EXHIBIT 10.29

                             JOINT VENTURE AGREEMENT

 between

LYNX Therapeutics Inc., 3832 Bay Center Place, Hayward,  California,  94545, USA
(hereinafter referred to as "LYNX")

 and

BASF Aktiengesellschaft, 67056 Ludwigshafen, Federal Republic of Germany
(hereinafter referred to as ,,BASF")

WHEREAS, LYNX and BASF own or control potentially complementary technologies and
expertises, and

WHEREAS, LYNX and BASF desire to have exploited certain complementary assets for
the purpose of evaluating the applicability of dynamic gene expression  analyses
for the toxico-pharmacology of chemicals, for discovering novel drug targets and
drugs for unmet medical  needs,  and the  development  of production  strains of
microorgnisms for fermentations, and

WHEREAS, LYNX can offer contract research and development by exploitation of its
various gene sequencing and identification platforms,

THEREFORE,  LYNX and BASF are interested in forming an industrial  collaboration
including a Joint Venture  Company,  which shall benefit both parties and hereby
agree as follows:

                                    Article 1

                                   Definitions

For  purposes of this  Agreement,  the  following  terms shall have the meanings
indicated below.

1.1      A-GmbH (limited  liability company) is a 100% subsidiary of BASF with a
         nominal capital of DM 50,000 to be paid in cash. A-GmbH is formed under
         the laws of the Federal Republic of Germany.

1.2      B-GmbH  (limited liability company) is a 100% subsidiary of LYNX with a
         nominal capital of DM 50,000 to be paid in cash. B-GmbH is formed under
         the laws of the Federal Republic of Germany.



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1.3      Holding Company means individually A-GmbH or B-GmbH,  Holding Companies
         means collectively A-GmbH and B-GmbH.

1.4      Partner means  individually BASF or LYNX,  Partners means  collectively
         BASF and LYNX.

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

1.6      Massively  Parallel Genomic Sequencing or MPGS means the acquisition of
         deoxynucleotide sequences from the genome of an organism by proprietary
         technologies based on LYNX intellectual property.

1.7      Massively Parallel  Hybridization or MPH means the use of gridded solid
         phase  arrays of cloned  cDNAs for the purpose of  analyzing by nucleic
         acid  hybridization  the  levels of gene  expression  in tissue or cell
         samples.

1.8      TET-Technology     means    a    method     for     tetracycline     or
         tetracycline-derivative   inducible  or  repressible   gene  regulation
         operating via  tetracycline  repressors or derivatives or  tetracycline
         repressor  or  derivative  fusion  proteins to the extent BASF may make
         such technology  available to the Joint Venture Company contemplated in
         this Agreement without having to make additional payments therefor.

1.9      Incyte  Database  means  the  database  BASF  may,   according  to  the
         Collaborative  Agreement  between  BASF and Incyte  dated June 27, 1996
         (the Incyte  Agreement),  make  available to the Joint Venture  Company
         contemplated  in this  Agreement  without  having  to  make  additional
         payments therefor.

                                    Article 2

                            The Joint Venture Company

 2.1     Formation

2.1.1    The Joint Venture Company (hereinafter referred to as the  "JVC") shall
         be    established    in   the    form    of   a    stock    corporation
         (Aktiengesellschaft-AG) by the Holding Companies in accordance with the
         laws applicable in the Federal Republic of Germany.

CONFIDENTIAL TREATMENT REQUESTED

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2.1.2    The corporate name of the JVC shall be "BASF-LYNX Bioscience AG".

2.1.3    Place of  business  and  registered  head office of the JVC shall be in
         Heidelberg.

2.1.4    The JVC shall be  established  according to the Articles of Association
         attached hereto as Annex 1.

2.2      Object

         The JVC will apply  collaboratively the technologies and knowledge made
         available  primarily by the Holding  Companies for  characterizing  the
         dynamics of gene expression and gene product (protein) activities.  The
         initial objectives shall be to

         Evaluate  the  applicability  of the   "Dynamic  Imaging"  approach  to
         predicting the toxico-pharmacology of chemicals, and

         Discover novel drug targets for intervening in diseases or disorders of
         epilepsy, and

         Develop production strains of microorganisms for fermentations, and

         Generate  dynamic gene expression  databases from tissues and cells (e.
         9.  during  development  and  aging)  of  interest  to the  JVC and its
         potential customers, and

         Develop, acquire and integrate the bioinformatics  technologies for the
         analyses,  interpretation,  storage and  distribution  of the databases
         generated by the JVC.

         Other  objectives of the JVC can be defined by mutual  agreement of the
         Partners.

2.3      Share capital

2.3.1    The share capital of the JVC shall at the time of  incorporation  be DM
         100,000 (Deutsche Mark: one hundred thousand), to be fully paid in cash
         by AGmbH  (DM  51,000)  and  B-GmbH  (DM  49,000).  The  ratio of their
         participation shall be 51:49 in favour of A-GmbH.

2.3.2    The nominal value of a share shall be DM 5 (Deutsche Mark: five). 3,000
         shares  (i.e.  15  (fifteen)  percent  of the share  capital)  shall be
         preferred  shares  without / voting  rights with a  guaranteed  minimum
         dividend  of 4 (four)  percent,  which are to be  offered  to the JVC's
         employees and others according to the terms described in Article 4.


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2.3.3    According  to its  Articles of  Association  the JVC's  shares shall be
         registered  shares that can be transferred  only with the permission of
         the Supervisory  Board of the JVC  (vinkulierte  Namensaktien,  * 68 11
         Aktiengesetz).

