10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For Quarterly Period Ended March 31, 2002

[   ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from        to

Commission File Number 000-30361

Illumina, Inc.

(Exact name of registrant as specified in its charter)

Delaware	33-0804655
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9885 Towne Centre Drive San Diego, CA 92121

(Address of principal executive offices) (Zip Code)

(858) 202-4500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]   No [   ]

Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value	32,327,591 Shares
Class	Outstanding at March 31, 2002

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Balance Sheets
		Condensed Statements of Operations
		Condensed Statements of Cash Flows
		Notes to Condensed Financial Statements
	Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities.
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 5. Other Information.
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT 10.18
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.21
EXHIBIT 10.22

ILLUMINA, INC.

INDEX

				Page No.
PART I.		FINANCIAL INFORMATION
	Item 1.	Financial Statements
			Condensed Balance Sheets — March 31, 2002 (unaudited) and December 30, 2001		3
			Condensed Statements of Operations — Three Month Periods Ended March 31, 2002 and April 1, 2001 (unaudited)		4
			Condensed Statements of Cash Flows — Three Month Periods Ended March 31, 2002 and April 1, 2001 (unaudited)		5
			Notes to Condensed Financial Statements		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk			21
PART II.		OTHER INFORMATION
	Item 1.	Legal Proceedings			22
	Item 2.	Changes in Securities and Use of Proceeds			22
	Item 3.	Defaults upon Senior Securities			22
	Item 4.	Submission of Matters to a Vote of Security Holders			22
	Item 5.	Other Information			22
	Item 6.	Exhibits and Reports on Form 8-K			22
Signatures					25

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ILLUMINA, INC.
Condensed Balance Sheets

			March 31,		December 30,
			2002		2001
			(unaudited)		(Note)
			(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	10,417	$	4,165
	Investments, available for sale			77,363		89,621
	Accounts and interest receivable, net			1,525		1,266
	Inventory, net			1,080		971
	Prepaid expenses and other current assets			262		237
		Total current assets		90,647		96,260
Property and equipment, net				49,317		25,972
Intangible and other assets, net				588		233
		Total assets	$	140,552	$	122,465
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	4,264	$	4,511
	Current portion of long-term debt			319		—
	Current portion of equipment note obligations			306		297
		Total current liabilities		4,889		4,808
Long-term debt, less current portion				25,619		—
Deferred revenue				10,173		10,048
Other long-term liabilities				740		818
Commitments
Stockholders’ equity				99,131		106,791
		Total liabilities and stockholders’ equity	$	140,552	$	122,465

Note: The Balance Sheet at December 30, 2001 has been derived from the audited financial statements as of that date.

See accompanying notes.

3

ILLUMINA, INC.
Condensed Statements of Operations
(Unaudited)

			Three months ended
			March 31,			April 1,
			2002			2001
			(In thousands, except
			per share amounts)
Revenue
	Product and service revenue		$	540		$	28
	Research revenue			729			536
		Total revenue		1,269			564
Operating expenses:
	Cost of revenue			339			14
	Research and development (exclusive of stock based compensation of $662 and $850 for the three months ended March 31, 2002 and April 1, 2001, respectively)			7,092			4,450
	General and administrative (exclusive of stock based compensation of $563 and $757 for the three months ended March 31, 2002 and April 1, 2001, respectively)			1,642			1,185
	Amortization of deferred compensation and other non-cash compensation charges			1,225			1,607
		Total operating expenses		10,298			7,256
Loss from operations				(9,029	)		(6,692	)
Interest income, net				362			1,774
Net loss			$	(8,667	)	$	(4,918	)
Net loss per share, basic and diluted			$	(0.28	)	$	(0.17	)
Shares used in calculating net loss per share, basic and diluted				30,455			29,224

See accompanying notes.

4

ILLUMINA, INC.
Condensed Statements of Cash Flows
(Unaudited)

				Three months ended
				March 31,			April 1,
				2002			2001
				(In thousands)
Operating activities:
Net loss				$	(8,667	)	$	(4,918	)
		Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			959			192
		Amortization of premium on investments			252			1
		Amortization of deferred compensation and other non-cash compensation charges			1,225			1,607
		Changes in operating assets and liabilities:
			Accounts and interest receivable		(259	)		144
			Inventory		(109	)		(170	)
			Prepaid expenses and other current assets		(25	)		39
			Deferred revenue		125			188
			Other assets		(355	)		—
			Accounts payable and accrued liabilities		(247	)		628
			Other liabilities		2			—
Net cash used in operating activities					(7,099	)		(2,289	)
Investing activities:
	Purchase of investment securities				(25,222	)		—
	Maturity of investment securities				36,623			985
	Purchase of property and equipment				(24,304	)		(1,595	)
Net cash used in investing activities					(12,903	)		(610	)
Financing activities:
	Proceeds from long term debt				26,000			—
	Payments on long term debt				(62	)		—
	Payments on equipment note obligations				(71	)		(62	)
	Proceeds from issuance of common stock, net of repurchased shares				387			458
Net cash provided by financing activities					26,254			396
Net increase (decrease) in cash and cash equivalents					6,252			(2,503	)
Cash and cash equivalents at beginning of period					4,165			116,102
Cash and cash equivalents at end of period				$	10,417		$	113,599

See accompanying notes.

5

ILLUMINA, INC.
Notes to Condensed Financial Statements
(Unaudited)

Note 1. General

Illumina, Inc. (the “Company”) was incorporated on April 28, 1998. The Company is developing next-generation tools that will permit the large-scale analysis of genetic variation and function. The Company’s proprietary BeadArray™ technology will provide the throughput, cost effectiveness and flexibility necessary to enable researchers in the life sciences and pharmaceutical industries to perform the billions of tests necessary to extract medically valuable information from advances in genomics. This information will correlate genetic variation and function with particular disease states, enhancing drug discovery, allowing diseases to be detected earlier and more specifically and permitting better choices of drugs for individual patients. In addition to the life sciences and pharmaceutical industries, the Company’s technology will have applicability across a wide variety of industries, including agriculture, petrochemicals and food, flavor and beverages.

The unaudited financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying financial statements have been prepared on a basis consistent with the audited financial statements and contain adjustments, consisting of only normal, recurring accruals, necessary to present fairly the Company’s financial position and results of operations. Interim financial results are not necessarily indicative of results anticipated for the full year. These unaudited financial statements should be read in conjunction with the Company’s 2001 audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses incurred during the reporting period. Actual results could differ from those estimates.

Note 2. Inventories

Inventories are stated at the lower of standard cost (which approximates actual cost) or market. The components of inventories are as follows:

	March 31,		December 30,
	2002		2001
	(In thousands)
Raw materials	$	913	$	971
Work in process		165		—
Finished goods		2		—
	$	1,080	$	971

6

ILLUMINA, INC.
Notes to Condensed Financial Statements (continued)
(Unaudited)

Note 3. 2000 Employee Stock Purchase Plan

In February 2000, the board of directors and stockholders adopted the 2000 Employee Stock Purchase Plan (the “Purchase Plan”). A total of 1,458,946 shares of the Company’s common stock have been reserved for issuance under the Purchase Plan. The Purchase Plan permits eligible employees to purchase common stock at a discount, but only through payroll deductions, during defined offering periods. The price at which stock is purchased under the Purchase Plan is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. In addition, the Purchase Plan provides for annual increases of shares available for issuance under the Purchase Plan beginning with fiscal 2001; in fiscal 2002, the Board of Directors elected to not provide for the annual increase. In February 2002, 49,220 shares were issued under the Purchase Plan.

Note 4. Net Loss per Share

Basic and diluted net loss per common share are presented in conformity with SFAS No. 128, Earnings per Share, and SAB 98, for all periods presented. Under the provisions of SAB 98, common stock and convertible preferred stock that has been issued or granted for nominal consideration prior to the effective date of our initial public offering must be included in the calculation of basic and diluted net loss per common share as if these shares had been outstanding for all periods presented. To date, the Company has not issued or granted shares for nominal consideration.

In accordance with SFAS No. 128, basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Potentially dilutive securities comprised of incremental common shares issuable upon the exercise of stock options were excluded from diluted net loss per share because of their anti-dilutive effect.

Note 5. Fiscal Year

The Company’s fiscal year is 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, and September 30.

Note 6. Commitments and Long-Term Debt

In July 2000, the Company entered into a 10-year lease to rent space in two newly constructed buildings that are now occupied by the Company. That lease contained an option to purchase the buildings together with certain adjacent land that has been approved for construction of an additional building. At the time the lease was executed, the Company provided the developer with a $1.6 million letter of credit that was increased to $3.1 million in the third quarter of 2001, and which was secured by restricted cash. In addition the Company provided the developer $6.2

7

ILLUMINA, INC.
Notes to Condensed Financial Statements (continued)
(Unaudited)

million of funding in the form of an interest bearing, secured loan with a term of approximately one year and a $0.5 million deposit. In December 2000, the Company paid $2.3 million to execute the option to purchase the buildings and related land. During the third quarter of 2001, the term of the secured loan expired and the principal and accrued interest thereon was applied to the purchase price for the project. The purchase closed in January 2002, at which time the letter of credit was cancelled and the Company assumed a $26 million, 10-year mortgage on the property at a fixed interest rate of 8.36%.

The Company will make payments under the loan totaling $2.3 million in 2002 and $2.5 million per year thereafter until the loan expires in January 2012 at which time a balloon payment of $21.2 million will be due.

In October 1998, the Company entered into a $1.0 million lease financing arrangement with a lease financing corporation. As of December 31, 1999, the Company had utilized all funds available under the lease arrangement. In April 2000, the Company entered into a $3.0 million loan arrangement to be used at its discretion to finance purchases of capital equipment. The loan is secured by the capital equipment financed. As of March 31, 2002, $1.7 million remains available under this loan arrangement.

Note 7. Effect of New Accounting Standards

The FASB has issued SFAS No. 141, Business Combinations, which requires that the purchase method of accounting be used for all business combinations subsequent to June 30, 2001 and specifies criteria for recognizing intangible assets acquired in a business combination. There was no impact on the financial statements.

The FASB has issued SFAS No. 142, Goodwill and Other Intangible Assets, which establishes a new basis for accounting for intangible assets deemed to have indefinite lives. Such assets are no longer amortized but are reviewed annually for impairment, or more frequently, if indicators of impairment arise. Intangible assets with definite useful lives will continue to be amortized over their respective estimated useful lives. This statement was required to be adopted by companies for fiscal years beginning after December 15, 2001. The Company adopted the new Statement effective January 1, 2002. There was no impact on the financial statements.

The FASB has issued SFAS No. 143, Accounting for Asset Retirement Obligations, which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost should be allocated to expense using a systematic and rational method. This Statement is required to be adopted by companies for fiscal years beginning after December 15, 2002. The impact on the financial statements is not expected to be material.

8

ILLUMINA, INC.
Notes to Condensed Financial Statements (continued)
(Unaudited)

The FASB has issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes, with exceptions, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS 144 retains the basic indicators of impairment recognition and undiscounted cash-flow measurement model of SFAS No. 121, however, it removes goodwill from the scope of the analysis, as the accounting for goodwill is now subject to the provisions of SFAS No. 141 and 142. SFAS No. 144 also provides additional guidance on differentiating between assets held and used, held for sale, and held for disposal other than by sale. The impact on the financial statements is not material.

9

ILLUMINA, INC.

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this report and the financial statements and notes thereto for the year ended December 30, 2001 included in the Company’s Annual Report on Form 10-K. Operating results are not necessarily indicative of results that may occur in future periods.

The following discussion and analysis may contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and inventions. The cautionary statements made in this discussion and analysis should be read as applying to all related forward-looking statements wherever they appear in this 10-Q. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include those discussed in “Factors Affecting Operating Results” below as well as those discussed elsewhere.

Overview

Illumina, Inc. was incorporated in April 1998. We are developing next-generation tools that will permit the large-scale analysis of genetic variation and function. Our proprietary BeadArray™ technology will provide the throughput, cost effectiveness and flexibility necessary to enable researchers in the life sciences and pharmaceutical industries to perform the billions of tests necessary to extract medically valuable information from advances in genomics. This information will correlate genetic variation and function with particular disease states, enhancing drug discovery, allowing diseases to be detected earlier and more specifically and permitting better choices of drugs for individual patients. In addition to the life sciences and pharmaceutical industries, our technology will have applicability across a wide variety of industries, including agriculture, petrochemicals and food, flavor and beverages. In the first quarter of 2001, we began commercial sale of custom oligonucleotides manufactured using our proprietary Oligator™ technology. In the second quarter of 2001, we initiated our SNP genotyping services business by entering into a contract with GlaxoSmithKline and we have entered into seven new services contracts in 2002.

In November 1999, we entered into a strategic partnership with Applied Biosystems under which our BeadArray™ technology will be commercialized together with instruments, reagents and software manufactured and distributed by Applied Biosystems. We expect Applied Biosystems to commercialize the first products under this partnership in mid-2002.

10

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

To date, most of our revenues have been generated from government grants from the National Institutes of Health. As a result of the 2001 launch of our SNP genotyping services and custom oligonucleotide business, we generated product and service revenue of approximately $1.0 million during fiscal 2001, and $0.5 million in the three months ended March 31, 2002. We are seeking to expand our customer base for these products and services, and we expect that Applied Biosystems will launch our collaboration SNP genotyping system in mid-2002. However, our expansion efforts may not be successful; in addition, we have no control over the efforts of our collaborator.

We have incurred substantial operating losses since our inception. As of March 31, 2002, our accumulated deficit was $58.8 million, and total stockholders’ equity was $99.1 million. These losses have principally occurred as a result of the substantial resources required for the research, development and manufacturing scale up effort required to commercialize our products and services. We expect to continue to incur substantial and increasing costs for these activities over the next several years and to increase our selling, general and administrative costs as we begin to build up our sales and marketing infrastructure to expand and support the sale of products and services. As a result, we will need to increase revenue significantly to achieve profitability.

Under our agreement with Applied Biosystems, we will receive a share of the profit earned on all components of the SNP genotyping system sold by Applied Biosystems. Applied Biosystems also agreed to provide $10.0 million of non-refundable development support funding, all of which had been received as of December 30, 2001. This funding has been recorded as deferred revenue, which will become realized at a rate of 25% of the total profit share we earn from sales of collaboration products. The remaining 75% of the profit share will be payable in cash by Applied Biosystems.

Results of Operations

Three Months Ended March 31, 2002 and April 1, 2001

Revenue

Revenue for the three months ended March 31, 2002 and April 1, 2001 was $1.3 million and $0.6 million, respectively. Government grants and other research funding accounted for approximately 57% and 95% of our total revenue for the three months ended March 31, 2002 and April 1, 2001, respectively. We expect grant revenue to generally decline as a proportion of total revenue over the next few years as product and service revenue become a more important part of our business. In 2001, we began sales of custom oligonucleotides and most of the product and service revenue for the three months ended March 31, 2002 was derived from those sales.

11

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

Cost of Revenue

Cost of revenue for the three months ended March 31, 2002 and April 1, 2001 was $0.3 million and approximately $14,000, respectively. The increase was driven by increased sales of products and services.

Research and Development

Our research and development expenses consist primarily of salaries and other personnel-related expenses, facility costs and laboratory and manufacturing supplies. Research and development expenses increased $2.6 million to $7.1 million for the three months ended March 31, 2002, from $4.5 million for the three months ended April 1, 2001. The increase in expenses was primarily driven by higher headcount, related personnel costs and higher laboratory and manufacturing supplies required to continue development of our BeadArray technology, which is the underlying technology on which Illumina was founded. During the three months ended March 31, 2002, our research activities in this area increased $1.7 million over the same period in 2001. These additional resources involved exploring and optimizing assays for various types of genetic analysis experiments, increasing the multiplexing level of our arrays, continuing development of the scanning instrumentation required to read our arrays and building up and testing our BeadArray based SNP genotyping services system. Research to support our Oligator technology platform increased $0.6 million during the three months ended March 31, 2002 as compared to the three months ended April 1, 2001 as we continue to explore methods for improving capacity and cost. The remaining $0.3 million of expense increase was related to manufacturing process improvement activities mostly related to automating various parts of the manufacturing process to improve yields, cost, quality and processing time. We expect that our research and development expenses, including facilities related costs, will increase substantially in future years to support our collaborative research programs, internal product research and technology development.

General and Administrative

     Our selling, general and administrative expenses consist primarily of personnel costs for sales and marketing, finance, human resources, business development and general management, as well as professional fees, such as expenses for legal and accounting services. Selling, general and administrative expenses increased $0.4 million to $1.6 million for the three months ended March 31, 2002, from $1.2 million for the three months ended April 1, 2001. A portion of this increase was due to increases in the sales and marketing costs required to launch and support our custom oligonucleotide sales and SNP genotyping services operations. The remaining increase was to support our growth as well as higher legal costs. We expect that our selling, general and administrative expenses will increase as we expand our staff, add sales and marketing infrastructure and incur additional costs to support our growth.

12

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

Amortization of Deferred Compensation and Other Non-Cash Compensation Charges

From our inception through July 27, 2000, in connection with the grant of certain stock options and sales of restricted stock to employees, founders and directors, we have recorded deferred stock compensation totaling $17.8 million, representing the difference between the exercise or purchase price and the fair value of our common stock as estimated for financial reporting purposes on the date such stock options were granted or such restricted stock was sold. We recorded this amount as a component of stockholders’ equity and amortize the amount as a charge to operations over the vesting period of the restricted stock and options. We recorded amortization of this deferred compensation of $1.0 million and $1.4 million for the three months ended March 31, 2002 and April 1, 2001, respectively. Subsequent to July 27, 2000, no deferred compensation has been recorded as all options have been granted at fair market value.

For employees, founders and directors, deferred compensation represents the difference between the exercise price of the option or purchase price of the stock and the deemed fair value of our common stock on the date of grant in accordance with Accounting Principles Board Opinion No. 25 and its related interpretations. For consultants, deferred compensation is recorded at the fair value for the options granted or stock sold in accordance with Statement of Financial Accounting Standards No. 123 and is periodically remeasured and expensed in accordance with Emerging Issues Task Force No. 96-18.

We recognize compensation expense over the vesting period for employees, founders and directors, using an accelerated amortization methodology in accordance with Financial Accounting Standards Board Interpretation No. 28. In February 2000, we modified all our consultant agreements to include assurances that the contracts would be fulfilled. In accordance with these modifications, we recorded additional deferred compensation of $3.0 million as a component of stockholders’ equity and amortize this amount as a charge to operations ratably over the vesting periods of the restricted stock and options. We recorded amortization of this deferred compensation of approximately $0.2 million for the both the three months ended March 31, 2002 and April 1, 2001.

Interest Income, net

Interest income on our cash and cash equivalents and investments was $0.9 million and $1.8 million for the three months ended March 31, 2002 and April 1, 2001, respectively. Interest income decreased in 2002 due to lower average levels of invested funds and lower effective interest rates. Interest expense was $0.6 million for the three months ended March 31, 2002 as compared to approximately $36,000 for the three months ended April 1, 2001. Interest expense for the three months ended March 31, 2002 resulted primarily from a $26.0 million loan related to the purchase of our new facility during the first quarter of 2002.

13

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

Liquidity and Capital Resources

As of March 31, 2002, we had cash, cash equivalents and investments of approximately $87.8 million. We currently invest our funds in U.S. dollar based investment-grade corporate and government debt securities with average maturities of approximately 18 months.

     Our operating activities used cash of $7.1 million in the three months ended March 31, 2002, as compared to $2.3 million in the three months ended April 1, 2001. Our use of cash for these periods primarily resulted from losses from operations, excluding amortization of non-cash charges.

     Our investing activities used cash of $12.9 million in the three months ended March 31, 2002 as compared to $0.6 million in the three months ended April 1, 2001. The large use of cash for investing activities in 2002 primarily resulted from purchases of property and equipment. Purchases of property and equipment increased approximately $22.7 million as compared to the prior year period, primarily due to the purchase of our new facility.

     Our financing activities provided cash of $26.3 million in the three months ended March 31, 2002 as compared to $0.4 million in the three months ended April 1, 2001. Cash provided by financing activities in 2002 resulted primarily from $26.0 million in loan proceeds related to the purchase of our new facility.

     In October 1998, we entered into a $1.0 million capital equipment lease financing arrangement with a lease financing corporation. As of December 31, 1999, we had utilized all funds available under this lease agreement. In April 2000, we entered into a $3.0 million loan arrangement to be used at our discretion to finance purchases of capital equipment, $1.7 million of which remains available at March 31, 2002.

     In July 2000, we entered into a 10-year lease to rent space in two newly constructed buildings that we now occupy. That lease contained an option to purchase the buildings together with eight acres of adjacent land that has been approved for construction of an additional building. At the time the lease was executed, we provided the developer with a $1.6 million letter of credit that was increased to $3.1 million in the third quarter of 2001, and which was secured by restricted cash. In addition, we provided the developer $6.2 million of funding in the form of an interest bearing, secured loan with a term of approximately one year and a $0.5 million deposit. In December 2000, we paid $2.3 million to execute the option to purchase the buildings and related land. During the third quarter of 2001, the term of the secured loan expired and the principal and accrued interest thereon was applied to the purchase price for the project. The purchase closed in January 2002, at which time, the letter of credit was cancelled and we assumed a $26.0 million, 10-year mortgage on the property at a fixed interest rate of 8.36%.

14

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

We expect that our current cash and cash equivalents, investments and funding from existing strategic alliances and grants will be sufficient to fund our anticipated operating needs for at least the next 24 months. However, our future capital requirements and the adequacy of our available funds will depend on many factors, including scientific progress in our research and development programs, the magnitude of those programs, competing technological and market developments, our ability to successfully commercialize our first products in partnership with Applied Biosystems and to expand our oligonucleotide and SNP genotyping services businesses. Therefore, we may require additional funding within this time frame and the additional funding, if needed, may not be available on terms that are acceptable to us, or at all. Further, any additional equity financing may be dilutive to our then existing stockholders and may adversely affect their rights.

Factors affecting our operating results

We have generated only a small amount of revenue from product and service offerings to date. We expect to continue to incur net losses and we may not achieve or maintain profitability.

     We have incurred net losses since our inception and expect to continue to incur net losses. At March 31, 2002, our accumulated deficit was approximately $58.8 million. We expect to continue to have increasing net losses and negative cash flow. The magnitude of our net losses will depend, in part, on the rate of growth, if any, of our revenue and on the level of our expenses. We expect to incur significant expenses for research and development, for developing our manufacturing capabilities and for efforts to commercialize our products. As a result, we expect that our operating expenses will increase significantly in the near term and, consequently, we will need to generate significant additional revenue to achieve profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our success depends upon the increasing availability of genetic information and the continued emergence and growth of markets for analysis of genetic variation and function.

     We design our products primarily for applications in the life sciences and pharmaceutical industries. The usefulness of our technology depends in part upon the availability of genetic data. We are initially focusing on markets for analysis of genetic variation and function, namely SNP genotyping, gene expression profiling and proteomics. These markets are new and emerging, and they may not develop as we anticipate, or reach their full potential. Other methods of analysis of genetic variation and function may emerge and displace the methods we are developing. Also, researchers may not seek or be able to convert raw genetic data into medically valuable information through the analysis of genetic variation and function. If genetic data is not available or if our target markets do not emerge in a timely manner, demand for our products will not develop as we expect, and we may never become profitable.

15

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

We have limited manufacturing experience. If we are unable to develop our manufacturing capability or find third-party manufacturers to manufacture our products, we may not be able to launch our products in a timely manner, or at all.

     We have limited experience manufacturing our products in the volumes that will be necessary for us to achieve significant commercial sales. To date, our manufacturing activities for arrays have been limited to supplying pre-commercial products for internal use by us and our collaborative partners. We have only recently begun manufacturing oligonucleotides for commercial sale and operating our internal SNP genotyping service business. We have not yet developed a commercial manufacturing process for scanning instrumentation.

     The nature of our products requires customized components that currently are available from a limited number of sources. For example, we currently obtain the fiber optic bundles included in our products from a single source. If we are unable to secure a sufficient supply of fiber optic bundles or other product components, we will be unable to meet demand for our products. We will need to enter into contractual relationships with manufacturers for commercial-scale production of our products, or develop these capabilities internally, and we cannot assure you that we will be able to do so on a timely basis, for sufficient quantities or on commercially reasonable terms. Accordingly, we may not be able to establish or maintain reliable, high-volume manufacturing at commercially reasonable costs.

We are an early stage company with no commercially available microarray products, and our success depends on our ability, alone or with our partners or collaborators, to develop commercially successful products and on market acceptance of our new and unproven technology.

     We currently have no commercially available microarray products. Our technologies are in the early stages of development or commercialization. You should evaluate us in light of the uncertainties and complexities affecting an early stage company developing tools for the life sciences and pharmaceutical industries.

     Historically, life sciences and pharmaceutical companies have analyzed genetic variation and function using a variety of technologies. Compared to the existing technologies, our technologies are new and unproven. In order to be successful, our products must meet the commercial requirements of the life sciences and pharmaceutical industries as tools for the large-scale analysis of genetic variation and function.

     We may not be successful in the commercial development of products. We must conduct a substantial amount of additional research and development before some of our microarray products will be ready for sale. In addition, we are only at the early phase of offering custom oligonucleotides and SNP genotyping services to the market. Problems frequently encountered in connection with the development or early commercialization of products and services using new

16

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

and unproven technologies might limit our ability to develop and successfully commercialize these products and services.

     Market acceptance will depend on many factors, including:

• our ability and the ability of our collaborative partners to demonstrate to potential customers the benefits and cost effectiveness of our products and services relative to others available in the market;

• the extent of our partners’ efforts to market, sell and distribute our products;

• our or our partners’ ability to manufacture products in sufficient quantities with acceptable quality and reliability and at an acceptable cost; and

• the willingness and ability of customers to adopt new technologies requiring capital investments.

Commercialization of our technologies depends on partnerships and collaborations with other companies, in particular Applied Biosystems. If our current partnership and collaborations are not successful, or if we are not able to enter into additional partnerships and collaborations in the future, we may not be able to develop our technologies or products.

     We currently do not possess all of the resources or intellectual property necessary to develop and commercialize all the products or services that may result from our technologies. We will need either to develop a sales, marketing and support group with relevant experience or make appropriate arrangements with strategic partners in order to market and sell our products. In addition, we may need to enter into agreements to obtain intellectual property necessary to commercialize some of our products or services. We have chosen to enter into a collaborative arrangement to develop and commercialize our initial SNP genotyping array product. We have entered into an agreement with Applied Biosystems to gain access to their proprietary chemistry format for use with the array products of the partnership. Applied Biosystems also will fund, in part, the development of the array products. Our partnership agreement provides that Applied Biosystems will develop the detection instrument and reagent kits required for use with the genotyping array product, and will provide sales and marketing support for those products. If Applied Biosystems does not deliver the instrument in a timely way or successfully market the genotyping system or if Applied Biosystems elects to terminate or restrict the use of intellectual property within our partnership, we may not be able to develop or successfully commercialize our initial products or services on a timely basis, or at all. For instance, in 2001 we announced a delay in the introduction of our first product with Applied Biosystems to mid-2002. We may need to work with other corporate partners and collaborators to develop other chemistry formats and to gain access to genetic data for use with our technologies.

17

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

     We have limited or no control over the resources that any partner or collaborator may devote to our products. Any of our present or future partners or collaborators may not perform their obligations as expected. These partners or collaborators may breach or terminate their agreements with us or otherwise fail to meet their obligations or perform their collaborative activities successfully and in a timely manner. Further, any of our partners or collaborators may elect not to develop products arising out of our partnerships or collaborations or devote sufficient resources to the development, manufacture or commercialization of these products. If any of these events occur, we may not be able to develop our technologies or commercialize our products and our ability to generate revenue will decrease.

Any inability to adequately protect our proprietary technologies could harm our competitive position.

