Document:

<PAGE>

                                                                    Exhibit 10.1

                                CREDIT AGREEMENT

This Credit Agreement ("Agreement") is made and entered into as of the first day
of April, 2001 ("Effective Date"), by and between Embrex, Inc. ("Lender") and
Advanced Automation, Inc. ("Borrower").

                              W I T N E S S E T H:
                              - - - - - - - - - -

WHEREAS, Lender and Borrower will be entering into a Development and Supply
Agreement ("Development and Supply Agreement") in conjunction with this
Agreement.

WHEREAS, Lender desires to extend credit to Borrower by making loans to Borrower
from time to time in sums equal to an aggregate amount not exceeding the Loan
Commitment in order to facilitate Borrower's performance of its obligations
under the Development and Supply Agreement; and

WHEREAS, Borrower desires to borrow from Lender sums equal to an aggregate
amount not exceeding the Loan Commitment.

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, the parties hereto agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

Section 1.01 Certain Defined Terms. As used herein, the following terms shall
             ---------------------
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
                  ----------

         "Business Day" shall mean any day on which the principal office of
          ------------
Lender is not closed.

         "Default" shall mean an Event of Default or an event which with notice
          -------
or lapse of time or both would become an Event of Default.

         "Indebtedness" shall mean all sums owed or to be owed by Borrower to
          ------------
Lender, whether principal or interest.

         "Interest Rate" shall mean six percent (6%) per annum.
          -------------

         "Loan" and "Loans" shall mean loans made issued pursuant to Article II
          ----       -----
of this Agreement.

<PAGE>

         "Loan Commitment" shall mean an amount equal to Three Million Three
          ---------------
Hundred Seventy Thousand Dollars ($3,370,000.00).

         "Maturity Date" shall mean April 30, 2003.
          -------------

         "Note" shall mean the promissory note referenced in Section 2.01 hereof
          ----
substantially in the form of Exhibit A hereto.

Accounting terms not specifically defined herein shall be defined in accordance
with generally accepted accounting principles.

                                   ARTICLE II
                               EXTENSION OF CREDIT

Section 2.01 Loans. Subject to the conditions set forth below in this Article
             -----
II, Lender agrees to make loan(s) (each a "Loan" and collectively, the "Loan")
                                           ----                         ----
to Borrower during the period from and including the Effective Date to the date
falling 30 days before the Maturity Date in an aggregate principal amount not
exceeding at any one time outstanding the Loan Commitment; notwithstanding the
foregoing or any other provision of this Agreement, the payment to be made by
Lender to Borrower on April 26, 2001, in the amount of Forty-Three Thousand Four
Hundred Twenty-Three and 28/100 Dollars ($43,423.28), shall be deemed a Loan
hereunder. The Loans shall mature and be payable in full on the Maturity Date.
The Loans made by Lender shall be evidenced by a single promissory note of
Lender in substantially the form of Exhibit A hereto ("Note"), payable to the
                                                       ----
order of Lender in a principal amount equal to the amount of the Loan
Commitment. The Note shall be dated the date hereof.

Section 2.02 Availability. Availability of Loans hereunder will be limited to
             ------------
and conditioned on Borrower's providing Lender with drawdown requests
satisfactory in form and substance to Lender (each a "Drawdown Request"). Each
                                                      --------
Drawdown Request must be in an amount equal to the amount of expenses actually
incurred by Borrower during the calendar month prior to the Drawdown Request in
connection with Borrower's performance of its obligations under the Development
Program (as defined in the Development and Supply Agreement). Lender must
pre-authorize, in writing, each such expense (whether labor, materials or
travel) incurred under the Development Program before being obligated to make
Loans against such expenses pursuant to Drawdown Requests hereunder. Each
Drawdown Request shall include (i) a detailed breakdown of the expenses incurred
and for which a drawdown is requested, (ii) a copy of the related
pre-authorization by Lender, and (iii) a certification of the matters set forth
in Section 2.03 below.

Section 2.03 Conditions. In addition to the foregoing, Lender shall not be
             ----------
required to make any Loan unless, on the date of making the requested Loan: (i)
there shall exist no Default; (ii) the representations and warranties of
Borrower set forth in this Agreement shall be true and correct immediately prior
to and after giving effect to the requested

                                        2

<PAGE>

Loan; and (iii) such Loan shall not violate any requirement of law and shall not
be enjoined in any fashion.

Section 2.04 Use of Loan Proceeds. Borrower shall use proceeds of the Loans
             --------------------
solely and exclusively to perform its obligations under the Development and
Supply Agreement.

                                   ARTICLE III
                                    INTEREST

Section 3.01 Interest. The Loans shall accrue simple interest at the rate of six
             --------
percent (6%) per annum. All computations of interest shall be made by Lender on
the basis of a year of 360 days, for the actual number of days (including the
first day but excluding the last day) elapsed. In no event will the amount of
any interest due and payable hereunder exceed the maximum rate of interest
allowed by applicable law.

                                   ARTICLE IV
                                    PAYMENTS

Section 4.01 Repayment of Principal. Borrower shall pay Lender the outstanding
             ----------------------
principal amount of the Loans, and all accrued interest, on the Maturity Date,
or such earlier date as provided for in this Agreement.

Section 4.02 Payments. Except to the extent otherwise provided herein, all
             --------
payments of principal and interest to be made by Borrower under this Agreement
and the Note shall be made (i) in United States of America Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to
Lender via commercially acceptable means on the date on which such payment shall
become due, or (ii) in such other form of consideration, including without
limitation the performance of services, as may be mutually agreed upon by Lender
and Borrower.

Section 4.03 Prepayment. If Borrower completes all of its obligations under the
             ----------
Development and Supply Agreement, to Lender's satisfaction prior to the Maturity
Date, then Borrower may at such time prepay the entire amount owed on the Loans
(which payment shall include all outstanding principal and accrued interest)
without penalty. Any such prepayment shall be applied first to accrued interest
on the Loans and then to principal.

Section 4.04 Costs. Borrower agrees to pay on demand all costs, expenses and
             -----
losses, if any (including without limitation reasonable attorney's fees)
incurred by Lender in connection with the enforcement of this Agreement and the
Note. In addition, Lender agrees to indemnify Borrower for all costs, expenses
and losses, if any (including without limitation reasonable attorney's fees)
incurred by Borrower in connection with any action bought by a regulatory body
challenging the lawfulness of this Agreement.

                                        3

<PAGE>

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

Section 5.01  Borrower represents and warrants to Lender that:

     (a) Corporate Existence. Borrower is a corporation duly organized, legally
         -------------------
         existing and in good standing under the laws of South Carolina, and is
         duly qualified to transact business in each State or other jurisdiction
         in which the character of the properties owned by it or the nature of
         its business require such qualification.

     (b) Authority; Enforceability; No Conflicts. Borrower is duly authorized
         ---------------------------------------
         and empowered to borrow the funds as contemplated hereunder, and to
         execute and deliver this Agreement and the Note. All corporate action
         requisite for borrowing funds as contemplated hereunder and the due
         execution and delivery of this Agreement and the Note has been duly and
         effectively taken. This Agreement, the Note and the Loans are valid and
         binding obligations of Borrower enforceable in accordance with their
         terms (subject to any applicable bankruptcy, insolvency or other laws
         generally affecting the enforcement of creditors' rights). This
         Agreement, the Note and the Loans do not violate or conflict with any
         provisions of Borrower's articles of incorporation, bylaws, or any
         agreement, law or regulation to which it is subject, and the same do
         not require the consent or approval of any regulatory authority or
         governmental body or any political subdivision thereof.

     (c) Accuracy of Information. All information previously furnished by or on
         -----------------------
         behalf of Borrower to Lender is true and correct and fairly reflects
         the financial condition of Borrower as of the dates thereof, and the
         financial condition of Borrower has not changed materially and
         adversely since the date thereof.

