CALIPER TECHNOLOGIES CORP, S-1/A, 1999-11-17

CALIPER TECHNOLOGIES CORP
S-1/A, 1999-11-17
LABORATORY ANALYTICAL INSTRUMENTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1999

REGISTRATION NO. 333-88827

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CALIPER TECHNOLOGIES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3826 33-0675808
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>

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605 FAIRCHILD DRIVE

MOUNTAIN VIEW, CA 94043-2234
(650) 623-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

DANIEL L. KISNER, M.D.

PRESIDENT AND CHIEF EXECUTIVE OFFICER
605 FAIRCHILD DRIVE
MOUNTAIN VIEW, CA 94043-2234
(650) 623-0700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

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<S> <C>
ROBERT L. JONES, ESQ. JONATHAN L. KRAVETZ, ESQ.
BRETT D. WHITE, ESQ. MINTZ, LEVIN, COHN, FERRIS,
COOLEY GODWARD LLP GLOVSKY AND POPEO, P.C.
FIVE PALO ALTO SQUARE ONE FINANCIAL CENTER
3000 EL CAMINO REAL BOSTON, MA 02111
PALO ALTO, CA 94306-2155 (617) 542-6000
(650) 843-5000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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CALCULATION OF REGISTRATION FEE

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<CAPTION>
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PROPOSED MAXIMUM
AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value...... 4,140,000 $15.00 $62,100,000 $17,264
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(1) Includes 540,000 shares subject to the underwriters' over-allotment option.

(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act.

(3) $16,680 of this fee was previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1999

3,600,000 Shares

Caliper TechnologiesCorp.Logo

Common Stock

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Caliper Technologies Corp. is selling shares of common stock. Prior to this
offering, there has been no public market for our common stock. The initial
public offering price of our common stock is expected to be between $13.00 and
$15.00 per share. We have applied to list our common stock on The Nasdaq Stock
Market's National Market under the symbol "CLPR."

The underwriters have an option to purchase a maximum of 540,000 additional
shares to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 7.

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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS CALIPER
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about ,
1999.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

CIBC WORLD MARKETS
HAMBRECHT & QUIST
The date of this prospectus is , 1999.
<PAGE> 3

[DESCRIPTION OF GRAPHICS]

Captions

Headline: CALIPER'S LABCHIP SYSTEMS

PUTTING THE LAB ON A CHIP

Illustration: This illustration, centered on the page, depicts Caliper's
LabChip technology by showing how laboratory experimental
functions, processes and equipment can be miniaturized,
integrated and automated and put on a microfluidic chip. In the
top half of the illustration, a cross-section of a laboratory
environment is pictured in which five researchers at various lab
stations are shown carrying out various steps of experiments
manually, using various pieces of equipment. The various
processes and pieces of equipment they are using are identified
with a number in a color dot that corresponds to the legend and
captions on the page. Below the illustration of the lab is an
illustration of a LabChip. The activities of the researchers that
are carried out on the chip are identified with connecting lines
to the area on the chip where they take place. The dimensions of
the chip are also described.

Caption:

Researchers typically conduct experiments by performing a series
of steps requiring multiple pieces of equipment and significant
manual handling. In our LabChip systems, these functions can be
performed on a single chip.

Caption for side of chip: Actual size ~ 1"

Legend:

Red dot#1 Test tubes, beakers and other glassware are replaced by
microscopic channels in the chip.

Lime dot#2 The chip measures and dispenses fluids, performing the functions
of manual liquid measuring instruments and robotic workstations.

Yellow dot#3 Chemicals are mixed as they move through the channels, allowing
reactions to take place.

Purple dot#4 Like an incubator, the LabChip system controls temperature
and reaction time.

Orange dot#5 The chip replaces the manual work of moving samples from one lab
station to another.

Blue dot#6 Like chemical analysis equipment, the chip can separate molecules
from each other.

Green dot#7 The results of the experiment are automatically detected and
displayed.
<PAGE> 4

Fold-Out P.2

Inside Front Cover

The series of four photographs on the right side of the page shows actual
elements of Caliper's personal laboratory system, based on the Agilent 2100
Bioanalyzer. The first image shows a LabChip device with wells and channels. The
second image shows one of the first chips that Caliper and its commercialization
partner, Agilent, are commercializing. The third image shows the chip inside
the Agilent 2100 Bioanalyzer with the top of the Agilent 2100 Bioanalyzer
open. The fourth image shows the entire Agilent 2100 Bioanalyzer system,
including chips, reagents, the chip instrument and a personal computer,
monitor, keyboard and printer.

Top Caption: We have developed two types of LabChip systems. Our first
personal laboratory system, the Agilent 2100 Bioanalyzer,
is designed to enhance individual researcher
productivity. Our high throughput system, which rapidly
conducts experiments using different chemicals in each
experiment, is designed for use by centralized laboratories
that produce large amounts of data.

Headline Personal Laboratory System

Captions:

Magnified chip: Each chip contains a network of microchannels through which
chemicals are moved to perform experiments.

Actual Agilent A menu of LabChip kits is being developed for a wide
2100 chip: range of routine laboratory experiments.

Chip in Agilent The chip is placed in an instrument that controls the
2100: movement of chemicals and detects the results of the
experiment.

Full System: The Agilent 2100 Bioanalyzer is currently being marketed
and sold by Agilent Technologies, a subsidiary of
Hewlett-Packard.
<PAGE> 5

Fold-out P.3

This series of photographs shows actual elements of Caliper's high throughput
system. The first image shows two Sipper chips in the palm of a hand. One chip
has a single capillary or sipper, the other has 4 capillaries. The second image
is a close-up photograph of the capillary of the Sipper chip poised over a
96-well plate. It is just about to draw a one nanoliter sample from one of the
wells. The third image shows the assay development station that Caliper provides
to customers. The fourth image shows the current high throughput system that
Caliper's technology access program customers are using for drug screening.

Top Caption: Same as above; text will apply to both pages

Headline: High Throughput System

Captions:

Hand with Sipper chips: Sipper chips are the core of our high throughput
systems. They have a short glass tube which draws minute
samples into the chip.

Close-up of sipper: The Sipper chip can access chemical samples from
standard laboratory storage systems.

Development station: Our development systems enable our pharmaceutical
company customers to modify experimental conditions in
ways that suit their needs.

Full System: Our first high throughput system combines the Sipper
chip with automated sample handling to perform thousands
of experiments per day.
<PAGE> 6

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TABLE OF CONTENTS

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PAGE
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PROSPECTUS SUMMARY.................... 3
RISK FACTORS.......................... 7
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS.................. 15
USE OF PROCEEDS....................... 16
DIVIDEND POLICY....................... 16
CAPITALIZATION........................ 17
DILUTION.............................. 18
SELECTED FINANCIAL DATA............... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 20
BUSINESS.............................. 27
</TABLE>

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PAGE
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MANAGEMENT............................ 44
CERTAIN TRANSACTIONS.................. 55
PRINCIPAL STOCKHOLDERS................ 57
DESCRIPTION OF CAPITAL STOCK.......... 59
SHARES ELIGIBLE FOR FUTURE SALE....... 62
UNDERWRITING.......................... 63
NOTICE TO CANADIAN RESIDENTS.......... 66
LEGAL MATTERS......................... 67
EXPERTS............................... 67
WHERE YOU CAN FIND MORE INFORMATION... 67
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 7

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all the information you should consider before
buying shares in the offering. You should read the entire prospectus carefully.

CALIPER

We are a leader in lab-on-a-chip technologies, which enable experiments
that ordinarily require laboratories full of equipment and people to be
conducted on a chip small enough to fit in the palm of a child's hand. Each chip
contains a network of microscopic channels through which fluids and chemicals
are manipulated in order to perform experiments. We believe our LabChip systems
have the potential to revolutionize experimentation in a wide range of
industries by enabling individuals and organizations to perform laboratory
experiments at a speed, cost and scale previously unattainable.

We believe that we are the first company to sell and deliver lab-on-a-chip
products to customers. During 1999, we introduced our first two LabChip systems:

- Personal Laboratory System. In collaboration with Hewlett-Packard, we
launched the Agilent 2100 Bioanalyzer system, our first personal
laboratory system for use by individual laboratory researchers.
Hewlett-Packard is transferring our collaboration to its subsidiary,
Agilent Technologies.

- High Throughput System. High throughput systems rapidly conduct
experiments using different chemicals in each experiment. Under our
technology access program, we have sold and delivered initial versions of
our high throughput systems for drug screening to Amgen and Hoffmann-La
Roche, and have contracted to deliver a high throughput system to Eli
Lilly.

We develop, manufacture and sell our proprietary LabChip systems to
pharmaceutical and other companies. The pharmaceutical, agriculture, clinical
diagnostics and chemical industries rely on laboratory experimentation to obtain
important information that can be used to discover and develop new products.
These companies, however, still rely on manual, multi-step experiments that use
tools such as test tubes, beakers and large pieces of equipment that utilize
decades-old technology. These tools and processes are expensive and
labor-intensive, rendering them inadequate to handle these companies'
accelerating needs for greater research and development productivity.

We believe that our LabChip systems represent a revolutionary advance in
laboratory experimentation. Our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, enable pharmaceutical companies to perform the massive
scale experimentation they need to advance the drug discovery process. As a
result, our LabChip technology has the potential to reduce the time it takes to
discover and commercialize new drugs.

Our LabChip systems miniaturize, integrate and automate experimentation to
an unprecedented degree. Because we have great flexibility in channel design and
can exert split-second computer control over fluid flow, we have the ability to
create chips for a multitude of experiments, or applications. We believe the key
benefits of our LabChip systems are:

- High Speed. Our LabChip systems accelerate experiments as much as 10-fold
or more, depending on the application.

- Reduced Cost. Our LabChip systems use only a small fraction of the normal
amount of expensive reagents, as little as 1/100,000th in some cases, and
also reduce labor involved in each experiment.

- Improved Data Accuracy. Our LabChip systems generally produce more
accurate and consistent data by reducing human error and the variability
caused by the use of multiple instruments.

3
<PAGE> 8

Our objective is to be the leading lab-on-a-chip company. Key elements of
our strategy to achieve this objective are as follows:

- Focus on the pharmaceutical industry first

- Rapidly build our installed customer base

- Leverage our installed customer base by expanding the menu of chip
applications

- Generate recurring revenue from high-value chips

- Build a substantial intellectual property estate

- Maintain leadership in chip technology and manufacturing

- Opportunistically penetrate new industries

We have applied for registration of the following trademarks: Caliper, the
Caliper logo, LabChip, the LabChip logo, and LibraryCard. Sipper is a trademark
of Caliper. This prospectus also includes trademarks of companies other than
Caliper.

Caliper was incorporated in Delaware on July 26, 1995. Our principal
offices and manufacturing facilities are located at 605 Fairchild Drive,
Mountain View, California 94043-2234, and our telephone number is (650)
623-0700. Our website is located at http://www.calipertech.com. Information
contained on our website is not a part of this prospectus.

4
<PAGE> 9

THE OFFERING

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Common stock offered.................................... 3,600,000 shares
Common stock to be outstanding after the offering....... 19,404,501 shares
Use of proceeds......................................... For general corporate purposes, including
capital expenditures, manufacturing
scale-up, product development and technology
research. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.................. CLPR
</TABLE>

The number of shares to be outstanding after this offering is based on the
number of shares outstanding on September 30, 1999 and excludes:

- 1,669,891 shares that may be issued upon exercise of options outstanding
as of September 30, 1999 at a weighted average exercise price of $0.82
per share

- 2,008,211 additional shares that we could issue under our stock option
plans, of which options to purchase 610,278 shares of common stock were
granted in October 1999 at a weighted average exercise price of $3.62 per
share

- 300,000 shares that we could issue under our employee stock purchase plan

- 74,503 shares that may be issued upon exercise of warrants outstanding as
of September 30, 1999 at a weighted average exercise price of $1.22 per
share

- 38,460 shares that may be issued at an exercise price of $1.22 per share
upon exercise of warrants that will be issued if a patent milestone is
met

ASSUMPTIONS USED IN THIS PROSPECTUS

Unless otherwise indicated, information in this prospectus assumes the
following:

- the conversion of all of our outstanding shares of convertible preferred
stock into shares of common stock upon the closing of this offering

- a 1-for-1.56 reverse stock split to be completed prior to the closing of
this offering

- the filing of our amended and restated certificate of incorporation
immediately following the closing of this offering

- no exercise of the underwriters' over-allotment option

We entered into a collaboration agreement with Hewlett-Packard in May 1998
under which Hewlett-Packard agreed to manufacture, market and distribute some of
our products, as we further describe in this prospectus. Hewlett-Packard is
transferring our collaboration to its subsidiary, Agilent Technologies. Where we
refer to Agilent in this prospectus, we are referring to Hewlett-Packard prior
to the transfer of this collaboration and Agilent following the transfer of this
collaboration.

5
<PAGE> 10

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JULY 26, 1995) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
--------------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.............................. $ -- $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses................... 534 4,952 9,678 12,516 9,228 17,786
Operating loss....................... (534) (4,820) (7,412) (4,361) (4,803) (8,927)
Net loss............................. (536) (4,710) (6,281) (2,975) (3,745) (8,126)
Accretion on redeemable convertible
preferred stock.................... -- (262) (1,470) (2,174) (1,587) (1,822)
Net loss attributable to common
stockholders....................... $ (536) $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
Net loss per common share, basic and
diluted............................ $(1.71) $ (3.90) $ (4.38) $ (2.39) $ (2.54) $ (3.71)
Shares used in computing net loss per
common share, basic and diluted.... 313 1,274 1,768 2,157 2,099 2,684
Pro forma net loss per share, basic
and diluted (unaudited)............ $ (0.21) $ (0.53)
Shares used in computing pro forma
net loss per share, basic and
diluted (unaudited)................ 14,347 15,217
</TABLE>

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<CAPTION>
SEPTEMBER 30, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 27,820 $73,742
Working capital............................................. 23,278 69,200
Total assets................................................ 34,658 80,580
Long-term obligations, less current portion................. 3,483 3,483
Redeemable convertible preferred stock...................... 50,538 --
Total stockholders' equity (deficit)........................ (25,262) 71,198
</TABLE>

The increase in net loss attributable to common stockholders due to
accretion on redeemable convertible preferred stock will not occur after this
offering because all of the outstanding preferred stock will be converted to
common stock at the closing of the offering.

See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.

The as adjusted balance sheet data reflects the receipt and application of
the net proceeds from the sale of the 3,600,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per share after
deducting underwriting discounts and commissions and estimated offering expenses
and the conversion of all outstanding preferred stock into common stock. See
"Use of Proceeds" and "Capitalization."

6
<PAGE> 11

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. If any of the
following risks actually occurs, we may not be able to conduct our business as
currently planned and our financial condition and operating results could be
seriously harmed. In addition, the trading price of our common stock could
decline due to the occurrence of any of these risks, and you may lose all or
part of your investment. See "Special Note Regarding Forward-Looking
Statements."

RISKS RELATED TO OUR BUSINESS

OUR LABCHIP SYSTEMS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD CAUSE OUR
REVENUE TO DECLINE.

Our technologies are still in the early stages of development, and our
LabChip systems incorporating these technologies have only recently been made
commercially available. If our LabChip systems do not gain market acceptance, we
will be unable to generate sales and our revenue will decline. The commercial
success of our LabChip systems will depend upon market acceptance of the merits
of our LabChip systems by pharmaceutical and biotechnology companies, academic
research centers and other companies that rely upon laboratory experimentation.
We have not yet demonstrated these benefits. Market acceptance will depend on
many factors, including:

- our ability to demonstrate the advantages and potential economic value of
our LabChip systems over alternative well-established technologies and
products

- the extent of Agilent's efforts to market the Agilent 2100 Bioanalyzer

- our ability to market our high throughput systems through our technology
access program

Because the products comprising our LabChip systems have been in operation
for a limited period of time, their accuracy, reliability, ease of use and
commercial value have not been fully established. If the initial Agilent 2100
Bioanalyzer customers or our initial technology access program customers do not
approve of our initial LabChip systems because these systems fail to generate
the quantities and quality of data they expect, are too difficult or costly to
use, or are otherwise deficient, market acceptance of these LabChip systems
would suffer and we may not be able to generate further sales. We cannot assure
you that these customers' efforts to put our LabChip systems into use will
continue or will be expeditious or effective. Potential customers for our high
throughput systems may also wait for indications from our three initial
technology access program customers that our high throughput systems work
effectively and generate substantial benefits. Further, non-acceptance by the
market of our initial LabChip systems could undermine not only those systems but
subsequent LabChip systems as well.

WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NOT ACHIEVE PROFITABILITY.

We have experienced significant operating losses each year since our
inception and expect to incur substantial additional operating losses for at
least the next two years, primarily as a result of expected increases in
expenses for manufacturing capabilities, research and product development costs
and general and administrative costs. We may never achieve profitability. For
example, we experienced net losses of approximately $6.3 million in 1997, $3.0
million in 1998 and $8.1 million in the first nine months of 1999. As of
September 30, 1999, we had an accumulated deficit of approximately $28.4
million, which includes $5.7 million of accretion on redeemable convertible
preferred stock. Our losses have resulted principally from costs incurred in
research and development and from general and administrative costs associated
with our operations. These costs have exceeded our revenue and interest income
which, to date, have been generated principally from collaborative research and
development agreements, technology access fees, cash and investment balances
and, to a lesser extent, product sales and government grants.

7
<PAGE> 12

OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND ANY FAILURE TO MEET FINANCIAL
EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.

Our quarterly operating results have fluctuated significantly in the past
and we expect they will fluctuate in the future as a result of many factors,
some of which are outside of our control. For example, our revenues have varied
dramatically as a result of the timing of fees obtained under our technology
access program, as these fees are comparatively large and are recognized
unevenly over time. It is possible that in some future quarter or quarters, our
operating results will be below the expectations of securities analysts or
investors. In this event, the market price of our common stock may fall abruptly
and significantly. Because our revenue and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.

If revenue declines in a quarter, whether due to a delay in recognizing
expected revenue or otherwise, our earnings will decline because many of our
expenses are relatively fixed. In particular, research and development and
general and administrative expenses are not affected directly by variations in
revenue.

WE ARE INVOLVED IN INTELLECTUAL PROPERTY LITIGATION THAT MAY HURT OUR
COMPETITIVE POSITION, MAY BE COSTLY TO US AND MAY PREVENT US FROM SELLING OUR
PRODUCTS.

Our suit against Aclara. We have filed a suit against Aclara Biosciences,
Inc. and our former patent counsel alleging that they misappropriated our trade
secrets, and that our former patent counsel breached their duties to us as our
attorneys. We may not be successful in our lawsuit against them, in which case
we will have incurred substantial litigation costs that we will not recover.

Aclara's suit against us. In addition, subsequent to the filing of our
suit, Aclara sued us claiming we are infringing one of its patents with our
LabChip systems that use electrical charges to move fluids and chemicals through
the channels of the chip. If we lose this case, we will need to obtain from
Aclara a license to this technology in order to continue to market our products
that have been found to infringe Aclara's patent, which may include all products
currently marketed by Agilent. This license could be expensive, or could require
us to license to Aclara some of our technology which would result in a partial
loss of our competitive advantage in the marketplace, each of which could
seriously harm our ability to conduct our business, and hurt our financial
condition and results of operations. We believe that we have meritorious
defenses in this action. However, litigation is unpredictable and we may not
prevail with any of these defenses. If Aclara is successful in its suit against
us and is unwilling to grant us a license, we will be required to stop selling
our products that are found to infringe Aclara's patent unless we can redesign
them so they do not infringe Aclara's patent, which we may be unable to do. In
addition, if we lose the patent suit, we could be required to pay Aclara
damages, including treble damages, which could be substantial and seriously harm
our financial position.

Public announcements may hurt our stock price. During the course of these
lawsuits there may be public announcements of the results of hearings, motions,
and other interim proceedings or developments in the litigation. If securities
analysts or investors perceive these results to be negative, it could have a
substantial negative effect on the trading price of our stock.

This litigation will be expensive, may be protracted and confidential
information may be compromised. Whether or not we are successful in these
lawsuits, we expect this litigation to consume substantial amounts of our
financial and managerial resources. At any time Aclara may file additional
claims against Caliper, which could increase the risk, expense and duration of
the litigation. Further, because of the substantial amount of discovery required
in connection with this type of litigation, there is a risk that some of our
confidential information could be compromised by disclosure. For more
information on our litigation with Aclara, see "Business -- Legal Proceedings."

IF AGILENT DETERMINES THAT WE MAY BE VIOLATING A THIRD-PARTY PATENT, IT MAY
TERMINATE SALES OF THE AGILENT 2100 BIOANALYZER, WHICH WILL DECREASE OUR
REVENUE.

Under our collaboration agreement with Agilent, Agilent may elect at any
time to stop developing, manufacturing or distributing any product that it
reasonably determines, on the advice of counsel, poses a substantial risk of
infringing a third-party patent. For example, if we lose the Aclara litigation,
or if any

8
<PAGE> 13

adverse developments occur during the course of this litigation, or if any other
third-party claims that we are violating their patent, then Agilent may
terminate marketing and selling of the Agilent 2100 Bioanalyzer system which
will decrease our revenue.

OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR
PRODUCTS.

Third parties may assert infringement or other intellectual property claims
against us, such as in the Aclara litigation described above and under
"Business-Legal Proceedings." We may have to pay substantial damages, including
treble damages, for past infringement if it is ultimately determined that our
products infringe a third party's proprietary rights. Further, we may be
prohibited from selling our products before we obtain a license, which, if
available at all, may require us to pay substantial royalties. Even if these
claims are without merit, defending a lawsuit takes significant time, may be
expensive and may divert management attention from other business concerns. We
are aware of third-party patents that may relate to our technology or potential
products. We have also been notified that third parties have attempted to
provoke an interference with one issued U.S. patent that we have exclusively
licensed to determine the priority of inventions. Any public announcements
related to litigation or interference proceedings initiated or threatened
against us could cause our stock price to decline.

WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD
BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL
PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

We rely on patents to protect a large part of our intellectual property and
our competitive position. In order to protect or enforce our patent rights, we
may initiate patent litigation against third parties, such as infringement suits
or interference proceedings. These lawsuits could be expensive, take significant
time, and could divert management's attention from other business concerns. They
would put our patents at risk of being invalidated or interpreted narrowly and
our patent applications at risk of not issuing. We may also provoke these third
parties to assert claims against us. Patent law relating to the scope of claims
in the technology fields in which we operate is still evolving and,
consequently, patent positions in our industry are generally uncertain. We
cannot assure you that we will prevail in any of these suits or that the damages
or other remedies awarded, if any, will be commercially valuable. During the
course of these suits, there may be public announcements of the results of
hearings, motions and other interim proceedings or developments in the
litigation. If securities analysts or investors perceive any of these results to
be negative, it could cause our stock to decline.

THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

In addition to patents, we rely on a combination of trade secrets,
copyright and trademark laws, nondisclosure agreements and other contractual
provisions and technical measures to protect our intellectual property rights.
Nevertheless, these measures may not be adequate to safeguard the technology
underlying our products. If they do not protect our rights, third parties could
use our technology, and our ability to compete in the market would be reduced.
In addition, employees, consultants and others who participate in the
development of our products may breach their agreements with us regarding our
intellectual property, and we may not have adequate remedies for the breach. We
also may not be able to effectively protect our intellectual property rights in
some foreign countries. For a variety of reasons, we may decide not to file for
patent, copyright or trademark protection outside of the United States. We also
realize that our trade secrets may become known through other means not
currently foreseen by us. Notwithstanding our efforts to protect our
intellectual property, our competitors may independently develop similar or
alternative technologies or products that are equal or superior to our
technology and products without infringing on any of our intellectual property
rights or design around our proprietary technologies.

9
<PAGE> 14

For further information on our intellectual property and the difficulties in
protecting it, see "Business -- Intellectual Property."

IF WE DO NOT SUCCESSFULLY INTRODUCE NEW PRODUCTS AND EXPAND THE RANGE OF
APPLICATIONS FOR OUR LABCHIP SYSTEMS, WE MAY EXPERIENCE A DECLINE IN REVENUE OR
SLOW REVENUE GROWTH AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.

We intend to develop LabChip systems with increasingly high throughput
capabilities and develop a broad range of applications for our LabChip
technology. If we are unable to do so, our LabChip systems may not become widely
used and we may experience a decline in revenue or slow revenue growth and may
not achieve or maintain profitability.

In order for our high throughput systems to achieve the levels of
throughput necessary to meet customers' demands, we need to develop and
manufacture Sipper chips with more than one capillary, which we may not be able
to do. Our current high throughput systems operate with Sipper chips with only
one capillary, a small glass tube used to draw compounds into the chip. In order
to achieve the levels of throughput that our customers desire, we will need to
develop a LabChip system accommodating multiple capillaries, which we may not be
able to do. If we cannot cost-effectively deliver chips with multiple
capillaries, we may not be able to attract new customers to purchase our high
throughput systems, which would seriously harm our future prospects. Further,
our existing technology access program customers may decide not to renew their
annual access subscriptions, which would seriously reduce our revenue.

We must develop new applications for existing LabChip instruments, which we
may not be able to do. The Agilent 2100 Bioanalyzer uses LabChip kits that we
specifically design for each application. We currently have LabChip kits
commercially available for only three applications relating to DNA and RNA
sizing and quantification. We currently are developing LabChip kits for other
applications. If we are unable to develop LabChip kits for specific applications
required by potential customers, those customers will not purchase the Agilent
2100 Bioanalyzer.

We must also continue to develop applications for our high throughput
systems. If we are not able to complete the development of these applications,
or if we experience difficulties or delays, we may lose our current technology
access program customers and may not be able to obtain new customers.

WE RELY HEAVILY ON AGILENT TO MANUFACTURE, MARKET AND DISTRIBUTE THE AGILENT
2100 BIOANALYZER. IF AGILENT FAILS TO PERFORM UNDER OUR AGREEMENT OR
SUCCESSFULLY COMMERCIALIZE OUR COLLABORATIVE PRODUCTS, OUR REVENUE FROM THE
AGILENT 2100 BIOANALYZER WOULD BE REDUCED AND WE MAY LOSE THE DEVELOPMENT
FUNDING WE CURRENTLY RECEIVE FROM AGILENT.

Agilent manufactures, markets and distributes the Agilent 2100 Bioanalyzer
under an agreement we entered into in May 1998. We also rely on Agilent for
significant financial and technical contributions in the development of products
covered by the agreement. Our ability to develop, manufacture and market these
products successfully depends significantly on Agilent's performance under this
agreement. If Agilent experiences manufacturing or distribution difficulties,
does not actively market the Agilent 2100 Bioanalyzer, or does not otherwise
perform under this agreement, our revenue from the Agilent 2100 Bioanalyzer
would be reduced. In addition, Agilent may terminate the agreement at their
discretion at any time after May 2001. If Agilent terminates this agreement, we
would need to obtain development funding from other sources, and we may be
required to find one or more other collaborators for the development and
commercialization of our products. Our inability to enter into agreements with
commercialization partners or develop our own marketing, sales, and distribution
capabilities would increase costs and impede the commercialization of our
products.

10
<PAGE> 15

WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND MAY ENCOUNTER
MANUFACTURING PROBLEMS OR DELAYS WHICH COULD RESULT IN LOST REVENUE.

Although Agilent manufactures the Agilent 2100 Bioanalyzer, we manufacture
the chips used in this instrument and also currently manufacture instruments and
Sipper chips for our high throughput systems. We currently have limited
manufacturing capacity for our LabChip systems and products and experience
variability in manufacturing yields for chips, particularly Sipper chips. If we
fail to deliver chips and high throughput screening products in a timely manner,
our relationships with our customers could be seriously harmed, and revenue
would decline. We currently have one manufacturing facility located in Mountain
View, California. The actual number of chips we are able to sell or use depends
in part upon the manufacturing yields for these chips. We have only recently
begun to manufacture significant numbers of Sipper chips and are continuing to
develop our quality control procedures for these chips. In order to offer Sipper
chips with multiple capillaries for ultra high throughput applications, we will
need to achieve consistently high yields in the process of inserting
capillaries. We cannot assure you that manufacturing or quality control problems
will not arise as we attempt to scale-up our production of chips or that we can
scale-up manufacture and quality control in a timely manner or at commercially
reasonable costs. If we are unable to consistently manufacture Sipper chips or
chips for the Agilent 2100 Bioanalyzer on a timely basis because of these or
other factors, our product sales will decline. We are currently manufacturing
high throughput instruments in-house, in limited volumes and with largely manual
assembly. If demand for our high throughput instruments increases, we will
either need to expand our in-house manufacturing capabilities or outsource to
Agilent or other manufacturers.

IF A NATURAL DISASTER STRIKES OUR MANUFACTURING FACILITY WE WOULD BE UNABLE TO
MANUFACTURE OUR PRODUCTS FOR A SUBSTANTIAL AMOUNT OF TIME AND WE WOULD
EXPERIENCE LOST REVENUE.

We rely on a single manufacturing facility to produce our chips and high
throughput systems, and have no alternative facilities. The facility and some
pieces of manufacturing equipment are difficult to replace and could require
substantial replacement lead-time. Our manufacturing facility may be affected by
natural disasters such as earthquakes and floods. Earthquakes are of particular
significance since the manufacturing facility is located in Mountain View,
California, an earthquake-prone area. In the event our existing manufacturing
facility or equipment is affected by man-made or natural disasters, we would be
unable to manufacture products for sale, meet customer demands or sales
projections. If our manufacturing operations were curtailed or ceased, it would
seriously harm our business.

WE EXPECT TO ENCOUNTER INTENSE COMPETITION IN THE MARKETS WE TARGET, WHICH COULD
RENDER OUR PRODUCTS OBSOLETE OR SUBSTANTIALLY LIMIT THE VOLUME OF PRODUCTS THAT
WE SELL.

Technologies involving the manipulation of very small amounts of fluid,
which are referred to as "microfluidic technologies," have undergone, and are
expected to continue to undergo, rapid and significant change. Our future
success will depend in large part on our ability to maintain a competitive
position in these and future technologies, which we may not be able to do. Rapid
technological development may result in our products or technologies becoming
obsolete. Products offered by us could be made obsolete either by less expensive
or more effective products based on similar or other technologies. We expect to
encounter intense competition from a number of companies that offer products for
laboratory experimentation. We anticipate that our competitors will come from
two sectors:

- companies providing products based on established technologies

- companies developing their own microfluidic or lab-on-a-chip technologies

To compete effectively with established technologies, we must demonstrate
the advantages and potential economic value of our LabChip systems and products
over alternative established technologies. In order to compete with other
companies developing microfluidic technologies we must capitalize on our first
to market status and develop the enhancements to our technology necessary to
compete successfully with newly emerging technologies. If we are unable to do
these things, our ability to sell our products and generate revenue will be
seriously reduced.

11
<PAGE> 16

Our competitors may have more resources than we do which would enable them
to compete more favorably against us. In many instances, our competitors have or
will have substantially greater financial, technical, research, and other
resources and larger, more established marketing, sales, distribution, and
service organizations than we do. In addition, competitors may have greater name
recognition than we do, and may offer discounts as a competitive tactic. We
cannot assure you that our competitors will not succeed in developing or
marketing technologies or products that are more effective or commercially
attractive than our products, or that would render our technologies and products
obsolete. Also, we may not have the financial resources, technical expertise or
marketing, distribution or support capabilities to compete successfully in the
future. Our success will depend in large part on our ability to maintain a
competitive position in our technologies.

Agilent may compete with us in the future. In addition, there is the
possibility that we may experience competition from Agilent if they, or we,
terminate our agreement after May 2003. Under the terms of our agreement, upon
termination we will grant to Agilent a non-exclusive license to our LabChip
technologies as then developed for use in the research products field. See
"Business -- Competition" for a further description of the competition we face.

BECAUSE A SMALL NUMBER OF CUSTOMERS AND AGILENT HAVE ACCOUNTED FOR, AND ARE
LIKELY TO CONTINUE TO ACCOUNT FOR, A SUBSTANTIAL PORTION OF OUR REVENUE, OUR
REVENUE COULD DECLINE DUE TO THE LOSS OF ONE OF THESE CUSTOMERS OR THE
TERMINATION OF OUR AGREEMENT WITH AGILENT.

Historically we have had very few customers and one commercial partner,
Agilent, from which we have derived the majority of our revenue and, if we were
to lose any one of these, our revenue would decrease substantially. Agilent and
three customers accounted for 91% of total revenue in the nine months ended
September 30, 1999, and two customers and Agilent accounted for 97% of total
revenue in fiscal year 1998. We and Agilent introduced the Agilent 2100
Bioanalyzer system in September 1999 and have not yet derived significant
revenue from the sale of this product on a commercial scale. Although we
anticipate that the introduction of the Agilent 2100 Bioanalyzer system will
expand our revenue base, we expect that we will continue to rely on our large
customers and on Agilent for the majority of our revenue.

FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUE.

We anticipate that our existing capital resources and the net proceeds from
this offering will enable us to maintain currently planned operations through at
least the year 2000. However, we premise this expectation on our current
operating plan, which may change as a result of many factors. Consequently, we
may need additional funding sooner than anticipated. Our inability to raise
capital would seriously harm our business and product development efforts. In
addition, we may choose to raise additional capital due to market conditions or
strategic considerations even if we believe we have sufficient funds for our
current or future operating plans. To the extent that additional capital is
raised through the sale of equity or convertible debt securities, the issuance
of these securities could result in dilution to our stockholders.

We currently have no credit facility or committed sources of capital other
than an equipment lease line with $1.7 million unused and available. To the
extent operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the development
and commercialization of our technologies. These funds may not be available on
favorable terms, or at all. If adequate funds are not available on attractive
terms, we may be required to curtail operations significantly or to obtain funds
by entering into financing, supply or collaboration agreements on unattractive
terms.

WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.

We are highly dependent on Daniel L. Kisner, M.D., our President and Chief
Executive Officer, and our three founding executive officers, Calvin Y. H. Chow,
Michael R. Knapp, Ph.D. and J. Wallace Parce, Ph.D., as well as the other
principal members of our management and scientific staff. The loss of services
of any of these persons could seriously harm our product development and
commercialization efforts. In

12
<PAGE> 17

addition, research, product development and commercialization will require
additional skilled personnel in areas such as chemistry and biology, software
engineering and electronic engineering. Our business is located in Silicon
Valley, California, where demand for personnel with these skills is extremely
high and is likely to remain high. As a result, competition for and retention of
personnel, particularly for employees with technical expertise, is intense and
the turnover rate for these people is high. If we are unable to hire, train and
retain a sufficient number of qualified employees, our ability to conduct and
expand our business could be seriously reduced. The inability to retain and hire
qualified personnel could also hinder the planned expansion of our business.

WE MAY NEED TO OBTAIN GOVERNMENT REGULATORY APPROVAL OR CERTIFICATION FOR OUR
PRODUCTS IF WE ENTER THE DIAGNOSTICS MARKET. IF WE FAIL TO OBTAIN APPROVAL OR
CERTIFICATION WE COULD NOT SELL PRODUCTS IN THIS MARKET.

If we develop and sell LabChip systems for clinical diagnostic
applications, we would have to comply with government regulations before
manufacturing these products. The process of obtaining and maintaining required
regulatory clearances and approvals and otherwise complying with regulatory
guidelines and laws in the United States and other countries is lengthy,
expensive, and uncertain. In addition, we or our collaboration partners may also
be required to comply with FDA regulations which apply to our or their
manufacturing facilities. Failure to comply with FDA regulations or other legal
requirements could lead to suspension of manufacturing and other sanctions. We
cannot assure you that our operations will comply with FDA regulations, or other
legal requirements or that we will not be required to incur substantial costs to
comply with these requirements. If we fail to meet these regulations we will not
be able to expand into the clinical diagnostics market.

OUR OR THIRD PARTIES' COMPUTER SYSTEMS MAY FAIL IN THE YEAR 2000, WHICH WOULD
DELAY OUR PRODUCT DEVELOPMENT AND THE MANUFACTURING OF OUR PRODUCTS.

Failure of our computer systems could seriously delay our product
development processes and/or reduce our ability to cost-effectively manage our
business during the time required to fix these problems. In addition, computer
failures could cause Agilent to incur delays in manufacturing the Agilent 2100
Bioanalyzer, or our customers to postpone or cancel orders for our products. We
have assessed the readiness of our computer systems to handle dates beyond the
year 1999. We have not assessed the readiness of our non-software suppliers or
our customers. Unforeseen problems may arise in our own computers, our products,
and embedded systems, and from customers, suppliers and other organizations with
which we conduct transactions worldwide. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000
Readiness" for more information on the status of our preparation relating to
this issue.

RISKS RELATED TO THIS OFFERING

NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.

The initial public offering price will be substantially higher than the
book value per share of our common stock. Investors purchasing common stock in
this offering will, therefore, incur immediate dilution of $10.33 in net
tangible book value per share of common stock, based on an assumed public
offering price of $14.00 per share. In addition, the number of shares available
for issuance under our stock option and employee stock purchase plans will
automatically increase without stockholder approval. Investors will incur
additional dilution upon the exercise of outstanding stock options and warrants.
See "Dilution" for a more detailed discussion of the dilution new investors will
incur in this offering.

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.

Following this offering our directors, entities affiliated with our
directors, and our executive officers will beneficially own, in the aggregate
approximately 32% of our outstanding common stock. These

13
<PAGE> 18

stockholders as a group will be able to substantially influence the management
and affairs of Caliper and, if acting together, would be able to influence most
matters requiring the approval by our stockholders, including the election of
directors, any merger, consolidation or sale of all or substantially all of our
assets and any other significant corporate transaction. The concentration of
ownership may also delay or prevent a change of control of Caliper at a premium
price if these stockholders oppose it. See "Principal Stockholders" for details
on our stock ownership.

PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.

Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of the outstanding voting
stock, from consummating a merger or combination including us. These provisions
could limit the price that investors might be willing to pay in the future for
our common stock.

THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.

Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the market price of our common stock
to decline. The number of shares of common stock available for sale in the
public market is limited by restrictions under federal securities law and under
lock-up agreements that our stockholders have entered into with the underwriters
and with us. Those lock-up agreements restrict our stockholders from selling,
pledging our otherwise disposing of their shares for a period of 180 days after
the date of this prospectus without the prior written consent of Credit Suisse
First Boston Corporation. However, Credit Suisse First Boston Corporation may,
in its sole discretion, release all or any portion of the common stock from the
restrictions of the lock-up agreements. The following table indicates
approximately when the 15,804,501 shares of our common stock that are not being
sold in the offering but which were outstanding as of September 30, 1999 will be
eligible for sale into the public market:

<TABLE>
<CAPTION>
DAYS AFTER THE SHARES ELIGIBLE
EFFECTIVE DATE FOR SALE COMMENT
-------------- --------------- ------------------------------------------------
<S> <C> <C>
On Effectiveness....... 289,676 Shares not locked-up and saleable under Rule 144
90 days................ 79,293 Shares not locked-up and saleable under Rules
144 and 701
180 days............... 15,435,532 Lock-up released: shares saleable under Rules
144 and 701
</TABLE>

Additionally, of the 1,669,891 shares that may be issued upon the exercise
of options outstanding as of September 30, 1999, approximately 493,079 shares
will be vested and eligible for sale 180 days after the date of this prospectus.
For a further description of the eligibility of shares for sale into the public
market following the offering, see "Shares Eligible for Future Sale."

14
<PAGE> 19

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. We have attempted
to identify forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects," "intends,"
"may," "plans," "potential," "predicts," "should" or "will" or the negative of
these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Risk Factors," that may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these
forward-looking statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are not under any duty to update any
of the forward-looking statements after the date of this prospectus to conform
these statements to actual results, unless required by law.

15
<PAGE> 20

USE OF PROCEEDS

Our net proceeds from the sale of the 3,600,000 shares of common stock we
are offering, at an assumed initial public offering price of $14.00 per share,
are estimated to be approximately $45.9 million after deducting underwriting
discounts and commissions and estimated offering expenses payable by us. We
expect to use the net proceeds for general corporate purposes, including capital
expenditures, manufacturing scale-up, product development and technology
research.

