Document:

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                                                                    EXHIBIT 10.2

                                                                  EXECUTION COPY

                          REGISTRATION RIGHTS AGREEMENT

               This Registration Rights Agreement (this "Agreement") is made and
entered into as of May 24, 2001, among Lynx Therapeutics, Inc., a Delaware
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").

               This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").

               The Company and the Purchasers hereby agree as follows:

        1.     Definitions

               Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

               "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.

               "Business Day" shall have the meaning set forth in the Purchase
Agreement.

               "Closing Date" shall have the meaning set forth in the Purchase
Agreement.

               "Commission" means the Securities and Exchange Commission.

               "Common Stock" means the Company's common stock, $.01 par value,
or such securities in to which that such stock shall hereafter be reclassified.

               "Effectiveness Date" means with respect to the Registration
Statement required to be filed hereunder, the 120th day following the date
hereof.

               "Effectiveness Period" shall have the meaning set forth in
Section 2(a).

               "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

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               "Filing Date" means with respect to the Shares and the Warrants,
the 30th day following the date hereof.

               "Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.

               "Indemnified Party" shall have the meaning set forth in Section
5(c).

               "Indemnifying Party" shall have the meaning set forth in Section
5(c).

               "Losses" shall have the meaning set forth in Section 5(a).

               "Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.

               "Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

               "Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

               "Registrable Securities" means (i) the Shares, and (ii) the
shares of Common Stock issuable upon exercise in full of the Warrants; provided,
however, that Registrable Securities shall cease to be Registrable Securities
when (A) such shares of Common Stock have been disposed of in accordance with
the Registration Statement or (B) such shares of Common Stock have been
transferred pursuant to Rule 144 under the Securities Act.

               "Registration Statement" means the registration statement
contemplated by Section 3(c), including the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.

               "Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

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               "Rule 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

               "Rule 424" means Rule 424 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

               "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.

               "Shares" means the shares of Common Stock issued to the
Purchasers pursuant to the Purchase Agreement.

               "Special Counsel" means one special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to Section 4.

               "Warrants" means the Warrants issued to the Purchasers pursuant
to the Purchase Agreement.

        2.     Shelf Registration

               (a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering the resale of
all Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form) and shall contain (except if otherwise directed by the
Holders) the "Plan of Distribution" attached hereto as Annex A. The Company
shall use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the Effectiveness Date, and shall use its
best efforts to keep such Registration Statement continuously effective under
the Securities Act until the date which is two years after the date that such
Registration Statement is declared effective by the Commission or such earlier
date when all Registrable Securities covered by such Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144(k)
(the "Effectiveness Period").

               (b) The Registration Statement to be filed hereunder shall
include (but not be limited to) a number of shares of Common Stock equal to no
less than the sum of (i) the Shares issued to the Purchaser on the Closing Date
and (ii) the number of shares of Common Stock issuable upon exercise in full of
the Warrants.

               (c) If: (a) the Registration Statement is not filed on or prior
to its Filing Date (if the Company files such Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (a)), or (b) the Company fails to file with the Commission
a

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request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within five days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that the
Registration Statement will not be "reviewed," or not subject to further review,
or (c) the Registration Statement filed hereunder is not declared effective by
the Commission on or prior to the Effectiveness Date, or (d) after the
Registration Statement is filed with and declared effective by the Commission,
such Registration Statement ceases to be effective as to all Registrable
Securities to which it is required to relate at any time prior to the expiration
of the Effectiveness Period without being succeeded within ten Business Days by
an amendment to such Registration Statement or by a subsequent Registration
Statement filed with and declared effective by the Commission, or (e) the
exercise rights of the Holders pursuant to the Warrants are suspended for any
reason, or (f) an amendment to a Registration Statement is not filed by the
Company with the Commission within ten Business Days of the Commission's
notifying the Company that such amendment is required in order for such
Registration Statement to be declared effective (any such failure or breach
being referred to as an "Event," and for purposes of clauses (a), (c), (e) the
date on which such Event occurs, or for purposes of clause (b) the date on which
such five day period is exceeded, or for purposes of clauses (d) and (f) the
date which such ten Business Day-period is exceeded, being referred to as "Event
Date"), then, on each such Event Date and every monthly anniversary thereof
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 2.0% of the
aggregate purchase price paid by such Holder pursuant to the Purchase Agreement.
If the Company fails to pay any liquidated damages pursuant to this Section in
full within seven days after the date payable, the Company will pay interest
thereon at a rate of 15% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing daily from the
date such liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full. The liquidated damages pursuant to the terms hereof
shall apply on a pro-rata basis for any portion of a month prior to the cure of
an Event.

