Document:

<PAGE>   1
                                                                   EXHIBIT 10.18

                                            ***TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                            UNDER 17 C.F.R. SS.SS. 200.80(B)(4),
                                                           200.83 AND 240.24B-2*

                             JOINT VENTURE AGREEMENT

between

LYNX Therapeutics Inc., 25861 Industrial Boulevard, Hayward, California, 94545,
USA (hereinafter referred to as "LYNX")

and

BASF Aktiengesellschaft, 67056 Ludwigshafen, Deutschland
(hereinafter referred to as "BASF")

                                    PREAMBLE

WHEREAS, BASF and LYNX have concluded the "Joint Venture Agreement" of October
23, 1996, as amended by the "First Amendment to Joint Venture Agreement" of
October 23, 1998, according to which a joint venture company ("JVC") was
established in Heidelberg, Germany under the name "BASF LYNX Bioscience AG" by
BASF Biotechnology Holding GmbH, a company wholly owned by BASF ("BASF
Holding"), and LYNX Therapeutics GmbH, a company wholly owned by LYNX ("Lynx
Holding").

BASF Holding holds 51 percent of the JVC's voting stock and Lynx Holding holds
49 percent of the JVC's voting stock and each of them holds certain preferred
shares in the JVC which are destined to be offered to the JVC's employees,
members of its Executive Board and Scientific Advisory Board and certain other
collaborators.

The JVC conducts certain research and development services for BASF Holding and
Lynx Holding on the basis of the "Technology License and Development Agreement"
of January 1, 1997 between the JVC on the one hand and BASF Holding and Lynx
Holding on the other hand, as amended by the "First Amendment to Technology
License and Development Agreement" and the results of such research and
development conducted by the JVC under that agreement are owned jointly by BASF
Holding and Lynx Holding (the "Old License Agreement"). The exploitation of
these results is governed by the "Joint Venture Operating Agreement" between
BASF Holding and Lynx Holding of January 1, 1997.

In Article 7 of the Joint Venture Agreement the parties envisaged to merge BASF
Holding and

<PAGE>   2

Lynx Holding into the JVC after [...***...], inter alia with regard to a
possible initial public offering ("IPO") of the JVC's shares.

WHEREAS, the parties now intend to make an IPO for the JVC's shares as early as
reasonably possible [...***...], the exact timing taking into account the JVC's
performance as well as the prevailing stock market conditions for comparable
companies.

NOW, THEREFORE, in order to prepare the JVC for and to initiate and complete
such an IPO, BASF and LYNX agree as follows:

1.   CHANGE OF THE CORPORATE NAME OF THE JVC

The JVC's corporate name shall be changed from "BASF LYNX Bioscience AG" to a
name to be proposed by the JVC's CEO and agreed upon by the parties. BASF shall
procure that BASF Holding, and LYNX shall procure that Lynx Holding shall vote
for the respective proposal and change of the Articles of Association of the JVC
at the next general meeting of JVC's shareholders.

2.   GOVERNANCE OF THE JVC

The Advisory Board of the JVC shall be dissolved with effect as of the end of
the next general meeting of the JVC's shareholders.

The Supervisory Board of the JVC shall consist of six members, with effect as of
the end of the next general meeting of the JVC's shareholders. BASF shall
procure that BASF Holding, and LYNX shall procure that Lynx Holding shall vote
for the respective proposal and change of the Articles of Association of the JVC
at the next general meeting of the JVC's shareholders.

Each party may propose three members of the Supervisory Board of the JVC, it
being understood that the parties shall be in agreement on the nomination of all
members prior to their election. BASF shall procure that BASF Holding, and LYNX
shall procure that Lynx Holding shall vote for the election of the agreed
members at the next general meeting of JVC's shareholders.

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                      -2-
<PAGE>   3

3.   LICENSES

LYNX shall on the date of execution of this Agreement enter into the Technology
License Agreement attached as Annex 1 hereto with the JVC.

