S-8

As filed with the Securities and Exchange Commission on July 13, 2005

Registration No. 333-          

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SOLEXA, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation) 94-3161073
(I.R.S. Employer Identification No.)

25861 Industrial Blvd.
Hayward, California 94545

(Address of principal executive offices)

Lynx Therapeutics, Inc. 1992 Stock Option Plan
The Solexa Share Option Plan for Consultants
The Solexa Unapproved Company Share Option Plan
Solexa Limited Enterprise Management Incentive Plan

(Full title of the plans)

John West
Chief Executive Officer
Solexa, Inc.
25861 Industrial Blvd.
Hayward, California 94545
(510) 670-9300

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:
James C. Kitch, Esq.
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
(650) 843-5000

CALCULATION OF REGISTRATION FEE

		Proposed Maximum	Proposed Maximum
Title of Securities		Offering	Aggregate		Amount of
to be Registered	Amount to be Registered (1)	Price per Share (2)(3)	Offering Price (2)(3)		Registration Fee
Common Stock, par value $0.01 per share	1,803,139 shares	$1.7656-6.075	$	8,019,567.96	$	943.90

(1) Pursuant to Rule 416(a) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement shall cover any additional shares of Registrant’s Common Stock that become issuable in respect of the shares registered hereunder by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without receipt of consideration which results in an increase in the number of the Registrant’s outstanding shares of common stock.

(2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(h) promulgated under the Securities Act. The offering price per share and aggregate offering price are based upon the average of the high and low prices of Registrant’s Common Stock as reported on the NASDAQ SmallCap Market on July 12, 2005, in accordance with Rule 457(c) of the Securities Act.

(3) Calculated solely for the purpose of determining the amount of the registration fee pursuant to Rule 457(h) promulgated under the Securities Act. The offering price per share and aggregate offering price are based upon the weighted average exercise price of the outstanding options.

The registration fee is calculated as follows:

			Offering Price			Aggregate Offering
Title of Securities to be Registered	Number of Shares		Per Share			Price
Common Stock, $0.01 par value, reserved for future issuance under the Lynx Therapeutics, Inc. 1992 Stock Option Plan		1,000,000	$	6.075	(2)	$	6,075,000.00	(2)
Common Stock, $0.01 par value, to be issued under the Solexa Share Option Plan for Consultants		405,180	$	1.7656	(3)	$	715,385.81	(3)
Common Stock, $0.01 par value, to be issued under the Solexa Unapproved Company Share Option Plan		76,709	$	3.6776	(3)	$	282,105.02	(3)
Common Stock, $0.01 par value, to be issued under the Solexa Limited Enterprise Management Incentive Plan		321,250	$	2.9481	(3)	$	947,077.13	(3)
Total		1,803,139				$	8,019,567.96

TABLE OF CONTENTS

	The registration fee is calculated as follows:
	Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
	Item 4. DESCRIPTION OF SECURITIES
	Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
	Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
	Item 7. EXEMPTION FROM REGISTRATION CLAIMED
	Item 8. EXHIBITS
	Item 9. UNDERTAKINGS
SIGNATURES
POWER OF ATTORNEY
EXHIBIT INDEX
EXHIBIT 5.1
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
EXHIBIT 99.4

PART II

Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following documents filed by Solexa, Inc. (the “Registrant”) with the Securities and Exchange Commission (the “SEC”) are incorporated by reference into this Registration Statement:

     (a) Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (File No. 000-22570), filed with the SEC on March 31, 2005;

     (b) Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 (File No. 000-22570), filed with the SEC on May 23, 2005;

     (c) Registrant’s Current Reports on Form 8-K (File No. 000-22570), filed with the SEC on January 3, 2005, January 10, 2005, March 7, 2005 (as amended by Amendment No. 1 to Current Report on Form 8-K/A filed with the SEC on May 20, 2005), March 29, 2005, April 8, 2005, April 26, 2005, May 11, 2005, May 23, 2005, June 9, 2005 and June 28, 2005; and

     (d) The description of the Registrant’s Common Stock contained in the Registrant’s Registration Statement on Form 10 (File No. 000-22570), filed with the SEC on October 5, 1993, including any amendment or report filed for the purpose of updating such description.

     All reports and other documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part of this registration statement from the date of the filing of such reports and documents.

Item 4. DESCRIPTION OF SECURITIES

     Not applicable.

Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL

     Not applicable.

Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Article VI of the Registrant’s Amended and Restated Certificate of Incorporation, as amended, provides that, to the fullest extent permitted by the General Corporation Law of Delaware, as the same now exists or may hereafter be amended, a director of the Registrant shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability:

• for any breach of their duty of loyalty to the corporation or its stockholders,

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• for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law,

• for unlawful payments of dividends or unlawful stock repurchases or redemptions, or

• for any transaction from which the director derived an improper personal benefit.

     The Registrant’s Bylaws, as amended, provide that the Registrant shall indemnify its directors and executive officers to the fullest extent not prohibited by Delaware law or other applicable law, though the extent of indemnification may be modified through individual contracts. The Registrant shall not be required to indemnify any director or executive officer in connection with any proceeding initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the board of directors, or (iii) such indemnification is provided by the Registrant, in its sole discretion, pursuant to Delaware law. The Registrant’s Bylaws, as amended, provide that the Registrant may indemnify its other officers, employees and agents as set forth in Delaware law. The Registrant has the power to purchase insurance on behalf of any person required or permitted to be indemnified pursuant to its Bylaws, as amended.

     The Registrant has entered into agreements to indemnify its directors and executive officers, in addition to indemnification provided for in the Registrant’s Bylaws, as amended. These agreements, among other things, provide for indemnification of the Registrant’s directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts that any such person becomes legally obligated to pay because of any claims made against or by such person in connection with any action or proceeding to which such person is, was, or is threatened to be made a party by reason of the fact that such person serves or served as a director, officer, employee or other agent of the Registrant or any other company or enterprise at the request of the Registrant. The Registrant believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

Item 7. EXEMPTION FROM REGISTRATION CLAIMED

     Not applicable.

Item 8. EXHIBITS

Exhibit
Number	Description
4.1(1)	Form of Common Stock Certificate.
5.1	Opinion of Cooley Godward LLP.
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm, with respect to Solexa, Inc.
23.2	Consent of Ernst & Young LLP, Independent Auditors, with respect to Solexa Limited.
23.3	Consent of Cooley Godward LLP (contained in Exhibit 5.1 to this Registration Statement).
24.1	Power of Attorney is contained on the signature pages.
99.1	Lynx Therapeutics, Inc. 1992 Stock Option Plan, as amended.
99.2	The Solexa Share Option Plan for Consultants.
99.3	The Solexa Unapproved Company Share Option Plan.
99.4	Solexa Limited Enterprise Management Incentive Plan.

(1) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005, and incorporated herein by reference.

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Item 9. UNDERTAKINGS

1. The undersigned registrant hereby undertakes:

     (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

          (i) To include any prospectus required by section 10(a)(3) of the Securities Act;

          (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§ 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

          (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

     Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the issuer pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference herein.

     (b) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

2. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hayward, State of California, on this 13th day of July, 2005.

Solexa, Inc.
By:	/s/ John West
	John West
	Chief Executive Officer and Director

POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John West and Linda Rubinstein, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John West JOHN WEST	Chief Executive Officer and Director (Principal Executive Officer)	July 13, 2005
/s/ Linda M. Rubinstein LINDA M. RUBINSTEIN	Chief Financial Officer (Principal Financial and Accounting Officer)	July 13, 2005
/s/ Craig C. Taylor CRAIG C. TAYLOR	Chairman of the Board	July 13, 2005
/s/ Genghis Lloyd-Harris GENGHIS LLOYD-HARRIS	Director	July 13, 2005
/s/ Stephen D. Allen STEPHEN D. ALLEN	Director	July 13, 2005
HERMANN HMAUSER	Director	July ___, 2005
/s/ G. Mason Morfit G. MASON MORFIT	Director	July 13, 2005
/s/ Douglas M. Fambrough DOUGLAS M. FAMBROUGH	Director	July 13, 2005

EXHIBIT INDEX

Exhibit
Number	Description
4.1(1)	Form of Common Stock Certificate.
5.1	Opinion of Cooley Godward LLP.
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm, with respect to Solexa, Inc.
23.2	Consent of Ernst & Young LLP, Independent Auditors, with respect to Solexa Limited.
23.3	Consent of Cooley Godward LLP (contained in Exhibit 5.1 to this Registration Statement).
24.1	Power of Attorney is contained on the signature pages.
99.1	Lynx Therapeutics, Inc. 1992 Stock Option Plan, as amended.
99.2	The Solexa Share Option Plan for Consultants.
99.3	The Solexa Unapproved Company Share Option Plan.
99.4	Solexa Limited Enterprise Management Incentive Plan.

(1) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005, and incorporated herein by reference.

EX-5.1

Exhibit 5.1

[COOLEY GODWARD LLP LETTERHEAD]

July 12, 2005

Solexa, Inc.
25861 Industrial Boulevard
Hayward, CA 94545

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection with the filing by Solexa, Inc. (formerly Lynx Therapeutics, Inc., the “Company”) of a Registration Statement on Form S-8 (the “Registration Statement”) with the Securities and Exchange Commission covering the offering of up to (i) 1,000,000 shares (the “SOP Shares”) of the Company’s Common Stock, $.01 par value per share (“Common Stock”), pursuant to the Company’s 1992 Stock Option Plan (the “Stock Plan”), and (ii) 803,139 shares of Common Stock (the “Solexa Plan Shares” and together with the SOP Shares, the “Shares”) in connection with the assumption by the Company of options issued under the Solexa Share Option Plan for Consultants (the “Consultant Plan”), the Solexa Unapproved Company Share Option Plan (the “Unapproved Plan”), and the Solexa Limited Enterprise Management Incentive Plan (the “EMI Plan” and together with the Stock Plan, Consultant Plan, and Unapproved Plan, the “Plans”), pursuant to that certain Acquisition Agreement, dated as of September 28, 2004, by and between Solexa Limited and the Company (the “Agreement”).

In connection with this opinion, we have examined the Registration Statement and related Prospectus, the Company’s Amended and Restated Certificate of Incorporation, as amended, the Company’s Bylaws, as amended, and such other documents, records, certificates, memoranda and other instruments as we deem necessary as a basis for this opinion. We have assumed the genuineness and authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies thereof, and the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof.

Solexa, Inc.
Page Two

On the basis of the foregoing, and in reliance thereon, we are of the opinion that the Shares, when sold and issued in accordance with the Plans and the Registration Statement and the related Prospectus, will be validly issued, fully paid, and nonassessable (except as to shares issued pursuant to certain deferred payment arrangements, which will be fully paid and nonassessable when such deferred payments are made in full).

We consent to the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,

COOLEY GODWARD LLP

By:	/s/ James C. Kitch
	James C. Kitch

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-8) of Solexa, Inc. pertaining to the Lynx Therapeutics, Inc. 1992 Stock Option Plan, the Solexa Share Option Plan for Consultants, the Solexa Unapproved Company Share Option Plan and the Solexa Limited Enterprise Management Incentive Plan of our report dated February 18, 2005 (except for Note 17, as to which the date is March 4, 2005), with respect to the consolidated financial statements of Solexa, Inc. (formerly Lynx Therapeutics, Inc.) included in its Annual Report (Form 10-K) for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Palo Alto, California
July 7, 2005

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form S-8) of Solexa, Inc. pertaining to the Lynx Therapeutics, Inc. 1992 Stock Option Plan, the Solexa Share Option Plan for Consultants, the Solexa Unapproved Company Share Option Plan and the Solexa Limited Enterprise Management Incentive Plan of our report dated May 13, 2005 with respect to the financial statements of Solexa Limited included in Solexa, Inc.’s Amendment No. 1 to its Current Report on Form 8-K/A dated May 20, 2005, filed with the Securities and Exchange Commission.

/s/ Ernst & Young  

Ernst & Young LLP 

Cambridge, England
July 8, 2005

EX-99.1

EXHIBIT 99.1

LYNX THERAPEUTICS, INC.

1992 STOCK OPTION PLAN

Adopted July 1, 1992

Last Amended by the Board on October 26, 2004

Approved by Stockholders on March 1, 2005

Termination Date: March 11, 2006

1. Purposes.

      (a) Eligible Option Recipients. The persons eligible to receive Options are the Employees, Directors and Consultants of the Company and its Affiliates.

      (b) Available Options. The purpose of the Plan is to provide a means by which eligible recipients of Options may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Options: (i) Incentive Stock Options, and (ii) Nonstatutory Stock Options.

      (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Options, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.

2. Definitions.

      (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

      (b) “Board” means the Board of Directors of the Company.

      (c) “Code” means the Internal Revenue Code of 1986, as amended.

      (d) “Committee” means a Committee appointed by the Board in accordance with subsection 3(c).

      (e) “Common Stock” means the common stock of the Company.

      (f) “Company” means Lynx Therapeutics, Inc., a Delaware corporation.

      (g) “Consultant” means any person, including an advisor, (1) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (2) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include either Directors of the Company who are not compensated by the Company for their services as Directors or Directors of the Company who are merely paid a director’s fee by the Company for their services as Directors.

