061603 S8 Exhibit 4.2



Exhibit 4.2

CEPHEID

1997 STOCK OPTION PLAN

(as amended on May
28, 2003)

1.PURPOSE.  The
purpose of this Plan is to provide incentives to attract, retain and motivate
eligible persons whose present and potential contributions are important to the
success of the Company, its Parent and Subsidiaries, by offering them an
opportunity to participate in the Company's future performance through awards of
Options.  Capitalized terms not defined in the text are defined in Section 22.

2.SHARES SUBJECT TO THE PLAN
.

2.1Number of Shares Available.  Subject to Sections 2.2 and 16,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan as of May 28, 2003, is 7,195,867 Shares plus (i) any
authorized shares not issued or subject to outstanding grants under the
Company's 2000 Non-Employee Directors' Stock Option (the "Directors'
Plan") on the date the Directors' Plan is terminated;
(ii) shares that are subject to issuance upon exercise of an option granted
under the Directors' Plan but cease to be subject to such option for any reason
other than exercise of such option; and (iii) shares that were issued under
the Directors' Plan which are repurchased by the Company at the original issue
price or forfeited.  Subject to Sections 2.2 and 16 hereof, Shares subject to
Options, and Shares issued upon exercise of Options, will again be available for
grant and issuance in connection with subsequent Options under this Plan to the
extent such Shares: (i) are repurchased by the Company at the original
issue price or forfeited on or after May 28, 2003; or (ii) cease to be
subject to issuance upon exercise of an Option, other than due to exercise of
such Option.  In addition, on each January 1 occurring after May 28, 2003, the
aggregate number of Shares reserved and available for grant and issuance
pursuant to this Plan will be increased automatically by a number of Shares
equal to the lesser of (i) 1,000,000 Shares, (ii) 3% of the total outstanding
shares of the Company as of January 1, or (iii) an amount determined by the
Board, provided that no more than 50,000,000 shares shall be issued as ISOs (as
defined in Section 5 below).  At all times the Company shall reserve and keep
available a sufficient number of Shares as shall be required to satisfy the
requirements of all outstanding Options granted under this Plan and all other
outstanding but unvested Options granted under this Plan.  

2.2Adjustment of Shares.  In the
event that the number or type of outstanding shares of the Company's Common
Stock is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number and
class of Shares reserved for issuance under this Plan, (b) the Exercise Prices
of outstanding Options, and (c) the number of Shares subject to outstanding
Options may, upon approval of the Board in its discretion, be proportionately
adjusted in compliance with applicable securities laws; provided,
however, that fractions of a Share will not be issued.

3.ELIGIBILITY.
ISOs (as defined in Section 5 below) may be granted only to employees (including
officers and directors who are also employees) of the Company or of a Parent or
Subsidiary of the Company.  All other Options may be granted to employees,
officers, directors, consultants, independent contractors and advisors of the
Company or any Parent or Subsidiary of the Company; provided such
consultants, independent contractors and advisors render bona fide services not
in connection with the offer and sale of securities in a capital-raising
transaction.  No person will be eligible to receive more than
one million five hundred thousand (1,500,000) Shares in any calendar year under
this Plan pursuant to the grant of Options hereunder, other than new employees
of the Company or of a Parent or Subsidiary of the Company (including new
employees who are also officers and directors of the Company or any Parent or
Subsidiary of the Company), who are eligible to receive up to a maximum of two
million (2,000,000) Shares in the calendar year in which they commence their
employment.  A person may be granted more than one
Option under this Plan.  

4.ADMINISTRATION.

4.1Committee Authority.  This Plan
will be administered by the Committee or by the Board acting as the Committee.
Except for automatic grants to Outside Directors pursuant to
Section 6 hereof, and subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan.  Except for automatic grants to Outside Directors pursuant to
Section 6 hereof, the Committee will have the
authority to:

(a)construe and interpret
this Plan, any Option Agreement and any other agreement or document executed
pursuant to this Plan; 

(b)prescribe, amend and
rescind rules and regulations relating to this Plan or any Option; 

(c)select persons to
receive Options;

(d)determine the form and
terms of Options;

(e)determine the number of
Shares or other consideration subject to Options;

(f)determine whether
Options will be granted singly, in combination with, in tandem with, in
replacement of, or as alternatives to, other Options under this Plan or any
other incentive or compensation plan of the Company or any Parent or Subsidiary
of the Company;

(g)grant waivers of Plan or
Option conditions;

(h)determine the vesting,
exercisability and payment of Options;

(i)correct any defect,
supply any omission or reconcile any inconsistency in this Plan, any Option or
any Option Agreement; 

(j)determine whether an
award has been earned; and

(k)make all other
determinations necessary or advisable for the administration of this
Plan.



