"), enter into or engage
in any business engaged in the development or commercialization of products
directly competitive with products of the Corporation, including any subsidiary
of the Corporation (a "Subsidiary"), including products under development by the
Corporation or a Subsidiary within the geographic area of the Corporation's
business.

          (b)  During the term of this Agreement and for one (1) year
thereafter, CEO shall not, directly or indirectly, without the prior written
consent of the Corporation, solicit or induce any employee of the Corporation or
any affiliate to leave the employ of the Corporation or any affiliate or hire
for any purpose any employee of the Corporation or any affiliate or any employee
who has left the employment of the Corporation or any affiliate within six
months of the termination of said employee's employment with the Corporation.

               (c)  During the term of this Agreement and for one (1) year
thereafter, the CEO shall not, directly or indirectly, without the prior written
consent of the Corporation:

                    (i)  solicit or accept employment or be retained by any
                         party who, at any time during the term of this
                         Agreement, was a customer or supplier of the
                         Corporation or any affiliate where his position will be
                         related to the business of the Corporation; or

                    (ii) solicit or accept the business of any customer or
                         supplier of the Corporation or any affiliate with
                         respect to products similar to those supplied by the
                         Corporation.

               (d)  In the event that the Officer 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 an 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
Officer 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.

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<PAGE>
 
     5.   CONFIDENTIAL INFORMATION
          ------------------------

          (a)  The CEO agrees that during the course of his employment or at any
time after termination, he will not disclose or make accessible to any other
person, the Corporation's products, services and technology, both current and
under development, promotion and marketing programs, lists, trade secrets,
litigation information and other confidential and proprietary business
information of the Corporation, any Subsidiary or any of its clients.  The CEO
agrees: (i) not to use any such information for himself or others; and (ii) not
to take any such material or reproductions thereof from the Corporation's
facilities at any time during his employment by the Corporation, except as
required in the CEO's duties to the Corporation.  The CEO agrees immediately to
return all such material and reproductions thereof in his possession to the
Corporation upon request and in any event upon termination of employment.

          (b)  Except with prior written authorization by the Corporation, the
CEO agrees not to disclose or publish any of the confidential, technical or
business information or material of the Corporation, any Subsidiary, its clients
or any other party to whom the Corporation owes an obligation of confidence, at
any time during or after his employment with the Corporation.

          (c)  The CEO hereby assigns to the Corporation all right, title and
interest he may have or may acquire in all inventions (including patent rights)
developed by the CEO during the term of this Agreement ("Inventions") and agrees
that all Inventions shall be the sole property of the Corporation and its
assigns, and the Corporation and its assigns shall be the sole owner of all
patents, copyrights and other rights in connection therewith.  The CEO further
agrees to assist the Corporation in every proper way (but at the Corporation's
expense) to obtain and from time to time enforce patents, copyrights or other
rights on said Inventions in any and all countries.

     6.   TERMINATION
          -----------

          (a)  The term of this Agreement shall continue for the period set
forth in Section 2 hereof unless sooner terminated upon the first to occur of
the following events (the "Termination Date"):

               (i)  The death of the CEO;

               (ii) Termination by the Board of Directors of the Corporation for
                    just cause. Any of the following actions by the CEO shall
                    constitute just cause:

                    (A)  Material breach by the CEO of Section 4 or Section 5 of
                         this Agreement;

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<PAGE>
 
                     (B) Material breach by the CEO of any provision of this
                         Agreement other than Section 4 or Section 5 or the
                         willful or reckless failure by the CEO to perform his
                         duties hereunder which breach or failure is not cured
                         by the CEO within fifteen (15) days of notice thereof
                         from the Corporation; or

                     (C) The commission by the CEO of any act of fraud or theft
                         against the Corporation or any Subsidiary, or the
                         conviction of the CEO of any criminal act.

               (iii) Termination by the CEO for just cause. Any of the following
                     actions or omissions by the Corporation shall constitute
                     just cause:

                     (A) Material breach by the Corporation of any provision of
                         this Agreement which is not cured by the Corporation
                         within fifteen (15) days of notice thereof from the
                         CEO;

                     (B) Any action by the Corporation to intentionally harm the
                         CEO; or

                     (C) A Change in Control of the Corporation (as defined
                         below), unless CEO is offered and, in his sole
                         discretion, accepts (1) a comparable executive
                         position of the acquiror or of the division of the
                         acquiror which assumes the business of the corporation
                         after the Change in Control and (2) compensation
                         comparable to that provided to the CEO under this
                         Agreement.

