EXHIBIT 10.31
                                  CONFIDENTIAL
                              SEPARATION AGREEMENT




         This  Confidential  Separation  Agreement (the  "Agreement") is entered
into between Lynx  Therapeutics,  Inc. (the "Company") and David W. Martin,  Jr.
("Dr. Martin").

         1.  SEPARATION.  Dr.  Martin's  last day of work with the  Company  was
November 1, 1996 (the "Separation  Date").  Effective as of the Separation Date,
Dr.  Martin  hereby  resigns from any and all of his  positions as an officer or
director of the Company and its subsidiaries, including Spectragen, Inc.

         2. ACCRUED  SALARY AND PAID TIME OFF.  The Company has paid Dr.  Martin
all  accrued  salary,  and all accrued and unused  vacation  earned  through the
Separation Date, subject to standard payroll deductions and withholding, and Dr.
Martin acknowledges receipt of such payment.

         3.  SEVERANCE.  In lieu of the severance  benefits  provided for In Dr.
Martin's  Employment  Agreement  dated  as of  April 3,  1995  (the  "Employment
Agreement"),  the  Company  agrees to  provide  Dr.  Martin  with the  severance
benefits described below:

                  a. The Company will  continue to pay Dr.  Martin at the annual
base salary rate of $200,000 in semi-monthly installments for twelve (12) months
from the Separation Date. On or prior to the tenth day of each month, Dr. Martin
shall  provide the Company with a written  statement of any income that has been
earned by him from other sources of employment  (but  excluding for this purpose
director  fees paid to Dr.  Martin in  respect  of  directorships  he  currently
holds),  and fifty  percent  (50%) of any such  earnings  shall be  applied to a
reduction of payments due to Dr. Martin under this subparagraph.

                  b. The Company will advance  $17,333 to Dr. Martin within five
(5)  days of  execution  of  this  Separation  Agreement  pursuant  to the  Loan
Agreement dated as of May 1, 1995, in order to bring the  outstanding  principal
balance of such loan to $150,000.  Such advance will be applied to the reduction
of debt to the company as stated in Paragraph 5 below. No further  advances will
be made under such  agreement,  and the Company agrees to forgive the principal,
and accrued interest, effective January 1, 1997 (an aggregate of $157,861.58).

                  c. Because the Company believes, on the advice of its counsel,
that  the  severance  payment  and the  forgiven  Promissory  Note  balance  (as
described in 3.b.  above) may be treated as taxable  income to Dr.  Martin under
current state and federal income tax statutes and  regulations,  the Company may
deduct taxes from its cash payments due to Dr. Martin hereunder.


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         4. HEALTH  INSURANCE.  To the extent permitted by the federal COBRA law
and by the Company's current group health insurance policies, Dr. Martin will be
eligible to continue his medical and dental insurance benefits.  Dr. Martin will
be provided  with a separate  notice of his COBRA  rights.  If Dr. Martin elects
continued  coverage under COBRA,  Dr. Martin will be responsible for the payment
of the COBRA premiums.

         5. EQUITY;  PROMISSORY  NOTE. In connection  with the exercise of stock
options granted to him, Dr. Martin and the Company entered into a Stock Purchase
Agreement dated as of May 1, 1995 (the "Stock Purchase  Agreement")  pursuant to
which Dr. Martin purchased 250,000 shares of Common Stock with a Promissory Note
in the principal amount of $450,000.  Together with accrued interest, the amount
outstanding under such note was $498,060 at the Separation Date. Under the terms
of the Stock  Purchase  Agreement  157,500  shares are  currently  unvested  and
subject to a repurchase  option in favor of the Company at an aggregate price of
$329,273.  The Company hereby exercises its option, and the exercise price shall
be applied to payment of the Promissory Note (reducing the balance to $168,787).
The advance of $17,333  described in Paragraph 3.b above will also be applied to
payment of the Promissory  Note  (reducing the balance to $151,454).  Dr. Martin
agrees to pay the remaining  balance in full on or before November 30, 1996, and
acknowledges  and agrees that the Company can and will  exercise its rights as a
secured creditor (including  execution of a sale of collateral in the market) if
such balance is not paid when due. Upon payment in full of the Promissory  Note,
the Company agrees to cancel the Promissory  Note and to deliver to Mr. Martin a
stock certificate representing the balance of the Common Stock currently held in
escrow  pursuant to the Stock Purchase  Agreement as soon as it can be processed
by the Company's transfer agent.