4.   JVC SHARES HELD BY EMPLOYEES

The parties agree that the aggregate [...***...] percent of the JVC's share
capital destined for the JVC's employees, members of its Executive Board and
Scientific Advisory Board and certain other collaborators should be fully
distributed to these qualified groups by [...***...] and the parties shall
procure that the JVC shall make the required offers as soon as reasonably
possible.

5.   INCREASES OF THE SHARE CAPITAL OF THE JVC

     5.1 The share capital of the JVC shall be increased by [...***...] to
[...***...], the shares shall be converted into ordinary bearer shares with a
nominal value of [...***...] each. BASF shall procure that BASF Holding, and
LYNX shall procure that Lynx Holding shall vote for the respective proposal and
change of the Articles of Association of the JVC at the next general meeting of
JVC's shareholders.

     5.2 BASF shall procure that BASF Holding, and LYNX shall procure that Lynx
Holding shall subscribe for shares according to their current shareholding in
the JVC.

     5.3 BASF shall procure that BASF Holding pays [...***...] and LYNX shall
procure that Lynx Holding pays [...***...] to the JVC into the capital reserve
(Kapitalrucklage) on or prior to [...***...]. Upon the subscription by BASF
Holding and Lynx Holding to their shares in the increased capital pursuant to
Section 5.1.1 above, such capital reserve shall be converted into equity
(Grundkapital) in the nominal amounts subscribed by BASF Holding and Lynx
Holding respectively and the remainder shall remain booked as capital reserve
(Kapitalrucklage) and is to be used by the JVC for the purpose of providing the
funds to the holders of the Employee Shares to subscribe to the increased
capital attributable to the Employee Shares.

     5.4 The holders of the Employee Shares shall receive the funds to subscribe
to the increased capital as [...***...] loans from the JVC the repayment of
which shall be waived

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                      -3-
<PAGE>   4

by the JVC in fractions of [...***...] % ([...***...]) per full year of
employment or function with JVC.

     5.5 The parties shall endeavor to have one or more investor(s) subscribe a
further capital increase at a price to be agreed upon between the parties and
such investors(s), resulting in a participation of such investor(s) in the order
of magnitude of [...***...] percent of the JVC's issued share capital.

6.   MERGER

BASF shall procure that BASF Holding, and LYNX shall procure that Lynx Holding
(after spinning off all other activities except its holding of the JVC shares)
conclude a merger contract with the JVC in a form to be approved by the parties
essentially containing the following provisions:

     a)   BASF Holding and Lynx Holding shall be dissolved without liquidation
          and transfer their entire assets and liabilities to the JVC (Section
          2, no. 1 UmwG) with effect as of [...***...].

     b)   In return, BASF shall receive the shares in the JVC formerly held by
          BASF Holding and LYNX shall receive the shares in the JVC formerly
          held by Lynx Holding.

The parties undertake to approve such contract at the general shareholders'
meeting of BASF Holding and Lynx Holding respectively.

BASF shall procure that BASF Holding, and LYNX shall procure that Lynx Holding
approve such merger contract at the next general shareholder's meeting of the
JVC.

The parties hereby waive the merger report pursuant to Section 8 (3) UmwG and
shall procure that BASF Holding and Lynx Holding respectively will do so as
well.

The parties hereby waive the merger audit pursuant to Sections 8 (3), 9 (3) UmwG
and shall procure that BASF Holding and Lynx Holding respectively will do so as
well.

BASF shall procure that BASF Holding, and LYNX shall procure that Lynx Holding,
have no assets other than shares in the JVC, cash, receivables or rights from
the Old License Agreement and the "Joint Venture Operating Agreement" between
BASF Holding and Lynx Holding of January 1, 1997 and no liabilities other than
owner's equity.

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                      -4-
<PAGE>   5

7.   IPO

The parties agree that they will initiate and agree to a further increase of the
JVC's capital to be agreed upon (estimated to be in the order of magnitude of
[...***...]) in case of an IPO.

The parties agree that the JVC will take the necessary steps for the preparation
of the IPO and make proposals to BASF and LYNX about the

o    business plan of the JV

o    selection of the investment banks as Lead Manager (Bookrunner) of the IPO,

o    syndicate structure (Co-Manager) of the IPO,

o    size of offering (number of shares, Greenshoe) and the pricing
     (bookbuilding range),

o    listing place (stock exchange),

o    timetable for the IPO including Investor Relations activities (Road Shows
     etc.).

The parties agree that the IPO will be composed of newly issued shares but in
case of the execution of the "greenshoe option" the parties may provide shares
from their portfolios for this purpose only. The parties will assist and give
advice to the JVC in the preparation of the IPO.

8.   ENTIRE AGREEMENT

The "Joint Venture Agreement" of October 23, 1996, as amended by the "First
Amendment to Joint Venture Agreement" of October 23, 1998 and the "Joint Venture
Operating Agreement" between BASF Holding and Lynx Holding of January 1, 1997
shall be terminated upon this Agreement coming into effect.

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 thirty (30) days. If no successful
resolution of the dispute has been mutually agreed to,

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                      -5-
<PAGE>   6

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
10.1 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.

     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.

10. EFFECTIVE DATE

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

11. MISCELLANEOUS

     11.1 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
parties.

     11.2 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 parties hereto shall be obliged to replace such invalid
provisions by new provisions having similar economic effects.

                                      -6-
<PAGE>   7

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

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

     11.5 Each party 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.

<TABLE>
<CAPTION>
Ludwigshafen, dated as of this June 29, 2001    Hayward, dated as of this June 28, 2001

BASF AKTIENGESELLSCHAFT                         LYNX THERAPEUTICS INC.

<S>                                             <C>
By: /s/ Joachim Scholz                          By: /s/ Edward C. Albini
    ----------------------------------------        -----------------------------------
Name: Joachim Scholz                            Name: Edward C. Albini
      --------------------------------------          ---------------------------------
Title: Director, Legal                          Title: Chief Financial Officer
      --------------------------------------           --------------------------------
</TABLE>

                                      -7-<PAGE>   1
                                                                   EXHIBIT 10.19

                                            ***TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                            UNDER 17 C.F.R. SS.SS. 200.80(B)(4),
                                                           200.83 AND 240.24B-2*

                          TECHNOLOGY LICENSE AGREEMENT

     THIS TECHNOLOGY LICENSE AGREEMENT (the "Agreement"), is entered into as of
June 1, 2001 (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"), and LYNX THERAPEUTICS,
INC., a Delaware corporation, with its principal place of business at Hayward,
California ("Lynx").

                                    RECITALS

     WHEREAS, Lynx and BASF AG have formed, through wholly-owned subsidiaries,
the Joint Venture to conduct a research program in the areas of neurological
diseases, toxico-pharmacology, and the development of production strains of
microorganisms for fermentations;

     WHEREAS, the Joint Venture has been conducting its research program using
Lynx Licensed Technology under the Technology License and Development Agreement
dated January 1, 1997, as amended by the First Amendment to Technology License
and Development Agreement of October 23, 1998, between BASF Biotechnologies
Beteiligungs-und Verwertungsgesellschaft mbH and Lynx Therapeutics GmbH (the
"Old License Agreement"); and

     WHEREAS, the parties desire to terminate the Old License Agreement and
enter into this Agreement upon the Effective Date in accordance with the terms
and conditions hereinafter stated.

     NOW, THEREFORE, Lynx and the Joint Venture hereby agree as follows:

1.   DEFINITIONS

     1.1 "BEADS" shall mean the combitag beads that have covalently attached to
their surface oligonucleotide polymers of at least [...***...] bases, which
beads are useful in the conduct of MPSS and Megasort analyses.

     1.2 "NEUROSCIENCE FIELD" shall mean the diagnosis, treatment or prevention
of neurological diseases associated with the loss or structural alterations of
neurons or glial cells, including epilepsy, Alzheimer`s Disease, Parkinson`s
Disease, stroke, head trauma, multiple sclerosis, dystonia and Lou Gehrig`s
Disease and other motorneuron diseases.

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

     1.4 "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

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       1.
<PAGE>   2

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.

     1.5 "LYNX LICENSED TECHNOLOGY" shall mean Lynx's proprietary technologies
for conducting MPSS and Megasort analyses, as existing on the Effective Date and
as improved by Lynx during the term of this Agreement, including but not limited
to the Lynx Patents and the Lynx Know-How and the Lynx Bioinformatics.

     1.6 "LYNX BIOINFORMATICS" shall mean the software and other proprietary
means owned or controlled by Lynx during the term of the Agreement that is
useful for analyzing data obtained through the application of Lynx Licensed
Technology.

     1.7 "MASSIVELY PARALLEL SIGNATURE SEQUENCING" or "MPSS" shall mean the
technology owned and/or controlled by Lynx for simultaneously generating
signature sequences of cDNAs in a Megaclone(TM) Library disposed in a flow cell
using the ligation-based sequencing method described in Brenner et al. Nature
Biotechnology, 18: 630-634 (2000).

     1.8 "LYNX KNOW-HOW" shall mean the information, data, knowledge, methods,
procedures, processes, and techniques owned or controlled by Lynx (a) that
comprise the method of performing Megasort analyses, (b) that comprise the MPSS
method or that are directly related to using the MPSS Instruments in conducting
MPSS analyses, or (c) that comprise the Lynx Bioinformatics. The term "Lynx
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 perform MPSS or Megasort analyses using Reagents
supplied by Lynx.

     1.9 "MEGASORT" shall mean Lynx's methodology for detecting and isolating
cDNA molecules that are differentially expressed in two samples using
fluorescence activated cell sorting.

     1.10 "MPSS INSTRUMENT" shall mean the equipment, designed and developed by
Lynx, 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 during the term of the Agreement.

     1.11 "LYNX 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 and that claim MPSS Instruments, Reagents and/or
Lynx Bioinformatics, or the use thereof, or the methods of MPSS or Megasort, 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 reexaminations, reissues or extensions of such patents.

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

     1.13 "RESEARCH PROGRAM" shall mean the research and drug discovery program
to be conducted by the Joint Venture directed to the areas of: (a) discovering
novel drug targets and

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       2.

<PAGE>   3

identifying drugs useful in diseases or disorders of the nervous system that are
associated with the loss or structural alterations of neurons or glial cells,
including Alzheimer`s Disease, Parkinson`s Disease, epilepsy, stroke, head
trauma, multiple sclerosis, dystonia and Lou Gehrig`s Disease and other
motorneuron diseases; (b) evaluating the use of "dynamic imaging" approach to
predicting the toxico-pharmacology of chemical substances; (c) generating gene
expression databases from tissues and cells of interest in the Neuroscience
Field; and (d) developing production strains of microorganisms for
fermentations.

2. LICENSES AND RIGHTS

     2.1 LYNX LICENSE GRANT. Lynx hereby grants to the Joint Venture, during the
term of this Agreement, a non-exclusive, royalty-free license, without the right
to assign or to grant sublicenses, under the Lynx Licensed Technology solely in
order to conduct the Research Program, including but not limited to the right to
use the MPSS Instruments provided by Lynx hereunder and to practice the method
of MPSS using said instruments and the Reagents.

     2.2 LIMITED [...***...] LICENSE. In consideration of the license fee set
forth in Section 3, the license under Lynx Licensed Technology set forth in
Section 2.1, insofar as it grants rights under Lynx Licensed Technology to use
the MPSS Instruments currently in its possession and the [...***...]
next-generation MPSS Instruments to be supplied to the Joint Venture pursuant to
Section 4.1 below to perform MPSS analyses in the Research Program, shall be
[...***...].

     2.3 RESTRICTIONS ON USE OF LYNX LICENSED TECHNOLOGY. The Joint Venture
covenants that the Joint Venture shall not utilize the Lynx Licensed Technology,
the MPSS Instruments, any Reagents and any other instrumentation provided to the
Joint Venture by Lynx, except as specifically required to conduct the Research
Program. In particular, but without limiting the foregoing, the Joint Venture
agrees that it shall not use the MPSS Instruments or any such other Lynx
instrumentation, or use or practice the Lynx Licensed Technology, to provide
analysis services for any third party, including BASF AG and/or any of its
affiliates. For purposes of clarity, it is understood and agreed that (a) the
Joint Venture may pursue the Research Program in collaboration with other
commercial companies, and in connection therewith to analyze samples provided by
the collaborator, pursuant to agreements under which the MPSS or Megasort
analysis of collaborator samples is incidental to, and constitutes a minor part
of the Joint Venture's work in connection with, a broader research and drug
discovery program to be conducted by the Joint Venture in the collaboration and
under which the Joint Venture retains a significant economic interest in any
subsequent commercial exploitation of the results of the collaboration and (b)
the Joint Venture, in connection with efforts to secure such an agreement, may
perform MPSS or Megasort analyses on samples provided by a potential
collaborator in order to demonstrate the capability of the Lynx Technology,
provided that no more than [...***...] such analyses are performed for any
potential collaborator and, absent execution of a formal collaboration agreement
consistent with (a) above, the potential collaborator will have no right to use
the results of such analyses for any purposes. The Joint Venture shall not, and
shall not engage, permit or encourage any third party to, copy, reverse engineer
or modify the MPSS Instruments or any Reagents or other Lynx instrumentation or
decompile, translate or otherwise attempt to obtain the source code for any
software included therein or in the Lynx Bioinformatics. Notwithstanding the
foregoing, decompiling such software is permitted to the extent the laws of the
Joint Venture's jurisdiction give the Joint Venture the right to do so to obtain
information necessary to render the software interoperable with other software;

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       3.

<PAGE>   4

provided, however, that the Joint Venture must first request such information
from Lynx and Lynx may, in its discretion, either provide such information to
the Joint Venture or impose reasonable conditions, including a reasonable fee,
on such use of the source code for the software to ensure that Lynx's
proprietary rights in the source code for the software are protected. Lynx shall
have the right from time to time to have an independent expert, who shall be
reasonably acceptable to the Joint Venture, visit and inspect the facilities of
the Joint Venture and copies of any Joint Venture agreements with collaborators
and potential collaborators for the purpose of verifying the Joint Venture's
compliance with the limitations on the Joint Venture's license rights under this
Agreement. A copy of the expert's report shall be sent to the Joint Venture. If
the expert finds that the Joint Venture is in compliance, such expert's report
shall be limited to confirming the Joint Venture's compliance.

     2.4 LYNX COVENANT; RIGHTS RETAINED. Lynx hereby covenants and agrees that
it will not prior to [...***...] years after shipment of the last of the
[...***...] next generation MPSS Instruments to the Joint Venture pursuant to
Section 4.1 below establish an internal biology capability or enter into a
collaboration with another company that is competitive with the capabilities of
the Joint Venture to conduct research directed to the discovery or development
of treatments for [...***...] or provide MPSS Instruments to any third party for
use in establishing an internal capacity to perform MPSS analyses in support of
such third party's research directed to the discovery or development of
treatments for [...***...]. Except as expressly provided by the foregoing, Lynx
shall retain all rights to use the Lynx Licensed Technology and the Lynx
Bioinformatics, and to use and practice MPSS and Megasort for all research or
commercial purposes.

     2.5 MEGATYPE. The parties acknowledge that Lynx is developing an
application of its Bead-based analytical technologies, currently referred to as
Megatype, which is expected to provide single nucleotide polymorphism disease or
trait association information. If during the term of this Agreement Lynx
successfully reduces this technology to practice and deploys it for commercial
use, Lynx (a) agrees to review with the Joint Venture the capabilities of this
technology and its potential uses in the Neuroscience Field and (b) if requested
by the Joint Venture, to discuss in good faith the terms and conditions under
which this technology may be made available for use in selected projects in the
Neuroscience Field to be identified by agreement of the parties.

3. LICENSE FEE

     3.1 In consideration of the [...***...] license rights provided by Lynx
under Section 2.2, the Joint Venture hereby agrees to pay Lynx a non-refundable
license fee in the amount of [...***...]. Such payment shall be made by bank
wire transfer in immediately available funds in U.S. Dollars to an account
designated by Lynx on or before [...***...].

4.   INSTRUMENTS, REAGENTS AND SERVICES

     4.1 LYNX LOAN OF MPSS INSTRUMENTS. The parties acknowledge that Lynx
Germany has provided the Joint Venture with [...***...] MPSS Instruments for use
as permitted in Section 2.1. Lynx is currently developing a next-generation MPSS
Instrument and will provide [...***...] such instruments to the Joint Venture
for use under Section 2.1 once the pertinent developments have been reduced to
practice and successfully implemented at Lynx. The Joint Venture shall reimburse
Lynx for Lynx's costs to ship and install instruments in the Joint Venture's
facility. During the term of this

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       4.

<PAGE>   5

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 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 on such terms and conditions as are
applicable at the time to the supply of equivalent instruments to others. Unless
otherwise agreed Lynx USA shall retain the entire right, title and interest in
and to all MPSS Instruments provided by Lynx 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.

     4.2 LYNX REAGENTS SUPPLY. During the term of the Agreement, Lynx 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 provided once each calendar quarter by the
Joint Venture in writing, with delivery times and methods of delivery to be
agreed by the parties. Each quarterly order shall be only for the quantities of
Reagents necessary to conduct the estimated number of MPSS runs and/or Megasort
analyses during the upcoming calendar quarter, after taking into account all
remaining quantities of Reagents held by the Joint Venture from prior orders of
Reagents. Each quarterly order shall include information on the number of MPSS
runs and/or Megasort analyses conducted in each prior quarter and estimated to
be conducted in future quarters. Additionally, each order should include
information on the quantities of Reagents actually consumed in each prior
quarter and the estimated quantities of Reagents to be held as inventory by the
Joint Venture as of the beginning of the upcoming quarter. Lynx agrees to supply
Reagents free of charge for up to [...***...] MPSS runs to be conducted by the
Joint Venture during the period from [...***...]. Any additional Reagents
required by the Joint Venture for use during such period shall be purchased from
Lynx at [...***...]. Any Reagents to be used by the Joint Venture after
[...***...] (including any inventory of free Reagents held by the Joint Venture
on [...***...]) shall be purchased from Lynx at the prices and on the terms and
conditions applicable to purchases of Reagents by other customers of Lynx at the
time.

     4.3 LYNX TECHNICAL SUPPORT. Lynx shall provide during the term of this
Agreement technical assistance as reasonably requested by the Joint Venture to
assist the Joint Venture in its utilization in 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.

     4.4 MAINTENANCE OF MPSS INSTRUMENTS. The Joint Venture shall be responsible
for the day-to-day maintenance and upkeep of all MPSS Instruments provided
hereunder. Lynx 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.

     4.5 MAINTENANCE AND SUPPORT FEE CHARGES. In consideration of Lynx's support
and maintenance services under Sections 4.3 and 4.4, the Joint Venture shall pay
to Lynx [...***...] spent by each Lynx employee in connection with performing
such services and in addition will reimburse Lynx for its out-of-pocket travel
and other costs incurred in providing support and maintenance.
______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       5.

<PAGE>   6

     4.6 PAYMENT TERMS; LATE PAYMENT. All payments shall be net payments without
deduction of any bank or transfer charges or similar payments with the exception
of the withholding taxes payable in Germany under the law in force at the time
of the payment, if applicable. The Joint Venture shall be entitled to withhold
these taxes in the name and for the account of Lynx and shall immediately render
to Lynx the tax receipt(s) setting forth the amount thus paid. If upon
application of the beneficiary any withholding tax can be reduced, the Joint
Venture will file on behalf of Lynx for such reduction. Lynx will provide the
Joint Venture with a proxy. Except as otherwise specified herein, payments to be
made to Lynx under this Agreement shall be due net [...***...] days after Lynx's
invoice and shall be made in US Dollars by wire transfer to an account specified
by Lynx. Each payment will reference the applicable Lynx invoice or otherwise
describe in reasonable detail the obligation to which such payment relates. Any
payment not paid on or before the payment due date shall bear interest, to the
extent permitted by applicable law, at [...***...] rate of interest as reported,
from time to time, by Bank of America NT&SA in San Francisco, California, until
paid in full.

5. JOINT VENTURE INVENTIONS

     5.1 ASSIGNMENT OF JOINT VENTURE INVENTIONS. The Joint Venture hereby
assigns and conveys to Lynx all right, title and interest in and to all Joint
Venture Inventions relating to Lynx Licensed Technology, MPSS, Megasort or
Reagents or uses thereof subject only to the Joint Venture's right to continue
to use and practice such Joint Venture Inventions, solely as needed to further
conduct the Research Program during the term of this Agreement. The Joint
Venture agrees to execute all documents and instruments and take all other
reasonable actions, at Lynx's expense, as are necessary to assign and transfer
to Lynx, and to perfect title in Lynx, all such inventions.

     5.2 DISCLOSURE OF INVENTIONS. As soon as practicable under the
circumstances, the Joint Venture shall describe to Lynx any Joint Venture
Inventions made during the term of the Agreement that are to be assigned to Lynx
under Section 5.1. For any such Joint Venture Inventions that the Joint Venture
or Lynx believes may be patentable (a "Patentable Invention"), the Joint Venture
shall also provide a complete written disclosure for each and every such
Patentable Invention. The Joint Venture also shall, at Lynx's request, provide
Lynx 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 such Joint Venture Inventions.

     5.3 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 any such Joint Venture Inventions, except for any statutory
rights of its employees.

6. CONFIDENTIALITY

     6.1 CONFIDENTIALITY. The Joint Venture shall use its best efforts to keep
the Lynx Licensed Technology and all information relating thereto, including all
Joint Venture Inventions that are assignable to Lynx pursuant to Section 5.1
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 and/or such 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

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       6.

<PAGE>   7

disclosure or distribution of confidential information by the Joint Venture or
its employees may be executed only by the Executive Board.

     6.2 NON-DISCLOSURE AGREEMENTS. All employees of the Joint Venture shall be
required to enter into non-disclosure agreements governing the use of
confidential information.

     6.3 SURVIVAL. Except as otherwise provided in Article 9, the provisions of
this Article 6 shall survive any termination of this Agreement for a period of
[...***...] years after such termination.

7. WARRANTIES AND REPRESENTATIONS

     7.1 LYNX REPRESENTATION. Lynx 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.

     7.2 IP REPRESENTATION. Lynx represents and warrants to the best of its
knowledge that the use by the Joint Venture of the Lynx Licensed Technology as
provided for hereunder will not infringe the intellectual property rights of
third parties.

     7.3 OTHER THAN THE REPRESENTATIONS IN SECTIONS 7.1 AND 7.2, LYNX MAKES NO
OTHER, AND HEREBY DISCLAIM ALL, REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS
OR IMPLIED, REGARDING THE LYNX 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 INDEMNIFICATION. The Joint Venture shall defend, indemnify and hold
harmless Lynx 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, Megasort or the Lynx Licensed Technology except for
negligence or willful misconduct by Lynx; 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 Licensed Technology.

9. TERM AND TERMINATION; RENEWAL

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       7.

<PAGE>   8

     9.1 TERM. This Agreement shall enter in force from and after the Effective
Date hereof and expires on December 31, 2007, unless sooner terminated in
accordance with the provisions of Section 9.2 below.

