Exhibit 10.01

FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement is entered into as of
May 12, 2005 (the
“Amendment”), by and between COMERICA BANK (“Bank”) and CEPHEID (“Borrower”).
RECITALS

Borrower and Bank are parties to that certain Loan and Security Agreement dated
as of
November 9, 2004, as amended (the “Agreement”). The parties desire to amend the
Agreement
in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:

Section 1.1 of the Agreement is hereby amended to add or amend the following
defined terms to read as follows:

“Collateral” means the property described on Exhibit A attached hereto.

                                                            “Credit Extension”
means each Advance, Letter of Credit, Equipment Advance, or any other extension
of credit by Bank for the benefit of Borrower hereunder.

“Equipment Advance” has the meaning set forth in Section 2.1(c).

                                                            “Equipment Line”
means a credit extension of up to Three Million Dollars ($3,000,000).

“Equipment Maturity Date” means May 12, 2009.
“Purchase Card Sublimit” means $300,000.
“Revolving Line” means a credit extension of up to Four Million
Three Hundred Thousand Dollars ($4,300,000).

 

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The first sentence of Section 2.1(a)(i) of the Agreement is hereby amended to
read as follows: “Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Revolving Line or (ii) the Borrowing Base,
minus, in each case, the aggregate face amount of all outstanding Letters of
Credit and the Purchase Card Sublimit.”

The first sentence of Section 2.1(b)(i) of the Agreement is hereby amended to
read as follows: “Subject to the terms and conditions of this Agreement, at any
time prior to the Revolving Maturity Date, Bank agrees to issue or cause to be
issued standby letters of credit for the account of Borrower (each, a “Letter of
Credit” and collectively, the “Letters of Credit”) in an aggregate outstanding
face amount not to exceed the lesser of the Revolving Line or the Borrowing Base
minus, in each case, the aggregate amount of the outstanding Advances and the
Purchase Card Sublimit, provided that the aggregate face amount of all
outstanding Letters of Credit shall not exceed Two Million Dollars ($2,000,000)
at any time.”

New Sections 2.1(c) and (d) are hereby added to the Agreement to read as
follows:

(c) Equipment Advances.

                    (i) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through May 12, 2006, Bank agrees to
make advances (each an “Equipment Advance” and, collectively, the “Equipment
Advances”) to Borrower in an aggregate amount not to exceed the Equipment Line.
Each Equipment Advance shall not exceed one hundred percent (100%) of the
invoice amount of new equipment and tenant improvements approved by Bank from
time to time (which Borrower shall, in any case, have purchased within 90 days
of the date of the corresponding Equipment Advance), excluding taxes, shipping,
warranty charges, freight discounts and installation expense. Notwithstanding
the foregoing, in the initial Equipment Advance, Bank will finance such
equipment and tenant improvements purchased at any time after September 1, 2004.

                    (ii) Interest shall accrue from the date of each Equipment
Advance at the rate specified in Section 2.3, and shall be payable monthly on
the twenty fourth (24th) day of each month so long as any Equipment Advances are
outstanding. Any Equipment Advances that are outstanding on July ___, 2005 shall
be payable in thirty six (36) equal monthly installments of principal, plus all
accrued interest, beginning on August ___, 2005, and continuing on the same day
of each month thereafter. Any Equipment Advances that are outstanding on October
___, 2005 (which have not already begun amortizing) shall be payable in thirty
six (36) equal monthly installments of principal, plus all accrued interest,
beginning on November ___, 2005, and continuing on the same day of each month
thereafter. Any Equipment Advances that are outstanding on January ___, 2006
(which have not already begun amortizing) shall be payable in thirty six
(36) equal monthly installments of principal, plus all accrued interest,
beginning on February ___, 2006, and continuing on the same day of each month

 

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thereafter. Any Equipment Advances that are outstanding on April ___, 2006
(which have not already begun amortizing) shall be payable in thirty six
(36) equal monthly installments of principal, plus all accrued interest,
beginning on May ___, 2006, and continuing on the same day of each month
thereafter. On the Equipment Maturity Date, at which time all amounts owing
under this Section 2.1(c) and any other amounts owing under this Agreement shall
be immediately due and payable. Equipment Advances, once repaid, may not be
reborrowed. Except as set forth in the Amended and Restated LIBOR Addendum to
Loan and Security Agreement executed in connection herewith, Borrower may prepay
any Equipment Advances without penalty or premium.