      (d) Notwithstanding anything in this Agreement to the contrary, if the
Company shall furnish to the Holders a certificate signed by the President or
Chief Financial Officer of the Company stating that the Board of Directors of
the Company has made the good faith determination (i) that continued use by the
Holders of the Registration Statement for purposes of effecting offers or sales
of Registrable Securities pursuant thereto would require under the Securities
Act premature disclosure in the Registration Statement (or the prospectus
relating thereto) of material, nonpublic information concerning a proposed
material transaction involving the Company, (ii) that such premature disclosure
would be materially adverse to the Company or would make the successful
consummation by the Company of any such material transaction significantly less
likely and (iii) that it is therefore essential to suspend the use by the
Holders of such Registration Statement (and the prospectus relating thereto) for
purposes of effecting offers or sales of Registrable Securities pursuant
thereto, then the right of the Holders to use the Registration Statement (and
the prospectus relating thereto) for purposes of effecting offers or sales of
Registrable Securities pursuant thereto shall be suspended for a period (the
"Suspension Period") of not more than 15 days after delivery by the Company of
the certificate referred to above in this Section 2(d). No more than two
Suspension Periods may occur in any 12-month period. A Suspension Period shall
not commence until the tenth Trading Day following the expiration of a
Suspension Period. The period of any such suspension of the

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Registration Statement shall be added to the Effectiveness Period and
Effectiveness Date. During the Suspension Period, none of the Holders of
Registrable Securities shall offer or sell any Registrable Securities pursuant
to or in reliance upon the Registration Statement (or the prospectus relating
thereto).

               (e) Each Holder of Registrable Securities agrees to furnish to
the Company with information reasonably requested for the preparation of the
Registration Statement.

        3.     Registration Procedures

               In connection with the Company's registration obligations
hereunder, the Company shall:

               (a) Not less than five Business Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to the
Holders and their Special Counsel copies of all such documents proposed to be
filed (other than those incorporated or deemed to be incorporated by reference),
which documents will be subject to the review of such Holders and their Special
Counsel (all comments, if any, to be delivered to the Company in writing from
the Special Counsel on behalf of all the Purchasers), and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or supplements thereto to which the Holders of
a majority of the Registrable Securities and their Special Counsel shall
reasonably object, provided, the Company is notified of such objection no later
than three Business Days after the Holders have been so furnished copies of such
documents. The parties agree that if the Holders or the Special Counsel shall
fail to provide comments to the Company or their counsel to a proposed
Registration Statement by the expiration of the third Business Day following the
date on which they received the same for review, then a number of days equal to
the number of Business Days in excess of such periods shall be added to the
definitions of Filing Date and Effectiveness Date for purposes of Section 2(c)
hereof.

                (b) Subject to Section 2(d), (i) prepare and file with the
Commission such amendments, including post-effective amendments, to the
Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) respond as promptly as reasonably possible, and in any event
within ten days, to any comments received from the Commission with respect to
the Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv)

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comply in all material respects with the provisions of the Securities Act and
the Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

               (c) Subject to Section 2(d), notify the Holders of Registrable
Securities to be sold and their Special Counsel as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five Business Days
prior to such filing) and (if requested by any such Person) confirm such notice
in writing no later than two Business Days following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement (the
Company shall provide true and complete copies thereof and all written responses
thereto to the Special Counsel on behalf of the Purchasers); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

               (d) Promptly deliver to each Holder and the Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. Subject to Section 2(d), the Company hereby consents to the
use of such Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.