      (h) “Continuous Service” means that the Optionholder’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Optionholder’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Optionholder renders such service, provided that there is no interruption or termination of the Optionholder’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director of the Company will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.

      (i) “Covered Employee” means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

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      (j) “Director” means a member of the Board of Directors of the Company.

      (k) “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code; provided, however, that to the extent that Section 260.140.41 of Title 10 of the California Code of Regulations applies to an Option, “Disability” shall mean the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company or an Affiliate because of the sickness or injury of the person and such inability results in termination of employment by the Company or an Affiliate.

      (l) “Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

      (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

      (n) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows and in each case in a manner consistent with Section 260.140.50 of Title 10 of the California Code of Regulations:

      (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market, Nasdaq SmallCap Market or Over The Counter Bulletin Board system the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange, market or system (or the exchange, market or system with the greatest volume of trading the Common Stock) on the last market trading day prior to determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.

      (ii) In the absence of an established market or system for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.

      (o) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

      (p) “Non-Employee Director” means a Director of the Company who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

      (q) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

      (r) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

      (s) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

      (t) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.

      (u) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

      (v) “Outside Director” means a Director of the Company who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation”

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receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is not currently receiving direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as a Director or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

      (w) “Plan” means this Lynx Therapeutics, Inc. 1992 Stock Option Plan.

      (x) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

      (y) “Securities Act” means the Securities Act of 1933, as amended.

      (z) “Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.

3. Administration.

      (a) Administration by Board. The Board will administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).

      (b) Powers of Board. The board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

      (i) To determine from time to time which of the persons eligible under the Plan shall be granted Options; when and how each Option shall be granted; what type or combination of types of Option shall be granted; the provisions of each Option granted (which need not be identical), including the time or times when a person shall be permitted to receive stock pursuant to an Option; and the number of shares with respect to which an Option shall be granted to each such person.

      (ii) To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.

      (iii) To amend the Plan or an Option as provided in Section 11.

      (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.

      (c) Delegation to Committee.

      (i) General. The Board may delegate administration of the Plan to a Committee or Committees of one or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.

      (ii) Committee Composition when Common Stock is Publicly Traded. At such time as the Common Stock is publicly traded, in the discretion of the Board, a Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee may (i) delegate to a committee of one or more members of the Board who are not Outside Directors, the authority to grant Options to eligible persons who are either (a) not then Covered Employees

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and are not expected to be Covered Employees at the time of recognition of income resulting from such Option or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (ii) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Options to eligible persons who are not then subject to Section 16 of the Exchange Act.

4. Shares Subject to the Plan.

      (a) Share Reserve.

      (i) If the transactions contemplated by that certain Acquisition Agreement, dated September 28, 2004, by and between the Company and Solexa Limited (the “Acquisition Agreement”), are completed, subject to the provisions of Section 10 relating to adjustments upon changes in stock and Section 4(d) below, the stock that may be issued pursuant to Options shall not exceed in the aggregate three million seventy one thousand fifty two (3,071,052) shares of Common Stock less any shares of Common Stock remaining outstanding which were originally issued to Employees, Officers or Directors of, or Consultants to, the Company pursuant to stock purchase agreements or similar compensatory arrangements approved by the Board. Such share reserve consists of the (x) one million seventy one thousand fifty two (1,071,052) shares of Common Stock currently reserved for issuance under the Plan, plus (y) an increase of two million (2,000,000) shares of Common Stock authorized by the Board on October 26, 2004, subject to stockholder approval at the 2004 Annual Meeting to be held on                     , 2005.

      (ii) If the transactions contemplated by the Acquisition Agreement are not completed, subject to the provisions of Section 10 relating to adjustments upon changes in stock and Section 4(d) below, the stock that may be issued pursuant to Options shall not exceed in the aggregate one million three hundred and seventy one thousand fifty two (1,371,052) shares of Common Stock less any shares of Common Stock remaining outstanding which were originally issued to Employees, Officers or Directors of, or Consultants to, the Company pursuant to stock purchase agreements or similar compensatory arrangements approved by the Board. Such share reserve consists of the (x) one million seventy one thousand fifty two (1,071,052) shares of Common Stock currently reserved for issuance under the Plan, plus (y) an increase of three hundred thousand (300,000) shares of Common Stock authorized by the Board on October 26, 2004, subject to stockholder approval at the 2004 Annual Meeting to be held on                     , 2005.

      (b) Reversion of Shares to the Share Reserve. If any Option shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the stock not acquired under such Option shall revert to and again become available for issuance under the Plan. If any Common Stock acquired pursuant to the exercise of an Option shall for any reason be repurchased by the Company under an unvested share repurchase option provided under the Plan, the stock repurchased by the Company under such repurchase option shall not revert to and again become available for issuance under the Plan.

      (c) Source of Shares. The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.

      (d) Reserve Limitation. Notwithstanding Section 4(a), if at the time of each grant of a Stock Award under the Plan, the Company is subject to Section 260.140.45 of Title 10 of the California Code of Regulations (“Section 260.140.45”), and to the extent required by Section 260.140.45 the total number of securities issuable upon exercise of all outstanding options of the Company and the total number of shares provided for under this Plan or any other equity incentive, stock bonus or similar plan or agreement of the Company shall not exceed thirty percent (30%) of the then outstanding capital stock of the Company (as measured as set forth in Section 260.140.45), unless stockholder approval to exceed thirty percent (30%) has been obtained in compliance with Section 260.140.45, in which case the limit shall be such higher percentage as approved by the stockholders.

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5. Eligibility.

      (a) Eligibility for Specific Options. Incentive Stock Options may be granted only to Employees. Nonstatutory Stock Options may be granted to Employees, Directors and Consultants.

      (b) Ten Percent Stockholders.

      (i) So long as the Company is subject to Section 260.140.41 of Title 10 of the California Code of Regulations, no Ten Percent Stockholder shall be eligible for the grant of a Nonstatutory Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant; provided, however, that a Nonstatutory Stock Option may be granted at a lower exercise price and a longer term if a lower percentage of the Fair Market Value of the Common Stock on the date of grant and a longer term is permitted by Section 260.140.41 of Title 10 of the California Code of Regulations at the time of the grant of the Nonstatutory Stock Option.

      (ii) No Ten Percent Stockholder shall be eligible for the grant of a Nonstatutory Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.

      (iii) So long as the Company is subject to Section 260.140.42 of Title 10 of the California Code of Regulations, a Ten Percent Stockholder shall not be granted a restricted stock award unless the purchase price of the restricted stock is at least (A) one hundred percent (100%) of the Fair Market Value of the Common Stock on the date of grant or (B) such lower percentage of the Fair Market Value of the Common Stock on the date of grant as is permitted by Section 260.140.42 of Title 10 of the California Code of Regulations at the time of the grant of the restricted stock award.

      (c) Section 162(m) Limitation. Subject to the provisions of Section 10 relating to adjustments upon changes in stock, no employee shall be eligible to be granted Options covering more than one hundred forty two thousand eight hundred fifty seven (142,857) shares of the Common Stock during any calendar year.

      (d) Consultants.

      (i) A Consultant shall not be eligible for the grant of an Option if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.

      (ii) Form S-8 generally is available to consultants and advisors only if (i) they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer’s securities.

6. Option Provisions.

      Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option

5

shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

      (a) Term. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date it was granted.

      (b) Exercise Price of an Incentive Stock Option. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

      (c) Exercise Price of a Nonstatutory Stock Option. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

      (d) Consideration. The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) by delivery to the Company of other Common Stock, according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other Common Stock) with the Optionholder or in any other form of legal consideration that may be acceptable to the Board; provided, however, that at any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.

      In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement or at such higher rate of interest necessary in order to avoid variable award treatment for financial accounting purposes.

      (e) Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing provisions of this subsection 6(e), the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

      (f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall be transferable to the extent provided in the Option Agreement; provided however, to the extent that the Company is subject to Section 260.140.41(d) of Title 10 of the California Code of Regulations at the time of the grant of the Nonstatutory Stock Option, the Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing provisions of this subsection 6(f), the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a

6

third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

      (g) Vesting Generally. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments which may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(g) are subject to any Option provisions governing the minimum number of shares as to which an Option may be exercised. Notwithstanding the foregoing, to the extent that the Company is subject to the following restrictions on vesting under Section 260.140.41(f) of Title 10 of the California Code of Regulations at the time of the grant of the Option, then an Option granted to an Employee who is not an Officer or Director on the date of grant shall provide for vesting of the total number of shares of Common Stock at a rate of at least twenty percent (20%) per year over five (5) years from the date the Option was granted, subject to reasonable conditions such as continued employment.

      (h) Termination of Continuous Service. In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), which period, for so long as the Company is subject to Section 260.140.41(g) of Title 10 of the California Code of Regulations, shall not be less than thirty (30) days unless such termination is for cause), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.

      (i) Extension of Termination Date. An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 6(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.

      (j) Disability of Optionholder. In the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement, which period, for so long as the Company is subject to Section 260.140.41(g) of Title 10 of the California Code of Regulations, shall not be less than six (6) months) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.

      (k) Death of Optionholder. In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise the Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to subsection 6(e) or 6(f), but only within the period ending on the earlier of (1) the date twelve (12) months following the date of death (or such longer or shorter period specified in the Option Agreement, which period, for so long as the Company is subject to Section 260.140.41(g)

7

of Title 10 of the California Code of Regulations, shall not be less than six (6) months) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.

      (l) Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares subject to the Option prior to the full vesting of the Option. Subject to the “Repurchase Limitation” of Section 9(h) (for so long as the Company is subject to Sections 260.140.41 and 260.140.42 of Title 10 of the California Code of Regulations), any unvested shares so purchased may be subject to an unvested share repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. Provided that the “Repurchase Limitation” in Section 9(h) is not violated,(for so long as the Company is subject to Sections 260.140.41 and 260.140.42 of Title 10 of the California Code of Regulations) the Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.

7. Covenants of the Company.

      (a) Availability of Shares. During the terms of the Options, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Options.

      (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Option or any stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Options unless and until such authority is obtained.

8. Use of Proceeds from Stock.

      Proceeds from the sale of stock pursuant to Options shall constitute general funds of the Company.

9. Miscellaneous.

      (a) Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate the time at which an Option may first be exercised or the time during which an Option or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Option stating the time at which it may first be exercised or the time during which it will vest.

      (b) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.

      (c) No Employment or other Service Rights. Nothing in the Plan or any instrument executed or Option granted pursuant thereto shall confer upon any Optionholder or other holder of Options any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Option was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

      (d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with respect to which Incentive Stock Options are exercisable for

8

the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.

      (e) Investment Assurances. The Company may require an Optionholder, as a condition of exercising or acquiring stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is acquiring the stock subject to the Option for the Optionholder’s own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (iii) the issuance of the shares upon the exercise or acquisition of stock under the Option has been registered under a then currently effective registration statement under the Securities Act or (iv) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.

      (f) Withholding Obligations. To the extent provided by the terms of an Option Agreement, the Optionholder may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under an Option by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the Optionholder as a result of the exercise or acquisition of stock under the Option; or (iii) delivering to the Company owned and unencumbered shares of the Common Stock.

      (g) Information Obligation. To the extent required by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall deliver financial statements to Participants at least annually. This Section 9(g) shall not apply to key Employees whose duties in connection with the Company assure them access to equivalent information.

      (h) Repurchase Limitation. The terms of any repurchase option shall be specified in the Stock Award, and the repurchase price may be either the Fair Market Value of the shares of Common Stock on the date of termination of Continuous Service or the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase or (ii) their original purchase price. To the extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the California Code of Regulations at the time a Stock Award is made, any repurchase option contained in a Stock Award granted to a person who is not an Officer, Director or Consultant shall be upon the terms described below:

      (i) Fair Market Value. If the repurchase option gives the Company the right to repurchase the shares of Common Stock upon termination of Continuous Service at not less than the Fair Market Value of the shares of Common Stock to be purchased on the date of termination of Continuous Service, then (i) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous Service (or in the case of shares of Common Stock issued upon exercise of Stock Awards after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”) and (ii) the right terminates when the shares of Common Stock become publicly traded.

      (ii) Original Purchase Price. If the repurchase option gives the Company the right to repurchase the shares of Common Stock upon termination of Continuous Service at the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase or (ii) their original purchase price, then

9

(x) the right to repurchase at the original purchase price shall lapse at the rate of at least twenty percent (20%) of the shares of Common Stock per year over five (5) years from the date the Stock Award is granted (without respect to the date the Stock Award was exercised or became exercisable) and (y) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous Service (or in the case of shares of Common Stock issued upon exercise of Options after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”).

10. Adjustments upon Changes in Stock.

      (a) Capitalization Adjustments. If any change is made in the stock subject to the Plan, or subject to any Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person pursuant to subsection 5(c), and the outstanding Options will be appropriately adjusted in the class(es) and number of securities and price per share of stock subject to such outstanding Options. Such adjustments shall be made by the Board, the determination of which shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

      (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then such Options shall be terminated if not exercised (if applicable) prior to such event.