                    (iii) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time three
(3) Business Days before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a completed loan
supplement in substantially the form attached hereto as Exhibit A and a copy of
the invoice, serial number, and proof of payment of such invoice for any
equipment or tenant improvements to be financed.

          (d) Purchase Cards. Subject to the terms and conditions set forth in
this Agreement, Bank agrees to make credit available to Borrower pursuant to a
Treasury Management Service Agreement Purchasing Card between Borrower and Bank,
in Bank’s standard form, in an amount not to exceed the Purchase Card Sublimit.
As set forth herein, the Purchase Card Sublimit shall be reserved against the
Revolving Line and the Borrowing Base to apply to Borrower’s obligations under
such agreement.

Section 2.2 of the Agreement is hereby amended in its entirety to read as
follows:

     2.2 Overadvances. If the aggregate amount of the outstanding Advances plus
the aggregate face amount of all outstanding Letters of Credit plus the Purchase
Card Sublimit exceeds the lesser of the Revolving Line or the Borrowing Base at
any time, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.

Section 2.3(a) of the Agreement is hereby amended in its entirety to read as
follows:

          (a) Interest Rates. Except as set forth in Section 2.3(b), the
Advances and the Equipment Advances, each of which shall be a Prime Rate Option
Advance or a LIBOR Option Advance as elected by Borrower in accordance with the
terms set forth in the Amended and Restated LIBOR Addendum to Loan and Security
Agreement dated as of May 12, 2005, shall bear interest on the outstanding Daily
Balance thereof at the applicable rate set forth in such Amended and Restated
LIBOR Addendum to Loan and Security Agreement.

 

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Sections 6.6 and 6.7 of the Agreement are hereby amended in their entirety to
read as follows:

     6.6 Minimum Unrestricted Cash at Bank. Borrower shall maintain with Bank
and/or Comerica Securities (provided that securities account control agreements
are in place with respect to such accounts) at all times a balance of
unrestricted cash that is at least eight tenths (0.80) of the outstanding
balance of all Indebtedness (including without limitation any outstanding
Letters of Credit and the Purchase Card Sublimit) owing by Borrower to Bank.

     6.7 Minimum Unrestricted Cash. Borrower shall maintain at all times a
balance of unrestricted cash that is at least Twenty Five Million Dollars
($25,000,000), provided that, at any time that any Equipment Advances are
outstanding, Borrower shall maintain at all times a balance of unrestricted cash
that is at least the greater of (i) Twenty Five Million Dollars ($25,000,000) or
(ii) Remaining Months Liquidity. As used herein, “Remaining Months Liquidity”
means the net change in Borrower’s cash during the six months immediately
preceding the date of measurement net of changes in debt, stock, paid-in
capital, minority interests, and milestone license payments set forth on
Schedule 1 attached hereto.

 

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Exhibit A to the Agreement is hereby amended to read as Exhibit A (including
attachments) to this Amendment.

Exhibit C to the Agreement is hereby amended to read as Exhibit C to this
Amendment.

Exhibit D to the Agreement is hereby amended to read as Exhibit D to this
Amendment.

Schedule 1 to the Amendment is hereby added and incorporated by this reference
into the Amendment.

Borrower grants and pledges to Bank a continuing security interest in all
presently existing and hereafter acquired or arising Collateral, as described on
Exhibit A to this Amendment, in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Agreements and the other Loan Documents. Except
as set forth in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof.

Unless otherwise defined, all initially capitalized terms in this Amendment
shall be as defined in the Agreement. The Agreement, as amended hereby, shall be
and remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of
Bank under the Agreement, as in effect prior to the date hereof. Borrower
ratifies and reaffirms the continuing effectiveness of all promissory notes,
guaranties, security agreements, mortgages, deeds of trust, environmental
agreements, and all other instruments, documents and agreements entered into in
connection with the Agreement, except to the extent such security interest are
being released pursuant to Section 17 above.

Borrower represents and warrants that the representations and warranties
contained in the Agreement are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is continuing.

This Amendment may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one
instrument.

As a condition to the effectiveness of this Amendment, Bank shall have received,
in form and substance satisfactory to Bank, the following:

          a. this Amendment, duly executed by Borrower;

          b. Corporate Resolutions to Borrow;

          c. Amended and Restated LIBOR Addendum to Loan and Security Agreement;

          d. disbursement instructions, an agreement to provide insurance, and
an auto-debit authorization;

          e. an amount equal to all Bank Expenses incurred through the date of
this Amendment (not to exceed $3,000 in connection with this Amendment); and

          f. such other documents, and completion of such other matters, as Bank
may reasonably deem necessary or appropriate.

