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                                                                   EXHIBIT 10.11

*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                        DEVELOPMENT AND SUPPLY AGREEMENT

        THIS DEVELOPMENT AND SUPPLY AGREEMENT (the "Agreement") is made and
entered into as of this ____ day of November, 1998, (the "Effective Date") by
and between INNOGENETICS N.V., a Belgian company with its principal office at
Industriepark 7- box 4, B-9052 Ghent, Belgium, ("INNOGENETICS") and CEPHEID, a
California corporation with its principal office at 1190 Borregas Avenue,
Sunnyvale, California 94089 ("CEPHEID").

                                 R E C I T A L S

        A. INNOGENETICS has certain proprietary technology and experience
relating to diagnostic assay reagents, protocols, and detection systems.

        B. CEPHEID has the ability to apply its proprietary microelectronics,
micromachining and microfluidics technologies in the development of test
systems, breadboards and prototypes to optimize INNOGENETICS diagnostic assay
procedures.

        C. The parties desire to enter into this Agreement to develop,
manufacture, and commercialize innovative diagnostic systems integrating
proprietary INNOGENETICS assays and technologies, and proprietary CEPHEID
technologies and systems.

        THE PARTIES AGREE AS FOLLOWS:

        1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

                "CEPHEID IP" shall mean all copyrights, trademarks, Know-How,
and inventions (as evidenced by authorship on a patent application or utility
model) developed during the Term of the R&D Collaboration solely by CEPHEID
employees or consultants which do not incorporate Confidential Information
belonging to INNOGENETICS.

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                "Change of Control" shall mean either (a) an event where a
company other than INNOGENETICS acquires, merges with, or in some manner gains a
controlling interest (greater than 50% equity ownership or the right by contract
or otherwise to elect a majority of the Board of Directors) in CEPHEID, or (b)
an event where a company other than CEPHEID acquires, merges with, or in some
manner gains a controlling interest (greater than 50% equity ownership or the
right by contract or otherwise to elect a majority of the Board of Directors) in
INNOGENETICS.

                "Confidential Information" shall mean (a) all proprietary
information and materials, patentable or otherwise, of a Party which is
disclosed by or on behalf of such Party to the other Party, including, but not
limited to formulations, techniques, methodology, equipment, data, reports,
Know-How, preclinical and clinical trials and the results thereof, sources of
supply, patent positions and business plans, including any negative
developments, and (b) any other information designated by the disclosing Party
to the other Party as confidential or proprietary, whether or not related to the
Project; provided however, Confidential Information shall not include
information disclosed which: (i) was known or used by the receiving Party prior
to its date of disclosure to the receiving Party, as evidenced by the prior
written records of the receiving Party; or (ii) either before or after the date
of the disclosure to the receiving Party is lawfully disclosed without
restriction on disclosure to the receiving Party by an independent, unaffiliated
third party rightfully in possession of the Confidential Information; or (iii)
either before or after the date of the disclosure to the receiving Party becomes
published or generally known to the public through no fault or omission on the
part of the receiving Party; or (iv) is required to be disclosed by the
receiving Party to comply with applicable laws, to defend or prosecute
litigation or to comply with governmental regulations, provided that the
receiving Party provides prior written notice of such disclosure to the other
Party and takes reasonable and lawful actions to avoid and/or minimize the
degree of such disclosure.

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                "Field" shall mean (i) human diagnostics, as evidenced by
regulatory labeling indicating approval for use in human diagnostics or for
investigation of putative clinical utility by a diagnostics laboratory in a
clinical research setting (e.g. For Investigational Use Only or For Research Use
Only); (ii) food testing; and (iii) veterinary testing. Additional fields
associated with opportunities that may arise during the course of the R&D
Collaboration will be the subject of good faith negotiations between the
Parties.

                "INNOGENETICS IP" shall mean all copyrights, trademarks,
Know-How and inventions (as evidenced by authorship on a patent application or
utility model) developed during the Term of the R&D Collaboration solely by
INNOGENETICS employees or consultants which do not incorporate Confidential
Information belonging to CEPHEID.

                "Joint IP" shall mean all copyrights, Know-How and inventions
(as evidenced by authorship on a joint application for a patent or utility
model) developed during the Term of the R&D Collaboration jointly by
INNOGENETICS and CEPHEID employees or consultants.

                "Know-How" shall mean all information, patentable or otherwise,
of a Party (whether solely or jointly owned) which (a) is used or developed in
the R&D Collaboration and (b) is reasonably useful or necessary or is required
to develop, use, manufacture, distribute and/or sell the Products.

                "Net Sales" shall mean revenues actually received by CEPHEID
from a third party attributable to sale or transfer of any product less costs
actually identified on the invoice and allowed directly attributable to such
sale or transfer, including (i) discounts, in amounts customary in the trade,
for quantity purchases, cash payments and prompt payments, (ii) credits or
refunds for claims or returns, (iii) any transportation or insurance premiums
paid by CEPHEID and (iv) taxes, including sales, use, excise, import, export and
other taxes and duties borne by CEPHEID.

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                "Party" shall mean INNOGENETICS or CEPHEID; "Parties" shall mean
both INNOGENETICS and CEPHEID and their affiliates (defined as an entity in
which INNOGENETICS or CEPHEID has greater than 50% equity ownership or
controlling interest).

                "Prior IP" shall mean any patents, patent applications,
copyrights, trademarks, licenses, and Know-How, owned by a Party prior to the
date of this Agreement.

                "Production Unit" shall mean a Product produced using final
production equipment and processes, resulting in a unit that can be used, as
required, for clinical trials and obtaining product registration, or that can be
sold.

                "Products" shall mean systems, subsystems, consumables, and
software resulting from the R&D Collaboration and incorporating proprietary
CEPHEID technology and proprietary INNOGENETICS technology, or systems,
subsystems, and consumables incorporating proprietary CEPHEID technology that
are specifically designed and produced according to INNOGENETICS approved
Product Requirements and Specifications for use with proprietary INNOGENETICS
technology and assay procedures.

                "Product Requirements and Specifications" shall mean a detailed
listing of design features and performance characteristics of Products that are
required to meet the defined needs of the intended customers or users, that are
required to achieve success in the defined markets, and which are deemed to be
technically feasible by the Parties. Product Requirements and Specifications
will be developed as part of the Work Plan for a given Product or group of
Products prior to initiation of the development phase for that Product or
Products. Product Requirements and Specifications can be modified during the
development phase upon approval by the R&D Committee.

                "R&D Collaboration" shall mean the collaboration between the
Parties pursuant to this Agreement.

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                "R&D Committee" shall mean the research and development
committee comprised of three members from the technical and commercial
management teams of each of CEPHEID and INNOGENETICS.

                "Term" shall have the meaning described in Section 8 of this
Agreement.

                "Territory" shall mean any and all countries of the world.

                "Work Plan" shall mean a detailed work plan setting forth
Product Requirements and Specifications, as well as a budget and development
milestones and timetables established by the Parties for the development of the
Products. A Work Plan will be developed for each Product or group of Products to
be developed under the R&D Collaboration.

        2. R&D COMMITTEE AND WORK PLAN.

                The Parties shall appoint their members of the R&D Committee
within 15 days after the Effective Date of this Agreement. The R&D Committee
shall establish a Work Plan within 60 days after the Effective Date of this
Agreement. The R&D Committee shall have the authority to make all decisions
concerning the conduct of the R&D Collaboration, including annual updates of,
and modifications to, the Work Plan. With respect to all matters to be decided
by the R&D Committee, the decision of a majority of all the members of the R&D
Committee shall be determinative. Any modifications to the Work Plan shall be in
writing. All meetings of the R&D Committee shall be summarized in writing and
sent to both Parties. At least two representatives of each Party shall be
present at such meetings. All decisions made by the R&D Committee shall be
approved in writing by all members before becoming effective. The R&D Committee
shall meet at least quarterly, alternating between CEPHEID's headquarters in
California and INNOGENETICS' headquarters in Belgium, or in other mutually
agreed upon venues, or by video conferencing.

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        3. RESEARCH AND DEVELOPMENT COLLABORATION.

                3.1 R&D Collaboration Phases. The R&D Collaboration shall
proceed in a minimum of three major phases:

                        3.1.1 Phase 1 - Feasibility Demonstration and Method
Optimization. Test systems, breadboards, and prototypes shall be developed to
demonstrate the feasibility of various analytical processes integral to the
performance of INNOGENETICS' existing and future test methods, including rapid,
micro-PCR, homogeneous detection, and sample preparation and DNA or RNA
extraction for human genomic and pathogen samples. Prototypes shall be designed
according to the requirements of INNOGENETICS' assay reagents and protocols, and
will be used to optimize the INNOGENETICS assay procedures. The results from
this feasibility and optimization work will enable the definition of
specifications for saleable products to be developed by CEPHEID on behalf of
INNOGENETICS.

                        As part of Phase I, the following prototypes will be
delivered by CEPHEID to INNOGENETICS, according to schedules to be established
in the Work Plan:

                I-CORE/Smart Cycler(TM):

                -       One optical thermal cycler prototype (8 reaction sites,
                        100ul tube, sprung heater design, 2 color optics).

                -       Two optical thermal cycler prototypes (8 reaction sites,
                        25ul tube, sprung heater design, 4 color optics).

 Sample Preparation Cartridges:

                -       Prototype HCV Extraction Cartridges (number to be
                        determined).

                -       Prototype Genomic DNA Extraction Cartridges (number to
                        be determined).

                        3.1.2 Phase 2 - Product Development (Near-Term
Products). As determined by the Product Requirements and Specification efforts
of the R&D

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Committee, and by the results of the feasibility/optimization work of Phase 1,
the Parties envision that several potential products will be developed by
CEPHEID on behalf of INNOGENETICS, such as:

                -       I-CORE based thermal cycler as a precursor to LIPA
                        hybridization

                -       I-CORE based thermal cycler with homogeneous detection
                        (fluorescent dye based)

                -       Sample preparation cartridge for HCV RNA extraction and
                        concentration (or general pathogen RNA extraction)

                -       Sample preparation device for human genomic DNA
                        extraction and concentration (HLA model).

                Each of these projects will be defined by a Work Plan, outlining
Product Requirements and Specifications, as well as budget and development
milestones and timetable.

                        3.1.3 Phase 3 - Product Development (Long-Term
Products). Both INNOGENETICS and CEPHEID realize that there is considerable
value in developing systems that provide true automation of important diagnostic
test procedures. Accordingly, they have together conceived of a fully integrated
system or system based on the complete integration of their respective
technologies and carrying out a complete diagnostic procedure from sample
preparation through detection and result reporting. Based on the results of the
feasibility/optimization work of Phase 1, a system or systems will be jointly
specified that will provide the basis for joint research and development
activities directed toward this fully integrated system. Such joint
specification may lead to continued feasibility work, or to a development
program, under a Work Plan.

                        3.1.4 Modification of Phase 1. If feasibility of I-CORE
based procedures or either sample preparation cartridge is not demonstrated
within the time frame projected for Phase 1, the R&D Committee may recommend
that the feasibility work be extended, or the applicable portion of the program
be terminated. Such

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extension or termination shall be subject to approval by the management
committees of both INNOGENETICS and CEPHEID.

                        3.1.5 Modification of Phase 2. Following the Phase 1
feasibility work and upon initiation of development of specified products, the
R&D Committee shall define and agree upon milestones within the development Work
Plan. If the Parties do not achieve the milestones, the R&D Committee may
recommend that the development work be extended, or the applicable portion of
the program be terminated. Such extension or termination shall be subject to
approval by the management committees of both INNOGENETICS and CEPHEID.

                        3.1.6 R&D Collaboration Termination. A decision to
terminate the R&D Collaboration shall be based on the objective assessment by
both Parties of technical and/or commercial issues. If after such objective
assessment, both Parties cannot reach agreement, then the matter shall be
referred to arbitration in accordance with Section 15. If the R&D Collaboration
is terminated, either Party shall be able to use Joint IP developed during the
R&D Collaboration, subject to the terms and conditions of Section 6.7.

