<PAGE>

                                                                    EXHIBIT 10.7

                             EMPLOYMENT AGREEMENT
                             --------------------

          EMPLOYMENT AGREEMENT, effective January 1, 2000 (the "Effective
Date"), by and between ORCHID BIOCOMPUTER, INC., a Delaware corporation (the
"Company") and DALE R. PFOST, Ph.D., an individual (the "Executive").

                            PRELIMINARY STATEMENTS
                            ----------------------

          WHEREAS, the Company and the Executive were parties to an Employment
Agreement, dated November 1, 1996 (the "1996 Employment Agreement"); and

          WHEREAS, the Company and Executive wish to terminate the 1996
Employment Agreement; and

          WHEREAS, the Company wishes to continue its employment of the
Executive as President and Chief Executive Officer under the terms and
conditions set forth herein; and

          WHEREAS, the Executive wishes to continue his employment with Company
under the terms and conditions set forth herein.

          NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the parties
hereto, intending to be legally bound, hereby agree as follows:

     1.   TERMINATION OF 1996 EMPLOYMENT AGREEMENT.
          ----------------------------------------

          The Company and the Executive agree that, as of the Effective Date,
the 1996 Employment Agreement shall be and hereby is terminated, including any
guarantees of Sarnoff Corporation.

     2.   TERM OF EMPLOYMENT.
          ------------------

          2.1  Term.  The Term of this Agreement shall be the three-year period
               ----
commencing on January 1, 2000 and ending on December 31, 2002, unless terminated
earlier pursuant to Section 7 of this Agreement or extended to December 31, 2003
pursuant to Section 2.2 of this Agreement.

          2.2  Notice of Continued Employment.  The Company shall notify the
               ------------------------------
Executive no later than June 30, 2002 as to whether it intends to continue (or
not continue) the Executive's employment beyond December 31, 2002.  If the
Company notifies the Executive that it does not intend to continue his
employment beyond December 31, 2002, the Term of this Agreement shall be
extended through and until December 31, 2003.  If the Company notifies the
Executive that it intends to continue his employment beyond December 31, 2002,
and the Executive agrees to continue his employment beyond December 31, 2002,
the parties shall negotiate and memorialize in a written agreement the terms of
the Executive's continued employment; provided, however, if the parties fail to
                                      --------  -------
execute such a written agreement, the terms of this Agreement shall continue
through and until June 30, 2003. If the Company notifies the
<PAGE>

Executive pursuant to this Section 2.2 that it intends to continue his
employment, and the Executive does not agree to continue his employment after
December 31, 2002 and does not terminate his employment before December 31, 2002
for Good Reason (as defined in Section 7.5), the Executive shall be deemed to
have resigned his employment voluntarily on the earlier of December 31, 2002 and
the effective date of any prior termination without Good Reason, as defined in
this Agreement; his resignation shall constitute a Termination without Good
Reason under this Agreement; and the Executive shall not be entitled to any
severance pay. If the Company fails to notify the Executive by June 30, 2002 as
to whether it intends to continue his employment, such failure shall not be
considered a breach of this Agreement, and the Term shall be extended one day
for each day after June 30, 2002 that the Company fails to provide the Employee
with such notice.

     3.   POSITIONS AND DUTIES.
          --------------------

          3.1  Duties.  During the Term of Employment, the Executive will serve
               ------
as President and Chief Executive Officer of the Company with responsibility for
the business, affairs and operations of the Company, subject to the direction
and control of the Board of Directors of the Company.  The Executive will,
during the Term of Employment, serve the Company faithfully, diligently, and
competently and to the best of his ability, and will hold, in addition to the
offices of President, and Chief Executive Officer of the Company, such other
executive offices in the Company to which he may be elected, appointed or
assigned by the Board of Directors from time to time and will discharge such
executive duties in connection therewith.  The Executive shall devote all of his
business time to the performance of his duties hereunder; provided, however,
                                                          --------  -------
that, notwithstanding any provision in this Agreement to the contrary, the
Executive shall not be precluded from devoting reasonable periods of time
required for serving as a member of committees or advisory boards or board(s) of
directors of companies or organizations which have been approved by the Board of
Directors of the Company so long as such memberships or activities do not
interfere with the performance of the Executive's duties hereunder and are not
contrary to the business or other interests of the Company, as determined in the
sole discretion of the Board of Directors of the Company.

          3.2  Nomination to Board.  So long as the Executive is the President,
               -------------------
and/or Chief Executive Officer of the Company, the Company will continue to use
diligent efforts to maintain the Executive's election as a director of the Board
of the Company.

     4.   COMPENSATION.
          ------------

          4.1  Salary.  The Company will, commencing with the Effective Date and
               ------
during the Term of Employment, pay the Executive as compensation for the
performance of his duties and obligations hereunder a salary at the rate of
Three Hundred Fifty Thousand Dollars ($350,000) per annum, less applicable and
customary withholdings ("Salary"), payable in approximately equal installments
not less than twice per month and otherwise in accordance with the Company's
customary payroll practices.  Such salary shall be reviewed, and increases in
such salary, if any, shall be determined by the Board of Directors of the
Company or a compensation committee formed by the Board of Directors of the
Company at the end of each 12-month period of employment after the Effective
Date during the Term of Employment.

                                      -2-
<PAGE>

          4.2  Grant of Options.  By resolution of the Board of Directors, dated
               ----------------
February 2, 2000, the Company issued to the Executive as of such date the
options to purchase 730,000 shares of the Company's common stock (the "Shares"),
subject to the exercise prices and vesting schedule set forth in Exhibit A,
which shall be formalized in a separate stock option agreement.

     5.   EXPENSES AND BENEFITS.
          ---------------------

          5.1  Business Expenses.  All travel and other reasonable and ordinary
               -----------------
business expenses incident to rendering services by the Executive hereunder will
be reimbursed by the Company subject to the submission of appropriate vouchers
and receipts in accordance with the Company's policies and procedures from time
to time in effect.

          5.2  Benefits.  During the Term of Employment, and thereafter under
               --------
the specific circumstances set forth in this Agreement, the Executive shall be
entitled to participate in all employee and fringe benefit plans and programs
generally offered to other members of the Company's management who are similarly
situated, including, without limitation, all pension, profit sharing, incentive,
retirement, insurance, health and disability benefits and plans. The Company
reserves its right to modify or terminate any of its employee and fringe benefit
plans and programs at any time. Notwithstanding the foregoing, the Company shall
provide the Executive, at Company cost, the following:

               5.2.1  Medical insurance for the Executive and his family
consistent with the medical insurance benefits made available by the Company to
its employees;

               5.2.2  Life insurance coverage in an amount equal to three (3)
times the Executive's Salary;

               5.2.3  Business travel insurance;

               5.2.4  Contributory long-term disability insurance consistent
with Company policy; and

               5.2.5  Contributory short-term disability insurance consistent
with Company policy.

          5.3  Cash and Stock Bonuses; Stock Options.  The Company shall pay to
               -------------------------------------
the Executive an annual bonus of up to 25% of Salary for each year during the
Term of Employment," subject to achievement of specific performance milestones
set forth in the Company's Business Plan.  The Company shall pay to the
Executive an annual bonus of up to 35% of Salary for each year during the Term
of Employment," if such specific performance milestones are substantially
exceeded, as determined in good faith by the Board of Directors in its
discretion.

                                      -3-
<PAGE>

          5.4  Retirement Plan. The Company shall contribute an amount equal to
               ---------------
10% per year of the Executive's Salary to a non-qualified retirement plan
established for the benefit of the Executive.  Such contributions shall be made
on a quarterly basis.

          5.5  Vacation.  During the Term of Employment, the Executive shall be
               --------
entitled to four (4) weeks per year of vacation time, to be taken consistent
with the policies of the Company and the effective discharge of the Executive's
duties. Such vacation time shall accumulate from year to year, but the Executive
shall not be entitled to any payment with respect to any vacation time remaining
at the end of any year; provided however, that all accrued but unpaid vacation
                        -------- -------
pay shall be paid to the Executive upon any termination of the Executive's
employment. In addition, any such accrued vacation may be paid to the Executive
prior to termination upon the approval of the Board of Directors.

          5.6  Sick Leave; Holidays.  During the Term of Employment, the
               --------------------
Executive shall be entitled to sick leave and holidays in accordance with the
established policies of the Company from time to time in effect.

          5.7  Waiver of Compensation for Board Service.  The Executive waives
               ----------------------------------------
any right to receive additional compensation in respect of service as a director
of the Company or a member of any committees of the Board of Directors, and
agrees that the consideration set forth in this Agreement shall constitute
compensation for such services as may be requested of the Executive by the
Company.

          5.8  Legal Expenses for Review of this Agreement.  The Company agrees
               -------------------------------------------
to reimburse the Executive for all reasonable legal expenses incurred by him in
connection with the review, negotiation, and finalization of this Agreement.

     6.   ANNUAL REVIEW.
          -------------

          The Board of Directors of the Company shall conduct an annual review
of the Executive's performance, at which time the Board shall determine the
Executive's bonus, if any, for the previous year and the Salary for the
following year pursuant to Sections 5.3 and 2.1, respectively.

     7.   TERMINATION.
          -----------

          7.1  Death.  This Agreement shall be terminated by the death of the
               -----
Executive. In the event that the Executive's employment is terminated by reason
of death, the Executive's estate shall receive his accrued but unpaid Salary,
accrued but unpaid vacation pay, and benefits in accordance with the Company's
benefit plans, programs, and/or policies.

          7.2  Disability.  This Agreement may be terminated by the Board of
               ----------
Directors of the Company for "Disability" if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the Executive's duties hereunder on a full time basis for six (6)
months.  In the event that the Executive receives disability insurance benefits
paid for by the Company during any period prior to the termination of this
Agreement

                                      -4-
<PAGE>

by reason of Disability pursuant to this Section, the Executive's Salary shall
be reduced by an amount equal to such disability insurance benefits received
during such period. If the Executive's employment hereunder is terminated by
reason of Disability of the Executive, the Company shall give ten (10) days
written notice to that effect to the Executive in the manner provided herein. In
such case, the Executive shall receive as severance Salary for a period of
eighteen (18) months after the date of termination; provided, however, that the
                                                    --------  -------
severance payments payable hereunder by the Company to the Executive during such
eighteen-month period shall be reduced by an amount equal to any disability
insurance benefits paid for by the Company and received by the Executive during
such eighteen-month period, with such benefits being grossed-up for purposes of
such calculation by the amount necessary to make such payment equivalent on a
pre-tax basis to the Salary payments received by the Executive.