               (e) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders
and the Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period

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and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, that the Company shall not be required to
qualify generally to do business or consent to service of process in any
jurisdiction where it is not now so qualified or has not so consented or subject
the Company to any material tax in any such jurisdiction where it is not then so
subject.

               (f) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may
reasonably request.

               (g) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

               (h)    Comply with all applicable rules and regulations of the
Commission.

        4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the stock market or trading facility on which the
Common Stock is then listed for trading, and (B) in compliance with applicable
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and up to $7,500 for the Special Counsel for the Holders
and (v) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement.

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        5.     Indemnification

               (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers and directors of each of them, the agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them authorized and acting
on the Holder's behalf, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable costs of preparation and reasonable attorneys' fees) and
reasonable expenses (collectively, "Losses"), as incurred, to the extent such
Losses arise out of or relate to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arise out of or relate to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder or the Special Counsel expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder or the Special Counsel
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (2) in the case of an
occurrence of an event of the type specified in Section 3(d)(ii)-(vi), the use
by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.

               (b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of or relating to any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or relating to any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the extent
that such untrue statement or omission was made in reliance upon and conformity
with written information furnished by such Holder or the Special Counsel to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder or the Special Counsel expressly for use therein, or to

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the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved by such Holder or the Special Counsel expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(c)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

               (c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses reasonably incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.

               An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.

              All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Business Days of written notice thereof to the Indemnifying
Party

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(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).

               (d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to, or insufficient to hold harmless, an Indemnified
Party (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken
or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

               The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), (i) no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission; and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

               The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.

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        6.     Miscellaneous

               (a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the Registrable Securities then
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities then outstanding to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.

               (b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that would have the effect of impairing
the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. Except as and to the extent specified in Schedule 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person that have not been satisfied in full.

                (c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.

               (d) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.

               (e) Piggy-Back Registrations. Except during Suspension Periods as
set forth in Section 2(d), if at any time during the Effectiveness Period there
is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within 15 days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered.

               (g)  Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and

                                      41.
<PAGE>   12

effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 6:30 p.m. (New York City time) on a Business
Day, (ii) the Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Agreement later than 6:30 p.m. (New York City time) on any
date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as follows:

        If to the Company:              Lynx Therapeutics, Inc.
                                        25861 Industrial Boulevard
                                        Hayward, CA 94545
                                        Facsimile No.: (510) 670-9302
                                        Attn: Chief Financial Officer

        With a copy to:                 Cooley Godward LLP
                                        Five Palo Alto Square
                                        3000 El Camino Real
                                        Palo Alto, CA  94306
                                        Facsimile No.: (650) 849-7400
                                        Attn: James Kitch, Esq.

        If to a Purchaser:              To the address set forth
                                        under such Purchaser's name on the
                                        signature pages hereto.

        If to any other Person who is then the registered Holder:

                                        To the address of such Holder as it
                                        appears in the stock transfer
                                        books of the Company

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

               (h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.

               (i) Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and the
same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding

                                      42.
<PAGE>   13

obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.

               (j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

               (k)    Cumulative Remedies.  The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

               (l) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

               (m) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

               (n) Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any

                                      43.
<PAGE>   14

way acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                           SIGNATURE PAGES TO FOLLOW]

                                      44.
<PAGE>   15

               IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.

                             LYNX THERAPEUTICS, INC.

                             By:    /s/ Edward C. Albini
                                    ---------------------------
                             Name:   Edward C. Albini
                             Title:  Chief Financial Officer

                                [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES OF PURCHASER TO FOLLOW]

<PAGE>   16

                             HBK MASTER FUND L.P.
                             By:    HBK Investments L.P.
                                    Investment Advisor

                             By:    /s/ Kevin O'Neil
                                    ---------------------------
                             Name:  Kevin O'Neil
                             Title: Authorized Signatory

                             Address for Notice:

                             300 Crescent Court, Suite 700
                             Dallas, Texas 75201
                             Facsimile No.: 214-758-1207
                             Telephone No.: 214-758-6107
                             Attn:   Jeff Estes and General Counsel

                             With a copy to:
                             Robinson Silverman Pearce Aronsohn & Berman LLP
                             1290 Avenue of the Americas
                             New York, NY  10104
                             Facsimile No.:  (212) 541-4630 and (212) 541-1432
                             Attn:  Eric L. Cohen, Esq.

