Document:

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                                                                    EXHIBIT 10.4

                              SUBLEASE AGREEMENT
                              ------------------

     This SUBLEASE AGREEMENT ("Sublease") is made and entered into as of August
__, 1998 by and between GENSIA SICOR INC., a Delaware corporation
("Sublandlord") and ILLUMINA, INC., a__________ corporation ("Subtenant").

     WHEREAS, GENA PROPERTY COMPANY, a California general partnership, as
landlord ("Landlord"), and Sublandlord, as tenant, are parties to a certain
Lease Agreement dated as of December 21, 1993 ("Master Lease") whereby Landlord
leased to Sublandlord two (2) buildings (the "Buildings") located at 9360 (the
"9360 Building") and 9390 (the "9390 Building") Towne Centre Drive, San Diego,
CA 92121 (collectively, the "Master Premises") as more particularly described in
the Master Lease, upon the terms and conditions contained therein.  All
capitalized terms used herein shall have the same meaning ascribed to them in
the Master Lease unless otherwise defined herein.  A copy of those portions of
the Master Lease which are applicable to this Sublease is attached hereto as
Exhibit "A" and made a part hereof.  Hereinafter, the term "Master Lease" shall
refer to only those portions of the Master Lease which are intended to be
applicable to this Sublease, as attached hereto as Exhibit "A".

     WHEREAS, Sublandlord and Subtenant are desirous of entering into a sublease
of that portion of the 9390 Building crosshatched on the demising plan annexed
hereto as Exhibit "B" and made a part hereof ("Sublease Premises") on the terms
and conditions hereafter set forth.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto mutually covenant and agree as
follows:

     1.  Demise.  Sublandlord hereby subleases and demises to Subtenant and
         ------
Subtenant hereby hires and subleases from Sublandlord the Sublease Premises
(which, based on Sublandlord's measurement thereof in accordance with its
customary practice, the parties stipulate contain an aggregate of [*] rentable
square feet of laboratory space located in the 9390 Building), upon and subject
to the terms, covenants and conditions hereinafter set forth. Subject to any
existing rights in favor of other subtenants within the Buildings with respect
thereto, Sublandlord shall endeavor to notify Subtenant in the event space
comprising approximately 6000 rentable square feet becomes available for
subleasing on the first floor of the 9390 Building. Subtenant shall have five
(5) business days to respond to such notification with an offer to sublease such
additional space. The foregoing does not constitute an option with respect to
any such space in favor of Subtenant and Sublandlord shall not be required to
enter into exclusive negotiations with Subtenant with respect thereto.

     2.  Lease Term.
         ----------

         (a)  Lease Term.  The term of this Sublease ("Term") shall commence on
              ----------
August 21, 1998, or (ii) the date upon which Subtenant, or any person occupying
any of the Sublease Premises with Subtenant's permission, commences business
operations from the Sublease Premises ("Sublease Commencement Date") and end,
unless sooner terminated as provided herein, on August 20, 2000 ("Sublease
Expiration Date").

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____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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         (b)  Option to Extend.  Notwithstanding the provisions of Section
              ----------------
2(a) to the contrary and provided Subtenant is not in default under this
Sublease at the time of the exercise thereof or at the time of its occupancy
pursuant thereto, Subtenant shall have one (1) option to extend this Sublease
("Option to Extend") as to the Sublease Premises for an additional one (1) year
period. The Option to Extend shall be exercisable by Subtenant upon delivery of
prior written notice (the "Exercise Notice") thereof to Sublandlord. Each
Exercise Notice shall be given not later than ninety (90) days prior to the
then-expiration of the Term. In the event Subtenant shall exercise its Option to
Extend pursuant to the provisions set forth herein, the Term of this Sublease
shall be extended by the period applicable to such Option to Extend and the
Sublease Expiration Date shall be deemed to be the expiration date of such
extended Term of this Sublease. Such extended Term shall be on all the terms and
conditions of this Sublease, as applicable, including the rental rate applicable
to the Sublease Premises for which occupancy is so extended.

     3.  Use.  The Sublease Premises shall be used and occupied by Subtenant
         ---
solely for research, development and laboratory uses in compliance with the
Master Lease and for no other purpose.

     4.  Subrental.
         ---------

         (a)  Base Rental. Beginning with the Sublease Commencement Date, and
              -----------
thereafter during the Term of this Sublease and ending on the Sublease
Expiration Date, Subtenant shall pay to Sublandlord monthly installments of base
rent in the amount of $_______ each ("Base Rental") calculated at the monthly
rate of [*] per rentable square foot of the Premises. On each anniversary of
the Sublease Commencement Date, the Base Rental shall increase by an amount
equal to [*] of the then-existing Base Rental.

     The first monthly installment of Base Rental shall be paid by Subtenant
concurrently with the execution of this Sublease by Subtenant.  Base Rental and
additional rent shall hereinafter be collectively referred to as "Rent."

         (b)  Prorations.  If the Sublease Commencement Date is not the first
              ----------
(1st) day of a month, or if the Sublease Expiration Date is not the last day of
a month, a prorated installment of monthly Base Rental based on a thirty (30)
day month shall be paid for the fractional month during which the Term commenced
or terminated.

         (c)  Normal Operating Expenses.  Beginning with the Sublease
              -------------------------
Commencement Date and continuing to the Sublease Expiration Date, Subtenant
shall pay to Sublandlord as additional rent for this subletting the cost of all
additional expenses, costs and charges payable to Landlord or to third party
providers by Sublandlord resulting from Subtenant's use of the Sublease
Premises, which are not Normal Operating Expenses (as defined below) for the
Building and the Sublease Premises. The term "Normal Operating Expenses" shall
mean the full cost of all operating expenses (including Building maintenance,
common area expenses, insurance premiums for casualty insurance maintained by
Sublandlord with respect to the Building, but excluding any insurance coverages
for Subtenant's personal property), security and janitorial services provided by
Sublandlord and real estate taxes, applicable to the Sublease

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____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

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Premises which are allocable to Subtenant's normal and customary use of the
Sublease Premises in accordance with this Sublease. Normal Operating Expenses
shall include Subtenant's utility charges for electricity usage to the extent
not separately metered to Subtenant and shall exclude other excess or non-
standard costs, expenses or charges incurred with respect to Subtenant's use or
occupancy of the Sublease Premises which are incurred or requested by Subtenant.
Subtenant shall not be responsible for payment of any Impositions (as defined in
Paragraph 9(a) of the Master Lease) which are part of the Normal Operating
Expenses or which are not otherwise made the responsibility of Subtenant
pursuant to this Sublease.

         (d)  Payment of Rent.  Except as otherwise specifically provided in
              ---------------
this Sublease, Rent shall be payable in lawful money without demand, and without
offset, counterclaim, or setoff in monthly installments, in advance, on the
first day of each and every month during the Term of this Sublease. All of said
Rent is to be paid to Sublandlord at its office at the address set forth in
Section 13 herein, or at such other place or to such agent and at such place as
Sublandlord may designate by notice to Subtenant. Any additional rent payable on
account of items which are not payable monthly by Sublandlord to Landlord under
the Master Lease is to be paid to Sublandlord as and when such items are payable
by Sublandlord to third parties or to Landlord under the Master Lease, unless a
different time for payment is elsewhere stated herein. Upon written request
therefor, Sublandlord agrees to provide Subtenant with copies of any statements
or invoices received by Sublandlord from Landlord pursuant to the terms of the
Master Lease.

         (e)  Late Charge.  Subtenant shall pay to Sublandlord an
              -----------
administrative charge at an annual interest rate equal to the Prime Rate plus
three percent (3%) ("Interest Rate") on all amounts of Rent payable hereunder
which are not paid within three (3) business days of the date on which such
payment is due, such charge to accrue from the date upon which such amount was
due until paid.

     5.  Security Deposit.  Concurrently with the execution of this Sublease,
         ----------------
Subtenant shall deposit with Sublandlord the sum of __________________________
Dollars ($_____) ("Deposit"), which shall be held by Sublandlord as security
for the full and faithful performance by Subtenant of its covenants and
obligations under this Sublease. The Deposit is not an advance Rent deposit, an
advance payment of any other kind, or a measure of Sublandlord's damage in case
of Subtenant's default. If Subtenant defaults in the full and timely performance
of any or all of Subtenant's covenants and obligations set forth in this
Sublease, then Sublandlord may, from time to time, without waiving any other
remedy available to Sublandlord, use the Deposit, or any portion of it, to the
extent necessary to cure or remedy the default or to compensate Sublandlord for
all or a part of the damages sustained by Sublandlord resulting from Subtenant's
default. Subtenant shall immediately pay to Sublandlord within five (5) days
following demand, the amount so applied in order to restore the Deposit to its
original amount, and Subtenant's failure to immediately do so shall constitute a
default under this Sublease. If Subtenant is not in default with respect to the
covenants and obligations set forth in this Sublease at the expiration or
earlier termination of the Sublease, Sublandlord shall return the Deposit to
Subtenant after the expiration or earlier termination of this Sublease.
Sublandlord's obligations with respect to the Deposit are those of a debtor and
not a trustee. Sublandlord shall not be required to maintain the Deposit
separate and apart from Sublandlord's general or other

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funds and Sublandlord may commingle the Deposit with any of Sublandlord's
general or other funds. Subtenant shall not at any time be entitled to interest
on the Deposit.

     6.  Signage.  Subtenant shall have no right to maintain Subtenant
         -------
identification signs in any location in, on, or about the Premises other than a
listing in the lobby directory for the Building and an identification sign
located at the entry to the Sublease Premises, the size, appearance and location
of such signs to be subject to Sublandlord's prior approval. The cost of such
signs, including the installation, maintenance and removal thereof, shall be at
Subtenant's sole cost and expense. If Subtenant fails to maintain its Sublease
Premises sign, or if Subtenant fails to remove same upon the expiration or
earlier termination of this Sublease and repair any damage caused by such
removal, Sublandlord may do so at Subtenant's expense and Subtenant shall
reimburse Sublandlord for all actual costs incurred by Sublandlord to effect
such removal.

     7.  Parking.  At no additional rent or charge, Subtenant shall have the
         -------
right, during the Term of this Sublease, to use on a non-reserved basis parking
spaces in the parking facilities of the Buildings in number equal to 3.6 spaces
per 1,000 square feet of rentable area of the Sublease Premises. All such
parking privileges shall be subject to the terms and conditions set forth in the
Master Lease.

     8.  Incorporation of Terms of Master Lease.
         --------------------------------------

         (a)  This Sublease is subject and subordinate to the Master Lease.
Subject to the modifications set forth in this Sublease, the terms of the Master
Lease are incorporated herein by reference, and shall, as between Sublandlord
and Subtenant (as if they were "Landlord" and "Tenant," respectively, under the
Master Lease) constitute the terms of this Sublease except to the extent that
they are inapplicable to, inconsistent with, or modified by, the terms of this
Sublease. Notwithstanding the foregoing, to the extent provisions of the Master
Lease are unique and personal to Sublandlord's interest in the Buildings
pursuant to the Master Lease or are indicated on the attached Exhibit "A" as
intentionally omitted from the Master Lease, Subtenant shall not be required to
comply with such provisions. Provisions which are personal and unique to
Sublandlord under the Master Lease include, but are not limited to, Paragraphs
17, 18 and 19 of the Master Lease. In the event of any inconsistencies between
the terms and provisions of the Master Lease and the terms and provisions of
this Sublease, the terms and provisions of this Sublease shall govern. Subtenant
acknowledges that it has reviewed the Master Lease and is familiar with the
terms and conditions thereof.

         (b)  For the purposes of incorporation herein, the terms of the
Master Lease are subject to the following additional modifications:

              (i)  In all provisions of the Master Lease (under the terms
     thereof and without regard to modifications thereof for purposes of
     incorporation into this Sublease) requiring the approval or consent of
     Landlord, Subtenant shall be required to obtain the approval or consent of
     both Sublandlord and Landlord.

              (ii) In all provisions of the Master Lease requiring Tenant to
     submit, exhibit to, supply or provide Landlord with evidence, certificates,
     or any other matter or thing, including, without limitation, the provisions
     of Sections 10(c) and 10(f) thereof,

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     Subtenant shall be required to submit, exhibit to, supply or provide, as
     the case may be, the same to both Landlord and Sublandlord. In any such
     instance, Sublandlord shall determine if such evidence, certificate or
     other matter or thing shall be satisfactory.

              (iii) In the event of any taking by eminent domain or casualty to
     the Sublease Premises such that Subtenant is deprived of the use and
     occupancy of greater than fifty percent (50%) of the Sublease Premises for
     a period in excess of ninety (90) days, Subtenant and Sublandlord shall
     each have the right to terminate this Sublease upon not less than thirty
     (30) days written notice to the other. In the event of any such taking by
     eminent domain or casualty such that Subtenant is deprived of fifty percent
     (50%) or less of the use and occupancy of the Sublease Premises, or in the
     event Subtenant elects to continue occupancy of the remaining portion of
     the Sublease Premises after the occurrence of a taking or casualty giving
     Subtenant a right to terminate this Sublease, the Rent shall be
     proportionally reduced for the portion of the Term during which Subtenant
     is prevented from using and occupying the damaged or taken portion of the
     Sublease Premises. Sublandlord shall have no obligation to restore or
     rebuild any portion of the Sublease Premises after any destruction or
     taking by eminent domain, and Subtenant shall have no rights to any portion
     of the award in any eminent domain proceeding affecting the Sublease
     Premises.

