8-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 8-K
 
Current Report Pursuant to Section 13 or 15(d) of the
 
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): May 24, 2001
 
Lynx Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation)

0-22570	94-3161073
(Commission File No.)	(IRS Employer Identification No.)

25861 Industrial Blvd.
Hayward, California 94545
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (510) 670-9300

TABLE OF CONTENTS

	Item 5. Other Events.
	Item 7. Exhibits.
SIGNATURE
INDEX TO EXHIBITS
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 99.1

Item 5. Other Events.

On May 24, 2001, Lynx Therapeutics, Inc. completed an $11.1 million private placement of common stock and warrants to purchase common stock to seven accredited investors. The private placement included the sale of 1,747,248 newly issued shares of common stock at a purchase price of $6.37 per share and warrants to purchase up to an aggregate of 436,808 shares of common stock at a purchase price of $9.2011 per share. A press release announcing the closing is filed as Exhibit 99.1 hereto. The transaction documents effecting the issuance and sale of the common stock and warrants are filed as Exhibits 10.1, 10.2 and 10.3 hereto.

Item 7. Exhibits.

10.1	Securities Purchase Agreement, dated as of May 24, 2001, by and among Lynx Therapeutics, Inc. and the investors listed therein.
10.2	Registration Rights Agreement, dated as of May 24, 2001, by and among Lynx Therapeutics, Inc. and the investors listed therein.
10.3	Form of Warrant issued by Lynx Therapeutics, Inc. in favor of each investor.
99.1	Press Release, dated May 24, 2001, entitled “Lynx Closes $11 Million Private Equity Financing.”

SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LYNX THERAPEUTICS, INC.
Dated: June 1, 2001	By:	/s/ Edward C. Albini
		Edward C. Albini Chief Financial Officer (Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

10.1	Securities Purchase Agreement, dated as of May 24, 2001, by and among Lynx Therapeutics, Inc. and the investors listed therein.
10.2	Registration Rights Agreement, dated as of May 24, 2001, by and among Lynx Therapeutics, Inc. and the investors listed therein.
10.3	Form of Warrant issued by Lynx Therapeutics, Inc. in favor of each investor.
99.1	Press Release, dated May 24, 2001, entitled “Lynx Closes $11 Million Private Equity Financing.”

