Document:

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                                                                   EXHIBIT. 10.8

Portions of this exhibit were omitted and filed separately with the Secretary of
the Commission pursuant to an application for confidential treatment filed with
the Commission pursuant to Rule 406 under the Securities Act of 1933.  Such
portions are marked by a series of asterisks.

                             PRODUCTION AGREEMENT

     This agreement including the Exhibits attached hereto (this "Agreement"),
dated June 9, 1998, is between

     Koninklijke Utermohlen N.V., a limited liability company organized under
the laws of the Netherlands, with its registered office at Wolvega, the
Netherlands ("Seller")

and

     STC Technologies, Inc., a limited liability company organized under the
laws of the State of Delaware, with its registered offices at Bethlehem,
Pennsylvania 18018, the United States of America ("Purchaser");

WHEREAS:

     The Seller carries on the business of the production, sale and distribution
of a cryogenic product for the treatment of warts, marketed and sold under the
name and trademark Histofreezer (the "Histofreezer Business");

     Pursuant to an agreement (the "Asset Purchase Agreement") the same date as
this Agreement, the Purchaser has purchased and accepted, and the Seller has
sold and transferred to the Purchaser certain assets belonging to the
Histofreezer Business.  A copy of the Asset Purchase Agreement is attached
hereto as Exhibit A;

     The Purchaser and the Seller wish to enter into a separate agreement, set
out below, to govern the production by the Seller, for the Purchaser, of
products for the Histofreezer Business;

NOW, THEREFORE, the parties here to agree as follows:

                            ARTICLE 1 - DEFINITIONS

In this Agreement, the following expressions have, except where the context
otherwise requires, the following meanings:

Confidential Information.  The term "Confidential Information" shall mean
------------------------
customer lists, customer details, prices, designs, all data, research, know how,
recipes, ingredients, formulae, processes, sketches, specifications, samples,
reports, studies, findings, inventions and ideas relating the Products.
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Copyrights.  The term "Copyrights" shall mean all copyrights related to the
----------
Products and the Histofreezer Business.

Cost.  The term "Cost" shall mean the direct cost to the Seller excluding any
----
and all indirect costs such as, including but without limitation operating
costs.

Intellectual Property Rights.  The term "Intellectual Property Rights" shall
----------------------------
mean the Patents, the Trademarks, the Copyrights and the know-how related to the
Products and the Histofreezer Business.

Materials.  The term "Materials" shall mean all relevant packaging and raw
---------
materials necessary and/or desirable for the manufacture of the Products by the
Seller.

New Product.  The term "New Product" shall mean a Product which has been changed
-----------
by an amendment to Specifications recommended by the Purchaser and any product
which is not a Product.

Patents.  The term "Patents" shall mean the Patents as defined in the Asset
-------
Purchase Agreement.

Products.  The term "Products" shall mean the products (together with their
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relevant packaging) set out in the price list attached as Exhibit 1 hereto and
produced in accordance with the Specifications.

Specifications.  The term "Specifications" shall mean the specifications
--------------
previously used by Apco B.V.; current ISO 9002/46002 standards; CE Standards;
the specifications comprised in Exhibit 3.1 of this Agreement or otherwise
comprised in this Agreement; all relevant laws; all relevant regulations; all
relevant directives; best manufacturing practice and procedures; principles of
good workmanship; acknowledged standards together with specific (but reasonable)
instructions of the Purchaser in the relevant written order for any Product(s).

Trademarks.  The term "Trademark" shall mean the Trademark as defined in the
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Asset Purchase Agreement.

Working Day.  The term "Working Day" shall mean a normal working day of the
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Seller.

                   ARTICLE 2 - PRODUCTION, ORDERS, PACKAGING

          2.1. The Purchaser appoints the Seller to be its exclusive
manufacturer of the Products on a worldwide basis for the duration of this
Agreement and the Seller shall exclusively produce and the Purchaser will
purchase Products in accordance with the provisions of this Agreement.

          2.2. In the first week of each calendar month the Purchaser will
provide the Seller with a production schedule (the "Production Schedule")
setting out the Purchaser's anticipated requirements for the production of
Products by the Seller for the next two (2) calendar months.

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          2.3. Within five (5) Working Days after receipt by the Seller of the
Production Schedule (supplied pursuant to Section 2.2 above), the Seller shall
confirm this Production Schedule to the Purchaser. If the Seller has
insufficient Materials, the Seller will take all reasonable action to obtain
sufficient Materials to fulfill this Production Schedule.

          2.4. (i)  The Seller shall not hold or order Materials for more than
six (6) months production of Products under this Agreement without the written
consent of the Purchaser. If the Seller shall hold or order Materials for more
than six months production of Products without the written consent of the
Purchaser, then it shall do so at its own risk and the Purchaser will not be
obliged to buy any such Materials from the Seller as set forth in subsection
(ii) of this Section 2.4. For the avoidance of doubt the calculation of the
likely demand for Materials shall be reasonable and based upon the preceding six
months demand for Materials.

               (ii) If the Purchaser gives the Seller less than six (6) months
notice of a change to the Products and certain of the Sellers stock of Materials
are therefore no longer required, the Purchaser shall, at its option, purchase
such Materials from the Seller at their Cost to the Seller or shall permit the
Seller to continue to use such Materials until they are fully used. Such
purchase shall be for such Materials required for up to a maximum of six months
production of Products or more if written consent has been given by the
Purchaser to the Seller in respect of the ordering of the same.

          2.5. The Seller will at all times maintain a minimum stock of Products
equal to an average of two (2) calendar months sales of Products based upon the
preceding twelve (12) months sales.

          2.6. (i)  The Purchaser shall place order for Products in writing by
facsimile to the Seller. Such order shall specify the quantity of the Products
and the information specified in Article 5 of this Agreement,

          (ii) If the order is:

                    (a) received by the Seller during a Working Day, the Seller
shall immediately confirm the order to the Purchaser and shall within five (5)
Working Days (or a longer period if specified in the relevant order) dispatch
the relevant Products to the Purchaser's customer as specified in the relevant
order.

                    (b) not received by the Seller during a Working Day, the
Seller shall confirm the order to the Purchaser on the first Working Day
following receipt of the facsimile by the Seller and shall within five (5)
Working Days (or a longer period if specified in the relevant order) from this
date dispatch the relevant Products to the Purchaser's customer as specified in
the relevant order.

          2.7. The Seller shall be responsible for completing all the relevant
paperwork required for the dispatch of the Products to the Purchaser's customers
and the Seller shall dispatch goods to such customers in accordance with Article
5 hereof.

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          2.8. Subject to Section 16.7, the Seller has the right to have the
Products manufactured by the Seller by a third party and the Seller may
subcontract its obligations to manufacture Products or any part of them under
this Agreement provided always that the Seller must obtain the written consent
of the Purchaser in respect to the appointment of any new subcontractor for the
manufacture of the Products or any part of them (for the avoidance of doubt not
being a subcontractor at the date of this Agreement), which consent shall not be
unreasonably withheld.

          2.9. The Seller shall during the continuance of the agreement maintain
for its own risk and account such facilities and employ sufficient qualified
personnel as are necessary to manufacture the Products in accordance with
obligations imposed upon it by this Agreement in quantities sufficient to meet
the demands of the market or make arrangements with subcontractors in order to
effect the same.

                ARTICLE 3 - SPECIFICATIONS AND QUALITY CONTROL

          3.1. The Seller will produce, package and label the Products in
conformity with the Specifications. The Purchaser reserves the right to amend
the Specification and quality control procedures relating to the Products at any
time and shall notify the Seller of the same in writing upon reasonable notice
or shorter notice if required by law or any other regulatory body. For the
avoidance of doubt the Purchaser shall solely be responsible for the
Specification of the Products and any changes to the Specification of the
Products shall only be made on the written instruction of the Purchaser to the
Seller.

          3.2. The Seller shall procure that such notices as the Purchaser may
require concerning the Intellectual Property Rights are affixed to or used in
connection with the Products.

          3.3. The Seller shall not without Purchaser's written consent effect
or permit the removal or alteration of, or the making of any addition to, any
trademark, the trade name, notice, nameplate, serial number or patent number or
other reference to Intellectual Property Rights to be referred to or to be
affixed to any of the Products or in any accompanying documentation as per the
instructions of the Purchaser or to any packaging or other material supplied by
the Purchaser.

          3.4. The Seller shall produce the Products in accordance with the then
current ISO9002/46002 and CE standards. Copies of all relevant documents related
to the production of the Products including, but without limitation, those
documents required to complete the CE mark file as approved by KEMA, will be
made available to the Purchaser upon signing this Agreement. Notwithstanding the
foregoing, the Seller will be responsible for maintaining the CE mark files and
shall ensure they are kept up to date and in accordance with good practice for
as long as the Purchaser has not obtained the CE registration in its own name.
The Seller shall supply the Purchaser with copies of all additions to the CE
file and ISO file which relate to the quality control aspects of production of
the Product(s) immediately upon their receipt by the Seller.

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          3.5. The Purchaser or its designated representative shall have the
right to inspect the Seller's facilities used for the manufacturing and
warehousing of the Products and the Purchaser or its designated representative
shall have the right to examine the Products manufactured by the Seller in order
to ensure that the Projects are being manufactured in accordance with the
Specifications and procedures provided for in this Agreement.

          3.6. The Seller expressly agrees to inspect the fitness, safety and
good condition of the Products prior to their delivery to the Purchaser's
customers. Further, the Products shall be delivered only with those
instructions, and warnings to accompany each individual Product as the Purchaser
consents to in writing.

                   ARTICLE 4 - PURCHASE PRICE AND INVOICING

          4.1. The Purchaser shall purchase the Products from the Seller at the
prices set out in Exhibit 4.1 to this Agreement and shall pay for them within 45
days of the date of the relevant invoice.

          4.2. The Seller shall only invoice the Purchaser for Products when
they have been dispatched to the Purchaser's customer in accordance with the
provisions of Article 5 below.

          4.3. If the Cost to the Seller of Materials shall increase by more
than 30 percent, then the parties shall use their best endeavors to agree
revised prices for the Products taking into account such changes. Any such
variation shall ensure that the difference between the Seller's reasonable and
proper Cost of production of the Products and the price of the Products to the
Purchaser shall remain substantially the same as at the date of this Agreement.

                             ARTICLE 5 - DELIVERY

          5.1. Unless otherwise instructed, the Seller will deliver the Products
directly to the customers designated by the Purchaser in the Purchaser's order.
The Purchaser's order shall indicate the time of delivery, the destination and
the customer to whom and where the delivery has to take place and whether the
Costs of transportation of the Products is for the account of the Purchaser or
the Purchaser's customer. The Seller shall inform the relevant carrier to
invoice either the Purchaser or the Purchaser's customer for the Cost of such
transportation as appropriate. It is agreed that such destination may be world
wide and the Seller hereby confirms to be able to deliver to any world-wide
destination as designated in such orders. The Seller will ensure all appropriate
and necessary documentation and other regulatory requirements are fulfilled
including transportation in order to ensure the delivery of Products to the
relevant Purchaser's customer. The costs of such documentation and compliance
with regulatory requirements are for the account of the Seller save for the Cost
of transportation which shall be borne by the Purchaser or the Purchaser's
customer.

          5.2. The Purchaser shall indicate the means of transport in the
requests, mentioned under Section 5.1 and furthermore under which conditions
transport shall take place in accordance with the Incoterms 1990 of the
International Chamber of Commerce.

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          5.3. Products shall be at the Purchaser's risk from the moment of
their dispatch by the Seller (Ex Works Wolvega as defined in Inctoterms 1990 of
the International Chamber of Commerce, subject to the obligations on the Seller
set out in Section 5.1 above) to the Purchaser's customer.

          5.4. Immediately after the dispatch of Products to the Purchaser's
customer, the Seller shall inform the Purchaser of the same in writing together
with the estimated time and date of arrival of such Products to the Purchaser's
customer.

                           ARTICLE 6 - NEW PRODUCTS

          6.1. If the Purchaser requests the Seller to produce a New Product,
then the procedure between the parties shall be:

               (i)   First, the Purchaser shall define the specifications for
the New Product together with a proposed purchase price for the same.

               (ii)  Second, within 20 Working Days the Seller shall notify the
Purchaser of the cost of supplying such New Products to the Purchaser and of any
additional costs to the Purchaser under its obligation to buy Materials under
Section 2.4 The Seller shall calculate the cost and price of supplying New
Products to the Purchaser upon a similar basis to the calculations used for the
existing cost structure and any such cost calculation shall be reasonable.

               (iii) Third, the Parties using their reasonable endeavors, shall
attempt to agree a price for supply for New Products.

                     ARTICLE 7 - CONFIDENTIAL INFORMATION

          7.1.   Each party shall handle all Confidential Information provided
by the other party as business secrets and shall handle Confidential Information
in strict confidence. Each party is further required to take all necessary
precautions to ensure that the information and material will not be disclosed to
any third party without the written consent of the other party.

          7.2.   This obligation of confidentiality applies to all employees and
other persons, including any subcontractor without limitation, acting for and on
behalf of any of the Parties and each of the Purchaser and the Seller shall
ensure that such persons are placed under the same duty of confidence that the
Purchaser and the Seller have agreed to in this Agreement.

          7.3.   This Article 7 shall remain in force for a period of 5 years
after this Agreement has terminated.

                          ARTICLE 8 - R&D AND SUPPORT

          8.1.   The Seller will assist the Purchaser with respect to any
further research and development for the Products and will use its best
endeavors to provide the Purchaser with know-how and feedback in respect
thereof.

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          8.2. The Seller shall pass on to the Purchaser, without any
compensation and for the avoidance of doubt on a royalty free basis and non-
exclusive basis any technical improvements which he has made during the duration
of this Agreement, or, where a patentable invention has been discovered by the
Seller, to grant non-exclusive licenses (with rights to assign and sublicense)
in respect of inventions relating to improvements and new applications of the
original invention, to the Purchaser for the term of the patent held by the
latter. Insofar as improvements and inventions made by the Seller during the
duration of this Agreement are incapable of being used independently of the
Purchaser's secret know-how or patent, the Seller's undertaking as referred to
in the first sentence shall be exclusive in favor of the Purchaser.

          8.3. For the avoidance of doubt any improvements in and/or additions
to know-how related to the Production process for Products created by the Seller
shall belong to the Seller.

          8.4. Immediately after it has come to its attention the Seller shall
report to the Purchaser any and all cases of unfair practice in connection with
the Products and of any violation of Intellectual Property Rights. The Seller
shall upon request of the Purchaser provide the Purchaser with any and all
possible assistance and cooperation in defending and securing such rights of the
Purchaser. At the request of the Purchaser, the Seller will participate in
actions including legal action before the competent courts against any third
party infringing the Purchaser's rights.

          8.5. In the case of an event as referred to in Section 8.4 the
Purchaser will use its best endeavors to resolve the issue.

                   ARTICLE 9 - INTELLECTUAL PROPERTY RIGHTS

          9.1. Except as provided hereafter, nothing contained herein shall be
construed as a transfer or a license or any patent, industrial designs,
trademark, trade names, know-how or any other intellectual property right, in
any of the Products; all such rights are to be expressly reserved to the
Purchaser as the exclusive true and lawful owner thereof.

          9.2. The Purchaser herewith grants to the Seller a limited non-
exclusive license to use the Intellectual Property Rights as follows:

               (i)  The use is limited to the effect that the Seller may use the
Intellectual Property Rights only in direct connection with the manufacturing,
packaging and warehousing of the Products under this Agreement only for sale to
the Purchaser. This does not include the use thereof on stationery, in
advertising, at trade fairs, on radio and television, or as part of the Seller's
firm name. The Seller may only assign or sub-license the Intellectual Property
Rights with the written consent of the Purchaser.

               (ii)  The Seller may not use the Intellectual Property Rights for
any of the Products that have been altered or changed without the Purchaser's
prior written consent nor for other products or services which are not the
Purchaser's.

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               (iii)  The Purchaser reserves the right to impose additional
directions or limitations concerning the use of the Intellectual Property Rights
and such directions or limitations shall automatically become a binding part of
this Agreement upon the Purchaser having given the Seller written notice of the
same without prejudice to the rights granted to the Seller under Section 9.2
subsection (i).

          9.3. The limited license granted by this Article 9 shall automatically
expire upon the termination or expiration of this Agreement and the Seller shall
have no right to whatsoever nature to use the Intellectual Property Rights
following the termination of this Agreement.

          9.4. Products to be delivered under this Agreement will bear the
Trademarks.

          9.5. Without prejudice to any rights which the Purchaser may have
against the Seller under the Asset Purchase Agreement if the manufacturer of
Products by the Seller or its subcontractors (collectively, the "Group") (i)
results in any claim for patent infringement against the Group or (ii) if a
member of the Group shall be sued by a third party for infringement of a third
party's patent rights, and the alleged infringing process, method or composition
is claimed under the Purchaser's Patents, the Seller shall immediately notify
the Purchaser in writing setting forth the facts in reasonable detail. The
Purchaser shall have the right in its sole discretion, to control the defense of
such claim or suit with counsel of its choice at its expense, in which event the
Seller shall have the right to be represented by advisory counsel of its own
selection at its own expense, and the Seller shall cooperate fully in the
defense of such suit, and shall furnish to the Purchaser all evidence and
assistance in its control. If the Purchaser does not elect within thirty (30)
days after such notice to so control the defense of such suit, the Seller may
undertake such control at its own expense. The Purchaser shall then have the
right to be represented by advisory counsel of its own selection at its own
expense, shall cooperate fully in the defense of such suit, and shall furnish to
the Seller all evidence and assistance in its control. The party that does not
control the defense shall be enabled to join the suit to file any counter claims
for damages in respect of the third party, provided always that it accepts the
control of and shall act in line with the defense by the other party. The Seller
shall not settle the suit or otherwise consent to an adverse judgment in such
suit that diminishes the rights or interests of the Purchaser or imposes
additional obligations on the Purchaser, without the express written consent of
the Purchaser, which consent shall not be withheld unreasonably. Without
prejudice to any rights which the Purchaser may have against the Seller under
the Asset Purchase Agreement any judgments, settlements or damages payable with
respect to legal proceedings covered by this Article 9.5 shall be paid by or to
the party which controls the defense.

                          ARTICLE 10 - PENALTY CLAUSE

          10.1.  Any breach of:

                 (i) Articles 7 and 9 of this Agreement and Article 11 of the
Asset Purchase Agreement shall be considered by the Parties hereto as an event
of gross default ("Gross Default"); and

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                 (ii) any other Article of this Agreement shall, provided that
such breach is not remedied with 30 (thirty) days of notice to the other Party
in default, from the Party not being in default, also be considered by the
Parties hereto as an event of gross default ("Gross Default").

          10.2. In the event of Gross Default, the defaulting party shall
without any prior notice or court action being required forfeit to the benefit
of the other party a penalty immediately payable amounting to ** for each
violation and for ** each day that such default will continue up to an aggregate
maximum of ** without any damage or loss required to be proven, the foregoing
without prejudice to the right of the non-defaulting Party to claim full damages
and to exercise any other right available to it in addition thereto. It is
agreed that article 6:92 paragraphs 1 and 2 of the Netherlands Civil Code are
not applicable.

                ARTICLE 11 - REPLACEMENT AND RECALL OF PRODUCTS

          11.1.  The Seller shall recall and replace, at its expense (including,
without limitation, all indirect costs such as transportation, documentation,
customs formalities and other regulatory compliance), any Products that are not
produced in accordance with the Specifications or any variation of them ("Faulty
Products"), or at the option of the Purchaser the Seller shall refund to the
Purchaser the price paid for the same in which case the Seller will acquire the
Faulty Products. The Seller's obligation to recall and to replace Faulty
Products pursuant to this Article 11 shall not apply to Products that after
delivery to the Purchaser's customer have been subjected to misuse, mishandling,
or to neglect or unusual physical or chemical stress. The Seller shall inform
the Purchaser in writing of the existence of Faulty Products as soon as it is
aware of the same, and shall recall or replace or refund Faulty Products within
5 Working Days of becoming aware of the same.

          11.2. If the Seller fails to comply with its obligations pursuant to
Section 11.1 within five Working Days from the Purchaser informing the Seller in
writing of its failure the Purchaser may also recall or replace Faulty Products
and the provisions of Article 11.1 shall apply as relevant. For the avoidance of
doubt the cost of such recall and replacement or refund of Faulty Products shall
be at the Seller's expense and the Purchaser shall charge the costs of the same
to the Seller.

                           ARTICLE 12 - INDEMNITIES

          12.1. By the Seller: The Seller hereby agrees to indemnify and hold
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Purchaser harmless from ad against any and all claims, suits, losses,
obligations, damages, deficiencies, costs, penalties, liabilities (including
strict liabilities), assessments, judgments, amounts paid in settlement, fines,
and expenses (including court costs and reasonable fees of lawyers and other
professionals) (including court costs and reasonable fees of lawyers and other
professionals) (individually and collectively, "Losses") for bodily injury,
personal injury, death, property and other damage caused by any Product which is
not manufactured in accordance with the provisions of this Agreement (and in
particular, but without limitation, the Specifications provided for in this
Agreement or as otherwise varied in accordance with the provisions of it) or
caused by the breach by the Seller of any representation, warranty, covenant or
other obligation

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of this Agreement or caused by the negligence of the Seller or any person for
whose actions the Seller is legally liable provided, however, that the Seller
shall have no liability to the Purchaser for any Losses to the extent that such
Losses resulted from or arose out of (i) the negligence or misconduct or (ii)
breach of this Agreement of/by the Purchaser or any person for whose actions the
Purchaser is liable or (iii) any occurrence for which the Purchaser has
liability to the Seller pursuant to Article 12.2 below or (iv) any occurrence
for which the Purchaser has liability to the Seller pursuant to the Asset
Purchase Agreement.

          12.2. By the Purchaser. Without prejudice to any rights the Purchaser
                ----------------
may have against the Seller under the Asset Purchase Agreement the Purchaser
hereby agrees to indemnify and hold the Seller harmless from and against any and
all Losses, resulting from an infringement by the Product or any New Product of
the intellectual property rights of a third party, for bodily injury, personal
injury, death, property and other damage caused by the Products manufactured in
accordance with the provisions of this Agreement (and in particular the
Specifications provided for in this Agreement or as otherwise varied in
accordance with the provisions of it) or caused by the breach by the Purchaser
of any representation, warranty, covenant or other obligation of this Agreement
or caused by the negligence or the Purchaser or any person for whose actions the
Purchaser is legally liable provided, however, that the Purchaser shall have no
liability to the Seller for any Losses to the extent that such Losses resulted
from or arose out of (i) the negligence or misconduct of the Seller or any
person for whose actions the Seller is legally liable, (ii) a breach by the
Seller of this Agreement, (iii) any occurrence for which the Seller has
liability to the Purchaser pursuant to Section 12.1 above or (iv) any occurrence
for which the Seller has liability to the Purchaser pursuant to the Asset
Purchase Agreement.

          12.3. Indemnification Procedure. Each party shall provide prompt
                -------------------------
notice to the other of any actual or threatened Loss or claim therefor of which
the other becomes aware; provided that the failure to provide prompt notice
shall only be a bar to recovering Losses to the extent that a party was
prejudiced by such failure. In the event of any such actual or threatened Loss
or claim therefor, each party shall provide the other information and assistance
as the other shall reasonably request for purposes of the defense of such
threatened loss or claim and each party shall receive from the other all
necessary and reasonably cooperation in such defense including, but not limited
to, the services of employees or the other party who are familiar with the
transactions or occurrences out of which any such Loss or claim may have arisen.
As provided in Section 9.5 each party shall have the right to participate in the
defense of any Loss or Losses with counsel of its choosing whose reasonable and
proper fees shall be borne by the party with liability for indemnification under
Article 12.1 or 12.2 as the case may be, and no party shall have the right to
settle any claim or agree to the entry of any judgment or other relief without
the prior consent of the other party, which consent shall not be withheld
unreasonably.

                     ARTICLE 13 - DURATION AND TERMINATION

          13.1. This Agreement shall be in force as from June 1, 1998 for a
period of 5 (five) years. Early termination of this Agreement will be possible
only as provided below and such termination shall not include the termination of
rights and obligations which are expressed herein to continue. Without prejudice
to any rights and obligations the parties may have in the

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event of breach of this Agreement, no compensation shall be due by the
terminating party in connection with any termination hereof.

          13.2. Each party may terminate this Agreement with immediate effect by
giving written notice to the other party (i) in the event of Gross Default by
the other party, (ii) in the event of receivership ("faillissement") or
moratorium ("surseance van betaling") of such other party or of direct or
indirect owners of at least half of such other party's share capital and (iii)
in the event the performance of this Agreement has been suspended due to force
majeure (as specified in Article 17 below) for at least 30 (thirty) consecutive
days.

          13.3. The Purchaser may terminate this Agreement with immediate effect
by giving written notice to the Seller:

                    (a) if there are changes to the direct or indirect control
or ownership of (the shares in the capital of) the Seller and the Purchaser does
not provide its consent for the same, such consent not to be unreasonably
withheld;

                    (b) in the event that the Seller cannot or does not comply
with its obligations under Article 3 of this Agreement.

          13.4. Upon the termination of this Agreement

                    (a) all unfilled orders for the manufacturing of Products
may be cancelled at the discretion of the Purchaser;

                    (b) the Seller shall remove and discontinue with immediate
effect, the use of the Intellectual Property Rights and the use of all signs,
stationery, advertising and other material that would make it appear to the
public that Seller is still manufacturing the Products or has any connection
with the Purchaser;

                    (c) save in the event of Gross Default of the Seller the
Seller shall within 10 Working Days of termination supply the Purchaser with a
list of its inventory of Products and New Products (if any). The Purchaser shall
buy all such Products for the prices referred to in Section 4.1 up to a maximum
of the value of 2 months inventory of Products based upon sales of Products for
the preceding 6 months except for any Products older than 6 months and damaged
Products, which shall be transferred to the Purchaser at no cost. The Seller
shall deliver these Products in accordance with the Purchaser's instructions to
the Purchaser or to a third party;

                    (d) save in the event of Gross Default of the Seller the
Seller shall within 10 Working Days of termination supply the Purchaser with a
list of its inventory of Materials. The Purchaser shall buy all such Materials
for a price equal to their cost to the Seller up to a maximum value of 6 months
inventory of Materials, based upon sales of Products for the preceding 6 months.
In such circumstances the Purchaser shall also buy any additional Materials for
which the Purchaser has given consent to the Seller in accordance with Section
2.4 for a price equal to their cost to the Seller;

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                    (e) in the case of Gross Default of the Seller the Seller
shall immediately transfer all the Products and Materials in its inventory at no
cost to the Purchaser;

                    (f) the Seller shall forthwith return all packaging,
literature, manuals and other material supplied by Purchaser or related to the
Intellectual Property Rights or any Confidential Information to the Purchaser,
together with all copies thereof;

                    (g) the Seller shall refrain from using the Intellectual
 Property Rights and any other proprietary rights of Purchaser for any business
 and manufacturing purposes whatsoever.

                             ARTICLE 14 - NOTICES

          14.1. Any notice or other communications required or permitted
hereunder, shall be in writing and given by any of the following methods: (i)
personal delivery; (ii) facsimile transmission and in the case of a facsimile
transmission a fax confirmation receipt report shall evidence receipt of such
facsimile transmission; (iii) registered or certified mail, postage prepaid,
return receipt requested; or (iv) overnight delivery service. Notices shall be
sent to the appropriate party at its address or facsimile number given below (or
at such other address or facsimile number for such party as shall be specified
by notice given hereunder):

If to the Purchaser:
STC Technologies, Inc.
1745 Eaton Avenue
Bethlehem, PA  18018-1799
USA
to the attention of Mr. Michael Gausling

If to the Seller:
Koninklijke Utermohlen N.V.
Frisaxstraat 1
8471 ZW Wolvega
The Netherlands
to the attention of Mr. D.T. van der Vat

                 ARTICLE 15 - APPLICABLE LAW AND JURISDICTION

          15.1. This Agreement shall be governed by and construed in accordance
with the laws of the Netherlands.

          15.2. Any disputes arising between the parties under or in connection
with the Agreement or any further agreements resulting herefrom, shall be
resolved by the court of competent jurisdiction of Amsterdam.

                                       12
<PAGE>

                          ARTICLE 16 - MISCELLANEOUS

     16.1. Costs. Each party to this Agreement shall pay its own costs of an
           -----
incidental to the formation of this Agreement.

     16.2. Complete Agreement. This Agreement, including the Schedules and
           ------------------
Exhibits attached thereto, represents the entire understanding and agreement
between the Purchase and the Seller with respect to the subject matter hereof.
All preceding agreements and understandings pertaining thereto have been
incorporated into this Agreement or, if not incorporated, have been superseded
by this Agreement and have lapsed from the date of the coming into force of this
Agreement.

     16.3. Amendment. This Agreement can only be amended, supplemented or
           ---------
changed, and any provisions or conditions of the Agreement can only be waived,
in writing signed by both parties with a specific reference to this Agreement.

     16.4. Recitals and Headings. Recitals (i) through (iii) shall be deemed to
           ---------------------
form part of this Agreement. The headings contained in this Agreement are
included for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.