<PAGE>   17

                             FIRST INVESTORS HOLDING CO., INC.

                             By:  /s/ Kenneth L. Henderson
                                    ---------------------------
                                  Kenneth L. Henderson
                                  Attorney-in-Fact

                             Address for Notice:

                             c/o Cavallo Capital Corp.
                             660 Madison Avenue, 18th Floor
                             New York, NY 10021
                             Tel.: (212) 651-9000
                             Fax: (212) 651-9010
                             Attn: Avi Vigder

                             With copies to:

                             Robinson Silverman Pearce Aronsohn & Berman LLP
                             1290 Avenue of the Americas
                             New York, NY  10104
                             Facsimile No.:  (212) 541-4630 and (212) 541-1432
                             Attn: Eric L. Cohen, Esq.

<PAGE>   18

                             HALIFAX FUND, LP

                             By:    /s/ Maurice Hryshko
                                    ---------------------------
                             Name:  Maurice Hryshko
                             Title: Counsel, The Palladin Group, LP
                             Investment Advisor to Halifax Fund, LP

                             Address for Notice:

                             c/o Palladin Group LP
                             195 Maplewood Ave.
                             Maplewood, New Jersey 07040
                             Facsimile: (973) 313-6495
                             Attention: Maurice Hryshko, Esq.

<PAGE>   19

                                    CRAIG C. TAYLOR

                                    /s/ Craig C. Taylor
                                    ---------------------------

                                    Address for Notice:

                                    c/o Alloy Ventures
                                    480 Cowper Avenue
                                    Palo Alto, CA 94301

<PAGE>   20

                                    JAMES C. KITCH

                                    /s/ James C. Kitch
                                    ---------------------------

                                    Address for Notice:

                                    c/o Cooley Godward LLP
                                    5 Palo Alto Square
                                    3000 El Camino Real
                                    Palo Alto, CA 94306-2155

<PAGE>   21

                                  FREDERICK D. BARON

                                  /s/ Frederick D. Baron
                                    ---------------------------

                                  Address for Notice:

                                  c/o Cooley Godward LLP
                                  5 Palo Alto Square
                                  3000 El Camino Real
                                  Palo Alto, CA 94306-2155

<PAGE>   22

                                  MICHAEL TRAYNOR

                                  /s/ Michael Traynor
                                  ---------------------------

                                  Address for Notice:

                                  c/o Cooley Godward LLP
                                  One Maritime Plaza
                                  20th Floor
                                  San Francisco, CA 94111-3580<PAGE>   1
                                                                    EXHIBIT 10.3

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

                            LYNX THERAPEUTICS, INC.

                                    WARRANT

Warrant No. [ ]                                             Dated: May 24, 2001

        Lynx Therapeutics, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, [ ] or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company up
to a total of [ ](1) shares of common stock, $.01 par value per share (the
"Common Stock"), of the Company (each such share, a "Warrant Share" and all such
shares, the "Warrant Shares") at an exercise price per share equal to $9.2011
(as such exercise price may be adjusted from time to time as provided in Section
8, the "Exercise Price"), at any time and from time to time from and after the
date hereof and through and including the fifth year anniversary of the date
hereof (the "Expiration Date"), and subject to the following terms and
conditions:

               1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.

__________________
(1) 25% warrant coverage.

<PAGE>   2

               2.     Registration of Transfers and Exchanges.

                      (a)    The Company shall register the transfer, subject
to compliance with applicable federal and state securities laws of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address for notice set forth in Section
12. Upon any such registration or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.

