Exhibit 10.1

Embrex, Inc.

Short-Term Incentive Plan

1. Purpose. This Short-Term Incentive Plan (this “Plan or “STIP”) was
established by Embrex, Inc. (the “Company”) to enable the Company to continue to
attract, retain, and motivate employees by providing Participants significant
incentive compensation for meeting and exceeding the Company’s Adjusted EPS
Growth Rate and other financial performance targets. Basing a portion of each
eligible Employee’s potential incentive pay on the overall performance of the
Company as measured by the Company’s Adjusted EPS Growth Rate allows the Company
to better align the interests of the Company’s employees with those of the
Company’s shareholders, furthers the overall strategic objectives of the
Company, and adds additional economic value to the Company and its shareholders.

2. Effective Date. The initial effective date of the Plan shall be July 20,
2006. Although the performance criteria may change or be adjusted from year to
year, the Plan will remain in effect from year to year (each calendar year shall
be referred to herein as a “Plan Year”) until such time as the Plan is amended
or terminated in writing by the Company’s Board of Directors as provided in
Section 11 or the occurrence of a Change in Control as provided in Section 8.

3. Definitions. The following terms shall have the meanings ascribed to such
terms in this Section unless the context clearly requires otherwise:

“Adjusted Earnings” for a given Plan Year shall be equal to the reported Net
Income for the Plan Year, except in extraordinary circumstances as determined by
the Plan Administrator, in the Plan Administrator’s sole discretion. For
purposes of computing Adjusted Earnings for the 2006 Plan Year only, the
following items shall be added to Net Income:

(1) all after-tax severance-related expense recognized in earnings in the
applicable calendar year in connection with major corporate restructurings; and

(2) all after-tax stock-based compensation expense recognized in 2006 earnings
in excess of all such expense recognized in 2005 earnings.

“Adjusted EPS” for a given Plan Year shall be computed by the Plan
Administrator, in the Plan Administrator’s sole discretion, by dividing Adjusted
Earnings for said Plan Year by the number in the denominator of the fraction
used for calculating said Plan Year’s Diluted EPS as computed in accordance with
generally accepted accounting principles.

“Adjusted EPS Growth Rate” shall be computed by the Plan Administrator, in the
Plan Administrator’s sole discretion, as follows: (Adjusted EPS for the
applicable Plan Year divided by the Adjusted EPS for the immediately preceding
Plan Year) minus 1.

“Award” and “Awards” shall mean any of the payments that may be paid to
Participants pursuant to this Plan.

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“Board” shall mean the Board of Directors of the Company.

“Cause” for purposes of this Plan shall mean (i) the willful and continued
failure by a Participant to perform substantially his or her duties with the
Company (other than any such failure resulting from Participant’s disability)
for a significant period of time, or (ii) the willful engaging by a Participant
in gross misconduct materially and demonstrably injurious to the Company.

“Change in Control” shall have the meaning set forth in Section 8 hereof.

“Company” shall mean Embrex, Inc., a North Carolina corporation, and its wholly
owned subsidiaries.

“Company-Level Multiplier” shall have the meaning set forth in Section 6(a)
hereof.

“Executive Award Pool” shall have the meaning set forth in Section 6(b)(1)
hereof.

“Executive Participant” shall mean the current or former President or any
current or former Vice President of the Company who is eligible to participate
in this Plan.

“Net Income” for a given Plan Year shall mean the Company’s net income for that
particular Plan Year as computed in accordance with generally accepted
accounting principles and reported in the Company’s financial statements for the
applicable Plan Year.

“Non-Executive Award Pool” shall have the meaning set forth in Section 6(c)(1)
hereof.

“Non-Executive Participant” shall mean any current or former employee of the
Company who is eligible to participate in this Plan and who is not deemed to be
an Executive Participant.

“Notice Letter” shall mean a letter issued to a Participant by the Company under
the direction of the Board setting forth the Participant’s Target Award
Percentage. Notice Letters shall only be issued to those Participants for whom
the Board has established a Target Award Percentage other than five percent
(5%).

“Participant” shall mean any Executive Participant or Non-Executive Participant.

“Plan” shall mean this Short-Term Incentive Plan.

“Plan Administrator” shall mean the Board of Directors of the Company or the
Board’s duly appointed delegate for such purposes.

 

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“Plan Year” shall mean a calendar year consisting of the 12-month period
beginning each January 1st and ending each December 31st.

“Preliminary Award” shall have the meaning set forth in Section 6(a) hereof.