          7.3  For Cause.  The Company shall have the right to terminate the
               ---------
Executive's employment for Cause (as hereinafter defined). In the event that the
Executive's employment hereunder is terminated for Cause (as hereinafter
defined), the Company shall pay to the Executive only the Salary earned to the
date of termination and any accrued but unpaid vacation pay, and the Executive
shall not be entitled to any severance pay. For purposes of this Agreement,
"Cause" shall mean (i) conviction of any crime (whether or not involving the
Company) constituting a felony in the jurisdiction involved; (ii) engaging in
any substantiated act involving moral turpitude; (iii) gross neglect or
misconduct in the performance of Executive's duties hereunder; (iv) willful
failure or refusal to perform such duties as may reasonably be delegated to
Executive; or (v) material breach of any provision of this Agreement by
Executive; provided, however, that with respect to clauses (iii), (iv) or (v),
           --------  -------
Executive shall have received written notice from the Company setting forth the
alleged act or failure to act constituting "Cause" hereunder, and Executive
shall not have cured such act or refusal to act within thirty (30) days of his
actual receipt of notice.

          7.4  Termination Without Cause.  The Company may terminate the
               -------------------------
Executive's employment at any time without Cause.

               7.4.1  Termination on or before December 31, 2000.  If the
                      ------------------------------------------
Executive's employment is terminated under this Section 7.4 on or before
December 31, 2000, the Company shall provide the Executive with six (6) months'
notice of such termination and shall pay to the Executive, in lieu of any
further compensation and benefits for the balance of the Term and provided that
the Executive complies with paragraph 7.7, severance pay equal to the Salary
that the Executive would have otherwise received during the eighteen (18) month
period immediately following the effective date of the termination.

               7.4.2  Termination after December 31, 2000 but on or before
                      ----------------------------------------------------
December 31, 2001.  If the Executive's employment is terminated under this
-----------------
Section 7.4 after December 31, 2000 but before January 1, 2002, the Company
shall provide the Executive with twelve (12) months' notice of such termination
and shall pay to the Executive, in lieu of any further compensation and benefits
for the balance of the Term and provided that the Executive complies with
paragraph 7.7, severance pay equal to the Salary that the Executive would have
otherwise received during the eighteen (18) month period immediately following
the effective date of the termination.

                                      -5-
<PAGE>

               7.4.3  Termination after December 31, 2001 but on or before June
                      ----------------------------------------------------------
30, 2002.  If the Executive's employment is terminated under this Section 7.4
--------
after December 31, 2001 but before July 1, 2002, the Company shall provide the
Executive with eighteen (18) months' notice of such termination and shall pay to
the Executive, in lieu of any further compensation and benefits for the balance
of the Term and provided that the Executive complies with paragraph 7.7,
severance pay equal to eighteen (18) months of Salary following the effective
date of termination.

               7.4.4  Termination after June 30, 2002.
                      -------------------------------

                      7.4.4.1  If Company Has Previously Notified Executive of
                               ------------------------------------------------
Intent Not to Continue Employment.  If the Executive's employment is terminated
---------------------------------
under this Section 7.4 after June 30, 2002 and the Company has notified the
Executive pursuant to Section 2.2 of its intention not to continue the
Executive's employment, the Company shall pay to the Executive, in lieu of any
further compensation and benefits for the balance of the Term, as extended
pursuant to Section 2.2 of this Agreement, and provided that the Executive
complies with section 7.7, severance pay equal to the Salary the Executive would
have received for the balance of the Term plus severance pay equal to eighteen
(18) months of Salary payments, to be paid consecutively.

                      7.4.4.2  If Company Has Previously Notified Executive of
                               -----------------------------------------------
Intent to Continue Employment.  If the Executive's employment is terminated
-----------------------------
under this Section 7.4 after June 30, 2002 (but before the expiration of the
Term) and the Company has notified the Executive pursuant to Section 2.2 that it
intended to continue his employment, the Company shall provide the Executive
with eighteen (18) months' notice of such termination and shall pay to the
Executive, in lieu of any further compensation and benefits for the balance of
the Term and provided that the Executive complies with section 7.7, severance
pay equal to eighteen (18) months of Salary following the effective date of
termination; provided, however, if the parties fail to execute a written
             --------  -------
agreement by June 30, 2003 and the Company at any time thereafter terminates the
Executive's employment without Cause, the Company shall provide the Executive
with twelve (12) months' notice of such termination and shall pay to the
Executive, in lieu of any further compensation and benefits for the balance of
the Term and provided that the Executive complies with section 7.7, severance
pay equal to eighteen (18) months of Salary following the effective date of
termination.

                      7.4.4.3  If Company Has Previously Not Notified Executive
                               ------------------------------------------------
of Intent to Continue Employment.  If the Executive's employment is terminated
--------------------------------
under this Section 7.4 after June 30, 2002 and the Company has not notified the
Executive pursuant to Section 2.2 as to whether it intended to continue (or not
continue) his employment, the Company shall provide the Executive with eighteen
(18) months' notice of such termination and shall pay to the Executive, in lieu
of any further compensation and benefits for the balance of the Term, as
extended, and provided that the Executive complies with section 7.7, severance
pay equal to eighteen (18) months of Salary.

                                      -6-
<PAGE>

               7.4.5  Payment of Severance to Be Made in Installments.  The
                      -----------------------------------------------
severance pay under this Section 7.4 shall be paid in equal installments no less
frequently than on a monthly basis.

               7.4.6  Right to Severance Ceases upon Breach of Sections 8, 9,
                      -------------------------------------------------------
or 10. Notwithstanding anything to the contrary contained herein, in the event
-----
that the Executive shall breach Section 8, 9 or 10 of this Agreement and such
breach clearly is not insignificant, as determined by at least a two-thirds
majority of the Board of Directors of the Company, in addition to any other
remedies the Company may have in the event the Executive breaches this
Agreement, the Company's obligation pursuant to this Section to continue such
Salary shall cease and the Executive's rights thereto shall terminate and shall
be forfeited.