EX-10.1 2 f73183ex10-1.txt EXHIBIT 10.1 1 EXHIBIT 10.1 EXECUTION COPY _______________________________________________________________________________ SECURITIES PURCHASE AGREEMENT among LYNX THERAPEUTICS, INC. and THE INVESTORS SIGNATORY HERETO Dated as of May 24, 2001 2 SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated 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"). WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder the Company desires to issue and sell to the Purchasers and the Purchasers, severally and not jointly, desire to purchase from the Company, shares of the Company's common stock, $.01 par value per share (the "Common Stock"), and certain other securities of the Company as more fully described in this Agreement. NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Purchasers agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Closing. Subject to the terms and conditions set forth in this Agreement, the Company shall issue and sell to the Purchasers and the Purchasers shall, severally and not jointly, purchase shares of Common Stock ("Shares") and warrants to purchase Shares for an aggregate purchase price of $11,129,969.76 (the "Purchase Price"). The purchase and sale of the Shares and Warrants hereunder shall be closed (the "Closing") at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290 Avenue of the Americas, New York, NY 10104, on the execution date of this Agreement. The date of the Closing is hereinafter referred to as the "Closing Date." (a) The Closing Date. On the Closing Date, the parties shall deliver or shall cause to be delivered the following: (A) the Company shall deliver to each Purchaser: (1) an original stock certificate representing a number of Shares by dividing the aggregate purchase price indicated below such Purchaser's name on the signature page of this Agreement by the Per Share Purchase Price (as defined herein), registered in the name of such Purchaser, (2) a Common Stock purchase warrant, in the form of Exhibit C, registered in the name of such Purchaser, pursuant to which such Purchaser shall have the right to acquire a number of shares of Common Stock equal to 25% of the Shares purchased by it hereunder upon the terms set forth therein (collectively, the "Warrants"), (3) an executed Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit A (the "Registration Rights Agreement"), (4) Transfer Agent Instructions, in the form of Exhibit D, executed by the Company and delivered to and acknowledged in writing by the Company's transfer agent (the "Transfer Agent Instructions") and (5) the legal opinion of Cooley Godward LLP, outside counsel to the 3 Company, in the form of Exhibit E; and (B) each Purchaser shall deliver: (1) the purchase price indicated below such Purchaser's name on the signature page to this Agreement, in United States dollars in immediately available funds by wire transfer to an account designated in writing by the Company for such purpose and (2) an executed Registration Rights Agreement. 1.2 Certain Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.2: (a) "Business Day" shall mean any day except Saturday, Sunday and any day which shall be a federal legal holiday or a day on which banking institutions in the State of New York or the State of California are authorized or required by law or other governmental action to close. (b) "Commission" means the Securities and Exchange Commission. (c) "NASDAQ" means the Nasdaq National Market. (d) "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. (e) "Purchase Price Per Share" means 90% of the average of the VWAP's (as defined below) for each of the five Trading Days (as defined below) immediately preceding the Closing Date. (f) "Subsequent Market" shall mean any of the New York Stock Exchange, American Stock Exchange, or Nasdaq SmallCap Market. (g) "Trading Day" means (i) a day on which the Common Stock is traded on the NASDAQ or on the Subsequent Market on which the Common Stock is then listed or quoted, as the case may be, or (ii) if the Common Stock is not listed on the NASDAQ or a Subsequent Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day. (h) "VWAP" means the daily volume weighted average price (as reported by Bloomberg Financial L.P. using the VAP function) of the Common Stock on the NASDAQ or Subsequent Market (as applicable) on the date in question. 2. 4 ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Purchasers as of the date of this Agreement: (a) Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted and described in the SEC Documents (as defined below). The Company has no subsidiaries other than Lynx Therapeutics GmbH (the "Subsidiary"). The Subsidiary is an entity, duly incorporated or otherwise organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiary is duly qualified to do business and is in good standing (with respect to jurisdictions that recognize such concept) as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of the Securities (as defined below), this Agreement, the Registration Rights Agreement, the Transfer Agent Instructions or the Warrants (collectively, the "Transaction Documents"), (y) have or result in a material adverse effect on the results of operations, assets or condition (financial or otherwise) of the Company and the Subsidiary, taken as a whole, or (z) adversely impair the Company's ability to perform fully on a timely basis its obligations under any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse Effect"). (b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company. Each of the Transaction Documents has been duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, and assuming the due authorization, execution and delivery by the Purchasers, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws, both state and federal, affecting creditors' and contracting parties' rights or remedies generally or (ii) the exercise by courts of equity powers and except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws. Neither the Company nor the Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, by-laws or other organizational or charter documents. 3. 5 (c) Capitalization. The number of authorized, issued and outstanding capital stock of the Company as of March 31, 2001 is set forth in Schedule 2.1(c). Except as disclosed in Schedule 2.1(c), the Company owns all of the capital stock of the Subsidiary. No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the securities of the Company entitled to preemptive or similar rights arising out of any agreement or understanding with the Company or the Subsidiary by virtue of any of the Transaction Documents. Except as a result of the purchase and sale of the Shares and the Warrants and except as disclosed in Schedule 2.1(c) or set forth in the SEC Documents, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or the Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. The issue and sale of the Securities (as defined below), will not obligate the Company to issue shares of Common Stock or other securities to any Person other than the Purchasers and will not result in a right of any holder of Company securities to adjust the exercise or conversion or reset price under such securities. (d) Issuance of the Securities. The Securities (as defined below) have been duly authorized and the Shares, when issued and paid for in accordance with the terms hereof, and the Underlying Shares (as defined below), when issued upon exercise of the Warrants, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of first refusal of any kind (collectively, "Liens"). The Company has reserved a sufficient number of duly authorized shares of Common Stock to issue all of the Shares and for issuance hereunder upon exercise in full of the Warrants. The shares of Common Stock issuable upon exercise of the Warrants are referred to herein as the "Underlying Shares." The Shares, the Warrants and the Underlying Shares are collectively referred to herein as, the "Securities." (e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company's or the Subsidiary's certificate or articles of incorporation, bylaws or other charter documents (each as amended through the date hereof), or (ii) subject to obtaining the Required Approvals (as defined below), conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or the Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or the Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or the Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), as would not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any 4. 6 governmental authority, except for violations which, individually or in the aggregate, could not have or result in a Material Adverse Effect. (f) Filings, Consents and Approvals. Except as disclosed in Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filings required pursuant to Section 3.10, (ii) the filing with the SEC of a resale registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares issued on the Closing Date and the Underlying Shares issuable upon exercise of the Warrants (the "Registration Statement"), (iii) the application(s) to the NASDAQ for the listing of the Shares and the Underlying Shares for trading on the NASDAQ (and with any other national securities exchange or market on which the Common Stock is then listed) in the time and manner required thereby, and (iv) applicable Blue Sky filings (collectively, the "Required Approvals"). (g) Litigation; Proceedings. Except as set forth in the SEC Documents, and as disclosed in Schedule 2.1(g), there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or the Subsidiary or the respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, individually or in the aggregate, have or result in a Material Adverse Effect. Neither the Company nor the Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving (A) a claim of violation of or liability under federal or state securities laws or (B) a claim of breach of fiduciary duty. The Company does not have pending before the Commission any request for confidential treatment of information, and the Company has no knowledge of any expected such request that would be made prior to the Effective Date (as defined below). There has not been, and to the best of the Company's knowledge there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. During the five years preceding the Closing Date: (i) the Company has not commenced any legal proceedings against any of its present or former stockholders or any investment bank and (ii) no legal proceedings have been commenced against the Company or any of its present or former directors or officers by a present or former stockholder or any investment bank. (h) No Default or Violation. Neither the Company nor the Subsidiary (i) is in default under or in violation of (and no event has occurred which has not been waived which, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or the Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any statute, rule or regulation of any governmental authority, in each case of clauses (i), (ii) or (iii) 5. 7 above, except as would not individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect. (i) Private Offering. Assuming the accuracy of the representations and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer, issuance and sale of the Securities as contemplated hereby are exempt from the registration requirements of the Securities Act. Neither the Company nor any Person acting on its behalf has taken or is, to the knowledge of the Company, contemplating taking any action which could subject the offering, issuance or sale of such Securities to the registration requirements of the Securities Act including soliciting any offer to buy or sell the Securities by means of any form of general solicitation or advertising. (j) SEC Documents; Financial Statements. The Company has filed all reports required to be filed by it under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof (the foregoing materials being collectively referred to herein as the "SEC Documents" and, together with the Schedules to this Agreement, the "Disclosure Materials") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements to which the Company is a party or to which the property or assets of the Company are subject have been filed as exhibits or incorporated by reference to the SEC Documents as required under the Exchange Act. The financial statements of the Company included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. Since December 31, 2000, except as specifically disclosed in the SEC Documents, (a) there has not been a Material Adverse Effect, (b) the Company has not incurred any liabilities (contingent or otherwise) other than (x) liabilities incurred in the ordinary course of business consistent with past practice and (y) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (c) the Company has not altered its method of accounting or the identity of its auditors, (d) the Company has not declared or made any payment or distribution of cash or other property to its stockholders or officers or directors (other than in compliance with existing Company stock option plans) with respect to its capital stock, or purchased, redeemed (or made any agreements to purchase or redeem) any shares of its capital stock and (e) the Company has not issued or committed to issue shares of Common Stock or securities that are convertible or exchangeable into, or give holders thereof the right to receive, shares of Common Stock. 6. 8 (k) Investment Company. The Company is not, and is not an Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (l) Certain Fees. Subject to Section 4.1, except for certain fees payable by the Company to Intercoastal Financial Services Corp., no fees or commissions will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold harmless the Purchasers, their employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and reasonable attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred. (m) Form S-3 Eligibility. The Company is eligible to register its Common Stock for resale under Form S-3 promulgated under the Securities Act. (n) Listing and Maintenance Requirements. Except as set forth in the SEC Documents, the Company has not, in the two years preceding the date hereof received notice (written or oral) from the NASDAQ, any stock exchange, market or trading facility on which the Common Stock is or has been listed (or on which it has been quoted) to the effect that the Company is not in compliance with the listing or maintenance requirements of such exchange, market or trading facility. The Company is, and has no reason to believe, based on current circumstances, that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. (o) Patents and Trademarks. Except as set forth in the SEC Documents, the Company and the Subsidiary have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and rights which are necessary or material for use in connection with their respective businesses as described in the SEC Documents and which the failure to so have would have a Material Adverse Effect (collectively, the "Intellectual Property Rights"). Neither the Company nor the Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or the Subsidiary violates or infringes upon the rights of any Person. To the best knowledge of the Company, (i) all such Intellectual Property Rights are enforceable and (ii) there is no existing infringement by another Person of any of the Intellectual Property Rights. (p) Registration Rights; Rights of Participation. Except as set forth on Schedule 6(b) to the Registration Rights Agreement, and as disclosed in Schedule 2.1(p), the Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied. Except as set forth on Schedule 6(b) to the Registration Rights Agreement, and as disclosed in Schedule 2.1(p), no Person has any 7. 9 right of first refusal, preemptive right, right of participation or any similar right to participate in the transactions contemplated by the Transaction Documents. (q) Regulatory Permits. The Company and the Subsidiary possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Documents, except where the failure to possess such permits would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect ("Material Permits"), and neither the Company nor the Subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit. (r) Title. Neither the Company nor the Subsidiary own any real property. Except as disclosed in Schedule 2.1(r), the Company and the Subsidiary have good and marketable title in all personal property owned by them which is material to the business of the Company and the Subsidiary, in each case free and clear of all Liens, except (i) for Liens, if any, reflected in the financial statements included in or incorporated by reference into the SEC documents, and (ii) for Liens as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and the Subsidiary. Any real property and facilities held under lease by the Company and the Subsidiary are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiary are in compliance in all material respects and do not interfere with the use made and proposed to be made of such property and buildings by the Company and the Subsidiary. (s) Labor Relations. No material labor problem exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company. (t) Solvency. Based on the financial condition of the Company as of the Closing Date, (i) the Company's fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company's existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company's assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). (u) Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company 8. 10 fulfilling their obligations or exercising their rights under this Agreement, including without limitation the Company's issuance of the Securities and the Purchasers' ownership of the Securities. (v) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or its agents or counsel with any information that constitutes or might constitute material non-public information. The Company understands and confirms that the Purchasers shall be relying on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 2.2 Representations and Warranties of the Purchasers. Each Purchaser hereby for itself and for no other Purchaser, represents and warrants to the Company as follows: (a) Organization; Authority. Such Purchaser, if an entity, is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations thereunder. The purchase by such Purchaser of the Securities to be acquired by it hereunder has been duly authorized by all necessary action on the part of such Purchaser. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms. (b) Investment Intent. Such Purchaser is acquiring the Securities as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Purchaser's right, subject to the provisions of this Agreement, the Registration Rights Agreement and the Warrants, at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable securities laws. Nothing contained herein shall be deemed a representation or warranty by such Purchaser to hold Securities for any period of time. Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute the Securities. (c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, and at each exercise date under its respective Warrants, it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. (d) Experience of such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and 9. 11 financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. (e) Ability of such Purchaser to Bear Risk of Investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. (f) Access to Information. Such Purchaser acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Company's financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information contained in the Disclosure Materials. Neither such inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser's right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company's representations and warranties contained in the Transaction Documents. (g) General Solicitation. Such Purchaser is not purchasing the Securities as a result of or subsequent to any advertisement, article, notice or other communication regarding such Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (h) Reliance. Such Purchaser understands and acknowledges that (i) the Securities are "restricted securities" under the federal securities laws as they are being offered and sold to it without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption, depends in part on, and the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance. Such Purchaser understands that such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, the Purchaser represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 2.2. 10. 12 ARTICLE III OTHER AGREEMENTS OF THE PARTIES 3.1 Transfer Restrictions. (a) The Securities may only be disposed of pursuant to an effective registration statement under the Securities Act, to the Company or pursuant to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with any applicable federal and state securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or to the Company, except as otherwise set forth herein, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. Notwithstanding the foregoing, the Company, without requiring a legal opinion as described in the immediately preceding sentence, hereby consents to and agrees to register on the books of the Company and with any transfer agent for the securities of the Company any transfer of Securities by a Purchaser to an Affiliate of such Purchaser or to one or more funds or managed accounts under common management with such Purchaser, and any transfer among any such Affiliates or one or more funds or managed accounts, provided that the transferee certifies to the Company that it is an "accredited investor" as defined in Rule 501(a) under the Securities Act and that it is acquiring the Securities solely for investment purposes (subject to the qualifications hereof). Any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement and, if such transfer is of all or a portion of the Warrants held by such Purchaser, as a holder of the Warrants. (b) The Shares, the Warrants and any Underlying Shares issued while there is not an effective Registration Statement shall be issued with the following legend: [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE] HAVE [NOT] 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, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES 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. (c) However, Underlying Shares issued when there is an effective Registration Statement or when such legend is not required under the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Commission) shall not 11. 13 contain the legend set forth above nor any other legend. The Company shall cause its counsel to issue the legal opinion included in the Transfer Agent Instructions to the Company's transfer agent on the date that the Registration Statement is declared effective by the Commission (such date, the "Effective Date"). The Company agrees that following the Effective Date, it will, no later than three Trading Days following the delivery by a Purchaser to the Company of a certificate or certificates representing Shares or Underlying Shares issued with a restrictive legend and registered on the Effective Date, cause to be delivered to such Purchaser certificates representing such Shares or Underlying Shares which shall be free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions of transfer set forth in this Section. 3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of Underlying Shares upon exercise of the Warrants will result in dilution of the outstanding shares of Common Stock. The Company further acknowledges that its obligation to issue Underlying Shares upon exercise of the Warrants pursuant to the terms thereof is unconditional and absolute, subject to the limitations set forth in the Warrants, regardless of the effect of any such dilution. 3.3 Furnishing of Information. As long as the Purchasers own Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if the Company is not required to file reports pursuant to such sections, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act such information as is required for the Purchasers to sell the Securities under Rule 144 promulgated under the Securities Act. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell Underlying Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including causing its attorneys to render and deliver any legal opinion required under such rule or by the transfer agent of the Common Stock or clearing broker for the Purchaser in order to permit a Purchaser to sell shares under Rule 144. Upon the request of any such Person, the Company shall deliver to such Person a written certification of a duly authorized officer as to whether it has complied with such requirements. 3.4 Integration. The Company shall not, and shall use its best efforts to ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchasers, or that would be integrated with the offer or sale of the Securities for the purposes of the rules and regulations of NASDAQ. 3.5 Increase in Authorized Shares. If on any date the Company would be, if a notice of exercise were to be delivered on such date, precluded from issuing the number of Underlying Shares issuable upon exercise in full of the Warrants due to the unavailability of a sufficient number of authorized but unissued or reserved shares of Common Stock, then the Board of 12. 14 Directors of the Company shall promptly prepare and mail to the stockholders of the Company proxy materials requesting authorization to amend the Company's certificate of incorporation to increase the number of shares of Common Stock which the Company is authorized to issue so as to provide enough shares for issuance under the Warrants. In connection therewith, the Board of Directors shall (a) adopt proper resolutions authorizing such increase, (b) recommend to and otherwise use its best efforts to promptly and duly obtain stockholder approval to carry out such resolutions (and hold a special meeting of the stockholders no later than the earlier to occur of the 60th day after delivery of the proxy materials relating to such meeting and the 90th day after request by a holder of Warrants to issue the number of Underlying Shares in accordance with the terms hereof) and (c) within five Business Days of obtaining such stockholder authorization, file an appropriate amendment to the Company's certificate or articles of incorporation to evidence such increase. 3.6 Reservation and Listing of Underlying Shares. The Company shall take such steps as may be required to cause the listing of the Shares and Underlying Shares on the NASDAQ and such other exchange, market or quotation facility on which the Common Stock is traded. The Company shall maintain a reserve of shares of Common Stock for issuance upon exercise in full of the Warrants in accordance with this Agreement and the Warrants, respectively, in such amount as may be required to fulfill its obligations in full under the Warrants. 3.7 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and not for the satisfaction of any portion of the Company's debt (other than payment of trade payables in the ordinary course of the Company's business and prior practices). Until the first anniversary of the date hereof, the Company shall not use such net proceeds to redeem any Company equity or equity-equivalent securities or to settle any outstanding litigation. 3.8 Exercise Obligations. The Company shall honor exercises of the Warrants and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Warrants. 3.9 Subsequent Financings; Limitation on Registration. (a) Subject to Section 3.9(c), from the date of this Agreement through the Effective Date, other than to the Purchasers or an Affiliate thereof, the Company shall not directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant of any option to purchase or other disposition) any 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), and the Company will cause the Subsidiary not to offer, sell or issue during such period any of such Subsidiary's securities which provide the holder thereof the right to receive any Common Stock (collectively, "Common Stock Equivalents") (such dispositions, collectively, a "Subsequent Placement"), unless: (A) the Company delivers to the Purchasers a written notice (the "Subsequent Placement Notice") of its intention to effect such Subsequent Placement, which Subsequent Placement Notice shall describe in reasonable detail the proposed terms of such Subsequent Placement, the amount of proceeds intended to be raised thereunder, the Person with whom such Subsequent Placement shall be effected, and attached to 13. 15 which shall be a term sheet or similar document relating thereto and (B) such Purchaser shall not have notified the Company by 6:30 p.m. (New York City time) on the tenth Trading Day after its receipt of the Subsequent Placement Notice of its willingness to provide (or to cause its sole designee to provide), subject to completion of mutually acceptable documentation, financing to the Company on the same terms set forth in the Subsequent Placement Notice. If the Purchasers shall fail to notify the Company of its intention to enter into such negotiations within such time period, the Company may effect the Subsequent Placement substantially upon the terms and to the Persons (or Affiliates of such Persons) set forth in the Subsequent Placement Notice; provided, that the Company shall provide the Purchasers with a second Subsequent Placement Notice, and the Purchasers shall again have the right of first refusal set forth above in this paragraph (b), if the Subsequent Placement subject to the initial Subsequent Placement Notice shall not have been consummated for any reason on the terms set forth in such Subsequent Placement Notice within 30 Trading Days after the date of the initial Subsequent Placement Notice with the Person (or an Affiliate of such Person) identified in the Subsequent Placement Notice. The Subsequent Placement shall be allocated among the Purchasers on a pro rata basis by reference to the purchase price indicated below the Purchasers name on the signature pages to this Agreement, or in such other manner as the Purchasers shall determine. (b) Except to register: (x) the Registrable Securities (as defined in the Registration Rights Agreement), (y) securities of the Company permitted pursuant to Section 6(c) of the Registration Rights Agreement to be registered in the Registration Statement, and (z) Common Stock permitted to be issued pursuant to Section 3.9(c), the Company may not file a registration statement to register any of its securities from the date of this Agreement through the Effective Date. (c) The restrictions contained in Section 3.9(a) and 3.9(b) shall not apply to: (i) the granting of options or warrants to employees, officers and directors of the Company, and the issuance of Common Stock upon exercise of such options or warrants granted under any stock option plan heretofore or hereinafter duly adopted by the Company and purchases of Common Stock pursuant to the Company's employee stock purchase plan; (ii) the issuance of shares of Common Stock issuable upon exercise of any currently outstanding warrants and other outstanding convertible securities of the Company, in each case as and to the extent disclosed in Schedule 2.1(c) or the SEC Documents (but not as to any amendments or modifications of the terms of such securities after the date of this Agreement, including "back-dated" agreements); (iii) the issuance of shares of Common Stock pursuant to a public offering underwritten on a firm commitment basis registered under the Securities Act; or (iv) the issuance of securities in connection with a transaction or relationship including, but not limited to an acquisition, joint venture or collaboration or licensing arrangement, in which the Company issues securities to an entity which is, itself or through its subsidiaries, an operating company in a business related or synergistic to the business of the Company and in which the Company reasonably believes it will receive material benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital. Clauses (i)-(iv) of this Section 3.9(c) are collectively referred to herein as "Exempt Events". 14. 16 (d) Except for Exempt Events, from the date of this Agreement through the Effective Date, the Company shall not, without the prior written consent of the Purchasers holding at least a majority of the Registrable Securities, (a) issue or agree to issue shares of Common Stock at a price below the Purchase Price Per Share or (b) issue any Common Stock Equivalents or enter an agreement to issue Common Stock Equivalents, that entitle any Person to acquire shares of Common Stock at a price per share less than the Purchase Price Per Share (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, be entitled to receive shares of Common Stock at a price less than the Purchase Price Per Share, such issuance shall be deemed to have occurred for less than the Purchase Price Per Share). 