                        3.2 R&D Collaboration Employees. In order to facilitate
the R&D Collaboration, employees of either Party may be assigned to work on the
premises of the other Party for specified periods of time and for specifically
defined projects, provided that visits shall be on mutually convenient dates and
during mutually convenient business hours and shall not unreasonably interrupt
the operations of the other Party. Each Party shall require each of its
employees and consultants assigned to the R&D Collaboration to execute an
agreement for the assignment of inventions and for the protection of
Confidential Information in such reasonable form as may from time to time be
used by such Party and approved by the other Party.

                        3.3 R&D Collaboration Funding.

        INNOGENETICS shall fund the fully loaded Research, Development and
Engineering ("RD&E") costs that CEPHEID incurs on behalf of INNOGENETICS in

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performing work of the R&D Collaboration to develop INNOGENETICS specified
products.

                        3.3.1 Phase 1 Funding. Such RD&E costs shall be
comprised of direct RD&E costs, RD&E overhead, and direct costs and allocated
overhead of constructing and delivering prototype systems and cartridges as
described in 3.1.1.

        Estimated funding requirements for Phase I are as follows:

<TABLE>
<CAPTION>
                                               ($000's)
                              Q1        Q2        Q3        Q4       Total
                              --        --        --        --       -----
<S>                          <C>       <C>       <C>       <C>       <C>
I-CORE/Smart Cycler(TM)      $[**]        --        --        --     $[**]
Sample Prep Cartridges       $[**]     $[**]     $[**]     $[**]     $[**]

Total                        $[**]     $[**]     $[**]     $[**]     $[**]
</TABLE>

The above quarterly funding estimates are for a time period commencing December
1, 1998 and ending November 30, 1999. Funding provided to CEPHEID by
INNOGENETICS, under the Heads of Agreement dated August 19, 1998 and executed by
the Parties, that exceeded the actual expenditures incurred by CEPHEID in
carrying out the applicable activities under the Heads of Agreement, shall be
credited towards the funding estimates above.

The above funding estimates are based on a fully loaded RD&E FTE cost of
$[**]. This FTE cost may be adjusted on an annual basis, as necessary,
provided that CEPHEID provides evidence of increased costs of FTE's directed to
the R&D Collaboration.

                        3.3.2 Phase 2 and 3 Funding. INNOGENETICS shall fund the
fully loaded RD&E costs that CEPHEID incurs in connection with the completion of
INNOGENETICS specified products, based on the prototypes developed and evaluated
in Phase 1. Such expenses may include, but are not limited to, INNOGENETICS
specific user software and user interface, instrument chassis and external case,
and any scale-up

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costs specific to the INNOGENETICS products. Budgets will be included in Work
Plans for Phases 2 and 3 Products shall be developed and approved by the
Research Committee at the appropriate time prior to initiation of associated
RD&E activities.

                        3.3.3 Reconciliation. Required funding for Phase 1, 2
and 3 shall be estimated by the Parties and set forth in the Work Plan. The
estimated funding shall be paid by INNOGENETICS to CEPHEID in advance on a
quarterly basis, after receipt of the corresponding invoice from CEPHEID. Within
90 days after the end of each phase of Phase 1, 2, and 3 CEPHEID shall submit
its actual RD&E costs in reasonable detail. If such actual cost, as approved in
advance by the R&D Committee, exceeds the amounts paid CEPHEID, INNOGENETICS
shall promptly pay CEPHEID the difference, and if such actual cost for Phase 1
or 2 is less than the amounts paid CEPHEID, INNOGENETICS shall receive a credit
against its future funding obligations in the amount of such difference or for
Phase 3 CEPHEID shall promptly pay INNOGENETICS the difference.

                        3.3.4 Records. The Parties shall keep true and accurate
records to substantiate the expenditure of all funds paid for the RD&E, to
document Net Sales amounts, or as necessary to carry out other obligations under
this Agreement. Upon request, the Parties shall permit an authorized independent
certified public accountant to inspect once per calendar year such records in
confidence in order to verify only the information subject to the inspection.
Such examination shall be at the cost of the Party requesting the inspection,
unless the accountant concludes that the records show a difference of 5% or
more, in which case the examination will be paid by the audited Party.

                        3.3.5 Diligence. CEPHEID will be responsible to hire and
retain scientists with sufficient qualifications, skill, and experience to carry
out its obligations under this Agreement. During the term of the R&D
Collaboration, CEPHEID shall use all reasonable efforts and proceed diligently
to perform the obligations and activities set out for CEPHEID in the Work Plan,
including, without limitation, using its good faith

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efforts to allocate the required number of scientists. CEPHEID shall conduct all
work under the Work Plan in compliance with all requirements of applicable laws,
rules, and regulations, and all other applicable good laboratory practices in an
attempt to achieve its objectives efficiently and expeditiously.

                        3.3.6 R&D Collaboration Reporting. Within forty-five
(45) days following the end of each quarter during the term of the R&D
Collaboration, CEPHEID shall provide to INNOGENETICS written reports (i)
summarizing the activities and results obtained under the Work Plan during such
quarter; (ii) setting forth the number and allocation of FTE's devoted to the
Work Plan with reference to the different activities performed during such
quarter.

        4. LICENSES.

                4.1 Exclusive License Grant. During the Term of the R&D
Collaboration and Supply Agreement (as per Section 7 thereof), CEPHEID hereby
grants INNOGENETICS a royalty-free, worldwide, exclusive license to sell and
have sold the Products that incorporate INNOGENETICS proprietary technology or
are intended for use solely with INNOGENETICS' proprietary technology or assay
methods.

                4.2 Non-Exclusive License Grant. During the Term of the R&D
Collaboration and Supply Agreement, CEPHEID hereby grants INNOGENETICS a
royalty-free, worldwide, non-exclusive license to sell and have sold generically
applicable products developed in the course of the R&D Collaboration, the
applications of which are not limited to use with INNOGENETICS proprietary
technology or assay methods.

                4.3 Non-exclusive Trademark License. CEPHEID hereby grants
INNOGENETICS a royalty-free worldwide, non-exclusive license to use CEPHEID
trademarks in connection with marketing and sale of the Products identified in
Sections 4.1 and 4.2. INNOGENETICS agrees to submit the use of such trademarks
in any literature or product inserts or labeling to CEPHEID for review and
approval prior to use

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and to use the trademarks only in a manner approved by CEPHEID. INNOGENETICS
shall clearly reference CEPHEID in any marketing literature and product inserts.

        5. NON-COMPETE.

                5.1 DNA Extraction Sample Preparation Cartridge. If the R&D
Collaboration results in development of a sample preparation cartridge for
extraction of genomic DNA that does not incorporate proprietary INNOGENETICS
technology and that is generically applicable for any procedure based on
analysis of human genomic DNA, then CEPHEID agrees not to provide such cartridge
for sale by another party to be licensed and approved for use in [**], which are
current market areas for INNOGENETICS; for a time period of [**] following the
supply to INNOGENETICS by CEPHEID of the number of Production Units necessary to
conduct clinical trials, marketing trials and product registration.

                5.2 Viral Nucleic Acid Extraction Sample Preparation Cartridge.
If the R&D Collaboration results in the development of a sample preparation
cartridge for extraction of viral nucleic acid that does not incorporate
proprietary INNOGENETICS technology and that is generically applicable for any
procedure based on analysis of viral nucleic acid, then CEPHEID agrees not to
provide such cartridge for sale by another party to be licensed and approved for
use in [**], which are applications areas currently under development by
INNOGENETICS for a time period of [**] following the supply to INNOGENETICS by
CEPHEID of the number of Production Units necessary to conduct clinical trials,
marketing trials and product registration.

                5.3 Royalties. If after the applicable time period for
non-compete, CEPHEID provides a generically applicable cartridge for sale by
another party for any of the listed applications (as referenced in 5.1 and 5.2),
then CEPHEID will pay to

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INNOGENETICS, within 60 days after the end of each calendar quarter, a royalty
of [**] on CEPHEID's Net Sales of such cartridge(s), up to a cumulative amount
equal to [**] of the R&D funding provided by INNOGENETICS to CEPHEID for
development of such specific cartridge(s). All such royalties shall be payable
in United States dollars. In addition, INNOGENETICS will be able to purchase
such generic cartridges from CEPHEID at pricing terms no less favorable (taken
as a whole, based on volume and other terms) than those provided to other
companies to whom the generic cartridges are sold by CEPHEID.

                5.4 Distribution Rights. As outlined in 4.1, INNOGENETICS will
have exclusive distribution rights for Products in the Field and Territory. As
outlined in 4.2, INNOGENETICS will have non-exclusive distribution rights for
generically applicable products developed in the course of the R&D
Collaboration, in the Field and Territory. Such rights shall extend to third
parties with whom INNOGENETICS has a distributor agreement. INNOGENETICS shall
have responsibility for obtaining all permits and regulatory approvals necessary
to sell the Products within its Territory.

                5.5 Third Party Collaborations. Subject to the terms and
conditions of this Agreement, the Parties shall each have the right to enter
into collaborations with third parties.

        6. INTELLECTUAL PROPERTY.

                6.1 CEPHEID Third Party Intellectual Property. CEPHEID shall be
responsible at its cost for securing rights to any third party intellectual
property related to systems, subsystems, and non-reagent consumables (such as
disposable reaction tubes), required to make, use, and/or sell Products in the
Field.

                6.2 INNOGENETICS Third Party Intellectual Property. INNOGENETICS
shall be responsible at its cost for securing rights to any third party
intellectual property related to reagents and detection (such as **), required
to make, use, and/or sell Products in the Field.

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                6.3 Other Technologies. For technologies that are not clearly
applicable to systems or reagents and detection, the Parties shall discuss and
determine where responsibility for securing a license shall lie.

                6.4 Prior Intellectual Property. Each Party owns their
respective Prior IP, and the other Party shall not obtain any rights thereto,
except as expressly set forth in this Agreement.

                6.5 CEPHEID Intellectual Property. CEPHEID shall solely own all
CEPHEID IP.

                6.6 INNOGENETICS Intellectual Property. INNOGENETICS shall
solely own all INNOGENETICS IP.

                6.7 Joint Intellectual Property. Both INNOGENETICS and CEPHEID
shall jointly own all Joint IP. Either Party shall have a first right of refusal
to exclusively license some or all of the Joint IP, under terms to be
negotiated. If neither Party opts to take an exclusive license to some or all of
the Joint IP, then each Party shall receive an unrestricted royalty-bearing
license, under terms to be negotiated, to use such Joint IP outside of the R&D
Collaboration, subject to any limitations imposed by dominating Prior IP of
either Party. The Parties will agree and define which of the Parties will have
responsibility for filing and maintaining the joint patents, on a case by case
basis. Costs for filing and maintaining will be equally shared by both Parties,
unless a different cost sharing formula for a particular joint patent, is agreed
upon by both Parties. If a joint patent is infringed by a third party, the
Parties will jointly decide on the appropriate action. No Party will take action
in response to a third party infringement of a joint patent without consent of
the other Party, which shall not be unreasonably withheld.

        7. SUPPLY AGREEMENT.

                7.1 Exclusive Supplier. For the Term of this Agreement, CEPHEID
shall supply INNOGENETICS with one hundred percent (100%) of its requirements
for the CEPHEID systems, subsystems and consumables that are incorporated in the

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Products. Such systems, subsystems, and consumables shall be subject to
CEPHEID's terms and conditions of sale, as the same may be modified from time to
time, but not more than once per year.

                7.2 Pricing. Such systems, subsystems, and consumables shall be
sold to INNOGENETICS at transfer prices that shall be established in the
following manner: target transfer prices will be established at the time that
such Products are specified, as part of the Product Requirements and
Specifications under the Work Plan. Final transfer prices shall be agreed upon
at least 90 days prior to sale to INNOGENETICS. Transfer prices shall be
reviewed and subject to renegotiation at the request of either Party, but no
more than once per year. CEPHEID shall be responsible for any royalty payments
to Lawrence Livermore National Laboratories ("LLNL") relating to the sale of
such systems, subsystems and consumables based on technology licensed from LNL
to CEPHEID.

                7.3 Transfer Price Estimates. For the I-CORE based system, the
estimated transfer prices are as follows, subject to unit volumes and specific
product characteristics that may be required by INNOGENETICS: Per I-CORE site:
$[**]; Per Reaction Tube: $[**]. These estimated transfer prices are based
on estimated standard cost plus a certain percent profit margin for CEPHEID.