               (iv)  Termination by the Board of Directors of the Corporation
                     without just cause.

          (b)  Upon termination pursuant to subparagraph (ii) of paragraph (a)
above, the CEO (or his estate in the event of termination pursuant to
subparagraph (i)), shall be entitled to receive the Base Salary and bonuses
accrued but unpaid as of the date of termination.

          (c)  Upon termination pursuant to subparagraph (iii)(C) or (iv) above,
the CEO shall be entitled to receive the Base Salary plus average bonuses
(three-year average) for a period equal to the longer of (a) the remainder of
the term of this Agreement or (b) twelve (12) months from the Termination Date.
At the discretion of the Corporation, such Base Salary may be paid either in one
lump sum or in monthly installments throughout the remaining term of this
Agreement.  In addition, the Corporation shall provide continuation of health
benefits for a period equal to the longer of (a) the remainder of the term of
this Agreement, or (b) twelve (12) 

                                      -5-
<PAGE>
 
months from the Termination Date to the extent authorized by and consistent with
29 U.S.C. (S) 1161 et seq. (Commonly known as "COBRA"), with the cost of the
regular premium for such benefit shared in the same relative proportion by the
Corporation and the CEO as in effect on the Termination Date. Notwithstanding
the foregoing, nothing in this Section 6(c) shall be construed to affect the
CEO's right to receive COBRA continuation entirely at the CEO's own cost to the
extent that the CEO may continue to be entitled to COBRA continuation after the
CEO's right to cost sharing under this Section 6(c) ceases.

          (d)  For purposes of this Agreement, a "Change in Control of the
Corporation" shall be deemed to have occurred upon any one of the following
events:

               (i)   The date on which shares of Common Stock are first
                     purchased pursuant to a tender offer or exchange offer
                     (other than such an offer by the Corporation, any
                     Subsidiary, any employee benefit plan of the Corporation or
                     of any Subsidiary or any entity holding shares or other
                     securities of the Corporation for or pursuant to the terms
                     of such plan), whether or not such offer is approved or
                     opposed by the Corporation and regardless of the number of
                     shares purchased pursuant to such offer;

               (ii)  The date the Corporation acquires knowledge that any person
                     or group deemed a person under Section 13(d)-3 of the
                     Securities Exchange Act of 1934 ("Exchange Act") (other
                     than the Corporation, any Subsidiary, any employee benefit
                     plan of the Corporation or of any Subsidiary or any entity
                     holding shares of Common Stock or other securities of the
                     Corporation for or pursuant to the terms of any such plan
                     or any individual or entity or group or affiliate thereof
                     which acquired its beneficial ownership interest prior to
                     the date of this Agreement), in a transaction or series of
                     transactions, has become the beneficial owner, directly or
                     indirectly (with beneficial ownership determined as
                     provided in Rule 13d-3, or any successor rule, under the
                     Exchange Act), of securities of the Corporation entitling
                     the person or group to 30% or more of all votes (without
                     consideration of the rights of any class or stock to elect
                     directors by a separate class vote) to which all
                     stockholders of the Corporation would be entitled in the
                     election of the Board of Directors were an election held on
                     such date;

               (iii) The date, during any period of two consecutive years, when
                     individuals who at the beginning of such period constitute
                     the Board of Directors of the Corporation cease for any
                     reason to constitute at least a majority thereof, unless
                     the election, or the

                                      -6-
<PAGE>
 
                    nomination for election by the stockholders of the
                    Corporation, of each new director was approved by a vote of
                    at least two-thirds of the directors then still in office
                    who were directors at the beginning of such period; and

               (iv) the date of approval by the stockholders of the Corporation
                    of an agreement (a "reorganization agreement") providing
                    for:

                    (A)  The merger or consolidation of the Corporation with
                         another corporation where the stockholders of the
                         Corporation, immediately prior to the merger or
                         consolidation, do not beneficially own, immediately
                         after the merger or consolidation, shares of the
                         corporation issuing cash or securities in the merger or
                         consolidation entitling such stockholders to 65% or
                         more of all votes (without consideration of the rights
                         of any class of stock to elect directors by a separate
                         class vote) to which all stockholders of such
                         corporation would be entitled in the election of
                         directors or where the members of the Board of
                         Directors of the Corporation, immediately prior to the
                         merger or consolidation, do not, immediately after the
                         merger or consolidation, constitute a majority of the
                         Board of Directors of the corporation issuing cash or
                         securities in the merger or consolidation; or

                    (B)  The sale or other disposition of all or substantially
                         all the assets of the Corporation.