3.10 Certain Securities Laws Disclosures; Publicity. The Company shall: (i) on the Closing Date issue a press release acceptable to the Purchasers disclosing the transactions contemplated hereby, (ii) file with the Commission a Report on Form 8-K disclosing the transactions contemplated hereby in the time and manner required under the Exchange Act, and (iii) timely file with the Commission a Form D promulgated under the Securities Act. The Company shall, no less than two Business Days prior to the filing of any disclosure required by clauses (ii) and (iii) above, provide a copy thereof to the Purchasers for their review. The Company and the Purchasers shall consult with each other in issuing any other press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory agency or stock market or trading facility with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement, filings or other communications without the prior written consent of the other, except if such disclosure is required by law or stock market regulation, in which such case the disclosing party shall promptly provide the other party with prior notice of such public statement, filing or other communication. 3.11 Reimbursement. If any Purchaser becomes involved in any capacity in any action, proceeding or investigation brought before the one year anniversary of the date of this Agreement by or against any Person who is a stockholder of the Company, solely as a result of such Purchaser's acquisition of the Securities under this Agreement, the Company will reimburse such Purchaser for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates, partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement. 15. 17 3.12 Shareholder Rights Plan. No claim will be made or enforced by the Company or any other Person that any Purchaser is an "Acquiring Person" under any shareholders rights plan or similar plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities or shares of Common Stock under the Transaction Documents, assuming for this purpose that such Purchaser does not otherwise acquire control of any other shares of Common Stock that would trigger the provisions of any such plan or arrangement. 3.13 Disclosure of Material Non-Public Information. The Company shall not and shall cause each of its Affiliates and other Persons acting on behalf of the Company not to divulge to any Purchaser any information that it believes to be material non-public information unless such Purchaser has agreed in writing to receive such information. The Company agrees to comply with the newly adopted Regulation FD promulgated under the Exchange Act. 3.14 Put event. From the date of this Agreement until the Effective Date, upon the occurrence of any of the following events (each, an "Event"), a Purchaser may provide the Company with a notice (an "Event Notice ") requiring the Company to reacquire all or a portion of the Shares which such Purchaser acquired hereunder and then still holds at a put price (the "Put Price") per share equal to the Purchase Price Per Share paid by the Purchaser for such shares: (a) immediately prior to an assignment by the Company for the benefit of creditors or commencement of a voluntary case under Title 11 of the United States Code, or an entering into of an order for relief in an involuntary case under Title 11 of the United States Code, or adoption by the Company of a plan of liquidation or dissolution; (b) the Common Stock fails to be listed or quoted for trading on the NASDAQ for a period of three Trading Days (which need not be consecutive Trading Days); and (c) the Registration Statement is not declared effective on or prior to the 180th day following the Closing Date. The Company shall pay the Put Price by the fifth Trading Day following the date of the delivery of the Event Notice. Interest shall accrue on the aggregate Put Price from the date such amount is due until paid in full at the rate of 15% per annum (or such lesser maximum amount that is permitted to be paid by applicable law), to accrue daily from the date such payment is due hereunder through and including the date of payment. Any Event Notice may be rescinded by the delivering Purchaser at any time prior to its receipt of the full Put Price. 16. 18 ARTICLE IV MISCELLANEOUS 4.1 Fees and Expenses. Except as otherwise set forth in the Registration Rights Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Securities. 4.2 Entire Agreement; Amendments. The Transaction Documents, together with the Exhibits and Schedules thereto and Transfer Agent Instructions, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 4.3 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 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 U.S. 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 C. Kitch, Esq. If to a Purchaser: To the address set forth under such Purchaser's name on the signature pages hereto or such other address as may be designated in writing hereafter, in the same manner, by such Person. 17. 19 4.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and each of the Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 4.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 4.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor. 4.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 4.8 Governing Law. The corporate laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. 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 (including with respect to the enforcement of any of the Transaction Documents), 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 via registered or certified mail or overnight delivery (with evidence of delivery) 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. 18. 20 4.9 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery and exercise of the Warrants. 4.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding 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 page were an original thereof. 4.11 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affecting or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 4.12 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. 4.13 Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser under any Transaction Document is several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant 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 way acting in concert with respect to such obligations or the transactions contemplated by the Transaction Document. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, 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 FOLLOWS] 19. 21 IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above. LYNX THERAPEUTICS, INC. By: /s/ Edward C. Albini -------------------------------- Name: Edward C. Albini Title: Chief Financial Officer [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASER FOLLOWS] 22 HBK MASTER FUND L.P. By: HBK Investments L.P. Investment Advisor By: /s/ Kevin O'Neil ------------------------------ Name: Kevin O'Neil Title: Authorized Signatory Aggregate Purchase Price for Shares to be acquired: $6,749,995.98 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. 23 FIRST INVESTORS HOLDING CO., INC. By: /s/ Kenneth L. Henderson -------------------------------- Kenneth L. Henderson Attorney-in-Fact Aggregate Purchase Price for Shares to be acquired: $1,999,995.27 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. 24 HALIFAX FUND, LP By: /s/ Maurice Hryshko ---------------------------- Name: Maurice Hryshko Title: Counsel, The Palladin Group, LP Investment Advisor to Halifax Fund, LP Aggregate Purchase Price for Shares to be acquired: $1,999,995.27 Address for Notice: c/o Palladin Group LP 195 Maplewood Ave. Maplewood, New Jersey 07040 Facsimile: (973) 313-6495 Attention: Maurice Hryshko, Esq. 25 CRAIG C. TAYLOR /s/ Craig C. Taylor --------------------- Aggregate Purchase Price for Shares to be acquired: $249,997.02 Address for Notice: c/o Alloy Ventures 480 Cowper Avenue Palo Alto, CA 94301 26 JAMES C. KITCH /s/ James C. Kitch ------------------ Aggregate Purchase Price for Shares to be acquired: $99,996.26 Address for Notice: c/o Cooley Godward LLP 5 Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306-2155 27 FREDERICK D. BARON /s/ Frederick D. Baron ---------------------- Aggregate Purchase Price for Shares to be acquired: $19,995.43 Address for Notice: c/o Cooley Godward LLP 5 Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306-2155 28 MICHAEL TRAYNOR /s/ Michael Traynor ------------------- Aggregate Purchase Price for Shares to be acquired: $9,994.53 Address for Notice: c/o Cooley Godward LLP One Maritime Plaza 20th Floor San Francisco, California 94111-3580 29 EXHIBIT D TRANSFER AGENT INSTRUCTIONS May __, 2001 [Transfer Agent] Dear ___________: Reference is made to that certain Securities Purchase Agreement (the "PURCHASE AGREEMENT") among Lynx Therapeutics, Inc., a Delaware corporation (the "COMPANY"), and the buyers named therein (the "HOLDERS") pursuant to which the Company is selling to the Holders shares (the "SHARES") of its Common Stock, par value $.01 per share (the "COMMON STOCK"), and certain Common Stock purchase warrants (the "WARRANTS") which shall be exercisable into shares of Common Stock. The Shares and the shares of Common Stock issuable upon exercise of the Warrants are collectively referred to herein as "UNDERLYING SHARES." This letter shall serve as our irrevocable authorization and direction to you (provided that you are the transfer agent for the Company with respect to its Common Stock at such time) to issue Underlying Shares from time to time upon notice from the Company to issue such Underlying Shares. So long as you have previously received (x) an opinion of the Company's outside counsel substantially in the form of EXHIBIT I attached hereto (which the Company shall direct be delivered to you by such outside counsel upon the effectiveness of the registration statement covering resales of Underlying Shares) stating that a registration statement covering resales of Underlying Shares has been declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and that Underlying Shares may be issued (or reissued if they have been issued at a time when there was not such an effective registration statement) or resold without any restrictive legend (the "OPINION") and (y) a copy of such registration statement, then certificates representing Underlying Shares shall not bear any legend restricting transfer of Underlying Shares thereby and should not be subject to any stop-transfer restriction. Provided, however, that if you have not previously received a copy of the Opinion and such registration statement, then the certificates representing Underlying Shares shall bear the following legend: [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 30 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, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES 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. and, provided, further, that the Company may, from time to time, notify you to place stop-transfer restrictions on the certificates for Underlying Shares in the event, but only in the event, a registration statement covering Underlying Shares is subject to amendment for events then current. Please be advised that the Holders have relied upon this instruction letter as an inducement to enter into the Purchase Agreement and, accordingly, the Holders are a third party beneficiary to these instructions. Please execute this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions. Very truly yours, LYNX THERAPEUTICS, INC. By: Name: Title: ACKNOWLEDGED AND AGREED: [Transfer Agent] By: Name: Title: 31 EXHIBIT I [FORM OF OUTSIDE COUNSEL OPINION] [Addressee] [Address] To Whom It May Concern: The Registration Statement on Form S-3 (File No. 333-____________) of Lynx Therapeutics, Inc. was declared effective at ___:____ __.M. Eastern Time on _____________, 2001. Upon issuance of the Underlying Shares referred to in the Company's instruction letter attached, you are authorized to issue certificates for the Company's common stock without restrictive legends. Very truly yours, EX-10.2 3 f73183ex10-2.txt EXHIBIT 10.2 1 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. 2 "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. 32. 3 "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 33. 4 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 34. 5 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) 35. 6 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 36. 7 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. 37. 8 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 38. 9 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 39. 10 (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. 40. 11 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. 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. 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. 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. 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] 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. 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. 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. 19 CRAIG C. TAYLOR /s/ Craig C. Taylor --------------------------- Address for Notice: c/o Alloy Ventures 480 Cowper Avenue Palo Alto, CA 94301 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 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 22 MICHAEL TRAYNOR /s/ Michael Traynor --------------------------- Address for Notice: c/o Cooley Godward LLP One Maritime Plaza 20th Floor San Francisco, CA 94111-3580 EX-10.3 4 f73183ex10-3.txt EXHIBIT 10.3 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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 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) 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: - -------------------------- EX-99.1 5 f73183ex99-1.txt EXHIBIT 99.1 1 EXHIBIT 99.1 PRESS RELEASE LYNX CLOSES $11 MILLION PRIVATE EQUITY FINANCING Hayward, CA May 24, 2001 Lynx Therapeutics, Inc. (NASDAQ: LYNX) announced today it has completed an $11.1 million private placement of common stock and warrants to purchase common stock. The financing included the sale of 1,747,248 newly issued shares of common stock at $6.37 per share. The private placement was managed by Lynx and included a group of seven investors led by HBK Master Fund L.P. Lynx has agreed to file with the SEC a resale registration statement related to the privately placed securities. Lynx expects to use the net proceeds from the financing to support ongoing commercial, business development and research and development activities. Lynx's research and development efforts will focus on the continuing development of the Megatype(TM) and Protein ProFiler(TM) technologies, as well as internal discovery projects. Since the beginning of 2001, Lynx has expanded the commercialization of its technologies through agreements with Celera Genomics, AstraZeneca, GenoMar ASA, UroGene S.A., Phytera, Inc. and AniGenics, Inc, and extended its collaboration agreement with Hybrigenics S.A. Additionally, Lynx has initiated a collaborations program with several world-renowned academic researchers. Lynx is a leader in the development and application of novel technologies for the discovery of gene expression patterns and genomic variations important to the pharmaceutical, biotechnology and agricultural industries. These technologies are based on the Megaclone(TM) technology, Lynx's unique and proprietary cloning procedure, which transforms a sample containing millions of DNA molecules into one made up of millions of micro-beads, each of which carries approximately 100,000 copies of one of the DNA molecules in the sample. Megaclone(TM) technology is the foundation for Lynx's analytical applications, including: Massively Parallel Signature Sequencing, or MPSS(TM), technology, which provides gene sequence information and high-resolution gene expression data; Megasort(TM) technology, which provides differentially expressed gene sets; and Megatype(TM) technology, which is expected to provide single nucleotide polymorphism, or SNP, disease- or trait-association information. Statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release include statements relating to the intended use of the proceeds from this financing, the potential success of commercial, business development and research and development activities and the potential need to raise additional funds in the future, which may not be available to the Company. The Company cautions readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements due to the risks and factors identified from time to time in the 2 Company's reports filed with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2000, and its Quarterly Report on Form 10-Q for the period ended March 31, 2001. The information in this press release is current as of its release date. Lynx does not take the responsibility to update this information as it changes. THIS NEWS RELEASE IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES DISCUSSED HEREIN. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED AND SOLD IN THE UNITED STATES UNLESS REGISTERED UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