                7.4 Pricing Formula. The cost plus profit margin method shall be
generally applied by CEPHEID in establishing transfer prices. However, the
Parties recognize that other formulas for revenue sharing and transfer pricing
may be more appropriate for other market or product opportunities, depending
upon unit volumes, price per test and other market conditions. In order to
ensure an equitable sharing of return for both parties, such other formulas
shall be considered by the Parties on an opportunity by opportunity basis, and
agreed upon in the course of establishing target transfer prices as part of the
Work Plan for a Product or group of Products.

                7.5 CEPHEID Records. CEPHEID shall keep true and correct records
to substantiate the supply price charged to INNOGENETICS pursuant to this
Section 7.

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Upon request of INNOGENETICS, CEPHEID shall permit INNOGENETICS or its
authorized representative to inspect once per calendar year records for the
preceding two calendar years in confidence in order to verify the supply price
charged to INNOGENETICS.

                7.6 Product Need Forecasts; Minimum Purchase Requirements. At
the initiation of Phase 2 of the Research and Development Collaboration and on
an annual basis thereafter, INNOGENETICS shall provide CEPHEID with a written
two-year forecast of Products required. This forecast shall be comprised of a
one year forecast (first 6 months of monthly requirements and following 2
quarters of quarterly requirements) and a one year projection. This forecast
will be updated quarterly. CEPHEID shall notify INNOGENETICS as soon as possible
in the event CEPHEID determines that it would be unable to supply PRODUCTS in
accordance with the forecasted orders. Upon launch of the said Products, the
first three months of the updated forecast will represent a purchase commitment.
In addition, the Parties shall negotiate a schedule of minimum annual purchase
requirements for each Product.

                7.7 Manufacturing Rights. The Parties agree that the
manufacturing of Products, excluding biologically active components, shall be
the responsibility of CEPHEID. INNOGENETICS shall be responsible for the
manufacturing of the biologically active components and shall have the right to
incorporate the biologically active components into the Products. INNOGENETICS
shall have the final Product responsibility towards its customers and regulatory
bodies. In the case that all test specific biologically active components would
need to be incorporated into the Production Units within a single production
process, CEPHEID as well as INNOGENETICS shall have to approve the manufacturing
plans as well as the procedures and facilities where such production will take
place. The procedures and facilities shall, in any case, allow the manufacturing
of Products under conditions acceptable to the regulatory bodies of those
countries where Products shall be sold.

                7.8 Security of Supply.

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                        7.8.1. Product Quality, Safety, and Conformity. All
Products supplied to INNOGENETICS, including the containerization and packaging
thereof (as defined and agreed upon as part of the Product Requirements and
Specifications) shall, at the time of delivery, be free from manufacturing
defects (including, without limitation, defects in material and workmanship),
and shall be manufactured, packaged, and supplied in conformity in all aspects
with the Product Requirements and Specifications, and International Airfreight
Transport Association requirements in force at such time. CEPHEID shall have
carried out the applicable and agreed upon tests and quality control procedures
relative to the Products prior to the delivery thereof. The Products shall be of
merchantable quality, and generally safe for their intended use.

                        7.8.2. Changes in Product Requirements and
Specifications. No amendment shall be made to the Product Requirements and
Specifications without the prior written approval of the other Party; without
limitation of the foregoing, the manufacturing process, labeling, packing
components with respect to any Product shall not be changed if such change could
affect the performance or registration of any such Product without the prior
written consent of INNOGENETICS. In the event of any agreed-upon change, CEPHEID
shall provide reasonable documentation to enable INNOGENTICS to appropriately
modify the Product Requirements and Specifications to be applied to the Product
thereunder.

                        7.8.3. Modifications to Products or Production Process.
If CEPHEID makes any improvement, modification, or adjustment to any of the
Products of the production process thereof during the Term of this Agreement,
CEPHEID shall notify INNOGENETICS as soon as is practicable. INNOGENETICS shall
have the option of including or not including in the Products such improvement,
modification, or adjustment as it shall request, on a schedule and at a cost
agreed upon by the Parties.

                        7.8.4. Certification of Conformity to Product
Requirements and Specifications. CEPHEID will undertake in respect of each
delivery of Products to INNOGENETICS to give notice to INNOGENETICS with such
delivery, the appropriate

                                       17
<PAGE>   18

documentation in which CEPHEID certifies that the Products in such delivery have
been analyzed and meet the applicable Product Requirements and Specifications.
Such documentation shall also set forth the batch or lot number of the Products,
the date of manufacture, and as applicable, batch-to-batch test data and
expiration dates for such Products. The configuration of such documentation as
well as the testing methods to be applied to ensure conformity of the delivered
Products to the applicable Product Requirements and Specifications shall be
agreed upon by both Parties as part of the approval of the Product Requirements
and Specifications.

                        7.8.5. Notification of Non-Conformance or Customer
Complaints. Each Party shall notify the other Party promptly of the discovery
and nature of any non-conformance of any Product to its Product Requirements and
Specifications and regarding any material complaints such Party may receive from
customers, or from any governmental or regulatory authority in respect to such
Product, its manufacture, or its constituents. Upon notification by either
Party, the appropriate Party or Parties (depending upon whether the
non-conformance is related to hardware, software, and/or reagents) shall conduct
a quality assurance/quality control investigation and shall inform the other
Party or Parties regarding the findings of such investigation, as soon as such
findings are available, and in any event within two (2) weeks of the other
Party's notification. In addition, each Party shall inform the other Party of
any and all defects it discovers within its production process that might
influence the performance of the Products delivered to INNOGENETICS. Upon
INNOGENETICS's request, CEPHEID shall provide to INNOGENETICS all reasonable
information and assistance necessary for INNOGENETICS to understand and resolve
complaints received from its customers or regulatory authority.

                        7.8.6. Quality Audits and Inspections. CEPHEID shall
allow INNOGENETICS and its duly authorized representatives, and the personnel of
appropriate regulatory authorities, reasonable access to such premises as are
used in the production and testing of the Products for the purpose of conducting
a quality audit

                                       18
<PAGE>   19

thereof. As appropriate, INNOGENTICS shall allow CEPHEID and its duly authorized
representatives reasonable access to such premises as are used in the
incorporation of biologically active components into Products, for the purpose
of CEPHEID's rendering its approval of such facilities and procedures, as per
Section 7.7.

                        7.8.7. Inability to Supply Products. Subject to the
provisions in Section 21 regarding excusable delays as a result of force
majeure, upon written notice to CEPHEID from INNOGENETICS, CEPHEID shall
transfer the applicable technology, know-how, and licenses to INNOGENETICS to
make, have made, sell, and have sold Products, upon the occurrence of any of the
following events, (i ) - (v ) below. However the Parties recognize that the
underlying objective of this Agreement is to realize an economical and
reasonable way the mutual interests and requirements of the Parties. In the
instance of an inability to supply Products, the Parties will meet to discuss
potential solutions in order to avoid the recurrence of the inability to supply
Products.

(i) CEPHEID is unable to supply such Product or Product component for any
reason, including by reason of non-compliance with regulatory requirements or
the commencement by or against CEPHEID any bankruptcy or insolvency proceeding,
or CEPHEID is unable to supply any such Product or Product component conforming
in all respects with the representations and warranties set forth in the
Agreement;

(ii) CEPHEID notifies INNOGENETICS that it is unwilling to manufacture or supply
such Product or Product component;

(iii) CEPHEID fails to meet three (3) consecutive scheduled delivery dates, or
delivery is delayed by more than three (3) months, or fails to meet an agreed
upon replacement date by more than thirty (30) days.

(iv) CEPHEID shall be in violation, breach or default of any material
representation, warranty, covenant, or agreement contained in the Agreement and
shall not have cured or undertake to cure the same within sixty (60) days after
INNOGENETICS's request to do so;

                                       19
<PAGE>   20

(v) CEPHEID fails, over any twelve (12) month period, to deliver more than
eighty percent (80%) of INNOGENETIC's orders for Products in accordance with
INNOGENETICS's forecast.

CEPHEID will make all necessary efforts to ensure that such technology transfer
is finalized within three (3) months after being given written notice by
INNOGENETICS that such technology transfer is requested according to this
paragraph 7.8 of the Agreement. Such technology transfer shall be at CEPHEID's
expense. INNOGENETICS shall use the transferred technology only for the
manufacture and sale of the Products affected under the applicable event or
events above.

                7.9 Freedom from Liens and Encumbrances. Upon payment to CEPHEID
by INNOGENETICS under the terms of Section 7.2, the Products supplied to
INNOGENTICS by CEPHEID shall be free of all liens and encumbrances of any kind.

        8. TERM.

                8.1 Supply Agreement. Unless earlier terminated in accordance
with the provisions of this Section 8, Section 7 "Supply Agreement" shall remain
in effect as from the Effective Date of this Agreement for as long as Products
are purchased by INNOGENETICS from CEPHEID in amounts at least equivalent to the
minimum purchase requirements.

                8.2 R&D Collaboration. Unless earlier terminated in accordance
with the provisions of this Section 8.2 "R&D Collaboration" shall remain in
effect as long as CEPHEID and INNOGENETICS identify product development
opportunities of mutual interest, under mutually acceptable terms, they will
continue to collaborate to introduce important, innovative products to the
diagnostics marketplace.

                8.3 Termination. This Agreement may be terminated as follows:

                        (a) by mutual written consent of the Parties; and

                        (b) failure by either Party or its Affiliates to comply
with any of the material obligations contained in this Agreement shall entitle
the other Party to give the

                                       20
<PAGE>   21

defaulting Party notice specifying the nature of the default and requiring it to
cure such default. If such default is not cured within 60 days after the receipt
of such notice (or, if such default cannot be cured within such 60-day period,
if the Party in default does not commence and diligently continue actions to
cure such default), the notifying Party shall be entitled, without prejudice to
any other rights conferred on it by this Agreement, in addition to any other
remedies available to it by law or in equity, to terminate this Agreement
immediately by giving written notice. The right of either Party to terminate the
Agreement, as hereinabove provided, shall not be affected in any way by its
waiver or failure to take action with respect to any previous default.

        9. ASSIGNABILITY.

                9.1 Assignment by CEPHEID. Upon prior approval by INNOGENETICS
not to be unreasonably withheld, CEPHEID may assign all its rights and duties
under this Agreement.

                9.2 Assignment by INNOGENETICS. Upon prior approval by CEPHEID
not to be unreasonably withheld, INNOGENETICS may assign all its rights and
duties under this Agreement.

        10. CHANGE OF CONTROL

                10.1 Survival of Rights. In the event of a Change of Control of
CEPHEID, the following rights that INNOGENETICS enjoys under this Agreement
shall survive, as follows:

                        a) Systems, subsystems, and consumables comprising
Products that are manufactured by CEPHEID or its vendors and sold to
INNOGENETICS will continue to be sold to INNOGENETICS at the same transfer
prices and the same minimum purchase requirements in effect at the time of the
Change of Control for at least eighteen (18) months following the Change of
Control. If after 18 months following the Change of Control, INNOGENETICS is
unable to purchase the applicable systems, subsystems, and

                                       21
<PAGE>   22

consumables from CEPHEID under substantially equivalent terms, INNOGENETICS
shall automatically obtain a royalty-free license to manufacture these systems,
subsystems, and consumables themselves, or to contract for their manufacture by
vendors of INNOGENETICS' selection. CEPHEID will also transfer to INNOGENETICS
the applicable technology and Know-How necessary to enable INNOGENETICS to
manufacture the applicable systems, subsystems, and consumables.

                b) R&D Collaborations underway at the time of Change of Control
will be carried out to completion, as defined by development of product or
products that are fully specified at the time. Such R&D Collaborations will
proceed according to the agreed upon Work Plans with INNOGENETICS providing
funding at the agreed upon levels. If CEPHEID is unable to supply the products
resulting from these collaborations to INNOGENETICS, then INNOGENETICS will
receive a royalty-free license to manufacture these products themselves.

                10.2 Termination. INNOGENETICS may elect to terminate part or
all of this Agreement with CEPHEID in the event of the Change of Control in
either CEPHEID or INNOGENETICS, but in so electing, INNOGENETICS must provide at
least six (6) months notice of its intention to do so. If INNOGENETICS elects to
terminate the Agreement as a result of a change of control in INNOGENETICS, and
in so terminating, INNOGENETICS no longer wishes to market and sell Products
that have been developed or sold up to that point, then CEPHEID will have the
option to receive a license to the associated INNOGENETICS technology and to
sell or have sold the associated Products, at terms to be negotiated.

