<PAGE>

                                                                   EXHIBIT 10.40


August 9, 2001


Calvin Y.H. Chow
c/o Caliper Technologies
605 Fairchild Drive
Mountain View, CA 94043-2234

Dear Calvin:

This letter sets forth the substance of the separation agreement (the
"Agreement") that Caliper Technologies (the "Company") is offering to you to aid
in your employment transition.

        1.     SEPARATION. Your last day as an employee of the Company will be
August 31, 2001 (the "Separation Date").

        2.     ACCRUED SALARY AND PAID TIME OFF. On the Separation Date, the
Company will pay you all accrued salary, and all accrued and unused flex leave
and vacation, earned through the Separation Date, subject to standard payroll
deductions and withholdings. You are entitled to these payments regardless of
whether or not you sign this Agreement.

        3.     CONSULTING AGREEMENT. The Company agrees to retain you, and you
agree to make yourself available and to perform, as a consultant under the terms
specified below. You acknowledge and agree that the Company is providing this
consulting arrangement in lieu of the severance benefits described in your
Employment Agreement with the Company dated August 18, 1995, and that this
consulting arrangement provides you with benefits greater than the severance
benefits set forth in your Employment Agreement.

               (a)    CONSULTING PERIOD. The Company will engage you as a
consultant commencing on the Separation Date and continuing through February 28,
2003 ("Consulting Period").

               (b)    CONSULTING SERVICES. During the Consulting Period, you
will make yourself available, by telephone or in person, with reasonable notice
on a mutually agreeable basis to provide consulting services to the Company as
requested by the Company. You agree to exercise the highest degree of
professionalism and utilize your expertise and creative talents in performing
these services. You agree not to represent or purport to represent the Company
in any manner whatsoever to any third party during the Consulting Period unless
authorized by the Company in writing to do so.

               (c)    CONSULTING FEES. During the Consulting Period, the Company
agrees to pay you consulting fees in the amount of $23,175 per month
("Consulting Fees"). As a

<PAGE>

Calvin Chow
Page 2


consultant, the Company will not withhold from the Consulting Fees any amount
for taxes (including income and employment taxes) or other payroll deductions.
The Company will issue you an IRS 1099 Form with respect to your Consulting
Fees. You acknowledge that you will be entirely responsible for payment of any
taxes which may be due with regard to the Consulting Fees, and you hereby
indemnify and save harmless the Company from any liability for any taxes,
penalties or interest that may be assessed by any taxing authority with respect
to the Consulting Fees, with the exception of the employer's share of social
security, if any. The Company will reimburse you for documented business
expenses incurred during the Consulting Period, provided that these expenses
have been pre-approved by the Company in writing.

               (d)    OTHER WORK ACTIVITIES. During the Consulting Period, you
may engage in employment, consulting or other work relationships in addition to
your work for the Company EXCEPT work activity of any type that is directly
competitive with the Company or in the area of microfluidic technology. If you
engage in such competitive activity without the Company's express written
consent, the Company's obligations to pay you Consulting Fees throughout the
Consulting Period, to pay your health insurance premiums under Section 5, and to
accelerate the vesting of your stock options under Section 4 will cease
immediately and the Consulting Period will end immediately.

        4.     STOCK OPTIONS. As provided in your stock option agreements and
the applicable stock option plan documents, your Company stock options
("Options") will continue to vest during the first twelve months of the
Consulting Period. These Options will continue to be governed in all respects by
the applicable stock option agreements between you and the Company and the
applicable stock option plan documents. At the end of the twelfth month of the
Consulting Period (i.e., through August 31, 2002) and provided that you satisfy
the terms of this Agreement (including but not limited to the restrictions on
competitive employment set forth in Section 3(d) above), the Company will
accelerate the vesting of the then unvested portion of your Options such that
all of the unvested shares subject to your Options shall vest and become
immediately exercisable at that time.

        5.     HEALTH INSURANCE. As provided by the federal COBRA law and by the
Company's current group health insurance policies, you will be eligible to
continue your health insurance benefits at your own expense. Later, you may be
able to convert to an individual policy through the provider of the Company's
health insurance, if you wish. You will be provided with a separate notice of
your COBRA rights. If you elect continued coverage under COBRA, as part of this
Agreement, the Company will pay the COBRA premiums necessary to continue your
current coverage through the Consulting Period.

        6.     OTHER COMPENSATION OR BENEFITS. You acknowledge that, except as
expressly provided in this Agreement, you will not receive any additional
compensation, severance or benefits after the Separation Date.

        7.     EXPENSE REIMBURSEMENTS. You agree that, within ten (10) days of
the Separation Date, you will submit your final documented expense reimbursement
statement reflecting all business expenses you incurred through the Separation
Date, if any, for which you

<PAGE>

Calvin Chow
Page 3


seek reimbursement. The Company will reimburse you for these expenses pursuant
to its regular business practice.

        8.     RETURN OF COMPANY PROPERTY. You agree that, by the Separation
Date, you will return to the Company all Company documents (and all copies
thereof) and other Company property in your possession or control, including,
but not limited to, Company files, notes, notebooks, drawings, records, plans,
forecasts, reports, proposals, studies, financial information, sales and
marketing information, research and development information, personnel
information, specifications, computer-recorded information, tangible property
and equipment, credit cards, entry cards, identification badges and keys; and,
any materials of any kind which contain or embody any proprietary or
confidential information of the Company (and all reproductions thereof in whole
or in part).