     Our success will depend in part on our ability to obtain patents and maintain adequate protection of our intellectual property in the United States and other countries. If we do not protect our intellectual property adequately, competitors may be able to use our technologies and thereby erode our competitive advantage. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting their proprietary rights abroad. These problems can be caused by the absence of rules and methods for defending intellectual property rights.

     The patent positions of companies developing tools for the life sciences and pharmaceutical industries, including our patent position, generally are uncertain and involve complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We will apply for patents covering our technologies and products, as we deem appropriate. However, our applications may be challenged and may not result in issued patents. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. There also is risk that others may independently develop similar or alternative technologies or design around our patented technologies. Also, others may challenge or invalidate our patents, or our patents may fail to provide us with any competitive advantage. In addition, we may need to initiate lawsuits to protect or enforce our patents, which would be expensive and, if we lose, may cause us to lose some of our intellectual property rights, which would reduce our ability to compete in the marketplace.

     We also rely upon trade secret protection for our confidential and proprietary information. We have taken security measures to protect our proprietary information. These measures, however, may not provide adequate protection for our trade secrets or other proprietary information. We seek to protect our proprietary information by entering into confidentiality

18

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

agreements with employees, collaborators and consultants. Nevertheless, employees, collaborators or consultants may still disclose our proprietary information, and we may not be able to meaningfully protect our trade secrets. In addition, others may independently develop substantially equivalent proprietary information or techniques or otherwise gain access to our trade secrets.

We expect intense competition in our target markets, which could render our products obsolete or substantially limit the volume of products that we sell. This would limit our ability to compete and achieve profitability.

     We compete with life sciences companies that design, manufacture and market instruments for analysis of genetic variation and function and other applications using technologies such as two-dimensional electrophoresis, capillary electrophoresis, mass spectrometry, flow cytometry, microfluidics, and mechanically deposited, inkjet and photolithographic arrays. We anticipate that we will face increased competition in the future as new companies enter the market with new technologies. The markets for our products are characterized by rapidly changing technology, evolving industry standards, changes in customer needs, emerging competition and new product introductions. One or more of our competitors may render our technology obsolete or uneconomical. Many of our competitors have greater financial and personnel resources and more experience in research and development than we have. Furthermore, the life sciences and pharmaceutical companies, which are our potential customers and strategic partners, could develop competing products.

If we lose our key personnel or are unable to attract and retain additional personnel, we may be unable to achieve our goals.

     We are highly dependent on our management and scientific personnel. The loss of their services could adversely impact our ability to achieve our business objectives. We will need to hire additional qualified personnel with expertise in molecular biology, chemistry and biological information processing. We compete for qualified management and scientific personnel with other biotechnology companies, universities and research institutions, particularly those focusing on genomics. Competition for these individuals, particularly in the San Diego area, is intense, and the turnover rate can be high. Failure to attract and retain management and scientific personnel would prevent us from pursuing collaborations or developing our products or technologies.

     Our planned activities will require additional expertise in specific industries and areas applicable to the products developed through our technologies, including the life sciences and healthcare industries and molecular biology, chemistry and biological information processing. Thus, we will need to add new personnel, including management, and develop the expertise of existing management. The failure to do so could impair the growth of our business.

19

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

We may need additional capital in the future. If additional capital is not available on acceptable terms, we may have to curtail or cease operations.

     Our future capital requirements will be substantial and will depend on many factors including payments received under collaborative agreements and government grants, the progress and scope of our collaborative and independent research and development projects, and the filing, prosecution and enforcement of patent claims. We anticipate that our existing capital resources will enable us to maintain currently planned operations for at least the next 24 months. However, we premise this expectation on our current operating plan, which may change as a result of many factors. Consequently, we may need additional funding sooner than anticipated. Our inability to raise capital would seriously harm our business and product development efforts. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in dilution to our stockholders.

     We currently have no credit facility or committed sources of capital other than an equipment lease line with $1.7 million unused and available as of March 31, 2002. To the extent operating and capital resources are insufficient to meet future requirements, we will have to raise additional funds to continue the development and commercialization of our technologies. These funds may not be available on favorable terms, or at all. If adequate funds are not available on attractive terms, we may be required to curtail operations significantly or to obtain funds by entering into financing, supply or collaboration agreements on unattractive terms.

We expect that our results of operations will fluctuate. This fluctuation could cause our stock price to decline.

     Our operating results have fluctuated in the past and are likely to do so in the future. These fluctuations in our operating results could cause our stock price to fluctuate significantly or decline. A large portion of our expenses is relatively fixed, including expenses for facilities, equipment and personnel. In addition, we expect operating expenses to continue to increase significantly. Accordingly, if revenue does not grow as anticipated, we may not be able to reduce our operating losses.

     Due to the possibility of fluctuations in our revenue and expenses, we believe that comparisons of our operating results are not a good indication of our future performance. For example, oligonucleotide sales may fluctuate quarter to quarter depending on market conditions or oligonucleotide needs for both our genotyping services business and internal research. Our operating results may not meet the expectations of stock market analysts and investors. In that case, our stock price probably would decline.

20

ILLUMINA, INC.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (continued)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our investment portfolio and on the increase or decrease in the amount of interest expense we must pay with respect to our various outstanding debt instruments. Our risk associated with fluctuating interest expense and income is limited to our capital lease obligations and building mortgage and our investments in interest rate sensitive financial instruments. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments. Declines in interest rates over time will, however, reduce our interest income while increases in interest rates over time will increase our interest expense.

     Our equipment financings, amounting to $0.8 million as of March 31, 2002, are all at fixed rates and therefore, have minimal exposure to changes in interest rates. In January 2002, we assumed a $26.0 million mortgage in connection with the purchase of a new facility and related land. The interest rate on this loan is fixed for a 10-year period and consequently there is no exposure to increasing market interest rates.

     We have operated primarily in the United States and all transactions to date have been made in U.S. dollars. Accordingly, we have not had any exposure to foreign currency rate fluctuations, nor do we have any foreign currency hedging instruments in place.

21

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In March 2001, a complaint seeking damages of an unspecified amount was filed against us by Anthony W. Czarnik in the Superior Court of the State of California in connection with the termination of Dr. Czarnik’s employment with Illumina. The case is set for trial in the second quarter of 2002. We believe that the lawsuit is without merit and intend to defend against the claims vigorously.

We are not currently a party to any other material legal proceedings. From time to time, we may be involved in litigation relating to claims arising out of our operations in the usual course of business.

Item 2. Changes in Securities and Use of Proceeds

On July 27, 2000, we commenced our initial public offering pursuant to a Registration Statement on Form S-1 (File No. 333-33922) resulting in net offering proceeds of $101.3 million. Through March 31, 2002, approximately $3.6 million have been used for the purchase of real property and approximately $10.1 million have been used for construction of our new facility. The remaining balance is invested in a variety of interest-bearing instruments including U.S. Treasury securities, corporate debt securities and money market accounts.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

     None.

Item 5. Other Information.

     None.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits.

Exhibit Number	Description of Document
2.1(1)	Form of Merger Agreement between Illumina, Inc., a California corporation, and Illumina, Inc., a Delaware corporation.

22

Exhibit Number	Description of Document
3.1(2)	Amended and Restated Certificate of Incorporation.
3.2(1)	Bylaws.
3.3(3)	Certificate of Designation for Series A Junior Participating Stock (included as an exhibit to exhibit 4.3)
4.1(1)	Specimen Common Stock Certificate.
4.2(1)	Second Amended and Restated Stockholders Rights Agreement, dated November 5, 1999, by and among the Registrant and certain stockholders of the Registrant.
4.3(3)	Rights Agreement, dated as of May 3, 2001, between the Company and Equiserve Trust Company, N.A.
10.18	Replacement Reserve Agreement, dated as of January 10, 2002, between the Company and BNY Western Trust Company as Trustee for Washington Capital Joint Master Trust Mortgage Income Fund.
10.19	Loan Assumption and Modification Agreement, dated as of January 10, 2002, between the Company, Diversified Eastgate Venture and BNY Western Trust Company as Trustee for Washington Capital Joint Master Trust Mortgage Income Fund.
10.20	Tenant Improvement and Leasing Commission Reserve Agreement, dated as of January 10, 2002, between the Company and BNY Western Trust Company as Trustee for Washington Capital Joint Master Trust Mortgage Income Fund.
10.21	2000 Employee Stock Purchase Plan as amended on March 21, 2002.
10.22	2000 Stock Plan as amended on March 21, 2002.

(1)	Incorporated by reference to the same numbered exhibit filed with our registration Statement on Form S-1 (333-33922) filed April 3, 2000, as amended.
(2)	Incorporated by reference to the same numbered exhibit filed with our Annual Report on Form 10-K for the year ended December 31, 2000.
(3)	Incorporated by reference to the same numbered exhibit filed with our Registration Statement on Form 8-A (000-30361) filed May 14, 2001.

23

(b)  Reports on Form 8-K

     None.

24

SIGNATURES

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

Illumina , Inc.
(Registrant)