2.4      Bodies of the JVC

2.4.1    In addition to the  following  bodies of the JVC required  according to
         the  applicable  laws of the  Federal  Republic  of  Germany  for stock
         corporations (Aktiengesetz)

         (1) the Shareholders Meeting (Haul ptversammlung)
         (2) the Executive Board (Vorstand)
         (3) the Supervisory Board (Aufsichtsrat)

the JVC shall have

         (4) an Advisory Board (Beirat) and
         (5) a Scientific Advisory Board

         The  rules  for the  Executive  Board,  the  Supervisory  Board and the
Advisory Board are laid down in Annex 2.1 to 2.3.

2.4.2    Shareholders Meeting:

         The  Shareholders  Meeting  shall decide on the matters on which it has
         exclusive  competence  according to the binding  regulations  under the
         Stock  Corporation  Act  -  Aktiengesetz  (presently  listed  in *1 1 9
         Aktiengesetz)  with  the  majority   requirements   stipulated  in  the
         Aktiengesetz,  unless  otherwise  provided  in this  Agreement.  If the
         Advisory  Board has dealt with a matter  which has to be decided by the
         Shareholders Meeting, the Partners shall vote or cause their Holding.

         Companies to vote in  accordance  with the  decision or  recommendation
made by the Advisory Board in that matter.

2.4.3    Executive Board:

         Unless otherwise agreed by the Shareholders Meeting the Executive Board
         shall consist of two members: the Chief Executive Officer (CEO) and the
         Chief Scientific  Officer (CSO). The members of the Executive Board are
         appointed by the  Supervisory  Board which also  determines the term of
         their  appointment.  The regular term of their  appointment shall be at
         least one and not more than five years.

         The Executive  Board shall  require the prior  approval of the Advisory
         Board for the following matters: 

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         a) the appointment of the upper management (i.e.  senior scientists and
         supervisory  personnel) and the termination of contracts with the upper
         management

         b) granting of "Prokura"

         c) major  decisions  concerning the use of the  technology  provided by
         A-GmbH  and B-GmbH or the  Partners,  major  changes of the  scientific
         direction, focus, scope and business development or the commencement of
         significant operations in new fields of technology;

         d) the annual budget and the two year operating plan;

         e) all contracts  concerning  an amount  exceeding DM 250.000 or a term
         exceeding two years or extending beyond December 31, 2001, whichever is
         shorter;

         f) the general  terms and  conditions of all  employment-contracts  and
         benefits granted to employees;

         g)  all  capital  expenditures  beyond  DM  100.000  unless  explicitly
         approved by the Advisory Board as part of the budget under c) above;

         h) the establishment and dissolution of branches;

         i) the  acquisition  of companies or interests in them and the disposal
         hereof;

         j) the  acquisition,  disposal or  mortgaging  of real  estate,  rights
         similar to real estate, and rights regarding real estate;

         k) the  issuing  of loans and the  taking of  credits  to the extent in
         excess of the amounts  specifically set forth in the budget approved by
         the Advisory Board;

         l) entering into license  and/or  collaboration  contracts or any other
         strategic alliances;

         m) initiating or settling lawsuits.

2.4.4    Supervisory Board:

         Unless otherwise  resolved by the Shareholders  Meeting the Supervisory
         Board shall consist of three members to be elected by the  Shareholders
         Meeting with a 3/4 majority for a period  ending with the  Shareholders
         Meeting voting on their  discharge from  responsibility  ("Entlastung")
         for the financial year in which they were elected.



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         The appointment of members of the Executive Board and the determination
         of their term of office by the  Supervisory  Board has to be unanimous;
         provided,   however,  that  either  Partner  may  request  a  unanimous
         resolution  of the  Supervisory  Board to  terminate  a  member  of the
         Executive Board after an appropriate  grace period of attempted  remedy
         and a  replacement  proposal.  The  Partners  shall then use their best
         efforts to have a corresponding unanimous resolution of the Supervisory
         Board taken as soon as reasonably possible.

2.4.5    Advisory Board:

         The  Advisory  Board shall  consist of four  members.  Each Partner may
         appoint two members  (which it may replace at its  discretion by giving
         written  notice  to the  other  Partner  specifying  the  member  to be
         replaced,  the identity of the successor and the effective date of such
         replacement).  The  Executive  Board  reports on a regular basis to the
         Chairman of the Advisory  Board who shall keep the other members of the
         Advisory Board informed.

         The tasks and authority of the Advisory Board are:

         (1)  Recommendation  to the  Supervisory  Board of the  members  of the
         Executive  Board  to  be  appointed  by  the  Supervisory  Board  which
         recommendation has to be unanimous;

         (2) The  appointment  of the members of the  Scientific  Advisory Board
         (SAB); which appointment has to be unanimous;

         (3) Review of annual performance of upper management;

         (4) Decisions  concerning  the use of technology  made available to the
         JVC by the Holding Companies and/or the Partners,  change of scientific
         direction,  focus and scope and business  development,  which decisions
         shall require unanimity;

         (5) Decision on approvals required by the Executive Board.

2.4.6    Scientific Advisory Board (SAB):

         The  SAB  shall  consist  of  five  to  seven  members  with  staggered
         appointments  of up to three  years.  The  members  of the SAB shall be
         prominent  scientists  to support the CSO in  recruiting  and assessing
         suitable scientists and optimizing the JVC's R&D activities.


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2.5      Reporting and Accounting

         The JVC shall  establish an appropriate  financial and cost  accounting
         system  as well as a  reporting  system  being in line  with  generally
         accepted international standards and practices and the applicable legal
         regulations  in the  Federal  Republic  of Germany as  required  by the
         applicable  reporting  standards  of the Holding  Companies  and/or the
         Partners.

2.6      Inspection of Books

         Each Holding  Company and/or Partner is entitled during normal business
         hours to inspect or have inspected the books and accounts of the JVC at
         its own expense preferably through its internal auditing department.