4.2Committee Discretion.
Except for
automatic grants to Outside Directors pursuant to
Section 6 hereof, any determination made by the
Committee with respect to any Option will be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
this Plan or the Option, at any later time, and such determination will be final
and binding on the Company and on all persons having an interest in any Option
under this Plan.  The Committee may delegate to two or more directors of the Company the authority to grant
an Option under this Plan to Participants who are not Insiders of the
Company.

5.OPTIONS.  The
Committee may grant Options to eligible persons and will determine whether such
Options will be Incentive Stock Options within the meaning of the Code
("ISOs") or Nonqualified Stock Options
("NQSOs"), the number of Shares subject to the Option,
the Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:

5.1Form of Option Grant.
Each Option granted under this Plan will be evidenced by an Option Agreement
which will expressly identify the Option as an ISO or an NQSO ("Stock
Option Agreement"), and will be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.

5.2Date of Grant.  The date of
grant of an Option will be the date on which the Committee makes the
determination to grant such Option, unless otherwise specified by the Committee.
The Stock Option Agreement and a copy of this Plan will be delivered to the
Participant within a reasonable time after the granting of the Option.

5.3Exercise Period.  Options may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten
(10) years from the date the Option is granted; and provided further that
no ISO granted to a person who directly or by attribution owns more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any Parent or Subsidiary of the Company
("Ten Percent Shareholder") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted.  The Committee also may provide for Options to become exercisable at
one time or from time to time, periodically or otherwise, in such number of
Shares or percentage of Shares as the Committee determines.

5.4Exercise Price.  The Exercise
Price of an Option will be determined by the Committee when the Option is
granted; provided that: (i) the Exercise Price of an ISO will be not less than
100% of the Fair Market Value of the Shares on the date of grant; (ii) the Exercise Price of any ISO granted to a Ten Percent
Shareholder will not be less than 110% of the Fair Market Value of the Shares on
the date of grant; and (iii) the Exercise Price of an NQSO
will not be less than 85% of the Fair Market Value of the Shares on the date of
grant.  Payment for the Shares purchased may be made
in accordance with Section 7.


5.5Method of Exercise.  Options
may be exercised only by delivery to the Company of a written stock option
exercise agreement  (the "Exercise Agreement") in a
form approved by the Committee (which need not be the same for each
Participant), stating the number of Shares being purchased, the restrictions
imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding the Participant's investment intent and
access to information and other matters, if any, as may be required by or
desirable to the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.

5.6Termination.
Notwithstanding the exercise periods set forth in the Stock Option Agreement,
the exercise of an Option will always be subject to the following:

(a)If the Participant is
Terminated for any reason except the Participant's death or Disability, then the
Participant may exercise such Participant's Options only to the extent that such
Options would have been exercisable by the Participant on the Termination Date
no later than three (3) months after the Termination Date (or such shorter time
period not less than thirty (30) days or longer time period not exceeding five
(5) years as may be determined by the Committee, with any exercise beyond three
(3) months after the Termination Date deemed to be an NQSO), but in any event no
later than the expiration date of the Options.

(b)If the Participant is
Terminated because of Participant's death (or the Participant dies within three
(3) months after a Termination other than for Cause or because of the
Participant's Disability), then the Participant's Options may be exercised only
to the extent that such Options would have been exercisable by the Participant
on the Termination Date and must be exercised by the Participant (or the
Participant's legal representative or authorized assignee) no later than twelve
(12) months after the Termination Date (or such shorter time period not less
than six (6) months or longer time period not exceeding five (5) years as may be
determined by the Committee, with any exercise beyond (a) three (3) months after
the Termination Date when the Termination is for any reason other than the
Participant's death or Disability, or (b) twelve (12) months after the
Termination Date when the Termination is for the Participant's death or
Disability, deemed to be an NQSO), but in any event no later than the expiration
date of the Options.

