Document:

<PAGE>
                                                                   EXHIBIT 10.32
VIA COURIER

July 9, 2002

Dr. Norrie Russell
60 Hillmont Place
Danville, CA  94526

Dear Norrie:

This letter sets forth the substance of the separation agreement (the
"Agreement") which Lynx Therapeutics, Inc. (the "Company") is offering to aid in
your employment transition.

        1. RESIGNATION. On or before the Effective Date of this Agreement (as
defined in Section 14 herein), you will submit your resignation as Chief
Executive Officer ("CEO"), resign your membership on the Company's Board of
Director's ("Board"), and resign from any other offices or positions you may
hold with the Company, and the Board will accept your resignation, effective as
of May 31, 2002 (the "Separation Date"). You agree to submit your resignation in
a letter (in the form attached hereto as Exhibit A) to Craig C. Taylor, Chairman
of the Board.

        2. ACCRUED SALARY AND PAID TIME OFF. On the Separation Date, the Company
paid you all accrued salary, and all accrued and unused vacation earned through
the Separation Date, subject to standard payroll deductions and withholdings.
You were entitled to those payments regardless of whether or not you sign this
Agreement.

        3. SEVERANCE BENEFITS.

               (a) SEVERANCE PAYMENT. Although the Company has no policy or
procedure requiring payment of any severance benefits, if you sign and do not
revoke this Agreement, on or before the Effective Date the Company will pay you,
as severance, Two Hundred Forty Six Thousand Six Hundred Sixty Five Dollars and
no cents ($246,665.00), subject to standard payroll deductions and withholdings
(the "Severance Payment").

               (b) PROCEEDS AND LOAN REPAYMENT. During your employment with the
Company, you received a $250,000.00 housing loan (the "Loan") from the Company
pursuant to that certain Promissory Note Secured by Deed of Trust, dated
November 8, 1999 (the "Note"). A copy of the Note is attached hereto as Exhibit
C. Pursuant to the terms of the Note, you were obligated to repay the
outstanding balance of the Loan in the amount of $144,794.99, plus interest (the
"Loan Amount") immediately upon Separation Date.

As part of this Agreement, you have directed the Company to apply a portion of
the net Severance Payment against the Loan Amount such that you will receive a
cash distribution of the net Severance Payment in the amount of $60,000 and will
apply the balance of the net Severance Payment against the Loan Amount as a
payment thereunder. Accordingly, as of the Separation
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Page 2

Date, the Loan will have a remaining balance of $77,355.07. As further
consideration for the promises and covenants contained herein, the Company has
agreed to amend and restate the Note to inter alia incorporate the foregoing
payments and revise the repayment terms. A copy of the amended and restated Note
is attached hereto as Exhibit D.

        4. HEALTH INSURANCE. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company's current group health
insurance policies, you will be eligible to continue your group health insurance
benefits at your own expense. Later, you may be able to convert to an individual
policy through the provider of the Company's health insurance, if you wish.

        5. STOCK OPTIONS. Pursuant to the terms of your stock options, and the
Company's 1992 Stock Option Plan (the "Plan"), vesting of your stock options
ceased on the Separation Date. Your right to exercise any vested shares, and all
other rights and obligations with respect to your stock options, are set forth
in your stock option grant notices, stock option agreements, and the Plan.

        6. OTHER COMPENSATION OR BENEFITS. You acknowledge that, except as
expressly provided in this Agreement, you will not receive any additional
compensation, severance or benefits after the Separation Date.

        7. EXPENSE REIMBURSEMENTS. You agree that, within thirty (30) days of
the Separation Date, you will submit your final documented expense reimbursement
statement reflecting all business expenses you incurred through the Separation
Date, if any, for which you seek reimbursement. The Company will reimburse you
for these expenses pursuant to its regular business practice.

        8. RETURN OF COMPANY PROPERTY. By the Effective Date, you agree to
return to the Company all Company documents (and all copies thereof) and other
Company property that you have had in your possession at any time, including,
but not limited to, Company files, notes, drawings, records, business plans and
forecasts, financial information, specifications, computer-recorded information,
tangible property (including, but not limited to, computers), credit cards,
entry cards, identification badges and keys; and, any materials of any kind that
contain or embody any proprietary or confidential information of the Company
(and all reproductions thereof) ("Company Property"). You also represent that
you will perform a good faith search to ensure that you are no longer in
possession or control of any Company Property after the Effective Date.
Notwithstanding the foregoing, as part of this Agreement, the Company will allow
you to keep the laptop the Company issued you to perform your job duties.
However, you will only be allowed to keep the laptop computer if you return it
to the Company by the Effective Date so that the Company can remove all Company
data, files, and other property from the laptop before it returns the computer
to you. The Company will also allow you to keep the cellular telephone the
Company issued you to perform your job duties.

        9. TRANSITION CONSULTING. After the Separation Date and through November
1, 2002, the Company may engage you from time to time as a consultant regarding
patent and other
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Page 3

technology issues ("Consulting Period"). Should the Company utilize you to
perform transition consulting services it will be pursuant to the terms below.

                (a) CONSULTING SERVICES. During the Consulting Period, you agree
                to make yourself available, by telephone or in person, to
                provide consulting services on patent and other technology
                issues (the "Consulting Services") to the Company as requested
                by the Company's CEO, or by any other officer or director
                designated by the Board. You agree to exercise the highest
                degree of professionalism and to utilize your expertise and
                creative talents in performing the Consulting Services.

                (b) CONSULTING FEES. The Company will pay you at a rate of
                $100.00 per hour for these services. Because you will be an
                independent contractor, the Company will not withhold or deduct
                taxes or other customary employee withholdings from your
                Consulting Fees. You will be solely responsible for all tax
                revenues and payments required to be filed with or made to any
                federal, state, or local tax authority with respect to the
                Consulting Fees. The Company will report any Consulting Fees
                paid to you by filing a Form 1099-MISC with the Internal Revenue
                Service as required by law.

                (c) NO AGENCY OR EMPLOYMENT RELATIONSHIP. During the Consulting
                Period, you will not be allowed on Company premises unless
                specifically requested by the Board or CEO. During the
                Consulting Period, you will be an independent contractor and you
                will not be considered an agent or an employee of the Company;
                you will not have authority to make any representation,
                contract, or commitment on behalf of the Company and you shall
                not purport to have any such authority. In addition, you will
                not be entitled to any of the benefits which the Company may
                make available to its employees, such as group insurance,
                workers' compensation insurance coverage, profit sharing, or
                retirement benefits. You will be solely responsible for payment
                of any and all expenses incurred by you in performing the
                Services, except as incurred at the request of the Company and
                approved in advance by the CEO, or by an officer or director
                designated by the Board.

                (d) PROTECTION OF COMPANY INFORMATION. You agree that, during
                the Consulting Period and thereafter, other than in the course
                of performing the Services, you will not use or disclose any
                confidential or proprietary information or materials of the
                Company which you obtain or develop in the course of performing
                the Services, except with the advance written authorization of
                the Company's CEO. Any and all work product you create in
                connection with the Services will be the sole and exclusive
                property of the Company. You hereby assign to the Company, to
                the fullest extent permitted by law, all right, title, and
                interest in all inventions, techniques, processes, materials,
                and other intellectual property developed in the course of
                performing the Services.

        10. PROPRIETARY INFORMATION OBLIGATIONS. Both during and after your
employment you acknowledge your continuing obligations under your Employee
Invention Agreement not to
<PAGE>
Page 4

use or disclose any confidential or proprietary information of the Company
without prior written authorization from a duly authorized representative of the
Company. A copy of your Employee Invention Agreement is attached hereto as
Exhibit E.

        11. CONFIDENTIALITY. The provisions of this Agreement will be held in
strictest confidence by you and the Company and will not be publicized or
disclosed in any manner whatsoever; provided, however, that: (a) you may
disclose this Agreement to your immediate family; (b) the parties may disclose
this Agreement in confidence to their respective attorneys, accountants,
auditors, tax preparers, and financial advisors; (c) the Company may disclose
this Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as
otherwise required by law. In particular, and without limitation, you agree not
to disclose the terms of this Agreement to any current or former Company
employee.

        12. NONDISPARAGEMENT. Both you and the Company agree not to disparage
the other party, and the other party's officers, directors, employees,
shareholders and agents, in any manner likely to be harmful to them or their
business, business reputation or personal reputation; provided that both you and
the Company will respond accurately and fully to any question, inquiry or
request for information when required by legal process.

        13. RELEASE. You hereby release, acquit and forever discharge the
Company, its officers, directors, agents, servants, employees, attorneys,
shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys fees,
damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising out of or in any way related to agreements, events, acts or
conduct at any time prior to and including the date this Agreement is signed,
including but not limited to: all such claims and demands directly or indirectly
arising out of or in any way connected with your employment with the Company or
the termination of that employment; claims or demands related to salary,
bonuses, commissions, stock, stock options, or any other ownership interests in
the Company, vacation pay, fringe benefits, expense reimbursements, severance
pay, or any other form of compensation; claims pursuant to any federal, state or
local law, statute or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Americans with Disabilities
Act of 1990; the federal Age Discrimination in Employment Act of 1967, as
amended (the "ADEA"); the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.

        14. ADEA WAIVER. You acknowledge that you are knowingly and voluntarily
waiving and releasing any rights you may have under the ADEA, and that the
consideration given for the waiver and release in the preceding paragraph hereof
is in addition to anything of value to which you were already entitled. You
further acknowledge that you have been advised that: (a) your waiver and release
do not apply to any claims that may arise after the date you sign this
Agreement; (b) you should consult with an attorney prior to executing this
Agreement; (c)
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Page 5

you have twenty-one (21) days to consider this Agreement (although you may
choose voluntarily to execute this Agreement earlier); (d) you have seven (7)
days following the execution of this Agreement by the parties to revoke the
Agreement; (e) this Agreement will not be effective until the date upon which
the revocation period has expired, which will be the eighth day after this
Agreement is executed by you (the "Effective Date").

        15. SECTION 1542 WAIVER. YOU UNDERSTAND THAT THIS AGREEMENT INCLUDES A
RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. In giving this release, which includes
claims that may be unknown to you at present, you acknowledge that you have read
and understand Section 1542 of the California Civil Code which reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." You
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to your release of
any unknown or unsuspected claims you may have against the Company.

        16. FURTHER ASSURANCES. You agree to execute and deliver such other
documents and instruments, and take such other actions as may be required and
which may be necessary to consummate the transactions contemplated herein and to
otherwise effectuate the agreements herein, including without limitation,
executing (and causing to be acknowledged where appropriate) the exhibits
hereto.

        17. MISCELLANEOUS. This Agreement, including exhibits, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and
the Company with regard to this subject matter. It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties or representations. This Agreement may not be modified or amended
except in a writing signed by both you and a duly authorized officer of the
Company. This Agreement will bind the heirs, personal representatives,
successors and assigns of both you and the Company, and inure to the benefit of
both you and the Company, their heirs, successors and assigns. If any provision
of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination will not affect any other provision of this Agreement
and the provision in question will be modified by the court so as to be rendered
enforceable. This Agreement will be deemed to have been entered into and will be
construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within California. You
are advised by the Company to seek independent legal advice with respect to tax
issues pertaining to the provisions of this Agreement and the documents attached
hereto.