   1

                                                                    EXHIBIT 10.1


                                                                  EXECUTION COPY




_______________________________________________________________________________




                          SECURITIES PURCHASE AGREEMENT

                                      among

                             LYNX THERAPEUTICS, INC.

                                       and

                         THE INVESTORS SIGNATORY HERETO



                            Dated as of May 24, 2001



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        SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated 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").

        WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Rule 506 promulgated thereunder the Company desires to
issue and sell to the Purchasers and the Purchasers, severally and not jointly,
desire to purchase from the Company, shares of the Company's common stock, $.01
par value per share (the "Common Stock"), and certain other securities of the
Company as more fully described in this Agreement.

        NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:



                                    ARTICLE I
                                PURCHASE AND SALE

        1.1    Closing.

               Subject to the terms and conditions set forth in this Agreement,
the Company shall issue and sell to the Purchasers and the Purchasers shall,
severally and not jointly, purchase shares of Common Stock ("Shares") and
warrants to purchase Shares for an aggregate purchase price of $11,129,969.76
(the "Purchase Price"). The purchase and sale of the Shares and Warrants
hereunder shall be closed (the "Closing") at the offices of Robinson Silverman
Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290 Avenue of the
Americas, New York, NY 10104, on the execution date of this Agreement. The date
of the Closing is hereinafter referred to as the "Closing Date."

      (a) The Closing Date. On the Closing Date, the parties shall deliver or
shall cause to be delivered the following: (A) the Company shall deliver to each
Purchaser: (1) an original stock certificate representing a number of Shares by
dividing the aggregate purchase price indicated below such Purchaser's name on
the signature page of this Agreement by the Per Share Purchase Price (as defined
herein), registered in the name of such Purchaser, (2) a Common Stock purchase
warrant, in the form of Exhibit C, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire a number of
shares of Common Stock equal to 25% of the Shares purchased by it hereunder upon
the terms set forth therein (collectively, the "Warrants"), (3) an executed
Registration Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit A (the "Registration Rights Agreement"), (4)
Transfer Agent Instructions, in the form of Exhibit D, executed by the Company
and delivered to and acknowledged in writing by the Company's transfer agent
(the "Transfer Agent Instructions") and (5) the legal opinion of Cooley Godward
LLP, outside counsel to the



   3

Company, in the form of Exhibit E; and (B) each Purchaser shall deliver: (1) the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement, in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose and
(2) an executed Registration Rights Agreement.

        1.2    Certain Defined Terms.   As used in this Agreement, the
following terms shall have the meanings set forth in this Section 1.2:

        (a) "Business Day" shall mean any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York or the State of California are authorized
or required by law or other governmental action to close.

        (b)    "Commission" means the Securities and Exchange Commission.

        (c)    "NASDAQ" means the Nasdaq National Market.

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

        (e) "Purchase Price Per Share" means 90% of the average of the VWAP's
(as defined below) for each of the five Trading Days (as defined below)
immediately preceding the Closing Date.

        (f)    "Subsequent Market" shall mean any of the New York Stock
Exchange, American Stock Exchange, or Nasdaq SmallCap Market.

        (g) "Trading Day" means (i) a day on which the Common Stock is traded on
the NASDAQ or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (ii) if the Common Stock is not listed on the
NASDAQ or a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.

        (h) "VWAP" means the daily volume weighted average price (as reported by
Bloomberg Financial L.P. using the VAP function) of the Common Stock on the
NASDAQ or Subsequent Market (as applicable) on the date in question.


                                       2.
   4

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

        2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers as of the
date of this Agreement:

           (a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted and
described in the SEC Documents (as defined below). The Company has no
subsidiaries other than Lynx Therapeutics GmbH (the "Subsidiary"). The
Subsidiary is an entity, duly incorporated or otherwise organized, validly
existing and in good standing (with respect to jurisdictions that recognize such
concept) under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiary is duly qualified to do business and is in
good standing (with respect to jurisdictions that recognize such concept) as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below), this Agreement, the Registration Rights Agreement, the Transfer Agent
Instructions or the Warrants (collectively, the "Transaction Documents"), (y)
have or result in a material adverse effect on the results of operations, assets
or condition (financial or otherwise) of the Company and the Subsidiary, taken
as a whole, or (z) adversely impair the Company's ability to perform fully on a
timely basis its obligations under any of the Transaction Documents (any of (x),
(y) or (z), a "Material Adverse Effect").

               (b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered in accordance with the terms hereof and thereof, and assuming the due
authorization, execution and delivery by the Purchasers, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability thereof may be limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws, both state and federal, affecting creditors' and contracting parties'
rights or remedies generally or (ii) the exercise by courts of equity powers and
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws. Neither the
Company nor the Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.


                                       3.
   5


               (c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company as of March 31, 2001 is set forth in
Schedule 2.1(c). Except as disclosed in Schedule 2.1(c), the Company owns all of
the capital stock of the Subsidiary. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the securities of the Company
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company or the Subsidiary by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the Shares
and the Warrants and except as disclosed in Schedule 2.1(c) or set forth in the
SEC Documents, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or the Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Securities (as defined below), will not
obligate the Company to issue shares of Common Stock or other securities to any
Person other than the Purchasers and will not result in a right of any holder of
Company securities to adjust the exercise or conversion or reset price under
such securities.

               (d) Issuance of the Securities. The Securities (as defined
below) have been duly authorized and the Shares, when issued and paid for in
accordance with the terms hereof, and the Underlying Shares (as defined below),
when issued upon exercise of the Warrants, will be duly and validly issued,
fully paid and nonassessable, free and clear of all liens, encumbrances and
rights of first refusal of any kind (collectively, "Liens"). The Company has
reserved a sufficient number of duly authorized shares of Common Stock to issue
all of the Shares and for issuance hereunder upon exercise in full of the
Warrants. The shares of Common Stock issuable upon exercise of the Warrants are
referred to herein as the "Underlying Shares." The Shares, the Warrants and the
Underlying Shares are collectively referred to herein as, the "Securities."

               (e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or the Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or the Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
the Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or the Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), as
would not, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any


                                       4.
   6

governmental authority, except for violations which, individually or in the
aggregate, could not have or result in a Material Adverse Effect.

               (f) Filings, Consents and Approvals. Except as disclosed in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filings required pursuant to Section 3.10, (ii) the filing with the SEC
of a resale registration statement meeting the requirements set forth in the
Registration Rights Agreement and covering the resale by the Purchasers of the
Shares issued on the Closing Date and the Underlying Shares issuable upon
exercise of the Warrants (the "Registration Statement"), (iii) the
application(s) to the NASDAQ for the listing of the Shares and the Underlying
Shares for trading on the NASDAQ (and with any other national securities
exchange or market on which the Common Stock is then listed) in the time and
manner required thereby, and (iv) applicable Blue Sky filings (collectively, the
"Required Approvals").

            (g) Litigation; Proceedings. Except as set forth in the SEC
Documents, and as disclosed in Schedule 2.1(g), there is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or the
Subsidiary or the respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) would, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Neither the Company nor the Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
(A) a claim of violation of or liability under federal or state securities laws
or (B) a claim of breach of fiduciary duty. The Company does not have pending
before the Commission any request for confidential treatment of information, and
the Company has no knowledge of any expected such request that would be made
prior to the Effective Date (as defined below). There has not been, and to the
best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. During the five years preceding the Closing
Date: (i) the Company has not commenced any legal proceedings against any of its
present or former stockholders or any investment bank and (ii) no legal
proceedings have been commenced against the Company or any of its present or
former directors or officers by a present or former stockholder or any
investment bank.

               (h) No Default or Violation. Neither the Company nor the
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or the Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, in each case of clauses (i), (ii) or
(iii)


                                       5.
   7

above, except as would not individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.

            (i) Private Offering. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities as contemplated hereby are exempt from the
registration requirements of the Securities Act. Neither the Company nor any
Person acting on its behalf has taken or is, to the knowledge of the Company,
contemplating taking any action which could subject the offering, issuance or
sale of such Securities to the registration requirements of the Securities Act
including soliciting any offer to buy or sell the Securities by means of any
form of general solicitation or advertising.

            (j) SEC Documents; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to Section 13(a) or 15(d)
thereof, for the 12 months preceding the date hereof (the foregoing materials
being collectively referred to herein as the "SEC Documents" and, together with
the Schedules to this Agreement, the "Disclosure Materials") on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits or incorporated by reference to the SEC Documents as required
under the Exchange Act. The financial statements of the Company included in the
SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since December 31, 2000, except as specifically disclosed in the SEC Documents,
(a) there has not been a Material Adverse Effect, (b) the Company has not
incurred any liabilities (contingent or otherwise) other than (x) liabilities
incurred in the ordinary course of business consistent with past practice and
(y) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors, (d) the Company has not declared or made any payment
or distribution of cash or other property to its stockholders or officers or
directors (other than in compliance with existing Company stock option plans)
with respect to its capital stock, or purchased, redeemed (or made any
agreements to purchase or redeem) any shares of its capital stock and (e) the
Company has not issued or committed to issue shares of Common Stock or
securities that are convertible or exchangeable into, or give holders thereof
the right to receive, shares of Common Stock.



                                       6.
   8


               (k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

               (l) Certain Fees. Subject to Section 4.1, except for certain fees
payable by the Company to Intercoastal Financial Services Corp., no fees or
commissions will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement. The Company shall indemnify and hold harmless the Purchasers, their
employees, officers, directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and reasonable attorney's fees) and expenses suffered in
respect of any such claimed or existing fees, as such fees and expenses are
incurred.

               (m) Form S-3 Eligibility. The Company is eligible to register its
Common Stock for resale under Form S-3 promulgated under the Securities Act.

               (n) Listing and Maintenance Requirements. Except as set forth in
the SEC Documents, the Company has not, in the two years preceding the date
hereof received notice (written or oral) from the NASDAQ, any stock exchange,
market or trading facility on which the Common Stock is or has been listed (or
on which it has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange, market or trading
facility. The Company is, and has no reason to believe, based on current
circumstances, that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

               (o) Patents and Trademarks. Except as set forth in the SEC
Documents, the Company and the Subsidiary have, or have rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses and rights which are necessary or material for
use in connection with their respective businesses as described in the SEC
Documents and which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company nor the
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or the Subsidiary violates or infringes upon the rights of
any Person. To the best knowledge of the Company, (i) all such Intellectual
Property Rights are enforceable and (ii) there is no existing infringement by
another Person of any of the Intellectual Property Rights.

               (p) Registration Rights; Rights of Participation. Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, and as disclosed in
Schedule 2.1(p), the Company has not granted or agreed to grant to any Person
any rights (including "piggy-back" registration rights) to have any securities
of the Company registered with the Commission or any other governmental
authority which has not been satisfied. Except as set forth on Schedule 6(b) to
the Registration Rights Agreement, and as disclosed in Schedule 2.1(p), no
Person has any


                                       7.
   9

right of first refusal, preemptive right, right of participation or any similar
right to participate in the transactions contemplated by the Transaction
Documents.

            (q) Regulatory Permits. The Company and the Subsidiary possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect ("Material Permits"), and neither the
Company nor the Subsidiary has received any written notice of proceedings
relating to the revocation or modification of any Material Permit.

            (r) Title. Neither the Company nor the Subsidiary own any real
property. Except as disclosed in Schedule 2.1(r), the Company and the Subsidiary
have good and marketable title in all personal property owned by them which is
material to the business of the Company and the Subsidiary, in each case free
and clear of all Liens, except (i) for Liens, if any, reflected in the financial
statements included in or incorporated by reference into the SEC documents, and
(ii) for Liens as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company and the Subsidiary. Any real property and facilities held under
lease by the Company and the Subsidiary are held by them under valid, subsisting
and enforceable leases of which the Company and the Subsidiary are in compliance
in all material respects and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and the Subsidiary.

            (s) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.

            (t) Solvency. Based on the financial condition of the Company as of
the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).

               (u) Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company


                                       8.
   10

fulfilling their obligations or exercising their rights under this
Agreement, including without limitation the Company's issuance of the Securities
and the Purchasers' ownership of the Securities.

               (v) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

        2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser, represents and warrants to the
Company as follows:

               (a) Organization; Authority. Such Purchaser, if an entity, is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities to be
acquired by it hereunder has been duly authorized by all necessary action on the
part of such Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.

               (b) Investment Intent. Such Purchaser is acquiring the Securities
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement, the Registration Rights Agreement and the Warrants, at all
times to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute the
Securities.

               (c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and at each exercise date
under its respective Warrants, it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act.

               (d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and


                                       9.
   11

financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated the merits and
risks of such investment.

               (e) Ability of such Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.

               (f) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.

               (g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding such Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.

               (h) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are "restricted securities" under the federal securities laws
as they are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.

               Such Purchaser understands that such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. In this connection, the Purchaser represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.

               The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.



                                      10.
   12


                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

      3.1 Transfer Restrictions. (a) The Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. Notwithstanding the foregoing, the Company, without requiring a
legal opinion as described in the immediately preceding sentence, hereby
consents to and agrees to register on the books of the Company and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an Affiliate of such Purchaser or to one or more funds or managed
accounts under common management with such Purchaser, and any transfer among any
such Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement and, if such transfer is of all or a portion
of the Warrants held by such Purchaser, as a holder of the Warrants.

               (b) The Shares, the Warrants and any Underlying Shares issued
while there is not an effective Registration Statement shall be issued with the
following legend:

               [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
        SECURITIES ARE EXERCISABLE] HAVE [NOT] 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, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
        APPLICABLE STATE SECURITIES 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.

            (c) However, Underlying Shares issued when there is an effective
Registration Statement or when such legend is not required under the Securities
Act (including judicial interpretations and pronouncements issued by the Staff
of the Commission) shall not


                                      11.
   13

contain the legend set forth above nor any other legend. The Company shall cause
its counsel to issue the legal opinion included in the Transfer Agent
Instructions to the Company's transfer agent on the date that the Registration
Statement is declared effective by the Commission (such date, the "Effective
Date"). The Company agrees that following the Effective Date, it will, no later
than three Trading Days following the delivery by a Purchaser to the Company of
a certificate or certificates representing Shares or Underlying Shares issued
with a restrictive legend and registered on the Effective Date, cause to be
delivered to such Purchaser certificates representing such Shares or Underlying
Shares which shall be free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer set forth in
this Section.

        3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon exercise of the Warrants will result in
dilution of the outstanding shares of Common Stock. The Company further
acknowledges that its obligation to issue Underlying Shares upon exercise of the
Warrants pursuant to the terms thereof is unconditional and absolute, subject to
the limitations set forth in the Warrants, regardless of the effect of any such
dilution.

        3.3 Furnishing of Information. As long as the Purchasers own Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
causing its attorneys to render and deliver any legal opinion required under
such rule or by the transfer agent of the Common Stock or clearing broker for
the Purchaser in order to permit a Purchaser to sell shares under Rule 144. Upon
the request of any such Person, the Company shall deliver to such Person a
written certification of a duly authorized officer as to whether it has complied
with such requirements.