     16.5. Severability. If any provision of this Agreement is illegal, void or
           ------------
unenforceable, such provision shall have no force and effect, but the illegality
or unenforceability of such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement. If such
illegality, nullity or unenforceability becomes apparent, the parties shall
consult with each other as soon as practicable in order to reach agreement on a
legal, valid and enforceable replacement of such clause in such a manner that
the intention of the parties shall be approximated as much as possible.

     16.6. Implementation. The parties agree to execute such further documents
           --------------
or agreements as may be necessary or desirable for the implementation of this
Agreement and the consummation of the transactions contemplated hereby.

     16.7. Assignment. None of the rights or obligations under this Agreement
           ----------
may be assigned or transferred by the Seller without the prior written consent
of the Purchaser which shall not be unreasonably withheld. The Seller and
Purchaser can freely assign or transfer any ("cessie") or all
("contractsoverneming") of the rights and obligations under this Agreement to an
affiliated company. The Purchaser may freely assign any ("cessie") or all
("contractsoverneming") of the rights and obligations under this Agreement to
any third party. In so far as may be required, the Seller and the Purchaser
thereby in advance give their consent to any such assignment.

     16.8. Waiver. Failure or neglect by either party to enforce at any time of
           ------
the provisions hereof shall not be construed nor shall be deemed to be a waiver
of such parties' right hereunder nor shall in any way affect the validity of the
whole or any part of this Agreement nor prejudice the rights of such party to
take subsequent action.

                                       13
<PAGE>

     16.9. Agreement prevails over Exhibits. If there is any inconsistency
           --------------------------------
between the terms and conditions in the Exhibits and the other provisions of
this Agreement, then the provisions of this Agreement shall prevail.

                          ARTICLE 17 - FORCE MAJEURE

     17.1. No party shall be held liable or responsible to the other parties nor
be deemed to have defaulted under or breached this Agreement for failure or
delay in fulfilling or performing any term of the Agreement to the extent that
such failure or delay is caused by or results from causes beyond the control of
the affected party including but not limited to fires, earthquakes, floods,
embargoes, wars, acts of war, insurrections, riots, civil commotions and acts of
God.

SIGNED AND AGREED at ___________ in two original copies on the date and year
first above written.

/s/ Mr. D.T. van der Vat                    /s/ Michael Gausling
______________________________              _____________________________
Koninklikje Utermohlen N.V.                 STC Technologies, Inc.
By:  Mr. D.T. van der Vat                   By:  Michael Gausling
its:  Managing Director                     its:  President and CEO

                                       14
<PAGE>

                                                                     Exhibit 4.1

                                  The Prices

Table A
Product                                                           Price per unit
-------                                                           --------------
  * *                                                                   * *
  * *                                                                   * *

     For sales to the distributer in Belgium it has been agreed upon separately
that the Products in Table A will be priced to STC at **

     Other products that are part of this agreement are defined and priced as
follows:

Table B
-------
  * *                                                                   * *
  * *                                                                   * *
  * *                                                                   * *<PAGE>

                                                                    EXHIBIT 10.9

Portions of this exhibit were omitted and filed separately with the Secretary of
the Commission pursuant to an application for confidential treatment filed with
the Commission pursuant to Rule 406 under the Securities Act of 1933Financial
Printing GroupFinancial Printing GroupPortions of this exhibit were omitted and
filed separately with the Secretary of the Commission pursuant to an application
for confidential treatment filed with the Commission pursuant to Rule 406 under
the Securities Act of 1933.  Such portions are marked by a series of asterisks.

                        RESEARCH AND LICENSE AGREEMENT
                        ------------------------------

          This Research and License Agreement, dated April 26, 1995 (the
"Agreement"), is entered into among SRI International, a California nonprofit
public benefit corporation ("SRI"), having a place of business located at 333
Ravenswood Avenue, Menlo Park, California 94025-3493, the David Sarnoff Research
Center (a wholly owned subsidiary of SRI), a Delaware corporation ("Sarnoff"),
having a place of business located at 201 Washington Road, Princeton, New Jersey
08540 and SolarCare Technologies Corporation, a Delaware corporation ("STC"),
having a place of business located at 1745 Eaton Avenue, Bethlehem, Pennsylvania
18018.

                             W I T N E S S E T H :

          Whereas, SRI and Sarnoff own or have rights in certain patent rights
and know-how relating to Up-converting phosphor reporters (Labels), Probes and
instrumentation for use in Diagnostics applications.

          Whereas, STC has licensed certain patent rights and know-how relating
to Up-converting phosphor reporters for use in diagnostics applications.

          Whereas, STC desires to financially support certain research by SRI
and Sarnoff regarding Up-converting phosphor reporters (Labels), Probes and
instrumentation, on the terms and subject to the conditions of the Agreement.

          Whereas, SRI and Sarnoff are willing to grant a license to STC under
SRI's and Sarnoff's rights in such patent rights and know-how, together with the
inventions and other results of such research, to Up-converting phosphor
reporters (Labels), Probes and instrumentation, on the terms and subject to the
conditions of the Agreement.

          Now, Therefore, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereto, agreeing to be legally
bound hereby, agree as follows:
<PAGE>

          For purposes of the Agreement, the terms defined in this article shall
have the respective meanings set forth below:

          1.1.  "Affiliate" shall mean, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.  A Person shall be regarded as in control of
another Person if it owns, or directly or indirectly controls, at least fifty
percent (50%) of the voting stock or other ownership interest of the other
Person, or if it directly or indirectly possesses the power to direct or cause
the direction of the management and policies of the other Person by any means
whatsoever.  For purposes of this Agreement, Sarnoff shall not be deemed to be
an Affiliate of SRI.

          1.2.  "Blocking Patent" shall mean any patent rights  owned or
controlled by a Third Party, which are claimed to be infringed by the exercise
of the rights granted hereunder to practice any process or method, or to make,
use or sell any composition or apparatus under the Licensed Patents or Licensor
Improvements.

          1.3.  "Commercial Sale" shall mean, with respect to any Product, the
sale for use or consumption by the general public of such Product, provided,
however, that sales of Product for research, development, investigation,
clinical trials and or evaluation shall not be deemed sales for use or
consumption by the general public, unless the price for such Product is in
excess of Cost plus twenty percent (20%).

          1.4.  "Cost" shall mean the full value of all direct and indirect
expenses relating to the manufacture of a Product, plus thirty percent (30%)
allocation (based on sale price) for overhead expenses.

          1.5.  "Development Period" shall mean the period commencing on the
Effective Date and expiring on the ****************** of the Effective Date,
unless extended pursuant to Section 3.4 or terminated sooner pursuant to
Sections 13.3 and 13.6.

          1.6.  "Development Program" shall mean the research and development
program described generally in Article 3 and defined, in particular, in the Task
Orders attached hereto as Exhibit A, as amended from time to time in accordance
with this Agreement.

          1.7.  "Diagnostic(s)" shall mean the detection of soluble, suspended
or particulate substances, cells, biological macromolecules and/or other
analytes, including but not limited to proteins, carbohydrates, pharmaceuticals,
nucleic acids, bacteria, viruses and eukaryotic cells.

                                      -2-
<PAGE>

          1.8.   "Effective Date" shall mean the date of this Agreement, as
first written above.

          1.9.   "FDA" shall mean the United States Food and Drug
Administration, or the successor thereto.

          1.10.  "Field" shall mean any and all Diagnostic applications that
involve the use of Up-converting phosphor reporter (Label), Probe and/or
Labelled Probe compositions, materials, combinations, methods and/or processes
and the development, manufacture and sale of apparatus and compositions for use
in such Diagnostic applications.

          1.11.  "First Commercial Sale" shall mean the first Commercial Sale by
STC, its Affiliates or licensees.

          1.12.  "Government Program(s)" shall mean grants, contracts and/or
other arrangements sought from or awarded directly or indirectly by various
departments, agencies or instrumentalities of the United States Government or
the several states in connection with Diagnostics applications within the Field.

          1.13.  "Improvements" shall mean any and all inventions, discoveries,
ideas, processes, methods, compositions, formulae, techniques, information and
data, whether or not patentable, conceived, developed or reduced to practice
during the term of this Agreement that beneficially change or enhance the
economic and/or technical attributes of the Products, the use of the Products
and/or the manufacture of the Products arising out of or in connection with (a)
the Development Program, (b) any activity otherwise funded by STC under this
Agreement, (c) any activity in connection with the use of the STC Patent Rights
or STC Know-How, (d) any activity in connection with the use of the Licentec
Rights and/or (e) as set forth in Section 5.1, any activity in connection with
any Government Program.

          1.14.  "Instrument Product" shall mean a light emitting apparatus for
use in the Field, which if made, used or sold would infringe one or more Valid
Patent Claims of a Licensed Patent, but for the license granted by this
Agreement, or which otherwise uses or incorporates Licensed Know-How.

          1.15.  "Label" shall mean any chemical substituent that produces,
under appropriate excitation conditions, a detectable optical signal.

          1.16.  "Labelled Probe" shall mean a combination comprising one or
more Labels attached to a Probe or one or more Probes attached to a Label.

          1.17.  "Licensed Know-How" shall mean the SRI Know-How and the
Phosphor Know-How.

          1.18.  "Licensed Patents" shall mean the SRI Patents and the Phosphor
Patent.

                                      -3-
<PAGE>

          1.19.  "Licensors" shall mean Sarnoff and SRI, jointly and severally.

          1.20.  "Licensor Improvements" shall mean any and all Improvements
either (i) conceived or reduced to practice by employees or others acting by or
on behalf of SRI and/or Sarnoff, either alone or jointly with others or (ii)
acquired by SRI and/or Sarnoff by acquisition, license or otherwise.

          1.21.  "Licentec Rights" shall mean the rights granted to STC pursuant
to that certain Research and License Agreement being entered into
contemporaneously herewith, among STC, TPM Europe Holding B.V. ("TPM") and
Rijksuniversiteit Leiden ("Leiden") to practice certain processes or methods,
and to make, have made, use or sell certain compositions.

          1.22.  "Materials" shall mean phosphor particles and compositions,
biological reagents and other matter, laser diodes and other electronic and
optical devices to be supplied by SRI or Sarnoff to STC under this Agreement.

          1.23.  "Net Sales" shall mean, with respect to any Product, the
proceeds received by STC from the Commercial Sales of Product to independent
customers who are not Affiliates, less (a) credits, allowances, discounts and
rebates to, and chargebacks from the account of, such independent customers for
spoiled, damaged, out-dated, rejected or returned Product; (b) actual freight
and insurance costs incurred in transporting such Product in final form to such
customers; (c) cash, quantity and trade discounts; and (d) sales, use, value-
added and other taxes or governmental charges incurred in connection with the
exportation or importation of such Product in final form.

          1.24.  "Person" shall mean an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, government,
governmental agency, authority or instrumentality, or any other form of entity
not specifically listed herein.

          1.25.  "Phosphor Know-How" shall mean all technology, information and
data, which is not generally known, including but not limited to discoveries,
formulae, procedures, protocols, techniques, methods and results of
experimentation and testing, which are necessary or useful for STC (i) to make
use or sell in the Field, any composition, which is described in or related to
the Phosphor Patent, in which Sarnoff or SRI has an ownership or licensed
interest as of the date or during the term of this Agreement or (ii) to practice
any process related to any such compositions which are described in or related
to the Phosphor Patent.

          1.26.  "Phosphor Patent" shall mean (a) pending ********************
******************************************************************************
*************************************, and all corresponding foreign patent
applications heretofore or hereafter filed or having legal force in any country
owned by or licensed to Sarnoff, (b) all patent applications that claim any
Improvement heretofore or hereafter filed or having legal force in any country
owned by or licensed to Sarnoff, (c) all patents that have issued or in

                                      -4-
<PAGE>

the future issue from the patent applications described in clauses (a) and (b)
above, including utility, model and design patents and certificates of
invention, and (d) all divisionals, continuations, continuations-in-part,
reissues, renewals, extensions or additions to any such patent applications and
patents; all to the extent and only to the extent that Sarnoff has the right to
grant licenses, immunities or other rights thereunder as of the date or during
the term of the Agreement.

          1.27.  "Probe" shall mean a binding component which binds
preferentially to one or more targets with an affinity sufficient to permit
discrimination of Labelled Probe bound to a target from non-specifically bound
Labelled Probe (i.e., background).

          1.28.  "Product(s)" shall mean the Instrument Product and the Test
Product.

          1.29.  "Royalty Term" shall mean, with respect to each Product in each
country, the period of time equal to the longer of (a) ************** from the
date of the First Commercial Sale of such Product in such country or (b) the
term that one or more Valid Patent Claims of a Licensed Patent would infringe
the manufacture, use or sale of a Product, but for the license granted by this
Agreement.

          1.30.  "SRI Know-How" shall mean all technology, information and data,
which is not generally known, including but not limited to discoveries,
formulae, procedures, protocols, techniques, methods and results of
experimentation and testing, which are necessary or useful for STC to practice
in the Field any process or method, or to make use or sell in the Field, any
composition, which is described in or related to (i) the SRI Patents or (ii)
*******************************************************************************
*******************************************************************************
*****************, in all cases, in which Sarnoff or SRI has an ownership or
licensed interest as of the date or during the term of this Agreement.

          1.31.  "SRI Patents" shall mean (a) pending **************************
********************************************************************************
***********************************************************************, and all
corresponding foreign patent applications heretofore or hereafter filed or
having legal force in any country owned by or licensed to SRI or Sarnoff, (b)
all patent applications that claim any Improvement heretofore or hereafter filed
or having legal force in any country owned by or licensed to SRI or Sarnoff, (c)
all patents that have issued or in the future issue from the patent applications
described in clauses (a) and (b) above, including utility, model and design
patents and certificates of invention, and (d) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patent applications and patents; all to the extent and only to the extent that
SRI or Sarnoff has the right to grant licenses, immunities or other rights
thereunder as of the date or during the term of the Agreement.

          1.32.  "STC Know-How" shall mean all technology, information and data,
which is not generally known, including, but not limited to, formulae,
procedures, protocols, techniques

                                      -5-
<PAGE>

and results of experimentation and testing, which constitute an Improvement
conceived and reduced to practice during the term of this Agreement by employees
or others acting on behalf of STC, either alone or jointly with others (but not
including Improvements conceived by employees or others acting on behalf of
Licensors, either alone or jointly with others), in which STC has an ownership
or licensed interest, but shall not include any Licentec Rights.

          1.33.  "STC Patent Rights" shall mean (a) all patent applications that
claim any Improvement filed or having legal force in any country during the term
of this Agreement, owned by or licensed to STC, (b) all patents that have issued
or in the future issue therefrom, including utility, model and design patents
and certificates of invention and (c) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patent applications and patents; all to the extent and only to the extent that
STC has the right to grant licenses, immunities or other rights thereunder as of
the date or during the term of the Agreement, but shall not include any Licentec
Rights.