If this Agreement is acceptable to you, please sign below and return the
originals of both to me.
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Page 6

I wish you good luck in your future endeavors.

Sincerely,

LYNX THERAPEUTICS, INC.

By:  /s/ Kathy A. San Roman
     ---------------------------------------------------
        Kathy A. San Roman
        Vice President, Human Resources & Administration

Exhibit A -- Letter of Resignation
Exhibit B -- Letter of Resignation to Axaron Bioscience AG
Exhibit C -- Loan Agreement
Exhibit D -- Amended Note
Exhibit E -- Employee Invention Agreement

AGREED:

/s/  Norman Russell                               DATE: 12 July 2002
--------------------------------------------            ------------------------
Norrie Russell, Ph.D.

<PAGE>
                                    EXHIBIT A

                              LETTER OF RESIGNATION

<PAGE>
Mr. Craig C. Taylor
Chairman of the Board
Lynx Therapeutics, Inc.
25861 Industrial Boulevard
Hayward, CA  94545

Dear Craig:

        As we have discussed, I have resigned as Chief Executive Officer,
Director, and from any other position or office that I may hold with Lynx
Therapeutics, Inc., effective as of May 31, 2002.

                                            Sincerely,

                                            /s/ Norman Russell

                                            Norrie Russell, Ph.D.

<PAGE>
                                    EXHIBIT B

                  LETTER OF RESIGNATION TO AXARON BIOSCIENCE AG

<PAGE>
Dr. Alfred Bach
President & CEO
Axaron Bioscience AG
Im Neuenheimer Feld 515
69120 Heidelberg

Dear Alfred:

        I hereby resign as Director and any other position or office that I may
hold with Axaron Bioscience AG, effective as of May 31, 2002.

                                            Sincerely,

                                            /s/ Norman Russell

                                            Norrie Russell, Ph.D.

<PAGE>
                                    EXHIBIT C

                                 LOAN AGREEMENT

<PAGE>
                      DO NOT DESTROY THIS NOTE: WHEN PAID,
                    THIS NOTE AND DEED OF TRUST SECURING SAME
                           MUST BE SURRENDERED BEFORE
                            RECONVEYANCE WILL BE MADE

                           PROMISSORY NOTE SECURED BY
                                  DEED OF TRUST

$250,000                                                     HAYWARD, CALIFORNIA

                                                                NOVEMBER 8, 1999

        FOR VALUE RECEIVED, the undersigned, Norman J. W. Russell, Ph.D.
("Maker"), hereby promises to pay to the order of Lynx Therapeutics, Inc.
("Payee"), at 25861 Industrial Blvd., Hayward, CA 94545, or to such other place
as the holder hereof may from time to time designate by written notice to Maker,
in lawful money of the United States of America, the sum of Two Hundred Fifty
Thousand Dollars ($250,000).

        1. The entire unpaid principal balance plus accrued interest thereon
shall become due and payable upon the earlier of (i) the date of sale, exchange,
conveyance, encumbrance, hypothecation or other transfer by Maker of real
property at 60 Hillmont Place, Danville, CA 94526 or (ii) Norman J. W. Russell
ceases to be a full time employee of Lynx Therapeutics, Inc. or an affiliate
thereof.

        2. Interest shall accrue hereon from the date of this Note until paid,
at the rate of 6.02% per annum on the principal balance remaining from time to
time unpaid, compounded annually. Accrued interest shall be due and payable when
principal becomes due and payable in lawful tender of the United States of
America.

        3. The principal and related accrued interest thereon will be forgiven
on the following terms: Fifty Percent (50%) of principal plus accrued interest
thereon shall be forgiven at the end of two years of full-time employment; an
additional Twenty-five Percent (25%) of principal plus accrued interest thereon
will be forgiven at the end of three years of full-time employment; and the
remaining Twenty-five Percent (25%) of principal plus accrued interest thereon
will be forgiven at the end of four years of full-time employment.

        4. The entire unpaid principal balance plus accrued interest thereon at
the election of Payee, becomes immediately due and payable upon the occurrence
of any of the following, if any of these events occur prior to the end of four
years of full-time employment by Norman J. W. Russell:

               (a) Any failure on the part of the Maker to make any payment when
the same is due and to cure such default within five (5) days after notice is
given by Payee.

               (b) Any failure on the part of Maker (i) to perform or observe
any of their obligations under any of the "Loan Documents" (hereinafter
defined), and (ii) to commence and proceed diligently to cure such default
within ten (10) days after written notice thereof is given by Payee, and in any
event to cure such default within thirty (30) days after the date on which such
notice is given.

               (c) The sale, exchange, conveyance, encumbrance, hypothecation or
other transfer of the real property subject to the Deed of Trust (hereinafter
defined), or any part thereof or interest therein, or the entering into by Maker
of any contract or agreement to do so.

               (d) The filing by Maker of a voluntary petition in bankruptcy, a
petition for reorganization, arrangement or other relief under federal or state
bankruptcy laws, or a voluntary petition for the appointment of a receiver or
for other relief under the Laws of any state, or the making by Maker of an
assignment of all or substantially all of its assets for the benefit of
creditors.

<PAGE>
               (e) The adjudication of Maker as a bankrupt or insolvent, the
appointment of a receiver of all or substantially all of Maker's assets, or the
entry of an order of the reorganization of Maker under applicable federal or
state bankruptcy laws, if such adjudication, order or appointment is made upon a
petition filed against Maker and is not, within sixty (60) days after it is
made, vacated or stayed on appeal or otherwise, or if Maker by any action or
failure to act signifies its approval thereof, consent thereto or acquiescence
therein.

        5. In the event of any failure on the part of Maker to make any payment
when due, whether at maturity, as herein provided, or by reason of acceleration
of maturity under the terms of paragraphs 4 and 9 hereof, Payee shall be
entitled to recover from Maker all costs of effecting collection of the same,
including reasonable attorney's fees and all costs of collection, whether suit
be brought or not.

        6. Maker may prepay all or any part of the monies due hereunder without
penalty.

        7. Any notice to either party hereto may be given by delivering the same
in writing to such person, or by sending the same by registered or certified
mail, postage prepaid, to the following mailing addresses or to any other
mailing addresses within the State of California of which the parties notify
each other:

                  MAKER:     Norman J. W. Russell, Ph.D.
                             60 Hillmont Place
                             Danville, CA  94526

                  PAYEE:     Lynx Therapeutics Inc.
                             25861 Industrial Blvd.
                             Hayward, CA  94545
                             Attn: Chief Financial Officer

        8. This Note is secured by (i) a certain Second Deed of Trust of even
date herewith (the "Deed of Trust"), covering certain real property located at
60 Hillmont Place, Danville, CA 94526 and more fully described in Exhibit A to
the Deed of Trust.

        The Deed of Trust and all other documents now and/or hereinafter issued
in connection with the loan evidenced hereby are herein collectively referred to
as the "Loan Documents".

        9. In the event that Maker, without the prior written consent of Payee
sells, exchanges, conveys, encumbers, hypothecates or otherwise transfers the
real property covered by the Deed of Trust or any interest therein or portion
thereof, or agrees to do so, Payee may, at its option, declare all sums secured
hereby immediately due and payable. Consent to one such transaction shall not be
deemed to be a waiver of the right to grant or withhold such consent to future
or successive transactions, at Payee's sole discretion. Not withstanding the
above, Maker shall not refinance the subject property without the prior written
consent of Payee, which consent shall not be withheld unreasonably.

        10. In the event that any one or more of the provisions contained in
this Note or any of the Loan Documents shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note or any of the
Loan Documents, but this Note and the Loan Documents shall be construed as if
such invalid, illegal or unenforceable provisions had never been contained
herein or therein.

        11. Any failure of the Payee to exercise or enforce any right hereunder
or under any of the Loan Documents shall not constitute a waiver of such right.
All rights of the Payee hereunder or under the Loan Documents shall be
cumulative and not alternative and shall be in addition to any other rights and
remedies granted to the Payee pursuant to any other agreement, by statute, or by
law.

        12. This Note may not be changed orally, but only by an agreement in
writing signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.

<PAGE>
        13. This Note shall be construed and enforced in accordance with, and
governed by, the laws of the State of California and shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and assigns.

        14. The obligations of the undersigned under the Loan Documents shall be
joint and several.

        WITNESS, the undersigned has executed this Note, with the intent of
being legally bound, effective as of the date first set forth above.

/s/  Norman Russell
----------------------------------------
Norman J. W. Russell, Ph.D.

<PAGE>
                                    EXHIBIT D

                            AMENDED AND RESTATED NOTE

<PAGE>
                 AMENDED AND RESTATED PROMISSORY NOTE SECURED BY
                                  DEED OF TRUST

$77,355.07                                                          JULY 9, 2002
                                                             Hayward, California

        This AMENDED AND RESTATED PROMISSORY NOTE SECURED BY DEED OF TRUST
("NOTE") amends and restates that certain Promissory Note Secured by Deed of
Trust in the principal amount of $250,000, executed on November 8, 1999, in
Hayward California by NORMAN J. W. RUSSELL ("BORROWER") in favor of LYNX
THERAPEUTICS, INC., a Delaware corporation ("LENDER").

        Pursuant to the forgiveness provisions the original terms of the Note
and a payment of principal under a work separation agreement between Borrower
and Lender the outstanding principal amount of the Note has been reduced.

        Accordingly, Borrower hereby unconditionally promises to pay to the
order of Lender, in lawful money of the United States of America and in
immediately available funds the principal amount of Seventy-seven Thousand Three
Hundred fifty-five and 07/100 Dollars ($77,355.07) together with all accrued and
unpaid interest thereon, if any (the "LOAN") in accordance with the terms and
conditions hereof.

        1. SECURITY. This Note is secured by that certain Deed of Trust with
Assignment of Rents executed by Borrower and Borrower's spouse in favor of
Lender, as beneficiary and of even date herewith (as the same may from time to
time be amended, modified, supplemented, or restated, the "DEED OF TRUST"),
encumbering that certain real property located at 60 Hillmont Place, Danville,
California, as more particularly described therein (the "PROPERTY"). Borrower
hereby represents and warrants that, as of the date of this Note: (a) Borrower
and Borrower's spouse are the sole and lawful fee owners of the Property, (b)
the fair market value of the Property exceeds the aggregate amount of all
indebtedness secured by liens upon the Property, and (c) this Note is not for
consumer, family or household purposes as that term is defined and used in
Article XV of the California Constitution.

        2. PRINCIPAL REPAYMENT.

               (a) The Loan shall be due and payable in accordance with the
following schedule: one half (1/2) of the then outstanding principal plus all
accrued interest thereon shall be due and payable on September 30, 2002, and the
remaining balance of the outstanding principal plus all accrued interest thereon
shall be due and payable on December 30, 2002. Notwithstanding the foregoing,
the entire outstanding principal balance of the Loan plus all accrued interest
shall be due and payable in full immediately upon any Event of Default (as
defined in Section 7 below).

