Exhibit 10.18

Change of Control Retention and Severance Agreement

This Change of Control Retention and Severance Agreement (the “Agreement”) is
made and entered into as of             , 201    , by and between Cepheid and
                     (the “Executive”). Capitalized terms used in this Agreement
shall have the meanings set forth in Section 3 below.

1. Purpose. The purpose of this Agreement is to encourage Executive to remain in
the employ of the Company and to continue to devote Executive’s full attention
to the success of the Company in the event of a Change of Control, as such term
is defined in Section 3 of this Agreement.

2. Termination Upon Change of Control. In the event of Executive’s Termination
Upon Change of Control, Executive shall receive the following payments and
benefits:

2.1 Accrued Salary, Bonus, Vacation and Benefits. Executive shall receive all
salary and accrued vacation (less applicable withholding) earned through
Executive’s termination date, any earned but unpaid bonus, and the benefits, if
any, under Company benefit plans to which Executive may be entitled pursuant to
the terms of such plans.

2.2 Equity Award Acceleration. Provided that Executive complies with Section 5
below, all outstanding equity awards, including, without limitation, stock
options, restricted stock, restricted stock units, stock appreciation rights,
phantom stock rights and stock bonuses, granted or issued by the Company to
Executive prior to the Change of Control shall become fully vested and
exercisable, and any such outstanding equity awards that are subject to a right
of repurchase, right of forfeiture, or similar right, shall be released from
such right and shall be fully vested, in each case, immediately prior to the
effective date of the Termination Upon Change of Control.

2.3 Cash Severance Payment. Provided that Executive complies with Section 5
below, Executive shall receive a lump sum cash payment in an amount equal to
(i) [twelve (12)/fifteen (15)/eighteen (18)] months of Executive’s
then-effective annual base salary plus (ii) 100% of the target bonus for which
the Executive would have been eligible during the year of termination pursuant
to the Company’s then-effective Key Employee Incentive Plan or equivalent cash
incentive bonus plan (less applicable withholding), paid within ten
(10) business days of the effectiveness of the Release. For purposes of this
Section 2.3, a Termination Upon Change of Control will be determined consistent
with the rules relating to “separation from service” as defined in Section 409A
of the Internal Revenue Code of 1986, as amended (“Section 409A”).
Notwithstanding anything else provided herein, to the extent any payments
provided under this Agreement in connection with Executive’s termination of
employment constitute deferred compensation subject to Section 409A, and
Executive is deemed at the time of such termination of employment to be a
“specified employee” under Section 409A, then such payment shall not be made or
commence until the earlier of (i) the expiration of the 6-month period measured
from Executive’s separation from service from the Company or (ii) the date of

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Executive’s death following such a separation from service; provided, however,
that such deferral shall only be effected to the extent required to avoid
adverse tax treatment to Executive including, without limitation, the additional
twenty-percent (20%) tax for which Executive would otherwise be liable under
Section 409A(a)(1)(B) in the absence of such a deferral. The first payment
thereof will include a catch-up payment covering the amount that would have
otherwise been paid during the period between Executive’s termination of
employment and the first payment date but for the application of this provision,
and the balance of the installments (if any) will be payable in accordance with
their original schedule. All forms of compensation referred to in this Agreement
are subject to reduction to reflect applicable withholding and payroll taxes and
other deductions required by law. To the extent that any provision of this
Agreement is ambiguous as to its compliance with Section 409A, the provision
will be read in such a manner so that all payments hereunder comply with
Section 409A. To the extent any payment under this Agreement may be classified
as a “short-term deferral” within the meaning of Section 409A, such payment
shall be deemed a short-term deferral, even if it may also qualify for an
exemption from Section 409A under another provision of Section 409A.

3. Definitions. Capitalized terms used in this Agreement shall have the meanings
set forth in this Section 3.

3.1 “Cause” means Executive’s (a) failure to perform any reasonable and lawful
duty of Executive’s position or failure to follow the lawful written directions
of the Chief Executive Officer; (b) commission of an act that constitutes
misconduct and is injurious to the Company or any subsidiary; (c) conviction of,
or pleading “guilty” or “no contest” to, a felony under the laws of the United
States or any state thereof; (d) committing an act of fraud against, or the
misappropriation of property belonging to, the Company or any subsidiary;
(e) commission of an act of dishonesty in connection with Executive’s
responsibilities as an employee and affecting the business or affairs of the
Company; (f) breach of any confidentiality, proprietary information or other
agreement between Executive and the Company or any subsidiary; or (g) failure or
refusal to carry out the reasonable directives of the Company.

3.2 “Change of Control” means (a) any “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), other than a trustee or other fiduciary holding securities of
the Company under an employee benefit plan of the Company, becomes the
“beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 50%
or more of (A) the outstanding shares of common stock of the Company or (B) the
combined voting power of the Company’s then outstanding securities; (b) the
Company is party to a merger or consolidation which results in the voting
securities of the Company outstanding immediately prior thereto failing to
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or another entity) at least fifty
(50%) percent of the combined voting power of the voting securities of the
Company or such surviving or other entity outstanding immediately after such
merger or consolidation; (c) the sale or disposition of all or substantially all
of the Company’s assets (or consummation of any transaction having similar
effect); (d) the dissolution or liquidation of the Company; or (e) a change in
the composition of the Board of Directors of the Company, as a result of which
fewer than a majority of the directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who either (A) are directors of the Company as
of the date hereof, or (B) are elected, or

 

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nominated for election, to the Board with the affirmative votes of at least a
majority of those directors whose election or nomination was not in connection
with any transactions described in subsections (a), (b), (c) or (d) or in
connection with an actual or threatened proxy contest relating to the election
of directors of the Company.