Date: May 13, 2002	/s/ Timothy Kish
	Timothy Kish Vice President of Finance

25 EX-10.18 3 a81502ex10-18.txt EXHIBIT 10.18 EXHIBIT 10.18 REPLACEMENT RESERVE AGREEMENT THIS REPLACEMENT RESERVE AGREEMENT ("Agreement") is made as of January 10, 2002, by and between ILLUMINA, INC., a Delaware corporation, having its principal place of business at 9885 Towne Centre Drive, San Diego, California 92121 ("Borrower") and BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND, having an address at c/o Washington Capital Management, Inc., 4350 La Jolla Village Drive, Suite 960, San Diego, California 92122 ("Lender"), with reference to the following facts: A. Borrower, by a promissory note given to Lender (the note, together with all extensions, renewals, modifications, consolidations, substitutions, replacements, restatements and increases thereof shall collectively be referred to as the "Note") executed originally by Diversified Eastgate Venture, an Illinois general partnership, and assumed by Borrower, is indebted to Lender in the principal sum of Twenty Six Million Dollars ($26,000,000.00) in lawful money of the United States of America, with interest at the rate(s) set forth in the Note (the indebtedness evidenced by the Note, together with such interest accrued thereon, shall collectively be referred to as the "Loan"), principal and interest to be payable in accordance with the terms and conditions provided in the Note. B. The Loan is secured by, among other things, a Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing (the "Deed of Trust"), dated as of September 27, 2000, which grants Lender a first lien on the property encumbered thereby (the "Property"). All and any of the documents other than the Note, the Deed of Trust and this Agreement now or hereafter executed by Borrower and/or others and by or in favor of Lender, which wholly or partially secure or Guarantee payment of the Note are referred to as the "Other Security Documents." C. Lender requires as a condition to the assumption of the Loan by Borrower that Borrower enter into this Agreement and make certain deposits with Lender as provided in this Agreement as additional security for all of Borrower's obligations under the Note, the Deed of Trust and the Other Security Documents. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Deposits To The Replacement Reserve. 1.1 Monthly Deposits. On each date that a regularly scheduled payment of principal or interest is due under the Note, Borrower shall deposit with Lender (or, at Lender's election, in a pledged bank or escrow account in the name of Borrower and pledged to and selected by Lender) a monthly deposit in the amount of Two Thousand One Hundred Seventy Dollars ($2,170.00) (the "Monthly Deposit"). 1.2 Reassessment of Monthly Deposit. No more often than once each "Loan Year" (as defined below), Lender may reassess its estimate of the amount necessary for the Replacement Reserve Fund (defined below) and may increase the amount of the Monthly 1 Deposit by thirty (30) calendar days written notice to Borrower based upon the cumulative increase in the then-current "Index" (as defined below) over the "Basic Index" (as defined below). For purposes of this Section 1.2, the "Index" means: the Consumer Price Index, All Items 1982-1984 = 100, All Urban Consumers ("CPI-U"), for the Los Angeles-Riverside-Orange County, CA metropolitan area, as published by the United State Department of Labor, Bureau of Labor Statistics, or its successor index; and the "Basic Index" means the Index published for the month in which this Agreement is dated. In the event of the discontinuation of the compilation or publication of the Index, the index selected by Lender that most nearly replicates the information and statistics compiled in the Index shall be used to make such calculation. For purposes of this Section 1.2, a "Loan Year" means each 365 day period (or 366 day period in leap years) commencing with the date of this Agreement and ending on each anniversary thereof. 1.3 Scheduled Repairs. With respect to any Replacement (as defined below) which is identified on Exhibit "A" attached hereto and made a part hereof as a Scheduled Repair or Replacement (collectively, a "Scheduled Repair"), Borrower shall deposit with Lender the amount allocated for such Scheduled Repair (each, a "Scheduled Repair Deposit") at least two (2) months prior to the date on which the work for such Scheduled Repair is scheduled to begin. 1.4 Replacement Reserve. Monthly Deposits and Scheduled Repair Deposits made pursuant to this Agreement shall be referred to herein as the "Replacement Reserve Fund." Lender shall deposit the Replacement Reserve Fund, as received, in an interest bearing, pledged escrow or bank account (the "Replacement Reserve") selected by Lender with interest accruing thereon to Borrower's benefit. Borrower hereby acknowledges and confirms that (a) the Replacement Reserve Fund shall not constitute a trust fund (and, if deposited in Lender's name, may be commingled with other monies held by Lender, but if held in the name of Borrower, such funds shall not be commingled with monies held by Borrower), and (b) Lender or its designee shall have the sole right to make or approve withdrawals from the Replacement Reserve. 2. Pledge Of Replacement Reserve. As additional security for the payment of all sums due under the Loan and the performance by Borrower of the Obligations (as defined in the Deed of Trust), Borrower hereby pledges, assigns and grants to Lender a continuing perfected security interest in and to and a first lien upon, the Replacement Reserve Fund and the Replacement Reserve; provided that, Lender shall make disbursements from the Replacement Reserve in accordance with the terms of this Agreement. 3. Disbursements From Replacement Reserve. 3.1 Disbursements for Replacements Only. Lender shall make disbursements from the Replacement Reserve to pay or reimburse Borrower only for the costs of those items listed in Exhibit A (such items, including, without limitation, those items identified as Scheduled Repairs, collectively the "Replacements") in the manner provided in this Section 3. Lender shall not be obligated to make disbursements from the Replacement Reserve to pay or reimburse Borrower for the costs of routine maintenance to the Property or for costs which are to be reimbursed from funds held pursuant to a Required Repair Reserve Agreement dated as of the date hereof between Borrower and Lender, or any similar agreement, if any (the "Required 2 Repair Reserve Agreement"). Lender shall, upon written request from Borrower and satisfaction of the requirements set forth in this Section 3 and Section 4 of this Agreement, disburse to Borrower amounts from the Replacement Reserve necessary to pay for the actual approved costs of Replacements or to reimburse Borrower therefor, upon completion of such Replacements (or, upon partial completion in the case of Replacements made pursuant to Section 3.4) as determined by Lender. In no event shall Lender be obligated to disburse funds from the Replacement Reserve if an Event of Default (hereinafter defined) exists. 3.2 Request for Disbursement. Each request for disbursement from the Replacement Reserve shall be in a form specified or approved by Lender and shall specify (a) the specific Replacements for which the disbursement is requested, (b) the quantity and price of each item purchased, if the Replacement includes the purchase or replacement of specific items, (c) the price of all materials (grouped by type or category) used in any Replacement other than the purchase or replacement of specific items, and (d) the cost of all contracted labor or other services applicable to each Replacement for which such request for disbursement is made. With each request, Borrower shall certify that all Replacements have been made in accordance with applicable laws. Each request for disbursement shall include copies of invoices for all items or materials purchased and all contracted labor or services provided and each request shall include evidence satisfactory to Lender of payment of all such amounts. Except as provided in Section 3.4, each request for disbursement from the Replacement Reserve shall be made only after completion of the Replacement for which disbursement is requested. Borrower shall provide Lender evidence of completion satisfactory to Lender in its reasonable judgment. 3.3 Disbursement Conditions. Except as set forth in Section 3.4 below, Borrower shall pay all invoices in connection with the Replacements with respect to which a disbursement is requested prior to submitting such request for disbursement from the Replacement Reserve unless all such invoices do not exceed $10,000.00, in which case Lender shall disburse the amount for such invoices directly to Borrower and Borrower covenants and agrees to promptly pay such invoices. In addition, as a condition to any disbursement, Lender may require Borrower to obtain lien waivers from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000.00 for completion of its work or delivery of its materials. Any lien waiver delivered hereunder shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for the Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current reimbursement request. Lender may in its sole discretion, accept copies of cancelled checks in lieu of, or in addition to any of the foregoing invoice and/or lien waiver requirements. 3.4 Partial Completion. If (a) the time required to complete a Replacement exceeds one month, (b) the contractor performing such Replacement requires periodic payments pursuant to the terms of a written contract, (c) Lender has approved in writing in advance such periodic payments, and (d) the cost of the portion of the work completed under such contract exceeds Ten Thousand Dollars ($10,000.00), a request for reimbursement from the Replacement Reserve may be made after completion of a portion of the work under such contract, provided (i) such contract requires payment upon completion of such portion of the work, (ii) the materials for which the request is made are on site at the Property and are properly secured or have been installed in the Property, (iii) all other conditions in this Agreement for disbursement have been 3 satisfied, (iv) funds remaining in the Replacement Reserve are, in Lender's judgment, sufficient to complete such Replacement and other Replacements when required, and (v) each contractor or subcontractor receiving payments under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. 3.5 Number of Requests. Except as provided in Section 3.4, Borrower shall not make a request for disbursement from the Replacement Reserve more frequently than once in any calendar month. 3.6 Final Disbursement. Lender shall disburse to Borrower all amounts remaining in the Replacement Reserve (less all amounts which may have been applied by Lender as permitted by this Agreement) upon Borrower's completion of all Replacements to the reasonable satisfaction of Lender, provided that (a) there is no Event of Default under the Note, the Deed of Trust, this Agreement or any of the Other Security Documents which has not been cured to Lender's satisfaction, (b) Lender has received evidence required by Section 4.8 below that there are no mechanic's or materialman's liens, and (c) Lender has received all cost and architectural information required by Lender. 4. Performance Of Replacements. 4.1 Workmanlike Completion. Borrower shall make Replacements when required in order to keep the Property in good order and repair and in good marketable condition, and to keep the Property or any portion thereof from deteriorating. With respect to those Replacements identified as Scheduled Repairs, Borrower shall commence the work in connection with each such Scheduled Repair on or before the date specified in Exhibit A, and shall diligently pursue such work to completion, and shall complete such Scheduled Repair no later than the date specified therefor in Exhibit A. Borrower shall complete all Replacements in a good and workmanlike manner as soon as practicable following the commencement of making each such Replacement. 4.2 Contracts. Lender reserves the right, at its option, to approve all contracts or work orders with materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or materials in connection with the Replacements, the cost of which exceeds or is expected to exceed $10,000.00. Upon Lender's request, Borrower shall assign any contract or subcontract to Lender. 4.3 Lender's Right to Complete Replacements. In the event Lender determines in its reasonable discretion that any Replacement has not been commenced as required in Section 4.1 above, is not being performed in a workmanlike or timely manner, or that any Replacement has not been completed in a workmanlike manner by the completion date specified for such Replacement in Exhibit "A," Lender shall have the option to withhold the disbursement for such unsatisfactory Replacement and to proceed under existing contracts or to contract with third parties to make or complete such Replacement and to apply the Replacement Reserve Fund toward the labor and materials necessary to complete such Replacement, without providing any prior notice to Borrower, and to exercise any and all other remedies available to Lender upon an Event of Default hereunder. 4 4.4 Additional Replacements. If at any time during, the term of the Loan, Lender determines that replacements not listed on Exhibit "A" (and not covered by the Required Repair Reserve Agreement), are advisable to keep the Property in good order and repair and in good marketable condition, or to prevent deterioration of the Property or if any major building system or component (e.g., roof, HVAC system) not listed on Exhibit "A" will reach the end of its useful life within two (2) years of the date of any inspection by Lender, Lender may send Borrower written notice of the need for making such additional replacements (the "Additional Replacements"). Borrower shall promptly commence making such Additional Replacements in accordance with all the requirements of this Agreement. If Lender determines that (i) such replacements are of the type intended to be covered by this Agreement, (ii) such replacements are not covered or of the type intended to be covered by the Required Repair Reserve Agreement, (iii) costs for such replacements are reasonable, (iv) the funds in the Replacement Reserve are sufficient to pay for such replacements, and (v) all other conditions for disbursement under this Agreement have been met, Lender may disburse funds from the Replacement Reserve for such Additional Replacements; provided, however, Lender, in its discretion, may refuse to disburse funds from the Replacement Reserve for any item other than a Replacement specified on Exhibit "A." If Borrower fails to commence, within thirty (30) days after such notice or the commencement date specified in such notice, such Additional Replacements and/or fails to diligently pursue completion of such Additional Replacements, such failure shall be an Event of Default under this Agreement, and, in addition to all other rights Lender may have under this Agreement upon an Event of Default (including but not limited to Lender's rights under Section 5 of this Agreement) and under the Note, the Deed of Trust and the Other Security Documents, Lender may contract with third parties to make such Additional Replacements and may at its sole discretion (a) apply the funds in the Replacement Reserve toward the labor and materials necessary to complete such Additional Replacements, or (b) demand payment of such Additional Replacements from Borrower. Except for Sections 3.1 through 3.5, all references in this Agreement to "Replacements" or "Scheduled Repairs" shall include the "Additional Replacements," as applicable. 4.5 Entry onto Property. In order to facilitate Lender's completion or making of the Replacements pursuant to Sections 4.3 and 4.4 above, Borrower grants Lender the right to enter onto the Property and perform any and all work and labor necessary to complete or make the Replacements and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to Borrower and secured by the Deed of Trust. For this purpose, Borrower constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the Replacements in the name of Borrower. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower empowers said attorney-in-fact as follows: (a) to use any funds in the Replacement Reserve for the purpose of making or completing the Replacements; (b) to make such additions, changes and corrections to the Replacements as shall be necessary or desirable to complete the Replacements; (c) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (d) to pay, settle or compromise all existing bills and claims which are or may become liens against the Property, or as may be necessary or desirable for the completion of the Replacements, or for clearance of title; (e) to execute all applications and certificates in the name of Borrower which may be required by any of the contract documents; (f) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with the Property or 5 the rehabilitation and repair of the Property; and (g) to do any and every act which Borrower might do in its own behalf to fulfill the terms of this Agreement. 4.6 No Obligation of Lender. Nothing in this Section 4 shall: (a) make Lender responsible for making or completing the Replacements; (b) require Lender to expend funds in addition to the Replacement Reserve Fund to make or complete any Replacement; (c) obligate Lender to proceed with the Replacements; or (d) obligate Lender to demand from Borrower additional sums to make or complete any Replacement. 4.7 Inspections. (a) Borrower shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties making Replacements pursuant to this Section 4 to enter onto the Property during normal business hours (subject to the rights of tenants under their Leases) to inspect the progress of any Replacements and all materials being used in connection therewith, to examine all plans and shop drawings relating to such Replacements which are or may be kept at the Property, and to complete any Replacements made pursuant to this Section 4. Borrower shall cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 4.7 or the completion of Replacements pursuant to this Section 4. (b) Lender may require an inspection of the Property at Borrower's expense prior to making a monthly disbursement from the Replacement Reserve in order to verify completion of the Replacements for which reimbursement is sought. Lender may require that such inspection be conducted by an appropriate, independent, qualified professional selected by Lender and/or may require a copy of a certificate of completion by an independent, qualified professional acceptable to Lender prior to the disbursement of any amounts from the Replacement Reserve. Borrower shall pay the expense of the inspection as required hereunder, whether such inspection is conducted by Lender or by an independent, qualified professional. 4.8 Lien-Free Completion. (a) The Replacements and all materials, equipment, fixtures, or any other item comprising a part of any Replacement shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for those liens existing on the date of this Agreement which have been approved in writing, by Lender, if any). (b) Lender may require Borrower to provide Lender with a search of title to the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other liens of any nature have been placed against the Property since the date of recordation of the Deed of Trust and that title to the Property is free and clear of all liens (other than the lien of the Deed of Trust and any other liens previously approved in writing by Lender, if any). 4.9 Compliance with Laws. All Replacements shall comply with all applicable laws and applicable insurance requirements, including, without limitation, applicable 6 building codes, special use permits, environmental regulations and requirements of insurance underwriters. 4.10 Insurance Requirements. In addition to any insurance required under the Deed of Trust and the Other Security Documents, Borrower shall provide or cause to be provided workmen's compensation insurance, builder's risk, and public liability insurance and other insurance to the extent required under applicable law in connection with a particular Replacement. All such policies shall be in form and amount reasonably satisfactory to Lender. All such policies which can be endorsed with standard mortgagee clauses making loss payable to Lender or its assigns shall be so endorsed. Certified copies of such policies shall be delivered to Lender. 5. Failure To Make Replacements. 5.1 Event of Default. It shall be an "Event of Default" under this Agreement if Borrower (a) fails to make any Monthly Deposit payment required hereunder within ten (10) calendar days of the date when due, or (b) at any time prior to the completion of the Required Repairs, Borrower abandons or ceases work on any Replacement (which Borrower has commenced making) for a period of thirty (30) calendar days, unless such cessation results from an event of Force Majeure (as defined in the Deed of Trust) causes beyond the control of Borrower and Borrower is diligently pursuing the reinstitution of work, (c) Borrower fails to complete each Replacement in a good and workmanlike manner within the date set forth in Exhibit "A", (d) a mechanic's or materialman's lien is filed against the Property (unless such mechanic's or materialman's lien is promptly contested in good faith by Borrower and is bonded over to the satisfaction of Lender), or (e) Borrower fails to comply with any other provision of this Agreement and such failure is not cured within thirty (30) calendar days after notice from Lender; provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of one hundred twenty (120) days, unless, only in the case of cures that require construction or remedial work, such cure cannot with diligence be completed within such one hundred twenty (120) day period, in which case such period shall be extended for an additional one hundred twenty (120) days. The occurrence of an Event of Default, as defined in the Note, the Deed of Trust or any of the Other Security Documents, shall also be an "Event of Default" under this Agreement. Upon the occurrence and during the continuance of an Event of Default, Borrower shall not be entitled to receive any funds from the Replacement Reserve and Lender may use the Replacement Reserve Fund (or any portion thereof) for any purpose, including, but not limited to, completion of the Replacements as provided in Section 4, or for any other repair or replacement to the Property or toward payment of the Debt in such order, proportion and priority as Lender may determine in its sole discretion. Lender's right to withdraw and apply the Replacement Reserve Fund shall be in addition to all other rights and remedies provided to Lender under this Agreement, the Note, the Deed of Trust, the Other Security Documents, and at law or in equity. 7 5.2 Insufficient Funds in the Replacement Reserve. The insufficiency of any balance in the Replacement Reserve shall not relieve Borrower from its obligation (a) to fulfill all covenants in the Deed of Trust and the Other Security Documents, and (b) to complete all Replacements in accordance with the covenants and agreements in this Agreement and to pay all costs in connection therewith. 6. Waivers. 6.1 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with this Agreement, the Note, the Deed of Trust, any of the Other Security Documents, or the Obligations. 6.2 Waiver of Notice. To the extent permitted by applicable law, Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Lender is required by applicable law to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement does not specifically and expressly provide for the giving of notice by Lender to Borrower. 6.3 Waiver of Statute of Limitations. Borrower hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to any and all of its obligations hereunder. 6.4 Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS AGREEMENT, THE DEED OF TRUST OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. 7. Miscellaneous Provisions. 7.1 Notices. All notices or other written communications hereunder shall be given and become effective as provided in the Deed of Trust. 7.2 Choice of Law. This Agreement shall be governed, construed, applied and enforced in accordance with the laws of the State of California and the applicable laws of the United States of America. 7.3 Provisions Subject to Applicable Law. All rights, powers and remedies provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law and are intended to be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable under the provisions of any applicable law. 8 7.4 Inapplicable Provision. If any term of this Agreement or any application thereof shall be invalid or unenforceable, the remainder of this Agreement and any other application of the term shall not be affected thereby. 7.5 Costs. Borrower agrees to indemnify Lender and to hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs) arising from or in any way connected with the performance of the Replacements or the holding or disbursing of the Replacement Reserve or the Replacement Reserve Fund. Wherever it is provided for herein that Borrower pay any costs and expenses, such costs and expenses shall include, but not be limited to, all legal fees and disbursements of Lender (whether of retained firms, the reimbursement for the expenses of in-house staff or otherwise). Borrower hereby assigns to Lender all rights and claims Borrower may have against persons or entities supplying labor or materials in connection with the Replacements. 7.6 Headings, Etc. The headings and captions of various Sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting in any way, the scope or intent of the provisions hereof. 7.7 No Oral Change. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 7.8 Liability. If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. 7.9 Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 7.10 Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 7.11 Borrower's Records. Borrower shall furnish such financial statements, invoices, records, papers and documents relating to the Property as Lender may reasonably require from time to time to make the determinations permitted or required to be made by Lender under this Agreement. 7.12 No Third Party Beneficiary. This Agreement is intended solely for the benefit of Borrower and Lender and their respective successors and assigns, and no third party 9 shall have any rights or interest in the Replacement Reserve, the Replacement Reserve Fund, this Agreement, the Note, the Deed of Trust or any of the Other Security Documents. Nothing contained in this Agreement shall be deemed or construed to create an obligation on the part of Lender to any third party, nor shall any third party have a right to enforce against Lender any right that Borrower may have under this Agreement. 7.13 No Agency or Partnership. Nothing contained in this Agreement shall constitute Lender as a joint venturer, partner, agent, tenant-in-common or joint tenant of Borrower, or render Lender liable for any debts, obligations, acts, omissions, representations, or contracts of Borrower. 7.14 Termination of Replacement Reserve. After (a) payment in full of the Debt and release by Lender of the lien of the Deed of Trust and (b) payment in full for all Replacements completed or contracted to be performed prior to the date of the payment described in (a) above (provided Borrower has supplied Lender with evidence satisfactory to Lender of payment in full for all Replacements, and, if requested by Lender, waivers of liens and/or a title search of the Property or an endorsement to Lender's title insurance policy), Lender shall disburse to Borrower all amounts remaining in the Replacement Reserve, and this Agreement shall terminate. 7.15 Enforcement of Agreement. This Agreement is executed by Borrower and Lender for the benefit of Lender. Borrower understands and agrees that, in connection with any sale of the Loan to an Investor (as defined in the Deed of Trust), this Agreement may be assigned to such Investor. 7.16 Sole Discretion of Lender. Wherever pursuant to this Agreement (a) Lender exercises any right given to it to approve or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove all decisions that arrangements or terms are satisfactory or not satisfactory, and all other decisions and determinations made by Lender, shall be in the reasonable discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 7.17 Completion of Replacements. Lender's approval of any plans for any Replacement, release of funds from the Replacement Reserve, inspection of the Property by Lender or Lender's agents, or other acknowledgment of completion of any Replacement in a manner satisfactory to Lender shall not be deemed an acknowledgment or warranty to any person that the Replacement has been completed in accordance with applicable laws. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 10 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. "BORROWER" ILLUMINA, INC., a Delaware corporation By: /s/ TIMOTHY M. KISH ------------------------------- Timothy M. Kish Its: Vice President and Chief Financial Officer "LENDER" BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND By: /s/ COLLEEN IWANO ------------------------------- Colleen Iwano Its: Senior Vice President 11 EXHIBIT A List of Potential Replacements 1. Non-recurring capital repairs and replacements, including non-recurring structural repairs to the Property. 12 EX-10.19 4 a81502ex10-19.txt EXHIBIT 10.19 EXHIBIT 10.19 LOAN ASSUMPTION AND MODIFICATION AGREEMENT This Agreement, dated as of January 10, 2002, is entered into by and between BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND ("Lender"), DIVERSIFIED EASTGATE VENTURE, an Illinois general partnership ("Borrower"), and ILLUMINA, INC., a Delaware corporation ("Assuming Party"), with reference to the following facts: A. Borrower has signed, and is obligated to Lender under, the following documents, all of which are dated as of September 26, 2000, unless otherwise noted: 1. A Construction Loan Agreement (the "Loan Agreement"); 2. A Promissory Note (the "Note") in the original principal amount of Twenty Four Million Dollars ($24,000,000.00), payable to Lender, evidencing a loan (the "Loan") in the same principal amount; 3. A Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing (the "Deed of Trust") dated September 27, 2000, which secures the Note and other obligations of Borrower, which was recorded on September 27, 2000, as Document No. 2000-0516004, in the records of the County Recorder of San Diego County, California. The land, improvements and other real property which are subject to the Deed of Trust are hereinafter defined as the "Property"; 4. A UCC-1 financing statement filed with the California Secretary of State on October 2, 2000, as file no. 0027760702 (the "Existing UCC-1 Financing Statement"); 5. An Assignment of Leases and Rents dated September 27, 2000 (the "Assignment of Leases and Rents"); 6. An Environmental Indemnity Agreement (the "Existing Environmental Indemnity Agreement"); 7. An Assignment of Construction Agreements; 8. An Assignment of Architectural Agreements and Plans and Specifications; 9. An Assignment of Licenses, Permits and Contracts; 10. A Tenant Improvement and Leasing Commission Reserve Agreement (the "Existing TILC Reserve Agreement"); 11. A Replacement Reserve Agreement (the "Existing Replacement Reserve Agreement"); and Page 1 of 8 12. That certain modification to the Loan Documents dated September 27, 2001, modifying the terms of the Loan by, among other things, increasing the maximum amount thereof to Twenty Six Million Dollars ($26,000,000.00). The above documents, including any modifications and amendments thereto, together with this Agreement are hereinafter collectively defined as the "Loan Documents." B. The outstanding disbursed principal balance under the Note is Twenty Six Million Dollars ($26,000,000.00) and accrued interest on the Note is paid to January 1, 2002. C. Borrower has sold and conveyed the Property to Assuming Party, or is about to sell and convey the Property to Assuming Party. NOW, THEREFORE, FOR VALUABLE CONSIDERATION, including, without limitation, the mutual covenants and promises contained herein, the parties agree as follows: 1. INCORPORATION. The foregoing recitals are incorporated by this reference. 2. CONDITIONS PRECEDENT. Satisfaction, in the sole discretion of Lender, of each of the following is a condition precedent to Lender's obligations under this Agreement, (which satisfaction shall be evidenced by the recordation of the short form of this Agreement referred to below): 2.1 Receipt and approval by Lender of a title insurance policy issued by Chicago Title Insurance Company ("Title Company"), without any exception to fee title other than those expressly approved by Lender in writing, insuring Lender that the priority and validity of the Deed of Trust has not been and will not be impaired by this Agreement or the transactions contemplated hereby; 2.2 Receipt and approval by Lender of: (i) the executed original of this Agreement; (ii) a short form of this Agreement in form proper for recording; (iii) an Environmental Indemnity Agreement, (iv) Tenant Improvement and Leasing Reserve Agreement, (v) a Replacement Reserve Agreement, and (vi) any other documents and agreements which are required pursuant to this Agreement or which Lender requests; 2.3 Recordation in the Official Records of the County where the Property is located of the short form of this Agreement, together with such other documents and agreements, if any, required by this Agreement to be recorded; 2.4 Filing with the Delaware Secretary of State of a UCC Financing Statement (and such other filing offices as Lender requires), covering the collateral described in the Existing UCC-1 Financing Statement, which Financing Statement(s) Assuming Party hereby authorizes Lender to file; 2.5 Assuming Party's reimbursement to Lender of Lender's costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation, title insurance costs, recording fees, Page 2 of 8 attorneys' fees, appraisal, engineers' and inspection fees and documentation costs and charges, whether such services are furnished by Lender's employees or agents or independent contractors; 2.6 The representations and warranties contained in this Agreement are true and correct as of the date on which the other conditions precedent defined above are satisfied; 2.7 Receipt of by Lender of an opinion of counsel to Assuming Party, in form and content and covering such matters as Lender may require; and 2.8 Such other matters as Lender may require. 3. MODIFICATION OF LOAN DOCUMENTS. 3.1 The second paragraph on page 1 of the Deed of Trust is hereby amended and restated in its entirety to provide as follows: "Borrower, by its promissory note dated September 26, 2000, given to Lender, is indebted to Lender in the principal sum of Twenty-Four Million Dollars ($24,000,000.00), in lawful money of the United States of America (the note, together with all extensions, renewals, modifications, consolidations, substitutions, replacements, restatements and increases thereof, including but not limited to that certain modification dated September 27, 2001, which, among other things, increases the maximum amount thereof to Twenty Six Million Dollars ($26,000,000.00), shall collectively be referred to as the "Note"), with interest from the date thereof at the rates set forth in the Note, principal and interest to be payable in accordance with the terms and conditions provided in the Note." 3.2 Section 1 of the Assignment of Leases and Rents is hereby amended and restated in its entirety to provide as follows: "Security. This Assignment is made in consideration of that certain mortgage loan made by Assignor to Assignee, as evidenced by that certain note made by Assignor to Assignee, dated September 26, 2000, in the principal sum of Twenty-Four Million Dollars ($24,000,000.00) (together with all extensions, renewals, modifications, consolidations, substitutions, replacements, restatements and increases thereof, including but not limited to that certain modification dated September 27, 2001, which, among other things, increases the maximum amount thereof to Twenty Six Million Dollars ($26,000,000.00), collectively be referred to the `Note'), and secured by that certain Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing given by Assignor to Assignee, dated the date hereof, covering the Property and intended to be duly recorded (the `Deed of Trust'). The principal sum, interest and all other sums due and payable under the Note, the Deed of Trust and the Other Security Documents (hereinafter defined) are collectively referred to as the `Debt.' The documents other than this Assignment, the Note or the Deed of Trust now or hereafter executed by Assignor and/or others and by or in favor of Assignee which wholly or partially secure or guarantee payment of the Debt are hereinafter referred to as the `Other Security Documents.'" Page 3 of 8 4. CONVERSION TO PERMANENT TERM. Upon satisfaction of each of the conditions precedent to this Agreement defined above, the term of the Note shall be deemed converted to the Permanent Term (as defined in the Note). 5. EFFECTIVE DATE. The effective date of this Agreement shall be the date all of the conditions precedent defined above have been met to Lender's satisfaction. 6. ASSUMPTION. Assuming Party hereby assumes and agrees to pay when due all sums now due and owing or which hereafter become due and owing under the Note and the other Loan Documents and shall hereafter faithfully perform all of Borrower's obligations under and be bound by all of the provisions of the Loan Documents as if Assuming Party were an original signatory thereto and the execution of this Agreement by Assuming Party shall be deemed its execution of the Note, Deed of Trust and other Loan Documents. 7. RELEASE OF BORROWER. The parties acknowledge that Borrower shall be released from liability under the Loan Documents upon satisfaction of each of the conditions precedent to this Agreement defined above. In partial consideration of such release, Borrower warrants to Lender that Borrower has no further interest in the Property or in any other real or personal property in which Lender has a security interest under any Loan Document. 8. TERMINATION OF CERTAIN EXISTING DOCUMENTS. Upon satisfaction of each of the conditions precedent to this Agreement defined above, (i) that certain Repayment Guaranty dated September 26, 2000, executed by WILLIAM P. TSCHANTZ, in his individual capacity and as Trustee of the Tschantz Family Trust dated November 30, 1993; JANET A. TSCHANTZ, an individual; ROBERT C. TSCHANTZ, an individual; ANGELA D. TSCHANTZ, an individual; EDMUND T. BANNING, in his individual capacity and as Co-Trustee of the Edmund and Laura Banning Trust dated April 27, 1988 (as amended from time to time, the "Banning Trust") and LAURA L. BANNING, in her individual capacity and as Co-Trustee of the Banning Trust, to, with, and for the benefit of WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND, and (ii) the Existing Environmental Indemnity Agreement, the Existing TILC Reserve Agreement and the Replacement Reserve Agreement shall be deemed terminated and of no further force or effect. 9. ASSIGNMENT. Borrower hereby irrevocably and unconditionally assigns to Assuming Party all of Borrower's right, title and interest in and to: 9.1 The Property; 9.2 The Loan Documents; 9.3 All plans and specifications and contracts for construction of all or any part of the Improvements (as defined in the Loan Agreement); 9.4 All contracts for architectural and engineering work for all or any part of the Improvements; Page 4 of 8 9.5 All reciprocal easement agreements, operating agreements, and declarations of conditions, covenants and restrictions related to the Property; 9.6 All leases related to the Property; and 9.7 All sums currently held by or for the benefit of Lender under the Existing TILC Reserve Agreement and the Existing Replacement Reserve Agreement. Borrower represents and warrants to Lender that Borrower has obtained all consents to such assignments which are required by any agreement respecting any of the above. Borrower and Assuming Party agree as follows, which agreement shall have no effect on the rights of Lender or on the duties and obligations owing by Borrower or Assuming Party with respect to Lender: Assuming Party indemnifies and agrees to hold Borrower harmless from and against all claims, liabilities, losses, damages, causes of action and expenses (including court costs and reasonable attorneys' fees) (collectively, "Claims") incurred in connection with any obligations under the Loan Documents where the basis for such Claims arises out of an act or omission of Assuming Party occurring on or after the date of this assignment. Assignor indemnifies and agrees to hold Assuming Party harmless from and against all Claims incurred in connection with any obligations under the Loan Documents where the basis for such Claims arises out of an act or omission of Borrower before the date of this assignment. 10. NO CONSENTS NECESSARY. Assuming Party and Borrower each hereby represent and warrant to Lender, each to the best of its respective knowledge, that: (i) no Default, breach or failure of condition has occurred, or would exist with notice or the lapse of time or both, under any of the Loan Documents (as modified by this Agreement), and that all representations and warranties herein and in the other Loan Documents are true and correct as of the date hereof; and (ii) no consent to the transfer of the Property to Assuming Party is required under any agreement to which Borrower or Assuming Party is a party, including, without limitation, under any lease, construction agreement, operating agreement, deed of trust, mortgage or security instrument (other than the Loan Documents). 11. STATUS OF ASSUMING PARTY. Assuming Party represents and warrants to Lender that (i)) Assuming Party is not in default under any other loan of Assuming Party in favor of any other lender, and (ii) Assuming Party is not currently a debtor in any bankruptcy, reorganization, insolvency or similar proceeding. 12. WAIVER OF ACCELERATION. Lender hereby agrees that it shall not exercise its right to cause all sums secured by the Deed of Trust to become immediately due and payable because of the conveyance of the Property from Borrower to Assuming Party; provided, however, Lender reserves its right under the terms of the Deed of Trust to accelerate all principal and interest in the event of any subsequent sale, transfer, encumbrance or other conveyance of the Property. 13. KNOWLEDGE OF LOAN DOCUMENTS. Assuming Party warrants that Assuming Party has personal knowledge of all terms and conditions of the Loan Documents, and Page 5 of 8 further agrees that Lender has no obligation or duty to provide any information to Assuming Party regarding the terms and conditions of the Loan Documents. Assuming Party further understands and acknowledges that, except as expressly provided in a writing executed by Lender, Lender has not waived any right of Lender or obligation under the Loan Documents and Lender has not agreed to any modification of any provision of any Loan Document or to any extension of the Loan. 14. HAZARDOUS MATERIALS; CCP SECTION 726.5; SECTION 736. Without in any way limiting any other provision of this Agreement, Assuming Party expressly reaffirms as of the date hereof, and continuing hereafter: (i) each and every representation and warranty in the Loan Documents respecting "Hazardous Materials"; and (ii) each and every covenant and indemnity in the Loan Documents respecting "Hazardous Materials". In addition, Assuming Party and Lender agree that: (i) this Section is intended as Lender's written request for information (and Assuming Party's response) concerning the environmental condition of the real property security under the terms of California Code of Civil Procedure Section 726.5; and (ii) each representation and/or covenant in this Agreement or any other Loan Document (together with any indemnity applicable to a breach of any such representation and/or covenant) with respect to the environmental condition of the real property security is intended by Lender and Assuming Party to be an "environmental provision" for purposes of California Code of Civil Procedure Section 736. 15. MULTIPLE PARTIES. If more than one person or entity has signed this Agreement as Assuming Party or Borrower, then all references in this Agreement to Assuming Party or Borrower shall mean each and all of the persons so signing, as applicable. The liability of all persons and entities signing shall be joint and several. 16. CONFIRMATION OF SECURITY INTEREST. Nothing contained herein shall affect or be construed to affect any lien, charge or encumbrance created by any Loan Document or the priority of any such lien, charge or encumbrance over any other liens, charges or encumbrances. All assignments and transfers by Borrower to Assuming Party are subject to any security interest(s) held by Lender. 17. INTEGRATION; INTERPRETATION. The Loan Documents, including this Agreement, contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated herein and supersede all prior negotiations and shall not be modified except by written instrument executed by all parties. 18. SUCCESSORS AND ASSIGNS. Subject to all prohibitions against transfer contained in any Loan Document, this Agreement is binding upon and shall inure to the benefit of the heirs, successors and assigns of the parties. 19. ATTORNEYS' FEES; ENFORCEMENT. If any attorney is engaged by Lender to enforce or defend any provision of this Agreement, or as a consequence of any default under this Agreement, with or without the filing of any legal action or proceeding, Assuming Party shall pay to Lender, immediately upon demand, all attorneys' fees and all costs incurred by Lender in connection therewith, together with interest thereon from Page 6 of 8 the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein. 20. MISCELLANEOUS. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, except to the extent preempted by federal law. Any term of this Agreement which is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable shall be deemed severed herefrom and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had not been a part hereof. The headings used in this Agreement are for convenience only and shall be disregarded in interpreting the substantive provisions of this Agreement. Time is of the essence. IN WITNESS THEREOF, Borrower, Assuming Party and Lender hereby execute this Agreement. "LENDER" BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND By: /s/ COLLEEN IWANO ---------------------------- Colleen Iwano Its: Senior Vice President "BORROWER" DIVERSIFIED EASTGATE VENTURE, an Illinois general partnership By: Diversified Eastgate Pointe, LLC, a California limited liability company Its: General Partner By: /s/ WILLIAM P. TSCHANTZ ------------------------- William P. Tschantz Its: Manager By: GFBP Partners, LLC., a California limited liability company Its: General Partner By: /s/ WILLIAM P. TSCHANTZ ------------------------- William P. Tschantz Its: Manager Page 7 of 8 "ASSUMING PARTY" ILLUMINA, INC., a Delaware corporation By: /s/ TIMOTHY M. KISH -------------------------------- Timothy M. Kish Its: Vice President and Chief Financial Officer Page 8 of 8 EX-10.20 5 a81502ex10-20.txt EXHIBIT 10.20 EXHIBIT 10.20 TENANT IMPROVEMENT AND LEASING COMMISSION RESERVE AGREEMENT This TENANT IMPROVEMENT AND LEASING COMMISSION RESERVE AGREEMENT ("Agreement") is made as of January 10, 2002, by and between ILLUMINA, INC., a Delaware corporation, having its principal place of business at 9885 Towne Centre Drive, San Diego, California 92121 ("Borrower"), and BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND, having an address at c/o Washington Capital Management, Inc., 4350 La Jolla Village Drive, Suite 960, San Diego, California 92122 ("Lender"), with reference to the following facts: A. Borrower, by its assumption of a promissory note dated September 26, 2000, executed by Eastgate Diversified Venture, an Illinois general partnership, given to Lender (the note, together with all extensions, renewals, modifications, consolidations, substitutions, replacements, restatements and increases thereof shall collectively be referred to as the "Note") is indebted to Lender in the principal sum of Twenty Six Million Dollars ($26,000,000.00), in lawful money of the United States of America, with interest at the rates set forth in the Note (the indebtedness evidenced by the Note, together with such interest accrued thereon, shall collectively be referred to as the "Loan"), principal and interest to be payable in accordance with the terms and conditions provided in the Note. B. The Loan is secured by, among other things, a Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing (the "Deed of Trust"), dated as of September 27, 2000, which grants Lender a first lien on the property encumbered thereby (the "Property"). All and any of the documents other than the Note, the Deed of Trust and this Agreement now or hereafter executed by Borrower and/or others and by or in favor of Lender, which wholly or partially secure or guarantee payment of the Note are referred to as the "Other Security Documents." C. Lender requires as a condition to the assumption of the Loan by Borrower that Borrower enter into this Agreement and make certain deposits with Lender as provided in this Agreement as additional security for all of Borrower's obligations under the Note, the Deed of Trust and the Other Security Documents. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Deposits to the Tenant Improvement and Leasing Commission Reserve. 1.1 Monthly Deposit. On each date that a regularly scheduled payment of principal or interest is due under the Note, Borrower shall deposit with Lender (or, at Lender's election, in a pledged bank or escrow account in the name of Borrower and pledged to and selected by Lender) the sum of Twenty Thousand Dollars ($20,000.00) (the "Monthly Deposit"). 1.2 Reassessment of Monthly Deposit. No more often than once each "Loan Year" (as defined below), Lender may reassess its estimate of the amount necessary for the 1 Tenant Improvement and Leasing Commission Reserve Fund (defined below) and may increase the amount of the Monthly Deposit by thirty (30) calendar days written notice to Borrower, if Lender determines in its reasonable discretion that an increase is commercially reasonable and necessary to maintain a proper reserve to fund the costs of likely Tenant Improvements and/or Leasing Commissions (each as defined below) for the retenanting of the Property during the remaining term of the Loan. For purposes of this Section 1.2, a "Loan Year" means each 365 day period (or 366 day period in leap years) commencing with the date of this Agreement and ending on each anniversary thereof. 1.3 Shell Space Reserve. If any unimproved shell space exists, as of the Conversion Date, in (a) that certain two-story building consisting of approximately 46,250 rentable square feet ("Building A") on the Property, or (b) that certain two-story building consisting of approximately 51,250 rentable square feet ("Building B") on the Property, Borrower shall deposit with Lender One Hundred Dollars ($100.00) for each square foot of such unimproved shell space (the "Shell Space Reserve"). Monthly Deposits and the Shell Space Reserve shall collectively be referred to herein as the "Tenant Improvement and Leasing Commission Reserve Fund." 1.4 Tenant Improvement and Leasing Commission Reserve. Lender shall invest or cause to be invested the Tenant Improvement and Leasing Commission Reserve Fund, as received, in highly liquid, short-term U.S. government securities (the "Tenant Improvement and Leasing Commission Reserve") selected by Lender with any interest and gains in investment value accruing thereon to Borrower's benefit. Borrower hereby acknowledges and confirms that (a) the Tenant Improvement and Leasing Commission Reserve Fund shall not constitute a trust fund (and, if deposited in Lender's name, such funds may be commingled with other monies held by Lender, but, if held in the name of Borrower, such funds shall not be commingled with any other monies held by Borrower), and (b) Lender or its designee shall have the sole right to make or approve withdrawals from the Tenant Improvement and Leasing Commission Reserve. 2. Pledge of Tenant Improvement and Leasing Commission Reserve. As additional security for the payment of all sums due under the Loan and the performance by Borrower of the Obligations (as defined in the Deed of Trust), Borrower hereby pledges, assigns and grants to Lender a continuing perfected security interest in and to and a first lien upon, the Tenant Improvement and Leasing Commission Reserve Fund and the Tenant Improvement and Leasing Commission Reserve; provided that, Lender shall make disbursements from the Tenant Improvement and Leasing Commission Reserve in accordance with the terms of this Agreement. 3. Disbursements From Tenant Improvement and Leasing Commission Reserve 3.1 Disbursements for Tenant Improvements and Leasing Commissions Only. Lender shall make disbursements from the Tenant Improvement and Leasing Commission Reserve to pay or reimburse Borrower only for the cost of (a) tenant improvements required under any new lease or modification, renewal or extension of any existing lease which is entered into after the date hereof for the Property, provided that any such new lease or modification, renewal or extension of any existing lease which is entered into after the date hereof is done so in 2 accordance with the terms and provisions of the Deed of Trust and the Other Security Documents (collectively, the "Tenant Improvements"), and (b) leasing commissions incurred by Borrower in connection with the leasing of the Property or a portion thereof, provided that (x) such leasing commissions are reasonable and customary for properties similar to the Property and (y) the amount of such leasing commission is determined pursuant to arms length transactions between Borrower and any leasing agent to which a leasing commission is due, and excluding any leasing commissions which shall be due any member, general partner or shareholder of Borrower or any affiliate of Borrower (collectively, "Leasing Commissions"), in each case in the manner provided in this Section 3. Lender shall, upon written request from Borrower and satisfaction of the requirements set forth in this Section 3 and Section 4 of this Agreement, disburse to Borrower amounts from the Tenant Improvement and Leasing Commission Reserve necessary to pay for the actual approved costs of (I) Tenant Improvements or to reimburse Borrower therefor, upon completion of such Tenant Improvements (or, upon partial completion in the case of Tenant Improvements made pursuant to Section 3.5) as determined by Lender, and (II) Leasing Commissions upon satisfactory evidence that the obligations of the leasing agent have been fully performed. In no event shall Lender be obligated to disburse funds from the Tenant Improvement and Leasing Commission Reserve if an Event of Default (hereinafter defined) exists. 3.2 Request for Disbursement for Tenant Improvement. Each request for disbursement from the Tenant Improvement and Leasing Commission Reserve in connection with a Tenant Improvement shall be in a form specified or approved by Lender and shall specify (a) the specific Tenant Improvements for which the disbursement is requested, (b) the quantity and price of each item purchased, if the Tenant Improvement includes the purchase or replacement of specific items, (c) the price of all materials (grouped by type or category) used in any Tenant Improvement other than the purchase or replacement of specific items, and (d) the cost of all contracted labor or other services applicable to each Tenant Improvement for which such request for disbursement is made. With each such request, Borrower shall certify that all Tenant Improvements have been made in accordance with applicable laws and shall also deliver a certificate from the tenants for which the Tenant Improvements have been performed stating that such Tenant Improvements have been completed in a manner satisfactory and acceptable to such tenant, that such tenant has accepted the premises and containing such other information as Lender may require, in form and substance reasonably satisfactory to Lender. Each request for disbursement shall include copies of invoices for all items or materials purchased and all contracted labor or services provided and each request shall include evidence satisfactory to Lender of payment of all such amounts. Except as provided in Section 3.5, each request for disbursement from the Tenant Improvement and Leasing Commission Reserve shall be made only after completion of the Tenant Improvement for which disbursement is requested. Borrower shall provide Lender evidence of completion satisfactory to Lender in its reasonable judgment. 3.3 Request for Disbursement for Leasing Commissions. Each request for disbursement from the Tenant Improvement and Leasing Commission Reserve in connection with a Leasing Commission shall be in a form specified or approved by Lender and shall specify (a) the Leasing Commissions for which such disbursement is requested, and (b) the amount of each Leasing Commission. With each such request, Borrower shall certify that the obligations of the leasing agent have been fully performed, and Borrower shall also deliver a certification from 3 the leasing agent that no further sums are due to it in connection with the applicable Leasing Commission. Each request for disbursement shall include copies of invoices and bills for such Leasing Commissions marked paid; or Lender may in its sole discretion, accept copies of cancelled checks in satisfaction of this requirement. 