         6. OTHER COMPENSATION OR BENEFITS. Dr. Martin acknowledges that, except
for the closing  costs to which he is entitled per the April 1995  agreement and
as  expressly  provided in this  Agreement,  he will not receive any  additional
compensation, severance or benefits after the Separation Date.

         7. EXPENSE  REIMBURSEMENTS.  Dr. Martin agrees that,  prior to November
30, 1996, he will submit his final documented  expense  reimbursement  statement
reflecting all business  expenses he incurred  through the  Separation  Date, if
any, for which he seeks reimbursement. The Company will reimburse Dr. Martin for
these expenses pursuant to its regular business practice.

         8.  RETURN  OF  COMPANY  PROPERTY.  By the  date of  execution  of this
Agreement, Dr. Martin agrees to return to the Company all Company documents (and
all  copies  thereof)  and  other  Company  property  which  he  has  had in his
possession at any time, including,  but not limited to, Company files, notes and
notebooks,   drawings,   records,   business  plans  and  forecasts,   financial
information,  specifications,  computer-recorded information,  tangible property
(including,  but  not  limited  to,  computers),   credit  cards,  entry  cards,
identification  badges and keys; and, any materials of any kind which contain or
embody any  proprietary  or  confidential  information  of the Company  (and all
reproductions  thereof). Dr. Martin has two notebooks in his possession in which
he has  maintained  a diary of  activities  for the Company and  otherwise.  Dr.
Martin will make

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these  notebooks  available  to the Company  for  copying  but may retain  them,
subject to his continuing obligations regarding confidentiality.

         9. PROPRIETARY  INFORMATION  OBLIGATIONS.  Dr. Martin  acknowledges his
continuing obligations, both during and after his employment, under his Employee
Invention  Agreement to disclose  covered  inventions and not to use or disclose
any confidential or proprietary information of the Company without prior written
authorization from a duly authorized representative of the Company.

         10.  SOLICITATION.  Dr. Martin  agrees that for one year  following the
Separation  Date, he will not,  either  directly or through  others,  solicit or
attempt to solicit any  employee,  consultant or  independent  contractor of the
Company to terminate his or her relationship with the Company in order to become
an employee,  consultant or independent contractor to or for any other person or
business  entity.  Dr.  Martin  agrees not to  initiate  any  dialogue  with any
employee or consultant  of the Company  concerning  the Company's  management or
business affairs.

         11. CONFIDENTIALITY.  The provisions of this Agreement shall be held in
strictest  confidence  by Dr. Martin and the Company and shall not be publicized
or disclosed in any manner whatsoever;  provided, however, that: (a) the parties
may  disclose  this  Agreement  in  confidence  to their  respective  attorneys,
accountants,  auditors,  tax preparers,  and financial advisors; (b) the Company
may disclose this Agreement as necessary to fulfill standard or legally required
corporate reporting or disclosure requirements; and (c) the parties may disclose
this Agreement  insofar as such disclosure may be necessary to enforce its terms
or as otherwise  required by law. The Company will, and Dr. Martin may, disclose
that Dr. Martin has resigned as a result of  differences  over future  corporate
development  priorities and management  style. Dr. Martin agrees not to make any
disclosure  inconsistent  with the  foregoing.  All inquiries from third parties
regarding  references for Dr. Martin shall be referred to Kathy San Roman (Human
Resources), who shall respond only by stating that it is company policy to state
no more then already disclosed and giving Dr. Martin's dates of employment, that
his last position held was President and Chief Executive  Officer,  and his last
salary.

         12.  DISPUTE  RESOLUTION.  Dr.  Martin and the  Company  agree that all
disputes,  claims,  and causes of  action,  in law or  equity,  arising  from or
relating  to  this  Agreement  or  its  enforcement,   performance,  breach,  or
interpretation  shall be resolved solely and  exclusively by confidential  final
and   binding   arbitration    through   Judicial    Arbitration   &   Mediation
Services/Endispute,  Inc.  ("JAMS"),  in San  Francisco,  California,  under the
then-existing  JAMS  arbitration  rules.  However,  nothing  in this  section is
intended to prevent  either party from obtaining  injunctive  relief in court to
prevent irreparable harm pending the conclusion of any such arbitration.