2.7      Business Year

         The business year of the JVC shall be the calendar year.

                                    Article 3

                           Sale or Transfer of Shares

3.1      If a Partner desires to transfer shares in A-GmbH or B-GmbH or have its
         Holding Company transfer shares of the JVC, during the first five years
         after their  establishment  he needs the approval of the other Partner,
         being at the discretion of the other Partner.

3.2      After the five-year-term all or portion of the shares in the JVC and/or
         a majority interest in the Holding Company may be transferred, provided
         that the transferor first delivers to the other Partner a written offer
         to sell such shares to the other  Partner or its  Holding  Company at a
         price and on terms described in such written offer.

3.2.1    If such offer is not accepted  within  [REDACT]  months  after  receipt
         thereof, the transferor shall be free to sell the offered shares in the
         JVC to a third party at the same or a higher price and the same or less
         favourable  terms  as  offered  to the  other  Partner  or its  Holding
         Company.

CONFIDENTIAL TREATMENT REQUESTED

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3.2.2    If such  shares are to be offered to a third  party at a lower price or
         on more favourable terms as offered to the other Partner or its Holding
         Company,  the  transferor  must  first  offer  the  shares to the other
         Partner  or its  Holding  Company  again at such  lower  price and more
         favourable  terms;  provided that, the other Partner has to accept this
         new offer within  [REDACT] days after receipt  thereof.  Any offer to a
         third party which is not  consummated  within [REDACT] months after the
         end of the period within which the other Partner or its Holding Company
         could  have  accepted  such  offer  must be  withdrawn  and the  shares
         reoffered to the other Partner or its Holding Company by the transferor
         in accordance with this sub-section 3.2.2.

3.3      Unless otherwise agreed between the Parties, shares in the JVC may only
         be  transferred  to a third party (except to employees of the JVC or as
         part of ordinary  trading in a stock  exchange)  if such third party is
         bound to the terms of this Agreement.

                                    Article 4

                     JVC Shares held by Employees and Others

4.1      Object:  In order to best incentivize the JVC's  employees,  members of
         the Executive Board and the Scientific Advisory Board and certain other
         collaborators (e.g.  consultants),  the Partners regard it as desirable
         that a  substantial  interest  in the  JVC (not  exceeding  15  percent
         unless otherwise agreed by the Partners) be held by such persons.

4.2      The Partners therefore agree to have made available a sufficient number
         of preferred  shares for the purpose  described in Article 4.1,  either
         from the preferred shares held by them (in proportion to their interest
         in the JVC)  or by respective capital increase(s).

4.3      Terms  of  offer  to the JVC's   employees (to be  incorporated  in the
         JVC's employees' employment contracts):

4.3.1    The price of the offered  shares shall be  established  by the Advisory
         Board in advance for every calendar year.

4.3.2    Within the first five years of  employment  the  transfer of the shares
         shall not be permitted.

4.3.3    If the employment  terminates  before the end of the five-year  period,
         the JVC  has the right to acquire  the shares at the price  established
         by the Advisory Board according to 4.3.1.

CONFIDENTIAL TREATMENT REQUESTED

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4.3.4    After five years of  employment  the shares may be  transferred  with a
         right of first  refusal for the  JVC at market price or, in the absence
         of a market price  according to a procedure  comparable in substance to
         the provisions of Article 3.2.

4.4      The terms of offer for other persons than the JVC's employees shall be
         established by the Advisory Board from case to case.

                                    Article 5

                              Operation of the JVC

 5.1     During the first five years  after the  incorporation  of the JVC AGmbH
         will fund the JVC's Research and Development Activities ("R&D") with up
         to DM 50,000,000  (Deutsche Mark: fifty million) according to the terms
         of the Technology License and Development Agreement attached as Annex 3
         and upon request of LYNX,  BASF shall cause A-GmbH to make available to
         the JVC

         Non-exclusive right to use the TET-technology, and Access to the Incyte
         Database, and

         Non-exclusive right to use its toxocological database, and

         Non-exclusive  right to use its  future  technologies  relevant  to the
         object of the JVC

         and, in this case, the relevant  provisions of the  Technology  License
         and  Development  Agreement  attached as Annex 3 shall apply.  However,
         neither  the JVC nor  A-GmbH  shall  be  entitled  to claim  the  above
         technology respectively from A-GmbH or BASF.

5.2      During the first five years  after the  incorporation  of the JVC BGmbH
         will  permit the use of the  MPSS-technology  as well as the use of the
         bio-information  systems and of further  LYNX-technology related to the
         purpose of the Joint  Venture  free of charge  and BGmbH  will  further
         grant to the JVC

         Non-exclusive right to use its current gene technologies,  informatics,
         patents, trade secrets and know-how relevant to the object of the JVC,

         Non-exclusive  right to use its future gene technologies,  informatics,
         patents,  trade secrets and know-how (e. g. MPGS,  MPH) relevant to the
         object of the JVC,


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         Providing,  maintaining and updating of the operating  MPSSinstruments,
         hardware and software for data  generation,  collection and analysis at
         LYNX's costs as needed,

         Non-exclusive  right to use  bio-informatics  systems to  simulate  and
         analyse dynamic patterns of gene expression,

         Non-exclusive  right to use LYNX's CNS  database  that exists as of the
         Effective Date and

         Non-exclusive  right  to  use  LYNX's  phosphoramidate  oligonucleotide
         technology for validation relevant to the object of the JVC

         all according to the terms of the  Technology  License and  Development
         Agreement attached as Annex 3.