               7.4.7  Rights of the Company after Notice of Termination.
                      -------------------------------------------------
Notwithstanding any other provision of this Agreement, upon the Company's
notification of the Executive of the termination of his employment under this
Section 7, the Company shall be entitled (i) to hire a co-Chief Executive
Officer to serve concurrently with the Executive and perform some or all of the
functions previously performed by the Executive, as determined by the Board of
Directors in its sole discretion and (ii) to reduce or otherwise modify the
responsibilities of the Executive in its sole discretion.

          7.5  Termination by the Executive for Good Reason.  The Executive
               --------------------------------------------
shall have the right to terminate this Agreement for Good Reason. For purposes
of this Agreement, "Good Reason" shall be defined as (i) any material diminution
in the Executive's title or responsibilities or (ii) the Company's breach of
Section 4 of this Agreement, provided that such diminution or breach is not
cured within thirty (30) days after the Executive provides written notice of
such diminution or breach. If the Executive terminates his employment pursuant
to this Section, the Company shall pay to the Executive, in lieu of any further
compensation and benefits for the balance of the Term, severance pay equal to
the eighteen (18) months Salary. Severance pay under this Section shall be paid
in equal installments no less frequently than on a monthly basis.
Notwithstanding anything to the contrary contained herein, in the event that the
Executive shall breach Section 8, 9 or 10 of this Agreement and such breach
clearly is not insignificant, as determined by at least a two-thirds majority of
the Board of Directors of the Company, in addition to any other remedies the
Company may have in the event the Executive breaches this Agreement, the
Company's obligation pursuant to this Section to continue such Salary shall
cease and the Executive's rights thereto shall terminate and shall be forfeited.

          7.6  Termination by the Executive Without Good Reason. The Executive
               ------------------------------------------------
shall have the right to terminate this Agreement without Good Reason.  In the
event that the Executive terminates his employment with the Company without Good
Reason, the Company shall pay to the Executive only the Salary earned to the
date of termination and any accrued but unpaid vacation pay, and the Executive
shall not be entitled to any severance pay.

          7.7. No Further Liability; Release.  Payment made and performance by
               -----------------------------
the Company in accordance with this Section 7 shall operate to fully discharge
and release the Company and its directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and representatives from
any further obligation or liability with respect to

                                      -7-
<PAGE>

Executive's employment and termination of employment. Other than paying
Executive's Base Salary through the date of termination of Executive's
employment and making any severance payment pursuant to and in accordance with
this Section 7 (as applicable), the Company and its directors, officers,
employees, subsidiaries, affiliates, stockholders, successors, assigns, agents
and representatives shall have no further obligation or liability to Executive
or any other person under this Agreement. The Company shall have the right to
condition the payment of any severance pursuant to this Section 7 upon the
delivery by Executive to the Company of a release substantially similar to the
form attached as Exhibit B of any and all claims Executive may have against the
Company and its directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives arising out of or
related to Executive's employment by the Company and the termination of such
employment.

          7.8  Delivery of Resignations.  In the event that the Executive's
               ------------------------
services hereunder are terminated under any of the provision of this Agreement
(except Section 7.1), the Executive agrees that he will deliver his written
resignation as an officer and/or director of the Company to the Board of
Directors, such resignation to become effective as of the date of his final date
of employment as determined by the Board of Directors; provided, however, that
                                                       --------  -------
nothing herein shall be deemed to affect the provisions of Sections 8, 9, 10,
and 11 hereof. No severance payments under this Section 7 shall be made unless
the Board of Directors receives such written resignation.

     8.   DISCLOSURE OF INFORMATION:  INVENTIONS AND DISCOVERIES.
          ------------------------------------------------------

          The Executive shall promptly disclose to the Company all processes,
trademarks, inventions, improvements, discoveries and other information related
to the business of the Company (collectively "Developments") conceived,
developed or acquired by him alone or with others during the Term of Employment,
whether or not during regular working hours or through the use of materials or
facilities of the Company. All Developments shall be the sole and exclusive
property of the Company, and, upon request, the Executive shall promptly deliver
to the Company all drawings, sketches, models and other data and records
relating to the Developments. In the event that any such Development shall be
deemed by the Company to be patentable, the Executive shall, at the expense of
the Company, assist the Company in obtaining a patent or patents thereon and
execute all documents and do all such other acts and things necessary or proper
to obtain letters of patent and to invest in the Company full right, title and
interest in and to such Development.

     9.   NONDISCLOSURE.
          -------------

          9.1  Existence of Confidential Information.  The Company owns and has
               -------------------------------------
developed and compiled, and will develop and compile, certain proprietary
techniques and confidential information which have great value to its business
(referred to in this Agreement, collectively, as "Confidential Information").
Confidential Information includes not only information disclosed by the Company
to the Executive, but also information developed or learned by the Executive
during the course or as a result of employment with the Company, which
information shall be the property of the Company.  Confidential Information
includes all information that has or could have commercial value or other
utility in the businesses in which

                                      -8-
<PAGE>

the Company is engaged or contemplates engaging, and all information of which
the unauthorized disclosure could be detrimental to the interests of the
Company, whether or not such information is specifically labeled as Confidential
Information by such entity. By way of example and without limitation,
Confidential Information includes any and all information developed, obtained,
licensed by or to or owned by the Company concerning trade secrets, techniques,
know-how (including designs, plans, procedures, merchandising, marketing,
distribution and warehousing know-how, processes, and research records),
software, computer programs and designs, development tools, all proprietary
property, and any other intellectual property created, used or sold (through a
license or otherwise) by the Company, electronic data information know-how and
processes, innovations, discoveries, improvements, research, development, test
results, reports, specifications, data, formats, marketing data and plans,
business plans, strategies, forecasts, unpublished financial information,
orders, agreements and other forms of documents, price and cost information,
merchandising opportunities, expansion plans, budgets, projections, customer,
supplier, licensee, licensor and subcontractor identities, characteristics,
agreements and operating procedures, and salary, staffing and employment
information.