3.4 Disbursement Conditions. Borrower shall pay all invoices in connection with the Tenant Improvements with respect to which a disbursement is requested prior to submitting such request for disbursement from the Tenant Improvement and Leasing Commission Reserve unless all such invoices do not exceed $10,000.00, in which case Lender shall disburse the amount for such invoices directly to Borrower and Borrower covenants and agrees to promptly pay such invoices. In addition, as a condition to any disbursement, Lender may require Borrower to obtain lien waivers from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000.00 for completion of its work or delivery of its materials. Any lien waiver delivered hereunder shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for the Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current reimbursement request. Lender may in its sole discretion, accept copies of cancelled checks in lieu of, or in addition to any of the foregoing invoice and/or lien waiver requirements. 3.5 Partial Completion. If (a) the time required to complete a Tenant Improvement exceeds one month, (b) the contractor performing such Tenant Improvement requires periodic payments pursuant to the terms of a written contract, (c) Lender has approved in writing in advance such periodic payments, and (d) the cost of the portion of the work completed under such contract exceeds Ten Thousand Dollars ($10,000.00), a request for reimbursement from the Tenant Improvement and Leasing Commission Reserve may be made after completion of a portion of the work under such contract, provided (i) such contract requires payment upon completion of such portion of the work, (ii) the materials for which the request is made are on site at the Property and are properly secured or have been installed in the Property, (iii) all other conditions in this Agreement for disbursement have been satisfied, (iv) funds remaining in the Tenant Improvement and Leasing Commission Reserve are, in Lender's judgment, sufficient to complete such Tenant Improvement and fund other Tenant Improvements and Leasing Commissions when required, and (v) each contractor or subcontractor receiving payments under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. 3.6 Number of Requests. Except as provided in Section 3.5, Borrower shall not make a request for disbursement from the Tenant Improvement and Leasing Commission Reserve more frequently than once in any calendar month. 4. Performance of Tenant Improvements. 4.1 Workmanlike Completion. Borrower shall make Tenant Improvements when required under the terms of the applicable Lease. Borrower shall complete all Tenant Improvements in a good and workmanlike manner as soon as practicable following the commencement of making each such Tenant Improvement. 4 4.2 Contracts. Lender reserves the right, at its option, to approve all contracts or work orders with materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or materials in connection with the Tenant Improvements. Upon Lender's request, Borrower shall assign any contract or subcontract to Lender. 4.3 Lender's Right to Complete Tenant Improvements. In the event Lender determines in its reasonable discretion that any Tenant Improvement is not being performed in a workmanlike or timely manner or that any Tenant Improvement has not been completed in a workmanlike or timely manner, Lender shall have the option to withhold disbursement for such unsatisfactory Tenant Improvement and to proceed under existing contracts or to contract with third parties to complete such Tenant Improvement and to apply the Tenant Improvement and Leasing Commission Reserve Fund toward the labor and materials necessary to complete such Tenant Improvement, without providing any prior notice to Borrower, and to exercise any and all other remedies available to Lender upon an Event of Default. 4.4 Entry onto Property. In order to facilitate Lender's completion or making of the Tenant Improvements pursuant to Section 4.3 above, Borrower grants Lender the right to enter onto the Property and perform any and all work and labor necessary to complete or make the Tenant Improvements and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to Borrower and secured by the Deed of Trust. For this purpose, Borrower constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the Tenant Improvements in the name of Borrower. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Borrower empowers said attorney-in-fact as follows: (a) to use any funds in the Tenant Improvement and Leasing Commission Reserve for the purpose of making or completing the Tenant Improvements; (b) to make such additions, changes and corrections to the Tenant Improvements as shall be necessary or desirable to complete the Tenant Improvements; (c) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (d) to pay, settle or compromise all existing bills and claims which are or may become liens against the Property, or as may be necessary or desirable for the completion of the Tenant Improvements, or for clearance of title; (e) to execute all applications and certificates in the name of Borrower which may be required by any of the contract documents; (f) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with the Property or the rehabilitation and repair of the Property; and (g) to do any and every act which Borrower might do in its own behalf to fulfill the terms of this Agreement. 4.5 No Obligation of Lender. Nothing in this Section 4 shall: (a) make Lender responsible for making or completing the Tenant Improvements; (b) require Lender to expend funds in addition to the Tenant Improvement and Leasing Commission Reserve Fund to make or complete any Tenant Improvement; (c) obligate Lender to proceed with the Tenant Improvements; or (d) obligate Lender to demand from Borrower additional sums to make or complete any Tenant Improvement. 4.6 Inspections. 5 (a) Borrower shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties making Tenant Improvements pursuant to this Section 4 to enter onto the Property during normal business hours (subject to the rights of tenants under their Leases) to inspect the progress of any Tenant Improvements and all materials being used in connection therewith, to examine all plans and shop drawings relating to such Tenant Improvements which are or may be kept at the Property, and to complete any Tenant Improvements made pursuant to this Section 4. Borrower shall cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 4.6 or the completion of Tenant Improvements pursuant to this Section 4. (b) Lender may require an inspection of the Property at Borrower's expense prior to making a monthly disbursement from the Tenant Improvement and Leasing Commission Reserve in order to verify completion of the Tenant Improvements for which reimbursement is sought. Lender may require that such inspection be conducted by an appropriate, independent, qualified professional selected by Lender and/or may require a copy of a certificate of completion by an independent, qualified professional acceptable to Lender prior to the disbursement of any amounts from the Tenant Improvement and Leasing Commission Reserve. Borrower shall pay the expense of the inspection as required hereunder, whether such inspection is conducted by Lender or by an independent, qualified professional. 4.7 Lien-Free Completion. (a) The Tenant Improvements and all materials, equipment, fixtures, or any other item comprising a part of any Tenant Improvement shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for those liens existing on the date of this Agreement which have been approved in writing by Lender, if any). (b) Lender may require Borrower to provide Lender with a search of title to the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other liens of any nature have been placed against the Property since the date of recordation of the Deed of Trust and that title to the Property is free and clear of all liens (other than the lien of the Deed of Trust and any other liens previously approved in writing by Lender, if any). 4.8 Compliance with Laws. All Tenant Improvements shall comply with all applicable laws and applicable insurance requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. 4.9 Insurance Requirements. In addition to any insurance required under the Deed of Trust and the Other Security Documents, Borrower shall provide or cause to be provided workmen's compensation insurance, builder's risk, and public liability insurance and other insurance to the extent required under applicable law in connection with a particular Tenant Improvement. All such policies shall be in form and amount reasonably satisfactory to Lender. All such policies which can be endorsed with standard mortgagee clauses making loss payable to 6 Lender or its assigns shall be so endorsed. Certified copies of such policies shall be delivered to Lender. 5. Failure to Make Tenant Improvements. 5.1 Event of Default. It shall be an "Event of Default" under this Agreement if Borrower (a) fails to make any Monthly Deposit payment required hereunder within ten (10) calendar days of the date when due, or (b) fails to comply with any provision of this Agreement and such failure is not cured within thirty (30) calendar days after notice from Lender; provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of one hundred twenty (120) days, unless, only in the case of cures that require construction or remedial work, such cure cannot with diligence be completed within such one hundred twenty (120) day period, in which case such period shall be extended for an additional one hundred twenty (120) days. The occurrence of an Event of Default, as defined in the Note, the Deed of Trust or any of the Other Security Documents, shall also be an "Event of Default" under this Agreement. Upon the occurrence and during the continuance of an Event of Default, Borrower shall not be entitled to receive any funds from the Tenant Improvement and Leasing Commission Reserve and Lender may use the Tenant Improvement and Leasing Commission Reserve Fund (or any portion thereof) for any purpose, including, but not limited to, completion of the Tenant Improvements as provided in Section 4, payment of any Leasing Commissions then due and payable, or for any other repair or replacement to the Property or toward payment of the Debt in such order, proportion and priority as Lender may determine in its sole discretion. Lender's right to withdraw and apply the Tenant Improvement and Leasing Commission Reserve Fund shall be in addition to all other rights and remedies provided to Lender under this Agreement, the Note, the Deed of Trust, the Other Security Documents, and at law or in equity. 5.2 Insufficient Funds in the Tenant Improvement and Leasing Commission Reserve. The insufficiency of any balance in the Tenant Improvement and Leasing Commission Reserve shall not relieve Borrower from its obligation to fulfill (a) all covenants in the Deed of Trust and the Other Security Documents, (b) any covenants or agreements with any tenants under any Leases, or (c) any agreements with any leasing agents. 6. Waivers. 6.1 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with this Agreement, the Note, the Deed of Trust, any of the Other Security Documents, or the Obligations. 6.2 Waiver of Notice. To the extent permitted by applicable law, Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Lender is required by 7 applicable law to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement does not specifically and expressly provide for the giving of notice by Lender to Borrower. 6.3 Waiver of Statute of Limitations. Borrower hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to any and all of its obligations hereunder. 6.4 Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS AGREEMENT, THE DEED OF TRUST OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. 7. Miscellaneous Provisions. 7.1 Notices. All notices or other written communications hereunder shall be given and become effective as provided in the Deed of Trust. 7.2 Choice of Law. This Agreement shall be governed, construed, applied and enforced in accordance with the laws of the State of California and the applicable laws of the United States of America. 7.3 Provisions Subject to Applicable Law. All rights, powers and remedies provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law and are intended to be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable under the provisions of any applicable law. 7.4 Inapplicable Provision. If any term of this Agreement or any application thereof shall be invalid or unenforceable, the remainder of this Agreement and any other application of the term shall not be affected thereby. 7.5 Costs. Borrower agrees to indemnify Lender and to hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs) arising from or in any way connected with the performance of the Tenant Improvements or in connection with any Leasing Commissions or the holding or disbursing of the Tenant Improvement and Leasing Commission Reserve or the Tenant Improvement and Leasing Commission Reserve Fund. Wherever it is provided for herein that Borrower pay any costs and expenses, such costs and expenses shall include, but not be limited to, all legal fees and disbursements of Lender (whether of retained firms, the reimbursement for the expenses of in-house staff or otherwise). Borrower hereby assigns to Lender all rights and claims Borrower may have against all persons or entities acting as a leasing agent in connection with Leasing Commissions. 8 7.6 Headings, Etc. The headings and captions of various Sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting in any way, the scope or intent of the provisions hereof. 7.7 No Oral Change. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing, signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 7.8 Liability. If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. 7.9 Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 7.10 Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 7.11 Borrower's Records. Borrower shall furnish such financial statements, invoices, records, papers and documents relating to the Property as Lender may reasonably require from time to time to make the determinations permitted or required to be made by Lender under this Agreement. 7.12 No Third Part Beneficiary. This Agreement is intended solely for the benefit of Borrower and Lender and their respective successors and assigns, and no third party shall have any rights or interest in the Tenant Improvement and Leasing Commission Reserve, the Tenant Improvement and Leasing Commission Reserve Fund, this Agreement, the Note, the Deed of Trust or any of the Other Security Documents. Nothing contained in this Agreement shall be deemed or construed to create an obligation on the part of Lender to any third party, nor shall any third party have a right to enforce against Lender any right that Borrower may have under this Agreement. 7.13 No Agency or Partnership. Nothing contained in this Agreement shall constitute Lender as a joint venturer, partner, agent, tenant-in-common or joint tenant of Borrower, or render Lender liable for any debts, obligations, acts, omissions, representations, or contracts of Borrower. 7.14 Termination of Tenant Improvement and Leasing Commission Reserve. After (a) payment in full of the Debt and release by Lender of the lien of the Deed of Trust and (b) payment in full for all (i) Tenant Improvements completed or contracted to be performed, or 9 (i) Leasing Commissions due and payable, in each case prior to the date of the payment described in (a) above, Lender shall disburse to Borrower all amounts remaining in the Tenant Improvement and Leasing Commission Reserve, and this Agreement shall terminate. 7.15 Enforcement of Agreement. This Agreement is executed by Borrower and Lender for the benefit of Lender. Borrower understands and agrees that, in connection with any sale of the Loan to an Investor (as defined in the Deed of Trust), this Agreement may be assigned to such Investor. 7.16 Sole Discretion of Lender. Wherever pursuant to this Agreement (a) Lender exercises any right given to it to approve or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove all decisions that arrangements or terms are satisfactory or not satisfactory, and all other decisions and determinations made by Lender, shall be in the reasonable discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 7.17 Completion of Tenant Improvements. Lender's approval of any plans for any Tenant Improvement, release of funds from the Tenant Improvement and Leasing Commission Reserve, inspection of the Property by Lender or Lender's agents, or other acknowledgment of completion of any Tenant Improvement in a manner satisfactory to Lender shall not be deemed an acknowledgment or warranty to any person that the Tenant Improvement has been completed in accordance with applicable laws. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 10 IN WITNESS WHEREOF the undersigned have executed this Agreement as of the date first written above. "BORROWER" ILLUMINA, INC., A Delaware corporation By: /s/ TIMOTHY M. KISH ------------------------------- Timothy M. Kish Its: Vice President and Chief Financial Officer "LENDER" BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND By: /s/ COLEEN IWANO ------------------------------- Colleen Iwano Its: Senior Vice President 11 EX-10.21 6 a81502ex10-21.txt EXHIBIT 10.21 EXHIBIT 10.21 ILLUMINA, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN AS AMENDED AND RESTATED THROUGH MARCH 21, 2002 The following constitute the provisions of the 2000 Employee Stock Purchase Plan of Illumina, Inc. 1. PURPOSE. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. DEFINITIONS. (a) "BOARD" shall mean the Board of Directors of the Company or any committee thereof designated by the Board of Directors of the Company in accordance with Section 14 of the Plan. (b) "CODE" shall mean the Internal Revenue Code of 1986, as amended. (c) "COMMON STOCK" shall mean the common stock of the Company. (d) "COMPANY" shall mean Illumina, Inc., a Delaware corporation and any Designated Subsidiary of the Company. (e) "COMPENSATION" shall mean all base straight time gross earnings, but exclusive of commissions, payments for overtime, shift premium, incentive compensation, incentive payments, bonuses and other compensation. Such Compensation shall be calculated before deduction of (i) any income or employment tax withholdings or (ii) any contributions made by the participant to any Code Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit program now or hereafter established by the Company or any of its Subsidiaries. (f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary that has been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan. (g) "EMPLOYEE" shall mean any individual who is an Employee of the Company for tax purposes and whose customary employment with the Company is at least twenty (20) hours per week for more than five (5) months in any calendar year. (h) "ENROLLMENT DATE" shall mean the first Trading Day of each Offering Period. (i) "EXERCISE DATE" shall mean the first Trading Day in February and August of each year. (j) "FAIR MARKET VALUE" shall mean, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing selling price per share for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board; or (iv) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair Market Value shall be the initial price per share at which the Common Stock was sold pursuant to the underwriting agreement for the Company's initial public offering of the Common Stock. (k) "OFFERING PERIODS" shall mean the periods of approximately twenty-four (24) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day in February and August each year and terminating on the first Trading Day in February or August which is approximately twenty-four months later; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the registration statement on Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Common Stock (the "Registration Statement") effective and ending on the first Trading Day in August 2002. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan. (l) "PLAN" shall mean this 2000 Employee Stock Purchase Plan. (m) "PURCHASE PERIOD" shall mean the approximately six month period commencing on one Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end on February 1, 2001. (n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided, however, that the Purchase Price may be adjusted by the Board pursuant to Section 20. (o) "RESERVES" shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares 2 of Common Stock which have been authorized for issuance under the Plan but not yet placed under option. (p) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. (q) "TRADING DAY" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading. 3. ELIGIBILITY. (a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan. (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. OFFERING PERIODS. The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day in February and August each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 20 hereof; provided, however that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Registration Statement effective and ending on the first Trading Day in August 2002. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter. 5. PARTICIPATION. (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company's payroll office prior to the applicable Enrollment Date. (b) Once an eligible Employee becomes a participant in the Plan, such individual shall remain a participant until he or she terminates such participation as provided in Section 10 hereof, the Plan terminates or the participant loses his or her status as an Employee. 3 (c) An eligible Employee may be enrolled in only one Offering Period at a time. 6. PAYROLL DEDUCTIONS. (a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during the Offering Period; provided, however that should a pay day occur on an Exercise Date, a participant shall have the payroll deductions made on such day applied to his or her account under the new Offering Period or Purchase Period, as the case may be. (b) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account. (c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Company may, in its discretion, limit the nature and/or number of participation rate changes during any Offering Period, and may establish such other conditions or limitations as it deems appropriate for Plan administration. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof. (d) If by reason of the limitations set forth in Sections 3(b), 7 and 13(a), any option of a Participant does not accrue for a particular Purchase Period, then the payroll deductions that the Participant made during that Purchase Period with respect to such option shall be promptly refunded. In addition, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be decreased to one percent (1%) at any time during a Purchase Period. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof. (e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee. 4 7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of whole shares of the Company's Common Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase during each Purchase Period more than 25,000 shares of the Company's Common Stock (subject to any adjustment pursuant to Section 19), and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 13 hereof. The Board may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of the Company's Common Stock an Employee may purchase during each Purchase Period of such Offering Period. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The option shall expire on the last day of the Offering Period. 8. EXERCISE OF OPTION. (a) Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant's account which are not sufficient to purchase a full share shall be retained in the participant's account for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the participant as provided in Section 10 hereof. Any other monies left over in a participant's account after the Exercise Date shall be returned to the participant. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. (b) If the Board determines that, on a given Exercise Date, the number of shares with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such Exercise Date, the Board may in its sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, or (y) provide that the Company shall make a pro rata allocation of the shares available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20 hereof. The Company may make pro rata allocation of the shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company's stockholders subsequent to such Enrollment Date. 5 9. DELIVERY. As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option. 10. WITHDRAWAL. (a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant's payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement. (b) A participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws. 11. TERMINATION OF OPTION. (a) Upon a participant's ceasing to be an Employee, for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant's account during the Offering Period but not yet used to exercise the option shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15 hereof, and such participant's option shall be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice of termination of employment shall be treated as continuing to be an Employee for the participant's customary number of hours per week of employment during the period in which the participant is subject to such payment in lieu of notice. (b) Should the participant cease to be an Employee by reason of an approved unpaid leave of absence, then the participant shall have the right, exercisable up until the last business day of the Purchase Period in which such leave commences, to (i) withdraw all the payroll deductions collected to date on his or her behalf for that Purchase Period or (ii) have such funds held for the purchase of shares on his or her behalf on the next scheduled Exercise Date. Upon the participant's return to active service (A) within ninety (90) days following the commencement of such leave or (B) prior to the expiration of any longer period for which such participant's right to reemployment with the Company is guaranteed by statute or contract, his or her payroll deductions under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the participant withdraws from the Plan prior to his or her return. An individual who returns to active employment following a leave of absence that exceeds in duration the applicable (A) or (B) time period will be treated as a new Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before the next Enrollment Date. 6 12. INTEREST. No interest shall accrue on the payroll deductions of a participant in the Plan. 13. STOCK. (a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 1,458,946 shares, which consists of the (i) 500,000 shares initially reserved under the Plan and (ii) the 958,946 share automatic increase for the fiscal year 2001. The Board determined that no automatic increase would take effect for the fiscal year 2002. (b) The share reserve shall increase annually on the first day of the Company's fiscal year, beginning in 2001, by the number of shares equal to the lesser of (i) 1,500,000 shares, (ii) 3% of the outstanding shares of Common Stock on the last day of the immediately preceding fiscal year or (iii) an amount determined by the Board. (c) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised. (d) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse. 14. ADMINISTRATION. The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties. 15. DESIGNATION OF BENEFICIARY. (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to 7 any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 16. TRANSFERABILITY. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof. 17. USE OF FUNDS. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. 18. REPORTS. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any. 19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, MERGER OR ASSET SALE. (a) CHANGES IN CAPITALIZATION. Subject to any required action by the stockholders of the Company, the Reserves (including the number of shares automatically added annually to the Plan pursuant to Section 13(a)(i)), the maximum number of shares each participant may purchase each Purchase Period (pursuant to Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. (b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board. The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New 8 Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. (c) MERGER OR ASSET SALE. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, any Purchase Periods then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date") and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. 20. AMENDMENT OR TERMINATION. (a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors immediately following any Exercise Date if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 19 and this Section 20 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required. (b) Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan. (c) In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to: 9 (i) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and (iii) allocating shares. Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants. 21. NOTICES. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 23. TERM OF PLAN. The Plan shall become effective on the effective date of the Registration Statement. Unless sooner terminated by the Board, the Plan shall terminate upon the earliest to occur of (a) the purchase of shares on the Exercise Date coincidental with the first Trading Day in August 2010, (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to options exercised under the Plan or (iii) the date on which all options are exercised in connection with a dissolution or liquidation pursuant to Section 19(b) hereof or a merger or asset sale pursuant to Section 19(c) hereof. No further options shall be granted or exercised, and no further payroll deductions shall be collected, under the Plan following such termination. 24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent permitted by any applicable laws, regulations, or stock exchange rules if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Enrollment Date for that Offering Period, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their option on such Exercise Date and automatically enrolled in the new Offering Period beginning coincident with such Exercise Date. 10 25. AT WILL EMPLOYMENT. Nothing in the Plan shall confer upon the participant any right to continue in the employ of the Company or any Subsidiary for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Subsidiary employing such person) or of the participant, which rights are hereby expressly reserved by each, to terminate such person's employment at any time for any reason, with or without cause. 11 EXHIBIT A ILLUMINA, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT _____ Original Application Enrollment Date:___________ _____ Change in Payroll Deduction Rate _____ Change of Beneficiary(ies) 1. ____________________ hereby elects to participate in the Illumina, Inc. 2000 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to purchase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan. 2. I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (from 1 to 15%) in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.) 3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period and I do not lose eligibility to participate in the Employee Stock Purchase Plan, any accumulated payroll deductions will be used to automatically exercise my option. 4. I understand that the purchase of Common Stock on my behalf will be limited to: (a) $25,000 worth of Common Stock for each calendar year my option remains outstanding and (b) 25,000 shares of Common Stock per six (6)-month Purchase Period. I understand that there are other limitations to purchases contained in the Employee Stock Purchase Plan. 5. I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. 6. Shares purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of _______________________________ (Employee or Employee and Spouse only). 7. I understand that I may withdraw from the Employee Stock Purchase Plan at any time prior to the last business day of the Purchase Period and the Company will refund all my payroll deductions for that Purchase Period. However, I may not rejoin that particular Offering Period at any later date. Upon the termination of my employment for any reason (including death or disability) or my loss of eligibility to participate in the Employee Stock Purchase Plan, my participation in the Employee Stock Purchase Plan will immediately cease, and all my payroll deductions for the Purchase Period in which my employment terminates or my loss of eligibility occurs will immediately be refunded. 8. I understand that if I take an unpaid leave of absence, my payroll deductions will immediately cease, and any payroll deductions for the Purchase Period in which my leave begins will, at my election, either be refunded or applied to the purchase of shares of Common Stock at the end of that Purchase Period. If my re-employment is guaranteed by either law or contract, or if I return to active service within ninety (90) days, then upon my return my payroll deductions will automatically resume at the rate in effect when my leave begins. 9. I understand that the Company has the right, exercisable in its sole discretion, to amend or terminate all outstanding options under the Employee Stock Purchase Plan at any time, with such amendment or termination to become effective immediately following the end of any Purchase Period. Upon any such termination, I will cease to have any further rights to purchase shares of Common Stock under this Subscription Agreement. 10. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares) or one year after the Exercise Date for those shares, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within 30 days after the date of any disposition of my shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain. 11. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan. 2 12. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan: Beneficiary(ies) Name: ________________________________________________ (Please print) (First) (Middle) (Last) Relationship: ____________________________________ Address: ____________________________________ ____________________________________ Employee's Social Security Number: ____________________________________ Employee's Address: ____________________________________ ____________________________________ ____________________________________ I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME. Dated:_________________________ _____________________________________ Signature of Employee _____________________________________ Spouse's Signature (If beneficiary is other than spouse) 3 EXHIBIT B ILLUMINA, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN NOTICE OF WITHDRAWAL The undersigned participant in the Offering Period of the Illumina, Inc. 2000 Employee Stock Purchase Plan which began on ____________, ______ (the "Enrollment Date") hereby notifies the Company that he or she hereby withdraws from participation in the Plan. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account. The undersigned understands and agrees that his or her option for the current Offering Period will be automatically terminated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement. Name and Address of Participant: __________________________________ __________________________________ __________________________________ Signature:________________________ Date:_____________________________ EX-10.22 7 a81502ex10-22.txt EXHIBIT 10.22 EXHIBIT 10.22 ILLUMINA, INC. 2000 STOCK PLAN AS AMENDED AND RESTATED THROUGH MARCH 21, 2002 1. PURPOSES OF THE PLAN. The purposes of this 2000 Stock Plan are: - to attract and retain the best available personnel for positions of substantial responsibility, - to provide additional incentive to Service Providers, and - to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "ADMINISTRATOR" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 hereof. (b) "APPLICABLE LAWS" means the requirements relating to the administration of stock option plans, the grant of Options and the issuance of Shares under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options are granted under the Plan. (c) "BOARD" means the Board of Directors of the Company. (d) "CODE" means the Internal Revenue Code of 1986, as amended. (e) "COMMITTEE" means a committee of Directors appointed by the Board in accordance with Section 4 hereof. (f) "COMMON STOCK" means the common stock of the Company. (g) "COMPANY" means Illumina, Inc., a Delaware corporation. (h) "CONSULTANT" means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. (i) "CORPORATE TRANSACTION" means a merger of the Company with or into another corporation or the sale of substantially all of the assets of the Company. (j) "DIRECTOR" means a member of the Board. (k) "DISABILITY" means total and permanent disability as defined in Section 22(e)(3) of the Code. (l) "EFFECTIVE DATE" means the date on which the Securities and Exchange Commission ("SEC") declared the registration statement on Form S-1 filed with the SEC for the initial public offering of the Common Stock effective. (m) "EMPLOYEE" means any person, including Officers and Inside Directors, employed by the Company or any Parent or Subsidiary of the Company. An Employee shall not be deemed to cease Employee status by reason of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, 0s amended. (o) "FAIR MARKET VALUE" means, as of any date, the value of a Share determined as follows: (i) If the Common Stock is listed on any established stock exchange or traded on a national market system, including without limitation the Nasdaq National Market or the Nasdaq SmallCap Market of The Nasdaq Stock Market, the Fair Market Value of a Share shall be the closing selling price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (p) "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. (q) "INSIDE DIRECTOR" means a Director who is an Employee. 2 (r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option. (s) "NOTICE OF GRANT" means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement. (t) "OFFICER" means a person who is an executive officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (u) "OPTION" means a stock option granted pursuant to the Plan. (v) "OPTION AGREEMENT" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (w) "OPTIONED SHARES" means the Shares subject to an Option. (x) "OPTIONEE" means the holder of an outstanding Option granted under the Plan. (y) "OUTSIDE DIRECTOR" means a Director who is not an Employee. (z) "PARENT" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (aa) "PLAN" means this 2000 Stock Plan. (bb) "PREDECESSOR PLAN" means the Illumina, Inc. 1998 Incentive Stock Plan. (cc) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (dd) "SERVICE PROVIDER" means (i) an individual rendering services to the Company or any Parent or Subsidiary of the Company in the capacity of an Employee or Consultant or (ii) an individual serving as a Director. (ee) "SHARE" means a share of the Common Stock, as adjusted in accordance with Section 13 hereof. (ff) "SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. (gg) "WITHHOLDING TAXES" means the Federal, state and local income and employment withholding taxes to which the holder of an Option may be subject in connection with the exercise of that Option. 3 3. STOCK SUBJECT TO THE PLAN. (a) Subject to the provisions of Section 13 hereof, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 9,649,460 shares. Such share reserve consists of (i) the 2,649,460 reserved but unissued Shares under the Predecessor Plan transferred to the Plan as of the Effective Date, (ii) an additional 4,000,000 Shares, and (iii) the 1,500,000 Share automatic increase for the fiscal year 2001 and (iv) the 1,500,000 Share automatic increase for the fiscal year 2002. (b) An annual increase shall automatically occur on the first day of each fiscal year of the Company, beginning with fiscal year 2001, equal to the lesser of (i) 1,500,000 Shares, (ii) 5% of the outstanding Shares on the last day of the immediately preceding fiscal year or (iii) an amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Shares, including Shares repurchased by the Company on the open market. (c) If an outstanding Option (including those granted under the Predecessor Plan) expires or terminates for any reason prior to exercise in full, the unpurchased Optioned Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan upon exercise of an Option shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if unvested Shares are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. Should the exercise price of an Option under the Plan be paid with Shares or should Shares otherwise issuable under the Plan be withheld by the Company in satisfaction of the Withholding Taxes incurred in connection with the exercise of an Option, then the number of Shares available for issuance under the Plan shall be reduced by the gross number of Shares for which the Option is exercised, and not by the net number of Shares issued to the holder of such Option. 4. ADMINISTRATION OF THE PLAN. (a) PROCEDURE. (i) MULTIPLE ADMINISTRATIVE BODIES. Different Committees with respect to different groups of Service Providers may administer the Plan. (ii) SECTION 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code. (iii) RULE 16B-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. 4 (iv) OTHER ADMINISTRATION. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws. (b) POWERS OF THE ADMINISTRATOR. (i) Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (A) to determine the Fair Market Value; (B) to select the Service Providers to whom Options may be granted hereunder; (C) to determine the number of Shares to be covered by each Option granted hereunder; (D) to approve forms of Option Agreements for use under the Plan; (E) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted hereunder, which terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (F) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (G) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws; (H) to modify or amend each Option (subject to Section 15(c) hereof), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Option Agreement; (I) to allow Optionees to satisfy Withholding Tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of Withholding Tax is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; 5 (J) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator; (K) to make all other determinations deemed necessary or advisable for administering the Plan. (ii) Notwithstanding the foregoing, the Option grant provisions of Section 11 hereof shall be self-executing, and no Administrator shall exercise any discretionary functions with respect to such Option grants. (c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Shares issued under the Plan. 5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 6. LIMITATIONS. (a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, no installment under this Option shall qualify for favorable tax treatment as an Incentive Stock Option if (and to the extent) the aggregate Fair Market Value of the Shares (determined at the date of grant) for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Shares or other securities for which this Option or any other Incentive Stock Options granted to Optionee prior to the date of grant (whether under the Plan or any other option plan of the Company or any Parent or Subsidiary of the Company) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, the Option shall nevertheless become exercisable for the excess Optioned Shares in such calendar year as a Nonstatutory Stock Option. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. (b) Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause. (c) The following limitations shall apply to grants of Options: (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 500,000 Shares. (ii) However, in connection with his or her commencement of Service Provider status, an individual may be granted Options to purchase up to an additional 1,000,000 Shares, which shall not count against the limit set forth in subsection (i) above. 6 7. TERM OF PLAN. Subject to Section 19 hereof, the Plan shall become effective on the Effective Date. Unless the Plan is terminated earlier pursuant to Section 15(a) hereof, the Plan shall terminate upon the earliest to occur of (a) June 1, 2010, (b) the date on which all Shares available for issuance under the Plan shall have been issued as fully vested Shares or (c) the termination of all outstanding Options in connection with a dissolution or liquidation pursuant to Section 13(b) hereof or a Corporate Transaction pursuant to Section 13(c) hereof. Should the Plan terminate on June 1, 2010, then all Options outstanding at that time shall continue to have force and effect in accordance with the provisions of the applicable Option Agreement. 8. TERM OF OPTION. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement. 9. OPTION EXERCISE PRICE AND CONSIDERATION. (a) EXERCISE PRICE. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction. 7 (b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised. (c) FORM OF CONSIDERATION. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Such consideration may consist entirely of: (i) cash; (ii) promissory note; (iii) other Shares which, in the case of Shares acquired directly or indirectly from the Company, (A) have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (iv) consideration received through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (A) a Company-designated brokerage firm to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares plus all Withholding Taxes required to be withheld by the Company by reason of such exercise and (B) the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale; (v) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vi) any combination of the foregoing methods of payment; or (vii) such other consideration and method of payment for the issuance of Optioned Shares to the extent permitted by Applicable Laws. 10. EXERCISE OF OPTION. (a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. (i) Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. (ii) An Option shall be deemed exercised when the Company receives: (A) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (B) full payment for the Optioned Shares 8 with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Plan and shall be set forth in the Option Agreement. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 hereof. (iii) Exercising an Option in any manner shall decrease the number of Optioned Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, such Optionee may exercise his or her Option for a period of three (3) months measured from the date of termination, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Option shall immediately terminate as to all the unvested Optioned Shares covered by the unvested portion of the Option, and those Optioned Shares shall revert immediately to the Plan. To the extent the Optionee does not, within the post-termination time period specified in the Option Agreement, exercise the Option for the Optioned Shares in which Optionee is vested at the time of such termination of Service Provider status, the Option shall terminate with respect to those vested Optioned Shares at the end of such period, and those Optioned Shares shall revert to the Plan. (c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within twelve (12) months of termination, or such longer period of time as specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Option shall immediately terminate as to the Optioned Shares covered by the unvested portion of the Option, and those Optioned Shares shall revert immediately to the Plan. To the extent the Optionee does not, within the post-termination time period specified in the Option Agreement, exercise the Option for the Optioned Shares in which Optionee is vested at the time of such termination of Service Provider status, the Option shall terminate with respect to those vested Optioned Shares at the end of such period, and those Optioned Shares shall revert to the Plan. (d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider, the Option may be exercised within twelve (12) months following Optionee's death, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in 9 the Option Agreement) by the Optionee's designated beneficiary, provided such beneficiary has been designated prior to Optionee's death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionee's estate or by the person(s) to whom the Option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Option shall immediately terminate as to the Optioned Shares covered by the unvested portion of the Option, and those Optioned Shares shall immediately revert to the Plan. To the extent the Option is not, within the post-termination time period specified in the Option Agreement, exercised for the Optioned Shares in which Optionee is vested at the time of such termination of Service Provider status, the Option shall terminate with respect to those vested Optioned Shares, and those Optioned Shares shall revert to the Plan. 11. FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS. Outside Directors shall automatically be granted Options in accordance with the following provisions: (a) All Options granted pursuant to this Section shall be Nonstatutory Stock Options and, except as otherwise provided in this Section 11, shall be subject to the other terms and conditions of the Plan. (b) Each individual shall be automatically granted an Option to purchase 20,000 Shares (the "First Option") on the date such individual first attends a Board meeting as an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director but who remains a Director shall not receive a First Option. (c) On each annual stockholder meeting following the Effective Date, each Outside Director who continues to serve in such capacity shall be automatically granted an Option to purchase 10,000 Shares (a "Subsequent Option"). (d) The terms of a First Option or a Subsequent Option granted pursuant to this Section shall be as follows: (i) The term of the Option shall be ten (10) years measured from the date of grant. (ii) The Option shall be exercisable only during the time that the Outside Director remains a Director and for the six (6) month period following the date of the Optionee's cessation of service as a Director, provided, however, that the Option cannot be exercised after the termination of the Option. (iii) The exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant of the Option. (iv) Subject to Section 13 hereof, the Option shall become exercisable as to 25% of the Optioned Shares on each anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such dates. 10 (v) If an Outside Director dies while holding any outstanding Option under this Section 11, then that Option may be exercised within six (6) months following his or her death, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Outside Director's designated beneficiary, provided such beneficiary has been designated prior to his or her death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Outside Director, then such Option may be exercised by the personal representative of his or her estate or by the person(s) to whom the Option is transferred pursuant to his or her will or in accordance with the laws of descent and distribution. If, at the time of death, the Outside Director is not vested as to his or her entire Option, Option shall immediately terminate as to the Optioned Shares covered by the unvested portion of the Option, and those Optioned Shares shall immediately revert to the Plan. To the extent the Option is not, within the post-termination time period specified in the Option Agreement, exercised for the Optioned Shares in which the Outside Director is vested at the time of his or her cessation of Director status, the Option shall terminate with respect to those vested Optioned Shares, and those Optioned Shares shall revert to the Plan. 12. LIMITED TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. The Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Options, and those Options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee's death while holding those Options. Such beneficiary or beneficiaries shall take the transferred Options subject to all the terms and conditions of the applicable agreement evidencing each such transferred Option, including (without limitation) the limited time period during which the Option may be exercised following the Optionee's death. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as the Administrator deems appropriate. 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, CORPORATE TRANSACTION. (a) CHANGES IN CAPITALIZATION. Subject to any required action by the stockholders of the Company, (i) the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, (ii) the number of Shares that may be added annually to the Plan pursuant to Section 3(i) hereof, (iii) the number of Optioned Shares granted under First Options and Subsequent Options under Section 11 hereof, (iv) the maximum number of Optioned Shares that may be granted to any Service Provider within any fiscal year, (v) the maximum number of Optioned Shares that may be granted to any Service Provider in connection with his or her commencement of service and (vi) the number of Optioned Shares as well as the price per Share subject to each outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by 11 the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Optioned Shares. (b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Shares covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any unvested Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action. (c) CORPORATE TRANSACTION. (i) In the event of a Corporate Transaction, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Shares, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of Corporate Transaction, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the Corporate Transaction, the Option confers the right to purchase or receive, for each Optioned Share immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each Share held on the effective date of the Corporate Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Corporate Transaction is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Optioned Share, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Shares in the Corporate Transaction. (ii) All outstanding repurchase rights of the Company shall automatically terminate, and the unvested Shares subject to those terminated rights shall 12 immediately vest in full, in the event of a Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or Parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Administrator at the time the repurchase right is issued. (iii) Each Option which is assumed pursuant to this Section 13(c) shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the Option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to (A) the exercise price payable per share under each outstanding Option, provided the aggregate exercise price payable for such securities shall remain the same, (B) the maximum number and/or class of securities available for issuance over the remaining term of the Plan, (C) the maximum number and/or class of securities for which any one person may be granted Options under the Plan per year, (D) the maximum number and/or class of securities by which the share reserve is to increase automatically each year and (E) the number and/or class of securities subject to the Options granted under Section 11. 14. DATE OF GRANT. The date of grant of a First Option or Subsequent Option shall be the date on which it was automatically granted pursuant to Section 11 hereof. The date of grant of any other Option shall be, for all purposes, the date on which the Administrator grants such Option. Notice of the grant shall be provided to each Optionee within a reasonable time after the date of such grant. 15. AMENDMENT AND TERMINATION OF THE PLAN. (a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter, suspend or terminate the Plan. (b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. (c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination. 16. CONDITIONS UPON ISSUANCE OF SHARES. (a) Options shall not be granted and Shares shall not be issued pursuant to the exercise of an Option unless the grant of the Option, the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. 13 (b) No Shares or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the Shares, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful grant of Options and issuance and sale of any Shares hereunder shall relieve the Company of any liability in respect of the failure to grant such Options or issue or sell such Shares as to which such requisite authority shall not have been obtained. 18. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 19. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws. 20. PREDECESSOR PLAN. The Plan shall serve as the successor to the Predecessor Plan, and no further Option grants or direct stock issuances shall be made under the Predecessor Plan after the Effective Date. All Options outstanding under the Predecessor Plan on the Effective Date shall be transferred to the Plan at that time and shall be treated as outstanding Options under the Plan. However, each outstanding Option so transferred shall continue to be governed solely by the terms of the documents evidencing such Option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such transferred Options with respect to their acquisition of Shares. 14 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.18