                      (b)    This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company at its address for notice set
forth in Section 12 for one or more New Warrants, evidencing in the aggregate
the right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.

               3.     Duration and Exercise of Warrants.

                      (a)    This Warrant shall be exercisable by the
registered Holder on any business day before 6:30 P.M., New York City time, at
any time and from time to time on or after the date hereof to and including the
Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall expire and become void
and of no value. Prior to the Expiration Date, the Company may not call or
otherwise redeem this Warrant.

                     (b) Subject to Section 10 hereof, upon delivery of an
executed Form of Election to Purchase, together with the grid attached hereto as
Annex A duly completed and signed, to the Company at its address for notice set
forth in Section 12 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase hereunder in
Section 9, in the manner provided hereunder, all as specified by the Holder in
the Form of Election to Purchase, the Company shall promptly (but in no event
later than 3 business days after the Date of Exercise (as defined herein)) issue
or cause to be issued and cause to be delivered to or upon the written order of
the Holder and in such name or names as the Holder may designate, a certificate
for the Warrant Shares issuable upon such exercise, free of restrictive legends
except: (i) in the event that a registration statement covering the resale of
the Warrant Shares and naming the Holder as a selling stockholder thereunder is
not then effective or the Warrant Shares are not freely transferable without
volume restrictions pursuant to Rule 144(k) promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have
been issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant. The Company
shall, upon request of the Holder, if

                                       2.
<PAGE>   3

available, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. To effect an exercise
hereunder, the Holder shall not be required to physically surrender this Warrant
to the Company unless all the Warrant Shares have been exercised. Exercises
hereunder shall have the effect of lowering the number of Warrant Shares in an
amount equal to the applicable exercise, which shall be evidenced by entries set
forth on the attached Annex A. The Holder and the Company shall maintain records
showing the number of Warrant Shares exercised and the date of such exercises.
The Holder and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following exercise of
a portion of this Warrant, the number of shares issuable upon exercise of this
Warrant may be less than the amount stated on the face hereof.

                      A "Date of Exercise" means the date on which the Company
shall have received the Form of Election to Purchase completed and duly signed.

                      (c)    This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares.

               4.     Piggyback Registration Rights. This Warrant is subject
to the piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue through the
Effectiveness Period set forth therein. The Company will pay all registration
expenses in connection therewith.

               5. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

               6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges (including reasonable
attorneys' fees and expenses incurred by the Company in connection therewith) as
the Company may prescribe.

               7. Reservation of Warrant Shares. The Company covenants that it
will at all times reserve and keep available at all times out of the aggregate
of its authorized but unissued Common Stock, solely for the purpose of enabling
it to issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the

                                       3.
<PAGE>   4
adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and receipt of the payment of the applicable Exercise Price in accordance with
the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable.

               8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8. Upon each such adjustment of the
Exercise Price pursuant to this Section 8, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.

                      (a)    If  the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions to all the
holders of Common Stock or on any other class of capital stock payable in shares
of Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. In such event, the number of
Warrant shares issuable under this Warrant shall be equitably adjusted to
reflect such event (e.g. in the event of a 2:1 stock split of the Common Stock,
the number of Warrant shares shall be increased to twice the number available
for purchase prior to the record date for such stock split). Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision or combination, and shall apply to successive
subdivisions and combinations.

                      (b)    In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, then the Holder shall have
the right thereafter to exercise this Warrant only into the shares of stock and
other securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.

                      (c)    If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of

                                       4.
<PAGE>   5

its indebtedness or assets or rights or warrants to subscribe for or purchase
any security (excluding those referred to in Sections 8(a), (b) and (d)), then
in each such case the Exercise Price shall be determined by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").

                      (d)    Except for Exempt Events as defined in the
Securities Purchase Agreement dated May 24, 2001, between the Company and the
original Holder of this Warrant (the "Purchase Agreement"), if the Company or
any subsidiary thereof, as applicable, at any time after the Closing Date and
through the first anniversary of the Effective Date (both dates, as defined in
the Purchase Agreement) while this Warrant is outstanding, shall offer, sell,
grant any option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any shares of Common Stock or
any equity or equity equivalent securities (including any equity, debt or other
instrument that is at any time over the life thereof convertible into or
exchangeable for Common Stock) (collectively, "Common Stock Equivalents")
entitling any person or entity to acquire shares of Common Stock at a price per
share less than the Exercise Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights issued in connection
with such issuance at a price less than the prevailing Exercise Price, such
issuance shall be deemed to have occurred for less than such Exercise Price),
then, forthwith upon such issue or sale, the Exercise Price shall be reduced to
the price (calculated to the nearest cent) determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issuance, and (ii) the number of shares of
Common Stock which the aggregate consideration received (or to be received,
assuming exercise or conversion in full of such Common Stock Equivalents) for
the issuance of such additional shares of Common Stock would purchase at the
Exercise Price, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately after the issuance of such
additional shares. For purposes hereof, all shares of Common Stock that are
issuable upon conversion, exercise or exchange of Common Stock Equivalents shall
be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. The Company shall notify the Holder in writing, no
later than the business day following the issuance of any Common Stock or Common
Stock Equivalent subject to this section, indicating therein the applicable
issuance price, or of applicable reset price, exchange price, conversion price
and other pricing terms.

               (e) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, then as a condition of

                                       5.
<PAGE>   6

such merger, consolidation or asset sale, lawful provisions shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price not
to exceed that payable upon the exercise of this Warrant in full, the kind and
amount of shares of stock and other securities and property receivable in
connection with such merger, consolidation or asset sale by a holder of the same
number of shares of Common Stock as were purchasable by the Holder immediately
prior to such merger, consolidation or asset sale. In any such case, appropriate
provisions shall be made with respect to the rights and interest of the Holder
so that the provisions shall thereafter be applicable with respect to any shares
of stock or other securities and property deliverable upon exercise hereof, and
appropriate adjustments shall be made to purchase price per share payable
hereunder, provided the aggregate purchase price shall remain the same.

                      (f)    For the purposes of this Section 8, the following\
clauses shall also be applicable:

                             (i)  Record Date.  In case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                             (ii)  Treasury Shares.  The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.

                      (g)    All calculations under this Section 8 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.

                      (h)    Whenever the Exercise Price is adjusted pursuant
to Section 8(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.

                      (i)    If:

                              (i)   the Company shall declare a dividend (or
                                    any other distribution) on its Common
                                    Stock; or

                                       6.
<PAGE>   7

                   (ii)        the Company shall declare a special
                               nonrecurring cash dividend
                               on or a redemption of its Common Stock; or

                  (iii)        the Company shall authorize the
                               granting to all holders of the
                               Common Stock rights or warrants to
                               subscribe for or purchase any shares
                               of capital stock of any class or of
                               any rights; or

                   (iv)        the approval of any stockholders of
                               the Company shall be required in
                               connection with any reclassification
                               of the Common Stock, any
                               consolidation or merger to which the
                               Company is a party, any sale or
                               transfer of all or substantially all
                               of the assets of the Company, or any
                               compulsory share exchange whereby
                               the Common Stock is converted into
                               other securities, cash or property;
                               or

                    (v)        the Company shall authorize the voluntary
                               dissolution, liquidation or winding up of the
                               affairs of the Company,

then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least ten calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up, provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.

               9.     Payment of Exercise Price.  The Holder shall pay the
Exercise Price in one of the following manners:

                      (a)    Cash Exercise.  The Holder may deliver, in cash or
by certified or official bank check payable to the order of the Company, or by
wire transfer of immediately available funds to an account to be designated by
the Company, the Exercise Price multiplied by the number of Warrant Shares to be
issued; or

                                       7.
<PAGE>   8

                      (b)    Cashless Exercise. The Holder may surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

                   X = Y [(A-B)/A]
        where:
                   X = the number of Warrant Shares to be issued to the Holder.

                   Y = the number of Warrant Shares with respect to
                   which this Warrant is being exercised.

                   A = the average of the closing sale prices of the
                   Common Stock as reported on the Nasdaq National
                   Market for the five (5) trading days immediately
                   prior to (but not including) the Date of Exercise.

                   B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.

               10.    Certain Exercise Restrictions.

      A Holder may not exercise this Warrant to the extent such exercise would
result in the Holder, together with any affiliate thereof, beneficially owning
(as determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended and the rules promulgated thereunder (the "Exchange Act"))
in excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon such exercise and held by such Holder after
application of this Section. Since the Holder will not be obligated to report to
the Company the number of shares of Common Stock it may hold at the time of an
exercise hereunder, unless the exercise at issue would result in the issuance of
shares of Common Stock in excess of 9.999% of the then outstanding shares of
Common Stock without regard to any other shares which may be beneficially owned
by the Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any

                                       8.
<PAGE>   9
other Holder) upon not less than 61 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.

               11. Fractional Shares. The Company shall not be required to issue
or cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.

               12. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
25861 Industrial Boulevard, Hayward, CA 94545; facsimile No.: (510) 670-9302;
attn: Chief Financial Officer, or (ii) if to the Holder, to the Holder at the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

               13. Warrant Agent. The Company shall serve as warrant agent under
this Warrant. Upon prior written notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

               14. Miscellaneous.

                   (a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.

                   (b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal

                                       9.
<PAGE>   10

or equitable right, remedy or cause under this Warrant. This Warrant shall inure
to the sole and exclusive benefit of the Company and the Holder.

                      (c)    The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. The Company
and the Holder hereby irrevocably submit to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or that
such suit, action or proceeding is improper. Each of the Company and the Holder
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by receiving a copy thereof
sent to the Company at the address in effect for notices to it under this
instrument and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this
Warrant, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its' attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

                      (d)    The headings herein are for convenience only, do
not constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.

                      (e)    In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                                      10.
<PAGE>   11

               15. No Rights as a Stockholder. Holder shall not, by virtue
hereof, be entitled to any rights of stockholder of the Company, either at law
or equity, and the rights of Holder are limited to those expressed in this
Warrant. Nothing contained in this Warrant shall be construed as conferring upon
the Holder hereof the right to vote or to consent or to receive notice as a
stockholder of the Company on any matters or with respect to any rights
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
of the Warrant Shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised in accordance with its terms.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

                                      11.
<PAGE>   12

               IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.

                             LYNX THERAPEUTICS, INC.

                             By:
                                 ------------------------------
                             Name:  Edward C. Albini
                             Title: Chief Financial Officer

<PAGE>   13
                          FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the Warrant to which this form applies, issued by Lynx Therapeutics,
Inc. (the "Company"))

To  Lynx Therapeutics, Inc.:

        The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 value, of the Company (the "Common Stock") and, if
such Holder is not utilizing the cashless exercise provisions set forth in this
Warrant, encloses herewith $ [ ] in cash, certified or official bank check or
checks, which sum represents the aggregate Exercise Price (as defined in the
Warrant) for the number of shares of Common Stock to which this Form of Election
to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.

        The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER

_______________________________________________________________________________

_______________________________________________________________________________
                         (Please print name and address)

Dated: __________, ______                   Name of Holder:

(Print) _______________________________________________________________________

(By:) _________________________________________________________________________
(Name:)
(Title:)

                                             (Signature must conform in all
                                             respects to name of holder as
                                             specified on the face of the
                                             Warrant)

<PAGE>   14

                               FORM OF ASSIGNMENT

                  [To be completed and signed only upon transfer of Warrant]

        FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Lynx Therapeutics,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Lynx Therapeutics, Inc. with full power
of substitution in the premises.

Dated:

---------------, ----

                                 ---------------------------------------
                                 (Signature must conform in all respects
                                 to name of holder as specified on
                                 the face of the Warrant)

                                 ---------------------------------------
                                 Address of Transferee

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

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

In the presence of:

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

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