        3.4 Integration. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for the
purposes of the rules and regulations of NASDAQ.

        3.5 Increase in Authorized Shares. If on any date the Company would
be, if a notice of exercise were to be delivered on such date, precluded from
issuing the number of Underlying Shares issuable upon exercise in full of the
Warrants due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Board of


                                      12.
   14

Directors of the Company shall promptly prepare and mail to the stockholders of
the Company proxy materials requesting authorization to amend the Company's
certificate of incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue so as to provide enough shares for
issuance under the Warrants. In connection therewith, the Board of Directors
shall (a) adopt proper resolutions authorizing such increase, (b) recommend to
and otherwise use its best efforts to promptly and duly obtain stockholder
approval to carry out such resolutions (and hold a special meeting of the
stockholders no later than the earlier to occur of the 60th day after delivery
of the proxy materials relating to such meeting and the 90th day after request
by a holder of Warrants to issue the number of Underlying Shares in accordance
with the terms hereof) and (c) within five Business Days of obtaining such
stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.

        3.6 Reservation and Listing of Underlying Shares. The Company shall take
such steps as may be required to cause the listing of the Shares and Underlying
Shares on the NASDAQ and such other exchange, market or quotation facility on
which the Common Stock is traded. The Company shall maintain a reserve of shares
of Common Stock for issuance upon exercise in full of the Warrants in accordance
with this Agreement and the Warrants, respectively, in such amount as may be
required to fulfill its obligations in full under the Warrants.

        3.7 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices).
Until the first anniversary of the date hereof, the Company shall not use such
net proceeds to redeem any Company equity or equity-equivalent securities or to
settle any outstanding litigation.

        3.8 Exercise Obligations. The Company shall honor exercises of the
Warrants and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Warrants.

        3.9 Subsequent Financings; Limitation on Registration. (a) Subject to
Section 3.9(c), from the date of this Agreement through the Effective Date,
other than to the Purchasers or an Affiliate thereof, the Company shall not
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant of any option to purchase or
other disposition) any 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), and
the Company will cause the Subsidiary not to offer, sell or issue during such
period any of such Subsidiary's securities which provide the holder thereof the
right to receive any Common Stock (collectively, "Common Stock Equivalents")
(such dispositions, collectively, a "Subsequent Placement"), unless: (A) the
Company delivers to the Purchasers a written notice (the "Subsequent Placement
Notice") of its intention to effect such Subsequent Placement, which Subsequent
Placement Notice shall describe in reasonable detail the proposed terms of such
Subsequent Placement, the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent Placement shall be effected, and attached
to


                                      13.
   15

which shall be a term sheet or similar document relating thereto and (B) such
Purchaser shall not have notified the Company by 6:30 p.m. (New York City time)
on the tenth Trading Day after its receipt of the Subsequent Placement Notice of
its willingness to provide (or to cause its sole designee to provide), subject
to completion of mutually acceptable documentation, financing to the Company on
the same terms set forth in the Subsequent Placement Notice. If the Purchasers
shall fail to notify the Company of its intention to enter into such
negotiations within such time period, the Company may effect the Subsequent
Placement substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice; provided, that the
Company shall provide the Purchasers with a second Subsequent Placement Notice,
and the Purchasers shall again have the right of first refusal set forth above
in this paragraph (b), if the Subsequent Placement subject to the initial
Subsequent Placement Notice shall not have been consummated for any reason on
the terms set forth in such Subsequent Placement Notice within 30 Trading Days
after the date of the initial Subsequent Placement Notice with the Person (or an
Affiliate of such Person) identified in the Subsequent Placement Notice. The
Subsequent Placement shall be allocated among the Purchasers on a pro rata basis
by reference to the purchase price indicated below the Purchasers name on the
signature pages to this Agreement, or in such other manner as the Purchasers
shall determine.

               (b) Except to register: (x) the Registrable Securities (as
defined in the Registration Rights Agreement), (y) securities of the Company
permitted pursuant to Section 6(c) of the Registration Rights Agreement to be
registered in the Registration Statement, and (z) Common Stock permitted to be
issued pursuant to Section 3.9(c), the Company may not file a registration
statement to register any of its securities from the date of this Agreement
through the Effective Date.

               (c) The restrictions contained in Section 3.9(a) and 3.9(b) shall
not apply to: (i) the granting of options or warrants to employees, officers and
directors of the Company, and the issuance of Common Stock upon exercise of such
options or warrants granted under any stock option plan heretofore or
hereinafter duly adopted by the Company and purchases of Common Stock pursuant
to the Company's employee stock purchase plan; (ii) the issuance of shares of
Common Stock issuable upon exercise of any currently outstanding warrants and
other outstanding convertible securities of the Company, in each case as and to
the extent disclosed in Schedule 2.1(c) or the SEC Documents (but not as to any
amendments or modifications of the terms of such securities after the date of
this Agreement, including "back-dated" agreements); (iii) the issuance of shares
of Common Stock pursuant to a public offering underwritten on a firm commitment
basis registered under the Securities Act; or (iv) the issuance of securities in
connection with a transaction or relationship including, but not limited to an
acquisition, joint venture or collaboration or licensing arrangement, in which
the Company issues securities to an entity which is, itself or through its
subsidiaries, an operating company in a business related or synergistic to the
business of the Company and in which the Company reasonably believes it will
receive material benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital. Clauses (i)-(iv) of this Section 3.9(c) are
collectively referred to herein as "Exempt Events".



                                      14.
   16

               (d) Except for Exempt Events, from the date of this Agreement
through the Effective Date, the Company shall not, without the prior written
consent of the Purchasers holding at least a majority of the Registrable
Securities, (a) issue or agree to issue shares of Common Stock at a price below
the Purchase Price Per Share or (b) issue any Common Stock Equivalents or enter
an agreement to issue Common Stock Equivalents, that entitle any Person to
acquire shares of Common Stock at a price per share less than the Purchase Price
Per Share (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,
be entitled to receive shares of Common Stock at a price less than the Purchase
Price Per Share, such issuance shall be deemed to have occurred for less than
the Purchase Price Per Share).

        3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
(i) on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby in the time
and manner required under the Exchange Act, and (iii) timely file with the
Commission a Form D promulgated under the Securities Act. The Company shall, no
less than two Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in issuing
any other press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, except if such disclosure is required by law or stock
market regulation, in which such case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication.

        3.11 Reimbursement. If any Purchaser becomes involved in any capacity in
any action, proceeding or investigation brought before the one year anniversary
of the date of this Agreement by or against any Person who is a stockholder of
the Company, solely as a result of such Purchaser's acquisition of the
Securities under this Agreement, the Company will reimburse such Purchaser for
its reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Purchasers who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.


                                      15.
   17


        3.12 Shareholder Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities or shares of Common Stock under the Transaction Documents, assuming
for this purpose that such Purchaser does not otherwise acquire control of any
other shares of Common Stock that would trigger the provisions of any such plan
or arrangement.

        3.13 Disclosure of Material Non-Public Information. The Company shall
not and shall cause each of its Affiliates and other Persons acting on behalf of
the Company not to divulge to any Purchaser any information that it believes to
be material non-public information unless such Purchaser has agreed in writing
to receive such information. The Company agrees to comply with the newly adopted
Regulation FD promulgated under the Exchange Act.

        3.14 Put event. From the date of this Agreement until the Effective
Date, upon the occurrence of any of the following events (each, an "Event"), a
Purchaser may provide the Company with a notice (an "Event Notice ") requiring
the Company to reacquire all or a portion of the Shares which such Purchaser
acquired hereunder and then still holds at a put price (the "Put Price") per
share equal to the Purchase Price Per Share paid by the Purchaser for such
shares:

                      (a)    immediately prior to an assignment by the Company
for the benefit of creditors or commencement of a voluntary case under Title 11
of the United States Code, or an entering into of an order for relief in an
involuntary case under Title 11 of the United States Code, or adoption by the
Company of a plan of liquidation or dissolution;

                      (b)    the Common Stock fails to be listed or quoted for
trading on the NASDAQ for a period of three Trading Days (which need not be
consecutive Trading Days); and

                      (c)    the Registration Statement is not declared
effective on or prior to the 180th day following the Closing Date.

               The Company shall pay the Put Price by the fifth Trading Day
following the date of the delivery of the Event Notice. Interest shall accrue on
the aggregate Put Price from the date such amount is due until paid in full at
the rate of 15% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law), to accrue daily from the date such payment is due
hereunder through and including the date of payment. Any Event Notice may be
rescinded by the delivering Purchaser at any time prior to its receipt of the
full Put Price.


                                      16.
   18


                                   ARTICLE IV
                                  MISCELLANEOUS

        4.1 Fees and Expenses. Except as otherwise set forth in the Registration
Rights Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.

