Document:

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                                                                    EXHIBIT 10.7

                           ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement is made as of March ___, 2000 by and between
Illumina, Inc., a California corporation ("Buyer") and Spyder Instruments, Inc.,
a California corporation ("Seller").  This Asset Purchase Agreement, including
all schedules and exhibits, is referred to as the "Purchase Agreement."

                                   RECITALS
                                   --------

     A.  Seller develops technology related to high throughput chemical
synthesis (the "Business").

     B.  Seller desires to sell and Buyer desires to purchase all of the assets
of Seller.

     C.  Seller and Buyer are parties to an Option Agreement dated January 8,
1999, pursuant to which the parties made certain agreements regarding the
licensing of certain of the Seller's intellectual property ("Option Agreement").

     D.  Seller and Buyer desire to terminate the Option Agreement and to accept
the rights and obligations created pursuant hereto in lieu of the rights granted
to them under the Option Agreement.

                                   AGREEMENT
                                   ---------

     NOW, THEREFORE, the parties agree as follows:

1.  PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
    ------------------------------------------------

    1.1 Purchase of Assets. At the Closing, Seller will sell, transfer, and
        ------------------
convey to Buyer, and Buyer will purchase from Seller the following assets as
listed in Schedule 1.1 (the "Assets"):

       (a)  Equipment. All equipment, furniture and other tangible personal
            ---------
property owned by Seller.

       (b) Intellectual Property. All right, title and interest of Seller in and
           ---------------------
to all patents, copyrights, trademarks, service marks, trade names, trade
secrets, mask works, proprietary information, technology rights andlicenses,
proprietary rights and processes, know-how, research and development in
progress, all domestic and foreign applications, registrations and renewals of
any of the foregoing, and any and all other intellectual property including,
without limitation, all things authored, discovered, developed, made, perfected,
improved, designed, engineered, devised, acquired, produced, conceived or first
reduced to practice by Seller or any of its employees in the course of their
employment by Seller, whether tangible or intangible, improvements, inventions,
works of authorship, formulas, processes, routines, subroutines, techniques,
concepts, object code, flow charts, diagrams, coding sheets, source code,
listings and annotations, programmers' notes, information, work papers, work
product and other materials of any types whatsoever, and all rights
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of any kind in or to any of the foregoing (collectively, the "Intellectual
Property") which are relevant or applicable to the Business.

        (c) Claims. All claims of Seller against any parties relating to items
            ------
included in the Assets, including, without limitation, unliquidated rights under
manufactures' and vendors' warranties or guaranties, claims for trade secret
misappropriation and infringement of the Intellectual Property, and claims for
breach of employee proprietary information agreements.

        (d) Permits and Licenses. Government permits and licenses used in the
            --------------------
conduct of the Business, to the extent transferable.

        (e) Books and Records. All information, files and records directly
            -----------------
relating to the foregoing and which Buyer reasonably expects may be useful to
Buyer. In case of any disagreement as to whether an item directly relates to the
foregoing, Buyer shall be permitted to copy such item.

    1.2 Assumption of Liabilities. Buyer hereby agrees to assume, satisfy and
        -------------------------
perform when due those liabilities and obligations listed on Schedule 1.2 (the
"Assumed Liabilities") arising after the Closing Date (other than any liability
or obligation for a breach or default which occurred prior to the Closing Date).
Except for the Assumed Liabilities, Buyer shall not assume and shall not be
obligated to pay, discharge, or indemnify any party, with respect to any
obligations or liabilities of, or claims against, Seller, whether now or
hereafter existing or created (collectively, "Claims"), including but not
limited to:

             (i) any Claims under any expressed or implied contracts relating to
products or services, including without limitation Claims with respect to
product warranties or product liabilities;

             (ii) taxes of any nature whatsoever of Seller arising from the
operation of the Business or the ownership of the Assets for any period (or
portion of any period) ending on or prior to the Closing Date ("Seller Taxes");

             (iii) Claims under any employee agreements, including profit
sharing, pension, or other equity benefit or ERISA plan for Seller's employees;
and

             (iv) any other Claims arising out of the operation of the Business
or the ownership of the Assets prior to the date of this Purchase Agreement.

    1.3  Consideration.  In consideration for the transfer of the Assets at the
         -------------
Closing, Buyer shall pay to Seller One Hundred Thousand Dollars ($100,000) and
shall issue to Seller 175,000 shares of Common Stock of Buyer (the "Shares").

    1.4 Additional Consideration. In the event Buyer receives a research grant
        ------------------------
from the National Institutes of Health ("NIH") as a result of a grant
application submitted by Seller prior to the Closing Date (as defined below),
and such grant is approved within twelve months of the Closing Date, Buyer shall
pay to Seller additional cash consideration equal to ninety percent (90%) of the
grant funding actually received by Buyer from NIH. Each such payment shall be
made to Seller within thirty (30) days of receipt of the grant funds by Buyer.

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2.  CLOSING
    -------

    2.1  The Closing.  The closing of the purchase of the Assets (the "Closing")
         -----------
shall be held at the offices of Illumina, Inc., 9390 Towne Centre Drive, Suite
200, San Diego, California on March ___, 2000, or such other place and date as
the parties shall agree (the "Closing Date").

    2.2  Actions at the Closing.  At the Closing, the parties shall execute and
         ----------------------
deliver any bills of sale, endorsements, assignments and other instruments as
Buyer shall reasonably request, or as necessary or appropriate, to sell, convey,
assign, transfer and deliver to Buyer good title to all the Assets, free and
clear of any security interest, mortgage, lien, charge, adverse claim or
restriction of any kind, and to evidence the due execution, delivery and
performance of this Purchase Agreement.

    2.3  Taking of Necessary Action; Further Action.  If, at any time after the
         ------------------------------------------
Closing Date, any further action is necessary or desirable to carry out the
purposes of this Purchase Agreement and to vest Buyer with all of Seller's
right, title and possession to the Assets, the officers and directors of Seller
are fully authorized in the name of Seller or otherwise to take, and will take,
all such lawful and necessary and/or desirable action.

3.  REPRESENTATIONS AND WARRANTIES OF SELLER
    ----------------------------------------

     Seller represents and warrants to Buyer as follows, except as set forth in
the Disclosure Schedule attached hereto, which exceptions shall be deemed to be
representations and warranties as if made in this Section 3:

    3.1  Authority, Approval and Enforceability.
         --------------------------------------

         (a) Corporate Existence. Seller is a corporation duly organized,
             -------------------
validly existing and in good standing under the laws of California. Seller has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as conducted before the Closing.

         (b) Power to Execute Purchase Agreement. Seller has full power and
             -----------------------------------
authority to execute and to deliver this Purchase Agreement, and to perform its
obligations under this Purchase Agreement. All actions of Seller necessary for
such execution, delivery and performance have been duly taken.

         (c) Enforceability. Upon the due execution and delivery by the parties,
             --------------
this Purchase Agreement will be a binding obligation of Seller enforceable
against Seller in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally.

    3.2  Compliance with Applicable Laws.  Seller has duly complied with all
         -------------------------------
applicable laws, rules, regulations, ordinances, and all judgments, orders,
rulings, and decrees of all federal, state and local governmental authorities
(collectively, "Laws"), subject to such exceptions as shall have no material
adverse affect on the Assets or the Business.  Seller has not received
notification of any asserted present or past failure to so comply with any Laws.
Seller is not aware of any pending or threatened legal or administrative
proceedings or investigations, which, if determined adversely to

                                      -3-
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Seller, would result in any material adverse change to the Business or to any of
the Assets or would materially affect the ability of Seller to perform its
obligations hereunder.

    3.3  Absence of Conflicts.  The execution and delivery by Seller of this
         --------------------
Purchase Agreement does not, and the performance and consummation of the
transactions contemplated by this Purchase Agreement will not, result in any
conflict with, breach or violation of or default, termination or forfeiture
under (or upon the failure to give notice or the lapse of time, or both, result
in any conflict with, breach or violation of, or default, termination or
forfeiture under) any terms or provisions of the Articles of Incorporation, as
amended, or Bylaws, as amended, of Seller, or any statute, rule, regulation,
judicial or governmental decree, order, judgment, agreement, lease, loan
agreement, debenture, indenture, mortgage or other instrument binding upon
Seller or to which Seller is a party, subject to such exceptions as shall have
no adverse effect on the Assets or the Business.

    3.4  No Third Party Options.  There are no existing agreements, options,
         ----------------------
commitments or rights with, of or to any person to acquire any of the Assets or
any interest therein, subject to such exceptions as shall have no material
adverse effect on Seller's ability to transfer to Buyer the Assets or the
Business in conformity with the terms and provisions of this Purchase Agreement.

    3.5  Taxes.  The Seller has prepared and filed all required federal, state,
         -----
local and foreign returns, estimates, information statements and reports
relating to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities, together with
all interest, penalties and additions imposed with respect to such amounts and
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity ("Taxes").  Seller has paid all Taxes it is required to pay and has
withheld with respect to its employees all federal and state income taxes, FICA,
FUTA and other Taxes required to be withheld.

    3.6 Litigation. There is no suit, action (equitable, legal, administrative
        ----------
or otherwise), proceeding or investigation of any kind pending or, to Seller's
knowledge, threatened against Seller that would have a material adverse effect
on the value of the Assets, the operation of the Business by Buyer or the
transactions contemplated by this Purchase Agreement, nor does Seller know of
any reasonably likely basis for any such suit, action, proceeding or
investigation.

    3.7 Licenses and Other Rights. To Seller's knowledge, Seller has all
        -------------------------
permits, licenses and similar authority from governmental authorities necessary
for the conduct of the Business as presently conducted. To Seller's knowledge,
Seller is not in default under any of such permits, licenses or other similar
authority.

    3.8 Required Consents and Approvals. All governmental and other third party
        -------------------------------
consents or approvals required to be obtained by Seller to consummate the
transactions contemplated hereby have been obtained.

    3.9  Title to Assets.  The Assets are not held under any leases, security
         ---------------
agreements, conditional sales contracts, or other title retention arrangements.

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    3.10 Tangible Assets. All material items of tangible property included in
         ---------------
the Assets are in good operating condition and repair, subject to normal wear
and maintenance and are currently usable in the ordinary course of business.

    3.11  Agreements.  Seller has made available or provided Buyer complete and
          ----------
accurate copies of all agreements, written and oral, to which Seller is a party,
or of which Seller is aware, and which affect the operation of the Business by
Buyer.

    3.12  Intellectual Property Rights.
          ----------------------------

          (a) Seller owns all right, title and interest in (including the right
to assign or transfer) and to all of the Intellectual Property (or, except as
indicated in Schedule 3.12, has exclusively licensed such Intellectual Property)
and the Intellectual Property is so owned (or exclusively licensed) free and
clear of all liens, claims and encumbrances and no other person, including
without limitation, any present or former employee, consultant, officer, or
director of Seller, has any right whatsoever therein. Seller does not have any
obligation to compensate any person or entity for the use of any Intellectual
Property nor has Seller granted to any person or entity any license, option or
other right to use in any manner any Intellectual Property whether requiring the
payment of royalties or not. Seller has the exclusive right to use, sell,
license and dispose of, the exclusive right to bring actions for the
infringement of, and otherwise exercise, all of the Intellectual Property.

           (b) The Intellectual Property is freely transferable and assignable
(or sublicenseable) to Buyer and the execution, delivery and performance of this
Purchase Agreement, and documentation related to this Purchase Agreement
delivered by Seller contemporaneously herewith, and the consummation of the
transactions hereby and thereby, will not breach, violate or conflict with any
instrument or agreement governing any of the Intellectual Property, or impair
the right of Buyer to use, sell, license or dispose of the Intellectual
Property, or to bring any action for, the infringement of, any of the
Intellectual Property.

           (c) To the Seller's knowledge, the Intellectual Property does not
violate any copyright, patent, trade secret or other intellectual property
rights or other rights of any other person or entity. To the Seller's knowledge,
neither Seller nor any present or former employee or consultant thereof has
violated any intellectual property rights of any other person or entity and
Buyer's conducting the Business in the ordinary course shall not violate any
such third party rights.

           (d) To the knowledge of Seller, no third party is infringing any of
the Intellectual Property.

           (e) Seller has taken all reasonable steps necessary or appropriate
(including, without limitation, entering into appropriate confidentiality,
nondisclosure and noncompetition agreements with all officers, directors,
subcontractors, employees, licensees and entities that serve Seller) to
safeguard and maintain the secrecy and confidentiality of, and establish
Seller's proprietary rights in, all of the Intellectual Property.

                                      -5-
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           (f) All trade secrets and all embodiments thereof which are related
to the Business are presently and as of the Closing Date will be located at
Seller's facilities except for those which have been or will be delivered to
Buyer pursuant to this Purchase Agreement.

    3.13  Brokers.  Seller has not employed any investment bankers, finders or
          -------
brokers or incurred any liability for brokerage fees, commissions or similar
payments in connection with this transaction contemplated hereby.

    3.14  Disclosure.  No representation or warranty by Seller contained in this
          ----------
Purchase Agreement and no statement contained in any certificate, Schedule or
exhibit or list furnished to Buyer in connection with this Purchase Agreement or
the transactions contemplated hereby contains or will contain any untrue
statement of fact or omits to state a material fact necessary to make the
statements or information therein not misleading.

4.  REPRESENTATIONS AND WARRANTIES OF BUYER
    ---------------------------------------

     Buyer represents and warrants to Seller as follows:

     4.1  Approval, Authorization and Enforceability.
          ------------------------------------------

         (a) Corporate Existence. Buyer is a corporation duly organized, validly
             -------------------
existing and in good standing under the laws of the State of California.

         (b) Power to Execute Agreement. Buyer has full power and authority to
             --------------------------
execute, deliver and perform its obligations under this Purchase Agreement. All
action on the part of Buyer, its officers, directors and shareholders necessary
for the authorization, execution, delivery and performance of this Agreement by
Buyer, the authorization, sale, issuance and delivery of the Shares and the
performance of the Buyer's obligations hereunder has been taken or will be taken
prior to the Closing.

          (c) Absence of Conflicts. The execution and delivery by Buyer of this
              --------------------
Purchase Agreement does not, and the performance and consummation of the
transactions contemplated by this Purchase Agreement will not, result in any
conflict with, breach or violation of or default, termination or forfeiture
under (or upon the failure to give notice or the lapse of time, or both, result
in any conflict with, breach or violation of, or default, termination or
forfeiture under) any terms or provisions of the Articles of Incorporation, as
amended, or Bylaws, as amended, of Buyer, or any statute, rule, regulation,
judicial or governmental decree, order, judgment, agreement, lease, loan
agreement, debenture, indenture, mortgage or other instrument binding upon Buyer
or to which Buyer is a party.

          (d) Enforceability. Upon the due execution and delivery by the
              --------------
parties, this Purchase Agreement will be a binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally.

          (e) Validity of Shares. The Shares, when issued and delivered in
              ------------------
compliance with the provisions of this Agreement, will be duly and validly
authorized and issued and will be fully

                                      -6-
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paid and nonassessable and free and clear of all liens and encumbrances and
restrictions on transfer other than as set forth in this Agreement; provided,
however, that the Shares may be subject to restrictions on transfer under state
and/or federal securities laws.

          (f) Capitalization. The authorized capital stock of Buyer consists of
              --------------
60,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock, of
which 2,500,000 are designated as Series A Preferred Stock, 2,500,000 are
designated as Series A-1 Preferred Stock, 12,000,000 are designated as Series B
Preferred Stock, 12,000,000 are designated as Series B-1 Preferred Stock,
7,000,000 are designated as Series C Preferred Stock, and 7,000,000 are
designated as Series C-1 Preferred Stock. Immediately prior to the Closing, the
issued and outstanding stock of Buyer shall consist of 5,464,489 shares of
Common Stock, 2,499,998 Shares of Series A Preferred Stock, no shares of Series
A-1 Preferred Stock, 9,336,299 shares of Series B Preferred Stock, no shares of
Series B-1 Preferred Stock, 7,000,000 shares of Series C Preferred Stock, and no
shares of Series C-1 Preferred Stock. All such issued and outstanding shares
have been duly and validly authorized and issued, and are fully paid and
nonassessable. Except for (i) the conversion privileges of the Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-
1 Preferred Stock, Series C Preferred Stock, and Series C-1 Preferred Stock,
(ii) currently outstanding options to purchase 720,544 shares of Common Stock
granted to employees pursuant to the Buyer's 1998 Incentive Stock Plan (the
"Option Plan"), and (iii) warrants to purchase 43,183 shares of Series A
Preferred Stock, there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Buyer of any shares of its capital stock. In addition to
the aforementioned options, the Buyer has reserved an additional 1,799,634
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Option Plan.

    4.2 Litigation. There is no suit, action (equitable, legal, administrative
        ----------
or otherwise), proceeding or investigation of any kind pending or threatened
against Buyer, and there is no factual basis for any such suit, action,
proceeding or investigation of which Buyer is aware, which could materially
affect the ability of Buyer to carry out the transactions contemplated hereunder
in accordance with the terms hereof.

    4.3 Required Consents and Approvals. All governmental and other third party
        -------------------------------
consents or approvals required to be obtained by Buyer to consummate the
transactions contemplated hereby have been obtained.

    4.4  Brokers.  Buyer has not employed any broker or finder or incurred any
         -------
liability for any brokerage fees, commissions or similar payments in connection
with the transactions contemplated hereby.

5.  ADDITIONAL COVENANTS RELATING TO THE SALE OF ASSETS
    ---------------------------------------------------

    5.1 Allocation of Consideration. The amount paid by Buyer shall be allocated
        ---------------------------
among the Assets, as described on Schedule 5.1 in accordance with Section 1060
                                  ------------
of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder. No party to this Purchase Agreement will take a position
on any federal or state tax return, before any governmental agency

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<PAGE>

charged with the collection of any income tax, or in any judicial proceeding
that is in any way inconsistent with Schedule 5.1.
                                     ------------

    5.2 Sales Taxes. Buyer will be solely responsible for and will pay the cost
        -----------
of any sales taxes payable in connection with the sale, assignment, and transfer
of the Assets pursuant to this Purchase Agreement.

    5.3  Tax Liability and Returns.  Buyer shall not assume and Seller shall be
         -------------------------
responsible for and pay when due all Seller Taxes relating or attributable to
the Assets or the Business for the period (or that portion of any period) ending
on or prior to the Closing Date.  Buyer shall be responsible for and pay when
due all Taxes relating or attributable to the Assets or the Business for the
period (or that portion of any period) commencing after the Closing Date.

    5.4 Cooperation and Records Retention. Seller and Buyer shall (i) each
        ---------------------------------
provide the other with such assistance as may reasonably be requested by them in
connection with the preparation of any tax return, or in connection with any
audit or other examination by any taxing authority or any judicial or
administrative proceedings relating to liability for taxes or in connection with
any litigation or financial audit involving the Business, (ii) each retain and
provide the other, with any records or other information which may be relevant
to any such tax return, audit or examination, suit, proceeding or determination,
and (iii) each provide the other with any final determination of any such audit
or examination, suit, proceeding or determination that affects any amount
required to be shown on any tax return of the other for any period or otherwise.

    5.5  Bulk Sales Law.  Buyer understands that Seller will not comply with any
         --------------
bulk sales or similar laws applicable to the purchase and sale of the Assets.

    5.6 Restrictions on Transfer. Seller shall not sell or otherwise transfer or
        ------------------------
dispose of any of the Shares prior to the date that is (i) one year after the
Closing Date, with respect to [*] of the Shares, and (ii) two years after the
Closing Date with respect to the remaining [*]. The certificates representing
the Shares shall bear a legend indicating the existence of the restrictions
imposed by this Section 5.6. Nothing in this Agreement shall be construed as a
modification or amendment of any restrictions on transfer under applicable
federal or state securities laws.

6.  INDEMNIFICATION AND RELATED MATTERS.
    -----------------------------------

    6.1  Indemnification of Buyer.  Seller will indemnify and hold harmless
         ------------------------
Buyer and its officers and directors from and against any claims, actions,
damage, expense, liability, loss or deficiency, including without limitation,
reasonable attorneys' fees and other costs and expenses incident to any suit,
action, claim or proceeding (collectively, the "Damages"), in excess of Twenty-
Five Thousand Dollars ($25,000) in aggregate, arising out of or resulting from:

         (i) any inaccuracy in any representation or the breach of any warranty
made by Seller in this Agreement;

         (ii) any failure of Seller to perform or observe any term of this
Agreement; or

         (iii)  any liabilities or obligations of Seller other than Assumed
Liabilities.

____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -8-
<PAGE>

     Should Buyer suffer any Damages, it may seek payment from Seller or offset
Damages against payments due Seller under this Agreement; provided, however,
that in no event shall Seller's liability exceed the lesser of (a) the aggregate
consideration received by Seller hereunder (including amounts paid pursuant to
Section 1.4 hereof) and (b) $800,000. In the event that Buyer suffers Damages
hereunder, Seller shall have the right, in its sole discretion, to indemnify
Buyer for such Damages by either (x) paying to Buyer an amount equal to such
Damages in cash, (y) returning to Buyer a number of Shares with a value (as
determined by Buyer's Board of Directors in good faith at the time such Shares
are returned) equal to the amount of such Damages, or (z) doing any combination
of (x) and (y).

     6.2  Indemnification of Seller.  Buyer will indemnify and hold harmless
          -------------------------
Seller from and against any Damages in excess of Twenty-Five Thousand Dollars
($25,000) in aggregate, arising out of or resulting from:

         (i) any inaccuracy in any representation or the breach of any warranty
made by Buyer in this Agreement;

         (ii) any failure of Buyer to perform or observe any term of this
Agreement; or

         (iii)  the ownership of the Assets after Closing, including the Assumed
Liabilities.

     6.3  Survival of Representations and Warranties.  The representations and
          -------------------------------------------
warranties of the parties shall survive until two years after the Closing Date,
except for representations and warranties concerning Taxes, which shall survive
until the applicable statute of limitations has expired.

     6.4  Arbitration.
          -----------
          (a) All disputes under this Article 6 shall be settled by arbitration
in San Diego, California, before a single arbitrator pursuant to the rules of
the American Arbitration Association. Arbitration may be commenced at any time
by any party hereto giving written notice to each other party to a dispute that
such dispute has been referred to arbitration under this Section 6.4. The
arbitrator shall be selected by the joint agreement of Seller and Buyer, but if
they do not so agree within 20 days after the date of the notice referred to
above, the selection shall be made pursuant to the rules from the panels of
arbitrators maintained by such Association. Any award rendered by the arbitrator
shall be conclusive and binding upon the parties hereto; provided, however, that
any such award shall be accompanied by a written opinion of the arbitrator
giving the reasons for the award. This provision for arbitration shall be
specifically enforceable by the parties and the decision of the arbitrator in
accordance herewith shall be final and binding and there shall be no right of
appeal therefrom. Each party shall pay its own expenses of arbitration and the
expenses of the arbitrator shall be equally shared; provided, however, that if
in the opinion of the arbitrator any claim for indemnification or any defense or
objection thereto was unreasonable, the arbitrator may assess, as part of his
award, all or any part of the arbitration expenses of the other party (including
reasonable attorneys' fees) and of the arbitrator against the party raising such
unreasonable claim, defense or objection.

         (b) To the extent that arbitration may not be legally permitted
hereunder and the parties to any dispute hereunder may not at the time of such
dispute mutually agree to submit such

                                      -9-
<PAGE>

dispute to arbitration any party may commence a civil action in a court of
appropriate jurisdiction to solve disputes hereunder. Nothing contained in this
Section 6.4 shall prevent the parties from settling any dispute by mutual
agreement at any time.

     6.5  Compliance with Bulk Sales Laws.  Buyer and Seller hereby waive
          -------------------------------
compliance by Buyer and Seller with the bulk sales law and any other similar
laws in any applicable jurisdiction in respect of the transactions contemplated
by this Agreement.  Seller shall indemnify Buyer from, and hold it harmless
against, any liabilities, damages, costs and expenses resulting from or arising
out of (i) the parties' failure to comply with any of such laws in respect of
the transactions contemplated by this Agreement, or (ii) any action brought or
levy made as a result thereof, other than those liabilities which have been
expressly assumed, on such terms as expressly assumed, by Buyer pursuant to this
Agreement.

     6.6  Other Rights and Remedies Not Affected.  The indemnification rights of
          --------------------------------------
the parties under this Article 6 are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or otherwise for
any misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including without limitation
the right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby; provided, however,
that the maximum liability of Seller for claims for breaches of the
representations, warranties and covenants contained herein shall be as set forth
in Section 6.1 hereof.

7.   GENERAL PROVISIONS
     ------------------

     7.1  Notices.  Any notice, demand or request required or permitted to be
          -------
given by either party  pursuant to the terms of this Purchase Agreement shall be
in writing and shall be deemed given when delivered personally or by facsimile
transmission to the party to be notified, or three (3) days after deposit in the
U.S. mail, by registered or certified mail with postage prepaid, and addressed
to the parties at the addresses of the parties set forth below or at such other
address as a party may request by notifying the other in writing.

     BUYER:

     Illumina, Inc.
     9390 Towne Center Drive, Ste. 200
     San Diego, California  92121
     Attention:  John R. Stuelpnagel
     ---------

     SELLER:

     Spyder Instruments, Inc.
     3550 General Atomics Court
     San Diego, California  92121
     Attention:  Michael Lebl
     ---------

     7.2  Entire Agreement; Amendment.  This Purchase Agreement may be amended
          ---------------------------
by the parties only by an instrument in writing signed on behalf of each of the
parties.  This Purchase

                                      -10-
<PAGE>

Agreement constitutes the entire agreement and supersedes all prior and
contemporaneous agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, including, without
limitation, the Option Agreement.

     7.3 Governing Law. This Purchase Agreement shall be governed by and
         -------------
construed in accordance with the laws of the State of California as applied to
agreements made and performed in California by residents of California.

     7.4 Counterparts. This Purchase Agreement may be executed in counterparts,
         ------------
each of which shall be deemed an original and together shall constitute one
agreement.

     7.5 Specific Performance. The parties acknowledge that damages would be an
         --------------------
inadequate remedy for any breach of the provisions of this Purchase Agreement
and agree that the obligations of the parties hereunder shall be specifically
enforceable.

     7.6 Third Parties. This Purchase Agreement is not intended, and shall not
         -------------
be construed, to confer upon any person other than the parties any rights or
remedies.

     7.7  Headings.  The headings contained in this Purchase Agreement are for
          --------
reference only and shall not affect the meaning of any section.

     7.8 Fees, Costs and Expenses. Unless specifically stated to the contrary in
         ------------------------
this Purchase Agreement, all expenses incurred in connection with the
consummation of the transactions contemplated by this Purchase Agreement shall
be the sole responsibility of the party incurring such expenses.

                                      -11-
<PAGE>

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

"BUYER"                             ILLUMINA, INC.

                                    By:
                                        -------------------------------
                                        Jay Flatley, President

"SELLER"                            SPYDER INSTRUMENTS, INC.

                                    By:
                                        -------------------------------
                                    Title:
                                           ----------------------------
<PAGE>

                                  Schedule 1.1

                           Spyder Instruments Assets

1.   Equipment

Compas 768.3
Cover Plate
Multiprobe II
Ball Plate Covers
IC Programmers
HPLC Column

2.   Expensed Consumables

Miscellaneous Chemicals

3.   In-Process Research & Development and Intellectual Propert

Seller's rights pursuant to that certain Cross License Agreement dated April 14,
1999 between Spyder Instruments, Inc. and Trega Biosciences (the "Trega
License")

Seller's rights pursuant to that certain License Agreement dated November 10,
1994 between Spyder Instruments and Torrey Pines Institute for Molecular Studies
(the "TPIMS License").

US Patent Application [*] and related know how

Other In-Process R&D, including all related software, algorithms, methods of
synthesis, and modifications to equipment
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

<PAGE>

                                  Schedule 1.2

                              Assumed Liabilities

1.  All obligations of Seller under the Trega License and the TPIMS License.

2.  All claims or other obligations or liabilities arising out of the operation
of the Business or the ownership of the Assets after the Closing Date.

<PAGE>

                                  Schedule 5.1

                          Allocation of Purchase Price

--------------------------------------------------------------------------------
Equipment
--------------------------------------------------------------------------------
 Compas 768.3                                                            $28,194
--------------------------------------------------------------------------------
 Cover Plate                                                               2,500
--------------------------------------------------------------------------------
 Multiprobe II                                                            15,713
--------------------------------------------------------------------------------
 Ball Plate Covers                                                         1,333
--------------------------------------------------------------------------------
 IC Programmers                                                              200
--------------------------------------------------------------------------------
 HPLC Column                                                                   0
--------------------------------------------------------------------------------
Expensed Consumables
--------------------------------------------------------------------------------
 Miscellaneous Chemicals                                                  10,000
--------------------------------------------------------------------------------
In-Process R&D and IP
--------------------------------------------------------------------------------
 TPIMS License                                                            20,000
--------------------------------------------------------------------------------
 Trega License                                                            20,000
--------------------------------------------------------------------------------
 US Patent Application [*] and related know how                            6,667
--------------------------------------------------------------------------------
 Other In-Process R&D                                                     65,392
--------------------------------------------------------------------------------
    TOTAL                                                               $170,000
--------------------------------------------------------------------------------
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.<PAGE>

                                                                    EXHIBIT 10.8

                                  LICENSE AGREEMENT

     Effective as of May ____, 1998 (the "Effective Date"), TUFTS UNIVERSITY, a
body having corporate powers under the laws of the State of Massachusetts
("TUFTS"), and ILLUMINA, Inc., a California corporation having a principal place
of business at 2187 Newcastle Avenue, Suite 101, Cardiff, California 92007,
("LICENSEE") enter into this license agreement ("Agreement") and thereby agree
as follows:

1    BACKGROUND

     1.1  TUFTS is the owner of the patents and patent applications listed in
Exhibit 1 and any Licensed Patents, as hereinafter defined, which may issue
therefrom.

     1.2  TUFTS desires to have its technology developed and marketed in order
that products resulting therefrom may be available for public use and benefit.

     1.3  LICENSEE desires a worldwide, exclusive license, including the right
to sublicense, to develop, market and sell products under the Licensed Patents
and Know How (collectively, "Exclusive Technology") in all fields.

2    DEFINITIONS

     2.1  "Affiliate" means any corporation or other entity that is directly or
indirectly controlling, controlled by or under common control with LICENSEE.
For the purpose of this definition, "control" shall mean the direct or indirect
beneficial ownership of at least fifty percent (50%) in the income or stock of
such corporation or business.

     2.2  "Exclusive" means that, subject to the provision in Section 3.3, TUFTS
shall not grant further licenses to the Licensed Patents.

     2.3  "Know-How" means trade secrets, know-how, data and other information
(whether or not patentable or qualifying as a trade secret) relating to the
field of use relating to Licensed Patents discovered or developed at Tufts, or
revealed to LICENSEE pursuant to the research agreement referred to in Section 3
of the Master Agreement of even date herewith ("Research Agreement") between
Tufts and LICENSEE.  Know-How shall not include Licensed Patents.

     2.4  "Licensed Product" means any product, the manufacture or sale of which
is within a Valid Claim within the Licensed Patents in the country of
manufacture or sale.

                                      -1-
<PAGE>

     2.5  "Licensed Patents" means (i) the U.S. and foreign patents and patent
applications listed on Exhibit 1 hereto, (ii) all U.S. or foreign patent
applications filed after the Effective Date owned by TUFTS or which TUFTS has
the right to license which claim one or more inventions which would be dominated
by any patent issuing on a patent application within the Licensed Patents
pending as of the Effective Date (or a division, or continuation in whole or
part of such a pending application), (iii) all divisions, and continuations in
whole or part of any of the preceding, (iv) all foreign patent applications
corresponding to or claiming priority from any of the preceding, and (v) all
U.S. and foreign patents issuing on any of the preceding, including patents of
addition, reexaminations, and reissues.

     2.6  "Licensed Territory" means worldwide.

     2.7  "LICENSEE" shall mean Illumina, Inc. and its Affiliates.

     2.8  "Net Sales" means the gross revenue actually received by LICENSEE from
sales of Licensed Products, less the following items, but only insofar as they
are included in such gross revenue and are separately stated on the invoice:

          (a)  Import, export, value-added, excise and sales taxes, and custom
               duties, all to the extent separately identified on the invoice;

          (b)  Cost of insurance, packing, and transportation from the place of
               manufacture to the customer's premises;

          (c)  normal and customary rebates, and cash and trade discounts,
               actually taken; and

          (d) Credit for returns, allowances, or trades actually allowed.

     2.9  "Valid Claim" means a claim of (i) an issued, unexpired patent which
has not been held unenforceable or invalid by a court or other governmental
entity of competent jurisdiction, and which has not been disclaimed, or
withdrawn or found invalid or unenforceable in a reissue application or re-
examination proceeding; or (ii) a patent application, provided that not more
than five (5) years have elapsed from the date the claim takes priority for
filing purposes.

3    GRANT

     3.1  Subject to Public Law 96-517 and Public Law 98-620, TUFTS hereby
grants, to the extent that it lawfully may, to LICENSEE and LICENSEE hereby
accepts an exclusive license under the Exclusive Technology to make, have made,
import, have imported, use, lease, sell and offer for sale, have sold and
otherwise commercialize and exploit Licensed Products, and to practice any
method, process, or procedure within the Exclusive Technology, in the Licensed
Territory.

                                      -2-
<PAGE>

     3.2  Said license is Exclusive, including the right to sublicense pursuant
to Section 12, in the Licensed Territory for a term commencing as of the
Effective Date, and ending upon expiration of the last to expire of Licensed
Patents.

     3.3  LICENSEE agrees that TUFTS shall have the right to practice the
Exclusive Technology both on its own and/or in collaboration with third party
academic or not-for-profit research institutions, solely for non-commercial
purposes, and not for sale, license, or other distribution.

4    DILIGENCE

     4.1  LICENSEE will use reasonable best efforts to diligently and
continuously commercialize the Exclusive Technology.  To support the
commercialization of the Exclusive Technology, LICENSEE will raise $500,000 in
equity financing from third parties during the first year after the Effective
Date and use its best efforts to raise $2,000,000 in total financing (including
but not limited to equity or debt financing, government grant funding, sponsored
research and development funding, etc.) ("First Financing") during the second
year after the Effective Date.  If LICENSEE fails to meet any one of the
foregoing milestones within the time specified, TUFTS shall have the right to
terminate the license granted hereunder, provided that such action by TUFTS is
consistent with a determination of the arbitrators pursuant to Section 15 hereof
that LICENSEE has failed to exercise due diligence in the commercialization of
the Exclusive Technology pursuant to its obligations under this Section 4.1.

     4.2  LICENSEE shall further use its best efforts to bring one or more
Licensed Products to market through a thorough, vigorous and diligent
exploitation of Licensed Patents and to continue thereafter active, diligent
marketing of more Licensed Products throughout the life of this Agreement.

     4.3  In addition LICENSEE shall adhere to the following milestones:

          (a) LICENSEE shall deliver to TUFTS on or before the first anniversary
              of this Agreement an operating plan showing the amount of money,
              number and kind of personnel, and time budgeted and planned for
              each phase of development of the Licensed Products and shall
              provide similar reports to TUFTS on or before each subsequent
              anniversary. TUFTS agrees to keep this operating plan
              confidential.

          (b) The following expenditures shall be made by the LICENSEE, its
              Affiliates or its sublicensees on a calendar-year basis in order
              to develop and commercialize Licensed Products:

                 1999 - an expenditure of [*]

____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -3-
<PAGE>

                 2000 - an expenditure of [*]
                 2001 - an expenditure of [*]
                 2002 - an expenditure of [*]

          (c) Of the expenditures listed in Section 4.3(b), the following
              minimum expenditures shall be made by LICENSEE, its Affiliates or
              its sublicensees on a calendar-year basis in order to develop and
              commercialize a product dominated by US Patent Number 5,512,490:

                 1999 - an expenditure of [*]
                 2000 - an expenditure of [*]
                 2001 - an expenditure of [*]
                 2002 - an expenditure of [*]

          (d) LICENSEE shall permit an in-plant inspection by TUFTS on or before
              July 1, 1999 and thereafter permit in-plant inspections by TUFTS
              at regular intervals with at least six (6) months between
              inspections.

          (e) LICENSEE shall provide TUFTS with an annual report of research and
              development expenditures required under this Section 4.3.

     4.4    If LICENSEE fails to meet any of the milestones in this Section 4,
and the default has not been remedied within ninety (90) days after the date of
notice in writing of such default by TUFTS, TUFTS shall have the right to change
the license granted hereunder to a non-exclusive license.

5           PAYMENTS

     5.1    LICENSEE shall pay to TUFTS royalties equal to [*] of the Net Sales
received by LICENSEE from the sale of Licensed Products. In the event that a
Licensed Product under this Agreement is sold in a combination product
containing one or more other active ingredients or components which are or could
be separately available on a commercial basis, then Net Sales on the combination
product shall be calculated as follows:

          By multiplying the net selling price of the combination product by the
          fraction A/A+B, where A is the gross selling price, during the
          royalty-paying period being considered, of the Licensed Product sold
          separately, and B is the gross selling price, during the royalty
          period in question, of the other active ingredients or components sold
          separately.

     5.2    In the event that LICENSEE is required to take a license from any
third party in order to commercialize any Licensed Product, and LICENSEE must
make royalty payments to such third

____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -4-
<PAGE>

party ("Third Party Royalty Payment"), the royalties payable to TUFTS pursuant
to Section 5.1 above shall be reduced by an amount equal to fifty percent (50%)
of the Third Party Royalty Payment, provided, however, that such reduction shall
not reduce the royalty payment owed to Tufts in any single year to an amount
which is less than fifty per cent (50%) of that which would have been due to
TUFTS in the absence of Third Party Royalty Payments.

     5.3    LICENSEE shall pay TUFTS a sublicensing fee (the "Sublicensing Fee")
equal to twenty five percent (25%) of the net revenue received from sublicensing
of Licensed Patents and Licensed Products covered by one or more valid claims of
the Licensed Patents in the country in which such Product is sold. The
Sublicensing Fee shall be based upon the amount actually paid to LICENSEE by a
sublicensee, including fees, royalties and milestone payments, provided that the
Sublicensing Fee shall not include research and development support payments,
payments in compensation for the grant of rights to any other intellectual
property of LICENSEE, or equity or debt financing received by LICENSEE from such
sublicensee.

     5.4    LICENSEE hereby grants to TUFTS the right to purchase 500,000 shares
of LICENSEE'S common stock which represents 10.0% of the founding capitalization
(see Exhibit 2), at fair market value as determined by LICENSEE's Board of
Directors as of the date of purchase (such fair market value is currently $0.01
per share) pursuant to a separate stock purchase agreement ("Stock Agreement").

     5.5    The royalty on Net Sales made in currencies other than U.S. Dollars
shall be calculated using the appropriate foreign exchange rate for such
currency quoted by the Bank of America (San Francisco) foreign exchange desk, on
the close of business on the last banking day of each calendar quarter.
Royalties and payments to TUFTS shall be made in U.S. Dollars.

     5.6  Within thirty (30) days after receipt of a statement from TUFTS,
LICENSEE shall reimburse TUFTS for all costs incurred by TUFTS after the
Effective Date in connection with the preparation, filing and prosecution of all
patent applications and maintenance of Licensed Patents.

     5.7  In the event that in any country all of the valid claims within the
Licensed Patents which cover a particular Licensed Product are held invalid or
unenforceable, then LICENSEE's obligation to pay royalties on Net Sales with
respect to such Licensed Product shall terminate in such country. LICENSEE's
obligation to pay royalties on Net Sales shall terminate on a country-by-country
basis upon the expiration of the last to expire of any issued Licensed Patent in
each country.

6    ROYALTY REPORTS, PAYMENTS AND ACCOUNTING

     6.1  Beginning with the first sale of a Licensed Product, LICENSEE shall
make written reports (even if there are no further sales) of royalty payments
due, if any, to TUFTS within thirty (30) days after the end of each calendar
quarter.  This report shall state the number, description, and aggregate Net
Sales of Licensed Products during such completed calendar quarter by LICENSEE,
its

                                      -5-
<PAGE>

Affiliates and Sublicensees, and resulting calculations of earned royalty
payments due TUFTS pursuant to Section 5 for such completed calendar quarter.
Each such statement shall be certified by an officer of the LICENSEE as being
true, correct and complete.  Concurrent with the submission of each such report,
LICENSEE shall pay TUFTS any royalties due for the calendar quarter covered by
such report.

     6.2  LICENSEE agrees to keep and maintain records for a period of three (3)
years showing the manufacture, sale, use and other disposition of products sold
or otherwise disposed of under the license herein granted.  Such records will
include sufficient detail to enable the royalties payable hereunder by LICENSEE
to be determined.  LICENSEE further agrees to permit its books and records to be
examined by an independent certified public accountant selected by TUFTS and
acceptable to LICENSEE once per calendar year during the term of this Agreement,
for the sole purpose of verifying the reports and royalty payments made by
LICENSEE.  Such examination shall be made at LICENSEE'S place of business during
ordinary business hours with at least thirty (30) days prior written notice.
The accountant shall report to TUFTS only whether there has been a royalty
underpayment and, if so, the amount thereof.  Such examination is to be at the
expense of TUFTS except in the event that the results of the audit reveal an
under reporting of royalties due TUFTS of five percent (5%) or more, then the
audit costs shall be paid by LICENSEE within thirty (30) days of notice by TUFTS
to LICENSEE.

7    REPRESENTATIONS AND WARRANTIES

     7.1  TUFTS Disclaimer.  TUFTS MAKES NO REPRESENTATIONS, EXTENDS NO
          ----------------
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED (INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR PURPOSE), AND
ASSUMES NO RESPONSIBILITIES WHATSOEVER, WITH RESPECT TO THE LICENSED PATENTS OR
KNOW-HOW OR THE USE THEREOF, OR THE MANUFACTURE, POSSESSION, USE, MARKETING,
SALE, OR OTHER DISPOSITION BY TUFTS, LICENSEE, OR ANYONE ELSE, OF LICENSED
PRODUCT(S) OR ANY OTHER PRODUCTS OF SERVICES (INCLUDING, WITHOUT LIMITATION,
PRODUCTS MADE BY TUFTS, AND TUFTS SERVICES, THAT ARE OR WERE FURNISHED TO
LICENSEE AT ANY TIME BEFORE, ON, OR AFTER THE DATE HEREOF), EXCEPT ONLY AS
EXPRESSLY STATED HEREIN.  Without limitation of the foregoing generality,
nothing contained herein or in any disclosure of the Licensed Patents or Know-
How made by or on behalf of TUFTS shall be construed as extending any
representation or warranty with respect to the Licensed Patents or Know-How or
Licensed Products or the results to be obtained by the use of the Licensed
Patents or Know-How or any Licensed Products, or that anything made, used, or
sold by use of the Licensed Patents or Know-How or any part thereof, alone or in
combination, will be free from infringement of patents of third parties.   TUFTS
SHALL NOT BE LIABLE TO LICENSEE, ITS AFFILIATES, ITS SUBLICENSEES, OR ANY OTHER
PARTY, REGARDLESS OF THE FORM OR THEORY OF ACTION (WHETHER CONTRACT, TORT,
INCLUDING NEGLIGENCE, STRICT LIABILITY, OR OTHERWISE), FOR ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR

                                      -6-
<PAGE>

OTHER EXTRAORDINARY DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT,
LICENSED PATENTS, THE KNOW-HOW, THE LICENSED PRODUCTS, OR ANY PRODUCTS OR
SERVICES FURNISHED OR NOT FURNISHED BY TUFTS, EVEN IF TUFTS HAS BEEN ADVISED OF
THE POSSIBILITY THEREOF.

     LICENSEE agrees that all warranties, if any, in connection with the sale or
other disposition of any Licensed Products (or any products made by TUFTS and
furnished at any time to LICENSEE) by LICENSEE, its Affiliates, or its
sublicensees will be made by them and will not directly or impliedly obligate
TUFTS.

     7.2  TUFTS Representations.  Notwithstanding the first sentence of
          ---------------------
Section 7.1, TUFTS:

               (a) Warrants to LICENSEE that TUFTS has good title to the
Exclusive Technology and any tangible personal property furnished hereunder by
TUFTS to LICENSEE, including any quantities of materials similar to the products
to be made by LICENSEE as Licensed Products (but TUFTS makes no infringement or
other representations or warranties with respect thereto).

               (b) Represents that TUFTS is a corporation organized and existing
under the laws of the Commonwealth of Massachusetts and has the power and
authority to enter into this Agreement and the right to grant all the rights
described in this Agreement, including the rights to the Licensed Patents and
Know-How described herein.

               (c) Represents that TUFTS has taken all necessary action to
authorize its execution and delivery of this Agreement by the representatives of
TUFTS who carried out such execution and delivery, and to authorize the
performance by TUFTS of its obligations hereunder.

               (d) Represents that execution and delivery of this Agreement and
its performance by TUFTS will not result in any breach or violation of, or
constitute a default under, any agreement, instrument, judgment, or order to
which TUFTS is a party or by which it is bound.

               (e) Represents that TUFTS is not aware of any other intellectual
property right owned by TUFTS for which a license is necessary to practice the
rights to the Licensed Patents as set forth herein.

     7.3  LICENSEE Representations.  LICENSEE represents and warrants to TUFTS
          ------------------------
that:

               (a) LICENSEE is a corporation organized and existing under the
laws of California and has the power and authority to enter into this Agreement.

                                      -7-
<PAGE>

               (b) LICENSEE has taken all necessary action to authorize its
execution and delivery of this Agreement by the representatives of LICENSEE who
carried out such execution and delivery, and to authorize the performance by
LICENSEE of its obligations hereunder.

               (c) Execution and delivery of this Agreement and its Agreement
and its performance by LICENSEE will not result in any breach or violation of,
or constitute a default under, any agreement, instrument, judgment, or order to
which LICENSEE is a party or by which it is bound.

8  INDEMNITY

     8.1  Indemnity.  LICENSEE agrees to indemnify and hold harmless TUFTS, its
          ---------
trustees, officers and employees, from all costs, expenses (including reasonable
attorneys' fees), interest, losses, obligations, liabilities, and damages paid
or liability for which is incurred by any of said parties ("Losses"), and which
arise out of or are in connection with or are for the purpose of avoiding any
and all claims, demands, actions, causes of action, suits, appeals, and
proceedings ("Claims"), all whether groundless or not, or the settlement
thereof, based on any actual or alleged injuries, damages, or liability of any
kind whatsoever (including, without limitation, personal injury, death, property
damage, breach of warranty, or breach of contract) arising, directly or
indirectly, out of any one or more of:  any breach of LICENSEE of its
representations, warranties, or agreements hereunder; or out of any manufacture,
marketing, possession, use, sale or other disposition of Licensed Products or
products furnished by TUFTS to LICENSEE in connection herewith or in connection
with the Research Agreement (whether same occurs during or after the License or
during or after the License Period) by LICENSEE, its Affiliates, its
sublicensees, or anyone claiming by, through, or under any of them; or any
acquisition, possession, disclosure, or use of the Exclusive Technology or any
thereof, by LICENSEE, its Affiliates, its sublicensees, or anyone claiming by,
through, or under any of them; or the presence of LICENSEE's or its Affiliates'
or its sublicensees' officers, agents, employees, invitees, or property or any
thereof on TUFTS' premises, provided that the obligations of LICENSEE under this
Section 8.1 shall not apply if the Claims and any Losses resulted in whole or in
part from the intentional misconduct or gross negligence of TUFTS or any other
party indemnified under this Section.

     8.2  Defense; Settlement.  LICENSEE shall defend and control negotiation of
          -------------------
settlement of any Claim, as defined in Section 8.1.  TUFTS agrees to cooperate
fully in the defense of any Claim and may participate in the defense with
counsel of TUFTS' choosing, such separate counsel to be at TUFTS' expense unless
a conflict of interest exists between LICENSEE and TUFTS with respect to the
defense in which case LICENSEE shall pay the reasonable fees and expenses of
TUFTS' separate counsel.  Any settlement by which TUFTS would incur any
obligation or liability, whether for the payment of money, the taking of any
action, the refraining from any action, or otherwise, shall require the advance
written consent of TUFTS, which may be withheld in the sole discretion of TUFTS
without relieving LICENSEE of any of its indemnification or other obligations
hereunder.

                                      -8-
<PAGE>

     8.3  Insurance.  Not later than thirty (30) days before the time when
          ---------
LICENSEE, any subsidiary, or any sublicensee of LICENSEE shall use in humans or
sell any Licensed Products or any products furnished to LICENSEE by TUFTS at any
time (before, on or after the date hereof) in connection herewith or in
connection with the Research Agreement, and at all times thereafter until the
expiration of all applicable statutes of limitation pertaining to any such use,
sale or other disposition of any Licensed Products or the aforesaid products
furnished by TUFTS (whether same occurs or exists before or after the Effective
Date), LICENSEE will at LICENSEE's expense, obtain and maintain in full force
and effect, comprehensive general liability insurance, including product
liability insurance, protecting TUFTS against all claims, suits, obligations,
liabilities and damages, based upon or arising out of actual or alleged bodily
injury, personal injury, death, or any other damage to or loss of persons or
property, caused by any such use, sale, or other disposition.  Such insurance
policy or policies shall be issued by companies rated by A. M. Best as A VIII or
better (or other companies acceptable to TUFTS), shall name TUFTS as an
additional named insured, shall have limits of at least one million dollars
($1,000,000) per occurrence with an aggregate of three million dollars
($3,000,000), shall be non-cancelable except upon thirty (30) days prior written
notice to TUFTS, and shall provide that as to any loss covered thereby and also
by any policies obtained by TUFTS itself, LICENSEE's policies shall provide
primary coverage for TUFTS and TUFTS' policies shall be considered excess
coverage for TUFTS.

     8.4  Certificates; Policies.  LICENSEE will forthwith after the obtaining
          ----------------------
of such insurance required by Section 8.3, obtain and deliver to TUFTS
certificates of and copies of, and at all times thereafter deliver without
further demand replacement certificates and copies of, all such insurance
policies that are in force and effect, as reasonably requested by TUFTS.

9    MARKING

     Prior to the issuance of patents under Licensed Patents, LICENSEE agrees to
mark Licensed Product(s) (or their containers or labels) made, sold, or
otherwise disposed of by it under the license granted in this Agreement with the
words "Patent Pending," and following the issuance of one or more patents, with
the numbers of any applicable Licensed Patents.

10   USE OF NAMES

     10.1  Use of Names.   LICENSEE, its Affiliates and sublicensees agrees not
           ------------
to use the name of TUFTS or any TUFTS participant in the Research, as defined in
the Research Agreement, in any form of publicity or disclosure without TUFTS'
prior written consent, which may be withheld or withdrawn in TUFTS' discretion
at any time, provided however, that no such consent will be required with regard
to: (i) any proper reference by LICENSEE to published technical publications by
such participants; (ii) disclosures to potential investors and corporate
collaborators; and (iii) TUFTS will make no objection to LICENSEE's such other
disclosures as are required as a matter of law (including disclosures made under
applicable securities regulation) and such general disclosures

                                      -9-
<PAGE>

of this Agreement as may be desired by LICENSEE for purposes of grant
solicitations from governmental authorities.

11   PATENT PROSECUTION AND INFRINGEMENT

     11.1  TUFTS shall have the primary responsibility for the prosecution,
filing and maintenance of all Licensed Patents, including the conduct of all
interference, opposition, nullity and revocation proceedings, using counsel of
its choice; provided, however, that LICENSEE shall have reasonable opportunity
to advise and consult with TUFTS on such matters and may recommend TUFTS to take
such action as LICENSEE reasonably believes necessary to protect the Licensed
Patents.  Counsel shall concurrently provide TUFTS and LICENSEE with copies of
all material correspondence related to the prosecution of the patent
applications within the Licensed Patents.  Should TUFTS elect to abandon any
patent or patent application in any country, it shall give timely notice to
LICENSEE, who may continue prosecution or maintenance, at its sole expense and
TUFTS shall have no further rights with respect to such patent application or
patent in such country.  In the event that a conflict arises with respect to
patent counsel selected by TUFTS, LICENSEE may, with just cause and after
consulting with TUFTS, select new patent counsel reasonably acceptable to TUFTS.

     11.2  Payment of all reasonable fees and costs relating to the filing,
prosecution and maintenance of Licensed Patents which are incurred by TUFTS
after the Effective Date (including interference and/or opposition, nullity and
revocation proceedings) shall be the responsibility of LICENSEE.  TUFTS shall
periodically send LICENSEE invoices for any such patent expenses incurred by
TUFTS and LICENSEE shall pay such invoices within thirty (30) days of receipt
thereof.

     11.3  Each party shall inform the other promptly in writing of any alleged
infringement of the Licensed Patents by a third party, including all detail then
available.  TUFTS shall have the right, but shall not be obligated, to prosecute
at its own expense any such infringements, and LICENSEE agrees that TUFTS may
join LICENSEE as a plaintiff at the expense of TUFTS.  In any infringement
action commenced or defended solely by TUFTS, all expenses and all recovery for
infringement shall be those of TUFTS.

     11.4  If TUFTS has not taken legal action or been successful in obtaining
cessation of the infringement, within one hundred eighty (180) days of written
notification from LICENSEE of such infringement, or if TUFTS elects not to
continue prosecuting any legal action against an infringer, LICENSEE shall have
the right (while the LICENSEE is the exclusive licensee), but shall not be
obligated, to prosecute at its own expense any such infringement.  LICENSEE may
join TUFTS as a plaintiff in any such infringement suit at LICENSEE's expense.
No settlement, consent judgment or other voluntary final disposition of the suit
may be entered into without TUFTS' consent, which shall not be unreasonably
withheld or delayed.  In any such action by LICENSEE, after LICENSEE is first
reimbursed for LICENSEE's costs and expenses (including attorney's and expert
fees) and

                                      -10-
<PAGE>

then TUFTS is reimbursed for any credited royalties pursuant to Section 11.8,
TUFTS shall be entitled to receive an amount equal to the applicable royalties
on any recovery of profits and damages that is in excess of LICENSEE's costs and
expenses and TUFTS' royalty reimbursement. LICENSEE shall indemnify TUFTS
against any order for costs or other payments that may be made against TUFTS in
such proceedings.

     11.5  If any declaratory judgment action alleging invalidity or non-
infringement of any of the Licensed Patents shall be brought against LICENSEE,
TUFTS shall have the right at its election made within sixty (60) days after
commencement of that action, to intervene and take over the sole defense of the
action at its expense.

     11.6  In any infringement suit that either party brings to enforce the
Licensed Patents, the other party shall at the request and expense of the party
bringing the suit, cooperate in al reasonable respects, including, to the extent
possible, obtaining the testimony of its employees and making available physical
evidence in the possession of that party.

     11.7  LICENSEE, during the exclusive period of this Agreement, shall have
the exclusive right in accordance with the provisions of Section 12, to
sublicense any alleged infringer in the Licensed Territory for future use of the
Licensed Patents.

     11.8  If LICENSEE pay any amounts in fees, expenses or costs to maintain,
prosecute, bring or defend any proceeding relating to any infringement by a
third party of any Licensed Patents, any declaratory action alleging invalidity
or non-infringement of any Licensed Patents, or any interference, opposition,
nullity or revocation proceeding relating to any Licensed Patents pursuant to
this Section 11 (the "Section 11 Costs"), TUFTS agrees that 50% of the amount of
such Section 11 Costs may be credited as they are incurred by LICENSEE against
royalties due to TUFTS under Section 5 of this Agreement.

12   SUBLICENSES

     12.1  LICENSEE may grant sublicenses under the Exclusive Technology to
make, have made, import, have imported, use, lease, sell and offer for sale,
have sold and otherwise commercialize and exploit Licensed Products, and to
practice any method, process or procedure within the Exclusive Technology in the
Licensed Territory.  The terms and conditions of each sublicense shall be
consistent with the terms and conditions of this Agreement and shall contain,
among other things (by way of example but not limitation), provisions
substantially similar to and consistent with: the "Net Sales" definition;
Section 6; Section 7.1 (so that no representations or warranties inconsistent
with that Section shall be extended to or by any sublicensee); Section 10; and
Section 18.

     12.2  Any sublicense granted by LICENSEE under this Agreement shall remain
in effect in the event of any termination of this Agreement and shall provide
for the assignment of such

                                      -11-
<PAGE>

sublicense to TUFTS or its designee in the event that this Agreement is
terminated; provided, that the financial obligations of each sublicensee to
TUFTS shall be limited to the amounts such sublicensee would be obligated to pay
to LICENSEE had this Agreement not been terminated.

     12.3  Each sublicense shall provide that the obligations to TUFTS of
Sections 6, 7.1, 8.1, 10.1, 11.3, 11.4, 13.4, and 18 shall be binding on the
sublicensee and enforceable by both TUFTS and LICENSEE.

     12.4  LICENSEE shall furnish to TUFTS a true and complete copy of each
sublicense agreement and each amendment thereto, promptly after the sublicense
or amendment has been agreed upon.  TUFTS agrees that it will keep each
agreement confidential.

     12.5  No sublicense shall relieve LICENSEE of any of its obligations
hereunder, and LICENSEE shall be responsible for the acts or omissions of its
Affliliates and sublicensees and for compliance by them with their obligations,
and LICENSEE shall take all steps necessary to enforce that compliance to the
extent required to allow LICENSEE to fully comply with all of its obligations
under this Agreement.

13   TERM AND TERMINATION

     13.1  Unless sooner terminated in a manner provided herein, this Agreement
shall continue in force on a country-by-county and Licensed Product-by-Licensed
Product basis until the expiration of the last to expire of all Valid Claims in
such country included in the Licensed Patents.  Following such an expiration,
LICENSEE shall have a non-exclusive, royalty-free, irrevocable license in such
country, to the Know-How.

     13.2  LICENSEE shall have the right to terminate the Agreement at any time
following ninety (90) days written notice to TUFTS.  LICENSEE may terminate this
Agreement with respect to any country or any Licensed Patent by giving TUFTS
notice in writing at least sixty (60) days in advance of the effective date of
termination selected by LICENSEE.

     13.3  TUFTS may terminate this Agreement if LICENSEE:

          (a)  Is in default in payment of royalty;

          (b)  Is in material breach of any provision hereof;

and LICENSEE fails to remedy any such default, or breach, or fails to act
reasonably to remedy any default, or breach, within thirty (30) days after
receipt of written notice thereof by TUFTS.

                                      -12-
<PAGE>

     13.4  TUFTS may terminate this Agreement if LICENSEE fails to cure any
default on the diligence milestones in Section 4 after a twelve month period
commencing upon LICENSEE's receipt of written notification from TUFTS of
LICENSEE's default of such milestones.

     13.5  Surviving any termination are:

          (a)  LICENSEE's obligation to pay royalties accrued or accruable;

          (b)  Any cause of action or claim of LICENSEE or TUFTS, accrued or to
               accrue, because of any breach or default by the other party; and

          (c)  The provisions of Articles 8, 10, 15, 17 and Sections 7.1, 12.2
               and 13.4.

14   ASSIGNMENT

     Neither party may assign this Agreement or any part hereof without the
express written consent of the other, which consent shall not be unreasonably
withheld; provided, however, LICENSEE may assign this Agreement or any portion
hereof to an Affiliate or to a successor of all or substantially all its
business relating to the Licensed Patents or Know-How without the written
consent of TUFTS and shall provide TUFTS notice of any such assignment.
However, no assignment or other transfer by LICENSEE shall relieve LICENSEE of
any obligations hereunder and LICENSEE shall continue to be primarily and
jointly and severally liable (along with such assignee or other transferee) for
the performance of all obligations of LICENSEE and such assignee or other
transferee hereunder.

15   ARBITRATION

     15.1  Any controversy arising under or related to this Agreement, and any
disputed claim by either party against the other under this Agreement excluding
any dispute relating to patent validity or infringement arising under this
Agreement, shall be settled by arbitration in accordance with the Rules of
Commercial Arbitration of the American Arbitration Association.

     15.2  Upon request by either party, arbitration will be initiated by a
third party arbitrator mutually agreed upon in writing by LICENSEE and TUFTS
within thirty (30) days of such arbitration request.  Judgment upon the award
rendered by the arbitrator shall be final and nonappealable and may be entered
in a court having jurisdiction thereof.  The parties agree that any provision of
applicable law notwithstanding, they will not request and the arbitrators shall
have no authority to award punitive or exemplary damages against any party.  The
costs of the arbitration, including administrative fees and fees of the
arbitrators shall be shared equally by the parties.  Each party shall bear the
cost of its own attorneys' fees and expert fees.

                                      -13-
<PAGE>

     15.3  The parties shall be entitled to discovery in like manner as if the
arbitration were a civil suit in a Superior Court of the Commonwealth of
Massachusetts; provided, however, the arbitrator may limit the scope, time
and/or issues involved in discovery.

     15.4  Any arbitration shall be held at a location mutually agreed upon in
writing by LICENSEE and TUFTS.

16   NOTICES

     All notices under this Agreement shall be deemed to have been fully given
when done in writing and deposited in the United States mail, registered or
certified, or overnight deliver service (e.g., DHL, Federal Express) and
addressed as follows:
<TABLE>
<S>   <C>               <C>
     To TUFTS:          Tufts University
                        136 Harrison Avenue (75K-1520)
                        Boston, Massachusetts  02111

                        Attention: Associate Provost for Research

     with a copy to:    Massachusetts Biomedical Inititatives
                        20 Hampden Street
                        Roxbury, Massachusetts  02119

                        Attention: Director, Unified Office for Technology Transfer

     To LICENSEE:       Illumina, Inc.
                        2187 Newcastle Ave
                        Suite 101
                        Cardiff, California  92007

                        Attention: John R. Stuelpnagel
</TABLE>

Either party may change its address upon written notice to the other party.

17   CONFIDENTIALITY

     TUFTS shall maintain this Agreement and the reports and any information
provided by LICENSEE to TUFTS in confidence and not disclose such information or
reports to any third party, except as required by law and disclosed after notice
to LICENSEE and after requesting confidential treatment and a protective order,
if available.  TUFTS may, however, disclose to third parties total annual
royalty payments and general statistical information regarding payments made
hereunder in

                                      -14-
<PAGE>

the context of disclosing statistical information pertaining to the performance
of the TUFTS Office of Technology Licensing.

18  COMPLIANCE WITH LAWS

     18.1  Export Controls.  The Export Control Regulations of the U.S.
           ---------------
Department of Commerce prohibit, except under special validated license, the
exportation from the United States of technical data relating to certain
commodities (listed in the Regulations), unless the exporter has received
certain written assurance from the foreign importer.  In order to facilitate the
exchange of technical information under this Agreement, LICENSEE therefore
hereby agrees and gives its assurance to TUFTS that LICENSEE will not, unless
any required prior authorization is obtained from the U.S. Office of Export
Control, re-export directly or indirectly any technical data received from TUFTS
under this Agreement and will not export directly the Licensed Products or such
technical data to any country listed on either the Commodity Control List or
Militarily-Critical Technologies List.  TUFTS makes no representation as to
whether any such license is required or, if one is required, as to whether it
will be issued by the U.S. Department of Commerce.

     18.2   Other Laws.  In addition to the foregoing export control
            ----------
requirements, LICENSEE agrees that it, its Affiliates, and its sublicensees will
comply with all applicable mandatory or permissive patent marking laws, rules,
and regulations and comply with all other laws, rules, and regulations of all
governmental authorities applicable to any of their activities contemplated by
this Agreement, and will comply with all necessary and desirable practices in
connection and compliance with safety recommendations of trade associations or
governmental authorities.

19   MISCELLANEOUS

     19.1  Governing Law.  This Agreement shall be governed by the laws of in
           -------------
the Commonwealth of Massachusetts, without reference to principles of conflicts
of laws.

     19.2  Waiver.  None of the terms of this Agreement can be waived except by
           ------
the written consent of the party waiving compliance.

     19.3  Entire Agreement.  This Agreement and any Exhibits attached hereto
           ----------------
(each of which is hereby made part hereof by this reference), and the Master
Agreement entered into by the parties on even date herewith constitute the
entire agreement between the parties concerning the subject matter hereof, and
all prior negotiations, representations, warranties, agreements, and
understandings related thereto superseded hereby.

     19.4  Force Majeure.  Neither party shall not be considered in breach of
           -------------
this Agreement to the extent any failure to perform any term or provision is
caused by any reason beyond such party's reasonable control, or by reason of any
of the following circumstances: labor or employee disturbances or disputes of
any kind; accidents; laws, rules or regulations of any government

                                      -15-
<PAGE>

(including, without limitation, export and import regulations); failure of any
government approval required; disease; failure of utilities, mechanical
breakdowns, material shortages or other similar occurrences; civil disorders or
commotions, acts of aggression, vandalism or other similar occurrences; or fire,
floods, earthquakes, or acts of God.

     19.5  Independent Contractors.  The parties hereto shall be independent
           -----------------------
contractors with respect to each other, and neither shall be deemed to be the
agent, principal, employee, servant, joint venturer, or partner of the other for
any purpose.

     19.6  Severability.  If any provision of this Agreement shall to any extent
           ------------
be found to be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and any such invalid or unenforceable provision shall
be reformed so as to be valid and enforceable to the fullest extent permitted by
law.

     19.7  Headings.  Headings of Articles, Sections, and subsections included
           --------
herein for convenience for reference only and shall not be used to construe this
Agreement.

     19.8  Counterparts.  This Agreement may be executed in two counterparts,
           ------------
each of which shall be deemed an original and which together shall constitute
one instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the Effective Date set forth above.

TUFTS UNIVERSITY                       ILLUMINA, INC.
("TUFTS")                              ("LICENSEE")

By: __________________________________  By: __________________________________

Title:________________________________  Title:________________________________

                                      -16-
<PAGE>

                                   Exhibit 1

                                      [*]
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                                      -17-
<PAGE>

                                   Exhibit 2

                             Founding Capitalizaton

Person/Organization Shares % of Total
-------------------------------------

MBRI/Tufts                 0,500,000      10.0%
Founders                   1,275,000      25.5%
CW Group                   0,375,000      07.5%
Reserve                    2,825,000      57.0%

Total                      5,000,000       100%

                                      -18-

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