                                                                   EXHIBIT 10.18


                         REPLACEMENT RESERVE AGREEMENT


        THIS REPLACEMENT RESERVE AGREEMENT ("Agreement") is made as of January
10, 2002, by and between ILLUMINA, INC., a Delaware corporation, having its
principal place of business at 9885 Towne Centre Drive, San Diego, California
92121 ("Borrower") and BNY WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON
CAPITAL JOINT MASTER TRUST MORTGAGE INCOME FUND, having an address at c/o
Washington Capital Management, Inc., 4350 La Jolla Village Drive, Suite 960, San
Diego, California 92122 ("Lender"), with reference to the following facts:

        A. Borrower, by a promissory note given to Lender (the note, together
with all extensions, renewals, modifications, consolidations, substitutions,
replacements, restatements and increases thereof shall collectively be referred
to as the "Note") executed originally by Diversified Eastgate Venture, an
Illinois general partnership, and assumed by Borrower, is indebted to Lender in
the principal sum of Twenty Six Million Dollars ($26,000,000.00) in lawful money
of the United States of America, with interest at the rate(s) set forth in the
Note (the indebtedness evidenced by the Note, together with such interest
accrued thereon, shall collectively be referred to as the "Loan"), principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.

        B. The Loan is secured by, among other things, a Deed of Trust, Security
Agreement, Assignment of Rents and Fixture Filing (the "Deed of Trust"), dated
as of September 27, 2000, which grants Lender a first lien on the property
encumbered thereby (the "Property"). All and any of the documents other than the
Note, the Deed of Trust and this Agreement now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
Guarantee payment of the Note are referred to as the "Other Security Documents."

        C. Lender requires as a condition to the assumption of the Loan by
Borrower that Borrower enter into this Agreement and make certain deposits with
Lender as provided in this Agreement as additional security for all of
Borrower's obligations under the Note, the Deed of Trust and the Other Security
Documents.

        NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

        1.     Deposits To The Replacement Reserve.

               1.1 Monthly Deposits. On each date that a regularly scheduled
payment of principal or interest is due under the Note, Borrower shall deposit
with Lender (or, at Lender's election, in a pledged bank or escrow account in
the name of Borrower and pledged to and selected by Lender) a monthly deposit in
the amount of Two Thousand One Hundred Seventy Dollars ($2,170.00) (the "Monthly
Deposit").

               1.2 Reassessment of Monthly Deposit. No more often than once each
"Loan Year" (as defined below), Lender may reassess its estimate of the amount
necessary for the Replacement Reserve Fund (defined below) and may increase the
amount of the Monthly


                                       1


Deposit by thirty (30) calendar days written notice to Borrower based upon the
cumulative increase in the then-current "Index" (as defined below) over the
"Basic Index" (as defined below). For purposes of this Section 1.2, the "Index"
means: the Consumer Price Index, All Items 1982-1984 = 100, All Urban Consumers
("CPI-U"), for the Los Angeles-Riverside-Orange County, CA metropolitan area, as
published by the United State Department of Labor, Bureau of Labor Statistics,
or its successor index; and the "Basic Index" means the Index published for the
month in which this Agreement is dated. In the event of the discontinuation of
the compilation or publication of the Index, the index selected by Lender that
most nearly replicates the information and statistics compiled in the Index
shall be used to make such calculation. For purposes of this Section 1.2, a
"Loan Year" means each 365 day period (or 366 day period in leap years)
commencing with the date of this Agreement and ending on each anniversary
thereof.

               1.3 Scheduled Repairs. With respect to any Replacement (as
defined below) which is identified on Exhibit "A" attached hereto and made a
part hereof as a Scheduled Repair or Replacement (collectively, a "Scheduled
Repair"), Borrower shall deposit with Lender the amount allocated for such
Scheduled Repair (each, a "Scheduled Repair Deposit") at least two (2) months
prior to the date on which the work for such Scheduled Repair is scheduled to
begin.

               1.4 Replacement Reserve. Monthly Deposits and Scheduled Repair
Deposits made pursuant to this Agreement shall be referred to herein as the
"Replacement Reserve Fund." Lender shall deposit the Replacement Reserve Fund,
as received, in an interest bearing, pledged escrow or bank account (the
"Replacement Reserve") selected by Lender with interest accruing thereon to
Borrower's benefit. Borrower hereby acknowledges and confirms that (a) the
Replacement Reserve Fund shall not constitute a trust fund (and, if deposited in
Lender's name, may be commingled with other monies held by Lender, but if held
in the name of Borrower, such funds shall not be commingled with monies held by
Borrower), and (b) Lender or its designee shall have the sole right to make or
approve withdrawals from the Replacement Reserve.

        2.     Pledge Of Replacement Reserve.

        As additional security for the payment of all sums due under the Loan
and the performance by Borrower of the Obligations (as defined in the Deed of
Trust), Borrower hereby pledges, assigns and grants to Lender a continuing
perfected security interest in and to and a first lien upon, the Replacement
Reserve Fund and the Replacement Reserve; provided that, Lender shall make
disbursements from the Replacement Reserve in accordance with the terms of this
Agreement.

        3.     Disbursements From Replacement Reserve.

               3.1 Disbursements for Replacements Only. Lender shall make
disbursements from the Replacement Reserve to pay or reimburse Borrower only for
the costs of those items listed in Exhibit A (such items, including, without
limitation, those items identified as Scheduled Repairs, collectively the
"Replacements") in the manner provided in this Section 3. Lender shall not be
obligated to make disbursements from the Replacement Reserve to pay or reimburse
Borrower for the costs of routine maintenance to the Property or for costs which
are to be reimbursed from funds held pursuant to a Required Repair Reserve
Agreement dated as of the date hereof between Borrower and Lender, or any
similar agreement, if any (the "Required


                                       2


Repair Reserve Agreement"). Lender shall, upon written request from Borrower and
satisfaction of the requirements set forth in this Section 3 and Section 4 of
this Agreement, disburse to Borrower amounts from the Replacement Reserve
necessary to pay for the actual approved costs of Replacements or to reimburse
Borrower therefor, upon completion of such Replacements (or, upon partial
completion in the case of Replacements made pursuant to Section 3.4) as
determined by Lender. In no event shall Lender be obligated to disburse funds
from the Replacement Reserve if an Event of Default (hereinafter defined)
exists.

               3.2 Request for Disbursement. Each request for disbursement from
the Replacement Reserve shall be in a form specified or approved by Lender and
shall specify (a) the specific Replacements for which the disbursement is
requested, (b) the quantity and price of each item purchased, if the Replacement
includes the purchase or replacement of specific items, (c) the price of all
materials (grouped by type or category) used in any Replacement other than the
purchase or replacement of specific items, and (d) the cost of all contracted
labor or other services applicable to each Replacement for which such request
for disbursement is made. With each request, Borrower shall certify that all
Replacements have been made in accordance with applicable laws. Each request for
disbursement shall include copies of invoices for all items or materials
purchased and all contracted labor or services provided and each request shall
include evidence satisfactory to Lender of payment of all such amounts. Except
as provided in Section 3.4, each request for disbursement from the Replacement
Reserve shall be made only after completion of the Replacement for which
disbursement is requested. Borrower shall provide Lender evidence of completion
satisfactory to Lender in its reasonable judgment.

               3.3 Disbursement Conditions. Except as set forth in Section 3.4
below, Borrower shall pay all invoices in connection with the Replacements with
respect to which a disbursement is requested prior to submitting such request
for disbursement from the Replacement Reserve unless all such invoices do not
exceed $10,000.00, in which case Lender shall disburse the amount for such
invoices directly to Borrower and Borrower covenants and agrees to promptly pay
such invoices. In addition, as a condition to any disbursement, Lender may
require Borrower to obtain lien waivers from each contractor, supplier,
materialman, mechanic or subcontractor who receives payment in an amount equal
to or greater than $10,000.00 for completion of its work or delivery of its
materials. Any lien waiver delivered hereunder shall conform to the requirements
of applicable law and shall cover all work performed and materials supplied
(including equipment and fixtures) for the Property by that contractor,
supplier, subcontractor, mechanic or materialman through the date covered by the
current reimbursement request. Lender may in its sole discretion, accept copies
of cancelled checks in lieu of, or in addition to any of the foregoing invoice
and/or lien waiver requirements.

               3.4 Partial Completion. If (a) the time required to complete a
Replacement exceeds one month, (b) the contractor performing such Replacement
requires periodic payments pursuant to the terms of a written contract, (c)
Lender has approved in writing in advance such periodic payments, and (d) the
cost of the portion of the work completed under such contract exceeds Ten
Thousand Dollars ($10,000.00), a request for reimbursement from the Replacement
Reserve may be made after completion of a portion of the work under such
contract, provided (i) such contract requires payment upon completion of such
portion of the work, (ii) the materials for which the request is made are on
site at the Property and are properly secured or have been installed in the
Property, (iii) all other conditions in this Agreement for disbursement have
been


                                       3


satisfied, (iv) funds remaining in the Replacement Reserve are, in Lender's
judgment, sufficient to complete such Replacement and other Replacements when
required, and (v) each contractor or subcontractor receiving payments under such
contract shall provide a waiver of lien with respect to amounts which have been
paid to that contractor or subcontractor.

               3.5 Number of Requests. Except as provided in Section 3.4,
Borrower shall not make a request for disbursement from the Replacement Reserve
more frequently than once in any calendar month.

               3.6 Final Disbursement. Lender shall disburse to Borrower all
amounts remaining in the Replacement Reserve (less all amounts which may have
been applied by Lender as permitted by this Agreement) upon Borrower's
completion of all Replacements to the reasonable satisfaction of Lender,
provided that (a) there is no Event of Default under the Note, the Deed of
Trust, this Agreement or any of the Other Security Documents which has not been
cured to Lender's satisfaction, (b) Lender has received evidence required by
Section 4.8 below that there are no mechanic's or materialman's liens, and (c)
Lender has received all cost and architectural information required by Lender.

        4.     Performance Of Replacements.

               4.1 Workmanlike Completion. Borrower shall make Replacements when
required in order to keep the Property in good order and repair and in good
marketable condition, and to keep the Property or any portion thereof from
deteriorating. With respect to those Replacements identified as Scheduled
Repairs, Borrower shall commence the work in connection with each such Scheduled
Repair on or before the date specified in Exhibit A, and shall diligently pursue
such work to completion, and shall complete such Scheduled Repair no later than
the date specified therefor in Exhibit A. Borrower shall complete all
Replacements in a good and workmanlike manner as soon as practicable following
the commencement of making each such Replacement.

               4.2 Contracts. Lender reserves the right, at its option, to
approve all contracts or work orders with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Replacements, the cost of which exceeds or is expected to
exceed $10,000.00. Upon Lender's request, Borrower shall assign any contract or
subcontract to Lender.

               4.3 Lender's Right to Complete Replacements. In the event Lender
determines in its reasonable discretion that any Replacement has not been
commenced as required in Section 4.1 above, is not being performed in a
workmanlike or timely manner, or that any Replacement has not been completed in
a workmanlike manner by the completion date specified for such Replacement in
Exhibit "A," Lender shall have the option to withhold the disbursement for such
unsatisfactory Replacement and to proceed under existing contracts or to
contract with third parties to make or complete such Replacement and to apply
the Replacement Reserve Fund toward the labor and materials necessary to
complete such Replacement, without providing any prior notice to Borrower, and
to exercise any and all other remedies available to Lender upon an Event of
Default hereunder.


                                       4


               4.4 Additional Replacements. If at any time during, the term of
the Loan, Lender determines that replacements not listed on Exhibit "A" (and not
covered by the Required Repair Reserve Agreement), are advisable to keep the
Property in good order and repair and in good marketable condition, or to
prevent deterioration of the Property or if any major building system or
component (e.g., roof, HVAC system) not listed on Exhibit "A" will reach the end
of its useful life within two (2) years of the date of any inspection by Lender,
Lender may send Borrower written notice of the need for making such additional
replacements (the "Additional Replacements"). Borrower shall promptly commence
making such Additional Replacements in accordance with all the requirements of
this Agreement. If Lender determines that (i) such replacements are of the type
intended to be covered by this Agreement, (ii) such replacements are not covered
or of the type intended to be covered by the Required Repair Reserve Agreement,
(iii) costs for such replacements are reasonable, (iv) the funds in the
Replacement Reserve are sufficient to pay for such replacements, and (v) all
other conditions for disbursement under this Agreement have been met, Lender may
disburse funds from the Replacement Reserve for such Additional Replacements;
provided, however, Lender, in its discretion, may refuse to disburse funds from
the Replacement Reserve for any item other than a Replacement specified on
Exhibit "A." If Borrower fails to commence, within thirty (30) days after such
notice or the commencement date specified in such notice, such Additional
Replacements and/or fails to diligently pursue completion of such Additional
Replacements, such failure shall be an Event of Default under this Agreement,
and, in addition to all other rights Lender may have under this Agreement upon
an Event of Default (including but not limited to Lender's rights under Section
5 of this Agreement) and under the Note, the Deed of Trust and the Other
Security Documents, Lender may contract with third parties to make such
Additional Replacements and may at its sole discretion (a) apply the funds in
the Replacement Reserve toward the labor and materials necessary to complete
such Additional Replacements, or (b) demand payment of such Additional
Replacements from Borrower. Except for Sections 3.1 through 3.5, all references
in this Agreement to "Replacements" or "Scheduled Repairs" shall include the
"Additional Replacements," as applicable.

               4.5 Entry onto Property. In order to facilitate Lender's
completion or making of the Replacements pursuant to Sections 4.3 and 4.4 above,
Borrower grants Lender the right to enter onto the Property and perform any and
all work and labor necessary to complete or make the Replacements and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender
shall be deemed to have been advanced under the Loan to Borrower and secured by
the Deed of Trust. For this purpose, Borrower constitutes and appoints Lender
its true and lawful attorney-in-fact with full power of substitution to complete
or undertake the Replacements in the name of Borrower. Such power of attorney
shall be deemed to be a power coupled with an interest and cannot be revoked.
Borrower empowers said attorney-in-fact as follows: (a) to use any funds in the
Replacement Reserve for the purpose of making or completing the Replacements;
(b) to make such additions, changes and corrections to the Replacements as shall
be necessary or desirable to complete the Replacements; (c) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (d) to pay, settle or compromise all existing bills
and claims which are or may become liens against the Property, or as may be
necessary or desirable for the completion of the Replacements, or for clearance
of title; (e) to execute all applications and certificates in the name of
Borrower which may be required by any of the contract documents; (f) in its
reasonable discretion, to prosecute and defend all actions or proceedings in
connection with the Property or


                                       5


the rehabilitation and repair of the Property; and (g) to do any and every act
which Borrower might do in its own behalf to fulfill the terms of this
Agreement.

               4.6 No Obligation of Lender. Nothing in this Section 4 shall: (a)
make Lender responsible for making or completing the Replacements; (b) require
Lender to expend funds in addition to the Replacement Reserve Fund to make or
complete any Replacement; (c) obligate Lender to proceed with the Replacements;
or (d) obligate Lender to demand from Borrower additional sums to make or
complete any Replacement.

               4.7 Inspections.

                   (a) Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties making Replacements pursuant to this Section 4 to
enter onto the Property during normal business hours (subject to the rights of
tenants under their Leases) to inspect the progress of any Replacements and all
materials being used in connection therewith, to examine all plans and shop
drawings relating to such Replacements which are or may be kept at the Property,
and to complete any Replacements made pursuant to this Section 4. Borrower shall
cause all contractors and subcontractors to cooperate with Lender or Lender's
representatives or such other persons described above in connection with
inspections described in this Section 4.7 or the completion of Replacements
pursuant to this Section 4.

                   (b) Lender may require an inspection of the Property at
Borrower's expense prior to making a monthly disbursement from the Replacement
Reserve in order to verify completion of the Replacements for which
reimbursement is sought. Lender may require that such inspection be conducted by
an appropriate, independent, qualified professional selected by Lender and/or
may require a copy of a certificate of completion by an independent, qualified
professional acceptable to Lender prior to the disbursement of any amounts from
the Replacement Reserve. Borrower shall pay the expense of the inspection as
required hereunder, whether such inspection is conducted by Lender or by an
independent, qualified professional.

               4.8 Lien-Free Completion.

                   (a) The Replacements and all materials, equipment, fixtures,
or any other item comprising a part of any Replacement shall be constructed,
installed or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those liens existing on the date of
this Agreement which have been approved in writing, by Lender, if any).

                   (b) Lender may require Borrower to provide Lender with a
search of title to the Property effective to the date of the disbursement, which
search shows that no mechanic's or materialmen's liens or other liens of any
nature have been placed against the Property since the date of recordation of
the Deed of Trust and that title to the Property is free and clear of all liens
(other than the lien of the Deed of Trust and any other liens previously
approved in writing by Lender, if any).

               4.9 Compliance with Laws. All Replacements shall comply with all
applicable laws and applicable insurance requirements, including, without
limitation, applicable


                                       6


building codes, special use permits, environmental regulations and requirements
of insurance underwriters.

               4.10 Insurance Requirements. In addition to any insurance
required under the Deed of Trust and the Other Security Documents, Borrower
shall provide or cause to be provided workmen's compensation insurance,
builder's risk, and public liability insurance and other insurance to the extent
required under applicable law in connection with a particular Replacement. All
such policies shall be in form and amount reasonably satisfactory to Lender. All
such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such
policies shall be delivered to Lender.

        5.     Failure To Make Replacements.

               5.1 Event of Default. It shall be an "Event of Default" under
this Agreement if Borrower (a) fails to make any Monthly Deposit payment
required hereunder within ten (10) calendar days of the date when due, or (b) at
any time prior to the completion of the Required Repairs, Borrower abandons or
ceases work on any Replacement (which Borrower has commenced making) for a
period of thirty (30) calendar days, unless such cessation results from an event
of Force Majeure (as defined in the Deed of Trust) causes beyond the control of
Borrower and Borrower is diligently pursuing the reinstitution of work, (c)
Borrower fails to complete each Replacement in a good and workmanlike manner
within the date set forth in Exhibit "A", (d) a mechanic's or materialman's lien
is filed against the Property (unless such mechanic's or materialman's lien is
promptly contested in good faith by Borrower and is bonded over to the
satisfaction of Lender), or (e) Borrower fails to comply with any other
provision of this Agreement and such failure is not cured within thirty (30)
calendar days after notice from Lender; provided that if such default cannot
reasonably be cured within such thirty (30) day period and Borrower shall have
commenced to cure such default within such thirty (30) day period and thereafter
diligently and expeditiously proceeds to cure the same, such thirty (30) day
period shall be extended for so long as it shall require Borrower in the
exercise of due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of one hundred twenty (120) days,
unless, only in the case of cures that require construction or remedial work,
such cure cannot with diligence be completed within such one hundred twenty
(120) day period, in which case such period shall be extended for an additional
one hundred twenty (120) days. The occurrence of an Event of Default, as defined
in the Note, the Deed of Trust or any of the Other Security Documents, shall
also be an "Event of Default" under this Agreement. Upon the occurrence and
during the continuance of an Event of Default, Borrower shall not be entitled to
receive any funds from the Replacement Reserve and Lender may use the
Replacement Reserve Fund (or any portion thereof) for any purpose, including,
but not limited to, completion of the Replacements as provided in Section 4, or
for any other repair or replacement to the Property or toward payment of the
Debt in such order, proportion and priority as Lender may determine in its sole
discretion. Lender's right to withdraw and apply the Replacement Reserve Fund
shall be in addition to all other rights and remedies provided to Lender under
this Agreement, the Note, the Deed of Trust, the Other Security Documents, and
at law or in equity.


                                       7


               5.2 Insufficient Funds in the Replacement Reserve. The
insufficiency of any balance in the Replacement Reserve shall not relieve
Borrower from its obligation (a) to fulfill all covenants in the Deed of Trust
and the Other Security Documents, and (b) to complete all Replacements in
accordance with the covenants and agreements in this Agreement and to pay all
costs in connection therewith.

        6.     Waivers.

               6.1 Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Agreement, the Note, the Deed of Trust, any of the Other
Security Documents, or the Obligations.

               6.2 Waiver of Notice. To the extent permitted by applicable law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement specifically and
expressly provides for the giving of notice by Lender to Borrower and except
with respect to matters for which Lender is required by applicable law to give
notice, and Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Agreement does not
specifically and expressly provide for the giving of notice by Lender to
Borrower.

               6.3 Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to any and all of its obligations hereunder.

               6.4 Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS AGREEMENT, THE DEED OF TRUST OR
THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

        7.     Miscellaneous Provisions.

               7.1 Notices. All notices or other written communications
hereunder shall be given and become effective as provided in the Deed of Trust.

               7.2 Choice of Law. This Agreement shall be governed, construed,
applied and enforced in accordance with the laws of the State of California and
the applicable laws of the United States of America.

               7.3 Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Agreement invalid or unenforceable under the provisions of any applicable law.


                                       8


               7.4 Inapplicable Provision. If any term of this Agreement or any
application thereof shall be invalid or unenforceable, the remainder of this
Agreement and any other application of the term shall not be affected thereby.

               7.5 Costs. Borrower agrees to indemnify Lender and to hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations and costs and expenses (including
litigation costs) arising from or in any way connected with the performance of
the Replacements or the holding or disbursing of the Replacement Reserve or the
Replacement Reserve Fund. Wherever it is provided for herein that Borrower pay
any costs and expenses, such costs and expenses shall include, but not be
limited to, all legal fees and disbursements of Lender (whether of retained
firms, the reimbursement for the expenses of in-house staff or otherwise).
Borrower hereby assigns to Lender all rights and claims Borrower may have
against persons or entities supplying labor or materials in connection with the
Replacements.

               7.6 Headings, Etc. The headings and captions of various Sections
of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting in any way, the scope or intent of the
provisions hereof.

               7.7 No Oral Change. This Agreement, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.

               7.8 Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.

               7.9 Duplicate Originals; Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

               7.10 Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.

               7.11 Borrower's Records. Borrower shall furnish such financial
statements, invoices, records, papers and documents relating to the Property as
Lender may reasonably require from time to time to make the determinations
permitted or required to be made by Lender under this Agreement.

               7.12 No Third Party Beneficiary. This Agreement is intended
solely for the benefit of Borrower and Lender and their respective successors
and assigns, and no third party


                                       9


shall have any rights or interest in the Replacement Reserve, the Replacement
Reserve Fund, this Agreement, the Note, the Deed of Trust or any of the Other
Security Documents. Nothing contained in this Agreement shall be deemed or
construed to create an obligation on the part of Lender to any third party, nor
shall any third party have a right to enforce against Lender any right that
Borrower may have under this Agreement.

               7.13 No Agency or Partnership. Nothing contained in this
Agreement shall constitute Lender as a joint venturer, partner, agent,
tenant-in-common or joint tenant of Borrower, or render Lender liable for any
debts, obligations, acts, omissions, representations, or contracts of Borrower.

               7.14 Termination of Replacement Reserve. After (a) payment in
full of the Debt and release by Lender of the lien of the Deed of Trust and (b)
payment in full for all Replacements completed or contracted to be performed
prior to the date of the payment described in (a) above (provided Borrower has
supplied Lender with evidence satisfactory to Lender of payment in full for all
Replacements, and, if requested by Lender, waivers of liens and/or a title
search of the Property or an endorsement to Lender's title insurance policy),
Lender shall disburse to Borrower all amounts remaining in the Replacement
Reserve, and this Agreement shall terminate.

               7.15 Enforcement of Agreement. This Agreement is executed by
Borrower and Lender for the benefit of Lender. Borrower understands and agrees
that, in connection with any sale of the Loan to an Investor (as defined in the
Deed of Trust), this Agreement may be assigned to such Investor.

               7.16 Sole Discretion of Lender. Wherever pursuant to this
Agreement (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the reasonable discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.

               7.17 Completion of Replacements. Lender's approval of any plans
for any Replacement, release of funds from the Replacement Reserve, inspection
of the Property by Lender or Lender's agents, or other acknowledgment of
completion of any Replacement in a manner satisfactory to Lender shall not be
deemed an acknowledgment or warranty to any person that the Replacement has been
completed in accordance with applicable laws.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                       10



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

"BORROWER"                         ILLUMINA, INC.,
                                   a Delaware corporation

                                   By:       /s/ TIMOTHY M. KISH
                                           -------------------------------
                                           Timothy M. Kish
                                           Its:  Vice President and Chief
                                                 Financial Officer

"LENDER"                           BNY WESTERN TRUST COMPANY AS TRUSTEE FOR
                                   WASHINGTON CAPITAL JOINT MASTER TRUST
                                   MORTGAGE INCOME FUND


                                   By:       /s/ COLLEEN IWANO
                                           -------------------------------
                                           Colleen Iwano
                                           Its:  Senior Vice President


                                       11


                                    EXHIBIT A

                         List of Potential Replacements

1. Non-recurring capital repairs and replacements, including non-recurring
structural repairs to the Property.


                                       12

EX-10.19

                                                                   EXHIBIT 10.19

                   LOAN ASSUMPTION AND MODIFICATION AGREEMENT


This Agreement, dated as of January 10, 2002, is entered into by and between BNY
WESTERN TRUST COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST
MORTGAGE INCOME FUND ("Lender"), DIVERSIFIED EASTGATE VENTURE, an Illinois
general partnership ("Borrower"), and ILLUMINA, INC., a Delaware corporation
("Assuming Party"), with reference to the following facts:

A.      Borrower has signed, and is obligated to Lender under, the following
        documents, all of which are dated as of September 26, 2000, unless
        otherwise noted:

        1.   A Construction Loan Agreement (the "Loan Agreement");

        2.   A Promissory Note (the "Note") in the original principal amount of
             Twenty Four Million Dollars ($24,000,000.00), payable to Lender,
             evidencing a loan (the "Loan") in the same principal amount;

        3.   A Deed of Trust, Security Agreement, Assignment of Rents and
             Fixture Filing (the "Deed of Trust") dated September 27, 2000,
             which secures the Note and other obligations of Borrower, which was
             recorded on September 27, 2000, as Document No. 2000-0516004, in
             the records of the County Recorder of San Diego County, California.
             The land, improvements and other real property which are subject to
             the Deed of Trust are hereinafter defined as the "Property";

        4.   A UCC-1 financing statement filed with the California Secretary of
             State on October 2, 2000, as file no. 0027760702 (the "Existing
             UCC-1 Financing Statement");

        5.   An Assignment of Leases and Rents dated September 27, 2000 (the
             "Assignment of Leases and Rents");

        6.   An Environmental Indemnity Agreement (the "Existing Environmental
             Indemnity Agreement");

        7.   An Assignment of Construction Agreements;

        8.   An Assignment of Architectural Agreements and Plans and
             Specifications;

        9.   An Assignment of Licenses, Permits and Contracts;

        10.  A Tenant Improvement and Leasing Commission Reserve Agreement (the
             "Existing TILC Reserve Agreement");

        11.  A Replacement Reserve Agreement (the "Existing Replacement Reserve
             Agreement"); and


                                  Page 1 of 8


        12.    That certain modification to the Loan Documents dated September
               27, 2001, modifying the terms of the Loan by, among other things,
               increasing the maximum amount thereof to Twenty Six Million
               Dollars ($26,000,000.00).

        The above documents, including any modifications and amendments thereto,
        together with this Agreement are hereinafter collectively defined as the
        "Loan Documents."

B.      The outstanding disbursed principal balance under the Note is Twenty Six
        Million Dollars ($26,000,000.00) and accrued interest on the Note is
        paid to January 1, 2002.

C.      Borrower has sold and conveyed the Property to Assuming Party, or is
        about to sell and convey the Property to Assuming Party.

NOW, THEREFORE, FOR VALUABLE CONSIDERATION, including, without limitation, the
mutual covenants and promises contained herein, the parties agree as follows:

1.      INCORPORATION. The foregoing recitals are incorporated by this
        reference.

2.      CONDITIONS PRECEDENT. Satisfaction, in the sole discretion of Lender, of
        each of the following is a condition precedent to Lender's obligations
        under this Agreement, (which satisfaction shall be evidenced by the
        recordation of the short form of this Agreement referred to below):

        2.1    Receipt and approval by Lender of a title insurance policy issued
               by Chicago Title Insurance Company ("Title Company"), without any
               exception to fee title other than those expressly approved by
               Lender in writing, insuring Lender that the priority and validity
               of the Deed of Trust has not been and will not be impaired by
               this Agreement or the transactions contemplated hereby;

        2.2    Receipt and approval by Lender of: (i) the executed original of
               this Agreement; (ii) a short form of this Agreement in form
               proper for recording; (iii) an Environmental Indemnity Agreement,
               (iv) Tenant Improvement and Leasing Reserve Agreement, (v) a
               Replacement Reserve Agreement, and (vi) any other documents and
               agreements which are required pursuant to this Agreement or which
               Lender requests;

        2.3    Recordation in the Official Records of the County where the
               Property is located of the short form of this Agreement, together
               with such other documents and agreements, if any, required by
               this Agreement to be recorded;

        2.4    Filing with the Delaware Secretary of State of a UCC Financing
               Statement (and such other filing offices as Lender requires),
               covering the collateral described in the Existing UCC-1 Financing
               Statement, which Financing Statement(s) Assuming Party hereby
               authorizes Lender to file;

        2.5    Assuming Party's reimbursement to Lender of Lender's costs
               and expenses incurred in connection with this Agreement and the
               transactions contemplated hereby, including, without limitation,
               title insurance costs, recording fees,


                                  Page 2 of 8


               attorneys' fees, appraisal, engineers' and inspection fees and
               documentation costs and charges, whether such services are
               furnished by Lender's employees or agents or independent
               contractors;

        2.6    The representations and warranties contained in this Agreement
               are true and correct as of the date on which the other conditions
               precedent defined above are satisfied;

        2.7    Receipt of by Lender of an opinion of counsel to Assuming Party,
               in form and content and covering such matters as Lender may
               require; and

        2.8    Such other matters as Lender may require.

3.      MODIFICATION OF LOAN DOCUMENTS.

        3.1    The second paragraph on page 1 of the Deed of Trust is hereby
               amended and restated in its entirety to provide as follows:

               "Borrower, by its promissory note dated September 26, 2000, given
        to Lender, is indebted to Lender in the principal sum of Twenty-Four
        Million Dollars ($24,000,000.00), in lawful money of the United States
        of America (the note, together with all extensions, renewals,
        modifications, consolidations, substitutions, replacements, restatements
        and increases thereof, including but not limited to that certain
        modification dated September 27, 2001, which, among other things,
        increases the maximum amount thereof to Twenty Six Million Dollars
        ($26,000,000.00), shall collectively be referred to as the "Note"), with
        interest from the date thereof at the rates set forth in the Note,
        principal and interest to be payable in accordance with the terms and
        conditions provided in the Note."

        3.2    Section 1 of the Assignment of Leases and Rents is hereby amended
               and restated in its entirety to provide as follows:

               "Security. This Assignment is made in consideration of that
        certain mortgage loan made by Assignor to Assignee, as evidenced by that
        certain note made by Assignor to Assignee, dated September 26, 2000, in
        the principal sum of Twenty-Four Million Dollars ($24,000,000.00)
        (together with all extensions, renewals, modifications, consolidations,
        substitutions, replacements, restatements and increases thereof,
        including but not limited to that certain modification dated September
        27, 2001, which, among other things, increases the maximum amount
        thereof to Twenty Six Million Dollars ($26,000,000.00), collectively be
        referred to the `Note'), and secured by that certain Deed of Trust,
        Security Agreement, Assignment of Rents and Fixture Filing given by
        Assignor to Assignee, dated the date hereof, covering the Property and
        intended to be duly recorded (the `Deed of Trust'). The principal sum,
        interest and all other sums due and payable under the Note, the Deed of
        Trust and the Other Security Documents (hereinafter defined) are
        collectively referred to as the `Debt.' The documents other than this
        Assignment, the Note or the Deed of Trust now or hereafter executed by
        Assignor and/or others and by or in favor of Assignee which wholly or
        partially secure or guarantee payment of the Debt are hereinafter
        referred to as the `Other Security Documents.'"


                                  Page 3 of 8


4.      CONVERSION TO PERMANENT TERM. Upon satisfaction of each of the
        conditions precedent to this Agreement defined above, the term of the
        Note shall be deemed converted to the Permanent Term (as defined in the
        Note).

5.      EFFECTIVE DATE. The effective date of this Agreement shall be the date
        all of the conditions precedent defined above have been met to Lender's
        satisfaction.

6.      ASSUMPTION. Assuming Party hereby assumes and agrees to pay when due all
        sums now due and owing or which hereafter become due and owing under the
        Note and the other Loan Documents and shall hereafter faithfully perform
        all of Borrower's obligations under and be bound by all of the
        provisions of the Loan Documents as if Assuming Party were an original
        signatory thereto and the execution of this Agreement by Assuming Party
        shall be deemed its execution of the Note, Deed of Trust and other Loan
        Documents.

7.      RELEASE OF BORROWER. The parties acknowledge that Borrower shall be
        released from liability under the Loan Documents upon satisfaction of
        each of the conditions precedent to this Agreement defined above. In
        partial consideration of such release, Borrower warrants to Lender that
        Borrower has no further interest in the Property or in any other real or
        personal property in which Lender has a security interest under any Loan
        Document.

8.      TERMINATION OF CERTAIN EXISTING DOCUMENTS. Upon satisfaction of each of
        the conditions precedent to this Agreement defined above, (i) that
        certain Repayment Guaranty dated September 26, 2000, executed by WILLIAM
        P. TSCHANTZ, in his individual capacity and as Trustee of the Tschantz
        Family Trust dated November 30, 1993; JANET A. TSCHANTZ, an individual;
        ROBERT C. TSCHANTZ, an individual; ANGELA D. TSCHANTZ, an individual;
        EDMUND T. BANNING, in his individual capacity and as Co-Trustee of the
        Edmund and Laura Banning Trust dated April 27, 1988 (as amended from
        time to time, the "Banning Trust") and LAURA L. BANNING, in her
        individual capacity and as Co-Trustee of the Banning Trust, to, with,
        and for the benefit of WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE
        INCOME FUND, and (ii) the Existing Environmental Indemnity Agreement,
        the Existing TILC Reserve Agreement and the Replacement Reserve
        Agreement shall be deemed terminated and of no further force or effect.

9.      ASSIGNMENT. Borrower hereby irrevocably and unconditionally assigns to
        Assuming Party all of Borrower's right, title and interest in and to:

        9.1    The Property;

        9.2    The Loan Documents;

        9.3    All plans and specifications and contracts for construction of
               all or any part of the Improvements (as defined in the Loan
               Agreement);

        9.4    All contracts for architectural and engineering work for all or
               any part of the Improvements;


                                  Page 4 of 8


        9.5    All reciprocal easement agreements, operating agreements, and
               declarations of conditions, covenants and restrictions related to
               the Property;

        9.6    All leases related to the Property; and

        9.7    All sums currently held by or for the benefit of Lender under the
               Existing TILC Reserve Agreement and the Existing Replacement
               Reserve Agreement.

Borrower represents and warrants to Lender that Borrower has obtained all
consents to such assignments which are required by any agreement respecting any
of the above.

Borrower and Assuming Party agree as follows, which agreement shall have no
effect on the rights of Lender or on the duties and obligations owing by
Borrower or Assuming Party with respect to Lender: Assuming Party indemnifies
and agrees to hold Borrower harmless from and against all claims, liabilities,
losses, damages, causes of action and expenses (including court costs and
reasonable attorneys' fees) (collectively, "Claims") incurred in connection with
any obligations under the Loan Documents where the basis for such Claims arises
out of an act or omission of Assuming Party occurring on or after the date of
this assignment. Assignor indemnifies and agrees to hold Assuming Party harmless
from and against all Claims incurred in connection with any obligations under
the Loan Documents where the basis for such Claims arises out of an act or
omission of Borrower before the date of this assignment.

10.     NO CONSENTS NECESSARY. Assuming Party and Borrower each hereby represent
        and warrant to Lender, each to the best of its respective knowledge,
        that: (i) no Default, breach or failure of condition has occurred, or
        would exist with notice or the lapse of time or both, under any of the
        Loan Documents (as modified by this Agreement), and that all
        representations and warranties herein and in the other Loan Documents
        are true and correct as of the date hereof; and (ii) no consent to the
        transfer of the Property to Assuming Party is required under any
        agreement to which Borrower or Assuming Party is a party, including,
        without limitation, under any lease, construction agreement, operating
        agreement, deed of trust, mortgage or security instrument (other than
        the Loan Documents).

11.     STATUS OF ASSUMING PARTY. Assuming Party represents and warrants to
        Lender that (i)) Assuming Party is not in default under any other loan
        of Assuming Party in favor of any other lender, and (ii) Assuming Party
        is not currently a debtor in any bankruptcy, reorganization, insolvency
        or similar proceeding.

12.     WAIVER OF ACCELERATION. Lender hereby agrees that it shall not exercise
        its right to cause all sums secured by the Deed of Trust to become
        immediately due and payable because of the conveyance of the Property
        from Borrower to Assuming Party; provided, however, Lender reserves its
        right under the terms of the Deed of Trust to accelerate all principal
        and interest in the event of any subsequent sale, transfer, encumbrance
        or other conveyance of the Property.

13.     KNOWLEDGE OF LOAN DOCUMENTS. Assuming Party warrants that Assuming Party
        has personal knowledge of all terms and conditions of the Loan
        Documents, and


                                  Page 5 of 8


        further agrees that Lender has no obligation or duty to provide any
        information to Assuming Party regarding the terms and conditions of the
        Loan Documents. Assuming Party further understands and acknowledges
        that, except as expressly provided in a writing executed by Lender,
        Lender has not waived any right of Lender or obligation under the Loan
        Documents and Lender has not agreed to any modification of any provision
        of any Loan Document or to any extension of the Loan.

14.     HAZARDOUS MATERIALS; CCP SECTION 726.5; SECTION 736. Without in any way
        limiting any other provision of this Agreement, Assuming Party expressly
        reaffirms as of the date hereof, and continuing hereafter: (i) each and
        every representation and warranty in the Loan Documents respecting
        "Hazardous Materials"; and (ii) each and every covenant and indemnity in
        the Loan Documents respecting "Hazardous Materials". In addition,
        Assuming Party and Lender agree that: (i) this Section is intended as
        Lender's written request for information (and Assuming Party's response)
        concerning the environmental condition of the real property security
        under the terms of California Code of Civil Procedure Section 726.5; and
        (ii) each representation and/or covenant in this Agreement or any other
        Loan Document (together with any indemnity applicable to a breach of any
        such representation and/or covenant) with respect to the environmental
        condition of the real property security is intended by Lender and
        Assuming Party to be an "environmental provision" for purposes of
        California Code of Civil Procedure Section 736.

15.     MULTIPLE PARTIES. If more than one person or entity has signed this
        Agreement as Assuming Party or Borrower, then all references in this
        Agreement to Assuming Party or Borrower shall mean each and all of the
        persons so signing, as applicable. The liability of all persons and
        entities signing shall be joint and several.

16.     CONFIRMATION OF SECURITY INTEREST. Nothing contained herein shall affect
        or be construed to affect any lien, charge or encumbrance created by any
        Loan Document or the priority of any such lien, charge or encumbrance
        over any other liens, charges or encumbrances. All assignments and
        transfers by Borrower to Assuming Party are subject to any security
        interest(s) held by Lender.

17.     INTEGRATION; INTERPRETATION. The Loan Documents, including this
        Agreement, contain or expressly incorporate by reference the entire
        agreement of the parties with respect to the matters contemplated herein
        and supersede all prior negotiations and shall not be modified except by
        written instrument executed by all parties.

18.     SUCCESSORS AND ASSIGNS. Subject to all prohibitions against transfer
        contained in any Loan Document, this Agreement is binding upon and shall
        inure to the benefit of the heirs, successors and assigns of the
        parties.

19.     ATTORNEYS' FEES; ENFORCEMENT. If any attorney is engaged by Lender
        to enforce or defend any provision of this Agreement, or as a
        consequence of any default under this Agreement, with or without the
        filing of any legal action or proceeding, Assuming Party shall pay to
        Lender, immediately upon demand, all attorneys' fees and all costs
        incurred by Lender in connection therewith, together with interest
        thereon from


                                  Page 6 of 8


        the date of such demand until paid at the rate of interest applicable to
        the principal balance of the Note as specified therein.

20.     MISCELLANEOUS. This Agreement shall be governed by and interpreted in
        accordance with the laws of the State of California, except to the
        extent preempted by federal law. Any term of this Agreement which is
        determined by a court of competent jurisdiction to be invalid, illegal
        or unenforceable shall be deemed severed herefrom and the remaining
        parts shall remain in full force as though the invalid, illegal or
        unenforceable portion had not been a part hereof. The headings used in
        this Agreement are for convenience only and shall be disregarded in
        interpreting the substantive provisions of this Agreement. Time is of
        the essence.

IN WITNESS THEREOF, Borrower, Assuming Party and Lender hereby execute this
Agreement.

                              "LENDER"

                              BNY WESTERN TRUST COMPANY AS TRUSTEE FOR
                              WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE
                              INCOME FUND

                              By:     /s/ COLLEEN IWANO
                                      ----------------------------
                                      Colleen Iwano
                                      Its:  Senior Vice President

                              "BORROWER"

                              DIVERSIFIED EASTGATE VENTURE,
                              an Illinois general partnership

                              By:     Diversified Eastgate Pointe, LLC,
                                      a California limited liability company
                              Its:    General Partner

                                      By:    /s/ WILLIAM P. TSCHANTZ
                                             -------------------------
                                             William P. Tschantz
                                      Its:   Manager

                              By:     GFBP Partners, LLC., a California limited
                                      liability company
                              Its:    General Partner

                                      By:    /s/ WILLIAM P. TSCHANTZ
                                             -------------------------
                                             William P. Tschantz
                                      Its:   Manager


                                  Page 7 of 8


                              "ASSUMING PARTY"

                              ILLUMINA, INC., a Delaware corporation

                              By:      /s/ TIMOTHY M. KISH
                                      --------------------------------
                                      Timothy M. Kish
                                      Its:  Vice President and Chief Financial
                                            Officer

                                  Page 8 of 8

EX-10.20

                                                                   EXHIBIT 10.20


                             TENANT IMPROVEMENT AND
                      LEASING COMMISSION RESERVE AGREEMENT

        This TENANT IMPROVEMENT AND LEASING COMMISSION RESERVE AGREEMENT
("Agreement") is made as of January 10, 2002, by and between ILLUMINA, INC., a
Delaware corporation, having its principal place of business at 9885 Towne
Centre Drive, San Diego, California 92121 ("Borrower"), and BNY WESTERN TRUST
COMPANY AS TRUSTEE FOR WASHINGTON CAPITAL JOINT MASTER TRUST MORTGAGE INCOME
FUND, having an address at c/o Washington Capital Management, Inc., 4350 La
Jolla Village Drive, Suite 960, San Diego, California 92122 ("Lender"), with
reference to the following facts:

        A. Borrower, by its assumption of a promissory note dated September 26,
2000, executed by Eastgate Diversified Venture, an Illinois general partnership,
given to Lender (the note, together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note") is indebted
to Lender in the principal sum of Twenty Six Million Dollars ($26,000,000.00),
in lawful money of the United States of America, with interest at the rates set
forth in the Note (the indebtedness evidenced by the Note, together with such
interest accrued thereon, shall collectively be referred to as the "Loan"),
principal and interest to be payable in accordance with the terms and conditions
provided in the Note.

        B. The Loan is secured by, among other things, a Deed of Trust, Security
Agreement, Assignment of Rents and Fixture Filing (the "Deed of Trust"), dated
as of September 27, 2000, which grants Lender a first lien on the property
encumbered thereby (the "Property"). All and any of the documents other than the
Note, the Deed of Trust and this Agreement now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guarantee payment of the Note are referred to as the "Other Security Documents."

        C. Lender requires as a condition to the assumption of the Loan by
Borrower that Borrower enter into this Agreement and make certain deposits with
Lender as provided in this Agreement as additional security for all of
Borrower's obligations under the Note, the Deed of Trust and the Other Security
Documents.

        NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

        1.     Deposits to the Tenant Improvement and Leasing Commission
Reserve.

               1.1 Monthly Deposit. On each date that a regularly scheduled
payment of principal or interest is due under the Note, Borrower shall deposit
with Lender (or, at Lender's election, in a pledged bank or escrow account in
the name of Borrower and pledged to and selected by Lender) the sum of Twenty
Thousand Dollars ($20,000.00) (the "Monthly Deposit").

1.2     Reassessment of Monthly Deposit. No more often than once each "Loan
        Year" (as defined below), Lender may reassess its estimate of the amount
        necessary for the


                                        1


Tenant Improvement and Leasing Commission Reserve Fund (defined below) and may
increase the amount of the Monthly Deposit by thirty (30) calendar days written
notice to Borrower, if Lender determines in its reasonable discretion that an
increase is commercially reasonable and necessary to maintain a proper reserve
to fund the costs of likely Tenant Improvements and/or Leasing Commissions (each
as defined below) for the retenanting of the Property during the remaining term
of the Loan. For purposes of this Section 1.2, a "Loan Year" means each 365 day
period (or 366 day period in leap years) commencing with the date of this
Agreement and ending on each anniversary thereof.

               1.3 Shell Space Reserve. If any unimproved shell space exists, as
of the Conversion Date, in (a) that certain two-story building consisting of
approximately 46,250 rentable square feet ("Building A") on the Property, or (b)
that certain two-story building consisting of approximately 51,250 rentable
square feet ("Building B") on the Property, Borrower shall deposit with Lender
One Hundred Dollars ($100.00) for each square foot of such unimproved shell
space (the "Shell Space Reserve"). Monthly Deposits and the Shell Space Reserve
shall collectively be referred to herein as the "Tenant Improvement and Leasing
Commission Reserve Fund."

               1.4 Tenant Improvement and Leasing Commission Reserve. Lender
shall invest or cause to be invested the Tenant Improvement and Leasing
Commission Reserve Fund, as received, in highly liquid, short-term U.S.
government securities (the "Tenant Improvement and Leasing Commission Reserve")
selected by Lender with any interest and gains in investment value accruing
thereon to Borrower's benefit. Borrower hereby acknowledges and confirms that
(a) the Tenant Improvement and Leasing Commission Reserve Fund shall not
constitute a trust fund (and, if deposited in Lender's name, such funds may be
commingled with other monies held by Lender, but, if held in the name of
Borrower, such funds shall not be commingled with any other monies held by
Borrower), and (b) Lender or its designee shall have the sole right to make or
approve withdrawals from the Tenant Improvement and Leasing Commission Reserve.

        2.     Pledge of Tenant Improvement and Leasing Commission Reserve.

        As additional security for the payment of all sums due under the Loan
and the performance by Borrower of the Obligations (as defined in the Deed of
Trust), Borrower hereby pledges, assigns and grants to Lender a continuing
perfected security interest in and to and a first lien upon, the Tenant
Improvement and Leasing Commission Reserve Fund and the Tenant Improvement and
Leasing Commission Reserve; provided that, Lender shall make disbursements from
the Tenant Improvement and Leasing Commission Reserve in accordance with the
terms of this Agreement.

        3.     Disbursements From Tenant Improvement and Leasing Commission
Reserve

               3.1 Disbursements for Tenant Improvements and Leasing Commissions
Only. Lender shall make disbursements from the Tenant Improvement and Leasing
Commission Reserve to pay or reimburse Borrower only for the cost of (a) tenant
improvements required under any new lease or modification, renewal or extension
of any existing lease which is entered into after the date hereof for the
Property, provided that any such new lease or modification, renewal or extension
of any existing lease which is entered into after the date hereof is done so in


                                        2


accordance with the terms and provisions of the Deed of Trust and the Other
Security Documents (collectively, the "Tenant Improvements"), and (b) leasing
commissions incurred by Borrower in connection with the leasing of the Property
or a portion thereof, provided that (x) such leasing commissions are reasonable
and customary for properties similar to the Property and (y) the amount of such
leasing commission is determined pursuant to arms length transactions between
Borrower and any leasing agent to which a leasing commission is due, and
excluding any leasing commissions which shall be due any member, general partner
or shareholder of Borrower or any affiliate of Borrower (collectively, "Leasing
Commissions"), in each case in the manner provided in this Section 3. Lender
shall, upon written request from Borrower and satisfaction of the requirements
set forth in this Section 3 and Section 4 of this Agreement, disburse to
Borrower amounts from the Tenant Improvement and Leasing Commission Reserve
necessary to pay for the actual approved costs of (I) Tenant Improvements or to
reimburse Borrower therefor, upon completion of such Tenant Improvements (or,
upon partial completion in the case of Tenant Improvements made pursuant to
Section 3.5) as determined by Lender, and (II) Leasing Commissions upon
satisfactory evidence that the obligations of the leasing agent have been fully
performed. In no event shall Lender be obligated to disburse funds from the
Tenant Improvement and Leasing Commission Reserve if an Event of Default
(hereinafter defined) exists.

               3.2 Request for Disbursement for Tenant Improvement. Each request
for disbursement from the Tenant Improvement and Leasing Commission Reserve in
connection with a Tenant Improvement shall be in a form specified or approved by
Lender and shall specify (a) the specific Tenant Improvements for which the
disbursement is requested, (b) the quantity and price of each item purchased, if
the Tenant Improvement includes the purchase or replacement of specific items,
(c) the price of all materials (grouped by type or category) used in any Tenant
Improvement other than the purchase or replacement of specific items, and (d)
the cost of all contracted labor or other services applicable to each Tenant
Improvement for which such request for disbursement is made. With each such
request, Borrower shall certify that all Tenant Improvements have been made in
accordance with applicable laws and shall also deliver a certificate from the
tenants for which the Tenant Improvements have been performed stating that such
Tenant Improvements have been completed in a manner satisfactory and acceptable
to such tenant, that such tenant has accepted the premises and containing such
other information as Lender may require, in form and substance reasonably
satisfactory to Lender. Each request for disbursement shall include copies of
invoices for all items or materials purchased and all contracted labor or
services provided and each request shall include evidence satisfactory to Lender
of payment of all such amounts. Except as provided in Section 3.5, each request
for disbursement from the Tenant Improvement and Leasing Commission Reserve
shall be made only after completion of the Tenant Improvement for which
disbursement is requested. Borrower shall provide Lender evidence of completion
satisfactory to Lender in its reasonable judgment.

               3.3 Request for Disbursement for Leasing Commissions. Each
request for disbursement from the Tenant Improvement and Leasing Commission
Reserve in connection with a Leasing Commission shall be in a form specified or
approved by Lender and shall specify (a) the Leasing Commissions for which such
disbursement is requested, and (b) the amount of each Leasing Commission. With
each such request, Borrower shall certify that the obligations of the leasing
agent have been fully performed, and Borrower shall also deliver a certification
from


                                        3


the leasing agent that no further sums are due to it in connection with the
applicable Leasing Commission. Each request for disbursement shall include
copies of invoices and bills for such Leasing Commissions marked paid; or Lender
may in its sole discretion, accept copies of cancelled checks in satisfaction of
this requirement.

               3.4 Disbursement Conditions. Borrower shall pay all invoices in
connection with the Tenant Improvements with respect to which a disbursement is
requested prior to submitting such request for disbursement from the Tenant
Improvement and Leasing Commission Reserve unless all such invoices do not
exceed $10,000.00, in which case Lender shall disburse the amount for such
invoices directly to Borrower and Borrower covenants and agrees to promptly pay
such invoices. In addition, as a condition to any disbursement, Lender may
require Borrower to obtain lien waivers from each contractor, supplier,
materialman, mechanic or subcontractor who receives payment in an amount equal
to or greater than $10,000.00 for completion of its work or delivery of its
materials. Any lien waiver delivered hereunder shall conform to the requirements
of applicable law and shall cover all work performed and materials supplied
(including equipment and fixtures) for the Property by that contractor,
supplier, subcontractor, mechanic or materialman through the date covered by the
current reimbursement request. Lender may in its sole discretion, accept copies
of cancelled checks in lieu of, or in addition to any of the foregoing invoice
and/or lien waiver requirements.

               3.5 Partial Completion. If (a) the time required to complete a
Tenant Improvement exceeds one month, (b) the contractor performing such Tenant
Improvement requires periodic payments pursuant to the terms of a written
contract, (c) Lender has approved in writing in advance such periodic payments,
and (d) the cost of the portion of the work completed under such contract
exceeds Ten Thousand Dollars ($10,000.00), a request for reimbursement from the
Tenant Improvement and Leasing Commission Reserve may be made after completion
of a portion of the work under such contract, provided (i) such contract
requires payment upon completion of such portion of the work, (ii) the materials
for which the request is made are on site at the Property and are properly
secured or have been installed in the Property, (iii) all other conditions in
this Agreement for disbursement have been satisfied, (iv) funds remaining in the
Tenant Improvement and Leasing Commission Reserve are, in Lender's judgment,
sufficient to complete such Tenant Improvement and fund other Tenant
Improvements and Leasing Commissions when required, and (v) each contractor or
subcontractor receiving payments under such contract shall provide a waiver of
lien with respect to amounts which have been paid to that contractor or
subcontractor.

               3.6 Number of Requests. Except as provided in Section 3.5,
Borrower shall not make a request for disbursement from the Tenant Improvement
and Leasing Commission Reserve more frequently than once in any calendar month.

        4.     Performance of Tenant Improvements.

               4.1 Workmanlike Completion. Borrower shall make Tenant
Improvements when required under the terms of the applicable Lease. Borrower
shall complete all Tenant Improvements in a good and workmanlike manner as soon
as practicable following the commencement of making each such Tenant
Improvement.


                                        4


               4.2 Contracts. Lender reserves the right, at its option, to
approve all contracts or work orders with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Tenant Improvements. Upon Lender's request, Borrower shall
assign any contract or subcontract to Lender.

               4.3 Lender's Right to Complete Tenant Improvements. In the event
Lender determines in its reasonable discretion that any Tenant Improvement is
not being performed in a workmanlike or timely manner or that any Tenant
Improvement has not been completed in a workmanlike or timely manner, Lender
shall have the option to withhold disbursement for such unsatisfactory Tenant
Improvement and to proceed under existing contracts or to contract with third
parties to complete such Tenant Improvement and to apply the Tenant Improvement
and Leasing Commission Reserve Fund toward the labor and materials necessary to
complete such Tenant Improvement, without providing any prior notice to
Borrower, and to exercise any and all other remedies available to Lender upon an
Event of Default.

               4.4 Entry onto Property. In order to facilitate Lender's
completion or making of the Tenant Improvements pursuant to Section 4.3 above,
Borrower grants Lender the right to enter onto the Property and perform any and
all work and labor necessary to complete or make the Tenant Improvements and/or
employ watchmen to protect the Property from damage. All sums so expended by
Lender shall be deemed to have been advanced under the Loan to Borrower and
secured by the Deed of Trust. For this purpose, Borrower constitutes and
appoints Lender its true and lawful attorney-in-fact with full power of
substitution to complete or undertake the Tenant Improvements in the name of
Borrower. Such power of attorney shall be deemed to be a power coupled with an
interest and cannot be revoked. Borrower empowers said attorney-in-fact as
follows: (a) to use any funds in the Tenant Improvement and Leasing Commission
Reserve for the purpose of making or completing the Tenant Improvements; (b) to
make such additions, changes and corrections to the Tenant Improvements as shall
be necessary or desirable to complete the Tenant Improvements; (c) to employ
such contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (d) to pay, settle or compromise all existing bills
and claims which are or may become liens against the Property, or as may be
necessary or desirable for the completion of the Tenant Improvements, or for
clearance of title; (e) to execute all applications and certificates in the name
of Borrower which may be required by any of the contract documents; (f) in its
reasonable discretion, to prosecute and defend all actions or proceedings in
connection with the Property or the rehabilitation and repair of the Property;
and (g) to do any and every act which Borrower might do in its own behalf to
fulfill the terms of this Agreement.

               4.5 No Obligation of Lender. Nothing in this Section 4 shall: (a)
make Lender responsible for making or completing the Tenant Improvements; (b)
require Lender to expend funds in addition to the Tenant Improvement and Leasing
Commission Reserve Fund to make or complete any Tenant Improvement; (c) obligate
Lender to proceed with the Tenant Improvements; or (d) obligate Lender to demand
from Borrower additional sums to make or complete any Tenant Improvement.

               4.6    Inspections.


                                        5


                      (a) Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect or
inspector) or third parties making Tenant Improvements pursuant to this Section
4 to enter onto the Property during normal business hours (subject to the rights
of tenants under their Leases) to inspect the progress of any Tenant
Improvements and all materials being used in connection therewith, to examine
all plans and shop drawings relating to such Tenant Improvements which are or
may be kept at the Property, and to complete any Tenant Improvements made
pursuant to this Section 4. Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other persons described above in connection with inspections described in this
Section 4.6 or the completion of Tenant Improvements pursuant to this Section 4.

                      (b) Lender may require an inspection of the Property at
Borrower's expense prior to making a monthly disbursement from the Tenant
Improvement and Leasing Commission Reserve in order to verify completion of the
Tenant Improvements for which reimbursement is sought. Lender may require that
such inspection be conducted by an appropriate, independent, qualified
professional selected by Lender and/or may require a copy of a certificate of
completion by an independent, qualified professional acceptable to Lender prior
to the disbursement of any amounts from the Tenant Improvement and Leasing
Commission Reserve. Borrower shall pay the expense of the inspection as required
hereunder, whether such inspection is conducted by Lender or by an independent,
qualified professional.

               4.7    Lien-Free Completion.

                      (a) The Tenant Improvements and all materials, equipment,
fixtures, or any other item comprising a part of any Tenant Improvement shall be
constructed, installed or completed, as applicable, free and clear of all
mechanic's, materialman's or other liens (except for those liens existing on the
date of this Agreement which have been approved in writing by Lender, if any).

                      (b) Lender may require Borrower to provide Lender with a
search of title to the Property effective to the date of the disbursement, which
search shows that no mechanic's or materialmen's liens or other liens of any
nature have been placed against the Property since the date of recordation of
the Deed of Trust and that title to the Property is free and clear of all liens
(other than the lien of the Deed of Trust and any other liens previously
approved in writing by Lender, if any).

               4.8 Compliance with Laws. All Tenant Improvements shall comply
with all applicable laws and applicable insurance requirements, including,
without limitation, applicable building codes, special use permits,
environmental regulations and requirements of insurance underwriters.

               4.9 Insurance Requirements. In addition to any insurance required
under the Deed of Trust and the Other Security Documents, Borrower shall provide
or cause to be provided workmen's compensation insurance, builder's risk, and
public liability insurance and other insurance to the extent required under
applicable law in connection with a particular Tenant Improvement. All such
policies shall be in form and amount reasonably satisfactory to Lender. All such
policies which can be endorsed with standard mortgagee clauses making loss
payable to


                                        6


Lender or its assigns shall be so endorsed. Certified copies of such policies
shall be delivered to Lender.

        5.     Failure to Make Tenant Improvements.

               5.1 Event of Default. It shall be an "Event of Default" under
this Agreement if Borrower (a) fails to make any Monthly Deposit payment
required hereunder within ten (10) calendar days of the date when due, or (b)
fails to comply with any provision of this Agreement and such failure is not
cured within thirty (30) calendar days after notice from Lender; provided that
if such default cannot reasonably be cured within such thirty (30) day period
and Borrower shall have commenced to cure such default within such thirty (30)
day period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) day period shall be extended for so long as it shall
require Borrower in the exercise of due diligence to cure such default, it being
agreed that no such extension shall be for a period in excess of one hundred
twenty (120) days, unless, only in the case of cures that require construction
or remedial work, such cure cannot with diligence be completed within such one
hundred twenty (120) day period, in which case such period shall be extended for
an additional one hundred twenty (120) days. The occurrence of an Event of
Default, as defined in the Note, the Deed of Trust or any of the Other Security
Documents, shall also be an "Event of Default" under this Agreement. Upon the
occurrence and during the continuance of an Event of Default, Borrower shall not
be entitled to receive any funds from the Tenant Improvement and Leasing
Commission Reserve and Lender may use the Tenant Improvement and Leasing
Commission Reserve Fund (or any portion thereof) for any purpose, including, but
not limited to, completion of the Tenant Improvements as provided in Section 4,
payment of any Leasing Commissions then due and payable, or for any other repair
or replacement to the Property or toward payment of the Debt in such order,
proportion and priority as Lender may determine in its sole discretion. Lender's
right to withdraw and apply the Tenant Improvement and Leasing Commission
Reserve Fund shall be in addition to all other rights and remedies provided to
Lender under this Agreement, the Note, the Deed of Trust, the Other Security
Documents, and at law or in equity.

               5.2 Insufficient Funds in the Tenant Improvement and Leasing
Commission Reserve. The insufficiency of any balance in the Tenant Improvement
and Leasing Commission Reserve shall not relieve Borrower from its obligation to
fulfill (a) all covenants in the Deed of Trust and the Other Security Documents,
(b) any covenants or agreements with any tenants under any Leases, or (c) any
agreements with any leasing agents.

        6.     Waivers.

               6.1 Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Agreement, the Note, the Deed of Trust, any of the Other
Security Documents, or the Obligations.

               6.2 Waiver of Notice. To the extent permitted by applicable law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement specifically and
expressly provides for the giving of notice by Lender to Borrower and except
with respect to matters for which Lender is required by


                                        7


applicable law to give notice, and Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Agreement does not specifically and expressly provide for the giving of notice
by Lender to Borrower.

               6.3 Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to any and all of its obligations hereunder.

               6.4 Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS AGREEMENT, THE DEED OF TRUST OR
THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS,
EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

        7.     Miscellaneous Provisions.

               7.1 Notices. All notices or other written communications
hereunder shall be given and become effective as provided in the Deed of Trust.

               7.2 Choice of Law. This Agreement shall be governed, construed,
applied and enforced in accordance with the laws of the State of California and
the applicable laws of the United States of America.

               7.3 Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Agreement invalid or unenforceable under the provisions of any applicable law.

               7.4 Inapplicable Provision. If any term of this Agreement or any
application thereof shall be invalid or unenforceable, the remainder of this
Agreement and any other application of the term shall not be affected thereby.

               7.5 Costs. Borrower agrees to indemnify Lender and to hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations and costs and expenses (including
litigation costs) arising from or in any way connected with the performance of
the Tenant Improvements or in connection with any Leasing Commissions or the
holding or disbursing of the Tenant Improvement and Leasing Commission Reserve
or the Tenant Improvement and Leasing Commission Reserve Fund. Wherever it is
provided for herein that Borrower pay any costs and expenses, such costs and
expenses shall include, but not be limited to, all legal fees and disbursements
of Lender (whether of retained firms, the reimbursement for the expenses of
in-house staff or otherwise). Borrower hereby assigns to Lender all rights and
claims Borrower may have against all persons or entities acting as a leasing
agent in connection with Leasing Commissions.


                                        8


               7.6 Headings, Etc. The headings and captions of various Sections
of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting in any way, the scope or intent of the
provisions hereof.

               7.7 No Oral Change. This Agreement, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing, signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.

               7.8 Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.

               7.9 Duplicate Originals; Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

               7.10 Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.

               7.11 Borrower's Records. Borrower shall furnish such financial
statements, invoices, records, papers and documents relating to the Property as
Lender may reasonably require from time to time to make the determinations
permitted or required to be made by Lender under this Agreement.

               7.12 No Third Part Beneficiary. This Agreement is intended solely
for the benefit of Borrower and Lender and their respective successors and
assigns, and no third party shall have any rights or interest in the Tenant
Improvement and Leasing Commission Reserve, the Tenant Improvement and Leasing
Commission Reserve Fund, this Agreement, the Note, the Deed of Trust or any of
the Other Security Documents. Nothing contained in this Agreement shall be
deemed or construed to create an obligation on the part of Lender to any third
party, nor shall any third party have a right to enforce against Lender any
right that Borrower may have under this Agreement.

               7.13 No Agency or Partnership. Nothing contained in this
Agreement shall constitute Lender as a joint venturer, partner, agent,
tenant-in-common or joint tenant of Borrower, or render Lender liable for any
debts, obligations, acts, omissions, representations, or contracts of Borrower.

               7.14 Termination of Tenant Improvement and Leasing Commission
Reserve. After (a) payment in full of the Debt and release by Lender of the lien
of the Deed of Trust and (b) payment in full for all (i) Tenant Improvements
completed or contracted to be performed, or


                                        9


(i) Leasing Commissions due and payable, in each case prior to the date of the
payment described in (a) above, Lender shall disburse to Borrower all amounts
remaining in the Tenant Improvement and Leasing Commission Reserve, and this
Agreement shall terminate.

               7.15 Enforcement of Agreement. This Agreement is executed by
Borrower and Lender for the benefit of Lender. Borrower understands and agrees
that, in connection with any sale of the Loan to an Investor (as defined in the
Deed of Trust), this Agreement may be assigned to such Investor.

               7.16 Sole Discretion of Lender. Wherever pursuant to this
Agreement (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the reasonable discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.

               7.17 Completion of Tenant Improvements. Lender's approval of any
plans for any Tenant Improvement, release of funds from the Tenant Improvement
and Leasing Commission Reserve, inspection of the Property by Lender or Lender's
agents, or other acknowledgment of completion of any Tenant Improvement in a
manner satisfactory to Lender shall not be deemed an acknowledgment or warranty
to any person that the Tenant Improvement has been completed in accordance with
applicable laws.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                       10


        IN WITNESS WHEREOF the undersigned have executed this Agreement as of
the date first written above.

"BORROWER"                            ILLUMINA, INC.,
                                      A Delaware corporation

                                      By:       /s/ TIMOTHY M. KISH
                                              -------------------------------
                                              Timothy M. Kish
                                              Its:  Vice President and Chief
                                                    Financial Officer

"LENDER"                              BNY WESTERN TRUST COMPANY AS TRUSTEE FOR
                                      WASHINGTON CAPITAL JOINT MASTER TRUST
                                      MORTGAGE INCOME FUND


                                      By:       /s/ COLEEN IWANO
                                              -------------------------------
                                              Colleen Iwano
                                              Its:  Senior Vice President




                                       11

EX-10.21

                                                                   EXHIBIT 10.21

                                 ILLUMINA, INC.

                        2000 EMPLOYEE STOCK PURCHASE PLAN

                 AS AMENDED AND RESTATED THROUGH MARCH 21, 2002

The following constitute the provisions of the 2000 Employee Stock Purchase Plan
of Illumina, Inc.

               1. PURPOSE. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

               2. DEFINITIONS.

                  (a) "BOARD" shall mean the Board of Directors of the Company
or any committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.

                  (b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.

                  (c) "COMMON STOCK" shall mean the common stock of the Company.

                  (d) "COMPANY" shall mean Illumina, Inc., a Delaware
corporation and any Designated Subsidiary of the Company.

                  (e) "COMPENSATION" shall mean all base straight time gross
earnings, but exclusive of commissions, payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation. Such
Compensation shall be calculated before deduction of (i) any income or
employment tax withholdings or (ii) any contributions made by the participant to
any Code Section 401(k) salary deferral plan or any Code Section 125 cafeteria
benefit program now or hereafter established by the Company or any of its
Subsidiaries.

                  (f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary that has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

                  (g) "EMPLOYEE" shall mean any individual who is an Employee of
the Company for tax purposes and whose customary employment with the Company is
at least twenty (20) hours per week for more than five (5) months in any
calendar year.

                  (h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.

                  (i) "EXERCISE DATE" shall mean the first Trading Day in
February and August of each year.



                  (j) "FAIR MARKET VALUE" shall mean, as of any date, the value
of Common Stock determined as follows:

                      (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing selling price per share for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system on the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable;

                      (ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;

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

                      (iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
per share at which the Common Stock was sold pursuant to the underwriting
agreement for the Company's initial public offering of the Common Stock.

                  (k) "OFFERING PERIODS" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day in February and August each
year and terminating on the first Trading Day in February or August which is
approximately twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
registration statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Common Stock (the
"Registration Statement") effective and ending on the first Trading Day in
August 2002. The duration and timing of Offering Periods may be changed pursuant
to Section 4 of this Plan.

                  (l) "PLAN" shall mean this 2000 Employee Stock Purchase Plan.

                  (m) "PURCHASE PERIOD" shall mean the approximately six month
period commencing on one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end on February 1, 2001.

                  (n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value
of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided, however, that the Purchase Price may be adjusted
by the Board pursuant to Section 20.

                  (o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares


                                        2


of Common Stock which have been authorized for issuance under the Plan but not
yet placed under option.

                  (p) "SUBSIDIARY" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.

                  (q) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.

               3. ELIGIBILITY.

                  (a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.

                  (b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.

               4. OFFERING PERIODS. The Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period commencing
on the first Trading Day in February and August each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Registration
Statement effective and ending on the first Trading Day in August 2002. The
Board shall have the power to change the duration of Offering Periods (including
the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected thereafter.

               5. PARTICIPATION.

                  (a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.

                  (b) Once an eligible Employee becomes a participant in the
Plan, such individual shall remain a participant until he or she terminates such
participation as provided in Section 10 hereof, the Plan terminates or the
participant loses his or her status as an Employee.


                                        3


                  (c) An eligible Employee may be enrolled in only one Offering
Period at a time.

               6. PAYROLL DEDUCTIONS.

                  (a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period; provided, however that should a pay day occur on an Exercise Date, a
participant shall have the payroll deductions made on such day applied to his or
her account under the new Offering Period or Purchase Period, as the case may
be.

                  (b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.

                  (c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Company may, in its discretion, limit the nature
and/or number of participation rate changes during any Offering Period, and may
establish such other conditions or limitations as it deems appropriate for Plan
administration. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's receipt of
the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.

                  (d) If by reason of the limitations set forth in Sections
3(b), 7 and 13(a), any option of a Participant does not accrue for a particular
Purchase Period, then the payroll deductions that the Participant made during
that Purchase Period with respect to such option shall be promptly refunded. In
addition, to the extent necessary to comply with Section 423(b)(8) of the Code
and Section 3(b) hereof, a participant's payroll deductions may be decreased to
one percent (1%) at any time during a Purchase Period. Payroll deductions shall
recommence at the rate provided in such participant's subscription agreement at
the beginning of the first Purchase Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 10 hereof.

                  (e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.


                                        4


               7. GRANT OF OPTION. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of whole shares of the
Company's Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than 25,000 shares of the Company's Common Stock (subject to any
adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 13 hereof.
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of the Company's Common Stock
an Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.

               8. EXERCISE OF OPTION.

                  (a) Unless a participant withdraws from the Plan as provided
in Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.

                  (b) If the Board determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Board may in its sole discretion (x) provide that the Company shall make a
pro rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
stockholders subsequent to such Enrollment Date.


                                        5


               9.  DELIVERY. As promptly as practicable after each Exercise
Date on which a purchase of shares occurs, the Company shall arrange the
delivery to each participant, as appropriate, of a certificate representing the
shares purchased upon exercise of his or her option.

               10. WITHDRAWAL.

                  (a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.

                   (b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.

               11. TERMINATION OF OPTION.

                   (a) Upon a participant's ceasing to be an Employee, for any
reason, he or she shall be deemed to have elected to withdraw from the Plan and
the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.

                   (b) Should the participant cease to be an Employee by reason
of an approved unpaid leave of absence, then the participant shall have the
right, exercisable up until the last business day of the Purchase Period in
which such leave commences, to (i) withdraw all the payroll deductions collected
to date on his or her behalf for that Purchase Period or (ii) have such funds
held for the purchase of shares on his or her behalf on the next scheduled
Exercise Date. Upon the participant's return to active service (A) within ninety
(90) days following the commencement of such leave or (B) prior to the
expiration of any longer period for which such participant's right to
reemployment with the Company is guaranteed by statute or contract, his or her
payroll deductions under the Plan shall automatically resume at the rate in
effect at the time the leave began, unless the participant withdraws from the
Plan prior to his or her return. An individual who returns to active employment
following a leave of absence that exceeds in duration the applicable (A) or (B)
time period will be treated as a new Employee for purposes of subsequent
participation in the Plan and must accordingly re-enroll in the Plan (by making
a timely filing of the prescribed enrollment forms) on or before the next
Enrollment Date.


                                        6


               12. INTEREST. No interest shall accrue on the payroll deductions
of a participant in the Plan.

               13. STOCK.

                   (a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be 1,458,946 shares, which consists of the (i) 500,000 shares initially
reserved under the Plan and (ii) the 958,946 share automatic increase for the
fiscal year 2001. The Board determined that no automatic increase would take
effect for the fiscal year 2002.

                   (b) The share reserve shall increase annually on the first
day of the Company's fiscal year, beginning in 2001, by the number of shares
equal to the lesser of (i) 1,500,000 shares, (ii) 3% of the outstanding shares
of Common Stock on the last day of the immediately preceding fiscal year or
(iii) an amount determined by the Board.

                   (c) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.

                   (d) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.

               14. ADMINISTRATION. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.

               15. DESIGNATION OF BENEFICIARY.

                   (a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.

                   (b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to


                                        7


any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.

               16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

               17. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.

               18. REPORTS. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

               19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.

                   (a) CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, the Reserves (including the number of shares
automatically added annually to the Plan pursuant to Section 13(a)(i)), the
maximum number of shares each participant may purchase each Purchase Period
(pursuant to Section 7), as well as the price per share and the number of shares
of Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
option.

                   (b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New


                                        8


Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

                   (c) MERGER OR ASSET SALE. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.

               20. AMENDMENT OR TERMINATION.

                   (a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors immediately
following any Exercise Date if the Board determines that the termination of the
Offering Period or the Plan is in the best interests of the Company and its
stockholders. Except as provided in Section 19 and this Section 20 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
applicable law, regulation or stock exchange rule), the Company shall obtain
stockholder approval in such a manner and to such a degree as required.

                   (b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

                   (c) In the event the Board determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:


                                        9


                       (i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;

                       (ii) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway at the
time of the Board action; and

                       (iii) allocating shares.

               Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.

               21. NOTICES. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

               22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

               As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

               23. TERM OF PLAN. The Plan shall become effective on the
effective date of the Registration Statement. Unless sooner terminated by the
Board, the Plan shall terminate upon the earliest to occur of (a) the purchase
of shares on the Exercise Date coincidental with the first Trading Day in August
2010, (ii) the date on which all shares available for issuance under the Plan
shall have been sold pursuant to options exercised under the Plan or (iii) the
date on which all options are exercised in connection with a dissolution or
liquidation pursuant to Section 19(b) hereof or a merger or asset sale pursuant
to Section 19(c) hereof. No further options shall be granted or exercised, and
no further payroll deductions shall be collected, under the Plan following such
termination.

               24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the
extent permitted by any applicable laws, regulations, or stock exchange rules if
the Fair Market Value of the Common Stock on any Exercise Date in an Offering
Period is lower than the Fair Market Value of the Common Stock on the Enrollment
Date for that Offering Period, then all participants in such Offering Period
shall be automatically withdrawn from such Offering Period immediately after the
exercise of their option on such Exercise Date and automatically enrolled in the
new Offering Period beginning coincident with such Exercise Date.


                                       10


               25. AT WILL EMPLOYMENT. Nothing in the Plan shall confer upon the
participant any right to continue in the employ of the Company or any Subsidiary
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Company (or any Subsidiary employing such person) or
of the participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.


                                       11


                                    EXHIBIT A

                                 ILLUMINA, INC.
                        2000 EMPLOYEE STOCK PURCHASE PLAN

                             SUBSCRIPTION AGREEMENT

_____ Original Application                       Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)


                      1. ____________________ hereby elects to participate in
        the Illumina, Inc. 2000 Employee Stock Purchase Plan (the "Employee
        Stock Purchase Plan") and subscribes to purchase shares of the Company's
        Common Stock in accordance with this Subscription Agreement and the
        Employee Stock Purchase Plan.

                      2. I hereby authorize payroll deductions from each
        paycheck in the amount of ____% of my Compensation on each payday (from
        1 to 15%) in accordance with the Employee Stock Purchase Plan. (Please
        note that no fractional percentages are permitted.)

                      3. I understand that said payroll deductions shall be
        accumulated for the purchase of shares of Common Stock at the applicable
        Purchase Price determined in accordance with the Employee Stock Purchase
        Plan. I understand that if I do not withdraw from an Offering Period and
        I do not lose eligibility to participate in the Employee Stock Purchase
        Plan, any accumulated payroll deductions will be used to automatically
        exercise my option.

                      4. I understand that the purchase of Common Stock on my
        behalf will be limited to: (a) $25,000 worth of Common Stock for each
        calendar year my option remains outstanding and (b) 25,000 shares of
        Common Stock per six (6)-month Purchase Period. I understand that there
        are other limitations to purchases contained in the Employee Stock
        Purchase Plan.

                      5. I have received a copy of the complete Employee Stock
        Purchase Plan. I understand that my participation in the Employee Stock
        Purchase Plan is in all respects subject to the terms of the Plan.

                      6. Shares purchased for me under the Employee Stock
        Purchase Plan should be issued in the name(s) of
        _______________________________ (Employee or Employee and Spouse only).

                      7. I understand that I may withdraw from the Employee
        Stock Purchase Plan at any time prior to the last business day of the
        Purchase Period and the Company will refund all my payroll deductions
        for that Purchase Period. However, I may not rejoin that




        particular Offering Period at any later date. Upon the termination of my
        employment for any reason (including death or disability) or my loss of
        eligibility to participate in the Employee Stock Purchase Plan, my
        participation in the Employee Stock Purchase Plan will immediately
        cease, and all my payroll deductions for the Purchase Period in which my
        employment terminates or my loss of eligibility occurs will immediately
        be refunded.

                      8. I understand that if I take an unpaid leave of absence,
        my payroll deductions will immediately cease, and any payroll deductions
        for the Purchase Period in which my leave begins will, at my election,
        either be refunded or applied to the purchase of shares of Common Stock
        at the end of that Purchase Period. If my re-employment is guaranteed by
        either law or contract, or if I return to active service within ninety
        (90) days, then upon my return my payroll deductions will automatically
        resume at the rate in effect when my leave begins.

                      9. I understand that the Company has the right,
        exercisable in its sole discretion, to amend or terminate all
        outstanding options under the Employee Stock Purchase Plan at any time,
        with such amendment or termination to become effective immediately
        following the end of any Purchase Period. Upon any such termination, I
        will cease to have any further rights to purchase shares of Common Stock
        under this Subscription Agreement.

                      10. I understand that if I dispose of any shares received
        by me pursuant to the Plan within 2 years after the Enrollment Date (the
        first day of the Offering Period during which I purchased such shares)
        or one year after the Exercise Date for those shares, I will be treated
        for federal income tax purposes as having received ordinary income at
        the time of such disposition in an amount equal to the excess of the
        fair market value of the shares at the time such shares were purchased
        by me over the price which I paid for the shares. I hereby agree to
        notify the Company in writing within 30 days after the date of any
        disposition of my shares and I will make adequate provision for Federal,
        state or other tax withholding obligations, if any, which arise upon the
        disposition of the Common Stock. The Company may, but will not be
        obligated to, withhold from my compensation the amount necessary to meet
        any applicable withholding obligation including any withholding
        necessary to make available to the Company any tax deductions or
        benefits attributable to sale or early disposition of Common Stock by
        me. If I dispose of such shares at any time after the expiration of the
        2-year and 1-year holding periods, I understand that I will be treated
        for federal income tax purposes as having received income only at the
        time of such disposition, and that such income will be taxed as ordinary
        income only to the extent of an amount equal to the lesser of (1) the
        excess of the fair market value of the shares at the time of such
        disposition over the purchase price which I paid for the shares, or (2)
        15% of the fair market value of the shares on the first day of the
        Offering Period. The remainder of the gain, if any, recognized on such
        disposition will be taxed as capital gain.

                      11. I hereby agree to be bound by the terms of the
        Employee Stock Purchase Plan. The effectiveness of this Subscription
        Agreement is dependent upon my eligibility to participate in the
        Employee Stock Purchase Plan.


                                        2


                      12. In the event of my death, I hereby designate the
        following as my beneficiary(ies) to receive all payments and shares due
        me under the Employee Stock Purchase Plan:

        Beneficiary(ies) Name: ________________________________________________
               (Please print)    (First)      (Middle)              (Last)

        Relationship: ____________________________________
        Address:      ____________________________________
                      ____________________________________


        Employee's Social
        Security Number:            ____________________________________
        Employee's Address:         ____________________________________
                                    ____________________________________
                                    ____________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________________            _____________________________________
                                                   Signature of Employee

                                           _____________________________________
                                                          Spouse's Signature
                                           (If beneficiary is other than spouse)


                                        3


                                    EXHIBIT B

                                 ILLUMINA, INC.
                              2000 EMPLOYEE STOCK PURCHASE PLAN
                              NOTICE OF WITHDRAWAL

        The undersigned participant in the Offering Period of the Illumina, Inc.
2000 Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from participation in the Plan. He or she hereby directs the Company to pay to
the undersigned as promptly as practicable all the payroll deductions credited
to his or her account. The undersigned understands and agrees that his or her
option for the current Offering Period will be automatically terminated. The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
shall be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement.

                                        Name and Address of Participant:
                                        __________________________________
                                        __________________________________
                                        __________________________________


                                        Signature:________________________
                                        Date:_____________________________

EX-10.22

                                                                   EXHIBIT 10.22


                                 ILLUMINA, INC.

                                 2000 STOCK PLAN

                 AS AMENDED AND RESTATED THROUGH MARCH 21, 2002

        1. PURPOSES OF THE PLAN. The purposes of this 2000 Stock Plan are:


              -   to attract and retain the best available personnel for
                  positions of substantial responsibility,

              -   to provide additional incentive to Service Providers, and

              -   to promote the success of the Company's business.

               Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.

        2. DEFINITIONS. As used herein, the following definitions shall apply:

                  (a) "ADMINISTRATOR" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 hereof.

                  (b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans, the grant of Options and the issuance of
Shares under U. S. state corporate laws, U.S. federal and state securities laws,
the Code, any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any other country or jurisdiction
where Options are granted under the Plan.

                  (c) "BOARD" means the Board of Directors of the Company.

                  (d) "CODE" means the Internal Revenue Code of 1986, as
amended.

                  (e) "COMMITTEE" means a committee of Directors appointed by
the Board in accordance with Section 4 hereof.

                  (f) "COMMON STOCK" means the common stock of the Company.

                  (g) "COMPANY" means Illumina, Inc., a Delaware corporation.

                  (h) "CONSULTANT" means any natural person, including an
advisor, engaged by the Company or a Parent or Subsidiary to render services to
such entity.

                  (i) "CORPORATE TRANSACTION" means a merger of the Company with
or into another corporation or the sale of substantially all of the assets of
the Company.

                  (j) "DIRECTOR" means a member of the Board.



                  (k) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

                  (l) "EFFECTIVE DATE" means the date on which the Securities
and Exchange Commission ("SEC") declared the registration statement on Form S-1
filed with the SEC for the initial public offering of the Common Stock
effective.

                  (m) "EMPLOYEE" means any person, including Officers and Inside
Directors, employed by the Company or any Parent or Subsidiary of the Company.
An Employee shall not be deemed to cease Employee status by reason of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, then three (3) months following
the 91st day of such leave any Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option. Neither service as Director nor payment
of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.

                  (n) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
0s amended.

                  (o) "FAIR MARKET VALUE" means, as of any date, the value of a
Share determined as follows:

                      (i) If the Common Stock is listed on any established stock
exchange or traded on a national market system, including without limitation the
Nasdaq National Market or the Nasdaq SmallCap Market of The Nasdaq Stock Market,
the Fair Market Value of a Share shall be the closing selling price for such
stock (or the closing bid, if no sales were reported) as quoted on such exchange
or system on the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

                      (ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or

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

                  (p) "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.

                  (q) "INSIDE DIRECTOR" means a Director who is an Employee.


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                  (r) "NONSTATUTORY STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option.

                  (s) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.

                  (t) "OFFICER" means a person who is an executive officer of
the Company within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.

                  (u) "OPTION" means a stock option granted pursuant to the
Plan.

                  (v) "OPTION AGREEMENT" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

                  (w) "OPTIONED SHARES" means the Shares subject to an Option.

                  (x) "OPTIONEE" means the holder of an outstanding Option
granted under the Plan.

                  (y) "OUTSIDE DIRECTOR" means a Director who is not an
Employee.

                  (z) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

                  (aa) "PLAN" means this 2000 Stock Plan.

                  (bb) "PREDECESSOR PLAN" means the Illumina, Inc. 1998
Incentive Stock Plan.

                  (cc) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

                  (dd) "SERVICE PROVIDER" means (i) an individual rendering
services to the Company or any Parent or Subsidiary of the Company in the
capacity of an Employee or Consultant or (ii) an individual serving as a
Director.

                  (ee) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 hereof.

                  (ff) "SUBSIDIARY" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.

                  (gg) "WITHHOLDING TAXES" means the Federal, state and local
income and employment withholding taxes to which the holder of an Option may be
subject in connection with the exercise of that Option.


                                        3


               3. STOCK SUBJECT TO THE PLAN.

                  (a) Subject to the provisions of Section 13 hereof, the
maximum aggregate number of Shares that may be optioned and sold under the Plan
is 9,649,460 shares. Such share reserve consists of (i) the 2,649,460 reserved
but unissued Shares under the Predecessor Plan transferred to the Plan as of the
Effective Date, (ii) an additional 4,000,000 Shares, and (iii) the 1,500,000
Share automatic increase for the fiscal year 2001 and (iv) the 1,500,000 Share
automatic increase for the fiscal year 2002.

                  (b) An annual increase shall automatically occur on the first
day of each fiscal year of the Company, beginning with fiscal year 2001, equal
to the lesser of (i) 1,500,000 Shares, (ii) 5% of the outstanding Shares on the
last day of the immediately preceding fiscal year or (iii) an amount determined
by the Board. The Shares may be authorized, but unissued, or reacquired Shares,
including Shares repurchased by the Company on the open market.

                  (c) If an outstanding Option (including those granted under
the Predecessor Plan) expires or terminates for any reason prior to exercise in
full, the unpurchased Optioned Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan upon exercise of an Option shall not be returned to the Plan and shall
not become available for future distribution under the Plan, except that if
unvested Shares are repurchased by the Company at their original purchase price,
such Shares shall become available for future grant under the Plan. Should the
exercise price of an Option under the Plan be paid with Shares or should Shares
otherwise issuable under the Plan be withheld by the Company in satisfaction of
the Withholding Taxes incurred in connection with the exercise of an Option,
then the number of Shares available for issuance under the Plan shall be reduced
by the gross number of Shares for which the Option is exercised, and not by the
net number of Shares issued to the holder of such Option.

               4. ADMINISTRATION OF THE PLAN.

                  (a) PROCEDURE.

                      (i) MULTIPLE ADMINISTRATIVE BODIES. Different Committees
with respect to different groups of Service Providers may administer the Plan.

                      (ii) SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

                      (iii) RULE 16B-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.


                                        4


                      (iv) OTHER ADMINISTRATION. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.

                  (b) POWERS OF THE ADMINISTRATOR.

                      (i) Subject to the provisions of the Plan, and in the case
of a Committee, subject to the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion:

                          (A) to determine the Fair Market Value;

                          (B) to select the Service Providers to whom Options
may be granted hereunder;

                          (C) to determine the number of Shares to be covered by
each Option granted hereunder;

                          (D) to approve forms of Option Agreements for use
under the Plan;

                          (E) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder, which
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the Shares relating
thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;

                          (F) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;

                          (G) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of satisfying applicable foreign laws;

                          (H) to modify or amend each Option (subject to Section
15(c) hereof), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Option Agreement;

                          (I) to allow Optionees to satisfy Withholding Tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the minimum amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
Withholding Tax is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;


                                        5


                          (J) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;

                          (K) to make all other determinations deemed necessary
or advisable for administering the Plan.

                      (ii) Notwithstanding the foregoing, the Option grant
provisions of Section 11 hereof shall be self-executing, and no Administrator
shall exercise any discretionary functions with respect to such Option grants.

                  (c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Shares issued under the Plan.

               5. ELIGIBILITY. Nonstatutory Stock Options may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.

               6. LIMITATIONS.

                  (a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, no installment under this Option shall qualify
for favorable tax treatment as an Incentive Stock Option if (and to the extent)
the aggregate Fair Market Value of the Shares (determined at the date of grant)
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Shares or other securities for which this Option or any other Incentive
Stock Options granted to Optionee prior to the date of grant (whether under the
Plan or any other option plan of the Company or any Parent or Subsidiary of the
Company) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred
Thousand Dollar ($100,000) limitation be exceeded in any calendar year, the
Option shall nevertheless become exercisable for the excess Optioned Shares in
such calendar year as a Nonstatutory Stock Option. For purposes of this Section
6(a), Incentive Stock Options shall be taken into account in the order in which
they were granted.

                  (b) Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

                  (c) The following limitations shall apply to grants of
Options:

                      (i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000 Shares.

                      (ii) However, in connection with his or her commencement
of Service Provider status, an individual may be granted Options to purchase up
to an additional 1,000,000 Shares, which shall not count against the limit set
forth in subsection (i) above.


                                        6


               7. TERM OF PLAN. Subject to Section 19 hereof, the Plan shall
become effective on the Effective Date. Unless the Plan is terminated earlier
pursuant to Section 15(a) hereof, the Plan shall terminate upon the earliest to
occur of (a) June 1, 2010, (b) the date on which all Shares available for
issuance under the Plan shall have been issued as fully vested Shares or (c) the
termination of all outstanding Options in connection with a dissolution or
liquidation pursuant to Section 13(b) hereof or a Corporate Transaction pursuant
to Section 13(c) hereof. Should the Plan terminate on June 1, 2010, then all
Options outstanding at that time shall continue to have force and effect in
accordance with the provisions of the applicable Option Agreement.

               8. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.

               9. OPTION EXERCISE PRICE AND CONSIDERATION.

                  (a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

                      (i) In the case of an Incentive Stock Option

                          (A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

                          (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

                      (ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

                      (iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.


                                        7


                  (b) WAITING PERIOD AND EXERCISE DATES. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions that must be satisfied before
the Option may be exercised.

                  (c) FORM OF CONSIDERATION. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. Such consideration may consist entirely of:

                      (i) cash;

                      (ii) promissory note;

                      (iii) other Shares which, in the case of Shares acquired
directly or indirectly from the Company, (A) have been owned by the Optionee for
more than six (6) months on the date of surrender, and (B) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised;

                      (iv) consideration received through a special sale and
remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable instructions to (A) a Company-designated brokerage firm to effect
the immediate sale of the purchased Shares and remit to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased Shares plus all Withholding
Taxes required to be withheld by the Company by reason of such exercise and (B)
the Company to deliver the certificates for the purchased Shares directly to
such brokerage firm in order to complete the sale;

                      (v) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;

                      (vi) any combination of the foregoing methods of payment;
or

                      (vii) such other consideration and method of payment for
the issuance of Optioned Shares to the extent permitted by Applicable Laws.

              10. EXERCISE OF OPTION.

                  (a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.

                      (i) Any Option granted hereunder shall be exercisable
according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Option Agreement. Unless
the Administrator provides otherwise, vesting of Options granted hereunder shall
be suspended during any unpaid leave of absence. An Option may not be exercised
for a fraction of a Share.

                      (ii) An Option shall be deemed exercised when the Company
receives: (A) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (B) full
payment for the Optioned Shares


                                        8


with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Plan and shall be set forth in the Option Agreement. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company),
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Shares, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such Shares promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13 hereof.

                      (iii) Exercising an Option in any manner shall decrease
the number of Optioned Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

                  (b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, such Optionee may exercise his or her Option for a period of
three (3) months measured from the date of termination, or such longer period of
time as specified in the Option Agreement, to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of the Option as set forth in the Option Agreement). If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Option shall immediately terminate as to all the unvested Optioned Shares
covered by the unvested portion of the Option, and those Optioned Shares shall
revert immediately to the Plan. To the extent the Optionee does not, within the
post-termination time period specified in the Option Agreement, exercise the
Option for the Optioned Shares in which Optionee is vested at the time of such
termination of Service Provider status, the Option shall terminate with respect
to those vested Optioned Shares at the end of such period, and those Optioned
Shares shall revert to the Plan.

                  (c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within twelve (12) months of termination, or such
longer period of time as specified in the Option Agreement, to the extent the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). If,
on the date of termination, the Optionee is not vested as to his or her entire
Option, the Option shall immediately terminate as to the Optioned Shares covered
by the unvested portion of the Option, and those Optioned Shares shall revert
immediately to the Plan. To the extent the Optionee does not, within the
post-termination time period specified in the Option Agreement, exercise the
Option for the Optioned Shares in which Optionee is vested at the time of such
termination of Service Provider status, the Option shall terminate with respect
to those vested Optioned Shares at the end of such period, and those Optioned
Shares shall revert to the Plan.

                  (d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within twelve (12) months following
Optionee's death, or such longer period of time as specified in the Option
Agreement, to the extent that the Option is vested on the date of death (but in
no event later than the expiration of the term of such Option as set forth in


                                        9


the Option Agreement) by the Optionee's designated beneficiary, provided such
beneficiary has been designated prior to Optionee's death in a form acceptable
to the Administrator. If no such beneficiary has been designated by the
Optionee, then such Option may be exercised by the personal representative of
the Optionee's estate or by the person(s) to whom the Option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Option shall immediately terminate as to the Optioned
Shares covered by the unvested portion of the Option, and those Optioned Shares
shall immediately revert to the Plan. To the extent the Option is not, within
the post-termination time period specified in the Option Agreement, exercised
for the Optioned Shares in which Optionee is vested at the time of such
termination of Service Provider status, the Option shall terminate with respect
to those vested Optioned Shares, and those Optioned Shares shall revert to the
Plan.

              11. FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS. Outside Directors
shall automatically be granted Options in accordance with the following
provisions:

                  (a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided in this Section 11,
shall be subject to the other terms and conditions of the Plan.

                  (b) Each individual shall be automatically granted an Option
to purchase 20,000 Shares (the "First Option") on the date such individual first
attends a Board meeting as an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.

                  (c) On each annual stockholder meeting following the Effective
Date, each Outside Director who continues to serve in such capacity shall be
automatically granted an Option to purchase 10,000 Shares (a "Subsequent
Option").

                  (d) The terms of a First Option or a Subsequent Option granted
pursuant to this Section shall be as follows:

                      (i) The term of the Option shall be ten (10) years
measured from the date of grant.

                      (ii) The Option shall be exercisable only during the time
that the Outside Director remains a Director and for the six (6) month period
following the date of the Optionee's cessation of service as a Director,
provided, however, that the Option cannot be exercised after the termination of
the Option.

                      (iii) The exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Option.

                      (iv) Subject to Section 13 hereof, the Option shall become
exercisable as to 25% of the Optioned Shares on each anniversary of its date of
grant, provided that the Optionee continues to serve as a Director on such
dates.


                                       10


                      (v) If an Outside Director dies while holding any
outstanding Option under this Section 11, then that Option may be exercised
within six (6) months following his or her death, or such longer period of time
as specified in the Option Agreement, to the extent that the Option is vested on
the date of death (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement) by the Outside Director's
designated beneficiary, provided such beneficiary has been designated prior to
his or her death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Outside Director, then such Option may be
exercised by the personal representative of his or her estate or by the
person(s) to whom the Option is transferred pursuant to his or her will or in
accordance with the laws of descent and distribution. If, at the time of death,
the Outside Director is not vested as to his or her entire Option, Option shall
immediately terminate as to the Optioned Shares covered by the unvested portion
of the Option, and those Optioned Shares shall immediately revert to the Plan.
To the extent the Option is not, within the post-termination time period
specified in the Option Agreement, exercised for the Optioned Shares in which
the Outside Director is vested at the time of his or her cessation of Director
status, the Option shall terminate with respect to those vested Optioned Shares,
and those Optioned Shares shall revert to the Plan.

              12. LIMITED TRANSFERABILITY OF OPTIONS. Unless determined
otherwise by the Administrator, an Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee. The Optionee may designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding Options,
and those Options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's death while
holding those Options. Such beneficiary or beneficiaries shall take the
transferred Options subject to all the terms and conditions of the applicable
agreement evidencing each such transferred Option, including (without
limitation) the limited time period during which the Option may be exercised
following the Optionee's death. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

              13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
CORPORATE TRANSACTION.

                  (a) CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, (i) the number of Shares which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, (ii) the number of Shares that may be added annually to the Plan
pursuant to Section 3(i) hereof, (iii) the number of Optioned Shares granted
under First Options and Subsequent Options under Section 11 hereof, (iv) the
maximum number of Optioned Shares that may be granted to any Service Provider
within any fiscal year, (v) the maximum number of Optioned Shares that may be
granted to any Service Provider in connection with his or her commencement of
service and (vi) the number of Optioned Shares as well as the price per Share
subject to each outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by


                                       11


the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Optioned Shares.

                  (b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Shares covered thereby, including Shares
as to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
unvested Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.

                  (c) CORPORATE TRANSACTION.

                      (i) In the event of a Corporate Transaction, each
outstanding Option shall be assumed or an equivalent option substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
Option, the Optionee shall fully vest in and have the right to exercise the
Option as to all of the Optioned Shares, including Shares as to which it would
not otherwise be vested or exercisable. If an Option becomes fully vested and
exercisable in lieu of assumption or substitution in the event of Corporate
Transaction, the Administrator shall notify the Optionee in writing or
electronically that the Option shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the Corporate
Transaction, the Option confers the right to purchase or receive, for each
Optioned Share immediately prior to the Corporate Transaction, the consideration
(whether stock, cash, or other securities or property) received in the Corporate
Transaction by holders of Common Stock for each Share held on the effective date
of the Corporate Transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the Corporate Transaction is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Optioned Share, to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Shares in the Corporate Transaction.

                      (ii) All outstanding repurchase rights of the Company
shall automatically terminate, and the unvested Shares subject to those
terminated rights shall


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immediately vest in full, in the event of a Corporate Transaction, except to the
extent: (i) those repurchase rights are to be assigned to the successor
corporation (or Parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Administrator at the time the repurchase right is issued.

                      (iii) Each Option which is assumed pursuant to this
Section 13(c) shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the Option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (A) the exercise price payable per share under each outstanding Option,
provided the aggregate exercise price payable for such securities shall remain
the same, (B) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan, (C) the maximum number and/or
class of securities for which any one person may be granted Options under the
Plan per year, (D) the maximum number and/or class of securities by which the
share reserve is to increase automatically each year and (E) the number and/or
class of securities subject to the Options granted under Section 11.

              14. DATE OF GRANT. The date of grant of a First Option or
Subsequent Option shall be the date on which it was automatically granted
pursuant to Section 11 hereof. The date of grant of any other Option shall be,
for all purposes, the date on which the Administrator grants such Option. Notice
of the grant shall be provided to each Optionee within a reasonable time after
the date of such grant.

              15. AMENDMENT AND TERMINATION OF THE PLAN.

                  (a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.

                  (b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

                  (c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.

              16. CONDITIONS UPON ISSUANCE OF SHARES.

                  (a) Options shall not be granted and Shares shall not be
issued pursuant to the exercise of an Option unless the grant of the Option, the
exercise of such Option and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.


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                  (b) No Shares or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the Shares,
and all applicable listing requirements of any stock exchange (or the Nasdaq
National Market, if applicable) on which Common Stock is then listed for
trading.

              17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful grant of
Options and issuance and sale of any Shares hereunder shall relieve the Company
of any liability in respect of the failure to grant such Options or issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

              18. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

              19. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.

              20. PREDECESSOR PLAN. The Plan shall serve as the successor to the
Predecessor Plan, and no further Option grants or direct stock issuances shall
be made under the Predecessor Plan after the Effective Date. All Options
outstanding under the Predecessor Plan on the Effective Date shall be
transferred to the Plan at that time and shall be treated as outstanding Options
under the Plan. However, each outstanding Option so transferred shall continue
to be governed solely by the terms of the documents evidencing such Option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such transferred Options with respect to
their acquisition of Shares.



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