Document:

<PAGE>

         [CONFIDENTIAL TREATMENT REQUESTED. CERTAIN PORTIONS OF THIS
    AGREEMENT HAVE BEEN REDACTED AND SEPARATELY FILED WITH THE COMMISSION]

                                                                   EXHIBIT 10.16

                  XENOGEN CORPORATION and TACONIC FARMS, INC.

                               License Agreement

 1.       Parties
          -------

          1.1 TACONIC Farms, Inc., a New York corporation, having a principal
place of business at 273 Hover Avenue, Germantown, New York 12526 USA
(hereinafter "TACONIC").

          1.2 XENOGEN Corporation, a California corporation, having a principal
place of business at 860 Atlantic Avenue, Alameda, California 94501 USA
(hereinafter "XENOGEN").

2.        Background
          ----------

          2.1 TACONIC and XENOGEN wish to enter into this agreement (hereinafter
"Agreement"), to develop and market Imaging Transgenic Animals and in
furtherance of an ongoing strategic relationship in the field of transgenic
animal models.

          2.2 TACONIC is the exclusive sub-licensee of U.S. Patent Nos.
4,740,470,5,464,764 and 5,487,992 (Capecchi et al., titled "Techniques for
Selection of Homologous Recombination") to sell animals created using this
technology. TACONIC is also a licensee of U.S. Patent No. 4,873,191 (Wagner
and Hoppe titled "Genetic Transformation of Zygotes") to sell animals created
using this technology. TACONIC has successfully marketed and promoted over forty
transgenic animal lines to the biomedical research community and is in the
business of breeding, producing and distributing animals for laboratory and
research purposes.

          2.3 XENOGEN is the exclusive licensee of U.S. Patent Number 5,650,135,
directed to the detection of light emitted from a source within the body of a
mammal (hereinafter the "Imaging Technology"). For the purposes of this
Agreement, Imaging Technology includes the technology described and claimed in
U.S. Patent Number 5,650,135, and any continuations,' continuations-in-part,
divisional, reissues, reexaminations, extensions and foreign counterparts
thereof. XENOGEN has the expertise to develop Imaging Transgenic Animals (as
defined

                                                                               1
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below) and wishes to market Imaging Transgenic Animals and related in vivo
imaging applications to biomedical researchers.

The parties agree as follows:

3.        Definitions

          3.1. "End Users" shall mean any entity, except XENOGEN, who has
                ---------
ordered and received Imaging Transgenic Animal through TACONIC pursuant to this
Agreement.

          3.2 "TACONIC Production Costs" shall mean cost of breeding services as
               ------------------------
defined under "Emerging Models Program" in Exhibit B. for a given model during a
given period of time.

          3.3 "Imagine Transgenic Animals" shall mean animals transgenic for a
               --------------------------
single luminescence reporter gene, as specified in Exhibit C, suitable for real
time in vivo imaging using the Imaging Technology.

          3.4 "Net Model Sales" shall mean the gross receipts of TACONIC from
               ---------------
any sale, lease, or any other permitted transaction of Imaging Transgenic
Animals less any discounts; allowance and credits to End-Users that are
customary in the trade and actually given; packing/crating and insurance
charges; and any sales and use taxes actually paid by TACONIC.

          3.5 "Research Purposes" shall mean the use of Imaging Transgenic
               -----------------
Animals in activities which are non-revenue producing, and specifically excludes
any commercial use. The term "commercial use" includes, without limitation, the
screening of compounds (e.g., for efficacy, toxicity, pharmacological
characteristics, or environmental impact) either by the End User or as part of a
service contract performed by or for a third party, profits stemming from sale,
lease, or other commercial distribution of the Imaging Transgenic Animals or
tissues derived therefrom.

          3.6 "Commercial Licensees List" shall mean a list of commercial
               -------------------------
entities which are licensed by XENOGEN to use Imaging Technology.

                                                                               2
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          3.7 "Non-Profit Entities List" shall mean a list of entities which
               ------------------------
XENOGEN has determined to have Non-Profit status for the purposes of obtaining a
Non-Profit Imaging License and/or a Non-Profit Material Transfer Agreement
(hereinafter "Non-Profit MTA").

          3.8. "Commercial End User" shall mean an End User who appears on the
                -------------------
then-current version of the Commercial Licensees List.

          3.9. "Non-Profit End User" shall mean an End User who appears on the
                -------------------
then-current version of the Non-Profit Entities List.

          3.10. "Requestor" shall mean an entity who requests to lease or
                 ---------
purchase an Imaging Transgenic Animal from TACONIC.

4.        Grant of Rights
          ---------------

          4.1 Make,Breed and Use. XENOGEN grants to TACONIC a worldwide license
              ------------------
to make, breed, and use Imaging Transgenic Animals, and a worldwide license to
use Imaging Technology solely for quality control purposes in the making and
breeding of such Imaging Transgenic Animals. Nothing in this Agreement shall be
construed to give TACONIC any right to carry out pharmaceutical research (on
behalf of itself or third parties) using Imaging Transgenic Animals.
Non-limiting examples of pharmaceutical research include the screening of
compounds (e.g., for target validation, efficacy, toxicity, pharmacological
characteristics, or environmental impact), mapping of pathways, and any other
research not directly related to performing quality control for purposes of
making and breeding the Imaging Transgenic Animals. TACONIC grants to XENOGEN a
worldwide license to make, breed and use Imaging Transgenic Animals, for
subsequent distribution by TACONIC, under U.S. Patent Nos. 4,740,470, 5,464,764,
5,487,992, and 4,873,191 and any and all continuations, continuations-in-part,
extensions, divisions, or reissues of such patents.

          4.2 Lease, Distribute, Use, and Sale. XENOGEN grants to TACONIC the
              --------------------------------
sole right to lease, distribute and sell Imaging Transgenic Animals to
End-Users, subject to the conditions of Articles 4 and 5 herein.