          1.34.  "Territory" shall mean world-wide.

          1.35.  "Test Product" shall mean a composition for use in the Field,
which if made, used or sold would infringe one or more Valid Patent Claims of a
Licensed Patent, but for the license granted by this Agreement, or which
otherwise uses or incorporates Licensed Know-How.

          1.36.  "Third Party" shall mean any Person other than SRI, Sarnoff,
STC, TPM, Leiden, GIB (as such term is defined in Section 17.5) and their
respective Affiliates and employees.

          1.37.  "Up-converting" shall mean the excitation of any phosphor
particle by light, which produces emission resulting light having a shorter
wavelength than the wavelength of the excitation light.

          1.38.  "Valid Patent Claim" shall mean a claim of an issued and
unexpired patent, which has not been held revoked, unenforceable or invalid by a
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, or which has not
been admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.

                                   ARTICLE 2

                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

          2.1.  Licensors represent and warrant to STC, as follows:

                2.1.1.  Licensors own and hold good, marketable and legal title
to the Licensed Patents and Licensed Know-How.

                                      -6-
<PAGE>

          2.1.2.  Licensors have not previously granted any rights (and are not
bound by any agreement to grant any rights) in the Licensed Patents or Licensed
that conflict with the rights granted to STC hereunder.

          2.1.3.  Each of Licensors is a corporation, duly organized, validly
existing and in good standing under the laws of its state of incorporation, with
the power and authority to own the Licensed Patents and the Licensed Know-How
and to sign, deliver and perform all of its obligations under this Agreement.

          2.1.4.  Each of Licensors has taken all necessary actions on its part
to authorize the execution, delivery and performance of the obligations
undertaken in this Agreement.  This Agreement has been duly, executed and
delivered by and on behalf of each of Licensors and constitutes the legal, valid
and binding obligations of Licensors, enforceable against them in accordance
with its terms.

          2.1.5.  All consents, approvals, licenses and authorizations of United
States government agencies and other persons required to be obtained in
connection with this Agreement have been properly obtained and are in full force
and effect.

          2.1.6.  The execution, delivery and performance of this Agreement (A)
does not, in any material respect, conflict with or violate any applicable
statute, law, rule or regulation (B) does not conflict with or violate any
organizational, charter or internal governance document of each of Licensors and
(C) does not conflict with or constitute a default under any contract, agreement
or obligation of each of Licensors.

          2.1.7.  As of the Effective Date, there is no litigation, other legal
action or claim pending, threatened or reported contesting the validity of or
right to use the Licensed Patents and/or Licensed Know-How and there has been no
notice of any infringement upon or conflict with any asserted rights of Third
Parties.

          2.1.8.  To the best knowledge of Sarnoff and SRI, each of Licensors
has delivered to STC all information and documents in their possession or under
their control prior to December 31, 1994 relating to the Licensed Patents and
Licensed Know-How.

     2.2. STC represents and warrants to Licensors, as follows:

          2.2.1.  STC has the legal right to use and sublicense the Licentec
Rights, in accordance with the terms of this Agreement.

          2.2.2.  STC is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware, with the power and
authority to sign, deliver and perform all of its obligations under this
Agreement.

                                      -7-
<PAGE>

          2.2.3.  STC has taken all necessary actions on its part to authorize
the execution, delivery and performance of the obligations undertaken in this
Agreement.  This Agreement has been duly executed and delivered by and on behalf
of STC and constitutes legal, valid and binding obligations enforceable against
STC in accordance with its terms.

          2.2.4.  All consents, approvals, licenses and authorizations of United
States governmental agencies and other persons required to be obtained in
connection with this Agreement have been properly obtained and are in full force
and effect.

          2.2.5.  The execution, delivery and performance of this Agreement (A)
does not, in any material respect, conflict with or violate any applicable
statute, law, rule or regulation, (B) does not conflict with or violate any
organizational, charter or internal governance document of STC and (C) does not
conflict with or constitute a default under any contract, agreement or
obligation of STC.

                                   ARTICLE 3

                              DEVELOPMENT PROGRAM
                              -------------------

          3.1.  Conduct of Research.  The Development Program to be performed by
                -------------------
Licensors shall be administered through Sarnoff and during the Development
Period, each of Sarnoff and SRI shall use their commercially reasonable efforts
to conduct the Development Program in accordance with the tasks set forth on
Exhibit A (each, a "Task" and, collectively, the "Tasks"), as such Exhibit may
be amended, in writing, from time to time by Task Orders (as such term is
hereinafter defined).  Each Task shall describe in reasonably sufficient detail
(a) the research activities to be conducted and the objectives thereof, (b) the
responsibilities of the parties, the principal researchers (if any) and any
specific resources required to conduct the research activities, (c) the total
funding and the payment schedule therefor and (d) an estimated schedule for such
activities.  Sarnoff and SRI shall conduct the Development Program in good
scientific manner, and in compliance in all material respects with all
requirements of applicable laws, rules and regulations.  Because the research
services to be performed are of an advisory or experimental nature, Sarnoff and
SRI do not warrant that the Development Program, in whole or in part, will be
successful or achieve the objectives set forth on Exhibit A.

                3.1.1.  From time to time during the term of the Development
Period, (i) STC and Sarnoff may mutually agree on the scope of new Tasks to be
conducted by Sarnoff to be included in the Development Program and (ii) STC and
SRI may mutually agree on the scope of new Tasks to be conducted by SRI to be
included in the Development Program.

                3.1.2. Each new Task shall be in writing ("Task Order") and
shall reference the Agreement and describe in reasonably sufficient detail (a)
the research activities to be conducted and the objectives thereof, (b) the
responsibilities of the parties, the principal researchers (if any) and any
specific resources required to conduct the research activities, (c) the total
funding and the payment schedule therefor and (d) an estimated schedule for such
activities.

                                      -8-
<PAGE>

               3.1.3.  STC and SRI or Sarnoff, as the case may be, shall execute
a copy of each mutually acceptable Task Order which thereafter shall be
incorporated in and made a part of this Agreement.

               3.1.4.  Upon Sarnoff's receipt of a fully-executed copy of the
Task Order and any initial research payment required for such Task, Sarnoff
and/or SRI shall initiate each new Task under the Development Program.

               3.1.5.  Licensors shall ensure that all of their respective
employees and independent contractors have executed and delivered binding
agreements agreeing to assign all intellectual property rights to Sarnoff or
SRI, as the case may be, and to promptly report the conception and reduction to
practice of all discoveries and inventions to the Sarnoff or SRI Intellectual
Property Office, as the case may be.

          3.2. Funding.  In consideration of the participation of Sarnoff and
               -------
SRI in the Development Program, STC agrees to pay to Sarnoff a research fee of
two hundred thousand dollars ($200,000) for the work to be performed during the
first year of this Agreement (the "Year 1 Fee"). The Year 1 Fee shall be paid to
Sarnoff, as set forth below. Sarnoff shall not incur expenses in conducting the
Development Program in excess of such total amount, and STC shall have no
obligation to reimburse Sarnoff for expenses incurred in excess of such total
amount, unless otherwise expressly agreed to in writing by both parties. If it
appears to Sarnoff that the Development Program to be conducted during the first
year of this Agreement cannot be completed without incurring expenses in excess
of such total amount, Sarnoff shall notify STC, and STC shall determine whether
(a) to discontinue the Development Program when such total amount has been
spent, (b) to authorize Sarnoff to spend additional amounts, or (c) to revise
the scope of the Development Program, as appropriate. Such Year 1 Fees are non-
refundable and non-creditable against future royalties, and following an initial
payment by STC to Sarnoff of one hundred thousand dollars ($100,000) within 7
days of the Effective Date, Sarnoff and SRI shall initiate work on the
Development Program. Such initial payment shall be applied to the Tasks in
accordance with Exhibit A and subsequent Task Orders. Thereafter, all future
payments by STC will be based on the Task Order schedule for payment terms as
called for under Section 3.1.2 (c) above.

          3.3. Second Year Funding.  Not less than sixty (60) days prior to the
               -------------------
expiration of the first year of the Development Period, Sarnoff shall present a
written development proposal in the form of proposed Task Orders, for the second
year effort.  STC shall commit to a research fee of three hundred thousand
dollars ($300,000) for the work to be performed during the second year (the
"Year 2 Fee") to maintain the license granted herein, except in the event that
the Development Program is terminated or modified by STC pursuant to Sections
13.3 and 13.6 or the second following sentence. The Year 2 Fee shall be paid in
accordance with the last sentence of this Section 3.3. Notwithstanding the
commitment of the Year 2 Fee and, in addition to the rights of STC set forth in
the second sentence of this Section 3.3, STC may request that the Year 2 Fee be
reduced to an amount less than three hundred thousand dollars ($300,000) in the
event that Sarnoff and SRI have failed to substantially perform the Development
Program during the first year of the Development

                                      -9-
<PAGE>

Program. In such case, a new Development Program for the second year may be
entered into by written consent of the Parties. The Year 2 Fee is non-refundable
and non-creditable against future royalties. The payment by STC of the Year 2
Fee will be in accordance with the terms of the Task Orders for the second year
of the Development Program.

          3.4.  Renewal.  By mutual written agreement and consent of the
                -------
Parties, the Development Program may be extended beyond the Development Period
for additional periods of one (1) year each.  If STC desires to renew the
Development Program, STC shall give Sarnoff written notice of such election not
less than sixty (60) days prior to the expiration of the then current
Development Period, as applicable.  Sarnoff shall have thirty (30) days to
present a written development proposal in the form of proposed Task Orders for
the renewal year.

          3.5.  Records.  Sarnoff, on behalf of the Licensors, shall maintain
                -------
records, in sufficient detail and in good scientific manner, which shall reflect
all work done and results achieved in the performance of each Task included in
the Development Program (including all data in the form required under all
applicable laws and regulations).

          3.6.  Meetings and Progress Reports.  During the term of the
                -----------------------------
Development Program, Sarnoff and SRI shall keep STC generally informed of the
progress under each Task, including telephonic conferences or other
communications at STC's request and meetings at Sarnoff, SRI or STC, at STC's
request.  The parties will meet approximately four times a year, but in no case
shall there be (i) more than four (4) months between meetings or a delay of more
than one (1) month from the date of completion of a Task, except as mutually
agreed in writing.  The first meeting shall be held at Sarnoff shortly after the
Effective Date.  The reasonable travel and subsistence costs for those SRI
and/or Sarnoff meeting participants invited by STC to attend a meeting will be
invoiced separately from Development Program payments and shall be paid by STC,
upon the presentation of accurate and complete conforming documentation.
Sarnoff or SRI, as the case may be, will provide STC with minutes of each
meeting within ten (10) days after the conduct of such meeting.  STC shall give
GIB (as such term is defined in Section 17.5) prompt notice of the arrangement
of any proposed meeting between STC and any Licensor relating to the Development
Program.  A representative of GIB (reasonably acceptable to the parties) shall
be permitted to attend any such meeting.  All costs and expenses of GIB and its
representative in connection with attendance at such meeting shall be borne by
GIB.  A written report from Sarnoff and SRI containing, in reasonable detail, a
description of the work performed by Sarnoff and SRI under each Task of the
Development Program and the results thereof will be transmitted to STC upon the
first to occur of (i) fifteen (15) days after the completion of each Task and
(ii) five (5) days prior to each scheduled meeting relating to such Task.

          3.7.  Final Task Report.  Within thirty (30) days following the
                -----------------
completion of each Task, Sarnoff shall prepare and provide STC with a detailed
written final Task report, which shall describe the work performed by Sarnoff
and SRI under each Task of the Development Program and the results thereof.

                                      -10-
<PAGE>

          3.8.  Development Program Information.  Except in the case of
                -------------------------------
Improvements owned by STC or Jointly by STC, Sarnoff and SRI (as set forth in
Section 12.1), SRI and Sarnoff shall own all information, data and other results
(including, but not limited to resulting patent applications and patents)
achieved by SRI and Sarnoff in the performance of the Development Program, all
of which shall be deemed Licensor Improvements licensed to STC under the license
granted to STC hereby, as set forth in Section 4.3 hereof.

          3.9.  Materials.
                ---------

                3.9.1.  From time to time, by Task Order, during the Development
Period, upon the request of STC, Sarnoff and SRI shall provide STC with
reasonable research quantities of Materials for use by STC solely to develop and
commercialize Products in the Field.  The cost of such Materials is included
within the total amount of Year 1 Fees and Year 2 Fees described above.

                3.9.2.  All Materials provided by Sarnoff and SRI to STC under
Section 3.9.1 above (a) shall remain the sole property of Sarnoff and SRI, (b)
shall be used by and under the control of STC solely to develop and
commercialize Products in the Field, (c) shall not be used by or delivered to
any Third Party without the prior written consent of Sarnoff, and (d) may be
used in connection with in vitro Diagnostics of samples obtained from human
                        -- -----
subjects, but shall not otherwise directly involve the in vivo application in or
                                                       -- ----
to human subjects, without the prior written consent of Sarnoff or SRI.

                3.9.3.  ALL MATERIALS PROVIDED BY SARNOFF OR SRI UNDER THE
AGREEMENT ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE
USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF ANY OTHER PERSON.

                                   ARTICLE 4

                                LICENSE GRANTS
                                --------------

          4.1.  Exclusive License.   SRI and Sarnoff hereby grant to STC an
                -----------------
exclusive license, with the right to grant sublicenses, to practice the methods,
and to make, have made, use and sell the Products under the SRI Patents and the
SRI Know-How within the Field and throughout the Territory.  Prior to the grant
of sublicense rights, STC shall inform SRI of the identity of the prospective
sublicensee and shall consult with SRI with respect thereto.  STC shall deliver
a copy of each sublicense under this Agreement to SRI promptly after execution
of the same.  Each sublicense shall be subject to the terms and conditions of
the Agreement.

                                      -11-
<PAGE>

          4.2.  Non-exclusive Licenses.
                ----------------------

                4.2.1.  Sarnoff hereby grants to STC a non-exclusive license,
with the right to grant sublicenses, to practice the methods, and to make, have
made, use and sell the Products under the Phosphor Patent and the Phosphor Know-
How within the Field and throughout the Territory. STC shall deliver a copy of
each sublicense under this Agreement to SRI promptly after execution of the
same. Each sublicense shall be subject to the terms and conditions of the
Agreement.