               (b) This Note is subject to Section 2966 of the Civil Code, which
provides that the Lender shall give written notice of the following to Borrower
at least 90 and not more

<PAGE>
than 150 days before the natural due date:(i) the name and address to whom the
payment is required to be paid, (ii) the date on which the payment is required
to be paid, (iii) the amount due at time of payment, and (iv) confirmation that
Borrower does not have a right to refinance the Note with Lender; provided,
however, the foregoing provisions of this section 2(b) shall be inapplicable to
an accelerated due date arising from an Event of Default.

        3. INTEREST RATE. Until paid in full, this Note shall bear interest at
the rate of 6.02% compounded annually.

        4. DEFAULT INTEREST. Upon the occurrence of an Event of Default, at the
Lender's option, the outstanding principal balance shall immediately begin to
accrue interest at a rate equal to fifteen percent (15.0%) compounded
continuously.

        5. APPLICATION OF PAYMENTS. Any payment on this Note shall be applied
first to accrued interest, then to other amounts owing hereunder, and thereafter
to the outstanding principal balance hereof. Any payment due hereunder shall be
paid to Lender at the address for notices below. Any amount payable hereunder
shall be due and payable without set-off, deduction, or counter-claim.

        6. PREPAYMENT. Subject to Section 5 above, Borrower may prepay the
outstanding principal balance of this Note in whole or in part, without penalty,
at any time.

        7. DEFAULT AND REMEDIES.

               (a) DEFAULT. Each of the following events shall be an "EVENT OF
DEFAULT" hereunder: (i) Borrower fails to pay timely any amounts due under this
Note on the date the same becomes due and payable, (ii) Borrower breaches any
covenant, representation, warranty, or agreement under this Note or any other
agreement with Lender, (iii) Borrower defaults on any of its obligations under
the Deed of Trust or any other instrument evidencing or securing this Note, (iv)
Borrower defaults on any of its obligations under any mortgage, deed of trust,
encumbrance or lien respecting the Property, which is senior to the Deed of
Trust, (v) Borrower dies, (vi) Borrower files a petition or action for relief
under any bankruptcy, insolvency or moratorium law or any other law for the
relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors or takes any action in furtherance of
any of the foregoing, (vii) an involuntary petition is filed against Borrower
(unless such petition is dismissed or discharged within sixty (60) days of
filing) under any bankruptcy statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody or control of any property of
Borrower, or (viii) Borrower transfers, directly or indirectly, of all or any
part of the Property, whether by sale, lease, assignment, mortgage or otherwise,
voluntarily or involuntarily.

               (b) REMEDIES. Upon the occurrence of an Event of Default, all
outstanding principal, accrued interest and other amounts owing hereunder shall,
at the option of Lender, and, in the case of an Event of Default pursuant to
Sections 7(a)(vi) and (vii) above, automatically, be immediately due and
payable. Lender shall have all rights and may exercise any remedies available to
it under the Deed of Trust or at law or in equity, successively or concurrently.

                                       2.
<PAGE>
        8. NOTICE. All notices or other communications required or given
hereunder shall be in writing and shall be deemed effectively given when
presented personally or on the date of receipt (or refusal of delivery) if sent
by courier service or U.S. Mail (certified or registered, postage prepaid,
return receipt requested) to the parties at the addresses given below or such
other addresses as the parties may hereafter designate in writing. The date
shown on the courier's confirmation of delivery or return receipt shall be
conclusive as to the date of receipt.

               BORROWER:     Norman J.W. Russell
                             60 Hillmont Place
                             Danville, CA 94526

               LENDER:       Lynx Therapeutics, Inc.
                             25861 Industrial Boulevard
                             Hayward, California, 94545
                             Attn: Vice President, Human Resources

        9. MAXIMUM LEGAL RATE OF INTEREST. All agreements between Borrower and
Lender, whether now existing or hereafter arising, are hereby limited so that in
no event shall the interest charged hereunder or agreed to be paid to Lender
exceed the maximum amount permitted under applicable law. Lender shall be
entitled to amortize, prorate and spread throughout the full term of this Note
all interest paid or payable so that the interest paid does not exceed the
maximum amount permitted under applicable law. If Lender ever receives interest
or anything deemed interest in excess of the maximum amount permitted under
applicable law, an amount equal to such excess shall be applied to the reduction
of the principal balance, and to the extent it exceeds the unpaid balance of
principal hereof, the remainder shall be refunded to Borrower. If interest
otherwise payable to Lender would exceed the maximum amount permitted under
applicable law, the interest payable shall be reduced to the maximum amount
permitted under applicable law. This section shall control all agreements
between Borrower and Lender in connection with the indebtedness evidenced
hereby.

        10. WAIVER. Borrower waives diligence, presentment, protest and demand
and also notice of protest, demand, dishonor, acceleration, intent to
accelerate, and nonpayment of this Note and agrees to pay all costs of
collection when incurred, including, without limitation attorneys' fees, costs
and other expenses. The right to plead any and all statutes of limitations as a
defense to any demands hereunder is hereby waived to the fullest extent
permitted by law.

        11. USE OF PROCEEDS; NON-TRANSFERABLE. The right of Borrower to request
and receive the Loan hereunder, as well as the other benefits under this Note,
shall not be assignable or otherwise transferable by Borrower.

        12. MISCELLANEOUS.

               (a) This Note may be modified only by a written agreement
executed by Borrower and Lender.

               (b) The terms of this Note shall inure to the benefit of and bind
Borrower and Lender and their respective heirs, legal representatives and
successors and assigns.

                                       3.
<PAGE>
               (c) Time is of the essence with respect to all matters set forth
in this Note.

               (d) If this Note is destroyed, lost or stolen, Borrower will
deliver a new note to Lender on the same terms and conditions as this Note with
a notation of the unpaid principal in substitution of the prior Note. Lender
shall furnish to Borrower reasonable evidence that the Note was destroyed, lost
or stolen and any security or indemnity that may be reasonably required by
Borrower in connection with the replacement of this Note.

               (e) If any provision of this Note shall be held to be invalid or
unenforceable, such determination shall not affect the remaining provisions of
this Note.

               (f) If this Note is now, or hereinafter shall be, signed by more
than one party or person, it shall be the joint and several obligation of such
parties or persons and shall be binding upon such parties or persons and upon
their respective successors and assigns.

        13. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.

        IN WITNESS WHEREOF, Borrower has executed this Secured Promissory Note
as of the date and year first above written.

                                    BORROWER:

                                    /s/  Norman Russell
                                    --------------------------------------------
                                    NORMAN J.W. RUSSELL

                                       4.
<PAGE>
WHEN RECORDED MAIL TO:

Lynx Therapeutics, Inc.
25861 Industrial Boulevard
Hayward, California, 94545
Attn: Vice President, Human Resources

--------------------------------------------------------------------------------
                                        SPACE ABOVE THIS LINE FOR RECORDER'S USE

                     DEED OF TRUST WITH ASSIGNMENT OF RENTS
                                  (SHORT FORM)

This DEED OF TRUST, made July 9, 2002, between NORMAN J. W. RUSSELL and JANE
RUSSELL, husband and wife HEREIN COLLECTIVELY called TRUSTOR, whose address is
60 Hillmont Place, Danville, California, 94526,

FIRST AMERICAN TITLE COMPANY, herein called TRUSTEE, and

LYNX THERAPEUTICS, INC. a Delaware corporation, herein called BENEFICIARY.

WITNESSETH: That Trustor grants to Trustee in trust, with power of sale, that
property in the

City of Danville, County of Contra Costa, State of California, described as:

    SEE LEGAL DESCRIPTION ATTACHED HERETO AS EXHIBIT A AND MADE A PART HEREOF

together with the rents, issues and profits thereof, subject, however, to the
right, power and authority hereinafter given to and conferred upon Beneficiary
to collect and apply such rents, issues and profits for the Purpose of Securing
(1) payment of the sum of $77,355.07 with interest thereon according to the
terms of a promissory note or notes of even date herewith made by Norman J.W.
Russell, payable to order of Beneficiary, and extensions or renewals thereof,
(2) the performance of each agreement of Trustor incorporated by reference or
contained herein, and (3) payment of additional sums and interest thereon which
may hereafter be loaned to Trustor, or Trustor's successors or assigns, when
evidenced by a promissory note or notes reciting that they are secured by this
Deed of Trust.

To protect the security of this Deed of Trust, and with respect to the property
above described Trustor expressly makes each and all of the agreements, and
adopts and agrees to perform and be bound by each and all of the terms and
provisions set forth in subdivision A, and it is mutually agreed that each and
all of the terms and provisions set forth in subdivision B of the fictitious
deed of trust recorded in Orange County August 17, 1964, and in all other
counties August 18, 1964, in the book and at the page of Official Records in the
office of the county recorder of the county where said property is located,
noted below opposite the name of such county, namely:

                                       1.
<PAGE>
<TABLE>
<CAPTION>
COUNTY          BOOK     PAGE      COUNTY       BOOK      PAGE      COUNTY            BOOK      PAGE     COUNTY       BOOK

                PAGE
<S>             <C>      <C>       <C>          <C>       <C>       <C>               <C>       <C>      <C>          <C>      <C>
ALAMEDA         1288     556       KINGS        858       713       PLACER            1028      379      SIERRA       38       187
ALPINE          3        130-31    LAKE         437       110       PLUMAS            166       1307     SISKIYOU     506      762
AMADOR          133      438       LASSEN       192       367       RIVERSIDE         3778      347      SOLANO       1287     621
BUTTE           1330     513       LOS          T-3878    874       SACRAMENTO        5039      124      SONOMA       2067     427
                                   ANGELES
CALAVERAS       185      338       MADERA       911       136       SAN BENITO        300       405      STANISLAUS   1970     56
COLUSA          323      391       MARIN        1849      122       SAN BERNARDINO    6213      768      SUTTER       655      585
CONTRA COSTA    4684     1         MARIPOSA     90        453       SAN FRANCISCO     A-804     596      TEHAMA       457      183
DEL NORTE       101      549       MENDOCINO    667       99        SAN JOAQUIN       2855      283      TRINITY      108      595
EL DORADO       704      635       MERCED       1660      753       SAN LUIS          1311      137      TULARE       2530     108
                                                                    OBISPO
FRESNO          5052     623       MODOC        191       93        SAN MATEO         4778      175      TUOLUMNE     177      160
GLENN           469      76        MONO         69        302       SANTA BARBARA     2065      881      VENTURA      2607     237
HUMBOLDT        801      83        MONTEREY     357       239       SANTA CLARA       6626      664      YOLO         769      16
IMPERIAL        1189     701       NAPA         704       742       SANTA CRUZ        1638      607      YUBA         398      693
INYO            165      672       NEVADA       363       94        SHASTA            800       633
KERN            3756     690       ORANGE       7182      18        SAN DIEGO SERIES 5 BOOK 1964, PAGE 149774
</TABLE>

shall inure to and bind the parties hereto, with respect to the property above
described. Said agreements, terms and provisions contained in said subdivisions
A and B, (identical in all counties, and printed on Pages 3 and 4 hereof) are by
the within reference thereto, incorporated herein and made a part of this Deed
of Trust for all purposes as fully as if set forth at length herein, and
Beneficiary may charge for a statement regarding the obligation secured hereby,
provided the charge therefor does not exceed the maximum allowed by law.