The amounts and timing of our actual expenditures will depend upon numerous
factors, including the status of our product development and commercialization
efforts, the amount of proceeds actually raised in this offering, the amount of
cash generated by our operations, competition, and sales and marketing
activities. We may also use a portion of the proceeds for the acquisition of, or
investment in, companies, technologies or assets that complement our business.
However, we have no present understandings, commitments or agreements to enter
into any potential acquisitions and investments. Further, we have not determined
the amounts we plan to spend on any of the areas listed above or the timing of
these expenditures. As a result, our management will have broad discretion to
allocate the net proceeds from this offering. Pending application of the net
proceeds as described above, we intend to invest the net proceeds of the
offering in short-term, investment-grade, interest-bearing securities.

DIVIDEND POLICY

We have never paid any cash dividends on our capital stock. We currently
anticipate that we will retain earnings to support operations and to finance the
growth and development of our business and do not anticipate paying cash
dividends for at least the next 24 months.

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<PAGE> 21

CAPITALIZATION

The following table presents the following information:

- Our actual capitalization as of September 30, 1999

- Our pro forma capitalization reflecting the conversion of all outstanding
shares of preferred stock into common stock upon the closing of this
offering

- Our pro forma as adjusted capitalization reflecting the sale of the
3,600,000 shares of common stock offered by us at an assumed initial
public offering price of $14.00 per share, less the underwriting
discounts and commissions and estimated offering expenses

This table should be read with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, less current portion............... $ 3,483 $ 3,483 $ 3,483
-------- -------- --------
Redeemable convertible preferred stock, $0.001 par value;
19,579,039 shares authorized, 11,703,692 shares issued and
outstanding, actual; no shares authorized or outstanding
pro forma and pro forma as adjusted....................... 50,538 -- --
-------- -------- --------
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 1,420,961
shares authorized, 829,142 shares issued and
outstanding, actual; 5,000,000 shares authorized, no
shares issued and outstanding pro forma and pro forma
as adjusted.......................................... 1 -- --
Common stock, $0.001 par value; 32,000,000 shares
authorized, 3,271,667 shares issued and outstanding,
actual; 70,000,000 shares authorized pro forma and
pro forma as adjusted, 15,804,501 shares issued and
outstanding pro forma, 19,404,501 shares issued and
outstanding pro forma as adjusted.................... 3 16 19
Additional paid-in capital................................ 8,948 59,474 105,393
Deferred stock compensation............................... (5,858) (5,858) (5,858)
Accumulated deficit....................................... (28,356) (28,356) (28,356)
-------- -------- --------
Total stockholders' equity (deficit).................... (25,262) 25,276 71,198
-------- -------- --------
Total capitalization................................. $ 28,759 $ 28,759 $ 74,681
======== ======== ========
</TABLE>

This table excludes the following shares:

- 1,669,891 shares that may be issued upon exercise of options outstanding
as of September 30, 1999 at a weighted average exercise price of $0.82
per share

- 300,000 shares that we could issue under our employee stock purchase plan

- 74,503 shares that may be issued upon exercise of warrants outstanding as
of September 30, 1999 at a weighted average exercise price of $1.22 per
share

- 38,460 shares that may be issued at an exercise price of $1.22 per share
upon exercise of warrants that will be issued if a patent milestone is
met

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<PAGE> 22

DILUTION

The pro forma net tangible book value of our common stock on September 30,
1999, reflecting the conversion of all outstanding shares of preferred stock
into shares of common stock upon the closing of this offering, was approximately
$25.3 million, or approximately $1.60 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets less total
liabilities divided by the number of shares of common stock outstanding.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of our common
stock immediately afterwards. Assuming our sale of 3,600,000 shares of common
stock offered by this prospectus at an assumed initial public offering price of
$14.00 per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our net tangible book value at
September 30, 1999 would have been approximately $71.2 million or $3.67 per
share. This represents an immediate decrease in net tangible book value of
$10.33 per share to new investors purchasing shares of common stock in this
offering. The following table illustrates this dilution on a per share basis:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share at September 30,
1999........................................................ $1.60
Increase per share attributable to new investors....... 2.07
-----
Pro forma net tangible book value per share after this
offering.................................................. 3.67
------
Dilution per share to new investors......................... $10.33
======
</TABLE>

The following table summarizes, on a pro forma basis, as of September 30,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering. We have assumed an initial public offering price of $14.00 per share,
and we have not deducted estimated underwriting discounts and commissions and
estimated offering expenses in our calculations.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 15,804,501 81.4% $43,754,000 46.5% $ 2.77
New investors.......................... 3,600,000 18.6 50,400,000 53.5 14.00
---------- ----- ----------- -----
Total............................. 19,404,501 100.0% $94,154,000 100.0%
========== ===== =========== =====
</TABLE>

The foregoing discussion and tables assume no exercise of any outstanding
stock options or warrants. The exercise of all options and warrants outstanding
as of September 30, 1999 having an exercise price less than the offering price
would increase the dilutive effect to new investors to $10.56 per share. See
"Capitalization," "Management -- Employee Benefit Plans" and "Description of
Capital Stock."

If the underwriters exercise their over-allotment in full, the following
will occur:

- the number of shares of common stock held by existing stockholders will
decrease to approximately 79.2% of the total number of shares of our
common stock outstanding

- the number of shares held by new investors will increase to 4,140,000
shares, or approximately 20.8% of the total number of our common stock
outstanding after this offering

18
<PAGE> 23

SELECTED FINANCIAL DATA

The statements of operations data for each of the years ended December 31,
1996, 1997 and 1998, and the balance sheet data as of December 31, 1997 and
1998, have been derived from our audited financial statements included elsewhere
in this prospectus which have been audited by Ernst & Young LLP, independent
auditors. The statements of operations data for the nine months ended September
30, 1998 and 1999, and the balance sheet data as of September 30, 1999, have
been derived from our unaudited financial statements included elsewhere in this
prospectus. The balance sheet data as of December 31, 1996 have been derived
from our audited financial statements not included in this prospectus. The
statements of operations data for the period from inception (July 26, 1995)
through December 31, 1995 and the balance sheet data at December 31, 1995 have
been derived from our unaudited financial statements not included in this
prospectus. Our historical results are not necessarily indicative of results to
be expected for any future period. The data presented below have been derived
from financial statements that have been prepared in accordance with generally
accepted accounting principles and should be read with our financial statements,
including the notes, and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 26, 1995) YEAR ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
--------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.................................................. $ -- $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses:
Research and development............................... 406 2,734 7,200 9,584 7,232 12,302
General and administrative............................. 128 1,240 2,478 2,932 1,996 3,487
Amortization of deferred stock compensation............ -- -- -- -- -- 1,997
Acquired in-process research and development........... -- 978 -- -- -- --
------ ------- ------- ------- ------- -------
Total costs and expenses................................. 534 4,952 9,678 12,516 9,228 17,786
------ ------- ------- ------- ------- -------
Operating loss........................................... (534) (4,820) (7,412) (4,361) (4,803) (8,927)
Interest income (expense), net........................... (2) 110 1,131 1,386 1,058 801
------ ------- ------- ------- ------- -------
Net loss................................................. (536) (4,710) (6,281) (2,975) (3,745) (8,126)
Accretion on redeemable convertible preferred stock...... -- (262) (1,470) (2,174) (1,587) (1,822)
------ ------- ------- ------- ------- -------
Net loss attributable to common stockholders............. $ (536) $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
====== ======= ======= ======= ======= =======
Net loss per common share, basic and diluted............. $(1.71) $ (3.90) $ (4.38) $ (2.39) $ (2.54) $ (3.71)
====== ======= ======= ======= ======= =======
Shares used in computing net loss per common share, basic
and diluted............................................ 313 1,274 1,768 2,157 2,099 2,684
Pro forma net loss per share, basic and diluted
(unaudited)............................................ $ (0.21) $ (0.53)
======= =======
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited).......................... 14,347 15,217
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
----- ------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 40 $12,450 $ 26,549 $ 31,052 $ 27,820
Working capital............................................. 74 11,783 24,679 30,074 23,278
Total assets................................................ 83 13,112 29,107 35,730 34,658
Long-term obligations, less current portion................. -- 417 1,430 2,008 3,483
Redeemable convertible preferred stock...................... -- 16,913 38,283 48,716 50,538
Total stockholders' deficit................................. (536) (4,986) (12,665) (17,654) (25,262)
</TABLE>

The financial data as of December 31, 1996 and for the year then ended
reflects the acquisition of ChemCore Corporation in February 1996. This
acquisition was accounted for as a purchase. See Note 3 of notes to our
financial statements.

See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.

19
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read with "Selected
Financial Data" and our financial statements and notes included elsewhere in
this prospectus. The discussion in this prospectus contains forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. The cautionary statements made
in this prospectus should be read as applying to all related forward-looking
statements wherever they appear in this prospectus. Our actual results could
differ materially from those discussed here. Factors that could cause or
contribute to these differences include those discussed in "Risk Factors," as
well as those discussed elsewhere. See "Risk Factors" and "Special Note
Regarding Forward-Looking Statements."

OVERVIEW

We are a leader in lab-on-a-chip technologies that miniaturize, integrate
and automate many laboratory processes. We develop, manufacture and sell our
proprietary LabChip systems to pharmaceutical and other companies. We believe
our LabChip systems have the potential to assemble the power and reduce the
scale of entire laboratories full of equipment and people. From inception in
July 1995 through September 1999, our operating activities were primarily
devoted to research and development of microfluidic technologies and first-
generation products such as the Agilent 2100 Bioanalyzer, LabChip kits and our
high throughput system, recruiting personnel, business development, raising
capital and acquiring assets. In the first half of 1999, we recognized revenue
from our first product sales when we sold initial versions of our high
throughput system for drug screening to two of our technology access program
customers. In addition, in September 1999, Agilent, our commercial partner,
introduced our first LabChip system for use by individual researchers.

Since our inception, we have incurred significant losses and, as of
September 30, 1999, we had an accumulated deficit of $28.4 million, which
includes $5.7 million of accretion on redeemable convertible preferred stock.
Our losses have resulted principally from costs incurred in research and
development, manufacturing scale-up, and from general and administrative costs
associated with our operations. We expect to continue to incur substantial
research and development, manufacturing scale-up, and general and administrative
costs. As a result, we will need to generate significantly higher revenue to
achieve profitability.

Our quarterly operating results will depend upon many factors, including
market acceptance of our products, the success and timing of signing new
customers to our technology access program, the introduction of new products by
our competitors, the timing of commercial availability of new applications for
our LabChip technology, and the timing and extent of our research and
development efforts. For a more complete discussion of factors that could cause
our quarterly operating results to vary, see "Risk Factors -- Our operating
results fluctuate significantly and any failure to meet financial expectations
may disappoint securities analysts or investors and result in a decline in our
stock price."

Our revenue has been derived principally from contract revenue earned under
our collaboration agreement with Agilent and from our technology access program
customers. To a lesser extent, we have derived revenue from the sale of products
and government grants. Although we are developing and plan to introduce future
products, we cannot assure you that we will be successful in these efforts. To
date, we have generated a substantial portion of our revenue from a limited
number of sources. Our three technology access program customers, Hoffmann-La
Roche, Amgen and Eli Lilly, and our commercial partner, Agilent, collectively
accounted for 91% of our revenue in the nine months ended September 30, 1999.
Hoffmann-La Roche, Amgen and Agilent collectively accounted for 97% of our
revenue in the year ended December 31, 1998, and Hoffman-La Roche alone
accounted for 94% of our revenue in the year ended December 31, 1997. Although
we are seeking to expand our customer base, we cannot assure you that these
efforts will be successful.

Under our agreement, Agilent funds our research and development
expenditures related to the collaboration, reimburses us for our costs of
supplying chips, and chemicals used in the experiment, which are referred to as
"reagents," to Agilent and pays us a share of the gross margin earned on all
components

20
<PAGE> 25

of LabChip systems they sell. We recognize revenue related to research and
development funding received from Agilent as we actually conduct the related
activities. We recognize revenue related to the reimbursement of our costs of
supplying chips and reagents to Agilent when we ship these products. We expect
to recognize revenue from our share of the gross margin earned on all components
of LabChip systems as Agilent ships these products. Under our technology access
program agreements, we recognize as revenue non-refundable license fees upon the
transfer of a license, subscription fees over the term of the subscription,
product sales upon the transfer of title to the customer, and development and
support fees in the period in which the costs are incurred. Subscription fees
and development and support fees may be received annually or quarterly in
advance depending upon the terms of the agreement. Payments received in advance
under all of these agreements are recorded as deferred revenue until earned. As
of September 30, 1999, a total of $2.4 million of revenue was deferred. We
expect to recognize this deferred revenue through the third quarter of year
2000.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 1999 and 1998

Revenue. Revenue increased to $8.9 million for the nine months ended
September 30, 1999 from $4.4 million for the comparable period in 1998. Of the
$4.5 million increase, $2.5 million was derived from our collaboration with
Agilent, which began in May 1998, and $1.4 million was derived from our
technology access program customers. The remaining $571,000 increase was derived
from our grant from the Advanced Technology Program of the National Institute of
Standards and Technology, which began in January 1999. This grant is for $2
million in aggregate and will continue until December 2001.

Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers for chip development, material costs
for prototype and test units, legal expenses resulting from intellectual
property prosecution and litigation, and other expenses related to the design,
development, testing, and enhancement of our products. We expense our research
and development costs as they are incurred. Research and development expenses
increased to $12.3 million during the nine months ended September 30, 1999 from
$7.2 million in the comparable period in 1998. The increase of $5.1 million was
attributable to continued growth of research and development activities,
including $3.0 million related to increased personnel and services to support
our technology access program and initial product launches, and $1.6 million
related to higher operating expenses as a result of our move to a larger
facility in January 1999 and the remainder due to expansion in operating
activities. We expect research and development spending to increase
significantly over the next several years as we expand our research and product
development efforts.

General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance and
other administrative personnel, recruiting expenses, professional fees, and
other corporate expenses including business development and general legal
activities. General and administrative expenses increased to $3.5 million during
the nine months ended September 30, 1999 from $2.0 million in the comparable
period in 1998. The increase of $1.5 million was due to $790,000 related to
compensation for general and administrative personnel, $298,000 related to
higher operating expenses as a result of our move to a larger facility in
January 1999, $101,000 related to increased general and administrative supply
costs and the remaining balance due to overall expansion in our operations. We
expect general and administrative expenses to continue to increase over the next
several years to support our growing business activities, the commercialization
of our products, and due to the costs associated with operating a public
company.

Amortization of Deferred Stock Compensation. Deferred stock compensation
represents the difference between the deemed fair value of our common stock for
accounting purposes and the exercise price of options at the date of grant.
During the year ended December 31, 1998 and the nine months ended September 30,
1999, we recorded deferred stock compensation totaling $7.9 million. We
anticipate that additional deferred compensation totalling $4.7 million will be
recorded for options granted in October 1999. These amounts are being amortized
over the respective vesting periods of the individual stock options using the
graded vesting

21
<PAGE> 26

method. We recorded amortization of deferred compensation of $2.0 million for
the nine months ended September 30, 1999. We expect to record amortization
expense for deferred compensation as follows: $1.8 million during the quarter
ended December 31, 1999, $4.3 million during 2000, $2.4 million during 2001,
$1.4 million during 2002, $630,000 during 2003 and $112,000 during 2004. The
amount of deferred compensation expense to be recorded in future periods may
decrease if unvested options for which deferred compensation has been recorded
are subsequently canceled.

Interest Income (Expense), Net. Net interest income consists of income
from our cash and investments offset by expenses related to our financing
obligations. Interest income decreased to $801,000 in the nine months ended
September 30, 1999 from net interest income of $1.1 million in the comparable
period of 1998. This decrease resulted from a declining cash and investment
balance due to cash used in operating activities and from higher financing
obligation balances.

Income Taxes. As of December 31, 1998, we had federal and California net
operating loss carryforwards of approximately $10.3 million and $1.4 million. We
also had federal research and development tax credit carryforwards of
approximately $700,000. The net operating loss and credit carryforwards will
expire at various dates beginning on 2002 through 2018, if not utilized.
Utilization of the net operating losses and credits may be substantially limited
due to the change in ownership provisions of the Internal Revenue Code of 1986
and similar state provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.

As of December 31, 1998 and 1997, we had deferred tax assets of
approximately $6.3 million and $5.3 million. The net deferred tax asset has been
fully offset by a valuation allowance. The net valuation allowance increased by
$1 million during the year ended December 31, 1998. Deferred tax assets relate
primarily to net operating loss carryforwards, research credit carryforwards,
and capitalized research and development costs.

Years Ended December 31, 1998 and 1997

Revenue. Revenue increased to $8.2 million in 1998 from $2.3 million in
1997. Of the $5.9 million increase, $3.2 million was due to revenue received
through the collaboration agreement with Agilent entered into in May 1998, and
$2.6 million was due to revenue received through technology access program
agreements with Hoffmann-La Roche and Amgen, which we entered into at the end of
1998.

Research and Development Expenses. Our research and development expenses
increased to $9.6 million in 1998 from $7.2 million in 1997. The increase of
$2.4 million was due to $1.4 million related to compensation for additional
scientific personnel, $503,000 due to supplies required to assemble, build and
test prototypes of LabChip systems, $357,000 for costs related to intellectual
property protection and the remaining balance due to expansion in our operating
activities.

General and Administrative Expenses. General and administrative expenses
increased to $2.9 million in 1998 from $2.5 million in 1997. The increase was
due to hiring of additional personnel to support our growing business
activities.

Interest Income (Expense), Net. Net interest income increased to $1.4
million in 1998 from $1.1 million in 1997. This increase was due to increases in
cash and investment balances as a result of our equity financing in May 1998.

Years Ended December 31, 1997 and 1996

Revenue. Revenue increased to $2.3 million in 1997 from $132,000 in 1996.
The increase was due primarily to increased efforts devoted to our previous
collaboration agreement with Hoffmann-La Roche that was executed in October 1996
and a research agreement with Perkin Elmer, each of which has since expired.

Research and Development Expenses. Our research and development expenses
increased to $7.2 million in 1997 from $2.7 million in 1996. The increase of
$4.5 million was due to $1.6 million in

22
<PAGE> 27

compensation for research and development personnel, $1.5 million was due to
sponsored research, $554,000 was related to higher operating expenses as a
result of our move to a larger facility in May 1997, $411,000 was due to
supplies required to assemble, build and test prototypes of LabChip systems,
$235,000 was paid to outside service providers for chip development and the
remaining balance was due to expansion in our operating activities.

General and Administrative Expenses. General and administrative expenses
increased to $2.5 million in 1997 from $1.2 million in 1996. The increase was
due to $933,000 in compensation and fees for additional general and
administrative personnel and consultants, $119,000 was related to higher
operating expenses as a result of our move to a larger facility in May 1997,
$105,000 was for recruiting fees and the remainder was due to overall expansion
in our operations.

Interest Income (Expense), Net. Net interest income increased to $1.1
million in 1997 from $110,000 in 1996. This increase was due to an increase in
our cash and investment balances from the proceeds of our equity financings in
the first half of 1997.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations from inception primarily through private
sales of preferred stock, contract and milestone payments to us under our
collaboration and technology access program agreements, and equipment financing
arrangements. As of September 30, 1999, we had received net proceeds of $43.8
million from issuances of common and preferred stock and $21.4 million from
collaborations, technology access program customers and government grants. In
addition, through September 30, 1999 we had financed equipment purchases and
leasehold improvements totaling approximately $6.3 million. We have used leases
and loans to finance capital expenditures. As of September 30, 1999, we had $4.6
million in capitalized lease obligations. These obligations are secured by the
equipment financed, bear interest at a weighted-average fixed rate of
approximately 10.4%, and are due in monthly installments through June 2004.
Under the terms of one equipment financing agreement, the financed equipment may
be purchased by us at a fair value at the end of the financing term. Other
equipment financing agreements require a balloon payment at the end of each loan
term.

As of September 30, 1999, we had $27.8 million in cash, cash equivalents
and marketable securities, as compared to $31.1 million as of December 31, 1998.
We used $2.2 million for operations in the nine months ended September 30, 1999.
This consisted of the net loss for the period of $8.1 million offset in part by
non-cash charges of $2.9 million related to deferred stock compensation
amortization and depreciation expense, and working capital changes of $3.2
million. We used $3.0 million in investing activities for the nine month period
ended September 30, 1999, which consisted of capital expenditures. We received
$2.0 million from financing activities for the nine months ended September 30,
1999, which consisted principally of proceeds from equipment financing of $2.5
million offset by repayments of equipment financing arrangements of $821,000.
See Note 7 of notes to our financial statements.

In January 1999 we entered into a $2.5 million financing arrangement for
the purchase of property and equipment. As of September 30, 1999, we had drawn
down approximately $752,000 and had $1.7 million remaining available under this
arrangement. As of September 30, 1999, we had $4.6 million in capitalized lease
obligations outstanding compared to $2.9 million at December 31, 1998. See Note
7 of notes to our financial statements.

Our capital requirements depend on numerous factors, including market
acceptance of our products, the resources we devote to developing and supporting
our products, and other factors. We expect to devote substantial capital
resources to continue our research and development efforts, to expand our
support and product development activities, and for other general corporate
activities. We believe that our current cash balances, together with the net
proceeds of this offering and revenue to be derived from our collaboration with
Agilent and our technology access program agreements will be sufficient to fund
our operations at least through the year 2000. During or after this period, if
cash generated by operations is insufficient to satisfy our liquidity
requirements, we may need to sell additional equity or debt securities or obtain
additional credit arrangements. Additional financing may not be available on
terms acceptable to us or at

23
<PAGE> 28

all. The sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders.

IMPACT OF INFLATION

The effect of inflation and changing prices on our operations was not
significant during the periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for fiscal years beginning after June
15, 1999 and is not anticipated to have an impact on our results of operations
or financial condition when adopted as we hold no derivative financial
instruments and do not currently engage in hedging activities.

In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires that entities capitalize costs related to internal use software once
criteria have been met. We adopted the provisions of SOP 98-1 on January 1,
1999. Through September 30, 1999, we had not capitalized any cost related to
internal use software.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities. The average duration of
all of our investments in 1998 was less than one year. Due to the short term
nature of these investments, we believe we have no material exposure to interest
rate risk arising from our investments. Therefore, no quantitative tabular
disclosure is required.

We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.

YEAR 2000 READINESS

The "Year 2000 issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example, software
with date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results.

We designed the Agilent 2100 Bioanalyzer to be Year 2000 compliant when
configured and used with the related documentation, and provided that the
underlying operating system of the host machine and any other software used with
or in the host machine or our product are Year 2000 compliant. However, we have
not exhaustively tested our other products for Year 2000 compliance. We continue
to respond to customer questions about our products.

We have defined Year 2000 compliance as the ability to:

- correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change

24
<PAGE> 29

- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration

- respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner

- store and provide output of date information in ways that are unambiguous
as to century if the date elements in interfaces and data storage specify
the century

- recognize Year 2000 as a leap year

We have sought and received certifications from our material software
vendors that licensed software is Year 2000 compliant. Despite testing by us and
current and potential customers, and assurances from developers of products
incorporated into our products, our products may contain undetected errors or
defects associated with Year 2000 date functions. Known or unknown errors or
defects in our product could result in delay or loss of revenues, diversion of
development resources, damage to our reputation, increased service and warranty
costs, or liability from our customers, any of which could harm our business.

Some commentators have predicted significant litigation regarding Year 2000
compliance issues. Because of the unprecedented nature of this litigation, it is
uncertain whether or to what extent we may be affected by it. Congress recently
passed a law that is intended to limit liability for some failures to achieve
Year 2000 compliance. We cannot assure you that this bill will provide us with
any protection, and it does not provide us with protection from any violations
arising under federal securities laws.

We have assessed our material internal information technology systems,
including both our own software products and third-party software and hardware
technology. We have also assessed our non-information technology systems. To the
extent that we are not able to test the technology provided by third-party
vendors, we have sought and received certifications from these vendors that
their systems are Year 2000 compliant. We are not currently aware of any
material operational issues or costs associated with preparing our internal
information technology and non-information technology systems for the Year 2000.
However, we may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in our internal information
technology and non-information technology systems.

Other than publicly available information, we do not currently have any
information concerning the Year 2000 compliance status of our technology access
customers or Agilent. Our current or future customers may incur significant
expenses to achieve Year 2000 compliance. If our customers are not Year 2000
compliant, they may experience material costs to remedy problems, or they may
face litigation costs. In either case, Year 2000 issues could reduce or
eliminate the budgets that current or potential customers could have for or
delay purchases of our products and services. As a result, our business could be
harmed. If Agilent experiences problems related to Year 2000 compliance, it may
delay manufacture or distribution of our current products or development of our
future products.

We have funded our Year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We will incur additional costs related to the Year 2000 plan for
administrative personnel to manage the project, outside contractor assistance,
technical support for our products, product engineering and customer
satisfaction. In addition, we may experience material problems and costs with
Year 2000 compliance that could harm our business.

We do not have a contingency plan to address situations that may result if
our critical operations are not Year 2000 compliant, and we do not anticipate
the need to do so. The cost of developing and implementing the plan may itself
be material. In addition, we may also experience external forces that might
generally affect industry and commerce, including utility or transportation
company Year 2000 compliance failure interruptions.

25
<PAGE> 30

Year 2000 issues affecting our business, if not adequately addressed by us,
our third party vendors or suppliers or our customers, could have a number of
"worst case" consequences. These include:

- claims from our customers asserting liability, including liability for
breach of warranties related to the failure of our product and services
to function properly, and any resulting settlements or judgments

- our inability to manage our own business.

26
<PAGE> 31

BUSINESS

OVERVIEW

We are a leader in lab-on-a-chip technologies. We believe our LabChip
systems can assemble the power and reduce the size of entire laboratories full
of equipment and people. Our LabChip systems miniaturize, integrate and automate
many laboratory processes, and put them on a chip that can fit in the palm of a
child's hand. Each chip contains a network of microscopic channels through which
fluids and chemicals are moved, using electricity or pressure, in order to
perform experiments. The chips are the key components of our LabChip systems,
which also include reagents as well as instruments and software that together
control and read the chips. We believe our LabChip systems have the potential to
revolutionize experimentation in a wide range of industries by enabling
individuals and organizations to perform laboratory experiments at a speed, cost
and scale previously unattainable. Our initial commercialization focus is the
pharmaceutical industry, where there is an urgent need to improve the efficiency
and reduce the cost of drug discovery and development. Future target industries
potentially include agriculture, clinical diagnostics, chemicals and consumer
products. We believe that we are the first company to sell and deliver
lab-on-a-chip products to customers. During 1999 we introduced our first two
LabChip systems, a personal laboratory system and a high throughput system.

INDUSTRY BACKGROUND

Laboratory Technology

The pharmaceutical, agriculture, clinical diagnostics and chemical
industries rely on laboratory experimentation to obtain important information
that can be used to discover and develop new products. Despite the critical
value of laboratory results to these industries, improvements to the basic
processes and tools used in laboratory experiments have only been incremental
and have not kept pace with technological advances in other industries,
including electronics and computing. Laboratory work still relies on manual
steps and tools, such as test tubes and beakers, and large pieces of equipment
that utilize technology that is decades old. These tools and processes are
expensive, labor-intensive and often imprecise, presenting significant
productivity and efficiency challenges for these industries.

New processes and tools are needed to enable individual researchers and
organizations to work more productively and efficiently. This need has been
recognized and some improvements have been made. In an attempt to increase speed
and reduce costs in many laboratory experiments, researchers have replaced test
tubes with plastic plates having 96 small reservoirs, or "wells," to facilitate
parallel experimentation. Further attempts to reduce costs have led researchers
to replace the 96-well plate with 384- and 1536-well plates in which reactions
can be performed in volumes that are 10 to 100-fold smaller. To enhance
efficiency, some suppliers have integrated multiple pieces of equipment into one
large piece of equipment. Organizations that perform high value, high volume
experimentation have attempted to automate processes by using liquid-handling
robotics to improve the quality and quantity of data achieved in centralized
testing. While these and other advances have helped researchers to work faster
and more efficiently, they still represent only incremental, not revolutionary,
improvements because they continue to rely on time-consuming, imprecise and
labor-intensive processes that can create bottlenecks throughout the entire
experimental process.

A Need for Better Laboratory Technology in the Pharmaceutical Industry

Pharmaceutical companies have realized that to stay competitive and meet
their goals for growth they will have to increase significantly the number of
new drugs they introduce each year. To achieve this, pharmaceutical companies
have found that they will have to engage in experimentation on a massive scale.
Pharmaceutical companies' investments in the comprehensive study of genetic
material, or "genomics," and novel methods of producing large numbers of new
chemical compounds, or "combinatorial chemistry," are examples of this decision.
These activities are generating a wealth of potential targets and new compounds
to be tested and offer the opportunity to discover many new drugs. However, they
also create a

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<PAGE> 32

technological quandary: how to perform significantly more experiments, in less
time, without unacceptable increases in research and development spending. We
believe that recent incremental advances in laboratory technology are not enough
to enable pharmaceutical companies to achieve their growth targets. New
technologies are needed to improve the volume and quality of information
generated in each stage of the drug discovery process, while simultaneously
reducing the cost of experimentation.

THE STAGES OF PHARMACEUTICAL DISCOVERY

Target identification involves acquiring knowledge about the role a particular
molecule, usually a protein, plays in the body in order to determine whether it
might be a good target for further investigation. Today, this activity is most
often initiated with genomics studies, in particular by DNA sequencing, RNA
analysis and genetic mapping.

Target validation is the demonstration that affecting the function of a
particular target has a positive effect on the course of a disease. Target
validation employs a variety of methods including RNA analysis, protein analysis
and cell biology.

Primary screening involves the large-scale testing of collections of chemical
compounds, or libraries, against validated targets. The goal is to find "hits,"
or individual members of the compound library that bind to, inhibit, or activate
a particular target. These libraries are tested in high throughput experiments.
The major pharmaceutical companies are moving towards screening up to 100
targets annually with libraries of up to one million compounds.

Lead optimization is a term that describes the process of sorting through the
compounds that emerge from the primary screen and conducting successive rounds
of chemical alterations and biological tests to find compounds likely to have
appropriate drug properties. Like target validation, lead optimization involves
a variety of methods, including protein analysis, cell biology, chemical
synthesis, as well as high throughput experiments. This stage also involves the
testing of compounds for therapeutic activity in animal models of disease.

Preclinical development involves testing of compounds to assure that they are
safe, have appropriate distribution throughout the body and are appropriately
metabolized. Formulation tests to ensure convenient delivery to patients are
performed, as are tests to ensure that the compounds can be manufactured with
consistent quality.

Clinical development is the testing of pharmaceutical compounds in humans to
demonstrate their safety and efficacy. Because clinical trials are the most
expensive part of drug development, pharmaceutical companies are trying to
improve the outcomes of clinical trials by using the methods of
"pharmacogenetics," the scientific discipline focused on how genetic differences
determine or predict responsiveness or adverse reactions to particular drugs. In
order to use pharmacogenetics in a clinical trial, each patient in the trial
will need his genetic make-up analyzed. This could entail analysis of
approximately 100,000 different sites in a patient's DNA. For a 1,000 patient
trial, this would require generating approximately 100 million data points.

The drug discovery process can be summarized by the six stages described
above. In each of these stages, researchers face many productivity bottlenecks
due to the limitations of current laboratory technologies. Individual
researchers conducting even the simplest, most common experiments must often
perform labor-intensive, time-consuming, multi-step processes on multiple pieces
of equipment. For example, to analyze DNA, researchers must first extract the
DNA and treat it with reagents. Then they pour gels and mount them in equipment
to separate the DNA. After loading the samples into the gels, they activate the
gels for a precise period of time. The gels must then be processed to reveal the
location of the DNA and scanned to see the results.

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<PAGE> 33

The whole process takes approximately half a day and produces only a few dozen
data points of genetic information. Thousands of pharmaceutical company
researchers perform this experiment on a routine basis.

Even "automated" experiments, such as high throughput screening, are still
laborious and time-consuming. For example, to perform one high throughput
screen, researchers typically need to remove thousands of compounds from storage
and transfer small amounts of these compounds to hundreds of new plates. Then
they add fluid to dilute them and transfer a portion of the diluted compound to
another set of plates. After adding more reagents, they move the plates to an
incubation station and incubate the mixture for a precise period of time. They
then transfer the plates to a detection instrument and scan the plates to see
the results. Finally, they discard all the plates. The whole process can take a
team of researchers weeks or months to complete, and has to be repeated to test
the same compounds against the next pharmaceutical target.

As currently performed, these processes are not well suited to the massive
scale-up we believe pharmaceutical companies are seeking. The number of people
and pieces of equipment required would be unmanageable. More importantly, data
quality has often suffered as companies have tried to implement higher
throughput versions of existing procedures, such as 384-well plates in place of
96-well plates. Pharmaceutical companies need a breakthrough in tools for
experimentation to free scientists from the limitations of current technology.

A Broad Need Across Industries for New Laboratory Technology

Other industries dependent upon biological and chemical information face
technology challenges similar to those facing the pharmaceutical industry. The
agricultural-biotechnology industry, for example, is adopting many of the same
research strategies used by the pharmaceutical industry, including genomics,
screening and combinatorial chemistry. In addition, the multi-billion dollar
clinical diagnostics industry continues to search for miniaturized and automated
equipment solutions that will facilitate patient point-of-care testing, as well
as high throughput, automated analysis platforms for use in centralized
reference laboratories. In these and other industries, technology for laboratory
experimentation is limiting the ability to access information about chemicals
and biochemicals, and therefore is limiting companies' ability to transform that
information into novel and commercially valuable products.

CALIPER SOLUTIONS

We believe that our LabChip technology represents a revolutionary advance
in laboratory experimentation needed by the pharmaceutical and other industries
today. The chips are the key components of our LabChip systems that also include
a particular LabChip instrument together with experiment-specific reagents and
software. Our chips contain a network of microscopic channels through which
fluids and chemicals are moved to perform experiments. A single type of chip
used with particular reagents and software to perform a particular experiment
make up one LabChip application. Depending on the chip format, reagents are
introduced either automatically or by the user. The chip is placed in the
instrument, which uses software to control the movement of fluids with pressure
or electricity. The instrument also has an optical system for detecting the
results. Because we have great flexibility in channel design and can exert
split-second computer control over fluid flow, we have the ability to create
chips for a multitude of experiments. Our LabChip systems miniaturize, integrate
and automate experiments providing, we believe, the benefits of high speed,
reduced cost, expanded individual researcher capability, improved data accuracy
and improved enterprise-wide productivity.

Features of LabChip Systems

- Miniaturization. Conventional laboratory equipment typically uses about a
drop of fluid, or 50 to 100 microliters, to perform each experiment. In
some LabChip applications, this volume is reduced to 1 nanoliter, or one
billionth of a liter, an improvement of up to 100,000-fold over
conventional systems.

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<PAGE> 34

- Integration. Integration is the compression of multiple processes into a
single process. Today most laboratory systems perform only one or two
steps of an experimental protocol. Our LabChip systems can integrate
complete experiments involving half a dozen or more steps into one
continuous process performed on a single chip.

- Automation. Today most laboratory experiments are performed using
multiple instruments in combination with multiple manual steps. With our
LabChip systems, entire experiments can be automated and performed inside
a chip using one instrument. The same instrument is used with different
chips to perform other automated experiments.

MINIATURIZATION, INTEGRATION AND AUTOMATION ON A SIPPER CHIP

LOGO
[This illustration is an actual schematic of a current Sipper chip that can be
used to prepare drug samples for analysis and to determine their potency, all on
the same high throughput chip. The specific functions that are part of this
experiment, and where they take place on the chip, are described in the
caption.]

Above is a diagram of a Sipper chip that can be used to prepare drug samples for
analysis and to determine their potency at high throughput. This is an example
of one of the many types of complicated experiments that our chips can perform,
which would normally be performed in a laboratory full of people and equipment.
Potency studies are done by diluting a drug into different concentrations and
testing each one for its effect on a pharmaceutical target. Higher potency drugs
will reduce target activity even at low concentrations. Potency provides
critical information for determining the quality of a drug candidate. We expect
to make this chip commercially available in the first half of the year 2000.

A one nanoliter drug sample, 1/50,000th of a drop, is drawn into the chip
through a small glass tube, or a capillary, attached at point (a). In assembly
line fashion, a different drug enters the chip every 30 seconds, and multiple
experiments are processed on the chip simultaneously. Each nanoliter is divided
sequentially into four portions (b), each of which contains ten times less than
the previous portion. Each portion is then diluted with an appropriate solution
to restore the original volume of sample and achieve four different
concentrations (c). Each of the four diluted drug samples is then mixed with the
target (d), and later, another reagent (e), and incubated for precisely the same
amount of time (f), to enable direct comparison of the results which are
detected on all reactions simultaneously (g).

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<PAGE> 35

Key Benefits of LabChip Systems

- High Speed. Our LabChip systems accelerate experiments as much as 10-fold
or more, depending on the application. For example, molecular separations
such as electrophoresis normally take one hour or more using conventional
equipment. On a chip, we can perform these separations in less than one
minute. Another example is that chemical reactions are usually incubated
for 30 minutes or more before the results are determined. Often, these
long incubation periods are necessary only to provide enough time for
manual steps to be performed on large numbers of samples. By integrating
sample processing and detection, we can perform reactions in one minute
or less and achieve comparable results. Our customers can take advantage
of this acceleration to increase throughput or to complete experiments
faster, depending on their needs.

- Reduced Cost. Our LabChip systems use only a small fraction of the normal
amount of expensive reagents used in experiments performed in test tubes
or 96-well plates, sometimes as little as 1/100,000th, and also reduce
labor involved in each experiment. Saving on reagent cost and labor can
enable pharmaceutical companies to expand the scale of experimentation in
ways that would otherwise not be feasible.

- Expanded Individual Researcher Capability. Because our LabChip systems
can collapse a multi-step, complex experiment into one step, individual
researchers can perform experiments previously outside their areas of
expertise. By comparison, with conventional, non-integrated equipment
researchers need to acquire the equipment and master the complexities of
performing each individual step.

- Improved Data Accuracy. Our LabChip systems generally produce more
accurate and consistent data by reducing human error and the variability
caused by the use of multiple instruments. With higher quality data, our
customers can make better decisions. For example, biochemical
determinations typically require accurate liquid measurements and precise
incubation times. When these are manually performed significant
variations can occur in liquid dispensing and in the duration of reaction
times.

- Improved Enterprise-Wide Productivity. We believe our LabChip systems can
improve data quality to the point where researchers can rely on data
generated outside their laboratory or organization. This would improve
enterprise-wide productivity by supporting data sharing and reducing the
need to repeat experiments. When different research groups use different
assortments of conventional equipment to perform experiments, they often
produce data that is not strictly comparable.

We believe that our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, to streamline and bring greater efficiency and speed to the
drug discovery and development process. Not all laboratory processes, however,
are ideally suited to be performed with our LabChip systems. Measuring low
concentrations of a material is not always feasible because of the very small
sample volume employed by the chip. Furthermore, if the chip cannot perform an
experiment completely, it typically does not generate enough material to be
analyzed by conventional laboratory equipment. In the broad set of applications
where LabChip systems are useful, however, we believe that they provide
increased efficiency, speed and faster decision-making and therefore provide
critical competitive advantages. The faster pharmaceutical companies can
identify and validate targets, screen massive numbers of compounds, optimize
leads and identify promising compounds to take into clinical development, the
greater their chances of seeing a return on investment for their research and
development dollars. LabChip technology has the potential to reduce the time it
takes to discover and commercialize new drugs. In the future, we believe we can
bring similar benefits to other industries.

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STRATEGY

Our objective is to be the leading lab-on-a-chip company. Key elements of
our strategy to achieve this objective include:

Focus on the Pharmaceutical Industry First. We are focusing on developing
our LabChip systems for the pharmaceutical industry, where the investment in
research and development is large and growing and the need for new technologies
to improve research and development efficiency is urgent. We are addressing the
need for enhanced productivity for individual pharmaceutical researchers with
our first LabChip personal laboratory system, featuring the Agilent 2100
Bioanalyzer, developed in collaboration with Agilent. We also have developed a
high throughput system for use by pharmaceutical companies for drug screening.
We are developing ultra high throughput systems and new chip applications to
bring greater efficiency to the drug discovery process.