         13. RELEASE. In exchange for the payments and other consideration under
this Agreement to which he would not otherwise be entitled, Dr. Martin agrees to
execute the Employee Agreement and Release attached hereto as Exhibit A.

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         14. MISCELLANEOUS. This Agreement, including Exhibit A, constitutes the
complete,  final and exclusive  embodiment of the entire  agreement  between Dr.
Martin  and the  Company  with  regard  to this  subject  matter  and  expressly
supersedes  the  Employment   Agreement  (but  not  Dr.   Martin's   Proprietary
Information  Agreement,  which remains in full force and effect).  It is entered
into without reliance on any promise or  representation,  written or oral, other
than  those  expressly  contained  herein,  and it  supersedes  any  other  such
promises,  warranties or representations.  This Agreement may not be modified or
amended  except in a writing  signed by both Dr.  Martin  and a duly  authorized
officer  of  the  Company.   This  Agreement  shall  bind  the  heirs,  personal
representatives,  successors and assigns of both Dr. Martin and the Company, and
inure to the benefit of both parties,  their heirs,  successors and assigns.  If
any provision of this Agreement is determined to be invalid or unenforceable, in
whole or in part, this determination will not affect any other provision of this
Agreement and the provision in question  shall be modified by the court so as to
be  rendered  enforceable.  Both  parties  acknowledge  that  they  have had the
opportunity  to seek  advice  regarding  this  Agreement  from their  respective
counsel.  This Agreement  shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within California.

                                            LYNX THERAPEUTICS, INC.


Dated:  November 11, 1996                       By:    /s/ Craig Taylor
                                                   -----------------------------
                                                      Craig Taylor
                                                      Chief Financial Officer


Dated:  November 11, 1996                             /s/ David W. Martin, Jr.
                                                   -----------------------------
                                                      David W. Martin, Jr.

Exhibit A - Employee Agreement and Release




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                                    EXHIBIT A

                         EMPLOYEE AGREEMENT AND RELEASE



         Except as  otherwise  set forth in this  Agreement,  I hereby  release,
acquit and forever  discharge  Lynx  Therapeutics,  Inc.  (the  "Company"),  its
parents and  subsidiaries,  and their  officers,  directors,  agents,  servants,
employees, attorneys,  shareholders,  successors, assigns and affiliates, of and
from any and all claims, liabilities, demands, causes of action, and damages, in
law, equity, or otherwise,  arising out of or in any way related to events, acts
or conduct at any time prior to and including the date this  Agreement is signed
or the Separation Date, whichever is later, and which arise out of or are in any
way connected with wrongful termination of my employment with the Company or any
compensatory  damages  therefor;  claims or  demands  related  to  stock,  stock
options, or expense reimbursements (except as set forth in this agreement);  and
claims pursuant to any federal, state or local  anti-discrimination law, statute
or cause of action  including,  but not limited to, the federal Civil Rights Act
of 1964,  as amended;  the Age  Discrimination  in  Employment  Act of 1967,  as
amended  ("ADEA");  the federal Americans with Disabilities Act of 1990, and the
California  Fair  Employment  and  Housing  Act, as  amended.  Not  withstanding
anything  in this  Agreement  or this  Exhibit  A, the  parties  agree that this
Agreement  and Exhibit A shall not  constitute a release of any rights or claims
by me, whether  pursuant to statute or insurance or otherwise,  to indemnity and
defense,  and attorneys fees and costs of defense in connection  with any claims
regarding  any acts or  omissions  within the course and scope of my  employment
and/or directorship with the Company,  nor shall this Agreement or its Exhibit A
constitute a release of any claim for breach of this Agreement



                             By:      /s/ David W. Martin, Jr.
                                   -----------------------------------------
                                          David W. Martin, Jr.

                             Date:        November 14, 1996
                                   -----------------------------------------