5.3      After the  exhaustion  of the initial  financial  and, if  requested by
         LYNX,  5-year  technology  commitment  by  A-GmbH  and  of  the  5-year
         technology  commitment by B-GmbH, the Holding Companies or the Partners
         will fund or cause to be funded the continued activities of the JVC, if
         this is  necessary  to enable  the JVC to  acquire  and/or  retain  the
         necessary  resources  and  technologies  for the future  success.  This
         financing  will be according to the  Partners'/A-  and BGmbH's ratio of
         participation  in the share capital of JVC. The decision  about further
         financing will have to be made unanimously by the Holding  Companies or
         the Partners. If further financing is agreed upon, it has to be used to
         buy the necessary  equipment and technologies (as for example from BASF
         and LYNX).

5.4      BASF and LYNX shall make available to their respective  Holding Company
         the technologies necessary to enable A-GmbH and B-GmbH to fulfill their
         functions under Articles 5.1 and 5.2.

5.5      The  Holding  Companies  on the one side and the JVC on the other  side
         shall  conclude  the  Technology  License  and  Development   Agreement
         attached as Annex 3 according to which the JVC conducts R&D in projects
         defined  by the  Holding  Companies  who get  coexclusive  title to all
         results  (except,pSept  the JVC's right to continue  using such results
         for its further R&D activities)

5.6      The JVC will  reserve  [REDACT]  of its MPSS  technology  capacity  for
         academic collaborations directly relevant to the charge and projects of
         the JVC.

5.7      Neither of the Partners  nor any of their  affiliates  (i.e.  companies
         controlling,  controlled  by or under  common  control  with a Partner,
         where "control" shall mean ownership of more than 50 (fifty) percent of
         the voting  rights) shall  cooperate  with third parties with regard to
         the subject of R&D projects undertaken by the JVC.

CONFIDENTIAL TREATMENT REQUESTED

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                                    Article 6

                         Exploitation of the R&D Results

6.1      Prior to the merger contemplated in Article 7, the R&D results shall be
         commercially  exploited  pursuant  to the  terms  of  the JV  Operating
         Agreement attached hereto as Annex 4.

6.2      After the merger the JVC's R&D results shall be commercially  exploited
         as follows:

         (1) The JVC's Executive Board or a Partner makes a written  proposal to
         the Advisory  Board that a particular  target or other JVC's R&D result
         is  ready  for   commercialization  or  commercial   exploitation  (the
         "Marketable Results")  and the Advisory Board shall inform the Partners
         or the other Partner hereof.

         (2) BASF shall have [REDACT] days,  after receipt of the proposal under
         (1) to make  an  Offer  to  license  the  Marketable  Results.  For the
         purposes  of this  Article  6.2, an "Offer"  shall mean a full  written
         proposal  to  exclusively  license  with  a  right  to  sublicense  the
         Marketable   Results  on  a  worldwide   basis  for  the   purposes  of
         researching,  developing and marketing products,  comprising, based on,
         or discovered  using the  Marketable  Results,  including due diligence
         obligations,   initial  license  payments,   milestones  and  milestone
         payments,  royalties,  and other terms common to comparable  technology
         licenses.

         (3) If BASF does not make an Offer within the [REDACT] day period, LYNX
         shall have an additional  [REDACT] days  thereafter to make an Offer as
         defined above.

         (4) Upon  receipt of an Offer under (2) or (3) (the "First  Offer") the
         Advisory  Board shall have  [REDACT]  days to  unanimously  accept such
         First Offer.  If the First Offer is not accepted  within [REDACT] days,
         the First Offer shall be deemed to have been rejected.

         (5) If the First Offer is rejected  under (4) the Partner  that did not
         make the First  Offer  shall  have  [REDACT]  days from the date of the
         rejection to make or obtain from a third party an Offer superior to the
         rejected offer in some material respect (the "Second" Offer").

         (6) If a Second  Offer is made  within the  [REDACT]  day  period,  the
         Partner who made the First Offer may submit a new Offer within [REDACT]
         days of receipt of the Second Offer (the "Third Offer").

         (7) The Advisory  Board must accept the best Offer  resulting  from the
         above   process,   taking   into   account  all   material   terms  and
         circumstances.

CONFIDENTIAL TREATMENT REQUESTED

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         (8) If and to the extent that milestone payments,  royalties or similar
         payments  become payable to third parties due to the  commercialization
         or exploitation of Marketable Results,  such payments shall be borne by
         the JVC.

6.3      A- and B-GmbH,  or after the merger  contemplated in Article 7, the JVC
         shall upon request of LYNX sell the  exclusive  access to LYNX to JVC's
         databases derived from normal, developing, differentiating and/or aging
         tissues and cells, and improvements in LYNX's  bioinformatics  systems.
         The terms and  conditions  of such sale shall be  determined  by A- and
         BGmbH or, after the merger  contemplated in Aricle 7, the JVC, based on
         the cost of LYNX of  acquiring  comparable  data.  Such  databases  and
         improvements in bioinformatics systems shall not be disclosed by A- and
         B-GmbH or the JVC to any third party other than LYNX.

                                    Article 7

                                     Merger


7.1      After the JVC has provided to A- and B-GmbH  Results which are sold for
         projected  revenues of more than [REDACT] million DM or generate actual
         revenues to A- and B-GmbH sufficient to cover more than [REDACT] of the
         JVC's expenses but not before  December 31, 2001 the Partners  envisage
         to merge Aand  B-GmbH into the JVC in order to  consolidate  the assets
         and activities of the JVC and the Holding Companies.

7.2      The merger described in 7.1 above as well as a possible public offering
         shall require explicit unanimous decisions of the Partners.

7.3      In the  case of a  merger  of the  Holding  Companies  into the JVC the
         Partners  shall procure that their  respective  Holding  Company has no
         obligations or liabilities  other than those  resulting from activities
         fully covered by joint  approval and decisions of A- and BGmbH and each
         Partner shall, in respect of its respective Holding Company,  indemnify
         and hold harmless the other Partner accordingly.

         In the case of such  merger  the  Holding  Companies  shall  each  have
         assets,  as shown by an audited  balance  sheet,  at least equal to the
         respective  nominal  capital  and  the  Partners  undertake  to pay any
         shortfall  in cash to  their  respective  Holding  Company  prior  to a
         merger. In order to avoid an evaluation of the R&D results owned by the
         Holding Companies, the Partners shall, in the case of such merger waive
         or cause their Holding Companies and the JVC to waive the merger report
         pursuant to ss. 8 (3) Umwandlungsgesetz.

CONFIDENTIAL TREATMENT REQUESTED

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                                    Article 8

                                     Secrecy

The  Partners and the Holding  Companies  agree and shall cause the JVC to agree
not to use any  know-how,  technical or  commercial  information  related to the
technologies  made  available by the  Partners for purposes  other than those of
this  Agreement and not to disclose  such  know-how,  technical  and  commercial
information to third parties.  The foregoing secrecy  obligation shall not apply
to know-how, technical and commercial information which was in the public domain
or was in the  recipient's  possession  at the  time  of  disclosure  to it,  is
acquired by it after the disclosure  from third parties  without  restriction on
disclose it or becomes public knowledge without no fault of the recipient or has
to be disclosed according to applicable legal regulations.  The Partners and the
Holding Companies shall impose on its relevant  directors and employees,  as far
as legally possible, a corresponding obligation.

                                    Article 9

                               Conflict Resolution

9.1      In the event that LYNX and BASF 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 each BASF
         and LYNX (the  "Decision-Makers").  The Decision-Makers will attempt in
         good faith to resolve  the matter in dispute  for a period of  [REDACT]
         days.  If no  successful  resolution  of the dispute has been  mutually
         agreed to, the dispute  will be settled  according  to the  arbitration
         procedures of Sections 9.2 and 9.3 of this Agreement.

9.2      Any  controversy  arising which cannot be resolved  pursuant to Section
         9.1 of this Agreement will be submitted to arbitration  pursuant to the
         Arbitration     Rules    of    the     Deutsche     Institution     fur
         Schiedsgerichtsbarkeit  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 thirty (30)
         days  of  the  filing  of  an  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
         Schiedsgerichtsbarkeit. 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.

CONFIDENTIAL TREATMENT REQUESTED

<PAGE>


                                     - 14 -


9.3      The arbitrators  will be instructed to issue detailed  written findings
         of fact and law. The  arbitrators  will be  authorized  to provided 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. Judgement upon the award rendered
         by the  arbitrators  may be  entered in any court  having  jurisdiction
         thereof.

                                   Article 10

                                    Duration

         The JVC shall be established  for an unlimited  period.  This Agreement
         shall  continue  in  force  for  as  long  as the  JVC is in  corporate
         existence  and the Partners  remain as direct or indirect  shareholders
         thereof.

                                   Article 11

                                 Effective Date

         This Agreement shall become  effective by being signed by both Partners
(the "Effective Date").

                                   Article 12

                                  Miscellaneous

12.1     Any  amendment,  modification  or supplement  to this  Agreement or its
         Annexes  shall be void  unless  it is made by  written  documents  duly
         signed by the Partners.

12.2     In the  event  that  any of the  provisions  of this  Agreement  or its
         Annexes are invalid because they are  inconsistent  with the applicable
         laws  this  shall  in no  manner  affect  the  validity  of  the  other
         provisions of this Agreement or its Annexes.  The Partners hereto shall
         be obliged to replace such invalid  provisions by new provisions having
         similar economic effects.

12.3     This Agreement and any rights and  obligations  hereunder  shall not be
         assigned  either whole or in part by either  Partner hereto without the
         prior  written  approval  of  the  other  Partner  which  shall  not be
         unreasonably withheld.

<PAGE>

                                     - 15 -


12.4     This Agreement  shall be governed by, and construed in accordance  with
         the laws of the Federal Republic of Germany.


12.5     Each Partner  shall pay its own legal,  accounting  and other  expenses
         incident  to  the  preparation,   negotiation  and  execution  of  this
         Agreement and the consummation of its obligations hereunder.



Ludwigshafen, October 23, 1996



LYNX Therapeutics Inc.                         BASF Aktiengesellschaft

/s/ Sam Eletr                                  H.J. Quadbeck-Seeger
---------------------------------              ---------------------------------

/s/ David W. Martin, Jr.                       Werner Kusters
---------------------------------              ---------------------------------





<PAGE>
                                                                         Annex 1
                             Articles of Association

                                    Chapter 1

                               General Provisions

Article 1 - Name and Registered Office

1.       The name of the company is ....

2.       The registered office of the company is at Heidelberg,


Article 2 - Objects of the Company

1.       Object of the company is the  research and  development  as well as the
         exploitation of the results in the field of bio-technology.

2.       The company is  authorised  to establish  branches  both in Germany and
         abroad and acquire  undertakings the objectives of which are consistent
         with and  related to those under  para.  1 hereof,  both in Germany and
         abroad or to acquire interests therein.

3.       The company is authorised to all sorts of transactions that support the
         above mentioned field of business.

Article 3 - Share Capital and Shares

1.       The share capital amounts to 100.000 DM (in words: one hundred thousand
         (Deutsche Mark).

2.       The share  capital is divided into 20.000  shares of 5 DM nominal value
         each.

3.       The shares shall be registered shares that can be transferred only with
         the permission of the Supervisory Board of the company.

4.       The company shall be entitled to issue dividend coupons and talons. The
         form and contents of the share certificates and of the dividend coupons
         and  talons  shall be  determined  by the  Executive  Board.  One share
         certificate may embody several shares.


<PAGE>

Article 4 - Duration of Company, Financial Year

1.       The duration of the company is not limited to a definite period.

2.       The financial year is the calendar year.


                                    Chapter 2

                                  Organisation

A        Executive Board

Article 5 - Composition, Rules of Procedure

1.       The Executive  Board shall  consist of at least two members.  The exact
         number will be determined by the Supervisory Board.

2.       The  Supervisory  Board shall lay down the Rules of  Procedure  for the
         Executive Board.

Article 6 - Representation

         The  company is legally  represented  by two  members of the  Executive
         Board jointly.

B        Supervisory Board



<PAGE>


Article 7 - Composition, Elections, Term of Office

1        The  Supervisory  Board shall consist of three members.  Members of the
         Supervisory Board have to be elected by the Shareholders Meeting with a
         2/3 majority. Simultaneously substitute members may be elected with the
         same majority, who take the place of any prematurely retired members in
         the order determined in the election.

2.       The members shall be elected for a period ending with the  Shareholders
         Meeting voting on their  discharge from  responsibility  for the fourth
         financial  year  after  the  beginning  of their  term of  office.  The
         financial  year in which the term of office  begins  shall not be taken
         into account.

3.       Elections  for retired  members not  succeeded by a  substitute  member
         shall be  effective  for the  remainder  of the term of  office  of the
         member retired.

4.       Any member of the Supervisory Board may, upon giving one month's notice
         in writing, resign from office at any time.

Article 8 - Chairmanship

1.       After  being  elected-  by  the  ordinary   Shareholders   Meeting  the
         Supervisory  Board  shall  elect from its  members a  chairman  and one
         deputy  chairman  for the term of its  office in a  meeting  especially
         invited for.

2.       In the event of any of these  offices  becoming  vacant,  a by-election
         shall take place for the  remainder of the term of office of the member
         retired.

3        Declarations  shall be made by the  chairman  or.  if  impeded,  by his
         deputy on behalf of the Supervisory Board.


<PAGE>

4.       The Supervisory Board shall lay down its own Rules of Procedure

Article 9 - Authority

The Supervisory Board shall have the authority as provided by these Articles and
by binding  legal  requirements.  Resolutions  of the  Supervisory  Board  shall
require a majority  of the votes;  the  nomination  of members of the  Executive
Board has to be unanimous.

C        Shareholders Meeting

Article 10 - Place and Notice

1.       Shareholders  Meetings shall take place at the registered office of the
         company.

2.       The Shareholders Meeting shall be called by the Executive Board.

3.       The Shareholders Meeting shall be called with at least one month notice
         prior to the day of the  meeting.  This  shall not  include  the day on
         which the notice is served and the final day for depositing shares.

Article 11 - Chairman of Shareholders Meeting

         One member of the  Supervisory  Board,  as a rule the  chairman  of the
         Supervisory  Board,  shall  be  designated  to chair  the  Shareholders
         Meeting.



<PAGE>


Article 12 - Authority

The Shareholders Meeting shall decide on those matters on which it has exclusive
competence  according to the binding regulations under the Stock Corporation Act
(Aktiengesetz), presently listed in (delta)119 AktG.

Article 13 - Resolutions

1.       The vote connected with each share corresponds to its nominal value.

2.       Resolutions of the Shareholders Meeting shall require a majority of the
         votes  cast,  unless a larger  majority  or  further  requirements  are
         specifically stipulated by law or by these Articles.

                                    Chapter 3

        Financial Statements, Annual Shareholders Meeting, Announcements

Article 14 - Financial Statements and Annual Shareholders Meeting

1.       The Executive  Board shall,  in the first three months of any financial
         year, prepare the financial  statements and Management's Report for the
         preceding   financial   year  and  submit  the  same  to  the  auditor.
         Immediately  after  receiving the auditors  report the Executive  Board
         shall  submit  the  financial  statements,   Management's  Report,  the
         auditors report, and the proposal for the distribution of profit to the
         Supervisory Board.

2.       An Annual  Shareholders  Meeting  shall be held  within the first eight
         months of each financial year.

3.       The Shareholders  Meeting shall decide in particular on the appointment
         of the auditor,  on the discharge from responsibility of the members of
         the Executive  Board and the  Supervisory  Board, on the appointment of
         the  

<PAGE>

         members of the Supervisory  Board, and on the approval of the financial
         statements where required by the law


Article 15 - Distribution of profit

         The  profit  shown  in the  financial  statements  after  depreciation,
         deferred  items  provisions  and reserves  shall be  distributed to the
         shareholders, unless the Shareholders Meeting decide otherwise.

Article 16 - Announcements

         Announcements  by the  Company  shall  be  made in the  German  Federal
         Gazette.

Article 17 - Binding version

         The German version of these Articles is the binding one.


<PAGE>


                                                                       Annex 2.1

              Rules of Procedure of the Executive Board of the JVC
                                    Article 1
                         Members of the Executive Board

Unless  otherwise  agreed by the  Supervisory  Board,  the Executive Board shall
consist of two members:

         - the Chief Executive Officer (CEO)
         - the Chief Scientific Officer (CSO)

                                    Section 2
                                    Authority

(1)      The Executive Board has the authority provided by the Stock Corporation
         Act  (Aktiengesetz).  The  prior  approval  of the  Advisory  Board  is
         required for the following matters:

         a) the appointment of the upper management (i.e.  senior scientists and
            supervisory  personnel)  and the  termination  of contracts with the
            upper management.

         b) granting of "Prokura"

         c) major decisions  concerning the use of the technologies  provided by
            A-GmbH and B-GmbH or the Partners,  major changes of the  scientific
            direction, focus, scope and business development or the commencement
            of significant  operations in new fields of technology including the
            specific  applications  or use of MPSS by  extra-mural  third  party
            collaborators of the JVC;

         d) the annual budget and the two year operating plan;

         e) all contracts  concerning  an amount  exceeding DM 250.000 or a term
            exceeding two years or extending beyond December 31, 2001, whichever
            is shorter;


<PAGE>


                                       - 2

         f) the general terms and  conditions of all  employment-  contracts and
            benefits granted to employees;

         g) all  capital   expenditures  beyond  DM  100.000  unless  explicitly
            approved by the Advisory Board as part of the budget under d) above;

         h) the establishment and dissolution of branches;

         i) the  acquisition  of companies or interests in them and the disposal
            hereof;

         j) the  acquisition,  disposal or  mortgaging  of real  estate,  rights
            similar to real estate, and rights regarding real estate;

         k) the  issuing  of loans and the  taking of  credits  to the extent in
            excess of the amounts  specifically set forth in the budget approved
            by the Advisory Board;

         l) entering into license  and/or  collaboration  contracts or any other
            strategic alliances;

         m) initiating or settling lawsuits.

(2)      The CEO  reports on a regular  basis to the  chairman  of the  Advisory
         Board.



<PAGE>


                                       - 3

                                    Section 3
                              Convocation/Decision

(1)      The Executive Board shall meet whenever business so requires,  at least
         at two weeks intervals.

(2)      Meetings  shall be convened  in the place  determined  by the CEO.  The
         individual  items  on the  agenda  shall  be so  specified  that  it is
         possible to vote by correspondence.

(3)      The  Executive  Board  shall only  constitute  a quorum  if,  after all
         members have been notified of the meeting,  at least two of its members
         participate in the resolution. Resolutions shall be passed unanimously.
         If  unanimity  can't be reached,  the CEO has to inform the chairman of
         the  Advisory  Board.  The  decision  will then be made by the Advisory
         Board.

(4)      The members of the Executive  Board may, if prevented  from attending a
         meeting,  arrange for their written votes to be given at the meeting of
         the Executive Board by other members of the Executive Board.

(5)      The CEO may cause a resolution of the  Executive  Board to be passed by
         obtaining declarations in writing,  provided, that such procedure shall
         not be objected to by any member within a reasonable period of not more
         than one week set by the CEO.

(6)      Announcements  shall  be  made by the CEO on  behalf  of the  Executive
         Board.



<PAGE>


                                       - 4

                                    Section 4
                                     Minutes

Minutes of each meeting have to made and signed by the CEO and the  secretary of
the corresponding  meeting.  A copy of the minutes has to be sent to all members
of the Executive  Board.  The minutes are considered to be approved if no member
of the meeting  within a reasonable of not more than two weeks after the receipt
of the minutes objects by written notice.

                                    Section 5
                                   Amendments

Amendments  of these  Rules of  Procedure  shall  require  a  resolution  of the
Supervisory Board.



<PAGE>


                                                                       Annex 2.2

             Rules of Procedure of the Supervisory Board of the JVC

                                    Article 1
                        Members of the Supervisory Board

(1)      The Supervisory Board shall consist of three members to be appointed by
         the Shareholders Meeting with a 3/4 majority. Simultaneously substitute
         members may be elected with the same majority who take the place of any
         prematurely retired member in the order fixed in the election.

(2)      The members shall be elected for a period ending with the  Shareholders
         Meeting voting on their discharge from  responsibility  (,,Entlastung")
         for the financial year in which they were elected.

(3)      After  being   elected  by  the  ordinary   Shareholders   Meeting  the
         Supervisory  Board  shall  for the  term  of its  office  in a  meeting
         especially  invited for elect a chairman and one deputy  chairman being
         elected members of the Supervisory  Board. In the event of any of these
         offices  becoming  vacant,  a  by-election  shall  take  place  for the
         remainder of the term of office of the member retired.

                                    Article 2

                                    Authority

The authority of the Supervisory Board shall be according to binding regulations
of the Stock  Corporation Act  (Aktiengesek) and to the Articles of Association,
as for example


<PAGE>


Page 2

 -       the nomination and termination of members of the Executive Board;

 -       the  control of the  management  of the  company;  and  deciding on the
         permission  to transfer the shares of the company as  stipulated in the
         Articles of Association.

                                    Article 3

                  Notices, conduct of business, quorum, voting

(1)      The  Supervisory  Board shall meet  whenever  business so requires,  at
         least at six-months intervals.

(2)      Meetings  shall be convened in the place of such meeting  determined by
         the  chairpersons.  All  meetings  shall  be  convened  by at  least  a
         fortnights' notice in writing. The individual items on the agenda shall
         be so  specified  that it is  possible  to vote by  correspondence.  In
         urgent cases, the length of notice may be shortened.

(3)      The  Supervisory  Board shall only  constitute  a quorum if,  after all
         members have been notified of the meeting,  at least two of its members
         participate  in the  resolution.  Unless  the law  provides  otherwise,
         resolutions shall be passed by a majority of votes cast. The nomination
         of members of the Executive  Board by the  Supervisory  Board has to be
         unanimous.

(4)      The members of the Supervisory Board may, if prevented from attending a
         meeting,  arrange for their  written votes to be cast at a meeting of a
         Supervisory Board by other members of the Supervisory Board.



<PAGE>


Page 3

 (5)     he chairman  or, if  impeded,  his deputy may cause  resolution  of the
         Supervisory  Board to be passed by  obtaining  declarations  in writing
         provided  that such  procedure  shall not be  objected to by any member
         within  at  reasonable  period  of not  more  than  one week set by the
         chairman or, if impeded, by his deputy.