(c)If the Participant is
Terminated because of Participant's Disability, then the Participant's Options
may be exercised only to the extent that such Options would have been
exercisable by the Participant on the Termination Date and must be exercised by
the Participant (or the Participant's legal representative or authorized
assignee) no later than six (6) months after the Termination Date, with any
exercise beyond (a) three (3) months after the Termination Date when the
Termination is for any reason other than the Participant's death or Disability,
or (b) twelve (12) months after the Termination Date when the Termination is for
the Participant's death or Disability, deemed to be an NQSO), but in any event
no later than the expiration date of the Options.

(d)If the Participant is
terminated for Cause, then Participant's Options shall expire on such
Participant's Termination Date, or at such later time and on such conditions as
are determined by the Committee.




5.7Limitations on Exercise.  The
Committee may specify a reasonable minimum number of Shares that may be
purchased on any exercise of an Option, provided that such minimum number will
not prevent any Participant from exercising the Option for the full number of
Shares for which it is then exercisable.

5.8Limitations on ISOs.  The
aggregate Fair Market Value (determined as of the date of grant) of Shares with
respect to which ISOs are exercisable for the first time by a Participant during
any calendar year (under this Plan or under any other incentive stock option
plan of the Company or any Parent or Subsidiary of the Company) will not exceed
$100,000.  If the Fair Market Value of Shares on the date of grant with respect
to which ISOs are exercisable for the first time by a Participant during any
calendar year exceeds $100,000, then the Options for the first $100,000 worth of
Shares to become exercisable in such calendar year will be ISOs and the Options
for the amount in excess of $100,000 that become exercisable in such calendar
year will be NQSOs.  In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date to provide for a different limit
on the Fair Market Value of Shares permitted to be subject to ISOs, such
different limit will be automatically incorporated herein and will apply to any
Options granted after the effective date of such amendment.

5.9Modification, Extension or R
enewal.  The Committee may modify, extend or renew outstanding Options and
authorize the grant of new Options in substitution therefor, provided that any
such action may not, without the written consent of a Participant, impair any of
such Participant's rights under any Option previously granted.  Any outstanding
ISO that is modified, extended, renewed or otherwise altered will be treated in
accordance with Section 424(h) of the Code.  The Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the
Exercise Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 for Options granted on the date the action is taken
to reduce the Exercise Price.

5.10No Disqualification.
Notwithstanding any other provision in this Plan, no term of this Plan relating
to ISOs will be interpreted, amended or altered, nor will any discretion or
authority granted under this Plan be exercised, so as to disqualify this Plan
under Section 422 of the Code or, without the consent of the Participant
affected, to disqualify any ISO under Section 422 of the Code.

6.AUTOMATIC GRANTS TO
OUTSIDE DIRECTORS.

6.1Types of Options and
Shares.  Options granted under this Plan and subject to this Section 6 shall
be NQSOs.

6.2Eligibility.
Options subject to this Section 6 shall be granted only to Outside Directors.
An Outside Director who is elected or reelected as a member of the Board will be
eligible to receive an option grant under this Section 6.

6.3Grant for Initial
Election or Appointment.  Each Outside Director who is first elected or
appointed as a member of the Board on or after the 2003 annual meeting of
shareholders will automatically be granted an option for 15,000 Shares (an
"Initial Election Grant") on the date such
Outside Director is first elected or appointed as a member of the Board.

6.4Annual Grants.  On the date of the first
meeting of the Board immediately following each annual meeting of shareholders
of the Company beginning with the 2003 annual meeting (even if held on the same
day as the meeting of shareholders), the Company shall grant each Outside
Director then in office for longer than six months, an option for 7,500 Shares
(an "Annual Grant").

6.5Discretionary Grant.
The Board may make discretionary grants to any Outside Director (a
"Discretionary Grant").

6.6Vesting and
Exercisability.  The date an Outside Director receives an Initial Election
Grant or an Annual Grant is referred to in this Plan as the "Start
Date" for such option.

(a)Initial Election
Grants.  Except as set forth in Section 16.4, each Initial Election Grant
will vest and become exercisable as to 5,000 of the Shares on each one-year
anniversary of the Start Date, so long as the Outside Director continuously
remains a director of the Company.  

(b)Annual Grants.  Except as set forth in Section
16.4, each Annual Grant will vest and become exercisable as to 7,500 of the
Shares on the one-year anniversary of the Start Date, so long as the Outside
Director continuously remains a director of the Company.  

(c)Discretionary
Grants.  Except as set forth in Section 16.4, Discretionary Grants shall
vest and be exercisable as determined by the Board.

6.7Exercise Price.  The
exercise price of an option grant to an Outside Director shall be the Fair
Market Value of the Shares at the time that the option is granted.