        4.2 Entire Agreement; Amendments. The Transaction Documents, together
with the Exhibits and Schedules thereto and Transfer Agent Instructions, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.

        4.3 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 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 U.S. 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 C. Kitch, Esq.

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

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


                                      17.
   19


        4.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.

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

        4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor.

        4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

        4.8 Governing Law. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. 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 (including with respect to
the enforcement of any of the Transaction Documents), 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 via registered or
certified mail or overnight delivery (with evidence of delivery) 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.


                                      18.
   20


        4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and exercise of the
Warrants.

        4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding 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
page were an original thereof.

        4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.

        4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

        4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant 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 way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, 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 FOLLOWS]




                                      19.
   21

               IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


                                    LYNX THERAPEUTICS, INC.

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







                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]



   22

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


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


                             Aggregate Purchase Price
                             for Shares to be acquired:          $6,749,995.98



                             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.


   23




                             FIRST INVESTORS HOLDING CO., INC.



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


                             Aggregate Purchase Price
                             for Shares to be acquired:           $1,999,995.27



                             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.


   24




                             HALIFAX FUND, LP



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


                             Aggregate Purchase Price
                             for Shares to be acquired:           $1,999,995.27



                             Address for Notice:

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


   25







                                    CRAIG C. TAYLOR

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

                                    Aggregate Purchase Price
                                    for Shares to be acquired:      $249,997.02


                                    Address for Notice:

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



   26







                                    JAMES C. KITCH


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

                                    Aggregate Purchase Price
                                    for Shares to be acquired:       $99,996.26


                                    Address for Notice:

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


   27






                                  FREDERICK D. BARON


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

                                  Aggregate Purchase Price
                                  for Shares to be acquired:         $19,995.43





                                  Address for Notice:

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



   28






                                  MICHAEL TRAYNOR


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

                                  Aggregate Purchase Price
                                  for Shares to be acquired:          $9,994.53



                                  Address for Notice:

                                  c/o Cooley Godward LLP
                                  One Maritime Plaza
                                  20th Floor
                                  San Francisco, California 94111-3580


   29




                                                                      EXHIBIT D

                           TRANSFER AGENT INSTRUCTIONS


                                                                    May __, 2001

[Transfer Agent]

Dear ___________:

        Reference is made to that certain Securities Purchase Agreement (the
"PURCHASE AGREEMENT") among Lynx Therapeutics, Inc., a Delaware corporation (the
"COMPANY"), and the buyers named therein (the "HOLDERS") pursuant to which the
Company is selling to the Holders shares (the "SHARES") of its Common Stock, par
value $.01 per share (the "COMMON STOCK"), and certain Common Stock purchase
warrants (the "WARRANTS") which shall be exercisable into shares of Common
Stock. The Shares and the shares of Common Stock issuable upon exercise of the
Warrants are collectively referred to herein as "UNDERLYING SHARES."

        This letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent for the Company with respect to
its Common Stock at such time) to issue Underlying Shares from time to time upon
notice from the Company to issue such Underlying Shares. So long as you have
previously received (x) an opinion of the Company's outside counsel
substantially in the form of EXHIBIT I attached hereto (which the Company shall
direct be delivered to you by such outside counsel upon the effectiveness of the
registration statement covering resales of Underlying Shares) stating that a
registration statement covering resales of Underlying Shares has been declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended, and that Underlying Shares may be issued (or reissued if they
have been issued at a time when there was not such an effective registration
statement) or resold without any restrictive legend (the "OPINION") and (y) a
copy of such registration statement, then certificates representing Underlying
Shares shall not bear any legend restricting transfer of Underlying Shares
thereby and should not be subject to any stop-transfer restriction. Provided,
however, that if you have not previously received a copy of the Opinion and such
registration statement, then the certificates representing Underlying Shares
shall bear the following legend:

        [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

   30




        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, OR IN A TRANSACTION NOT
        SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
        ACCORDANCE WITH APPLICABLE STATE SECURITIES 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.

and, provided, further, that the Company may, from time to time, notify you to
place stop-transfer restrictions on the certificates for Underlying Shares in
the event, but only in the event, a registration statement covering Underlying
Shares is subject to amendment for events then current.

        Please be advised that the Holders have relied upon this instruction
letter as an inducement to enter into the Purchase Agreement and, accordingly,
the Holders are a third party beneficiary to these instructions.

        Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions.

                                Very truly yours,

                                LYNX THERAPEUTICS, INC.


                                By:
                                Name:
                                Title:


ACKNOWLEDGED AND AGREED:

[Transfer Agent]

By:
Name:
Title:


   31




                                                                      EXHIBIT I

                        [FORM OF OUTSIDE COUNSEL OPINION]

[Addressee]
[Address]

To Whom It May Concern:

      The Registration Statement on Form S-3 (File No. 333-____________) of Lynx
Therapeutics, Inc. was declared effective at ___:____ __.M. Eastern Time on
_____________, 2001. Upon issuance of the Underlying Shares referred to in the
Company's instruction letter attached, you are authorized to issue certificates
for the Company's common stock without restrictive legends.


                                Very truly yours,

EX-10.2

   1




                                                                    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.


   2





               "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.




                                      32.
   3

               "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


                                      33.
   4

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


                                      34.
   5

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)


                                      35.
   6

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


                                      36.
   7

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.




                                      37.
   8

        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


                                      38.
   9

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


                                      39.
   10

(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.




                                      40.
   11

        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.
   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.
   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.
   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.
   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]


   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.


   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.


   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.


   19






                                    CRAIG C. TAYLOR

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

                                    Address for Notice:

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



   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


   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



   22






                                  MICHAEL TRAYNOR

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



                                  Address for Notice:

                                  c/o Cooley Godward LLP
                                  One Maritime Plaza
                                  20th Floor
                                  San Francisco, CA 94111-3580

EX-10.3

   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.


   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.
   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.
   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.
   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.
   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.
   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.
   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.
   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.
   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.
   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.
   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




   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)



   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:


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

EX-99.1

   1




                                                                    EXHIBIT 99.1

PRESS RELEASE
LYNX CLOSES $11 MILLION PRIVATE EQUITY FINANCING

Hayward, CA

May 24, 2001

Lynx Therapeutics, Inc. (NASDAQ: LYNX) announced today it has completed an $11.1
million private placement of common stock and warrants to purchase common stock.
The financing included the sale of 1,747,248 newly issued shares of common stock
at $6.37 per share. The private placement was managed by Lynx and included a
group of seven investors led by HBK Master Fund L.P. Lynx has agreed to file
with the SEC a resale registration statement related to the privately placed
securities.

Lynx expects to use the net proceeds from the financing to support ongoing
commercial, business development and research and development activities. Lynx's
research and development efforts will focus on the continuing development of the
Megatype(TM) and Protein ProFiler(TM) technologies, as well as internal
discovery projects. Since the beginning of 2001, Lynx has expanded the
commercialization of its technologies through agreements with Celera Genomics,
AstraZeneca, GenoMar ASA, UroGene S.A., Phytera, Inc. and AniGenics, Inc, and
extended its collaboration agreement with Hybrigenics S.A. Additionally, Lynx
has initiated a collaborations program with several world-renowned academic
researchers.

Lynx is a leader in the development and application of novel technologies for
the discovery of gene expression patterns and genomic variations important to
the pharmaceutical, biotechnology and agricultural industries. These
technologies are based on the Megaclone(TM) technology, Lynx's unique and
proprietary cloning procedure, which transforms a sample containing millions of
DNA molecules into one made up of millions of micro-beads, each of which carries
approximately 100,000 copies of one of the DNA molecules in the sample.
Megaclone(TM) technology is the foundation for Lynx's analytical applications,
including: Massively Parallel Signature Sequencing, or MPSS(TM), technology,
which provides gene sequence information and high-resolution gene expression
data; Megasort(TM) technology, which provides differentially expressed gene
sets; and Megatype(TM) technology, which is expected to provide single
nucleotide polymorphism, or SNP, disease- or trait-association information.

Statements included in this press release that are not historical in nature are
"forward-looking statements" within the meaning of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements in this press release include statements relating to the intended use
of the proceeds from this financing, the potential success of commercial,
business development and research and development activities and the potential
need to raise additional funds in the future, which may not be available to the
Company. The Company cautions readers that forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those indicated in the forward-looking statements due to
the risks and factors identified from time to time in the

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Company's reports filed with the U.S. Securities and Exchange Commission,
including its Annual Report on Form 10-K for the year ended December 31, 2000,
and its Quarterly Report on Form 10-Q for the period ended March 31, 2001. The
information in this press release is current as of its release date. Lynx does
not take the responsibility to update this information as it changes.

THIS NEWS RELEASE IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THE SECURITIES DISCUSSED HEREIN. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED AND SOLD IN THE
UNITED STATES UNLESS REGISTERED UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE.