Document:

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                                                                    EXHIBIT 10.7

                         APPLIED SCIENCE FICTION, INC.

                             EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") is made by and between Applied
Science Fiction, Inc. (the "Company"), and Robert E. Sleet, Jr. ("Executive") as
of October 4, 1999.

     1.   Duties and Scope of Employment.
          ------------------------------

               (a) Positions, Employment Commencement Date, Duties. Executive's
                   -----------------------------------------------
employment with the Company pursuant to this Agreement shall commence on October
4, 1999 (the "Employment Commencement Date"). As of the Employment Commencement
Date, the Company shall employ Executive as the Chief Financial Officer of the
Company. The period of Executive's employment with the Company is referred to
herein as the "Employment Term." During the Employment Term, Executive shall
render such business and professional services in the performance of his duties,
consistent with Executive's position within the Company, as shall reasonably be
assigned to him by the Chief Executive Officer.

               (b) Employment Term.  The Employment Term is originally for a
                   ---------------
period of one year from the Employment Commencement Date. The Employment Term
will automatically be extended an additional year at October 4, 2000 and all
subsequent employment commencement anniversary dates unless Executive is
notified in writing by the Company of its intent not to extend the Employment
Term and such notification occurs thirty (30) days prior to the end of the
Employment Term and any extensions thereto provided that the Executive is an
employee of the Company at that time. Notwithstanding the foregoing, the
Employment Term and/or the employment relationship between Executive and the
Company may be terminated at any time by either party in accordance with
provisions of Paragraph 3.

               (c) Obligations.  During the Employment Term and any extensions
                   -----------
thereto, Executive shall devote all of his full business efforts and time to the
Company. Executive agrees, during the Employment Term, not to actively engage in
any other employment, occupation or consulting activity (a) in any field related
to the Company's line of business, or (b) in a position that requires
significant time commitment, without first informing the Company of such
potential employment or activity and receiving the Company's approval.
Notwithstanding the above, Executive shall be free to participate in community
and charitable activities to the extent such activities do not interfere with
Executive's duties and responsibilities to the Company. Lack of objection by the
Company regarding any particular outside activities does not in any way reduce
the Executive's obligations under this Agreement.

     2.   Employee Benefits.
          -----------------

               (a) General.   During the Employment Term, Executive shall be
                   -------
eligible to participate in the employee benefit plans maintained by the Company
that are applicable to other senior management to the full extent provided for
under those plans. The terms of the employee benefit plans may, from time to
time, change without advance notice or without cause.
<PAGE>

               (b)  Relocation Expense Reimbursement.  If Executive chooses to
                    --------------------------------
relocate his principal residence closer to the Company's offices, the Company
will reimburse Executive for the following reasonable costs:

                         (i)   Transaction costs associated with buying
Executive's new residence (closing costs, inspections, title insurance,
brokerage and related fees, etc.).

                         (ii)  Transaction costs associated with selling
Executive's old residence (closing costs, inspections, title insurance,
brokerage and related fees, etc.).

                         (iii) Moving household furnishings and personal
effects.

     Executive will be fully grossed-up by the Company for any imputed income
required to be recognized with respect to this reimbursement so that the
economic effect to Executive, after taking into account any tax deductions
available to Executive, is the same as if this reimbursement was provided to
Executive on a non-taxable basis

          (c) Executive will accrue 160 hours of vacation per annum on a ratable
basis.  Executive may accumulate a maximum of 200 vacation hours at any time.
Vacation will not accrue after the 200-hour vacation limit has been reached.
Upon termination of Executive's employment with the Company for any reason,
Executive shall not be entitled to pay for any accrued and unused vacation
hours.

     3.   At-Will Employment.  Executive and the Company understand and
          ------------------
acknowledge and agree that Executive's employment with the Company constitutes
"at-will" employment. Subject to the Company providing severance benefits as
specified herein this Agreement, Executive and the Company understand,
acknowledge and agree that the employment relationship between Executive and the
Company may be terminated at any time, upon written notice to the other party,
with or without cause, at the option either of the Company or Executive.