7.PAYMENT FOR SHARE PURCHASES
.

7.1Payment.  Payment for Shares purchased
pursuant to this Plan may be made in cash (by check) or, where expressly
approved for the Participant by the Committee and where permitted by
law:

(a)by cancellation of
indebtedness of the Company to the Participant;

(b)by surrender of shares that
either:  (1) have been owned by the Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares); or (2) were obtained by the Participant in
the public market;

(c)by waiver of compensation
due or accrued to the Participant for services rendered to the Company or a
Parent or Subsidiary of the Company;

(d)with respect only to
purchases upon exercise of an Option, and provided that a public market for the
Company's Common Stock exists: 

(1)through a "same day
sale" commitment from the Participant and a broker-dealer that is a member
of the National Association of Securities Dealers (an
"NASD Dealer") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased to pay for
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Company; or

(2)through a
"margin" commitment from the Participant and an NASD Dealer whereby
the Participant irrevocably elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; 



(e)by any combination
of the foregoing; or

(f)by any other method approved
by the Board.



8.WITHHOLDING TAXES.

8.1Withholding Generally.  Whenever Shares
are to be issued in satisfaction of Options granted under this Plan, the Company
may require the Participant to remit to the Company an amount sufficient to
satisfy federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such Shares.  Whenever, under
this Plan, payments in satisfaction of Options are to be made in cash, such
payment will be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.

8.2Stock Withholding.  When, under
applicable tax laws, a Participant incurs tax liability in connection with the
exercise or vesting of any Option that is subject to tax withholding and the
Participant is obligated to pay the Company the amount required to be withheld,
the Committee may in its sole discretion allow the Participant to satisfy the
minimum withholding tax obligation by electing to have the Company withhold from
the Shares to be issued that number of Shares having a Fair Market Value equal
to the minimum amount required to be withheld, determined on the date that the
amount of tax to be withheld is to be determined.  All elections by a
Participant to have Shares withheld for this purpose will be made in accordance
with the requirements established by the Committee and be in writing in a form
acceptable to the Committee.

9.TRANSFERABILITY.  

9.1General Rule.  Except as
otherwise provided in this Section 9, Options granted under this Plan, and any interest
therein, will not be transferable or assignable by any Participant, and may not
be made subject to execution, attachment or similar process, otherwise than by
will or by the laws of descent and distribution or as determined by the
Committee and set forth in the Option Agreement with respect to Options that are
not ISOs.

9.2All Options other than NQSOs.  All Options
other than NQSOs shall be exercisable: (i) during the Participant's lifetime
only by (A) the Participant, or (B) the Participant's guardian or legal
representative; and (ii) after the Participant's death, by the legal
representative of the Participant's heirs or legatees.

9.3NQSOs.  Unless otherwise restricted by the
Committee, an NQSO shall be exercisable: (i) during the Participant's lifetime
only by (A) the Participant, (B) the Participant's guardian or legal
representative, (C) a Family Member of the Participant who has acquired the
NQSO by "permitted transfer;" and (ii) after the Participant's death,
by the legal representative of the Participant's heirs or legatees.
"Permitted transfer" means, as authorized by this Plan
and the Committee in an NQSO, any transfer effected by the Participant during
the Participant's lifetime of an interest in such NQSO but only such transfers
which are by gift or domestic relations order.  A permitted transfer does not
include any transfer for value and neither of the following are transfers for
value:  (a) a transfer under a domestic relations order in settlement of
marital property rights or (b) a transfer to an entity in which more than fifty
percent of the voting interests are owned by Family Members or the Participant
in exchange for an interest in that entity.

10.PRIVILEGES OF STOCK OWNERSHI
P; RESTRICTIONS ON SHARES.

10.1Voting and Dividends.  No
Participant will have any of the rights of a shareholder with respect to any
Shares until the Shares are issued to the Participant.  After Shares are issued
to the Participant, the Participant will be a shareholder and have all the
rights of a shareholder with respect to such Shares, including the right to vote
and receive all dividends or other distributions made or paid with respect to
such Shares; provided, that if such Shares are restricted stock, then any
new, additional or different securities the Participant may become entitled to
receive with respect to such Shares by virtue of a stock dividend, stock split
or any other change in the corporate or capital structure of the Company will be
subject to the same restrictions as the restricted stock; provided,
further, that the Participant will have no right to retain such stock
dividends or stock distributions with respect to Shares that are repurchased at
the Participant's Exercise Price pursuant to Section 10.2.