                                                                               3
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          4.3 Title to Imaging Transgenic Animals. The parties agree that all
              -----------------------------------
Imaging Transgenic Animals made pursuant in this Agreement shall be owned
exclusively by XENOGEN.

5.        Conditions of Transfer of Imaging Transgenic Animals to Third Parties
          ---------------------------------------------------------------------

          5.1 In response to a request to lease or purchase an Imaging
Transgenic Animal, TACONIC shall determine whether the entity seeking to
purchase the Imaging Transgenic Animal is on either the Commercial Licensees
List or the Non-Profit Entities List. If the entity is not on either list,
TACONIC shall contact XENOGEN for instructions on how to proceed. If the entity
is on one of the lists, TACONIC may proceed with the sale of Imaging Transgenic
Animals to the entity under the conditions contained in this Article 5.

          5.2 Prior to the lease or sale of an Imaging Transgenic Animal to an
entity on the Non-Profit Entities List, TACONIC will forward copies of the
Non-Profit MTA and the Non-Profit Imaging License to the Requestor for
execution. Upon receipt at TACONIC, copies of executed MTA's and Imaging
Licenses will be forwarded to XENOGEN for review and execution. TACONIC will not
distribute any Imaging Transgenic Animals to the Requestor until the Requestor
has returned to TACONIC an executed copy of the MTA and the Imaging License (by
fax or otherwise). Subsequent distributions to Non-Profit End Users who have
executed MTAs and Imaging Licenses will he made upon request, provided that no
subsequent distributions will be made to those End Users who XENOGEN has
identified in writing to TACONIC as in breach of an agreement or understanding
with XENOGEN.

          5.3 TACONIC may lease or sell Imaging Transgenic Animals to entities
by the then-current Commercial Licensees List. Upon the lease or sale of an
Imaging Transgenic Animal to an entity on the Commercial Licensees List, TACONIC
will forward copies of the purchase order and invoice to XENOGEN. TACONIC shall
not provide any Imaging Transgenic Animals to any commercial entity that is not
on the most current Commercial Licensees List.

                                                                               4
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6.       Obligations of Parties
         ----------------------

         TACONIC will provide the following development, quality assurance and
marketing support for Imaging Transgenic Animal lines developed pursuant to this
Agreement. The Imaging Transgenic Animal lines are to be obtained directly from
XENOGEN. The Imaging Transgenic Animal lines will be determined by XENOGEN and
listed in Attachment C.

         6.1 TACONIC will:

         .  Cesarean or embryo-transfer derived Imaging Transgenic Animals.

         .  Maintain a foundation colony under defined flora conditions to
            supply breeders to the production colony.

         .  Maintain a production colony in an Isolated Barrier Unit under
            Murine Pathogen Free conditions.

         .  Use reasonable efforts to inform the biomedical research community
            about the Imaging Transgenic Animals. Such efforts include but are
            not limited to; attending relevant trade shows, sending mailers to
            researchers, a listing in TACONIC Product Guide and a listing in the
            TACONIC Website.

         .  Provide initial technical advice to End-Users regarding the origin,
            use and characteristics of Imaging Transgenic Animals.

         .  Refer requesting End-Users to XENOGEN for technical assistance
            regarding imaging equipment and procedures for imaging
            animals.

         .  Process orders and distribute animals to End-Users.

          6.2 XENOGEN will:

          . Provide or arrange for provision to TACONIC an appropriate number of
            each Imaging Transgenic Animal line for derivation by TACONIC.

                                                                               5
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     .    Upon TACONIC's request XENOGEN will train TACONIC personnel on how to
          perform the necessary genotypic and phenotypic assays to quality
          assure the Imaging Transgenic Animals.

     .    Refer to TACONIC all Requestors for Imaging Transgenic Animals.

     .    Provide technical assistance in producing marketing literature
          for the Imaging Transgenic Animals.

     .    Provide technical assistance to End-Users regarding imaging equipment
          and procedures for imaging animals.

     .    Provide to TACONIC, and update as necessary, the Commercial Licensees
          List and the Non-Profit Entities List.

7.   Supply and Pricing
     ------------------

     7.1  TACONIC's initial list price for leasing Imaging Transgenic Animals
will be established by XENOGEN with input from TACONIC.

8.   Royalties, Payments and Reports
     -------------------------------

     8.1  For the licenses and rights granted hereunder TACONIC agrees to pay
XENOGEN a royalty (the "Royalty") which shall be equal to * * * of the Net Model
Sales for Imaging Transgenic Animals leased or sold by TACONIC from the
commencement of the Agreement through the most recent reporting period.

     8.2  TACONIC shall report to XENOGEN in writing within sixty (60) days
after the end of each quarter (i) the quantities of each Imaging Transgenic
Animal subject to royalty during said quarter and the Net Model sales thereon
and (ii) TACONIC Production Costs for the same period. With said reports,
TACONIC shall pay to XENOGEN any royalties due XENOGEN in accordance with
Section 8.1 above.

* * *  CONFIDENTIAL TREATMENT REQUESTED

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     8.3  Royalty reports and payments shall be sent to:

          XENOGEN Corporation
          860 Atlantic Avenue
          Alameda, CA 94501
          Attention: President

     8.4  Within thirty (30) days after receiving the reports and payments in
accordance with Section 8.2 above, XENOGEN shall pay to TACONIC any Production
Costs due TACONIC.

     8.5  At the commencement of this Agreement and within 60 days after the end
of each quarter XENOGEN shall provide TACONIC with a report of the licensed
users of Imaging Transgenic Animal technology.

     8.6  TACONIC shall keep adequate records in sufficient detail to enable
the royalties due from TACONIC hereunder to be determined.

9.   Representations and Warranties.
     ------------------------------

     9.1  XENOGEN represents and warrants to TACONIC that it is the exclusive
licensee of the Imaging Technology and that it has the right, power and
authority to grant the sub-licenses set forth in this Agreement.

     9.2  TACONIC represents and warrants to XENOGEN that it has the right,
power and authority to grant the sub-licenses set forth in this Agreement.

     9.3  XENOGEN represents and warrants that the Imaging Transgenic Mice
supplied to TACONIC under this Agreement shall conform to the definition of
Imaging Transgenic Animals as set forth herein.

     9.4  TACONIC represents and warrants that the Imaging Transgenic Mice sold
or leased to End Users shall conform to the definition of Imaging Transgenic
Animals as set forth herein.

                                                                               7
<PAGE>

10.  Termination
     -----------

     10.1 Term. This Agreement shall be effective as of the last date of its
          ----
execution and, unless earlier terminated upon mutual agreement of the Parties or
in accordance with the provisions of this Article 10, this Agreement shall
continue in force for a period of ten (10) years.

     10.2 Termination by XENOGEN. Upon any material breach or default of this
          ----------------------
Agreement by TACONIC, XENOGEN shall have the right to terminate this Agreement
upon thirty (30) days written notice to TACONIC. Unless TACONIC shall have cured
any such breach prior to the expiration of such thirty (30) day period, the
termination shall become effective upon expiration of such thirty (30) day
period.

     10.3 Termination by TACONIC. Upon any material breach or default of this by
          ----------------------
XENOGEN, TACONIC shall have the right to terminate this Agreement upon thirty
(30) days written notice to XENOGEN. Unless XENOGEN shall have cured any such
breach prior to the expiration of such thirty (30) day period, the termination
shall become effective upon expiration of such thirty (30) day period.

     10.4 Consequences of Termination. Upon termination of this Agreement for
          ---------------------------
any reason other than expiration, the licenses granted under this Agreement
terminate immediately, provided, however, that nothing herein shall be construed
to release either party from any obligation that accrued or matured prior to the
effective date of such termination.

11.  Miscellaneous
     -------------

     11.1 Assignment. This Agreement may not be assigned by either party
          ----------
without the prior written consent of the other party, except in connection with
the sale of all or substantially all of the business to which this Agreement
pertains. Any permitted assignee must agree in writing to be bound by the terms
and conditions of this Agreement prior to such assignment. For the purposes of
this Section 11.1, an "assignment" shall include any change in control of a
party whereby another person or entity acquires fifty percent (50%) or greater
ownership of such party.

     11.2 Notices. Any notices or other communications required or
          -------
permitted under this Agreement shall be in writing, shall specifically refer to
this Agreement, and shall be sent by

                                                                               8
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hand, recognized national overnight courier, first class mail, or confirmed
facsimile transmission to the addresses of the parties set forth on the first
page of this Agreement. Any such notice or communication shall be effective upon
receipt.

     11.3 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE
          -----------------------
FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES
OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER TACONIC OR XENOGEN
SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY OF THE FOREGOING.

     11.4 Governing Law. This Agreement and all disputes arising out of or
          -------------
related to this Agreement, or the performance, enforcement, breach or
termination hereof, and any remedies relating thereto, shall be construed,
governed, interpreted and applied in accordance with the laws of California,
U.S.A., without regard to conflict of laws principles, except that questions
affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent shall have been granted.

     11.5 Force Majeure. No party will be responsible for delays resulting
          -------------
from causes beyond the reasonable control of such party, including without
limitation fire, explosion, flood, war, strike, or riot, provided that the
nonperforming party uses commercially reasonable efforts to avoid or remove such
causes of nonperformance and continues performance under this Agreement with
reasonable dispatch whenever such causes are removed.

     11.6 Amendment and Waiver. This Agreement may be amended, supplemented, or
          --------------------
otherwise modified only by means of a written instrument signed by all parties.
Any waiver of any rights or failure to act in a specific instance shall relate
only to such instance and shall not be construed as an agreement to waive any
rights or fail to act in any other instance, whether or not similar.

     11.7 Severability. In the event that any provision of this Agreement
          ------------
shall be held invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect any

                                                                               9
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other provision of this Agreement, and the parties shall negotiate in good faith
to modify the Agreement to preserve (to the extent possible) their original
intent.

     11.8  Binding Effect. This Agreement shall be binding upon and inure to
           --------------
the benefit of the parties and their respective permitted successors and
assigns.

     11.9  Headings. All headings are for convenience only and shall not affect
           --------
the meaning of any provision of this Agreement.

     11.10 Entire Agreement. This Agreement, together with its Appendices,
           ----------------
constitutes the entire agreement between the parties with respect to its subject
matter and supersedes all prior agreements or understandings between the parties
relating to its subject matter.

IN WlTNESS WHEREOF, the parties have duly executed this Agreement the day and
year set forth below.

XENOGEN                                      TACONIC FARMS, INC.

By /s/ Pamela Reilly Contag                  By /s/ Samuel G. Phelan
   --------------------------                   ----------------------------

Name Pamela Reilly Contag                    Name  Samuel G. Phelan
     ------------------------                     --------------------------

Title President                              Title Treasurer
      -----------------------                      -------------------------

Date  12/29/99                               Date  1/13/00
      -----------------------                      -------------------------

                                                                              10
<PAGE>

                                  Exhibit A
                                  Agreements

                    Non-Profit Material Transfer Agreement

     This Agreement is entered into by and between _______________ (hereinafter
"INVESTIGATOR") at __________________ (hereinafter "INSTITUTION") and Xenogen
Corporation, 860 Atlantic Avenue, Alameda, CA 94501 (hereinafter "XENOGEN"), in
connection with Investigator's purchase of Imaging Transgenic Animals from
Taconic Farms, Inc. (hereinafter "TACONIC").

1.   The animals that are covered by this Agreement (the "Materials") include:

     (a)  ** TACONIC to fill in specific name(s) of Imaging Transgenic Animals
**, and

     (b)  Any substantially similar animals or progeny of the animals or other
biological material (including associated know-how and data) that is replicated
or derived therefrom by INVESTIGATOR or his co-workers and that could not have
been made but for the Materials, know how, or data supplied by XENOGEN or
TACONIC.

     The Materials listed above are considered proprietary to XENOGEN. XENOGEN
shall retain all title and interest in and to the Materials, and shall be free,
in its sole discretion, to distribute the Materials to others and to use it for
its own purposes.

2.   The Materials shall not be transferred to others without the express
written consent of XENOGEN. The Materials may not be used for any commercial
purpose without the express written consent of XENOGEN.

3.   INVESTIGATOR and INSTITUTION shall not distribute or release the Materials
to any person other than laboratory personnel under INVESTIGATOR's direct
supervision and shall ensure that no one will be allowed to take or send these
Materials to any other location unless written permission is obtained from
XENOGEN. Neither the Materials nor any biological Materials treated therewith or
derived therefrom will be used in human beings.

4.   INVESTIGATOR and INSTITUTION agree that nothing herein shall be deemed to
grant to either any rights under any XENOGEN patents nor any rights to use the
Materials nor any products or processes involving the Materials for profit-
making or commercial purposes. The Materials will not be used in research that
is subject to consulting or licensing obligations to another for profit
institution, corporation or business entity unless written permission is
obtained from XENOGEN.

5.   THE MATERIALS ARE EXPERIMENTAL IN NATURE AND ARE PROVIDED WITHOUT WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY,
EXPRESS OR IMPLIED. XENOGEN MAKES NO REPRESENTATION OR WARRANTY THAT THE USE OF
THE MATERIALS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

                                                                              11
<PAGE>

6.   In no event shall XENOGEN be liable for any use by INVESTIGATOR or
INSTITUTION of the Materials or any loss, claim, damage or liability, of
whatsoever kind or nature, which may arise from or in connection with this
Agreement or the use, handling or storage of the Materials by INVESTIGATOR or
INSTITUTION.

7.   INVESTIGATOR will use the Materials in compliance with all applicable laws
and governmental regulations, including current NIH guidelines for work with
recombinant DNA.

8.   Either party has the right to terminate this Agreement at any time, in
which case INVESTIGATOR and INSTITUTION will discontinue within thirty (30) days
the use of the Materials unless a new agreement between the parties is
established. If no new Agreement is established between the parties,
INVESTIGATOR and INSTITUTION agree, upon direction of XENOGEN, to return or
destroy the Materials. Paragraphs 1,5,6 and 8 shall survive any termination of
this agreement.

9.   This Agreement shall be effective as of the last date signed by the parties
below. The rights and obligations of the Investigator under this Agreement shall
not be assignable without the prior written consent of Xenogen. This Agreement
constitutes the entire agreement between the parties relating to the subject
matter hereof. No modification of this Agreement shall be effective unless the
modification is in writing and signed by an authorized representative of each
party. This Agreement and the rights of the parties shall be determined in
accordance with the laws of the State of California. without reference to
principles of conflicts of law.

     XENOGEN CORPORATION                     INVESTIGATOR

Name:  ____________________________     Name:  ____________________________

Title: ____________________________     Title: ____________________________

Signed:____________________________     Signed:____________________________

Date:  ____________________________     Date:  ____________________________

     INSTITUTION

Name:  ____________________________

Title: ____________________________

Signed:____________________________

Date:  ____________________________

                                                                              12
<PAGE>

                     Non-Profit Imaging License Agreement

     This Agreement is entered into by and between ________________ (hereinafter
"INVESTIGATOR") at _______________ (hereinafter "INSTITUTION") and XENOGEN
Corporation, 860 Atlantic Avenue, Alameda, CA 94501 (hereinafter "XENOGEN"), in
connection with INVESTIGATOR's purchase of (*TACONIC fill-in*) (hereinafter
"Imaging Transgenic Animals") from TACONIC Farms, Inc. (hereinafter "TACONIC").

     XENOGEN has a proprietary interest in certain technology suitable for non-
invasive in vivo imaging of light from mammals as claimed in U.S. Patent Number
5,650,135 (hereinafter "Imaging Technology").

     In the event that the INVESTIGATOR wishes to use the Imaging Technology to
detect light emitted from the Imaging Transgenic Animals, XENOGEN agrees to
provide the INVESTIGATOR with a limited license to the Imaging Technology under
the following conditions:

     1.  As of the effective date of this Agreement, XENOGEN grants to the
INVESTIGATOR a non-exclusive, non-transferable, royalty-free license ("License")
to detect light emitted from the Imaging Transgenic Animals using the Imaging
Technology solely for non-profit educational and non-commercial academic
research purposes at the INSTITUTION. The License is not transferable to any
other animal(s) sold by TACONIC or to any cell, organism or animal produced by
or for INVESTIGATOR. THE INVESTIGATOR SHALL NOT USE, OR KNOWINGLY PERMIT THE USE
OF, THE IMAGING TRANSGENIC ANIMALS IN CONNECTION WITH THE WAGING TECHNOLOGY FOR
ANY EXPERIMENTS OR ACTIVITY WHERE A FOR-PROFIT ORGANIZATION FUNDS, IN WHOLE OR
IN PART, SUCH ACTIVITIES OR POSSESSES ANY PRESENT OR FUTURE INTELLECTUAL
PROPERTY OR CONTRACT RIGHT IN SUCH ACTIVITIES, UNLESS EXPRESS PRIOR WRITTEN
CONSENT IS OBTAINED FROM XENOGEN.

     2.  This Agreement shall be effective as of the last date signed by the
parties below. The rights and obligations of the INVESTIGATOR under this
Agreement shall not be assignable without the prior written consent of XENOGEN.
This Agreement constitutes the entire agreement between the parties relating to
the subject matter hereof. No modification of this Agreement shall be effective
unless the modification is in writing and signed by an authorized representative
of each party. This Agreement and the rights of the parties shall be determined
in accordance with the laws of the State of California, without reference to
principles of conflicts of law.

     XENOGEN CORPORATION                     INVESTIGATOR

Name:  _________________________         Name:  _________________________

Title: _________________________         Title: _________________________

Signed:_________________________         Signed:_________________________

Date:  _________________________         Date:  _________________________

                                                                              13
<PAGE>

                  Applicable Patents and Patent Applications

Knockout Models

Knockout models are produced and distributed under rights to United States
Patent Nos. 5,464,764 and 5,487,992, 4,237,224, 4,468,464 and 4,740,470.

Transgenic Models

Transgenic Models are produced and distributed under right to United States
Patent Nos. 4,873,191; 4,237,224; 4,468,464 and 4,740,470.

TSG-p53(R), pim-1, TSG-p53(R)/Big Blue(R) mouse

These models are produced and distributed under rights to United States Patent
Nos. 4,736,866; 5,087,571; 5,569,824; Patent/Applications Nos. 484,723
(Canada); 85 304490.7 (EEC); and 60-134452 (Japan)

Imaging Transgenic Animals.

The detection and/or imaging of light originating within mammals is covered by
U.S. Patent Number $5,650,135, assigned to Stanford University and exclusively
licensed by XENOGEN Corporation, Alameda, CA.

                                                                              14
<PAGE>

                                    EXHIBIT B
                           TACONIC TRANSGENIC EXCHANGE
                        Breeding Services Unit Price List

                           PROPRIETARY MODELS PROGRAM

DERIVATION & QUARANTINE SERVICES:
--------------------------------

  QUARANTINE:
   HEALTH PROFILE DETERMINATION PROGRAM: (Isolator holding 12 mouse cages
    (minimum of two pairs per line plus 2 mice to be used as sentinels)
                                                         $2,600/effort
                                 $270/week after completion of 6 week program

   DONOR HOLDING/EXPANSION BREEDING: (Quarantined Microisolator maintenance of a
    line for purposes of breeding expansion to generate adequate numbers of
    donors prior to derivation)
                                                        $200/mouse line/week
                                                        $350/rat line/week

  DERIVATIONS: (Pricing for all Derivations assume that sufficient quantities of
  donor mice are provided within the appropriate age ranges so the derivation
  can commence the week following arrival of the mice.

   QUICK VIRUS FREE EMBRYO TRANSFER (all donors are discarded immediately after
     transfer, customer must ship additional donors if first derivation attempt
     is unsuccessful, breeding of derived pups not done until after complete
     health clearance):

                                                         $3,200/effort

   QUICK DEFINED FLORA EMBRYO TRANSFER (all donors are discarded immediately
     after transfer, customer must ship additional donors if first derivation
     attempt is unsuccessful, breeding of derived pups not done until after
     complete health clearance):

                                                         $4,100/effort

   VIRUS FREE EMBRYO TRANSFER (Donors are not discarded until after derived
     pups are weaned, derived pups may be bred pending complete health
     clearance)
                                                         $5,500/effort

   DEFINED FLORA EMBRYO TRANSFER (Donors are not discarded until after derived
     pups are weaned, derived pups may be bred pending complete health
     clearance):
                                                         $6,000/effort

   GERM FREE CESAREAN DERIVATION: (Donors are not discarded until after derived
     pups are weaned, derived pups may be bred pending complete health
     clearance):
                                                   Mice  $7,500/effort
                                                   Rats  $10,000/effort

                                                                              15
<PAGE>

ONGOING COLONY MAINTENANCE:
--------------------------

    HUSBANDRY:
     GNOTOBIOTIC ISOLATOR (12 mouse cages) Foundation Colony: $270/isolator/week

     VIRUS FREE PRODUCTION:
           Mouse Cage                                         $13.25/week
           Rat Cage                                           $22.00/week

     MPF PRODUCTION:
           Mouse Cage                                         $9.25/week
           Rat Cage                                           $18.00/week

    GENOTYPING & BIOPSIES:
       BIOPSY COLLECTION: (includes biopsy collection, pedigree log preparation
       and sorting based on genotype results)
           Tails:                                             $ 1.90/mouse
           Blood (price dependent on quantity & processing
           procedures):                                       $ 6.75/mouse

       BIOPSY PACKAGING & SHIPPING:
           wet ice in standard vials                          $50.00/package
           dry ice in standard vials                          $75.00/package

       DNA ASSAYS FOR GENOTYPING & GENETIC CHARACTERIZATION
           DNA Profile Characterization, two enzymes-two
            probes                                            $175/mouse
           One-time Fee for Setup of Southern Blot Assay      $975.00 minimum
           One-time Fee for Setup of Slot Blot or PCR assay   $50.00 minimum
           Southern Blot Analysis ($550 minimum)              $50.00/sample
           Slot Blot Assay ($325 minimum)                     $28.00/sample
           PCR Assay ($200 minimum)                           $23.00/sample
          See current Commercial Price List for further details on quantity
           discounts

    ORDER PROCESSING & SHIPMENTS
           Order Processing for shipments to Investigator Lab no charge
           Order Processing for shipments to Third Parties    $30.00/shipment
           Order Processing for International Shipments       $50.00/shipment
           TTC Shipping Cage                                  $22.00/TTC
           TTC Dividers                                       $2.75/divider
           Delivery:                                          Commercial Rates

CRYOPRESERVATION:
----------------
           Pilot Program                                      $800/line
           Long-term Cryopreservation (per embryo price)      determined by
                                                               Pilot Program

           Annual Storage Fee
                  up to 500 embryos                           $175/year

                                                                              16
<PAGE>

   ---------------------------EMERGING MODELS PROGRAM-------------------------

          Unit Prices for the Emerging Model Program are the same as those for
          the Proprietary Models Program except for the following items:

   DERIVATION & QUARANTINE SERVICES: (50% discount)
   ------------------------------------------------

        QUICK DEFINED FLORA EMBRYO TRANSFER (all donors are discarded
         immediately after transfer, customer must ship additional donors if
         first derivation attempt is unsuccessful, breeding of derived pups not
         done until after complete health clearance):
                                                                 $2,050/effort

        DEFINED FLORA EMBRYO TRANSFER (Donors are not discarded until after
         derived pups are weaned, derived pups may be bred pending complete
         health clearance):
                                                                 $3,000/effort

        GERM FREE CESAREAN DERIVATION: (Donors are not discarded until after
         derived pups are weaned, derived pups may be bred pending complete
         health clearance):
                                                            Mice $3,750/effort
                                                            Rats $5,000/effort

   ONGOING COLONY MAINTENANCE: (10% discount)
   ---------------------------
     HUSBANDRY:
      MPF PRODUCTION:
        Mouse Cage                                                $ 8.30/week
        Rat Cage                                                  $16.00/week

     GENOTYPING & BIOPSIES:
      DNA ASSAYS FOR GENOTYPING & GENETIC CHARACTERIZATION
        Southern Blot Analysis ($550 minimum)                     $50/sample
        Slot Blot Assay ($325 minimum)                            $28/sample
        PCR Assay ($200 minimum)                                  $23/sample

   MODEL PROMOTION & DISTRIBUTION
   ------------------------------
     Taconic is reimbursed for marketing and applicable licensing costs based
     upon the number of animals shipped to Third Parties and the cost recovery
     fee paid by Third Parties

       MARKETING FEE                        20% of cost recovery fees invoiced
                                            to third parties

       PATENT LICENSING ROYALTIES           % varies depending upon applicable
                                            licensing

     All Order Processing and Shipment costs (as specified above) are paid by
     Third Party end users.

     MATERIAL TRANSFER AGREEMENT ADMINISTRATION
     Models distributed with no MTA                      no charge
     Models distributed under Label License              $ l0.00/order
     Models distributed under executed MTA               $ 30.00/order

                                                                              17
<PAGE>

                                   EXHIBIT C

                        IMAGING TRANSGENIC ANIMAL LINES

--------------------------------------------------------------------------------
Line Name
--------------------------------------------------------------------------------
 1.
 2.
 3.
 4.
 5.
 6.
 7.
 8.
 9.
 10
--------------------------------------------------------------------------------

                                                                              18<PAGE>

         [CONFIDENTIAL TREATMENT REQUESTED. CERTAIN PORTIONS OF THIS
    AGREEMENT HAVE BEEN REDACTED AND SEPARATELY FILED WITH THE COMMISSION]

                                                                   EXHIBIT 10.17

                               LICENSE AGREEMENT
                               -----------------

         This Agreement made this 13th day of June, 1985 between the Ohio
University, a body politic incorporated under the laws of the State of Ohio
having its principal office at Athens, Ohio 45701 (hereinafter "Licensor"), and
Embryogen, Inc., a corporation under the laws of the State of Ohio having its
principal office at One President Street, Athens, Ohio 45701 (hereinafter
"licensee").

         WHEREAS, Licensor and Licensee have entered into a License Agreement
dated November 1, 1984, which granted a nonexclusive license to Licensee for the
purpose of developing and commercializing the technology embodied in a patent
application, U.S. Serial No. 273.239, filed June 12, 1981, entitled Genetic
Transformation of Zygotes, and more specifically described as embryonic nuclear
insertion gene transfer technology (hereinafter referred to as the "Invention");

         WHEREAS, Licensor and Licensee intend to terminate the November 1,
1984 License Agreement and enter into this Agreement in lieu thereof;

         WHEREAS, Licensor desires to grant an exclusive license to Licensee,
subject to a certain limited license heretofore granted to Genetic Engineering
(hereinafter referred to as the "Genetic Engineering License"), and subject to
certain terms and conditions set forth below, for the purpose of developing the
technology claimed in the patent application for commercial purposes; and

         WHEREAS, Licensee desires to obtain an exclusive license from
Licensor, excluding the rights granted under the Genetic

<PAGE>

Engineering License and subject to the terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and the sum of $10.00 paid by Licensee to Licensor,
the receipt of which is hereby acknowledged, the parties hereto agree as
follows:

     A.   LICENSOR'S AND LICENSEE'S RIGHTS.

     1.   License. The Licensor grants to the Licensee the exclusive,
          -------
nontransferable right and license to manufacture, use, market, sell, and
otherwise commercialize the Invention and its improvements throughout the world.
Such license includes the right to grant sublicenses upon terms consistent with
this Agreement. The exclusive right and license herein granted shall apply to
all inventions, improvements, patent applications, letters patent, trade
secrets, know-how or proprietary information which the Licensor now owns or
controls, or hereafter shall own or control, relating to the Invention,
including the patent application, U.S. Serial No. 273.239, filed June 12, 1981,
entitled Genetic Transformation of Zygotes.

     2.   Exclusion. The exclusivity of this license is subject to the rights
          ---------
granted in the Genetic Engineering License, a copy of which is available for
inspection at the offices of Licensor. This exclusion shall apply to only such
rights as are granted therein and Licensee shall have all other rights for its
exclusive use and employment.

     3.   Improvements. Should Licensor make any improvements in the Invention
          ------------
or the manner of using the same, it is hereby agreed that Licensee shall be
entitled to use the same with all
<PAGE>

rights which are hereby granted with respect to the Invention. The term,
"improvements", shall mean all modifications, enhancements and changes in or
with respect to the Invention, including the manufacture, use and the
application of the Invention.

     4.   Royalties.
          ---------

          (a)  Licensee shall pay to Licensor the following royalty payments:

               (i)  A royalty equivalent to * * * of the net sales made, if any,
by Licensee on any product produced from Licensee's use of the Invention
referred to above for the term of this Agreement; and

               (ii) A royalty equivalent to * * * of the royalties, rents, fixed
payments or other payments actually received, if any, by Licensee, under
licenses, sublicenses, and distribution, marketing, or exploitation agreements
with others regarding the Invention and any products produced therefrom.

          (b)  "Net Sales" shall refer to the invoice price and dollars charged
by Licensee for all products sold using the information contained in the
Invention which is the subject matter of this Agreement, excluding the
following:

               (i)   Any common carrier charge for transportation of said
product, to the extent included in such invoice price as a separately stated
charge;

               (ii)  Credit given or allowances made by Licensee on account of
returns, replacement, defects or renegotiation of the invoice price of the
product sold hereunder;

               (iii) Any sales, excise, use or ad valorem taxes

* * *  CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

and any direct governmental charges assessed on the manufacture, sales or
delivery of said product and included in such invoice price as a separately
stated charge;

          (iv) Any price paid by any subsidiary or affiliate controlled by
Licensee, if said subsidiary or affiliate purchased the product; and

          (v)  Any insurance, packing charges, rate discounts, normal and
customary trade, cash, and quantity discounts actually allowed, or commissions
to local or foreign agents to the extent that they are separately stated on the
invoice.

      (c) "Payments actually received" shall mean cash received or funds
deposited to the account of Licensee in which Licensee has an unrestricted right
of access and right to use the funds so paid.

      (d) Royalties shall be due and payable annually on or before April 30
for the previous fiscal year (December 31) and Licensee agrees to render with
each royalty payment a written statement setting forth the total net sales and
payments actually received that are subject to the aforesaid royalty.

      (e) Licensee shall keep, and cause to be kept, detailed accurate
records and books of accounts showing the information necessary for accurate
determination of royalties to be paid under this Agreement. Licensee agrees to
allow Licensor and its representatives to make reasonable inspections and
examinations of Licensee's operation, books and records as they relate to this
particular license, but no more than once per year.
<PAGE>

          5. Disclosure. Promptly upon request by Licensee, Licensor shall fully
             ----------
disclose to Licensee all available information concerning the practice of the
Invention.

          B. PATENT APPLICATION AND USE OF THE LICENSE

          1. Patent Prosecution. Licensor agrees to prosecute domestic and
             ------------------
foreign patent applications at its expense concerning the Invention and any
improvements hereto licensed to Licensee by Licensor pursuant to this Agreement.

          2. Right to Sublicense. Licensee shall have the right to sublicense
             -------------------
any of its rights granted hereunder to any person, firm or corporation
wheresoever situated.

          3. Marketing Disclosure. From time to time, Licensee agrees to consult
             --------------------
with Licensor concerning the plans relating to the proposed marketing of the
subject matter of the Invention and to inform Licensor as to the progress being
made in the development for the ultimate commercial exploitation of the
Invention.

          4. Assignment. The Licensee shall not have the right to assign this
             ----------
Agreement without the prior written consent of the Licensor, unless such
assignment shall be to an entity in which Licensee owns a controlling interest.

          C. LICENSOR'S RESERVED RIGHTS.

          Licensor reserves the right to continue research and development of
the Invention, including assigning research rights and engaging in other funded
research regarding the Invention and the subject matter of the Invention.
Licensor shall not commercialize, sell, assign or otherwise transfer any right
or information regarding the Invention for the purpose of commercial

                                      -5-
<PAGE>

practice of the Invention without the prior written consent of Licensee, which
consent may be withheld for any reason whatsoever. Licensor shall prevent the
disclosure of trade secrets and other proprietary information regarding the
Invention and it shall require any person, firm or corporation to whom it shall
make an authorized disclosure to enter into a confidentiality agreement in form
satisfactory to Licensee.

     D.   TERM

     1.   Events of Termination. This Agreement shall continue until the
          ---------------------
expiration of the last patent on the Invention and its improvements, subject to
the following:

     (a)  The Invention shall enter the public domain due to any reason
whatsoever;

     (b)  In the event of default or the breach of any term or condition of this
Agreement by the Licensee, the Licensor may terminate this Agreement on 90 days
written notice provided that the Licensee shall have a period of 90 days from
the date of receipt of such notice within which to cure any default or breach.
In the event such default or breach is cured, the termination shall be withdrawn
by the Licensor;

     (c)  In the event of default or breach by Licensor, the same provisions
shall apply as for the Licensee in the foregoing subparagraph.

     2.   Termination Procedure. Upon termination of this Agreement for any
          ---------------------
cause, the Licensee shall duly account to the Licensor and shall transfer to
Licensor all rights which it may possess and sublicenses, letters patents,
inventions, trade names, and trademarks relating to the Invention and
improvements
<PAGE>

thereto.

     3.   Effects of Termination. In the event of termination of this Agreement,
          ----------------------
the following shall occur:

          (a)  Unless otherwise prohibited by law, upon the termination of this
Agreement, Licensee shall have the right to complete any and all contracts for
the sales of products containing the Invention or improvements that it may have
upon its book or that it has become obligated for, and Licensee shall pay the
royalties as herein provided; provided that all contracts and sales are
completed within six (6) months after the termination of this Agreement;

          (b)  Licensee shall provide in any sublicense of the rights granted in
this Agreement that, upon the request of Licensor, Licensee shall have the right
and power to assign, and shall forthwith assign to Licensor all rights, title
and interest in, to and under the sublicense agreement between Licensee and its
sublicensees and that after any such assignment Licensor shall be entitled to
the royalties and other compensation payable by the sublicensees pursuant to the
terms of the sublicense and Licensor shall be subrogated to the rights and
liabilities of Licensee. In the event such sublicense grants rights to other
inventions and improvements owned or controlled by other persons, firms or
corporations in addition to the rights to the Inventions and improvements
granted hereunder, Licensor shall only be assigned a share of the compensation
payable under such sublicense. Such share shall be in proportion to the ratio of
the royalty amount Licensor would have received under this Agreement to the
total amount payable by Licensee to all
<PAGE>

licensors, including Licensor, as a result of Licensee's sublicense;

     (c)  Subject to the foregoing requirements regarding the completion of
contracts, upon the termination of this Agreement for whatever reason, Licensee
shall return any and all information in its possession regarding the Invention
or improvements;

     (d)  Due to the unique nature of the Invention and improvements and the
irreparable harm to the Licensor should Licensee continue to propagation of the
Invention or improvements embodied in the Licensee's products, Licensor is
authorized and entitled to obtain from any court of competent jurisdiction
restraining orders and preliminary and permanent injunctive relief, as well as
an equitable accounting of all profits and benefits arising out of any such
occurrence, prohibiting Licensee from thereafter using, raising, selling,
propagating or otherwise disseminating the Invention or improvements. The
restraining orders and injunctive relief shall allow Licensee to complete
certain of its sales contracts as provided heretofore and to require Licensee
and its sublicensees to immediately sell, if possible without further
propagation or use, all products containing the Invention or improvements or
otherwise assure Licensor that there will be no further use or propagation of
the Invention or improvements;

     (e)  At the option of Licensee, and in lieu of the foregoing equitable
remedy prohibiting the use and propagation of the Invention or improvements,
Licensee may elect to pay liquidated damages in the amount of two and one half
(2.5) times
<PAGE>

the present value of the stream of royalty income Paid to Licensor over a 5 year
period and amortized at a ten percent (10%) discount rate. The yearly royalty
payment for the stream of income shall be the highest yearly royalty for any one
calendar year during the preceding three (3) years. In such event, Licensee
shall continue to receive the rights and benefits granted under this Agreement.

          E. INFRINGEMENT.

          1. Licensee to Defend. The Licensee shall defend infringement suits
             ------------------
that may be brought against Licensee or Licensor on account of the manufacture,
use, or sale of-the-Invention and improvements thereto and when information is
brought to its attention indicating that others, without license, are unlawfully
infringing on the rights granted in this Agreement, Licensee shall prosecute
diligently the infringer.

          2. Cooperation. Licensor shall cooperate and assist Licensee at the
             -----------
request of Licensee in the defense of any infringement or the prosecution of any
unlawful infringer.

          3. Expenses. Licensor shall, to the extent of the royalties to be
             --------
received hereunder, indemnify Licensee for all expenses incurred for the defense
of any infringement suits that may be brought against Licensee or Licensor on
account of the manufacture, use, or sale of the Invention. Licensee shall pay
all expenses incurred with respect to prosecuting unlawful infringers of the
Invention.

          F. NOTICE.

          Any notice or payment required under this Agreement shall be addressed
as follows:

                                      -9-
<PAGE>

     If to Licensor:

         The Edison Animal Biotechnology Center
         The Ohio University
         Attention: Director of the Center
         Athens, Ohio 45701

     If to Licensee:

         Embryogen, Inc.
         Attention: President
         One President Street
         Athens, Ohio 45701

     G.  MISCELLANEOUS

     1.  Benefit.  This Agreement shall be binding upon the parties, their
         -------
successors and assigns, where permitted.

     2.  Waiver.  Waiver of any breach of this Agreement by either party
         ------
hereto shall in no event constitute a waiver as to any future breach, whether or
not similar in nature.

     3.  Covenant of Further Assurances. Each of the parties hereto, forthwith
         ------------------------------
upon request from the other, shall execute and deliver such documents and take
such actions as may be reasonably requested in order to carry out the intent and
purposes of this Agreement.

     4.  Construction and Governing Law. This Agreement shall be construed
         ------------------------------
and interpreted in accordance with the laws of the State of Ohio.

     5.  Arbitration. Any dispute under this Agreement shall be settled in
         -----------
Athens, Ohio, by arbitration pursuant to the rules then obtaining of the
American Arbitration Association.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officer on the date and year first above
written.

                                     -10-
<PAGE>

                                        THE OHIO UNIVERSITY

                                        By /s/ James L. Bruning
                                           ------------------------
                                           James L. Bruning, Provost

                                        EMBRYOGEN, INC

                                        By /s/ Wilfred R. Konneker
                                           -----------------------------
                                           Wilfred R. Konneker, President

                                     -11-
<PAGE>

                        AMENDMENT TO LICENSE AGREEMENT
                       DATED THE 13TH DAY OF JUNE, 1985

     Licensee shall prosecute all continuation and improvements in the patent No
4,873,191, Genetic Transformation of Zygotes, covered by this License Agreement
at its expense; and to report of any major developments with such prosecution to
the Licensor and provide a yearly written report of developments along with the
fourth-quarter royalty report.

     Dated and effective this 1st day of July 1991.

          LICENSEE                                      LICENSOR

  /s/ Steven Holtzman                           /s/ James L. Bruning
  ----------------------------                  --------------------------
      Steven Holtzman                               James L. Bruning
  Vice President, D.N.X., Inc.                  Provost of Ohio University

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