        11. CONFIDENTIAL INFORMATION.

                Each Party hereto shall maintain the Confidential Information of
the other Party in confidence during the term of this Agreement and during the
period ending two years after the termination of the R&D Collaboration, and
shall not disclose, divulge or otherwise communicate such Confidential
Information to others, or use it for any purpose,

                                       22
<PAGE>   23

except as permitted or contemplated by this Agreement or pursuant to, and in
order to carry out, the terms and objectives of this Agreement, and hereby
agrees to exercise every reasonable precaution to prevent the unauthorized
disclosure of such Confidential Information by any of its directors, officers,
employees, consultants, subcontractors, agents or sublicensees. The parties
agree that the R&D Committee must provide written consent before either Party
can publish scientific results related to the R&D Collaboration.

        12. REPRESENTATIONS.

                12.1 Representations of INNOGENETICS. INNOGENETICS hereby
represents to CEPHEID as follows:

                        a) it is a corporation validly existing and in good
standing under the laws of Belgium and has the corporate power and authority to
conduct its business and to own its assets and is duly qualified or licensed to
do business in Belgium

                        b) it has the power and authority to execute, deliver
and perform this Agreement and the transactions contemplated hereby, has taken
all necessary corporate action to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.

                        c) this Agreement has been executed and delivered by
INNOGENETICS and constitutes a valid and binding obligation of INNOGENETICS
enforceable against it in accordance with its terms.

                12.2 Representations of CEPHEID. CEPHEID hereby represents to
INNOGENETICS as follows:

                        a) it is a corporation validly existing and in good
standing under the laws of California and has the corporate power and authority
to conduct its business and to own its assets and is duly qualified or licensed
to do business in California.

                        b) it has the power and authority to execute, deliver
and perform this Agreement and the transactions contemplated hereby, has taken
all necessary corporate

                                       23
<PAGE>   24

action to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

                        c) this Agreement has been executed and delivered by
CEPHEID and constitutes a valid and binding obligation of CEPHEID enforceable
against it in accordance with its terms.

                        d) All the material contracts, agreements, and
instruments to which CEPHEID is a party, are valid, binding and in full force
and effect in all material respects. CEPHEID has complied with all the material
provisions of all its material contracts, obligations, agreements, plans,
arrangements, and commitments, and there does not exist any event of default
under any such agreement which would have a material adverse effect on the
condition, financial or otherwise, of CEPHEID. There is no action, suit,
proceeding or investigation pending or threatened against CEPHEID before any
court or before any governmental or administrative agency for the renegotiation
of or any other adjustment of any such agreement.

                        e) To CEPHEID's knowledge, there is pending or overtly
threatened action, suit, proceeding or claim, or to CEPHEID's knowledge, any
basis therefore, nor would there be, to CEPHEID's knowledge, any basis therefore
as a result of the services proposed to be conducted by CEPHEID hereby, whether
or not purportedly on behalf of CEPHEID, to which CEPHEID is or may be named as
a party or its property is or may be subject to, to CEPHEID's knowledge, to
which any officer, key employee or principal stockholder of CEPHEID is subject,
and in which (in any case) an unfavorable outcome, ruling or finding would have
a material adverse effect on the condition, financial or otherwise, or
operations of CEPHEID; and CEPHEID has no knowledge of any unasserted claim, the
assertion of which is likely and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or nonmonetary relief, which
claim (individually or collectively with other asserted claims) if sustained
would have a material adverse effect on the condition, financial or otherwise,
operations of CEPHEID. CEPHEID has not admitted in writing its inability to pay
its debts generally as they

                                       24
<PAGE>   25

become due, filed or consented to the filing against it of a petition of
bankruptcy or a petition to take advantage of any insolvency act, made an
assignment for the benefits of creditors, consented to the appointment of a
receiver for itself or for the whole or any substantial portion of its property
or had a petition of bankruptcy filed against it, been adjudicated a bankruptcy
or filed a petition or answer seeking reorganization or arrangement under any
law or statute of any jurisdiction similar to the laws of the United States.

                        f) Upon receipt of at least two (2) business days notice
and during normal business hours, CEPHEID agrees to provide INNOGENETICS
reasonable access to CEPHEID's research and development facilities, books and
records and full cooperation by the directors, officers, employees, technicians,
scientists and other agents and representatives of CEPHEID to the extent
necessary to fulfill its obligations under this Agreement and to utilize the
benefits of the licenses granted herein.

                        g) CEPHEID shall not conduct any work under the Work
Plan that knowingly infringes the valid intellectual property of any third
party.

                12.3. Representations of CEPHEID and INNOGENETICS. CEPHEID and
INNOGENETICS shall not enter into any other agreement or arrangement, or grant
any rights, inconsistent with the terms reflected herein.

        13. COVENANTS.

                13.1. Covenants of Innogenetics. INNOGENETICS covenants with
CEPHEID, in so far as it relates to the R&D work and supply and distribution
activities, as follows:

                        a) INNOGENETICS will at all times maintain product
liability insurance covering the Products in commercially reasonable amounts and
will name CEPHEID as a co-insured on such insurance.

                                       25
<PAGE>   26

                        b) INNOGENETICS will obtain and maintain at its cost all
regulatory approvals necessary for the manufacture, sale, exportation and
importation of the Products.

                13.2. Indemnification. Each Party covenants, in so far as it
relates to the R&D Collaboration and supply and distribution activities, as
follows: each Party shall indemnify, defend, and hold harmless the other Party,
its Affiliates, its licensees and its sublicensees, and their respective
directors, officers, employees, and agents, from any and all liabilities,
damages, losses, penalties, costs and expenses (including the fees of attorneys
and other professional advisors) arising of or resulting from: gross negligence,
recklessness or intentional acts or omissions of such Party and its Affiliates,
and their respective directors, officers, employees, and agents, in connection
with the work performed by such Party under this Agreement.

                13.3. Notice. In the event that either Party is seeking an
indemnification under this Article, such Party shall inform the indemnifying
Party of a claim as soon as reasonably practicable after it receives notice of
the claim, and shall permit the indemnifying Party to assume direction and
control of the defense of the claim (including the right to settle at the sole
discretion of the indemnifying Party) in the defense of the claim.

        14. NOTICES. All notices, requests, demands, and other communications
made in connection with this Agreement shall be in writing, shall be employ the
English language, and shall be deemed to have been duly given on the date of
delivery if delivered by hand delivery or by facsimile to the person identified
below for five days after mailing if mailed by certified or registered mail
postage prepaid return receipt requested addressed as follows:

                                       26
<PAGE>   27

               If to CEPHEID:          CEPHEID
                                       1190 Borregas Avenue
                                       Sunnyvale, CA 94089
                                       Attention:  President
                                       Facsimile:  408-541-4192
                                       Confirmation Number: 408-541-4191

               With a copy to:         Heller Ehrman White & McAuliffe
                                       2500 Sand Hill Road, Ste. 100
                                       Menlo Park, California  94025
                                       Attention:  August J. Moretti
                                       Facsimile:  (650) 234-4229
                                       Confirmation Number: (650) 234-4200

               If to INNOGENETICS:     INNOGENETICS
                                       Industriepark 7-Box 4, B-9052
                                       Ghent, Belgium
                                       Attention:  Business Development Dept.,
                                       Dirk Pollet, Ph.D.
                                       Facsimile: 32-9-241-0799
                                       Confirmation Number: 32-3-252-3752

               With a copy to:         INNOGENETICS
                                       Industriepark 7-Box 4, B-9052
                                       Ghent, Belgium
                                       Attention: Corporate Counsel
                                       Johan Van den Eynde
                                       Facsimile: 32-9-241-0799
                                       Confirmation Number: 32-9-241-0711

        Such addresses may be changed from time to time by means of a notice
given in the matter provided in this section.

        15. DISPUTE RESOLUTION. In the event that a dispute arises between the
Parties relating to or arising from this Agreement, the Parties shall negotiate
in good faith to resolve such dispute. Any resolution reached by the Parties
shall be binding on the Parties. In the event that the Parties fail to reach a
resolution within 30 days, then the dispute shall be submitted to the Chief
Executive Officers of INNOGENETICS and

                                       27
<PAGE>   28

CEPHEID who shall negotiate in good faith for a period of 30 days to resolve
such dispute. In the event that such officers do not reach a resolution with
respect to such dispute, such dispute shall be resolved by binding arbitration
to take place in London, England pursuant to the administrative authority of the
London Court of International Arbitration and under the UNCITRAL Arbitration
Rules now in force, with such modifications as the Parties shall agree. All
proceedings and all pleadings shall be in English. The Parties shall attempt by
agreement to nominate a sole arbitrator within 20 days of filing an arbitration
notice. If the Parties fail to nominate a sole arbitrator during such period,
the sole arbitrator shall be appointed by the London Court of International
Arbitration. The arbitration award shall be final and binding on the Parties.

        16. GOVERNING LAW. In the event of a dispute, the Agreement will be
governed by and construed by either Belgian or California law as determined by
the arbitrator pursuant to Section 15.

        17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts with the same effect as if the signatures to each counterpart were
upon a single instrument. All counterparts shall be considered an original of
this Agreement.

        18. NO AGENCY. Nothing herein shall be deemed to constitute either Party
as the agent or representative of the other Party, or both Parties as joint
venturers or partners for any purpose. Each Party shall be an independent
contractor, not an employee or partner of the other Party, and the manner in
which a Party renders its services under this Agreement shall be within such
Party's sole discretion. Neither Party shall be responsible for the acts or
omissions of the other Party, and neither Party will have authority to speak
for, represent or obligate the other Party in any way without prior written
authority from the other Party.

                                       28
<PAGE>   29

        19. WAIVER. The waiver by either Party of a breach or a default of any
provisions of this Agreement by the other Party shall not be construed as a
waiver of any succeeding breach of the same or any other provisions, nor shall
any delay or omission on the part of either Party to exercise or avail itself of
any right, power or privilege that it has or may have hereunder operate as a
waiver of any right, power or privilege by such Party.

        20. FORCE MAJEURE.

                20.1 General Force Majeure. In the event that either Party is
prevented from performing or is unable to perform any of its obligations under
this Agreement due to any act of God; fire; casualty; flood; war; strike;
lockout; failure or public utilities; injunction or any act, exercise, assertion
or requirement of governmental authority; epidemic; destruction of production
facilities; riots; insurrection; inability to procure or use materials, labor,
equipment, transportation or energy; or any other cause beyond the reasonable
control of the Party invoking this Section 20, if such Party shall have used its
best efforts to avoid such occurrence, such Party shall give notice to the other
Party promptly in writing, and thereupon the affected Party's performance shall
be excused and the time for performance shall be extended for the period of
delay or inability to perform due to such occurrence. Each party will take
reasonable efforts to prevent loss of equipment and information due to any act
of God or accident (including earthquake), including off-site archiving of
critical records and data.

                20.2. Unforeseen Developments. The underlying objective of this
Agreement is to realize in an economical and reasonable way the mutual interests
and requirements of the Parties. If, at any time, this Agreement should no
longer meet this objective because of economic developments or political changes
that could not be reasonably foreseen at the time of the signing of this
Agreement, thus causing undue and prolonged hardship to a Party, the Parties
shall meet to discuss a mutually agreeable solution according to the economic
and reasonable objectives of this Agreement.

                                       29
<PAGE>   30

        21. PUBLICITY. Neither party will disclose the existence or the terms of
this Agreement without the prior written consent of the other party, which
consent will not be unreasonably withheld.

        22. NON-SOLICITATION. During the term of the R&D Collaboration, each
Party agrees not to induce any employee of the other Party participating in the
R&D Collaboration to discontinue its employment with that Party in order to
become employed by or associated with any business, enterprise, or effort that
is associated with its own business.

        23. GENERAL. This document contains the entire agreement between the
Parties with respect to the subject matter of this Agreement and supersedes the
Heads of Agreement dated August 19, 1998 executed by the parties and all prior
and contemporaneous correspondence, understandings and discussions between the
Parties. This Agreement may be modified only by a subsequent written agreement
signed by both Parties. If any provision of this Agreement is held to be
unenforceable, the remaining provisions shall continue unaffected. This
Agreement shall be binding on the parties hereto and their respective successors
and assigns.

        IN WITNESS WHEREOF, the Parties have entered into this Agreement on the
first date written above.

INNOGENETICS                                CEPHEID

By:                                         By:
   ---------------------------------           ---------------------------------
Its:                                        Its:
    --------------------------------            --------------------------------

                                       30<PAGE>   1
                                                                   Exhibit 10.16

*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                       THERMAL CYCLER SUPPLIER AGREEMENT

       This Agreement, effective April 15, 2000, is made by and between PE
Biosystems, a division of PE Corporation, a corporation of the State of
Delaware, having an office at 850 Lincoln Centre Drive, Foster City, California
94404 ("PE CORP"), and Cepheid, a corporation of the State of California, having
an office at 1190 Borregas Avenue, Sunnyvale, California 94089 ("Thermal Cycler
Supplier") hereafter collectively referred to as "The Parties."

       Whereas, PE CORP has the power to convey limited rights for research and
in certain other fields under U.S. Patents Nos. 4,683,195, 4,683,202 and
4,965,188, describing and claiming gene amplification processes including, among
others, a process known as the polymerase chain reaction ("PCR") process, which
are owned by Roche Molecular Systems, Inc., and amplification process claims in
corresponding counterpart patents and patent applications in other countries,
owned by F. Hoffmann-La Roche Ltd (both of which are referred to collectively
herein as "Roche").

       Whereas, PE CORP offers to PCR users commercial and non-commercial
license rights under these patents and patent applications for automated
performance of the PCR process for research and certain other fields that
include, inter alia, an up-front fee component based on the capacity of thermal
cyclers used to perform the process.

Whereas, PE CORP offers to thermal cycler suppliers license rights under those
patents, namely, an authorization to distribute their instruments with a label
conveying to their customers rights under the up-front fee component of the PCR
licenses described above, and the right to promote their instruments as
"Authorized Thermal Cyclers" for PCR.

       Whereas, PE CORP owns US. Patents Nos. 5,038,852 and 5,333,675,
describing and claiming automated apparatus suitable for performing the PCR
process, and apparatus claims in corresponding counterpart patents and patent
applications in other countries.

                                       1
<PAGE>   2

       Whereas, PE CORP owns U.S. Patent No. 5,475,610, describing and claiming
improvements in thermal cycling apparatus for- PCR, including a pressing heated
cover, and corresponding counterpart patents and patent applications in other
countries.

       Whereas, PE CORP owns U.S. Patent No. 5,656,493, describing and claiming
an amplification system comprising PCR reagents and a thermal cycler programmed
to carry out a PCR protocol.

       Whereas, PE CORP owns patents and applications outside the U.S. that
claim priority of U.S. application Serial No. 899,061 (filed in 1986) and that
claim automated performance of the PCR process using certain programmed thermal
cyclers.

       Whereas, PE CORP offers to PCR users license rights for research and
certain other fields under its amplification system claims and automated method
claims, and offers to thermal cycler suppliers the right to pass such rights to
their thermal cycler customers.

       Whereas, PE CORP has offered to Thermal Cycler Supplier the above Roche
process rights, and the PE CORP systems, apparatus, automated method and
pressing heated cover rights separately or in combinations, and Thermal Cycler
Supplier has requested rights under the above Roche PCR process patents and PE
CORP systems patent rights only, without rights under the above identified PE
CORP apparatus, automated method and pressing heated cover patents and
applications.

       NOW, THEREFORE, The Parties agree as follows:

         1.       Definitions

                  For the purpose of this Agreement the terms set forth
hereinafter shall be defined as fellows;

                                       2
<PAGE>   3

         1.1      "AFFILIATE" of a party to this Agreement shall mean an
organization: a) whose voting stock is controlled or owned directly or
indirectly to the extent of fifty percent (50%) or more by the party; b) which
directly or indirectly owns or controls fifty percent (50%) or more of the
voting stock of the party; c) whose majority ownership is directly or indirectly
common to that of the party; or d) defined under (a), (b), or (c) above except
the amount of said ownership is less than fifty percent (50%) but that amount is
the maximum amount permitted by law and Thermal Cycler Supplier has effective
control.

         1.2      "AMPLIFICATION PATENT RIGHTS" shall mean the nucleic acid
amplification processes, including particularly the PCR process, covered by:
United States Patents Nos. 4,683,195, 4,683,202 and 4,965,188; and any
corresponding amplification process claim in patents and patent applications in
other countries claiming priority of any of them. Amplification Patent Rights
include rights only under the identified Roche patents and applications. They do
not include rights, expressly or by implication, under any other Roche or PE
CORP patent or application, or to any claim to reagents, apparatus, or a system
of reagents and apparatus.

         1.3      "AMPLIFICATION SYSTEM PATENT RIGHTS" shall mean U.S. Patent
No. 5,656,493, which describes and claims an amplification system comprising PCR
reagents and a thermal cycler programmed to carry out a PCR protocol.
Amplification System Patent Rights include rights only under the identified PE
CORP patent. They do not include rights, expressly or by implication, under any
other Roche or PE CORP patent or application, or to any claim to reagents,
apparatus, or an amplification process, even if that process is a result of the
natural and intended operation of the system.

         1.4      "AUTHORIZED REAGENT" shall mean a DNA polymerase whose use in
performance of the PCR process is covered by the running-royalty component of a
PCR process license under the Amplification Patent Rights for internal research
and development. The running-royalty component of that license may be obtained
through the purchase of reagents bearing a valid label conveying the

                                       3
<PAGE>   4

running-royalty component; alternatively, it may be purchased from PE CORP.
Other PCR process licenses in the Fields also require use of Authorized
Reagents.

         1.5      "AUTHORIZED THERMAL CYCLER" shall mean a thermal cycler or
temperature cycling instrument whose use in automated performance of the PCR
process is covered by the automated-capacity, up-front fee component of a PCR
process license under the Amplification Patent Rights for internal research and
development. The up-front fee component of that license may be obtained through
the purchase of a thermal cycler or temperature cycling instrument bearing a
valid label conveying the up-front component; alternatively, it may be purchased
from PE CORP. Other PCR process licenses in the Fields also require use of an
instrument whose use is similarly covered, i.e., an "Authorized Thermal
Cycler".

         1.6      "FIELDS" shall mean research and development, quality
assurance or control, environmental testing, plant diagnostics, identity testing
(other than parentage testing for humans) and forensics. The Fields specifically
exclude human and veterinary diagnostics.

         1.7      "NET SALES PRICE" for thermal cyclers, temperature cycling
instruments and add-on modules distributed under this Agreement shall refer to
the sales price charged to unrelated Third-Party end users as to whom the price
is not affected by any other purchase, by any other dealing or by any special
course of dealing, and shall mean the gross invoice price to such an end user
less the following deductions where applicable: (i) discounts allowed and taken,
in amounts customary in the trade, and (ii) sales and/or use taxes and/or duties
for particular sales. No allowance or deduction shall be made for commissions or
collections, by whatever name known. Thermal cyclers, temperature cycling
instruments and add-on modules subject to this Agreement shall be separately
invoiced items.

                  For distributions other than sales described by the preceding
paragraph, including any sale, loan, lease, consignment, gift or other
distribution (i) to an end user that is Thermal Cycler,

                                       4
<PAGE>   5

Supplier itself, an Affiliate or a distributor, (ii) to an end user that enjoys
a special course of dealing with Thermal Cycler Supplier, an Affiliate or
distributor, or (iii) is under a reagent rental agreement or other arrangement
that is not a sale to an unrelated Third-Party end user as to whom the price is
unaffected by other purchase, dealing or special course of dealing, the Net
Sales Price shall be determined by reference to the Net Sales Price which would
be applicable in an arm's length sale to a similarly situated unrelated
Third-Party end user as to whom the price is not affected by any other purchase,
by any other dealing or by any special course of dealing.

                  Net Sales Price shall be calculated on the basis of sales or
transfers to end users by Thermal Cycler Supplier, its Affiliate or a
distributor of either, as the case may be. In the event Thermal Cycler Supplier
is unable to account for end-user sales by any distributor, the Net Sales Price
shall be calculated as the price to the final distributor multiplied by [**],
which factor represents a [**] margin on sales to end users by the distributor.

         1.8      "TERRITORY" shall mean worldwide.

         1.9      "THIRD PARTY" shall mean a party other than The Parties.

         1.10     "TEMPERATURE CYCLING INSTRUMENT", as used in this Agreement,
shall mean an instrument, whether in single or multiple modules, that includes a
thermal cycler as defined in Article 1.11 and additional structure for
performing one or more other functions.

         1.11     "THERMAL CYCLER", as used in this Agreement, shall mean an
instrument, whether in single or multiple modules, that is capable in itself of
automatically cycling samples in the PCR process.

2.  GRANT

                                       5
<PAGE>   6

         2.1      Upon the terms and subject to the exceptions and conditions of
this agreement, PE CORP grants to Thermal Cycler Supplier the following
personal, non-transferable, royalty-bearing, non-exclusive rights in the
Territory under the Amplification Patent Rights:

                  (a)      Thermal Cycler Supplier is hereby authorized to sell
                  and distribute to end users under Thermal Cycler Supplier's
                  name and trademarks the specific thermal cyclers and
                  temperature cycling instruments described in Exhibit 1 (i.e.
                  the Smart Cycler(R) System, Smart Cycler(R) XC System and
                  GeneXpert(TM) Prototype, in the configurations described) and
                  any thermal cycler or temperature cycling instrument
                  containing one or more I-CORE(TM) modules (as defined in
                  Exhibit 1) manufactured by Thermal Cycler Supplier, but not
                  otherwise to sell or distribute to thermal cycler suppliers,
                  with a label conveying to end users (including Thermal Cycler
                  Supplier itself) in the Fields the up-front rights of PCR
                  process licenses under the Amplification Patent Rights as
                  specified in the label set forth in Section 5.1 below, that
                  is, with an Authorized Thermal Cycler label; and

                  (b)      Thermal Cycler Supplier may advertise and promote
                  such thermal cyclers and temperature cycling instruments as
                  described in Exhibit 1 and so labeled as Authorized Thermal
                  Cyclers for PCR.

The grant of this Section 2.1 conveys no right or immunity, express or implied,
under the Amplification System Patent Rights.

         2.2      Upon the terms and subject to the exceptions and conditions of
this Agreement, PE CORP grants to Thermal Cycler Supplier a personal,
non-transferable, royalty-bearing, non-exclusive right under the Amplification
System Patent Rights to convey to end-user customers (including Thermal Cycler
Supplier itself) of Thermal Cycler Supplier's Authorized Thermal Cyclers a non-
exclusive license to use the same in the Fields in the Territory. The grant of
this Section 2.2 includes no right or immunity, express or implied, under the
Amplification Patent Rights.

                                       6
<PAGE>   7

         2.3      No right, immunity, authorization or license is granted,
expressly or by implication, for any other purpose, or in any other field,
including: to make, have made, use or sell any polymerase (such as Taq),
amplification reagent or kit; or to perform PCR or nucleic acid amplification
that is not fully licensed under the Amplification Patent Rights. No right,
immunity, authorization or license is granted, expressly or by implication,
under any patent or patent application that is not expressly included in the
Amplification Patent Rights, or the Amplification System Patent Rights.
Specifically, but without limitation, no right, immunity, authorization or
license is granted, expressly or by implication, under patents and applications
of PE CORP or Roche that cover apparatus, methods, or reagents for real-time
detection (for example, U.S. Patent No. 5,928,907 and published European patent
applications EP 872562 and EP 512334) or for homogeneous assay (for example,
U.S. Patents Nos. 5,210,015, 5,487,972, 5,538,848, all related to the 5'
nuclease assay).

         2.4      Rights granted to Thermal Cycler Supplier by this Agreement
are personal to Thermal Cycler Supplier alone. Thermal Cycler Supplier shall
have no right to sublicense, assign or otherwise transfer or share its rights
hereunder.

         2.5      Notwithstanding the prohibition of Section 2.4, Thermal Cycler
Supplier's rights to sell to end users under the grants of Sections 2.1 and 2.2
include the right to sell through Affiliates (so long as Thermal Cycler Supplier
reports and pays under this Agreement on their behalf) and through distributors
of Thermal Cycler Supplier and such Affiliates, as well as directly.

         2.6      Thermal Cycler Supplier agrees not to promote, directly or
through distributors, the unlicensed use of the Amplification Patent Rights by
the sale of unauthorized thermal cyclers or temperature cycling instruments, or
by selling add-on modules for thermal cyclers or temperature cycling instruments
other than as additions to Authorized Thermal Cyclers.

         3.       FEES, ROYALTIES, RECORDS AND REPORTS

                                       7
<PAGE>   8

         3.1      For the licenses and rights granted under Article 2, Thermal
Cycler Supplier shall pay to PE CORP:

                  (a)      license issue fee of US$[**];

                  (b)      for each Smart Cycler(R) System or Smart Cycler(R) XC
                           System thermal cycler as described in Exhibit 1
                           (including all modules and components), or any
                           thermal cycler or temperature cycling instrument
                           containing one or more I-CORE(TM) modules (as defined
                           in Exhibit 1) having a maximum capacity, if fully
                           expanded, of more than [**] individual samples,
                           delivered or invoiced by Thermal Cycler Supplier or
                           an Affiliate after the effective date of this
                           Agreement, US$[**] plus [**] percent ([**]%) of the
                           Net Sales Price, and for each add-on module, [**]
                           percent ([**]%) of the Net Sales Price;

                  (c)      for each GeneXpert(TM) Prototype temperature cycling
                           instrument as described in Exhibit 1 (including all
                           modules and components), or any thermal cycler or
                           temperature cycling instrument containing one
                           I-CORE(TM) module (as defined in Exhibit 1) having a
                           non-expandable capacity of no more than [**]
                           individual sample, delivered or invoiced by Thermal
                           Cycler Supplier or an Affiliate after the effective
                           date of this Agreement, US$[**] plus [**] percent
                           ([**]%) of the Net Sales Price; and

                  (d)      for each thermal cycler or temperature cycling
                           instrument containing one or more I-CORE(TM) modules
                           (as defined in Exhibit 1) having a maximum capacity,
                           if fully expanded, of at least [**] but no more than
                           [**] individual samples, delivered or invoiced by
                           Thermal Cycler Supplier or an Affiliate after the
                           effective date of this Agreement, US$[**] plus [**]

                                       8
<PAGE>   9

                           [**] percent ([**]%) of the Net Sales Price, and for
                           each add-on module, [**] percent ([**]%) of the Net
                           Sales Price.

The license issue fee shall be paid on the effective date of this Agreement. The
per-thermal cycler payments specified in this Section 3,1 shall be paid as
specified in Sections 3.4 and 3.5. Each thermal cycler or temperature cycling
instrument for which those payments are paid shall be an Authorized Thermal
Cycler and shall be so designated pursuant to Article 5 hereof.

         3.2      All amounts payable hereunder shall be payable in United
States dollars. Sales in other countries shall be converted to U.S. dollars
based on the New York rate of exchange as quoted in the Wall Street Journal for
the last business day of the applicable quarter. If not so published, The
Parties may agree on a substitute publication. In the event there is no
comparable publication, the applicable rate for such date by the appropriate
governmental agency in such country shall apply.

         3.3      Thermal Cycler Supplier shall keep, and shall require its
pertinent Affiliates to keep, full, true and accurate books of account
containing all particulars necessary to show the amount payable to PE CORP under
this Agreement. Such books and the supporting data shall be open at all
reasonable times, for three (3) years following the end of the calendar year to
which they pertain (and access shall not be denied thereafter, if reasonably
available), to the inspection of an independent inspector retained by PE CORP.
If in dispute, such records shall be kept until the dispute is settled.
Inspection shall be at PE CORP's expense, unless the inspector concludes that
the amount payable that is stated in a report is understated by five percent
(5%) or more, in which case expenses shall be paid by Thermal Cycler Supplier.

         3.4      Thermal Cycler Supplier shall within thirty (30) days after
the first of each January, April, July and October deliver to PE CORP a true and
accurate accounting report. This report shall be on a country-by-country basis
and shall give such particulars of the business conducted by Thermal Cycler
Supplier in each country during the preceding three (3) calendar months as are

                                       9
<PAGE>   10

pertinent to accounting under this Agreement and shall be in accordance with,
and include all information specified in, the royalty report form attached
hereto as Appendix A.

                  The correctness and completeness of each report shall be
attested to in writing by the responsible financial officer of Thermal Cycler
Supplier or by Thermal Cycler Supplier's external auditor.

         3.5      Simultaneously with the delivery of each royalty report,
Thermal Cycler Supplier shall pay to PE CORP the monies then due under this
Agreement for the period covered by the report. Each report and payment shall be
sent by the due date to the following address:

                  PE Biosystems
                  PE Corporation
                  850 Lincoln Centre Drive
                  Foster City, California, 94404 U.S.A.
                  Attention: Director of Licensing

or to any address that PE CORP may advise in writing.

         3.6      If Thermal Cycler Supplier shall fail to pay any amount owing
under this Agreement by the due date, the amount owed shall bear interest at two
percent (2%) over the Citibank NA base lending rate ("prime rate") from the due
date until paid, provided, however, that if this interest rate is held to be
unenforceable for any reason, the interest rate shall be the maximum rate
allowed by law at the time the payment is due.

         3.7      Failure of Thermal Cycler Supplier to pay any amount specified
under this Agreement within thirty (30) days after the due date will give PE
CORP the right to terminate under Section 6.7.

         3.8      If all patents included in the Amplification Patent Rights
expire before all patents included in the Amplification System Patent Rights,
or vice versa, the per-thermal cycler payments

                                       10
<PAGE>   11

specified in Section 3.1 shall thereafter be reduced to the amount PE CORP is
then charging for the remaining claims.

         4.       PAST SALES SALES AND ACTIVITIES

         4.1      On the effective date of this Agreement, Thermal Cycler
Supplier shall pay to PE CORP the sum of $[**]. In consideration thereof all
thermal cyclers and temperature cycling instruments delivered or invoiced by
Thermal Cycler Supplier and its Affiliates (including thermal cyclers and
temperature cycling instruments delivered to themselves for use) prior to the
effective date of this Agreement shall be considered Authorized Thermal Cyclers
subject to the conditions of Section 4.2 and 5.3; and all earlier use of such
thermal cyclers or temperature cycling instruments by customers, direct or
indirect, of Thermal Cycler Supplier shall be deemed to have been use of a
thermal cycler or temperature cycling instrument within the grant of this
Agreement. This section does not apply to thermal cyclers or temperature cycling
instruments already authorized by PCR users.

         4.2      Thermal Cycler Supplier shall send to the original end-user
customers of the thermal cyclers and temperature cycling instruments that are
the subject of Section 4.1, Authorized Thermal Cycler notices in accord with
Section 5.1 with a means reasonably satisfactory to PE CORP to relate each such
notice to the appropriate thermal cycler or temperature cycling instrument. Any
such thermal cycler or temperature cycling instrument not having an
authorization notice within one hundred and twenty (120) days after the
effective date of this Agreement shall cease to be an Authorized Thermal Cycler
unless Thermal Cycler Supplier establishes to the reasonable satisfaction of PE
CORP that (a) the thermal cycler or temperature cycling instrument falls within
Section 4.1 and (b) the Authorized Thermal Cycler notice for the thermal cycler
or temperature cycling instrument has not been applied to another instrument.

                                       11
<PAGE>   12

         5.       AUTHORIZATION NOTICE

         5.1      Thermal Cycler Supplier agrees to include prominently in the
front of the user's manual for each Authorized Thermal Cycler, and for no other
thermal cycler or temperature cycling instrument, a Notice as specified from
time to time by PE CORP. Unless and until PE CORP reasonably instructs
differently, the Notice shall be:

                           AUTHORIZED THERMAL CYCLER

                  THIS INSTRUMENT, SERIAL NO. ____, IS AN AUTHORIZED THERMAL
                  CYCLER. ITS PURCHASE PRICE INCLUDES THE UP-FRONT FEE COMPONENT
                  OF A LICENSE UNDER THE PATENTS ON THE POLYMERASE CHAIN
                  REACTION (PCR) PROCESS, WHICH ARE OWNED BY ROCHE MOLECULAR
                  SYSTEMS INC. AND F. HOFFMANN-LA ROCHE LTD, TO PRACTICE THE PCR
                  PROCESS FOR INTERNAL RESEARCH AND DEVELOPMENT USING THIS
                  INSTRUMENT. THE RUNNING ROYALTY COMPONENT OF THAT LICENSE MAY
                  BE PURCHASED FROM PE BIOSYSTEMS OR OBTAINED BY PURCHASING
                  AUTHORIZED REAGENTS. THIS INSTRUMENT IS ALSO AN AUTHORIZED
                  THERMAL CYCLER FOR USE WITH APPLICATIONS LICENSES AVAILABLE
                  FROM PE BIOSYSTEMS. ITS USE WITH AUTHORIZED REAGENTS ALSO
                  PROVIDES A LIMITED PCR LICENSE IN ACCORDANCE WITH THE LABEL
                  RIGHTS ACCOMPANYING SUCH REAGENTS. PURCHASE OF THIS PRODUCT
                  DOES NOT ITSELF CONVEY TO THE PURCHASER A COMPLETE LICENSE OR
                  RIGHT TO PERFORM THE PCR PROCESS. FURTHER INFORMATION ON
                  PURCHASING LICENSES TO PRACTICE THE PCR PROCESS MAY BE
                  OBTAINED BY CONTACTING THE DIRECTOR OF LICENSING AT PE
                  CORPORATION, 850 LINCOLN CENTRE DRIVE, FOSTER CITY, CALIFORNIA
                  94404.

                  NO RIGHTS ARE CONVEYED EXPRESSLY, BY IMPLICATION OR ESTOPPEL
                  TO ANY PATENTS ON REAL-TIME METHODS, INCLUDING BUT NOT LIMITED
                  TO 5' NUCLEASE ASSAYS, OR TO ANY PATENT CLAIMING A REAGENT OR
                  KIT.

                  PE BIOSYSTEMS DOES NOT GUARANTEE THE PERFORMANCE OF THIS
                  INSTRUMENT.

         5.2      Thermal Cycler Supplier agrees to affix permanently and
prominently to each Authorized Thermal Cycler the designation "Authorized
Thermal Cycler", its Serial Number and a direction to consult the user's manual
for license information.

                                       12
<PAGE>   13

         5.3      Thermal Cycler Supplier further agrees to instruct the
ultimate purchaser that transfer of the thermal cycler or temperature cycling
instrument without the Serial Number or the Notice shall automatically terminate
the authorization granted by this Agreement and the thermal cycler or
temperature cycling instrument shall cease to be an Authorized Thermal Cycler.

         5.4      To avoid confusion among thermal cycler users, Thermal Cycler
Supplier agrees not to designate or refer to thermal cyclers or temperature
cycling instruments covered by this Agreement as "licensed" unless it fully and
simultaneously explains that the thermal cyclers or temperature cycling
instruments do not convey with their purchase a complete license under the
Amplification Patent Rights.

         5.5      No Authorization Notice shall be supplied with an add-on
module or anything else which is less than a complete thermal cycler or
temperature cycling instrument.

         6.       TERM AND TERMINATION

         6.1      This Agreement, unless sooner terminated, shall continue until
the expiration of the last-to-expire of the patents under which rights are
granted in this Agreement.

         6.2      This Agreement shall terminate upon a holding of invalidity or
unenforceability of all patent claims licensed hereunder by a final court
decision from which no appeal is or can be taken.

         6.3      Thermal Cycler Supplier may terminate this Agreement for any
reason by giving written notice to PE CORP and ceasing to advertise or promote
its thermal cyclers or temperature cycling instruments as described in Exhibit 1
as Authorized Thermal Cyclers. Such termination shall be effective ninety (90)
days after said notice or cessation, whichever is later.

                                       13
<PAGE>   14

         6.4      The decision of a Court or Administrative body finding PE CORP
liable or culpable due to Thermal Cycler Supplier's manufacture of thermal
cyclers or temperature cycling instruments covered by this Agreement or due to
the sale or distribution of those thermal cyclers or temperature cycling
instruments by Thermal Cycler Supplier, an Affiliate or a distributor shall give
PE CORP the right to terminate this Agreement immediately upon notice.

         6.5      This Agreement shall terminate upon (i) an adjudication of
Thermal Cycler Supplier as bankrupt or insolvent, or Thermal Cycler Supplier's
admission in writing of its inability to pay its obligations as they mature;
(ii) an assignment by Thermal Cycler Supplier for the benefit of creditors;
(iii) the appointment of, or Thermal Cycler Suppliers applying for or consenting
to the appointment of, a receiver, trustee or similar officer for a substantial
part of its property; (iv) the institution of or any act of Thermal Cycler
Supplier instituting any bankruptcy, insolvency arrangement, or similar
proceeding; (v) the issuance or levy of any judgment, writ, warrant of
attachment or execution or similar process against a substantial part of the
property of Thermal Cycler Supplier; or (vi) loss of Thermal Cycler Suppliers
federal or state licenses, permits or accreditation necessary for distribution
of Authorized Thermal Cyclers.

         6.6      PE CORP may terminate this Agreement immediately on notice
upon any change in the ownership or control of Thermal Cycler Supplier or of its
assets. For such purposes, a "change in ownership or control" shall mean that
30% or more of the voting stock of Thermal Cycler Supplier becomes subject to
the ownership or control of a person or entity, or any related group of persons
or entities acting in concert, which person(s) or entity(ies) did not own or
control such portion of voting stock on the Effective Date hereof. PE CORP shall
have the same right to terminate upon any transfer of 30% or more of the assets
of Thermal Cycler Supplier.

         6.7      Upon any breach of or default of a material term under this
Agreement by Thermal Cycler Supplier, PE CORP may terminate this Agreement upon
thirty (30) days' written notice. PE CORP will withdraw such notice if, during
the notice period, Thermal Cycler Supplier fully cures such breach or default to
PE CORP's reasonable satisfaction.

                                       14
<PAGE>   15

         6.8      Upon expiration or termination of this Agreement, all rights
granted to Thermal Cycler Supplier shall revert to or be retained by PE CORP.

         6.9      Thermal Cycler Supplier's obligations to report and pay
royalties as to activities under this Agreement shall survive termination or
expiration.

         7.       CONFIDENTIALITY - PUBLICITY

         7.1      In advertisements, catalogs, brochures, sales literature and
promotional literature for Authorized Thermal Cyclers, Thermal Cycler Supplier,
Affiliates and distributors shall state the following prominently in type and
location:

                  Practice of the patented polymerase chain reaction (PCR)
                  process requires a license. The <Supplier's Model> Thermal
                  Cycler is an Authorized Thermal Cycler and may be used with
                  PCR licenses available from PE Corporation. Its use with
                  Authorized Reagents also provides a limited PCR license in
                  accordance with the label rights accompanying such reagents.

         7.2      With respect to Thermal Cycler Supplier's distribution of any
written information to Third Parties, including but not limited to advertising,
brochures, catalogs, promotional and sales material, and public relations
material, PE CORP shall have the right to prescribe changes regarding references
to, or descriptions of: PE CORP, PCR, the patents under which rights are granted
in this Agreement, PCR licenses or authorizations, or this Agreement. Thermal
Cycler Supplier agrees to comply with PE CORP's reasonable prescriptions.

         7.3      Except as provided in Sections 7.1 and 7.2, Thermal Cycler
Supplier shall, to the extent reasonably practicable, maintain the
confidentiality of the provisions of this Agreement and shall refrain from
disclosing the terms of this Agreement without the prior written consent of PE
CORP, except to the extent Thermal Cycler Supplier concludes in good faith that
such disclosure is required under applicable law or regulation, in which case PE
CORP shall be notified in advance

                                       15
<PAGE>   16

         8.       COMPLIANCE AND QUALITY

         8.1      In the exercise of any and all rights and in performance
hereunder, it shall be the duty of Thermal Cycler Supplier, not PE CORP, to
comply fully with all applicable laws, regulations and ordinances and to obtain
and keep in effect licenses, permits and other governmental approvals (federal,
state or local) necessary or appropriate to carry on activities hereunder.

         8.2      PE CORP does not approve or endorse thermal cyclers or
temperature cycling instruments of Thermal Cycler Supplier in any way or for any
purpose, including PCR Quality and quality control with respect to suitability
for PCR, according to standards and requirements that may exist in the
marketplace from time to time, are the sole responsibility of Thermal Cycler
Supplier.

         9.       ASSIGNMENT

         9.1      This Agreement shall not be assigned by Thermal Cycler
Supplier (including without limitation any assignment or transfer that would
arise from a sale or transfer of Thermal Cycler Supplier's business).

         9.2      PE CORP may assign all or any part of its rights and
obligations under this Agreement at any time without the consent of Thermal
Cycler Supplier. Thermal Cycler Supplier agrees to execute such further
acknowledgments or other instruments as PE CORP may reasonably request in
connection with such assignment.

         10.      NEGATION OF WARRANTIES AND INDEMNITY

         10.1     Nothing in this Agreement shall be construed as: (a) a
warranty or representation by PE CORP as to the validity or scope of any patent;
(b) a warranty or representation that the practice under the Amplification
Patent Rights or the Amplification System Patent Rights is or will be free from
infringement of patents of Third Patties; (c) an authority or obligation to
sublicense or to sue

                                       16
<PAGE>   17

Third Parties for infringement; (d) except as expressly set forth herein,
conferring the right to use in advertising, publicity or otherwise, in any form,
the name of, or any trademark or trade name of, PE CORP or Roche; (e) conferring
by implication, estoppel or otherwise any license, immunity or right under any
patent owned by or licensed to PE CORP or Roche other than those specified,
regardless of whether such patent is dominant or subordinate to the patents
under which rights are granted in this Agreement; (f) an obligation to furnish
any know-how; or (g) creating any agency, partnership, joint venture or similar
relationship between PE CORP or Roche and Thermal Cycler Supplier.

         10.2     PE CORP MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

         10.3     Thermal Cycler Supplier agrees to take all reasonable
precautions to prevent death, personal injury, illness and property damage from
the use of Authorized Thermal Cyclers. Thermal Cycler Supplier shall assume full
responsibility for its operation under the patents under which rights are
granted in this Agreement, the manufacture of Authorized Thermal Cyclers and the
use thereof and shall defend, indemnify and hold PE CORP harmless from and
against all liability, demands, damages, expenses (including attorneys fees) and
losses for death, personal injury, illness, property damage or any other injury
or damage, including any damages or expenses arising in connection with state or
federal regulatory action, in view of the use by Thermal Cycler Supplier, its
officers, directors, agents and employees of the Amplification Patent Rights and
the Amplification System Patent Rights, and the manufacture and use of
Authorized Thermal Cyclers except that Thermal Cycler Supplier shall not be
liable to PE CORP for injury or damage arising solely because of PE CORP's
negligence.

         11.      MOST FAVORED LICENSEE

         11.1     If after signature of this Agreement, PE CORP grants to any
unrelated third party, other than Roche, a license of substantially the same
scope as granted to Thermal Cycler Supplier

                                       17
<PAGE>   18

herein but under more favorable royalty rates than those given to Thermal Cycler
Supplier under this Agreement, PE CORP shall promptly notify Thermal Cycler
Supplier of said more favorable royalty rates, and Thermal Cycler Supplier shall
have the right and option to substitute such more favorable royalty rates for
the royalty rates contained herein. Thermal Cycler Supplier's right to elect
said more favorable royalty rates shall extend only for so long as and shall be
conditioned on Thermal Cycler Supplier's acceptance of all the same conditions,
favorable or unfavorable, under which such more favorable royalty rates shall
be available to such other third party. Upon Thermal Cycler Supplier's
acceptance of all such terms of said third-party agreement, the more favorable
royalty rates shall be effective as to Thermal Cycler Supplier on the date of
execution of such other third party license agreement. Notwithstanding the
foregoing, in the event that PE CORP and/or Roche shall receive substantial
other nonmonetary consideration, for example, such as intellectual property
rights, as a part of the consideration for its granting of such license to a
third party, then this Section 11.1 shall not apply.

         12.      GENERAL

         12.1     This Agreement constitutes the entire agreement between The
Parties as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into, extinguished by
and completely expressed by it. This Agreement may be modified or amended only
by a writing executed by authorized officers of each of The Parties.

         12.2     Any notice required or permitted to be given by this Agreement
shall be given by postpaid, first class, registered or certified mail, or by
courier or facsimile, properly addressed to the other party at the respective
address as shown below:

                                       18
<PAGE>   19

If to PE CORP:
                           PE Biosystems
                           PE Corporation
                           850 Lincoln Centre Drive
                           Foster City, California 94404 U.S.A.
                           Attn.: Director of Licensing

If to Thermal Cycler Supplier:

                           Cepheid
                           1190 Borregas Avenue
                           Sunnyvale, California 94089
                           Attn.: President

Either party may change its address by providing notice to the other. A notice
shall be deemed given four (4) full business days after the day of mailing, or
one full day after the date of delivery to the courier, or the date of facsimile
transmission, as the case may be.

         12.3     Governing Law and Venue. This Agreement shall be deemed made
in the State of Delaware, and it shall be construed and enforced in accordance
with the law of the State of Delaware. The Parties agree that the exclusive
jurisdiction and venue for any dispute or controversy arising from this
Agreement shall be in the state or federal courts in Delaware.

         12.4     Nothing in this Agreement shall be construed to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement or concerning the legal right of The
Parties to enter into this contract and any statute, law or ordinance, the
latter shall prevail, but the provision shall be limited only to the extent
necessary.

         12.5     If any provision of this Agreement is held or discovered to
both parties' satisfaction to be illegal, invalid or unenforceable in any
jurisdiction or to render any patent in that jurisdiction unenforceable, the
provision as it applies to that jurisdiction only shall be replaced
automatically, as part of the document, by a provision as similar in terms as
possible but not subject to such infirmity, in order to achieve the intent of
the parties to the extent possible. In any event, as to that

                                       19
<PAGE>   20

jurisdiction all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.

IN WITNESS WHEREOF, The Parties hereto have duly executed this Agreement on the
date(s) indicated below.

PE BIOSYSTEMS                                CEPHEID
                                             ----------------------------------
                                             (THERMAL CYCLER SUPPLIER)

By:  /s/ [Signature Illegible]               By: /s/ THOMAS L. GUTSHALL
   -------------------------------------        -------------------------------
Title: V. P., Intellectual Property          Title:  CEO & Chairman
      ----------------------------------           ----------------------------
Date:           4/13/00                      Date:       4/6/00
     -----------------------------------          -----------------------------

                                       20
<PAGE>   21
<TABLE>
<S><C>

APPENDIX A

                                               SUMMARY ROYALTY/FEE REPORT
                                           THERMAL CYCLER SUPPLIER AGREEMENT

                       FOR THE PERIOD: ________ TO ________ FOR SALES IN THE COUNTRY OF ________

               THERMAL CYCLER (TC) SUPPLIER: CEPHEID  EFFECTIVE DATE: 4/15/00 ROYALTY/FEE RATE: ________

[ ] Check here if there were no sales for this period.

TC/TCI/Add-on Mod.          # of          Gross Invoice Price   Deductions Allowed   Net Sales Price
     Model #         TC/TCI/Add-on Mod.         (actual)             (explain)           (actual)      Royalty/Fee Due

______________       ______________       ______________        ______________       ______________    ______________

______________       ______________       ______________        ______________       ______________    ______________

______________       ______________       ______________        ______________       ______________    ______________

______________       ______________       ______________        ______________       ______________    ______________

______________       ______________       ______________        ______________       ______________    ______________

     TC/TCI/Add-on Mod.              # of                                         Calculated Net
          Model #             TC/TCI/Add-on Mod.       Price to Distributor        Sales Price         Royalty/Fee Due

     ______________           ______________             ______________           ______________       ______________

     ______________           ______________             ______________           ______________       ______________

     ______________           ______________             ______________           ______________       ______________

     ______________           ______________             ______________           ______________       ______________

     ______________           ______________             ______________           ______________       ______________

                                                                             TOTAL ROYALTY/FEE EARNED: ______________

                                                                              ROYALTY/FEE PAYMENT DUE: ______________

I hereby certify the information set forth above is correct and complete with respect to the amounts due under the
applicable license agreement.