      (c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of (1) a sale of substantially all of the assets of the Company, (2) a merger or consolidation in which the Company is not the surviving corporation or (3) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then any surviving corporation or acquiring corporation shall assume any Options outstanding under the Plan or shall substitute similar Options (including an award to acquire the same consideration paid to the stockholders in the transaction described in this subsection) for those outstanding under the Plan. In the event any surviving corporation or acquiring corporation refuses to assume such Options or to substitute similar Options for those outstanding under the Plan, then with respect to Options held by Optionholders whose Continuous Service has not terminated, the vesting shall be accelerated in full, and the Options shall terminate if not exercised at or prior to such event. With respect to any other Options outstanding under the Plan, such Options shall terminate if not exercised prior to such event.

11. Amendment of the Plan and Options.

      (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 10 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.

      (b) Stockholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.

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      (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.

      (d) No Impairment of Rights. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.

      (e) Amendment of Options. The Board at any time, and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.

12. Termination or Suspension of the Plan.

      (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on March 11, 2006. No Options may be granted under the Plan while the Plan is suspended or after it is terminated.

      (b) No Impairment of Rights. Rights and obligations under any Option granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except with the written consent of the Optionholder.

13. Effective Date of Plan.

      The Plan shall become effective as determined by the Board, but no Option shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

11 EX-99.2 6 f09608exv99w2.htm EXHIBIT 99.2

Exhibt 99.2

THE SOLEXA SHARE OPTION PLAN FOR CONSULTANTS

Adopted by the Company on 14th April 1999

Cameron McKenna
Mitre House
160 Aldersgate Street
London EC1A 4DD

T +44(0)171 367 3000
F +44(0)171 367 2000

TABLE OF CONTENTS

Clause	Page
1. Definitions		1
2. Participation and Restrictions on the Granting of Options		4
3. Rights to exercise options		6
4. Exercise of options		7
5. Take-overs, reconstructions and winding-up		8
6. Adjustment of options for variation of share capital		10
7. Expenses		11
8. Administration		11
9. General		12
10. Alterations		13
11. Inland Revenue Requests		14
12. Termination		14

(i)

THE RULES OF THE SOLEXA SHARE OPTION PLAN FOR CONSULTANTS

1.	Definitions
1.1	In this Plan the words and expressions set out below shall have the meanings specified against them unless otherwise specifically provided and any reference to a provision of an Act of Parliament shall include any modification, consolidation, re-enactment or extension of it.

“Acquiring Company”	a company which obtains control of the Company in accordance with Rule 5.5;
“the Auditors”	the auditors (acting as experts not arbitrators) for the time being of the Company or in the event of there being joint auditors such one of them as the Directors shall select;
“the Company”	Solexa Limited;
“Consultant”	any person who is not employed by the Company or any Subsidiary but who provides research or other services to the Company and/or a Subsidiary either directly or indirectly;
“Control”	the meaning given to that expression by Section 840 of the Taxes Act;
“Date of Adoption”	the date of the adoption of this Plan by the Company;
“Date of Announcement”	the date on which the Company makes an announcement of its results for the last preceding financial year, half year or other period;

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“Date of Grant”	the date upon which the Directors issue an Option Certificate in accordance with Rule 2.3;
“Directors”	the directors for the time being of the Company or the directors present at a duly convened meeting of the board of directors or of a duly appointed committee of the board of directors at which a quorum is present including, without limiting the generality of the foregoing, the Remuneration Committee;
“Eligible Person”	any person who at the Date of Grant is a Consultant;
“Exercise Condition”	an objective condition precedent to the exercise of an Option imposed in accordance with Rule 2.2;
“Issue or Re-organisation”	any capitalisation, consolidation or sub-division or reduction of share capital in the Company and/or any other variation in the share capital of the Company which in the opinion of the Directors justifies a variation in the number of shares subject to an Option and/or the Option Price pursuant to that Option;
“Market Value”	such value per share, in relation to which an Option is to be granted, as the Company may consider to be the market value thereof on the day preceding the relevant Date of Grant and determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992;

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“Option”	a right granted to acquire Shares in the Company;
“Option Certificate”	a certificate issued to an Option Holder in accordance with Rule 2.3;
“Option Holder”	a person holding an Option;
“Option Price”	the acquisition price for a Share comprised in any Option which shall be determined by the Directors, shall be:-
	(i)	in the case of an option to acquire Shares by subscription not less than the nominal value of a Share; or
	(ii)	subject to (i) above and Rule 6 the Market Value of a Share; or
	(iii)	subject to (i) above such other value as the Directors in their absolute discretion may determine;
“this Plan”	the Solexa Share Option Plan for Consultants established by these Rules in its present form or as from time to time amended in accordance with the provisions hereof;
“the Remuneration Committee”	The remuneration committee of the board of Directors;
“Shares”	ordinary shares in the Company of 0.25 pence each or as the context may require shares for the time being representing the same whether in consequence of any Issue or Reorganisation or otherwise;

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“Subsidiary”	a company which is both under the Control of the Company and which is a subsidiary of the Company within the meaning of Section 736 of the Companies Act;
“Vest”	the time when an Option Holder can exercise the Option over a specified percentage of Shares subject to Rules 3.1.1 and 4.1 and the terms “Vested” and “Vesting” shall be construed accordingly provided always that where an Option Holder ceases to be a consultant he shall continue to have a right of exercise to the extent that the Option has vested;
“the Taxes Act”	the Income and Corporation Taxes Act 1988;

1.2	In these Rules unless the context otherwise requires words denoting the singular number shall include the plural number and words denoting the masculine gender shall include the feminine gender.
2.	Participation and Restrictions on the Granting of Options
2.1	The Directors may, on such dates as they shall determine grant Options at the Option Price to such Eligible Persons as they may in their absolute discretion select. No Eligible Person shall be entitled as of right to participate in this Plan.
2.2	The Directors may impose an Exercise Condition on any Option which they grant preventing its exercise unless such condition has been complied with. If, after the Directors have imposed an Exercise Condition, events happen which cause them to consider that it is no longer appropriate they may vary the Exercise Condition provided always that any such amendment may only be one which the Directors reasonably consider will result in a fairer measure of the performance of the assignment of the Option Holder, will ensure that this Plan operates more effectively in the achievement of its purpose of providing share benefits for persons who contribute to the prosperity of

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	the Company, and will be no more difficult to satisfy than would have been the case if there had been no such amendment.
2.3	The Directors shall grant Options by resolution. As soon as practicable thereafter, the Directors shall issue in respect of each Option granted as aforesaid an Option Certificate given under seal or executed as a deed. The date of issuing such Option Certificate given under seal or executed as a deed shall be taken for all purposes of this Plan as the Date of Grant in respect of the relevant Option. No payment to the Company shall be required on the grant of an Option. The Option Certificate shall be in such form as the Directors shall from time to time determine and shall specify the number of Shares comprised in the Option, the Date of Grant, any Exercise Condition and the Option Price.
2.4	Any Eligible Person to whom an Option is granted may by notice given in writing within 30 days after its Date of Grant renounce his rights thereto, in which event such Option shall be deemed for all purposes never to have been granted.
2.5	Each Option shall be personal to the Option Holder to whom it is granted and other than a transfer to the Option Holder’s personal representatives on death shall not be transferable, assignable or chargeable. Any other purported transfer, assignment, charge, disposal or dealing with the rights and interests of the Option Holder under this Plan shall render the Option void.
2.6	The aggregate number of Shares which may be issued on the exercise of Options granted on any day in the period of 10 years commencing on the Date of Adoption shall not, when added to the aggregate of:

2.6.1	the total number of Shares issued or remaining issuable in respect of Options granted under this Plan in the 10 years preceding that day; and
2.6.2	the total number of Shares issued or remaining issuable in respect of any Employees’ Share Scheme adopted by the Company or any Subsidiary in the 10 years preceding that day,

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	exceed such number as represents 25% of the issued ordinary share capital of the Company immediately prior to that day.
2.7	In applying the limit contained in rule 2.6 no account will be taken of Shares subject to an option or Option which, as regards any right to acquire such Shares has lapsed or been released, surrendered or cancelled.
2.8	No Options shall in any event be granted more than 10 years after the Date of Adoption.
3.	Rights to exercise options
3.1	Subject to the provisions of Rules 3.2, 3.3 and 5 an Option shall be capable of being exercised to the extent that it has Vested in accordance with the provisions of the Option Certificate

3.1.1	following the third anniversary of its date of Grant; and
3.1.2	before the tenth anniversary of its Date of Grant,

	Provided that any relevant Exercise Condition has been satisfied, unless the Rules provide otherwise.
3.2	If an Option Holder ceases to be a Consultant (otherwise than by reason of his death) and without immediately upon such cessation becoming an employee of the Company or a Subsidiary, the Option may be exercised pursuant to Rule 3.1.1 above to the extent that it has Vested at the date of cessation within the period mentioned in Rule 3.1.2 above and to the extent that the Option has not Vested it shall lapse unless there has been a breach by the Option Holder of the contract pursuant to which the Option Holder’s services are provided to the Company in which event the Option shall not be exercised at all and shall lapse in its entirety.
3.3	If an Option Holder dies before exercising an Option granted to him under this Plan at a time when he is otherwise entitled to exercise the Option, the Option may to the extent that it has Vested be exercised by his personal representatives within 12 months after the date of his death or within such period as the directors may in their absolute discretion allow and to the extent that the Option has not Vested it shall lapse.

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3.4	Notwithstanding any other provision of this Plan, an Option granted under this Plan may not be exercised after the expiry of the period of 10 years (or such shorter period as the Directors may have determined before the grant thereof) beginning with the Date of Grant.
3.5	If an Option Holder ceases to be a Consultant and immediately on such cessation becomes an employee of the Company or a Subsidiary the Rules of this Plan shall cease to apply and if the Directors shall in their absolute discretion permit, in the event that the Company has adopted an unapproved Company Share Option Plan the rules of that Plan shall apply in their place.
4.	Exercise of options
4.1	Options may be exercised in whole or in part on dates determined by the Directors which shall not be more than four months apart.
4.2	The exercise of any Option granted under this Plan shall be effected by giving notice to the Company and otherwise in such form and manner as the Directors may from time to time prescribe and, unless the Directors determine otherwise, any such notice shall have effect only on receipt by the Company, together with the appropriate payment.
4.3	Subject to Rule 4.4 below, within 30 days after an Option under this Plan has been exercised by any person, the Directors on behalf of the Company shall allot to him (or his nominee) or, as appropriate, procure the transfer to him (or his nominee) of the number of Shares in respect of which the Option has been exercised, provided that, for the avoidance of doubt, where Shares are so allotted or transferred to a nominee, the beneficial interest in them must Vest in the person who exercised the Option.
4.4	All Shares allotted under this Plan shall rank pari passu in all respects with the Shares of the same class for the time being in issue save as regards any rights attaching to such Shares by reference to a record date prior to the date of the allotment, and in the case of the transfer of existing Shares, the transferee shall not acquire any rights attaching to such shares by reference to a record date prior to the date of the transfer.

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4.5	The personal representatives of a deceased Option Holder may not exercise an Option if the Option Holder was precluded from doing so at the time of his death.
4.6	The allotment or transfer of any Shares under this Plan shall be subject to obtaining any approval or consent mentioned in Rule 9.4 below.
4.7	In the event of a partial exercise, the Company shall, within 30 days of the partial exercise, issue to the Option Holder a new option certificate showing the balance of the Option and a new form of exercise of that balance.
5.	Take-overs, reconstructions and winding-up
5.1	If any person obtains Control of the Company (within the meaning of section 840 of the Taxes Act) as a result of making a general offer or otherwise to acquire shares in the Company, or having obtained such Control makes such an offer, the Directors may within 7 days of becoming aware thereof notify every Option Holder (or as the case may be his personal representative) thereof and, subject to compliance with any Exercise Condition and to Rules 3.2, 3.3 and 3.4 above and Rule 5.5 below, the Directors may in their absolute discretion determine that an Option granted under this Plan may be exercised to the extent that it has Vested, within six months (or such longer period as the Directors may permit) of such notification.
5.2	For the purposes of Rule 5.1 above, a person shall be deemed to have obtained Control of the Company if he and others acting in concert (as defined by the City Code on Takeovers and Mergers) with him have together obtained Control of it.
5.3	If any application is made to the Court under section 425(1) of the Companies Act 1985 a meeting in relation to a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Directors may permit any Option granted under this Plan, subject to compliance with any Exercise Condition and to Rules 3.2, 3.3, and 3.4 above, to be exercised until the time of the meeting, such exercise being conditional upon the Court sanctioning such compromise or arrangement.

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5.4

If any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if under section 425 of that Act the Court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Directors shall forthwith notify every Option Holder (or as the case may be his personal representatives) thereof and any Option granted under this Plan may, subject to compliance with any Exercise Condition and to Rules 3.2, 3.3, and 3.4 above be exercised within one month of such notification, but to the extent that it is not exercised within that period shall (notwithstanding any other provision of this Plan and notwithstanding that such Option did not become exercisable during the period) lapse on the expiry thereof.

5.5

If an Acquiring Company:-

5.5.1	obtains Control of the Company as a result of making a general offer or otherwise to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have Control of the Company, or
5.5.2	obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985; or
5.5.3	becomes bound or entitled to acquire Shares in the Company under sections 428 to 430F of that Act.

Any Option Holder may at any time within such period as the Acquiring Company shall specify, by agreement with the Acquiring Company and if the Directors in their absolute discretion shall allow, enter into a share exchange option agreement in respect of any Option granted under this Plan which has not lapsed, whereby on exercise of such

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	Option, the Shares acquired in the Company shall be exchanged for equivalent shares in a different company (whether the Acquiring Company itself or some other company).
6.	Adjustment of options for variation of share capital
6.1	Subject to Rule 2.9 above and Rules 6.3 and 6.4 below, on the occurrence of an Issue or Re-organisation the Directors may make such adjustment as they consider appropriate under Rule 6.2.
6.2	An adjustment made under this sub-rule shall be to one or more of the following:-

6.2.1	the number of shares in respect of which any Option granted under this Plan may be exercised;
6.2.2	the price at which shares may be acquired by the exercise of any such Option;
6.2.3	where any such Option has been exercised but no shares have been allotted or transferred pursuant to such exercise, the number of shares which may be so allotted or transferred and the price at which they may be acquired.

6.3

Except in the case of a capitalisation issue, no adjustment under Rule 6.2 above shall be made without the prior confirmation in writing by the Auditors that it is in their opinion fair and reasonable.

6.4

An adjustment under Rule 6.2 above may have the effect of reducing the price at which Shares may be acquired by the exercise of an Option to less than their nominal value, but, in the case of an Option to acquire Shares by subscription, only if and to the extent that the Directors shall be authorised to capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the Shares in respect of which the Option is exercised and which are to be allotted pursuant to such exercise exceeds the price at which the same may be subscribed for and to apply such sum in paying up such amount on such Shares; and so that on exercise of any Option in respect of which such reduction shall have been made the Directors shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid.

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6.5	As soon as reasonably practicable after making any adjustment under Rule 6.2 above, the Directors shall give notice in writing thereof to any Option Holders affected thereby.
7.	Expenses
	Any expenses of the Company involved in any issue or transfer of shares in the name of any Option Holder or his personal representative(s) or nominee(s) shall be payable by the Company.
8.	Administration
8.1	Any notification or other notice in writing which the Company is required to give, or may desire to give, to any Eligible Person or Option Holder (or his personal representative(s)) in pursuance of this Plan shall be sufficiently given if delivered to him by hand or sent through the post in prepaid cover addressed to the Eligible Person or Option Holder (or his personal representative(s)) at the last address known to the Company as being his address. Any certificate, notification or other notice in writing required to be given to the Company shall be properly given if sent to or delivered to the Company at its registered office. Any notification, certificate or other notices sent by post shall be deemed delivered on the second day following the date of posting. All notices documents certificates given by or to an Eligible Person or Option Holder (or his personal representative(s)) shall be sent at his risk.
8.2	Option Holders (or their personal representative(s)) shall have made available to them copies of all notices and other documents sent by the Company to its holders of shares generally.

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9.	General
9.1	The Directors shall at all times ensure that there are sufficient Shares available as may be required to meet the subsisting rights of Option Holders by either ensuring that the Company shall at all times keep available for allotment unissued Shares at least sufficient to satisfy Options under which Shares may be subscribed for and/or to procure that sufficient Shares are available for transfer to satisfy Options.
9.2	The decision of the Directors in any dispute or question relating to any Option shall be final and conclusive, subject to the written confirmation of the Auditors whenever required under the provisions of this Plan.
9.3	Participation in this Plan by an Option Holder is a matter entirely separate from any pension right or entitlement he may have and from his terms or conditions of engagement with any Group Member and participation in this Plan shall in no respects whatever effect in any way an Option Holder’s terms or conditions of engagement with any Group Member. In particular (but without limiting the generality of the foregoing words) any Option Holder who terminates his contract with any Group Member shall not be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under this Plan which he might otherwise have enjoyed.
9.4	In the event that the Company is admitted to the Official List of the London Stock Exchange or becomes listed on the Alternative Investment Market any subsequent grant or exercise of an Option shall be subject to obtaining any approval or consent required under the provisions of The Stock Exchange Listing Rules or the AIM Admission Rules published by the London Stock Exchange, of the City Code on Takeovers and Mergers, or of any regulations and enactments.
9.5	If the Company or any Subsidiary is required to account for any amount of social security contributions that the Option Holder is liable to pay as a result of the grant of an Option to an Eligible Person the Option Holder shall reimburse the Company or the Subsidiary, as the case may be, in respect of the amount of social security contributions

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	forthwith and in any event no later than 21 days from the date of the grant of the Option.
9.6	If the Company or any Subsidiary is required to account for any amount of tax, duties and social security contributions as a result of the exercise of an Option granted to an Eligible Person, the Option Holder shall reimburse the Company or the Subsidiary, as the case may be, in respect of the amount of tax, duties and social security contributions accounted for forthwith and in any event no later than 21 days from the date of the exercise of the Option.
10.	Alterations
10.1	Subject to Rules 10.2, 10.4 and 10.5 below, the Directors may at any time alter or add to all or any of the provisions of this Plan, or the terms of any Option granted under it, in any respect.
10.2	Subject to Rule 10.3 below, no alteration or addition to the advantage of Option Holders shall be made under Rule 10.1 above without the prior approval by ordinary resolution of the members of the Company in general meeting.
10.3	Rule 10.2 above shall not apply to any alteration or addition which is minor in nature and:-

10.3.1	is necessary or desirable in order to comply with the provisions of any proposed or existing legislation, or to obtain or maintain favourable taxation, exchange control or regulatory treatment of the Company, and Subsidiary or Option Holder, or
10.3.2	is made to benefit the administration of this Plan.

10.4   No alteration or addition to the disadvantage of any Option Holder shall be made under Rule 10.1 above unless:-

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10.4.1	the Directors shall have invited every relevant Option Holder to give an indication as to whether or not he approves the alteration or addition, and
10.4.2	the alteration or addition is approved by a majority of those Option Holders who have given such an indication.

10.5	As soon as reasonably practicable after making any alteration or addition under Rule 10.1 above, the Directors shall give notice in writing thereof to any Option Holder affected thereby.
11.	Inland Revenue Requests
	The Company shall provide to the Inland Revenue (within such time limit as the Inland Revenue directs) any information required by it and an Option Holder shall:-
11.1	promptly provide to the Company such information as it may reasonably request; and
11.2	consent to the Company providing such information concerning him to the Inland Revenue for the purpose of complying with such request from the Inland Revenue.
12.	Termination
	The Company in general meeting or the Directors may at any time resolve to terminate this Plan in which event no further Options shall be granted, but the provisions of this Plan shall in relation to Options then subsisting continue in full force and effect.

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EX-99.2

exv99w2

EX-99.3

Exhibit 99.3

THE SOLEXA

UNAPPROVED COMPANY SHARE OPTION PLAN

Adopted by the Company on 23rd January 2001

CMS Cameron McKenna
Mitre House, 160 Aldersgate Street, London, EC1A 4DD
Telephone: +44(0)20 7367 3000 Fax: +44(0)20 7367 2000
CDE Box 724

TABLE OF CONTENTS

Clause		Page
1.	Definitions		1
2.	Participation		6
3.	Rights to exercise options		8
4.	Exercise of options		9
5.	Take-overs, reconstructions and winding-up		10
6.	Exercise of the Option — Sale		12
7.	Adjustment of options for variation of share capital		15
8.	Expenses		16
9.	Administration		16
10.	General		17
11.	Alterations		18
12.	Inland Revenue Requests		19
13.	Termination		20

(i) 

THE RULES OF THE SOLEXA
UNAPPROVED COMPANY SHARE OPTION PLAN

1.	Definitions
1.1	In this Plan the words and expressions set out below shall have the meanings specified against them unless otherwise specifically provided and any reference to a provision of an Act of Parliament shall include any modification, consolidation, re-enactment or extension of it.

“Acquiring Company”	a company which obtains control of the Company in accordance with Rule 6.5
“the Auditors”	the auditors (acting as experts not arbitrators) for the time being of the Company or in the event of there being joint auditors such one of them as the Directors shall select;
“the Company”	Solexa Limited;
“Conditional Exercise Notice”	a notice in the form set out in Schedule 1 to these rules or in such other form as the Directors may determine;
“Control”	the meaning given to that expression by Section 840 of the Taxes Act;
“Date of Adoption”	the date of the adoption of this Plan by the Company;
“Date of Announcement”	the date on which the Company makes an announcement of its results for the last preceding financial year, half year or other period;

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“Date of Grant”	the date upon which the Directors issue an Option Certificate in accordance with Rule 2.3;
“Directors”	the directors for the time being of the Company or the directors present at a duly convened meeting of the board of directors or of a duly appointed committee of the board of directors at which a quorum is present including, without limiting the generality of the foregoing, the Remuneration Committee;
“Eligible Employee”	any person who at the Date of Grant, is either a director of the Company and/or any Subsidiary and is required to devote to his duties not less than 25 hours per week (excluding meal breaks), or any employee of the Company and/or any Subsidiary who is not a director;
“Employees’ Share Scheme”	any employees’ share scheme within the meaning of Section 743 of the Companies Act 1985;
“Exercise Condition”	an objective condition precedent to the exercise of an Option imposed in accordance with Rule 2.2;
“Exchange”	the grant of an Option (“a New Option”) in consideration for the release of any option over shares in another company (“the Target Company”) granted under another discretionary share option scheme in circumstances where the Company or any Subsidiary obtains Control of the Target Company or becomes bound or entitled to acquire shares in the Target Company under sections 428 to 430F of the Companies Act 1985;

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“Group Member”	a Participating Company or a body corporate which is (within the meaning of Section 736 of the Companies Act 1985) the Company’s holding company or a Subsidiary of the Company’s holding company or any other body corporate nominated by the Board for this purpose which is not under the Control of any single person, but is under the Control of two or more persons, one of whom being the Company or the Company’s holding company and in relation to which the Company, or as the case may be, the Company’s holding company is able (whether directly or indirectly) to exercise 20% or more of its equity voting rights;
“Issue or Re-organisation”	any capitalisation, consolidation or sub-division or reduction of share capital in the Company and/or any other variation in the share capital of the Company which in the opinion of the Directors justifies a variation in the number of shares subject to an Option and/or the Option Price pursuant to that Option;
“Market Value”	such value per share, in relation to which an Option is to be granted, as the Company may consider to be the market value thereof on the day preceding the relevant Date of Grant and determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992;
“Option”	a right granted to acquire Shares in the Company;
“Option Certificate”	a certificate issued to an Option Holder in accordance with Rule 2.3;

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“Option Holder”	a person holding an Option;
“Option Price”	the acquisition price for a Share comprised in any Option which shall be determined by the Directors and, subject to Rule 7, shall be not less than the higher of:-
	(i)	in the case of an option to acquire Shares by subscription the nominal value of a Share; and
	(ii)	subject to (i) above and Rule 7 the Market Value of a Share;
	(iii)	subject to (i) above such other value as the Directors in their absolute discretion may determine;
“Participating Company”	the Company and any Subsidiary which is for the time being nominated by the Directors to be a company participating in this Plan;
“this Plan”	the Solexa Unapproved Company Share Option Plan established by these Rules in its present form or as from time to time amended in accordance with the provisions hereof;
“Redundancy”	dismissal by reason of redundancy for the purposes of Part XI of the Employment Rights Act 1996 and the term Redundant shall be construed accordingly;
“the Remuneration Committee”	The remuneration committee of the board of Directors;

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“Retirement”	retirement by an Eligible Employee on reaching the age of 65 or such other date at which it is agreed with the Group Member by which he is employed that such Eligible Employee may retire;
“Shares”	ordinary shares in the Company of 0.25 pence each or as the context may require shares for the time being representing the same whether in consequence of any Issue or Reorganisation or otherwise;
“Sale”	the acquisition by any person or by persons who in relation to each other are connected persons or acting in concert within the meaning of the City Code of such number of shares in the Company as confer in aggregate more than 50% of the total voting rights conferred by all the shares in the capital of the Company for the time being in issue and conferring the right to vote at all general meetings of the Company and a Sale shall be treated as having taken place when an unconditional legally binding agreement for the Sale has been signed or when a conditional legally binding agreement for the Sale becomes unconditional.
“Subsidiary”	a company which is both under the Control of the Company and which is a subsidiary of the Company within the meaning of Section 736 of the Companies Act 1985;
“Vest”	the time when an Option Holder can exercise the Option over a specified percentage of Shares subject

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	to Rules 3.1 and 4.1 and the terms “Vested” and “Vesting” shall be construed accordingly provided always that on the cessation of an Option Holder’s employment he shall continue to have a right of exercise to the extent that the Option has vested at that date;
“the Taxes Act”	the Income and Corporation Taxes Act 1988;
“Year of Assessment”	a fiscal year from 6th April to 5th April;

1.2	In these Rules unless the context otherwise requires words denoting the singular number shall include the plural number and words denoting the masculine gender shall include the feminine gender.
2.	Participation
2.1	The Directors may, on such dates as they shall determine grant Options to such Eligible Employees as they may in their absolute discretion select. No Eligible Employee shall be entitled as of right to participate in this Plan. In determining the extent of participation of an Eligible Employee the Directors shall be subject to the limits contained in Rule 3.
2.2	The Directors may impose an Exercise Condition which has been approved by the majority of the shareholders of the Company on any Option which they grant preventing its exercise unless such condition has been complied with. If, after the Directors have imposed an Exercise Condition, events happen which cause them to consider that it is no longer appropriate they may vary the Exercise Condition provided always that any such amendment may only be one which the Directors reasonably consider will result in a fairer measure of the performance of the job of the Option Holder, will ensure that this Plan operates more effectively in the achievement of its purpose of providing share benefits for employees who contribute to the prosperity of the Company, and will be no more difficult to satisfy than would have been the case if there had been no such amendment.

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2.3	The Directors shall grant Options by resolution. As soon as practicable thereafter, the Directors shall issue in respect of each Option granted as aforesaid an Option Certificate given under seal or executed as a deed. The date of issuing such Option Certificate given under seal or executed as a deed shall be taken for all purposes of this Plan as the Date of Grant in respect of the relevant Option. No payment to the Company shall be required on the grant of an Option. The Option Certificate shall be in such form as the Directors shall from time to time determine and shall specify the number of Shares comprised in the Option, the Date of Grant, any Exercise Condition and the Option Price.
2.4	Any Eligible Employee to whom an Option is granted may by notice given in writing renounce his rights thereto or otherwise release his Option in whole or in part, in which event such Option shall be deemed for all purposes never to have been granted to the extent of such renunciation or release and the Company will provide the Option Holder with a balance option certificate in respect of that part of the Option which has not been renounced or released as the case may be.
2.5	Each Option shall be personal to the Option Holder to whom it is granted and other than a transfer to the Option Holder’s personal representatives on death shall not be transferable, assignable or chargeable. Any other purported transfer, assignment, charge, disposal or dealing with the rights and interests of the Option Holder under this Plan shall render the Option void.
2.6	The aggregate number of shares which may be issued on the exercise of Options granted on any day in the period of 10 years commencing on the Date of Adoption shall not, when added to the aggregate of:-

2.6.1	the total number of shares issued or remaining issuable in respect of Options granted under this Plan in the 10 years preceding that day; and
2.6.2	the total number of shares issued or remaining issuable in respect of any other employee share scheme adopted by the Company or any Subsidiary or in respect of an Exchange in the 10 years preceding that day,

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	exceed such number as represents 25% of the issued ordinary share capital of the Company immediately prior to that day.
2.7	In applying the limits contained in Rules 2.6 no account will be taken of shares subject to an option or Option which, as regards any right to acquire such shares has lapsed or been released, surrendered or cancelled.
2.8	No Options shall in any event be granted or otherwise offered more than 10 years after the Date of Adoption.
3.	Rights to exercise options
3.1	Subject to the provisions of Rules 3.2, 3.3, 5 and 6 an Option shall be capable of being exercised to the extent that it has Vested in accordance with the provisions of the Option Certificate before the tenth anniversary of its Date of Grant provided that any relevant Exercise Condition has been satisfied, unless the Rules provide otherwise.
3.2	If an Option Holder ceases to be a director or employee of a Group Member (otherwise than by reason of his death), the Option may be exercised before the tenth anniversary of the Date of Grant pursuant to Rule 3.1 above to the extent that it has Vested at the date of cessation and to the extent that the Option has not Vested it shall lapse, unless there has been a breach by the Option Holder of the Option Holder’s employment contract or any confidentiality agreement between the Option Holder and any Group Member, in which event the Option may not be exercised at all and shall lapse in its entirety on the earlier of the date of cessation of employment or the date of the breach.
	An Option Holder shall not be treated for the purposes of Rule 3.2 above as ceasing to be a director or employee of a Group Member until such time as he is no longer a director or employee of any Group Member.
3.3	If an Option Holder dies before exercising an Option granted to him under this Plan at a time when he is otherwise entitled to exercise the Option, the Option may to the extent it has Vested be exercised by his personal representatives within 12 months after the date

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	of his death or within such longer period as the directors may in their absolute discretion allow and to the extent that the Option has not Vested it shall lapse.
3.4	Notwithstanding any other provision of this Plan, an Option granted under this Plan may not be exercised after the expiry of the period of 10 years (or such shorter period as the Directors may have determined before the grant thereof) beginning with the Date of Grant.
4.	Exercise of options
4.1	Options may be exercised in whole or in part.
4.2	The exercise of any Option granted under this Plan shall be effected by giving notice to the Company and otherwise in such form and manner as the Directors may from time to time prescribe and, unless the Directors determine otherwise, any such notice shall have effect only on receipt by the Company, together with the appropriate payment.
4.3	Subject to Rule 4.4 below, within 30 days after an Option under this Plan has been exercised by any person, the Directors on behalf of the Company shall allot to him (or his nominee) or, as appropriate, procure the transfer to him (or his nominee) of the number of Shares in respect of which the Option has been exercised, provided that, for the avoidance of doubt, where Shares are so allotted or transferred to a nominee, the beneficial interest in them must vest in the person who exercised the Option.
4.4	All Shares allotted under this Plan shall rank pari passu in all respects with the Shares of the same class for the time being in issue save as regards any rights attaching to such Shares by reference to a record date prior to the date of the allotment, and in the case of the transfer of existing Shares, the transferee shall not acquire any rights attaching to such shares by reference to a record date prior to the date of the transfer.
4.5	The personal representatives of a deceased Option Holder may not exercise an Option if the Option Holder was precluded from doing so at the time of his death.

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4.6	The allotment or transfer of any Shares under this Plan shall be subject to obtaining any approval or consent mentioned in Rule 10.4 below.
4.7	In the event of a partial exercise, the Company shall, within 30 days of the partial exercise, issue to the Option Holder a new option certificate showing the balance of the Option and a new form of exercise of that balance.
5.	Take-overs, reconstructions and winding-up
5.1	If any application is made to the Court under section 425(1) of the Companies Act 1985 a meeting in relation to a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Directors may permit any Option granted under this Plan, subject to compliance with any Exercise Condition and to Rules 3.2, 3.3, and 3.4 above, to be exercised until the time of the meeting, such exercise being conditional upon the Court sanctioning such compromise or arrangement.
5.2	If any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if under section 425 of that Act the Court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Directors shall forthwith notify every Option Holder (or as the case may be his personal representatives) thereof and any Option granted under this Plan may, subject to Rules 3.2, 3.3, and 3.4 above and (in any case where any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985) to compliance with any Exercise Condition, be exercised within one month of such notification, but to the extent that it is not exercised within that period shall (notwithstanding any other provision of this Plan and notwithstanding that such Option did not become exercisable during the period) lapse on the expiry thereof.

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5.3   If an Acquiring Company:-

5.3.1	obtains Control of the Company as a result of making:
5.3.1.1	a general offer or otherwise to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have Control of the Company, or
5.3.1.2	a general offer or otherwise to acquire all the shares in the Company which are of the same class as the Shares which may be acquired by the exercise of Options granted under this Plan, or
5.3.2	obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985, or
5.3.3	becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of that Act,

any Option Holder may at any time within such period as the Acquiring Company shall specify, by agreement with the Acquiring Company, release any Option granted under this Plan which has not lapsed (“the Old Option”) in consideration of the grant to him of an option (“the New Option”) which is equivalent to the Old Option but relates to shares in a different company (whether the Acquiring Company itself or some other company).

5.4

The New Option shall be regarded for the purposes of Rule 5.3 above as equivalent to the Old Option, but so that the provisions of this Plan shall for this purpose be construed as if:

5.4.1   the New Option were an option granted under this Plan at the same time as the Old Option;

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5.4.2	except for the purposes of the definitions of “Group Member”, “Participating Company” and “Subsidiary” in Rule 1.1 above and the reference to “the Directors” in Rule 3.4 above, the expression “the Company” were defined as “a company whose shares may be acquires by the exercise of Options granted under this Plan;
5.4.3	Rule 11.2 below were omitted; and
5.4.4	all Exercise Conditions have been satisfied.

5.5	In the event that a New Option is granted pursuant to Rule 5.4 above and the Option Holder is made Redundant within twelve months of the Acquiring Company obtaining Control of the Company the Option Holder may exercise any Option held by him in full within twelve months of ceasing to be a director or employee of a Group Member.
5.6	In the event that an Acquiring Company does not agree to the release of Old Options and the grant of New Options pursuant to Rule 5.3 above and otherwise on terms which, in their absolute discretion, are acceptable to the Directors, every Option Holder shall be entitled to exercise any Option granted up to a maximum of 50% of the total number of Shares under Option in addition to the Shares which may be acquired pursuant to Rule 6 below but provided that the total number of Shares which may be acquired pursuant to Rules 5.6 and 6 shall not exceed the total number of Shares which are the subject of any Option granted.
6.	Exercise of the Option — Sale
6.1	Subject to Rules 3.1 and 10.4 in the event of a Sale the Option may be exercised in accordance with the following provisions of this Rule 6 immediately before the Sale and only if the Option Holder agrees immediately to sell all the Shares acquired as a result of the exercise of the Option to the Purchaser at the same price per Share as is accepted by the other shareholders of the Company and insofar as the Option is not exercised in full it shall lapse and cease to be exercisable immediately after the Sale takes place.

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6.2	An Option granted under this Plan may be exercised pursuant to this Rule 6 to the extent that it has Vested (including in addition any further proportion which is exercisable by virtue of Rule 5.6), within six months (or such longer period as the Directors may permit) of such notification.
6.3	The Directors shall give notice in writing to the Option Holders before a Sale takes place specifying:

6.3.1	that negotiations are proceeding for a Sale;
6.3.2	details of the price per share which the prospective purchaser is offering at the time the notice is given;
6.3.3	the period during which the Option must be exercised;
6.3.4	whether the Acquiring Company will provide a New Option as provided in Rules 5.3 and 5.4; and
6.3.5	the number of shares over which the Option Holder may exercise the Option pursuant to Rule 6.2.

6.4	Any notice given by the Directors to the Option Holders in accordance with Rule 6.3 shall be given in sufficient time before a binding agreement for the Sale (whether conditional or unconditional) is signed to allow the Option Holders an opportunity to exercise their Options, being at least 5 business days before the date on which such agreement is signed.
6.5	Any Option Holder who intends to exercise his Option immediately before the Sale shall within the period specified by the Directors serve a Conditional Exercise Notice on the Company specifying:

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6.5.1	the number of Shares over which the Option Holder wishes to exercise his Option (which shall not in any event exceed the number of Shares in respect of which that Option subsists); and
6.5.2	the minimum price (if any) at which the Option Holder is prepared to sell the Shares which he will acquire on the exercise of the Option to the Purchaser.

6.6	A Conditional Exercise Notice given in accordance with Rule 6.5 may not be withdrawn.
6.7	Subject to Rule 6.10 the service of a Conditional Exercise Notice in accordance with Rule 6.5 shall constitute the Company the Option Holder’s agent for the sale of all the Shares specified in the Conditional Exercise Notice to the Purchaser on terms which are no less favourable than the terms on which the shares are acquired by the Purchaser from the other shareholders of the Company provided that the price at which the Company shall sell the Shares as agent for the Option Holder shall not be less than the price specified in the Conditional Exercise Notice or, if no price is specified, shall exceed the Exercise Price.
6.8	If the Company is able to sell the Shares to the Purchaser in accordance with Rule 6.7 the Directors may appoint any person nominated by them to be the attorney of an Option Holder to sign any agreement and to complete, execute and deliver in the name of and on behalf of the Option holder any stock transfer form and any other documents necessary to transfer the Shares over which the Option is exercised to the Purchaser against payment of the purchase money or other consideration to the Company.
6.9	The Company may receive the purchase money or other consideration on behalf of an Option Holder and give a valid discharge to the Purchaser for it. The Company shall be entitled to deduct and retain out of the purchase money such amounts as may be required to meet any liability of the Option Holder pursuant to rule 10.5 and in the event that non cash consideration is received for the Sale the Company shall be entitled to sell such proportion of the non cash consideration as shall be required to meet the Option Holder’s liability under Rule 10.5.

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6.10	Subject to Rule 6.9 above the Company will pay the purchase money or transfer the non cash consideration received by it in respect of the Sale of an Option Holder’s Shares to the Option Holder as soon as reasonably practicable following receipt.
6.11	A Conditional Exercise Notice served in accordance with Rule 6.5 shall not constitute a valid exercise of an Option unless:

6.11.1	there is a Sale; and
6.11.2	the agreement for the Sale provides for a consideration for the Sale of at least the price per Share specified by the Option holder in the Conditional Exercise Notice or if no such price is specified a price exceeding the Exercise Price

	and if and only if the conditions in Rules 6.10.1 and 6.10.2 are satisfied the Option shall be deemed to have been exercised immediately before the time that a Sale takes place.
6.12	If a Conditional Exercise Notice has been served by an Option Holder but has failed to constitute a valid exercise of an Option, the Company shall repay any monies paid by the Option Holder as the Exercise Price for the Option as soon as reasonably practicable after the Directors become aware that the Sale will not proceed or, if a Sale takes place, as soon as reasonably practicable after the Sale.
7.	Adjustment of options for variation of share capital
7.1	Subject to Rules 7.3 and 7.4 below, on the occurrence of an Issue or Re-organisation the Directors may make such adjustment as it considers appropriate under Rule 7.2.
7.2	An adjustment made under this sub-rule shall be to one or more of the following:-

7.2.1	the number of Shares in respect of which any Option granted under this Plan may be exercised;
7.2.2	the price at which Shares may be acquired by the exercise of any such Option;

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7.2.3   where any such Option has been exercised but no Shares have been allotted or transferred pursuant to such exercise, the number of Shares which may be so allotted or transferred and the price at which they may be acquired.

7.3	Except in the case of a capitalisation issue, no adjustment under Rule 7.2 above shall be made without the prior confirmation in writing by the Auditors that it is in their opinion fair and reasonable.
7.4	An adjustment under Rule 7.2 above may have the effect of reducing the price at which Shares may be acquired by the exercise of an Option to less than their nominal value, but, in the case of an Option to acquire Shares by subscription, only if and to the extent that the Directors shall be authorised to capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the Shares in respect of which the Option is exercised and which are to be allotted pursuant to such exercise exceeds the price at which the same may be subscribed for and to apply such sum in paying up such amount on such Shares; and so that on exercise of any Option in respect of which such reduction shall have been made the Directors shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid.
7.5	As soon as reasonably practicable after making any adjustment under Rule 7.2 above, the Directors shall give notice in writing thereof to any Option Holders affected thereby.
8.	Expenses
	Any expenses of the Company involved in any issue or transfer of shares in the name of any Option Holder or his personal representative(s) or nominee(s) shall be payable by the Company.
9.	Administration
9.1	Any notification or other notice in writing which the Company is required to give, or may desire to give, to any Eligible Employee or Option Holder (or his personal representative(s)) in pursuance of this Plan shall be sufficiently given if delivered to him

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	by hand or sent through the post in prepaid cover addressed to the Eligible Employee or Option Holder (or his personal representative(s)) at the last address known to the Company as being his address. Any certificate, notification or other notice in writing required to be given to the Company shall be properly given if sent to or delivered to the Company at its registered office. Any notification, certificate or other notices sent by post shall be deemed delivered on the second day following the date of posting. All notices documents certificates given by or to an Eligible Employee or Option Holder (or his personal representative(s)) shall be sent at his risk.
9.2	Option Holders (or their personal representative(s)) shall have made available to them copies of all notices and other documents sent by the Company to its holders of shares generally.
10.	General
10.1	The Directors shall at all times ensure that there are sufficient Shares available as may be required to meet the subsisting rights of Option Holders by either ensuring that the Company shall at all times keep available for allotment unissued Shares at least sufficient to satisfy Options under which Shares may be subscribed for and/or to procure that sufficient Shares are available for transfer to satisfy Options.
10.2	The decision of the Directors in any dispute or question relating to any Option shall be final and conclusive, subject to the written confirmation of the Auditors whenever required under the provisions of this Plan.
10.3	Participation in this Plan by an Option Holder is a matter entirely separate from any pension right or entitlement he may have and from his terms or conditions of employment with any Group Member and participation in this Plan shall in no respects whatever affect in any way an Option Holder’s pension rights or entitlement or terms or conditions of employment with any Group Member. In particular (but without limiting the generality of the foregoing words) any Option Holder who leaves employment with any Group Member shall not be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under this Plan which he might otherwise have

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	enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or breach of contract or by way of compensation for loss of office or otherwise howsoever.
10.4	In the event that the Company is admitted to the Official List of the London Stock Exchange or becomes listed on the Alternative Investment Market any subsequent grant or exercise of an Option shall be subject to obtaining any approval or consent required under the provisions of the Listing Rules published by the UK Listing Authority, of the City Code on Takeovers and Mergers, or of any regulations and enactments.
10.5	If the Company or any Participating Company is required to account for any amount of tax, duties or social security contributions (including primary Class 1 and secondary Class 1 National Insurance Contributions) as a result of the grant, exercise or release of an Option granted to an Eligible Employee, the Option Holder shall reimburse the Company or the Participating Company, as the case may be, in respect of the amount of tax, duties and social security contributions (including primary Class 1 and secondary Class 1 National Insurance Contributions) accounted for forthwith and in any event no later than 21 days from the date of grant or exercise of the Option, as the case may be. The Company shall have the right to retain such number of Shares and to sell the same as may be required to meet the Option Holder’s liabilities pursuant to this Rule 10.5.
11.	Alterations
11.1	Subject to Rules 11.2, 11.4 and 11.5 below, the Directors may at any time alter or add to all or any of the provisions of this Plan, or the terms of any Option granted under it, in any respect.
11.2	Subject to Rule 11.3 below, no alteration or addition to the advantage of Option Holders shall be made under Rule 11.1 above without the prior approval by ordinary resolution of the members of the Company in general meeting.
11.3	Rule 11.2 above shall not apply to any alteration or addition which is minor in nature and:-

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11.3.1	is necessary or desirable in order to comply with the provisions of any proposed or existing legislation, or to obtain or maintain favourable taxation, exchange control or regulatory treatment of any Participating Company, Group Member or Option Holder, and is not made to Rule 3 above or
11.3.2	is made to benefit the administration of this Plan.

11.4   No alteration or addition to the disadvantage of any Option Holder shall be made under Rule 11.1 above unless:-

11.4.1	the Directors shall have invited every relevant Option Holder to give an indication as to whether or not he approves the alteration or addition, and
11.4.2	the alteration or addition is approved by a majority of those Option Holders who have given such an indication.

11.5	As soon as reasonably practicable after making any alteration or addition under Rule 11.1 above, the Directors shall give notice in writing thereof to any Option Holder affected thereby.
11.6	No alteration shall be made to this Plan if it would thereby cease to be an Employees’ Share Scheme.
12.	Inland Revenue Requests
	The Company shall provide to the Inland Revenue (within such time limit as the Inland Revenue directs) any information required by it and an Option Holder shall:-
12.1	promptly provide to the Company such information as it may reasonably request; and
12.2	consent to the Company providing such information concerning him to the Inland Revenue for the purpose of complying with such request from the Inland Revenue.

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13.	Termination
	The Company in general meeting or the Directors may at any time resolve to terminate this Plan in which event no further Options shall be granted, but the provisions of this Plan shall in relation to Options then subsisting continue in full force and effect.

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SCHEDULE 1

THE SOLEXA UNAPPROVED COMPANY SHARE OPTION PLAN

To:	Company Secretary
	Solexa Limited

1.   I hereby exercise the Option granted to me on (insert date of grant) in respect of [all/      r ]* of the Shares over which the Option subsists upon condition that the following events occur;

1.1	there is a Sale
1.2	the agreement for the Sale provides that the consideration for the Sale will be the payment by the Purchaser of at least the price per Share specified in 2 below or, if no such price is specified, the Option Price.

2.	I hereby appoint the Company as my agent to sell the Shares specified in this notice for a price per Share [of at least £ /exceeding the Option Price]** and I appoint such person as the Directors may nominate to be my attorney to sign any agreement to effect such sale and to complete, execute and deliver in my name and on my behalf any stock transfer form and any other documents necessary to transfer the Shares specified in 1 above to the Purchaser.
3.	I enclose a cheque made payable to Solexa Limited in the sum of £ being the aggregate Option Price of such Shares.
4.	I execute and deliver this document as a Deed in the presence of the witness specified below.

Name:

Address:

Signature

Witness name:

Witness address:

Witness signature:

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Notes:
1.	This form must be accompanied by payment of the Option Price for the Shares in respect of which the Option is exercised.
2.	Where the Option is exercised by personal representatives, an office copy of the Probate or Letters of Administration should accompany the form.
3.	The form must be signed in the presence of a witness who should not be related to you.
4.	IMPORTANT. The Company does not undertake to advise you on the tax consequences of exercising your Option. If you are unsure of the tax liabilities which may arise, you should take appropriate professional advice before exercising your Option.
*	Delete/insert number as appropriate
**	Delete/insert purchase price as appropriate

SIGNED (but not delivered until the Date of Sale)	)
as a deed by	)
in the presence of:	)

Witness signature:

Witness name:

Witness occupation:

Witness address:

EXECUTED (but not delivered until the Date of Sale	)
as a deed by Solexa Limited	)
acting by	)

Director

Director/Secretary

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EX-99.4

Exhibit 99.4

SOLEXA LIMITED

ENTERPRISE MANAGEMENT INCENTIVE
(“EMI”)
PLAN

SCHEDULE
PLAN RULES

(Adopted by the Company on 22 May 2002)

Contents

1.	Definitions and interpretation
2.	Participation
3.	Individual limits
4.	Rights to exercise options
5.	Exercise of options
6.	Takeovers, reconstructions and winding up
7.	Exercise of the option – Sale
8.	Adjustment of options for variation of share capital
9.	Expenses
10.	Administration
11.	General
12.	Inland Revenue requests
13.	Amendments

THE RULES OF THE SOLEXA LIMITED

ENTERPRISE MANAGEMENT INCENTIVE PLAN

1.

Definitions

1.1

In this Plan, the following words and expressions set out below shall have the meanings specified against them unless otherwise specifically provided and any reference to a provision of an Act of Parliament shall include any modification, consolidation, re-enactment or extension of it and, unless the context otherwise requires, words in the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine and vice versa.

“Acquiring Company”	a company which obtains control of the Company pursuant to Rule 6;
“the Agreement”	the agreement in writing granting an EMI Option pursuant to this Plan entered into by an Eligible Employee and the Company in such form as the Directors shall from time to time determine and which (in the case of an EMI Option) complies with paragraph 40 of Schedule 14;
“Auditors”	the auditors (acting as experts not arbitrators) for the time being of the Company or in the event of there being joint auditors such one of them as the Directors shall select;
“Committed Time”	the meaning given in paragraph 29 of Schedule 14;
“the Company”	Solexa Limited;
“Company Limit”	the limit specified in paragraph 11 of Schedule 14 from time to time;
“Conditional Exercise Notice”	a notice set out in the Schedule to these Rules or in such other form as the Directors shall decide;
“Connected Person”	the meaning given by Section 839 of the Taxes Act;

“Control”	the meaning given by Section 840 of the Taxes Act;
“Date of Adoption”	the date of adoption of this Plan by the Company;
“Date of Grant”	the date on which an Option is granted as evidenced by the Agreement;
“Directors”	the directors for the time being of the Company or the directors present at a duly convened meeting of the board of directors or of a duly appointed committee of the board of directors at which a quorum is present including, without, limiting the generality of the foregoing, the Remuneration Committee;
“Disqualifying Event”	an event specified in paragraphs 47 to 52 inclusive of Schedule 14 which causes an EMI Option to cease to satisfy the requirements of Schedule 14;

“Eligible Employee”	an individual:
	(a)	who is a bona fide employee of the Company or a Qualifying Subsidiary;
	(b)	whose Committed Time is at least 25 hours per week, or, if less, 75% of his Working Time; and
	(c)	who is not precluded from such participation by paragraphs 30 to 36 inclusive of Schedule 14 (no material interest);

“EMI Option”	an Option which is a qualifying option within the meaning given in paragraph 1 of Schedule 14;
“Employer Company”	the Company by reference to whose employment the Committed Time requirement is met by the Eligible Employee;
“Excluded Person”	any shareholder in the Company at the date of adoption of this Plan or any person connected or company associated (within the meaning of Sections 839 and 416, respectively, of the Taxes Act) with such persons;
“Exercise Condition”	an objective condition precedent to the exercise of an EMI Option

imposed in accordance with Rule 4;

“Exercise Price”	the price determined by the Directors at which each Share subject to an EMI Option may be acquired (subject to Rule 11 - variation of share capital) and either:
	(a)	specified at the Date of Grant; or
	(b)	to be determined at a later date by reference to a formula specified at the Date of Grant,
	provided that if Shares are to be subscribed, it may not be less than the nominal value of a Share;

“Group Member”	a Participating Company or a body corporate which is (within the meaning of Section 736 of the Companies Act 1985) the Company’s holding company or a Subsidiary of the Company’s holding company or any other body corporate nominated by the Board for this purpose which is not under the control of any single person but is under the Control of two or more persons, one of whom being the Company or the Company’s holding company and in relation to which the Company, or as is the case may be, the Company’s holding company is able (whether directly or indirectly) to exercise 20% or more of its equity voting rights;
“Individual Limit”	the limit specified in Rule 4 on the value of Shares in respect of which EMI Options or other options may be granted to Eligible Employees;
“Issue or Re-Organisation”	any capitalisation, consolidation or sub-division or reduction of share capital in the Company and/or any other variation in the share capital of the Company which in the opinion of the Directors justifies a variation in the number of shares subject to an Option and/or the Option price pursuant to that Option;
“Market Value”	on any day the market value of a Share determined in accordance with paragraphs 10 and 66 of Schedule 14:

“Option”	a right to acquire Shares pursuant to this Plan being either an EMI Option or an Unapproved Option;
“Optionholder”	a person holding an Option;
“Participating Company”	the Company and any Subsidiary which is for the time being nominated by the Directors to be a company participating in this Plan;
“this Plan”	the Solexa Limited Enterprise Management Incentive Plan, as amended from time to time;
“Qualifying Exchange of Shares”	the meaning given in paragraph 60 of Schedule 14;
“Qualifying Subsidiary”	the meaning given in paragraph 15 of Schedule 14;
“Redundancy”	dismissal by reason of redundancy for the purposes of Part XI of the Employment Rights Act 1996 and the term Redundant shall be construed accordingly;
“Remuneration Committee”	the remuneration committee of the board of Directors;
“Retirement”	retirement by an Eligible Employee on reaching the age of 65 or such other date at which it is agreed with the Group Member by which he is employed that such Eligible Employee may retire;
“Shares”	ordinary shares in the Company of 0.25 pence, each of which is fully paid up and non-redeemable within the meaning of paragraph 38 of Schedule 14 or as the context may require shares for the time being representing the same whether in consequence of any Issue or Reorganisation or otherwise;
“Sale”	the acquisition by any person or by persons (other than an Excluded Person) who in relation to each other are connected or are acting in concert within the meaning of the City Code of Takeovers and Mergers

	of such number of shares in the Company as confer in aggregate more than 50% of the total voting rights conferred by all the shares in the capital of the Company for the time being in issue and conferring the right to vote at all general meetings of the Company and a Sale shall be treated as having taken place when an unconditional legally binding agreement for the Sale has been signed or when a conditional legally binding agreement for the Sale becomes unconditional;
“Schedule 14”	Schedule 14 to the Finance Act 2000;
“Subsidiary”	any company which the Company Controls (on its own or together with any Connected Person);
“Subsisting Option”	any Option which has not lapsed or surrendered or been exercised;
“Taxes Act”	the Income and Corporation Taxes Act 1988;
“Unapproved Option”	an Option which at the Date of Grant is not an EMI Option;
“Vest”	the time when an Optionholder can exercise the Option over a specified percentage of Shares subject to Rules 4.1 and 5.1 and the terms, “Vested” and “Vesting” shall be construed accordingly;
“Working Time”	the meaning given in paragraph 29 of Schedule 14;

2	Participation
2.1	Subject to Rule 2.4, the Directors may, on such dates as they shall determine grant Options to such Eligible Employees as they may in their absolute discretion select. No Eligible Employee shall be entitled as of right to participate in this Plan. In determining the extent of participation of an Eligible Employee the Directors shall be subject to the limits contained in Rule 3.