10.2Restrictions on Shares.  At the discretion of
the Committee, the Company may reserve to itself and/or its assignee(s) a right
to repurchase (a "Right of Repurchase") a portion of or
all Unvested Shares held by a Participant following such Participant's
Termination at any time within ninety (90) days after the later of the
Participant's Termination Date and the date the Participant purchases Shares
under this Plan, for cash and/or cancellation of purchase money indebtedness, at
the Participant's Exercise Price, as the case may be.

11.CERTIFICATES.  All certificates for
Shares or other securities delivered under this Plan will be subject to such
stock transfer orders, legends and other restrictions as the Committee may deem
necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other
requirements of the SEC or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.

12.ESCROW; PLEDGE OF SHARES
.  To enforce any restrictions on a Participant's Shares, the Committee may
require the Participant to deposit all certificates representing Shares,
together with stock powers or other instruments of transfer approved by the
Committee, appropriately endorsed in blank, with the Company or an agent
designated by the Company to hold in escrow until such restrictions have lapsed
or terminated, and the Committee may cause a legend or legends referencing such
restrictions to be placed on the certificates.  Any Participant who is permitted
to execute a promissory note as partial or full consideration for the purchase
of Shares under this Plan will be required to pledge and deposit with the
Company all or part of the Shares so purchased as collateral to secure the
payment of the Participant's obligation to the Company under the promissory
note; provided, however, that the Committee may require or accept
other or additional forms of collateral to secure the payment of such obligation
and, in any event, the Company will have full recourse against the Participant
under the promissory note notwithstanding any pledge of the Participant's Shares
or other collateral.  In connection with any pledge of the Shares, the
Participant will be required to execute and deliver a written pledge agreement
in such form as the Committee will from time to time approve.  The Shares
purchased with the promissory note may be released from the pledge on a pro rata
basis as the promissory note is paid.

13.EXCHANGE AND BUYOUT OF 
AWARDS.  The Committee may, at any time or from time to time, authorize
the Company, with the consent of the respective Participants, to issue new
Options in exchange for the surrender and cancellation of any or all outstanding
Options.  The Committee may at any time buy from a Participant an Option
previously granted with payment in cash, Shares (including restricted stock) or
other consideration, based on such terms and conditions as the Committee and the
Participant may agree.

14.SECURITIES LAW AND OTHER&nbs
p;REGULATORY COMPLIANCE.  An Option will not be effective unless
such Option is in compliance with all applicable federal and state securities
laws, rules and regulations of any governmental body, and the requirements of
any stock exchange or automated quotation system upon which the Shares may then
be listed or quoted, as they are in effect on the date of grant of the Option
and also on the date of exercise or other issuance.  Notwithstanding any other
provision in this Plan, the Company will have no obligation to issue or deliver
certificates for Shares under this Plan prior to:  (a) obtaining any approvals
from governmental agencies that the Company determines are necessary or
advisable; and/or (b) completion of any registration or other qualification of
such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable.  The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.

15.
NO OBLIGATION TO EMPLOY
.  Nothing in this Plan or any Option granted under this Plan will confer or
be deemed to confer on any Participant any right to continue in the employ of,
or to continue any other relationship with, the Company or any Parent or
Subsidiary of the Company or limit in any way the right of the Company or any
Parent or Subsidiary of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.

16.
CORPORATE TRANSACTIONS.

16.1Dissolution or Liquidation.  Except for automatic grants to Outside Directors pursuant to
Section 6 hereof, in the event of the proposed
dissolution or liquidation of the Company, the Company shall notify the
Participant at least thirty (30) days prior to such proposed action. To the
extent it has not been previously exercised, all Options will terminate
immediately prior to the consummation of such proposed action.

16.2
Merger or Asset Sale.  Except for automatic grants to Outside Directors pursuant to
Section 6 hereof, in the event of a merger of
the Company with or into another corporation, or the sale of substantially all
of the assets of the Company:

(a)Options.  Each
Option shall be assumed or an equivalent option substituted by the successor
corporation (including as a "successor" any purchaser of substantially all of
the assets of the Company) or a parent or subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Option, the Participant shall have the right to exercise the
Option as to all of the shares of Common Stock covered by the Option, including
Shares as to which it would not otherwise be exercisable. If an Option is
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Company shall notify the Participant that the Option shall
be fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For
the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to purchase
or receive, for each share of Common Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its parent
entity, the Company may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Common Stock subject to the Option, to be solely common stock of the
successor corporation or its parent entity equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or sale of
assets.

(b)Shares Subject to
Right of Repurchase.  Any Shares subject to a Right of Repurchase of the
Company, as described in Section 10.2 herein, shall be exchanged for the consideration
(whether stock, cash, or other securities or property) received in the merger or
asset sale by the holders of Common Stock for each share held on the effective
date of the transaction, as described in the preceding paragraph.  If in such
exchange the Participant receives shares of stock of the successor corporation
or a parent or subsidiary of such successor corporation, and if the successor
corporation has agreed to assume or substitute for Options as provided in the
preceding paragraph, such exchanged shares shall continue to be subject to such
Right of Repurchase.  If, as provided in the preceding paragraph, the
Participant shall have the right to exercise an Option as to all of the shares
of Common Stock covered thereby, all Shares that are subject to a Right of
Repurchase of the Company shall be released from such Right of Repurchase and
shall be fully vested.

16.3Assumption of Options by the&
nbsp;Company.  The Company, from time to time, also may substitute or assume
outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either; (a) granting an
Option under this Plan in substitution of such other company's award; or (b)
assuming such award as if it had been granted under this Plan if the terms of
such assumed award could be applied to an Option granted under this Plan.  Such
substitution or assumption will be permissible if the holder of the substituted
or assumed award would have been eligible to be granted an Option under this
Plan if the other company had applied the rules of this Plan to such grant.  In
the event the Company assumes an award granted by another company, the terms and
conditions of such award will remain unchanged (except that the exercise
price and the number and nature of Shares issuable upon exercise of any such
option will be adjusted appropriately pursuant to Section 424(a) of the Code).
In the event the Company elects to grant a new Option rather than assuming an
existing option, such new Option may be granted with a similarly adjusted
Exercise Price.

16.4Outside Directors
Options.  Notwithstanding any provision to the contrary, in the event of a
dissolution or liquidation described in Section 16.1 or a merger or asset sale
described in Section 16.2, the vesting of all options granted to Outside
Directors pursuant to Section 6 of this Plan will accelerate and such options
will become exercisable in full prior to the consummation of such event at such
times and on such conditions as the Committee determines, and must be exercised,
if at all, within three (3) months of the consummation of said event.  Any
options not exercised within such three-month period shall expire.

17.ADOPTION AND SHAREHOLDER AP
PROVAL.  This Plan will become effective on the date on which the
registration statement filed by the Company with the SEC under the Securities
Act registering the initial public offering of the Company's Common Stock is
declared effective by the SEC (the
"Effective Date").  This Plan shall be approved by
the shareholders of the Company (excluding Shares issued pursuant to this Plan),
consistent with applicable laws, within twelve (12) months before or after the
date this Plan is adopted by the Board.  Upon the Effective Date, the Committee
may grant Options pursuant to this Plan; provided, however, that:
(a) no Option may be exercised prior to initial shareholder approval of this
Plan; (b) no Option granted pursuant to an increase in the number of Shares
subject to this Plan approved by the Board will be exercised prior to the time
such increase has been approved by the shareholders of the Company; (c) in the
event that initial shareholder approval is not obtained within the time period
provided herein, all Options granted hereunder shall be cancelled, any Shares
issued pursuant to any Options shall be cancelled, and any purchase of Shares
issued hereunder shall be rescinded; and (d) in the event that shareholder
approval of such increase shall not be obtained within the time period provided
herein, all Options granted pursuant to such increase shall be cancelled, any
Shares issued pursuant to any Options granted pursuant to such increase will be
cancelled, and any purchase of Shares pursuant to such increase shall be
rescinded.

18.TERM OF PLAN/GOVERNING
LAW.  Unless earlier terminated as provided herein, this Plan will
terminate ten (10) years from the date this Plan is adopted by the Board or, if
earlier, the date of shareholder approval.  This Plan and all agreements
thereunder shall be governed by and construed in accordance with the laws of the
State of California.

19.AMENDMENT OR TERMINATION OF
 PLAN.  The Board may at any time terminate or amend this Plan in
any respect, including, without limitation, amendment of any form of Option
Agreement or instrument to be executed pursuant to this Plan; provided,
however, that the Board will not, without the approval of the
shareholders of the Company, amend this Plan in any manner that requires such
shareholder approval; provided further, that a Participant's Option shall
be governed by the version of this Plan then in effect at the time such Option
was granted.  

20.
NONEXCLUSIVITY OF THE PLAN
.  Neither the adoption of this Plan by the Board, the submission of this
Plan to the shareholders of the Company for approval, nor any provision of this
Plan will be construed as creating any limitations on the power of the Board to
adopt such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and bonuses
otherwise than under this Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.

21.INSIDER
TRADING POLICY.  Each Participant who receives an Option shall comply
with any policy adopted by the Company from time to time covering transactions
in the Company's securities by employees, officers and/or directors of the
Company.

22.DEFINITIONS.  As used in this
Plan, the following terms will have the following meanings:

"Board" means the Board of
Directors of the Company.

"Cause" means (a) the
commission of an act of theft, embezzlement, fraud, dishonesty, (b) a breach of
fiduciary duty to the Company or a Parent or Subsidiary of the Company, or (c) a
failure to materially perform the customary duties of employee's employment.

"Code"
means the Internal Revenue Code of 1986, as amended.

"Committee" means the
Compensation Committee of the Board or those persons to whom administration of
the Plan, or part of the Plan, has been delegated as permitted by law. 

"Company" means Cepheid or
any successor corporation.

"Disability" means a
disability, whether temporary or permanent, partial or total, as determined by
the Committee. 

"Exchange Act" means
the Securities Exchange Act of 1934, as amended.

"Exercise Price" means
the price at which a holder of an Option may purchase the Shares issuable upon
exercise of the Option.

"Fair Market Value"
means, as of any date, the value of a share of the Company's Common Stock
determined as follows:

(a)if such Common Stock is
then quoted on the Nasdaq National Market, its closing price on the Nasdaq
National Market on the date of determination (or if there are no sales for such
date, then the last preceding business day on which there were sales) as
reported in The Wall Street Journal;

(b)if such Common Stock is
publicly traded and is then listed on a national securities exchange, its
closing price on the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported
in The Wall Street Journal;

(c)if such Common Stock is
publicly traded but is not quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange, the average of the
closing bid and asked prices on the date of determination as reported in The
Wall Street Journal;

(d)in the case of an Option
made on the Effective Date, the price per share at which shares of the Company's
Common Stock are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's Common Stock
pursuant to a registration statement filed with the SEC under the Securities
Act;  or

(e)if none of the foregoing is
applicable, by the Committee in good faith.



"Family
Member" includes any of the following:

(a)child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law of the Participant, including any such person with such
relationship to the Participant by adoption;  

(b)any person (other than a tenant
or employee) sharing the Participant's household;

(c)a trust in which the persons in
(a) and (b) have more than fifty percent of the beneficial interest;

(d)a foundation in which the
persons in (a) and (b) or the Participant control the management of assets;
or

(e)any other entity in which the
persons in (a) and (b) or the Participant own more than fifty percent of the
voting interest.



"Insider" means an officer
or director of the Company or any other person whose transactions in the
Company's Common Stock are subject to Section 16 of the Exchange Act.

"Option" means an award of
an option to purchase Shares pursuant to Section 5.

"Option Agreement"
means, with respect to each Option, the signed written agreement between the
Company and the Participant setting forth the terms and conditions of the
Option.

"Outside
Director" means a member of the Board who is not an employee of the
Company or any Parent or Subsidiary.

"Parent" means any
corporation (other than the Company) in an unbroken chain of corporations ending
with the Company if each of such corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

"Participant" means a person
who receives an Option under this Plan.

"Plan" means
this Cepheid 1997 Stock Option Plan, as amended from time to time.

"SEC"
means the Securities and Exchange Commission.

"Securities Act" means
the Securities Act of 1933, as amended.

"Shares" means shares of the
Company's Common Stock reserved for issuance under this Plan, as adjusted
pursuant to Sections 2 and 16, and any successor security.

"Subsidiary" means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

"Termination" or
"Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of
absence approved by the Committee; provided, that such leave is for a
period of not more than 90 days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute or unless provided otherwise pursuant
to formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing.  In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Option while on leave from the employ of the Company or a
Parent or Subsidiary of the Company as it may deem appropriate, except that in
no event may an Option be exercised after the expiration of the term set forth
in the Stock Option Agreement.  The Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the
"Termination Date").

"Unvested
Shares" means "Unvested Shares" as defined in the Option Agreement.