                4.2.2.  Sarnoff and SRI hereby grant and agree to grant to STC,
for no additional royalty or other consideration, a non-exclusive, worldwide
license, with the right to grant sublicenses, to make, have made, use and sell
the Products under any patent rights of Licensors not included within the scope
of the Licensed Patents or Licensed Know-How, but only to the extent necessary,
within the Field, to make, have made, use and sell the Products under the
Licensed Patents and Licensed Know-How; all to the extent and only to the extent
that SRI or Sarnoff have the right to grant licenses, immunities or other rights
thereunder as of the date or during the term of this Agreement. Each sublicense
shall be subject to the terms and conditions of the Agreement. Notwithstanding
anything to the contrary set forth in this Agreement, STC, its Affiliates or
assigns shall have no right, title, interest or license, either express or
implied, in the Sarnoff technology known as "********," as described in U.S.
Patent application**************************************************************
********************************************************************************
**************** and any improvements, enhancements or further developments to
any of the foregoing (collectively, the "****************").  Sarnoff
represents, warrants and agrees that (i) it has not utilized and will not
utilize, in connection with the ****************, any rights in the Licensed
Patents, Licensed Know-How and/or Improvements (including Licensor Improvements)
exclusively licensed to STC and (ii) the scope of the **************** is, and
will remain, outside of the scope of the exclusive licenses granted to STC
hereunder, except that, for purposes of the representation, warranty and
agreement set forth in this clause (ii), the word "useful" appearing in the
fifth line of the definition of the term "SRI Know-How" set forth in Section
1.30 hereof shall be deemed to be deleted.

          4.3.  Improvements and the License Thereof.
                ------------------------------------

                4.3.1.  Licensors shall each, independently, disclose to STC,
within forty-five (45) days after (i) receipt by such Licensor's Intellectual
Property Office of both the reported conception and reduction to practice or
(ii) the acquisition, by assignment, license or otherwise, of any Licensor
Improvements.

                4.3.2.

                    (a)  Subject to Section 4.3.2(c) relating to Improvements
conceived, developed or reduced to practice solely by employees of Sarnoff in
connection with

                                      -12-
<PAGE>

activities relating to the Phosphor Patent and the Phosphor Know-How, SRI
and Sarnoff hereby grant and agree to grant to STC,****************************
********************, an exclusive license, with the right to grant sublicenses
(in accordance with the terms set forth in Section 4.1), to practice the
methods, and to make, have made, use and sell the Products under the Licensor
Improvements relating to clauses (a), (b) (d) and (e) of the definition of
Improvements set forth in Section 1.13 hereof, and the Joint Inventions
described in Section 12.1 (including patents and patent applications) within the
Field and throughout the Territory.

                    (b)  SRI and Sarnoff hereby grant and agree to grant to STC,
************************************************, a non-exclusive license, with
the right to grant sublicenses (in accordance with the terms set forth in
Section 4.1), to practice the methods, and to make, have made, use and sell the
Products under the Licensor Improvements relating to clause (c) of the
definition of Improvements set forth in Section 1.13 hereof within the Field and
throughout the Territory.

                    (c)  Sarnoff hereby grants and agrees to grant to STC,
***********************************************, a non-exclusive license, with
the right to grant sublicenses (in accordance with the terms set forth in
Section 4.2.1), to practice the methods, and to make, have made, use and sell
the Products under the Licensor Improvements relating to those Improvements
conceived, developed or reduced to practice solely by employees of Sarnoff in
connection with activities relating to the Phosphor Patent and the Phosphor
Know-How, within the Field and throughout the Territory.

          4.4.  Reservation of Certain Rights.  Notwithstanding the foregoing,
                -----------------------------
the licenses granted to STC under the Agreement are subject to the reservation
of (a) the right of SRI and Sarnoff to practice the processes and methods, and
to make, use and sell the compositions, matter, apparatus, instruments and
products, which are the subject of claims disclosed in the Licensed Patents or
which constitute Licensed Know-How or Licensor Improvements, (i) for all
commercial purposes outside the Field and (ii) for internal non-commercial
research purposes, and (b) certain rights in favor of the United States
Government pursuant to Title 35 United States Code Chapter 18 and the
regulations promulgated thereunder, in connection with Government Programs.

          4.5.  STC License Grant.  STC hereby grants to Licensors a non-
                -----------------
exclusive, irrevocable, royalty-free license to practice the processes and
methods, and to make, have made, and use the compositions, claimed in the STC
Patent Rights or which constitute STC Know-How within the Territory (a) for all
commercial purposes outside the Field (except in connection with or relating to
the ****************), with the right to grant sublicenses and (b) for internal
non-commercial research purposes (except in connection with or relating to the
********* *******, without the right to grant sublicenses.  STC shall disclose
and make available to SRI and Sarnoff information regarding the STC Patent
Rights and the STC Know-How.

          4.6.  Licentec License Grant.  STC hereby grants to Licensors a non-
                ----------------------
exclusive sublicense to practice the processes and methods, and to make, have
made, and use the

                                      -13-
<PAGE>

compositions, claimed in the Licentec Rights, royalty-free (without the right to
grant sublicenses to any Person), for non-commercial internal research purposes
under this Agreement within the Field and within the Territory, to the extent
permitted under the Agreement described in Section 1.21.

          4.7.  Technical Assistance under the License.
                --------------------------------------

                4.7.1.  Upon execution of the Agreement and from time to time
during the term of this Agreement, promptly upon the request of STC (unless
disclosed by SRI and Sarnoff previously under the terms of this Agreement), SRI
and Sarnoff shall disclose and make available to STC all information available
to SRI and Sarnoff and not previously disclosed to STC regarding use within the
Field of the Licensed Patents, Licensed Know-How and Licensor Improvements.

                4.7.2.  Upon execution of the Agreement and from time to time
during the term of this Agreement, promptly upon the request of Licensors, STC
shall disclose and make available to Licensors all information available to STC
and not previously disclosed to Licensors regarding the STC Patent Rights, STC
Know-How and the Licentec Rights.

                4.7.3.  During the term of the Agreement, upon reasonable notice
and during normal business hours, SRI and Sarnoff (a) shall provide such
technical assistance regarding the Licensed Patents, Licensed Know-How and
Licensor Improvements, as STC reasonably requests, to conduct its activities
contemplated by the Agreement, and (b) shall make available to STC such
technical personnel of SRI and Sarnoff as reasonably necessary to provide the
foregoing technical assistance. STC shall reimburse SRI and Sarnoff its standard
research or consulting costs for any such technical assistance, determined in
accordance with SRI's and Sarnoff's normal business practice applied on a
consistent basis, together with all reasonable out-of-pocket travel and other
expenses incurred by SRI and Sarnoff in providing such technical assistance. At
the request of STC, SRI and Sarnoff shall provide STC with estimates of the
anticipated costs of any requested technical assistance prior to undertaking
such technical assistance.

                4.7.4.  During the term of the Agreement, upon reasonable notice
and during normal business hours, STC (a) shall provide such technical
assistance regarding the STC Patent Rights, STC Know-How, Improvements owned by
STC and Licentec Rights, as Licensors reasonably request to conduct their
activities contemplated by the Agreement, and (b) shall make available to
Licensors such technical personnel of STC as reasonably necessary to provide the
foregoing technical assistance. SRI and Sarnoff, as the case may be, shall
reimburse STC its standard research or consulting costs for any such technical
assistance, determined in accordance with STC's normal business practice applied
on a consistent basis, together with all reasonable out-of-pocket travel and
other expenses incurred by STC in providing such technical assistance. At the
request of Licensors, STC shall provide Licensors with estimates of the
anticipated costs of any requested technical assistance prior to undertaking
such technical assistance.

                                      -14-
<PAGE>

                4.7.5.  In the event that STC desires to enter into an agreement
with any Third Party (which, for purposes of this Section 4.7.5 shall not
include GIB and its Affiliates) to provide any contract research and development
services in connection with the research and development of the Products, STC
shall give SRI and Sarnoff first consideration to provide such research or
development services, provided that after discussions concerning the provision
of such contract research and development services, STC shall have no obligation
to enter into such agreement with Sarnoff or SRI.

          4.8.  Supply of Materials.  At the request of STC, from time to time,
                -------------------
during the term of this Agreement, SRI and Sarnoff shall supply to STC (on a
non-exclusive basis) such quantities of Materials, as STC reasonably requests,
for use in the manufacture of Products intended by STC for Commercial Sale,
provided, however, that Sarnoff and SRI shall have no express or implied
obligation to seek or obtain a change in Sarnoff's or SRI's permit status or
establish a FDA GMP facility in which to manufacture phosphors.  The terms of
such supply arrangement shall be such reasonable terms as the parties, in good
faith, negotiate from time to time.  The terms of this Section 4.8 are not
intended to limit the scope of Section 3.9, the subject of which is the supply
of Materials for the development and commercialization of Products in the Field
in connection with the Development Program.

                                   ARTICLE 5

                                OTHER PROGRAMS
                                --------------

          5.1.  Government Programs.  Subject to the terms hereof, SRI and
                -------------------
Sarnoff shall be free to seek Government Programs, provided that all
intellectual property rights invented, discovered, conceived or reduced to
practice in connection therewith, to the extent that Licensors have the ability
to obtain and maintain such rights (with respect to which they shall use their
commercially reasonable efforts) and subject to the requirements and government
reservations under such Government Programs, shall be deemed Licensor
Improvements hereunder.  Licensors shall inform STC of such programs as soon as
practicable after becoming aware of or acquiring an interest in pursuing such
Government Programs.  Licensors shall give STC first consideration, to the
extent permitted under such Government Programs, to provide research or
development services within STC's areas of expertise, provided that Licensors
shall have no obligation to enter into such arrangement with STC.

          5.2.  Government Programs with STC.
                ----------------------------

          5.2.1.  Certain Government Programs will require the participation of
a for-profit company to commercialize the products developed under such
programs.  Licensors shall inform STC of such Government Programs as soon as
practicable after becoming aware of or acquiring an interest in pursuing such
Government Programs.  SRI and Sarnoff shall grant STC a right of first offer to
become the commercialization partner in connection with such Government Program
and shall provide to STC, both with such offer and during the period from

                                      -15-
<PAGE>

the date STC receives such offer through the date that is the later to occur of
(i) 15 days prior to the submission of a proposal in response to a request for
proposal by SRI or Sarnoff or (ii) 45 days after notification of the award of a
contract to SRI or Sarnoff under such Government Program (the "Evaluation
Period"), all of the written information in its possession or under its control
and access to SRI and Sarnoff personnel so as to enable STC to evaluate and
respond to such offer. During the Evaluation Period, in the event that STC
expresses any preliminary interest in the offer, STC, SRI and Sarnoff shall
conduct good faith discussions and negotiations with respect to such Government
Program and neither SRI or Sarnoff shall be permitted to solicit or conduct
discussions or negotiations with any Third Party with respect to such Government
Program. STC agrees to respond within the Evaluation Period as to whether it
will accept or reject such offer of participation in such Government Program,
and in any event, as promptly as it determines that it has no interest in
participating in such Government Program. In the event that STC does not respond
within the Evaluation Period it will be deemed to have rejected such offer. In
the event that such offer is rejected or deemed rejected, SRI and Sarnoff shall
be permitted to enter into an arrangement with a Third Party (subject to and
only in accordance with Section 5.3 hereof), provided that such arrangement, as
a whole, is on terms no more or less favorable to SRI or Sarnoff and no more
favorable to such Third Party than the arrangement last offered to STC. In
connection with such Government Program and in the event that STC is the prime
contractor, STC shall provide any subcontract research or development services
under the Government Program in the areas that are not areas of expertise of
STC, to SRI or Sarnoff, provided that the terms of such subcontract are
reasonably satisfactory to STC.

                5.2.2.  Rights to subject inventions made with STC in connection
with or arising out of such Government Program shall be deemed Improvements,
subject to this Agreement.

          5.3.  Government Programs without STC.  Should STC reject the offer to
                -------------------------------
participate in such Government Program, the parties agree to seek out a Third
Party, mutually agreeable to STC, SRI and Sarnoff, to participate in such
Government Program.  STC agrees to enter into discussions with such Third Party
to provide the appropriate licenses to such Third Party, provided, however, that
STC shall have no obligation whatsoever to grant a license to such Third Party.

          5.4.  Commercial Programs.  Sarnoff and SRI shall have the right to
                -------------------
market their development capabilities and enter into Third Party agreements
relating to Up-converting phosphor reporters outside the Field.

                                   ARTICLE 6

                    FEES, ROYALTIES AND MILESTONE PAYMENTS
                    --------------------------------------

          6.1.  License and Maintenance Fees.  In partial consideration of the
                ----------------------------
licenses granted to STC in Sections 4.1 and 4.2.1 above, STC shall pay to SRI a
license fee of ********

                                      -16-
<PAGE>

upon the execution of this Agreement. During the term hereof, STC shall also pay
to SRI an annual maintenance fee of ******* on each anniversary after the
completion of the Development Period until the First Commercial Sale of a
Product. Such license and maintenance fees are non-refundable and non-creditable
against future royalties.

          6.2.  Royalties on Test Products.  As additional consideration for the
                --------------------------
license granted to STC to use the Licensed Know-How in connection with the
manufacture, use and sale of the Test Products, during the Royalty Term, STC
shall pay to SRI royalties equal to **************** of Net Sales of Test
Products by STC and its Affiliates.  Upon and after such time as the
manufacture, use and sale of Test Products by STC and its Affiliates would
infringe a Valid Patent Claim relating to a Label method claim set forth in the
SRI Patents, the royalty rate shall be increased by **************** of Net
Sales of Test Products by STC and its Affiliates, in such countries in the
Territory in which there exist such Valid Patent Claims, for the remainder of
the Royalty Term.  Upon and after such time as the manufacture, use and sale of
Test Products by STC and its Affiliates would infringe a Valid Patent Claim
relating to a Probe composition claim set forth in the SRI Patents, the royalty
rate shall be increased by **********  **** of Net Sales of Test Products by STC
and its Affiliates, in such countries in the Territory in which there exist such
Valid Patent Claims, for the remainder of the Royalty Term.

          6.3.  Royalties on Instrument Products.  As additional consideration
                --------------------------------
for the license granted to STC to use the Licensed Know-How in connection with
the manufacture, use and sale of the Instrument Products, during the Royalty
Term, STC shall pay to SRI royalties equal to ****************** of Net Sales of
Instrument Products by STC and its Affiliates.  Upon and after such time as the
manufacture, use and sale of Instrument Products by STC and its Affiliates would
infringe a Valid Patent Claim relating to an apparatus claim set forth in the
SRI Patents, the royalty rate shall be increased by ****************** of Net
Sales of Instrument Products by STC and its Affiliates, in such countries in the
Territory in which there exist such Valid Patent Claims, for the remainder of
the Royalty Term.

          6.4.  Minimum Annual Royalty.  Upon and after the First Commercial
                ----------------------
Sale and during the Royalty Term, STC shall pay to SRI minimum annual royalties
of ******* for the first year, ******* for the second year and ******** per year
thereafter.