The undersigned Trustor, requests that a copy of any Notice of Default and any
Notice of Sale hereunder be mailed to Trustor at the address hereinbefore set
forth.

SEE ADDENDUM 1 AND ADDENDUM 2 ATTACHED HERETO AND INCORPORATED HEREIN BY THIS
REFERENCE FOR ADDITIONAL PROVISIONS.

Signature of Trustor

/s/  Norman Russell
--------------------------------------------
Norman J. W. Russell

/s/  Jane Russell
--------------------------------------------
Jane Russell

                      (Signatures need to be acknowledged)

                                       2.
<PAGE>
                                  DO NOT RECORD

The following is a copy of Subdivisions A and B of the fictitious Deed of Trust
recorded in each county in California as stated in the foregoing Deed of Trust
and incorporated by reference in said Deed of Trust as being a part thereof as
if set forth at length therein.

    To protect the security of this Deed of Trust, Trustor agrees:

        To keep said property in good condition and repair; not to remove or
demolish any building thereon; to complete or restore promptly and in good and
workmanlike manner any building which may be constructed, damaged or destroyed
thereon and to pay when due all claims for labor performed and materials
furnished therefor; to comply with all laws affecting said property or requiring
any alterations or improvements to be made thereon; not to commit or permit
waste thereof; not to commit, suffer or permit any act upon said property in
violation of law; to cultivate, irrigate, fertilize, fumigate, prune and do all
other acts which from the character or use of said property may be reasonably
necessary, the specific enumerations herein not excluding the general.

        To provide, maintain and deliver to Beneficiary fire insurance
satisfactory to and with loss payable to Beneficiary. The amount collected under
any fire or other insurance policy may be applied by Beneficiary upon any
indebtedness secured hereby and in such order as Beneficiary may determine, or
at option of Beneficiary the entire amount so collected or any part thereof may
be released to Trustor. Such application or release shall not cure or waive any
default or notice of default hereunder or invalidate any act done pursuant to
such notice.

        To appear in and defend any action or proceeding purporting to affect
the security hereof or the rights or powers of Beneficiary or Trustee; and to
pay all costs and expenses, including cost of evidence of title and attorney's
fees in a reasonable sum, in any such action or proceeding in which Beneficiary
or Trustee may appear, and in any suit brought by Beneficiary to foreclose this
Deed.

        To pay: at least ten days before delinquency all taxes and assessments
affecting said property, including assessments on appurtenant water stock; when
due, all encumbrances, charges and liens, with interest, on said property or any
part thereof, which appear to be prior or superior hereto; all costs, fees and
expenses of this Trust.

Should Trustor fail to make any payment or to do any act as herein provided,
then Beneficiary or Trustee, but without obligation so to do and without notice
to or demand upon Trustor and without releasing Trustor from any obligation
hereof, may: make or do the same in such manner and to such extent as either may
deem necessary to protect the security hereof, Beneficiary or Trustee being
authorized to enter upon said property for such purposes; appear in and defend
any action or proceeding purporting to affect the security hereof or the rights
or powers of Beneficiary or Trustee; pay, purchase, contest or compromise any
encumbrance, charge or lien which in the judgment of either appears to be prior
or superior hereto; and, in exercising any such powers, pay necessary expenses,
employ counsel and pay his reasonable fees.

        To pay immediately and without demand all sums so expended by
Beneficiary or Trustee, with interest from date of expenditure at the amount
allowed by law in effect at the date hereof, and to pay for any statement
provided for by law in effect at the date hereof regarding the obligation
secured hereby any amount demanded by the Beneficiary not to exceed the maximum
allowed by law at the time when said statement is demanded.

    It is mutually agreed:

        That any award of damages in connection with any condemnation for public
use of or injury to said property or any part thereof is hereby assigned and
shall be paid to Beneficiary who may apply or release such monies received by
him in the same manner and with the same effect as above provided for
disposition of proceeds of fire or other insurance.

        That by accepting payment of any sum secured hereby after its due date,
Beneficiary does not waive his right either to require prompt payment when due
of all other sums so secured or to declare default for failure so to pay.

        That at any time or from time to time, without liability therefor and
without notice, upon written request of Beneficiary and presentation of this
Deed and said note for endorsement, and without affecting the personal liability
of any person for payment of the indebtedness secured hereby, Trustee may:
reconvey any part of said property; consent to the making of any map or plat
thereof; join in granting any easement thereon; or join in any extension
agreement or any agreement subordinating the lien or charge hereof.

        That upon written request of Beneficiary stating that all sums secured
hereby have been paid, and upon surrender of this Deed and said note to Trustee
for cancellation and retention or other disposition as Trustee in its sole
discretion may choose and upon payment of its fees, Trustee shall reconvey,
without warranty, the property then held hereunder. The recitals in such
reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The Grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."

        That as additional security, Trustor hereby gives to and confers upon
Beneficiary the right, power and authority, during the continuance of these
Trusts, to collect the rents, issues and profits of said property, reserving
unto Trustor the right, prior to any default by Trustor in payment of any
indebtedness secured hereby or in performance of any agreement hereunder, to
collect and retain such rents, issues and profits as they become due and
payable. Upon any such default, Beneficiary may at any time without notice,
either in person, by agent, or by a receiver to be appointed by a court, and
without regard to the adequacy of any

                                       3.
<PAGE>
security for the indebtedness hereby secured, enter upon and take possession of
said property or any part thereof, in his own name sue for or otherwise collect
such rents, issues, and profits, including those past due and unpaid, and apply
the same, less costs and expenses of operation and collection, including
reasonable attorney's fees, upon any indebtedness secured hereby, and in such
order as Beneficiary may determine. The entering upon and taking possession of
said property, the collection of such rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any default or notice
of default hereunder or invalidate any act done pursuant to such notice.

        That upon default by Trustor in payment of any indebtedness secured
hereby or in performance of any agreement hereunder, Beneficiary may declare all
sums secured hereby immediately due and payable by delivery to Trustee of
written declaration of default and demand for sale and of written notice of
default and of election to cause to be sold said property, which notice Trustee
shall cause to be filed for record. Beneficiary also shall deposit with Trustee
this Deed, said note and all documents evidencing expenditures secured hereby.

After the lapse of such time as may then be required by law following the
recordation of said notice of default, and notice of sale having been given as
then required by law, Trustee, without demand on Trustor, shall sell said
property at the time and place fixed by it in said notice of sale, either as a
whole or in separate parcels, and in such order as it may determine, at public
auction to the highest bidder for cash in lawful money of the United States,
payable at time of sale. Trustee may postpone sale of all or any portion of said
property by public announcement at such time and place of sale, and from time to
time thereafter may postpone such sale by public announcement at the time fixed
by the preceding postponement. Trustee shall deliver to such purchaser its deed
conveying the property so sold, but without any covenant or warranty, express or
implied. The recitals in such deed of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any person, including Trustor, Trustee, or
Beneficiary as hereinafter defined, may purchase at such sale.

After deducting all costs, fees and expenses of Trustee and of this Trust,
including cost of evidence of title in connection with sale, Trustee shall apply
the proceeds of sale to payment of: all sums expended under the terms hereof,
not then repaid, with accrued interest at the amount allowed by law in effect at
the date hereof; all other sums then secured hereby; and the remainder, if any,
to the person or persons legally entitled thereto.

        Beneficiary, or any successor in ownership of any indebtedness secured
hereby, may from time to time, by instrument in writing, substitute a successor
or successors to any Trustee named herein or acting hereunder, which instrument,
executed by the Beneficiary and duly acknowledged and recorded in the office of
the recorder of the county or counties where said property is situated, shall be
conclusive proof of proper substitution of such successor Trustee or Trustees,
who shall, without conveyance from the Trustee predecessor, succeed to all its
title, estate, rights, powers and duties. Said instrument must contain the name
of the original Trustor, Trustee and Beneficiary hereunder, the book and page
where this Deed is recorded and the name and address of the new Trustee.

        That this Deed applies to, inures to the benefit of, and binds all
parties hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns. The term Beneficiary shall mean the owner and holder,
including pledgees of the note secured hereby, whether or not named as
Beneficiary herein. In this Deed, whenever the context so requires, the
masculine gender includes the feminine and/or neuter, and the singular number
includes the plural.

        That Trustee accepts this Trust when this Deed, duly executed and
acknowledged, is made a public record as provided by law. Trustee is not
obligated to notify any party hereto of pending sale under any other Deed of
Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee
shall be a party unless brought by Trustee.

DO NOT RECORD                                      REQUEST FOR FULL RECONVEYANCE

TO FIRST AMERICAN TITLE INSURANCE COMPANY, TRUSTEE:

        The undersigned is the legal owner and holder of the note or notes, and
of all other indebtedness secured by the foregoing Deed of Trust. Said note or
notes, together with all other indebtedness secured by said Deed of Trust, have
been fully paid and satisfied; and you are hereby requested and directed, on
payment to you of any sums owing to you under the terms of said Deed of Trust,
to cancel said note or notes above mentioned, and all other evidences of
indebtedness secured by said Deed of Trust delivered to you herewith, together
with the said Deed of Trust, and to reconvey, without warranty, to the parties
designated by the terms of said Deed of Trust, all the estate now held by you
under the same.

        Dated
             -------------------------

                                          --------------------------------------

                                          --------------------------------------
Please mail Deed of Trust,
                          ------------------------------------------------------
Note and Reconveyance to
                        --------------------------------------------------------
Do not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both
must be delivered to the Trustee for cancellation before reconveyance will be
made.

                                       4.
<PAGE>
                                   ADDENDUM 1
                                       TO
                                  DEED OF TRUST

                              ADDITIONAL PROVISIONS

Trustor also agrees that it shall not encumber, hypothecate, sell, assign, or
otherwise transfer the property above described, and the performance of such
agreement is one of the purposes secured by this Deed of Trust.

                                       5.
<PAGE>
                                   ADDENDUM 2
                                       TO
                                  DEED OF TRUST

        1. DEFINITIONS. As used in this Addendum:

               (a) "THIRD PARTY SECURED OBLIGATION" means any obligation which
is required to be performed by Borrower (as defined below) under this Deed of
Trust or which is secured by this Deed of Trust:

               (b) "CO-OWNER" means Jane Russell; and

               (c) "BORROWER" means Norman J.W. Russell.

        As used herein, "BENEFICIARY" shall mean Beneficiary (as defined in the
Deed of Trust) or Trustee (as defined in the Deed of Trust) if acting on behalf
of Beneficiary (as defined in the Deed of Trust). All other capitalized words
are used herein as they are defined in the attached Deed of Trust.

        2. RIGHTS OF BENEFICIARY. Co-Owner authorizes Beneficiary to perform any
or all of the following acts at any time in its sole discretion, all without
notice to Co-Owner and without affecting Beneficiary's rights or Co-Owner's
obligations under this Deed of Trust:

               (a) Beneficiary may alter any terms of the Third Party Secured
Obligation or any part of it, including renewing, compromising, extending or
accelerating, or otherwise changing the time for payment of, or increasing or
decreasing the rate of interest on, the Third Party Secured Obligation or any
part of it;

               (b) Beneficiary may take and hold any additional security for the
Third Party Secured Obligation, accept substituted security for that obligation,
and subordinate, exchange, enforce, waive, release, compromise, fail to perfect
and sell or otherwise dispose of any such security;

               (c) Beneficiary may direct the order and manner of any sale of
all or any part of any security now or later to be held for the Third Party
Secured Obligation, and Beneficiary may also bid at any such sale;

               (d) Beneficiary may apply any payments or recoveries from
Borrower or any other source, and any proceeds of any security, to the Third
Party Secured Obligation in such manner, order and priority as Beneficiary may
elect, whether that obligation is secured by this Deed of Trust or not at the
time of the application;

               (e) Beneficiary may release Borrower of Borrower's liability for
the Third Party Secured Obligation or any part of it;

               (f) Beneficiary may substitute, add or release any one or more
guarantors or endorsers; and

                                       6.
<PAGE>
               (g) In addition to the Third Party Secured Obligation,
Beneficiary may extend other credit to Borrower, and may take and hold security
for the credit so extended, all without affecting Beneficiary's rights or
Co-Owner's liability under this Deed of Trust.

        3. DEED OF TRUST TO BE ABSOLUTE. Co-Owner expressly agrees that until
each and every term, covenant and condition of this Deed of Trust and the Third
Party Secured Obligation is fully performed, Co-Owner shall not be released by
or because of:

               (a) Any act or event which might otherwise discharge, reduce,
limit or modify Co-Owner's obligations under this Deed of Trust;

               (b) Any waiver, extension, modification, forbearance, delay or
other act or omission of Beneficiary, or its failure to proceed promptly or
otherwise as against Borrower, any other person or any security;

               (c) Any action, omission or circumstance which might increase the
likelihood that Co-Owner may be called upon to perform under this Deed of Trust
or which might affect the rights or remedies of Co-Owner as against Borrower;
and

               (d) Any dealings occurring at any time between Borrower and
Beneficiary, whether relating to the Third Party Secured Obligation or
otherwise.

        Co-Owner hereby expressly waives and surrenders any defense to
Co-Owner's liability under this Deed of Trust based upon any of the foregoing
acts, omissions, agreements, waivers or matters. It is the purpose and intent of
this Deed of Trust that the obligations of Co-Owner under it shall be absolute
and unconditional under any and all circumstances.

        4. CO-OWNER'S WAIVERS. Co-Owner waives:

               (a) All statutes of limitations as a defense to any action or
proceeding brought against Co-Owner by Beneficiary, to the fullest extent
permitted by law;

               (b) Any right it may have to require Beneficiary to proceed
against Borrower, proceed against or exhaust any other security held from
Borrower, or pursue any other remedy in Beneficiary's power to pursue;

               (c) Any defense based on any claim that Co-Owner's obligations
exceed or are more burdensome than those of Borrower;

               (d) Any defense based on: (i) any legal disability of Borrower,
(ii) any release, discharge, modification, impairment or limitation of the
liability of Borrower to Beneficiary from any cause, whether consented to by
Beneficiary or arising by operation of law or from any bankruptcy or other
voluntary of involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships ("INSOLVENCY PROCEEDING") and (iii) any rejection
or disaffirmance of the Third Party Secured Obligation, or any part of it, or
any security held for it, in any such Insolvency Proceeding;

                                       7.
<PAGE>
               (e) Any defense based on any action taken or omitted by
Beneficiary in any Insolvency Proceeding involving Borrower, including any
election to have Beneficiary's claim allowed as being secured, partially secured
or unsecured, any extension of credit by Beneficiary to Borrower in any
Insolvency Proceeding, and the taking and holding by Beneficiary of any security
for any such extension of credit;

               (f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of this Deed of Trust, and of the existence, creation, or incurring
of new or additional indebtedness, and demands and notices of every kind;

               (g) Any defense based on or arising out of any defense that
Borrower may have to the payment or performance of the Third Party Secured
Obligation or any part of it;

               (h) All rights and defenses that the Co-Owner may have because
the Third Party Secured Obligation is secured by real property, which means,
among other things:

                    (i) The Beneficiary may foreclose under this Deed of Trust
without first foreclosing on any other real or personal property collateral; and

                    (ii) If the Beneficiary forecloses on any real property
collateral pledged as collateral:

                         (1) The amount of the Third Party Secured Obligation
may be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price; and

                         (2) The Beneficiary may foreclose pursuant to this Deed
of Trust even if the Beneficiary, by foreclosing on the real property
collateral, has destroyed any right the Co-Owner may have to collect from the
Borrower; and

                    (i) The Co-Owner waives all rights and defenses arising out
of an election of remedies by the Beneficiary, even though that election of
remedies, such as a nonjudicial foreclosure, has destroyed the Co-Owner's rights
of subrogation and reimbursement against the Borrower by the operation of
Section 580d of the California Code of Civil Procedure or otherwise.

        This is an unconditional and irrevocable waiver of any rights and
defenses the Co-Owner may have because the Third Party Secured Obligation is
secured by real property. These rights and defenses include, but are not limited
to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the
California Code of Civil Procedure.

        5. WAIVERS OF SUBROGATION AND OTHER RIGHTS.

               (a) Upon a default by Borrower, Beneficiary in its sole
discretion, without prior notice to or consent of Co-Owner, may elect to: (i)
foreclose either judicially or nonjudicially against any real or personal
property security it may hold for the Third Party Secured Obligation, (ii)
accept a transfer of any such security in lieu of foreclosure, (iii)

                                       8.
<PAGE>
compromise or adjust the Third Party Secured Obligation or any part of it or
make any other accommodation with Borrower or Co-Owner, or (iv) exercise any
other remedy against Borrower or any security. No such action by Beneficiary
shall release or limit the liability of Co-Owner, who shall remain liable under
this Deed of Trust after the action, even if the effect of the action is to
deprive Co-Owner of any subrogation rights, rights of indemnity, or other rights
to collect reimbursement from Borrower for any sums paid to Beneficiary, whether
contractual or arising by operation of law or otherwise. Co-Owner expressly
agrees that under no circumstances shall it be deemed to have any right, title,
interest or claim in or to any real or personal property to be held by
Beneficiary or any third party after any foreclosure or transfer in lieu of
foreclosure of any security for the Third Party Secured Obligation.

               (b) Regardless of whether Co-Owner may have made any payments to
Beneficiary, Co-Owner hereby waives: (i) all rights of subrogation, all rights
of indemnity, and any other rights to collect reimbursement from Borrower for
any sums paid to Beneficiary, whether contractual or arising by operation of law
(including the United States Bankruptcy Code or any successor or similar
statute) or otherwise, (ii) all rights to enforce any remedy that Beneficiary
may have against Borrower, and (iii) all rights to participate in any security
now or later to be held by Beneficiary for the Third Party Secured Obligation.
The waivers given in this Section 5(b) shall be effective until the Third Party
Secured Obligation has been paid and performed in full.

               (c) Co-Owner understands and acknowledges that if Beneficiary
forecloses judicially or nonjudicially against any real property security for
the Third Party Secured Obligation, that foreclosure could impair or destroy any
ability that Co-Owner may have to seek reimbursement, contribution, and
indemnification from Borrower or others based on any right Co-Owner may have of
subrogation, reimbursement, contribution or indemnification. Co-Owner further
understands and acknowledges that in the absence of this Deed of Trust, such
potential impairment or destruction of Co-Owner's rights, if any, may entitle
Co-Owner to assert a defense to this Deed of Trust based on Section 580d of the
California Code of Civil Procedure as defined in Union Bank v. Gradsky, 265
Cal.App.2d 40 (1968). By executing this Deed of Trust, Co-Owner freely,
irrevocably and unconditionally: (i) waives and relinquishes that defense and
agrees that Co-Owner will be fully liable under this Deed of Trust even though
Beneficiary may foreclose judicially or nonjudicially against any real property
security for the Third Party Secured Obligation, (ii) agrees that Co-Owner will
not assert that defense in any action or proceeding which Beneficiary may
commence to enforce this Deed of Trust, (iii) acknowledges and agrees that the
rights and defense that Co-Owner may have or be entitled to assert based upon or
arising out of any one or more Sections 580a, 580b, 580d or 726 of the
California Code of Civil Procedure or Section 2848 of the California Civil Code,
and (iv) acknowledges and agrees that Beneficiary is relying on this waiver in
making the Third Party Secured Obligation, and that this waiver is a material
part of the consideration which Beneficiary is receiving for making the Third
Party Secured Obligation.

        6. REVIVAL AND REINSTATEMENT. If Beneficiary is required to pay, return
or restore to Borrower or any other person any amounts previously paid on the
Third Party Secured Obligation because of any Insolvency Proceeding of Borrower,
any stop notice or any other reason, the obligations of Co-Owner shall be
reinstated and revived and the rights of Beneficiary shall continue with regard
to such amounts, all as though they had never been paid.

                                       9.
<PAGE>
        7. INFORMATION REGARDING BORROWER. Before signing this Deed of Trust,
Co-Owner understands and acknowledges that Co-Owner is aware of the financial
condition and business operations of Borrower and such other matters as Co-Owner
deems appropriate to assure Co-Owner of Borrower's ability to discharge its
obligations in connection with the Third Party Secured Obligation. Co-Owner
assumes full responsibility for that due diligence, as well as for keeping
informed of all matters which may affect Borrower's ability to pay and perform
its obligations to Beneficiary. Beneficiary has no duty to disclose to Co-Owner
any information which Beneficiary may have or receive about Borrower's financial
condition, business operations, or any other circumstances.

                                      10.
<PAGE>
                                    EXHIBIT A
                                       TO
                                  DEED OF TRUST

                        LEGAL DESCRIPTION OF THE PROPERTY

                                   [ATTACHED]

                                      11.
<PAGE>
RECORDING REQUESTED BY AND WHEN RECORDED
MAIL TO:

Lynx Therapeutics, Inc.
25861 Industrial Boulevard
Hayward, California, 94545
Attn: Vice President, Human Resources

--------------------------------------------------------------------------------

                                        SPACE ABOVE THIS LINE FOR RECORDER'S USE

                  REQUEST FOR NOTICE UNDER SECTION 2924b CIVIL
                                      CODE

        In accordance with Section 2924b, Civil Code, request is hereby made
that a copy of any Notice of Default and a copy of any Notice of Sale under Deed
of Trust recorded as instrument No. 1999-0296940-00, on November 10, 1999,
Official Records of Contra Costa County, California, and describing land therein
as

                    Legal description attached hereto and made a part hereof

executed by Norman J.W. Russell and Jane Russell, husband and wife, as Trustor,
in which Washington Mutual Bank, FA is named as Lender/Beneficiary, and
California Reconveyance Company, as Trustee, be mailed to Lynx Therapeutics,
Inc. at 25861 Industrial Boulevard, Hayward, California, 94545, Attn: Vice
President, Human Resources.