          9.2  Protection of Confidential Information.  The Executive
               --------------------------------------
acknowledges and agrees that in the performance of Executive's duties hereunder
the Company may disclose to and entrust the Executive with Confidential
Information which is the exclusive property of such entities and which the
Executive may possess or use only in the performance of the Executive's duties
to the Company. The Executive also acknowledges that Executive is aware that the
unauthorized disclosure of Confidential Information, among other things, may be
prejudicial to the Company's interests, an invasion of privacy and an improper
disclosure of trade secrets. The Executive shall not, directly or indirectly,
use, make available, sell, disclose or otherwise communicate to any corporation,
partnership or other entity, individual or other third party, other than in the
course of the Executive's assigned duties and for the benefit of the Company,
any Confidential Information, either during the Term or thereafter. In the event
the Executive desires to publish the results of the Executive's work for or
experiences with the Company through literature, interviews or speeches, the
Executive will submit requests for such interviews or such literature or
speeches to the Board of Directors of the Company at least fourteen (14) days
before any anticipated dissemination of such information for a determination of
whether such disclosure is in the best interests of the Company, including
whether such disclosure may impair trade secret status or constitute an invasion
of privacy. The Executive agrees not to publish, disclose or otherwise
disseminate such information without the prior written approval of the Board of
Directors of the Company.

          9.3  Delivery of Records, Etc.  In the event the Executive's
               -------------------------
employment with the Company ceases for any reason, the Executive will not remove
from the Company's premises without its prior written consent any records
(written or electronic), files, drawings, documents, equipment, materials and
writings received from, created for or belonging to the Company, including those
which relate to or contain Confidential Information, or any copies thereof.
Upon request or when employment with the Company terminates, the Executive will
immediately deliver the same to the Company.

                                      -9-
<PAGE>

     10.  NON-COMPETITION AND NON-SOLICITATION.
          ------------------------------------

          10.1  Non-competition.  The Executive recognizes the highly
                ---------------
competitive nature of the Company's business and that the Executive's position
with the Company and access to and use of the Company's confidential records and
proprietary information renders the Executive special and unique. The Executive
hereby agrees that, during the Term of Employment and for a period of one (1)
year after the termination of the Executive's employment with the Company for
any reason, the Executive shall not, directly or indirectly, own, manage,
operate, join, control, participate in, invest in or otherwise be connected or
associated with, in any manner, including as an officer, director, employee,
independent contractor, stockholder, member, partner, consultant, advisor,
agent, proprietor, trustee or investor, any Competing Business located in the
United States; provided, however, that ownership of 2% or less of the stock or
               --------  -------
other securities of a corporation, the stock of which is listed on a national
securities exchange or is quoted on The Nasdaq Stock Market, shall not
constitute a breach of this Section 10, so long as the Executive does not in
fact have the power to control, or direct the management of, or is not otherwise
associated with, such corporation.

          For purposes hereof, the term "Competing Business" shall mean any
business or venture which, directly or indirectly, engages in a business that
competes with the business of the Company.

          10.2  No Solicitation of Employment.  During the Term of Employment
                -----------------------------
and for a period of one (1) year thereafter, Executive shall not solicit or
encourage any employee of the Company to leave the Company for any reason, nor
assist any business in doing so, nor employ such an employee in a Competing
Business or any other business.

     11.  INSURANCE.
          ---------

          The Company shall have the right at its own cost and expense to apply
for and to secure in its own name, or otherwise, life, health or accident
insurance or any or all of them covering the Executive, and the Executive agrees
to cooperate with the Company in connection with the procurement of any such
insurance, and any claims thereunder.

     12.  REMEDIES FOR BREACH.
          -------------------

          The parties hereto agree that the Executive is obligated under this
Agreement to render personal services during the Term of Employment of a
special, unique, unusual, extraordinary and intellectual character, thereby
giving this Agreement special value, and, in the event of a breach or threatened
breach of any covenant of the Executive herein, the injury or imminent injury to
the value and the goodwill of the Company's business could not be reasonably or
adequately compensated in damages in an action at law. Accordingly, Executive
expressly acknowledges that the Company shall be entitled to specific
performance, injunctive relief or any other equitable remedy against the
Executive, without the posting of a bond, in the event of any breach or
threatened breach of any provision of this Agreement by the Executive
(including, without limitation, Sections 8, 9, and 10). Without limiting the
generality of the foregoing, if the Executive breaches or threatens to breach
Section 8, 9 or 10 of this Agreement, such breach or threatened breach will
entitle the Company, without posting of bond, to an

                                      -10-
<PAGE>

injunction prohibiting (i) the Executive from disclosing any Confidential
Information to any Competing Business; (ii) such Competing Business from
receiving from the Executive or using any such Confidential Information; and
(iii) the Executive from, indirectly or directly, owning, managing, operating,
joining, controlling, participating in, investing in or otherwise being
connected or associated with, in any manner, any such Competing Business. The
rights and remedies of the parties hereto are cumulative and shall not be
exclusive, and each such party shall be entitled to pursue all legal and
equitable rights and remedies and to secure performance of the obligations and
duties of the other under this Agreement, and the enforcement of one or more of
such rights and remedies by a party shall in no way preclude such party from
pursuing, at the same time or subsequently, any and all other rights and
remedies available to it.

     13.  ASSIGNMENT AND TRANSFER.
          -----------------------

          13.1 The Company. This Agreement shall inure to the benefit of and be
               -----------
enforceable by, and may be assigned by the Company to, any purchaser of all or
substantially all of the Company's business or assets, any successor to the
Company or any assignee thereof (whether direct or indirect, by purchase,
merger, consolidation or otherwise).

          13.2 The Executive.  The Executive's rights and obligations under
               -------------
this Agreement shall not be transferable by the Executive by assignment or
otherwise, and any purported assignment, transfer or delegation thereof shall be
void; provided, however, that if the Executive shall die, all amounts then
      --------  -------
payable to the Executive hereunder shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee or other designee or, if
there be no such designee, to the Executive's estate.

     14.  NOTICES.
          -------

          All notices required or permitted under this Agreement shall be in
writing and delivered by any method providing for proof of delivery.  Any notice
shall be deemed to have been given on the date of receipt.  Notices shall be
delivered to the parties at the following addresses until a different address
has been designated by notice to the other party:

          14.1  If to the Executive:

                Dale R. Pfost, Ph.D.
                4 Rosedale Way
                Pennington, NJ 08534

          14.2  If to the Company:

                Orchid BioSciences, Inc.
                303 College Road East
                Princeton, NJ 08540
                Attention: Chief Operating Officer

                                      -11-
<PAGE>

     15.  MISCELLANEOUS.
          -------------

          No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the Company and the Executive. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. Except for the guaranty attached hereto and made a part hereof,
no agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party or any other
party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New Jersey applicable in the case of agreements made
and entirely performed in such State. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated exclusively in the State and Federal courts located in the County of
Mercer, State of New Jersey. The aforementioned choice of venue is intended by
the parties to be mandatory and not permissive in nature, thereby precluding the
possibility of litigation between the parties with respect to or arising out of
this Agreement in any jurisdiction other than that specified in this paragraph.

     16.  VALIDITY.
          --------

          It is the intention of the Executive and the Company that the
provisions of this Agreement (including, without limitation, those of Sections
8, 9, 10 and 12 hereof) shall be enforced to the fullest extent permissible
under the laws and public policies of each jurisdiction in which such
enforcement is sought. The invalidity or enforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. If any tribunal of competent jurisdiction shall decide that any of the
provisions of this Agreement should be deemed illegal or unenforceable, then
only those provisions shall be deemed invalid (or shall be appropriately
modified to the maximum extent permissible in keeping with the intent of the
parties) and the remainder of this Agreement shall continue in full force and
effect.

     17.  SURVIVAL.
          --------

          The provisions of Sections 7 (regardless of the continuation of
Executive's Salary thereunder), 8, 9, 10, 12 and 17 hereof shall survive the
termination of this Agreement and shall be binding upon the Executive's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devises and legatees.

     18.  HEADINGS.
          --------

          The headings of this Agreement are for convenience of reference only
and are not part of the substance of this Agreement.

                                      -12-
<PAGE>

     19.  COUNTERPARTS.
          ------------

          This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be a original but all of which together will constitute
one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first above written.

EXECUTIVE                                    ORCHID BIOSCIENCES, INC.


/s/ Dale R. Pfost                            By: /s/ Sidney M. Hecht
--------------------                             ---------------------
Dale R. Pfost, Ph.D.                             Name:  Sidney M. Hecht
                                                 Title Director

                                      -13-
<PAGE>

                                   Exhibit A
                                   ---------

          1.   The option to purchase 100,000 shares of the Company's common
stock at $1.25 per share issued to the Executive on December 10, 1999,
shall vest in equal increments monthly over a period of four years; provided,
                                                                    --------
however, vesting shall accelerate upon any acquisition of the Company.
-------

          The options to purchase 630,000 shares of the Company's common stock
issued to the Executive on February 2, 2000, include:

          2.   The option to purchase 270,000 shares at $6.00 per share, which
shall vest in equal increments monthly over a period of four years; provided,
                                                                    --------
however, vesting shall accelerate upon any acquisition of the Company.
-------

          3.   The option to purchase 120,000 shares at $6.00 per share, which
shall vest if and when the price of Orchid Biocomputer stock exceeds $16 within
the period between 6 and 18 months immediately following the Company's initial
public offering ("IPO") and is sustained for 45 trading days thereafter
(trailing 45-day average); provided, however, vesting shall accelerate if any
                           --------  -------
acquisition of the Company occurs with a stock or equivalent purchase price of
at least $16 per share.

          4.   The option to purchase 120,000 shares at $6.00 per share, which
shall vest if and when the price of Orchid Biocomputer stock exceeds $32 within
the period between 6 and 30 months immediately following the IPO and is
sustained for 45 trading days thereafter (trailing 45-day average); provided,
                                                                    --------
however, vesting shall accelerate if any acquisition of the Company occurs with
-------
a stock or equivalent purchase price of at least $32 per share.

          5.   The option to purchase 120,000 shares at $6.00 per share, which
shall vest if and when the price of Orchid Biocomputer stock exceeds $64 within
the period between 6 and 42 months immediately following the IPO and is
sustained for 45 trading days thereafter (trailing 45-day average); provided,
                                                                    --------
however, vesting shall accelerate if any acquisition of the Company occurs with
-------
a stock or equivalent purchase price of at least $64 per share.

          To the extent permitted under the Internal Revenue Code and any other
applicable law, the options described above shall be Incentive Stock Options.
<PAGE>

                                   EXHIBIT B
                                   ---------

                    SEVERANCE AGREEMENT AND GENERAL RELEASE

     WHEREAS, ______________ (the "Employee") is an employee of Orchid
Biosciences, Inc. ("Orchid"); and

     WHEREAS, the Employee is being terminated from employment with Orchid for
___________; and

     WHEREAS, the Employee is entitled to certain severance benefits identified
in an Employment Agreement dated _____, 2000 (the "Employment Agreement"); and

     WHEREAS, the severance benefits under the Employment Agreement are
contingent upon the execution of this Severance Agreement and General Release
(the "Agreement").

     NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the Employee and Orchid agree as follows:

1.   Last Day of Employment.  The Employee's last day of employment with Orchid
     ----------------------
     will be _____________, ______ (the "Termination Date").

2.   General Benefits.  Upon the Termination Date the Employee will be entitled
     ----------------
     to the following general benefits:

     a.   All salary and wages through the Termination Date will be paid in
          accordance with Orchid's normal payroll procedure or in a single lump
          sum payment, as determined within the discretion of Orchid.

     b.   The Employee is entitled to accrued vacation pay, totaling $_________,
          which will be included in the Employee's final paycheck for the period
          ending on the Termination Date.

     c.   The Employee is entitled to elect to receive continuation health
          coverage under the Consolidated Omnibus Budget Reconciliation Act of
          1985 ("COBRA") after the Employee's Termination Date, which is the
          date of a "qualifying event" under COBRA.

     d.   All group-term life insurance, long-term disability, short-term
          disability, and other welfare benefits terminate in accordance with
          the provisions of all plans.  The Employee may be entitled to
          individual conversion privileges under the various policies.  Orchid
          will provide information to the Employee regarding all individual
          conversion rights.

     e.   The Employee's entitlement, if any, to a distribution of all benefits
          under the Orchid

                                       1
<PAGE>

          Profit Sharing and Section 401(k) Plan (the "Section 401(k) Plan"),
          will be made in accordance with the provisions of the Section 401(k)
          Plan.

     f.   The Employee will be entitled to state unemployment benefits, if any,
          in accordance with the rules for the State of the Employee's
          employment.

3.   Severance Benefits.  Orchid will provide the Employee with a severance
     ------------------
     benefit equal to all severance benefits identified in Section 7 of the
     Employment Agreement.

     All severance benefits will be paid by and in accordance with the Company's
     normal payroll procedures.  However, no severance benefits will be paid
     until after 8 days after receipt of an executed copy of this Agreement by
     Orchid, and the return of all property to Orchid, as provided in Section 5.
     Severance benefits will also be reduced to the extent of any advance
     payments, for any excess expense reimbursements, and for any amounts owed
     to Orchid by the Employee.

     Notwithstanding any provision to the contrary, the payment of any severance
     benefits will not be treated as extending the Employee's employment for any
     employee benefit or employment purposes.

4.   Adequate Consideration.  The Employee agrees that the severance benefit
     ----------------------
     identified in Section 3 is adequate and sufficient consideration for the
     Employee's execution of the General Release set forth below.

5.   Return of Property.  To the extent the Employee is in the possession of any
     ------------------
     Orchid property, including personal computers ("PCs"), fax machines,
     scanners, copiers, cellular phones, Orchid credit cards, and any Orchid
     documents, correspondence and related corporate materials, the Employee
     will return all property to Orchid on or before the Termination Date.

6.   Expense Accounts and Reports.  The Employee will be allowed to submit a
     ----------------------------
     final expense reports and accountings to Orchid within 2 weeks after the
     Termination Date, and will receive all necessary reimbursements from
     Orchid.

7.   General Release.  The Employee agrees to fully release and forever
     ---------------
     discharge Orchid, its successors, assigns and any related companies, and
     their respective shareholders, officers, employees, agents and directors,
     from all claims or demands the Employee may have arising out of or related
     to the Employee's employment or termination with Orchid, including claims
     of which the Employee is unaware and claims which are not specifically
     released and identified below.  These claims include, but are not limited
     to, claims arising under the Constitution of the United States, a release
     of any rights or claims the Employee may have under the Age Discrimination
     in Employment Act of 1967 as amended ("ADEA"), 29 U.S.C. 621 et seq., which
                                                                  -- ---
     prohibits age discrimination in employment; Title VII of the Civil Right
     Act of 1964, as amended, 42 U.S.C. 2000(e) et seq., which prohibits
                                                -- ---
     discrimination in employment based on race, color, national origin,
     religion or sex; the Civil Rights Act of 1966, 42 U.S.C. 1981 et seq.; the
                                                                   -- ---
     Equal Pay Act, which prohibits paying men and women

                                       2
<PAGE>

     unequal pay for equal work; or any other federal, state or local laws or
     regulations prohibiting employment discrimination; Employee Retirement
     Income Security Act, 29 U.S.C. 1001 et seq.; Executive Orders 11246 and
                                         -- ---
     11141; the Constitution of the State of New Jersey or any other states in
     which the Employee resides or works; any New Jersey or other state laws
     against discrimination; any claims of breach of public policy of the State
     of New Jersey or other state, negligence, breach of contract, wrongful
     discharge, constructive discharge, breach of an implied covenant of good
     faith and fair dealings; any express or implied contracts with Orchid or
     any related companies; any federal or state common law and any federal,
     state or local statutes, ordinances and regulations. The Employee further
     waives any claim or right to payment of any attorney's fees or expenses.