2.2

The Directors may impose an Exercise Condition which has been approved by the majority of the shareholders of the Company on any Option which they grant preventing its exercise unless such condition has been complied with. If, after the Directors have imposed an Exercise Condition, events happen which cause them to consider that it is no longer appropriate they may vary the Exercise Condition provided always that any such amendment may only be one which the Directors reasonably consider will result in a fairer measure of the performance of the job of the Optionholder, will ensure that this Plan operates more effectively in the achievement of its purpose of providing share benefits for employees who contribute to the prosperity of the Company, and will be no more difficult to satisfy than would have been the case if there had been no such amendment.

2.3

The Directors shall grant Options. As soon as practicable after the Directors decide to grant an Option to an Eligible Employee the Directors and the Eligible Employee shall enter into an enforceable Agreement in a form determined by the Directors from time to time which shall state:

(a)	the Date of Grant of the Option;
(b)	that the Option is an EMI Option or an Unapproved Option (as the case may be);
(c)	(in respect of an EMI Option) that the Option is granted under the provisions of Schedule 14;
(d)	the number, or maximum number, of Shares that may be acquired;
(e)	the Exercise Price payable for each Share subject to the Option or the method by which that price is to be determined;
(f)	any conditions or dates imposed by the Directors pursuant to Rules 2 and 4; and
(g)	when and how the Option may be exercised,

and in the case of an EMI Option such Agreement shall include any other details required pursuant to paragraph 40 of Schedule 14.

2.4   The Directors may grant an EMI Option to an Eligible Employee only if all of the following conditions are satisfied at that time:

(a)	the Directors have satisfied themselves that it is being granted for commercial reasons in order to recruit or retain an employee and not as part of a plan or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax;
(b)	The total Market Value of Shares in the Company in respect of which unexercised EMI Options subsist, shall not exceed £3 million or such other value as shall be specified at that time in paragraph 11 of Schedule 14;
(c)	the Company or a Group Company as the case may be meets the trading activities requirement of paragraph 17 of Schedule 14;
(d)	the gross assets of the Company do not exceed £30 million (or such other amount as may at that time be specified in paragraph 15 of Schedule 14). For these purposes “gross assets” means:

(i)	the sum of all the fixed and current assets of the Company; or
(ii)	if the Company is a member of a group of companies, the sum of the fixed and current assets of all the Group Companies excluding any member’s rights against, or shares in or securities of, another Group Company).

	determined in accordance with Inland Revenue Statement of Practice 2/00 or its successors; and
(e)	the qualifying subsidiaries requirement of paragraph 14 of Schedule 14 is satisfied.

2.5   For the purposes of Rule 2.4(b) above, the Market Value of a Share shall be determined in accordance with paragraph 10 of Schedule 14 in respect of the day on which each of the relevant unexercised EMI Options was granted.

2.6	Any Eligible Employee to whom an Option is granted may by notice given in writing renounce his rights thereto or otherwise release his Option in whole or in part, in which event such Option shall be deemed for all purposes never to have been granted to the extent of such renunciation or release and the Company will provide the Optionholder with a balance Agreement in respect of that part of the Option which has not been renounced or released as the case may be.
2.7	Each Option shall be personal to the Optionholder to whom it is granted and other than a transfer to the Optionholder’s personal representatives on death shall not be transferable, assignable or chargeable. Any other purported transfer, assignment, charge, disposal or dealing with the rights and interests of the Optionholder under this Plan shall render the Option void.
2.8	The aggregate number of Shares which may be issued in relation to Options granted on any day in the period of ten years commencing on the Date of Adoption shall not, when added to the aggregate of:

2.8.1	the total number of shares issued or remaining issuable in respect of Options granted under this Plan in the 10 years preceding that day; and
2.8.2	the total number of shares issued or remaining issuable in respect of any other employee share scheme adopted by the Company or any Subsidiary or in respect of an Exchange in the 10 years preceding that day,

	exceed such number as represents 25% of the issued ordinary share capital of the Company immediately prior to that day.
2.9	In applying the limits contained in Rules 2.8 no account will be taken of shares subject to an option or Option which, as regards any right to acquire such shares has lapsed or been released, surrendered or cancelled.

3.	Individual limits
3.1	Any EMI Option granted to an Eligible Employee by the Directors under this Plan shall be limited and take effect so that, immediately following such grant, the aggregate Market Value of:

(a)	all shares in respect of which EMI Options or other options which are qualifying options within the meaning given in paragraph 1 of Schedule 14 are then held by him and granted by reason of his employment with any one or more Group Companies;
(b)	all other shares in respect of which EMI Options or other options which are qualifying options within the meaning given in paragraph 1 of Schedule 14 were granted to him within the preceding three years by virtue of his employment with any one or more Group Companies, whether or not such EMI Options have been exercised or released; and
(c)	all shares in respect of which options were granted to him under a company share option plan approved by the Inland Revenue under Schedule 9 to the Taxes Act by virtue of his employment with the Employer Company or any other Group Company, which options have neither lapsed nor been exercised or released,

	shall not exceed £100,000 or such other amount as may from time to time be specified in paragraph 10 of Schedule 14.
3.2	For the purposes of Rule 3.1, the Market Value of the Shares shall be their Market Value at the date or dates on which the relevant EMI Options or other options or shares were granted or such earlier time or times as may be agreed with the Inland Revenue.
3.3	Where the Directors grants an Option which is in excess of the Individual Limit, the excess shall be an Unapproved Option.
3.4	If an Optionholder has been granted EMI Options in respect of shares whose Market Value is at the relevant Date of Grant equal to the Individual Limit (whether or not they have been exercised or released) any Options granted to him within 3 years of the date on which he was granted his last EMI Option shall be Unapproved Options.

4	Rights to exercise options
4.1	Subject to the provisions of Rules 4.2, 4.3, 4.4, 6 and 7, an Option shall be capable of being exercised to the extent that it has Vested in accordance with the provisions of the Agreement before the tenth anniversary of its Date of Grant provided that any relevant Exercise Condition has been satisfied, unless the Rules provide otherwise.
4.2	If an Optionholder ceases to be a director or employee of a Group Member (otherwise than by reason of his death), the Option may be exercised before the tenth anniversary of the Date of Grant pursuant to Rule 4.1 above, to the extent that it has Vested at the date of cessation and to the extent that the Option has not Vested it shall lapse, unless there has been a breach by the Optionholder of the Optionholder’s employment contract or any confidentiality agreement between the Optionholder and any Group Member, in which event the Option may not be exercised at all and shall lapse in its entirety on the earlier of the date of cessation of employment or the date of the breach.
4.3	If an Optionholder dies before exercising an Option granted to him under this Plan at a time when he is otherwise entitled to exercise the Option, the Option may, to the extent that it has Vested be exercised by his personal representatives within 12 months after the date of his death and to the extent that the Option has not vested it shall lapse.
4.4	(Subject to Rules 4.1 and 4.2, unless and to the extent the Directors in their discretion decide otherwise) an Option may be exercised during the period of 40 days following a Disqualifying Event.
5.	Exercise of options
5.1	Options may be exercised in whole or in part.
5.2	The exercise of any Option granted under this Plan shall be effected by giving notice to the Company and otherwise in such form and manner as the Directors may from time to time prescribe and, unless the Directors determine otherwise, any such notice shall have effect only on receipt by the Company, together with the appropriate payment.

5.3	Subject to Rule 5.4 below, within 30 days after an Option under this Plan has been exercised by any person, the Directors on behalf of the Company shall allot to him (or his nominee) or as appropriate, procure the transfer to him (or his nominee) of the number of Shares in respect of which the Option has been exercised, provided that, for the avoidance of doubt, where Shares are so allotted or transferred to a nominee, the beneficial interest in them must vest in the person who exercised the Option.
5.4	Shares allotted under this Plan shall rank pari passu in all respects with the Shares of the same class for the time being in issue save as regards any rights attaching to such Shares by reference to a record date prior to the date of allotment and in the case of a transfer of existing Shares, the transferee shall not acquire any rights attaching to such Shares by reference to a record date prior to the date of the transfer.
5.5	The personal representatives of a deceased Optionholder may not exercise an Option if the Optionholder was precluded from doing so at the time of his death.
5.6	The allotment or transfer of any shares under this Plan shall be subject to obtaining any approval or consent mentioned in Rule 11.4, below.
6.	Takeovers, Reconstructions And Winding Up
6.1	If the Company gives notice to its shareholders of a meeting in pursuance of any application made to the Court under section 425 of the Companies Act 1985 in relation to a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Directors may permit any Option granted under this Plan, subject to compliance with any Exercise Condition and to Rules 4.2, 4.3, and 4.4, above, to be exercised until the time of the meeting, such exercise being conditional upon the Court sanctioning such compromise or arrangement.
6.2	If any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430 of the Companies Act 1985, or if under section 425 of that Act, the Court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the

reconstruction of the Company or its amalgamation with any other company or companies, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Directors shall forthwith notify every Optionholder (or, as the case may be, his personal representatives) thereof and any Option granted under this Plan may, subject to Rules 4.2, 4.3, and 4.4, above and (in any case where any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430 of the Companies Act 1985) in compliance with any Exercise Condition, be exercised within one month of such notification, but to the extent that it is not exercised within that period shall (notwithstanding the provisions of this Plan and notwithstanding that such Option did not become exercisable during the period) lapse on the expiry thereof.

6.3

If an Acquiring Company:

6.3.1   obtains Control of the Company as a result of making:

(a)	a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have Control of the Company; or
(b)	a general offer to acquire all the shares in the Company which are of the same class as the Shares which may be acquired by the exercise of Options granted under this Plan; or
(c)	obtains Control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985;
(d)	becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985;

any Optionholder may at any time within such period as the Acquiring Company shall specify by agreement with the Acquiring Company release any Option granted under this Plan which has not lapsed (“the Old Option”) in consideration of the grant to him of an option (“the New Option”) which is equivalent to the Old Option but relates to shares in a different company (whether the Acquiring Company itself or some other company).

6.4   A new option shall only qualify as a New Option if the requirements of Rule 6.3 above are met, and:

(a)   the Option is granted to the holder of the Old Option by reason of his employment:

(i)	with the Acquiring Company; or
(ii)	if the Company is a parent company, with the Company or another Group Company;

(b)   at the time of the release of rights under the Old Option, the requirements of:

(i)	paragraph 9 of Schedule 14 (purpose of granting the option); and
(ii)	paragraph 11 of Schedule 14 (maximum value of Options in respect of relevant Company’s Shares);

are met in relation to the New Option;

(c)	at that time, the independence requirement and the trading activities requirement as set out in paragraphs 13 and 17 respectively of Schedule 14 are met in relation to the Acquiring Company;
(d)	at that time, the individual to whom the New Option is granted is an Eligible Employee in relation to the Acquiring Company;
(e)	at that time, the requirements of Part V of Schedule 14 are met in relation to the New Option;
(f)	the total Market Value, immediately before the release, of the Shares which were subject to the Old Option is equal to the total Market Value, immediately after the grant of the Shares in respect of which the New Option is granted; and

(g)   the total amount payable by the Eligible Employee for the acquisition of Shares in pursuance of the New Option is equal to the total amount that would have been payable for the acquisition of Shares in pursuance of the Old Option.