     9.2 TERMINATION FOR BREACH. Any party may terminate the Agreement upon
[...***...] days written notice in the event the other party breaches a material
term of the Agreement and fails to cure such breach within such [...***...] -day
period after receiving such notice.

     9.3 RETURN OF LYNX TECHNOLOGY. Upon expiration or termination of this
Agreement, absent a renewal pursuant to Section 9.4, the Joint Venture shall
return to Lynx all Lynx Licensed Technology, including any MPSS Instruments and
Reagents, in its possession at the time.

     9.4 RENEWAL. In the event the Joint Venture desires to continue to have
access to the Lynx Licensed Technologies after December 31, 2007, Lynx agrees to
provide such access on a nonexclusive basis at prices and on terms and
conditions equivalent to those being extended by Lynx to comparable customers at
the time.

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
directly, indirectly, by operation of law or otherwise by such party without the
express written consent of the other party, provided that such consent shall not
be unreasonably withheld to any such assignment or transfer that is in
connection with a merger or other acquisition of such party or all of its
relevant business assets. It is expressly understood that Lynx may in its
discretion withhold its consent to any such assignment or transfer by the Joint
Venture to any entity that competes with Lynx.

     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 a recognized
over-night delivery service 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 Lynx:                Lynx Therapeutics, Inc.
                                    25861 Industrial Boulevard
                                    Hayward, CA 94545
                                    USA
                                    Attn: President
                                    Fax:  (510) 670-9302

In the case of the Joint Venture:   BASF-LYNX Bioscience AG
                                    Im Neuenheimer Feld 515
                                    69120 Heidelberg, Germany

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       8.

<PAGE>   9

     10.4 GOVERNING LAW. This Agreement shall be construed in accordance with,
and its performance shall be governed by, the laws of the State of California.

     10.5 DISPUTE RESOLUTION. If a dispute or controversy regarding any right or
obligation under this Agreement arises between the Parties, the Parties will
seek to resolve such dispute or controversy by good faith negotiation between
senior management representatives of the Parties, to be commenced promptly after
such dispute or controversy arises. If such dispute or controversy is not
resolved by such negotiation within [...***...] days of notice by one party to
the other, then the Parties shall proceed as follows. Any unresolved dispute,
controversy, action, claim or proceeding initiated by either Party (other than a
third party action, claim, or proceeding) relating to, arising out of, or
resulting from this Agreement, or the performance by either Party of its
obligations hereunder, whether before or after termination of this Agreement,
shall be finally resolved by binding arbitration. Any arbitration hereunder
shall be conducted under the Rules of conciliation and Arbitration of the
International Chamber of Commerce. Each such arbitration shall be conducted in
the English language by a panel of three arbitrators appointed in accordance
with such rules, and shall be held in San Francisco, California. 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 so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be.

     10.6 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.

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

     10.8 INTEGRATION. This Agreement, along with any written addenda,
amendments, or modifications signed by both parties referencing this Section
10.8, 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.

     10.9 TERMINATION OF OLD AGREEMENT. The Old License Agreement is hereby
terminated as of the Effective Date (except as to the agreements contained
therein between the Joint Venture and BASF, which are not affected by this
Agreement).

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

______________________
*CONFIDENTIAL TREATMENT REQUESTED

                                       9.

<PAGE>   10

     10.11 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 and the Joint Venture have executed this
Agreement, in triplicate originals but collectively evidencing only a single
contract.

                             LYNX THERAPEUTICS INC.

                             By: /s/ Edward C. Albini
                                 ----------------------------------------------
                                 Edward C. Albini

                             Title: Chief Financial Officer
                                    -------------------------------------------

                             BASF-LYNX BIOSCIENCE AG

                             By: /s/ Dr. Alfred Bach
                                 ----------------------------------------------
                                 Dr. Alfred Bach

                             Title: Vorstand (CEO)
                                    -------------------------------------------

                                      10.

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