“STIP” shall mean this Short-Term Incentive Plan.

“Target Award” for a given Participant shall mean the sum of all the
Participant’s actual base pay or wages paid by the Company to the Participant
for an applicable Plan Year multiplied by the Participant’s individual Target
Award Percentage. For such purposes, the term “base pay” shall not include any
other incentive plan payments, bonuses, commissions, or other similar amounts
and shall be determined based on amounts of base pay actually paid during the
applicable calendar year. In the event a Participant has not worked the entire
Plan Year, base pay shall be calculated based on the amount actually paid during
the Plan Year and not the Participant’s annualized base pay.

“Target Award Percentage” for a given Participant shall mean five percent
(5%) unless otherwise established by approval of the Board and communicated to
the applicable Participant in a Notice Letter.

4. Eligibility/Plan Entry. Each executive officer (i.e., the President and Vice
Presidents) of the Company hired on or before the first business day in October
of the applicable Plan Year shall automatically be considered an Executive
Participant eligible to participate in the Plan. In addition, the Board (or the
Board’s delegate for purposes of determining Plan eligibility for Non-Executive
Participants) may, in the Board’s (or its delegate’s) complete and sole
discretion, designate any other employee hired on or before the first business
day in October of a Plan Year to participate in the Plan for said Plan Year.

5. Administration of the Plan. The Plan shall be administered by the Board or
the Board’s duly appointed delegate. On an annual basis, the Board (or its
delegate) shall designate the Non-Executive Participants eligible to participate
and determine the applicable Adjusted EPS Growth Rate, Company-Level Multiplier,
individual Participants’ Target Award Percentages and such other Company
performance criteria necessary to provide for incentive compensation under the
Plan. The Board shall also review and approve any proposed amendments to the
Plan as the Board, in the Board’s sole discretion, deems necessary and
appropriate from time to time. The Board shall have sole discretion to
administer, construe, and interpret the terms of the Plan, resolve disputes
arising in the operation of the Plan, and to establish such rules as it deems
necessary for handling special situations or circumstances which develop in the
administration of the Plan. Notwithstanding any other provisions of this Plan to
the contrary, the Board shall have authority, in the Board’s sole discretion, to
provide for payment of prorated Awards under the Plan to Participants (or
Participants’ beneficiaries) following a Participant’s involuntary separation
from service with the Company other than for Cause and in cases of separation
from service due to a Participant’s retirement, death, or disability. The Board
shall make any and all factual and legal determinations in connection with the
administration and interpretation of the Plan. The Board’s decisions will be
final and binding on all parties, including the Company, the respective
Participants, their beneficiaries or heirs, other employees, and Company
shareholders.

 

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6. Computation and Allocation of Awards.

(a) Preliminary Awards. A Participant’s preliminary award (the “Preliminary
Award”) for a given Plan Year shall be computed by multiplying the Participant’s
Target Award established for said Plan Year by the company-level multiplier (the
“Company-Level Multiplier”) corresponding to the Company’s Adjusted EPS Growth
Rate as established and communicated by the Board (or its delegate) for a given
Plan Year. (See attached Exhibit A, as amended from time to time, for applicable
Plan Year Company-Level Multiplier.)

(b) Executive Award Pool.

(1) Computation. The executive award pool (“Executive Award Pool”) shall equal
the sum of the Preliminary Awards for all Executive Participants.

(2) Allocation. After reviewing the annual performance appraisals of each
Executive Participant, the Board, in the Board’s sole discretion, shall have the
authority to make a discretionary adjustment increasing or decreasing each
Executive’s Preliminary Award under the Plan in allocating the entire Executive
Award Pool among the Executive Participants. Final allocations of the Executive
Award Pool shall be paid to each Executive Participant, to the extent eligible
to receive an allocation, in a lump sum cash payment as soon as administratively
practicable following the Board’s review and computation of the Executive Award
Pool but in no event shall such Awards be paid later than two and one-half (2
1/2) months following the end of the applicable Plan Year.

(c) Non-Executive Award Pool.

(1) Computation. The non-executive award pool (“Non-Executive Award Pool”) shall
equal the sum of the Preliminary Awards for all Non-Executive Participants.

(2) Allocation. After reviewing the annual performance appraisals of each
Non-Executive Participant, the President of the Company, in the President’s sole
discretion, shall have the authority to make individual discretionary
adjustments increasing or decreasing each Non-Executive Participant’s
Preliminary Award under the Plan in allocating the entire Non-Executive Award
Pool among Non-Executive Participants. Final allocations of the Non-Executive
Award Pool shall be paid to each Non-Executive Participant, if determined to be
eligible for such an allocation, in a lump sum cash payment as soon as
administratively practicable following the President’s review and computation of
the Non-Executive Award Pool for the applicable Plan Year but in no event shall
such Awards be paid later than two and one-half (2 1/2) months following the end
of the applicable Plan Year.

(d) Administrative Discretion. In making decisions regarding employees’
participation in the Plan and/or allocation of Awards under the Plan, the Board
(or the President for purposes of allocating the entire Non-Executive Award Pool
among Non-Executive Participants) may consider any factors the Board (or
President, as applicable) deems relevant.

 

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(e) Withholding Taxes. Payments made under this Plan shall be subject to all
withholdings required at the time of such allocations under any income tax or
other laws, whether of the United States or any state, municipality or other
taxing authority.

7. Termination of Employment; Forfeiture of Unpaid Awards. Awards shall not be
considered earned under this Plan unless and until paid. A Participant must
remain employed with the Company through the end of the Plan Year for which a
particular Award is to be paid in order to be eligible to receive an Award for
that Plan Year. Notwithstanding the foregoing, the Board, in the Board’s sole
discretion, may provide for prorated payment of Awards for a given Plan Year to
any Participant whose employment is terminated during the applicable Plan Year:
(i) due to the Participant’s retirement, death, or disability;
(ii) involuntarily by the Company without Cause; or (iii) due to other special
circumstances. If a Participant who was continuously employed by the Company
through the end of a particular Plan Year resigns or otherwise voluntarily
terminates his or her employment with the Company or if the Company terminates
the Participant’s employment for Cause at any time following the close of the
Plan Year through the time Awards for such Plan Year are actually paid, the
Participant shall forfeit all of his or her rights, title and interest in and to
any Awards under the Plan for the given Plan Year and the Company shall have no
obligation thereafter to pay any Award to such Participant.

8. Change in Control. In the event of a “Change in Control” of the Company, as
such term is then defined in the Company’s most recently executed Change in
Control Severance Agreement with any of its officers, the current Plan Year
shall end on the date of said Change in Control and the Company-Level Multiplier
to be applied for the portion of such Plan Year that elapsed up through the date
of the Change in Control shall be prorated in a corresponding fashion and Awards
under the Plan shall be paid to Participants on a pro rata basis in accordance
with the terms of this Plan subject to the Board’s general discretion under
Sections 5 and 6 hereof.

9. Participant Access to Company’s Financial Information. Participation in the
Plan by a Participant does not entitle him or her to any greater access to the
Company’s financial records and related information than the Participant had
prior to participating in the Plan.

10. Dispute Resolution. This Section 10 sets forth the exclusive procedure to be
followed by all Participants in resolving disputes involving Awards or potential
Awards under this Plan. All disputes relative to a given Plan Year must be
presented to the Board within thirty (30) days following the payment date of the
Award for that Plan Year or the Participant’s right to dispute such a payment
will be irrevocably waived. Any Participant with a concern or potential dispute
with respect to an Award under the Plan shall be given an opportunity to present
his or her concerns regarding the disputed Award to the Board. A decision will
be rendered by the Board within ten (10) business days of the meeting. The Chair
of the Board will be responsible for preparing a written version of the decision
to be communicated to the Participant. The decision by the Board regarding the
matter shall be final and binding on all Plan Participants.

11. Amendment or Termination of this Plan. Upon notice to the affected
Participants, the Board shall have the right to amend or terminate this Plan at
any time. Awards under this Plan are not earned or vested unless and until paid
to Participants. Amendments may be applied retroactively to the beginning of the
then current Plan Year, but shall not affect Awards related to Plan Years that
were completed prior to the time of amendment.

 

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12. Miscellaneous.

(a) Nothing contained in this Plan guarantees the continued employment of a
Participant with the Company and in no way constitutes a contract of employment.
The Plan shall not change the status of any Participant’s employment or the
Company’s policies regarding termination of employment. The employment of those
Participants who are employees is, and shall continue to be, at-will employment
unless such employment is otherwise subject to the terms and conditions set
forth in a Participant’s individual employment agreement.

(b) No Award hereunder may be assigned, pledged, mortgaged or hypothecated and,
to the extent permitted by law, no such Award shall be subject to legal process
or attachment for the payment of any claims against any Participant entitled to
receive the same.

(c) The provisions of the Plan shall be construed according to the laws of the
State of North Carolina.

 

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