     Notwithstanding any provisions to the contrary, this release does not
     include a release of (a) the Employee's rights under this Agreement; or (b)
     the Employee's right, if any, to individual conversion privileges under any
     medical, dental, long term disability, life insurance, and other welfare
     program.

8.   No Future Lawsuits.  The Employee agrees that the Employee will not file,
     ------------------
     or permit to be filed in the Employee's name or on the Employee's behalf,
     any lawsuit or administrative claim against any of the person or entities
     released in this Agreement based upon any act or event that is the subject
     matter of this Agreement and which occurred before the effective date of
     this Agreement.

9.   Non-Admission of Liability.  The use of this Agreement by Orchid does not
     --------------------------
     signify any liability by Orchid or any related companies to provide any
     benefits.

10.  Period for Review and Consideration of Agreement.  The Employee understands
     ------------------------------------------------
     that the Employee will be given a period of 21 days to review and consider
     this Agreement before signing it.  The Employee further understands that
     the Employee may wait up to 21 day period prior to signing the Agreement,
                  --------
     or may also execute the Agreement prior to the expiration of the 21 day
                                       --------
     review period.

11.  Older Workers Benefit Protection Act.  The Company is not required to
     ------------------------------------
     provide the Employee with any demographic information required by the Older
     Workers Benefit Protection Act of 1990, due to the individual nature of
     this termination. [To confirm based upon future facts and law.]

12.  Encouragement to Consult Attorney.  The Employee is encouraged to consult
     ---------------------------------
     with an attorney before signing this Agreement.

13.  Right to Revoke Agreement.  The Employee may revoke this Agreement within 7
     -------------------------
     days of the Employee's signing of this Agreement.  If this Agreement has
     not been revoked within such 7 day period it becomes effective on the 8th
     day.  Revocation can be made by delivering a written notice of revocation
     to Sarajane N. Mackenzie, Vice President of Human Resources.  For this
     revocation to be effective, written notice must be received by Orchid no
     later than close of business on the 7th day after the Employee signs this
     Agreement.  If the Employee fails to sign this Agreement or revokes this
     Agreement, it will not be effective

                                       3
<PAGE>

     or enforceable and the Employee will not receive the severance benefit
     described in Section 3 of this Agreement.

14.  Confidentiality of Terms.  The Employee and Orchid agree that the terms of
     ------------------------
     this Agreement are confidential and will not be disclosed to any person
     without the written consent of Orchid, except to the Employee's legal and
     tax advisors and members of the Employee's immediate family, or to the
     extent required by law.  However, the Employee agrees and acknowledges that
     this Agreement may be introduced as evidence by Orchid in the event the
     Employee commences any legal, administrative, judicial or arbitration
     proceeding against Orchid.

15.  Non-Defamation.  The Employee agrees that he will not, directly or
     --------------
     indirectly, in public or private, deprecate, impugn or otherwise make any
     remarks that would tend to or be construed to tend to defame Orchid or its
     reputation, nor will the Employee assist any other person, firm or company
     in engaging in such activities.  Orchid also agrees not to engage in any
     activities, directly or indirectly, that would defame the Employee, or his
     reputation.

16.  Entire Agreement.  This document, constitutes the entire Agreement between
     ----------------
     the Employee and Orchid, concerning the subject matter hereof.  Orchid has
     made no promises to the Employee other than those in this Agreement,
     concerning the subject matter hereof.  This Agreement supersedes all prior
     agreements and understandings between the parties with respect to such
     subject matters, except as provided in Section 20 below.

17.  Severability Clause.  If any one or more provisions contained in this
     -------------------
     Agreement will, for any reason, be held to be invalid, illegal or
     unenforceable in any respect, such invalidity, illegality or
     unenforceability will not affect any other provision of this Agreement, but
     this Agreement will be construed as if such invalid, illegal or
     unenforceable provision had never been contained herein.

18.  No Release of Future Claims.  This Agreement does not waive or release any
     ---------------------------
     rights or claims that the Employee may have under the Age Discrimination in
     Employment Act which arise after the effective date of the Agreement, if
     applicable.

19.  Reference.  Reference inquiries from prospective employers will be handled
     ---------
     by only verifying the Employee's dates of employment and last position held
     with Orchid.

20.  Employment Agreement.  Notwithstanding any provisions to the contrary, all
     --------------------
     provisions of the Employment Agreement that survive the termination of the
     Employment Agreement shall continue in full force and effect, including any
     confidentiality, nonsoliciation and other provisions.

21.  New Jersey Law.  The Employee and Orchid agree that this Agreement and any
     --------------
     interpretation thereof will be governed by the laws of the State of New
     Jersey, except as preempted by ERISA.

     THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ THIS

                                       4
<PAGE>

     AGREEMENT, UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT.

                                   EMPLOYEE



___________________  _____________________________
Dated

                           ORCHID BIOSCIENCES, INC.



___________________ By:____________________________
Dated


For internal use:

     Date Delivered to Employee: _______, ______.

     21 Day Period for Consideration Ends:  _______________________

     Date signed:  ______________

     7-Day Period for Revocation Ends:  ______________________

                                       5