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                                                                    EXHIBIT 10.3

                             1997 STOCK OPTION PLAN
                                       OF
                                     CEPHEID

     1.   PURPOSES OF THE PLAN.

          The purposes of the 1997 Stock Option Plan (the "Plan") of Cepheid, a
California corporation (the "Company"), are to:

          (a)  Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;

          (b)  Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or its Affiliates; and

          (c)  Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").

          Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").

     2.   ELIGIBLE PERSONS.

          Every person who at the date of grant of an Option is a full-time
employee of the Company or of any Affiliate (as defined below) of the Company is
eligible to receive NQOs or ISOs under this Plan. Every person who at the date
of grant is a consultant to, or non-employee director of, the Company or any
Affiliate (as defined below) of the Company is eligible to receive NQOs under
this Plan. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.

     3.   STOCK SUBJECT TO THIS PLAN.

          Subject to the provisions of Section 6.1.1 of the Plan, the total
number of shares of stock which may be issued under options granted pursuant to
this Plan shall not exceed 2,000,000 shares of Common Stock. The shares covered
by the portion of any grant under the Plan which expires unexercised shall
become available again for grants under the Plan.

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     4.   ADMINISTRATION.

          (a)  This Plan shall be administered by the Board of Directors of the
Company (the "Board") or, either in its entirety or only insofar as required
pursuant to Section 4(b) hereof, by a committee (the "Committee") of at least
two Board members to which administration of the Plan, or of part of the Plan,
is delegated (in either case, the "Administrator").

          (b)  From and after such time as the Company registers a class of
equity securities under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), it is intended that this Plan shall be
administered in accordance with the disinterested administration requirements of
Rule 16b-3 promulgated by the Securities and Exchange Commission ("Rule 16b-3"),
or any successor rule thereto.

          (c)  Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its discretion: (i) to grant Options; (ii) to
determine the fair market value of the Common Stock subject to Options; (iii) to
determine the exercise price of Options granted; (iv) to determine the persons
to whom, and the time or times at which, Options shall be granted, and the
number of shares subject to each Option; (v) to interpret this Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to this Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.

          (d)  All questions of interpretation, implementation, and application
of this Plan shall be determined by the Administrator. Such determinations shall
be final and binding on all persons.

          (e)  With respect to persons subject to Section 16 of the Exchange
Act, if any, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent any provision of this Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.

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     5.   GRANTING OF OPTIONS; OPTION AGREEMENT.

          (a)  No Options shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board.

          (b)  Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Company, executed by the Company and the
person to whom such Option is granted; provided, however, that the failure by
the Company, the optionee, or both to execute such an agreement shall not
invalidate the granting of an Option, although the exercise of each option shall
be subject to Section 6.1.3.

          (c)  The stock option agreement shall specify whether each Option it
evidences is an NQO or an ISO.

          (d)  Subject to Section 6.3.3 with respect to ISOs, the Administrator
may approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval.

     6.   TERMS AND CONDITIONS OF OPTIONS.

          Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.

          6.1  Terms and Conditions to Which All Options Are Subject. All
Options granted under this Plan shall be subject to the following terms and
conditions:

               6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, or recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Board in (a) the number and class
of shares of stock subject to this Plan and each Option outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, however,
that the Company shall not be required to issue fractional shares as a result of
any such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.

               6.1.2 Corporate Transactions.

                    (a)  Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify the Optionee 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.

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                    (b)  Merger or Asset Sale. 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:

                         (i)  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
Optionee 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 Administrator shall
notify the Optionee 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 Administrator 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.

                         (ii) Shares Subject to Right of Repurchase. Any Shares
subject to a Right of Repurchase of the Company 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 Optionee 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 a Right of Repurchase as provided in the Optionee's Stock Option Plan stock
purchase agreement. If, as provided in the preceding paragraph, the Optionee
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.

               6.1.3 Time of Option Exercise. Subject to Section 5 and Section
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the stock option agreement granting the Option, or (b)
in accordance with a schedule related to the date of the grant of the Option,
the date of first employment, or such other date as may be set by the
Administrator (in any case, the "Vesting Base Date") and specified in the
written stock option agreement relating to such Option; provided, however, that
the right to

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exercise an Option must vest at the rate of at least 20% per year over five
years from the date the Option was granted. In any case, no Option shall be
exercisable until a written stock option agreement in form satisfactory to the
Company is executed by the Company and the optionee.