By _______________________________________ Title ____________________ Date ___________________

Name (please print) _______________________________

PE CORPORATION

Send report to:

Director of Licensing, PE Biosystems, PE Corporation, 850 Lincoln Centre Drive, Foster City, CA 94404  USA

</TABLE>
<PAGE>   22
                                    EXHIBIT 1

Attached (Exhibits 1a - 1c) are descriptions and specifications for the specific
Cepheid thermal cyclers and temperature cycling instruments referenced in the
"Grant" clause, Article 2.1, paragraph (a):

Exhibit la - Smart Cycler(R) System (2 pages)

Exhibit 1b - Smart Cycler(R) XC System (2 pages)

Exhibit 1c - GeneXpert(TM) Prototype (2 pages)

Also attached (Exhibit 1d) is a prospective set of general specifications for
any thermal cycler or temperature cycling instrument containing one or more
I-CORE(TM) modules which may be manufactured under this Agreement by Cepheid, as
referenced in the "Grant" clause, Article 2.1, paragraph (a).

                                       22

<PAGE>   23

Exhibit 1d: General Specifications for Cepheid's Thermal Cycle and Temperature
Cycling Instruments

The instruments are those containing one or more I-CORE(TM) modules. An I-CORE
module is comprised of (1) a single site, discrete, individually controllable
heater sleeve containing a heating element and designed to accept a disposable
reaction tube or cartridge, (2) an integrated cooling mechanism (e.g. a fan)
that enables passage of ambient or cooled air across the heater sleeve, and (3)
optical blocks containing solid state components that enable optical
interrogation of the reaction solution in the reaction tube or cartridge.

In a single site configuration comprised or a single I-CORE module, the I-CORE
module will contain all of the elements listed above.

In a multi-site configuration comprised of multiple I-CORE modules, each I-CORE
module:

         a)       will contain a single site, discrete, individually
                  controllable heater sleeve containing a heating element and
                  designed to accept a disposable reaction tube or cartridge.

         b)       may or may not contain an integrated cooling mechanism. If an
                  integrated cooling mechanism is not included, each I-CORE
                  reaction site will be cooled by the passage of ambient or
                  cooled air coming from an external source passing across the
                  heater sleeve.

         c)       may or may not contain optical blocks. If optical blocks are
                  not included, the instrument will be optically "blind", that
                  is, it will not be capable of optical interrogation, or
                  optical interrogation will occur on a separate module.

                                       23
<PAGE>   24
Exhibit 1a, page 1

[CEPHEID LOGO]      BIOANALYSIS FOR THE NEW MILLENNIUM

                                 RAPID THERMAL
                                  CYCLING WITH
                              REAL-TIME DETECTION

                             SMART CYCLER(R) SYSTEM

The Smart Cycler(R) from Cepheid is a highly versatile and efficient thermal
cycler with real-time optical detection specifically tailored to the rapidly
evolving needs of today's molecular biology laboratory. Based on state of the
art microelectronic design, the Smart Cycler(R) can be configured by the user
into a series of 1-6 processing blocks, each containing 16 reaction sites. Each
of the 16 sites within a processing block is individually programmable, and
each is capable of 4 channel multiplexed fluorometric detection. Through a
sophisticated PC-based user interface, the operator can define and
simultaneously carry out any number of separate protocols, each with a unique
set of cycling parameters, threshold criterion, and analytical algorithms. In
addition, each site can be thermally and optically monitored on a real-time
basis and results can be analyzed and reported according to user defined modes.
The Smart Cycler(R) is the ideal system for method optimization and for
efficiently processing workloads comprised of variable sample numbers and
protocols.

                  DILUTION SERIES PERFORMED ON SMART CYCLER(R)
                        SYSTEM USING A BETA-ACTIN ASSAY

                                    [GRAPH]

o  1-6 PROCESSING BLOCKS

o  16 INDEPENDENTLY PROGRAMMABLE REACTION SITES PER PROCESSING BLOCK

o  4 COLOR REAL-TIME OPTICAL DETECTION IN EACH SITE

o  FASTER & MORE SENSITIVE THAN REFERENCE SYSTEMS
<PAGE>   25
Exhibit 1a, page 2

[CEPHEID LOGO] BIOANALYSIS FOR THE NEW MILLENNIUM

SPECIFICATIONS;

PHYSICAL DIMENSIONS

     12"W x 12"Lx 10"H (each processing block)
     22 lbs per processing block

POWER REQUIREMENTS
     85-264 VAC, 47-200 Hz
     350 Watts

OPTICS*
     2 optic blocks per site
     Components: LED's, filters, photo-diodes
     4 color excitation
     4 color detection from 500 nm - 700 nm
     Dye detection limit <10nM
          for FAM/TAM/TET/ROX

SITE-LEVEL HEATING/COOLING ASSEMBLY*
     Solid state heater and forced air cooling
          at each reaction site
     16 independently controlled reaction sites
          per processing block
     1-6 processing blocks can be interconnected

COMPUTER
     Pentium(R) computer
     WIN 98 OS, WIN 2000
     CD ROM
     USB
     A single host PC supports up to six SmartCycler
          instruments

SOFTWARE/USER INTERFACE
     Windows 98, Windows 2000 compatible
     Menu driven user interface
     Point & click protocol definition
          (cycle #, temp, times, read points,
          melting curve analysis, quantitation)
     Qualitative and quantitative data analysis

REACTION TUBES*
     Single use, disposable tubes
     Polypropylene construction
     25 (micro)l & 100 (micro)l reaction volumes
     No-leak closure seals and pressurized tube

PERFORMANCE PARAMTERS
     Heating ramp rates
          6.5 degrees C/sec from 50 degrees C to 95 degrees C
     Cooling ramp rates
          2 degrees C/sec from 95 degrees C to 50 degrees C
     Programmed time at Temperature
          +/- 1.0 sec
     Temperature accuracy
          +/- 0.5 degrees C from 60 degrees C to 95 degrees C
     Melt curve programmable ramp rate
          0.1 degrees C/sec to 1.0 degrees C/sec

ASSAY PERFORMANCE
     Cycle time (Beta Actin assay)
          <40 seconds per cycle
          <30 minutes for 45 cycles
     Analytical sensitivity (Beta Actin assay)
          150,000 copies in <28 cycles
          150 copes in <34 cycles
          <150 copies in 35 - 45 cycles
     Analytical precision
          Site to site threshold crossing in
          +/- 0.5 cycles

*Covered by issued or pending patents

<PAGE>   26
Exhibit 1b, page 1

[CEPHEID LOGO] BIOANALYSIS FOR THE NEW MILLENNIUM

[PHOTO] PORTABLE NUCLEIN ACID DETECTION

                           SMART CYCLER(R) XC SYSTEM

The Smart Cycler XC (Xtreme Conditions) from Cepheid is a very rapid, highly
efficient, fully ruggedized, battery operated thermal cycler with real-time
optical detection. Based on state of the art microelectronic design, the Smart
Cycler XC is comprised of 16 independently programmable reaction sites, each
with 4 channel multiplexed fluorometric detection. Up to 16 different protocols
can be processed and monitored simultaneously and each reaction can be
terminated as soon as a positive signal threshold is reached. Speed and
sensitivity of the system meets or surpasses that of sophisticated laboratory
systems. The Smart Cycler XC is the solution for rapid, real-time, field-based
pathogen detection or other nucleic acid probe analysis.

[Graph]

O  BATTERY OPERATED
O  16 INDEPENDENTLY PROGRAMMABLE REACTION SITES
O  4 COLOR REAL-TIME OPTICAL DETECTION
O  FASTER & MORE SENSITIVE THAN LABORATORY SYSTEMS

<PAGE>   27
                                                              EXHIBIT 1b, page 2

[CEPHEID LOGO]

                       BIOANALYSIS FOR THE NEW MILLENNIUM

SPECIFICATIONS:

PHYSICAL DIMENSIONS
     26.5" X 18.9 X 13.4
     62 lbs w/computer & rechargeable battery pack

POWER REQUIREMENTS
     Can run on:
          AC (110V/60Hz; 220V/50Hz)
          Internal battery pack (1 hour operation)
          External battery pack (6 hours operation)
          Automobile electrical adaptor or 12V auto battery

OPTICS*
     2 optic blocks per site
     Components: LED's, filters, photo-diodes
     4 color excitation
     4 color detection from 500 nm - 700 nm
     Dye detection limit <10nM for FAM/TAM/TET/ROX

SITE-LEVEL HEATING/COLLING ASSEMBLY*
     Solid state heater and forced air cooling at each reaction site
     16 independently controlled reaction sites per processing block
     1-4 processing blocks can be interconnected

COMPUTER
     Laptop Pentium(R) computer
     WIN 98 OS, WIN 2000
     USB, modem, ethernet
     A single host PC supports up to four Smart Cycler XC instruments
     Zip Drive

SOFTWARE/USER INTERFACE WINDOWS 98
     Windows 98, Windows 2000 compatible
     Menu driven user interface
     Point & click protocol definition (cycle #, temp, times, read points,
          melting curve analysis, quantitation)
     Qualitative and quantitative data analysis

REACTION TUBES*
     Single use, disposable tubes
     Polypropylene construction
     25 ul & 100 ul reaction volumes
     No-leak closure seals and pressurized tube

PERFORMANCE PARAMETERS
     Heating ramp rates
          6.5 degrees C/sec from 50 degrees C to 95 degrees C
     Cooling ramp rates
          2 degrees C/sec from 95 degrees C to 50 degrees C
     Programmed time at Temperature
          +/- 1.0 sec
     Temperature accuracy
          +/- 0.5 degrees C from 60 degrees C to 95 degrees C
     Melt curve programmable ramp rate
          0.1 degrees C/sec to 1.0 degrees C/sec

ASSAY PERFORMANCE
     Cycle time (Beta Actin assay)
          <40 seconds per cycle
          <30 minutes for 45 cycles

     Analytical sensitivity (Beta Actin assay)
          150,000 copies in <28 cycles
          150 copies <34 cycles
         <150 copies in 35 - 45 cycles
     Analytical precision
          Site to site threshold crossing in +/- 0.5 cycles

RUGGEDIZATION/ENVIRONMENTAL
     Meets MIL STD 810E for shock and vibration
     Temperature: -32 C to 71 C Storage
                    0 C to 49 C Operation

*Covered by issued or pending patents
<PAGE>   28
Exhibit 1c, page 1

[CEPHEID LOGO] BIOANALYSIS FOR THE NEW MILLENNIUM

                            GENEXPERT(TM) PROTOTYPE

[PHOTO] Integrated, Automated, Hands-off DNA Detection

                         SUMMARY OF DATA - CT/GC ASSAY

Cepheid has integrated its proprietary cartridge-based sample preparation
technology with its rapid thermal cycling and real-time detection platform
(I-CORE(TM)) to produce a revolutionary demonstration system -- the
GeneXpert(TM). The cartridge, which employs a fluid circuit comprised of various
processing elements, automatically carries out a complete sample preparation and
DNA extraction procedure (including filtration, cell lysis, DNA extraction, and
addition of pre-loan assay specific PCR reagents) on 5 ml of urine in less than
5 minutes. The extracted DNA and PCR reaction mixture is delivered automatically
to a closed, integrated reaction tube, where it undergoes rapid thermal cycling,
amplification and real-time optical readings in a Cepheld I-CORE(TM) module.
Using a Taqman based system for homogeneous fluorescent detection, the presence
of Ct can be detected using the TET channel and GC using the FAM channel.
Results are available in less than 30 minutes from the start of the procedure.

<TABLE>
<CAPTION>

                       CEPHEID      FDA APPROVED       FDA APPROVED
                    GENEXPERT(TM)  REFERENCE KIT A   REFERENCE KIT B
  ASSAY TIME           CT & GC            CT                 GC
  ----------        ------------   ---------------   ---------------
<S>                 <C>            <C>               <C>
TOTAL # OF STEPS           1              23                 33
Sample Preparation        <5              98                 66
(minutes)
Amplification             25            90-100              120
(minutes)
Detection              [Real Time]       119                 85
(minutes)
TOTAL TIME               <30             307                271
(MINUTES)
</TABLE>
<PAGE>   29
EXHIBIT 1c, page 2

[CEPHEID LOGO] BIOANALYSIS FOR THE NEW MILLENNIUM

                        [GRAPH RAPID LYSIS OF CHLAMYDIA]

               [GRAPH MULTIPLEX DETECTION OF CT AND GC IN URINE]

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