The undersigned requests that a copy of any Notice of Default and of any Notice
of Sale hereunder be mailed to him at his address hereinbefore set forth.

Dated:  July 19, 2002
        -------

Lynx Therapeutics, Inc,

By:     /s/ Kathy A. San Roman
   ---------------------------

Its:    Vice President, Human Resources & Administration
    ----------------------------------------------------

                                       1.
<PAGE>
RECORDING REQUESTED BY AND WHEN RECORDED
MAIL TO:

Lynx Therapeutics, Inc.
25861 Industrial Boulevard
Hayward, California, 94545
Attn: Vice President, Human Resources

--------------------------------------------------------------------------------

                                        SPACE ABOVE THIS LINE FOR RECORDER'S USE

                  REQUEST FOR NOTICE UNDER SECTION 2924b CIVIL
                                      CODE

        In accordance with Section 2924b, Civil Code, request is hereby made
that a copy of any Notice of Default and a copy of any Notice of Sale under Deed
of Trust recorded as instrument No. 2000-0094895-00, on May 8, 2000, Official
Records of Contra Costa County, California, and describing land therein as

                   Legal description attached hereto and made a part hereof

executed by Norman J.W. Russell and Jane Russell, husband and wife, as Trustor,
in which Wells Fargo Bank, N.A. is named as Lender/Beneficiary, and American
Securities Company, as Trustee, be mailed to Lynx Therapeutics, Inc. at 25861
Industrial Boulevard, Hayward, California, 94545, Attn: Vice President, Human
Resources.

The undersigned requests that a copy of any Notice of Default and of any Notice
of Sale hereunder by mailed to him at his address hereinbefore set forth.

Dated:  July 19, 2002
        -------

Lynx Therapeutics, Inc,

By:     /s/  Kathy A. San Roman
   ----------------------------

ITS:    VICE PRESIDENT, HUMAN RESOURCES & ADMINISTRATION
    ----------------------------------------------------

                                       1.
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
-------------------------------------------------------------------------------

STATE OF CALIFORNIA                                )
                                                   )  SS.
COUNTY OF                                          )
          -----------------------------------------

On                  , before me,                                               ,
   -----------------            -----------------------------------------------
         Date                              Name And Title Of Officer
                                       (e.g. "Jane Doe, Notary Public")

personally appeared                                                            ,
                   ------------------------------------------------------------
                                         Name of Signer(s)

[ ] personally known to me -- OR -- [X]   proved to me on the basis of
                                          satisfactory evidence to be the
                                          person(s) whose name(s) is/are
                                          subscribed to the within instrument
                                          and acknowledged to me that
                                          he/she/they executed the same in
                                          his/her/their authorized
                                          capacity(ies), and that by
                                          his/her/their signature(s) on the
                                          instrument the person(s), or the
                                          entity upon behalf of which the
                                          person(s) acted, executed the
                                          instrument.

                                          WITNESS my hand and official seal.

                                          --------------------------------------
                                                Signature of Notary Public

--------------------------------------------------------------------------------

                                    OPTIONAL

   Though the information below is not required by law, it may prove valuable
         to persons relying on the document and could prevent fraudulent
           removal and reattachment of this form to another document.

 DESCRIPTION OF ATTACHED DOCUMENT

 Title or Type of Document:
                           -----------------------------------------------------

 Document Date:                           Number of Pages:
               -------------------------                  ----------------------

 Signer(s) Other Than Named Above:
                                  ----------------------------------------------

<Table>
<S>                                                          <C>
             CAPACITY(IES) CLAIMED BY SIGNER(S)                         CAPACITY(IES) CLAIMED BY SIGNER(S)

 Signer's Name:                                              Signer's Name:
               ------------------------------------------                  ---------------------------------------

 [ ]Individual                                               [ ]Individual
 [ ]Corporate Officer                                        [ ]Corporate Officer
    Title(s):                                                   Title(s):
              -------------------------------------------                 ----------------------------------------
 [ ]Partner -- [ ] Limited [ ] General                       [ ]Partner -- [ ] Limited [ ] General
 [ ]Attorney-in-Fact                                         [ ]Attorney-in-Fact
 [ ]Trustee                                                  [ ]Trustee
 [ ]Guardian or Conservator            ------------------    [ ]Guardian or Conservator         ------------------
 [ ]Other:                              RIGHT THUMBPRINT     [ ]Other:                           RIGHT THUMBPRINT
           ------------------------        OF SIGNER                  -----------------------       OF SIGNER
                                       ------------------                                       ------------------
           ------------------------     Top of thumb here              ----------------------    Top of thumb here

 Signer is representing:                                     Signer is representing:

 -----------------------------------                         --------------------------------

 -----------------------------------   ------------------    --------------------------------   ------------------

-------------------------------------------------------------------------------------------------------------------
</Table>

<PAGE>
                                    EXHIBIT E

                          EMPLOYEE INVENTION AGREEMENT

<PAGE>
                             LYNX THERAPEUTICS INC.

                          EMPLOYEE INVENTION AGREEMENT

1.      As an employee of Lynx Therapeutics Incorporated (the "Company"), and in
        consideration of the compensation now and hereafter paid to me, I agree
        at all times during the term of my employment and thereafter, to hold in
        strictest confidence, and not to use or to disclose to any person, firm
        or corporation, without express authorization of an officer of the
        Company, any information, manufacturing technique, processes, formulas,
        development or experimental work, work in process, trade secrets or any
        other proprietary or confidential matter relating to the products, sales
        or business of the Company.

2.      I further agree that I will promptly make full disclosure to the
        Company, will hold in trust for the sole right and benefit of the
        Company, and will assign all my right, title and interest to, any and
        all inventions, discoveries, developments, improvements or trade secrets
        which I may solely or jointly conceive, develop or reduce to practice,
        or cause to be conceived, developed or reduced to practice, during the
        period of time I am in the employ of the Company, except any invention,
        discovery, development, improvement or trade secret as to which I can
        prove that:

        a)      it was developed entirely on my own time; and

        b)      no equipment, supplies, facility or trade secret of the Company
                was used in its development; and

        c)      (i) it does not relate to the business or actual or demonstrably
                anticipated research or development of the Company, or (ii) it
                does not result from any work performed by me for the Company.

        Notwithstanding the foregoing, I also assign to or as directed by the
        Company all my right, title and interest in and to any and all
        inventions, discoveries, developments, improvements or trade secrets,
        full title to which is required to be in the United States by a contract
        between the Company and the United States or any of its agencies.

3.      I agree to execute any proper oath or verify any proper document in
        connection with carrying out the terms of this agreement. In the event
        the

<PAGE>
        Company is unable (because of my mental or physical incapacity or for
        any other reason whatsoever) to secure my signature to apply for, or to
        pursue any application for any United States or foreign letters patent,
        covering inventions assigned to the Company as stated above, I hereby
        irrevocably designate and appoint the Company and its duly authorized
        officer and agents as my agent and attorney in fact, to act for and in
        my behalf and stead to execute and file any such applications and to do
        all other lawfully permitted acts to further the prosecution and
        issuance of letters patent thereon with the same legal force and effect
        as if executed by me. I have attached hereto a list describing all
        inventions made by me prior to my employment with the Company belonging
        to me, relating to the Company's proposed business and products and not
        assigned to the Company, or, if no such list is attached, I represent
        that there are no such inventions. I hereby waive and quitclaim to the
        Company any and all claims of any nature whatsoever which I now or may
        hereafter have for infringement of any patent or patents resulting from
        any such applications for letters patent assigned hereunder to the
        Company.

4.      I recognize that the Company may receive from third parties their
        confidential or proprietary information subject to a duty on the
        Company's part to maintain the confidentiality of such information and
        to use it only for certain limited purposes. I agree that I owe the
        Company and such third parties during the term of my employment and
        thereafter a duty to hold all such confidential or proprietary
        information in the strictest confidence and not to disclose it to any
        person, firm or corporation (except as necessary in carrying out my work
        for the Company consistent with the Company's agreement with such third
        party) or use it for the benefit of anyone other than for the Company or
        such third party consistent with the Company's agreement with such third
        party without the express authorization of an officer of the Company.

5.      I further agree that at the time of leaving the employ of the Company, I
        will deliver to the Company and will not keep in my possession, nor
        deliver to anyone else, any and all drawings, blueprints, notes,
        memoranda, specifications, devices, documents, or any other material
        containing or disclosing any of the matters referred to herein.

6.      I agree that I will not during my employment at the Company improperly
        use or disclose any proprietary information or trade secrets of my
        former or concurrent employers or companies, if any, and that I shall
        not bring onto the premises of the Company any unpublished document or
        any property

<PAGE>
        belonging to my former or concurrent employers or companies, if any,
        unless consented to in writing by said employers or companies.

7.      The provisions of this agreement requiring assignment to the Company do
        not apply to any invention which qualifies fully under the provisions of
        Section 2870 of the California Labor Code. I will advise the company
        promptly in writing of any inventions, discoveries, developments,
        improvement or trade secrets that I believe meet the criteria in
        subparagraphs 2 a, b, and c above; and I will at that time provide to
        the Company in writing all evidence necessary to substantiate that
        belief. I understand that the Company will keep in confidence and will
        not disclose to third parties without my consent any confidential
        information disclosed in writing to the company relating to inventions
        which qualify fully under the provision of Section 2870 of the
        California Labor Code.

IN WITNESS WHEREOF, I have subscribed my name hereunto this
18th     day of       June                  , 1999.
----           ----------------------------   ----

                                            /s/  Norman Russell
                                            ------------------------------------
                                                         Signature

                                                 Dr. NJW Russell
                                            ------------------------------------
                                                         Print Name

/s/  Cristina Alves
------------------------------------
              Witness<PAGE>
                                                                    Exhibit 10.4

                              EMPLOYMENT AGREEMENT

        This Employment Agreement ("AGREEMENT"), dated as of May 15, 2002
("EFFECTIVE DATE"), is between Medical Discoveries, Inc., a Utah corporation
("MDI"), and Judy M. Robinett, an individual ("EXECUTIVE").

1. EMPLOYMENT RELATIONSHIP / POSITION / DUTIES.

        1.1 EMPLOYMENT RELATIONSHIP. As of the Effective Date, Executive shall
be employed by MDI as President and Chief Executive Officer. Executive and MDI
acknowledge that either party may terminate this employment relationship at any
time and for any or no reason, subject to the obligation of MDI to provide the
severance benefits specified in this Agreement.

        1.2 POSITION. Executive will serve MDI as its President and Chief
Executive Officer.

        1.3 DUTIES. Executive will, during the term of this Agreement,
faithfully and diligently perform all such acts and duties, and furnish such
services, as the Board of Directors of MDI shall reasonably direct and are
consistent with the position of President and Chief Executive Officer. Executive
will devote such time, energy, and skill to the business of MDI as shall
reasonably be required for such performance of her duties.

2. TERM OF EMPLOYMENT. Unless sooner terminated in accordance with this
Agreement, the term of employment will be for the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date (the
"TERM"); provided, however, that in the event of a Change of Control (as defined
in Section 5.4(c)) during said three-year period, the Term shall extend to the
later of (i) said three-year period or (ii) 12 months following the Change of
Control.

3. SALARY AND BONUS. MDI will pay Executive (i) base pay at an annual rate of
$200,000, plus (ii) bonus payments as part of MDI's annual management bonus
program. Executive's incentive eligibility under the bonus program shall be such
that performance at the target levels established by the Board of Directors for
an annual bonus performance period would result in an incentive payment equal to
50% of Executive's base pay.

4. OTHER BENEFITS.

        4.1 SIGNING BONUS. MDI agrees to pay Executive a signing bonus of
$200,000, subject to all applicable withholding requirements, payable upon
execution of this Agreement.

        4.2 EMPLOYEE BENEFIT PROGRAMS. Executive will be eligible to participate
in all employee benefit programs established by MDI that are applicable to
management personnel such as medical, pension, 401(k), disability and life
insurance plans on the same basis as other

                                       1
<PAGE>

employees of MDI from time to time, but nothing herein shall require the
adoption or maintenance by MDI of any specific plans.

        4.3 VACATIONS AND HOLIDAYS. Executive will be provided such holidays,
sick leave and vacation as MDI makes available to its management level employees
generally; provided, however, that Executive shall be entitled to not less than
four weeks' paid vacation in each twelve month period.

        4.4 EXPENSES. MDI will reimburse Executive in accordance with company
policies and procedures for reasonable expenses (including travel expenses)
necessarily incurred in the performance of duties hereunder against appropriate
receipts and vouchers indicating the specific business purpose for each such
expenditure. In addition, MDI shall provide Executive with a cellular phone and
a monthly calling plan of Executive's choosing.

        4.5 VEHICLE. MDI shall provide Executive with the use of a company-owned
vehicle.

5. COMPENSATION UPON TERMINATION.

        5.1 TERMINATION WITHOUT CAUSE. In the event of a Termination of
Executive's Employment (as defined in Section 5.4(a)) at any time during the
Term other than for Cause (as defined in Section 5.4(b)), death, or Disability
(as defined in Section 5.4(d)), and contingent upon Executive's execution of the
Release of Claims (as defined in Section 5.3) and compliance with Section 10,
Executive shall be entitled to receive as severance pay an amount in cash equal
to Executive's annual base pay at the rate in effect immediately prior to the
date of termination for a period equal to the longer of two years or the
unexpired portion of the Term. MDI shall pay Executive such amount in a single
payment after employment has ended and eight days have passed following
execution of the Release of Claims without revocation. This severance pay shall
be in lieu of any other compensation for periods after the date of termination.

        5.2 TERMINATION FOR CAUSE, DEATH, OR DISABILITY. Upon Termination of
Executive's Employment at any time during the Term for Cause, death, or
Disability, Executive will be paid her compensation through the date of
termination and will have no rights to payments after the termination date.

        5.3 RELEASE OF CLAIMS. In consideration for and as a condition precedent
to receiving the severance benefits outlined in Section 5.1 and elsewhere in
this Agreement, Executive agrees to execute a comprehensive release of
claims/non-disparagement agreement in a form acceptable to MDI ("RELEASE OF
CLAIMS"). Executive promises to execute and deliver the Release of Claims to MDI
within the later of (i) 45 days from the date Executive receives the Release of
Claims or (ii) the last day of Executive's active employment.

        5.4 DEFINITIONS.

               (a) Termination of Executive's Employment. Termination of
Executive's Employment means that MDI has terminated Executive's employment with
MDI (including any

                                       2
<PAGE>

subsidiary of MDI). If Executive is assigned additional or different titles,
tasks or responsibilities from those currently held or assigned, consistent with
Executive's areas of professional expertise and with no decrease in annual base
compensation, whether at MDI or any subsidiary of MDI, such circumstances shall
not constitute a Termination of Executive's Employment. Termination of
Executive's Employment shall include termination by resignation of Executive,
within 12 months of a Change of Control, by written notice to MDI referring to
the applicable paragraph of Section 5.4(a), for "Good Reason" based on:

                      (i) the assignment to Executive of a different title, job
        or responsibilities that results in a decrease in the level of
        responsibility of Executive with respect to the surviving company after
        the Change of Control when compared to Executive's level of
        responsibility for MDI's operations prior to the Change of Control;
        provided that Good Reason shall not exist if Executive continues to have
        the same or a greater general level of responsibility for the former MDI
        operations after the Change of Control as Executive had prior to the
        Change of Control even if the former MDI operations are a subsidiary or
        division of the surviving company;

                      (ii) a reduction by MDI or the surviving company in
        Executive's base pay as in effect immediately prior to the Change of
        Control;

                      (iii) a significant reduction by MDI or the surviving
        company in total benefits available to Executive under cash incentive,
        stock incentive and other employee benefit plans after the Change of
        Control compared to the total package of such benefits as in effect
        prior to the Change of Control; or

                      (iv) MDI or the surviving company requires Executive to be
        based more than 50 miles from where Executive's office is located
        immediately prior to the Change of Control except for required travel on
        company business to an extent substantially consistent with the business
        travel obligations that Executive undertook on behalf of MDI prior to
        the Change of Control.

               (b) Cause. Termination of Executive's Employment for "Cause"
shall mean termination upon (i) the willful and continued failure by Executive
to perform substantially Executive's reasonably assigned duties with MDI (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board of Directors of MDI which specifically identifies the
manner in which the Board believes that Executive has not substantially
performed Executive's duties or (ii) the willful engaging by Executive in
illegal or dishonest conduct which is materially and demonstrably injurious to
MDI. No act, or failure to act, on Executive's part shall be considered
"willful" unless done, or omitted to be done, by Executive without reasonable
belief that Executive's action or omission was in, or not opposed to, the best
interests of MDI. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the

                                       3
<PAGE>

Board or based upon the advice of counsel for MDI shall be conclusively presumed
to be done, or omitted to be done, by Executive in the best interests of MDI.

               (c) Change of Control. A Change of Control shall mean that one of
the following events has taken place:

                      (i) The consummation of a merger or consolidation of MDI
        with or into another entity or any other corporate reorganization, if
        more than 50% of the combined voting power of the continuing or
        surviving entity's securities outstanding immediately after such merger,
        consolidation or other reorganization is owned by persons who were not
        stockholders of MDI immediately prior to such merger, consolidation or
        other reorganization; or

                      (ii) the sale, transfer or other disposition of all or
        substantially all of MDI's assets; or

                      (iii) A change in the composition of the Board of
        Directors, as a result of which fewer than one-half of the incumbent
        directors are directors who either:

                              (1) Had been directors of MDI 24 months prior to
               such change; or

                              (2) Were elected, or nominated for election, to
               the Board of Directors with the affirmative votes of at least a
               majority of the directors who had been directors of MDI 24 months
               prior to such change and who were still in office at the time of
               the election or nomination.

A transaction shall not constitute a Change of Control if its sole purpose is to
change the state of MDI's incorporation or to create a holding company that will
be owned in substantially the same proportions by the persons who held MDI's
securities immediately before such transaction. In addition, notwithstanding
anything in the foregoing to the contrary, no Change of Control shall be deemed
to have occurred for purposes of this Agreement by virtue of any transaction
which results in Executive, or a group of persons which includes Executive,
acquiring, directly or indirectly, securities representing 20% or more of the
voting power of outstanding securities of MDI.

               (d) Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with MDI
for an aggregate of 90 days in any period of 180 consecutive days as a result of
Executive's incapacity due to physical or mental illness, unless within 30 days
after notice of termination by MDI following such absence Executive shall have
returned to the full-time performance of Executive's duties.

        5.5 GROSS-UP PAYMENT. Notwithstanding anything in this Agreement to the
contrary, if any payment pursuant to this Agreement (each a "PAYMENT") is
subject to the excise tax

                                       4
<PAGE>

imposed on "excess parachute payments" by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "CODE") (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "EXCISE TAX"), then
Executive shall be entitled to an additional payment (a "GROSS-UP PAYMENT") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Payment and any federal, state and local income tax and Excise Tax upon
the Gross-Up Payment, shall be equal to the Payment. No Gross-Up Payment shall
be payable under this Section 5.5 if the Payment is not subject to an Excise
Tax.

6. CONFIDENTIAL INFORMATION.

        6.1 Executive recognizes that MDI's business and continued success
depend upon the use and protection of confidential and proprietary business
information concerning MDI and its business (all such information being
"CONFIDENTIAL INFORMATION"). For purposes of this Agreement, the phrase
"Confidential Information" includes, for MDI and its current or future
subsidiaries and affiliates, without limitation, and whether or not specifically
designated as confidential or proprietary: all business plans and marketing
strategies; information concerning existing and prospective markets and
customers; financial information; information concerning the development of new
products and services; and technical and non-technical data related to designs,
specifications, compilations, inventions, improvements, methods, processes,
procedures and techniques; provided, however, that the phrase does not include
information that (a) was lawfully in Executive's possession prior to disclosure
of such information by MDI; (b) was, or at any time becomes, available in the
public domain other than through a violation of this Agreement or any other
confidentiality agreement maintained by MDI; (c) is documented by Executive as
having been developed by Executive outside the scope of Executive's employment
and independently; or (d) is furnished to Executive by a third party not under
an obligation of confidentiality to MDI.

        6.2 Executive agrees that Executive will use Confidential Information
only for the benefit of MDI and will not directly or indirectly use or divulge,
or permit others to use or divulge, any Confidential Information for any reason,
except as authorized by MDI. Executive's obligation under this Agreement is in
addition to any obligations Executive has under state or federal law. Executive
agrees to deliver to MDI immediately upon termination of Executive's employment,
or at any time MDI so requests, all tangible items containing any Confidential
Information (including, without limitation, all memoranda, computer storage
devices, photographs, records, reports, manuals, drawings, blueprints,
prototypes, notes taken by or provided to Executive, and any other documents or
items of a confidential nature belonging to MDI), together with all copies of
such material in Executive's possession or control. Executive agrees that in the
course of Executive's employment with MDI, Executive will not violate in any way
the rights that any entity has with regard to trade secrets or proprietary or
confidential information. Executive's obligations under this Section 6 are
indefinite in term and shall survive the termination of this Agreement.

7. WORK PRODUCT AND TRADEMARKS, TRADENAMES AND COPYRIGHTS. Executive agrees that
all right, title and interest in and to all trademarks, tradenames and
copyrights, registered or unregistered, used by MDI in its business (the
"BUSINESS") are the property of MDI, and

                                       5
<PAGE>

Executive will not during the term of her employment or thereafter use or, to
the extent of her ability to do so, permit others to use such trademarks,
tradenames and copyrights except as permitted by MDI. Further, Executive agrees
that all right, title and interest in and to the materials resulting from the
performance of Executive's duties to MDI and all copies thereof, including works
in progress, in whatever media, (the "WORK"), will be and remain in MDI upon
their creation. Executive will mark all Work with MDI's copyright or other
proprietary notice as directed by MDI. Executive further agrees:

        7.1 To the extent that any portion of the Work constitutes a work
protectable under the copyright laws of the United States (the "COPYRIGHT LAW"),
that all such Work will be considered a "work made for hire" as such term is
used and defined in the Copyright Law and that MDI will be considered the
"author" of such portion of the Work and the sole and exclusive owner throughout
the world of copyright therein; and

        7.2 If any portion of the Work does not qualify as a "work made for
hire" as such term is used and defined in the Copyright Law, that Executive
hereby assigns and agrees to assign to MDI, without further consideration, all
right, title and interest in and to such Work or in any such portion thereof and
any copyright therein and further agrees to execute and deliver to MDI, upon
request, appropriate assignments of such Work and copyright therein and such
other documents and instruments as MDI may request to fully and completely
assign such Work and copyright therein to MDI, its successors or nominees, and
that Executive hereby appoints MDI as attorney-in-fact to execute and deliver
any such documents on Executive's behalf in the event Executive should fail or
refuse to do so within a reasonable period following MDI's request.

8. INVENTIONS AND PATENTS. For purposes of this Agreement, "Inventions"
includes, without limitation, information, inventions, contributions,
improvements, ideas, or discoveries, whether patentable or not, and whether or
not conceived or made during work hours. Executive agrees that all Inventions
conceived or made by Executive during the period of employment with MDI belong
to MDI, provided they grow out of Executive's work with MDI or are related in
some manner to the Business, including, without limitation, research and product
development, and projected business of MDI or its affiliated companies.
Accordingly, Executive will:

        8.1 Make adequate written records of such Inventions, which records will
be MDI's property;

        8.2 Assign to MDI, at its request, any rights Executive may have to such
Inventions for the U.S. and all foreign countries;

        8.3 Waive and agree not to assert any moral rights Executive may have or
acquire in any Inventions and agree to provide written waivers from time to time
as requested by MDI; and

        8.4 Assist MDI (at MDI's expense) in obtaining and maintaining patents
or copyright registrations with respect to such Inventions.

                                       6
<PAGE>

        Executive understands and agrees that MDI or its designee will
determine, in its sole and absolute discretion, whether an application for
patent will be filed on any Invention that is the exclusive property of MDI, as
set forth above, and whether such an application will be abandoned prior to
issuance of a patent. MDI will pay to Executive, either during or after the term
of this Agreement, the following amounts if Executive is sole inventor, or
Executive's proportionate share if Executive is joint inventor: $750 upon filing
of the initial application for patent on such Invention; and $1,500 upon
issuance of a patent resulting from such initial patent application, provided
Executive is named as an inventor in the patent.

        Executive further agrees that Executive will promptly disclose in
writing to MDI during the term of Executive's employment and for one year
thereafter, all Inventions whether developed during the time of such employment
or thereafter (whether or not MDI has rights in such Inventions) so that
Executive's rights and MDI's rights in such Inventions can be determined.
Executive represents and warrants that Executive has no Inventions, software,
writings or other works of authorship useful to MDI in the normal course of the
Business, which were conceived, made or written prior to the date of this
Agreement and which are excluded from the operation of this Agreement

9. REMEDIES. Notwithstanding other provisions of this Agreement regarding
dispute resolution, Executive agrees that Executive's violation of any of
Sections 6, 7, or 8 of this Agreement would cause MDI irreparable harm which
would not be adequately compensated by monetary damages and that an injunction
may be granted by any court or courts having jurisdiction, restraining Executive
from violation of the terms of this Agreement, upon any breach or threatened
breach of Executive of the obligations set forth in any of Sections 6, 7, or 8.
The preceding sentence shall not be construed to limit MDI from any other relief
or damages to which it may be entitled as a result of Executive's breach of any
provision of this Agreement, including Sections 6, 7, or 8.

10. RESIGNATION OF CORPORATE OFFICES. Executive will resign Executive's office,
if any, as a director, officer or trustee of MDI, its subsidiaries or affiliates
and of any other corporation or trust of which Executive serves as such at the
request of MDI, effective as of the date of Termination of Executive's
Employment. Executive agrees to provide MDI such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.

11. DISPUTE RESOLUTION. Except for the right of MDI and Executive to seek
injunctive relief in court, any controversy, claim or dispute of any type
arising out of or relating to Executive's employment or the provisions of this
Agreement shall be resolved in accordance with this Section 11, which will be
the sole and exclusive procedure for the resolution of any disputes. Matters
subject to these provisions include, without limitation, claims or disputes
based on statute, contract, common law and tort and will include, for example,
matters pertaining to termination, discrimination, harassment, compensation and
benefits. Matters to be resolved under these procedures also include claims and
disputes arising out of statutes such as Title VII of the Civil Rights Act and
the Age Discrimination in Employment Act. Nothing in this

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<PAGE>

provision is intended to restrict Executive from submitting any matter to an
administrative agency with jurisdiction over such matter.

        11.1 COMPLIANCE WITH MDI POLICY. Executive and MDI will make a good
faith attempt to resolve all disputes in accordance with any dispute resolution
policy adopted by MDI before resorting to any other dispute resolution
procedure.

        11.2 MEDIATION. MDI and Executive will make a good faith attempt to
resolve any and all claims and disputes not resolved in accordance with Section
11.1 by submitting them to mediation in Salt Lake City, Utah before resorting to
arbitration or any other dispute resolution procedure. The mediation of any
claim or dispute must be conducted in accordance with the then-current American
Arbitration Association ("AAA") national rules for the resolution of employment
disputes by mediation, by a mediator who has had both training and experience as
a mediator of general employment and commercial matters. If the parties to this
agreement cannot agree on a mediator, then the mediator will be selected by the
AAA in accordance with the criteria described in this provision. Within 30 days
after the selection of the mediator, MDI and Executive and their respective
attorneys will meet with the mediator for one mediation session of at least four
hours. If the claim or dispute cannot be settled during such mediation session
or mutually agreed continuation of the session, either MDI or Executive may give
the mediator and the other party to the claim or dispute written notice
declaring the end of the mediation process. All discussions connected with this
mediation provision will be confidential and treated as compromise and
settlement discussions. Nothing disclosed in such discussions, which is not
independently discoverable, may be used for any purpose in any later proceeding.
The mediator's fees will be paid by MDI.

        11.3 ARBITRATION. If any claim or dispute has not been resolved in
accordance with Section 11.1 and Section 11.2, then the claim or dispute will be
determined by arbitration in Salt Lake City, Utah, in accordance with the
then-current AAA national rules for the resolution of employment disputes by
arbitration, except as modified herein. The arbitration will be conducted by a
sole neutral arbitrator who has had both training and experience as an
arbitrator of general employment and commercial matters and who is and for at
least ten years has been, a partner, a shareholder, or a member in a law firm.
If MDI and Executive cannot mutually agree on an arbitrator, then the arbitrator
will be selected by the AAA applying the criteria in this provision. No person
who has served as a mediator under the mediation provision, however, may be
selected as the arbitrator for the same claim or dispute. Reasonable discovery
will be permitted and the arbitrator may decide any issue as to discovery. The
arbitrator may decide any issue as to whether or as to the extent to which, any
dispute is subject to the dispute resolution provisions in Section 11 and the
arbitrator may award any relief permitted by law. The arbitrator must base the
arbitration award on the provisions of Section 11 and applicable law and must
render the award in writing, including an explanation of the reasons for the
award. Judgment upon the award may be entered by any court having jurisdiction
of the matter, and the decision of the arbitrator will be final and binding. The
statute of limitations applicable to the commencement of a lawsuit will apply to
the commencement of arbitration under Section 11.3. The arbitrator's fees will
be paid in equal portions by MDI and Executive, unless the arbitrator determines
that, under the

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<PAGE>

circumstances of the arbitration and considering the award of the arbitrator,
one or the other of the parties should pay the entire amount of the arbitrator's
fees.

12. FEES. Unless otherwise agreed, the prevailing party will be entitled to its
costs and attorneys' fees incurred in any litigation relating to the
interpretation or enforcement of this Agreement.

13. DISCLOSURE. Executive agrees fully and completely to reveal the terms of
this Agreement to any future employer or potential employer of Executive and
authorizes MDI, at its election, to make such disclosure.

14. REPRESENTATION OF EXECUTIVE. Executive represents and warrants to MDI that
Executive is free to enter into this Agreement and has no commitment,
arrangement or understanding to or with any party that restrains or is in
conflict with Executive's performance of the covenants, services and duties
provided for in this Agreement. Executive agrees to indemnify MDI and to hold it
harmless against any and all liabilities or claims arising out of any
unauthorized act or acts by Executive that, the foregoing representation and
warranty to the contrary notwithstanding, are in violation, or constitute a
breach, of any such commitment, arrangement or understanding.

15. ASSIGNABILITY. During Executive's employment, this Agreement may not be
assigned by either party without the written consent of the other; provided,
however, that MDI may assign its rights and obligations under this Agreement
without Executive's consent to a successor by reorganization, sale, merger or
liquidation, if such successor carries on the Business substantially in the form
in which it is being conducted at the time of the reorganization, sale, merger
or liquidation. This Agreement is binding upon Executive, Executive's heirs,
personal representatives and permitted assigns and on MDI, its successors and
assigns.

16. NOTICES. Any notice required or permitted to be given hereunder is
sufficient if in writing and delivered by hand, by facsimile or by registered or
certified mail, to Executive at 738 Aspenwood Lane, Twin Falls, ID 83301 or to
MDI at 30103 W. Quinn Rd., Prosser, WA 99350, Attn: David R. Walker. Either
Executive or MDI may change the place to which notice is to be given by
providing notice thereof to the other party.

17. SEVERABILITY. If any provision of this Agreement or compliance by any of the
parties with any provision of this Agreement constitutes a violation of any law,
or is or becomes unenforceable or void, then such provision, to the extent only
that it is in violation of law, unenforceable or void, shall be deemed modified
to the extent necessary so that it is no longer in violation of law,
unenforceable or void, and such provision will be enforced to the fullest extent
permitted by law. If such modification is not possible, said provision, to the
extent that it is in violation of law, unenforceable or void, shall be deemed
severable from the remaining provisions of this Agreement, which provisions will
remain binding on the parties.

18. WAIVERS. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial

                                       9
<PAGE>

waiver of a breach of any provision of this Agreement operate or be construe as
a waiver of any subsequent breach; nor will any single or partial exercise of
any right or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by law.

19. GOVERNING LAW. The validity, construction and performance of this Agreement
shall be governed by the laws of the State of Idaho without regard to the
conflict of laws provisions of such laws.

20. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties with respect to the relationship between Executive and MDI and
supersedes all prior agreements and understandings, and there are no other
representations or agreements other than as stated in this Agreement related to
the terms and conditions of Executive's employment. This Agreement may be
changed only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.

        IN WITNESS WHEREOF, the parties have duly signed and delivered this
Agreement as of the day and year first above written.

MEDICAL DISCOVERIES, INC.

By: /s/ David R. Walker                            /s/ Judy M. Robinett
   ----------------------------------------       ------------------------------
Name:  David R. Walker                            Judy M. Robinett
Title:  Chairman of the Board of Directors

                                       10

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