(6)      Announcements  shall be made by the  chairman  or, if  impeded,  by his
         deputy on behalf of the Supervisory Board.

                                    Article 4

                                     Minutes

Minutes  of each  meeting  have to be made and  signed by the  chairman  and the
secretary of the corresponding meeting. A copy of the minutes have to be sent to
all members of the Supervisory  Board. The minutes are considered to be approved
if no member of the meeting within a reasonable  time of not more than two weeks
after the receipt of the minutes object by written notice.


<PAGE>


                                                                       Annex 2.3

               Rules of Procedure of the Advisory Board of the JVC

                                    Section 1

                          Members of the Advisory Board

The Advisory  Board shall  consist of four  members.  A-GmbH and BGmbH (or their
successors)  may  appoint  two  members  each  (which  they may replace at their
discretion).

                                    Section 2

                         Authority of the Advisory Board

(1)      The  Advisory  Board  shall  decide on its  approval  required  for the
         following actions of the Executive Board:

         a) the appointment of the upper management (i.e.  senior scientists and
            supervisory  personnel)  and the  termination  of contracts with the
            upper management

         b) granting of "Prokura"

         c) major  decisions  concerning the use of the  technology  provided by
            A-GmbH and B-GmbH or the Partners,  major changes of the  scientific
            direction, focus, scope and business development or the commencement
            of significant operations in new fields of technology;

         d) the annual budget and the two year operating plan;


<PAGE>


- 2

         e) all contracts  concerning  an amount  exceeding DM 250.000 or a term
            exceeding two years or extending beyond December 31, 2001, whichever
            is shorter;

         f) the general  terms and  conditions of all  employment-contracts  and
            benefits granted to employees.

         g) all  capital   expenditures  beyond  DM  100.000  unless  explicitly
            approved by the Advisory Board as part of the budget under d) above;

         h) the establishment and dissolution of branches;

         i) the  acquisition  of companies or interests in them and the disposal
            hereof;

         j) the  acquisition,  disposal or  mortgaging  of real  estate,  rights
            similar to real estate, and rights regarding real estate;

         k) the  issuing  of loans and the  taking of  credits  to the extent in
            excess of the amounts  specifically set forth in the budget approved
            by the Advisory Board;

         l) entering into license  and/or  collaboration  contracts or any other
            strategic alliances;

         m) initiating or settling lawsuits.

(2)      The Advisory Board shall  recommend the members of the Executive  Board
         to be appointed by the Supervisory Board.


<PAGE>


- 3

(3)      The Advisory  Boards  appoints the members of the  Scientific  Advisory
         Board.

(4)      The  Advisory  Board  reviews  the  annual  performance  of  the  upper
         management.

(5)      The Advisory  Board decides on the use of technology  made available to
         the  JVC by the  Holding  Companies  and/or  the  Partners,  change  of
         scientific direction, focus and scope and business development.

(6)      The Advisory Board decides in all matters where the Executive  Board is
         unable to reach unanimity.

(7)      Decisions on the matters  described in (1) (a),  (c), (i), (l) and (m),
         (2), (3) and (5) require unanimity.

                                    Section 3
                                  Chairmanship

(1)      The Advisory  Board has a  chairperson  and a deputy  chairperson.  The
         office  of the  chairperson  as  well  as  the  office  of  the  deputy
         chairperson shall rotate annually.

(2)      The chairman of the Advisory  Board shall keep the other members of the
         Advisory  Board  informed on the reports  received  from the  Executive
         Board.

                                    Section 4
                  Notices, Conduct of Business, Quorum, Voting

(1)      The Advisory Board shall as a rule meet at  three-months  intervals.  A
         meeting of the  Advisory  Board shall  furthermore  be called  whenever
         requested by any shareholder holding more than 25 % of the shares.



<PAGE>


- 4 -

(2)      Meetings of the Advisory  Board shall be convened and the place of such
         meetings  determined  by the  chairman  or, if  impeded,  by the deputy
         chairman.  All  meetings  shall be convened  by at least a  fortnight's
         notice in  writing.  The  individual  items on the  agenda  shall be so
         specified  that it is  possible  to vote by  correspondence.  In urgent
         cases, the length of notice may be shortened.

(3)      The voting  rights of the  Advisory  Board's  members  shall follow the
         voting rights the  shareholder  they represent has in the  Shareholders
         Meeting.

(4)      The Advisory Board shall only constitute a quorum if, after all members
         have been  notified of the  meeting,  at least one  appointee of A- and
         B-GmbH (or their  successors)  participates in the  resolution.  Unless
         these Rules of Procedure provide otherwise, resolutions shall be passed
         by a majority vote.

(5)      The chairman or, if impeded,  his deputy may cause a resolution  of the
         Advisory Board to be passed by obtaining votes in writing provided that
         such  procedure  shall  not be  objected  to by  any  member  within  a
         reasonable  period of not more than one week set by the  chairman or if
         impeded, by his deputy.

(6)      Declarations  shall be made by the  chairman  or,  if  impeded,  by his
         deputy on behalf of the Advisory Board.

(7)      Minutes of each  meeting have to be made and signed by the chairman and
         the secretary of the corresponding  meeting.  A copy of the minutes has
         to be sent to all  members  of the  Advisory  Board.  The  minutes  are
         considered  to be  approved  if no  member  of  the  meeting  within  a
         reasonable  period of not more than one month  after the receipt of the
         minutes objects in writing.

                                    Section 5
                                   Amendments
Amendments of these Rules of Procedure  shall require a unanimous  resolution of
the Advisory Board.