          6.5.  Sublicense Fee.
                --------------

                6.5.1.  Except as set forth in Section 6.5.2, during the Royalty
Term, STC shall pay to SRI a sublicense fee of the lesser of (i) **************
****** or (ii) the percent payable by STC in respect of sublicenses to TPM
Europe Holding B.V. in connection with the Licentec Rights, of those certain
payments received by STC from the grant of sublicense rights to Third Parties to
make, use or sell Products within the Field and within the Territory. No sales
of Products by Third Parties shall be included in the Net Sales of STC and its
Affiliates. All payments made to SRI in respect of sublicense rights shall be
credited against the minimum royalty obligation of STC set forth in Section 6.4.

                                      -17-
<PAGE>

                6.5.2.  In the event that, in connection with a Government
Program identified to STC by SRI, STC sublicenses its rights granted hereunder
to a Third Party for-profit entity identified by SRI, STC shall pay to SRI a
sublicense fee of ******************** of any consideration received by STC from
the grant of sublicense rights to such Third Parties to make, use or sell
Products within the Field and within the Territory. No sales of Products by such
Third Parties shall be included in the Net Sales of STC and its Affiliates. All
payments made to SRI in respect of sublicense rights shall be credited against
the minimum royalty obligation of STC set forth in Section 6.4.

          6.6.  Third Party Royalties.  With respect to any Product sold in any
                ---------------------
country by STC, its Affiliates or sublicensees, if STC is required to pay
royalties to any Third Party in order to exercise its rights hereunder to
practice any process or method, or to make, use or sell any composition, which
is the subject of a Blocking Patent in such country, then STC shall have the
rights to withhold and/or reduce royalty payments and sublicense fees, in
accordance with the terms set forth in Article 10 hereof.

          6.7.  Reagent Rental Royalties.  Notwithstanding anything set forth in
                ------------------------
Sections 6.2. and 6.3. to the contrary, in the event that STC enters into any
arrangement with a Third Party whereby STC leases (or arranges for a lease) to,
or places (or arranges for the placement) of an Instrument Product at the
facility of a Third Party end user in combination with an agreement to sell Test
Product to such Third Party end user and the prices with respect to the
Instrument Product and Test Product are not separately identified (a "Reagent
Rental Transaction"), STC shall pay royalties as follows: (a) STC shall pay
royalties on the Test Products on the basis of the ****************************
******************************** in the Reagent Rental Transaction and (b) STC
shall pay royalties on the Instrument Product on the basis of ******************
*****************************************************************************
net of any financing charges incurred in connection with such Reagent Rental
Transaction.

                                   ARTICLE 7

                        ROYALTY REPORTS AND ACCOUNTING
                        ------------------------------

          7.1.  Reports, Etc.  During the term of the Agreement following the
                ------------
First Commercial Sale of a Product, STC shall furnish to SRI semi-annual written
reports (with respect to the period from January 1 through June 30 and the
period from July 1 through December 31) showing in reasonably specific detail,
on a country by country basis, (a) the gross sales of each Product sold by STC
and its Affiliates during the reporting period and the calculation of Net Sales
from such gross sales; (b) the royalties payable in United States dollars, if
any, which shall have accrued hereunder based upon Net Sales of each Product;
(c) the withholding taxes, if any, required by law to be deducted in respect of
such sales; (d) the date of the First Commercial Sales of each Product in each
country during the reporting period; (e) the exchange rates used in determining
the amount of United States dollars; (f) the aggregate amount

                                      -18-
<PAGE>

of payments received by STC from the grant of sublicense rights to Third Parties
and (g) the aggregate royalties accrued on Net Sales and the aggregate
sublicense fee accrued during such period and the calculation of the minimum
royalties, if any, payable to SRI for such period. With respect to receipts from
sales of Products invoiced in United States dollars and sublicense fees received
in United States dollars, the gross sales, Net Sales, royalties payable and
sublicense fees shall be expressed in United States dollars. With respect to
receipts from sales of Products invoiced in a currency other than United States
dollars and sublicense fees received in a currency other than United States
dollars, the gross sales, Net Sales, royalties payable and sublicense fees shall
be expressed in United States dollars, calculated using an internationally
acceptable exchange rate for such currency in effect in connection with the
exchange by STC of such other currency into United States dollars (as disclosed
pursuant to clause (e) above). Reports shall be due on the ninetieth (90th) day
following the close of each period. STC shall keep complete and accurate records
in sufficient detail to properly reflect all gross sales and Net Sales and to
enable the royalties payable hereunder to be determined.

          7.2.  Audits.
                ------

                7.2.1.  Upon the written request of SRI and not more than once
in each calendar year, STC shall permit an independent certified public
accounting firm of nationally recognized standing, selected by SRI and
reasonably acceptable to STC, at SRI's expense, to have access during normal
business hours to such of the records of STC as may be reasonably necessary to
verify the accuracy of the royalty reports hereunder for any year ending not
more than thirty-six (36) months prior to the date of such request. The
accounting firm shall disclose to SRI only whether the records are correct or
not and the specific details concerning any discrepancies. No other information
shall be shared.

                7.2.2.  If such accounting firm concludes that additional
royalties were owed during such period, STC shall pay the additional royalties
within thirty (30) days of the date SRI delivers to STC such accounting firm's
written report so concluding. The fees charged by such accounting firm shall be
paid by SRI; provided, however, if the audit discloses that the royalties
payable by STC for the audited period are more than one hundred five percent
(105%) of the royalties actually paid for such period, then STC shall pay the
reasonable fees and expenses charged by such accounting firm.

                7.2.3.  STC shall include in each sublicense granted by it
pursuant to the Agreement a provision requiring the sublicensee to make reports
to STC, to keep and maintain records of sales made pursuant to such sublicense
and to grant access to such records by SRI's independent accountant to the same
extent required of STC under the Agreement. Upon the expiration of thirty-six
(36) months following the end of any year, the calculation of royalties payable
with respect to such year shall be binding and conclusive upon SRI and STC and
their respective Affiliates.

          7.3.  Confidential Financial Information.  Licensors shall treat all
                ----------------------------------
financial information subject to review under this article or under any
sublicense agreement as

                                      -19-
<PAGE>

confidential, and shall cause its accounting firm to retain all such financial
information in confidence.

                                   ARTICLE 8

                                   PAYMENTS
                                   --------

          8.1.  Payment Terms.  Royalties shown to have accrued by each royalty
                -------------
report provided for under Article 7 above shall be due and payable on the date
such royalty report is due.  Payment of royalties in whole or in part may be
made in advance of such due date.

          8.2.  Payment Method.  Except as provided in this section, all
                --------------
payments under the Agreement shall be paid in United States dollars, and all
such payments shall be originated from a United States bank located in the
United States and made by bank wire transfer in immediately available funds to
such account as the party to whom the payment is due shall designate before such
payment is due.

          8.3.  Exchange Control.  If at any time legal restrictions prevent the
                ----------------
prompt remittance of part or all royalties with respect to any country where the
Product is sold, STC shall give prompt written notice to SRI of such event and
the reasons therefor, and shall use reasonable commercial methods to make such
payment through lawful means or methods.  In the event that, notwithstanding the
efforts set forth in the preceding sentence, STC is unable to lawfully remit
such royalties, it shall establish a separate bank account in such country, on
behalf of SRI, into which account the proper amount of royalties with respect to
sales of Product in such country shall be deposited, whereupon the obligation of
STC to pay SRI such royalties shall be deemed satisfied.

          8.4.  Withholding Taxes.  All amounts owing from one party to the
                -----------------
other under the Agreement shall not be grossed-up to account for any withholding
taxes, value-added taxes or other taxes, levies or charges with respect to such
amounts payable by one party to the other, their Affiliates or sublicensees, or
any taxes required to be withheld by the party owing amounts hereunder, its
Affiliates or sublicensees to the extent such taxes are imposed by reason of the
party owing amounts hereunder, its Affiliates or sublicensees having a permanent
establishment in any country or otherwise being subject to taxation by such
country.

                                   ARTICLE 9

                             DILIGENCE OBLIGATIONS
                             ---------------------

          9.1.  Research, Development and Commercialization Efforts.  STC shall
                ---------------------------------------------------
use its commercially reasonable efforts to research, develop and commercialize,
to obtain all regulatory approvals to manufacture and market, and to commence
marketing and market, such Products in

                                      -20-
<PAGE>

such countries as STC determines are commercially feasible. STC, at its sole
expense, shall fund all such efforts at an annual minimum level of $1,000,000
beginning from the Effective Date of this Agreement and continuing through the
first to occur of the third (3rd) anniversary of the Effective Date or the
First Commercial Sale of Product. In the event that the First Commercial Sale of
Product has not occurred on or prior to such third (3rd) anniversary,
thereafter, until the First Commercial Sale of Product, STC, at its sole
expense, shall fund all such efforts at an annual minimum level of $2,000,000.
After such First Commercial Sale of Product such minimum annual funding
obligation shall cease and STC shall use commercially reasonable efforts to meet
the reasonably foreseeable market demand therefor.

          9.2.  Records.  STC shall maintain records, in sufficient detail and
                -------
in good scientific manner appropriate for patent purposes, which shall reflect
all work done and results achieved in the performance of its research and
development regarding the STC Patent Rights and STC Know-How (including all data
in the form required under all applicable laws and regulations).

          9.3.  Reports.  Within ninety (90) days following the last day of June
                -------
and December during the term of the Agreement, STC shall prepare and deliver to
SRI a written report which shall describe, in reasonably sufficient detail, (a)
the research performed to date employing the Licensed Patents and Licensed Know-
How, (b) the progress of the development of Products, and (c) the status of
obtaining the necessary approvals to manufacture and market Products.

                                  ARTICLE 10

                     INFRINGEMENT ACTIONS BY THIRD PARTIES
                     -------------------------------------

          10.1.  Patent Defense, Blocking Patents, Etc.
                 -------------------------------------

                 10.1.1.  If the manufacture, use or sale of a Product by STC,
its Affiliates, or licensees (collectively, the "Group") (i) results in any
claim for patent infringement against the Group because of a Blocking Patent or
(ii) if a member of the Group shall be sued by a Third Party for infringement of
a Third Party's patent rights, and the alleged infringing process, method or
composition is claimed under the Licensed Patents and/or Licensor Improvements,
the party to this Agreement having notice of such claim shall promptly notify
the others in writing, setting forth the facts in reasonable detail. STC shall
have the right, in its sole discretion, to control the defense of such claim or
suit with counsel of its choice at its own expense, in which event Licensors
shall have the right to be represented by one (1) advisory counsel of their own
selection at their own expense, and each Licensor shall cooperate fully in the
defense of such suit, and shall furnish to STC all evidence and assistance in
its control. Subject to Sections 10.1.4 and 10.1.5, STC shall not have the right
to settle the suit or otherwise consent to an adverse judgment in such suit that
diminishes the rights or interests of the Licensors or imposes additional

                                      -21-
<PAGE>

obligations on the Licensors, without the express written consent of Licensors,
which consent shall not be withheld unreasonably. If STC does not elect within
thirty (30) days after such notice to so control the defense of such suit,
Licensors may undertake such control at their own expense. STC shall then have
the right to be represented by advisory counsel of its own selection at its own
expense, shall cooperate fully in the defense of such suit, and shall furnish to
Licensors all evidence and assistance in its control. Licensors shall not have
the right to settle the suit or otherwise consent to an adverse judgment in such
suit that diminishes the rights or interests of the Group or imposes additional
obligations on the Group, without the express written consent of STC, which
consent shall not be withheld unreasonably. Any judgments, settlements or
damages payable with respect to legal proceedings covered by this Section 10.1
shall be paid by the party which controls the defense, provided that eighty
percent (80%) of any payment made by STC (including payments under Section
14.1(c)) shall be deducted from any royalty (including minimum royalties) and
sublicense fees otherwise payable by STC to SRI.

          10.1.2.  In connection with any claim or suit arising under Section
10.1.1, eighty percent (80%) of any such costs and expenses incurred by STC and
eighty percent (80%) of any costs and expenses incurred by STC in connection
with its indemnification obligations arising out of clause (c) of Section 14.1
shall be offset against any minimum and other royalties and sublicense fees
payable hereunder.  In addition, in the event and to the extent that STC is
obligated to make royalty payments and pay sublicense fees after deducting such
offset, STC shall have the right to reserve and not pay-over to SRI all royalty
payments and sublicense fees attributable to the country in which the claim of
infringement arose.

          10.1.3.  If the Blocking Patent, claim, or suit is resolved pursuant
to Section 10.1.4(a), STC shall have the right to retain all reserved royalty
payments and sublicense fees.  If the Blocking Patent, claim, or suit is
resolved under Section 10.1.4(b), STC shall pay-over to SRI any reserved royalty
payments and sublicense fees, after deduction of eighty percent (80%) of all
costs, expenses, judgments, settlements and damages incurred by STC in such
matter (including under Section 14.1(c)).  If the Blocking Patent, claim, or
suit is resolved under Section 10.1.5(a), STC shall pay-over to SRI a percentage
of any reserved royalty payments and sublicense fees (after deducting eighty
percent (80%) of all the costs, expenses, judgments, settlements and damages
incurred by STC in such matter, including under Section 14.1(c)) equal to the
ratio of the reduced royalty rate to the royalty rate in effect immediately
prior to such reduction.  STC shall have the right to retain any remaining
reserved royalty payment and sublicense fees (after deducting all such costs,
including under Section 14.1(c)).  If the Blocking Patent, claim, or suit is
resolved under Section 10.1.5(b), STC shall have the right to retain all
reserved amounts.

          10.1.4.  Notwithstanding anything to the contrary set forth herein, if
a Blocking Patent is issued, discovered, or claimed by a Third Party, or, if a
Third Party shall claim or sue a member of the Group for infringement of a Third
Party's patent rights, and the alleged infringing process, method or composition
is claimed under the Licensed Patents and/or Licensor Improvements, then STC
shall have the right, at STC's sole election, and upon 60 (sixty) days written
notice to SRI to:

                                      -22-
<PAGE>

                    (a) terminate this Agreement as to such country and/or to
such Products; or

                    (b) attempt to resolve the problem raised by the Blocking
Patent, claim, or suit, in which event STC's obligations under this Agreement
with respect to such license in such country shall be suspended pending the
resolution of the matter. The matter shall be deemed resolved if STC is granted
a royalty-free license under the Blocking Patents.

          10.1.5.   Notwithstanding anything to the contrary set forth herein,
if STC is unable to resolve the matter without entering into a royalty-bearing
license agreement with such Third Party, then:

                    (a)  The royalty rate for Products sold in such country
shall be reduced by the rate of the royalty bearing license agreement with such
Third Party, but shall be ******************************, in the case of Test
Products, and ******************, in the case of Instrument Products; or

                    (b) STC may terminate this Agreement as to such country on
30 (thirty) days written notice to SRI.

                                  ARTICLE 11

                                CONFIDENTIALITY
                                ---------------

          11.1.  Confidential Information.  During the term of this Agreement,
                 ------------------------
and for a period of five (5) years following the expiration or earlier
termination hereof, each party shall exercise reasonable care to maintain in
confidence all information of the other party (including samples) disclosed by
the other party and identified as, or acknowledged to be, confidential (the
"Confidential Information"), and shall not use, disclose or grant the use of the
Confidential Information, except on a need-to-know basis to those directors,
officers, employees, agents, independent contractors, sublicensees and permitted
assignees, to the extent such disclosure is reasonably necessary in connection
with such party's activities as expressly authorized by this Agreement.  To the
extent that disclosure is authorized by this Agreement, prior to disclosure,
each party hereto shall obtain the written agreement of any such Person, who is
not otherwise bound by fiduciary obligations to such party, to hold in
confidence and not make use of the Confidential Information for any purpose
other than those permitted by this Agreement.  Each party shall notify the other
promptly upon discovery of any unauthorized use or disclosure of the other
party's Confidential Information.

          11.2.  Permitted Disclosures.  The nonuse and nondisclosure
                 ---------------------
obligations contained in this article shall not apply to the extent that (a) any
receiving party (the "Recipient") is required (i) to disclose information by
law, order or regulation of a governmental agency or a court of competent
jurisdiction, or (ii) to disclose information to any governmental agency for
purposes of obtaining approval to test or market a product, provided, in either
case, that the

                                      -23-
<PAGE>

Recipient shall provide written notice thereof to the other party and sufficient
opportunity to object, time permitting, to any such disclosure or to request
confidential treatment thereof; or (b) the Recipient can demonstrate that (i)
the information was public knowledge at the time of such disclosure to the
Recipient, or thereafter became public knowledge, other than as a result of acts
directly or indirectly attributable to the Recipient in violation hereof; (ii)
the information was rightfully known by the Recipient (as shown by its written
records) prior to the date of disclosure to the Recipient by the other party
hereunder; (iii) the information was disclosed to the Recipient on an
unrestricted basis from a Third Party not under a duty of confidentiality to the
other party; or (iv) the information was independently developed by employees or
agents of the Recipient without access to the Confidential Information of the
other party.

                                  ARTICLE 12

                            INVENTIONS AND PATENTS
                            ----------------------

          12.1.  Ownership of Inventions.  The entire right and title in and to
                 -----------------------
all Improvements conceived and reduced to practice in the performance of the
parties' activities contemplated by this Agreement and during the term of this
Agreement (collectively, the "Inventions") (a) by employees or others acting
solely on behalf of SRI, shall be owned solely by SRI ("SRI Inventions"), (b) by
employees or others acting solely on behalf of Sarnoff, shall be owned solely by
Sarnoff ("Sarnoff Inventions"), (c) by employees or others acting solely on
behalf of STC shall be owned solely by STC ("STC Inventions"), and (d) by
employees or others acting jointly on behalf of SRI, Sarnoff and/or STC, shall
be owned jointly by SRI, Sarnoff and/or STC (the "Joint Inventions").  Each
party promptly shall disclose to the other parties the making, conception and
reduction to practice of Inventions by employees or others acting on behalf of
such party.  SRI, Sarnoff and STC each hereby represents that all employees and
other Persons acting on its behalf in performing its obligations under the
Agreement shall be obligated to assign to it, or as it shall direct, all
Inventions conceived by such employees or other Persons.

          12.2.  Invention Responsibilities.  Subject to the provisions of this
                 --------------------------
Article 12 and the last sentence of this Section 12.2, SRI shall be responsible
for and shall control the preparation, filing, prosecution and maintenance of
all patent applications and patents regarding SRI Inventions; Sarnoff shall be
responsible for and shall control the preparation, filing, prosecution and
maintenance of all patent applications and patents regarding Sarnoff Inventions;
and STC shall be responsible for and shall control the preparation, filing,
prosecution and maintenance of all patent applications and patents regarding STC
Inventions.  SRI, Sarnoff and STC shall determine by mutual agreement the party
which shall be responsible for and shall control the preparation, filing,
prosecution and maintenance of all patent applications and patents regarding
Joint Inventions. SRI, Sarnoff and STC each shall cooperate with the other
parties and shall execute all lawful papers and instruments and make all
rightful oaths and declarations as may be necessary in the preparation, filing,
prosecution and maintenance of all patent

                                     -24-
<PAGE>

applications and patents as referred to in this section. Notwithstanding
anything to the contrary set forth in this Section 12.2, neither SRI nor Sarnoff
shall file any patent application containing any information with respect to a
SRI Invention, Sarnoff Invention or Joint Invention in the event that STC
desires to maintain such information or Invention as a trade secret.

          12.3.  Licensed Patents.
                 ----------------

                 12.3.1.  Prosecution of SRI Patents.  SRI shall exert its
                          --------------------------
reasonable commercial efforts to file and prosecute patent applications included
in the SRI Patents in the *****************************************************
*******************************************************************************
and such other countries as the parties mutually agree, and to maintain any
resulting patents. At SRI's discretion, such foreign filing may be initiated
through the Patent Cooperation Treaty designating such countries. SRI shall
provide STC with copies of each such patent application as filed, together with
notice of its filing date and serial number, and copies of all office actions
and responses thereto. In addition, prior to taking any action upon or after the
Effective Date, SRI will consult with STC and its patent counsel in respect of
patent strategy and other matters in connection with the prosecution and
maintenance of the SRI Patents. SRI shall amend or modify any patent application
or other filing, as reasonably requested by STC. Upon and after the issuance of
patents included within the SRI Patents, SRI shall be obligated to maintain such
patents in full force and effect.

                 12.3.2.  Prosecution of Phosphor Patent.  Sarnoff shall exert
                          ------------------------------
its reasonable commercial efforts to file and prosecute patent applications
included in the Phosphor Patent in the*****************************************
*******************************************************************************
************ and such other countries as the parties mutually agree, and to
maintain any resulting patents. At Sarnoff's discretion, such foreign filing may
be initiated through the Patent Cooperation Treaty designating such countries.
Sarnoff shall provide STC with copies of each such patent application as filed,
together with notice of its filing date and serial number, and copies of all
office actions and responses thereto. In addition, prior to taking any action
upon or after the Effective Date, Sarnoff will consult with STC and its patent
counsel in respect of patent strategy and other matters in connection with the
prosecution and maintenance of the Phosphor Patent. SRI shall amend or modify
any patent application or other filing, as reasonably requested by STC. Upon and
after the issuance of patents included within the Phosphor Patent, SRI shall be
obligated to maintain such patents in full force and effect.

                 12.3.3.  Expense Reimbursement by STC.  In connection with the
                          ----------------------------
obligations of SRI and Sarnoff set forth in Sections 12.3.1 and 12.3.2 above,
STC shall reimburse SRI for reasonable fees, costs and expenses, in an amount of
up to ******************************* per year, promptly after the presentation
of accurate and complete invoices and other supporting documentation as STC
reasonably requests.

                                      -25-
<PAGE>

               12.3.4.  Prosecution by STC.  If SRI or Sarnoff should decide
                        ------------------
against or fail to file, prosecute or maintain a patent application or patent in
respect of an Invention in any country, SRI or Sarnoff will notify STC in a
timely manner. STC shall have the right, at its expense, to file, prosecute
and/or maintain such application or patent in any such country. In any such
case, SRI and Sarnoff agree, if requested by STC, to assist and cause its
employees to assist STC in every reasonable way (with out of pocket expenses to
be reimbursed by STC), including execution of documents, to enable STC to take
such action. In the event that SRI or Sarnoff desires to assign a particular
patent application or patent in any country to STC and STC agrees to accept such
assignment, STC agrees to grant to SRI and Sarnoff, in fields of use other than
the Field, an exclusive license in the particular patent application or patent
in that country, with right to sublicense. Each party agrees, upon request, to
inform the other parties of the status of any application or patent in which
such other parties has rights as provided in this Agreement. Notwithstanding
anything to the contrary set forth in this Section, if SRI's or Sarnoff's
decision against or failure to file, prosecute or maintain a patent application
or patent is a breach of an obligation of such party under 12.3.1, 12.3.2 or
another section of this Agreement, STC shall have the right to offset its
expenses against any amount due and owing to SRI and/or Sarnoff, as the case may
be.

               12.3.5.  Enforcement of SRI Patents and Invention Patent Rights.
                        ------------------------------------------------------
Each party shall notify the others of any infringement in the Field known to
such party of the SRI Patents and Invention patent rights and shall provide the
other with the available evidence, if any, of such infringement. STC, at its
sole expense, shall have the right to determine the appropriate course of action
to enforce such patents and patent rights or otherwise abate the infringement
thereof, to take (or refrain from taking) appropriate action to enforce such
patents and patent rights, to sue in the name of SRI and/or Sarnoff, as the case
may be and to control any litigation or other enforcement action and to enter
into, or permit, the settlement of any such litigation or other enforcement
action with respect to such patents and patent rights, and shall consider, in
good faith, the interests of SRI and Sarnoff in so doing. All monies recovered
upon the final judgment or settlement of any such suit to enforce such patents
and patent rights in the Field shall be divided, after payment of counsel and
reimbursement of expenses, ******************** to SRI or Sarnoff and
******************** to STC. Notwithstanding the foregoing SRI and Sarnoff shall
fully cooperate with STC, at STC's request, in the planning and execution of any
action to enforce such patents and patent rights.

               12.3.6.  Enforcement of Phosphor Patent.  STC shall notify
                        ------------------------------
Sarnoff of any infringement in the Field known to STC of Phosphor Patent and
shall provide Sarnoff with the available evidence, if any, of such infringement.
Sarnoff, at its sole expense, shall have the right to determine the appropriate
course of action to enforce the Phosphor Patent or otherwise abate the
infringement thereof, to take (or refrain from taking) appropriate action to
enforce the Phosphor Patent, to control any litigation or other enforcement
action and to enter into, or permit, the settlement of any such litigation or
other enforcement action with respect to the Phosphor Patent, and shall
consider, in good faith, the interests of STC in so doing. If, within sixty (60)
days of receipt of notice from STC, Sarnoff does not abate the infringement or
file suit to enforce the Phosphor Patent against the infringing parties in the
Field, or is STC reasonably determines

                                      -26-
<PAGE>

that Sarnoff is not giving due consideration to its interests, STC shall have
the right to take whatever action it deems appropriate to enforce the Phosphor
Patent and to sue in the name of SRI and/or Sarnoff, as the case may be. The
party controlling any such enforcement action shall not settle the action or
otherwise consent to an adverse judgment in such action that adversely affects
the rights or interests of the non-controlling party or imposes additional
obligations on the non-controlling party, without the prior written consent of
the non-controlling party, which consent shall not be withheld unreasonably. All
monies recovered upon the final judgment or settlement of any such suit to
enforce the Phosphor Patent in the Field shall be divided, after payment of
counsel and reimbursement of expenses, ******************** to SRI or Sarnoff
and ******************** to STC. Notwithstanding the foregoing, SRI, Sarnoff and
STC shall fully cooperate with each other in the planning and execution of any
action to enforce the Phosphor Patent.

                                  ARTICLE 13

                             TERM AND TERMINATION
                             --------------------

          13.1.  Expiration.  Subject to the provisions of this Article 13, this
                 ----------
Agreement shall expire on the expiration of STC's obligation to pay royalties to
SRI under Sections 6.2 and 6.3 above.

          13.2.  Termination by STC.  STC may terminate the Agreement, in its
                 ------------------
sole discretion, upon thirty (30) days prior written notice to SRI.

          13.3.  Termination for Cause.  Except as otherwise provided in Article
                 ---------------------
15 and Section 17.11, a party may terminate the Agreement (a) upon or after the
breach of any material provision of the Agreement by the other party if the
other party has not cured such breach within thirty (30) days after written
notice thereof by the non-breaching party; (b) if the other party voluntarily
commences any action or seeks any relief regarding its liquidation,
reorganization, dissolution or similar act or under any bankruptcy, insolvency
or similar law, other than an action under Chapter 11 of the U.S. Bankruptcy
Code or (c) if a proceeding is commenced or an order, judgment or decree is
entered seeking the liquidation, reorganization, dissolution or similar act or
any other relief under any bankruptcy, insolvency or similar law against the
other party, without its consent, which continues undismissed or unstayed for a
period of sixty (60) days, other than an action under Chapter 11 of the U.S.
Bankruptcy Code.

          13.4.  Termination of Licentec Rights.  Except as set forth below, in
                 ------------------------------
the event that the patent license to STC under the Licentec Rights is
terminated, SRI shall have the right to terminate this Agreement upon thirty
(30) days prior written notice, except, however, (a) if STC is contesting the
termination of such rights, the effect of such notice shall be stayed until
thirty (30) days after a final, binding and unappealable determination that such
termination was proper and lawful, (b) if the Licentec Rights have been assigned
to GIB Laboratories, Inc. and assumed by it, SRI shall not have the right to
terminate this agreement, (c) if the manufacture, use and sale of Products in
the Field do not infringe a Valid Patent Claim of the Licentec Rights, SRI shall
not

                                      -27-
<PAGE>

have the right to terminate this Agreement and/or (d) the termination is with
respect to less than all of the Licentec Rights.

          13.5.  Effect of Expiration or Termination.  Expiration or termination
                 -----------------------------------
of the Agreement shall not relieve the parties of any obligation accruing prior
to such expiration or termination, and the provisions of Articles 11, 14, 16 and
17 shall survive the expiration or termination of this Agreement. Upon
expiration of this Agreement under Section 13.1 above, STC shall have a fully-
paid, non-exclusive license under the Licensed Know-How and Licensor
Improvements in the Field.

          13.6.  Development Program Breach.  Notwithstanding anything to the
                 --------------------------
contrary contained herein, in the event of a breach by SRI or Sarnoff of their
obligations under the Development Program, STC shall have the right to terminate
its obligations under the Development Program in the manner set forth in Section
13.3 (provided that Licensors then do not have the right to terminate this
Agreement as a result of a breach of this Agreement by STC), but all other
provisions of this Agreement shall remain in full force and effect.

                                  ARTICLE 14

               INDEMNIFICATION, INSURANCE, LIMITED LIABILITY AND
                           DISCLAIMER OF WARRANTIES
                           ------------------------

          14.1.  Indemnification by STC.  Except to the extent set forth in this
                 ----------------------
Section 14.1 and in Sections 14.2 and 14.6, STC shall indemnify, defend and by
this Agreement or hold harmless SRI and Sarnoff, their directors, officers,
employees and agents from and against all direct, out-of-pocket, losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) that they may suffer as a result of any claims, demands, actions or other
proceedings made or instituted by any Third Party against any of them and
arising out of or relating to (a) any breach of this Agreement by STC, (b) any
negligence, recklessness or intentional act or omission by  STC in the
performance of its activities contemplated by this Agreement, (c) any claim of
infringement resulting from the use of the Licensed Patents or Licensor
Improvements or (d) any personal injury to or death of any person or damage to
any property in connection with any act or omission by STC in the performance of
its activities contemplated by this Agreement, except to the extent that those
losses, liabilities, damages and expenses arise out of or are related to (y) the
negligence, recklessness or intentional act or omission by SRI or Sarnoff in the
performance of its activities contemplated by this Agreement or (z) any personal
injury to or death of any person or damage to any property in connection with
any act or omission by SRI or Sarnoff in the performance of its activities
contemplated by this Agreement.

          14.2. Indemnification by SRI and Sarnoff.  Except to the extent set
                ----------------------------------
forth in this Section 14.2 and in Sections 14.1, 14.5 and 14.6, SRI and Sarnoff
shall indemnify, defend and hold harmless STC and its directors, officers,
employees and agents from and against all direct, out-of-pocket, losses,
liabilities, damages and expenses (including reasonable attorneys' fees and

                                      -28-
<PAGE>

costs) that they may suffer as a result of any claims, demands, actions or other
proceedings made or instituted by any Third Party against any of them that arise
out of or are related to (a) the negligence, recklessness or intentional act or
omission by SRI or Sarnoff in the performance of its Development Program
activities contemplated by this Agreement or (b) any personal injury or death to
any person or damage to any property in connection with any act or omission by
SRI or Sarnoff in the performance of its Development Program activities
contemplated by this Agreement, except to the extent that those losses,
liabilities, damages and expenses arise out of (y) the negligence, recklessness
or intentional acts or omissions of STC in the performance of its activities
contemplated by this Agreement or (z) any personal injury to or death of any
person or damage to any property in connection with any act or omission by STC
in the performance of its activities contemplated by this Agreement.

          14.3.  Indemnification Procedure.  A party (the "Indemnitee") that
                 -------------------------
intends to claim indemnification under this article shall promptly notify the
other party of any loss, liability, damage or expense, or any claim, demand,
action or other proceeding with respect to which the Indemnitee intends to claim
such indemnification.  A party shall not settle or consent to an adverse
judgment in any such claim, demand, action or other proceeding that adversely
affects the rights or interests of any Indemnitee or imposes additional
obligations on such Indemnitee, without the prior express written consent of
such Indemnitee.  The Indemnitees, its employees and agents, shall cooperate
fully with all other parties and its legal representatives in the investigation
of any action, claim or liability covered by this indemnification.

          14.4.  Insurance.
                 ---------

                 14.4.1.  By SRI.  SRI shall maintain comprehensive general
                          ------
liability insurance, including contractual liability insurance, against claims
for bodily injury or property damage arising from its activities contemplated by
the Agreement, with such insurance companies and in such amounts as SRI
customarily maintains for similar activities. SRI shall maintain such insurance
during the Development Period and thereafter for so long as SRI maintains
insurance for itself covering such activities.

                 14.4.2.  By Sarnoff.  Sarnoff shall maintain comprehensive
                          ----------
general liability insurance, including contractual liability insurance, against
claims for bodily injury or property damage arising from its activities
contemplated by the Agreement, with such insurance companies and in such amounts
as Sarnoff customarily maintains for similar activities. Sarnoff shall maintain
such insurance during the Development Period and thereafter for so long as
Sarnoff maintains insurance for itself covering such activities.

                 14.4.3.  By STC.  STC shall maintain comprehensive general
                          ------
liability insurance, including contractual and product liability insurance,
against claims for bodily injury or property damage arising from its activities
contemplated by the Agreement, with insurance companies reasonably acceptable to
SRI, and in amounts not less than ********** per occurrence and ********** in
the aggregate. STC shall maintain such insurance for so long as it continues to
conduct its activities contemplated by the Agreement and thereafter for so long
as

                                      -29-
<PAGE>

STC maintains insurance for itself covering such activities. Upon request, STC
shall provide SRI with certificates of insurance evidencing STC's compliance
with the insurance requirements of this section.

          14.5.  Product Liability.  SRI and Sarnoff assume no responsibility
                 -----------------
for the manufacturing, product specifications, or end-uses of Product.  No
warranties made by STC in connection with Product shall expressly or implicitly
obligate SRI or Sarnoff.  STC shall indemnify, defend and hold SRI and Sarnoff
harmless against all claims for all losses, expenses and damages awarded by a
court of competent jurisdiction, and reimburse Sarnoff or SRI for all reasonable
legal fees and costs incurred by Sarnoff or SRI in defense of such claims
arising from the manufacture, use or sale of Product.  STC shall have the right
to control any lawsuit based on such claims and to settle the same.  SRI and/or
Sarnoff shall give STC prompt written notice of any claim against SRI and/or
Sarnoff for which SRI and/or Sarnoff shall seek indemnification.

          14.6.  Limited Liability.  In no event shall any party be liable to
                 -----------------
another party for any special, consequential or incidental damages arising out
of or related to this Agreement, however caused and on any theory of liability
(including negligence), and whether or not a party has been advised of the
possibility of such damages.  In no event shall SRI's or Sarnoff's aggregate
liability to STC exceed the total amount actually paid by STC to SRI and Sarnoff
under this Agreement.

          14.7.  DISCLAIMER OF WARRANTIES.  NOTHING IN THE AGREEMENT SHALL BE
                 ------------------------
CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY SRI OR SARNOFF THAT ANY
PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION INCLUDED IN THE
LICENSED PATENTS, THAT ANY PATENT INCLUDED IN THE LICENSED PATENTS WHICH ISSUES
WILL BE VALID, OR THAT THE USE OF ANY LICENSED PATENTS OR LICENSED KNOW-HOW WILL
NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF ANY OTHER PERSON.  FURTHERMORE,
SRI OR SARNOFF MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE LICENSED PATENTS OR LICENSED KNOW-HOW, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

                                  ARTICLE 15

                                 FORCE MAJEURE
                                 -------------

          No party shall be held liable or responsible to the other parties nor
be deemed to have defaulted under or breached the Agreement for failure or delay
in fulfilling or performing any term of the Agreement to the extent, and for so
long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including but not limited to fires,
earthquakes, floods, embargoes, wars, acts of war (whether war is declared or
not),

                                      -30-
<PAGE>

insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or actions, omissions or delays in acting by any
governmental authority or other party.

                                  ARTICLE 16

                              DISPUTE RESOLUTION
                              ------------------

          Subject to Section 16.4 hereof, any controversy or claim arising out
of or relating to the Agreement, or the breach thereof, or any failure to agree
where agreement of the parties is necessary pursuant hereto, including the
determination of the scope of this agreement to arbitrate, shall be resolved by
the following procedures:

          16.1.  Attempt to Resolve Dispute.  The parties shall use all
                 --------------------------
reasonable efforts to amicably resolve the dispute through direct discussions.
The senior management of each party commits itself to respond promptly to any
such dispute.  Either party may send written notice to the other party
identifying the matter in dispute and invoking the procedures of this article.
If said dispute cannot be settled through direct discussions, the parties agree
to first endeavor to settle the dispute in an amicable manner by mediation in
Philadelphia, Pennsylvania and administered by the American Arbitration
Association ("AAA"), 417 Montgomery Street, San Francisco, California 94104-
1113, pursuant to the Commercial Mediation Rules of the AAA at the time of
submission prior to resorting to binding arbitration.

          16.2.  Application to Binding Arbitration.  If after ninety (90) days
                 ----------------------------------
from the first written notice of dispute, the parties fail to resolve the
dispute by written agreement or mediation, either party may submit the dispute
to final and binding arbitration administered by the American Arbitration
Association ("AAA"), 417 Montgomery Street, San Francisco, California 94104-
1113, pursuant to the Commercial Arbitration Rules of the AAA at the time of
submission. California Arbitration Law shall govern except in the event a stay
is sought pursuant to the California Code of Civil Procedure Section 1281.2(c),
in which event the parties agree that the issue shall be resolved under the
United States Arbitration Act.  The arbitration shall be held in San Francisco,
California before a single neutral, independent, and impartial arbitrator (the
"Arbitrator").

          16.3.  Binding Arbitration Procedure.  Unless the parties have agreed
                 -----------------------------
upon the selection of the Arbitrator before then, the AAA shall appoint the
Arbitrator as soon as practicable, but in any event within thirty (30) days
after the submission to AAA for binding arbitration.  The Arbitrator's award
shall be a final and binding determination of the dispute and shall be fully
enforceable as an arbitration award by the California courts in accordance with
the California Arbitration Law.  The prevailing party shall be entitled to
recover its reasonable attorneys' fees and expenses, including arbitration
administration fees, incurred in connection with such proceeding.  Neither party
nor the Arbitrator may disclose the existence, content, or results of any
arbitration hereunder without the prior written consent of both parties.

                                      -31-
<PAGE>

          16.4  Injunctive Relief.  To the extent that any controversy or claim
                -----------------
gives rise to a prayer for injunctive relief, equitable action or specific
performance, the aggrieved party shall have the right to commence such an action
in any court of competent jurisdiction, notwithstanding anything contained in
Sections 16.1, 16.2 or 16.3 to the contrary.

                                  ARTICLE 17

                                 MISCELLANEOUS

          17.1.  Notices.  Any consent, notice or report required or permitted
                 -------
to be given or made under the Agreement by one party to the other party shall be
in writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, U.S. first class mail, courier or nationally-recognized
delivery service), U.S. first class mail postage prepaid, courier or nationally-
recognized delivery service, and addressed to the other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor.  Except as otherwise provided in the
Agreement, such consent, notice or report shall be effective upon receipt by the
addressee.

          If to Sarnoff, for
          all technical matters:  David Sarnoff Research Center
                         201 Washington Road
                                    Princeton, NJ 08540-6449
                                    Attention:  John Aceti

          If to SRI, for
          all other matters:    SRI International
                                    333 Ravenswood Avenue
                                    Menlo Park, CA  94025-3493
                                    Attention:  General Counsel

          If to STC, for
          all matters:          SolarCare Technologies
                                     Corporation
                                    1745 Eaton Avenue
                                    Bethlehem, PA 18018
                                    Attention:  Michael Gausling

          17.2.  Governing Law.  The Agreement, including the decision to
                 -------------
arbitrate and any decision by an arbitrator pursuant to Article 16, shall be
governed by and construed in accordance with the laws of the State of
California, without regard to the conflicts of law principles thereof.

                                      -32-
<PAGE>

          17.3.   U.S. Export Laws and Regulations.  Each party hereby
                  --------------------------------
acknowledges that the rights and obligations of the Agreement are subject to the
laws and regulations of the United States relating to the export of products and
technical information.  Without limitation, each party shall comply with all
such laws and regulations.

          17.4.   Relationship of Parties.  The obligations and liabilities of
                  -----------------------
SRI and Sarnoff hereunder shall be joint and several.

          17.5.   Assignment.  Except as set forth in this Section 17.5 and in
                  ----------
Section 17.11, no party shall assign its rights or obligations under the
Agreement, in whole or in part, by operation of law or otherwise, without the
prior written consent of the other parties.  Any purported assignment in
violation of this section shall be null and void.  The rights of STC hereunder
may be assigned without the prior written consent of SRI or Sarnoff (a) to GIB
Laboratories, Inc. ("GIB") and/or its Affiliates, upon the resolution,
satisfactory to the Licensors and GIB, of the scope of the indemnification set
forth in Section 14.1(c) hereof and (b) in connection with the direct or
indirect sale of all or part of STC or the line of STC's business which is the
subject of this Agreement.  STC and/or its assignee shall give Licensors prompt
written notice of any such assignment.

          17.6.   Waivers and Amendments.  No change, modification, extension,
                  ----------------------
termination or waiver of the Agreement, or any of the provisions herein
contained, shall be valid unless made in writing and signed by duly authorized
representatives of the parties hereto.

          17.7.   Entire Agreement.  The Agreement embodies the entire
                  ----------------
understanding between the parties and supersedes any prior understanding and
agreements between and among them respecting the subject matter hereof.  There
are no representations, agreements, arrangements or understandings, oral or
written, between the parties hereto relating to the subject matter of the
Agreement which are not fully expressed herein.

          17.8.   Severability.  Any of the provisions of the Agreement which
                  ------------
are determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof and without affecting the validity or enforceability of any of
the terms of the Agreement in any other jurisdiction.

          17.9.   Waiver.  The waiver by either party hereto of any right
                  ------
hereunder or the failure to perform or of a breach by the other party shall not
be deemed a waiver of any other right hereunder or of any other breach or
failure by said other party whether of a similar nature or otherwise.

          17.10.  Counterparts.  The Agreement may be executed in two or more
                  ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                                      -33-
<PAGE>

          17.11.  GIB Laboratories, Inc.
                  ---------------------

                  17.11.1.  Notwithstanding anything to the contrary set forth
in Section 13.3 to the contrary, and subject to the next sentence of this
Section 17.11.1, in the event that Licensors terminate this Agreement due to a
default by STC, Licensors shall give prompt written notice to GIB at 41 Spring
Street, New Providence, New Jersey 07974 (or to such other address as previously
communicated, in writing, by GIB to Licensors) and GIB shall have the right,
during a period of forty-five (45) days from the date that Licensors so
terminate this Agreement, to cure such default, which, if so cured, shall fully
reinstate STC's rights under this Agreement. In the event that such default is
not capable of cure within such forty-five (45) day period and GIB is using all
diligent efforts to cure such default, such cure period shall be extended for an
additional period, not to exceed thirty (30) days.

                  17.11.2.  Licensors hereby consent to the assignment, if any,
by STC to GIB in accordance with clause (a) of Section 17.5. and agree that GIB
shall have no liability for STC's pre-assignment obligations in excess of STC's
payment obligations arising under Article 6 and Sections 3.2, 3.3 and 12.3.3
during the fifteen (15) month period preceding the date of the assignment and
shall have no liability under the indemnification set forth in Section 14.1(c)
until the resolution, satisfactory to Licensors and GIB, of the scope of such
indemnification.

          IN WITNESS WHEREOF, the parties have executed the Agreement as of the
Effective Date hereof.

For:  SRI International            For:  David Sarnoff Research
                                                 Center

By:  /s/ John K. Clemens        By:  /s/ Carmen A. Catenese
     ------------------------        --------------------------

Title:  Senior Vice President   Title:  Vice President
        Science & Technology            -----------------------
        Group

For:  SolarCare Technologies
      Corporation

By:  /s/ Michael J. Gausling
     -----------------------

Title:  President
        --------------------
                                      -34-
<PAGE>

                                   EXHIBIT A
                                   ---------

                                 RESEARCH PLAN
                                 -------------

                               [TO BE COMPLETED]

                                      A-1

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