               6.1.4 Option Grant Date. Except in the case of advance approvals
described in Section 5(d), the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.

               6.1.5 Nonassignability of Option Rights. No Option granted under
this Plan shall be assignable or otherwise transferable by the optionee except
by will or by the laws of descent and distribution. During the life of the
optionee, an Option shall be exercisable only by the optionee.

               6.1.6 Payment. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize any one or more of
the following additional methods of payment:

                    (a)  Acceptance of the optionee's full recourse promissory
note for all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no additional interest
would be imputed), which promissory note may be either secured or unsecured in
such manner as the Administrator shall approve (including, without limitation,
by a security interest in the shares of the Company); and

                    (b)  Delivery by the optionee of Common Stock already owned
by the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.

               6.1.7 Termination of Employment.

                    (a)  If for any reason other than death or disability, an
optionee ceases to be employed by the Company or any of its Affiliates (such
event being called a "Termination"), Options held at the date of Termination (to
the extent then exercisable) may be exercised in whole or in part at any time
within three months of the date of such Termination, or such other period of not
less than thirty days after the date of such Termination as is specified in the
Option Agreement (but in no event after the Expiration Date); provided, that if
such exercise of the Option would result in liability for the optionee under
Section 16(b) of the Exchange Act, then such three-month period automatically
shall be extended until the tenth day following the

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last date upon which optionee has any liability under Section 16(b) (but in no
event after the Expiration Date).

                    (b)  If an optionee dies while employed by the Company or an
Affiliate or within the period that the Option remains exercisable after
Termination, Options then held (to the extent then exercisable) may be
exercised, in whole or in part, by the optionee, by the optionee's personal
representative, or by the person to whom the Option is transferred by devise or
the laws of descent and distribution, at any time within twelve months after the
death of the optionee, or such other period of not less than six months from the
date of Termination as is specified in the Option Agreement (but in no event
after the Expiration Date).

                    (c)  If an optionee ceases to be employed by the Company as
a result of his or her disability, the optionee may, but only within six (6)
months from the date of Termination (and in no event after the Expiration Date),
exercise the Option to the extent otherwise entitled to exercise it at the date
of Termination; provided, however, that if such disability is not a "disability"
as such term is defined in Section 22(e)(3) of the Code, in the case of an ISO
such ISO shall automatically convert to an NQO on the day three months and one
day following such Termination. To the extent that the optionee was not entitled
to exercise the Option at the date of Termination or if the optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

                    (d)  For purposes of this Section 6.1.7, "employment"
includes service as a director or as a consultant. For purposes of this Section
6.1.7, an optionee's employment shall not be deemed to terminate by reason of
sick leave, military leave, or other leave of absence approved by the
Administrator, if the period of any such leave does not exceed 90 days or, if
longer, if the optionee's right to reemployment by the Company or any Affiliate
is guaranteed either contractually or by statute.

               6.1.8 Repurchase of Stock. At the option of the Administrator,
the stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase either:

                    (a)  shall be at the Option exercise price and (i) shall
lapse at the rate of at least 20% per year over five years from the date the
Option is granted (without regard to the date it becomes exercisable), and must
be exercised for cash or cancellation of purchase money indebtedness within 90
days of such termination and (ii) if the right is assignable by the Company, the
assignee must pay the Company upon assignment of the right (unless the assignee
is a 100% owned subsidiary of the Company or is an Affiliate) cash equal to the
difference between the Option exercise price and the value (determined as set
forth in Section 6.1.11) of the stock to be purchased if the Option exercise
price is less than such value; or

                    (b)  shall be at the higher of the Option exercise price or
the value (determined as set forth in Section 6.1.11) of the stock being
purchased on the date of

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termination, and must be exercised for cash or cancellation of purchase money
indebtedness within 90 days of termination of employment, and such right shall
terminate when the Company's securities become publicly traded.

          Determination of the number of shares subject to any such right of
repurchase shall be made as of the date the employee's employment by, director's
director relationship with, or consultant's consulting relationship with, the
Company terminates, not as of the date that any Option granted to such employee,
director or consultant is thereafter exercised.