6.5	Unless and to the extent that the Directors in their discretion decide otherwise where an Old Option is released pursuant to Rule 6.3, any conditions imposed pursuant to Rule 4 shall cease to apply forthwith.
6.6	The New Options shall be regarded for the purposes of Rule 6.3 as equivalent to the Old Option, but so that the provisions of this Plan shall be construed as if:

(a)	the New Option were an Option granted under this Plan at the same time as the Old Option;
(b)	save for the definition of “Group Company”, “Participating Company” and “Subsidiary” in Rule 1 and the reference to “the Directors” in Rule 4.4, above, references to “the Company” (including the definition in Rule 1) shall be construed as being references to the Acquiring Company to whose shares the New Option relates;
(c)	all Exercise Conditions have been satisfied.

6.7

In the event that a New Option is granted pursuant to Rule 6.3, above and the Optionholder is made Redundant within 12 months of the Acquiring Company obtaining Control of the Company, the Optionholder may exercise any Option held by him in full within 12 months of ceasing to be a director or employee of a Group Member.

6.8

In the event that an Acquiring Company does not agree to the release of Old Options and the grant of New Options pursuant to Rule 6.3, above, every Optionholder shall be entitled to exercise any Option granted up to a maximum of 50% of the total number of Shares originally under Option at the Date of Grant (as adjusted pursuant to Rule 8) in addition to the Shares which may be acquired pursuant to Rule 7 below, but provided that the total number of Shares which may be acquired pursuant to Rules 6.8 and 7 shall not exceed the total number of Shares which are the subject of any Option granted.

7.	Exercise of the Option – Sale
7.1	Subject to Rules 4.1 and 11.4, in the event of a Sale, the Option may be exercised in accordance with the following provisions of Rule 7 immediately before the Sale and only if the Optionholder agrees to sell immediately all the Shares acquired as a result of the exercise of the Option to the Purchaser at the same price per Share as is accepted by the other shareholders in the Company.
7.2	An Option granted under this Plan may be exercised pursuant to this Rule 7 to the extent that it has Vested (including in addition any further proportion which is exercisable by virtue of Rule 6.8), within six months (or such longer period as the Directors may permit) of any notification pursuant to Rule 7.3 and thereafter shall lapse (subject to Rule 6.3). Any Options which have not Vested or become exercisable pursuant to Rule 6.8 shall (subject to Rule 6.3) lapse following the Sale.
7.3	The Directors shall give notice in writing to the Optionholders before a Sale takes place, specifying:

7.3.1	that negotiations are proceeding for a Sale;
7.3.2	details of the price per share which the prospective purchaser is offering at the time the notice is given;
7.3.3	the period during which the option must be exercised;
7.3.4	whether the Acquiring Company will provide a New Option as provided in Rules 6.3 and 6.4; and
7.3.5	the number of shares over which the Optionholder may exercise the Option pursuant to Rule 7.2.

7.4   Any notice given by the Directors to the Optionholders in accordance with Rule 7.3 shall be given in sufficient time before a binding agreement for the Sale (whether conditional or

unconditional) is signed to allow the Optionholders an opportunity to exercise their Options, being at least 5 business days before the date on which such agreement is signed.

7.5	Any Optionholder who intends to exercise his Option immediately before the Sale shall within the period specified by the Directors serve a Conditional Exercise Notice on the Company specifying the number of Shares over which the Optionholder wishes to exercise his Option (which shall not in any event exceed the number of Shares in respect of which the Option subsists).
7.6	A Conditional Exercise Notice given in accordance with Rule 7.5 may not be withdrawn.
7.7	Subject to Rule 7.10, the service of a Conditional Exercise Notice in accordance with Rule 7.5 shall constitute the Company the Optionholder’s agent for the sale of all the Shares specified in the Conditional Exercise Note to the Purchaser on terms which are no less favourable than the terms on which the shares are acquired by the Purchaser from the other shareholders of the Company provided that the price at which the Company shall sell the Shares as agent for the Optionholder shall not be less than the price specified in the Conditional Exercise Notice or, if no price is specified, shall exceed the Exercise Price.
7.8	If the Company is able to sell the Shares to the Purchaser in accordance with Rule 7.7 the Directors may appoint any person nominated by them to be the attorney of an Optionholder to sign any agreement and to complete, execute and deliver in the name of and on behalf of the Optionholder any stock transfer form and any other documents necessary to transfer the Shares over which the Option is exercised to the Purchaser against payment of the purchase money or other consideration to the Company.
7.9	The Company may receive the purchase money or other consideration on behalf of an Optionholder and give a valid discharge to the Purchaser for it. The Company shall be entitled to deduct and retain out of the purchase money such amounts as may be required to meet any liability of the Optionholder pursuant to Rule 11.5 and in the event that non cash consideration is received for the Sale the Company shall be entitled to sell such proportion of the non cash consideration as shall be required to meet the Optionholder’s liability under Rule 11.5.

7.10	Subject to Rule 7.9 above, the Company will pay the purchase money or transfer the non cash consideration received by it in respect of the Sale of an Optionholder’s Shares to the Optionholder as soon as reasonably practicable following receipt.
7.11	A Conditional Exercise Notice served in accordance with Rule 7.5 shall not constitute a valid exercise of an Option unless there is a Sale.
	If the condition above is satisfied, the Option shall be deemed to have been exercised immediately before the time that a Sale takes place.
8.	Adjustment of options for variation of share capital
8.1	Subject to Rules 8.3 and 8.4 below, on the occurrence of an Issue or Reorganisation the Directors may make such adjustment as they consider appropriate under Rule 8.2.
8.2	An adjustment under this sub-rule shall be one or more of the following:

8.2.1	the number of Shares in respect of which an Option granted under this Plan may be exercised;
8.2.2	the price at which Shares may be acquired by the exercise of any such Option
8.2.3	where any such Option has been exercised but no Shares have been allotted or transferred pursuant to such exercise, the number of Shares which may be so allotted or transferred and the price at which they may be acquired.

8.3	Except in the case of a capitalisation issue, no adjustment under Rule 8.2 above shall be made without the prior confirmation in writing by the Auditors that it is their opinion fair and reasonable.
8.4	An adjustment under Rule 8.2 above, may have the effect of reducing the price at which Shares may be acquired by the exercise of an Option to less than their nominal value, but, in the case of an Option to acquire Shares by subscription, only if and to the extent that the Directors shall be authorised to capitalise from the reserves of the Company a sum equal to

	the amount by which the nominal value of the Shares in respect of which the Option is exercised and which are to be allotted pursuant to such exercise exceeds the price at which the same may be subscribed for and to apply such sum in paying up such amount on such Shares; and so that on exercise of any Option in respect of which such reduction shall have been made the Directors shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid.
8.5	As soon as reasonably practicable after making any adjustment under Rule 8.2 above, the Directors shall give notice in writing thereof to any Optionholders affected thereby.
9.	Expenses
	Any expenses of the Company involved in any issue or transfer of shares in the name of any Optionholder or his personal representative(s) or nominee(s) shall be payable by the Company.
10.	Administration
10.1	Any notification or other notice in writing which the Company is required to give, or may desire to give, to any Eligible Employee or Optionholder (or his personal representative(s)) in pursuance of this Plan shall be sufficiently given if delivered to him by hand or sent through the post in prepaid cover addressed to the Eligible Employee or Optionholder (or his personal representative(s)) at the last address known to the Company as being his address. Any certificate, notification or other notice in writing required to be given to the Company shall be properly given if sent to or delivered to the Company at its registered office. Any notification, certificate or other notices sent by post shall be deemed delivered on the second day following the date of posting. All notices documents certificates given by or to an Eligible Employee or Optionholder (or his personal representative(s)) shall be sent at his risk.
10.2	Optionholders (or their personal representative(s)) shall have made available to them copies of all notice and other documents sent by the Company to its holders of shares generally.
10.3	The Directors shall have power from time to time to make and vary such regulations (not being inconsistent with this Plan) for the implementation and administration of this Plan and/or the Agreement as they think fit.

10.4	The costs of establishing and administering this Plan shall be borne by the Company.
10.5	The Company may, but shall not be obliged to, provide Eligible Employees or Optionholders with copies of any notices circulars or other documents sent to shareholders of the Company.
10.6	Within 92 days (or such longer period as may from time to time be permitted by Schedule 14) of granting an Option under this Plan notice shall be given to the Inland Revenue by the Employer Company and shall contain:

(a)	the information required by the Inland Revenue pursuant to paragraph 2 of Schedule 14;
(b)	a declaration from a director or the Company Secretary of the Employer Company, that in his opinion the requirements of Schedule 14 have been met in relation to an Option under this Plan and that to the best of his knowledge, the information provided is correct and complete; and
(c)	a declaration from the Optionholder to whom the Option is granted that he meets the Committed Time requirement.

11.	General
11.1	The Directors shall at all times ensure that there are sufficient Shares available as may be required to meet the subsisting rights of Optionholders by either ensuring that the Company shall at all times keep available for allotment unissued Shares at least sufficient to satisfy Options under which Shares may be subscribed for and/or to procure that sufficient Shares are available for transfer to satisfy Options.
11.2	The decision of the Directors in any dispute or question relating to any Option shall be final and conclusive, subject to the written confirmation of the Auditors whenever required under the provisions of this Plan.
11.3	Participation in this Plan by an Optionholder is a matter entirely separate from any pension right or entitlement he may have and from his terms or conditions of employment with any

	Group Member and participation in this Plan shall in no respects whatever affect in any way an Optionholder’s pension rights or entitlement or terms or conditions of employment with any Group Member. In particular (but without limiting the generality of the foregoing words) any Optionholder who leaves employment with any Group Member shall not be entitled to any compensation for any loss of any right or benefit or prospective right or benefit under this Plan which he might otherwise have enjoyed whether such compensation is claimed by way of damages for wrongful dismissal or breach of contract or by way of compensation for loss of office or otherwise howsoever.
11.4	In the event that the Company is admitted to the Official List of the London Stock Exchange or becomes listed on the Alternative Investment Market any subsequent grant or exercise of an Option shall be subject to obtaining any approval or consent required under the provisions of the Listing Rules published by the UK Listing Authority, of the City Code on Takeovers and Mergers, or of any regulations and enactments.
11.5	If the Company or any Participating Company is required to account for any amount of tax, duties, or social security contributions (including primary Class 1 and secondary Class 1 National Insurance Contributions) as a result of the grant, exercise or release of an Option granted to an Eligible Employee, the Optionholder shall reimburse the Company or the Participating Company, as the case may be, in respect of the amount of tax, duties and social security contributions (including primary Class 1 and secondary Class 1 National Insurance Contributions) accounted for forthwith and in any event no later than 21 days from the date of grant or exercise of the Option, as the case may be. The Company shall have the right to retain such number of Shares and to sell the same as may be required to meet the Optionholder’s liabilities pursuant to this Rule 11.5
11.6	The Directors may grant an Option subject to the condition that the Optionholder shall enter into a formal agreement to meet the Company’s secondary National Insurance Contributions due on the exercise or release of the Option. For this purpose, the Optionholder may be required, if requested by the Company at any time before the exercise or release of the Option, to enter into an election to transfer liability for such National Insurance Contributions in a form approved by the Inland Revenue and acceptable to the Company and to enter into such arrangements as may be approved by the Inland Revenue in order to secure the transfer of the liability.

11.7	This Plan shall commence upon the date the Directors adopt this Plan and shall terminate on the expiry of the period of ten years from such date. On termination no further Options may be granted but such termination shall be without prejudice to any accrued rights in existence at the date thereof.
11.8	This Plan and all Options granted under it shall be governed by and construed in accordance with English law.
12.	Inland Revenue Requests
12.1	Notwithstanding Rule 13, if the Inland Revenue raise a notice of enquiry pursuant to paragraph 4 of Schedule 14 and conclude that the requirements of Schedule 14 have not been met in relation to this Plan and/or the Agreement (as the case may be) the Directors may alter the Rules of this Plan as may be necessary to ensure that the requirements of Schedule 14 have been met.
12.2	The Company shall provide to the Inland Revenue (within such time limit as the Inland Revenue directs) any information required by it and an Optionholder shall:

(i)	promptly provide to the Company such information as it may reasonably request; and
(ii)	consent to the Company providing such information concerning him to the Inland Revenue for the purpose of complying with such request from the Inland Revenue.

13.	Amendments
13.1	Subject or Rules 13.2, 13.4 and 13.5 below, the Directors may at any time alter or add to all or any of the provisions of this plan, or the terms of any Option granted under it, in any respect.
13.2	Subject to Rule 13.3 below, no alteration or addition to the advantage of Optionholder shall be made under Rule 13.1 above without the prior approval by ordinary resolution of the members of the Company in general meeting.

13.3   Rule 13.2 above, shall not apply to any alteration or addition which is minor in nature and:-

13.3.1	is necessary or desirable in to comply with the provisions of any proposed or existing legislation, or to obtain or maintain favourable taxation, exchange control or regulatory treatment of the Company, and Subsidiary or Optionholder, or
13.3.2	is made to benefit the administration of this Plan.

13.4   No alteration or addition to the disadvantage of any Optionholder shall be made under Rule 13.1 above unless: -

13.4.1	the Directors shall have invited every relevant Optionholder to give an indication as to whether or not he approves the alteration or addition, and
13.4.2	the alteration or addition is approved by a majority of those Optionholder who have given such an indication.

13.5   As soon as reasonably practicable after making any alteration or addition under Rule 13.1 above, the Directors shall given notice in writing thereof to any Optionholder affected thereby.