         (c)  During the Term, Subtenant shall not be required to maintain
     casualty insurance policies and coverages with respect to the Sublease
     Premises and Subtenant shall be named as an additional insured under such
     policies maintained by Sublandlord (to the extent of Subtenant's interest
     in the Sublease Premises), evidence of such coverage to be in the form of a
     certificate of insurance provided by Sublandlord to Subtenant; provided,
                                                                    ---------
     however, such policies and coverages maintained by Sublandlord with respect
     -------
     to the Buildings and the Sublease Premises shall not include coverage for
     Subtenant's personal property and Subtenant, at its sole cost and expense,
     shall maintain such policies and coverages with respect to its personal
     property as it may elect.  During the Term, Subtenant shall maintain a
     policy of comprehensive general liability insurance with respect to its
     occupancy of, and activities on, the Sublease Premises and related common
     areas, which coverage shall be subject to any required waivers of
     subrogation as are described under Paragraph 16 of the Master Lease and
     shall have a minimum policy limit of $4,000,000 and shall otherwise meet
     the requirements of the Master Lease for such insurance coverage.  All such
     policies shall name Sublandlord, Landlord and any other party required to
     be so named under the Master Lease as additional insureds thereunder and
     shall be with carriers reasonably acceptable to Sublandlord and, in all
     events, in accordance with the requirements of the Master Lease except as
     otherwise provided hereinabove.  In the event Subtenant elects to carry its
     own policies of casualty insurance with respect to the Sublease Premises,
     all such policies shall name Sublandlord as an additional insured
     thereunder.

     9.  Subtenant's Obligations.  Subtenant covenants and agrees that all
         -----------------------
obligations of Sublandlord under the Master Lease shall be done or performed by
Subtenant with respect to the Sublease Premises, except as otherwise provided by
this Sublease, and Subtenant's obligations shall run to Sublandlord and Landlord
as Sublandlord may determine to be appropriate or be required by the respective
interests of Sublandlord and Landlord. Subtenant agrees to indemnify
Sublandlord, and hold it harmless, from and against any and all claims, damages,
losses, expenses and liabilities, except for special or consequential damages
(including reasonable

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attorneys' fees), incurred as a result of the non-performance, non-observance or
non-payment of any of Sublandlord's obligations under the Master Lease which, as
a result of this Sublease, became an obligation of Subtenant. If Subtenant makes
any payment to Sublandlord pursuant to this indemnity, Subtenant shall be
subrogated to the rights of Sublandlord concerning said payment. Subtenant shall
not do, nor permit to be done, any act or thing which is, or with notice or the
passage of time would be, a default under this Sublease or the Master Lease.

     10.  Sublandlord's Obligations.  Sublandlord covenants and agrees that all
          -------------------------
obligations of Sublandlord under the Master Lease, other than those which are to
be done or performed by Subtenant, with respect to the Sublease Premises shall
be done or performed by Sublandlord. Sublandlord agrees that Subtenant shall be
entitled to receive all services and repairs to be provided by Landlord to
Sublandlord under the Master Lease with respect to the Sublease Premises.
Subtenant shall look solely to Landlord for all such services and shall not,
under any circumstances, seek nor require Sublandlord to perform any of such
services, nor shall Subtenant make any claim upon Sublandlord for any damages
which may arise by reason of Landlord's default under the Master Lease;
provided, however, Sublandlord shall provide all necessary assistance and
cooperation to Subtenant (at no material cost or liability to Sublandlord) to
enforce Sublandlord's rights under the Master Lease to compel performance by
Landlord with respect to such services or repairs to which Subtenant is
entitled. Any condition resulting from a default by Landlord shall not
constitute as between Sublandlord and Subtenant an eviction, actual or
constructive, of Subtenant and no such default shall excuse Subtenant from the
performance or observance of any of its obligations to be performed or observed
under this Sublease, or entitle Subtenant to receive any reduction in or
abatement of the Rent provided for in this Sublease unless, and to the extent,
Sublandlord is excused from performance, or entitled to a reduction or abatement
of its rental obligations to Landlord under the Master Lease also. In
furtherance of the foregoing, Subtenant does hereby waive any cause of action
and any right to bring any action against Sublandlord by reason of any act or
omission of Landlord under the Master Lease, subject to the right of assistance
and cooperation from Sublandlord described above. Sublandlord covenants and
agrees with Subtenant that Sublandlord will pay all fixed rent and additional
rent payable by Sublandlord pursuant to the Master Lease to the extent that
failure to perform the same would adversely affect Subtenant's use or occupancy
of the Sublease Premises. Sublandlord shall extend all reasonable cooperation to
Subtenant (at no material cost or liability to Sublandlord) to enable Subtenant
to receive the benefits under this Sublease, as the same are dependent upon
performance under the Master Lease.

     11.  Default by Subtenant.  In the event Subtenant shall be in default of
          --------------------
any covenant of, or shall fail to honor any obligation under, this Sublease,
Sublandlord shall have available to it against Subtenant all of the remedies
available (a) to Landlord under the Master Lease in the event of a similar
default on the part of Sublandlord thereunder or (b) at law.

     12.  Quiet Enjoyment.  So long as Subtenant pays all of the Rent due
          ---------------
hereunder and performs all of Subtenant's other obligations hereunder,
Sublandlord shall do nothing to affect Subtenant's right to peaceably and
quietly have, hold and enjoy the Sublease Premises.

     13.  Notices.  Anything contained in any provision of this Sublease to the
          -------
contrary notwithstanding, Subtenant agrees, with respect to the Sublease
Premises, to comply with and remedy any default in this Sublease or the Master
Lease which is Subtenant's obligation to cure,

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within the period allowed to Sublandlord under the Master Lease, even if such
time period is shorter than the period otherwise allowed therein due to the fact
that notice of default from Sublandlord to Subtenant is given after the
corresponding notice of default from Landlord to Sublandlord. Sublandlord agrees
to forward to Subtenant, promptly upon receipt thereof by Sublandlord, a copy of
each notice of default with respect to Subtenant's obligations under this
Sublease received by Sublandlord in its capacity as Tenant under the Master
Lease. Subtenant agrees to forward to Sublandlord, promptly upon receipt
thereof, copies of any notices received by Subtenant from Landlord or from any
governmental authorities. All notices, demands and requests shall be in writing
and shall be sent either by hand delivery or by a nationally recognized
overnight courier service (e.g., Federal Express), in either case return receipt
requested, to the address of the appropriate party. Notices, demands and
requests so sent shall be deemed given when the same are received.

     Notices to Sublandlord shall be sent to the attention of:

     Gensia Sicor, Inc.
     19 Hughes
     Irvine, CA  92628
     Attn: Chief Financial Officer

     Notices to Subtenant shall be sent to the attention of:

     Illumina, Inc.
     2187 Newcastle Avenue, Suite 101
     Cardiff, CA  92007
     Attn: President

     14.  Broker.  Sublandlord and Subtenant represent and warrant to each
          ------
other that no brokers were involved in connection with the negotiation or
consummation of this Sublease other than John Burnham & Company. Each party
agrees to indemnify the other, and hold it harmless, from and against any and
all claims, damages, losses, expenses and liabilities (including reasonable
attorneys' fees) incurred by said party as a result of a breach of this
representation and warranty by the other party.

     15.  Condition of Premises.  Subtenant acknowledges that it is subleasing
the Sublease Premises "as- is" in an unfurnished condition and that Sublandlord
is not making any representation or warranty concerning the condition of the
Sublease Premises and that Sublandlord is not obligated to perform any work to
prepare the Sublease Premises for Subtenant's occupancy. Subtenant acknowledges
that it is not authorized to make or do any alterations or improvements in or to
the Sublease Premises without Sublandlord's prior written consent, which consent
may not be unreasonably withheld and which may impose additional reasonable and
customary requirements applicable to the construction and completion of such
alterations or improvements in addition to requiring Subtenant's compliance with
requirements of the Master Lease. Sublandlord shall not be deemed to be
unreasonable in withholding its consent to any alteration or improvement which
does not conform with the use requirements under this Sublease or which is
materially different from alterations or improvements customarily seen in first
class laboratory space. Subtenant further acknowledges that it must

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deliver the Sublease Premises to Sublandlord on the Sublease Expiration Date in
the condition substantially the same as that on the Sublease Commencement Date
subject to ordinary wear and tear and damage due to a taking or casualty (other
than arising from Subtenant's failure to maintain the Sublease Premises or due
to the negligence or intentional misconduct of Subtenant). Sublandlord may
require Subtenant to remove, and to repair all damage to the Sublease Premises
in connection therewith, any alterations made by Subtenant during the Term, at
Subtenant's sole cost and expense, in connection with any vacation of the
Sublease Premises by Subtenant under the terms of this Sublease.

     16.  Notice to Landlord.  Section 21(b) of the Master Lease requires
          ------------------
Sublandlord to provide thirty (30) days' written notice of this Sublease to
Landlord. Sublandlord shall provide such notice promptly following the execution
and delivery of this Sublease by Sublandlord and Subtenant. In the event
Landlord asserts that Landlord's written consent to this Sublease is required
under the Master Lease and such consent (without regard to the merit of
Landlord's assertion) has not been obtained within thirty (30) days of
Sublandlord's receipt of written notice from Landlord thereof, then this
Sublease may be terminated by either party hereto upon notice to the other, and
upon such termination neither party hereto shall have any further rights against
or obligations to the other party hereto. The Sublease Term shall not be deemed
to have commenced until such 30-day notice period has run and/or, if applicable,
Landlord's consent has been obtained. If Subtenant has commenced occupation of
the Sublease Premises pursuant to a right to do so under this Sublease prior to
the expiration of such notice period or receipt of such consent, such occupancy
shall be deemed to be pursuant to a revocable license which is otherwise on all
the terms and conditions of this Sublease, including payment of Rent, from
Sublandlord to Subtenant, which license Sublandlord may revoke at any time.

     17.  Termination of the Lease.  If for any reason the term of the Master
          ------------------------
Lease shall terminate prior to the Sublease Expiration Date, this Sublease shall
automatically be terminated. Sublandlord shall not be liable to Subtenant by
reason of Subtenant's loss of occupancy in the Sublease Premises due to such
termination unless (i) such termination shall have been caused by the default of
Sublandlord under the Master Lease, and said Sublandlord default was not as a
result of a Subtenant default hereunder, or (ii) Subtenant is not given at least
one (1) calendar month's prior written notice of the effective date of a
termination of the Master Lease if such termination is the result of any
election or exercise of a right or option held by Sublandlord under the Master
Lease to effect such termination, or is the result of Sublandlord's mutual
agreement with Landlord to terminate the Master Lease outside the parameters of
the Master Lease. In the event of any voluntary termination of the Master Lease
by Sublandlord, Sublandlord shall use reasonable efforts to endeavor to preserve
Subtenant's occupancy of the Sublease Premises, substantially on the terms and
provisions of this Sublease, for the remaining Sublease Term notwithstanding
such termination. Sublandlord shall not be required to incur any cost or
liability in connection with such endeavor and shall, in no event, be liable to
Subtenant for any failure on the part of Sublandlord to secure such continued
occupancy.

     18.  Assignment and Subletting.
          -------------------------

          (a) Independent of and in addition to any provisions of the Master
Lease, including without limitation the obligation to obtain Landlord's consent
to any assignment, it is understood and agreed that Subtenant shall have no
right to sublet the Sublease Premises or any

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portion thereof or any right or privilege appurtenant thereto; provided,
however, that Subtenant shall have the right to assign this Sublease or any
interest therein, and to suffer or permit any other person (other than agents,
servants or associates of the Subtenant) to occupy or use the Sublease Premises,
only upon the prior written consent of Sublandlord and Landlord, which consent
shall not be unreasonably withheld. Any assignment by Subtenant without
Sublandlord's prior written consent shall be void and shall, at the option of
Sublandlord, terminate this Sublease.

          (b)  Subtenant shall advise Sublandlord by notice of (i) Subtenant's
intent to assign this Sublease, (ii) the name of the proposed assignee and
evidence reasonably satisfactory to Sublandlord that such proposed assignee is
comparable in reputation, stature and financial condition to tenants then
leasing comparable space in comparable buildings, and (iii) the terms of the
proposed assignment. Sublandlord shall, within twenty (20) days of receipt of
such notice, and any additional information requested by Landlord concerning the
proposed assignee's financial responsibility, elect one of the following:

               (i)  Consent to such proposed assignment; or

               (ii) Refuse such consent, which refusal shall be on reasonable
          grounds.

          (c)  In the event that Sublandlord shall consent to an assignment
under the provisions of this Section 18, Subtenant shall pay Sublandlord's
reasonable processing costs and reasonable attorneys' fees incurred in giving
such consent (not to exceed $3,000 in any one instance). Notwithstanding any
permitted assignment, Subtenant shall at all times remain directly, primarily
and fully responsible and liable for all payments owed by Subtenant under the
Sublease and for compliance with all obligations under the terms, provisions and
covenants of the Sublease. If for any proposed assignment, Subtenant receives
Rent or other consideration, either initially or over the term of the
assignment, in excess of the Rent required by this Sublease, after a deduction
for the following: (a) any brokerage commission paid by Subtenant in connection
therewith and (b) any reasonable attorneys' fees in connection with preparing
and negotiating an assignment document ("Profit"), Subtenant shall pay to
Sublandlord as additional Rent, fifty percent (50%) of such Profit or other
consideration received by Subtenant within five (5) days of its receipt by
Subtenant or, in the event the assignee makes payment directly to Sublandlord,
Sublandlord shall refund fifty percent (50%) of the Profit to Subtenant after
deducting (a) and (b) above.

          (d)  Occupancy of all or part of the Sublease Premises by parent,
subsidiary, or affiliated companies or a joint venture partnership of Subtenant
shall not be deemed an assignment or subletting provided that such parent,
subsidiary or affiliated companies or a joint venture partnership were not
formed as a subterfuge to avoid the obligation of this Section 18. If Subtenant
is a corporation, unincorporated association, trust or general or limited
partnership, then the sale, assignment, transfer or hypothecation of any shares,
partnership interest, or other ownership interest of such entity or the
dissolution, merger, consolidation, or other reorganization of such entity, or
the sale, assignment, transfer or hypothecation of the assets of such entity,
shall not be deemed an assignment or sublease subject to the provisions of this
Section 18.