               6.1.9 Withholding and Employment Taxes. At the time of exercise
of an Option or at such other time as the amount of such obligations becomes
determinable (the "Tax Date"), the optionee shall remit to the Company in cash
all applicable federal and state withholding and employment taxes. If authorized
by the Administrator in its sole discretion after considering any tax or
accounting consequences, an optionee may elect to (i) deliver a promissory note
on such terms as the Administrator deems appropriate, (ii) tender to the Company
previously owned shares of Stock or other securities of the Company, or (iii)
have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company to pay some or all of the amount of tax that is required
by law to be withheld by the Company as a result of the exercise of such Option,
subject to the following limitations:

                    (a)  Any election pursuant to clause (iii) above by an
optionee subject to Section 16 of the Exchange Act shall either (x) be made at
least six months before the Tax Date and shall be irrevocable; or (y) shall be
made in (or made earlier to take effect in) any ten-day period beginning on the
third business day following the date of release for publication of the
Company's quarterly or annual summary statements of earnings and shall be
subject to approval by the Administrator, which approval may be given at any
time after such election has been made. In addition, in the case of (y), the
Option shall be held at least six months prior to the Tax Date.

                    (b)  Any election pursuant to clause (ii) above, where the
optionee is tendering Common Stock issued pursuant to the exercise of an Option,
shall require that such shares be held at least six months prior to the Tax
Date.

          Any of the foregoing limitations may be waived (or additional
limitations may be imposed) by the Administrator, in its sole discretion, if the
Administrator determines that such foregoing limitations are not required (or
that such additional limitations are required) in order that the transaction
shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3,
or any successor rule thereto. In addition, any of the foregoing limitations may
be waived by the Administrator, in its sole discretion, if the Administrator
determines that Rule 16b-3, or any successor rule thereto, is not applicable to
the exercise of the Option by the optionee or for any other reason.

          Any securities tendered or withheld in accordance with this Section
6.1.9 shall be valued by the Company as of the Tax Date.

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               6.1.10 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code. If Options provide for a right of first refusal in favor of the
Company with respect to stock acquired by employees, directors or consultants,
such Options shall provide that the right of first refusal shall terminate upon
the earlier of (i) the closing of the Company's initial registered public
offering to the public generally, or (ii) the date ten years after the grant
date as set forth in Section 6.1.4.

               6.1.11 Determination of Value. For purposes of the Plan, the
value of Common Stock or other securities of the Company shall be determined as
follows:

                    (a)  If the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, its fair market value shall be the
closing sales price for such stock or the closing bid if no sales were reported,
as quoted on such system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there are no sales for such date, then for
the last preceding business day on which there were sales), as reported in the
Wall Street Journal or similar publication.

                    (b)  If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).

                    (c)  In the absence of an established market for the stock,
the fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.

               6.1.12 Option Term. Subject to Section 6.3.5, no Option shall be
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the stock option agreement is referred to in this Plan
as the "Expiration Date").

               6.1.13 Exercise Price. The exercise price of any Option granted
to any person who owns, directly or by attribution under the Code currently
Section 424(d), stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of any Affiliate (a "Ten
Percent Stockholder") shall in no event be less than 110% of the fair market
value (determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.

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          6.2  Terms and Conditions to Which Only NQOs Are Subject. Options
granted under this Plan which are designated as NQOs shall be subject to the
following terms and conditions:

               6.2.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of an NQO shall be not less than 85% of the fair market value
(determined in accordance with Section 6.1.11) of the stock subject to the
Option on the date of grant.

          6.3  Terms and Conditions to Which Only ISOs Are Subject. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:

               6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.

               6.3.2 Disqualifying Dispositions. If stock acquired by exercise
of an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.

               6.3.3 Grant Date. If an ISO is granted in anticipation of
employment as provided in Section 5(d), the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.

               6.3.4 Vesting. Notwithstanding any other provision of this Plan,
ISOs granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 in fair market value of stock
(measured on the grant dates(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, and unless otherwise provided by the Administrator, the vesting
limitation described above shall be applied by deferring the exercisability of
those ISOs or portions of ISOs which have the highest per share exercise prices;
but in no event shall more than $100,000 in fair market value of stock (measured
on the grant date(s)) vest in any calendar year. The ISOs or portions of ISOs
whose exercisability is so deferred shall become exercisable on the first day of
the first subsequent calendar year during which they may be exercised, as
determined by applying these same principles and all other provisions of this
Plan including those relating to the expiration and termination of ISOs. In no
event, however, will the operation of this Section 6.3.4 cause an ISO to vest
before its terms or, having vested, cease to be vested.

               6.3.5 Term. Notwithstanding Section 6.1.12, no ISO granted to any
Ten Percent Stockholder shall be exercisable more than five years after the date
of grant.

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     7.   MANNER OF EXERCISE.

          (a)  An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.1.6. The date the Company
receives written notice of an exercise hereunder accompanied by payment of the
exercise price will be considered as the date such Option was exercised.

          (b)  Promptly after receipt of written notice of exercise of an
Option, the Company shall, without stock issue or transfer taxes to the optionee
or other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a shareholder with respect to any shares of stock covered by the
Option until the date of issuance (as evidenced by the appropriate entry on the
books of the Company or a duly authorized transfer agent) of such shares.

     8.   EMPLOYMENT OR CONSULTING RELATIONSHIP.

          Nothing in this Plan or any Option granted thereunder shall interfere
with or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.

     9.   FINANCIAL INFORMATION.

          The Company shall provide to each optionee during the period such
optionee holds an outstanding Option, and to each holder of Common Stock
acquired upon exercise of Options granted under the Plan for so long as such
person is a holder of such Common Stock, annual financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall include, at a
minimum, a balance sheet and an income statement, and shall be delivered as soon
as practicable following the end of the Company's fiscal year.

     10.  CONDITIONS UPON ISSUANCE OF SHARES.

          Shares of Common Stock shall not be issued pursuant to the exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").

     11.  NONEXCLUSIVITY OF THE PLAN.

          The adoption of the Plan shall not be construed as creating any
limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.

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     12.  MARKET STANDOFF.

          Each Optionee, if so requested by the Company or any representative of
the underwriters in connection with any registration of the offering of any
securities of the company under the Securities Act shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first two registration statements of the Company to
become effective under the Securities Act which includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until the end of such
180-day period.

     13.  AMENDMENTS TO PLAN.

          The Board may at any time amend, alter, suspend or discontinue this
Plan. Without the consent of an optionee, no amendment, alteration, suspension
or discontinuance may adversely affect outstanding Options except to conform
this Plan and ISOs granted under this Plan to the requirements of federal or
other tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
shareholder approval is advisable.

     14.  EFFECTIVE DATE OF PLAN.

          This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the shareholders of the Company, or approval of shareholders of the Company
voting at a validly called shareholders' meeting, is obtained within 12 months
after adoption by the Board. If such shareholder approval is not obtained within
such time, Options granted hereunder shall terminate and be of no force and
effect from and after expiration of such 12-month period. Options may be granted
and exercised under this Plan only after there has been compliance with all
applicable federal and state securities laws.

Plan adopted by the Board of Directors on:  January 31, 1997

Plan approved by Shareholders on:           January 31, 1997

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                                                                    EXHIBIT 10.4

                                     CEPHEID

                        2000 EMPLOYEE STOCK PURCHASE PLAN

     1.   Purpose. This Plan is intended to provide Employees of the Company and
its Designated Subsidiaries an opportunity to purchase Common Stock through
accumulated payroll deductions.

     2.   Definitions.

          (a)  "Administrator" means the Board or the persons appointed by the
Board to administer this Plan pursuant to Section 13.

          (b)  "Board" means the Board of Directors of the Company.

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

          (d)  "Common Stock" means the Common Stock of the Company.

          (e)  "Company" means Cepheid, a California corporation.

          (f)  "Compensation" means all regular, straight-time gross earnings of
a Participant, including commissions but exclusive of payments for overtime,
shift premium, incentive compensation, incentive payments, bonuses and other
compensation.

          (g)  "Continuous Employment" means the absence of any interruption or
termination of service as an Employee. Continuous Employment shall not be
considered interrupted in the case of a leave of absence agreed to in writing by
the Company, provided that either (i) the leave does not exceed 90 days or (ii)
re-employment upon expiration of the leave is guaranteed by contract or statute.

          (h)  "Designated Subsidiaries" means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion to participate
in this Plan.

          (i)  "Employee" means any person, including an officer, who is
employed for at least 20 hours per week by the Company or one of its Designated
Subsidiaries during at least 22 weeks in any calendar year. Whether an
individual qualifies as an Employee shall be determined by the Administrator, in
its sole discretion, by reference to Section 3401(c) of the Code and the
regulations promulgated thereunder; unless the Administrator makes a contrary
determination, the Employees of the Company shall, for all purposes of this
Plan, be those individuals who satisfy the customary employment criteria set
forth above and are carried as employees by the Company or a Designated
Subsidiary for regular payroll purposes.

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          (j)  "Purchase Date" means such business days during each Offering
Period of this Plan as may be identified by the Administrator pursuant to
Section 8.

          (k)  "Interim Offering Date" means the first business day following a
Purchase Date other than the last Purchase Date of an Offering Period.

          (l)  "Offering Date" means the first business day of an Offering
Period.

          (m)  "Offering Period" means a period established by the Administrator
pursuant to Section 4 during which payroll deductions are accumulated from one
or more Participants and applied to the purchase of Common Stock.

          (n)  "Participant" means an Employee who has elected to participate in
this Plan pursuant to Section 5.

          (o)  "Plan" means this Cepheid 2000 Employee Stock Purchase Plan.

          (p)  "Purchase Right" means a right to purchase Common Stock granted
               pursuant to Section 7.

          (q)  "Subsidiary" means, from time to time, any corporation, domestic
or foreign, of which not less than 50% of the voting shares are held by the
Company or another Subsidiary of the Company.

     3.   Eligibility.

          (a)  Regular Participation. Any person who is, or will be, an Employee
on an Offering Date shall be eligible to participate in this Plan during the
corresponding Offering Period, subject to the requirements of Section 5(a).

          (b)  Interim Participation. Any person who becomes an Employee after
an Offering Date shall be eligible to participate in this Plan during the
corresponding Offering Period, but only on and beginning with the first Interim
Offering Date.

          (c)  No Participation by Five-Percent Stockholders. Notwithstanding
paragraphs (a) and (b) of this Section 3, an Employee shall not participate in
this Plan during an Offering Period if immediately after the grant of a Purchase
Right on the Offering Date or Interim Offering Date, the Employee (or any other
person whose stock would be attributed to the Employee under Section 424(d) of
the Code) would own stock possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company or of any
Subsidiary. For this purpose, an Employee is treated as owning stock that he or
she could purchase by exercise of Purchase Rights or other options.

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     4.   Offering Periods.

          Unless otherwise determined by the Administrator:

          (a)  the first Offering Period under this Plan shall begin on the
first business day before the effective date of a firmly underwritten initial
public offering of Common Stock and shall end on the last business day of June
2002;

          (b)  the duration of each Offering Period (other than the first
Offering Period) shall be 24 months (measured from the first business day of the
first month to the last business day of the 12th month);

          (c)  a new Offering Period shall begin on the first business day after
the last Purchase Date of an Offering Period; and

          (d)  an Offering Period shall terminate on the first date that no
Participants are enrolled in it.

     5.   Participation.

          (a)  An Employee may become a Participant in this Plan by completing a
subscription agreement, in such form or forms as the Administrator may approve
from time to time, and delivering it to the Administrator within 15 days before
the applicable Offering Date or Interim Offering Date, unless another time for
filing the subscription agreement is set by the Administrator for all Employees
with respect to a given Offering Period. The subscription agreement shall
authorize payroll deductions pursuant to this Plan and shall have such other
terms as the Administrator may specify from time to time.

          (b)  At the end of an Offering Period, each Participant in the
Offering Period who remains an Employee shall be automatically enrolled in the
next succeeding Offering Period (a "Re-enrollment") unless, in a manner and at a
time specified by the Administrator, but in no event later than the day before
the Offering Date of such succeeding Offering Period, the Participant notifies
the Administrator in writing that the Participant does not wish to be
re-enrolled. Re-enrollment shall be at the withholding percentage specified in
the Participant's most recent subscription agreement unless the Participant
changes that percentage by timely written notice. No Participant shall be
automatically re-enrolled whose participation has terminated by operation of
Section 10.

     6.   Payroll Deductions.

          (a)  Each Participant shall have withheld a percentage of his or her
Compensation received during an Offering Period. Withholding shall be in whole
percentages of such Compensation, up to a maximum (not to exceed 15%)
established by the Administrator from time to time, as specified by the
Participant in his or her subscription agreement. Payroll deductions for a
Participant during an Offering Period shall begin with the first payroll
following

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the Offering Date or Interim Offering Date and shall end on the last Purchase
Date of the Offering Period, unless sooner terminated by the Participant as
provided in Section 10.

          (b)  All payroll deductions made by a Participant shall be credited to
the Participant's account under this Plan. A Participant may not make any
additional payments into such account.

          (c)  A Participant may reduce the rate of his or her payroll
deductions to 0% at any time during an Offering Period, effective 15 days after
the Participant files with the Administrator a new subscription agreement
authorizing the change. A Participant may make other changes to the rate of his
or her payroll deductions during an Offering Period effective the day after the
first Purchase Date that is at least 15 days after the Administrator's receipt
of a new subscription agreement authorizing the change.

     7.   Purchase Rights.

          (a)  Grant of Purchase Rights. On the Offering Date, or (if
applicable) Interim Offering Date of each Offering Period, the Participant shall
be granted a Purchase Right to purchase during the Offering Period the number of
shares of Common Stock determined by dividing (i) $25,000 multiplied by the
number of (whole or part) calendar years in the Offering Period by (ii) the fair
market value of a share of Common Stock on the Offering Date or Interim Offering
Date.

          (b)  Terms of Purchase Rights. Except as otherwise determined by the
Administrator, each Purchase Right shall have the following terms:

               (i)   The per-share price of the shares subject to a Purchase
                     Right shall be 85% of the lower of the fair market values
                     of a share of Common Stock on (a) the Offering Date, or
                     Interim Offering Date, on which the Purchase Right was
                     granted and (b) the Purchase Date. The fair market value of
                     the Common Stock on a given date shall be the closing price
                     as reported in the Wall Street Journal; provided, however,
                     that if there is no public trading of the Common Stock on
                     that date, then fair market value shall be determined by
                     the Administrator in its discretion.

               (ii)  Payment for shares purchased by exercise of Purchase Rights
                     shall be made only through payroll deductions under Section
                     6.

               (iii) Upon purchase or disposition of shares acquired by exercise
                     of a Purchase Right, the Participant shall pay, or make
                     provision adequate to the Administrator for payment of, all
                     tax (and similar) withholdings that the Administrator
                     determines, in its discretion, are required due to the
                     acquisition or disposition, including without limitation
                     any such withholding that the Administrator determines in
                     its discretion is necessary to allow the Company and its

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                     Subsidiaries to claim tax deductions or other benefits in
                     connection with the acquisition or disposition.

               (iv)  During his or her lifetime, a Participant's Purchase Right
                     is exercisable only by the Participant.

               (v)   The Purchase Rights will in all respects be subject to the
                     terms and conditions of this Plan, as interpreted by the
                     Administrator from time to time.

     8.   Purchase Dates; Purchase of Shares; Refund of Excess Cash.

          (a)  The Administrator shall establish one or more Purchase Dates for
each Offering Period. Unless otherwise determined by the Administrator,

               (i)   the last business days of December 2000, June 2001,
                     December 2001 and June 2002 shall be the Purchase Dates of
                     the initial Offering Period under this Plan, and

               (ii)  the last trading day of each December and June during a
                     subsequent Offering Period shall be a Purchase Date.

          (b)  Each Participant's Purchase Right shall be exercised
automatically on each Purchase Date during the Offering Period, to purchase the
maximum number of full shares at the applicable price using the Participant's
accumulated payroll deductions.

          (c)  The shares purchased upon exercise of a Purchase Right shall be
deemed to be transferred to the Participant on the Purchase Date.

          (d)  Any cash remaining in a Participant's payroll deduction account
after the purchase of shares on a Purchase Date shall be carried forward in that
account for application on the next Purchase Date; provided that upon
termination of an Offering Period, any such cash shall be promptly refunded to
the Participant.

     9.   Registration and Delivery of Share Certificates.

          (a)  Shares purchased by a Participant under this Plan will be
registered in the name of the Participant, or in the name of the Participant and
his or her spouse, or in the name of the Participant and joint tenant(s) (with
right of survivorship), as designated by the Participant.

          (b)  As soon as administratively feasible after each Purchase Date,
the Company shall deliver to the Participant a certificate representing the
shares purchased upon exercise of a Purchase Right. If approved by the
Administrator in its discretion, the Company may instead (i) deliver a
certificate (or equivalent) to a broker for crediting to the Participant's
account or (ii) make a notation in the Participant's favor of non-certificated
shares on the Company's stock records.

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     10.  Withdrawal; Termination of Employment.

          (a)  A Participant may withdraw all, but not less than all, the
payroll deductions credited to his account under this Plan at any time before a
Purchase Date by giving written notice to the Administrator in a form the
Administrator prescribes from time to time. The Participant's Purchase Right
will automatically terminate on the date of receipt of the notice, all payroll
deductions credited to the Participant's account will be refunded promptly
thereafter, and no further payroll deductions will be made during the Offering
Period.

          (b)  Upon termination of a Participant's Continuous Employment for any
reason, including retirement or death, the payroll deductions credited to the
Participant's account will be promptly refunded to the Participant or, in the
case of death, to the person or persons entitled thereto under Section 14 of
this Plan, and the Participant's Purchase Right will automatically terminate.

          (c)  A Participant's withdrawal from an offering will not affect the
Participant's eligibility to participate in a succeeding offering or in any
similar plan that may be adopted by the Company.

     11.  Use of Funds; No Interest.

          Amounts withheld from Participants' Compensation under this Plan shall
constitute general funds of the Company, may be used for any corporate purpose,
and need not be segregated from other funds. No interest shall accrue on a
Participant's payroll deductions.

     12.  Number of Shares Reserved.

          (a)  The following number of shares of Common Stock are reserved for
issuance under this Plan, and such number may be issued at any time before
termination of this Plan:

               (i)   Beginning the date of approval of this Plan by the
                     stockholders of the Company, 200,000 shares of Common
                     Stock; and

               (ii)  Beginning the first business day of each calendar year
                     starting January 1, 2001, the lesser of an additional (i)
                     200,000 shares of Common Stock, (ii) 0.75% of the
                     outstanding shares of capital stock on such date or (iii)
                     an amount determined by the Board.

          (b)  If the total number of shares that would otherwise be subject to
Purchase Rights granted on an Offering Date exceeds the number of shares then
available under this Plan (after deduction of all shares for which Purchase
Rights have been exercised or are then outstanding), the Administrator shall
make a pro-rata allocation of the available shares in a manner that it
determines to be as uniform and equitable as practicable. In such event, the
Administrator shall give written notice of the reduction and allocation to each
Participant.

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          (c)  The Administrator may, in its discretion, transfer shares
reserved for issuance under this Plan into a plan or plans of similar terms, as
approved by the Board, providing for the purchase of shares of Common Stock to
employees of Subsidiaries designated by the Board that do not (or do not
thereafter) participate in this Plan. Such additional plans may, without
limitation, provide for variances from the terms of this Plan to take into
account special circumstances (such as foreign legal restrictions) affecting the
employees of the designated Subsidiaries.

     13.  Administration.

          This Plan shall be administered by the Board or by such directors,
officers, and employees of the Company as the Board may select from time to time
(the "Administrator"). All costs and expenses incurred in administering this
Plan shall be paid by the Company, provided that any taxes applicable to an
Employee's participation in this Plan may be charged to the Employee by the
Company. The Administrator may make such rules and reg ulations as it deems
necessary to administer this Plan and to interpret any provision of this Plan.
Any determination, decision, or action of the Administrator in connection with
the construction, interpretation, administration, or application of this Plan or
any right granted under this Plan shall be final, conclusive, and binding upon
all persons, and no member of the Administrator shall be liable for any such
determination, decision, or action.

     14.  Designation of Beneficiary.

          (a)  A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
this Plan in the event of the Participant's death.

          (b)  A designation of beneficiary may be changed by the Participant at
any time by written notice. In the event of the death of a Participant, and in
the absence of a beneficiary validly designated under this Plan who is living at
the time of the Participant's death, the Administrator shall deliver such shares
and/or cash to the executor or administrator of the Participant's estate, or if
no such executor or administrator has been appointed (to the Administrator's
knowledge), the Administrator, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant or, if no spouse, dependent, or relative is known to the
Administrator, then to such other person as the Administrator may designate.

     15.  Transferability.

          Neither payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of a Purchase Right or to receive shares
under this Plan may be assigned, transferred, pledged, or otherwise disposed of
in any way (other than by will, the laws of descent and distribution or as
provided in Section 14) by the Participant. Any such attempt at assignment,
transfer, pledge, or other disposition shall be without effect, except that the
Administrator may treat such act as an election to withdraw funds in accordance
with Section 10.

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     16.  Reports.

          Individual accounts will be maintained for each Participant in this
Plan. Statements of account will be given to Participants promptly following
each Purchase Date, setting forth the amounts of payroll deductions, per-share
purchase price, number of shares purchased, and the remaining cash balance, if
any.

     17.  Adjustments upon Changes in Capitalization.

          (a)  Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by each Purchase Right
that has not yet been exercised and the number of shares of Common Stock that
have been authorized for issuance under this Plan but have not yet been placed
under a Purchase Right (collectively, the "Reserves"), as well as the price per
share of Common Stock covered by each Purchase Right that has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Administrator, whose determination shall be final, binding, and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to a Purchase
Right.

          (b)  In the event of the proposed dissolution or liquidation of the
Company, the then-current Offering Period will terminate immediately before the
consummation of such proposed action, unless otherwise provided by the Board or
the Administrator (if the Administrator is not the Board). In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation (if stockholders of the
Company own less than 50% of the total outstanding voting power in the surviving
entity or a parent of the surviving entity after the merger), each Purchase
Right shall be assumed or an equivalent purchase right shall be substituted by
the successor corporation or a parent or subsidiary of the successor
corporation, unless the successor corporation does not agree to assume the
Purchase Right or to substitute an equivalent purchase right, in which case the
Administrator may, in lieu of such assumption or substitution, accelerate the
exercisability of Purchase Rights and allow Purchase Rights to be exercisable
(if the Board approves) as to shares as to which the Purchase Right would not
otherwise be exercisable, on terms and for a period that the Administrator
determines in its discretion. To the extent that the Administrator accelerates
exercisability of Purchase Rights as described above, it shall promptly so
notify all Participants in writing.

          (c)  The Administrator may, in its discretion, also make provision for
adjusting the Reserves, as well as the price per share of Common Stock covered
by each outstanding

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Purchase Right, if the Company effects one or more reorganizations,
recapitalizations, rights offerings, or other increases or reductions of shares
of its outstanding Common Stock, or if the Company consolidates with or merges
into any other corporation.

     18.  Amendment or Termination.

          (a)  The Board may at any time terminate or amend this Plan. No
amendment may be made without prior approval of the stockholders of the Company
(obtained in the manner described in paragraph 20) if it would:

               (i)   Increase the number of shares that may be issued under this
                     Plan; or

               (ii)  Change the designation of the employees (or class of
                     employees) eligible for participation in this Plan.

          (b)  The Board may elect to terminate any or all outstanding Purchase
Rights at any time, except to the extent that exercisability of such Purchase
Rights has been accelerated pursuant to Section 17(b). If this Plan is
terminated, the Board may also elect to terminate Purchase Rights upon
completion of the next purchase of shares on the next Purchase Date or to permit
Purchase Rights to expire in accordance with their terms (with participation to
continue through such expiration dates). If Purchase Rights are terminated
before expiration, any funds contributed to this Plan that have not been used to
purchase shares shall be refunded to Participants as soon as administratively
feasible.

     19.  Notices.

          All notices or other communications by a Participant to the Company or
the Administrator under or in connection with this Plan shall be deemed to have
been duly given when received in the form specified by the Administrator at the
location, or by the person, designated by the Administrator for that purpose.

     20.  Stockholder Approval.

          This Plan shall be submitted to the stockholders of the Company for
their approval within 12 months after the date this Plan is adopted by the
Board.

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     21.  Conditions upon Issuance of Shares.

          (a)  Shares shall not be issued with respect to a Purchase Right
unless the exercise of such Purchase Right and the issuance and delivery of such
shares pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

          (b)  As a condition to the exercise of a Purchase Right, the Company
may require the person exercising such Purchase Right to represent and warrant
at the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.

     22.  Term of Plan.

          This Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the stockholders of the
Company as described in Section 20. It shall continue in effect for a term of 20
years unless sooner terminated under Section 19.

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