 

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

              CEPHEID
 
       

  By:    

       
 
       

  Title:    

       
 
       

  Name:    

       
 
            COMERICA BANK
 
       

  By:    

       
 
       

  Title:    

       
 
       

  Name:    

       

 

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EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT

All Borrower’s (herein referred to as “Borrower” or “Debtor”):

(i) accounts now owned or hereafter arising and all proceeds thereof, including
cash and noncash proceeds and any returned or repossessed goods arising
therefrom and including any deposit or similar accounts into which any such
proceeds are deposited, and all other property due or to become due to Debtor
arising out of the sale or other disposition of Debtor’s property, whether in
the form of instruments, payment intangibles, investment property, deposit
accounts or letter of credit rights;

(ii) cash, cash equivalents, and investments, including without limitation all
deposit accounts of whatever nature (including all money market accounts),
investment property (including securities and securities entitlements), money,
and all of Debtor’s books and records with respect to any of the foregoing, and
any and all cash proceeds and/or noncash proceeds of any of the foregoing; and

(iii) all equipment, tenant improvements, or other personal property of Debtor
financed by Bank pursuant to that certain Loan and Security Agreement dated as
of November 9, 2004, as amended by that certain First Amendment to Loan and
Security Agreement dated as of May 12, 2005, as further amended or replaced from
time to time (collectively, the “Loan Agreement”), including, without limitation
as listed on Annex A to each Loan Supplement executed by Borrower in connection
with the Loan Agreement, whether now owned or hereafter acquired, wherever
located, together with all substitutions, renewals or replacements of and
additions, improvements, and accessions to any and all of the foregoing, and all
proceeds from sales, renewals, releases or other dispositions thereof.

 

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Loan Supplement

LOAN AGREEMENT SUPPLEMENT, dated ___(“Supplement”), supplements the Loan and
Security Agreement dated as of November 9, 2004, as amended by that certain
First Amendment to Loan and Security Agreement dated as of May 12, 2005, as
further amended or replaced from time to time (collectively, the “Loan
Agreement”) by and between the undersigned (“Borrower”), and Comerica Bank
(“Bank”). Capitalized terms used herein but not otherwise defined herein are
used with the respective meanings given to such terms in the Loan Agreement.

To secure the prompt payment by Borrower of all Obligations (as defined in the
Loan Agreement), and the performance by Borrower of all the terms contained in
the Loan Agreement, Borrower grants Bank, a first priority security interest in
each item of equipment and other property described in Annex A attached hereto,
which equipment and other property shall be deemed to be additional Collateral
under the Loan Agreement. The Loan Agreement is hereby incorporated by reference
herein and is hereby ratified, approved and confirmed. Annex A is attached
hereto. This Supplement may be executed by Borrower and Bank in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.

This Supplement is delivered as of this day and year first above written.

                  COMERICA BANK       CEPHEID “Bank”       “Borrower”
 
               
By:
          By:    

               
 
               
Name:
          Name:    

               
 
               
Title:
          Title:    

               

Annex A - Description of additional Collateral

 

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Annex A

The Equipment and tenant improvements being financed with the Equipment Advance
is listed below. Upon the funding of such Equipment Advance, this schedule
automatically shall be deemed to be a part of the Collateral.

                 
Description of
Equipment:
  Make   Model   Serial #   Invoice #

 

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EXHIBIT C

BORROWING BASE CERTIFICATE

                           
 
                        Borrower: CEPHEID   Lender: Comerica Bank Commitment
Amount: $4,300,000            
 
                         
 
                        ACCOUNTS RECEIVABLE            

    1.     Accounts Receivable Book Value as of ___          
$                    

    2.     Additions (please explain on reverse)           $                    

    3.     TOTAL ACCOUNTS RECEIVABLE           $                    
 
                        ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)    
              4.     Amounts over 90 days due   $                        
 
                              5.     Balance of 25% over 90 day accounts  
$                        
 
                       

    6.     Concentration Limits 1                   7.     Ineligible Foreign
Accounts 2   $                        
 
                              8.     Governmental Accounts  
$                        
 
                              9.     Contra Accounts   $                        
 
                              10.     Demo Accounts   $                        
 
                              11.     Intercompany/Employee Accounts  
$                        
 
                              12.     Other (please explain on reverse)  
$                        
 
                       

    13.     TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS           $                    

    14.     Eligible Accounts (#3 minus #13)           $                    

    15.     LOAN VALUE OF ACCOUNTS (80% of #14)           $                    
 
                        BALANCES            

    16.     Maximum Loan Amount           $4,300,000

    17.     Total Funds Available [Lesser of #16 or #15]          
$                    

    18.     Present balance owing on Line of Credit          
$                    

    19.     Outstanding under Sublimits           $                    

    20.     RESERVE POSITION (#17 minus #18 and #19)          
$                    

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1   Ineligible concentration Accounts include Accounts with respect to an
account debtor, including Subsidiaries and Affiliates, whose total obligations
to Borrower exceed twenty-five percent (25%) of all Accounts, to the extent such
obligations exceed the aforementioned percentage, except (A) Accounts with
respect to which Northrop Grumman is the account debtor, (B) Accounts with
respect to which Fisher Scientific is the account debtor, (c) Accounts with
respect to which Smiths Detection is the account debtor, and (D) as approved in
writing by Bank.   2   “Eligible Foreign Accounts” means Accounts with respect
to which the account debtor does not have its principal place of business in the
United States and that (a) are supported by one or more letters of credit or
credit insurance in an amount and of a tenor, and issued by a financial
institution or insurer, acceptable to Bank, (b) are accounts on which the
account debtor is Takara Bio Inc., a corporation formed under the laws of Japan,
or Gene Company Limited (provided such Accounts are not otherwise excluded under
the definition of “Eligible Accounts”), or (c) that Bank approves on a
case-by-case basis.

 

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The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Comerica Bank.

              CEPHEID        
 
           
By:
                         

  Authorized Signer        

 

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EXHIBIT D
COMPLIANCE CERTIFICATE

TO:           COMERICA BANK

FROM:     CEPHEID

The undersigned authorized officer of CEPHEID hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the “Agreement”), (i) Borrower is in complete
compliance for the period ending ___with all required covenants except as noted
below and (ii) all representations and warranties of Borrower stated in the
Agreement are true and correct as of the date hereof. Attached herewith are the
required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.

Please indicate compliance status by circling Yes/No under “Complies” column.

              Reporting Covenant   Required       Complies
Quarterly financial statements
  Quarterly at 10-Q deadline   Yes   No
Annual (CPA Audited)
  Annually at 10-K deadline   Yes   No
10K and 10Q
  Concurrent with filing at the
Securities Exchange Commission   Yes   No
A/R & A/P Agings, Borrowing Base Cert.
  Monthly within 20 days   Yes   No

                  Financial Covenant   Required   Actual       Complies
Minimum Unrestricted Cash at Bank
  0.80x Bank debt   $                       Yes   No
Minimum Unrestricted Cash
  $25,000,000*   $                       Yes   No

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*At any time that any Equipment Advances are outstanding, Borrower shall
maintain at all times a balance of unrestricted cash that is at least the
greater of (i) Twenty Five Million Dollars ($25,000,000) and (ii) six (6) times
Remaining Months Liquidity

          Comments Regarding Exceptions: See Attached.   BANK USE ONLY
 
       

  Received by:    

       
Sincerely,
                AUTHORIZED SIGNER
 
       

  Date:    

       
 
       

  Verified:    
 
       
SIGNATURE
                AUTHORIZED SIGNER
 
       

  Date:    
 
       
TITLE
       
 
            Compliance Status                               Yes No
 
       
DATE
       

 

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Schedule 1
Milestone Payments
$1,000,000 in the quarter ending March 31, 2005
$1,000,000 in the quarter ending June 30, 2005
$8,000,000 in the quarter ending September 30, 2005
$1,000,000 in the quarter ending December 31, 2005

 

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CORPORATE RESOLUTIONS TO BORROW

       
 
   
Borrower:           CEPHEID
   
 
     

I, the undersigned Secretary or Assistant Secretary of CEPHEID (the
“Corporation”), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California.

I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Certificate of Incorporation, as amended, and the
Restated Bylaws of the Corporation, each of which is in full force and effect on
the date hereof.

I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.

BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:

          NAMES   POSITION   ACTUAL SIGNATURES
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       

acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:

Borrow Money. To borrow from time to time from Comerica Bank (“Bank”), on such
terms as may be agreed upon between the officers, employees, or agents of the
Corporation and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation.

Execute Loan Documents. To execute and deliver to Bank that certain First
Amendment to Loan and Security Agreement dated as of May 12, 2005 (the
“Amendment”) and any documents related to the Amendment or to that certain Loan
and Security Agreement dated as of April 25, 2003, as amended (collectively with
the Amendment, the “Loan Documents”), and also to execute and deliver to Bank
one or more amendments, renewals, extensions, modifications, consolidations, or
substitutions for the Loan Documents.

Grant Security. To grant a security interest to Bank in the Collateral described
in the Loan Documents, which security interest shall secure all of the
Corporation’s Obligations, as described in the Loan Documents.

Letters of Credit. To execute letter of credit applications and other related
documents pertaining to Bank’s issuance of letters of credit.

 

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Purchase Card Program. To execute agreements related to Bank’s purchase card
program. Negotiate Items. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.

Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.

BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation’s agreements or commitments in effect at
the time notice is given.

I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.

IN WITNESS WHEREOF, I have hereunto set my hand on May 12, 2005, and attest that
the signatures set opposite the names listed above are their genuine signatures.

              CERTIFIED AND ATTESTED BY:
 
       

  X    

       

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LIBOR

Amended and Restated Addendum to Loan and Security Agreement

     This Amended and Restated Addendum to Loan and Security Agreement (this
“Addendum”) is entered into as of this 24th day of May 12, 2005, by and between
COMERICA BANK (“Bank”) and CEPHEID (“Borrower”). This Addendum supplements the
terms of the Loan and Security Agreement dated as of October 27, 2004 between
Borrower and Bank, as amended from time to time, including without limitation by
that certain First Amendment to Loan and Security Agreement dated as of even
date herewith (collectively, the “Note”). This Agreement is intended to and does
completely amend and restate, without novation, that certain LIBOR Addendum to
Loan and Security Agreement entered into between Bank and Borrower dated as of
October 27, 2004.

 

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     1. Definitions.

          a. Advance. As used herein, “Advance” means an Advance (as defined in
the Note) requested by Borrower and made by Bank under the Note, including a
LIBOR Option Advance or a Prime Rate Option Advance.

          b. Business Day. As used herein, “Business Day” means any day except a
Saturday, Sunday or any other day designated as a holiday under Federal or
California statute or regulation.

          c. Credit Extension means an Advance and/or an Equipment Advance.

          d. Equipment Advance. As used herein, “Equipment Advance” means an
Equipment Advance (as defined in the Note) requested by Borrower and made by
Bank under the Note, including a LIBOR Option Advance and/or a Prime Rate Option
Advance.

          e. LIBOR. As used herein, “LIBOR” means the rate per annum (rounded
upward if necessary, to the nearest whole 1/100 of 1%) and determined pursuant
to the following formula:

             

  LIBOR =   Base LIBOR    

           

      100% - LIBOR Reserve Percentage    

                    i. “Base LIBOR” means the rate per annum determined by Bank
at which deposits for the relevant LIBOR Period would be offered to Bank in the
approximate amount of the relevant LIBOR Option Advance in the inter-bank LIBOR
market selected by Bank, upon request of Bank at 10:00 a.m. California time, on
the day that is the first day of such LIBOR Period.

                    ii. “LIBOR Reserve Percentage” means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable LIBOR Period.

          f. LIBOR Business Day. As used herein, “LIBOR Business Day” means a
Business day on which dealings in Dollar deposits may be carried out in the
interbank LIBOR market.

          g. LIBOR Period. As used herein, “LIBOR Period” means, with respect to
a LIBOR Option Advance:

 

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                    i. initially, the period commencing on, as the case may be,
the date the Credit Extension is made or the date on which the Credit Extension
is converted to a LIBOR Option Advance, and continuing for (A) in every case of
an Equipment Advance, (i) before the Equipment Advance begins to amortize, a
period for any number of days selected by Borrower in the notice of Credit
Extension as provided in the Note or in the notice of conversion as provided in
this Addendum provided that the last day of such period shall be on or before
the date on which the applicable Equipment Advance would begin to amortize, and
(ii) after the Equipment Advance has begun to amortize, a period for any number
of days selected by Borrower provided that the last day of such period shall be
on or before the Equipment Maturity Date and (B) in every case of an Advance, a
thirty (30) day period thereafter, so long as the LIBOR Option is quoted for
such period in the applicable interbank LIBOR market, as such period is selected
by Borrower in the notice of Credit Extension as provided in the Note or in the
notice of conversion as provided in this Addendum; and

                    ii. thereafter, each period commencing on the last day of
the next preceding LIBOR Period applicable to such LIBOR Option Advance and
continuing for, (A) in every case of an Equipment Advance, a three (3) year
period thereafter and (B) in every case of an Advance, a thirty (30) day period
thereafter, so long as the LIBOR Option is quoted for such period in the
applicable interbank LIBOR market, as such period is selected by Borrower in the
notice of continuation as provided in this Addendum.

          h. Regulation D. As used herein, “Regulation D” means Regulation D of
the Board of Governors of the Federal Reserve System as amended or supplemented
from time to time.

          i. Regulatory Development. As used herein, “Regulatory Development”
means any or all of the following: (i) any change in any law, regulation or
interpretation thereof by any public authority (whether or not having the force
of law); (ii) the application of any existing law, regulation or the
interpretation thereof by any public authority (whether or not having the force
of law); and (iii) compliance by Bank with any request or directive (whether or
not having the force of law) of any public authority.

     2. Interest Rate Options.

          g. Borrower shall have the following options regarding the interest
rate to be paid by Borrower on Advances under the Note:

 

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                    i. A rate equal to two and one-half percent (2.50%) above
Bank’s LIBOR, (the “LIBOR Option”), which LIBOR Option shall be in effect during
the relevant LIBOR Period; or

                    ii. A rate equal to the “Prime Rate” as defined in the Note
and quoted from time to time by Bank as such rate may change from time to time
(the “Prime Rate Option”).

          h. Equipment Advances shall bear interest at a rate equal to the
“Prime Rate” as defined in the Note and quoted from time to time by Bank, as
such rate may change from time to time. Notwithstanding the foregoing, at the
time any Equipment Advance begins to amortize (and only at such point in time),
Borrower shall have the following options regarding the interest rate to be paid
by Borrower on such Equipment Advance under the Note:

                    i. A rate equal to two and one-half percent (2.50%) above
Bank’s LIBOR, (the “LIBOR Option”), which LIBOR Option shall be in effect during
the relevant LIBOR Period; or

                    ii. A rate equal to the “Prime Rate” as defined in the Note
and quoted from time to time by Bank as such rate may change from time to time
(the “Prime Rate Option”).

     3. LIBOR Option Advance. The minimum LIBOR Option Advance will not be less
than Two Hundred Fifty Thousand Dollars and 00/100 Dollars ($250,000) for any
LIBOR Option Advance.

     4. Payment of Interest on LIBOR Option Advances. Interest on each LIBOR
Option Advance shall be payable pursuant to the terms of the Note. Interest on
such LIBOR Option Advance shall be computed on the basis of a 360-day year and
shall be assessed for the actual number of days elapsed from the first day of
the LIBOR Period applicable thereto but not including the last day thereof.

     5. Bank’s Records Re: LIBOR Option Advances. With respect to each LIBOR
Option Advance, Bank is hereby authorized to note the date, principal amount,
interest rate and LIBOR Period applicable thereto and any payments made thereon
on Bank’s books and records (either manually or by electronic entry) and/or on
any schedule attached to the Note, which notations shall be prima facie evidence
of the accuracy of the information noted.

     6. Selection/Conversion of Interest Rate Options. At the time any Credit
Extension is requested under the Note and/or Borrower wishes to select the LIBOR
Option for all or a portion of the outstanding principal balance of the Note,
and at the end of each LIBOR Period, Borrower shall give Bank notice specifying
(a) the interest rate option selected by Borrower; (b) the principal amount
subject thereto; and (c) if the LIBOR Option is selected, the length of the
applicable LIBOR Period. Any such notice may be given by telephone so long as,
with respect to each LIBOR Option selected by Borrower, (i) Bank receives
written confirmation from Borrower not later than three (3) LIBOR Business Days
after such telephone notice is given; and (ii) such

 

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notice is given to Bank prior to 10:00 a.m., California time, on the first day
of the LIBOR Period. For each LIBOR Option requested hereunder, Bank will quote
the applicable fixed LIBOR Rate to Borrower at approximately 10:00 a.m.,
California time, on the first day of the LIBOR Period. If Borrower does not
immediately accept the rate quoted by Bank, any subsequent acceptance by
Borrower shall be subject to a redetermination of the rate by Bank; provided,
however, that if Borrower fails to accept any such quotation given, then the
quoted rate shall expire and Bank shall have no obligation to permit a LIBOR
Option to be selected on such day. If no specific designation of interest is
made at the time any Credit Extension is requested under the Note or at the end
of any LIBOR Period, Borrower shall be deemed to have selected the Prime Rate
Option for such Credit Extension or the principal amount to which such LIBOR
Period applied. At any time the LIBOR Option is in effect, Borrower may, at the
end of the applicable LIBOR Period, convert to the Prime Rate Option. At any
time the Prime Rate Option is in effect, Borrower may convert to the LIBOR
OPTION, and shall designate a LIBOR Period.

     7. Default Interest Rate. From and after the maturity date of the Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of the Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to five percent (5.00%)
above the rate of interest from time to time applicable to the Note.

     8. Prepayment. In the event that the LIBOR Option is the applicable
interest rate for all or any part of the outstanding principal balance of the
Note, and any payment or prepayment of any such outstanding principal balance of
the Note shall occur on any day other than the last day of the applicable LIBOR
Period (whether voluntarily, by acceleration, required payment, or otherwise),
or if Borrower elects the LIBOR Option as the applicable interest rate for all
or any part of the outstanding principal balance of the Note in accordance with
the terms and conditions hereof, and, subsequent to such election, but prior to
the commencement of the applicable LIBOR Period, Borrower revokes such election
for any reason whatsoever, or if the applicable interest rate in respect of any
outstanding principal balance of the Note hereunder shall be changed, for any
reason whatsoever, from the LIBOR Option to the Prime Rate Option prior to the
last day of the applicable LIBOR Period, or if Borrower shall fail to make any
payment of principal or interest hereunder at any time that the LIBOR Option is
the applicable interest rate hereunder in respect of such outstanding principal
balance of the Note, Borrower shall reimburse Bank, on demand, for any resulting
loss, cost or expense incurred by Bank as a result thereof, including, without
limitation, any such loss, cost or expense incurred in obtaining, liquidating,
employing or redeploying deposits from third parties. Such amount payable by
Borrower to Bank may include, without limitation, an amount equal to the excess,
if any, of (a) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, refunded or converted, for the period from the date
of such prepayment or of such failure to borrow, refund or convert, through the
last day of the relevant LIBOR Period, at the applicable rate of interest for
such outstanding principal balance of the Note, as provided under this Note,
over (b) the amount of interest (as reasonably determined by Bank) which would
have accrued to Bank on such amount by placing such amount on deposit for a
comparable period with leading banks in the

 

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interbank LIBOR market. Calculation of any amounts payable to Bank under this
paragraph shall be made as though Bank shall have actually funded or committed
to fund the relevant outstanding principal balance of the Note hereunder through
the purchase of an underlying deposit in an amount equal to the amount of such
outstanding principal balance of the Note and having a maturity comparable to
the relevant LIBOR Period; provided, however, that Bank may fund the outstanding
principal balance of the Note hereunder in any manner it deems fit and the
foregoing assumptions shall be utilized only for the purpose of the calculation
of amounts payable under this paragraph. Upon the written request of Borrower,
Bank shall deliver to Borrower a certificate setting forth the basis for
determining such losses, costs and expenses, which certificate shall be
conclusively presumed correct, absent manifest error. Any prepayment hereunder
shall also be accompanied by the payment of all accrued and unpaid interest on
the amount so prepaid. Any outstanding principal balance of the Note which is
bearing interest at such time at the Prime Rate Option may be prepaid without
penalty or premium. Partial prepayments hereunder shall be applied to the
installments hereunder in the inverse order of their maturities.

BY INITIALING BELOW, BORROWER ACKNOWLEDGE(S) AND AGREE(S) THAT: (A) THERE IS NO
RIGHT TO PREPAY ANY LIBOR OPTION ADVANCE, IN WHOLE OR IN PART, WITHOUT PAYING
THE PREPAYMENT AMOUNT SET FORTH HEREIN (“PREPAYMENT AMOUNT”), EXCEPT AS
OTHERWISE REQUIRED UNDER APPLICABLE LAW; (B) BORROWER SHALL BE LIABLE FOR
PAYMENT OF THE PREPAYMENT AMOUNT IF BANK EXERCISES ITS RIGHT TO ACCELERATE
PAYMENT OF ANY LIBOR OPTION ADVANCE AS PART OR ALL OF THE OBLIGATIONS OWING
UNDER THE NOTE, INCLUDING WITHOUT LIMITATION, ACCELERATION UNDER A DUE-ON-SALE
PROVISION; (C) BORROWER WAIVES ANY RIGHTS UNDER SECTION 2954.10 OF THE
CALIFORNIA CIVIL CODE OR ANY SUCCESSOR STATUTE; AND (D) BANK HAS MADE EACH LIBOR
OPTION ADVANCE PURSUANT TO THE NOTE IN RELIANCE ON THESE AGREEMENTS.

     

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BORROWER’S INITIALS
   

 

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     9. Hold Harmless and Indemnification. Borrower agrees to indemnify Bank and
to hold Bank harmless from, and to reimburse Bank on demand for, all losses and
expenses which Bank sustains or incurs as a result of (i) any payment of a LIBOR
Option Advance prior to the last day of the applicable LIBOR Period for any
reason, including, without limitation, termination of the Note, whether pursuant
to this Addendum or the occurrence of an Event of Default; (ii) any termination
of a LIBOR Period prior to the date it would otherwise end in accordance with
this Addendum; or (iii) any failure by Borrower, for any reason, to borrow any
portion of a LIBOR Option Advance.

     10. Funding Losses. The indemnification and hold harmless provisions set
forth in this Addendum shall include, without limitation, all losses and
expenses arising from interest and fees that Bank pays to lenders of funds it
obtains in order to fund the loans to Borrower on the basis of the LIBOR
Option(s) and all losses incurred in liquidating or re-deploying deposits from
which such funds were obtained and loss of profit for the period after
termination. A written statement by Bank to Borrower of such losses and expenses
shall be conclusive and binding, absent manifest error, for all purposes. This
obligation shall survive the termination of this Addendum and the payment of the
Note.

     11. Regulatory Developments Or Other Circumstances Relating To Illegality
or Impracticality of LIBOR. If any Regulatory Development or other circumstances
relating to the interbank Euro-dollar markets shall, at any time, in Bank’s
reasonable determination , make it unlawful or impractical for Bank to fund or
maintain, during any LIBOR Period, to determine or charge interest rates based
upon LIBOR, Bank shall give notice of such circumstances to Borrower and:

          a. In the case of a LIBOR Period in progress, Borrower shall, if
requested by Bank, promptly pay any interest which had accrued prior to such
request and the date of such request shall be deemed to be the last day of the
term of the LIBOR Period; and

          b. No LIBOR Period may be designated thereafter until Bank determines
that such would be practical.

     12. Additional Costs. Borrower shall pay to Bank from time to time, upon
Bank’s request, such amounts as Bank determines are needed to compensate Bank
for any costs it incurred which are attributable to Bank having made or
maintained a LIBOR Option Advance or to Bank’s obligation to make a LIBOR Option
Advance, or any reduction in any amount receivable by Bank hereunder with
respect to any LIBOR Option or such obligation (such increases in costs and
reductions in amounts receivable being herein called “Additional Costs”),
resulting from any Regulatory Developments, which (i) change the basis of
taxation of any amounts payable to Bank hereunder with respect to taxation of
any amounts payable to Bank hereunder with respect to any LIBOR Option Advance
(other than taxes imposed on the overall net income of Bank for any LIBOR Option
Advance by the jurisdiction where Bank is headquartered or the jurisdiction
where Bank extends the LIBOR Option Advance; (ii) impose or modify any reserve,
special deposit, or similar requirements relating to any extensions of credit

 

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or other assets of, or any deposits with or other liabilities of, Bank
(including any LIBOR Option Advance or any deposits referred to in the
definition of LIBOR); or (iii) impose any other condition affecting this
Addendum (or any of such extension of credit or liabilities). Bank shall notify
Borrower of any event occurring after the date hereof which entitles Bank to
compensation pursuant to this paragraph as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
Determinations by Bank for purposes of this paragraph, shall be conclusive,
provided that such determinations are made on a reasonable basis.

     13. Legal Effect. Except as specifically modified hereby, all of the terms
and conditions of the Note remain in full force and effect.

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     IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date
first set forth above.

              CEPHEID   COMERICA BANK Borrower   Bank
 
           
By:
      By:    

           
 
           
Title:
      Title: