Exhibit 10.12


      Technology License and Development Agreement between the 
                   Company and BASF-LYNX Bioscience AG




               TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT

   THIS TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT (the "Agreement") is
made and entered into as of January 1, 1997 (the "Effective Date"), by and
between BASF-Lynx Bioscience AG, a corporation established under the laws
of Germany, with its principal place of business at Heidelberg, Germany
("The Joint Venture"), LYNX THERAPEUTICS GMBH, a limited liability company
established under the laws of Germany ("Lynx Germany"), and BASF
BIOTECHNOLOGIE BETEILIGUNGS- UND VERWERTUNGSGESELLSCHAFT MBH, a limited
liability company established under the laws of Germany ("BASF GmbH").


                                  RECITALS

   WHEREAS, Lynx Therapeutics, Inc. ("Lynx USA"), the parent company of
Lynx Germany, and BASF AG have agreed to form, through Lynx GmbH and BASF
GmbH, respectively, the Joint Venture as a joint venture to conduct a
research program in the area of epilepsy, toxico-pharmacology, and the
development of production strains of microorganisms for fermentations;
   WHEREAS, Lynx USA owns the rights to certain inventions and
technology, and related instruments and methods, including a novel
technique for determining cDNA sequence information rapidly from a sample,
which is potentially useful for identifying genes and drug targets of
interest, and Lynx USA has licensed such inventions and technology to Lynx
Germany and has committed certain materials and resources to support the
use thereof;
   WHEREAS, BASF AG owns the rights to certain inventions and
technology, and BASFAG will, upon request of Lynx USA, license such
inventions and technology to BASF GmbH and has committed up to [.***.]* in
funding to support the research program;
   WHEREAS, The Joint Venture desires to obtain a license under such
Lynx and BASF inventions and technology and to utilize Lynx instruments
and reagents, and to receive funding from BASF GmbH to conduct such
research; and
   WHEREAS, Lynx Germany is willing to grant such licenses to The Joint
Venture and to provide The Joint Venture the use of inventions, know-how,
instruments, reagents, technical support and service as necessary to
conduct the research program, and BASF GmbH is willing to grant such
licenses to The Joint Venture and to contribute funding, in accordance
with the terms and conditions hereinafter specified.
   NOW, THEREFORE, Lynx Germany, BASF GmbH and The Joint Venture hereby
agree as follows:
1. DEFINITIONS

1.1 "BASF Licensed Technology" shall mean the TET Technology, the 
    Incyte Database and the BASF AG toxicology database.

1.2 "Beads" shall mean the combitag beads that have covalently 
    attached to their surface [.***.] of at least [.***.],* which beads 
    are useful in the conduct of MPSS analysis.

1.3 "CNS Database" shall mean the neurobiological sequence database 
    owned or controlled by Lynx USA on the Effective Date and derived 
    from nervous system tissues.

1.4 "Field" shall mean the treatment or prevention of diseases or 
    disorders in area of epilepsy, the toxico-pharmacology of chemical 
    substances in microbial and metazoan organisms, and the development 
    of production strains of microorganisms for fermentation.

1.5 "Future BASF Technology" shall mean inventions, discoveries and 
    developments owned or controlled by BASF AG, relating to or derived 
    from the BASF Licensed Technology.

1.6 "Future Gene Technology" shall mean inventions, discoveries and 
    developments owned or controlled by Lynx USA, relating to or derived 
    from the MPSS, MPGS, or MPH techniques or analysis, that are useful 
    for gathering gene or cDNA sequence information rapidly and/or 
    analyzing gene expression via sequence information.

1.7 "Incyte Database" means the database with BASF AG may, according 
    to the Collaborative Agreement between BASF AG and Incyte dated June 
    27, 1996 (the "Incyte Agreement"), make available to The Joint 
    Venture [.***.] having to [.***.] therefor.  

1.8 "Instrument Improvements" shall mean all modifications and 
    improvements to the MPSS equipment that are made by or on behalf of 
    Lynx USA and incorporated in the then current standard model of such 
    MPSS equipment for production or commercial use during the term of 
    this Agreement.

1.9 "The Joint Venture Inventions" shall mean any invention, 
    discovery, development, concept, or idea, whether or not patentable 
    or copyrightable, that is made by or on behalf of The Joint Venture 
    (including by any of its employees, agents, contractors or 
    collaborators) during the term of the Agreement, and including 
    without limitation processes, methods, software, formulae, data, 
    techniques, compositions of matter, and devices, and all 
    improvements thereof and know-how and trade secrets relating 
    thereto, but excluding The Joint Venture's rights from academic 
    collaborations contemplated in Section 2.4 below.

1.10 "Lynx Licensed Technology" shall mean the MPSS Patents and the 
    MPSS Know-How, the Lynx Bioinformatics, the Future Gene Technology, 
    the CNS Database, and the Phosphoramidate Patents.

1.11 "Lynx Bioinformatics" shall mean the software and other 
    proprietary means owned or controlled by Lynx USA during the term of 
    the Agreement that is useful for analyzing MPSS sequence data for 
    simulating and analyzing dynamic patterns of gene expression and for 
    genomic analyses.

1.12 "Massively Parallel Genomic Sequencing" or "MPGS" means the 
    acquisition of [.***.]* sequences from the genome of an organism by 
    proprietary technologies based on Lynx Licensed Technology.

1.13 "Massively Parallel Hybridization" or "MPH" means the use of 
    gridded solid phase arrays of cloned cDNAs for the purpose of 
    analyzing by [.***.] the levels of gene expression in tissue or cell 
    samples. 

1.14 "Massively Parallel Signature Sequencing" or "MPSS" means the 
    parallel acquisition, of at least [.***.] (a "Signature Sequence") 
    from each of at least [.***.] templates sampled from a given cell 
    culture or tissue cDNA library.

1.15 "MPSS Know-How" shall mean the information, data, knowledge, 
    methods, procedures, processes, and techniques owned or controlled 
    by Lynx USA that comprise the method of MPSS sequencing or that are 
    directly related to using the MPSS Instruments in conducting MPSS 
    analyses.  The term "MPSS Know-How" shall not include any 
    information or trade secrets relating to the manufacture of the 
    Beads or other proprietary Reagents and which are not necessary to 
    know in order to practice the MPSS analyses.

1.16 "MPSS Instrument" shall mean the equipment, designed and developed 
    by Lynx USA, that can conduct MPSS analyses of templates sampled 
    from a given cell culture or tissue cDNA library, and all Instrument 
    Improvements to such equipment made or acquired by Lynx USA during 
    the term of the Agreement.

1.17 "MPSS Patents" shall mean (a) any and all U.S. and corresponding 
    foreign patent applications, whether now existing or hereafter 
    filed, that are owned or controlled by Lynx USA and that claim MPSS 
    Instruments and/or reagents, or the use thereof, or the method of 
    MPSS, and (b) any divisions, continuations, continuations-in-part, 
    reissues or substitute applications arising from, and based upon, 
    any of the foregoing patent applications, and (c) any patent(s) 
    issuing from any of the foregoing, and including all reexamination, 
    reissues or extensions of such patents.

1.18 "Phosphoramidate Patents" shall mean the issued patents owned or 
    Controlled by Lynx USA during the term of the Agreement that claim 
    [.***.].*

1.19 "Reagents" shall mean the Beads and such other proprietary 
    reagents, diluents, or materials that are necessary for operating 
    the MPSS Instruments and conducting the MPSS sequence analyses of 
    template samples, to the extent that such materials are not 
    reasonably available for purchase on the open market.

1.20 "Research Program" shall mean the research and drug discovery 
    program to be conducted by The Joint Venture, that shall 
    characterize the dynamics of gene expression and gene product 
    activities, initially limited to the areas of: (a) discovering novel 
    drug targets for identifying drugs useful in the area of epilepsy; 
    (b) evaluating the use of "dynamic imaging" approach to predicting 
    the toxico-pharmacology of known chemical substances; and (c) 
    generating dynamic gene expression databases from tissues and cells 
    of interest in the Field; (d) developing production strains of 
    microorganisms for fermentation.

1.21 "TET-Technology" means a method of [.***.] or [.***.] operating 
    via [.***.] or [.***.] or [.***.] or [.***.] to the extent BASF AG 
    may make such technology available to The Joint Venture Without 
    having to make additional payments therefor.

1.22 "Toxicology Database" means BASF AG's comprehensive collection of 
    non-proprietary toxicological data as well as the toxicological 
    expertise of BASF AG's department of toxicology.

2. LICENSES AND RIGHTS

2.1 Lynx MPSS License Grant.  Lynx Germany hereby grants to The 
    Joint Venture, during the term of the Agreement, [.***.], without 
    the right to assign or to grant sublicenses, under the MPSS Patents 
    and the MPSS Know-How to use the MPSS Instruments provided by Lynx 
    Germany hereunder and to practice the method of MPSS with said MPSS 
    Instruments, all solely in order to conduct the Research Program.  
    Lynx Germany also grants The Joint Venture, during the term of the 
    Agreement, [.***.] without the right to assign or to grant 
    sublicenses, under the Future Gene Technology, solely in order to 
    conduct the Research Program.  

2.2 Lynx Research Licenses.  Lynx Germany hereby grants The Joint 
    Venture, during the term of the Agreement, [.***.]* without the 
    right to assign or to grant sublicenses, to use the Lynx 
    Bioinformatics and the CNS Database provided by Lynx Germany 
    hereunder, solely in order to conduct the Research Program.  Lynx 
    Germany also grant The Joint Venture the right under the 
    Phosphoramidate Patents to utilize [.***.] containing [.***.] solely 
    in conducting research work under the Research Program, for example 
    as necessary to validate drug targets identified under the Research 
    Program.

2.3 BASF License Grant.  BASF GmbH hereby grants to The Joint 
    Venture, during the term of the Agreement, [.***.], without the 
    right to assign or to grant sublicenses to use and practice the TET-
    Technology and to use and access the Incyte Database and the 
    Toxicology Database, all solely in order to conduct the Research 
    Program.  BASF GmbH also grants The Joint Venture, during the term 
    of the Agreement, [.***.], without the right to assign or to grant 
    sublicenses, under the Future BASF Technology.

2.4 Restriction on Use of Lynx Technology.  The Joint Venture 
    covenants that The Joint Venture shall not utilize the MPSS 
    Instruments and shall not use or practice the MPSS Technology, the 
    Future Gene Technology, the Lynx Bioinformatics, or the CNS 
    Database, except as specifically required to conduct the Research 
    Program, as established and under the direction of the Advisory 
    Board.  In particular, but without limiting the foregoing, The Joint 
    Venture agrees that it shall not use the MPSS Instruments or use or 
    practice the MPSS Technology to provide sequence analysis services 
    for any third party, including BASF AG and/or BASF GmbH and/or Lynx 
    USA and/or Lynx Germany, provided, however, that approximately 
    [.***.] of the research and development efforts of The Joint Venture 
    under the Research Program may be devoted to projects as part of 
    academic collaborations in the Field approved by the The Joint 
    Venture Advisory Board, provided that The Joint Venture retains all 
    rights resulting from such collaborative work.  The Joint Venture 
    shall not, and shall not engage, permit or encourage any third party 
    to, reverse engineer or modify the MPSS Instruments or decompile, 
    translate or otherwise attempt to obtain the source code for any 
    software included in the MPSS Instruments or the Lynx 
    Bioinformatics.

2.5 Lynx Rights Retained.  Lynx USA shall retain all rights to 
    use the Lynx Licensed Technology, the Lynx Bioinformatics, the CNS 
    Database, and to use and practice MPSS and the Phosphoramidate 
    Patents, for all research or commercial purposes, subject to Section 
    5.7 of The Joint Venture Agreement, provided that the scope of any 
    R&D project undertaken by the Joint Venture subject to that section 
    is set forth in the minutes of the Advisory Board.

2.6 Bioinformatics.  As part of The Joint Venture's research and 
    development efforts under the Research Program, The Joint Venture 
    shall develop, acquire and/or integrate the bioinformatics 
    technologies as necessary for the analysis, interpretation and use 
    of the gene expression information generated by The Joint Venture in 
    practicing the MPSS method as permitted hereunder.

3. FUNDING

3.1 BASF GmbH Funding.  BASF GmbH hereby agrees to provide 
    research funding (the "Funding Commitment") for The Joint Venture 
    according to the following schedule:

(a) As promptly as is practical after the Effective Date, BASF GmbH 
    shall provide The Joint Venture with an initial contribution of 
    [.***.]* to enable The Joint Venture to initiate the Research 
    Program.

(b) BASF promises to provide up to [.***.] on a quarterly basis 
    according to research budgets prepared by the The Joint Venture 
    Executive Board, subject to review and unanimous approval by the 
    The Joint Venture Advisory Board.  Operating shortfalls resulting 
    from the budgeting process set forth above shall be added to the 
    budget for the following quarter.  BASF hereby agrees and promises 
    that such funds shall be contributed within [.***.] of budget 
    approval by the The Joint Venture Advisory Board.

4. INSTRUMENTS, REAGENTS AND SERVICES

4.1 Lynx loan of MPSS Instruments.  As promptly as is practical 
    after the Effective Date, Lynx Germany shall provide The Joint 
    Venture with a fully operational MPSS Instrument for use as 
    permitted in Section 2.1.  During the term of the Agreement, if The 
    Joint Venture demonstrates that it has the capability, need, and 
    resources to utilize, consistent with the Research Program plans and 
    goals, additional MPSS Instruments, Lynx Germany shall at such time 
    use reasonable efforts to arrange to provide The Joint Venture with 
    one or more additional MPSS Instruments for use under Section 2.1.  
    Lynx USA shall retain the entire right, title and interest in and to 
    all MPSS Instruments provided by Lynx Germany hereunder.  The Joint 
    Venture shall use, and shall require all its employees, agents or 
    contractors to use, all reasonable efforts to keep such MPSS 
    Instruments in good working order and not to modify or permit 
    modification of or cause harm or loss to come to such equipment, or 
    any software associated with such equipment provided by Lynx 
    Germany.

4.2 Lynx Reagents Supply.  During the term of the Agreement, Lynx 
    Germany shall supply The Joint Venture with its reasonable 
    requirements of Reagents for use in performing the Research Program 
    as permitted under Section 2.1.  Delivery of the Reagents will be 
    based on orders made by The Joint Venture in writing, with delivery 
    times and methods of delivery to be agreed by the parties.  In the 
    event that The Joint Venture in any calendar year desires to order 
    amounts of Reagents in excess of that amount needed to perform 
    [.***.] analyses, then with respect to ` such additional amounts of 
    Reagents that Lynx Germany is able to provide, Lynx Germany shall 
    charge The Joint Venture for such supply [.***.] equal to [.***.] 
    for such Reagents, plus reasonable shipping and insurance. 

4.3 Lynx Training and Technical Assistance.  Lynx Germany shall 
    provide technical assistance to The Joint Venture as reasonably 
    requested by The Joint Venture to assist in the transfer of the Lynx 
    Licensed Technology, to the extent The Joint Venture has rights to 
    use or practice such Lynx Licensed Technology as provided in Article 
    2 hereof.  On a reasonable schedule after the Effective Date, Lynx 
    Germany shall also provide such documents and supporting materials 
    relating to the Lynx Licensed Technology as are necessary in order 
    for The Joint Venture to utilize such Lynx Licensed Technology as 
    permitted in Article 2.  Lynx Germany, or Lynx USA as appropriate 
    shall also provide reasonable training for up to [.***.] of The 
    Joint Venture in the use, operation and maintenance of the MPSS 
    Instruments and the practice of the MPSS analysis methods.  The 
    Joint Venture shall pay for all travel and living expenses of its 
    employees related to receiving such training.

4.4 BASF Training and Technical Assistance.  BASF GmbH shall 
    provide technical assistance to The Joint Venture as reasonably 
    requested by The Joint Venture to assist in the transfer of the BASF 
    Licensed Technology, to the extent The Joint Venture has rights to 
    use or practice such BASF Licensed Technology as provided in ` 
    Article 2 hereof.

4.5 Lynx Maintenance of MPSS Instruments.  The Joint Venture 
    shall be responsible for the day-to-day maintenance and upkeep of 
    all MPSS Instruments as directed by Lynx Germany and provided 
    hereunder.  Lynx Germany shall provide, or shall arrange to be 
    provided, reasonable service and repair of such MPSS Instruments to 
    the extent The Joint Venture, using reasonable efforts, is not able 
    to address any such service or maintenance needs of the MPSS 
    Instruments.

5. INVENTIONS AND RESULTS

5.1 Disclosure of Inventions.  On a regular basis, and in any 
    event at least [.***.]*, The Joint Venture shall provide to Lynx 
    Germany and BASF GmbH a written summary of all The Joint Venture 
    Inventions made during the term of the Agreement.  For any such The 
    Joint Venture Inventions that The Joint Venture believes may be 
    patentable (the "Patentable Invention"), The Joint Venture shall 
    include in such report a complete written disclosure for each and 
    every such Patentable Invention.  The Joint Venture also shall, at 
    Lynx Germany's or BASF GmbH's request, provide Lynx Germany and BASF 
    GmbH copies of, and/or the right to inspect and copy, all results 
    and raw data of the Research Program and other activities of The 
    Joint Venture that may pertain to inventions or patentable 
    discoveries.

5.2 Recording of Results and Data.  The Joint Venture shall 
    require that all its employees, consultants and collaborators 
    performing work for The Joint Venture, whether pursuant to the 
    Research Program or otherwise, shall record all results and raw data 
    from such work, and all The Joint Venture Inventions, in laboratory 
    notebooks owned and maintained by The Joint Venture.  Such 
    laboratory notebooks shall be regularly reviewed, witnessed and 
    dated by appropriate senior scientists at The Joint Venture.  The 
    Joint Venture shall maintain such notebooks in its control at all 
    times and shall use reasonable efforts to keep such notebooks 
    confidential and in a secure manner.  As used herein, "results and 
    raw data" means all results, information and data resulting from or 
    derived from research or development work, and all conclusions based 
    upon analysis or such results, information and data, including 
    without limitation all materials such as films, printouts, graphs 
    and photographs that generate, comprise or analyze such results, 
    information or data and are typically included in laboratory 
    notebooks.

5.3 Assignment of The Joint Venture Inventions.  The Joint 
    Venture hereby assigns and conveys to Lynx Germany and BASF GmbH 
    jointly all right, title and interest in and to all The Joint 
    Venture Inventions, subject only to The Joint Venture's right to 
    continue to use and practice the The Joint Venture Inventions, 
    solely as needed to further conduct the Research Program during the 
    term of this Agreement.  Lynx Germany and BASF GmbH hereby 
    acknowledge and agree that each possesses [.***.]* in The Joint 
    Venture Inventions which may not be conveyed, transferred or severed 
    without the permission of the other, as provided in The Joint 
    Venture Operating Agreement.  The Joint Venture agrees to execute 
    all documents and instruments and take all other reasonable actions, 
    at its expense, as are necessary to assign and transfer to Lynx 
    Germany and BASF GmbH, and to perfect title in Lynx Germany and BASF 
    GmbH, all such The Joint Venture Inventions.  The Joint Venture, 
    Lynx Germany, and BASF GmbH further agree that as to any Joint 
    Venture Invention or any invention arising out of any academic 
    collaboration contemplated by paragraph 2.4, relating to Future Gene 
    Technology, MPSS, MPH, or MPGS processes, instruments, or reagents, 
    the Joint Venture and BASF GmbH hereby respectively grant to Lynx 
    Germany and Lynx USA worldwide [.***.], with full rights to 
    sublicense, under their respective rights, to make, have made, use, 
    sell, or otherwise commercialize such inventions, subject to section 
    5.7 of the Joint Venture Agreement.

5.4 Non-Encumbrance.  The Joint Venture hereby covenants and 
    agrees that The Joint Venture shall not permit any lien, 
    encumbrance, burden or claim by any Third Party upon The Joint 
    Venture Inventions, except for any rights therein under the R&D 
    Agreement and statutory rights of its employees.

6. CONFIDENTIALITY AND PUBLICATION

6.1 Publication.  The parties agree that it may be beneficial to 
    a party to publish or present at academic conferences or symposia, 
    or similar events, certain of the The Joint Venture Inventions.  
    However, to preserve commercial value and rights in such The Joint 
    Venture Inventions, The Joint Venture agrees that, prior to the 
    submission for publication of any article or abstract or the public 
    disclosure at a scientific meeting, of any information related to 
    the The Joint Venture Inventions, The Joint Venture shall notify 
    Lynx Germany and BASF GmbH and provide Lynx Germany and BASF GmbH a 
    copy of the proposed manuscript, abstract, speech or other 
    disclosure, for Lynx Germany's and BASF GmbH's prior review and 
    approval at least [.***.]* to submission or release.  The Joint 
    Venture, and any of its employees, agents, or collaborators, shall 
    not make any such publication or disclosure unless Lynx Germany and 
    BASF GmbH give their prior approval, which approval shall not be 
    unreasonably withheld.  Lynx Germany shall have the right to publish 
    articles on the The Joint Venture Inventions.  As part of any 
    article or other disclosure, The Joint Venture shall not publish or 
    disclose any information relating to the BASF Licensed Technology, 
    Future BASF Technology, TET-Technology, or Toxicology Database, 
    unless given prior written approval from BASF GmbH, and the Joint 
    Venture shall not publish or disclose any information relating to 
    Lynx Licensed Technology, Future Gene Technology, Beads, CNS 
    Database, Instrument Improvements, Lynx Bioinformatics, MPGS, MPSS, 
    MPSS Know-How, MPSS Instrument, MPSS Patents, or Reagents, unless 
    given prior written approval from Lynx Germany.

6.2 Confidentiality.  The Joint Venture shall use its best 
    efforts to keep the Lynx Licensed Technology and BASF Licensed 
    Technology and all information relating thereto, and, except as 
    provided in Section 5.1, all The Joint Venture Inventions strictly 
    confidential and shall only use such information to the extent 
    reasonably necessary to further the purposes of this Agreement.  The 
    Joint Venture may disclose the Lynx Licensed Technology, the BASF 
    Licensed Technology and/or the The Joint Venture Inventions only to 
    those of its employees and collaborators with a need to know such 
    information in order to perform the Research Program as contemplated 
    herein.  Confidential Disclosure Agreements related to the 
    disclosure or distribution of confidential information by The Joint 
    Venture or its employees may be executed only by the Executive 
    Board.

6.3 Non-Disclosure Agreements.  All employees of The Joint 
    Venture shall be required to enter into non-disclosure agreements 
    governing the use of Confidential information.

6.4 Survival.  Except as otherwise provided in Article 9, the 
    provisions of this Article 5 shall survive any termination of this 
    Agreement for a period of [.***.]* such [.***.].

7. WARRANTIES AND REPRESENTATIONS

7.1 BASF Representation.  BASF GmbH represents that to the best 
    of its knowledge it has the unencumbered right to grant the licenses 
    to The Joint Venture under the BASF Licensed Technology granted 
    hereunder and that to the best of its knowledge it has the authority 
    and capacity to enter into this Agreement and to perform its 
    obligations hereunder.

7.2 Lynx Representation.  Lynx Germany represents that to the 
    best of its knowledge it has the unencumbered right to grant the 
    licenses to The Joint Venture under the Lynx Licensed Technology 
    granted hereunder and that to the best of its knowledge it has the 
    authority and capacity to enter into this Agreement and to perform 
    its obligations hereunder.

7.3 Joint Representation.  Each Party represents and warrants to 
    the best of its knowledge that the use by The Joint Venture of its 
    technology as provided for hereunder will not infringe the 
    intellectual property rights of third parties.

7.4 OTHER THAN THE REPRESENTATION IN SECTIONS 7.1 TO 7.3, LYNX GERMANY 
    AND BASF GMBH MAKE NO OTHER, AND HEREBY DISCLAIM ALL, 
    REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, REGARDING 
    THE LYNX AND/OR BASF LICENSED TECHNOLOGY, INCLUDING WITHOUT 
    LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR 
    PURPOSE, OR NON-INFRINGEMENT, AND ALL SUCH INFORMATION AND MATERIALS 
    ARE PROVIDED "AS IS."

8. INDEMNITY

8.1 Indemnifications.  The Joint Venture shall defend, indemnify 
    and hold harmless Lynx Germany and BASF GmbH from and against any 
    and all claims, damages, losses and expenses of any nature 
    (including reasonable attorney's fees), included, but not limited to 
    death, personal injury, illness, property damage or products 
    liability arising from or in connection with any of the following:
(a) the use by The Joint Venture of any method or process related to 
    MPSS, the MPSS Instruments, the Lynx Licensed Technology or the BASF 
    Licensed Technology except for negligence or willful conduct by the 
    Parties or the Parents; or

(b) the breach by The Joint Venture or its employees, agents or 
    collaborators of any material obligation under this Agreement.

(c) any third party patent infringement actions brought against The 
    Joint Venture which are not based on Lynx or BASF Licensed 
    Technology.

9. TERM AND TERMINATION

9.1 Term.  This Agreement shall enter in force from and after the 
    Effective Date hereof and expires on [.***.], unless sooner 
    terminated in accordance with the provisions of Paragraphs 9.2 or 

9.3 below.

9.2 Termination.  Lynx Germany may terminate this Agreement upon 
    written notice of termination to BASF GmbH and The Joint Venture in 
    the event that:

(a) BASF GmbH has failed to make its initial capital contribution of 
    [.***.];

(b) BASF GmbH has materially failed to contribute to The Joint Venture 
    amounts it is required to contribute under its obligation under this 
    Agreement, and such failure has not been cured [.***.] of receiving 
    written notice from Lynx Germany or The Joint Venture of such failure;
    and BASF GmbH may terminate this Agreement upon written notice
    of termination to Lynx Germany and The Joint Venture in the event that
    Lynx Germany has failed to achieve by [.***.] the Milestone described
    in Exhibit A.

9.3 Termination for Breach.  Any party may terminate the 
    Agreement upon [.***.] written notice in the event the other party 
    breaches a material term of the `"Agreement and fails to cur*e such 
    breach within such [.***.] after receiving such notice.

10. MISCELLANEOUS

10.1 Non-Assignment.  This Agreement and the rights and benefits 
    conferred upon a party hereunder, or any part hereof, may not be 
    assigned or transferred by such party without the express written 
    consent of the other party, except pursuant to a merger or other 
    acquisition of such party or all of its relevant business assets.

10.2 Binding.  This Agreement shall be binding upon and inure to 
    the benefit of the permitted successors, representatives and assigns 
    of the parties hereto.

10.3 Notices.  Any payment, notice or other communication required 
    or permitted to be given by either party hereto shall be deemed to 
    have been properly given and be given and be effective on the date 
    of delivery if delivered, in writing, in person, by facsimile 
    transmission or by first class mail to the respective addresses set 
    forth below, or to such other address as either party shall 
    designate by written notice given to the other party:

In the case of BASF-Lynx 
Bioscience AG:                   As communicated to Lynx
                                 Germany and BASF GmbH
                                 from time to time
 In the case of Lynx Germany:    [.***.]*
                                 with a copy to:

                                 Lynx Therapeutics, Inc.
                                 3832 Bay Center Place
                                 Hayward, CA 94545
                                 USA  
                                 Attn: [.***.]
In the case of BASF GmbH:        As communicated to
                                 BASF-Lynx Bioscience AG and
                                 Lynx Germany from time to time

10.4 Governing Law.  This Agreement shall be construed in 
    accordance with, and its performance shall be governed by, the laws 
    of the Federal Republic of Germany.

10.5 Dispute Resolution.  In the event that Lynx Germany and BASF 
    GmbH cannot reach agreement on any matter pursuant to this 
    Agreement, the matter will be referred to further review, 
    discussion, and resolution between a senior officer of BASF AG and 
    Lynx USA (the "Decision-Makers").  The Decision-Makers will 
    attempt in good faith to resolve the matter in dispute for a period 
    of [.***.].  If no successful resolution of the dispute has been 
    mutually agreed to, the dispute will be settled according to the 
    arbitration procedures of Sections 10.6 and 10.7 of this Agreement.

10.6 Arbitration.  Any controversy arising which cannot be 
    resolved pursuant' to Section 10.5 of this Agreement will be 
    submitted to arbitration pursuant to the Arbitration Rules of the 
    Deutsche Institution fur Schiedsgerichstbarkeit e.V., then in 
    effect, by three arbitrators knowledgeable as to pharmaceutical 
    industry standards.  The place of arbitration shall be Heidelberg, 
    Germany.  The arbitrators will be appointed by mutual agreement of 
    the Decision-Makers within [.***.]* of the filing of the arbitration 
    claim.  In the event the Decision-Makers fail to mutually agree to 
    the arbitrators, three qualified arbitrators will be appointed by 
    the Deutsche Institution fur Schiedsgerichstbarkeit.  The 
    arbitrators will be instructed to consider, in making any 
    determination, the customary practices in the biotechnology and 
    pharmaceutical industry to the extent such practices exist.  The 
    language of the arbitration shall be English.

10.7 Arbitration Rules.  The arbitrators will be instructed to 
    issue detailed written findings of fact and law.  The arbitrators 
    will be authorized to provide for interim and final injunctive 
    relief and the parties acknowledge and agree that such arbitration 
    will be the sole forum for such interim and final injunctive relief.  
    The arbitrators will have the right but not the obligation to award 
    to the prevailing party the cost of resolving any dispute regarding 
    this Agreement or the formation, breach, enforcement or performance 
    hereof, including any reasonable fees of attorneys, accountants and 
    expert witnesses incurred by the prevailing party.  Punitive damages 
    will not be recoverable in any arbitration initiated pursuant to 
    this Agreement.  Judgment upon the award rendered by the arbitrators 
    may be entered in any court having jurisdiction thereof.

10.8 Headings.  The headings of the several sections of this 
    Agreement are inserted for convenience and reference only and are 
    not intended to be a part of or to affect the meaning or 
    interpretation of this Agreement.

10.9 Amendment.  No amendment or modification hereof shall be 
    valid or binding upon the parties unless made in writing signed by 
    both parties.

10.10 Integration.  This Agreement embodies the entire, complete 
    and exclusive understanding of the parties hereto and supersedes all 
    previous communications, representations or understandings, either 
    oral or written, between the parties hereto relating to the subject 
    matter hereof.

10.11 Waiver.  Any waiver by either party of any breach of this 
    Agreement shall not constitute a waiver of any subsequent or other 
    breach.

10.12 Severability.  If any provision or provisions of this 
    Agreement shall be held to be invalid, illegal or unenforceable, the 
    validity, legality and enforceability of the remaining provisions 
    shall not be in any way affected or impaired thereby.

    IN WITNESS WHEREOF, Lynx Germany, BASF GmbH, and The Joint Venture 
Bioscience AG have executed this Agreement, in triplicate originals but 
collectively evidencing only a single contract.

                         BASF BIOTECHNOLOGIE BETEILIGUNGS-UND 
                         VERWERTUNGSGESELLSCHAFT MBH
                          By: \s\ Dr. Joerg Buchmuller
                          Title: Managing Director

                         LYNX THERAPEUTICS GMBH
                          By: \s\ Edward C. Albini
                          Title: Managing Director

                         BASF-LYNX BIOSCIENCE AG
                          By: \s\ Alfred Bach, Ph.D.
                          Title: Chief Executive Officer


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* Confidential Treatment Request

<PAGE>

                              EXHIBIT A
                              MILESTONE

     The achievement of the Milestone will be demonstrated as follows:

1. The parties will jointly select a cell system or cell culture 
    suitable for this demonstration experiment.

2. One portion of the cell culture will be "induced" using an agreed 
    upon inducer, such as a [.***.],* for a specified period, such as 
    [.***.].

3. Lynx will take [.***.] from the "uninduced" and [.***.] from the 
    "induced" system or culture, following its internal protocols for 
    sampling. 

4. Lynx will extract the [.***.] contained in each of the [.***.] such 
    samples, using its internal protocols for [.***.] extraction.  

5. The cDNA extracted from each of the [.***.] will be divided into 
    [.***.], and a separate MPSS Library Analysis will be conducted on 
    all of the resulting [.***.] samples.

6. If the data generated from all [.***.] of each of the [.***.] are 
    within the set (induced or uninduced) substantially identical, but 
    yet between the sets substantially different, then the Milestone has 
    been achieved.

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* Confidential Treatment Request