3.3 “Company” means Cepheid and any successor or assign to substantially all the
business and/or assets of Cepheid.

3.4 “Diminution of Responsibilities” means the occurrence of any of the
following conditions, without Executive’s consent: (a) a significant diminution
in the nature or scope of Executive’s authority, title, function or duties from
Executive’s authority, title, function or duties in effect immediately preceding
any Change of Control; (b) a ten percent (10%) reduction in Executive’s base
salary or a twenty-five percent (25%) reduction in Executive’s target bonus
opportunity, if any, in effect immediately preceding any Change of Control (in
either case, unless such reduction is part of a Company officer-wide program to
reduce expenses); (c) the Company’s requiring Executive to be based at any
office or location more than 50 miles from the office where Executive was
employed immediately preceding the Change of Control; (d) any material breach of
the terms of this Agreement by the Company; or (e) failure of any successor or
assignee to the Company to assume this Agreement; provided, however, that
Executive shall provide notice to the Company within 90 days of the occurrence
of a condition listed above constituting a Diminution of Responsibilities and
allow the Company 30 days in which to cure such condition.

3.5 “Termination Upon Change of Control” means:

(a) any involuntary termination of the employment of Executive by the Company
without Cause within twelve (12) months following a Change of Control; or

(b) any resignation by Executive based on a Diminution of Responsibilities where
(i) such Diminution of Responsibilities occurs within twelve (12) months
following the Change of Control, and (ii) such resignation occurs within ninety
(90) days following such Diminution of Responsibilities.

4. Federal Excise Tax. If the payments and benefits provided for in this
Agreement constitute “parachute payments” within the meaning of the Internal
Revenue Code of 1986, as amended (the “Code”), but for this Section 4, would be
subject to the excise tax imposed by Section 4999 of the Code, then the payments
and benefits under this Agreement will be payable, at Executive’s election,
either in full or in such lesser amount as would result, after taking into
account the applicable federal, state and local income taxes and excise tax
imposed by Section 4999 of the Code, in Executive’s receipt on an after-tax
basis of the greatest amount of benefits. In the event Executive elects to
receive such lesser amount of the payments and benefits under this Agreement,
the payments and benefits shall be reduced in the following order: (A) a pro
rata reduction of (i) cash payments that are subject to Section 409A as deferred
compensation and (ii) cash payments not subject to Section 409A; (B) a pro rata
reduction of (i) employee benefits that are subject to Section 409A as deferred
compensation and (ii) employee benefits not subject to Section 409A; and (C) a
pro rata cancellation of (i) accelerated vesting of stock and other equity-based
awards that are subject to Section 409A as deferred compensation and (ii) stock
and other

 

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equity-based awards not subject to Section 409A. In the event that acceleration
of vesting of stock and other equity-based award compensation is to be reduced,
such acceleration of vesting shall be cancelled in the reverse order of the date
of grant of Executive’s stock and other equity-based awards unless Executive
elects in writing a different order for cancellation.

5. Release of Claims. The payments and benefits set forth in Sections 2.2 and
2.3 of this Agreement are subject to Executive’s delivery to the Company of a
signed release of claims in a form satisfactory to the Company and satisfaction
of all conditions to make such release effective within sixty (60) days
following the date of his Termination Upon Change of Control (the “Release”).

6. Agreement Not to Solicit. If Company performs its obligations to deliver the
severance compensation set forth in Sections 2.2 and 2.3 of this Agreement, then
for a period of one (1) year after Executive’s termination of employment,
Executive will not solicit any employee of the Company to discontinue that
person’s employment relationship with the Company.

7. Arbitration. Any claim, dispute or controversy arising out of this Agreement,
the interpretation, validity or enforceability of this Agreement or the alleged
breach thereof shall be submitted by the parties to binding arbitration by the
American Arbitration Association. The site of the arbitration proceeding shall
be in Santa Clara County, California, or another location mutually agreed to by
the parties.

8. Conflict in Benefits; Effect of Agreement. This Agreement shall supersede all
prior arrangements, whether written or oral, and understandings regarding
severance compensation following a Change of Control and shall be the exclusive
agreement for the determination of any severance compensation due upon
Executive’s termination of employment upon a Change of Control.

9. Miscellaneous.

9.1 Successors of the Company. The Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.

9.2 No Employment Agreement. This Agreement does not alter Executive’s at-will
employment status or obligate the Company to continue to employ Executive for
any specific period of time, or in any specific role or geographic location.

9.3 Modification of Agreement. This Agreement may be modified, amended or
superceded only by a written agreement signed by Executive and the Chief
Executive Officer.

9.4 Governing Law. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of California.

9.5 Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter of this
Agreement, and supersedes all prior understandings and agreements, whether oral
or written between or among the parties hereto with respect to the specific
subject matter hereof.

 

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EXECUTIVE     CEPHEID

 

    By:  

 

    Name:  

John L. Bishop

    Title:  

Chief Executive Officer

 

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