     4.   Compensation.
          ------------

               (a)  Base Salary.  While employed by the Company, the Company
                    -----------
shall pay the Executive as compensation for his services a base salary at the
annualized rate of $225,000.00 (the "Base Salary"). The Compensation Committee
of the Company's Board shall review the Base Salary at least annually, and after
such review may increase, but not decrease, the Base Salary. The Base Salary
shall be paid periodically in accordance with normal Company payroll practices
and subject to the usual, applicable withholdings.

               (b)  Bonuses.  Executive shall not be eligible for bonuses
                    -------
unless otherwise granted by the Compensation Committee of the Board of
Directors.

               (c)  Equity Compensation.
                    -------------------

                         (i) Employment-Based Vesting Stock Option.  Executive
                             -------------------------------------
shall receive a stock option to purchase a total of 195,000 shares of Company
common stock with a per share exercise price equal to the fair value per common
share as determined by the Company's Board of

                                      -2-
<PAGE>

Directors on the date of grant (the "Employment-Based Stock Option"). The
Employment-Based Stock Option shall be for a term of ten years (or shorter upon
termination of employment with the Company) and shall be vested with respect to
25% of the total grant as of the first anniversary of the Employment
Commencement Date and shall thereafter vest at the rate of 1/48/th/ of the total
grant per month at each of the following 36 monthly anniversary dates so as to
be 100% vested on the fourth year anniversary thereof, conditioned upon
Executive's continued employment with the Company as of each vesting date. This
option grant is in all respects subject to the terms, definitions and provisions
of the Company's 1995 Stock Option/Stock Issuance Plan (the "Stock Plan") and
the standard form of stock option agreement thereunder to be entered into by and
between Executive and the Company (the "Employment-Based Option Agreement"). The
Stock Plan and Employment-Based Option Agreement are incorporated by reference
for all purposes as if fully set forth at length herein.

               (d)  Severance.  If the Executive is involuntarily terminated by
                    ---------
the Company at any time without "Cause" as defined below, then promptly
following such termination, the Company shall pay or provide to Executive
liquidated damages as follows: (i) Executive shall receive a lump sum payment
equal to the Executive's Base Salary, less applicable withholding, and (ii) the
unvested portion of Executive's Employment-Based Stock Option that would be
vested on next succeeding October 4 after the date of such termination shall be
vested. Executive acknowledges and agrees that the payments set forth in this
Paragraph, are a reasonable estimate of damages to Executive and that this
amount is not a penalty. For the purposes of this Agreement, "Cause" means fraud
or intentional misconduct, which is materially harmful to the Company.

                    (ii) Subsequent Awards.  During the Employment Term,
                         -----------------
Executive shall be eligible to receive stock and stock option grants, as
determined by and at the sole discretion of the Compensation Committee of the
Board of Directors.

     5.   Confidential and/or Proprietary Information.
          -------------------------------------------

               (a)  At the beginning and throughout Executive's employment with
                    the Company, he will receive certain sensitive, proprietary,
                    trade secret and/or confidential information about the
                    Company. Executive agrees that his employment creates a
                    relationship of confidence and trust with the Company with
                    respect to such proprietary, trade secret and/or
                    confidential information of the Company. Executive further
                    agrees to enter into the Company's Proprietary Information
                    Agreement ("Proprietary Information Agreement") at the
                    commencement of his employment. Executive further agrees
                    that during his employment and at all times after
                    termination of his employment, Executive will keep in
                    confidence and trust all proprietary, trade secret and/or
                    confidential information of the Company without the written
                    consent of the Company, except as may be necessary in the
                    ordinary course of performing Executive's duties to the
                    Company.

               (b)  In consideration of the covenants of the Company in this
                    Agreement, the receipt by Executive of proprietary, trade
                    secret and/or confidential information of the company, and
                    other good and valuable consideration,

                                      -3-
<PAGE>

               Executive acknowledges and agrees as follows: At any time within
               one year after separation of Executive's employment with the
               Company for any reason, Executive, without the Company's written
               consent, directly or indirectly, alone or as a partner, joint
               venture, officer, director, employee, consultant, agent or
               stockholder (other than a less than 5% stockholder of a publicly
               traded Company) will not (i) knowingly engage in any activity
               which is in competition with the business and/or the specific
               products, technologies and/or services of the Company, as existed
               at the Company at the date of termination; (ii) knowingly solicit
               any of the Company'' employees or customers, (iii) knowingly hire
               any of the Company's employees or consultants in an unlawful
               manner or solicit for hire or actively encourage employees or
               consultants to leave the Company; and/or (iv) otherwise knowingly
               breach Executive's confidential information obligations as set
               forth in his Proprietary Information Agreement with the Company.
               Should Executive engage in any conduct listed above, then: (1)
               Executive's stock options, to the extent, unexercised, and
               notwithstanding any provision in this employment Agreement to the
               contrary, shall immediately terminate, cease to be exercisable
               and expire effective the date on which the Executive enters into
               such activity, unless this stock option is terminated sooner for
               any other reason. (2) with respect to any portion of Executive's
               stock options or related shares exercised or sold during the
               period beginning one year prior to the Executive's termination
               and ending two years after Executive's termination, any gain
               represented by the Fair Market Value on the date of exercise if
               the shares are still held, or on the date of sale, over the
               exercise price multiplied by the number of shares Executive sold
               or exercised, without regard to any subsequent market price
               increase or decrease, shall be paid by Executive to the Company.

          By accepting and executing this Agreement, Executive agrees and
          acknowledges that the provisions of this section are reasonably
          necessary to protect the Company's proprietary, trade secret and/or
          confidential information, legitimate business interests and goodwill.
          Executive further agrees that the restrictions as to duration,
          geographic area, and scope of activity in this section are reasonably
          necessary for the protection of the Company's proprietary, trade
          secret and/or confidential information, legitimate business interest
          and goodwill and are not oppressive or injurious to the public
          interest.  Executive further agrees that if the scope of any of the
          restrictions is too broad to permit enforcement to its full extent,
          then such restriction shall be enforced to the maximum extent
          permitted by law, and the Executive hereby agrees that such scope may
          be judicially modified accordingly in any proceeding to enforce such
          restriction.  The Company shall be entitled to injunctive relief
          against Executive's activities in the event of a breach or threatened
          breach of any of the provisions in this section to the extent allowed
          by law.

6.   Severability.  In the event that any provision or covenant hereof becomes
     ------------
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall

                                      -4-
<PAGE>

continue in full force and effect without said provision and the existence of
such unenforceable provision shall not constitute a defense to the enforcement
of the remainder of this Agreement.

     7.   Entire Agreement.  This Agreement, the Stock Plan, the Employment-
          ----------------
Based Option Agreement and the Proprietary Information Agreement constitute the
entire agreement and understanding between the Company and Executive concerning
Executive's employment relationship with the Company, and supersede and replace
any and all prior or contemporaneous verbal or written agreements and
understandings concerning Executive's employment relationship with the Company.
This Agreement may only be modified by writing signed by all parties to this
Agreement.

     8.   Arbitration and Equitable Relief.
          --------------------------------

          (a)  Except as provided in Section 8(d) below, Executive agrees that
any dispute or controversy arising out of, relating to, or in connection with
this Agreement, the interpretation, validity, construction, performance, breach,
or termination of this Agreement, and/or the employment relationship between the
Company and Executive, shall be settled by arbitration to be held in Travis
County, Texas, pursuant to the Federal Arbitration Act and in accordance with
the National Rules for the Resolution of Employment Disputes then in effect of
the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.

          (b)  The arbitrator shall apply Texas law to the merits of any dispute
or claim, without reference to rules of conflict of law. The arbitration
proceedings shall be governed by the Federal Arbitration Act, federal
arbitration law and the Rules, without reference to state arbitration law.
Executive hereby expressly consents to the personal jurisdiction of the state
and federal courts located in Travis County, Texas for any action or proceeding
arising from or relating to this Agreement and/or relating to any arbitration in
which the parties are participants.

          (c)  The Company shall pay the costs and expenses of such arbitration.

          (d)  Executive understands that nothing in Section 8 modifies
Executive's at-will status. The employment relationship between Executive and
the Company may be terminated at any time, upon written notice to the other
party, with or without cause, at the option either of the Company or the
Executive.

          (e)  EXECUTIVE HAS READ AND UNDERSTANDS SECTION 8, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE
AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION
WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES AN EXPRESS WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL

                                      -5-
<PAGE>

ASPECTS OF THE EMPLOYMENT RELATIONSHIP BETWEEN THE COMPANY AND EXECUTIVE,
INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

               (i)   ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
          BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT
          OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
          INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
          MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT
          OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

               (ii)  ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
          MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE
          CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
          DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
          DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE TEXAS
          COMMISSION ON HUMAN RIGHTS ACT, AND [TEXAS LABOR CODE SECTION 21, et
          seq;]

               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
          REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

     9.   No Oral Modification, Cancellation or Discharge.  This Agreement may
          ------------------------------------------------
only be modified, amended, canceled or discharged in writing signed by Executive
and the Company.

     10.  Withholding.  The Company shall be entitled to withhold, or cause to
          -----------
be withheld; any amount of applicable withholding with respect to payments
and/or compensation to Executive in connection with this Agreement and
Executive's employment with the Company.

     11.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
          -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

     12.  Effective Date.  This Agreement is effective October 4, 1999.
          --------------

     13.  Acknowledgment.  Executive agrees that he is not presently affected
          --------------
by a disability, which would prevent Executive from freely, knowingly and
voluntarily executing this Agreement. Executive acknowledges that he has had the
opportunity to review and revise this Agreement, has had sufficient time to, and
has carefully read and fully understands all the provisions of this Agreement,
and is knowingly and voluntarily entering into this Agreement.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below:

                                      -6-
<PAGE>

APPLIED SCIENCE FICTION, INC.

By:   /s/ [ILLEGIBLE]
     ------------------------------------

Its:  President
     ------------------------------------

ROBERT E. SLEET, JR.

/s/ Robert E. Sleet, Jr
-----------------------------------------

                                      -7-<PAGE>

                                                                    Exhibit 10.8

                         APPLIED SCIENCE FICTION, INC.

                             EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") is made by and between Applied
Science Fiction, Inc. (the "Company"), and Dan Sullivan ("Executive") as of
November 15, 1999.

     1.   Duties and Scope of Employment.
          ------------------------------

               (a)  Positions, Employment Commencement Date, Duties. Executive's
                    -----------------------------------------------
employment with the COmpany pursuant to this Agreement shall commence on
November 15, 1999 (the "Employment Commencement Date"). As of the Employment
Commencement Date, the Company shall employ Executive as the Executive Vice
President, Intellectual Property Strategy and Administration of the Company. The
period of Executive's employment with the Company is referred to herein as the
"Employment Term." During the Employment Term, Executive shall render such
business and professional services in the performance of his duties, consistent
with Executive's position within the Company, as shall reasonably be assigned to
him by the Chief Executive Officer.

               (b)  Employment Term. The Employment Term is originally for a
                    ---------------
period of one year from the Employment Commencement Date. The Employment Term
will automatically be extended an additional year at November 15, 2000 and all
subsequent employment commencement anniversary dates unless Executive is
notified in writing by the Company of its intent not to extend the Employment
Term and such notification occurs thirty (30) days prior to the end of the
Employment Term and any extensions thereto provided that the Executive is an
employee of the Company at that time. Notwithstanding the foregoing, the
Employment Term and/or the employment relationship between Executive and the
Company may be terminated at any time by either party in accordance with
provisions of Paragraph 3.

               (c)  Obligations. During the Employment Term and any extensions
                    -----------
thereto, Executive shall devote all of his full business efforts and time to the
Company. Executive agrees, during the Employment Term, not to actively engage in
any other employment, occupation or consulting activity (a) in any field related
to the Company's line of business, or (b) in a position that requires
significant time commitment, without first informing the Company of such
potential employment or activity and receiving the Company's approval.
Notwithstanding the above, Executive shall be free to participate in community
and charitable activities to the extent such activities do not interfere with
Executive's duties and responsibilities to the Company. Lack of objection by the
Company regarding any particular outside activities does not in any way reduce
the Executive's obligations under this Agreement.

     2.   Employee Benefits.
          -----------------

               (a)  General. During the Employment Term, Executive shall be
                    -------
eligible to participate in the employee benefit plans maintained by the Company
that are applicable to other senior
<PAGE>

management to the full extent provided for under those plans. The terms of the
employee benefit plans may, from time to time, change without advance notice or
without cause.

          If Executive does not elect coverage under the Company's medical
     benefits plan, the Company shall reimburse Executive for the reasonable
     costs of medical insurance premiums paid for by Executive for he and his
     spouse in excess of the amount Executive would be required to pay had he
     elected coverage for he and his spouse under the Company's medical benefits
     plan. The alternate medical plan will be selected by the Executive and
     approved by the Company within 90 days of date of employment. The medical
     benefit provision shall remain in force until cancelled by Executive. In
     the event that the current provider of the medical insurance plan ceases
     operation or discontinues operations in the area where the Executive
     currently resides, the Executive will select an equivalent plan with
     approval of the Company. The Company will not withhold reasonable approval
     of such a plan change.

          Upon termination of employment, the Company may, at its sole
     discretion, estimate the future value of continuing the current medical
     benefits plan and compensate Executive for the net present value of the
     future medical benefits plan in the form of a lump sum or annuity payment
     on behalf of the Executive.

          (b)  Relocation Expense Reimbursement. If Executive chooses to
               --------------------------------
relocate his principal residence closer to the Company's offices prior to
November 15, 2001 the Company will reimburse Executive for the following
reasonable costs:

                 (i)   Transaction costs associated with buying Executive's new
                       residence (closing costs, inspections, title insurance,
                       brokerage and related fees, etc.)

                 (ii)  Transaction costs associated with selling Executive's old
                       residence (closing costs, inspections, title insurance,
                       brokerage and related fees, etc.)

                 (iii) Moving household furnishings and personal effects.

          (c)  Expenses. Executive's principal office will be in Austin, Texas.
               --------
For the period November 15, 1999 through November 15, 2001, the Company will pay
the following expenses in connection with Executive's work in the principal
office:

                 (i)   Executive's reasonable living expenses in Austin, Texas
                       not to exceed $2,000.00 per month.

                 (ii)  Executive's reasonable travel expenses between Austin,
                       and Connecticut.

                 (iii) Executive's spouse's travel expenses between Austin,
                       Texas and Connecticut.

                                      -2-
<PAGE>

     Executive will be fully grossed-up by the Company for any imputed income
required to be recognized with respect to this reimbursement so that the
economic effect to Executive, after taking into account any tax deductions
available to Executive, is the same as if this reimbursement was provided to
Executive on a non-taxable basis.

               (d)  Executive will accrue 160 hours of vacation per annum on a
ratable basis. Executive may accumulate a maximum of 200 vacation hours at any
time. Vacation will not accrue after the 200-hour vacation limit has been
reached. Upon termination of Executive's employment with the Company for any
reason, Executive shall not be entitled to pay for any accrued and unused
vacation hours.

     3.   At-Will Employment. Executive and the Company understand and
          ------------------
acknowledge and agree that Executive's employment with the Company constitutes
"at-will" employment. Subject to the Company providing severance benefits as
specified herein this Agreement, Executive and the Company understand,
acknowledge and agree that the employment relationship between Executive and the
Company may be terminated at any time, upon written notice to the other party,
with or without cause, at the option either of the Company's Board of Directors
or Compensation Committee of the Board of Directors or Executive.

     4.   Compensation.
          ------------

               (a)  Base Salary. While employed by the Company, the Company
                    -----------
shall pay the Executive as compensation for his services a base salary at the
annualized rate of $200,000.00 (the "Base Salary"). The Compensation Committee
of the Company's Board shall review the Base Salary at least annually, and after
such review may increase, but not decrease, the Base Salary. The Base Salary
shall be paid periodically in accordance with normal Company payroll practices
and subject to the usual, applicable withholdings.

               (b)  Bonuses. Beginning for the year ended December 31, 2000, and
                    -------
for all subsequent fiscal years, Executive shall be eligible for a target bonus
equal to 40% of Base Salary for the fiscal year (the "Target Bonus") (with a
greater payment based on achievement in excess of the target milestones) based
upon performance criteria established at the discretion of and approved by the
Compensation Committee of the Board of Directors or the Chief Executive Officer;
provided, however, that the payment of any such annual bonus shall be subject to
Executive's employment with the Company on May 31 of the fiscal year to which
that bonus relates, and such payment will be prorated based on the number of
days of such fiscal year the Executive was employed with the Company at the date
Executive's employment with the Company is terminated for any reason except for
"Cause" as defined in 4(d) below. If Executive's employment with the Company is
terminated with "Cause" (as defined in Paragraph 4(d) below), then Executive is
not eligible for payment of any bonuses and/or Target Bonuses.

               (c)  Equity Compensation. Employment-Based Vesting Stock Option.
                    -------------------
Executive shall receive a stock option to purchase a total of 185,000 shares of
Company common stock with a per share exercise price of $3.50 per share (the
"Employment-Based Stock Option"). The Employment-Based Stock Option shall be for
a term of ten years (or shorter upon termination of

                                      -3-
<PAGE>

employment with the Company) and shall be vested with respect to 25% of the
total grant as of the first anniversary of the Employment Commencement Date and
shall thereafter vest at the rate of 1/48/th/ of the total grant per month at
each of the following 36 monthly anniversary dates so as to be 100% vested on
the fourth year anniversary thereof, conditioned upon Executive's continued
employment with the Company as of each vesting date. This option grant is in all
respects subject to the terms, definitions and provisions of the Company's 1995
Stock Option/Stock Issuance Plan (the "Stock Plan") and the standard form of
stock option agreement thereunder to be entered into by and between Executive
and the Company (the "Employment-Based Option Agreement"). The Stock Plan and
Employment-Based Option Agreement are incorporated by reference for all purposes
as if fully set forth at length herein.

               Severance. If the Executive is involuntarily terminated by the
               ---------
Company at any time without "Cause" as defined below, then promptly following
such termination, the Company shall pay or provide to Executive liquidated
damages as follows: (i) Executive shall receive a lump sum payment equal to the
Executive's Base Salary, less applicable withholding, and (ii) the unvested
portion of Executive's Employment-Based Stock Option that would be vested on
next succeeding November 15 after the date of such termination shall be vested.
Executive acknowledges and agrees that the payments set forth in this Paragraph,
are a reasonable estimate of damages to Executive and that this amount is not a
penalty. For purposes of this Agreement, "Cause" means fraud or intentional
misconduct, which is materially harmful to the Company.

               (e)  Subsequent Awards. During the Employment Term, Executive
                    -----------------
shall be eligible to receive stock and stock option grants, as determined by and
at the sole discretion of the Compensation Committee of the Board of Directors.

     4.   Confidential and/or Proprietary Information.
          -------------------------------------------

               (a)  At the beginning and throughout Executive's employment with
                    the Company, he will receive certain sensitive, proprietary,
                    trade secret and/or confidential information about the
                    Company. Executive agrees that his employment creates a
                    relationship of confidence and trust with the Company with
                    respect to such proprietary, trade secret and/or
                    confidential information of the Company. Executive further
                    agrees to enter into the Company's Proprietary Information
                    Agreement ("Proprietary Information Agreement") at the
                    commencement of his employment. Executive further agrees
                    that during his employment and at all times after
                    termination of his employment, Executive will keep in
                    confidence and trust all proprietary, trade secret and/or
                    confidential information of the Company without the written
                    consent of the Company, except as may be necessary in the
                    ordinary course of performing Executive's duties to the
                    Company.

               (b)  In consideration of the covenants of the Company in this
                    Agreement, the receipt by Executive of proprietary, trade
                    secret and/or confidential information of the company, and
                    other good and valuable consideration, Executive
                    acknowledges and agrees as follows: At any time within one
                    year

                                      -4-
<PAGE>

               after separation of Executive's employment with the Company for
               any reason, Executive, without the Company's written consent,
               directly or indirectly, alone or as a partner, joint venture,
               officer, director, employee, consultant, agent or stockholder
               (other than a less than 5% stockholder of a publicly traded
               Company) will not (except as explicitly allowed through a written
               consent from the Company's Board of Directors) (i) knowingly
               engage in any activity which is in competition with the business
               and/or the specific products, technologies and/or services of the
               Company, as existed at the Company at the date of termination;
               (ii) knowingly solicit any of the Company's employees or
               customers, (iii) knowingly hire any of the Company's employees or
               consultants in an unlawful manner or solicit for hire or actively
               encourage employees or consultants to leave the Company; and/or
               (iv) otherwise knowingly breach Executive's confidential
               information obligations as set forth in his Proprietary
               Information Agreement with the Company. Should Executive engage
               in any conduct listed above, then: (1) Executive's stock options,
               to the extent, unexercised, and notwithstanding any provision in
               this employment Agreement to the contrary, shall immediately
               terminate, cease to be exercisable and expire effective the date
               on which the Executive enters into such activity, unless this
               stock option is terminated sooner for any other reason. (2) With
               respect to any portion of Executive's stock options or related
               shares exercised or sold during the period beginning one year
               prior to the Executive's termination and ending two years after
               Executive's termination, any gain represented by the Fair Market
               Value on the date of exercise price multiplied by the number of
               shares Executive sold or exercised, without regard to any
               subsequent market price increase or decrease, shall be paid by
               Executive to the Company.

          By accepting and executing this Agreement, Executive agrees and
          acknowledges that the provisions of this section are reasonably
          necessary to protect the Company's proprietary, trade secret and/or
          confidential information, legitimate business interests and goodwill.
          Executive further agrees that the restrictions as to duration,
          geographic area, and scope of activity in this section are
          reasonably necessary for the protection of the Company's proprietary,
          trade secret and/or confidential information, legitimate business
          interest and goodwill and are not oppressive or injurious to the
          public interest. Executive further agrees that if the scope of any of
          the restrictions is too broad to permit enforcement to its full
          extent, then such restriction shall be enforced to the maximum extent
          permitted by law, and the Executive hereby agrees that such scope may
          be judicially modified accordingly in any proceeding to enforce such
          restriction. The Company shall be entitled to injunctive relief
          against Executive's activities in the event of a breach or threatened
          breach of any of the provisions in this section to the extent allowed
          by law.

     5. Severability. In the event that any provision or covenant hereof becomes
        ------------
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall

                                      -5-
<PAGE>

continue in full force and effect without said provision and the existence of
such unenforceable provision shall not constitute a defense to the enforcement
of the remainder of this Agreement.

     6.   Entire Agreement. This Agreement, the Stock Plan, the Employment-Based
          ----------------
Option Agreement and the Proprietary Information Agreement constitute the entire
agreement and understanding between the Company and Executive concerning
Executive's employment relationship with the Company, and supersede and replace
any and all prior or contemporaneous verbal or written agreements and
understandings concerning Executive's employment relationship with the Company.
This Agreement may only be modified by writing signed by all parties to this
Agreement.

     7.   Arbitration and Equitable Relief.
          --------------------------------

          (a)  Except as provided in Section 8(d) below, Executive agrees that
any dispute or controversy arising out of, relating to, or in connection with
this Agreement, the interpretation, validity, construction, performance, breach,
or termination of this Agreement, and/or the employment relationship between the
Company and Executive, shall be settled by arbitration to be held in Travis
County, Texas, pursuant to the Federal Arbitration Act and in accordance
with the National Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction.

          (b)  The arbitrator shall apply Texas law to the merits of any dispute
or claim, without reference to rules of conflict of law. The arbitration
proceedings shall be governed by the Federal Arbitration Act, federal
arbitration law and the Rules, without reference to state arbitration law.
Executive hereby expressly consents to the personal jurisdiction of the state
and federal courts located in Travis County, Texas for any action or proceedings
arising from or relating to this Agreement and/or relating to any arbitration
in which the parties are participants.

          (c)  The Company shall pay the costs and expenses of such arbitration.

          (d)  Executive understands that nothing in Section 8 modifies
Executive's at-will status. The employment relationship between Executive and
the Company may be terminated at any time, upon written notice to the other
party, with or without cause, at the option either of the Company or the
Executive.

          (e)  EXECUTIVE HAS READ AND UNDERSTANDS SECTION 8, WHICH DISCUSSES
ARBITRATION, EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE
AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES AN EXPRESS WAIVER OF EXECUTIVE'S RIGHT TO A
JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL

                                      -6-
<PAGE>

ASPECTS OF THE EMPLOYMENT RELATIONSHIP BETWEEN THE COMPANY AND EXECUTIVE,
INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:

               (i)   ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
     BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF
     GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
     INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
     MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
     PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.

               (ii)  ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
     MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL
     RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN
     EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE
     FAIR LABOR STANDARDS ACT, THE TEXAS COMMISSION ON HUMAN RIGHTS ACT, AND
     [TEXAS LABOR CODE SECTION 21, et seq;]

               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
     REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

     8.   No Oral Modification, Cancellation or Discharge. This Agreement may
          -----------------------------------------------
only be modified, amended, canceled or discharged in writing signed by Executive
and the Company.

     9.   Withholding. The Company shall be entitled to withhold, or cause to be
          -----------
withheld; any amount of applicable withholding with respect to payments and/or
compensation to Executive in connection with this Agreement and Executive's
employment with the Company.

     10.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
          -------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

     11.  Effective Date. This Agreement is effective November 15, 1999.
          --------------

     12.  Acknowledgment. Executive agrees that he is not presently affected by
          --------------
a disability, which would prevent Executive from freely, knowingly and
voluntarily executing this Agreement. Executive acknowledges that he has had the
opportunity to review and revise this Agreement, has had sufficient time to, and
has carefully read and fully understands all the provisions of this Agreement,
and is knowingly and voluntarily entering into this Agreement.

                                      -7-

<PAGE>

     13. Expiration Date.  This offer of Agreement expires Friday, November 19,
         ---------------
1999.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below:

     APPLIED SCIENCE FICTION, INC.

     By:    /s/ [ILLEGIBLE]
           -----------------------

     Its:      PRESIDENT
           -----------------------

     Daniel Sullivan

     /s/ Daniel J. Sullivan
     ----------------------
     November 15, 1999

                                      -8-

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