     (d) Litigation. There is no pending or threatened action or proceeding
         ----------
         before any court, commission, governmental agency, whether State or
         Federal, or arbitration which may materially adversely affect the
         financial condition, operations, properties, or business of Borrower or
         the ability of Borrower to perform its obligations hereunder or under
         the Note.

                                        4

<PAGE>

                                   ARTICLE VI
                                     NOTICES

Section 6.01 Notice. All notices and communications directed by Borrower to
             ------
Lender shall be sent to:

         Embrex, Inc.
         P.O. Box 13989
         Research Triangle Park, North Carolina 27709-3989
         Attention: Vice President, Finance and Administration

All notices and communications directed by Lender to Borrower shall be sent to:

         Advanced Automation, Inc.
         17 Haywood Road
         Greenville, SC 29607
         Attention: Chairman

All notices and communications shall be sent by certified mail return receipt
requested, or by personal delivery. Either party may from time to time notify
the other party of a different address to which all notices and communications
shall thereafter be addressed.

                                   ARTICLE VII
                                     DEFAULT

Section 7.01 Events of Default. With respect to Borrower, if any of the
             -----------------
following events shall occur and be continuing, such event shall be considered
an "Event of Default" as that term is used herein:
    ----------------

     (a) Failure to pay any principal of, or interest on, the Loans when due and
         payable,

     (b) Default in the observance of performance of any covenant contained
         herein, or in the Development and Supply Agreement, to be performed or
         kept by Borrower,

     (c) Any representation or warranty made by Borrower herein proves to have
         been untrue in any material respect as of the date hereof, or any
         representation, statement, certificate or data furnished or made by
         Borrower hereunder proves to have been untrue in any material respect,
         as of the date as of which the facts therein set forth were stated or
         certified, or

     (d) Borrower shall generally not pay its debts as such debts become due, or
         shall admit in writing its inability to pay its debts generally, or
         shall make a general assignment for the benefit of creditors, or any
         proceeding shall

                                        5

<PAGE>

         be instituted by or against Borrower seeking to adjudicate it a
         bankrupt or insolvent or seeking liquidation, winding up,
         reorganization, arrangement, adjustment, protection, relief, or
         composition of it or its debts under any law relating to bankruptcy,
         insolvency or reorganization or relief of debtors, or seeking the entry
         of an order for relief or the appointment of a receiver, trustee or
         other similar official for it or any substantial part of its property,
         or Borrower shall take any corporate action to authorize any of the
         actions set forth above in this subsection (d).

Section 7.02 Remedies Upon an Event of Default. Upon the occurrence of any of
             ---------------------------------
the above listed Events of Default, Lender may at any time thereafter, at its
option, take any or all of the following actions, at the same or at different
times: (i) declare the balance of the Loans and the Note to be immediately due
and payable, both as to principal and interest, without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived by
Borrower; (ii) exercise other rights and remedies as Lender may be provided
hereunder or under the Note, or as provided by law; and (iii) any obligation of
Lender to advance funds hereunder or under the Note and all other obligations
(if any) of Lender shall immediately cease and terminate.

                                  ARTICLE VIII
                          COVENANTS AND REPRESENTATIONS

Section 8.01 Taxes and Other Liens. Borrower will pay all taxes, assessments,
             ---------------------
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a lien against the property of Borrower, except
liabilities being diligently contested in good faith and against which Borrower
will set up reserves in accordance with generally accepted accounting
principles.

Section 8.02 Corporate Existence; Maintenance of Properties. Borrower will
             ----------------------------------------------
maintain its corporate existence, remain in good standing in each jurisdiction
in which it is required to be qualified, maintain all franchises, permits and
licenses reasonably necessary in its business, comply in all material respects
with all valid and applicable statutes, rule and regulations, and it will at all
times protect, and/or maintain in reasonably good and workable condition, its
properties (including without limitation intangible assets, intellectual
property, trade names and trademarks).

                                   ARTICLE IX
                                  MISCELLANEOUS

Section 9.01 Governing Law. This Agreement shall be interpreted and construed in
             -------------
accordance with the laws of the State of North Carolina.

Section 9.02 Amendments. This Agreement shall not be modified or amended except
             ----------
by an instrument in writing signed by both parties.

                                        6

<PAGE>

Section 9.03 Severability. If any one or more provisions of this Agreement shall
             ------------
be found to be illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

Section 9.04 Entire Agreement. This Agreement, the Note and the Development and
             ----------------
Supply Agreement sets forth the entire agreement and understanding between the
parties with respect to the subject matter hereof and thereof. Any oral
representations or modifications concerning this Agreement shall be of no force
or effect unless contained in a subsequent written modification signed by a duly
authorized officer or agent of the party to be bound thereby.

Section 9.05 Headings. The descriptive headings contained herein are for
             --------
convenience only and shall not control or affect the meaning, interpretation or
construction of any provision of this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers on the Effective Date.

Embrex, Inc.                        Advanced Automation, Inc.

By:    /s/ Randall L. Marcuson      By:    /s/ Sunder Subbaroyan
       -------------------------           ------------------------
Name:  Randall L. Marcuson          Name:  Sunder Subbaroyan
Title: President and CEO            Title: Chairman

By:   /s/ Don T. Seaquist              By: __________________________
      --------------------------       Name:  _______________________
Name:  Don T. Seaquist                 Title: Secretary
Title: Secretary

                                        7

<PAGE>

                                    EXHIBIT A
                                    ---------
                                       to
                                CREDIT AGREEMENT

                                 PROMISSORY NOTE

$3,370,000.00                                 Dated: April 1, 2001

           FOR VALUE RECEIVED, the undersigned ("Borrower"), HEREBY PROMISES TO
PAY to the order of Embrex, Inc., a North Carolina corporation ("Lender"), the
principal amount of Three Million Three Hundred Seventy Thousand Dollars
($3,370,000.00), pursuant to the Loans (as defined in the Credit Agreement
referred to below), on or before April 30, 2003 (the "Maturity Date"); together
with interest (computed on the basis of a year of 360 days for the actual number
of days, including the first day but excluding the last day, elapsed) on the
principal amount hereof outstanding from time to time from and including the
date hereof until the Maturity Date, payable on the Maturity Date at an interest
rate of six percent (6%) per annum.

           This Promissory Note is the Note referred to in, and is entitled to
the benefits of, the Credit Agreement, dated April 1, 2001 (the "Credit
Agreement"), between Borrower and Lender. All capitalized terms used herein and
not otherwise defined herein shall have the meanings given to them in the Credit
Agreement.

           The Borrower shall have the right to prepay in full the principal
amount hereunder together with accrued interest to the date of such payment on
the principal amount in accordance with Section 4.03 of the Credit Agreement.

           If any of the following events shall occur and be continuing:

                    (a)  Borrower shall fail to pay any principal of, or any
           interest on, the Loans as evidenced by this Promissory Note when the
           same becomes due and payable;

                    (b)  Borrower shall default in the observance of performance
           of any covenant contained in the Credit Agreement, or in the
           Development and Supply Agreement, to be performed or kept by
           Borrower;

                    (c)  Any representation or warranty made by Borrower in the
           Credit Agreement proves to have been untrue in any material respect
           as of the date hereof, or any representation, statement, certificate
           or data furnished or made by Borrower under the Credit Agreement
           proves to have been untrue in any material respect, as of the date as
           of which the facts therein set forth were stated or certified; or

<PAGE>

                    (d) Borrower shall generally not pay its debts as such debts
           become due, or shall admit in writing its inability to pay its debts
           generally, or shall make a general assignment for the benefit of
           creditors; or any proceeding shall be instituted by or against
           Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking
           liquidation, winding up, reorganization, arrangement, adjustment,
           protection, relief, or composition of it or its debts under any law
           relating to bankruptcy, insolvency or reorganization or relief of
           debtors, or seeking the entry of an order for relief or the
           appointment of a receiver, trustee, or other similar official for it
           or any substantial part of its property; or Borrower shall take any
           corporate action to authorize any of the actions set forth above in
           this subsection (d);

then, and in any such event, Lender may declare this Promissory Note, all
interest thereon and all other amounts payable hereunder to be forthwith due and
payable, whereupon this Promissory Note, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which Borrower hereby expressly
waives.