Rapidly Build Our Installed Customer Base. We intend to take advantage of
our first-to-market position to rapidly build our installed customer base. Our
goal is to increase customer familiarity with lab-on-a-chip technology and to
establish our LabChip systems as the platform of choice. Our strategy is to
offer products for applications that are practiced widely and to bring LabChip
technology to market through the combination of a major commercialization
partnership and direct selling. Our first commercial collaborator, Agilent, is
an established leader in analytical instrumentation and has initiated a
multi-faceted sales and marketing campaign designed to achieve wide penetration.
Our direct selling strategy is focused primarily on large pharmaceutical
companies and is designed to encourage early adoption of our LabChip systems
through our technology access program.

Leverage Our Installed Customer Base by Expanding the Menu of Chip
Applications. A significant portion of our internal research and development
efforts is dedicated to new chip applications development. We intend to expand
our menu of chip applications and sell them to customers that have already
purchased LabChip instruments. For example, we are developing LabChip
applications for genomics to bring significant advances in functionality to this
technology-hungry area. We also intend to expand current markets by implementing
a LabChip instrumentation "operating system" strategy that encourages other
companies, such as reagent manufacturers, to develop compatible products that
can operate with our chips.

Generate Recurring Revenue From High-Value Chips. We expect to generate
recurring revenue from the sale of single-use chips for the Agilent 2100
Bioanalyzer. In addition, we intend to value price the chips for our high
throughput systems to reflect the cost savings and other benefits that our
customers may achieve, possibly by charging customers for the amount of data
they generate. While we are focused on generating revenues from the sale and use
of our chips, we also will receive revenue from the sale of the Agilent 2100
Bioanalyzer, software and reagents. We also intend to generate recurring revenue
from our technology access program through license fees and ongoing subscription
fees as well as through the sale of instruments.

Build a Substantial Intellectual Property Estate. We pursue an
intellectual property strategy of licensing important patents and pursuing
patent protection for our own inventions. As of September 30, 1999, we owned, or
held licenses to, 34 issued U.S. patents and 120 pending U.S. patent
applications. These patents and applications are directed to various
technological areas that we believe are valuable to our business. We believe
that maintaining a deep and broad intellectual property estate will be an
important competitive advantage.

Maintain Leadership in Chip Technology and Manufacturing. We believe that
our long-term success will derive from maintaining leadership in lab-on-a-chip
technology and chip manufacturing. We focus on improving the power and
capabilities of our chips to increase their value. We are also working to
enhance manufacturing processes to reduce our production costs.

Opportunistically Penetrate New Industries. We believe that LabChip
technology has the potential to transform the way that laboratory
experimentation is performed across multiple industries. We expect to
selectively pursue these other industries, leveraging our pharmaceutical
industry experience and products. We may pursue these opportunities alone or
with collaborators.

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<PAGE> 37

PRODUCTS AND SERVICES

We have developed two types of LabChip systems, personal laboratory systems
and high throughput systems, based on distinct chip formats. Our personal
laboratory systems use chips with reservoirs for the various chemical reagents,
which the user introduces manually. Our high throughput systems use our Sipper
chips that have a short glass tube, or capillary, that draws nanoliter volumes
of reagents into the chip.

Personal Laboratory Systems

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION STATUS
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Agilent 2100 Bioanalyzer Desktop LabChip instrument and Marketed by Agilent
software
- -----------------------------------------------------------------------------------------------
DNA 7500 LabChip Kit Chips and reagents for analyzing Marketed by Agilent
small DNA fragments
- -----------------------------------------------------------------------------------------------
DNA 12000 LabChip Kit Chips and reagents for analyzing Marketed by Agilent
large DNA fragments
- -----------------------------------------------------------------------------------------------
RNA 6000 LabChip Kit Chips and reagents for analyzing Marketed by Agilent
RNA samples
- -----------------------------------------------------------------------------------------------
New LabChip Kits A series of kits containing In development
chips and reagents for
applications in molecular and
cell biology
- -----------------------------------------------------------------------------------------------
</TABLE>

Agilent 2100 Bioanalyzer System. Our first personal laboratory system is
based on the Agilent 2100 Bioanalyzer, a desktop instrument designed to perform
a wide range of everyday scientific applications using a menu of different
LabChip kits. Each kit contains a chip and reagents designed specifically for
the application. This LabChip system brings the benefits of miniaturized,
integrated and automated experimentation to the researcher's desktop. Agilent
launched this product in September 1999.

Agilent is selling the Agilent 2100 Bioanalyzer with an initial menu of
three LabChip kits for DNA and RNA sizing and concentration analysis. For these
initial applications, we believe the system's principal advantages are that it:

- reduces analysis time from hours to minutes

- integrates several experimentation steps into one

- significantly reduces consumption of costly reagents

- produces higher quality data than conventional methods

Because these applications are among the most common experiments performed
in genetic research, the potential customer base for these applications includes
most pharmaceutical and biotechnology companies, as well as human genome
research centers and other academic laboratories.

We are developing new applications involving analysis of protein and cells,
as well as additional applications involving DNA and RNA analysis. We believe
that protein and cell applications on the Agilent 2100 Bioanalyzer may be
particularly attractive to researchers in those disciplines because their
existing tools are generally less advanced than those available to genetic
researchers.

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<PAGE> 38

High Throughput Systems

<TABLE>
- -----------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION STATUS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Caliper 110 Sipper System High throughput LabChip Direct sales to customers
instrument and software for
single capillary Sipper chips
- -----------------------------------------------------------------------------------------------
Fluorogenic Assay Sipper Sipper chip for screening Direct sales to customers
Chip several types of enzyme and
protein receptor targets
- -----------------------------------------------------------------------------------------------
Mobility Shift Assay Sipper Sipper chip for screening other Direct sales to customers
Chip types of enzyme and protein
receptor targets
- -----------------------------------------------------------------------------------------------
Assay Development Station Instrument system and software Direct sales to customers
for developing LabChip
experimental methods
- -----------------------------------------------------------------------------------------------
Assay Development Chips Chips for use with the assay Direct sales to customers
development station
- -----------------------------------------------------------------------------------------------
Cell-based Assay Sipper Sipper chip for screening cell In development
Chip receptor targets
- -----------------------------------------------------------------------------------------------
Dilutor Sipper Chips Sipper chips that do sample In development
preparation and screening on the
same chip
- -----------------------------------------------------------------------------------------------
Caliper 220 Sipper System Ultra high throughput LabChip In development
instrument and software for
multiple capillary Sipper chips
- -----------------------------------------------------------------------------------------------
Multi-capillary Sipper Multiple capillary versions of In development
Chips the Sipper chips described above
- -----------------------------------------------------------------------------------------------
</TABLE>

Our high throughput systems are being designed to perform thousands or tens
of thousands of pharmaceutical experiments per day on each Sipper chip.

Caliper 110 Sipper System. Our first high throughput system is based on
the Caliper 110, which uses a Sipper chip with a single capillary. Like the
Agilent 2100 Bioanalyzer, the Caliper 110 is designed to perform a wide range of
experiments using a menu of different chips. We currently offer two Sipper chips
used for performing drug screening experiments for several classes of enzymes.
High throughput enzyme experiments are among the most common experiments used in
primary drug screening. Some of the reagents used in these experiments are
expensive and it can take months to produce them in the quantities required for
conventional screening systems. We believe the principal advantages of the
Caliper 110 are that it:

- reduces costly reagent consumption up to 100,000-fold

- integrates multiple experimental functions

- reduces the need for user intervention

- produces higher data quality than conventional methods

We expect to add several more Sipper chips enabling our technology access
program customers to use the Caliper 110 for a significant percentage of the
types of experiments they run. Another important advantage of the Caliper 110 is
that it can be used not only for primary screening but also for lead
optimization. Furthermore, the Caliper 110 is compact and could be placed in
locations outside the centralized screening group, allowing for more efficient
drug development efforts.

Caliper 220 Ultra High Throughput System. We expect to increase throughput
by increasing the number of channels and capillaries on each chip. We intend to
introduce chips with four and then eight or

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<PAGE> 39

more capillaries per chip and to enable customers to effectively utilize
multiple instruments by providing integrated plate handling capabilities. We are
currently testing a prototype of our Caliper 220 ultra high throughput
instrument and expect to offer this product to technology access program
customers in 2000. In this way, we expect to offer systems that can perform more
than 100,000 experiments per day.

We are also working to integrate compound storage and sample preparation
into our screening systems. These activities represent major expenses for
pharmaceutical companies. We believe that our LabChip systems can offer dramatic
cost reductions in these areas. We intend to offer a Sipper chip which can
dilute compounds on the chip prior to performing the screening experiment, or
"assay." We expect that this will reduce the amount of expensive compounds used
by approximately 1,000-fold and eliminate the major expense of diluting
thousands of compounds in wells. The next integration step will be to enable
researchers to place entire compound libraries onto our proprietary LibraryCard
reagent array, and then dilute and access compounds using the capillary of our
Sipper chips. For a description of our LibraryCard reagent array program, see
"-- Research and Development."

We sell our current high throughput systems to technology access program
customers and provide training and support. We also develop initial assays for
them and offer some level of customization in order to integrate our systems
most effectively into each customer's production processes.

We sell assay development systems to our technology access program
customers so that they can modify experimental conditions used with our standard
assay chips to be suitable for each new pharmaceutical target. This process is
comparable to the assay development they already carry out with existing
screening systems, which typically takes several weeks to a few months. In fact,
we believe that the process likely will be accelerated and improved using
chip-based systems.

Services

<TABLE>
- -----------------------------------------------------------------------------------------------
SERVICE DESCRIPTION STATUS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Value Added Screening Assay development, compound Direct sales to customers
Collaborations leasing and screening services
for customers' pharmaceutical
targets
- -----------------------------------------------------------------------------------------------
</TABLE>

We are using our high throughput systems internally to offer screening
services to pharmaceutical and biotechnology customers that prefer to outsource
this activity. Under our value added screening collaboration program, we develop
LabChip assays for targets selected by a customer. We then screen the targets
against the customer's compound library, our own library, or both, and provide
the data to the customer.

We believe that our screening services also add substantial value to our
product businesses. We deploy our most advanced high throughput screening
systems in our internal screening services operation. By making intensive use of
those systems in this business, we can provide critical feedback to our product
development groups. This accelerates development and enables us to deliver
better systems to our technology access program customers. We also intend to use
our screening services capability to demonstrate to potential technology access
program customers how our LabChip systems can streamline screening operations
and enhance productivity.

COMMERCIALIZATION

We currently are commercializing our first personal laboratory system, the
Agilent 2100 Bioanalyzer system, through our collaboration with Agilent. We are
also directly selling our high throughput systems through our technology access
program and are providing high throughput screening services through our value
added screening collaboration program.

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<PAGE> 40

Strategic Alliance with Agilent

We have established a broad relationship with Agilent to create a line of
commercial research products based on our LabChip technologies. This
relationship provides us with the scale and expertise of a leading analytical
instrumentation company to bring these novel products to market. When this
relationship was established in May 1998, Agilent and Caliper publicly stated
their intention to invest over $100 million collectively to create and
commercialize this line of products over the ensuing five years. In September
1999, Agilent introduced the Agilent 2100 Bioanalyzer with three different
LabChip kits, our first LabChip products under this agreement.

In this collaboration, Caliper primarily focuses on developing core
technology and LabChip applications. We also manufacture the chips and supply
the chips and reagents to Agilent. If we elect, however, not to manufacture
chips for a LabChip application or we are unable to meet minimum supply
commitments to be mutually established in the future, Agilent would have the
right to manufacture those chips. Agilent primarily focuses on developing
instruments and software, manufacturing instruments, and marketing, selling and
supporting complete systems. Agilent has the contractual right to develop the
marketing plan under the collaboration, although to date we and Agilent have
made these decisions in a collaborative manner.

Agilent funds our product development efforts under the collaboration,
reimburses our costs of supplying chips and reagents, and pays us a share of the
gross margin on all components of LabChip systems. The gross margin share varies
depending on the type of collaboration product, whether we or Agilent
manufacture the collaboration product, and whether the collaboration product is
sold during the collaboration or after the collaboration has terminated. These
financial arrangements allow us to offset a portion of the substantial risks
inherent in introducing novel technologies. At the same time, they enable us to
support a broad product development program and to retain a substantial
financial interest in the products we create.

Our agreement with Agilent is mutually exclusive in the field of
lab-on-a-chip technologies for the research products market. It requires our
consent before Agilent may offer products exceeding established sample
throughput limits, and it requires Agilent's consent before we may offer these
products outside the collaboration in excess of established volume limitations.

The term of the Agilent agreement is eight years, beginning in May 1998.
After three years, Agilent may elect not to meet annual funding requirements, in
which case either party may terminate the agreement. In any event either party
may terminate the agreement after five years. If the agreement terminates after
three years, we will continue to offer the collaboration's products through
Agilent but Agilent will have no rights to our technologies for the development
of new products. If either party terminates the agreement after five years, we
will grant Agilent a non-exclusive license to use the lab-on-a-chip technologies
that we have developed up to that time in order to develop new products in
substantially the same field that applied during the collaboration. We will also
transfer chip manufacturing know-how and receive royalties on Agilent's sales of
systems that employ our patented technologies. Regardless of whether the
collaboration terminates after three or five years, both Caliper and Agilent
will have the right to sell collaboration products, with reciprocal supply
arrangements.

Technology Access Program

Our technology access program is initially focused on high throughput
systems for drug screening. In this program, we work directly with
pharmaceutical company customers during the product development process to
create successive generations of products. We provide technology access program
customers with early access to new products, and offer technical training,
support and customization services. By working closely with these customers, we
focus our technology and product development efforts where we believe they can
have maximum impact for the pharmaceutical marketplace.

Our technology access program customers have non-exclusive access to all of
the high throughput screening products we offer during the term of the
agreement. These agreements generally provide for

36
<PAGE> 41

customers to pay an up-front license fee and annual subscription fees, and to
reimburse us for our costs of providing development and support services.
Instruments and chips are generally sold separately on a product-by-product
basis, although some agreements establish prices for critical instruments or
estimates of the price we will charge them for Sipper chips based on the amount
of data they generate. Our technology access program customers can terminate
their participation in the program and still have the right to purchase those
products that we offered to them during their participation in the program.

We currently have three technology access program customers for our high
throughput screening systems: Eli Lilly, Amgen, and Hoffmann-La Roche. Our
agreements with these customers generally contain the terms described above. Key
terms unique to each agreement are described below.

Eli Lilly. We signed our most recent technology access agreement with Eli
Lilly in August 1999. The term is three years, although Eli Lilly may
temporarily suspend its technology access program participation and later
reinitiate participation, during which time our support and assistance
obligations will also be suspended. Eli Lilly may terminate the agreement on any
anniversary.

Amgen. We entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until we have delivered an initial ultra high throughput
system. The term of this agreement is three years, although Amgen may terminate
the agreement on any anniversary or if we fail to deliver the ultra high
throughput screening system in a timely manner.

Hoffmann-La Roche. We entered into a technology access agreement with
Hoffmann-La Roche in November 1998, which is due to expire in July 2000. This
agreement supersedes an earlier agreement under which Roche funded early
development of the high throughput screening technology in exchange for
exclusive rights to an ultra high throughput screening system. Roche now has
non-exclusive rights similar to other technology access program customers. We
did not receive an up-front license fee or annual subscription fee from
Hoffmann-La Roche.

Value Added Screening Collaboration Program

In our value added screening collaboration program we offer high throughput
screening services using our LabChip systems. This can enable smaller companies
that may not be able to afford to participate in our technology access program
to take advantage of our high throughput systems in the early phases of
commercialization. Our first value added screening collaboration agreement was
established with Neurocrine Biosciences in December 1998. We receive screening
fees based on the amount of data generated, preclinical milestones and royalties
on Neurocrine products emerging from the collaboration. This agreement has a
three-year term, but may be terminated by either party under limited
circumstances after the first year.

TECHNOLOGY

We believe that we have established a leading position in three areas of
lab-on-a-chip technology.

Microfabrication

We create lab-on-a-chip devices using the same manufacturing methods that
are used to make microchips in the computer industry called "microfabrication."
Microfabrication makes it possible to create intricate designs of interconnected
channels that are extremely small. Each pattern is designed to produce the
series of fluid manipulation steps that will execute an experiment. We use the
principles of fluid dynamics, chemical and electrical engineering and biophysics
to create initial designs using computer-aided design tools. Because we have
designed, manufactured and tested hundreds of different chips, we have developed
proprietary design rules that make each round of chip creation more predictable
and likely to succeed. We design our chips to be disposable and relatively
inexpensive to manufacture. We place the more expensive electronic controls and
sensing capability in a separate instrument.

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Once a design pattern is completed, we use microchip manufacturing methods
to recreate the design as channels in a sheet of quartz, glass or plastic. This
process creates highly precise channels with dimensions that can be varied by
width and depth. A typical channel is roughly 50 microns wide and 10 microns
deep, approximately the size of a strand of hair.

In the next step, a second sheet of quartz, glass or plastic with a precise
pattern of holes is fused to the first sheet using a proprietary process. This
covers the channels and converts them to closed microfluidic conduits. The end
of each channel connects to an open reservoir through which fluids are
introduced. The sheets are then cut into individual chips, which can be less
than one inch to a few inches on a side. The individual chips are then packaged
into plastic holders that make them easier for the user to handle.

We currently make two basic chip formats. In our planar chips, such as
those used in the Agilent 2100 Bioanalyzer, the user introduces all of the
chemical reagents into the reservoirs, including the various samples to be
tested, using pipets. In our Sipper chips, such as those used in the Caliper
110, a small glass tube, or capillary, inserted into the chip draws a few
nanoliters of each sample into the channel network. In this way, minute
quantities of a large number of samples can be tested in a single chip. The
samples are introduced into the capillary one after the other, spaced by buffer
solution. They proceed through the channel network in a continuous flow,
assembly-line fashion to perform a complete experiment. We have an issued U.S.
patent claiming this assay technique.

Microfluidics

In our LabChip systems the movement of minute quantities of fluids, or
"microfluidics," is actively controlled by computer programs. We use two
different methods of generating fluid motion in microchannels: electrokinetics
and pressure.

Electrokinetic flow is generated when electrodes attached to
computer-driven power supplies are placed in the reservoirs at each end of a
channel and activated to generate electrical current through the channel. Under
these conditions, fluids of the appropriate type will move by a process known as
"electro-osmosis." Typical flow rates within the channel are about a millimeter
per second and the flow rate can be controlled with a high degree of precision.
Programs can then be written to generate highly specific and complex networks of
flow. One key to designing complex systems is controlling and directing the flow
at intersections. Fundamental techniques for accomplishing this were invented by
Dr. J. Michael Ramsey, one of our co-founders and a member of our Scientific
Advisory Board, and are covered by a series of issued and pending U.S. patent
applications. We hold an exclusive license to these patents for most
applications and a non-exclusive license for remaining applications.

Another electrokinetic phenomenon known as "electrophoresis" occurs in the
channels. This is the movement of charged molecules or particles in an electric
field. Electrophoresis is often used in conventional laboratories for analyzing
molecules since they move differently according to their physical make-up.
Electrophoresis can be used to move molecules in solution, or to separate
molecules with very subtle differences. Electrophoresis and electro-osmosis
generally occur at the same time in channels. However, we have developed
proprietary techniques for minimizing either force while maintaining the other,
as appropriate, for a given application.

Pressure can also be used to move fluid in the channels. On the
microfluidic scale, small amounts of pressure produce highly predictable and
reproducible fluid flow. We use both computer-controlled pressure and
electrokinetic forces to gain precise control over fluid flow in the
microfluidic channel network. It is possible to use electrokinetic forces alone,
pressure forces alone, or a combination of the two methods.

Lab-on-a-Chip Applications Development

We have developed a large amount of expertise at discovering new functions
that microfluidic chips can perform. We have generated proprietary computer
models of how an experiment can be carried out. We store these functional
designs and we can incorporate them into new designs that simulate complete

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experiment pathways. In this way, we believe the value of new microfluidic
inventions can be rapidly expanded across many application development projects.

We have also developed expertise at making experiments work in our chips.
Currently, all of our systems use fluorescent chemical reagents and optical
detection instruments to read experimental results. We often need to explore
chemical strategies for labeling relevant reagents that can reveal how different
molecular interactions take place. Another area of investigation addresses the
fact that in these small dimensions, the amount of channel surface material
relative to the amount of liquid is many times higher than in a test tube or
microwell plate. Because of this, the surface material can exert a chemical
influence on the biochemical reactions taking place. We have created strategies
to avoid the problems this can cause, or benefit from it if possible. We have
developed Sipper chips that perform and analyze enzyme reactions using part of
the channel design as a tiny, continuously operating electrophoresis machine.
Thus, reactions with one sample are going on in one area of the chip while
electrophoretic separation of the products of another sample is taking place in
a different part of the chip. We have also found that, in many cases,
fluorescence polarization spectroscopy, an optical detection method that can
determine the proportion of a fluorescent molecule that is attached to a larger
molecule or is unbound in solution, can be used to read reaction results without
needing to electrophoretically separate the biochemicals. We have built this
optical detection capability into our high throughput systems. In general, our
experience is that microfabrication and microfluidics provide a rich tool set
with which to create innovative new applications.

RESEARCH AND DEVELOPMENT

We have made substantial investments in lab-on-a-chip research and product
development since our inception. We explored fundamental issues of lab-on-a-chip
technology as early as possible in order to find solutions to important
technical challenges and seek patent protection for our solutions. Today we are
supplementing these core technology research efforts with applied product
development efforts in several areas.

Technology Research

Our technology research activities fall into several classes.

Chemical Engineering. We are increasing our understanding of the design
rules guiding the development of new chips. Using the principles of chemical
engineering we create patterns of interconnected channels that permit execution
of the various common steps of experimentation. Designs from one chip can be
used for other chips needing similar fluidic functions for a different
application. Mathematics and computer models also help minimize the number of
iterations necessary to achieve new functional chip designs.

Chip Manufacturing. We continue to seek ways to improve the yield and
decrease the cost of manufacturing our chips. We are exploring novel fabrication
techniques and the use of new materials that offer functional advantages, such
as manufacturing in quartz to take advantage of its superior optical features.
We have development programs in manufacturing technology for chips made of
plastic. Plastic devices potentially offer cost advantages and can offer
favorable surface chemical features for some applications. A major area of
development is micromachining technology for precisely attaching capillaries to
our Sipper chips to access reagents. In high throughput experimentation, the
number of capillaries and channels determines the level of throughput.
Accordingly we are developing high yield fabrication methods to enable us to
cost-effectively manufacture chips with many capillaries to perform ultra high
throughput experimentation.

Engineering and Software. We use the skills of electrical engineers,
optical engineers, mechanical engineers, product designers and software
engineers to create new instrumentation to run our chips. These instruments
control fluid movement inside the chip, present the reagents to the chip from
conventional fluid sources, and detect the results of biochemical or cell-based
experiments with optical methods. Software engineers write computer programs
that control the sources of fluid motion, communicate between different
instrument components and interpret signals from the detection system. Currently
we

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develop the software for our high throughput systems. We collaborate with
Agilent to develop software for our personal laboratory systems.

Product Development

Our product development efforts are currently focused on new applications
and capabilities for
our existing instruments, our LibraryCard system, and high throughput genomic
systems.

Extensions of Existing Product Lines. For each of our first generation
instruments, we are expanding the menu of applications to address other stages
of the pharmaceutical development process. For the Agilent 2100 Bioanalyzer, we
intend to introduce new applications that address everyday productivity needs in
many areas of genomics, protein chemistry and cell biology. We are broadening
the application menu for high throughput systems as well to include assays that
measure many important activities of cells and proteins.

LibraryCard System. We are developing a new format for storing and
accessing reagents, which we call the LibraryCard reagent array. We have learned
how to reconstitute very small quantities of dried reagents stored at high
density on a planar surface. We can conveniently access reagents stored in this
way using our Sipper chips. The LibraryCard reagent array could produce a
fundamental change in the way large libraries of reagents are used. Today, these
libraries are only accessible in centralized reference-style laboratories that
can conveniently work with automated warehouses of reagents. When libraries can
be reduced to the size of a postcard, high throughput experimentation involving
massive data acquisition can be decentralized. We believe that this will
increase the size of the market for applications that run on this type of
system. We believe this type of system could significantly impact several stages
of the pharmaceutical development process, particularly primary screening and
pharmacogenetic studies.

Genomics. Genomics is the high throughput analysis of DNA and RNA.
Genomics applications include sequencing DNA and DNA genotyping. Genotyping is
the determination of the DNA sequence variation present at a particular site in
an individual's DNA. One type of these variations, called single nucleotide
polymorphisms or "SNPs," are believed to be important determinants of disease.
Like all experimentation processes, these applications are a combination of
various fluid manipulations, biochemical reactions, molecular separations and
detection. We believe they can be performed on the same basic high throughput
platform we have built for other applications. In early 1999, we began a
project, funded in part by the Advanced Technology Program of the National
Institute of Standards and Technology, to adapt the platform and develop chips
to run high throughput nucleic acids analyses. While the specific aim of the
program is to develop a diagnostics system, the first commercial products to
emerge from the technology could be genomics products, such as a system for high
throughput SNP genotyping. Our goal is to apply lab-on-a-chip technology to some
of the most important areas of biology today, including DNA sequencing, and
emerging areas such as genetic analysis for pharmacogenetics.

Our research and development expenses for the first nine months of 1999,
and for the years ended 1998, 1997 and 1996, were approximately $12.3 million,
$9.6 million, $7.2 million, and $2.7 million, respectively. We intend to
increase our research and development budget and staffing levels during the
remainder of 1999 and into 2000. As of September 30, 1999, we had 70 employees
engaged in research and development, including 42 with advanced degrees.

MANUFACTURING

We manufacture our chips in-house and are currently manufacturing high
throughput instruments in limited volumes. We rely upon Agilent to manufacture
the Agilent 2100 Bioanalyzer. Our high throughput instruments are generally
integrated with plate stacking and handling units offered commercially by other
companies. We contract with third parties to supply most reagents for the
research products business. We currently depend on suppliers to supply prepared
materials for use in the manufacture of chips. We intend to continue and may
extend the subcontracting of portions of our manufacturing processes to
subcontractors where we feel it best leverages the supplier's manufacturing
experience, costs, and/or

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improves our ability to meet customer demands. For a discussion of the methods
we use to manufacture our chips see "-- Technology" and "-- Research and
Development."

COMPETITION

Although we believe that we are currently the only company selling and
delivering lab-on-a-chip products to customers, we expect to encounter intense
competition from a number of companies that offer products for laboratory
experimentation. We anticipate that our competitors will come primarily from the
following two sectors:

- companies providing conventional products based on established
technologies

- companies developing their own microfluidics or lab-on-a-chip
technologies

In order to compete against vendors of conventional products, we will need
to demonstrate the advantages of our LabChip products over alternative
well-established technologies and products. We will also need to demonstrate the
potential economic value of our LabChip products relative to these conventional
technologies and products. Some of the companies that provide these products
include PE Corp., Agilent, Beckman-Coulter, Amersham Pharmacia Biotech, Bio-Rad
Laboratories, Molecular Devices, and LJL BioSystems.

We will also need to compete effectively with companies developing their
own microfluidics or lab-on-a-chip technologies and products, such as Aclara
Biosciences and Orchid Biocomputer. Other companies known to have initiated
microfluidic programs include Motorola, 3M and PE Corp. Microfluidic
technologies have undergone and are expected to continue to undergo rapid and
significant change. Our future success will depend in large part on our ability
to establish and maintain a competitive position in these and future
technologies.

In many instances, our competitors have or will have substantially greater
financial, technical, research, and other resources and larger, more established
marketing, sales, distribution, and service organizations than we do. Moreover,
competitors may have greater name recognition than we do, and may offer
discounts as a competitive tactic. We cannot assure you that our competitors
will not succeed in developing or marketing technologies or products that are
more effective or commercially attractive than our products, or that would
render our technologies and products obsolete. Also, we may not have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. Our success will depend in
large part on our ability to maintain a competitive position with our
technologies.

INTELLECTUAL PROPERTY

We seek patent protection on our lab-on-a-chip technologies. As of
September 30, 1999, we owned or held licenses to 34 issued U.S. patents and 120
pending U.S. patent applications, some of which derive from a common parent
application. Our issued patents expire between 2012 and 2018. Foreign
counterparts of many of these patents and applications have been filed and/or
issued in one or more other countries, resulting in a total of more than 330
issued patents which expire between 2012 and 2019 and pending patent
applications in the United States and foreign countries. These patents and
applications are directed to various technological areas which we believe are
valuable to our business, including:

- control of movement of fluid and other material through interconnected
microchannels

- continuous flow high throughput screening assay methods and systems

- analytical and control instrumentation

- analytical system architecture

- chip-based assay chemistries and methods

- chip compatible sample accession

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- software for control of microfluidic based systems and data analysis

- chip manufacturing processes

We also rely upon copyright protection, trade secrets, know-how, continuing
technological innovation and licensing opportunities to develop and maintain our
competitive position. Our success will depend in part on our ability to obtain
patent protection for our products and processes, to preserve our copyrights and
trade secrets, to operate without infringing the proprietary rights of third
parties and to acquire licenses related to enabling technology or products used
with our lab-on-a-chip technology.

We are party to various exclusive and non-exclusive license agreements with
third parties which give us rights to use certain technologies. For example, we
have an exclusive license in the fields we are currently operating in from
Lockheed Martin Energy Research Corporation, relating to patents covering
inventions by Dr. J. Michael Ramsey. A failure to maintain some or all of the
rights to these technologies could seriously harm our business.

EMPLOYEES

As of September 30, 1999, we had a total of 101 employees, including 70 in
research and development, 14 in manufacturing and 17 in administration and
finance. None of our employees is represented by a collective bargaining
agreement, nor have we experienced any work stoppage. We consider our relations
with our employees to be good.

FACILITIES

Our principal research and development, manufacturing and administrative
facilities are currently located in approximately 53,000 square feet of leased
space in Mountain View, California. The lease for this space will expire in
December 2008. We believe that our current facilities are adequate for our needs
through the year 2000.

LEGAL PROCEEDINGS

On March 22, 1999, we filed a lawsuit in California Superior Court for the
County of Santa Clara (Case No. CV 780743), against Aclara Biosciences Inc., a
patent attorney named Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
our trade secrets relating to our business plans, patents and intellectual
property strategy. The suit also alleges that Mr. Rowland and Flehr Hohbach
committed a breach of the duties they owed to us as our former attorneys. The
suit seeks damages and equitable remedies to prevent Aclara, Mr. Rowland and
Flehr Hohbach from benefiting from the alleged misappropriation and breach of
duties. While we believe that our complaint is meritorious, we cannot assure you
that we will prevail in our action against any or all of the defendants, or that
if we prevail, the damages or equitable remedies awarded, if any, will be
commercially valuable. Furthermore, we have incurred and are likely to continue
to incur substantial costs and expend substantial personnel time in pursuing our
claims against Aclara, Mr. Rowland and Flehr Hohbach.

On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California (Case No. C-99-1968BZ)
alleging that we are making, using, selling or offering for sale microfluidic
devices that infringe United States Patent Number 5,750,015 in willful disregard
of Aclara's patent rights. This patent concerns methods and devices for moving
molecules by the application of electrical fields. The Aclara action seeks
damages for past and future reduced sales or lost profits based upon the making,
using, selling and offering for sale of our products and processes, and seeks to
enjoin our continued activities relating to these products. This action subjects
us to potential liability for damages, including treble damages, and could
require us to cease making, using or selling the affected products, or to obtain
a license in order to continue to manufacture, use or sell the affected
products. While we believe we have meritorious defenses to this action, we
cannot assure you that we will prevail in this action nor can we assure you that
any license required would be made available on commercially acceptable terms,
if

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at all. Furthermore, we have incurred and are likely to continue to incur
substantial costs and expend substantial personnel time in defending against the
claims filed by Aclara. Failure to successfully defend ourselves against the
Aclara action could have a material adverse effect on our business, financial
condition and operating results. For further information on the risks associated
with this litigation see "Risk Factors -- We are involved in intellectual
property litigation that may hurt our competitive position, may be costly to us
and may prevent us from selling our products."

SCIENTIFIC ADVISORY BOARD

We have assembled a group of scientific advisors who are leaders in fields
related to microfluidics technology and systems. These advisors assist us in
formulating our research, development and commercialization strategy and
include:

George Whitesides, Ph.D., Chair, Mallinckrodt Professor of Chemistry at Harvard
University and Member of the National Academy of Sciences. Dr. Whitesides is the
Chairman of our Scientific Advisory Board.

J. Michael Ramsey, Ph.D., a co-founder of Caliper and Corporate Research Fellow
and Head of the Laser Spectroscopy and Microinstrumentation Group in the
Chemical and Analytical Sciences Division at Oak Ridge National Laboratory.

Robert H. Austin, Ph.D., Professor of Physics at Princeton University.

Charles P. Cantor, Ph.D., Professor of Biomedical Engineering and Biophysics at
Boston University, and Member of the National Academy of Sciences.

George Church, Ph.D., Senior Investigator at the Howard Hughes Medical Institute
at Harvard Medical School.

Jed Harrison, Ph.D., Professor of Analytical Chemistry at the University of
Alberta.

Richard Haugland, Ph.D., President and Corporate Research Director of Molecular
Probes, Inc.

James W. Jorgenson, Ph.D., Francis P. Venable Professor of Chemistry at the
University of North Carolina.

Barry Karger, Ph.D., James L. Waters Chair in Analytical Chemistry and Director
of the Barnett Institute of Chemical Analysis and Materials Science at
Northeastern University, Boston, Massachusetts.

Butrus T. Khuri-Yakub, Ph.D., Professor of Electrical Engineering at the E.L.
Ginzton Laboratory of Stanford University.

Andreas Manz, Ph.D., SmithKline Beecham Chair of Analytical Chemistry at the
Imperial College of Science, London.

Stephen D. Senturia, Ph.D., Barton L. Weller Professor of Electrical Engineering
at the Massachusetts Institute of Technology.

Christopher T. Walsh, Ph.D., Hamilton Kuhn Professor of Biological Chemistry and
Molecular Pharmacology at Harvard Medical School and Member of the National
Academy of

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND FOUNDERS

The following presents information about our directors, executive officers
and co-founders as of September 30, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel L. Kisner, M.D. ................... 52 President, Chief Executive Officer and Director
Calvin Y. H. Chow......................... 44 Chief Operating Officer and Co-founder
James L. Knighton......................... 45 Chief Financial Officer
Michael R. Knapp, Ph.D. .................. 47 Vice President of Science and Technology and
Co-founder
J. Wallace Parce, Ph.D. .................. 49 Vice President of Research and Co-founder
William M. Wright III..................... 51 Vice President of Operations
David V. Milligan, Ph.D.(1)(2)............ 59 Chairman of the Board of Directors
Anthony B. Evnin, Ph.D.(1)................ 58 Director
Charles M. Hartman(2)..................... 58 Director
Regis P. McKenna.......................... 60 Director
Robert T. Nelsen(2)....................... 36 Director
Michael Steinmetz, Ph.D.(1)............... 52 Director
Lawrence A. Bock.......................... 40 Co-founder
J. Michael Ramsey, Ph.D. ................. 47 Co-founder
</TABLE>

- ---------------
(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

DANIEL L. KISNER, M.D., has served as our President and Chief Executive
Officer since February 1999 and as a Director since March 1999. From May 1994 to
January 1999, Dr. Kisner served as President and Chief Operating Officer of Isis
Pharmaceuticals, Inc., a biotechnology company. From February 1993 to May 1994,
Dr. Kisner served as Executive Vice President and Chief Operating Officer of
Isis Pharmaceuticals, Inc. From March 1991 to February 1993, he served as
Executive Vice President of Isis Pharmaceuticals, Inc. and was responsible for
business and product development, and manufacturing. From December 1988 to March
1991, Dr. Kisner served as Division Vice President of Pharmaceutical Development
for Abbott Laboratories. Dr. Kisner has held a tenured position in the Division
of Oncology at the University of Texas, San Antonio School of Medicine and is
certified by the American Board of Internal Medicine and certified in Medical
Oncology. Dr. Kisner holds a B.A. from Rutgers University and an M.D. from
Georgetown University.

CALVIN Y. H. CHOW, co-founded Caliper and has served as our Chief Operating
Officer since February 1998. Mr. Chow also served as our Vice President of
Development from September 1995 to February 1998. From October 1985 to September
1995, Mr. Chow served as Vice President of Engineering and Operations of
Molecular Devices Corporation, a bioanalytical instrumentation company, where he
was responsible for product development and company-wide manufacturing. Mr. Chow
holds a B.S. in Electrical Engineering from Illinois Institute of Technology and
an M.S. in Electrical Engineering from Stanford University.

JAMES L. KNIGHTON, has served as our Chief Financial Officer since
September 1999. From October 1998 to September 1999, Mr. Knighton served as
Senior Vice President and Chief Financial Officer of SUGEN, Inc., a
biotechnology company. From July 1997 to October 1998, Mr. Knighton served as
Vice President of Investor Relations and Corporate Communications at Chiron
Corporation, a biotechnology company. From 1985 to 1994, Mr. Knighton served in
various operations, planning and R&D functions at

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E. I. DuPont de Nemours Inc., a global, diversified chemical and life science
company. Mr. Knighton holds a B.S. in Biology from the University of Notre Dame,
an M.S. in Genetics from the University of Pennsylvania and an M.B.A. from the
Wharton School at the University of Pennsylvania.

MICHAEL R. KNAPP, PH.D., co-founded Caliper and has served as our Vice
President of Science and Technology since September 1995. From November 1994
through August 1995, Dr. Knapp was engaged in activities related to forming
Caliper, including securing our core technology license and procuring financing.
From October 1988 to October 1994, Dr. Knapp served as President and Scientific
Director at Molecular Tool, Inc., a genetics technology company he co-founded in
1988. Previously, Dr. Knapp was on the staff of the Center for Neurobiology and
Behavior at Columbia University and was a Scientific Director of Genetica SARL,
an affiliate of Rhone Poulenc SA in Paris, France. Dr. Knapp holds a B.S. in
Biology from Trinity College (Hartford) and a Ph.D. in Medical Microbiology from
Stanford University.

J. WALLACE PARCE, PH.D., co-founded Caliper and has served as our Vice
President of Research since October 1995. Prior to joining Caliper, Dr. Parce
spent 12 years with Molecular Devices Corporation as a founder, consultant,
Director of Research and Vice President of Research. From 1980 until 1984 he was
an Assistant Professor in the Department of Biochemistry at Wake Forest
University, from 1982 until 1987 an associate in the Department of Microbiology
and Immunology, and from 1984 until 1987, an Associate Professor of
Biochemistry. Dr. Parce received his B.A. in Chemistry from Western Maryland
College in 1972 and his Ph.D. in Biochemistry from Wake Forest University in
1976. From 1976 until 1980 Dr. Parce was a Post Doctoral Fellow in Chemistry at
Stanford University.

WILLIAM M. WRIGHT III, has served as our Vice President of Operations since
September 1998. From November 1995 to May 1998, Mr. Wright served as Vice
President of Operations of Biocircuits Corporation, a medical diagnostic
company, where he was responsible for instrument and immunoassay cartridge
manufacturing. From 1984 to 1995, Mr. Wright was Vice President of Site
Operations with Dade International Inc., formerly a division of Baxter
International, Inc., a medical products manufacturing company, where he assisted
in the start-up and launch of the Baxter International Paramax Analytical
Clinical Chemistry Business. Mr. Wright holds a B.S. in Industrial Technology
from California State University at Long Beach.

DAVID V. MILLIGAN, PH.D., has been a Director since October 1996 and the
Chairman of the Board since April 1997. He has been a Vice President and Special
Limited Partner of Bay City Capital, Merchant Bank since 1997. From 1979 to
1996, Dr. Milligan served in a variety of management positions at Abbott
Laboratories, a healthcare products company. During his career at Abbott
Laboratories he led both the diagnostic products and pharmaceutical products
research and development organizations and was Senior Vice President and Chief
Scientific Officer when he retired at the end of 1996. He is also a director of
ICOS Corporation and Diametrics Medical, Inc. He is a member of the chemistry
department advisory boards of the University of California at Berkeley and
Princeton University. Dr. Milligan holds an A.B. in Chemistry from Princeton
University and an M.S. and a Ph.D. in Organic Chemistry from the University of
Illinois.

ANTHONY B. EVNIN, PH.D., has been a Director since June 1996. He has been a
General Partner of Venrock Associates, a venture capital partnership since 1975.
He is also a director of Centocor, Inc., Ribozyme Pharmaceuticals, Inc. and
Triangle Pharmaceuticals, Inc. Dr. Evnin holds an A.B. from Princeton University
and a Ph.D. in Chemistry from Massachusetts Institute of Technology.

CHARLES M. HARTMAN, has been a Director since June 1996. He has been a
General Partner of CW Group, a manager of medical venture capital funds since
April 1983. From 1966 to 1983, Mr. Hartman served in various positions at
Johnson & Johnson where he was responsible for identification, evaluation and
negotiation situations ranging from single product opportunities to company
acquisitions, both domestically and internationally. Mr. Hartman is a director
of The Hastings Center, a non-profit organization devoted to the study of
bioethical issues in medicine and the life sciences. Mr. Hartman holds a B.S. in
Chemistry from the University of Notre Dame and an M.B.A. from the University of
Chicago.

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REGIS P. MCKENNA, has been a Director since September 1998. Mr. McKenna has
been Chairman of The McKenna Group, an international consulting firm
specializing in the application of information and telecommunications
technologies to business strategies since 1973. Mr. McKenna is on the board of
The Economic Strategies Institute and the Competitiveness Council. He is
Chairman of the Board of the Santa Clara University Center for Science,
Technology and Society and was a founding board member of Smart Valley. He is a
trustee at Santa Clara University and President of the Board of Trustees for The
New Children's Shelter of Santa Clara County. Mr. McKenna is on the board of
directors of a number of high technology start-up companies. Mr. McKenna holds a
B.A. from Duquesne University.

ROBERT T. NELSEN, has been a Director since September 1995. Since July
1994, Mr. Nelsen has served as a senior principal of various venture capital
funds associated with ARCH Venture Partners, including ARCH Venture Fund II,
L.P., ARCH Venture Fund III, L.P. and ARCH Venture Fund IV, L.P. From April 1987
to July 1994, Mr. Nelsen was Senior Manager at ARCH Development Corporation, a
company affiliated with the University of Chicago, where he was responsible for
new company formation. He holds a B.S. in Biology and Economics from the
University of Puget Sound and an M.B.A. from the University of Chicago.

MICHAEL STEINMETZ, PH.D., has been a Director since July 1997. He has been
a partner of MPM Asset Management LLC in Cambridge, MA, a venture capital firm
focusing on investments in private biotechnology companies in the U.S. and
Europe, since 1997. From 1997 to 1998, Dr. Steinmetz was also a partner of the
Bellevue Group in Zurich, Switzerland. From 1986 to 1997, Dr. Steinmetz worked
at Hoffmann-La Roche Inc. He headed the Biology Department in Basel and its
worldwide biotechnology research activities. He also was Vice President of
Preclinical Research and Preclinical Research and Development in Nutley, New
Jersey. Dr. Steinmetz was a member of the Board of Directors at Roche USA and
Millennium Pharmaceuticals. Dr. Steinmetz holds a Ph.D. in Natural Sciences from
the University of Munich, has lectured at the University of Basel and is Adjunct
Professor at Rutgers University.

LAWRENCE A. BOCK, co-founded Caliper and served as a director of Caliper
and acting Chief Executive Officer from inception until April 1997 and since
then has been an advisor to Caliper. He has been a General Partner of CW Group,
a medical venture capital fund since June 1998. From 1988 to 1998, Mr. Bock was
General Partner of Avalon Ventures, a seed stage venture capital firm, where he
founded Vertex Pharmaceuticals, Athena Neurosciences, Pharmacopeia, Neurocrine
Biosciences and Argonaut Technologies. He is a founder and director of Illumina
Inc. and FastTrack Systems, Inc. Mr. Bock holds a B.S. in Biochemistry from
Bowdoin College and an M.B.A. from the University of California, Los Angeles.

J. MICHAEL RAMSEY, PH.D., co-founded Caliper and has served on our
Scientific Advisory Board since September 1995. Since February 1979 Dr. Ramsey
has served on the research staff at Oak Ridge National Laboratory where he is
presently a Corporate Research Fellow and Head of the Laser Spectroscopy and
Microinstrumentation Group. Dr. Ramsey holds a B.S. degree in Chemistry from
Bowling Green State University and a Ph.D. in Chemistry from Indiana University.

BOARD COMPOSITION

We currently have seven directors. Upon the closing of this offering the
terms of office of the board of directors will be divided into three classes. As
a result, a portion of our board of directors will be elected each year. The
division of the three classes, the initial directors and their respective
election dates are as follows:

- the class I directors will be Anthony B. Evnin, Ph.D. and Robert T.
Nelsen and their term will expire at the annual meeting of stockholders
to be held in 2000

- the class II directors will be Charles M. Hartman, David V. Milligan,
Ph.D. and Michael Steinmetz, Ph.D. and their term will expire at the
annual meeting of stockholders to be held in 2001

46
<PAGE> 51

- the class III directors will be Daniel L. Kisner, M.D. and Regis P.
McKenna and their term will expire at the annual meeting of stockholders
to be held in 2002

At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. In addition, the authorized number of directors may be
changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
management of Caliper.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1998, Mr. Hartman and Drs. Milligan and Steinmetz served as
members of the compensation committee of our board of directors. No member of
the compensation committee serves as a member of the board of directors or
compensation committee of any other entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee. Prior to the formation of the compensation committee in June 1996,
our board of directors as a whole made decisions relating to compensation of our
executive officers.

BOARD COMMITTEES

Audit Committee. Our audit committee reviews our internal accounting
procedures and consults with, and reviews the services provided by, our
independent auditors. Current members of our audit committee are Drs. Evnin,
Milligan and Steinmetz.

Compensation Committee. Our compensation committee reviews and recommends
to the board of directors the compensation and benefits of all our officers and
reviews general policy relating to compensation and benefits of our employees.
The compensation committee also administers the issuance of stock options and
other awards under our stock plans. Current members of the compensation
committee are Messrs. Hartman and Nelsen and Dr. Milligan.

DIRECTOR COMPENSATION

Directors currently receive no cash compensation from us for their services
as members of the board or for attendance at committee meetings. Directors may
be reimbursed for expenses in connection with attendance at board of directors
and committee meetings.

In September of 1996, we granted Dr. Milligan, in connection with his
services as one of our directors, the right to purchase 19,230 shares of common
stock at $0.11 per share. Our right to repurchase these shares lapses in 60
equal monthly installments. In November 1997, we granted Dr. Milligan an
additional stock option to purchase 6,410 shares of common stock at an exercise
price of $0.62 per share. This option fully vested in September 1998. In April
1999, we granted Dr. Milligan an additional stock option to purchase 6,410
shares of common stock at an exercise price of $0.97 per share. This option
fully vested in September 1999. In October 1999, we granted Dr. Milligan an
additional stock option to purchase 6,410 shares of common stock at an exercise
price of $3.12. This option will fully vest in September 2000. In September
1998, we granted Mr. McKenna, in connection with his services as one of our
directors, a stock option to purchase 19,230 shares of common stock at an
exercise price of $0.97 per share. This option vests in 60 equal monthly
installments. In October 1999, we granted Mr. McKenna an additional stock option
to purchase 3,205 shares of common stock at an exercise price of $3.12 per
share. This option fully vests in September 2000. We have also entered into
consulting agreements with each of Dr. Milligan and Mr. McKenna. See "Certain
Transactions" for a description of these agreements.

In October 1999, we adopted the 1999 Non-Employee Directors' Stock Option
Plan to provide for the automatic grant of options to purchase shares of common
stock to our non-employee directors who are not employees of Caliper or of any
affiliate of Caliper. Any non-employee director elected after the closing of
this offering will receive an initial option to purchase 20,000 shares of common
stock. Starting at the

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<PAGE> 52

annual stockholder meeting in 2000, all non-employee directors will receive an
annual option to purchase 3,200 shares of common stock and the chairman of the
board will receive an annual option to purchase 6,400 shares of common stock.
See "-- Employee Benefit Plans -- 1999 Non-Employee Directors' Stock Option
Plan" for a more detailed explanation of the terms of these stock options.

LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY

Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to the
fullest extent permitted by Delaware law. We are also empowered under our bylaws
to enter into indemnification contracts with our directors and officers and to
purchase insurance on behalf of any person we are required or permitted to
indemnify. Pursuant to this provision, we expect to enter into indemnification
agreements with each of our directors and executive officers.

We intend to obtain officer and director liability insurance to cover
liabilities our officers and directors may incur in connection with their
services to Caliper, including matters arising under the Securities Act. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty of care to us and our stockholders.
This provision in the certificate of incorporation does not eliminate the duty
of care, and in appropriate circumstances, equitable remedies including an
injunction or other forms of non-monetary relief would remain available under
Delaware law. Under current Delaware law, a director's liability to us or our
stockholders may not be limited:

- to any breach of the director's duty of loyalty to us or our stockholders

- for acts or omissions not in good faith or involving intentional
misconduct

- for knowing violations of law

- for any transaction from which the director derived an improper personal
benefit

- for improper transactions between the director and us

- and for improper distributions to stockholders and loans to directors and
officers

This provision also does not affect a director's responsibilities under any
other laws including the federal securities laws or state or federal
environmental laws.

There is no pending litigation or proceeding involving a director or
officer of Caliper as to which indemnification is being sought, nor are we aware
of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.

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<PAGE> 53

EXECUTIVE COMPENSATION

The following table presents summary information for the fiscal year ended
December 31, 1998, regarding the compensation of each of our most highly
compensated executive officers whose salary and bonus for 1998 were in excess of
$100,000. We did not have a Chief Executive Officer or Chief Financial Officer
during 1998. Dr. Daniel L. Kisner joined Caliper in February 1999 as our
President and Chief Executive Officer, and Mr. James L. Knighton joined Caliper
in September 1999 as our Chief Financial Officer. See "-- Employment Agreements"
below for a description of Dr. Kisner's and Mr. Knighton's employment
arrangements.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- --------------------------- -------- ------- ------------
<S> <C> <C> <C>
Calvin Y. H. Chow......................................... $194,775 $38,000 64,102
Chief Operating Officer
Michael R. Knapp, Ph.D. .................................. 165,746 22,000 32,051
Vice President of Science and Technology
J. Wallace Parce, Ph.D. .................................. 186,200 22,000 32,051
Vice President of Research
</TABLE>

Mr. Chow's bonus figure includes $19,000 received in cash and 19,644 shares
of common stock received in lieu of cash. Dr. Knapp's bonus figure includes
$14,740 received in cash and 7,506 shares of common stock received in lieu of
cash. Dr. Parce's bonus figure includes $14,740 received in cash and 7,506
shares of common stock received in lieu of cash.

OPTION GRANTS IN FISCAL YEAR 1998

The following table presents each grant of stock options during the fiscal
year ended December 31, 1998, to each of the individuals listed in the Summary
Compensation Table.

The exercise price of each option was equal to the fair market value of our
common stock as valued by the board of directors on the date of grant. In
determining the fair market value of our common stock on the date of grant our
board of directors considered many factors, including:

- the option grants involved illiquid securities in a nonpublic company

- prices of preferred stock issued by Caliper to outside investors in
arm's-length transactions

- the rights, preferences and privileges of the preferred stock over the
common stock

- Caliper's performance and operating results at the time of grant

- Caliper's stage of development and business strategy

- the likelihood of achieving a liquidity event for the shares of common
stock underlying these options, such as an initial public offering or a
sale of Caliper

The exercise price may be paid in cash, promissory notes, in shares of our
common stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased shares.
The options granted to Mr. Chow, Drs. Knapp and Parce vest as to 20% on
September 16, 1999 and 1/60th per month thereafter.

The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities

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<PAGE> 54

and Exchange Commission and does not represent our prediction of our stock price
performance. The potential realizable values at 5% and 10% appreciation are
calculated by:

- multiplying the number of shares of common stock under the option by the
assumed initial public offering price of $14.00 per share

- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options

- subtracting from that result the aggregate option exercise price

Percentages shown under "Percentage of Total Options Granted in 1998" are
based on an aggregate of 423,253 options granted to employees, consultants and
directors of Caliper under our stock option plans during 1998.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING PERCENTAGE OF TOTAL EXERCISE OPTION TERM
OPTIONS OPTIONS PRICE PER EXPIRATION -----------------------
NAME GRANTED GRANTED IN 1998 SHARE DATE 5% 10%
- ---- ---------- ------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Calvin Y. H. Chow............ 64,102 15.15% $0.97 09/16/08 $1,330,026 $2,053,909
Michael R. Knapp, Ph.D. ..... 32,051 7.57 0.97 09/16/08 665,014 1,026,959
J. Wallace Parce, Ph.D. ..... 32,051 7.57 0.97 09/16/08 665,014 1,026,959
</TABLE>

OPTION VALUES AT DECEMBER 31, 1998

The following table presents the number and value of securities underlying
unexercised options that are held by each of the individuals listed in the
Summary Compensation Table as of December 31, 1998. No shares were acquired on
the exercise of stock options by these individuals during the year ended
December 31, 1998.

Amounts shown under the column "Value of Unexercised In-the-Money Options
at December 31, 1998" are based on the assumed initial public offering price of
$14.00, without taking into account any taxes that may be payable in connection
with the transaction, multiplied by the number of shares underlying the option,
less the exercise price payable for these shares.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Calvin Y. H. Chow.......................... 23,236 106,250 $313,157 $1,401,834
Michael R. Knapp, Ph.D..................... 30,663 74,200 416,319 984,223
J. Wallace Parce, Ph.D..................... 22,701 74,734 305,919 991,448
</TABLE>

EMPLOYMENT AGREEMENTS

In January 1999, we entered into an employment agreement with Daniel L.
Kisner, M.D. to serve as our President and Chief Executive Officer at a base
salary of $350,000 a year starting on February 28, 1999, with an annual
discretionary bonus of up to 50% of his base salary based upon specific
objectives to be agreed upon by Dr. Kisner and the board. Pursuant to the
employment agreement, Dr. Kisner received an option to purchase 641,025 shares
of our common stock at an exercise price of $0.97 per share. This option vests
over a period of five years in 60 equal monthly installments. In addition, Dr.
Kisner is entitled to a housing loan of up to $500,000 which may be forgiven
over time, and monthly mortgage assistance to support a $500,000 mortgage, plus
additional payments to compensate for the tax payable on these portions of his
compensation. The employment agreement is at-will and contains a
non-solicitation agreement. This agreement also provides that if Dr. Kisner is
terminated without cause or Dr. Kisner voluntarily terminates

50
<PAGE> 55

his employment after a constructive termination, he will be paid his then
current salary for 12 months in monthly installments or until he becomes
employed, whichever is earlier, and a portion of his options will be partially
accelerated.

In September 1999, we entered into an employment agreement with James L.
Knighton to serve as our Chief Financial Officer at a base salary of $245,000 a
year starting in September, 1999, with a sign-on bonus of $50,000 and an annual
discretionary bonus set by the board based upon specific objectives to be
determined, with a minimum bonus of 30% of his base salary guaranteed during the
first 12 months of employment. In addition, Mr. Knighton will receive a stock
bonus equal to $100,000 divided by the initial public offering price when our
common stock trades at or above 125% of the initial public offering price for
six consecutive months. Pursuant to the employment agreement, Mr. Knighton
received an option to purchase 269,230 shares of our common stock at an exercise
price of $3.12 per share, plus a bonus payable at the time of exercise in the
amount of $1.56 per share of stock exercised, plus an additional amount to cover
taxes on the bonus. In addition, Mr. Knighton is entitled to a housing loan of
up to $500,000. The employment agreement is at-will, and provides that if Mr.
Knighton is terminated without cause or Mr. Knighton voluntarily terminates his
employment after a constructive termination, he will be paid his base salary for
12 months in monthly installments or until he becomes employed, whichever is
earlier, and a portion of his options will be partially accelerated.

EMPLOYEE BENEFIT PLANS

1999 Equity Incentive Plan

We adopted our 1999 equity incentive plan in October 1999. The incentive
plan is an amendment and restatement of our 1996 stock incentive plan and will
terminate in 2009 unless the board terminates it sooner.

Share Reserve. We have reserved a total of 4,000,000 shares of our common
stock for issuance under the 1996 stock incentive plan. If the recipient of a
stock award does not purchase the shares under the stock award before the stock
award expires or otherwise terminates, the shares that are not purchased again
become available for issuance under the incentive plan.

On the day after each annual meeting of our stockholders for 10 years,
beginning in 2000, the number of shares in the reserve automatically will be
increased by the greater of:

- 5% of our outstanding shares on a fully-diluted basis; or

- that number of shares that could be issued under awards granted under the
incentive plan during the prior 12-month period.

The automatic share reserve increase in the aggregate may not exceed 12,820,000
shares over the 10-year period.

Administration. The board administers the incentive plan unless it
delegates administration to a committee. The board has the authority to
construe, interpret and amend the incentive plan.

Eligibility. The board may grant incentive stock options that qualify
under Section 422 of the Internal Revenue Code to our employees and to the
employees of our affiliates. The board also may grant nonstatutory stock
options, stock bonuses and restricted stock purchase awards to our employees,
directors and consultants as well as to the employees, directors and consultants
of our affiliates.

Option Terms. The board may grant incentive stock options with an exercise
price of 100% or more of the fair market value of a share of our common stock on
the grant date. It may grant nonstatutory stock options with an exercise price
as low as 85% of the fair market value of a share on the grant date. The maximum
option term is 10 years. The board may provide for exercise periods of any
length in individual option grants. However, generally an option terminates
three months after the optionholder's service to our affiliates and to us
terminates.

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<PAGE> 56

Other Provisions. Transactions not involving our receipt of consideration,
such as a merger, consolidation, reorganization, stock dividend, or stock split,
may change the class and number of shares under the incentive plan and to
outstanding awards. The board will appropriately adjust the incentive plan as to
the class and the maximum number of shares under the incentive plan, and to the
cap on the number of shares available for incentive stock options. It also will
adjust outstanding awards as to the class, number of shares and price per share
of the awards.

Terms of Other Stock Awards. The board determines the purchase price of
other stock awards, which may not be less than 85% of the fair market value of
our common stock on the grant date. However, the board may award stock bonuses
in consideration of past services without a purchase payment. Shares that we
sell or award under the incentive plan may, but need not be, restricted and
possess a repurchase option with a vesting schedule that the board determines.
The board, however, may accelerate the vesting of the restricted stock.

If we dissolve or liquidate, then outstanding stock awards will terminate
immediately prior to the event. If we sell, lease or dispose of all, or
substantially all, of our assets, or are acquired pursuant to a merger or
consolidation then, the surviving entity will either assume or substitute all
outstanding awards under the incentive plan. If it declines to do so, then
generally the vesting and exercisability of the stock awards will accelerate.

Stock Awards Granted. As of September 30, 1999, we had granted options to
purchase 2,528,306 shares under the incentive plan, and 534,110 shares remained
available for future grant. However, the number of shares remaining available
for future grant will increase by 1,274,101 shares if the stockholders approve
the share reserve increase. The board has not granted any stock bonuses under
the 1999 equity incentive plan.

1996 Equity Incentive Plan

Our 1996 equity incentive plan was adopted by the board of directors in
January 1996 and approved by the stockholders in August 1996. The board
authorized and reserved an aggregate of 705,128 shares of Caliper common stock
for issuance under the 1996 equity incentive plan. The 1996 equity incentive
plan provides for the grant of incentive stock options to employees and
nonstatutory stock options to employees, directors and consultants of Caliper
and its affiliates. The 1996 equity incentive plan provides that it will be
administered by the board, or a committee appointed by the board, which
determines recipients and types of options to be granted, including number of
shares under the option and the exercisability of the shares.

As of September 30, 1999, under the 1996 equity incentive plan (a) options
to purchase 91,399 shares of common stock were outstanding and (b) options to
purchase 116,425 shares had been exercised. In July 1996, the board voted that
no additional grants would be made under the 1996 equity incentive plan.

1999 Non-Employee Directors' Stock Option Plan

We adopted the 1999 non-employee directors' stock option plan in October
1999. The directors' plan provides for the automatic grant to our non-employee
directors of options to purchase shares of our common stock. The directors' plan
will terminate in 2009 unless the board terminates it sooner.

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<PAGE> 57

Share Reserve. We have reserved a total of 200,000 shares of our common
stock for issuance under the directors' plan. On the day after each annual
meeting of our stockholders, for 10 years, starting in 2000, the share reserve
will automatically be increased by a number of shares equal to the greater of:

- 0.3% of our outstanding shares on a fully-diluted basis, or

- that number of shares that could be issued under options granted under
the directors' plan during the prior 12-month period.

If an optionholder does not purchase the shares under the option before the
option expires or otherwise terminates, the shares that are not purchased again
become available for issuance under the directors' plan.

Administration. The board administers the directors' plan. The board has
the authority to construe, interpret and amend the directors' plan but the
directors' plan specifies the essential terms of the options.

Eligibility and Option Terms. Each person who is first elected or
appointed as a non-employee director after this initial public offering will
automatically receive an option for 20,000 shares. The initial grant will be
fully exercisable upon date of grant and will vest monthly over 5 years.

In addition, on the day after each of our annual meetings of the
stockholders, starting with the annual meeting in 2000, each non-employee
director will automatically receive another option if the recipient has been a
non-employee director for at least the prior six months. The annual grant will
cover 6,400 shares for the chairman of the board and 3,200 shares otherwise,
will be fully exercisable upon date of grant and will vest in 12 months. Options
have an exercise price equal to 100% of the fair market value of our common
stock on the grant date. The option term is 10 years.

If we dissolve or liquidate, then outstanding options will terminate
immediately prior to the event. If we sell, lease or dispose of all, or
substantially all, of our assets, or are acquired pursuant to a merger or
consolidation then, the surviving entity will either assume or replace all
outstanding options under the directors' plan. If it declines to do so, then
generally the vesting and exercisability of the options will accelerate.
However, if an option is assumed or replaced but the optionholder is not elected
to the board of directors of the acquiring or surviving corporation at the first
meeting of the board after the event, then the vesting of that option will
accelerate by 18 months.

Options Issued. The directors' plan will not be effective until the date
of this initial public offering of our stock. Therefore, we have not issued any
options under the directors' plan.

1999 Employee Stock Purchase Plan

We adopted the 1999 employee stock purchase plan in October 1999. The
purchase plan has no set termination date. It will terminate when all of the
shares reserved under it have been issued unless the board terminates it
earlier.

Share Reserve. We authorized the issuance of 300,000 shares of our common
stock pursuant to purchase rights granted to eligible employees under the
purchase plan. On the day after each annual meeting of our stockholders for 10
years, beginning in 2000, the number of shares in the reserve automatically will
be increased by the greater of:

- 0.5% of our outstanding shares on a fully-diluted basis, or

- that number of shares that have been issued under the purchase plan
during the prior 12-month period.

The automatic share reserve increase in the aggregate may not exceed
3,000,000 shares over the 10-year period.

Eligibility. We intend to qualify the purchase plan as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The purchase plan provides a means by which eligible employees may purchase our
common stock through payroll deductions. We implement the

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<PAGE> 58

purchase plan by offerings of purchase rights to eligible employees. Generally,
all of our full-time employees and full-time employees of our affiliates
incorporated in the United States who have been employed for at least 10 days
may participate in offerings under the purchase plan. However, no employee may
participate in the purchase plan if immediately after we grant the employee a
purchase right, the employee has voting power over 5% or more of our outstanding
capital stock. As of the date hereof, no shares of common stock have been
purchased under the purchase plan.

Offerings. Under the purchase plan, the board may specify offerings of up
to 27 months. Unless the board otherwise determines, common stock is purchased
for accounts of participating employees at a price per share equal to the lower
of:

- 85% of the fair market value of a share on the first day of the offering,
or

- 85% of the fair market value of a share on the purchase date.

The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:

- 85% of the fair market value of a share on the day they began
participating in the purchase plan, or

- 85% of the fair market value of a share on the purchase date.

Participating employees may authorize payroll deductions of up to 10% of
their compensation for the purchase of stock under the purchase plan. Employees
may end their participation in the offering at any time up to 10 days before a
purchase period ends. Their participation ends automatically on termination of
their employment.

Other Provisions. The board may grant eligible employees purchase rights
under the purchase plan only if the purchase rights together with any other
purchase rights granted under other employee stock purchase plans established by
us or by our affiliates, if any, do not permit the employee's rights to purchase
our stock to accrue at a rate which exceeds $25,000 of fair market value of our
stock for each calendar year in which the purchase rights are outstanding.

If we sell, lease or dispose of all, or substantially all, of our assets,
or are acquired pursuant to a merger or acquisition then, the board may provide
that the successor corporation will assume or substitute for outstanding
purchase rights. Alternatively, the board may shorten the offering period and
provide that our stock will be purchased for the participants immediately before
the event.

401(k) Plan

We maintain a retirement and deferred savings plan for our employees that
is intended to qualify as a tax-qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to a statutory
limit, which is $10,000 in calendar year 1999.

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<PAGE> 59

CERTAIN TRANSACTIONS

The following executive officers, directors or holders of more than five
percent of our voting securities purchased securities in the amounts as of the
dates shown below.

<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
COMMON --------------------------------------------------------
STOCK SERIES B SERIES C SERIES D SERIES E
----------------- ------------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel L. Kisner, M.D............... 64,101 -- -- -- --
Calvin Y. H. Chow................... 218,178 -- -- -- --
Michael R. Knapp, Ph.D.............. 210,263 20,479 5,342 -- --
J. Wallace Parce, Ph.D.............. 193,220 -- -- -- --
William M. Wright III............... 10,256 -- -- -- --
David V. Milligan, Ph.D............. 96,152 -- -- -- --
Charles M. Hartman.................. 7,692 -- -- -- --
Regis P. McKenna.................... 19,230 -- -- 32,051 --
5% STOCKHOLDERS
Venrock Associates(1)............... 76,181 1,062,536 44,267 55,128 --
Venrock Associates II, L.P.(1)...... 46,692 652,779 66,401 73,077 --
CW Partners III, L.P.(2)............ 122,874 -- -- -- --
CW Ventures II, L.P.(2)............. -- 1,414,831 90,906 -- --
Lombard Odier & Cie................. -- 409,594 641,026 480,769 224,359
The Dow Chemical Company............ -- -- -- 1,041,667 --
Hoffmann-La Roche Inc............... -- -- 854,701 -- --
BB BioVentures, L.P.(3)............. -- -- -- 801,282 --
Price Per Share..................... $0.00156 to $0.97 $1.2207211 $4.68 $6.24 $9.36
Date(s) of Purchase................. 8/95 to 9/99 4/96 to 10/96 10/96 to 12/96 1/97 to 3/98 5/98
</TABLE>

- ---------------
(1) Anthony B. Evnin, Ph.D., one of our directors, is a general partner of
Venrock Associates.

(2) Charles M. Hartman, one of our directors, is a general partner of CW Group.

(3) Michael Steinmetz, Ph.D., one of our directors, is a partner of MPM Asset
Management LLC, the management advisor of BB BioVentures, L.P.

We have entered into the following agreements with our executive officers,
directors and holders of more than five percent of our voting securities.

Amended and Restated Investors' Rights Agreement. Caliper and the
preferred stockholders described above have entered into an agreement, pursuant
to which these and other preferred stockholders will have registration rights
with respect to their shares of common stock following this offering. Upon the
completion of this offering, all shares of our outstanding preferred stock will
be automatically converted into common stock on a one for one basis. See
"Description of Capital Stock -- Registration Rights" for a further description
of the terms of this agreement.

Dow Chemical Agreement. On January 14, 1997, we entered into a development
agreement with The Dow Chemical Company to work together on polymer chip
manufacturing technologies. This work concluded in 1998. In consideration of
Dow's contribution under the development agreement, we issued 240,385 shares of
our Series D preferred stock to Dow. The remaining shares of Series D preferred
stock held by Dow were purchased with cash in connection with our Series D
financing.

MPM Capital Advisors LLC Agreement. On July 24, 1997, we entered into an
agreement with MPM Capital Advisors LLC. Under the terms of this agreement, MPM
agreed to develop a strategic overview and business plan for Caliper. In
consideration for these services we paid MPM $125,000 and issued 39,262 shares
of our common stock. This agreement was terminated on April 23, 1998.

55
<PAGE> 60

David V. Milligan, Ph.D. Consulting Agreement. As part of our ongoing
program of research and development, we entered into a twelve-month consulting
agreement with Dr. David V. Milligan, our Chairman of the Board, effective April
30, 1997. The term of this agreement may be renewed annually for up to five
years. Under the terms of this agreement, Dr. Milligan has agreed to provide
consultation and advice concerning our core competitive strengths and the
development of optimal growth strategies. In exchange, we have agreed to pay Dr.
Milligan $80,000 per year and granted Dr. Milligan a stock option to purchase
64,102 shares of our common stock at $0.47 per share. This option vests monthly
over a period of five years. This agreement has been renewed and remains in
effect. We have also granted Dr. Milligan stock options in connection with his
services as one of our directors. See "Management -- Director Compensation."

Regis P. McKenna Consulting Agreement. We entered into a twelve-month
consulting agreement with Regis P. McKenna, one of our directors, on April 30,
1997. Under the terms of this agreement, Mr. McKenna agreed to provide
assistance in developing our technology and business strategies. In exchange,
Mr. McKenna was allowed to purchase 19,230 shares of common stock at $0.62 per
share. In July 1998, Mr. McKenna was granted a stock option for 19,230 shares of
common stock at $0.97 per share. In August 1999, Mr. McKenna was granted a stock
option for 19,230 shares of common stock at $0.97 per share. This option vests
in twelve equal monthly installments beginning in May 1999. This agreement has
been renewed and remains in effect. We have also granted Mr. McKenna stock
options in connection with his services as one of our directors. See
"Management -- Director Compensation."

Executive Employment Agreements. We have entered into employment contracts
with Daniel L. Kisner, M.D. our President and Chief Executive Officer, and James
L. Knighton, our Chief Financial Officer. See "Management -- Employment
Agreements."

Indebtedness of Management. In March 1997, we loaned Michael R. Knapp, our
Vice President of Science and Technology, $200,000 in connection with the
purchase of a residence. The interest on this loan is 6.61% per year and begins
to accrue on January 1, 2002. The principal and accrued interest is to be repaid
in five equal annual installments beginning June 30, 2002. The promissory note
will accelerate and become due and payable should Dr. Knapp's employment with us
is terminated for any reason. The promissory note is full recourse and is
secured by a deed of trust on the residence. In September 1999, we loaned Daniel
L. Kisner, M.D. our President and Chief Executive Officer, $425,000 in
connection with the purchase of a residence. The loan has a maximum term of six
years with an annual interest rate of 5.96%. The loan may be forgiven by our
board based upon Dr. Kisner's performance over five years.

Warrants. In August 1995, we entered into an agreement, as amended, with
Michael R. Knapp, Ph.D., our Vice President of Science and Technology, under
which we agreed to issue to Dr. Knapp two warrants, each for 19,230 shares of
our common stock at $1.22 per share, upon the achievement of performance
milestones. In October 1996, we issued to Dr. Knapp the first of the two
warrants. This warrant is exercisable until October 11, 2006.

Stock Options. In October 1996, in connection with his services as a
consultant to us, we granted to Charles M. Hartman, one of our directors, a
stock option to purchase 7,692 shares of common stock at an exercise price $0.47
per share.

We believe that all of the transactions described above were made on terms
no less favorable to Caliper than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between Caliper and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the board of directors, including a majority of the
independent and disinterested directors, and will continue to be on terms no
less favorable to Caliper than could be obtained from unaffiliated third
parties.

Indemnification Agreements. We intend to enter into indemnification
agreements with our directors and officers for the indemnification of these
persons to the full extent permitted by law. We also intend to execute these
agreements with our future directors and officers.

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<PAGE> 61

PRINCIPAL STOCKHOLDERS

The following table presents information regarding the beneficial ownership
of our common stock as of September 30, 1999, and as adjusted to reflect the
sale of our common stock offered by this prospectus, by:

- each of the individuals listed in the "Summary Compensation Table" above

- each of our directors

- each person, or group of affiliated persons, who is known by us to own
beneficially five percent or more of our common stock

- all current directors and executive officers as a group

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock under options held by that person that are currently
exercisable or exercisable within 60 days of September 30, 1999 are considered
outstanding. These shares, however, are not considered outstanding when
computing the percentage ownership of each other person.

Except as indicated in the footnotes to this table and pursuant to state
community property laws, each stockholder named in the table has sole voting and
investment power for the shares shown as beneficially owned by them. Percentage
of ownership is based on 15,804,501 shares of common stock outstanding on
September 30, 1999 and 19,404,501 shares of common stock outstanding after
completion of this offering. This table assumes no exercise of the underwriters'
over-allotment option. Unless otherwise indicated in the footnotes, the address
of each of the individuals named below is: c/o Caliper Technologies Corp., 605
Fairchild Drive, Mountain View, California 94043.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
-------------------------------------------------
SHARES ISSUABLE
PURSUANT TO
OPTIONS AND SHARES
WARRANTS CALIPER MAY PERCENTAGE
EXERCISABLE REPURCHASE BENEFICIALLY
NUMBER OF WITHIN WITHIN OWNED
SHARES 60 DAYS OF 60 DAYS OF -------------------
BENEFICIALLY SEPTEMBER 30, SEPTEMBER 30, BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED 1999 1999 OFFERING OFFERING
- ------------------------------------ ------------ ----------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel L. Kisner, M.D.(1)................... 64,101 32,050 -- * *
Calvin Y. H. Chow(2)........................ 218,178 5,373 25,641 1.4% 1.2%
Michael R. Knapp, Ph.D...................... 236,084 29,944 4,807 1.7 1.4
J. Wallace Parce, Ph.D.(3).................. 193,220 10,180 28,205 1.3 1.1
David V. Milligan, Ph.D..................... 96,152 -- 32,051 * *
Anthony B. Evnin, Ph.D.(4).................. 2,077,061 -- -- 13.1 10.7
Charles M. Hartman(5)....................... 1,636,303 -- -- 10.4 8.4
Regis P. McKenna(6)......................... 51,281 33,332 -- * *
Robert T. Nelsen(7)......................... 708,837 -- -- 4.5 3.7
Michael Steinmetz, Ph.D.(8)................. 840,544 -- -- 5.3 4.3
5% STOCKHOLDERS
Venrock Associates(4)....................... 2,077,061 -- -- 13.1 10.7
Lombard Odier & Cie(9)...................... 1,755,748 -- -- 11.1 9.1
CW Group(5)................................. 1,628,611 -- -- 10.3 8.4
The Dow Chemical Company(10)................ 1,041,667 -- -- 6.6 5.4
Hoffmann-La Roche Inc.(11).................. 854,701 -- -- 5.4 4.4
BB BioVentures, L.P.(8)..................... 840,544 -- -- 5.3 4.3
All directors and executive officers as a
group (12 persons)(12).................... 6,132,017 112,587 90,704 39.2% 32.0%
</TABLE>

57
<PAGE> 62

- ---------------
* Represents beneficial ownership of less than 1 percent.

(1) Includes 38,461 shares held by The Kisner Revocable Trust u/a/d 9/23/99, of
which Dr. Kisner is a trustee, 12,820 shares held by The Jordan Renee
Kisner Exempt Irrevocable Trust u/a/d 9/23/99, of which Dr. Kisner is a
trustee and 12,820 shares held by The Griffin Daniel Kisner Exempt
Irrevocable Trust u/a/d 9/23/99, of which Dr. Kisner is a trustee.

(2) Includes 25,872 shares that are held by Tiffany Chow, 12,820 shares held by
Harrison Chow and 12,820 shares held by Stephanie Chow, the children of Mr.
Chow.

(3) Includes 12,820 shares held by Charles Andrew Parce and 12,820 shares held
by Laura Marie Parce, the children of Dr. Parce.

(4) Consists of 1,238,112 shares held by Venrock Associates, and 838,949 shares
held by Venrock Associates II, L.P. Venrock Associates is located at 30
Rockefeller Plaza, Suite 5508, New York, NY 10112. Dr. Evnin, David R.
Hathaway, Patrick F. Latterell, Ted H. McCourtney, Ray A. Rothrock,
Kimberley A. Rummelsburg and Anthony Sun are general partners of Venrock
Associates and disclaim beneficial ownership of these shares except to the
extent of each of their proportionate partnership interest in these shares.

(5) Includes 122,874 shares held by CW Partners III, L.P., and 1,505,737 shares
held by CW Ventures II, L.P. CW Group is located at 1041 Third Avenue, 2nd
Floor, New York, NY 10021. Mr. Hartman, Barry Weinberg and Walter Channing
are general partners of CW Ventures and disclaim beneficial ownership of
these shares except to the extent of each of their proportionate
partnership interest in these shares.

(6) Includes 32,051 shares held by The Regis P. and Dianne T. McKenna Trust, of
which Mr. McKenna is a trustee.

(7) Consists of 708,837 shares held by ARCH Venture Fund II, L.P., a limited
partnership managed by ARCH Management Partners II, L.P. ARCH Venture
Partners, L.P. is the general partner of ARCH Management Partners II, L.P.
Mr. Nelsen, is the Managing Director of ARCH Venture Corporation, which is
the general partner of ARCH Venture Partners, L.P. Messrs. Steven Lazarus
and Keith Crandell are each a Managing Director of ARCH Venture Partners,
L.P. ARCH Venture Fund II, L.P. is located at 8725 W. Higgins Road, Suite
290, Chicago, Illinois 60631. Messrs. Nelsen, Lazarus and Crandell each
disclaim beneficial ownership of these shares except to the extent of each
of their pecuniary interest in these shares.

(8) Includes 801,282 shares held by BB BioVentures, L.P. BB BioVentures, L.P.
is located at One Cambridge Center, 9th Floor, Cambridge, MA 02142. Dr.
Steinmetz is a partner of MPM Asset Management LLC, the management advisor
of BB BioVentures, L.P. Dr. Steinmetz disclaims beneficial ownership of
these shares. Also includes 39,262 shares held by MPM Capital Advisors LLC,
a wholly owned subsidiary of MPM Capital L.P. MPM Capital L.P. also owns
51% of MPM Asset Management LLC. Dr. Steinmetz disclaims beneficial
ownership of these shares except to the extent of his proportional
partnership interest in these shares. Ansbert Gadicke is the managing
director of BAB BioVentures, N.V., the general partner of BAB BioVentures
L.P., which is the general partner of BB BioVentures, L.P. Mr. Gadicke
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in these shares.

(9) Lombard Odier & Cie is located at 11, Rue de la Corraterie, 1204 Geneva,
Switzerland. Lombard Odier & Cie is a private Swiss banking institution.

(10) The Dow Chemical Company is located at 2030 Dow Center, Midland, Michigan
48674. The Dow Chemical Company is a publicly traded company and is listed
on the NYSE under the symbol "DOW".

(11) Hoffmann-La Roche Inc. is located at 340 Kingland Street, Nutley, New
Jersey 07110. Hoffmann-La Roche Inc. is a subsidiary of Roche Holding Ltd.
which is a publicly traded company and is listed on the Swiss Market.

(12) Total number of shares includes 5,255,053 shares of common stock held by
entities affiliated with directors and executive officers. See footnotes 1
through 8 above.

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<PAGE> 63

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, our authorized capital stock will consist
of 70,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value.

COMMON STOCK

As of September 30, 1999, there were 15,804,501 shares of common stock
outstanding held of record by 158 stockholders. The holders of common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders. The holders of common stock are entitled to receive
ratably any dividends as may be declared by the board of directors out of
legally available funds, after the superior rights of the holders of preferred
stock have been satisfied. See "Dividend Policy." Upon a liquidation,
dissolution or winding up of Caliper, holders of the common stock are entitled
to share ratably in all assets remaining after payment of liabilities and
amounts due to the holders of preferred stock as described below. Holders of
common stock have no preemptive rights and no right to convert their common
stock into any other securities. There are no redemption or sinking fund
provisions that apply to the common stock. All outstanding shares of common
stock are, and all shares of common stock to be outstanding upon completion of
this offering will be, fully paid and non-assessable.

PREFERRED STOCK

The board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon the preferred stock,
including dividend rights, conversion rights, terms of redemption, liquidation
preference, sinking fund terms and the number of shares constituting any series
or the designation of a series, without any further vote or action by the
stockholders. The board of directors, without stockholder approval, can issue
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of common stock. The issuance of preferred stock
could have the effect of delaying, deferring or preventing a change in control
of Caliper. We have no present plan to issue any shares of preferred stock.

WARRANTS

As of September 30, 1999, one warrant to purchase 32,767 shares of Series B
preferred stock was outstanding at an exercise price of $1.22 per share. This
warrant expires upon the earlier of May 10, 2002 or three years after completion
of this offering. The warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares that may be issued upon the
exercise of the warrant if a stock dividend, stock split, reorganization,
reclassification or consolidation occurs. Upon the closing of this offering, the
warrant to purchase Series B preferred stock will become exercisable for common
stock at the rate of one share of common stock for each share of preferred stock
underlying the warrant.

As of September 30, 1999, three warrants to purchase a total of 41,736
shares of common stock were outstanding at an exercise price of $1.22 per share.
One of the warrants expires on the earlier of January 3, 2002 or the closing of
a merger or acquisition of Caliper. Two of the warrants expire on October 11,
2006. Each warrant contains provisions for the adjustment of the exercise price
and the aggregate number of shares that may be issued upon the exercise of the
warrants if a stock dividend, stock split, reorganization, reclassification or
consolidation occurs.

Upon the achievement of a patent milestone we will be obligated to issue
two warrants, each to purchase 19,230 shares of common stock at an exercise
price of $1.22 per share. If issued, the warrants will expire in January 2006.

REGISTRATION RIGHTS

On the date 180 days after the completion of this offering, the holders of
11,855,090 shares of common stock or their transferees will be entitled to
rights to register these shares under the Securities Act of 1933. If we propose
to register any of our securities under the Securities Act, either for our own

59
<PAGE> 64

account or for the account of other securityholders, the holders of these shares
will be entitled to notice of the registration and will be entitled to include,
at our expense, their shares of common stock. In addition, the holders of these
shares may require us, at our expense and on not more than two occasions at any
time beginning approximately six months from the date of the closing of this
offering, to file a registration statement under the Securities Act covering
their shares of common stock, and we will be required to use our best efforts to
have the registration statement declared effective. Further, the holders may
require us at our expense to register their shares on Form S-3 when this form
becomes available. These rights shall terminate on the earlier of five years
after the effective date of this offering, or when a holder is able to sell all
its shares pursuant to Rule 144 under the Securities Act in any 90-day period.
Attached to these registration rights are conditions and limitations, including
the right of the underwriters to limit the number of shares included in the
registration statement.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER PROVISIONS

Delaware Law

In general, Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years following the date
that the stockholder became an interested stockholder unless:

- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;

- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held under the plan will be tendered in a tender or
exchange offer; or

- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.

Section 203 defines "business combination" to include:

- any merger or consolidation involving the corporation and the interested
stockholder;

- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;

- in general, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested
stockholder; or

- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.

In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.

Charter Provisions

Our certificate of incorporation and bylaws include a number of provisions
that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of Caliper. First, our certificate
of incorporation provides that all stockholder actions upon completion of this
offering must be effected at a duly called meeting of holders and not by a
consent in writing. Second, our bylaws provide that special meetings of the
holders may be called only by the chairman of the board of directors, the

60
<PAGE> 65

chief executive officer, or our board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors. Third, our
certificate of incorporation provides that our board of directors can issue up
to 5,000,000 shares of preferred stock, as described under "-- Preferred Stock"
above. Fourth, our certificate of incorporation and the bylaws provide for a
classified board of directors, in which approximately one-third of the directors
would be elected each year. Consequently, any potential acquiror would need to
successfully complete two proxy contests in order to take control of the board
of directors. Our certificate of incorporation includes a provision requiring
cumulative voting for directors only if required by California law. Under
cumulative voting, a minority stockholder holding a sufficient percentage of a
class of shares may be able to ensure the election of one or more directors. As
a result of the provisions of the certificate of incorporation and California
and Delaware law, unless California Corporations Code applies to us,
stockholders will not be able to cumulate votes for directors. Finally, our
bylaws establish procedures, including advance notice procedures with regard to
the nomination of candidates for election as directors and stockholder
proposals. These provisions of our certificate of incorporation and bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control or management of Caliper.

TRANSFER AGENT AND REGISTRAR

Norwest Bank Minnesota, N.A. has been appointed as the transfer agent and
registrar for our common stock.

NATIONAL MARKET LISTING

We have applied for listing of our common stock on the Nasdaq Stock
Market's National Market under the symbol "CLPR."

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<PAGE> 66

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, because a
large number of our shares of common stock outstanding will not be available for
sale shortly after this offering because of contractual and legal restrictions
on resale as described below. Sales of substantial amounts of our common stock
in the public market after these restrictions lapse could depress the prevailing
market price and limit our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of
19,404,501 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless
these shares are purchased by affiliates. The remaining 15,804,501 shares of
common stock held by existing stockholders are restricted securities. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under the Securities Act.

As a result of the contractual restrictions described below and the rules
under the Securities Act, the restricted shares will be available for sale in
the public market as follows:

Lock-Up Agreements

All of our officers and directors, and a majority of our stockholders,
warrant holders and option holders, have agreed not to transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock,
for a period of 180 days after the date the registration statement of which this
prospectus is a part is declared effective. Transfers or dispositions can be
made sooner with the prior written consent of Credit Suisse First Boston
Corporation.

Registration Rights

On the date 180 days after the completion of this offering, the holders of
11,855,090 shares of our common stock will have rights to require us to register
their shares under the Securities Act. Upon the effectiveness of a registration
statement covering these shares, the shares would become freely tradeable.

Stock Options

Immediately after this offering, we intend to file a registration statement
under the Securities Act covering approximately 3,978,102 shares of common stock
reserved for issuance under our stock option plans and employee stock purchase
plan. The registration statement is expected to be filed and become effective as
soon as practicable after the closing of this offering. Accordingly, shares
registered under the registration statements will be available for sale in the
open market, beginning 180 days after the effective date of the registration
statement of which this prospectus is a part.

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<PAGE> 67

UNDERWRITING

Under the terms and conditions contained in the underwriting agreement
dated , 1999, we have agreed to sell to the underwriters named below,
for whom Credit Suisse First Boston Corporation, CIBC World Markets Corp. and
Hambrecht & Quist LLC are acting as representatives, the following respective
number of shares of common stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
CIBC World Markets Corp. ...................................
Hambrecht & Quist LLC.......................................

--------
Total.............................................
========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 540,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. This option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock to the public
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a concession of $ per share.
The underwriters and selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............. $ $ $ $
Expenses payable by us............... $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We, our directors, officers and the majority of our stockholders have
agreed that we and they will not:

- offer, sell, contract to sell, announce our intention to sell, pledge or
otherwise dispose of, directly or indirectly; or

- file with the Securities and Exchange Commission a registration statement
under the Securities Act of 1933 relating to;

any additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock without the prior
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus, except in connection with our stock option and
employee stock purchase plans.

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<PAGE> 68

The underwriters have reserved for sale, at the initial public offering
price, up to 180,000 shares of the common stock for employees, directors and
other persons associated with us who may wish to purchase common stock in the
offering. The number of shares available for sale to the general public in the
offering will be reduced to the extent these persons purchase these reserved
shares. Any reserved shares not so purchased will be offered by the underwriters
to the general public on the same terms as the other shares.

A limited number of shares may be made available via the Internet to
customers of one or more underwriters participating in this offering. If any
underwriter uses the Internet to make offers and sales, a copy of our
preliminary prospectus in electronic format will be made available on a web site
maintained by the underwriter or pursuant to a hosting arrangement entered into
by the underwriter with a third party. After the prospectus is made available,
the underwriter will accept conditional offers to purchase shares from its
customers that complete and pass an online eligibility profile. All conditional
offers to purchase shares must be reconfirmed by the customer or they will not
be accepted. Conditional offers may be withdrawn at any time before the customer
receives a notice of acceptance from the underwriter. In the event that the
demand for shares from customers submitting online conditional offers exceeds
the amount of shares available for Internet distribution, the underwriter will
use a random allocation method to distribute shares to customers. There are no
plans to direct shares to particular purchasers via the Internet.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933 or to contribute to payments which the underwriters may
be required to make as a result of these liabilities.

We have applied to list our shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "CLPR."

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include:

- the information presented in this prospectus and otherwise available to
the underwriters

- the history and the prospects for the industry in which we will compete

- the ability of our management

- the prospects for our future earnings

- the present state of our development and our current financial condition

- the general condition of the securities markets at the time of this
offering

- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

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<PAGE> 69

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.

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<PAGE> 70

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the province in Canada in which the resale is made, and which
may require resales to be made in accordance with statutory exemptions available
in the province in which the resale is made or pursuant to a discretionary
exemption granted by the securities regulatory authority in that province.
Purchasers are advised to seek legal advice prior to any resale of the common
stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under the
securities laws of the province in which the common stock is purchased to
purchase the common stock without the benefit of a prospectus qualified under
these securities laws, (2) if required by the laws of the province in which the
common stock is purchased, that the purchaser is purchasing as principal and not
as agent, and (3) the purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or recission or rights of action under the civil liability provisions of
the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from Caliper. Only one report must be
filed for common stock acquired on the same date and under the same prospectus
exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors about the tax consequences of an investment in the common stock in
their particular circumstances and regarding the eligibility of the common stock
for investment by the purchaser under relevant Canadian legislation.

66
<PAGE> 71

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed
upon for us by Cooley Godward LLP, Palo Alto, California. As of the date of this
prospectus, partners and associates of Cooley Godward LLP own an aggregate of
approximately 18,696 shares of common stock through an investment partnership.
The underwriters have been represented by Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., Boston, Massachusetts.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998, and for each of the three years in the
period ended December 31, 1998, presented in their report. We have included our
financial statements in this prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 regarding the shares of
common stock offered by us. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information contained in the
registration statement, some items of which are contained in exhibits to the
registration statement as permitted by the rules and regulations of the
Commission. For further information on Caliper and the common stock offered,
reference is made to the registration statement, including the exhibits, and the
financial statements and notes filed as a part of the registration statement. A
copy of the registration statement, including the exhibits and the financial
statements and notes filed as a part of it, may be inspected without charge at
the public reference facilities maintained by the Securities and Exchange
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part of the registration statement may be obtained from the
Securities and Exchange Commission upon the payment of fees prescribed by it.
The Securities and Exchange Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding companies that file electronically with it.

67
<PAGE> 72

CALIPER TECHNOLOGIES CORP.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit)............................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 73

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Caliper Technologies Corp.

We have audited the accompanying balance sheets of Caliper Technologies Corp. as
of December 31, 1997 and 1998, and the related statements of operations,
redeemable convertible preferred stock and stockholders' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Caliper Technologies Corp. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.

Palo Alto, California

March 5, 1999

The foregoing report is in the form that will be signed upon the completion of
the stock split described in Note 11 to the financial statements.

/s/ ERNST & YOUNG LLP

Palo Alto, California

October 28, 1999

F-2
<PAGE> 74

CALIPER TECHNOLOGIES CORP.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (DEFICIT) AT
------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
-------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 312 $ 5,158 $ 3,628
Marketable securities..................................... 26,237 25,894 24,192
Accounts receivable....................................... -- 1,082 390
Inventories............................................... -- -- 206
Prepaid expenses and other current assets................. 189 600 761
-------- -------- --------
Total current assets........................................ 26,738 32,734 29,177
Property and equipment, net................................. 2,050 2,796 4,856
Deposits and other assets................................... 119 -- --
Notes receivable............................................ 200 200 625
-------- -------- --------
Total assets................................................ $ 29,107 $ 35,730 $ 34,658
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 148 $ 228 $ 912
Accrued compensation...................................... 283 432 690
Other accrued liabilities................................. 1,142 493 606
Deferred revenue.......................................... -- 626 2,399
Current portion of equipment financing.................... 486 881 1,292
-------- -------- --------
Total current liabilities................................... 2,059 2,660 5,899
Noncurrent portion of equipment financing................... 1,430 2,008 3,299
Deferred rent............................................... -- -- 184
Commitments
Redeemable convertible preferred stock, $0.001 par value,
issuable in series; 17,308,333 shares authorized in 1997
and 19,579,039 shares authorized in 1998 and 1999 (none
pro forma); 10,774,309 shares issued and outstanding in
1997, 11,703,692 shares issued and outstanding in 1998 and
1999 (none pro forma); aggregate liquidation preference of
$44,810 at December 31, 1998 and September 30, 1999 (none
pro forma)................................................ 38,283 48,716 50,538 $ --
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 1,691,667
shares authorized in 1997, 1,420,961 shares authorized
in 1998 and 1999 (5,000,000 shares pro forma); 829,142
shares issued and outstanding in 1997, 1998, and 1999
(none pro forma); aggregate liquidation preference of
$1,009 at December 31, 1998 and September 30, 1999 (none
pro forma).............................................. 1 1 1 --
Common stock, $0.001 par value; 28,000,000 shares
authorized in 1997, 32,000,000 shares authorized in 1998
and 1999 (70,000,000 shares pro forma); 2,478,711,
2,772,343, and 3,271,667 shares issued and outstanding
in 1997, 1998, and 1999, respectively (15,804,501 shares
pro forma).............................................. 3 3 3 16
Additional paid-in capital................................ 590 1,250 8,948 59,474
Deferred stock compensation............................... -- (500) (5,858) (5,858)
Accumulated deficit....................................... (13,259) (18,408) (28,356) (28,356)
-------- -------- -------- --------
Total stockholders' equity (deficit)........................ (12,665) (17,654) (25,262) $ 25,276
-------- -------- -------- ========
$ 29,107 $ 35,730 $ 34,658
======== ======== ========
</TABLE>

See accompanying notes.
F-3
<PAGE> 75

CALIPER TECHNOLOGIES CORP.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.................................................... $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses:
Research and development................................. 2,734 7,200 9,584 7,232 12,302
General and administrative............................... 1,240 2,478 2,932 1,996 3,487
Amortization of deferred stock compensation.............. -- -- -- -- 1,997
Acquired in-process research and development............. 978 -- -- -- --
------- ------- ------- ------- -------
Total costs and expenses................................... 4,952 9,678 12,516 9,228 17,786
------- ------- ------- ------- -------
Operating loss............................................. (4,820) (7,412) (4,361) (4,803) (8,927)
Interest income............................................ 179 1,191 1,581 1,183 1,076
Interest expense........................................... (69) (60) (195) (125) (275)
------- ------- ------- ------- -------
Net loss................................................... (4,710) (6,281) (2,975) (3,745) (8,126)
Accretion on redeemable convertible preferred stock........ (262) (1,470) (2,174) (1,587) (1,822)
------- ------- ------- ------- -------
Net loss attributable to common stockholders............... $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
======= ======= ======= ======= =======
Net loss per common share, basic and diluted............... $ (3.90) $ (4.38) $ (2.39) $ (2.54) $ (3.71)
======= ======= ======= ======= =======
Shares used in computing net loss per common share, basic
and diluted.............................................. 1,274 1,768 2,157 2,099 2,684
Pro forma net loss per share, basic and diluted
(unaudited).............................................. $ (0.21) $ (0.53)
======= =======
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited)............................ 14,347 15,217
</TABLE>

See accompanying notes.
F-4
<PAGE> 76

CALIPER TECHNOLOGIES CORP.

STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARES)

<TABLE>
<CAPTION>
STOCKHOLDERS EQUITY (DEFICIT)
REDEEMABLE ----------------------------------------------------
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------ ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------- --------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995....... -- $ -- -- $-- 416,660 $1 $ --
Issuance of common stock for cash... -- -- -- -- 1,208,237 1 26
Issuance of common stock and Series
A convertible preferred stock in
exchange for all of the
outstanding common and preferred
stock of ChemCore Corporation..... -- -- 829,142 1 678,786 1 492
Issuance of Series B redeemable
convertible preferred stock for
cash.............................. 5,448,454 6,651 -- -- -- -- --
Issuance of Series C redeemable
convertible preferred stock for
cash.............................. 2,136,752 10,000 -- -- -- -- --
Accretion on redeemable convertible
preferred stock................... -- 262 -- -- -- -- --
Net loss and comprehensive net
loss.............................. -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1996....... 7,585,206 16,913 829,142 1 2,303,683 3 518
Issuance of Series D redeemable
convertible preferred stock for
cash.............................. 3,089,744 19,280 -- -- -- -- --
Issuance of Series D redeemable
convertible preferred stock for
services.......................... 99,359 620 -- -- -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- -- -- 155,798 -- 60
Issuance of common stock for cash... -- -- -- -- 19,230 -- 12
Accretion on redeemable convertible
preferred stock................... -- 1,470 -- -- -- -- --
Net loss and comprehensive loss..... -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1997....... 10,774,309 38,283 829,142 1 2,478,711 3 590
Issuance of Series D redeemable
convertible preferred stock for
services.......................... 141,026 880 -- -- -- -- --
Issuance of Series E redeemable
convertible preferred stock for
cash.............................. 788,357 7,379 -- -- -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- -- -- 191,831 -- 84
Issuance of common stock for
services.......................... -- -- -- -- 101,801 -- 76
Accretion on redeemable convertible
preferred stock................... -- 2,174 -- -- -- -- --
Deferred stock compensation......... -- -- -- -- -- -- 500
Net loss and comprehensive loss..... -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1998....... 11,703,692 48,716 829,142 1 2,772,343 3 1,250
Issuance of common stock upon
exercise of stock options
(unaudited)....................... -- -- -- -- 490,040 -- 260
Issuance of common stock for
services (unaudited).............. -- -- -- 9,294 -- 83
Accretion on redeemable convertible
preferred stock (unaudited)....... -- 1,822 -- -- -- -- --
Deferred stock compensation
(unaudited)....................... -- -- -- -- -- -- 7,355
Amortization of deferred stock
compensation (unaudited).......... -- -- -- -- -- -- --
Net loss and comprehensive loss
(unaudited)....................... -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at September 30, 1999
(unaudited)....................... 11,703,692 $50,538 829,142 $1 3,271,667 $3 $ 8,948
========== ======= ========= == ========= == =======

<CAPTION>
STOCKHOLDERS EQUITY (DEFICIT)
--------------------------------------------
TOTAL
STOCKHOLDERS'
DEFERRED STOCK ACCUMULATED EQUITY
COMPENSATION DEFICIT (DEFICIT)
-------------- ----------- -------------
<S> <C> <C> <C>
Balances at December 31, 1995....... $ -- $ -- $ 1
Issuance of common stock for cash... -- -- 27
Issuance of common stock and Series
A convertible preferred stock in
exchange for all of the
outstanding common and preferred
stock of ChemCore Corporation..... -- -- 494
Issuance of Series B redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of Series C redeemable
convertible preferred stock for
cash.............................. -- -- --
Accretion on redeemable convertible
preferred stock................... -- (262) (262)
Net loss and comprehensive net
loss.............................. -- (5,246) (5,246)
------- -------- --------
Balances at December 31, 1996....... -- (5,508) (4,986)
Issuance of Series D redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of Series D redeemable
convertible preferred stock for
services.......................... -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- 60
Issuance of common stock for cash... -- -- 12
Accretion on redeemable convertible
preferred stock................... -- (1,470) (1,470)
Net loss and comprehensive loss..... -- (6,281) (6,281)
------- -------- --------
Balances at December 31, 1997....... -- (13,259) (12,665)
Issuance of Series D redeemable
convertible preferred stock for
services.......................... -- -- --
Issuance of Series E redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- 84
Issuance of common stock for
services.......................... -- -- 76
Accretion on redeemable convertible
preferred stock................... -- (2,174) (2,174)
Deferred stock compensation......... (500) -- --
Net loss and comprehensive loss..... -- (2,975) (2,975)
------- -------- --------
Balances at December 31, 1998....... (500) (18,408) (17,654)
Issuance of common stock upon
exercise of stock options
(unaudited)....................... -- -- 260
Issuance of common stock for
services (unaudited).............. -- -- 83
Accretion on redeemable convertible
preferred stock (unaudited)....... -- (1,822) (1,822)
Deferred stock compensation
(unaudited)....................... (7,355) -- --
Amortization of deferred stock
compensation (unaudited).......... 1,997 -- 1,997
Net loss and comprehensive loss
(unaudited)....................... -- (8,126) (8,126)
------- -------- --------
Balances at September 30, 1999
(unaudited)....................... $(5,858) $(28,356) $(25,262)
======= ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 77

CALIPER TECHNOLOGIES CORP.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(4,710) $ (6,281) $ (2,975) $ (3,745) $ (8,126)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 87 356 921 656 935
Amortization of deferred stock compensation............. -- -- -- -- 1,997
Acquired in-process research and development............ 978 -- -- -- --
Issuance of common and preferred stock for services..... -- 620 956 951 83
Changes in operating assets and liabilities:
Accounts receivable................................... -- -- (1,082) (158) 692
Notes receivable...................................... -- (200) -- -- (425)
Inventories........................................... -- -- -- -- (206)
Prepaid expenses and other assets..................... (58) (88) (411) (73) (161)
Deposits and other assets............................. -- (119) 119 100 --
Accounts payable and other accrued liabilities........ (674) 1,022 (569) (800) 797
Accrued compensation.................................. 75 208 149 69 258
Deferred revenue...................................... 275 (275) 626 77 1,773
Deferred rent......................................... -- -- -- -- 184
------- -------- -------- -------- --------
Net cash used in operating activities..................... (4,027) (4,757) (2,266) (2,923) (2,199)
------- -------- -------- -------- --------
INVESTING ACTIVITIES
Purchases of available-for-sale securities................ (5,050) (51,448) (39,996) (35,203) (16,610)
Proceeds from sales of available-for-sale securities...... -- -- 6,233 2,143 4,813
Proceeds from maturities of available-for-sale
securities.............................................. 147 30,114 34,106 29,283 13,499
Capital expenditures...................................... (648) (1,845) (1,667) (1,252) (2,995)
------- -------- -------- -------- --------
Net cash used in investing activities..................... (5,551) (23,179) (1,324) (5,029) (1,293)
------- -------- -------- -------- --------
FINANCING ACTIVITIES
Proceeds from equipment financing......................... 640 1,574 1,586 1,337 2,523
Payments of obligations under equipment financing......... (73) (225) (613) (404) (821)
Proceeds from issuance of common and preferred stock...... 16,678 19,352 7,463 7,423 260
Repayments of notes payable............................... (160) -- -- -- --
------- -------- -------- -------- --------
Net cash provided by financing activities................. 17,085 20,701 8,436 8,356 1,962
------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents...... 7,507 (7,235) 4,846 404 (1,530)
Cash and cash equivalents at beginning of period.......... 40 7,547 312 312 5,158
------- -------- -------- -------- --------
Cash and cash equivalents at end of period................ $ 7,547 $ 312 $ 5,158 $ 716 $ 3,628
======= ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................. $ 69 $ 60 $ 195 $ 125 $ 275
======= ======== ======== ======== ========
SCHEDULE OF NONCASH TRANSACTIONS
Issuance of common and preferred stock upon acquisition of
ChemCore................................................ $ 494 $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
Deferred stock compensation............................... $ -- $ -- $ 500 $ -- $ 7,355
======= ======== ======== ======== ========
</TABLE>

See accompanying notes.
F-6
<PAGE> 78

CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Caliper Technologies Corp. ("Caliper") was incorporated in the state of
Delaware on July 26, 1995. Caliper develops lab-on-a-chip technologies and
manufactures LabChip systems. These systems perform laboratory experiments for
use in the pharmaceutical industry and other industries.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

INTERIM FINANCIAL INFORMATION

The financial information at September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 is unaudited but, in the opinion of
management, has been prepared on the same basis as the annual financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) that Caliper considers necessary for a fair presentation of the
financial position at such date and the operating results and cash flows for
such periods. Results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for any subsequent period.

UNAUDITED PRO FORMA INFORMATION

If Caliper's initial public offering as described in Note 11 is
consummated, all of the preferred stock outstanding will automatically be
converted into common stock. The unaudited pro forma redeemable convertible
preferred stock and stockholders' equity at September 30, 1999 has been adjusted
for the assumed conversion of preferred stock based on the shares of preferred
stock outstanding at September 30, 1999.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, generally
five years. Furniture and equipment acquired under equipment financing is
amortized over the shorter of the useful lives or the financing period.
Leasehold improvements are amortized over the shorter of the estimated useful
life of the assets or lease term.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"), Caliper reviews long-lived
assets, including property and equipment, for impairment whenever events or
changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable. Under SFAS 121, an impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from
the use of the asset and its eventual disposition is less than its carrying
amount. Impairment, if any, is assessed using discounted cash flows. Through
September 30, 1999, there have been no such losses.

F-7
<PAGE> 79
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS AND MARKETABLE SECURITIES

Caliper considers all highly liquid investments with maturities of three
months or less from the date of purchase to be cash equivalents. Management
determines the appropriate classification of its cash equivalents and investment
securities at the time of purchase and reevaluates such determination as of each
balance sheet date. Management has classified Caliper's cash equivalents and
marketable securities as available-for-sale securities in the accompanying
financial statements. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in a separate component of
stockholders' equity, when material. Realized gains and losses are included in
interest income. The cost of securities sold is based on the specific
identification method.

Caliper invests its excess cash in U.S. government and agency securities,
debt instruments of financial institutions and corporations, and money market
funds with strong credit ratings. Caliper has established guidelines regarding
diversification of its investments and their maturities which should maintain
safety and liquidity.

STOCK-BASED COMPENSATION

Caliper accounts for employee stock option grants in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Employee
Stock Issued to Employees." Stock option grants to nonemployees are accounted
for in accordance with Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") and Emerging Issues Task
Force Consensus No. 96-18.

REVENUE RECOGNITION

Revenues are earned from services performed pursuant to collaboration
agreements, technology access program agreements and government grants.
Non-refundable license fees under technology access programs are recognized as
revenues upon the transfer of the license to third parties and when no further
performance obligations exist. Subscription fees received under the technology
access programs are recognized ratably over the subscription period. Payments
received in advance under these arrangements are recorded as deferred revenue
until earned.

Revenue from grants and development and support activities under
collaboration agreements and technology access programs are recorded in the
period in which the costs are incurred. Direct costs associated with these
contracts and grants are reported as research and development expense. Milestone
fees are recognized upon completion of specified milestones according to
contract terms. Revenue related to the reimbursement of costs for the supply of
chips and reagents to collaboration partners is recognized upon shipment.
Caliper's share of gross margin on components of the LabChip system sold by the
collaboration partners is recognized as revenue upon shipment by the
collaboration partner.

Product revenue is recognized upon the transfer of title to customers and
is recorded net of discounts, rebates and allowances.

RESEARCH AND DEVELOPMENT

Caliper expenses research and development costs as incurred.

F-8
<PAGE> 80
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES

Inventories are stated at the lower of standard cost (which approximates
actual cost) or market. At September 30, 1999, inventories consisted mainly of
raw materials.

COMPREHENSIVE INCOME (LOSS)

As of January 1, 1998, Caliper adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires unrealized gains or losses on Caliper's available-for-sale securities
to be included in other comprehensive income. For the years ended December 31,
1997 and 1998 and for the nine months ended September 30, 1999, comprehensive
loss approximated net loss as other comprehensive income (loss) was not
material.

SEGMENT REPORTING

Effective in January 1998, Caliper adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Caliper has determined that it operates in only one segment. Accordingly, the
adoption of SFAS 131 had no impact on Caliper's financial statements.

NET LOSS PER SHARE

Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded from the diluted earnings per
share computations as they have an antidilutive effect due to Caliper's net
loss.

The computation of pro forma net loss per share includes shares issuable
upon the conversion of outstanding shares of convertible preferred stock (using
the as-if converted method) from the original date of issuance.

F-9
<PAGE> 81
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A reconciliation of shares used in the calculations is as follows (in
thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Net loss............................... $(4,710) $(6,281) $(2,975) $(3,745) $(8,126)
Accretion on redeemable convertible
preferred stock..................... (262) (1,470) (2,174) (1,587) (1,822)
------- ------- ------- ------- -------
Net loss attributable to common
stockholders........................... $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
======= ======= ======= ======= =======
Weighted-average shares of common stock
outstanding............................ 2,052 2,365 2,596 2,563 2,953
Less: weighted-average shares subject to
repurchase............................. (778) (597) (439) (464) (269)
------- ------- ------- ------- -------
Weighted-average shares used in basic and
diluted net loss per share............. 1,274 1,768 2,157 2,099 2,684
======= ======= ======= ======= =======

Pro forma basic and diluted:
Net loss............................... $(2,975) $(8,126)
======= =======

Shares used above........................ 2,157 2,684
Adjustment to reflect weighted-average
effect of assumed conversion of
preferred stock (unaudited)............ 12,190 12,533
------- -------
Weighted-average shares used in pro forma
basic and diluted net loss per share
(unaudited)............................ 14,347 15,217
======= =======
</TABLE>

The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Options and warrants................. 625 1,359 1,263 1,308 1,744
Convertible preferred stock.......... 8,414 11,603 12,533 12,533 12,533
</TABLE>

SIGNIFICANT CONCENTRATIONS

Financial instruments that potentially subject Caliper to concentrations of
credit risk primarily consist of cash equivalents and marketable securities (see
Note 4).

In 1996, two companies represented 66% and 34% of total revenues. In 1997,
one company represented 94% of total revenues. In 1998, three companies
represented 40%, 40%, and 17% of total revenues. For the nine months ended
September 30, 1998, two companies represented 51% and 45% of total revenues. For
the nine months ended September 30, 1999, four companies represented 50%, 17%,
13% and 11% of total revenues.

F-10
<PAGE> 82
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 1999 and is not anticipated to have an impact on
Caliper's results of operations or financial condition when adopted as Caliper
holds no derivative financial instruments and does not currently engage in
hedging activities.

In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 requires that entities capitalize certain costs related to
internal use software once certain criteria have been met. The Company adopted
the provisions of SOP 98-1 on January 1, 1999. Through September 30, 1999, the
Company has not capitalized any costs related to internal use software.

2. CONTRACTS AND GRANTS

Strategic Alliance with Agilent

In May 1998, Caliper executed a collaboration agreement with
Hewlett-Packard Company ("Hewlett-Packard") to create a line of commercial
research products based on LabChip technologies. In November 1999,
Hewlett-Packard transferred this collaboration to its subsidiary, Agilent
Technologies, Inc. ("Agilent"). In this collaboration, Caliper primarily focuses
on developing core technology and LabChip applications. Caliper also
manufactures the chips and supplies the chips and reagents to Agilent. If
Caliper elects, however, not to manufacture chips for a LabChip application or
is unable to meet minimum supply commitments to be mutually established in the
future, Agilent would have the right to manufacture those chips. Agilent
primarily focuses on developing instruments and software, manufacturing
instruments, and marketing, selling and supporting complete systems.

Agilent funds Caliper's product development efforts under the
collaboration, reimburses Caliper's costs of supplying chips and reagents, and
pays Caliper a share of the gross margin on all components of LabChip systems.
The gross margin share varies depending on the type of collaboration product,
whether Caliper or Agilent manufacture the collaboration product, and whether
such collaboration product is sold during the collaboration or after the
collaboration has terminated. Under this agreement, Hewlett-Packard purchased
534,188 shares of Caliper's redeemable convertible preferred stock Series E with
an aggregate cost of $5.0 million. At December 31, 1998 this represented 3.5% of
Caliper's outstanding common and convertible preferred stock.

The term of the Agilent agreement is eight years, beginning in May 1998.
After three years, Agilent may elect not to meet certain annual funding
requirements, in which case either party may terminate the agreement. In any
event either party may terminate the agreement after five years.

F-11
<PAGE> 83
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

2. CONTRACTS AND GRANTS (CONTINUED)
Technology Access Program

Caliper maintains a technology access program which provides customers with
early access to new products, and offers technical training, support and
customization services. Technology access program customers have non-exclusive
access to all of the high throughput screening products Caliper offers during
the term of the agreement. These agreements generally provide for customers to
pay an up-front license fee and annual subscription fees, and to reimburse
Caliper for its costs of providing development and support services. Instruments
and chips are generally sold separately on a product-by-product basis, although
some agreements establish prices for initial instruments or estimates of per
data point charges for Sipper chips.

Caliper currently has three technology access program customers for its
high throughput screening systems: Eli Lilly and Company ("Eli Lilly"), Amgen,
Inc. ("Amgen"), and Hoffmann-La Roche Inc. ("Roche").

Eli Lilly. Caliper signed a technology access agreement with Eli Lilly in
August 1999. The term is three years, although Eli Lilly may temporarily suspend
its technology access program participation and later reinitiate participation,
during which time Caliper's support and assistance obligations will also be
suspended. Eli Lilly may terminate the agreement on any anniversary.

Amgen. Caliper entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until Caliper has delivered an initial ultra high
throughput system. The term of this agreement is three years, although Amgen may
terminate the agreement on any anniversary or if Caliper fails to deliver the
ultra high throughput screening system in a timely manner.

Hoffmann-La Roche. Caliper entered into a technology access agreement with
Hoffmann-La Roche in November 1998, which is due to expire in July 2000. This
agreement supersedes an earlier agreement under which Roche funded early
development of the high throughput screening technology in exchange for certain
exclusive rights to an ultra high throughput screening system. Under this
earlier agreement, Roche purchased 854,701 shares of Caliper's redeemable
convertible preferred stock Series C with an aggregate cost of $4.0 million. At
December 31, 1998, this represented 5.6% of Caliper's outstanding common and
convertible preferred stock. Roche now has non-exclusive rights similar to other
technology access program customers. Caliper did not receive an up-front license
fee or annual subscription fee from Hoffmann-La Roche.

Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.

Value Added Screening Collaboration Program

Caliper's value added screening collaboration program offers high
throughput screening services using Caliper's LabChip systems. Caliper's first
value added screening collaboration agreement was established with Neurocrine
Biosciences in December 1998. Caliper receives screening fees on a per data
point basis, preclinical milestones and royalties on Neurocrine products
emerging from the collaboration. This agreement has a three-year term, but may
be terminated by either party under certain circumstances after the first year.

Caliper recognized approximately $132,000, $2.1 million, and $7.9 million
under the above agreements in 1996, 1997, and 1998, respectively, and $4.3
million and $8.2 million for the nine months ended
F-12
<PAGE> 84
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

2. CONTRACTS AND GRANTS (CONTINUED)
September 30, 1998 and 1999, respectively. Revenue earned from reimbursement of
development and support activities approximated actual costs incurred.

In September 1998, Caliper received a grant from the Advanced Technology
Program of the National Institute of Standards and Technology ("NIST") to
develop a Reference Laboratory DNA Diagnostics System based on Caliper's
"lab-on-a-chip" technology of approximately $2 million over three years. The
grant period began in January 1999.

3. ACQUISITION OF CHEMCORE CORPORATION

In February 1996, Caliper completed the acquisition of ChemCore Corporation
("ChemCore"), an early stage research and development entity. Caliper assumed
all of the liabilities of ChemCore and acquired all of the outstanding common
stock and Series A preferred stock of ChemCore in exchange for 678,786 shares of
Caliper's common stock and 829,142 shares of Series A preferred stock at an
exchange ratio of 0.552762 to 1.

The acquisition was accounted for using the purchase method. Under the
purchase method, the results of operations of acquired companies are included
prospectively from the date of acquisition, and the aggregate acquisition cost
is allocated to the acquiree's assets, liabilities, and intangibles, if any,
based upon the fair values on the date of acquisition. On the date of the
acquisition, ChemCore had no significant assets, liabilities of approximately
$484,000, an exclusive license under a sponsored research and development
agreement, and certain patents, most of which were pending. Caliper allocated
the aggregate purchase cost of $978,000 to in-process research and development.
The technology acquired had no alternative future uses.

4. CASH EQUIVALENTS AND MARKETABLE SECURITIES

The following is a summary of cash equivalents and marketable securities at
December 31, 1997 and 1998:

<TABLE>
<CAPTION>
AMORTIZED COST AND
ESTIMATED FAIR VALUE
--------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Money market fund........................................ $ 312 $ 1,381
Bonds of the U.S. Government and its agencies............ 12,861 12,217
Commercial paper......................................... 12,355 17,454
Time deposits............................................ 1,021 --
------- -------
$26,549 $31,052
======= =======
Reported as:
Cash equivalents....................................... $ 312 $ 5,158
Marketable securities.................................. 26,237 25,894
------- -------
$26,549 $31,052
======= =======
</TABLE>

As of December 31, 1997 and 1998, the difference between the fair value and
the amortized cost of available-for-sale securities was immaterial. As of
December 31, 1997 and 1998, the average portfolio duration was less than one
year.

F-13
<PAGE> 85
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

4. CASH EQUIVALENTS AND MARKETABLE SECURITIES (CONTINUED)
There were no material gross realized gains or losses from sales of
securities or material unrealized gains and losses on investments at December
31, 1997 and 1998.

5. NOTES RECEIVABLE

At December 31, 1998, Caliper held a note receivable of $200,000 from an
officer of Caliper. This note, which bears interest at 6.61% per year from
January 2002, is collateralized by certain personal assets of the officer and
has certain amortization schedules for periodic payments with the final payment
to be made at the end of 2006.

At September 30, 1999, in addition to the $200,000 note receivable, Caliper
held an unsecured promissory note of $425,000 in connection with a loan to a
second officer of Caliper. The note bears interest at 5.96% per year and is
repayable upon the earlier of July 29, 2005 or the voluntary termination of his
employment with Caliper.

6. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Machinery, equipment, and furniture....................... $2,207 $ 3,775
Leasehold improvements.................................... 286 385
------ -------
2,493 4,160
Accumulated depreciation and amortization................. (443) (1,364)
------ -------
Property and equipment, net............................... $2,050 $ 2,796
====== =======
</TABLE>

Property and equipment at December 31, 1997 and 1998 includes assets
acquired under capital leases of approximately $2.2 million and $3.8 million.
Accumulated amortization related to leased assets was approximately $441,000 and
$1.4 million at December 31, 1997 and 1998.

7. EQUIPMENT FINANCING AND RENTAL COMMITMENTS

As of December 31, 1998, Caliper had $3.8 million of property and equipment
financed through long-term obligations, and approximately $1.8 million unused
and available under an equipment financing credit line. The draw down period
under the equipment financing credit line expired on June 30, 1999. The
obligations under the equipment financings are secured by the equipment
financed, bear interest at a weighted-average fixed rate of approximately 9.5%,
and are due in monthly installments through December 2003. Under the terms of
one equipment financing agreement, ownership of the financed equipment may be
purchased by Caliper at fair value at the end of the financing term. Other
equipment financing agreements require a balloon payment at the end of each loan
term.

F-14
<PAGE> 86
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

7. EQUIPMENT FINANCING AND RENTAL COMMITMENTS (CONTINUED)
As of December 31, 1998, future minimum lease payments under operating and
capital leases and principal payments on equipment loans are as follows:

<TABLE>
<CAPTION>
CAPITAL LEASES
AND
OPERATING EQUIPMENT
LEASES LOANS
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Years ending December 31:
1999...................................................... $ 1,664 $1,004
2000...................................................... 1,669 925
2001...................................................... 1,674 672
2002...................................................... 1,722 280
2003...................................................... 1,765 216
Thereafter................................................ 9,116 --
------- ------
Total minimum lease and principal payments........ $17,610 3,097
=======
Amount representing interest................................ (208)
------
Present value of future payments............................ 2,889
Current portion of equipment financing...................... (881)
------
Noncurrent portion of equipment financing................... $2,008
======
</TABLE>

Rent expense relating to operating leases was approximately $97,000 in
1996, $525,000 in 1997, $695,000 in 1998 and $1.2 million for the nine months
ended September 30, 1999.

In December 1998, Caliper entered into a 10-year facility operating lease
agreement. Caliper also entered into a sublease agreement through November 1999
for a total amount of $198,000. The appropriate amount has been offset against
the operating lease commitment for 1999, as shown above.

In connection with the facility lease, Caliper has a $1 million standby
letter-of-credit arrangement with a bank expiring on October 20, 2008. Caliper
has pledged a certificate of deposit of $1 million as collateral to this letter
of credit.

In January 1999, Caliper entered into a $2.5 million financing agreement
with Transamerica Business Credit Corporation ("Transamerica") for the purchase
of property and equipment which bears interest commensurate to the weekly
average of the four-year U.S. Treasury Securities. The drawdown period under the
equipment financing credit line expires on June 30, 2000. During the nine months
ended September 30, 1999, Caliper drew down the remaining $1.8 million balance
of the equipment financing credit line which existed as of December 31, 1998 at
a weighted-average interest rate of 11.8% and financed an additional $752,000 of
property and equipment purchases under the financing agreement with Transamerica
at a weighted-average interest rate of 12.1%. These obligations will be repaid
in monthly installments through June 2004. As of September 30, 1999, Caliper has
approximately $1.7 million unused and available balance with Transamerica.

F-15
<PAGE> 87
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

Convertible preferred stock is issuable in series, with rights and
preferences designated by series. The shares designated and outstanding are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------------------------- --------------------------------------
REDEMPTION/ REDEMPTION/
ISSUED AND LIQUIDATION ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING VALUE AUTHORIZED OUTSTANDING VALUE
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Convertible preferred
stock:
Series A............. 1,293,500 829,142 $ 1,008,900 1,293,462 829,142 $ 1,008,900
Undesignated
preferred
stock............ 398,167 -- -- 127,499 -- --
---------- ---------- ----------- ---------- ---------- -----------
1,691,667 829,142 1,008,900 1,420,961 829,142 1,008,900
---------- ---------- ----------- ---------- ---------- -----------
Redeemable
convertible
preferred stock:
Series B........... 8,600,000 5,448,454 7,157,964 8,550,706 5,448,454 7,515,862
Series C........... 3,333,333 2,136,752 10,600,864 3,333,333 2,136,752 11,130,907
Series D........... 5,375,000 3,189,103 20,524,486 5,195,000 3,330,129 22,460,607
Series E........... -- -- -- 2,500,000 788,357 7,608,461
---------- ---------- ----------- ---------- ---------- -----------
17,308,333 10,774,309 38,283,314 19,579,039 11,703,692 48,715,837
---------- ---------- ----------- ---------- ---------- -----------
Total.......... 19,000,000 11,603,451 $39,292,214 21,000,000 12,532,834 $49,724,737
========== ========== =========== ========== ========== ===========

<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------
REDEMPTION/
ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING VALUE
---------- ----------- -----------
<S> <C> <C> <C>
Convertible preferred
stock:
Series A............. 1,293,462 829,142 $ 1,008,900
Undesignated
preferred
stock............ 127,499 -- --
---------- ---------- -----------
1,420,961 829,142 1,008,900
---------- ---------- -----------
Redeemable
convertible
preferred stock:
Series B........... 8,550,706 5,448,454 7,796,935
Series C........... 3,333,333 2,136,752 11,547,172
Series D........... 5,195,000 3,330,129 23,300,572
Series E........... 2,500,000 788,357 7,892,996
---------- ---------- -----------
19,579,039 11,703,692 50,537,675
---------- ---------- -----------
Total.......... 21,000,000 12,532,834 $51,546,575
========== ========== ===========
</TABLE>

The holders of Series A, B, C, D, and E preferred stock are entitled to
receive noncumulative dividends at a rate of 5% of the original issue price, if
declared, prior to and in preference to the payment of dividends to holders of
common stock. At December 31, 1998, no such dividends had been declared.

Each share of Series A, B, C, D, and E preferred stock is convertible into
common stock at the option of the holder on a one-for-one basis, subject to
adjustments for antidilution purposes. Series A, B, C, D, and E preferred shares
are automatically converted into common stock at the earlier of (i) the closing
of Caliper's initial underwritten public offering which is at a price to the
public of at least $5.00 per share and which results in aggregate proceeds to
Caliper of $10 million, or (ii) a vote or written consent of a majority of the
shares of preferred stock then outstanding, voting together as a single class.
All preferred shares have voting rights equal to common stock on an
as-if-converted basis.

The holders of Series B preferred stock, voting as a separate class, are
entitled to elect four members of the board of directors. The holders of Series
A, B, C, D, and E preferred stock and common stock, voting together as a class,
are entitled to elect the remaining members to the board of directors.

At any time subsequent to February 19, 2001, Caliper shall, upon written
request from the holders of a majority of the then outstanding shares of Series
B, C, D, and E preferred stock, redeem in whole or in part the Series B, C, D,
and E preferred stock by paying in cash a sum equal to (i) the original issue
price per share, plus all declared but unpaid dividends on such shares, and (ii)
an amount equal to 5% of the original issue price per annum, compounded
annually, from the date such shares were originally issued through the
redemption date. The carrying amount of Series B, C, D, and E preferred stock
has been increased by periodic accretions so as to equal the redemption amount
at the redemption date.

Series B, C, D and E preferred stockholders are entitled to receive, upon
liquidation, a distribution of $1.22, $4.68, $6.24 and $9.36 per share,
respectively (subject to adjustment for a recapitalization) plus all

F-16
<PAGE> 88
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)

declared but unpaid dividends, in preference to series A preferred stockholders
and common stockholders. Following the distribution of liquidation preferences
to series B, C, D and E preferred stockholders, series A preferred stockholders
are entitled to receive a distribution of $1.22 per share in preference to the
common stockholders. Thereafter, the remaining assets and funds, if any, shall
be distributed ratably on a per share basis among all preferred and common
stockholders.

WARRANTS

In January 1996, in connection with an equipment financing agreement,
Caliper issued a warrant that entitles the holder to purchase 3,276 shares of
common stock at an exercise price of $1.22 per share. This warrant is
exercisable through the earlier of the effective date of a merger of Caliper or
January 3, 2002.

In May 1996, in connection with a capital lease agreement, Caliper granted
a warrant that entitles the holder to purchase 32,767 shares of Series B
preferred stock at an exercise price of $1.22 per share. This warrant is
exercisable through the earlier of three years after the effective date of
Caliper's initial public offering or May 10, 2002.

In October 1996, in connection with certain agreements, Caliper issued two
warrants that entitle the holders to purchase a total of 38,460 shares of common
stock at an exercise price of $1.22 per share. These warrants are exercisable
through October 11, 2006.

No amounts have been recorded by Caliper for the above warrant issuances,
as the amounts were determined to be immaterial at the time of issuance.

In August 1995, Caliper executed an agreement which calls for the issue of
two warrants to purchase a total of 38,460 shares of common stock at an exercise
price of $1.22 per share. These warrants will be issued if a certain patent
milestone is met and would expire in January 2006.

COMMON STOCK SUBJECT TO REPURCHASE

Common stock issued to founders of Caliper vest generally over five years
at 20% one year from the date of grant and on a monthly, pro rata basis
thereafter. From inception through December 31, 1998, the founders of Caliper
have purchased 1,708,234 shares of common stock, of which 340,539 shares are
unvested and remain subject to repurchase at the original issuance price in the
event of termination of employment or services to Caliper. Caliper has not
repurchased any shares in accordance with these rights.

STOCK OPTION PLANS

On August 31, 1996, Caliper's board of directors and stockholders adopted
the 1996 Stock Incentive Plan (the "Plan"). This Plan supersedes the 1996 Equity
Incentive Plan and provides for the issuance of common stock and the granting of
options to purchase common stock to employees, officers, directors, and
consultants of Caliper. Caliper grants shares of common stock for issuance under
the Plan at no less than the fair value of the stock (no less than 85% of fair
value for nonqualified options). Options granted under the Plan generally vest
over 5 years at a rate of 20% one year from the grant date and 1/60 monthly
thereafter. Options canceled under the 1996 Equity Incentive Plan are not
available for future grants.

F-17
<PAGE> 89
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
A summary of activity under the Plan is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING WEIGHTED-
------------------------- AVERAGE
OPTIONS NUMBER OF EXERCISE EXERCISE
AVAILABLE OPTIONS PRICE PRICE
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at inception (July 26, 1995)........... -- -- -- --
Authorized................................... 705,128 -- -- --
Granted...................................... (449,402) 449,402 $ 0.06-$0.47 $0.25
Exercised.................................... -- (24,999) $ 0.06-$0.47 $0.33
Canceled..................................... -- (6,410) $0.11 $0.11
---------- ---------
Balance at December 31, 1996................... 255,726 417,993 $ 0.06-$0.47 $0.25
Authorized................................... 961,538 -- -- --
Granted...................................... (890,051) 890,051 $ 0.47-$0.62 $0.51
Exercised.................................... -- (155,798) $ 0.06-$0.62 $0.38
Canceled..................................... 962 (962) $0.47 $0.47
---------- ---------
Balance at December 31, 1997................... 328,175 1,151,284 $ 0.06-$0.62 $0.43
Authorized................................... 1,282,038 -- -- --
Granted...................................... (423,253) 423,253 $ 0.62-$0.97 $0.86
Exercised.................................... -- (181,881) $ 0.06-$0.62 $0.45
Canceled..................................... 318,088 (326,649) $ 0.06-$0.62 $0.45
---------- ---------
Balance at December 31, 1998................... 1,505,048 1,066,007 $ 0.06-$0.97 $0.59
Granted (unaudited).......................... (988,406) 988,406 $0.97 $0.97
Exercised (unaudited)........................ -- (367,054) $ 0.06-$0.97 $0.59
Canceled (unaudited)......................... 17,468 (17,468) $ 0.62-$0.97 $0.66
---------- ---------
Balance at September 30, 1999 (unaudited)...... 534,110 1,669,891 $ 0.06-$0.97 $0.82
========== =========
</TABLE>

Included in options granted for the nine months ended September 30, 1999 is
an option grant to purchase 641,025 shares of common stock issued to an
executive officer pursuant to the terms of his employment contract.

Caliper granted nonqualified options of 234,856, 458,010, 79,484, and
140,842 for the years ended December 31, 1996, 1997, 1998 and the nine months
ended September 30, 1999, respectively.

As part of the ChemCore merger in February 1996, Caliper exchanged, at the
ratio of 0.552762 to 1, outstanding options to purchase 240,499 shares of
ChemCore common stock at an exercise price of $0.20 for options to purchase
132,936 shares of Caliper's common stock at an exercise price $0.36 per share.
These options were initially granted at the fair value of ChemCore's common
stock and generally vest over five years at a rate of 20% per year.

F-18
<PAGE> 90
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
A summary of activity of options assumed as part of the ChemCore merger is
as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Balance at December 31, 1996 and 1997....................... 132,936 $0.36
Exercised................................................... (9,950) $0.36
--------
Balance at December 31, 1998................................ 122,986 $0.36
Exercised (unaudited)....................................... (122,986) $0.36
--------
Balance at September 30, 1999 (unaudited)................... --
========
</TABLE>

At December 31, 1998 and September 30, 1999, options to purchase 235,348
and 173,841 shares of common stock were exercisable at a weighted-average
exercise price of $0.41 and $0.64 per share.

At December 31, 1998 and September 30, 1999, the remaining contractual life
of outstanding options ranged from 5.00 to 9.13 years and 6.42 to 9.84 years,
respectively, with a weighted-average contractual life of 8.14 and 8.83 years,
respectively. The weighted-average fair value of options granted during 1996,
1997, 1998, and for the nine months ended September 30, 1999 was $0.06, $0.13,
$0.22, and $0.25 respectively.

STOCK BASED COMPENSATION

Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if Caliper had accounted for its
employee stock options under the fair-value method of that Statement. The fair
value of these options was estimated at the date of grant using the
Black-Scholes method and the following assumptions for 1996, 1997, and 1998, and
the nine months ended September 30, 1999: volatility of 0.01, risk-free interest
rate of 6%, an expected life of five years, and no dividends.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using the
straight-line method. Caliper's pro forma information follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Net loss attributable to common stockholders:
As reported........................................... $(4,972) $(7,751) $(5,149) $ (9,948)
Pro forma............................................. $(4,977) $(7,776) $(5,185) $(10,006)

Basic and diluted net loss per share:
As reported........................................... $ (3.90) $ (4.38) $ (2.39) $ (3.71)
Pro forma............................................. $ (3.91) $ (4.40) $ (2.40) $ (3.73)
</TABLE>

The effects of applying SFAS 123 for pro forma disclosures are not likely
to be representative of the effects on reported net loss for future years.

Caliper has recorded deferred stock compensation of approximately $500,000
for the year ended December 31, 1998 and $7.4 million for the nine months ended
September 30, 1999, representing the difference between the exercise price of
the options granted and the deemed fair value of the common

F-19
<PAGE> 91
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
stock. These amounts are being amortized by charges to operations over the
vesting periods of the individual stock options using the graded vesting method.
Such amortization expense amounted to approximately $2.0 million for the nine
months ended September 30, 1999.

RESERVED STOCK

As of December 31, 1998, Caliper had reserved shares of common stock for
future issuance as follows:

<TABLE>
<S> <C>
Stock options............................................ 2,694,041
Warrants................................................. 41,736
Preferred stock.......................................... 12,565,601
Stock agreement.......................................... 7,692
----------
15,309,070
==========
</TABLE>

In addition, Caliper has reserved 32,767 shares of Series B convertible
redeemable preferred stock for issuance upon exercise of warrants.

9. INCOME TAXES

Caliper has no provision for U.S. federal or state income taxes for any
period as it has incurred operating losses.

As of December 31, 1998, Caliper had federal and California net operating
loss carryforwards of approximately $10.3 million and $1.4 million. Caliper also
had federal research and development tax credit carryforwards of approximately
$700,000. The net operating loss and credit carryforwards will expire at various
dates beginning on 2002 through 2018, if not utilized.

Utilization of the net operating losses and credits may be subject to a
substantial limitation due to the change in ownership provisions of the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Caliper's deferred tax assets and liabilities for federal and state income taxes
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards......................... $ 2,600 $ 3,600
Research credit carryforwards............................ 500 1,000
Capitalized research and development..................... 1,700 1,600
Other, net............................................... 500 100
------- -------
Net deferred tax assets.................................. 5,300 6,300
Valuation allowance...................................... (5,300) (6,300)
------- -------
Total.......................................... $ -- $ --
======= =======
</TABLE>

F-20
<PAGE> 92
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

9. INCOME TAXES (CONTINUED)
Because of Caliper's lack of earnings history, the deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
$2.1 million, $3.2 million, and $1 million, respectively during the years ended
December 31, 1996, 1997, and 1998.

10. LITIGATION

On March 22, 1999, Caliper filed a lawsuit in California Superior Court for
the County of Santa Clara against Aclara Biosciences, Inc., and Caliper's former
patent counsel Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
certain of Caliper's trade secrets relating to our business plans, patents and
intellectual property strategy. The suit also alleges that Mr. Rowland and Flehr
Hohbach committed a breach of the duties they owed to Caliper as its former
attorneys. The suit seeks damages and equitable remedies to prevent Aclara, Mr.
Rowland and Flehr Hohbach from benefiting from the alleged misappropriation and
breach of duties. While Caliper believes that its complaint is meritorious,
there can be no assurance that Caliper will prevail in its action against any or
all of the defendants, or that if Caliper prevails, any damages or equitable
remedies awarded, if any, will be commercially valuable. Furthermore, Caliper
has incurred and is likely to continue to incur substantial costs and expend
substantial personnel time in pursuing its claims against Aclara, Mr. Rowland
and Flehr Hohbach.

On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California alleging that Caliper is
making, using, selling or offering for sale microfluidic devices that infringe
United States Patent Number 5,750,015 in willful disregard of Aclara's patent
rights. This patent concerns methods and devices for moving molecules by the
application of electrical fields. The Aclara action seeks damages for past and
future reduced sales or lost profits based upon the making, using, selling and
offering for sale of Caliper's products and processes, and seeks to enjoin
Caliper's continued activities relating to these products. This action subjects
Caliper to potential liability for damages and could require Caliper to cease
making, using or selling the affected products, or to obtain a license in order
to continue to manufacture, use or sell the affected products. While Caliper
believes that it has meritorious defenses in this action, there can be no
assurance that Caliper will prevail or that any license required would be made
available on commercially acceptable terms, if at all. Furthermore, Caliper has
incurred and is likely to continue to incur substantial costs and expend
substantial personnel time in defending against the claims filed by Aclara.
Caliper's failure to successfully defend itself against the Aclara action could
have a material adverse effect on Caliper's business, financial condition and
operating results.

11. SUBSEQUENT EVENTS (UNAUDITED)

In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Equity Incentive Plan ("1999 Equity Plan"). The 1999 Equity
Plan amended and restated the 1996 Stock Incentive Plan and increased the shares
reserved for issuance to 4 million. In addition, the 1999 Equity Plan provides
for an automatic increase in the shares reserved for issuance by the greater of
5% of outstanding shares on a fully-diluted basis or the number of shares that
have been made subject to awards granted under the 1999 Equity Plan during the
prior 12-month period. The automatic share reserve increase may not exceed
12,820,000 shares in aggregate over the 10-year period.

In October 1999, options to purchase 610,278 shares were granted pursuant
to the 1999 Equity Plan with a weighted average exercise price of $3.62 per
share. The Company estimates that additional deferred compensation of
approximately $4.7 million will be recorded as a result of these option grants
and amortized to compensation expense in accordance with Caliper's policy.

F-21
<PAGE> 93
CALIPER TECHNOLOGIES CORP.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

11. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)

In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Non-Employee Directors' Stock Option Plan ("1999 Directors'
Plan") which provides for the automatic grant of options to non-employee
directors. A total of 200,000 shares of common stock has been reserved for
issuance under this plan. The number of shares reserved for issuance will
automatically increase by the greater of 0.3% of outstanding shares on a
fully-diluted basis or the number of shares subject to options granted under the
1999 Directors' Plan during the prior 12-month period. The automatic share
reserve increase may not exceed 2 million shares in aggregate over the 10-year
period.

In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Employee Stock Purchase Plan ("1999 Purchase Plan"). A total
of 300,000 shares of common stock has been reserved for issuance under the 1999
Purchase Plan. The number of shares reserved automatically increases by the
greater of 0.5% of outstanding shares on a fully-diluted basis or the number of
shares issued under the 1999 Purchase Plan during the prior 12-month period. The
automatic share reserve increase may not exceed 3 million shares in aggregate
over the 10-year period. The 1999 Purchase Plan permits eligible employees to
acquire shares of Caliper's common stock through payroll deductions of up to 10%
of their base compensation. No employee may participate in the 1999 Purchase
Plan if immediately after the grant the employee has voting power over 5% or
more of the outstanding capital stock. Under the 1999 Purchase Plan, the board
may specify offerings of up to 27 months. Unless the board determines otherwise,
common stock may be purchased at the lower of 85% of the fair market value of
Caliper's common stock on the first day of the offering or 85% of the fair
market value of Caliper's common stock on the purchase date. The initial
offering period will begin on the effective date of the initial public offering.

In October 1999, Caliper's board of directors authorized management to file
a registration statement with the Securities and Exchange Commission to permit
Caliper to sell its common stock to the public. Upon completion of Caliper's
initial public offering, all of the outstanding preferred stock will be
converted into shares of common stock.

In October 1999, Caliper's board of directors approved a 1-for-1.56 reverse
stock split. The reverse stock split will become effective prior to the time of
Caliper's initial public offering. The accompanying financial statements have
been adjusted retroactively to reflect the reverse split of all outstanding
common and convertible preferred stock.

F-22
<PAGE> 94

[Caliper Technologies Corp. Logo]
<PAGE> 95

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by Caliper in connection with the sale of the
Common Stock being registered. All the amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market
application fee.

<TABLE>
<S> <C>
Registration fee............................................ $ 17,264
NASD filing fee............................................. 6,710
Nasdaq National Market application fee...................... 90,000
Blue sky qualification fee and expenses..................... 5,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 250,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 21,026
----------
Total.................................................. $ 950,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:

- for any breach of duty of loyalty to us or to our stockholders;

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- under Section 174 of the Delaware General Corporation Law; or

- for any transaction from which the director derived an improper personal
benefit.

Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify its
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.

We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify each
director and officer for some expenses including attorneys' fees, judgments,
fines and settlement amounts incurred by any of these persons in any action or
proceeding, including any action by or in the right of Caliper, arising out of
person's services as our director or officer, any subsidiary of ours or any
other company or enterprise to which the person provides services at our
request.

The underwriting agreement will provide for indemnification by the
underwriters of Caliper, our directors, our officers who sign the registration
statement, and our controlling persons for some liabilities, including
liabilities arising under the Securities Act.

II-1
<PAGE> 96

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The number of shares and price per share presented below have been adjusted
to reflect a 1-for-1.56 reverse stock split. Since January 1, 1996, Caliper has
sold and issued the following unregistered securities:

(1) From January 1996 through October 1999, Caliper has granted stock
options to purchase 3,361,390 shares of common stock, at a weighted
average exercise price of $1.57, to employees, consultants and
directors pursuant to its 1999 Equity Incentive Plan and 1996 Equity
Incentive Plan. Of these stock options, 352,610 shares have been
cancelled or have lapsed without being exercised, 732,914 shares have
been exercised in common stock, no shares of which have been
repurchased and 2,275,866 shares remain outstanding.

(2) In February 1996, Caliper issued an aggregate of 829,142 shares of
Series A preferred stock and 678,786 shares of common stock to
shareholders of ChemCore Corporation in connection with the merger of
ChemCore with and into Caliper. Each share of ChemCore's Common stock
and Series A preferred stock were converted into 0.552762 shares of
Caliper's Common stock and Series A preferred stock, respectively.
Shares of Series A preferred stock are convertible into shares of
common stock at the rate of one share of common stock for each share
of Series A preferred stock outstanding. In addition, Caliper issued
options to purchase 132,936 shares of common stock at $0.36 per share,
which options were exercised from March 1998 through February 1999.

(3) From April 1996 to October 1996, Caliper issued an aggregate of
5,448,454 shares of Series B preferred stock to 12 accredited
investors and 1 officer at $1.2207 per share, for an aggregate
purchase price of $6,651,043. In May 1996, Caliper issued a warrant to
purchase 32,767 shares of Series B preferred stock to Comdisco, Inc.
at an exercise price of $1.2207 per share. Shares of Series B
preferred stock are convertible into shares of common stock at the
rate of one share of common stock for each share of Series B preferred
stock outstanding.

(4) From January 1996 to October 1996, Caliper issued warrants to purchase
an aggregate of 41,736 shares of common stock to 3 purchasers at an
exercise price of $1.2207 per share.

(5) From October 1996 to December 1996, Caliper issued an aggregate of
2,136,752 shares of Series C preferred stock to 15 accredited
investors and 1 officer at $4.68 per share, for an aggregate purchase
price of $9,999,999. Shares of Series C preferred stock are
convertible into shares of common stock at the rate of one share of
common stock for each share of Series C preferred stock outstanding.

(6) From January 1997 to April 1998, Caliper issued an aggregate of
3,089,744 shares of Series D preferred stock to 17 accredited
investors at $6.24 per share, for an aggregate purchase price of
$19,280,000. In this period, Caliper issued an additional 240,385
shares of Series D preferred stock to Dow Chemical Company as payment
for services rendered pursuant to the terms of a development agreement
dated January 14, 1997. Shares of Series D preferred stock are
convertible into shares of common stock at the rate of one share of
common stock for each share of Series D preferred stock outstanding.

(7) In May 1998, Caliper issued an aggregate of 788,357 shares of Series E
preferred stock to 6 accredited investors at $9.36 per share, for an
aggregate purchase price of $7,379,004. Shares of Series E preferred
stock are convertible into shares of common stock at the rate of one
share of common stock for each share of Series E preferred stock
outstanding.

(8) In January 1996, Caliper issued an aggregate of 471,152 shares of
common stock to 3 founders, at $0.0016 per share.

(9) From January 1996 to April 1996, Caliper issued an aggregate of
447,110 shares of common stock to 10 scientific advisors and 1
consultant at $0.0016 per share.

II-2
<PAGE> 97

(10) From February 1996 to April 1996, Caliper issued an aggregate of
245,747 shares of common stock to 3 accredited investors in connection
with the Series B preferred stock financing, at $0.06 per share.

(11) From October 1996 to September 1997, Caliper issued 19,230 shares of
common stock to one board member at $0.11 per share and 19,230 shares
of common stock to another board member at $0.62 per share.

(12) From January 1998 to July 1999, Caliper issued 76,439 shares of common
stock to 8 individuals for services rendered to Caliper, with an
aggregate value of $125,520.

(13) In September 1998, Caliper issued 34,656 shares of common stock to 3
officers of Caliper in lieu of cash, with an aggregate value of
$33,520.

The sales and issuances of securities described in paragraphs (1), (8),
(9), (11), (12) and (13) above were deemed to be exempt from registration under
the Securities Act by virtue of Rule 701 promulgated thereunder in that they
were offered and sold either pursuant to a written compensatory benefit plan or
pursuant to a written contract relating to compensation, as provided by Rule
701.

The sale and issuance of securities described in paragraphs (2) through (7)
and (10) above were deemed to be exempt from registration under the Securities
Act by virtue of Section 4(2), Regulation D or Regulation S promulgated
thereunder. With respect to the grant of stock options and restricted stock
awards described in paragraphs (1), (9), (11) and (13), an exemption from
registration was unnecessary in that none of the transactions involved a "sale"
or securities as this term is used in Section 2(3) of the Securities Act.

II-3
<PAGE> 98

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of
Caliper, filed May 19, 1998.
3.2+ Amendment to Certificate of Incorporation.
3.3++ Form of Certificate of Incorporation of Caliper to be filed
immediately following the closing of the offering.
3.4++ Bylaws of Caliper.
4.1+ Reference is made to Exhibits 3.1 through 3.4.
4.2 Specimen Stock Certificate.
5.1 Opinion of Cooley Godward LLP.
10.1+ Lease Agreement, dated December 1, 1998, between Caliper and
605 East Fairchild Associates, L.P.
10.2 1996 Equity Incentive Plan.
10.3 1999 Equity Incentive Plan.
10.4 1999 Employee Stock Purchase Plan.
10.5 1999 Non-Employee Directors' Stock Option Plan.
10.6+ Employment Agreement, dated January 18, 1999, between
Caliper and Daniel L. Kisner, M.D.
10.7+ Promissory Note, dated July 29, 1999, between Caliper and
Daniel L. Kisner, M.D.
10.8+ Amended and Restated Investor Rights Agreement, dated May 7,
1998, among Caliper and certain stockholders of Caliper.
10.9+ Form of Indemnification Agreement entered into between
Caliper and its directors and executive officers.
10.10+** Collaboration Agreement, dated May 2, 1998, between Caliper
and Hewlett-Packard Company.
10.11+** Termination, Transition and Technology Access Program
Agreement, dated November 24, 1998, between Caliper and
Hoffmann-La Roche Inc.
10.12+** Technology Access Agreement, dated December 21, 1998,
between Caliper and Amgen, Inc.
10.13+** Technology Access Agreement, dated August 12, 1999, between
Caliper and Eli Lilly and Company.
10.14+** Screening Collaboration Agreement, dated December 16, 1998,
between Caliper and Neurocrine Biosciences, Inc.
10.15+** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (domestic).
10.16+** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (international).
10.17+ Consulting Agreement, dated April 30, 1997, between Caliper
and Dr. David V. Milligan.
10.18+ Employment Agreement, dated September 23, 1999, between
Caliper and James L. Knighton.
10.19+ Consulting Agreement, dated May 1, 1997, between Caliper and
Regis McKenna.
10.20 Promissory Note, dated March 25, 1997, between Caliper and
Michael R. Knapp, Ph.D.
10.21 Option Agreement, dated August 9, 1995, between Caliper and
Michael R. Knapp, Ph.D.
10.22 Amendment to Option Agreement, dated August 25, 1995,
between Caliper, Michael R. Knapp, Ph.D., J. Michael Ramsey,
Ph.D. and Avalon Medical Partners.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1+ Power of Attorney.
27.1+ Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

+ Previously filed.

** Confidential treatment has been requested for a portion of this exhibit.

++ Replaces previously filed exhibit.

II-4
<PAGE> 99

(B) FINANCIAL STATEMENT SCHEDULES.

All schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of this prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.

(2) That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 15 of this
Registration Statement or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against these liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by a director, officer, or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether the indemnification by
it is against public policy as expressed in the Securities Act of 1933,
and will be governed by the final adjudication of this issue.

(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in the denomination and registered
in the names required by the Underwriters to permit prompt delivery to
each purchaser.

II-5
<PAGE> 100

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Registrant has
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Santa
Clara, State of California, on the 17th day of November, 1999.

CALIPER TECHNOLOGIES CORP.

By: /s/ DANIEL L. KISNER, M.D.
------------------------------------
Daniel L. Kisner, M.D.
President and Chief Executive
Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----

<S> <C> <C>
/s/ DANIEL L. KISNER, M.D. President, Chief Executive November 17, 1999
- --------------------------------------------------- Officer and Director
Daniel L. Kisner, M.D. (principal executive
officer)

/s/ JAMES L. KNIGHTON Chief Financial Officer November 17, 1999
- --------------------------------------------------- (principal financial and
James L. Knighton accounting officer)

DAVID V. MILLIGAN, PH.D.* Chairman of the Board of November 17, 1999
- --------------------------------------------------- Directors
David V. Milligan, Ph.D.

ANTHONY B. EVNIN, PH.D.* Director November 17, 1999
- ---------------------------------------------------
Anthony B. Evnin, Ph.D.

CHARLES M. HARTMAN* Director November 17, 1999
- ---------------------------------------------------
Charles M. Hartman

REGIS P. MCKENNA* Director November 17, 1999
- ---------------------------------------------------
Regis P. McKenna

ROBERT T. NELSEN* Director November 17, 1999
- ---------------------------------------------------
Robert T. Nelsen

MICHAEL STEINMETZ, PH.D.* Director November 17, 1999
- ---------------------------------------------------
Michael Steinmetz, Ph.D.

*By: /s/ DANIEL L. KISNER, M.D.
- ---------------------------------------------------
Daniel L. Kisner, M.D.
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 101

EXHIBIT INDEX

- ---------------
* To be filed by amendment.

+ Previously filed.

** Confidential treatment has been requested for a portion of this exhibit.

++ Replaces previously filed exhibit.

<PAGE> 1

EXHIBIT 3.3

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CALIPER TECHNOLOGIES CORP.,
A DELAWARE CORPORATION

ARTICLE I.

The name of the corporation is CALIPER TECHNOLOGIES CORP.

ARTICLE II.

The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Prentice-Hall Corporation System,
Inc.

ARTICLE III.

The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware ("DGCL").

ARTICLE IV.

A. CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
fifty-five million (55,000,000) shares, of which fifty million (50,000,000)
shares shall be Common Stock, par value $0.001 per share, and five million
(5,000,000) shares shall be Preferred Stock, par value $0.001 per share.

B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock may be issued from time to time in one or more series. The Board
of Directors is hereby authorized, by filing a certificate (a "Preferred Stock
Designation") pursuant to the Delaware General Corporation Law, to fix or alter
from time to time the designation, powers, preferences and rights (voting or
otherwise) granted upon, and the qualifications, limitations or restrictions of,
any wholly unissued series of Preferred Stock, and to establish from time to
time the number of shares constituting any such series or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be
decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

ARTICLE V.

For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:

1.
<PAGE> 2

A. MANAGEMENT OF BUSINESS. The management of the business and the
conduct of the affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed exclusively by one or more resolutions adopted by the
Board of Directors.

B. BOARD OF DIRECTORS.

1. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the initial
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
to the public (the "Initial Public Offering"), the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the Initial
Public Offering, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the Initial Public Offering, the term
of office of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section B.1. of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.

2. In the event that the corporation is subject to Section
2115(b) of the CGCL AND is not a "listed" corporation or ceases to be a "listed"
corporation under Section 301.5 of the CGCL, Section B.1. of this Article V
shall not apply and all directors shall be shall be elected at each annual
meeting of stockholders to hold office until the next annual meeting.

3. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the CGCL AND is not a
"listed" corporation or ceases to be a "listed" corporation under Section 301.5
of the CGCL. During this time, every stockholder entitled to vote at an election
for directors may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.

2.
<PAGE> 3

Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

C. REMOVAL OF DIRECTORS.

1. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.

2. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section C.1. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.

D. VACANCIES.

1. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.

2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.

3.
<PAGE> 4

3. At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy by the directors then
in office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then:

(a) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or

(b) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.

E. BYLAW AMENDMENTS. Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.

F. BALLOTS. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.

G. ACTION BY STOCKHOLDERS. No action shall be taken by the stockholders of
the corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws; no action shall be taken by the stockholders by
written consent.

H. ADVANCE NOTICE. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.

I. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the stockholders
may be called only by the Chairman of the Board, the Chief Executive Officer, or
a majority of the members of the Board of Directors.

ARTICLE VI.

A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.

B. This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the CGCL) for breach of duty to the corporation and
its shareholders through bylaw provisions or through agreements with the agents,
or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.

4.
<PAGE> 5

C. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.

ARTICLE VII.

A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.

B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.

<PAGE> 1

EXHIBIT 3.4

BYLAWS

CALIPER TECHNOLOGIES CORP.

(A DELAWARE CORPORATION)

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES.....................................................................1

Section 1. Registered Office......................................................1

Section 2. Other Offices..........................................................1

ARTICLE II CORPORATE SEAL..............................................................1

Section 3. Corporate Seal.........................................................1

ARTICLE III STOCKHOLDERS' MEETINGS......................................................1

Section 4. Place Of Meetings......................................................1

Section 5. Annual Meetings........................................................1

Section 6. Special Meetings.......................................................4

Section 7. Notice Of Meetings.....................................................5

Section 8. Quorum.................................................................5

Section 9. Adjournment And Notice Of Adjourned Meetings...........................5

Section 10. Voting Rights..........................................................6

Section 11. Joint Owners Of Stock..................................................6

Section 12. List Of Stockholders...................................................6

Section 13. Action Without Meeting.................................................6

Section 14. Organization...........................................................7

ARTICLE IV DIRECTORS...................................................................8

Section 15. Number And Term Of Office..............................................8

Section 16. Powers.................................................................8

Section 17. Classes of Directors...................................................8

Section 18. Vacancies..............................................................9

Section 19. Resignation...........................................................10

Section 20. Removal...............................................................10

Section 21. Meetings..............................................................10

(a) Annual Meetings..............................................................10

(b) Regular Meetings.............................................................11

(d) Telephone Meetings...........................................................11
</TABLE>

i.
<PAGE> 3

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<CAPTION>
PAGE
<S> <C>
(e) Notice Of Meetings...........................................................11

(f) Waiver Of Notice.............................................................11

Section 22. Quorum And Voting.....................................................11

Section 23. Action Without Meeting................................................12

Section 24. Fees And Compensation.................................................12

Section 25. Committees............................................................12

(a) Executive Committee..........................................................12

(b) Other Committees.............................................................12

(d) Meetings.....................................................................13

Section 26. Organization..........................................................13

ARTICLE V OFFICERS...................................................................14

Section 27. Officers Designated...................................................14

Section 28. Tenure And Duties Of Officers.........................................14

(a) General......................................................................14

(b) Duties Of Chairman Of The Board Of Directors.................................14

(d) Duties Of Vice Presidents....................................................14

(e) Duties Of Secretary..........................................................15

(f) Duties Of Chief Financial Officer............................................15

Section 29. Delegation Of Authority...............................................15

Section 30. Resignations..........................................................15

Section 31. Removal...............................................................15

ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY
THE CORPORATION............................................................16

Section 32. Execution Of Corporate Instruments....................................16

Section 33. Voting Of Securities Owned By The Corporation.........................16

ARTICLE VII SHARES OF STOCK............................................................16

Section 34. Form And Execution Of Certificates....................................16
</TABLE>

ii.
<PAGE> 4

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 35. Lost Certificates.....................................................17

Section 36. Transfers.............................................................17

Section 37. Fixing Record Dates...................................................17

Section 38. Registered Stockholders...............................................18

ARTICLE VIII OTHER SECURITIES OF THE CORPORATION........................................18

Section 39. Execution Of Other Securities.........................................18

ARTICLE IX DIVIDENDS..................................................................19

Section 40. Declaration Of Dividends..............................................19

Section 41. Dividend Reserve......................................................19

ARTICLE X FISCAL YEAR................................................................19

Section 42. Fiscal Year...........................................................19

ARTICLE XI INDEMNIFICATION............................................................19

Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................................19

(a) Directors And Executive Officers.............................................19

(b) Other Officers, Employees and Other Agents...................................20

(d) Enforcement..................................................................20

(e) Non-Exclusivity Of Rights....................................................21

(f) Survival Of Rights...........................................................21

(g) Insurance....................................................................21

(h) Amendments...................................................................21

(i) Saving Clause................................................................21

(j) Certain Definitions..........................................................22

ARTICLE XII NOTICES....................................................................23

Section 44. Notices...............................................................23

(a) Notice To Stockholders.......................................................23

(b) Notice To Directors..........................................................23

iii.
<PAGE> 5

TABLE OF CONTENTS
(CONTINUED)

<TABLE>
<CAPTION>
PAGE
<S> <C>
(d) Time Notices Deemed Given....................................................23

(e) Methods Of Notice............................................................23

(f) Failure To Receive Notice....................................................23

(g) Notice To Person With Whom Communication Is Unlawful.........................23

(h) Notice To Person With Undeliverable Address..................................24

ARTICLE XIII AMENDMENTS.................................................................24

Section 45. Amendments............................................................24

ARTICLE XIV LOANS TO OFFICERS..........................................................24

Section 46. Loans To Officers.....................................................24
</TABLE>

iv.
<PAGE> 6

BYLAWS

CALIPER TECHNOLOGIES CORP.

(A DELAWARE CORPORATION)

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.

SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.

ARTICLE II

CORPORATE SEAL

SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

ARTICLE III

STOCKHOLDERS' MEETINGS

SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.

SECTION 5. ANNUAL MEETINGS.

(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the

1.
<PAGE> 7

direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in Section 5.

(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and

2.
<PAGE> 8

the beneficial owner, if any, on whose behalf the proposal is made; and (C) as
to the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of, in the case of the proposal, at
least the percentage of the corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"Solicitation Notice").

(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.

(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.

(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.

(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.

3.
<PAGE> 9

SECTION 6. SPECIAL MEETINGS.

(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), or (iv) by the holders of shares entitled to cast not
less than ten percent (10%) of the votes at the meeting; provided, however, that
following registration of any of the classes of equity securities of the
corporation pursuant to the provisions of the Securities Exchange Act of 1934,
as amended, special meetings of the stockholders may only be called as set forth
in (i), (ii) or (iii) above, except as otherwise required below.

At any time or times that the corporation is subject to Section 2115(b)
of the California General Corporation Law ("CGCL"), stockholders holding five
percent (5%) or more of the outstanding shares shall have the right to call a
special meeting of stockholders only as set forth in Section 18(c) herein.

(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.

(c) Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the corporation's notice of meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no

4.
<PAGE> 10

event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.

SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.

SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.

SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the

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adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.

SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.

SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.

SECTION 13. ACTION WITHOUT MEETING.

(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action

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<PAGE> 12

so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.

(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.

(c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the DGCL if such action had been voted on by stockholders at a meeting
thereof, then the certificate filed under such section shall state, in lieu of
any statement required by such section concerning any vote of stockholders, that
written consent has been given in accordance with Section 228 of the DGCL.

(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").

SECTION 14. ORGANIZATION.

(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.

(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to

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<PAGE> 13

the meeting after the time fixed for the commencement thereof, limitations on
the time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.

ARTICLE IV

DIRECTORS

SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.

SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.

SECTION 17. CLASSES OF DIRECTORS.

(a) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the Initial Public Offering, the directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class I directors shall expire and Class I directors
shall be elected for a full term of three years. At the second annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, this Section 17(a) shall become
effective and apply only when the corporation is a "listed" corporation within
the meaning of Section 301.5 of the CGCL.

(b) In the event that the corporation (i) is subject to Section
2115(b) of the CGCL and (ii) is not a "listed" corporation or ceases to be a
"listed" corporation under Section 301.5 of the CGCL, Section 17(a) of these
Bylaws shall not apply and all directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting.

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<PAGE> 14

(c) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation (i) is subject to Section 2115(b) of the CGCL and (ii)
is not a "listed" corporation or ceases to be a "listed" corporation under
Section 301.5 of the CGCL. During this time, every stockholder entitled to vote
at an election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.

Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.

SECTION 18. VACANCIES.

(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.

(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.

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(c) At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors
then in office who have been elected by stockholders shall constitute less than
a majority of the directors then in office, then

(1) Any holder or holders of an aggregate of five
percent (5%) or more of the total number of shares at the time outstanding
having the right to vote for those directors may call a special meeting of
stockholders; or

(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.

SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.

SECTION 20. REMOVAL.

(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.

(b) Following any date on which the corporation is no longer
subject to Section 2115(b) of the CGCL and subject to any limitations imposed by
law, Section 20(a) above shall no longer apply and removal shall be as provided
in Section 141(k) of the DGCL.

SECTION 21. MEETINGS.

(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such

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<PAGE> 16

meeting is held. No notice of an annual meeting of the Board of Directors shall
be necessary and such meeting shall be held for the purpose of electing officers
and transacting such other business as may lawfully come before it.

(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.

(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.

(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.

(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.

(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.

SECTION 22. QUORUM AND VOTING.

(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a

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majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.

(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.

SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.

SECTION 25. COMMITTEES.

(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.

(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.

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(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.

SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.

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ARTICLE V

OFFICERS

SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.

SECTION 28. TENURE AND DUTIES OF OFFICERS.

(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.

(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.

(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.

(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their

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office and shall also perform such other duties and have such other powers as
the Board of Directors or the President shall designate from time to time.

(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.

(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.

SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.

SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.

SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or

15.
<PAGE> 21

superior officers upon whom such power of removal may have been conferred by the
Board of Directors.

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION

SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.

All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.

SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.

ARTICLE VII

SHARES OF STOCK

SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of

16.
<PAGE> 22

issue. Each certificate shall state upon the face or back thereof, in full or in
summary, all of the powers, designations, preferences, and rights, and the
limitations or restrictions of the shares authorized to be issued or shall,
except as otherwise required by law, set forth on the face or back a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to this section or otherwise required by law or with
respect to this section a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Except as otherwise expressly provided by law,
the rights and obligations of the holders of certificates representing stock of
the same class and series shall be identical.

SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.

SECTION 36. TRANSFERS.

(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.

(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.

SECTION 37. FIXING RECORD DATES.

(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the

17.
<PAGE> 23

record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.

SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have

18.
<PAGE> 24

been delivered, such bond, debenture or other corporate security nevertheless
may be adopted by the corporation and issued and delivered as though the person
who signed the same or whose facsimile signature shall have been used thereon
had not ceased to be such officer of the corporation.

ARTICLE IX

DIVIDENDS

SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and applicable law.

SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

FISCAL YEAR

SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

ARTICLE XI

INDEMNIFICATION

SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.

(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by

19.
<PAGE> 25

such person unless (i) such indemnification is expressly required to be made by
law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the DGCL
or any other applicable law or (iv) such indemnification is required to be made
under subsection (d).

(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the DGCL or any other applicable law.

(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Section 43 or otherwise.

Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.

(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 43 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law

20.
<PAGE> 26

for the corporation to indemnify the claimant for the amount claimed. In
connection with any claim by an [executive] officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such executive officer is or was a
director of the corporation) for advances, the corporation shall be entitled to
raise a defense as to any such action clear and convincing evidence that such
person acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of the corporation, or with respect to
any criminal action or proceeding that such person acted without reasonable
cause to believe that his conduct was lawful. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.

(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.

(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

(g) INSURANCE. To the fullest extent permitted by the DGCL or
any other applicable law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Section 43.

(h) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.

(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 43 that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of

21.
<PAGE> 27

another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.

(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:

(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.

(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.

(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.

(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.

22.
<PAGE> 28

ARTICLE XII

NOTICES

SECTION 44. NOTICES.

(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.

(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.

(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.

(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.

(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.

(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.

(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to

23.
<PAGE> 29

such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the DGCL, the certificate shall state, if such is the fact and
if notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.

(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.

ARTICLE XIII

AMENDMENTS

SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.

ARTICLE XIV

LOANS TO OFFICERS

SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of

24.
<PAGE> 30

the corporation. Nothing in these Bylaws shall be deemed to deny, limit or
restrict the powers of guaranty or warranty of the corporation at common law or
under any statute.

25.

<PAGE> 1
EXHIBIT 4.2

Number Shares

CLP

[LOGO]

Caliper

CALIPER TECHNOLOGIES CORP.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP 130876 10 5

SEE REVERSE FOR CERTAIN DEFINITIONS AND A STATEMENT AS TO THE RIGHTS,
PREFERENCES, PRIVILEGES AND LIMITATIONS OF SHARES

THIS CERTIFIES THAT

IS THE OWNER OF

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.001, OF

CALIPER TECHNOLOGIES CORP.

transferable on the books of the Corporation by the holder hereof in person or
by a duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

/s/ Robert L. Jones /s/ Daniel L. Kisner
- -------------------------------- -------------------------------------
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER

[Seal]

<PAGE> 2
CALIPER TECHNOLOGIES CORP.

A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge at
the principal office of the Corporation.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right of survivorship and not as tenants

UNIF GIFT MIN ACT - ____________ Custodian ____________________________________
(Cust) (Minor)

Under Uniform Gifts To Minors

Act __________________________________________________
(State)

UNIF TRF MIN ACT - ____________ Custodian (until age) ________________________
(Cust) (Minor)

___________ (under California ____________________________)
(minor)

___________ Act ___________________________________________
(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ______________________ hereby sell, assign and transfer
unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

- -------------------------------------------------------------
| |
| |
- -------------------------------------------------------------

<PAGE> 3
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

- -------------------------------------------------------------------------------

Shares of the common
- ------------------------------------------------------------
stock represented by the within Certificate, and do hereby irrevocably

constitute and appoint Attorney
------------------------------------------------
to transfer the said stock on the books of the within named Corporation with

full power of substitution in the premises.

Dated
--------------------

/s/
--------------------------------------

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed

By:
---------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO THE S.E.C. RULE 17Ad-15.

<PAGE> 1
EXHIBIT 5.1

[Cooley Godward LLP Letterhead]

November 16, 1999

Caliper Technologies Corp.
605 Fairchild Drive
Mountain View, California 94043

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection
with the filing by Caliper Technologies Corp. (the "Company") of a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission"), including a prospectus to be filed with
the Commission pursuant to Rule 424(b) of Regulation C promulgated under the
Securities Act of 1933, as amended (the "Prospectus"), and the underwritten
public offering of up to 4,140,000 shares of Common Stock (the "Common Stock").

In connection with this opinion, we have (i) reviewed the Registration
Statement, the Company's Certificate of Incorporation and Bylaws and the
originals or copies certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below, (ii) assumed
that the Amendment to Certificate of Incorporation to be filed prior to the
effectiveness of the Registration Statement, the form of which is filed as
Exhibit 3.2 to the Registration Statement, shall have been duly filed with the
office of the Delaware Secretary of State and (iii) assumed that the shares of
the Common Stock will be sold to the Underwriters at a price established by the
Pricing Committee of the Board of Directors of the Company.

On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.

We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.

Very truly yours,

Cooley Godward LLP

By /s/ Brett D. White
------------------------
Brett D. White

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EXHIBIT 10.2

CALIPER TECHNOLOGIES CORP.

1996 EQUITY INCENTIVE PLAN

ADOPTED JANUARY 1, 1996

1. PURPOSES

(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.

(b) The Company, by means of the Plan, seeks to retain the services
of persons who are now Employees or Directors of or Consultants to the Company
or its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

2. DEFINITIONS

(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.

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

(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.

(e) "COMPANY" means Caliper Technologies Corp., a Delaware
corporation.

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(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT"
means a right granted pursuant to subsection 8(b)(2) of the Plan.

(g) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.

(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
that the service of an individual to the Company, whether as an Employee,
Director or Consultant, is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between the Company, Affiliates or their
successors.

(i) "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

(j) "DIRECTOR" means a member of the Board.

(k) "DISINTERESTED PERSON" means a Director: who either (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any affiliate entitling the participants therein to acquire equity securities
of the Company or any affiliate except as permitted by Rule 16b-3(c)(2)(i); or
(ii) is otherwise considered to be a "disinterested person" in accordance with
Rule 16b-3(c)(2)(i), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.

(l) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(n) "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations:

(1) If the common stock 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 ("NASDAQ") System, the Fair Market Value of a share of common stock
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 exchange with

2.
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the greatest volume of trading in common stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;

(2) If the common stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;

(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.

(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

(p) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted pursuant to subsection 8(b)(3) of the Plan.

(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.

(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(s) "OPTION" means a stock option granted pursuant to the Plan.

(t) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(u) "OPTIONEE" means a person who holds an outstanding Option.

(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

(w) "PLAN" means this 1996 Equity Incentive Plan.

3.
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(x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

(y) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.

(z) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.

(aa) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement

shall be subject to the terms and conditions of the Plan.

(bb) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a
right granted pursuant to subsection 8(b)(1) of the Plan.

3. ADMINISTRATION

(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each such person.

(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

(3) To amend the Plan or a Stock Award as provided in
Section 14.

(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

4.
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(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, at any time the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant Stock Awards to eligible persons who (1) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (ii) not persons with
respect to whom the Company wishes to avoid the application of Section 162(m) of
the Code.

(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.

4. SHARES SUBJECT TO THE PLAN

(a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate [one million one hundred thousand (1,100,000)]
shares of the Company's common stock. If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. Shares subject to Stock
Appreciation Rights exercised in accordance with Section 8 of the Plan shall not
be available for subsequent issuance under the Plan.

(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY

(a) Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant thereto may be
granted only to Employees, Directors or Consultants.

(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to the Director:
(i) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (ii) the Plan
otherwise complies with

5.
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the requirements of Rule 16b-3. The Board shall otherwise comply with the
requirements of Rule 16b-3. This subsection 5(b) shall not apply if the Board or
Committee expressly declares that it shall not apply.

(c) No person shall be eligible for the grant of an Option or an
award to purchase restricted stock if, at the time of grant, such person owns
(or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant, or in the case of a
restricted stock purchase award, the purchase price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.

(d) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than [two hundred fifty thousand
(250,000)] shares of the Company's common stock in any one calendar year period.

6. OPTION PROVISIONS

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

(b) PRICE. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted; the exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is

6.
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granted or to whom the Option is transferred pursuant to subsection 6(d), or (C)
in any other form of legal consideration that may be acceptable to the Board.

In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.

(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and any administrative interpretations or pronouncements thereunder
(a "QDRO"), and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person or any transferee pursuant to a QDRO.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.

(e) VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The Option may be subject to such other terms and conditions on
the time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.

(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (or such longer or shorter period, which in no event
shall be less than thirty (30) days, specified in the Option Agreement), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionee does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

7.
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An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.

(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period, which in no event shall be less than six (6) months, specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the Optionee
is not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option Agreement after the
termination of, the Optionee's Continuous Status as an Employee, Director or
Consultant, the Option may be exercised (to the extent the Optionee was entitled
to exercise the Option as of the date of death) by the Optionee's estate, by a
person who acquired the right to exercise the Option by bequest or inheritance
or by a person designated to exercise the option upon the Optionee's death
pursuant to subsection 6(d), but only within the period ending on the earlier of
(i) the date eighteen (18) months following the date of death (or such longer or
shorter period, which in no event shall be less than six (6) months, specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

(i) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option

8.
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as to any part or all of the shares subject to the Option prior to the full
vesting of the Option. Any unvested shares so purchased shall be subject to a
repurchase right in favor of the Company, with the repurchase price to be equal
to the original purchase price of the stock, or to any other restriction the
Board determines to be appropriate; provided, however, that (i) the right to
repurchase at the original purchase price shall lapse at a minimum rate of
twenty percent (20%) per year over five (5) years from the date the Option was
granted, and (ii) such right shall be exercisable only within (A) the ninety
(90) day period following the termination of employment or the relationship as a
Director or Consultant, or (B) such longer period as may be agreed to by the
Company and the Optionee (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares. Should the right of
repurchase be assigned by the Company, the assignee shall pay the Company cash
equal to the difference between the original purchase price and the stock's Fair
Market Value if the original purchase price is less than the stock's Fair Market
Value.

(j) RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to include
as part of any Option Agreement a provision entitling the Optionee to a further
Option (a "Re-Load Option") in the event the Optionee exercises the Option
evidenced by the Option agreement, in whole or in part, by surrendering other
shares of Common Stock in accordance with this Plan and the terms and conditions
of the Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is granted to a 10%
stockholder (as described in subsection 5(c)), shall have an exercise price
which is equal to one hundred ten percent (110%) of the Fair Market Value of the
stock subject to the Re-Load Option on the date of exercise of the original
Option and shall have a term which is no longer than five (5) years.

Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 12(e) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.

9.
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7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK

Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:

(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.

(b) TRANSFERABILITY. No rights under a stock bonus or restricted
stock purchase agreement shall be transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 and any administrative interpretations
or pronouncements thereunder, so long as stock awarded under such agreement
remains subject to the terms of the agreement.

(c) CONSIDERATION. The purchase price of stock acquired pursuant to
a stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.

(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee; provided, however, that (i) the right to repurchase at the original
purchase price shall lapse at a minimum rate of twenty percent (20%) per year
over five (5) years from the date the Stock Award was granted, and (ii) such
right shall be exercisable only (A) within the ninety (90) day period following
the termination of employment or the relationship as a Director or Consultant,
or (B) such longer period as may be agreed to by the Company and the holder of
the Stock Award (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code (regarding "qualified small business stock")),
and (iii) such right shall be exercisable only for cash or cancellation of
purchase money indebtedness for the shares. Should the right of repurchase be
assigned by the Company, the assignee shall pay the Company cash equal

10.
<PAGE> 11
to the difference between the original purchase price and the stock's Fair
Market Value if the original purchase price is less than the stock's Fair Market
Value.

(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 7(d), any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.

8. STOCK APPRECIATION RIGHTS

(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. If a Stock
Appreciation Right is granted to an individual who is at the time subject to
Section 16(b) of the Exchange Act (a "Section 16(b) Insider"), the Stock Award
Agreement of grant shall incorporate all the terms and conditions at the time
necessary to assure that the subsequent exercise of such right shall qualify for
the safe-harbor exemption from short-swing profit liability provided by Rule
16b-3 promulgated under the Exchange Act (or any successor rule or regulation).
Except as provided in subsection 5(d), no limitation shall exist on the
aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Rights.

(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:

(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.

(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is

11.
<PAGE> 12
exercised with respect to the particular shares of stock to which the Concurrent
Right pertains. The appreciation distribution payable on an exercised Concurrent
Right shall be in cash (or, if so provided, in an equivalent number of shares of
stock based on Fair Market Value on the date of the exercise of the Concurrent
Right) in an amount equal to such portion as shall be determined by the Board or
the Committee at the time of the grant of the excess of (A) the aggregate Fair
Market Value (on the date of the exercise of the Concurrent Right) of the vested
shares of stock purchased under the underlying Option which have Concurrent
Rights appurtenant to them over (B) the aggregate exercise price paid for such
shares.

(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent
Rights will be granted independently of any Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to Nonstatutory Stock Options as set forth in Section 6.
They shall be denominated in share equivalents. The appreciation distribution
payable on the exercised Independent Right shall be not greater than an amount
equal to the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number of shares of Company stock equal
to the number of share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is exercising the
Independent Right on such date, over (B) the aggregate Fair Market Value (on the
date of the grant of the Independent Right) of such number of shares of Company
stock. The appreciation distribution payable on the exercised Independent Right
shall be in cash or, if so provided, in an equivalent number of shares of stock
based on Fair Market Value on the date of the exercise of the Independent Right.

9. CANCELLATION AND RE GRANT OF OPTIONS

(a) The Board or the Committee shall have the authority to effect,
at any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of the affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option) or, in the
case of a 10% stockholder (as described in subsection 5(c)), not less than one
hundred ten percent (110%) of the Fair Market Value) per share of stock on the
new grant date. Notwithstanding the foregoing, the Board or the Committee may
grant an Option and/or Stock Appreciation Right with an exercise price lower
than that set forth above if such Option and/or Stock Appreciation Right is
granted as part of a transaction to which section 424(a) of the Code applies.

(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to
subsection 5(d) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 9, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the

12.
<PAGE> 13
grant of a substitute Option and/or Stock Appreciation Right; in the event of
such repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of Options and
Stock Appreciation Rights permitted to be granted pursuant to subsection 5(d) of
the Plan. The provisions of this subsection 9(b) shall be applicable only to the
extent required by Section 162(m) of the Code.

10. COVENANTS OF THE COMPANY

(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.

(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.

11. USE OF PROCEEDS FROM STOCK

Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.

12. MISCELLANEOUS

(a) Neither an Employee, Director or Consultant nor any person to
whom a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

(b) Throughout the term of any Stock Award, the Company shall
deliver to the holder of such Stock Award, not later than one hundred twenty
(120) days after the close of each of the Company's fiscal years during the term
of such Stock Award, a balance sheet and an income statement. This section shall
not apply when issuance is limited to key employees whose duties in connection
with the Company assure them access to equivalent information.

(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause, to remove any Director as provided in the
Company's By-

13.
<PAGE> 14
Laws and the provisions of the General Corporation Law of the State of
Delaware, or to terminate the relationship of any Consultant in accordance with
the terms of that Consultant's agreement with the Company or Affiliate to which
such Consultant is providing services.

(d) To the extent that the aggregate Fair Market Value (determined
at the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d), 7(b) or 8(b), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the holder of the Stock
Award to provide such other representations, written assurances or information
which the Company shall determine is necessary, desirable or appropriate to
comply with applicable securities and other laws as a condition of granting a
Stock Award to such person or permitting the holder of the Stock Award to
exercise the Stock Award. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.

(f) To the extent provided by the terms of a Stock Award Agreement,
the person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of the
common stock of the Company.

13. ADJUSTMENTS UPON CHANGES IN STOCK

(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation,

14.
<PAGE> 15
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan pursuant to subsection 4(a) and the maximum number of shares subject to
award to any person during any calendar year period pursuant to subsection 5(d),
and the outstanding Stock Awards will be appropriately adjusted in the class(es)
and number of shares and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)

(b) In the event of: (1) a merger or consolidation in which the
Company is not the surviving corporation or (2) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then to the extent not prohibited by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar Stock
Awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 10(b)) for those
outstanding under the Plan, or (ii) such Stock Awards shall continue in full
force and effect. In the event any surviving corporation and its Affiliates
refuse to assume such Stock Awards, or to substitute similar Stock Awards for
those outstanding under the Plan, then such Stock Awards shall be terminated if
not exercised prior to such event. In the event of a dissolution or liquidation
of the Company, any Stock Awards outstanding under the Plan shall terminate if
not exercised prior to such event.

14. AMENDMENT OF THE PLAN AND STOCK AWARDS

(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 13 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:

15.
<PAGE> 16
(1) Increase the number of shares reserved for Stock Awards
under the Plan;

(2) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or

(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.

(b) The Board may in its sole discretion submit any other amendment
to the Plan for stockholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of Section 162(m) of the Code
and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

(c) It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.

(e) The Board at any time, and from time to time, may amend the
terms of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.

15. TERMINATION OR SUSPENSION OF THE PLAN

(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on January 17, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

(b) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the written consent of the person to whom the Stock Award was
granted.

16.
<PAGE> 17

16. EFFECTIVE DATE OF THE PLAN

The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.

17.

<PAGE> 1
EXHIBIT 10.3

CALIPER TECHNOLOGIES CORP.

1999 EQUITY INCENTIVE PLAN

ADOPTED OCTOBER 1, 1999
AMENDED OCTOBER 28, 1999
APPROVED BY STOCKHOLDERS [NOVEMBER ___, 1999]
TERMINATION DATE: SEPTEMBER 30, 2009

1. PURPOSES.

(a) AMENDMENT AND RESTATEMENT OF INITIAL PLAN. The Plan initially
was established as the 1996 Stock Incentive Plan, effective as of July 25, 1996
(the "Initial Plan"). The Initial Plan, as amended, hereby is amended and
restated in its entirety and renamed the 1999 Equity Incentive Plan, effective
as of its adoption. The terms of the Initial Plan (other than the aggregate
number of shares issuable thereunder) shall remain in effect and apply to all
Stock Awards granted pursuant to the Initial Plan. Section 11 of the Plan shall
supersede Section 13 of the Initial Plan.

(b) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

(c) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

(d) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.

2. DEFINITIONS.

(a) "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

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

(d) "COMMITTEE" means a committee of one or more members of the
Board appointed by the Board in accordance with subsection 3(c).

<PAGE> 2
(e) "COMMON STOCK" means the common stock of the Company.

(f) "COMPANY" means Caliper Technologies Corp., a Delaware
corporation.

(g) "CONSULTANT" means any person, including an advisor, (i) engaged
by the Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or (ii) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors who are not compensated by the Company for their services as
Directors or Directors who are merely paid a director's fee by the Company for
their services as Directors.

(h) "CONTINUOUS SERVICE" means that the Participant's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

(j) "DIRECTOR" means a member of the Board of Directors of the
Company.

(k) "DISABILITY" means (i) before the Listing Date, the inability of
a person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.

(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(n) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:

2.
<PAGE> 3
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.

(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

(p) "LISTING DATE" means the first date upon which any security of
the Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.

(s) "OFFICER" means (i) before the Listing Date, any person
designated by the Company as an officer and (ii) on and after the Listing Date,
a person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated thereunder.

(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

3.
<PAGE> 4
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(v) "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

(y) "PLAN" means this Caliper Technologies Corp. 1999 Equity
Incentive Plan.

(z) "REVERSE STOCK SPLIT" means the 1-for-1.56 reverse stock split
approved by the Board of Directors on October 28, 1999.

(aa) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.

(bb) "SECURITIES ACT" means the Securities Act of 1933, as amended.

(cc) "STOCK AWARD" means any right granted under the Plan, including
an Option, a stock bonus and a right to acquire restricted stock.

(dd) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

(ee) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.

3. ADMINISTRATION.

(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan
unless and until the Board delegates administration to a Committee, as provided
in subsection 3(c).

(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

4.
<PAGE> 5
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

(iii) To amend the Plan or a Stock Award as provided in
Section 12.

(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

(i) GENERAL. The Board may delegate administration of the
Plan to a Committee or Committees of one (1) or more members of the Board, and
the term "Committee" shall apply to any person or persons to whom such authority
has been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.

(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

5.
<PAGE> 6
(d) EFFECT OF BOARD'S DECISION. All determinations, interpretations
and constructions made by the Board in good faith shall not be subject to review
by any person and shall be final, binding and conclusive on all persons.

4. SHARES SUBJECT TO THE PLAN.

(a) SHARE RESERVE. Subject to the provisions of Section 11 relating
to adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Six Million Two
Hundred Fifty Two Thousand Four Hundred Eleven (6,252,411) shares of Common
Stock (Four Million (4,000,000) shares of Common Stock upon the effectiveness
of, and after giving effect to, the Reverse Stock Split).

(b) EVERGREEN SHARE RESERVE INCREASE.

(i) Notwithstanding subsection 4(a) hereof, on the day after
each annual meeting of stockholders of the Company (the "Calculation Date") for
a period of ten (10) years, commencing with the annual meeting of stockholders
in 2000, the aggregate number of shares of Common Stock that is available for
issuance under the Plan shall automatically be increased by that number of
shares equal to the greater of (1) five percent (5%) of the Diluted Shares
Outstanding or (2) the number of shares of Common Stock subject to Stock Awards
granted during the prior 12-month period; provided, however, that the Board,
from time to time, may provide for a lesser increase in the aggregate number of
shares of Common Stock that is available for issuance under the Plan

(ii) Subject to the provisions of Section 11 hereof relating
to adjustments upon changes in securities, the increase in the maximum aggregate
number of shares of Common Stock that is available for issuance pursuant to
Incentive Stock Options granted under the Plan shall not exceed Twenty Million
(20,000,000) shares of Common Stock (Twelve Million Eight Hundred Twenty
Thousand (12,820,000) shares of Common Stock upon the effectiveness of, and
after giving effect to, the Reverse Stock Split).

(iii) "Diluted Shares Outstanding" shall mean, as of any date,
(1) the number of outstanding shares of Common Stock of the Company on such
Calculation Date, plus (2) the number of shares of Common Stock issuable upon
such Calculation Date assuming the conversion of all outstanding Preferred Stock
and convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.

(c) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.

(d) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

6.
<PAGE> 7
(e) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.(1)

5. ELIGIBILITY.

(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options
may be granted only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.

(b) TEN PERCENT STOCKHOLDERS.

(i) A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.

(ii) Prior to the Listing Date, a Ten Percent Stockholder
shall not be granted a Nonstatutory Stock Option unless the exercise price of
such Option is at least (i) one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.

(iii) Prior to the Listing Date, a Ten Percent Stockholder
shall not be granted a restricted stock award unless the purchase price of the
restricted stock is at least (i) one hundred percent (100%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.

(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section
11 relating to adjustments upon changes in the shares of Common Stock, no
Employee shall be eligible to be granted Options covering more than Three
Million (3,000,000) shares of Common Stock (Two

- --------
(1) Section 260.140.45 generally provides that the total number of shares
issuable upon exercise of all outstanding options (exclusive of certain rights)
and the total number of shares called for under any stock bonus or similar plan
shall not exceed a number of shares which is equal to 30% of the then
outstanding shares of the issuer (convertible preferred or convertible senior
common shares counted on an as if converted basis), exclusive of shares subject
to promotional waivers under Section 260.141, unless a percentage higher than
30% is approved by at least two-thirds of the outstanding shares entitled to
vote.

7.
<PAGE> 8
Million (2,000,000) shares of Common Stock upon the effectiveness of, and after
giving effect to, the Reverse Stock Split) during any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, this subsection 5(c) shall not apply until (i) the earliest of:
(1) the first material modification of the Plan (including any increase in the
number of shares of Common Stock reserved for issuance under the Plan in
accordance with Section 4); (2) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (3) the expiration of the Plan; or
(4) the first meeting of stockholders at which Directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.

(d) CONSULTANTS.

(i) Prior to the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by Rule 701, unless
the Company determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities Act as well as
comply with the securities laws of all other relevant jurisdictions.

(ii) From and after the Listing Date, a Consultant shall not
be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.

(iii) Rule 701 and Form S-8 generally are available to
consultants and advisors only if (i) they are natural persons; (ii) they provide
bona fide services to the issuer, its parents, its majority-owned subsidiaries
or majority-owned subsidiaries of the issuer's parent; and (iii) the services
are not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.

6. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on

8.
<PAGE> 9
exercise of each type of Option. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.

(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

(d) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is exercised
or (ii) at the discretion of the Board at the time of the grant of the Option
(or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to
the Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

9.
<PAGE> 10
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.

(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and, to the extent provided
in the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:

(i) Options granted prior to the Listing Date to an Employee
who is not an Officer, Director or Consultant shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted, subject
to reasonable conditions such as continued employment; and

10.
<PAGE> 11
(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.

(i) TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionholder's Continuous Service terminates (other than upon the Optionholder's
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date
of termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.

(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in subsection
6(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

(k) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted

11.
<PAGE> 12
prior to the Listing Date) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

(m) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Subject to the "Repurchase Limitation" in subsection
10(h), any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. Provided that the "Repurchase Limitation" in
subsection 10(h) is not violated, the Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.

(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares of Common Stock acquired by the Optionholder pursuant to the
exercise of the Option. Provided that the "Repurchase Limitation" in subsection
10(h) is not violated, the Company will not exercise its repurchase option until
at least six (6) months (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes) have elapsed
following exercise of the Option unless the Board otherwise specifically
provides in the Option.

(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.

(p) RE-LOAD OPTIONS.

(i) Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Unless otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

12.
<PAGE> 13
(ii) Any such Re-Load Option shall (1) provide for a number
of shares of Common Stock equal to the number of shares of Common Stock
surrendered as part or all of the exercise price of such Option; (2) have an
expiration date which is the same as the expiration date of the Option the
exercise of which gave rise to such Re-Load Option; and (3) have an exercise
price which is equal to one hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Re-Load Option on the date of exercise of the
original Option. Notwithstanding the foregoing, a Re-Load Option shall be
subject to the same exercise price and term provisions heretofore described for
Options under the Plan.

(iii) Any such Re-Load Option may be an Incentive Stock Option
or a Nonstatutory Stock Option, as the Board may designate at the time of the
grant of the original Option; provided, however, that the designation of any
Re-Load Option as an Incentive Stock Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on the exercisability of Incentive
Stock Options described in subsection 10(d) and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.

7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

(i) CONSIDERATION. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.

(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.

(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.

(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares of Common Stock under the stock bonus
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable

13.
<PAGE> 14
during the lifetime of the Participant only by the Participant. For a stock
bonus award made on or after the Listing Date, rights to acquire shares of
Common Stock under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the stock bonus agreement remains subject to the
terms of the stock bonus agreement.

(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

(i) PURCHASE PRICE. Subject to the provisions of subsection
5(b) regarding Ten Percent Stockholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
For restricted stock awards made on or after the Listing Date, the purchase
price shall not be less than eighty-five percent (85%) of the Common Stock's
Fair Market Value on the date such award is made or at the time the purchase is
consummated.

(ii) CONSIDERATION. The purchase price of Common Stock
acquired pursuant to the restricted stock purchase agreement shall be paid
either: (i) in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock's
"par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.

(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.

(v) TRANSFERABILITY. For a restricted stock award made
before the Listing Date, rights to acquire shares of Common Stock under the
restricted stock purchase agreement

14.
<PAGE> 15
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares of Common Stock under the restricted
stock purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as Common
Stock awarded under the restricted stock purchase agreement remains subject to
the terms of the restricted stock purchase agreement.

8. COVENANTS OF THE COMPANY.

(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards,
the Company shall keep available at all times the number of shares of Common
Stock required to satisfy such Stock Awards.

(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

9. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

10. MISCELLANEOUS.

(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or
any instrument executed or Stock Award granted pursuant thereto shall confer
upon any Participant any right to continue to serve the Company or an Affiliate
in the capacity in effect at the time the Stock

15.
<PAGE> 16
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that
the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans of the
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock Options.

(e) INVESTMENT ASSURANCES. The Company may require a Participant, as
a condition of exercising or acquiring Common Stock under any Stock Award, (i)
to give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of
a Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.

16.
<PAGE> 17
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.

(h) REPURCHASE LIMITATION. The terms of any repurchase option shall
be specified in the Stock Award and may be either at Fair Market Value at the
time of repurchase or at not less than the original purchase price. To the
extent required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:

(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares of Common Stock upon termination of
employment at not less than the Fair Market Value of the shares of Common Stock
to be purchased on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares of Common Stock within ninety (90) days of
termination of Continuous Service (or in the case of shares of Common Stock
issued upon exercise of Stock Awards after such date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.

(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives
the Company the right to repurchase the shares of Common Stock upon termination
of Continuous Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate of at least
twenty percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (ii) the right to repurchase
shall be exercised for cash or cancellation of purchase money indebtedness for
the shares of Common Stock within ninety (90) days of termination of Continuous
Service (or in the case of shares of Common Stock issued upon exercise of
Options after such date of termination, within ninety (90) days after the date
of the exercise) or such longer period as may be agreed to by the Company and
the Participant (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").

11. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es)

17.
<PAGE> 18
and maximum number of securities subject to the Plan pursuant to subsection 4(a)
and the maximum number of securities subject to award to any person pursuant to
subsection 5(c), and the outstanding Stock Awards will be appropriately adjusted
in the class(es) and number of securities and price per share of Common Stock
subject to such outstanding Stock Awards. The Board shall make such adjustments,
and its determination shall be final, binding and conclusive. (The conversion of
any convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.

(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.

12. AMENDMENT OF THE PLAN AND STOCK AWARDS.

(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible

18.
<PAGE> 19
Employees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options
granted under it into compliance therewith.

(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.

(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time
to time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.

14. EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.

15. CHOICE OF LAW.

The law of the State of Delaware shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.

19.

<PAGE> 1
EXHIBIT 10.4

CALIPER TECHNOLOGIES CORP.
1999 EMPLOYEE STOCK PURCHASE PLAN

ADOPTED OCTOBER 1, 1999
AMENDED OCTOBER 28, 1999
APPROVED BY STOCKHOLDERS [NOVEMBER ___, 1999]
TERMINATION DATE: NONE

1. PURPOSE.

(a) The purpose of the Plan is to provide a means by which Employees
of the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.

(b) The Company, by means of the Plan, seeks to retain the services
of such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.

(c) The Company intends that the Rights to purchase Shares granted
under the Plan be considered options issued under an "employee stock purchase
plan," as that term is defined in Section 423(b) of the Code.

2. DEFINITIONS.

(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

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

(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.

(e) "COMPANY" means Caliper Technologies Corp., a Delaware
corporation.

(f) "DIRECTOR" means a member of the Board.

(g) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements
set forth in the Offering for eligibility to participate in the Offering.

(h) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.

<PAGE> 2
(i) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.

(j) "EXCHANGE ACT" means the United States Securities Exchange Act
of 1934, as amended.

(k) "FAIR MARKET VALUE" means the value of a security, as determined
in good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.

(l) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

(m) "OFFERING" means the grant of Rights to purchase Shares under
the Plan to Eligible Employees.

(n) "OFFERING DATE" means a date selected by the Board for an
Offering to commence.

(o) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.

(p) "PARTICIPANT" means an Eligible Employee who holds an
outstanding Right granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Right granted under the Plan.

2.
<PAGE> 3
(q) "PLAN" means this 1999 Employee Stock Purchase Plan.

(r) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.

(s) "REVERSE STOCK SPLIT" means the 1-for-1.56 reverse stock split
approved by the Board of Directors on October 28, 1999.

(t) "RIGHT" means an option to purchase Shares granted pursuant to
the Plan.

(u) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3 as in effect with respect to the Company at the time
discretion is being exercised regarding the Plan.

(v) "SECURITIES ACT" means the United States Securities Act of 1933,
as amended.

(w) "SHARE" means a share of the common stock of the Company.

3. ADMINISTRATION.

(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c). Whether
or not the Board has delegated administration, the Board shall have the final
power to determine all questions of policy and expediency that may arise in the
administration of the Plan.

(b) The Board (or the Committee) shall have the power, subject to,
and within the limitations of, the express provisions of the Plan:

(i) To determine when and how Rights to purchase Shares
shall be granted and the provisions of each Offering of such Rights (which need
not be identical).

(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

(iii) To construe and interpret the Plan and Rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

(iv) To amend the Plan as provided in Section 14.

(v) Generally, to exercise such powers and to perform such
acts as it deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an Employee Stock Purchase Plan.

3.
<PAGE> 4
(c) The Board may delegate administration of the Plan to a Committee
of the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.

4. SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 13 relating to adjustments
upon changes in securities, the Shares that may be sold pursuant to Rights
granted under the Plan shall not exceed in the aggregate Four Hundred Fifty
Thousand (450,000) shares of Common Stock (Three Hundred Thousand (300,000)
shares of Common Stock upon the effectiveness of, and after giving effect to,
the Reverse Stock Split). If any Right granted under the Plan shall for any
reason terminate without having been exercised, the Shares not purchased under
such Right shall again become available for the Plan.

(b) The aggregate number of Shares that may be sold pursuant to
Rights granted under the Plan as specified in Section 4(a) hereof automatically
shall be increased as follows:

(i) On the day after each annual meeting of stockholders of
the Company (the "Calculation Date") for a period of ten (10) years, commencing
with the annual meeting of stockholders in 2000, the aggregate number of shares
of Common Stock that is available for issuance under the Plan shall
automatically be increased by that number of shares equal to the greater of (1)
five-tenths of one percent (0.5%) of the Diluted Shares Outstanding or (2) the
number of shares of Common Stock sold pursuant to Rights during the prior
12-month period; provided, however, that the Board, from time to time, may
provide for a lesser increase in the aggregate number of shares of Common Stock
that is available for issuance under the Plan

(ii) Subject to the provisions of Section 13 hereof relating
to adjustments upon changes in securities, the increase in the maximum aggregate
number of shares of Common Stock that is available for issuance pursuant to
Rights granted under the Plan shall not exceed Four Million Five Hundred
Thousand (4,500,000) shares of Common Stock (Three Million (3,000,000) shares of
Common Stock upon the effectiveness of, and after giving effect to, the Reverse
Stock Split).

4.
<PAGE> 5
number of dilutive Common Stock equivalent shares outstanding as the result of
any options or warrants outstanding during the fiscal year, calculated using the
treasury stock method.

(c) The Shares subject to the Plan may be unissued Shares or Shares
that have been bought on the open market at prevailing market prices or
otherwise.

5. GRANT OF RIGHTS; OFFERING.

(a) The Board may from time to time grant or provide for the grant
of Rights to purchase Shares of the Company under the Plan to Eligible Employees
in an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase Shares under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in Sections 6 through 9, inclusive.

(b) If a Participant has more than one Right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an
earlier-granted Right (or a Right with a lower exercise price, if two Rights
have identical grant dates) will be exercised to the fullest possible extent
before a later-granted Right (or a Right with a higher exercise price if two
Rights have identical grant dates) will be exercised.

6. ELIGIBILITY.

(a) Rights may be granted only to Employees of the Company or, as
the Board may designated as provided in subsection 3(b), to Employees of an
Affiliate. Except as provided in subsection 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require,
but in no event shall the required period of continuous employment be equal to
or greater than two (2) years.

(b) The Board may provide that each person who, during the course of
an Offering, first becomes an Eligible Employee will, on a date or dates
specified in the Offering which coincides with the day on which such person
becomes an Eligible Employee or which occurs thereafter, receive a Right under
that Offering, which Right shall thereafter be deemed to be a part of that
Offering. Such Right shall have the same characteristics as any Rights
originally granted under that Offering, as described herein, except that:

5.
<PAGE> 6
(i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right;

(ii) the period of the Offering with respect to such Right
shall begin on its Offering Date and end coincident with the end of such
Offering; and

(iii) the Board may provide that if such person first becomes
an Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.

(c) No Employee shall be eligible for the grant of any Rights under
the Plan if, immediately after any such Rights are granted, such Employee owns
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Affiliate. For purposes
of this subsection 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.

(d) An Eligible Employee may be granted Rights under the Plan only
if such Rights, together with any other Rights granted under all Employee Stock
Purchase Plans of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such Eligible Employee's rights to purchase
Shares of the Company or any Affiliate to accrue at a rate which exceeds twenty
five thousand dollars ($25,000) of the fair market value of such Shares
(determined at the time such Rights are granted) for each calendar year in which
such Rights are outstanding at any time.

(e) The Board may provide in an Offering that Employees who are
highly compensated Employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.

7. RIGHTS; PURCHASE PRICE.

(a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted the Right to purchase up to the
number of Shares purchasable either:

(i) with a percentage designated by the Board not exceeding
fifteen percent (15%) of such Employee's Earnings (as defined by the Board in
each Offering) during the period which begins on the Offering Date (or such
later date as the Board determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than the end of the
Offering; or

(ii) with a maximum dollar amount designated by the Board
that, as the Board determines for a particular Offering, (1) shall be withheld,
in whole or in part, from such Employee's Earnings (as defined by the Board in
each Offering) during the period which begins on the Offering Date (or such
later date as the Board determines for a particular Offering) and

6.
<PAGE> 7
ends on the date stated in the Offering, which date shall be no later than the
end of the Offering and/or (2) shall be contributed, in whole or in part, by
such Employee during such period.

(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.

(c) In connection with each Offering made under the Plan, the Board
may specify a maximum amount of Shares that may be purchased by any Participant
as well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.

(d) The purchase price of Shares acquired pursuant to Rights granted
under the Plan shall be not less than the lesser of:

(i) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Offering Date; or

(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Purchase Date.

8. PARTICIPATION; WITHDRAWAL; TERMINATION.

(a) An Eligible Employee may become a Participant in the Plan
pursuant to an Offering by delivering a participation agreement to the Company
within the time specified in the Offering, in such form as the Company provides.
Each such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board of such Employee's Earnings during the
Offering (as defined in each Offering). The payroll deductions made for each
Participant shall be credited to a bookkeeping account for such Participant
under the Plan and either may be deposited with the general funds of the Company
or may be deposited in a separate account in the name of, and for the benefit
of, such Participant with a financial institution designated by the Company. To
the extent provided in the Offering, a Participant may reduce (including to
zero) or increase such payroll deductions. To the extent provided in the
Offering, a Participant may begin such payroll deductions after the beginning of
the Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.