          (e)  Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that as a result of any payment or distribution
by the Corporation to or for the benefit of the CEO whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), the CEO would be subject to the excise tax imposed by
Section 49999 of the Internal Revenue Code (the "Code") or any interest or
penalties are incurred by the CEO with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), the CEO shall be entitled to promptly receive
an additional payment (a "Gross-Up Payment") in an amount such that, after
payment by the CEO of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income taxes and
Excise Tax imposed upon the Gross-Up Payment, the CEO is in the same after-tax
position as if no Excise Tax had been imposed upon the CEO with respect to the
Payments. Notwithstanding the foregoing provisions of this Section, if it shall
be determined that the CEO is entitled to a Gross-Up Payment, but that the CEO,
after taking into account the Payments and the Gross-Up Payment, would not
receive a net after-tax benefit of at least $50,000 (taking into account both

                                      -7-
<PAGE>
 
income taxes and Excise Tax) as compared to the net after-tax proceeds to the
CEO resulting from the elimination of the Gross-Up Payment and a reduction of
the Payments, in the aggregate, to an amount (the "Reduced Amount") such that
the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the CEO and the Payments, in the aggregate, shall be
reduced to the Reduced Amount.

          (f)  Cooperation: Pending Litigation

               (i)  Upon the request of the Corporation, in connection with any
                    suit, action, proceeding, arbitration or litigation
                    involving the Corporation (a "Litigation"), which Litigation
                    is directly or indirectly the result of an event, fact or
                    occurrence existing, in whole or in part, prior to the
                    Termination Date, CEO agrees to, at the expense of the
                    Corporation, in connection with any such Litigation:

                    (A)  attend depositions, meetings, conferences or other
                         scheduled proceedings related to the Litigation with a
                         designated officer of the Corporation;

                    (B)  provide a written outline of any actions taken by CEO
                         on behalf of the Corporation, or any information known
                         to CEO; and

                    (C)  otherwise cooperate with the Corporation, counsel to
                         the Corporation and with other parties or entities whom
                         the Corporation shall reasonably request.

               (ii) Unless CEO and the Corporation agree otherwise, CEO shall
                    not be required to engage or participate in any of the
                    activities described in Section 6(f) of this Agreement for
                    more than three (3) consecutive business days at a time, or
                    more than six (6) business days per ninety (90) day period.

     7.   NOTICES
          -------

          Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express or
similar overnight delivery; or three (3) days  after being mailed registered or
certified mail, postage prepaid, return receipt requested, to either party at
the address set forth above, or to such other address as such party shall give
by notice hereunder to the other party.

     8.   INDEMNIFICATION
          ---------------

                                      -8-
<PAGE>
 
          The Corporation will continue in effect an indemnification agreement
with the CEO in a form substantially identical to that previously entered into
between the Corporation and the CEO.

     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 provision 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.

     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 CEO and his legal representatives.  This Agreement
constitutes a personal service agreement, and the performance of the CEO's
obligations hereunder may not be transferred or assigned by the CEO.

     12.  NON-WAIVER
          ----------

          The failure of either party to insist upon the strict performance 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 Commonwealth of Massachusetts without regard to
principles of conflict of laws.

     14.  HEADINGS
          --------

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<PAGE>
 
          The headings of paragraphs are inserted for convenience and shall not
affect the interpretation of this Agreement on the day and year first above
written.


                                               INTERNEURON PHARMACEUTICALS, INC.



                                      By:  /s/ Lindsay A. Rosenwald 
                                          --------------------------------------
                                             Lindsay A. Rosenwald, M.D.
                                                    Chairman


                                           /s/ Glenn L. Cooper
                                          --------------------------------------
                                                  GLENN L. COOPER, M.D.

                                      -10-