           Borrower shall make payment of all principal and interest hereunder
prior to 2:00 P.M. (North Carolina time) on the day when due in lawful money of
the United States of America to Lender at its office in Research Triangle Park,
North Carolina in immediately available funds. Whenever any payment to be made
hereunder shall be otherwise due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest.

           Borrower also agrees to pay on demand all costs and expenses
(including without limitation reasonable attorneys' fees) incurred by Lender in
enforcing this Promissory Note.

           This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of North Carolina, without regard to
principles of conflict of laws.

           IN WITNESS WHEREOF, Borrower has executed this instrument under seal,
the day and year first above written.

                                ADVANCED AUTOMATION, INC.

                                By: /s/ Sunder Subbaroyan
                                     ------------------------------(SEAL)
                                Name:   Sunder Subbaroyan
                                Title:  Chairman

ATTEST:

By:    ___________________________
Name:  ___________________________
Title: ___________________________<PAGE>

                                                               EXHIBIT 10.2 ****

                              AMENDED AND RESTATED
                  RESEARCH, DEVELOPMENT AND MARKETING AGREEMENT

     AGREEMENT, dated as of July 20, 2001, by and between EMBREX, INC., a North
Carolina corporation ("Embrex"), and LIFESENSORS, INC., a Pennsylvania
corporation ("LifeSensors").

                                   Background

     A.    LifeSensors is a company whose principal business is to research,
design and commercialize cell-based biosensors and
screens.

     B.    Embrex is an agricultural biotechnology company focused on
developing products that improve bird health, reduce bird production costs and
provide other benefits to the poultry industry.

     C.    LifeSensors and Embrex desire to collaborate on the research and
development of products employing a **** biosensor designed to gender sort avian
eggs. To that end, the parties entered into a Research and Supply Agreement
dated December 29, 1999 (the "Original Agreement").

     D.    The parties wish to amend and restate the Original Agreement to
provide as set forth in this Agreement.

     NOW, THEREFORE, in consideration of the premises, covenants and agreements
set forth herein and of other good and valuable consideration, the receipt and
legal sufficiency of which the parties hereby acknowledge, and intending to be
legally bound, the parties agree as follows:

SECTION 1. Definitions

     The following terms, whether used in the singular or plural, shall have the
meanings assigned to them below for purposes of this Agreement:

     1.1   "Affiliate" of a specified Person means: (i) any Person directly or
            ---------
indirectly controlling, controlled by, or under common control with the
specified Person; (ii) any Person owning or controlling ten percent or more of
the outstanding voting securities of the specified Person; (iii) any officer,
director or partner of the specified Person; or (iv) if the specified Person is
an officer, director, or partner, any entity for which the specified Person acts
in such capacity.

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended ("Rule 24b-2"). Complete
copies of the entire exhibit have been filed separately with the Securities and
Exchange Commission (the" Commission") and marked "CONFIDENTIAL TREATMENT".

<PAGE>

     1.2  "Biosensor" means a **** such that males can be distinguished from
           ---------
females based on a signal generated by the ****, including any modification,
improvement, upgrade, new version or **** substitute developed by LifeSensors
pursuant to this Agreement and acceptable to Embrex.

     1.3  "Confidential Information" means all information, data, know-how and
           ------------------------
all other business, technical and financial data disclosed hereunder by one
party or any of its Affiliates to the other party or any of its Affiliates,
except any portion thereof which: (a) at the time of disclosure, is in the
public domain; (b) after disclosure, becomes part of the public domain by
publication or otherwise, except by breach of this Agreement by the recipient;
(c) the recipient can demonstrate by its written records was in the recipient's
possession at the time of such disclosure, and which was not acquired, directly
or indirectly, from the disclosing party; (d) is lawfully disclosed to the
recipient on a non-confidential basis by a third party who is not obligated to
the disclosing party or any other third party to retain such Confidential
Information in confidence; (e) results from research and development by the
recipient independent of such disclosure as shown by competent evidence; or (f)
is required to be disclosed by legal process (provided the party so disclosing
information timely informs the other party and uses its best efforts to limit
the disclosure and maintain confidentiality to the extent possible and permits
the other party to attempt by appropriate legal means to limit such disclosure).

     1.4  "Documentation" means all available documentation relating to the
           -------------
Biosensor, including user manuals, training materials, descriptions and
specifications, technical manuals, supporting materials and other printed
information.

     1.5  "Field of Use" means the in ovo and ex ovo gender classification of
           ------------
avian species.

     1.6  "Gender Sorting Products" means and includes all products derived
           -----------------------
from, or generated by, the combination, assimilation, fusing or manipulation of
the Sampling Module and/or the Laboratory Automation Module with the Biosensor
that have potential commercial utility within the Field of Use.

     1.7  "Gender Sorting Revenues" means the revenues generated by Embrex and
           -----------------------
its distributors, sublicensees and permitted assignees from the sale, lease or
other disposition of Gender Sorting Products and the performance of Gender
Sorting Services; provided that, when Gender Sorting Products are sold or used
as part of an integrated egg processing system and/or Gender Sorting Services
are performed in conjunction with other egg processing services, Gender Sorting
Revenues shall mean the value of gender sorting separate from other egg
processing, such as straight egg vaccination and associated options, that are
sold, leased or performed by Embrex and its customers, distributors, sublicenses
and permitted assignees. Gender Sorting Revenues shall be net of all preparation
costs for the Gender Sorting Products, including packaging, labeling and
inserts; and any commercially reasonable discounts or rebates

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended ("Rule 24b-2"). Complete
copies of the entire exhibit have been filed separately with the Securities and
Exchange Commission (the" Commission") and marked "CONFIDENTIAL TREATMENT".

                                        2

<PAGE>

as well as credits or allowances given or made due to end-user returns or
rejections of Gender Sorting Products. In the event that Embrex or its
distributors, sublicensees or permitted assigns shall market Gender Sorting
Products or Gender Sorting Services in combination with other egg processing or
related products or services, Embrex shall in good faith allocate to Gender
Sorting Revenues the consideration fairly attributable thereto.

     1.8   "Gender Sorting Services" means and includes all gender
            -----------------------
classification and sorting services performed by Embrex and its customers,
distributors, other sublicensees and permitted assignees utilizing the Gender
Sorting Products.

     1.9   "Intellectual Property Rights" means all forms of intellectual
            ----------------------------
property rights and protections, including, without limitation: (i) all right,
title and interest in and to all patents and all filed, pending or potential
applications for patents, including any reissue, reexamination, division,
continuation or continuation-in-part applications throughout the world now or
hereafter filed; (ii) all right, title and interest in and to all trade secrets,
and all trade secret rights and equivalent rights arising under the common law,
state law, federal law and laws of foreign countries; (iii) all right, title and
interest in and to all mask works, copyrights, other literary property or
authors' rights, whether or not protected by copyright or as a mask work, under
common law, state law, federal law and laws of foreign countries; and (iv) all
right, title and interest in and to all proprietary indicia, trademarks, trade
names, symbols, logos and/or brand names under common law, state law, federal
law and laws of foreign countries.

     1.10  "Invention" means any idea, functional design, concept, process,
            ---------
technique, invention, discovery or improvement, whether or not patentable,
conceived or first reduced to practice by one or more employees of a party
hereto in the performance of this Agreement, and "Joint Invention" means an
                                                  ---------------
Invention conceived or first reduced to practice jointly by one or more
employees of LifeSensors with one or more employees of Embrex in the performance
of this Agreement.

     1.11  "Laboratory Automation Module" means the device being developed by
            ----------------------------
Embrex to be used to detect the sex-specific signal generated by the Biosensor
or any other device, instrument or equipment used to deliver or decontaminate
the Biosensor.