(b) At any time during an Offering, a Participant may terminate his
or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at

7.
<PAGE> 8
any time prior to the end of the Offering except as provided by the Board in the
Offering. Upon such withdrawal from the Offering by a Participant, the Company
shall distribute to such Participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire Shares for the Participant) under the Offering, without interest unless
otherwise specified in the Offering, and such Participant's interest in that
Offering shall be automatically terminated. A Participant's withdrawal from an
Offering will have no effect upon such Participant's eligibility to participate
in any other Offerings under the Plan but such Participant will be required to
deliver a new participation agreement in order to participate in subsequent
Offerings under the Plan.

(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating Employee's employment
with the Company or a designated Affiliate for any reason (subject to any
post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee all of his
or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Shares for the terminated Employee) under
the Offering, without interest unless otherwise specified in the Offering. If
the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subsection 8(a), then the distribution shall be made from the separate account,
without interest unless otherwise specified in the Offering.

(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in Section 15 and, otherwise during his
or her lifetime, shall be exercisable only by the person to whom such Rights are
granted.

9. EXERCISE.

(a) On each Purchase Date specified therefor in the relevant
Offering, each Participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of Shares up to the maximum amount of
Shares permitted pursuant to the terms of the Plan and the applicable Offering,
at the purchase price specified in the Offering. No fractional Shares shall be
issued upon the exercise of Rights granted under the Plan unless specifically
provided for in the Offering.

(b) Unless otherwise specifically provided in the Offering, the
amount, if any, of accumulated payroll deductions remaining in any Participant's
account after the purchase of Shares that is equal to the amount required to
purchase one or more whole Shares on the final Purchase Date of the Offering
shall be distributed in full to the Participant at the end of the Offering,
without interest. If the accumulated payroll deductions have been deposited with
the Company's general funds, then the distribution shall be made from the
general funds of the Company, without interest. If the accumulated payroll
deductions have been deposited in a separate account with a financial
institution as provided in subsection 8(a), then the distribution

8.
<PAGE> 9
shall be made from the separate account, without interest unless otherwise
specified in the Offering.

(c) No Rights granted under the Plan may be exercised to any extent
unless the Shares to be issued upon such exercise under the Plan (including
Rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Plan is not so
registered or in such compliance, no Rights granted under the Plan or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the Plan is subject to such an effective registration statement
and such compliance, except that the Purchase Date shall not be delayed more
than twelve (12) months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If, on the Purchase Date of any
Offering hereunder, as delayed to the maximum extent permissible, the Plan is
not registered and in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire Shares) shall be distributed to the Participants, without interest
unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subsection 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.

10. COVENANTS OF THE COMPANY.

(a) During the terms of the Rights granted under the Plan, the
Company shall ensure that the amount of Shares required to satisfy such Rights
are available.

(b) The Company shall seek to obtain from each federal, state,
foreign or other regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to issue and sell Shares upon exercise of
the Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.

11. USE OF PROCEEDS FROM SHARES.

Proceeds from the sale of Shares pursuant to Rights granted under the
Plan shall constitute general funds of the Company.

12. RIGHTS AS A STOCKHOLDER.

A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, Shares subject to Rights granted under
the Plan unless and until the

9.
<PAGE> 10
Participant's Shares acquired upon exercise of Rights under the Plan are
recorded in the books of the Company.

13. ADJUSTMENTS UPON CHANGES IN SECURITIES.

(a) If any change is made in the Shares subject to the Plan, or
subject to any Right, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of Shares subject to the Plan pursuant to
subsection 4(a), and the outstanding Rights will be appropriately adjusted in
the class(es), number of Shares and purchase limits of such outstanding Rights.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction that does not involve the receipt
of consideration by the Company.)

(b) In the event of: (i) a dissolution, liquidation, or sale of all
or substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; or (iii) a
reverse merger in which the Company is the surviving corporation but the Shares
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then: (1) any surviving or acquiring corporation shall assume Rights
outstanding under the Plan or shall substitute similar rights (including a right
to acquire the same consideration paid to Stockholders in the transaction
described in this subsection 13(b)) for those outstanding under the Plan, or (2)
in the event any surviving or acquiring corporation refuses to assume such
Rights or to substitute similar rights for those outstanding under the Plan,
then, as determined by the Board in its sole discretion such Rights may continue
in full force and effect or the Participants' accumulated payroll deductions
(exclusive of any accumulated interest which cannot be applied toward the
purchase of Shares under the terms of the Offering) may be used to purchase
Shares immediately prior to the transaction described above under the ongoing
Offering and the Participants' Rights under the ongoing Offering thereafter
terminated.

14. AMENDMENT OF THE PLAN.

(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 13 relating to adjustments upon
changes in securities and except as to minor amendments to benefit the
administration of the Plan, to take account of a change in legislation or to
obtain or maintain favorable tax, exchange control or regulatory treatment for
Participants or the Company or any Affiliate, no amendment shall be effective
unless approved by the stockholders of the Company to the extent stockholder
approval is necessary for the Plan to satisfy the requirements of Section 423 of
the Code, Rule 16b-3 under the Exchange Act and any Nasdaq or other securities
exchange listing requirements. Currently under the Code, stockholder approval
within twelve (12) months before or after the adoption of the amendment is
required where the amendment will:

10.
<PAGE> 11
(i) Increase the amount of Shares reserved for Rights under
the Plan;

(ii) Modify the provisions as to eligibility for
participation in the Plan to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3;
or

(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.

(b) It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide Employees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Employee Stock Purchase
Plans and/or to bring the Plan and/or Rights granted under it into compliance
therewith.

(c) Rights and obligations under any Rights granted before amendment
of the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.

15. DESIGNATION OF BENEFICIARY.

(a) A Participant may file a written designation of a beneficiary
who is to receive any Shares and/or cash, if any, from the Participant's account
under the Plan in the event of such Participant's death subsequent to the end of
an Offering but prior to delivery to the Participant of such Shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death during an Offering.

(b) The Participant may change such designation of beneficiary 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 the Plan who is living at
the time of such Participant's death, the Company shall deliver such Shares
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole 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 Company,
then to such other person as the Company may designate.

16. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board in its discretion may suspend or terminate the Plan at
any time. Unless sooner terminated, the Plan shall terminate at the time that
all of the Shares subject to the Plan's

11.
<PAGE> 12
reserve, as increased and/or adjusted from time to time, have been issued under
the terms of the Plan. No Rights may be granted under the Plan while the Plan is
suspended or after it is terminated.

(b) Rights and obligations under any Rights granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except as expressly provided in the Plan or with the consent of the person to
whom such Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.

17. EFFECTIVE DATE OF PLAN.

The Plan shall become effective as determined by the Board, but no
Rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board, which date may be
prior to the effective date set by the Board.

12.

<PAGE> 1
EXHIBIT 10.5

CALIPER TECHNOLOGIES CORP.

1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

ADOPTED OCTOBER 1, 1999
AMENDED OCTOBER 28, 1999
APPROVED BY STOCKHOLDERS [NOVEMBER ___, 1999]
EFFECTIVE DATE: INITIAL PUBLIC OFFERING OF COMMON STOCK
TERMINATION DATE: NONE

1. PURPOSES.

(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive
Options are the Non-Employee Directors of the Company.

(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means
by which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Nonstatutory
Stock Options.

(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of its Non-Employee Directors, to secure and retain the
services of new Non-Employee Directors and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.

2. DEFINITIONS.

(b) "ANNUAL GRANT" means an Option granted annually to all
Non-Employee Directors who meet the specified criteria pursuant to subsection
6(b) of the Plan.

(d) "BOARD" means the Board of Directors of the Company.

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

(f) "COMMON STOCK" means the common stock of the Company.

(g) "COMPANY" means Caliper Technologies Corp., a Delaware
corporation.

(h) "CONSULTANT" means any person, including an advisor, (i) engaged
by the Company or an Affiliate to render consulting or advisory services and who
is compensated for

<PAGE> 2
such services or (ii) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either Directors of the Company
who are not compensated by the Company for their services as Directors or
Directors of the Company who are merely paid a director's fee by the Company for
their services as Directors.

(i) "CONTINUOUS SERVICE" means that the Optionholder's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Optionholder's Continuous Service shall not
be deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a Consultant of an Affiliate or an
Employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.

(j) "DIRECTOR" means a member of the Board of Directors of the
Company.

(k) "DISABILITY" means the permanent and total disability of a
person within the meaning of Section 22(e)(3) of the Code.

(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(n) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

(o) "INITIAL GRANT" means an Option granted to a Non-Employee
Director who meets the specified criteria pursuant to subsection 6(a) of the
Plan.

2.
<PAGE> 3
(p) "IPO DATE" means the effective date of the initial public
offering of the Common Stock.

(q) "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.

(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

(s) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(t) "OPTION" means a Nonstatutory Stock Option granted pursuant to
the Plan.

(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(v) "OPTIONHOLDER" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

(w) "PLAN" means this Caliper Technologies Corp. 1999 Non-Employee
Directors' Stock Option Plan.

(x) "REVERSE STOCK SPLIT" means the 1-for-1.56 reverse stock split
approved by the Board of Directors on October 28, 1999.

(y) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.

(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.

3. ADMINISTRATION.

(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan.
The Board may not delegate administration of the Plan to a committee.

(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

(i) To determine the provisions of each Option to the extent
not specified in the Plan.

(ii) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any

3.
<PAGE> 4
Option Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.

(iii) To amend the Plan or an Option as provided in Section
12.

(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company that are not in conflict with the provisions of the Plan.

(c) EFFECT OF BOARD'S DECISION. All determinations, interpretations
and constructions made by the Board in good faith shall not be subject to review
by any person and shall be final, binding and conclusive on all persons.

4. SHARES SUBJECT TO THE PLAN.

(a) SHARE RESERVE. Subject to the provisions of Section 11 relating
to adjustments upon changes in the Common Stock, the Common Stock that may be
issued pursuant to Options shall not exceed in the aggregate Three Hundred
Thousand (300,000) shares of Common Stock (Two Hundred Thousand (200,000) shares
of Common Stock upon the effectiveness of, and after giving effect to, the
Reverse Stock Split).

(b) EVERGREEN SHARE RESERVE INCREASE.

(i) Notwithstanding subsection 4(a) hereof, on the day after
each Annual Meeting (the "Calculation Date") for a period of ten (10) years,
commencing with the Annual Meeting in 2000, the aggregate number of shares of
Common Stock that is available for issuance under the Plan shall automatically
be increased by that number of shares equal to the greater of (1) three-tenths
of one percent (0.3%) of the Diluted Shares Outstanding or (2) the number of
shares of Common Stock subject to Options granted during the prior 12-month
period; provided, however, that the Board, from time to time, may provide for a
lesser increase in the aggregate number of shares of Common Stock that is
available for issuance under the Plan

(ii) "Diluted Shares Outstanding" shall mean, as of any date,
(1) the number of outstanding shares of Common Stock of the Company on such
Calculation Date, plus (2) the number of shares of Common Stock issuable upon
such Calculation Date assuming the conversion of all outstanding Preferred Stock
and convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.

(c) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Option shall revert to and again become available for issuance under the
Plan.

(d) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

4.
<PAGE> 5
5. ELIGIBILITY.

The Options as set forth in section 6 automatically shall be granted
under the Plan to all Non-Employee Directors.

6. NON-DISCRETIONARY GRANTS.

(a) INITIAL GRANTS. Without any further action of the Board, each
person who is elected or appointed for the first time to be a Non-Employee
Director automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director, be granted an Initial Grant to
purchase Thirty Thousand (30,000) shares of Common Stock (Twenty Thousand
(20,000) shares of Common Stock upon the effectiveness of, and after giving
effect to, the Reverse Stock Split) on the terms and conditions set forth
herein.

(b) ANNUAL GRANTS. Without any further action of the Board, each
Non-Employee Director shall be granted the following Options:

(i) On the day following each Annual Meeting, commencing
with the Annual Meeting in 2000, each person (other than the Chairman of the
Board) who is then a Non-Employee Director, and has been a Non-Employee Director
for at least six (6) months, automatically shall be granted an Annual Grant to
purchase Five Thousand (5,000) shares of Common Stock (Three Thousand Two
Hundred (3,200) shares of Common Stock upon the effectiveness of, and after
giving effect to, the Reverse Stock Split) on the terms and conditions set forth
herein.

(ii) On the day following each Annual Meeting, commencing
with the Annual Meeting in 2000, the Non-Employee Director who is then serving
as Chairman of the Board, automatically shall be granted an Annual Grant to
purchase Ten Thousand (10,000) shares of Common Stock (Six Thousand Four Hundred
(6,400) shares of Common Stock upon the effectiveness of, and after giving
effect to, the Reverse Stock Split) on the terms and conditions set forth
herein.

7. OPTION PROVISIONS.

Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan. Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate. Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

(b) EXERCISE PRICE. The exercise price of each Option shall be one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower

5.
<PAGE> 6
than that set forth in the preceding sentence if such Option is granted pursuant
to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.

(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of (i) cash or check, or (ii) delivery to the
Company of other Common Stock. The purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only by
shares of the Common Stock of the Company that have been held for more than six
(6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

(d) TRANSFERABILITY. An Option is not transferable, except (i) by
will or by the laws of descent and distribution, (ii) by instrument to an inter
vivos or testamentary trust, in a form accepted by the Company, in which the
Option is to be passed to beneficiaries upon the death of the trustor (settlor)
and (iii) by gift, in a form accepted by the Company, to a member of the
"immediate family" of the Optionholder as that term is defined in 17 C.F.R.
240.16a-1(e). In addition, Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

(e) VESTING. Options shall vest as follows:

(i) Initial Grants shall provide for vesting of 1/60th of
the shares subject to the Option each month for five (5) years after the date of
the grant.

(ii) Annual Grants shall provide for vesting of 100% of the
shares subject to the Option twelve (12) months after the date of the grant.

(f) EXERCISE. Options shall be exercisable in full immediately upon
grant.

(g) TERMINATION OF CONTINUOUS SERVICE. In the event an
Optionholder's Continuous Service terminates (other than upon the Optionholder's
death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date six (6) months following the termination of the Optionholder's
Continuous Service, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate.

(h) EXTENSION OF TERMINATION DATE. If the exercise of the Option
following the termination of the Optionholder's Continuous Service (other than
upon the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares would

6.
<PAGE> 7
violate the registration requirements under the Securities Act, then the Option
shall terminate on the earlier of (i) the expiration of the term of the Option
set forth in subsection 7(a) or (ii) the expiration of a period of three (3)
months after the termination of the Optionholder's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.

(i) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.

(j) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the three-month period after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise the
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period ending on the earlier of (1) the date eighteen (18) months
following the date of death or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

8. COVENANTS OF THE COMPANY.

(a) AVAILABILITY OF SHARES. During the terms of the Options, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.

(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Options unless and until such authority is obtained.

9. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

7.
<PAGE> 8
10. MISCELLANEOUS.

(a) STOCKHOLDER RIGHTS. No Optionholder shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Option unless and until such Optionholder has satisfied all
requirements for exercise of the Option pursuant to its terms.

(b) NO SERVICE RIGHTS. Nothing in the Plan or any instrument
executed or Option granted pursuant thereto shall confer upon any Optionholder
any right to continue to serve the Company as a Non-Employee Director or shall
affect the right of the Company or an Affiliate to terminate (i) the employment
of an Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant's agreement
with the Company or an Affiliate or (iii) the service of a Director pursuant to
the Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

(c) INVESTMENT ASSURANCES. The Company may require an Optionholder,
as a condition of exercising or acquiring stock under any Option, (i) to give
written assurances satisfactory to the Company as to the Optionholder's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Optionholder is
acquiring the stock subject to the Option for the Optionholder's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (iii) the issuance of the shares upon the
exercise or acquisition of stock under the Option has been registered under a
then currently effective registration statement under the Securities Act or (iv)
as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.

(d) WITHHOLDING OBLIGATIONS. The Optionholder may satisfy any
federal, state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

8.
<PAGE> 9
11. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock
subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the
Plan pursuant to subsection 4(a) and to the nondiscretionary Options specified
in Section 5, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such
outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Options shall
terminate immediately prior to such event.

(i) In the event of (i) a sale, lease or other disposition
of all or substantially all of the assets of the Company, (ii) a merger or
consolidation in which the Company is not the surviving corporation or (iii) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation shall
assume any Options outstanding under the Plan or shall substitute similar
Options (including an option to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan).

(ii) In the event any surviving corporation or acquiring
corporation refuses to assume such Options or to substitute similar Options for
those outstanding under the Plan, then the vesting of such Options and the
vesting of any shares of Common Stock acquired pursuant to such Options shall be
accelerated in full, and the Options shall terminate if not exercised at or
prior to such event.

(iii) In the event any surviving corporation or acquiring
corporation assumes such Options or substitutes similar Options for those
outstanding under the Plan but the Optionholder is not elected or appointed to
the board of directors of the surviving corporation or acquiring corporation at
the first meeting of such board of directors after such change in control event,
then the vesting of such Options and the vesting of any shares of Common Stock
acquired pursuant to such Options shall be accelerated by eighteen (18) months
on the day after the first meeting of the board of directors of the surviving
corporation or acquiring corporation.

9.
<PAGE> 10
(iv) In the event any surviving corporation or acquiring
corporation assumes such Options or substitutes similar Options for those
outstanding under the Plan and the Optionholder is elected or appointed to the
board of directors of the surviving corporation or acquiring corporation at the
first meeting of such board of directors after such change in control event,
then the vesting of such Options and the vesting of any shares of Common Stock
acquired pursuant to such Options shall not be accelerated.

12. AMENDMENT OF THE PLAN AND OPTIONS.

(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.

(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval.

(c) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

(d) AMENDMENT OF OPTIONS. The Board at any time, and from time to
time, may amend the terms of any one or more Options; provided, however, that
the rights under any Option shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.

13. TERMINATION OR SUSPENSION OF THE PLAN.

(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Options
may be granted under the Plan while the Plan is suspended or after it is
terminated.

(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Optionholder.

14. EFFECTIVE DATE OF PLAN.

The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

10.
<PAGE> 11
15. CHOICE OF LAW.

All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of Delaware, without
regard to such state's conflict of laws rules.

11.

<PAGE> 1
EXHIBIT 10.20

PROMISSORY NOTE

$200,000.00 Palo Alto, California
March 25, 1997

1. For value received, the undersigned, Michael R. Knapp (the
"Borrower" or "Employee"), promises to pay to Caliper Technologies Corp., a
Delaware corporation (the "Lender" or the "Company") the principal sum of Two
Hundred Thousand Dollars ($200,000.00) (the "Principal"), together with interest
on the Principal at the rate of 6.61% per year which shall begin to accrue on
January 1, 2002, in the amounts and at the times set forth on Exhibit A attached
hereto. Payments will be allocated first to accrued and unpaid interest and then
to principal.

2. Notwithstanding the foregoing, the entire Principal balance and
all accrued interest thereon, if any, shall be due and payable within 30 days
after the date of occurrence of any of the following:

A. The termination or cessation of employment of Borrower
by the Lender for any reason, whether voluntary or involuntary, and whether with
cause or without cause;

B. The sale, conveyance, assignment, alienation or any
other form of transfer (a "Transfer") of that certain real property commonly
known as 738 Glenmere Way, Redwood City, CA 94062 (the "Property"), or any part
thereof or interest therein, whether voluntary or involuntary; or

C. Any failure to make any payment or to perform any other
obligation which is secured by a deed of trust (including, but not limited to,
the deed of trust executed by Borrower on the date of this Promissory Note which
grants Lender a security interest in the Property ("Deed of Trust")) or other
lien on the Property, and which is deemed a default pursuant to the terms of
such deed of trust or other lien (or applicable law with respect to such other
lien); or

D. The amount of any indebtedness encumbering the Property
is increased over the amount of such indebtedness existing as of the date of
this Note (an "Indebtedness Increase").

E. The first anniversary of the date that the Lender has
notified Borrower ("Date of Notice") that publicly tradable Caliper Technologies
Corp. Common Stock owned by or which Borrower has the right to acquire has an
aggregate market value of $1,000,000 or more, as providing by the following
formula:

<PAGE> 2
(x * y) - (x * z) >= $1,000,000, where

"x" is the number of shares Borrower has purchased or as to
which Borrower has the fully exercisable right to purchase and
which shares are or upon purchase will be free of any right of
the Lender to repurchase.

"y" is the Fair Market Value of Caliper Technologies Corp.
Common Stock determined as follows:

(1) If the Common Stock is traded over-the-counter,
the average of the closing bid prices of the Common Stock over
the 20 trading days ending 5 business days before the Date of
Notice.

(2) If the Common Stock is traded on the National
Association of Securities Dealers Automated Quotation National
Market System, the average of the closing sales prices of the
Common Stock over the 20 trading days ending 5 business days
before the Date of Notice.

(3) If the Common Stock is traded on a securities
exchange, the average of the closing prices of the Common Stock
over the 20 trading days ending 5 business days before the Date
of Notice.

"z" is the amount actually paid or payable by Borrower to Lender
to acquire any shares represented by "x" in the foregoing
formula.

Such notice may be given by the Lender to Borrower only if both of the
following conditions are satisfied, making the shares "Publicly Tradable":

(i) The Lender has registered Common Stock as a
class of securities pursuant to Section 12 of the Securities
Exchange Act of 1934 or has otherwise registered shares with the
Securities and Exchange Commission allowing Common Stock to be
publicly traded.

(ii) The Common Stock represented by "x" in the
foregoing formula, in the opinion of counsel to the Lender, can
be sold on the open market in compliance with Rules 144 or 701,
or without restriction pursuant to Rule 144 (k), or Borrower's
Common Stock has been registered with the Securities and
Exchange Commission so that it can be sold on the open market
by Borrower, or otherwise can be sold on the open market by
Borrower. For purposes of determining whether shares can be sold
on the open market, (A) restrictions arising under Section 16
(b) of the Securities Exchange Act of 1934 shall not be deemed
to be restrictions on Borrower's ability to sell shares on the
open market, and (B) shares subject to "lock-up" or similar

<PAGE> 3
contractual restrictions on sale shall be deemed not sellable on
the open market until the restrictions have expired or have been
waived by the other party to the agreement.

3. In the event (i) Borrower defaults in the payment of Principal
or interest when due pursuant to the terms hereof or in Borrower's performance
of any obligation contained in the Deed of Trust (ii) any representation or
warranty of Borrower contained in this Note, the Deed of Trust or any other
agreement or instrument executed in connection with the loan described herein
proves to have been false or misleading in any material respect, or (iii)
Borrower defaults in Borrower's obligation to pay any indebtedness evidenced by
any other promissory note executed by Borrower and payable to the Lender or
there occurs any other default under any deed of trust, mortgage or other
document securing repayment of such indebtedness, then unless otherwise
prohibited by law, the Lender shall have the option, without demand or notice,
to declare the entire Principal balance of this Note, together with all accrued
and unpaid interest, to be immediately due and payable.

4. This Note is secured by the Deed of Trust, as defined above,
given by the Borrower to the Lender with respect to the Property, which Deed of
Trust shall be a lien of second priority against the Property.

5. Borrower hereby makes the following representations and
warranties to the Lender and acknowledges that the Lender is relying on such
representations in making the loan:

A. Borrower has good and marketable title to the Property
free and clear of any security interests, liens or encumbrances, other than a
grant of a first priority security interest to the financial institution which
lends Employee funds to acquire the Property.

B. The consent of no person or entity other than Borrower's
spouse and, if applicable, such financial institution, is required to grant the
security interest in the Property to Lender evidenced by the Deed of Trust.

C. There are no actions, proceedings, claims or disputes
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or the Property.

6. In addition to executing and delivering the Deed of Trust,
Borrower shall take any and all further actions that may from time to time be
required to ensure that the Deed of Trust creates a valid lien on the Property
in favor of the Lender which shall secure this Note. If it should hereafter be
determined that there are defects against title or matters which could result in
defects against title to the Property or that the consent of another person or
entity (other than Borrower's spouse or the holder of the first priority
security interest) is required to grant to, and perfect in, the Lender a valid
second-priority lien on the Property, Borrower shall, promptly on demand by the
Lender, take all actions

<PAGE> 4
necessary to remove such defects and to obtain such consent and grant (or cause
to be granted) and perfect such lien on the Property. Failure of Borrower to
comply with the provisions of this paragraph shall be deemed a default under
this Note and the Deed of Trust.

7. Upon the failure of Borrower to pay the Principal when due,
interest on the Principal shall thereafter accrue at the rate of ten percent
(10%) per annum, or, if higher, the highest rate permitted by applicable law.

8. This Note may be amended or modified, and provisions hereof may
be waived, only by the written agreement of Borrower and the Lender. No delay or
failure by the Lender in exercising any right, power or remedy hereunder shall
operate as a waiver of such right, power or remedy, and a waiver of any right,
power or remedy on any one occasion shall not operate as a bar or waiver of any
such right, power or remedy on any other occasion. Without limiting the
generality of the foregoing, the delay or failure by the Lender for any period
of time to enforce collection of any amounts due hereunder shall not be deemed
to be a waiver of any rights of the Lender under contract or under law. The
rights of the Lender under this Note are in addition to any other rights and
remedies which the Lender may have.

9. The Principal may be prepaid without penalty, in whole or in
part, at any time. All amounts payable hereunder shall be payable in lawful
money of the United States of America.

10. Without limiting the generality of paragraph 11 below, Borrower
hereby acknowledges that neither the Company nor the Lender has made any
representation or warranty to Borrower concerning the income tax consequences of
the loan to Borrower, and Borrower shall be solely responsible for ascertaining
and bearing such tax consequences. Borrower further acknowledges that (i) the
Company may, in its sole discretion, determine that it is required under the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated by the Internal Revenue Service ("IRS") thereunder, to
impute interest on the Principal of this Note at the rate set by the IRS, (ii)
the amount of any such imputed interest would be deemed to be compensation
income to Borrower which would be subject to tax withholding, and (iii) if so
determined by the Company, the Company would report and withhold the required
amount out of the current compensation paid to Borrower in accordance with the
Code and the rules and regulations promulgated thereunder.

11. THIS NOTE, THE DEED OF TRUST AND ALL RELATED DOCUMENTATION ARE
EXECUTED VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE ON THE PART OR
BEHALF OF THE PARTIES HERETO, WITH THE FULL INTENT OF CREATING THE OBLIGATIONS
AND SECURITY INTERESTS DESCRIBED HEREIN AND THEREIN. THE PARTIES ACKNOWLEDGE
THAT: (a) THEY HAVE READ SUCH DOCUMENTATION; (b) THEY HAVE BEEN REPRESENTED IN
THE PREPARATION, NEGOTIATION

<PAGE> 5
AND EXECUTION OF SUCH DOCUMENTATION BY LEGAL COUNSEL OF THEIR OWN CHOICE OR THAT
THEY HAVE VOLUNTARILY DECLINED TO SEEK SUCH COUNSEL; (c) THEY UNDERSTAND THE
TERMS AND CONSEQUENCES OF THIS NOTE, THE DEED OF TRUST AND ALL RELATED
DOCUMENTATION AND THE OBLIGATIONS THEY CREATE; AND (d) THEY ARE FULLY AWARE OF
THE LEGAL AND BINDING EFFECT OF THIS NOTE, THE DEED OF TRUST AND THE OTHER
DOCUMENTS CONTEMPLATED BY THIS AGREEMENT.

12. This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
California.

BORROWER:

/s/ MICHAEL R. KNAPP
-----------------------------------------
Michael R. Knapp

<PAGE> 1

EXHIBIT 10.21

August 3, 1995

VIA FACSIMILE

Dr. Michael R. Knapp
2630 North Calvert Street
Baltimore, MD 21218

RE: OPTION TO ACQUIRE THE OUTSTANDING STOCK
OF CALIPER MICROANALYTIC SYSTEMS, INC.

Gentlemen:

This letter sets forth the terms pursuant to which Caliper Technologies Corp., a
Delaware corporation ("Purchaser"), shall have the right to purchase from
Michael R. Knapp ("Stockholder") all of the outstanding capital stock of Caliper
Microanalytic Systems, Inc., a Maryland corporation ("Caliper").

1. OPTION. Subject to the terms of this letter, Stockholder hereby grants
to Purchaser an irrevocable option (the "Option") to purchase all, but not less
than all, of the outstanding capital stock of Caliper (the "Caliper Stock"). The
Option shall be exercisable at anytime during the eight (8) month period
following the date of this letter (referred to as the "Option Period") pursuant
to written notice delivered to Stockholder hereunder (with a copy to the Escrow
Agent provided for below) specifying the date, place and time for the Closing
provided for in paragraph 2 below.

2. EXERCISE PRICE. Upon exercise of the Option, and as consideration for
purchase of the Caliper Stock, Purchaser shall deliver to Stockholder an
aggregate of sixty thousand shares of Common Stock of Purchaser (the "Initial
Exercise Price"). Further, as additional consideration for the purchase of the
Caliper Stock following exercise of the Option, Purchaser shall deliver to
Stockholder a Warrant to purchase additional shares of Purchaser's Common Stock
upon the achievement of each of the milestones set forth below as follows:

<PAGE> 2

Dr. Michael R. Knapp
August 3, 1995
Page 2

<TABLE>
<CAPTION>
MILESTONE NUMBER OF
ADDITIONAL SHARES
SUBJECT TO WARRANT
<S> <C> <C>
1. Issuance to Caliper of a U.S. patent covering major claims 60,000
related to the Caliper biochemical analysis technology
(claims 1, 2, 11 and 21 in the present U.S. patent
application).

2. The first commercial launch of a product incorporating the 60,000
Caliper biochemical analysis technology or the consummation
of a significant strategic partnership between Caliper and
a major industry participant regarding such technology.
</TABLE>

The Warrant issuable upon the achievement of Milestone No. 1 above shall have an
exercise price equal to the price at which shares of preferred stock are issued
to investors in Purchaser's first round of financing (subsequent to the seed
financing by Avalon Ventures). The Warrant issuable upon the achievement of
Milestone No. 2 above shall have an exercise price equal to the price at which
shares of preferred stock are issued to investors in Purchaser's most recent
round of financing prior to the achievement of such milestone. Such Warrants
shall be exercisable for ten (10) years from the date of exercise of the Option
and shall otherwise contain such terms and conditions relating to the purchase
of shares on exercise thereof as are customarily found in similar warrants.
Neither the Initial Exercise Price nor the Warrant shares shall be subject to
vesting.

3. CLOSING. The closing of the purchase and sale of the Stock hereunder
(the "Closing") shall take place on the date and at the place and time specified
in the notice of exercise delivered pursuant to paragraph 1 above. At the
Closing, Purchaser shall deliver the Initial Exercise Price to Stockholder as
provided in Section 2 above and Stockholder shall deliver to Purchaser a
certificate representing the Caliper Stock duly executed for transfer.

4. EMPLOYMENT FOLLOWING OPTION EXERCISE. Upon exercise of the Option, if
applicable, Stockholder will be offered employment with Purchaser on terms
substantially as outlined on Exhibit A attached hereto. In the event the Option
expires without being exercised or Purchaser notifies Stockholder in writing
that Purchaser does not intend to exercise the option before the end of the
Option Period, Avalon will retain Stockholder as a consultant pursuant to
Avalon's standard form of consulting agreement for 4-months at his then current
rate of pay, or such shorter period if he gets another job before the end of the
4-month period, and as a

<PAGE> 3

Dr. Michael R. Knapp
August 3, 1995
Page 3

consultant, he will assist Avalon wit other projects as Avalon may reasonably
request.

5. ESCROW. Concurrently herewith, Stockholder, Purchaser and the Escrow
Agent defined therein shall execute and deliver the Escrow Agreement in the form
attached hereto as Exhibit B, and Stockholder shall deliver to the Escrow Agent
a certificate representing the Stock together an assignment separate from
certificate in the form attached hereto as Exhibit C, to be held pursuant to the
terms of such Escrow Agreement.

6. CONSIDERATION. As consideration for the Option, Purchaser shall
deliver a check payable to Stockholder for $100 concurrently with Stockholder's
execution of this letter as provided for below. This payment is nonrefundable.

7. CONDUCT DURING OPTION PERIOD. During the Option Period, Caliper shall
conduct its business in good faith in the ordinary course, and Stockholder shall
ensure that it does so. Without limiting the forgoing, during the Option Period,
Caliper shall (i) not enter into any material agreements or take any other
action that could adversely affect the purposes of this letter, (ii) act
diligently to protect its patent, copyright, trade secret and other intellectual
property rights (collectively referred to as the Technology) and (iii) supply
the Purchaser with all available information reasonably necessary for
consideration of the exercise of the Option.

8. AGREEMENT NOT TO SOLICIT. During the Option Period Caliper will not,
and Stockholder shall ensure that it does not, directly or indirectly, (i)
solicit, initiate or encourage submission of proposals or offers from any other
person relating to any purchase of all or any part of the Assets, whether by
means of the acquisition of an equity interest, merger, consolidation or
business combination or otherwise, or (ii) participate in any discussions or
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate or assist in any way with any attempt by any
other person to do any of the foregoing. Stockholder will promptly notify the
undersigned of any proposal, offer or inquiry of or contact with any person with
respect thereto, including the identity of the offeror and the terms of any
proposal.

<PAGE> 4

Dr. Michael R. Knapp
August 3, 1995
Page 4

9. CONFIDENTIAL INFORMATION. Each of us acknowledge that during the
Option Period, we may have access to information that is confidential to one
another and that is marked "confidential" (referred to as Confidential
Information). Caliper and Purchaser agree, both during the Option Period and for
three (3) years thereafter, to hold each other's Confidential Information in
confidence, and not to disclose or make each other's Confidential Information
available, in any form, to any third party or to use each other's Confidential
Information for any purpose other than as contemplated in this letter. The term
Confidential Information shall not include information which is or becomes a
part of the public domain through no act of the other party, was in the other
party's rightful possession prior to disclosure to that party, is legally
disclosed to the other party by a third party without restriction on disclosure
or is independently developed by the other party.

10. MISCELLANEOUS.

(a) Stockholder acknowledges that monetary damages are insufficient
to compensate for breach of his obligations under this letter, and that the
measure of damages is difficult to determine. Accordingly, without limitation on
any other remedies that may be available, in the event of any breach of
Stockholder's obligations under this letter, Purchaser shall be entitled to
specific performance, injunctive relief and any other equitable remedy that may
be appropriate.

(b) Stockholder hereby confirm that he is the legal and beneficial
owner of all the Stock, that there are no restrictions on his ability to vote
the Stock, that he has all requisite rights and authority to execute and deliver
this letter and that the Stock is not subject to any liens, security interests
or encumbrances of any kind.

(c) In the event of any change in Caliper's capital stock by reason
of stock dividends, splits, recapitalizations, or the like, the number and kind
of shares or securities subject to the Option and the purchase price per share
of Stock (but not the total purchase price) shall be appropriately and equitably
adjusted.

(d) This letter shall be construed in accordance with and governed by
the law of the State of California as applied to contracts entered into and
performed entirely within the State of California by California residents. This
letter may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

<PAGE> 5

Dr. Michael R. Knapp
August 3, 1995
Page 5

If you are in agreement with respect to the matters discussed above, please so
indicate by executing this letter in the space provided below and delivering it
to me no later than 5:00 p.m. California time on August 9, 1995.

Sincerely,

CALIPER TECHNOLOGIES CORP.

/s/ LAWRENCE A. BOCK
- ------------------------------------------
LAWRENCE A. BOCK
Chairman of the Board and Acting President
and Chief Executive Officer

THE FOREGOING IS AGREED TO AND ACCEPTED IN FULL:

CALIPER MICROANALYTIC SYSTEMS, INC.

/s/ MICHAEL R. KNAPP
- ------------------------------------------
MICHAEL R. KNAPP
President

<PAGE> 1
EXHIBIT 10.22

AMENDMENT TO STOCK OPTION AGREEMENT

This AMENDMENT TO STOCK OPTION AGREEMENT ("Amendment"), is made this 25th
day of August, 1995, by and between MICHAEL R. KNAPP ("Knapp"), J. MICHAEL
RAMSEY ("Ramsey, together with Knapp, the "Stockholders"), CALIPER TECHNOLOGIES
CORP., a Delaware corporation ("Purchaser"), and solely for purposes of Section
4 of the STOCK OPTION AGREEMENT (defined below) AVALON MEDICAL PARTNERS, a
California general partnership ("Avalon"). Capitalized terms used herein and not
otherwise defined shall have the meaning assigned to such terms in the Stock
Option Agreement (defined below).

WHEREAS, Knapp and Purchaser have entered into a letter agreement executed
on August 9, 1995 (the "Stock Option Agreement"), pursuant to which Knapp
granted to Purchaser an Option to purchase all of the outstanding capital stock
of Caliper MicroAnalytic Systems, Inc., a Maryland corporation ("Caliper"); and

WHEREAS, since the date of the Stock Option Agreement, Ramsey has purchased
100 shares of the capital stock of Caliper pursuant to a certain stock
restriction agreement by and between Ramsey and Caliper; and

WHEREAS, the parties hereto desire to amend the Stock Option Agreement to
reflect that Ramsey is a current stockholder of Caliper and to make Ramsey and
Avalon a party thereto.

NOW THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:

1. The introductory paragraph of the Stock Option Agreement is hereby
deleted and replaced in its entirety with the following:

"This letter sets forth the terms pursuant to which Caliper
Technologies Corp., a Delaware corporation ("Purchaser"), shall have the
right to purchase from Michael R. Knapp ("Knapp") and J. Michael Ramsey
("Ramsey", together with Knapp, the "Stockholders") all of the outstanding
capital stock of Caliper MicroAnalytic Systems, Inc., a Maryland
corporation ("Caliper"). Avalon Medical Partners, a California general
partnership ("Avalon"), joins in this Agreement solely for the purposes of
Section 4 hereof."

2. Except as otherwise set forth herein, references in the Stock Option
Agreement to "Stockholder" shall hereinafter be changed to "Stockholders".
Whenever the context may require, any pronouns used shall include the
corresponding masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.

3. The first paragraph of Section 2 ("Exercise Price") of the Stock
Option Agreement is hereby deleted and replaced in its entirety with the
following:

"Upon exercise of the Option, and as consideration for purchase of the
Caliper Stock, Purchaser shall deliver to Stockholders, pro rata, an
aggregate of

<PAGE> 2

sixty thousand shares of Common Stock of Purchaser (the "Initial Exercise
Price"). Further, as additional consideration for the purchase of the
Caliper Stock following exercise of the Option, Purchase shall deliver to
Stockholders, pro rata, a Warrant to purchase additional shares of
Purchaser's Common Stock upon the achievement of each of the milestones set
forth below as follows:"

4. Section 4 ("Employment Following Option Exercise") of the Stock Option
Agreement is hereby deleted and replaced in its entirety with the following:

"4. EMPLOYMENT FOLLOWING OPTION EXERCISE. Upon exercise of the Option,
if applicable, Knapp will be offered employment with Purchaser on terms
substantially as outlined on Exhibit A attached hereto. In the event the
Option expires without being exercised or Purchaser notifies Stockholders
in writing that Purchaser does not intend to exercise the Option before the
end of the Option Period, Avalon will retain Knapp as a consultant pursuant
to Avalon's standard form of consulting agreement for 4-months at Knapp's
then current rate of pay, or such shorter period if Knapp gets another job
before the end of the 4-month period, and as a consultant, Knapp will
assist Avalon with other projects as Avalon may reasonably request."

5. Exhibit C of the Stock Option Agreement is hereby deleted and replaced
in its entirety with Exhibit C attached hereto.

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

7. Except as specifically modified and amended hereby, in all other
respects the Stock Option Agreement shall continue to be in full force and
effect.

<PAGE> 3

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

PURCHASER: CALIPER TECHNOLOGIES CORP.

By: /s/ LAWRENCE A. BOCK
--------------------------------------
Name: LAWRENCE A. BOCK
------------------------------------
Title: Chairman of the Board and
Acting Chief Executive Officer
-----------------------------------

STOCKHOLDERS: /s/ MICHAEL R. KNAPP
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MICHAEL R. KNAPP

/s/ J. MICHAEL RAMSEY
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J. MICHAEL RAMSEY

FOR PURPOSES OF SECTION 4: AVALON MEDICAL PARTNERS

By: /s/ LAWRENCE A. BOCK
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Name:
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Title:
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<PAGE> 1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated March 5, 1999, in
Amendment No. 1 to the Registration Statement (Form S-1) and related Prospectus
of Caliper Technologies Corp. for the registration of 4,140,000 shares of its
common stock.

/s/ ERNST & YOUNG LLP

Palo Alto, California

November 16, 1999