                                                                    TOWNE CENTRE

                                       9
<PAGE>

     19.  Limitation of Estate.  Subtenant's estate shall in all respects be
          --------------------
limited to, and be construed in a fashion consistent with, the estate granted to
Sublandlord by Landlord. Subtenant shall stand in the place of Sublandlord and
shall defend, indemnify and hold Sublandlord harmless with respect to all
covenants, warranties, obligations, and payments made by Sublandlord under or
required of Sublandlord by the Master Lease with respect to the Subleased
Premises. In the event Sublandlord is prevented from performing any of its
obligations under this Sublease by a breach by Landlord of a term of the Master
Lease, then Sublandlord's sole obligation in regard to its obligation under this
Sublease shall be to use reasonable efforts in diligently pursuing the
correction or cure by Landlord of Landlord's breach.

     20.  Environmental Condition.
          -----------------------

          (a)  Base Line Study.  Subtenant shall conduct a Phase I
               ---------------
Environmental Assessment (the "Base Line Study") with respect to the Sublease
Premises in accordance with ASTM Standard E 1257-94 which, pursuant to such
Standard, shall not include any surface or subsurface testing on the Sublease
Premises. The Base Line Study shall assess the condition of the Sublease
Premises as it exists prior to any occupancy thereof by Subtenant and shall be
completed and approved by Subtenant as soon as possible. If the Base Line Study
is not completed and approved by Subtenant on or prior to the Sublease
Commencement Date, such completion and approval shall have occurred not later
than thirty (30) days following the Sublease Commencement Date. Subtenant's
failure to approve the results of such Base Line Study within five (5) days of
its completion shall permit Subtenant to terminate this Sublease, subject,
however, to Sublandlord's right (without any obligation of exercise) to cure
such disapproved matter to Subtenant's reasonable satisfaction within a
reasonable period of time after Sublandlord's receipt of notice of such
disapproval. Subtenant shall deliver a copy of the Base Line Study to
Sublandlord upon its completion. During the Term of the Sublease, Subtenant
shall deliver to Sublandlord, upon Sublandlord's request therefor, copies of all
notices, filings and permits delivered to, or received from, regulatory and
governmental entities having jurisdiction over Subtenant's operations on the
Sublease Premises with respect to the use, storage or disposal of Hazardous
Substances and a current inventory of all Hazardous Substances used and/or
stored on the Sublease Premises.

          (b)  Vacation.  Subtenant shall also conduct an exit environmental
               --------
assessment (the "Subtenant Exit Study") substantially the same in scope as the
Base Line Study (collectively, the "Studies"). The Subtenant Exit Study shall be
conducted not earlier than fifteen (15) days prior to Subtenant's vacation of
the Sublease Premises. In the event the Subtenant Exit Study reveals
contamination not described in the Base Line Study, then, to the extent such
contamination is the result of the act or omission of Subtenant, its agents,
employees, contractors, invitees or licensees, Subtenant shall promptly
remediate or remove such contamination in its entirety. Subtenant shall maintain
the results of the Base Line Study and the Subtenant Exit Study in strict
confidence and shall not, without Sublandlord's prior written consent, which may
be withheld in its sole discretion, disclose the results thereof, or any portion
thereof to any third party, excepting Subtenant's directors, officers,
employees, representatives and consultants on a need-to-know basis, unless
Subtenant is compelled under applicable law to disclose all or any portion of
said Studies. All such Studies shall be delivered to Sublandlord.

                                                                    TOWNE CENTRE

                                       10
<PAGE>

     21.  Sublandlord Entry and Inspection Rights.  In addition to all other
          ---------------------------------------
rights under the provisions of the Master Lease incorporated into this Sublease,
Sublandlord expressly reserves the right to enter onto the Sublease Premises to
inspect the Sublease Premises during the Term, which right shall include the
right to conduct the inspections and testing in the Sublease Premises during the
Term as described in Paragraph 10 of the Master Lease. Notwithstanding the
foregoing, Sublandlord shall use reasonable, good faith efforts to provide
Subtenant with at least twenty-four hours' prior notice (which may be
telephonic) of any entry onto the Sublease Premises and to provide the names of
the individuals who will be entering onto the Sublease Premises on Sublandlord's
behalf. Entry onto the Sublease Premises for the purpose of showing such space
to prospective subtenants or third party brokers shall be limited to the last
three (3) months of the Term unless Subtenant reasonably consents to each such
entry.

     22.  Entire Agreement.  It is understood and acknowledged that there are
          ----------------
no oral agreements between the parties hereto affecting this Sublease and this
Sublease supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Sublandlord to Subtenant with respect to the subject matter
thereof, and none thereof shall be used to interpret or construe this Sublease.
This Sublease, and the exhibits and schedules attached hereto, contain all of
the terms, covenants, conditions, warranties and agreements of the parties
relating in any manner to the rental, use and occupancy of the Sublease Premises
and shall be considered to be the only agreements between the parties hereto and
their representatives and agents. None of the terms, covenants, conditions or
provisions of this Sublease can be modified, deleted or added to except in
writing signed by the parties hereto. All negotiations and oral agreements
acceptable to both parties have been merged into and are included herein. There
are no other representations or warranties between the parties, and all reliance
with respect to representations is based totally upon the representations and
agreements contained in this Sublease. This Sublease may be executed in multiple
counterparts.

     IN WITNESS WHEREOF, the parties have entered into this Sublease as of the
date first written above.

<TABLE>
<CAPTION>
<S>                                              <C>

                                                 SUBLANDLORD:
                                                 -----------

                                                 GENSIA SICOR INC.,
                                                 a Delaware corporation

                                                 By:   _____________________________
                                                 Its:  _____________________________

                                                 SUBTENANT:
                                                 ---------
                                                 ILLUMINA, INC.,
                                                 a ______ corporation

                                                 By:   _____________________________
                                                 Its:  _____________________________
</TABLE>
                                                                    TOWNE CENTRE

                                       11
<PAGE>

                                  EXHIBIT "A"

                              COPY OF MASTER LEASE
                              --------------------

                                   [Attached]

                                                                    TOWNE CENTRE

                                       12
<PAGE>

                                  EXHIBIT "B"

                                 DEMISING PLAN
                                 -------------

                                   [Attached]

                                                                    TOWNE CENTRE

                                       13
<PAGE>

                     AMENDMENT NO. 1 TO SUBLEASE AGREEMENT
                     -------------------------------------

     This Amendment No. 1 to Sublease Agreement (this "Amendment") is made as of
March ___, 2000 ("Effective Date") by and between SICOR INC. (formerly known as
GENSIA SICOR INC.), a Delaware corporation ("Sublandlord") and ILLUMINA, INC., a
California corporation ("Subtenant").

                                    RECITALS
                                    --------

     A.  Sublandlord and Subtenant are parties to that certain Sublease
Agreement dated as of August 24, 1998 (the "Sublease") covering certain premises
("Sublease Premises") located at 9390 Towne Centre Drive, San Diego, California
92121, as more particularly described in the Sublease. All defined terms used in
this Amendment, unless otherwise indicated herein, shall have the meanings
ascribed to them in the Sublease.

     B.  The Sublease Premises originally consisted of approximately 9,876
rentable square feet of premises on the first floor of the Building ("Existing
Space"), as more particularly described in the Sublease. Subtenant desires to
expand into approximately 5,260 rentable square feet of additional space located
on the first floor of the Building ("Expansion Space"), as more particularly
described in Exhibit A attached hereto.
             ---------

     C.  Sublandlord and Subtenant wish to hereby modify certain terms and
provisions under the Sublease and are executing this Agreement to effectuate the
modification of the same.

                                   AGREEMENT
                                   ---------

     NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants hereafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

     1.  Amendment to Sublease. Effective as of the "Expansion Space
         ---------------------
Commencement Date" (defined below), the Sublease is hereby amended as follows:

         a.  Sublease Premises. The Sublease Premises are hereby amended to
             -----------------
mean and refer to the Existing Space and the Expansion Space (collectively, the
"Sublease Premises"), which Sublease Premises shall be deemed by the parties to
equal 15,136 rentable square feet.

         b.  Condition of Expansion Space. Subtenant acknowledges (i) that it
             ----------------------------
is subleasing the Expansion Space "as-is" in an unfurnished condition, (ii) that
Sublandlord is not making any representation or warranty concerning the
condition of the Expansion Space, and (iii) that Sublandlord is not obligated to
perform any work to prepare the Expansion Space for Subtenant's occupancy other
than to deliver the same in broom-clean condition.

         c.  Demising Plan. The Demising Plan attached to the Sublease as
             -------------
Exhibit B is hereby deleted and replaced with the Demising Plan attached hereto
---------
as Exhibit B.
   ---------

         d.  Base Rental. Section 4(a) of the Sublease is hereby amended to
             -----------
provide that, beginning as of the Expansion Space Commencement Date, and
thereafter during the Term

                                      -1-
<PAGE>

of the Sublease and ending on the Sublease Expiration Date, unless extended
pursuant to Section 2(b) of the Sublease, Subtenant shall pay to Sublandlord
monthly installments of Base Rental in the amount of Three and 50/100 Dollars
($3.50) per rentable square foot of Sublease Premises each month (i.e.,
$52,976).

         e.  Expansion Space Commencement Date. The Expansion Space
             ---------------------------------
Commencement Date shall be the earlier of (i) the date the existing subtenant of
the Expansion Space vacates such Expansion Space and Sublandlord delivers the
same to Subtenant in the condition required hereunder or (ii) the date upon
which Subtenant, or any person occupying any of said Expansion Space with
Subtenant's permission, commences business operations from the Expansion Space
("Expansion Space Commencement Date") and end on the Sublease Expiration Date.

         f.  Security Deposit. On or before the Effective Date, Subtenant shall
             ----------------
deposit with Sublandlord, in immediately available funds, an additional Deposit
equal to Three and 50/100 Dollars per rentable square foot of the Expansion
Space (i.e., $18,410). Such additional sum, along with the Deposit described in
Section 5 of the Sublease shall be collectively referred to as the "Deposit" and
shall be held on the same terms and conditions set forth in Section 5 of the
Sublease.

     2.  Effect of Amendment. Except as expressly amended under this Amendment,
         -------------------
all provisions of the Sublease shall remain in full force and effect. In the
event of any conflict between this Amendment and the Sublease, this Amendment
shall control to the extent of such conflict.

     3.  Entire Agreement. This Amendment constitutes the entire agreement
         ----------------
between the parties pertaining to the subject matter hereof, and the final,
complete and exclusive expression of the terms and conditions thereof. All prior
agreements, representations, negotiations and understandings of the parties
hereto, oral or written, express or implied, are hereby superseded and merged
herein. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same binding agreement.

                  [Remainder of page intentionally left blank]

                                      -2-
<PAGE>

     IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 to
Sublease as of the date written below:

Dated: March __, 2000

"Subtenant"                                "Sublandlord"
ILLUMINA, INC.,                            SICOR INC.,
a California corporation                   a Delaware corporation

By:  _____________________                 By:  _____________________
Name:  ___________________                 Name:  ___________________
Its:  ____________________                 Its:  ____________________

                                      -3-
<PAGE>

                                   EXHIBIT A
                                   ---------

                                Expansion Space
                                ---------------

                                   [Attached]

                                      -4-
<PAGE>

                                   EXHIBIT B
                                   ---------

                                 Demising Plan
                                 -------------

                                   [Attached]

                                      -5-<PAGE>

                                                                    EXHIBIT 10.5

                          JOINT DEVELOPMENT AGREEMENT

   This Joint Development Agreement ("Agreement") dated as of the _____day of
November, 1999 ("Effective Date") is by and between ILLUMINA, INC., a California
corporation, located at 9390 Towne Centre Drive, Suite 200, San Diego, CA 92121-
3015 ("Illumina"), and PE CORPORATION, a Delaware corporation, through its PE
Biosystems Group, located at 850 Lincoln Centre Drive, Foster City, CA 94404
("PEB").

                                   Background

     Illumina has certain skills, proprietary technology and know-how related to
the manufacture, design and use of Assembled Arrays.

     PEB has certain skills, proprietary technology and know-how related to the
development of bioanalytical instrumentation systems and associated reagents,
and the marketing, sales and support of products incorporating such systems.

     Illumina and PEB desire to enter into a Joint Development Program with the
objective of developing and commercializing products based on bioanalytical
instrumentation systems incorporating Assembled Arrays.

     Illumina and PEB will enter into a Series C Stock Purchase Agreement as of
the Effective Date, whereby PEB will purchase 1,250,000 shares of Illumina's
stock at a share price of $4.00 per share (the "Equity Agreement").

                                   Agreement

1.   Definitions

     1.1.  "Affiliate" means

          (A)  an organization of which 50% or more of the voting stock is
               controlled or owned directly or indirectly by either Party;

          (B)  an organization that directly or indirectly owns or controls 50%
               or more of the voting stock of a Party;

          (C)  an organization, the majority ownership of which is directly or
               indirectly common to the majority ownership of either Party; or

          (D)  an organization under (A), (B), or (C) immediately above in which
               the amount of the ownership is less than 50% and that amount is
               the maximum amount permitted by law.

                                       1
<PAGE>

1.2.  "Intellectual Property Rights" means all intellectual property rights
      worldwide arising under statutory or common law, and whether or not
      perfected, including, without limitation, the following:

      (A)  all patents, patent applications and patent rights, including
           divisions, continuations, renewals, reissues, continuing prosecution,
           and extensions of the foregoing (as and to the extent applicable) now
           existing, hereafter filed, issued or acquired;

      (B)  all rights associated with works of authorship including copyrights,
           copyright applications, copyright registrations, mask works, mask
           work applications, and mask work registrations;

      (C)  all rights relating to the protection of trade secrets and
           confidential information; and

      (D)  all know-how.

1.3.  "Pre-Collaboration Illumina Intellectual Property" means all Intellectual
      Property Rights that are owned by, either partially or wholly, or licensed
      to, or otherwise controlled by, Illumina as of the Effective Date.

1.4.  "Collaboration Illumina Intellectual Property" means all Intellectual
      Property Rights arising out of work performed under this Agreement that
      are conceived solely by one or more employees or agents of Illumina or its
      Affiliates.

1.5.  "Collaboration Joint Intellectual Property" means all Intellectual
      Property Rights arising out of work performed under this Agreement, that
      are jointly conceived by one or more employees or agents of Illumina, and
      by one or more employees or agents of PEB or its Affiliates.

1.6.  "Pre-Collaboration PEB Intellectual Property" means all Intellectual
      Property Rights that are owned by, either partially or wholly, or licensed
      to, or otherwise controlled by, PEB or its Affiliates as of the Effective
      Date, and that are necessarily infringed by the manufacture or use of
      Instruments.

1.7.  "Collaboration PEB Intellectual Property" means all Intellectual Property
      Rights arising out of work performed under this Agreement that are
      conceived solely by one or more employees or agents of PEB or its
      Affiliates.

1.8.  "Subject Patent" means any patent or patent application claiming or
      disclosing Pre-Collaboration Illumina Intellectual Property, Collaboration
      Illumina Intellectual Property, Collaboration Joint Intellectual Property,

                                       2
<PAGE>

      Pre-Collaboration PE Intellectual Property or Collaboration PEB
      Intellectual Property, including any Related Patents.

1.9.  "Subject Intellectual Property" means Pre-Collaboration Illumina
      Intellectual Property, Collaboration Illumina Intellectual Property,
      Collaboration Joint Intellectual Property, Pre-Collaboration PEB
      Intellectual Property, or Collaboration PEB Intellectual Property,
      including Subject Patents.

1.10. "Net Sales" means:

      (A)  with respect to sales by a Party, or an Affiliate of a Party, to non-
           affiliated third party purchasers, the actual amount of gross sales
           of Collaboration Product to a third party, less: trade, cash and
           quantity discounts, if any, actually allowed, amounts refunded for
           faulty or defective product, returns, rejections, freight, insurance
           and other transportation costs, tariffs, duties and similar
           governmental charges paid (except income taxes);

      (B)  with respect to sales by a Party made to any Affiliate, the Net Sales
           will be determined as if such Collaboration Product had been sold to
           a non-affiliated third party purchaser at an average Net Sales for
           such Collaboration Product during the immediately preceding 120 days;
           and

      (C)  with respect to Collaboration Product that is used by a Party, or an
           Affiliate of a Party, to supply services or information to a third
           party for commercial purposes, or are otherwise disposed of,
           excluding demonstration or other marketing activities performed for
           no or de minimis compensation, the Net Sales will be determined as if
           such Collaboration Product had been sold to a non-affiliated third
           party purchaser at the average Net Sales for such Collaboration
           Product during the immediately preceding 120 days.

1.11.  "Manufacturing Cost" means the fully-burdened manufacturing cost of a
       product as determined using a Party's customary practices and procedures
       in accordance with United States generally accepted accounting principles
       ("GAAP") including the following: direct material cost, material overhead
       cost, direct labor cost, fixed manufacturing overhead cost, variable
       manufacturing overhead cost, manufacturing variance cost, and third-party
       royalties (excluding up-front payments).

1.12.  "Gross Margin" means Net Sales less Manufacturing Cost.

                                       3
<PAGE>

1.13.  "Sales and Marketing Cost" means the fully-burdened cost associated with
       marketing, selling, distributing and supporting a product as determined
       using a Party's customary practices and procedures in accordance with
       GAAP including the following: installation cost, warranty cost,
       distribution cost, direct marketing cost, marketing overhead cost, direct
       selling cost, and selling overhead cost, and subject to Sections 4.1.3
       and 5.1(C).

1.14.  "Ongoing R&D Cost" means the fully-burdened cost associated with ongoing
       research and development to improve or develop new Collaboration Product
       after the New Product Release of a Collaboration Product, and subject to
       Sections 4.1.4 and 5.1 (D).

1.15.  "Residual Gross Margin" means Gross Margin less (A)  Sales and Marketing
       Cost and (B) Ongoing R&D Cost.

1.16.  "Party" means  Illumina or PEB and, when used in the plural, means
       Illumina and PEB.

1.17.  "Related Patent" means any patent or patent application that:

       (A)  claims substantially the same subject matter as a Subject Patent;

       (B)  claims improvements to inventions disclosed or claimed in a Subject
            Patent and requires rights under the Subject Patent to exploit such
            improvements;

       (C)  claims priority to a Subject Patent, including but not limited to
            continuation applications and patents, continuation-in-part
            applications and patents, divisional applications and patents,
            reexamination applications and patents, reissue applications and
            patents, and continuing prosecution applications and patents;

       (D)  is a parent of a  Subject Patent; or

       (E)  any foreign equivalents of a Subject Patent or any patent or patent
            application set forth in (A), (B), (C) or (D) immediately above.

1.18.  "PEB DNA Synthesis and Purification Patents" means U.S. Patent Nos.
       4,997,927 (GBF), 4,458,066, 5,132,418, 5,153,319, 4,973,679 (Caruthers
       Process), and 4,415,732, 4,668,777, 4,500,707 (Caruthers Reagents),
       including any Related Patent.

1.19.  "Start Development Checkpoint" means that point in a project at which,
       under PEB's  ISO 9001 procedures, a report is produced which documents

                                       4
<PAGE>

       that the following parameters have been established with respect to a
       Collaboration Product:

       (A)  technical feasibility;

       (B)  determination of funding and staffing levels required to effect New
            Product Release;

       (C)  product definition and specifications, including a target minimum
            sales price; and

       (D)  a schedule for New Product Release.

1.20.  "New Product Release" means that stage in the development of a
       Collaboration Product at which, under PEB's ISO 9001 procedures,
       unrestricted sale of the Collaboration Product to unaffiliated third-
       party customers is authorized.

1.21.  "Quarter" means a three month period beginning on or about the first day
       of January, April, July or October next following the Effective Date, and
       each three month period thereafter, except that the first Quarter will
       include the period from the Effective Date to the first day of the
       nearest such three month period after the Effective Date. Precise dates
       for the beginning and ending of Quarters may vary in accordance with
       PEB's customary accounting practices and procedures in accordance with
       GAAP. Upon Illumina's request, PEB will provide Illumina with a schedule
       of PEB's fiscal Quarters.

1.22.  "Assembled Array" means an array of microspheres having chemical
       functionality attached thereto distributed on a patterned substrate, as
       generally described in U.S Patent Application No.08/818,199.

1.23.  "Zip Code Chemistry" means a nucleic acid sequence detection method
       employing a sequence-specific hybridization pull-out step subsequent to a
       chemical or enzymatic polynucleotide ligation reaction, as generally
       described in International Patent Application No. WO 97/31256.

1.24.  "Instrument" means a device, including software required to operate the
       device and image assembly software, designed to perform assays in
       combination with an Assembled Array, and that is developed under the
       Joint Development Program.

1.25.  "Reagent" means a composition comprising enzymes, probes, PCR primers, or
       buffers necessary to effect Zip Code Chemistry used in combination with
       an Assembled Array, and that is developed under the Joint Development
       Program.

                                       5
<PAGE>

1.26.  "Early Access Program" means a program in which one or more third parties
       or Affiliates are given access to Beta Prototype Collaboration Product
       prior to New Product Release in return for a fee, including the providing
       of service or information to a third party by Illumina.

1.27.  "Beta Prototype" means a prototype Instrument that is assembled during
       the development of a Collaboration Product under the Joint Development
       Program for the purpose of design verification. Beta Prototype units are
       built by hand by the manufacturing department in consultation with the
       research department in limited numbers using few or no tooled parts. With
       respect to PEB's ISO 9001 procedures, the terms "Beta Prototype" and VTS
       Instrument" may be used interchangeably.

1.28.  "Collaboration Product" means Instrument, Reagent, or Assembled Array.

1.29.  "Collaboration Field" means the field of Zip Code Chemistry used in
       combination with Assembled Arrays.

1.30.  "Nucleic Acid Analysis Field" means the field of characterization of a
       nucleic acid sample including but not limited to the determination of the
       relative abundance of the nucleic acid, all or part of a sequence of the
       nucleic acid, or variations in the sequence of the nucleic acid. The
       Nucleic Acid Analysis Field excludes the Collaboration Field.

1.31.  "Joint Development Program" means the collaborative development and
       commercialization program to be conducted by Illumina and PEB as defined
       herein.

1.32.  "Confidential Information" means confidential knowledge, know-how,
       practices, processes, equipment, or other information that:

       (A)  is disclosed by a Party in a tangible form and is clearly labeled as
            confidential or proprietary at the time of disclosure; or,

       (B)  is disclosed by a Party in nontangible form, and is summarized in a
            writing that is delivered to the other Party within 30 days after
            disclosure; or,

       (C)  is disclosed by a Party under circumstances in which a reasonable
            person would understand that such information is confidential and
            proprietary to the disclosing Party.

       Notwithstanding (A), (B), and (C) immediately above, Confidential
       Information will not include, and nothing in Section 7 will in any way
       restrict the rights of either Illumina or PEB to use, disclose or
       otherwise

                                       6
<PAGE>

       deal with, any information that:

       (A)  was in the public domain as of the Effective Date or comes into the
            public domain during the term of this Agreement through no act of
            the receiving Party; or,

       (B)  was independently known to the receiving Party prior to the receipt
            thereof, or made available to the receiving Party as a matter of
            lawful right by a third party; or,

       (C)  is independently conceived, invented or acquired by the receiving
            Party by persons who were not exposed to the information.

2.  Exclusivity; Costs; Diligence

    2.1.  Exclusivity. Except as may be expressly permitted herein, during the
          -----------
          term of this Agreement neither Party nor its Affiliates will design,
          develop, manufacture, market, sell, distribute or service any
          Collaboration Product within the Collaboration Field except in
          accordance with the terms and conditions of this Agreement.

    2.2.  Responsibility for Costs. Except as provided in Section 3.7, each
          ------------------------
          Party will be responsible for its own costs and expenses in connection
          with its activities in furtherance of the Joint Development Program.

    2.3.  Diligence. The Parties will use commercially reasonable efforts to
          ---------
          conduct the Joint Development Program in accordance with the terms and
          conditions of this Agreement.

3.  Development of Collaboration Product

    3.1.  Responsibilities. In consultation with Illumina, PEB will have primary
          ----------------
          responsibility for definition of Collaboration Product, and
          development of Instruments and Reagents. In consultation with PEB,
          Illumina will have primary responsibility for development of Assembled
          Arrays. Illumina and PEB will share responsibility for development of
          particular assays to be used in conjunction with Collaboration
          Product. Primary responsibilities may be reallocated by the Joint
          Steering Committee.

    3.2.  Information Exchange. The Parties will keep each other informed with
          --------------------
          respect to all activities directly related to the Joint Development
          Program, including without limitation access to design plans and
          drawings, specifications, engineering change orders, software,
          supplier information, nucleic acid sequences, processes, materials,
          and chemistries directly related to Collaboration Product. Both
          Parties will participate in engineering milestone reviews for
          Collaboration Product.

                                       7
<PAGE>

    3.3.  Work Plan. Development of Collaboration Product may be conducted by
          ---------
          the Parties in accordance with a Work Plan The Work Plan may be
          modified as required from time to time by the Joint Steering
          Committee.

    3.4.  Development Teams.  Each Party will assign personnel to its
          -----------------
          development team with the appropriate skills and experience to
          accomplish the work established in the Work Plan. It is expected that
          such teams will work together to accomplish the objectives of the
          Joint Development Program including, if appropriate, conducting
          efforts at the same facility.

    3.5.  Exchange of Instruments, Reagents and Assembled Arrays for Internal
          -------------------------------------------------------------------
          Use Within the Collaboration Field.
          ----------------------------------

          3.5.1. Provision of Instruments and Reagents to Illumina. PEB will
                 -------------------------------------------------
                 provide Instruments and Reagents to Illumina, as such
                 Instruments and Reagents become available to PEB, for
                 Illumina's internal use in furtherance of the Joint Development
                 Program and not for resale, services, or other use except as
                 provided in Section 3.6. The number of Instruments and the
                 quantity of Reagents so provided will be determined by the
                 Joint Steering Committee.

          3.5.2. Provision of Assembled Arrays to PEB. Illumina will provide
                 ------------------------------------
                 Assembled Arrays to PEB, as such Assembled Arrays become
                 available to Illumina, for PEB's internal use in furtherance of
                 the Joint Development Program and not for resale, services, or
                 other use except as provided in Section 3.6. The number of
                 Assembled Arrays so provided will be determined by the Joint
                 Steering Committee.

    3.6.  Early Access Program. Illumina and PEB may manage the release of Beta
          --------------------
          Prototype Instrument through an Early Access Program. Illumina will,
          in consultation with PEB, have the primary responsibility for
          identifying participants in the Early Access Program. Illumina will
          receive any income derived from the Early Access Program. Illumina
          will reimburse PEB for PEB's direct manufacturing and support costs
          relating to the provision of Beta Prototype Instrument and any
          associated Reagents used in the Early Access Program to the extent
          that PEB's expenses do not exceed Illumina's income. No more than [*]
          Beta Prototype Instruments will be provided for use in the Early
          Access Program. At the conclusion of the Early Access Program, all
          Beta Prototype Instruments will be returned to PEB. Unless otherwise
          agreed to by the Parties in writing, the term of the Early Access
          Program will end upon the New Product Release of the relevant
          Instrument. Except, in no event will the term of the Early Access
          Program be less than 6 months from the time at which each Beta
          Prototype Instrument first become available.

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                                       8
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    3.7.  Development Funding to Illumina. PEB [*] to Illumina [*] in
          -------------------------------
          development funding to be used by Illumina to partially finance
          Illumina's activities in furtherance of the Joint Development Program.
          The [*] will be paid out to Illumina according to the schedule and
          conditions set forth in Exhibit 1. If the conditions are not achieved
          by Illumina on schedule as set forth in Exhibit 1, development funding
          will accrue according to the schedule. At such time as Illumina
          achieves the conditions set forth in Exhibit 1 and provided that the
          Agreement has not been terminated, PEB will pay Illumina all accrued
          development funding and continue paying future development funding
          according to the schedule set forth in Exhibit 1. PEB [*] for such
          development funding [*] for a given Quarter as set forth in Section
          4.3.

4.  Commercialization of Collaboration Product

    4.1.  Responsibilities.
          ----------------

          4.1.1.  Manufacture of Assembled Arrays. Assembled Arrays will be
                  -------------------------------
                  exclusively manufactured by Illumina or its designate in
                  consultation with PEB and transferred to PEB as provided under
                  Section 4.2.

          4.1.2.  Manufacture of Instruments and Reagents. Instruments and
                  ---------------------------------------
                  Reagents will be exclusively manufactured by PEB or its
                  designate in consultation with Illumina. Subject to any
                  required licenses, Illumina may manufacture oligonucleotides
                  for its internal use within the Collaboration Field. For the
                  avoidance of doubt, it is understood by Illumina that no
                  rights under PEB DNA Synthesis and Purification Patents are
                  granted by this Agreement, either expressly, impliedly, or by
                  estoppel.

          4.1.3.  Marketing, Sales and Support. Collaboration Product will be
                  ----------------------------
                  exclusively marketed, sold and supported (including service,
                  customer training and application support) through the
                  marketing, sales and service organizations of PEB, its
                  Affiliates and distributors, in accordance with a marketing
                  plan to be developed by PEB in consultation with Illumina.
                  Budgets for marketing, sales, and support activities relating
                  to Collaboration Product will be subject to the approval of
                  the Joint Steering Committee. Unless decided otherwise by the
                  Joint Steering Committee, Sales and Marketing Cost will be at
                  least 15% of annual Net Sales but no more than 30% of annual
                  Net Sales. Marketing literature dedicated to Collaboration
                  Product will be marked so as to indicate that the

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                                       9
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                  Collaboration Product is a product of both PEB and Illumina,
                  and PEB and Illumina will be referenced in the dedicated
                  marketing literature with equal prominence.

          4.1.4.  Ongoing Research and Development. After the New Product
                  --------------------------------
                  Release of a Collaboration Product, the Joint Steering
                  Committee may elect to support ongoing research and
                  development to improve the Collaboration Product. The
                  allocation of such research and development between Parties
                  will be decided by the Joint Steering Committee and reimbursed
                  to each Party pro rata to each Party's share of the research
                  and development expenses for such year.

     4.2  Transfer of Assembled Arrays to PEB for Resale by PEB.
          -----------------------------------------------------

          4.2.1.  Supply Agreement. Illumina will transfer to PEB Assembled
                  ----------------
                  Arrays for use in Collaboration Product used to generate Net
                  Sales. Prior to 90 days before a New Product Release of a
                  Collaboration Product, the Parties will enter into a supply
                  agreement to be negotiated in good faith between the Parties
                  which, consistent with this Agreement, will govern the
                  transfer of Assembled Arrays from Illumina to PEB. The supply
                  agreement will contain provisions which, in addition to
                  customary warranty, representations and indemnification
                  provisions, will set forth a commercially reasonable plan for
                  Illumina to supply Assembled Arrays to PEB in satisfaction of
                  PEB's reasonable requirements as to volume, cost, physical
                  specifications, regulatory requirements and schedule, and
                  obligate Illumina to provide technical support to PEB (but not
                  directly to PEB's customers).

          4.2.2.  Forecasts. Within 90 days prior to the date of a New Product
                  ---------
                  Release, and prior to the end of each calendar month
                  thereafter, PEB will submit to Illumina a 6 month rolling
                  forecast of PEB's estimated requirements for Assembled Arrays.
                  The forecast is an estimate only, and does not constitute an
                  order by PEB or any commitment by PEB to purchase the amount
                  of Assembled Arrays shown in the forecast. Any order of
                  Assembled Arrays by PEB will be in the form of a purchase
                  order. The Joint Steering Committee will determine an
                  appropriate level of inventory for Assembled Arrays based upon
                  forecasts and Illumina's demonstrated manufacturing capacity.
                  If the Joint Steering Committee elects to maintain more than 3
                  months of inventory of Assembled Arrays ("Excess Inventory"),
                  PEB will assume the financial burden for the Excess Inventory
                  by reimbursing Illumina for its Manufacturing Cost associated
                  with the Excess Inventory within 30 days of the date of
                  delivery by Illumina to PEB of the Excess Inventory.

                                       10
<PAGE>

         4.2.3.  Illumina Unwilling or Unable to Supply Assembled Arrays. If
                 -------------------------------------------------------
                 Illumina is unwilling or unable to supply Assembled Arrays to
                 PEB in accordance with this Section 4.2, or, if Illumina
                 refuses to negotiate in good faith with respect to entering
                 into such an agreement, the Assembled Arrays may be
                 manufactured by PEB or its designate, under the conditional no
                 exclusive license set forth in Section 6.3.3, and subject to
                 the payment obligations of Section 4.3. Illumina will provide
                 PEB reasonable assistance with respect to PEB's or its
                 designate's manufacture of Assembled Arrays, including the
                 transfer of know-how and documentation directly related to
                 manufacture of Assembled Arrays.

     4.3.  Value Sharing. After first reimbursing each Party's Manufacturing
           -------------
           Cost, next reimbursing each Party's Sales and Marketing Costs and
           then reimbursing each Party's Ongoing R&D Costs, PEB will pay
           Illumina [*] of Residual Gross Margin of Collaboration Product sold
           by PEB, its Affiliates, and distributors ("Illumina Share"), less
           monies owed to PEB for reimbursement of development funding provided
           to Illumina under Section 3.7. The balance of Gross Margin will be
           retained by PEB. If Residual Gross Margin becomes negative in any
           Quarter, PEB will accrue such losses. These accrued losses will be
           repaid to PEB from future Illumina Share before any future Residual
           Gross Margin is paid to Illumina. Illumina Share will be paid to
           Illumina as set forth in Sections 4.3.1, 4.3.2, 4.3.3, and 13.4.

           4.3.1.  Payment to Illumina of Actual Illumina Share. At the end of
                   --------------------------------------------
                   each Quarter in which Net Sales are realized ("Revenue
                   Quarter"), PEB will pay to Illumina the actual Illumina Share
                   earned for that Quarter.

           4.3.2.  Pre-payment to Illumina of Estimated Illumina Share.
                   ---------------------------------------------------
                   Beginning with the second Revenue Quarter, and for each
                   Quarter thereafter, in addition to payment to Illumina of the
                   actual Illumina Share for the previous Quarter under Section
                   4.3.1, PEB will pay to Illumina an estimated Illumina Share
                   for the Quarter. The amount of the estimated Illumina Share
                   will be equal to the actual Illumina Share for the previous
                   Quarter. The estimated Illumina Share will be paid to
                   Illumina in equal monthly installments during the Quarter.

           4.3.3.  Reconciliation. At the end of the second Revenue Quarter, and
                   --------------
                   at the end of each Quarter thereafter, PEB will determine the
                   difference between the actual Illumina Share for that Quarter
                   and the estimated Illumina Share for that Quarter. Illumina
                   will be charged or credited depending on whether the
                   estimated Illumina Share represents an overpayment or an
                   underpayment, respectively, for that Quarter.

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                                       11
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     4.4.  Supply of Instruments to Illumina for Use by Illumina Outside of the
           --------------------------------------------------------------------
           Collaboration Field. PEB will supply Instruments to Illumina for use
           -------------------
           by Illumina outside of the Collaboration Field ("OEM Instruments")
           under a supply agreement to be negotiated in good faith between the
           Parties. Except as otherwise provided for in Section 4.4.1 or in the
           supply agreement, Illumina or its designate will be solely
           responsible for all marketing, sales and support (including without
           limitation service, customer training and application support) of OEM
           Instruments. The transfer price for OEM Instrument will be the lower
           of (i) [*] below the then-current list price or (ii) [*] below the
           average selling price charged for Instruments sold to non-affiliated
           third party purchasers during the preceding Quarter.

           4.4.1.  OEM Instrument for Use Inside the Nucleic Acid Field.
                   ----------------------------------------------------
                   [*]

           4.4.2.  PEB Unwilling or Unable to Supply OEM Instruments. If PEB is
                   -------------------------------------------------
                   unwilling or unable to supply OEM Instrument to Illumina in
                   accordance with this Section 4.4, or, if PEB refuses to
                   negotiate in good faith with respect to entering into such an
                   agreement [*] and subject to the royalty obligations of
                   Section 6.3.8. PEB will provide Illumina reasonable
                   assistance with respect to Illumina's or its designate's
                   manufacture of OEM Instruments, including the transfer of
                   know-how and documentation directly related to manufacture of
                   OEM Instruments.

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                                       12
<PAGE>

5.   Joint Steering Committee

     5.1.  Purpose. A joint steering committee will be established to oversee
           -------
           the Joint Development Program established by this Agreement ("Joint
           Steering Committee"). The duties of the Joint Steering Committee will
           include, but not be limited to, the following:

           (A)  oversight of all aspects of the Joint Development Program,
                including definition, development, manufacturing (supply),
                marketing, sales, and support of Collaboration Product;

           (B)  implementation of changes to the Work Plan;

           (C)  approval of annual sales and marketing budgets for Sales and
                Marketing Cost;

           (D)  approval and allocation of annual budgets for Ongoing R&D Cost;

           (E)  allocation of Instruments, Assembled Arrays, and Reagents to
                Affiliates should either be in limited supply;

           (F)  organization of development teams and oversight of their
                activities;

           (G)  review of forecasts for Net Sales of Collaboration Products
                provided by PEB at least 90 days prior to New Product Release
                and Quarterly thereafter; and

           (H)  resolution of disputes arising under this Agreement as set forth
                in Section 5.4.

     5.2.  Membership. The Joint Steering Committee will be comprised of 3
           ----------
           employees from Illumina and 3 employees from PEB, appointed at the
           sole discretion of the respective Parties. Substitute employees may
           be appointed at any time. The Joint Steering Committee will be
           chaired in the first year by a senior representative from PEB, and
           thereafter on a rotating annual basis, by a senior representative
           from Illumina or PEB. The initial composition of the Joint Steering
           Committee will be as follows:

           For Illumina:   John R. Stuelpnagel
                           Mark S. Chee
                           Richard J. Pytelewski

           For PEB:        J. William Efcavitch
                           Dawn E. Madden

                                       13
<PAGE>

                           Elaine J. Heron

     5.3.  Meetings. The Joint Steering Committee will meet as often as is
           --------
           reasonably necessary to accomplish its purpose but at least
           quarterly, on a mutually agreeable date and at a place selected
           initially by PEB and then by each Party in turn thereafter.
           Representatives of Illumina or PEB, or both, in addition to members
           of the Joint Steering Committee, may attend such meetings at the
           invitation of either Party.

     5.4.  Joint Steering Committee Decisions and Dispute Resolution. Decisions
           ---------------------------------------------------------
           by the Joint Steering Committee will be made by consensus. If the
           Joint Steering Committee is unable to reach agreement, within 10
           business days the matter will be submitted for resolution to the
           President of Illumina and the President of the PE Biosystems Group.
           In the event that the Presidents of each Party cannot reach agreement
           within 10 business days after receiving notice from the Joint
           Steering Committee, which period may be extended by mutual agreement
           of the Parties, then either Party may initiate arbitration in
           accordance with the rules and procedures set forth in Exhibit 2.

     5.5.  Expenses. The Parties will each bear all expenses of their respective
           --------
           members related to their participation on the Joint Steering
           Committee.

6.  Intellectual Property; Patent Prosecution and Litigation; Licenses;
    Trademarks

     6.1.  Ownership of Intellectual Property.
           ----------------------------------

           6.1.1.  Pre-Collaboration Illumina Intellectual Property and
                   ----------------------------------------------------
                   Collaboration Illumina Intellectual Property. All rights and
                   --------------------------------------------
                   title to Pre-Collaboration Illumina Intellectual Property and
                   Collaboration Illumina Intellectual Property, whether
                   patentable or copyrightable or not, will belong to Illumina
                   and will be subject to the terms and conditions of this
                   Agreement.

           6.1.2.  Collaboration Joint Intellectual Property. All rights and
                   -----------------------------------------
                   title to Collaboration Joint Intellectual Property, whether
                   patentable or copyrightable or not, will belong jointly to
                   PEB and Illumina and will be subject to the terms and
                   conditions of this Agreement. Each Party will have the right
                   to independently practice the Collaboration Joint
                   Intellectual Property, without accounting to the other Party,
                   only to the extent that the practice of the Collaboration
                   Joint Intellectual Property by PEB does not require rights
                   under Pre-Collaboration Illumina Intellectual Property,
                   Collaboration Illumina Intellectual Property, or any other
                   Intellectual Property Rights owned by, either partially or
                   wholly, or licensed to Illumina

                                       14
<PAGE>

                   (subject to Sections 6.3.1, 6.3.2, and 6.3.3), and that
                   practice of the Collaboration Joint Intellectual Property by
                   Illumina does not require rights under Pre-Collaboration PEB
                   Intellectual Property, Collaboration PEB Intellectual
                   Property, or any other Intellectual Property Rights owned by,
                   either partially or wholly, or licensed to PEB (subject to
                   Sections 6.3.5, 6.3.6 and 6.3.7). Additionally, each Party
                   will have the right but not the obligation to bring, at its
                   own expense, an infringement action against any third party
                   under its interest in Joint Collaboration Intellectual
                   Property, subject to the same limitations set forth above
                   with respect to the practice of the Joint Collaboration
                   Intellectual Property by Illumina or PEB. The Parties will
                   assist one another and cooperate in any such litigation at
                   the other's reasonable request, and, if a Party is necessary
                   in order to institute or maintain an infringement suit by the
                   other Party as defined by law, that Party agrees to be joined
                   in the suit.

           6.1.3.  Pre-Collaboration PEB Intellectual Property and Collaboration
                   -------------------------------------------------------------
                   PEB Intellectual Property. All rights and title to Pre-
                   -------------------------
                   Collaboration PEB Intellectual Property and Collaboration PEB
                   Intellectual Property, whether patentable or copyrightable or
                   not, will belong to PEB and will be subject to the terms and
                   conditions of this Agreement.

     6.2.  Filing of Patent Applications.
           ------------------------------

           6.2.1.  Collaboration Illumina Intellectual Property. Illumina will
                   --------------------------------------------
                   have the first right, using in-house or outside legal counsel
                   selected by Illumina's sole discretion, to prepare, file,
                   prosecute, maintain and extend patent applications for
                   Collaboration Illumina Intellectual Property in countries of
                   Illumina's choosing. Illumina will bear all costs relating to
                   such activities. Illumina will solicit PEB's advice and
                   review of the patent applications, and Illumina will take
                   into consideration PEB's advice thereon. If Illumina elects
                   not to prepare, file, prosecute or maintain certain of the
                   patent applications or certain claims encompassed within the
                   patent applications, in one or more countries, Illumina will
                   give PEB notice thereof within a reasonable period prior to
                   allowing the patents or claims to lapse or become abandoned
                   or unenforceable, and PEB will thereafter have the right, at
                   its sole expense and discretion, to prepare, file, prosecute,
                   and maintain the patent applications in the name of PEB in
                   the one or more countries. Illumina will, at Illumina's
                   expense, assign the patent applications to PEB and provide
                   reasonable assistance to PEB to facilitate the filing and
                   prosecution of all the patent applications that Illumina has
                   elected not to pursue, and Illumina will execute all
                   documents

                                       15
<PAGE>

                   deemed necessary or desirable therefor. Subject to any future
                   license agreement between the Parties, PEB will provide to
                   Illumina a royalty-free non-exclusive license, with right to
                   sublicense, under all the patent applications that Illumina
                   has elected not to pursue and PEB has elected to pursue under
                   this Section 6.2.1. If claims describing Collaboration
                   Illumina Intellectual Property are combined in a patent
                   application with claims describing Pre-Collaboration Illumina
                   Intellectual Property, PEB's rights under this Section 6.2.1
                   will be limited to those claims describing Collaboration
                   Illumina Intellectual Property. PEB and Illumina will each
                   hold all information it presently knows or acquires under
                   this Section 6.2.1 as Confidential Information in accordance
                   with Section 7.

           6.2.2.  Collaboration PEB Intellectual Property. PEB will have the
                   ---------------------------------------
                   first right, using in-house or outside legal counsel selected
                   by PEB's sole discretion, to prepare, file, prosecute,
                   maintain and extend patent applications for Collaboration PEB
                   Intellectual Property in countries of PEB's choosing. PEB
                   will bear all costs relating to such activities. PEB will
                   solicit Illumina's advice and review of the patent
                   applications, and PEB will take into consideration Illumina's
                   advice thereon. If PEB elects not to prepare, file, prosecute
                   or maintain certain of the patent applications or certain
                   claims encompassed within the patent applications, in one or
                   more countries, PEB will give Illumina notice thereof within
                   a reasonable period prior to allowing the patents or claims
                   to lapse or become abandoned or unenforceable, and Illumina
                   will thereafter have the right, at its sole expense and
                   discretion, to prepare, file, prosecute, and maintain the
                   patent applications in the name of Illumina in the one or
                   more countries. PEB will, at PEB expense, assign said patent
                   applications to Illumina and provide reasonable assistance to
                   Illumina to facilitate the filing and prosecution of all the
                   patent applications that PEB has elected not to pursue, and
                   PEB will execute all documents deemed necessary or desirable
                   therefor. Subject to any future license agreement between the
                   Parties, Illumina will provide to PEB a royalty-free non-
                   exclusive license, with right to sublicense, under all the
                   patent applications that PEB has elected not to pursue and
                   Illumina has elected to pursue under this Section 6.2.2. If
                   claims describing Collaboration PEB Intellectual Property are
                   combined in a patent application with claims describing Pre-
                   Collaboration PEB Intellectual Property, Illumina's rights
                   under this Section 6.2.2 will be limited to those claims
                   describing Collaboration PEB Intellectual Property. PEB and
                   Illumina will each hold all information it presently knows or
                   acquires under this Section 6.2.2 as Confidential Information
                   in accordance with Section 7.

                                       16
<PAGE>

           6.2.3.  Collaboration Joint Intellectual Property. PEB and Illumina
                   -----------------------------------------
                   will jointly have the right, using in-house or outside legal
                   counsel selected by both Parties, to prepare, file,
                   prosecute, maintain and extend patent applications for
                   Collaboration Joint Intellectual Property in countries of the
                   Party's choosing. But, if the practice of the Collaboration
                   Joint Intellectual Property would necessarily infringe claims
                   of patents or patent applications claiming Pre-Collaboration
                   PEB Intellectual Property, the Collaboration Joint
                   Intellectual Property will, for the purposes of this Section
                   6.2.3 only, be treated as Collaboration PEB Intellectual
                   Property under Section 6.2.2; and, if the practice of the
                   Collaboration Joint Intellectual Property would necessarily
                   infringe claims of patents or patent applications claiming
                   Pre-Collaboration Illumina Intellectual Property, the
                   Collaboration Joint Intellectual Property will, for the
                   purposes of this Section 6.2.3 only, be treated as
                   Collaboration Illumina Intellectual Property under Section
                   6.2.1. If only one Party ("Filing Party") desires to file a
                   patent application in one or more countries, then the Filing
                   Party will thereafter have the right, at its sole expense, to
                   prepare, file, prosecute, and maintain the applications in
                   its own name in the one or more countries. The other Party
                   will, at its own expense, assign said patent applications to
                   the Filing Party and provide reasonable assistance to the
                   Filing Party to facilitate the filing and prosecution of all
                   the patent applications that the other Party has elected not
                   to pursue, and the other Party will execute all documents
                   deemed necessary or desirable therefor. The Filing Party will
                   provide to the other Party a royalty-free non-exclusive
                   license, with right to sublicense, under all the patent
                   applications that the other Party has elected not to pursue
                   and the Filing Party has elected to pursue under this Section
                   6.2.3. PEB and Illumina will each hold all information it
                   presently knows or acquires under this Section 6.2.3 as
                   Confidential Information in accordance with Section 7.

     6.3.  Licenses of Intellectual Property.
           ---------------------------------

           6.3.1.  Exclusive License to PEB for Instruments and Reagents.
                   -----------------------------------------------------
                   Subject to the exclusivity obligations of Section 2, payment
                   obligations under Section 4.3, and Illumina's reservation of
                   rights under Section 6.3.4, Illumina grants to PEB an
                   exclusive royalty-free license under Illumina's interest in
                   Subject Intellectual Property to make, have made, import,
                   use, offer to sell, and sell Instruments and Reagents in the
                   Collaboration Field.

           6.3.2.  Exclusive License to PEB for Assembled Arrays. Subject to the
                   ---------------------------------------------
                   exclusivity obligations of Section 2, payment obligations
                   under

                                       17
<PAGE>

                   Section 4.3, and Illumina's reservation of rights under
                   Section 6.3.4, Illumina grants to PEB an exclusive royalty-
                   free license under Illumina's interest in Subject
                   Intellectual Property to use, offer to sell, and sell
                   Assembled Arrays in the Collaboration Field.

           6.3.3.  Conditional Non-Exclusive License to PEB for Assembled
                   -------------------------------------------------------
                   Arrays. In the event that Illumina is unwilling or unable to
                   ------
                   supply Assembled Arrays to PEB under Section 4.2.3, or if
                   this Agreement is terminated by PEB under Section 11.2.2 and
                   subject to payment obligations under Section 4.3, Illumina
                   grants to PEB an exclusive royalty-free world-wide license
                   under Illumina's interest in Subject Intellectual Property to
                   make, have made, and import Assembled Arrays in the
                   Collaboration Field.

           6.3.4.  Illumina's Reservation of Rights. Notwithstanding the license
                   --------------------------------
                   grants of Sections 6.3.1, 6.3.2, and 6.3.3, Illumina retains
                   the right to use Instruments, Reagents, and Assembled Arrays
                   in the Collaboration Field for Illumina's internal use in
                   furtherance of the Joint Development Program and not for
                   resale, services or other use except as provided for in the
                   Early Access Program set forth in Section 3.6.

           6.3.5.  Non-Exclusive License to Illumina for Instruments. Subject to
                   -------------------------------------------------
                   the distribution restrictions of Section 4.4.1, PEB grants to
                   Illumina a non-exclusive royalty-free world-wide license
                   under PEB's interest in Subject Intellectual Property to use,
                   offer to sell, and sell Instruments outside of the
                   Collaboration Field.

           6.3.6.  Conditional Non-Exclusive License to Illumina for
                    -------------------------------------------------
                   Instruments. Subject to the royalty obligation of Section
                   -----------
                   6.3.8, and in the event that PEB is unwilling or unable to
                   supply OEM Instrument to Illumina under Section 4.4.2, or if
                   this Agreement is terminated by Illumina under Section
                   11.2.2, PEB grants to Illumina a non-exclusive royalty-
                   bearing world-wide license under PEB's interest in Subject
                   Intellectual Property to make, have made, and import,
                   Instruments outside of the Collaboration Field.

           6.3.7.  Non-Exclusive License to Illumina for Instruments Developed
                   -----------------------------------------------------------
                   Outside the Joint Development Program. Subject to the royalty
                   -------------------------------------
                   obligation of Section 6.3.8, PEB grants to Illumina a non-
                   exclusive royalty-bearing world-wide license under PEB's
                   interest in Collaboration PEB Intellectual Property to make,
                   have made, use, import, offer to sell, and sell instruments
                   (other than Instruments) outside the Collaboration Field.

                                       18
<PAGE>

           6.3.8.  Royalties. Illumina will pay to PEB a royalty of [*] of Net
                   ---------
                   Sales of Instruments or other instruments sold or otherwise
                   disposed of under the non-exclusive license granted to
                   Illumina under Section 6.3.6 or 6.3.7.

           6.3.9.  No rights other than those expressly granted in this Section
                   6.3 are hereby granted or intended to be granted to or by
                   either Party, either expressly, impliedly, or by estoppel,
                   under Subject Intellectual Property, or any other
                   Intellectual Property Rights, of either Party.

     6.4.  Interfering Third Party Intellectual Property. If a Party believes
           ---------------------------------------------
           that any activities within the Joint Development Program infringe any
           Intellectual Property Rights of a third party, that Party will
           promptly notify the other Party, and the Joint Steering Committee
           will seek to agree upon the appropriate response to be taken.

     6.5.  Patent Litigation.
           -----------------

           6.5.1.  Defense Against Third Party Claims. In the event of the
                   ----------------------------------
                   institution of any suit by a third party against Illumina or
                   PEB alleging that the manufacture, use, sale, distribution or
                   marketing of Collaboration Product infringes a third party
                   patent, the Party sued will promptly notify the other Party
                   in writing. The other Party will have the right but not the
                   obligation to defend or participate in the defense of such
                   suit at its own expense. Illumina and PEB will assist one
                   another and cooperate in any such litigation at the other's
                   reasonable request without expense to the requesting Party.
                   The Party conducting such action will have full control over
                   its conduct, including settlement thereof. But, no settlement
                   of an action will be made without the prior written consent
                   of the other Party if such settlement would adversely affect
                   the rights of the other Party, the consent not to be
                   unreasonably withheld or delayed.

           6.5.2.  Prosecution of Infringement Action. In the event that
                   ----------------------------------
                   Illumina or PEB becomes aware of actual or threatened
                   infringement of a patent resulting from Collaboration
                   Illumina Intellectual Property, Collaboration PEB
                   Intellectual Property, or Collaboration Joint Intellectual
                   Property, that Party will promptly notify the other Party in
                   writing. Either owner of a patent resulting from the
                   intellectual property will have the first right but not the
                   obligation to bring, at its own expense, an infringement
                   action against any third party and to use the other Party's
                   name in connection therewith. If an owner of the patent does
                   not commence a particular infringement action within 90 days,
                   the other Party, after

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                                       19
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                   notifying the owner in writing, will be entitled to bring the
                   infringement action at its own expense. The Party conducting
                   the action will have full control over its conduct, including
                   settlement thereof. But, no settlement of an action will be
                   made without the prior written consent of the other Party if
                   such settlement would adversely affect the rights of the
                   other Party, such consent not to be unreasonably withheld or
                   delayed. In any event, Illumina and PEB will assist one
                   another and cooperate in any such litigation at the other's
                   reasonable request without expense to the requesting Party,
                   and, if a Party is necessary in order to institute or
                   maintain an infringement suit by the other Party as defined
                   by law, that Party will join such suit, represented by its
                   own counsel.

           6.5.3.  Expenses. Illumina and PEB have the right to recover their
                    -------
                   respective actual out-of-pocket expenses, or proportionate
                   share thereof, in connection with any litigation or
                   settlement thereof from any recovery made by any Party. Any
                   excess amount will be shared between PEB and Illumina in an
                   amount proportional to their respective expenses.

           6.5.4.  Information. The Parties will keep one another reasonably
                   -----------
                   informed of the status of their respective activities
                   regarding any such litigation or settlement thereof.

     6.6.  Effect of Bankruptcy. All rights and licenses granted under this
           --------------------
           Agreement by one Party to the other Party are, and will irrevocably
           be deemed to be, "intellectual property" as defined in Section
           101(56) of Title 11, U.S. Code ("Bankruptcy Code"). In the event of
           the commencement of a case by or against either Party under any
           Chapter of the Bankruptcy Code, this Agreement will be deemed an
           executory contract and all rights and obligations hereunder will be
           determined in accordance with Section 365(n) thereof.

     6.7.  Trademarks and Non-Proprietary Names. The Joint Steering Committee,
           ------------------------------------
           at equally shared expense between each Party, will be responsible for
           the selection, registration and maintenance of all trademarks that it
           employs in connection with Collaboration Product, and both Parties
           will own and control such trademarks jointly for use in the
           Collaboration Field. Nothing in this agreement will be construed as a
           grant of rights, by license or otherwise, to either Party to use any
           trademarks for any purpose other than co-promotion of Collaboration
           Product as provided in this Agreement. PEB, at its expense, will be
           responsible for the selection of non-proprietary names for
           Collaboration Product sold by PEB.

7.   Confidentiality and Non-Solicitation

                                       20
<PAGE>

     7.1.  Non-Disclosure. Because Illumina and PEB will be cooperating with
           --------------
           each other under this Agreement, each may reveal Confidential
           Information to the other. The Parties agree, by using the same degree
           of care as each uses for its own information of like importance, but
           not less than a reasonable degree of care, to hold in confidence any
           Confidential Information disclosed by the other Party hereunder, and
           not to disclose any Confidential Information to any third party
           without the express written consent of the other Party. Each Party
           will disclose Confidential Information only to its employees or
           agents who have a need to know. Each Party will use Confidential
           Information only for purposes of furthering the Joint Development
           Program. With respect to any Confidential Information that is
           revealed by a Party to the other Party, this confidentiality
           requirement will remain in force for a period of 5 years following
           the date the Confidential Information is revealed.

     7.2.  Responsibility over Employees and Agents. Each Party will assume
           ----------------------------------------
           individual responsibility for the actions and omissions of its
           respective employees, agents and assigns, and to inform same of the
           responsibilities for confidentiality under this Agreement, and to
           obtain their agreement to be bound in the same manner that the Party
           is bound.

     7.3.  Affiliates. Nothing herein will be construed as preventing either
           ----------
           Party from disclosing any information to an Affiliate of PEB or
           Illumina for the purpose of furthering the Joint Development Program,
           provided such Affiliate has undertaken a similar obligation of
           confidentiality with respect to the Confidential Information.

     7.4.  Bankruptcy. All Confidential Information disclosed by one Party to
           ----------
           the other will remain the intellectual property of the disclosing
           Party. The bankrupt or insolvent Party will, to the extent permitted
           by law, take all steps necessary or desirable to maintain the
           confidentiality of the other Party's Confidential Information and to
           ensure that the court or other tribunal maintain such information in
           confidence in accordance with the terms of this Agreement. In the
           event that a court or other legal or administrative tribunal,
           directly or through an appointed master, trustee or receiver, assumes
           partial or complete control over the assets of a Party to this
           Agreement based on the insolvency or bankruptcy of such Party, the
           bankrupt or insolvent Party will promptly notify the court or other
           tribunal

           (A)  that Confidential Information received from the other Party
                under this Agreement remains the property of the other Party;
                and,

           (B)  of the confidentiality obligations under this Agreement.

     7.5.  Publication. Neither PEB nor Illumina will submit for written or oral
           -----------
           publication any manuscript, abstract or the like that includes data
           or other

                                       21
<PAGE>

           information generated and provided by the other Party or otherwise
           developed by either Party under the Joint Development Program without
           first obtaining the prior written consent of the other Party, which
           consent will not be unreasonably withheld or delayed. If written
           consent or written denial is not provided by the other Party within
           90 days, the first Party will have the right to publish. But, the
           foregoing will not apply to customary literature that is prepared for
           marketing and sales purposes and that does not contain Confidential
           Information.

     7.6.  Publicity. Neither Party nor any of its Affiliates will originate any
           ---------
           news relating to this Agreement without the prior written approval of
           the other Party, which approval will not be unreasonably withheld or
           delayed. However, within 30 days after the execution of this
           Agreement the Parties will mutually agree on a joint press release
           announcing the existence of this Agreement.

     7.7.  Compliance with Statutory Requirements. Nothing in this Agreement
           --------------------------------------
           will be construed as preventing or in any way inhibiting either Party
           from complying with statutory or regulatory requirements governing
           the development, manufacture, use, sale, or other distribution, of
           Collaboration Product in any manner that it reasonably deems
           appropriate, including, for example, by disclosing to regulatory
           authorities Confidential Information or other information received
           from a Party or third parties. The Parties will take reasonable
           measures to assure that no unauthorized use or disclosure is made by
           others to whom access to such information is granted under this
           Section 7.7.

     7.8.  Non-Solicitation. During the term of the Agreement, and for a period
           ----------------
           of 1 year thereafter, a Party will not solicit any person who is
           employed by or is an exclusive consultant to the other Party, and
           directly involved with the Joint Development Collaboration to
           terminate that person's employment by or consultantcy to the other
           Party. As used herein, the term "solicit" will mean requesting,
           directly or indirectly, any employee or consultant to terminate his
           employment by or consultantcy to a Party.

8.   Representations, Warranties and Covenants

     Each Party represents, warrants and covenants to the other Party that:

           (A)  it has the corporate power and authority and legal right to
                enter into this Agreement and to perform its obligations
                hereunder;

           (B)  the execution and delivery of this Agreement and the performance
                of the transactions contemplated thereby have been duly
                authorized by all necessary corporate action of the Party;

                                       22
<PAGE>

           (C)  the execution and delivery of this Agreement and the performance
                by the Party of any of its obligations under this Agreement do
                not and will not:

                (1)  conflict with, or constitute a breach or violation of, any
                     other contractual obligation to which it is a party, any
                     judgment of any court or governmental body applicable to
                     the Party or its properties, or, to the Party's knowledge,
                     any statute, decree, order, rule or regulation of any court
                     or governmental agency or body applicable to the Party or
                     its properties, and

                (2)  require any consent or approval of any governmental
                     authority or other person;

           (D)  each Party will, to the best of its knowledge without
                undertaking a special investigation, disclose to the other Party
                any material adverse proceedings, claims or actions that arise
                that would materially interfere with that Party's performance of
                its obligations under this Agreement; and

           (E)  each Party's employees have executed or will execute agreements
                whereby all right, title and interest in any Intellectual
                Property Rights will be assigned to their respective employers.

9.  Indemnification

    9.1.  PEB's Indemnity. PEB will defend and indemnify Illumina against any
          ---------------
          judgement, damage, liability, loss, cost or other expense, including
          legal fees ("Liability"), resulting from any third-party claims made
          or proceedings brought against Illumina to the extent that the
          Liability arises from the following:

          (A)  PEB's negligent or willful act or omission in the manufacture,
               storage, handling, distribution, use or sale of Collaboration
               Product; or,

          (B)  from PEB's breach of any warranty set forth in Section 8.

    9.2.  Illumina's Indemnity. Illumina will defend and indemnify PEB against
          --------------------
          any Liability, resulting from any third-party claims made or
          proceedings brought against PEB to the extent that the Liability
          arises from the following:

          (A)  Illumina's negligent or willful act or omission in the
               manufacture, storage, handling, distribution, use or sale of
               Collaboration Product; or,

                                       23
<PAGE>

          (B)  from Illumina's breach of any warranty set forth in Section 8.

    9.3.  Notice; Choice of Attorney. A Party that intends to claim
          --------------------------
          indemnification under this Section 9 (the "Indemnitee") will promptly
          notify the other Party (the "Indemnitor") of any Liability in respect
          of which the Indemnitee intends to claim indemnification. The
          Indemnitor, after it determines that indemnification is required of
          it, will assume the defense and settlement thereof with counsel of its
          choice, reasonably satisfactory to the other Party. But, an Indemnitee
          will have the right to retain its own counsel, with the fees and
          expenses to be paid by the Indemnitor if Indemnitor does not assume
          the defense; or, if representation of such Indemnitee by the counsel
          retained by the Indemnitor would be inappropriate due to actual or
          potential differing interests between such Indemnitee and any other
          Party represented by counsel. The Indemnitee's failure to deliver
          notice to the Indemnitor within a reasonable time after the
          commencement of any such action, if prejudicial to Indemnitor's
          ability to defend the action, will relieve the Indemnitor of any
          liability to the Indemnitee under this Section 9, but the omission to
          deliver notice to the Indemnitor will not relieve it of any liability
          that it may have to any Indemnitee otherwise than under this Section
          9.

    9.4.  Consent Required. The indemnity provisions in this Section 9 will not
          ----------------
          apply to amounts paid in settlement of any Liability if the settlement
          is effected without the consent of the Indemnitor.

    9.5.  Cooperation. The Indemnitee under this Section 9, its employees and
          -----------
          agents, will cooperate fully with the Indemnitor and its legal
          representatives in the investigations of any action, claim or
          liability covered by this indemnification. In the event that each
          Party claims indemnity from the other and one Party is finally held
          liable to indemnify the other, the Indemnitor will additionally be
          liable to pay the reasonable legal costs and attorneys' fees incurred
          by the Indemnitee in establishing its claim for indemnity.

    9.6.  Limitation on Liability. In no event will either Party be liable to
          -----------------------
          the other for incidental, special, consequential, or punitive damages.

10. Quiet Period

    During the period beginning on the Effective Date and ending 6 months
    thereafter, and inside the Nucleic Acid Field, Illumina will not negotiate
    with, or enter into any agreement with, a third party with respect to the
    commercialization of Illumina Pre-Collaboration Intellectual Property,
    Illumina Collaboration Intellectual Property, or Illumina's interest in
    Collaboration Joint Intellectual Property.

                                       24
<PAGE>

11. Term and Termination

    11.1.  Term. Unless terminated earlier as provided herein, this Agreement
           ----
           will commence on the Effective Date and will remain in full force
           until the expiration of the last to expire Subject Patent.

    11.2.  Termination.
           -----------

           11.2.1. This Agreement may be terminated without cause by mutual
                   written agreement of the Parties, effective as of the time
                   specified in such written agreement.

           11.2.2. This Agreement may be terminated by either Party,

                   (A)  in the event the other Party files in any court or
                        agency under any statute or regulation of any state or
                        country, a petition in bankruptcy or insolvency or for
                        reorganization or for the appointment of a receiver or
                        trustee of the other Party or of its assets, or if the
                        other Party proposes a written agreement of composition
                        or extension of its debts, or if the other Party will be
                        served with an involuntary petition against it, filed in
                        any insolvency proceeding, and the petition is not
                        dismissed within 60 days after the filing thereof, or if
                        the other Party will propose or be a Party to any
                        dissolution or liquidation, or if the other Party will
                        make an assignment for the benefit of creditors; or

                   (B)  upon any material breach of this Agreement by the other
                        Party; except that,

                        (1)  the Party alleging such breach must first give the
                             other Party written notice thereof, which notice
                             must state the nature of the breach in reasonable
                             detail and the other Party must have failed to cure
                             such alleged breach within 60 days after receipt of
                             the notice; and

                        (2)  the Party alleging the breach terminates the
                             Agreement within 1 year of first giving the other
                             Party such written notice.

           11.2.3  Survival of Obligations. Upon any termination of this
                   -----------------------
                   Agreement, by expiration of the term or otherwise, neither
                   Party will be relieved of any obligations incurred prior to
                   such termination. Despite any termination of this Agreement,
                   the obligations of the Parties under Sections 4.4, 6.1, 7, 8,
                   9, 11.2.3, and 13, as well as

                                       25
<PAGE>

                any other provisions that by their nature are intended to
                survive any termination, will survive and continue to be
                enforceable. With respect to the survival of licenses granted in
                Section 6.3,

             (A)  if termination of this Agreement is by PEB under Section
                  11.2.2, licenses granted to PEB under Section 6.3 will survive
                  termination of this Agreement only to the extent that the
                  licenses relate to Collaboration Product that has reached New
                  Product Release prior to such material breach; or

             (B)  if termination of this Agreement is by Illumina under Section
                  11.2.2, licenses granted to Illumina under Section 6.3 will
                  survive termination.

     11.2.4  Refund of Unused Development Funding. In the event that the
              ------------------------------------
     Agreement is terminated by PEB under Section 11.2.2, Illumina will refund
     to PEB any portion of development funding given to Illumina under Section
     3.7 that is unspent at the time of termination.

12.  Use of Collaboration Product by PEB or Affiliates

     In the event that PEB or an Affiliate of PEB uses Collaboration Product to
     supply services or information to a third party for commercial purposes,
     PEB shall make such Collaboration Product available for sale to third
     parties on commercially reasonable terms and without restriction, by way of
     license or otherwise, on the ability of such customers to themselves use
     such Collaboration Product to supply services or information to third
     parties for commercial purposes.  An Affiliate of a Party who desires to
     purchase or use Collaboration Product will not receive (i) any preferences
     over and above those granted to preferred third-party customers with
     respect to price of, the use of, or access to Collaboration Product, or
     (ii) any rights under  Collaboration Illumina Intellectual Property,
     Collaboration Joint Intellectual Property, or Collaboration PEB
     Intellectual Property, beyond those  granted to third party customers with
     the sale of Collaboration Product.

13.  General Provisions

     13.1.  Force Majeure. If the performance of any part of this Agreement by
            -------------
            either Party, or of any obligation under this Agreement, is
            prevented, restricted, interfered with or delayed by reason of any
            cause beyond the reasonable control of the Party liable to perform,
            unless conclusive evidence to the contrary is provided, the Party so
            affected will, upon giving written notice to the other Party, be
            excused from the performance to the extent of the prevention,
            restriction, interference or delay; provided, however, the affected
            Party will use its reasonable best efforts to avoid or remove the

                                       26
<PAGE>

            causes of non-performance and will continue performance with the
            utmost dispatch whenever the causes are removed. When the
            circumstances arise, the Parties will discuss what, if any,
            modification of the terms of this Agreement may be required in order
            to arrive at an equitable solution.

     13.2.  Governing Law. This Agreement will be deemed to have been made in
            -------------
            the State of California and its form, execution, validity,
            construction and effect will be determined in accordance with the
            laws of the State of California.

     13.3.  Books and Records. Using a Party's customary practices and
            -----------------
            procedures in accordance with GAAP, each Party will keep and
            maintain proper and complete records and books of account sufficient
            in detail to enable the verification of monies spent and received by
            each Party in connection with each Party's obligations under this
            Agreement. The books and records will be retained for a period of at
            least 6 years. Each Party will provide to the other Party detailed
            quarterly statements for monies spent and received by each Party in
            connection with each Party's obligations under this Agreement. Each
            Party will have the right from time to time (not to exceed once
            during each calendar year) during normal business hours and upon
            reasonable notice to inspect in confidence, or have an agent,
            accountant or other representative inspect in confidence, the books
            and records. The Party initiating the inspection will bear the costs
            thereof unless the inspection reveals a discrepancy unfavorable to
            that Party of at least 10%, in which case the other Party will pay
            the costs of the inspection. If the inspection results in a final
            determination that amounts have been overstated or understated, the
            applicable amount will be refunded or paid promptly by the
            appropriate Party.

     13.4.  Payments. All payments due under this Agreement will be due 30 days
            --------
            following the start or end, as the case may be, of the relevant
            Quarter. All payments under this Agreement will be made in United
            States dollars by wire transfer to a bank account designated by the
            Party receiving the payment, without deductions of taxes charges and
            any other duties that may be imposed. For converting payments due on
            sales made in currencies other than United States dollars into
            United States dollars, the payments will be converted at the closing
            commercial sell rate of exchange for United States dollars and each
            currency involved as quoted by Citibank, N.A., or any successor
            thereto, in New York on the last business day of the relevant
            period.

     13.5.  Severability. If a court or an arbitrator of competent jurisdiction
            ------------
            holds any provision of this Agreement to be illegal, unenforceable,
            or invalid, in whole or in part for any reason, the validity and
            enforceability of the remaining provisions, or portions thereof,
            will not be affected.

                                       27
<PAGE>

     13.6.  Entire Agreement. This Agreement and the Equity Agreement, and
            ----------------
            exhibits, and schedules referred to in this Agreement constitute the
            final, complete, and exclusive statement of the terms of the
            agreement between the Parties pertaining to the subject matter of
            this Agreement and supersedes all prior and contemporaneous
            understandings or agreements of the Parties. However, confidential
            disclosures made under previously executed Confidentiality
            Agreements between Illumina and PEB will remain subject to the terms
            of those Confidentiality Agreements. No Party has been induced to
            enter into this Agreement by, nor is any Party relying on, any
            representation or warranty outside those expressly set forth in this
            Agreement.

     13.7.  Modification of Agreement. No terms or conditions of this Agreement
            -------------------------
            will be varied or modified by any prior or subsequent statement,
            conduct or act of either of the Parties, except that the Parties may
            supplement, amend, or modify this Agreement by written instruments
            specifically referring to and executed in the same manner as this
            Agreement.

     13.8.  Assignment. Neither Party has the power to assign this Agreement nor
            ----------
            any interest hereunder without the written consent of the other
            Party. Except that either Party may assign this Agreement or any of
            its rights or obligations to any Affiliate or to any third party
            with which it may merge or consolidate, or to which it may transfer
            all or substantially all of its assets to which this Agreement
            relates, without obtaining the consent of the other Party.

     13.9.  Construction.
            ------------

            13.9.1.  Headings; Sections and Exhibits. Headings contained in this
                     -------------------------------
                     Agreement are for convenience only and will not be used in
                     the interpretation of this Agreement. References herein to
                     sections and exhibits are to the sections and exhibits,
                     respectively, of this Agreement. The exhibits are hereby
                     incorporated herein by reference and made a part of this
                     Agreement. Should any inconsistency exist or arise between
                     a provision of this Agreement and a provision of any
                     exhibit, schedule, or other incorporated writing, the
                     provision of this Agreement will prevail.

            13.9.2.  No Construction Against Drafter. Each Party and its counsel
                     -------------------------------
                     have participated fully in the review and revision of this
                     Agreement. Any rule of construction to the effect that
                     ambiguities are to be resolved against the drafting Party
                     will not apply in interpreting this Agreement.

            13.9.3.  Certain Words and Terms. Unless the context clearly
                      ----------------------
                     requires otherwise,

                                       28
<PAGE>

                     (A)  the plural and singular numbers will each be deemed to
                          include the other;

                     (B)  the masculine, feminine, and neuter genders will each
                          be deemed to include the others;

                     (C)  "will," "will agree," or "agrees" are mandatory, and
                          "may" is permissive;

                     (D)  "or" is not exclusive; and

                     (E)  "includes" and "including" are not limiting.

    13.10.  Counterparts. This Agreement may be executed in any number of
            ------------
            counterparts, and each counterpart will be deemed an original
            instrument, but all counterparts together will constitute but one
            agreement.

    13.11.  Notices.
            -------

            13.11.1.  Sufficient Notice. All notices, requests, demands, or
                      -----------------
                      other communications under this Agreement will be in
                      writing. Notice will be sufficiently given for all
                      purposes as follows:

           (A)  when personally delivered to the recipient, notice is effective
                on delivery;

           (B)  when mailed certified mail, return receipt requested, notice is
                effective on receipt, if delivery is confirmed by a return
                receipt;

           (C)  when delivered by Federal Express/Airborne/United Parcel
                Service/DHL WorldWide, or United States Express Mail, charges
                prepaid or charged to the sender's account, notice is effective
                on delivery, if delivery is confirmed by the delivery service;
                and

           (D)  when sent by telex or fax to the last telex or fax number of the
                recipient known to the Party giving notice, notice is effective
                on receipt, provided that

               (1)  a duplicate copy of the notice is promptly given by first-
                    class or certified mail or by overnight delivery, or

               (2)  the receiving Party delivers a written confirmation of
                    receipt. Any notice given by telex or fax will be deemed
                    received on the next business day if it is received after
                    5:00 p.m. (recipient's time) or on a nonbusiness day.

                                       29
<PAGE>

            13.11.2.  Notice Refused, Unclaimed, Or Undeliverable. Any correctly
                      -------------------------------------------
                   addressed notice that is refused, unclaimed, or undeliverable
                   because of an act or omission of the Party to be notified
                   will be deemed effective as of the first date that said
                   notice was refused, unclaimed, or deemed undeliverable by the
                   postal authorities, messenger, or overnight delivery service.

            13.11.3.  Addresses. Addresses for purpose of giving notice are as
                      ---------
                   follows:

            If to Illumina:                 Illumina, Inc.
                                            9390 Towne Centre Drive, Suite 200
                                            San Diego, CA 92121-3015
                                            FAX No.: 858-587-4297
                                            Attn.: President

            If to PEB                       PE Biosystems
                                            850 Lincoln Centre Drive
                                            Foster City, CA 94404
                                            FAX No.: 650-638-6677
                                            Attn.: President, PE Biosystems

[Signature Page Follows]

                                       30
<PAGE>

The Parties , through their authorized officers, have executed this Agreement as
of the Effective Date.

ILLUMINA, INC.                          PE CORPORATION, THROUGH ITS PE
                                        BIOSYSTEMS GROUP

By: _______________________________     By: _______________________________

Name: _____________________________     Name: _____________________________

Title: ____________________________     Title: ____________________________

Date: _____________________________     Date: _____________________________

                                       31
<PAGE>

                                   EXHIBIT 1

                 Technical Milestones and Development Funding
                 --------------------------------------------

                              Technical Milestones

                                      [*]

____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                       1
<PAGE>

                              Development Funding

                                      [*]

____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                       2
<PAGE>

                                   EXHIBIT 2

                         Alternative Dispute Resolution

In the event of any dispute, difference or question arising between the Parties
in connection with this Agreement, the construction thereof, or the rights,
duties or liabilities of either Party excluding any dispute or controversy for
which arbitration is prohibited by any applicable law or treaty, and which
dispute is not amicably resolved by the good faith efforts of the Parties under
Section 5.4, then such dispute will be resolved by binding Alternative Dispute
Resolution ("ADR") in the manner described below:

1)  If any Party intends to begin an ADR to resolve a dispute, such Party will
    provide written notice to counsel for the other Party informing the other
    Party of such intention and the issues to be resolved. Within 10 business
    days after the receipt of such notice, the other Party may by written notice
    to the counsel for the Party initiating ADR, add additional issues to be
    resolved. From the date of receipt of the ADR notice and until such time as
    any matter has been finally settled by ADR, the running of the time periods
    in which a Party must cure a breach of this Agreement will be suspended as
    to the subject matter of the dispute.

2)  Within 5 business days following the receipt of the original ADR notice
    ("Notice Date") a neutral will be selected by the then President of the
    Center for Public Resources ("CPR"), 14th Floor, 366 Madison Avenue, New
    York, New York 10017. The neutral will be an individual who will preside in
    resolution of any disputes between the Parties. The neutral selected will be
    a member of the Judicial Panel of the CPR and will not be an employee,
    director or shareholder of either a Party or of an Affiliate of either
    Party.

3)  Each Party will have 10 business days from the date the neutral is selected
    to object in good faith to the selection of that person. If either Party
    makes such an objection, the then president of the CPR will as soon as
    possible thereafter, select another neutral under the same conditions set
    forth above. This second selection will be final.

4)  No later than 90 business days after selection, the neutral will hold a
    hearing to resolve each of the issues identified by the Parties.

    a)  Each Party will have the right to be represented by counsel at the
        hearing.

    b)  The hearing will be held at such place as agreed upon by the Parties or
        if they are unable to agree at a place designated by the neutral.

5)  The ADR proceeding will be confidential and the neutral will issue
    appropriate protective orders to safeguard each Parties' Confidential
    Information. Except as required by law, no Party will make (or instruct the
    neutral to make) any public

                                       1
<PAGE>

    announcement with respect to the proceedings or decision of the neutral
    without the prior written consent of each other Party. The existence of any
    dispute submitted to ADR, and the award of the neutral, will be kept in
    confidence by the Parties and the neutral, except as required in connection
    with the enforcement of such award or as otherwise required by applicable
    law.

6)  It is the intention of the Parties that discovery, although permitted as
    described herein, will be limited except in exceptional circumstances. The
    neutral will permit such limited discovery necessary for an understanding of
    any legitimate issue raised in the ADR, including the production of
    documents. Each Party will be permitted but not required to take the
    deposition of not more than 5 persons, each such deposition not to exceed 6
    hours in length. If the neutral believes that exceptional circumstances
    exist, and additional discovery is necessary for a full and fair resolution
    of the issue, the neutral may order such additional discovery as the neutral
    deems necessary. At the hearing the Parties may present testimony (either by
    live witness or deposition) and documentary evidence. The neutral will have
    sole discretion with regard to the admissibility of any evidence and all
    other materials relating to the conduct of the hearing.

7)  Each Party will be entitled to no more than 4 hours of hearing to present
    testimony or documentary evidence. The testimony of both Parties will be
    presented during the same calendar day. Such time limitation will include
    any direct, cross or rebuttal testimony, but such time limitation will only
    be charged against the Party conducting such direct, cross or rebuttal
    testimony. It will be the responsibility of the neutral to determine whether
    the Parties have had the 4 hours to which they are entitled. If the neutral
    believes that exceptional circumstances exist, and additional hearing time
    is necessary for a full and fair resolution of the issue, the neutral may
    order such additional hearing time as the neutral deems necessary.

8)  At least 15 business days prior to the date set for the hearing, each Party
    will submit to each other Party and the neutral a list of all documents on
    which such Party intends to rely in any oral or written presentation to the
    neutral and a list of all witnesses, if any, such Party intends to call at
    such hearing and a brief summary of each witnesses testimony.

9)  At least 5 business days prior to the hearing, each Party must submit to the
    neutral and serve on each other Party a proposed ruling on each issue to be
    resolved. Such writing will be limited to presenting the proposed ruling,
    will contain no argument or analysis of the facts or issues, and will be
    limited to not more than 10 pages.

10) Not more than 5 business days following the close of hearings, the Parties
    may each submit post hearing briefs to the neutral addressing the evidence
    and issues to be resolved. Such post hearing briefs will not be more than 50
    pages.

                                       2
<PAGE>

11)  The neutral will rule on each disputed issue after the hearing as
     expeditiously as possible, but in no event more than 30 days after the
     close of the hearing. The neutral will, in rendering his decision, apply
     the substantive law of the state of California, U.S.A., and without giving
     effect to its principles of conflicts of law, and without giving effect to
     any rules or laws relating to arbitration. The neutral is not empowered
     with the remedy of termination of the Agreement.

12)  Any judgment upon the award rendered by the neutral may be entered in any
     court having jurisdiction thereof. The decision rendered in any such ADR
     will be final and not appealable, except in cases of fraud or bad faith on
     the part of the neutral or any Party to the ADR proceeding in connection
     with the conduct of such proceedings, and will be enforceable in any court
     of competent jurisdiction.

13)  The neutral will have the option to assess costs and expenses to the non-
     prevailing Party, otherwise the Parties will pay their own costs
     (including, without limitation, attorneys fees) and expenses in connection
     with such ADR.

                                       3

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