     1.12 "Mark" means, with respect to either party, any and all indicia,
           ----
marks, names, symbols and logos adopted from time to time to identify the party
or any of its products or services.

     1.13 "Person" means any individual, corporation, partnership, trust,
           ------
limited liability company or other entity, including any governmental entity.

                                        3

<PAGE>

     1.14  "Sampling Module" means the **** sampling device being developed by
            ---------------
Embrex for inclusion in the Gender Sorting Products, including any modification,
upgrade, new version or substitute developed by Embrex.

     1.15  "Term" means the period of time beginning on the date of this
            ----
Agreement and terminating on the date this Agreement terminates pursuant to
Section 10 of this Agreement.

SECTION 2. PURPOSE AND MANAGEMENT OF COLLABORATION

     2.1   Purpose. Through performance of their respective obligations under
           -------
this Agreement, Embrex and LifeSensors will use their respective commercially
reasonable efforts jointly to conceive, design and develop commercially viable
Gender Sorting Products. This collaboration will be conducted in three phases,
the first of which has been completed.

     2.2   Steering Committee. To provide open lines of communication and
           ------------------
facilitate the performance of their respective obligations under this Agreement,
the parties hereby establish a six-member Steering Committee comprised of three
designees from each party. The initial Steering Committee designees shall be Dr.
Catherine Ricks, Dr. Patricia Phelps and a designee to be identified from Embrex
and Dr. Tauseef R. Butt, Dr. Hiep Tran and Dr. Stephen Weeks from LifeSensors.
Each party shall be entitled to replace any of its designees to the Steering
Committee by written notice to the other party. The Steering Committee shall
convene on such schedule (but not less frequently than monthly) and employ such
procedures as it shall determine from time to time in good faith, except that it
is hereby agreed that valid actions of the Steering Committee shall require the
written consent of at least a majority of its members. Meetings of the Steering
Committee may be held by any means of communication acceptable to the members.

SECTION 3. DESIGN AND DEVELOPMENT

     3.1   LifeSensors' General Responsibilities. Except as otherwise provided
           -------------------------------------
herein, and subject to the payments to be made by Embrex hereunder, LifeSensors
shall provide all parts, labor, materials, and funding necessary to perform its
obligations under this Agreement. LifeSensors shall use reasonable commercial
efforts to design and construct the Biosensor in accordance with the specific
milestones described in Appendix A hereto, which may be amended, supplemented or
                        ----------
modified from time to time by the Steering Committee.

     3.2   Embrex's General Responsibilities. Except as otherwise provided
           ---------------------------------
herein, and subject to LifeSensors' performance of its duties and obligations
hereunder, Embrex shall provide all parts, labor, materials, and funding
necessary to perform its obligations under this Agreement. Embrex shall use
reasonable commercial efforts to design, develop, construct, market and sell
Gender Sorting Products and any modifications thereto considered appropriate by
Embrex.

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2
under the Securities Exchange Act of 1934, as amended ("Rule 24b-2"). Complete
copies of the entire exhibit have been filed separately with the Securities and
Exchange Commission (the" Commission") and marked "CONFIDENTIAL TREATMENT".

                                        4

<PAGE>

     3.3  Performance of Development Activities.
          -------------------------------------

          (a) Appendix A sets forth a development plan (the "Development Plan"),
              ----------
including a series of milestones for conducting the activities described in this
Section 3 (collectively, the "Development Activities"). Details regarding Phase
3 of the Development Plan shall be developed by the Steering Committee and set
forth in an amendment to the Development Plan approved in accordance with
Section 3.3(b). LifeSensors will undertake only those Development Activities
that are set forth in the Development Plan, as it may be amended from time to
time by the Steering Committee in accordance with Section 2.2. Each of Embrex
and LifeSensors will devote not less than the resources specified in the
Development Plan, as amended from time to time in accordance with this Section
3.3, to conducting its respective Development Activities, allocating such
resources and conducting such activities substantially on the schedule set forth
in and otherwise in accordance with the Development Plan, except to the extent
otherwise provided on Appendix A. In particular, during Phase 2 of the
                      ----------
Development Plan, LifeSensors agrees that no fewer than **** of its full-time
employees will be dedicated to the project.

          (b) The Development Plan may be amended from time to time during the
Term upon the mutual written agreement of at least a majority of the members of
the Steering Committee and with the approval of the parties, whereupon Appendix
                                                                       --------
A shall be revised to reflect the amendment.
-

          (c) Each party undertakes to diligently carry out its respective
Development Activities under this Agreement, and such Development Activities
shall be deemed a material obligation of such party under this Agreement. The
parties shall cooperate with each other and make a good faith effort to carry
out the Development Plan successfully. No party shall be liable to the other
party in the event that the Development Plan is not ultimately completed, except
for liability of one party determined in a final judgment by a court of
competent jurisdiction to have resulted solely from actions taken or omitted due
to such party's willful misconduct, gross negligence or knowing violation of
law.

     3.4  Compensation.
          ------------

          (a) Embrex agrees to reimburse LifeSensors for its services in
undertaking its Development Activities and for the purchase of equipment to be
used in the performance of its Development Activities, in each case as provided
on Appendix A. Interest shall accrue on amounts not paid by Embrex within ****
   ----------
days after the due date thereof at ****.

          (b) Compensation for additional services and improvements to the
Biosensor over those contemplated by the Development Plan shall be negotiated in
good faith by the parties

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                        5

<PAGE>

and mutually agreed upon in writing. In addition, if any portion of the
Development Plan shall be funded by a third party government grant, the parties
shall share in each grant in accordance with the contribution of such party and
the Intellectual Property owned by it to the work to be performed under the
grant.

SECTION 4. MANUFACTURING AND LICENSE

     4.1 General. The parties agree that it is not yet clear whether LifeSensors
         -------
or an alternative manufacturing site will be the optimal approach for final
product manufacture of the Biosensor. The parties agree to cooperate in
determining the best site for manufacture of the Biosensor. If LifeSensors is
         the site for manufacture or supplier of the Biosensor, the parties will
negotiate in good faith the terms of an agreement for the manufacture and supply
of the Biosensor. If an alternative manufacturing site is chosen, LifeSensors
shall provide to the manufacturer copies of the specifications, design and
process documentation relating to the Biosensor necessary for the manufacturer
to perform the entire process of manufacturing the Biosensor without any
assistance from LifeSensors, and, within 30 days after any significant change to
the design of the Biosensor, LifeSensors shall forward to the manufacturer new
or updated copies of the specifications, design and process documentation
relating to the Biosensor.

     4.2 Grant of Exclusive License.
         --------------------------

         (a) Subject to the terms and conditions of this Agreement, LifeSensors
hereby grants to Embrex an irrevocable, exclusive (even as against LifeSensors
and its Affiliates) worldwide right and license for the Term of this Agreement
to use the Biosensor (including without limitation all Intellectual Property
Rights therein and all Documentation associated therewith) for the development
of Gender Sorting Products in the Field of Use and to license, sell and
otherwise commercialize Gender Sorting Products and to perform Gender Sorting
Services derived from, including and utilizing the Biosensor in the Field of
Use.

     (b) In consideration of the license granted to Embrex by LifeSensors
hereunder, Embrex agrees to pay to LifeSensors royalties based on Gender Sorting
Revenues in the amounts set forth on Schedule 4.2 hereto. During the first ****
                                     ------------
period that royalties are payable hereunder Embrex shall remit the appropriate
payment of royalties **** in U.S. dollars within **** days after the end of each
****; thereafter, Embrex shall remit the appropriate payment of royalties ****
in U.S. dollars within **** days after the end of each ****. Each payment shall
be accompanied by a statement, certified by a duly authorized officer of Embrex,
which provides sufficient information from which to calculate the amount of
royalties due for applicable prior period. Interest shall accrue on amounts not
paid by Embrex when due at ****.

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                        6

<PAGE>

          (c) Subject to the restrictions set forth herein, the license granted
under this Agreement shall include the right of Embrex to grant written
sublicenses to customers, distributors and other licensees in the Field of Use;
provided that Embrex shall include in its statements to LifeSensors information
with respect to all sales of Gender Sorting Products and the performance of all
Gender Sorting Services by sublicensees and shall pay royalties to LifeSensors
on the Gender Sorting Revenues generated by the sublicensees, as provided in
Section 4.2(b) hereof.

          (d) Embrex shall keep complete records in sufficient detail to permit
the determination of royalties payable hereunder, including all relevant
information with respect to sublicenses entered into by Embrex to the extent
necessary to determine the payment of royalties hereunder. At the request and
expense of LifeSensors, Embrex shall permit a representative of LifeSensors to
examine, in confidence, during ordinary business hours once in each calendar
year such records as may be necessary to verify or determine royalties paid or
payable under this Agreement. If any such examination discloses to the
reasonable satisfaction of Embrex any underpayment in excess of ****%, the
reasonable cost of such examination shall be borne by Embrex.

          (e) LifeSensors hereby reserves all rights not specifically granted
herein to Embrex. Title to any Intellectual Property Rights, including without
limitation patents, designs, trade secrets and copyrights, used in the
Biosensor, shall remain with LifeSensors or relevant third parties, and shall
not pass to Embrex or any third party except to the extent such Intellectual
Property Rights are Embrex Inventions or Joint Inventions.

          (f) LifeSensors shall not provide Biosensors to or authorize or permit
any Person other than Embrex and Embrex' Affiliates to develop or commercialize
any product based on or including the Biosensor during the Term of this
Agreement in the Field of Use, nor shall LifeSensors grant to any Person or
exercise or permit the exercise during the Term of this Agreement of any rights
otherwise inconsistent with those granted to Embrex in this Section 4.2, except
to the extent provided in Section 3.5. For the duration of the rights and
license granted in this Section 4.2, the parties shall treat the Biosensor and
all related specifications, design and other information as Confidential
Information and hold the same in confidence pursuant to Section 7 below as it
relates to the Field of Use.

          (g) Embrex shall not copy or modify the Biosensors or remove, alter or
obscure any patent, proprietary rights or trademark notice embedded in or
displayed in connection with the Biosensor.

     4.3 Non-Competition. LifeSensors acknowledges that Embrex's engaging in
         ---------------
the developing and marketing activities contemplated by this Agreement will
involve significant effort and expenditures by Embrex and will require the
disclosure of valuable Confidential

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhbibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                        7

<PAGE>

Information (including trade secrets) by Embrex to LifeSensors, such that
LifeSensors' engaging in comparable activities itself or with any third party
during the Term would cause irreparable damage to Embrex. In that regard,
LifeSensors agrees that, during the Term, LifeSensors shall refrain, and shall
cause its Affiliates, distributors, sublicensees and assignees with respect to
the Biosensor or other matters relating to this Agreement, if any, to refrain,
from developing, marketing, selling, leasing or otherwise exploiting, or
providing Biosensors or similar devices or equipment to or for any Person other
than Embrex for the purpose of marketing, selling, leasing or otherwise
exploiting, avian gender classification products within the Field of Use
anywhere in the world. In connection with this undertaking, the parties
acknowledge that the nature of the agricultural biotechnology industry is
worldwide in scope and does not lend itself to meaningful limitation on the
basis of any smaller geographic subdivision, and, therefore, that limiting the
parties' activities described in this Section 4.3 by the Field of Use rather
than on a geographic basis is fair and reasonable.

SECTION 5. MARKETING, REGULATIONS AND RECORDS

     5.1 Marketing. Embrex will use commercially reasonable efforts to market
         ---------
and exploit Gender Sorting Products developed pursuant to this Agreement and to
market, sell and perform Gender Sorting Services. Except as otherwise provided
herein, LifeSensors shall not be required to conduct, or to bear or pay any
costs or expenses associated with, any marketing activities relating to Gender
Sorting Products or Gender Sorting Services.

     5.2 Non-Competition.
         ---------------

         (a) Embrex acknowledges that LifeSensors' engaging in the developing
and manufacturing activities contemplated by this Agreement will involve
significant effort and expenditures by LifeSensors and will require the
disclosure of valuable Confidential Information (including trade secrets) by
LifeSensors to Embrex, such that Embrex's marketing, sale or lease of any
competitive product or performance of any competitive service during the Term
would cause irreparable damage to LifeSensors. In that regard, Embrex agrees
that, except as set forth in Section 5.2(b), during the Term, Embrex shall
refrain, and shall cause its distributors, sublicensees and assignees with
respect to the Gender Sorting Products or other matters relating to this
Agreement to refrain, from marketing, selling, leasing or otherwise commercially
exploiting devices, equipment or other products that are competitive with the
Gender Sorting Products, or performing services that are competitive with the
Gender Sorting Services, within the Field of Use anywhere in the world. In
connection with this undertaking, the parties acknowledge that the nature of the
agricultural biotechnology industry is worldwide in scope and does not lend
itself to meaningful limitation on the basis of any smaller geographic
subdivision, and, therefore, that limiting Embrex's activities described in this
Section 5.2 by the Field of Use rather than on a geographic basis is fair and
reasonable.

                                        8

<PAGE>

           (b) Notwithstanding anything to the contrary set forth in Section
5.2(a), Embrex may, upon prior written notice to LifeSensors, elect to market,
sell, lease or otherwise commercially exploit products competitive with the
Gender Sorting Products or perform services competitive with the Gender Sorting
Services in contravention of Section 5.2(a) of this Agreement provided that
Embrex pays to LifeSensors minimum royalties in the amount of **** per quarter
for each calendar quarter during the Term, commencing with the date on which the
notice is given and prorated for any portion of a calendar quarter; provided,
however, that the obligation of Embrex to pay minimum royalties under this
Section 5.2(b) shall terminate at the time that Embrex shall have paid
LifeSensors total royalties pursuant to this Agreement equal to the amount of
all direct costs and expenses incurred by LifeSensors in the development of the
Biosensor and the performance of its Development Activities plus an additional
**** of those direct costs and expenses not to exceed a total of ****, provided
that LifeSensors furnishes Embrex with records it reasonably requests in order
to verify the costs and expenses that LifeSensors asserts were incurred.

           (c) Nothing set forth in this Section 5.2 shall prohibit Embrex from
engaging in research or development of products competitive with the Gender
Sorting Products.

     5.3   Regulations. Embrex shall be responsible for ensuring its compliance
           -----------
with all legal requirements in force in all jurisdictions where Embrex is doing
business related to this Agreement and the export and sale of Gender Sorting
Products, including all legal requirements in all jurisdictions where customers
of Gender Sorting Products are located, and Embrex shall obtain all necessary
authorizations. LifeSensors will cooperate with Embrex to the extent reasonably
requested by Embrex, and Embrex will reimburse LifeSensors for all costs and
expenses incurred by LifeSensors in doing so.

     5.4   Records. Embrex will keep accurate sales and accounting records,
           -------
including records of all revenues generated through lease or sale of the Gender
Sorting Products.

SECTION 6. REPRESENTATIONS

     6.1   Authority. Each party represents and warrants to the other that such
           ---------
party has full corporate power and authority to execute and deliver this
Agreement and any other agreements and instruments delivered in connection
herewith and to consummate the transactions contemplated hereby and thereby; and
that all corporate acts and other proceedings required to be taken to authorize
such execution, delivery and consummation of this and any such other agreements
and instruments have been duly and properly taken and obtained.

     6.2 No Conflicts. Each party represents and warrants to the other that none
         ------------
of the execution, delivery or performance of this Agreement or any other
agreements and instruments

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                        9

<PAGE>

delivered in connection herewith to be delivered by such party (a) conflicts (or
will conflict with) or results in a breach under (or will result in a breach
under) the organizational documentsny material contractual undertaking of such
party or (b) conflicts with (or will conflict with) or results in a violation
(or will result in a violation of) any applicable laws, rules or regulations.

     6.3  Title. Each party represents that it has good title or valid leases or
          -----
licenses for all its properties, rights and responsibilities under this under
this Agreement, including, but not limited to, the Biosensor, the Sampling
Module and the Laboratory Automation Module. To LifeSensors' knowledge the
Biosensor is and will be, and to Embrex's knowledge the Sampling Module and
Laboratory Automation Module are and will be, free and clear of any and all
liens, encumbrances or other claims, including, but not limited to, claims based
upon Intellectual Property Rights of or in favor of any other Person, except
rights of the United States Government as described in Section 11.14 of this
Agreement. If either party subsequently learns that the Biosensor, the Sampling
Module or the Laboratory Automation Module is not free and clear of any and all
liens, encumbrances or other claims, including, but not limited to, claims based
upon Intellectual Property Rights of or in favor of any other Person, such party
will inform the other party immediately by written notice.

SECTION 7.   CONFIDENTIALITY

     7.1. Disclosure and Use of Confidential Information. Each party shall keep
          ----------------------------------------------
secret and treat with confidentiality the Confidential Information of the other
party and, except as otherwise required by applicable law or with the other
party's prior written consent, not disclose any of such Confidential Information
to any Person whatsoever or use of the Confidential Information for any purpose
whatsoever other than in connection with performance of its obligations under
this Agreement. Each party shall limit dissemination of the Confidential
Information to such Persons who need to know such Confidential Information for
purposes of this Agreement, are informed of the confidential nature of the
Confidential Information, and agree to be bound by the terms and conditions of
this Section 7.1. Each party shall be responsible for any and all breaches of
this Section 7.1 by such party's officers, directors, agents, employees and
representatives. Each party's obligations pursuant to this Section 7.1 shall
continue for five years after the end of the Term or the earlier termination of
this Agreement.

     7.2. Remedies. Each party acknowledges that the non-defaulting party would
          --------
be damaged irreparably by the defaulting party's failure to perform its
obligations pursuant to Section 7.1; accordingly, the non-defaulting party shall
be entitled to enforce Section 7.1 by injunctive and other available relief,
including without limitation specific performance. This right shall be in
addition to any other remedy, equitable or otherwise, which the non-defaulting
party may have, including without limitation any award of damages. The
defaulting party hereby consents to the entry of an injunction against it in the
event of a breach of Section 7.1 or in the event of the substantial likelihood
that such a breach will occur.

                                       10

<PAGE>

SECTION 8.  INTELLECTUAL PROPERTY OWNERSHIP

     8.1    Inventions Owned by Parties.
            ---------------------------

            (a) Except as otherwise provided in this Agreement, each Invention
and all Intellectual Property Rights relating thereto will be the property of
the party or parties whose employees or agents make the Invention ("Owning
Party"), as determined by United States laws of inventorship. The Owning Party
will make a complete written disclosure to the other party of each Invention
submitted as an invention disclosure to the patent representative of the Owning
Party, specifically pointing out the features that the Owning Party believes to
be new or different and their relation to the work under this Agreement. The
Owning Party will promptly provide the other party with a copy of each patent
application filed with respect to such Invention, and, upon request, copies of
all official papers relating thereto. Joint Inventions relating to the Sampling
Module or Laboratory Automation Module will be owned by Embrex, and LifeSensors
agrees to assign, and hereby assigns, all right, title and interest in and to
the such Joint Inventions to Embrex; Joint Inventions relating to the Biosensor
will be owned by LifeSensors, and Embrex agrees to assign, and hereby assigns,
all right, title and interest in and to the such Joint Inventions to
LifeSensors. Other Joint Inventions will be jointly owned by the parties, with
the right to practice freely under any Intellectual Property Rights relating
thereto, except to the extent provided herein.

            (b) LifeSensors may determine that some or all Inventions and
Intellectual Property of Embrex in the Field of Use may have commercial
application outside the Field of Use. In that event, if LifeSensors shall seek a
license outside the Field of Use and Embrex has not commercialized or licensed
such Inventions and Intellectual Property in such field, Embrex agrees that it
will explore with LifeSensors appropriate opportunities to work together to
develop and commercially exploit such Inventions and Intellectual Property.

     8.2    Patent Protection. Each party shall, upon request, render reasonable
            -----------------
assistance to the other party in the filing, prosecution, maintenance, defense
and enforcement of all Intellectual Property Rights of the other party and shall
cause to be executed all assignments and other instruments and documents as the
other party may consider necessary or appropriate to carry out the intent of
this Section 8. Each party will be responsible for all patent filing,
prosecution, issuance and maintenance costs associated with the patents and
patent applications owned by them; provided that (i) Embrex will be responsible
for the costs of all delivery and targeting patents; and (ii) LifeSensors will
be responsible for all costs relating to the Biosensor, except that Embrex will
reimburse LifeSensors for all such costs that are directly related only to the
Field of Use. Notwithstanding the forgoing, LifeSensors will pay all costs
associated with the first patent relating to the Biosensor in the Field of Use.
The parties agree to cooperate in good faith to determine the locations in which
to seek patent protection for the Gender Sorting

                                       11

<PAGE>

Product or components thereof. Each party will use its best efforts to prosecute
and maintain all Intellectual Property Rights relating to Inventions owned by it
in those jurisdictions. If any party fails to do so, the other party may take
whatever action it deems necessary or appropriate to protect such rights,
including retention of counsel and payment of all fees and expenses of
prosecution and maintenance. If the other party chooses to pursue or maintain
patent protection in accordance with the preceding sentence: (i) future costs of
filing and maintaining such patent shall be borne solely by such party (the
"Maintaining Party"), (ii) the Maintaining Party shall deliver copies of all
documentation comprising or related to such patent to the other party, (iii) the
other party shall, upon request, render reasonable assistance to the Maintaining
Party in the filing, prosecution, maintenance, defense and enforcement of such
patent, for which assistance the Maintaining Party shall reimburse all related
expenses of the other party and shall pay to such party such reasonable fees as
it may demand (based on reasonable and customary time charges), and (iv) the
patent that is issued as a result of the Maintaining Party's filing shall be the
property of or assigned to the Maintaining Party.

     8.3   Infringement.
           ------------

     (a)   Each party shall promptly advise the other of any actual or potential
infringement of rights with respect to Gender Sorting Products in the Field of
Use, of which either becomes aware, prior to notifying any third party. In the
event of any alleged infringement, misappropriation or violation, and subject to
Section 8.3(b) below, Embrex shall have the right to bring suit and prosecute
the suit alleging infringement, misappropriation, or violation. Subject to
Section 8.3(b) below, Embrex shall pay all expenses of bringing and prosecuting
such suit and shall be entitled to retain all amounts recovered. LifeSensors
agrees that, if the infringement relates to the Biosensor, Embrex may include
LifeSensors as a plaintiff in any such suit and that LifeSensors will cooperate
reasonably with Embrex in the prosecution of such suit at Embrex's expense.

     (b)   If Embrex shall fail to bring suit and to prosecute any alleged
infringement, misappropriation or violation of rights in the Biosensor in the
Field of Use after reasonable notice given by LifeSensors to Embrex, LifeSensors
may bring suit and prosecute the alleged infringement, misappropriation, or
violation. LifeSensors shall pay all expenses of bringing and prosecuting such
suit and shall be entitled to retain all amounts recovered. Embrex agrees that
LifeSensors may include Embrex as a plaintiff in any such suit and that Embrex
will cooperate reasonably with LifeSensors in the prosecution of such suit at
LifeSensors' expense.

                                       12

<PAGE>

SECTION 9. INDEMNIFICATION

     9.1   Indemnification by LifeSensors. LifeSensors shall indemnify, defend
           ------------------------------
and hold Embrex, its Affiliates and their respective directors, officers,
employees, agents, successors and assigns harmless from and against any damages,
judgments, claims, suits, actions, liabilities, costs and expenses (including,
but not limited to, reasonable attorneys' fees) arising out of or connected with
(a) LifeSensors' material breach of any of its warranties or representations
hereunder, (b) LifeSensors' negligent acts or omissions or willful misconduct in
performing its obligations under this Agreement, or (c) any proceeding
instituted by or on behalf of a third party based upon a claim that the
manufacture, use or sale of the Biosensor infringes a United States patent or
any other Intellectual Property Rights of any third party.

     9.2   Indemnification by Embrex. Embrex shall indemnify, defend and hold
           -------------------------
LifeSensors, its Affiliates and their respective directors, officers,
employees, agents, successors and assigns harmless from and against any damages,
judgments, claims, suits, actions, liabilities, costs and expenses (including,
but not limited to, reasonable attorneys' fees) resulting from any third party
claims or suits arising solely out of (a) Embrex's material breach of any of its
warranties or representations hereunder, (b) Embrex's negligent acts or
omissions or willful misconduct in performing its other obligations under this
Agreement, or (c) any proceeding instituted by or on behalf of a third party
based upon a claim that the manufacture, use or sale of the Gender Sorting
Products (other than the Biosensor) infringes a United States patent or any
other Intellectual Property Rights of any third party.

     9.3   Indemnification Procedures. A party (the "Indemnitee") that intends
           --------------------------
to claim indemnification under this Section 9 shall promptly notify the other
party (the "Indemnitor") in writing of any action, claim or other matter in
respect of which the Indemnitee or any of its Affiliates, or any of their
respective directors, officers, employees or agents intend to claim such
indemnification; provided, however, the failure to provide such notice within a
reasonable period of time shall not relieve the Indemnitor of any of its
obligations hereunder except to the extent the Indemnitor is prejudiced by such
failure. The Indemnitee, its Affiliates, and their respective directors,
officers, employees and agents shall cooperate fully with the Indemnitor and its
legal representatives in the investigation, negotiation, compromise, settlement
and defense of any action, claim or other matter covered by this
indemnification. The Indemnitor shall be in charge of and control any such
investigation, negotiation, compromise, settlement and defense and shall have
the right to select counsel with respect thereto, provided that the Indemnitor
shall promptly notify the Indemnitee of all developments in the matter. In no
event shall the Indemnitor or Indemnitee compromise or settle any such matter
without the prior written consent of the other party, which shall not be bound
by any such compromise or settlement absent its prior consent, which shall not
be unreasonably withheld or delayed. The Indemnitee shall have the right, but
not the obligation, to be represented by counsel of its own selection and at its
own expense.

                                       13

<PAGE>

     9.4    Disclaimer of Damages. In no event shall either party be liable to
            ---------------------
the other party for incidental, special, consequential or punitive damages,
including, but not limited to, any claim for damages based upon lost profits.

SECTION 10. TERM AND TERMINATION

     10.1   Term. This Agreement shall commence as of the date hereof and
            ----
continue in effect until terminated pursuant to Section 10.2 below.

     10.2   Termination. The parties may terminate this Agreement at the times
            -----------
and in the manner stated below:

            (a) Either party may terminate this Agreement with or without cause,
upon 60 days' prior written notice to the other party, if the milestones set
forth on Appendix A have not been successfully completed by ****.
         ----------

            (b) Embrex may terminate this Agreement at any time after **** upon
ten days' prior written notice to LifeSensors if in the reasonable judgment of
Embrex (considering then existing market, economic and similar factors) a Gender
Sorting Product is not commercially viable; provided, however, that in such
event, Embrex agrees that it will not market, sell, lease, or perform gender
classification or sorting services using, another product incorporating a ****
biosensor for gender sorting applications in the Field of Use for a period of
**** after the date of termination.

            (c) Embrex may terminate this Agreement at any time after the
completion of the milestones set forth on Appendix A for any reason other than
                                          ----------

that set forth in Section 10.2(b) upon payment to LifeSensors of **** plus
additional **** of those direct costs and expenses not to exceed a total of
****, payable in quarterly installments of ****, with the first payment to be
made on the effective date of the termination, provided that LifeSensors
furnishes Embrex with records it reasonably requests in order to verify the
costs and expenses that LifeSensors asserts were incurred.

            (d) After the last to expire of the patents relating to the
Biosensor shall expire, either party may terminate this Agreement as of the end
of a calendar quarter upon at least 60 days' prior written notice of
termination, which notice shall specify the effective date of the termination.

            (e) Either party may terminate this Agreement by written notice in
the event the other party fails to cure (or commence appropriate steps to cure
and thereafter cures as soon

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                       14

<PAGE>

as reasonably practicable after the 60-day notice period referred to below in
this subparagraph (e)) any default of any of its material obligations hereunder
within 60 days after receipt of written notice of such default from the other
party.

            (f)  Either party may terminate this Agreement by written notice no
sooner than 90 days after the date on which the other party becomes unable to
pay its debts as they become due; if such other party makes any assignment of
its assets or business for the benefit of creditors in a bankruptcy or similar
proceeding; if a trustee or receiver is appointed to conduct such other party's
business or affairs; or if such other party is adjudged by a court having
competent jurisdiction to be either a voluntary or involuntary bankrupt; or such
other party becomes the subject of an involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors; provided that, in any case, such
petition or proceeding is not dismissed within 90 days of filing.

         10.3    Effect of Termination.
                 ---------------------

            (a)  The termination of this Agreement shall not, under any
circumstances, relieve either party of its obligation to pay any sums owed to
the other party as of the date of termination under the terms of this Agreement.

            (b)  Promptly after the termination of this Agreement, each party
shall return to the other party all samples and supplies of the Biosensor (in
the case of Embrex) and all specifications and other materials, documents and
data prepared, developed, compiled or furnished by the other party in connection
with this Agreement. Neither party shall make, use, dispose of or retain any
copies of any Confidential Information of the other party.

            (c)  Upon termination, Embrex shall immediately cease to use the
LifeSensors Marks and any other Intellectual Property Rights of LifeSensors, and
the license granted pursuant to Section 4.2 hereof shall immediately terminate.

            (d)  Termination of this Agreement for any reason shall not affect
rights and obligations of the parties accrued through the effective date of
termination. All of the provisions of this Agreement that by their terms are to
be performed or that otherwise are to endure after the termination of this
Agreement shall survive the termination of this Agreement and shall continue in
effect for the respective periods therein provided or contemplated.

                                       15

<PAGE>

SECTION 11. MISCELLANEOUS

     11.1   Compliance with Laws. Each party shall comply in all material
            --------------------
respects with all applicable laws, rules and regulations in connection with its
performance of its duties and obligations under this Agreement and its
consummation of the transactions contemplated hereby.

     11.2   Governing Law. This Agreement shall be governed by and construed in
            -------------
accordance with the laws of the State of North Carolina, without giving effect
to the conflicts of laws provisions thereof.

     11.3   Relationship of Parties. The parties' relationship established by
            -----------------------
this Agreement is that of independent contractors, and nothing contained herein
shall (a) give either party the power to direct or control the day-to-day
activities of the other, (a) constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking, or (c) allw either party to (and neither party shall) create or
assume any obligation on behalf of the other for any purpose whatsoever.

     11.4   Force Majeure. Except with respect to obligations to make payments
            -------------
hereunder, non-performance of either party shall be excused to the extent caused
by strike, fire, flood, governmental act or order or restriction, failure of any
supplier, or any other cause beyond the reasonable control of the non-performing
party. Upon the occurrence of any such condition, the non-performing party shall
notify the other party promptly and shall use its reasonable best efforts to
mitigate the effects thereof.

     11.5   Publicity. Except as required by applicable law, neither party shall
            ---------
issue or cause to be issued any press release, public announcement or other
public statement with respect to the transactions contemplated by this Agreement
without the prior written consent of the other party, which consent such other
party shall not withhold unreasonably.

     11.6   Entire Agreement. This Agreement contains the entire understanding
            ----------------
and agreement and supersedes all prior agreements and understandings of the
parties with respect to the subject matter hereof, including the Original
Agreement.

     11.7   Amendments. Neither this Agreement nor any of the terms or
            ----------
provisions hereof may be amended, modified or supplemented except by a written
instrument signed by both of the parties.

     11.8   Assignment. This Agreement shall be binding upon and shall inure to
            ----------
the benefit of the parties and their respective successors and assigns. Neither
this Agreement nor any rights, interests or obligations hereunder may be
assigned or otherwise transferred by either party without the prior written
consent of the other party, which consent shall not be unreasonably

                                       16

<PAGE>

withheld. For purposes of this Section 11.8 an "assignment" or "transfer" shall
be deemed to occur upon sale of all or substantially all of the assets of a
party or upon a merger, consolidation or similar transaction involving one of
the parties. Any purported assignment not permitted by this Section 11.8 shall
be null and void.

     11.9  Notices. Any notice or other communication required or permitted
           -------
hereunder shall be sufficiently given if personally delivered, delivered by a
nationally recognized overnight courier service, sent by confirmed facsimile
transmission or sent by registered or certified mail, postage prepaid, addressed
as follows:

If to Embrex, to:         Embrex, Inc.
                          1035 Swabia Court
                          Durham, North Carolina 27703
                          Attention: Catherine Ricks, Ph.D.

With a copy to:           Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
                          L.L.P.
                          2500 First Union Capitol Center
                          Raleigh, North Carolina 27601
                          Attention: Gerald F. Roach, Esq.

If to LifeSensors, to:    LifeSensors Inc.
                          271 Great Valley Parkway
                          Malvern, PA 19355
                          Attention: Tauseef R. Butt, PhD., President

With a copy to:           Duane Morris
                          One Liberty Place
                          Philadelphia, PA 19103-7396
                          Attention: Kathleen M. Shay, Esq.

or to such other address as either party may furnish to the other in the manner
described above. Any such notice or communication shall be deemed given as
follows: (a) if personally delivered or delivered by a nationally recognized
overnight courier service or by facsimile transmission, on the date so
delivered; or (b) if mailed by registered or certified mail, five days after the
date so mailed or on the date the return receipt is signed, whichever is
earlier.

     11.10 Severability. The invalidity of any provision of this Agreement, as
           ------------
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

                                       17

<PAGE>

         11.11 Headings. The headings contained in this Agreement are for
               --------
convenience of reference only and shall not constitute a part hereof or define,
limit or otherwise affect the meaning of any term or provision hereof.

         11.12 Counterparts; Facsimile Signature. This Agreement may be executed
               ---------------------------------
in two or more counterparts, all of which taken together shall constitute one
instrument. This Agreement may be executed by either party by delivery of such
party's facsimile signature hereon.

         11.13 Trademarks and Trade Names. Nothing in this Agreement shall be
               --------------------------
construed as conferring any rights to use in advertising, publicity or other
marketing activities any name, trade name, trademark or other designation of
either party hereto, including any contraction, abbreviation or simulation of
any of the foregoing.

         11.14 U.S. Government Rights. If the U.S. Government sponsored any
               ----------------------
Invention or other Intellectual Property that is the subject of this Agreement
all rights granted hereunder with respect to such Invention or other
Intellectual Property shall be subject to any applicable rights or restrictions
of the U.S. Government.

                      [Signatures Appear on Following Page]

                                       18

<PAGE>

        [Signature Page to Research, Development and Marketing Agreement]

     IN WITNESS WHEREOF, the parties, by authority duly given, have executed
this Agreement as of the day and year set forth in the preamble to this
Agreement.

                                           EMBREX, INC.

                                           By: /s/ Randall L. Marcuson
                                               -----------------------
                                           Name:   Randall L. Marcuson
                                           Title:  President and CEO

                                           LIFESENSORS, INC.

                                           By: /s/ Tauseef R. Butt
                                               ---------------------
                                           Name:   Tauseef R. Butt
                                           Title:  President

                                       19

<PAGE>

                                  SCHEDULE 4.2

                                Royalty Payments

Embrex shall pay LifeSensors royalties on Gender Sorting Revenues during each
calendar year during the Term of this Agreement as follows:

Gender Sorting Revenues (U.S. Dollars)       Royalty Rate (percentage of
ANNUAL BASIS                                 Gender Sorting Revenues)
------------                                 -----------------------

****                                         ****
****                                         ****
****                                         ****

Notwithstanding the foregoing, however, if and to the extent that the
Intellectual Property Rights with respect to the Biosensor are used by Embrex
and its sublicensees solely in a jurisdiction where there is no patent
protection for any aspect of the Biosensor, the royalty rates payable with
respect to Gender Sorting Revenues derived from such use of the Intellectual
Property Rights relating to the Biosensor shall, in each such case, be reduced
by **** of the rates set forth above.

**** Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                      4.2-1

<PAGE>

                                   APPENDIX A
                                Development Plan
                                -----------------

       LifeSensors Sensor Milestones, Dates Expected and Payment Schedule

Development will be in three phases:
-----------------------------------

Phase 1 -  Completed

Development of prototype **** biosensor **** and sampling modules respectively
****

Phase 2  ****

Development of first generation commercial Gender Sorting Products, which
incorporate the Biosensor being developed by LifeSensors and the Laboratory
Automation Module and the Sampling Module being developed by Embrex, by ****. A
decision to make the first and/or the second generation Gender Sorting Products
will be based on factors determined during this phase. During this phase,
process development on the Biosensor will be conducted and manufacturing
strategy delineated. Manufacture of the Sampling Module and Laboratory
Automation Module will be sub-contracted by Embrex to a machine automation shop.

Phase 3 ****

 .    Development and improvement of second generation Biosensor. Details
     regarding Phase 3 will be set forth in an amendment to the Development Plan
     developed by the Steering Committee as provided in Section 3.3. Phase 3
     will not be undertaken without the prior approval of the Steering
     Committee.

**** selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                      A-1

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
          Deliverable            Date Expected   Purpose                        Goals                          Milestone
                                                                                                                Payment
---------------------------------------------------------------------------------------------------------------------------
<S>                              <C>             <C>                            <C>                           <C>
         ****                         ****       ****                           ****                              ****

         ****                         ****       ****                           ****                              ****

         ****                         ****       ****                           ****                              ****

         ****                         ****       ****                           ****                              ****

         ****                         ****       ****                           ****                              ****

         ****                         ****       ****                           ****                              ****
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

**** selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                       A-2

<PAGE>

<TABLE>
----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>        <C>                            <C>                                  <C>
         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****

         ****                         ****       ****                           ****                                 ****
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

In addition to the milestone payments shown above, Embrex will pay to
LifeSensors a base development fee of $**** for sensor and process development
on the first day of each calendar **** commencing **** and continuing through
****. Embrex will also pay to LifeSensors development plan milestone incentives
of **** for ****, as shown above. Deliverables for **** and milestone payments
equal to **** will be defined by the Steering Committee in **** and attached to
Agreement.

**** selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                       A-3

<PAGE>

Equipment and Technologies allocation budget, **** per year for ****and ****.

Embrex agrees to reimburse LifeSensors in the amount of **** per year for both
**** and **** for the purchase of equipment to be used in its Development
Activities. LifeSensors proposes that, for ****, such equipment will include the
equipment listed below, but the final decision on which equipment will be
reimbursed will be made by the Steering Committee. The year **** equipment and
technology budget items will be presented by LifeSensors after **** and approved
by the Steering Committee.

****:

****

****

****

****

****

****

****

**** selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                       A-4

<PAGE>

****

****

****

****

****

****

Grand Total ****

Please note that Embrex share of this equipment cost is **** for ****.

**** selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission (the "Commission") and marked "CONFIDENTIAL
TREATMENT".

                                       A-5

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