        9.     PROPRIETARY INFORMATION OBLIGATIONS. You acknowledge your
continuing obligations under your Proprietary Information and Inventions
Agreement, a copy of which is attached hereto as Exhibit A. You further agree to
maintain in confidence and not to use or disclose any confidential or
proprietary information or materials of the Company that you may obtain or
develop during the Consulting Period, except as expressly authorized by the
Company, and you hereby assign and transfer to the Company your entire right,
title, and interest in and to all inventions, including, but not limited to,
ideas, improvements, designs, and discoveries, whether or not patentable or
reduced to practice, that you make or conceive in the course of performing
consulting services for the Company hereunder.

        10.    CONFIDENTIALITY. The provisions of this Agreement shall be held
in strictest confidence by you and the Company and shall not be publicized or
disclosed in any manner whatsoever; provided, however, that: (a) you may
disclose this Agreement to your immediate family; (b) the parties may disclose
this Agreement in confidence to their respective attorneys, accountants,
auditors, tax preparers, and financial advisors; (c) the Company may disclose
this Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as
otherwise required by law. By way of example and without limitation, you agree
not to disclose the terms of this Agreement to any current or former Company
employee.

        11.    NONDISPARAGEMENT. Both you and the Company's officers and
directors agree not to disparage the other party, and the other party's
officers, directors, employees, shareholders and agents, in any manner likely to
be harmful to them or their business, business reputation or personal
reputation; provided that both you and the Company shall respond accurately and
fully to any question, inquiry or request for information when required by legal
process.

        12.    NONSOLICITATION. You agree that during the Consulting Period and
for one (1) year following the end of the Consulting Period, you will not
directly or indirectly solicit, entice, induce or encourage any employee of the
Company or independent contractor dedicated full-time to the work of the Company
to become an employee or independent contractor to or for any other person or
entity.

<PAGE>

Calvin Chow
Page 4


        13.    RELEASE BY YOU. In exchange for the consulting agreement, COBRA
payments and other consideration under this Agreement to which you would not
otherwise be entitled, you hereby release, acquit and forever discharge the
Company, its parents and subsidiaries, and their officers, directors, agents,
servants, employees, attorneys, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising out of or in any
way related to agreements, events, acts or conduct at any time prior to and
including the date this Agreement is executed, including, but not limited to:
all such claims and demands directly or indirectly arising out of or in any way
connected with your employment with the Company or the termination of that
employment; claims or demands related to salary, bonuses, commissions, stock,
stock options, or any other ownership interests in the Company, vacation pay,
fringe benefits, expense reimbursements, severance pay, severance benefits, or
any other form of compensation; claims pursuant to any federal, state or local
law, statute, or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Americans with Disabilities
Act of 1990; the federal Age Discrimination in Employment Act of 1967, as
amended ("ADEA"); the California Fair Employment and Housing Act, as amended;
tort law; contract law; wrongful discharge; discrimination; harassment; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing.

        14.    RELEASE OF ADEA CLAIMS. You acknowledge that you are knowingly
and voluntarily waiving and releasing any rights you may have under the ADEA and
acknowledge that the consideration given for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which you were
already entitled. You further acknowledge that you have been advised by this
writing, as required by the ADEA, that: (a) your waiver and release do not apply
to any rights or claims that may arise after the execution date of this
Agreement; (b) you should consult with an attorney prior to executing this
Agreement (although you may choose not to do so); (c) you have twenty-one (21)
days to consider this Agreement (although you may voluntarily execute this
Agreement earlier); (d) you have seven (7) days following the execution of this
Agreement by the parties to revoke the Agreement; and (e) this Agreement shall
not be effective until the date upon which the revocation period has expired,
which shall be the eighth day after this Agreement is executed by you (the
"Effective Date").

        15.    RELEASE BY THE COMPANY. The Company hereby releases, acquits and
forever discharges you and your agents, successors, assigns, attorneys and
affiliates from any and all claims, liabilities, demands, causes of action,
costs, expenses, attorneys' fees, damages, indemnities and obligations of any
kind and nature, in law, equity or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising out of or in any way related to
agreements, events, acts or conduct at any time within the authorized course and
scope of your employment with the Company.

        16.    RELEASE OF UNKNOWN CLAIMS. The parties acknowledge that they have
read and understood Section 1542 of the California Civil Code, which states:

<PAGE>

Calvin Chow
Page 5


        "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
        KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
        RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
        SETTLEMENT WITH THE DEBTOR."

        The parties hereby expressly waive and relinquish all rights and
benefits under that section and any law in any jurisdiction of similar effect
with respect to their releases of any unknown or unsuspected claims.

        17.    MISCELLANEOUS. This Agreement, including Exhibit A, constitutes
the complete, final and exclusive embodiment of the entire agreement between you
and the Company with regard to this subject matter. It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties or representations. By way of example, this Agreement supersedes the
severance provisions contained in your August 18, 1995 Employment Agreement with
the Company, and this Agreement extinguishes the Company's obligation to provide
you with any severance under your Employment Agreement. This Agreement may not
be modified or amended except in a writing signed by both you and a duly
authorized officer of the Company. This Agreement shall bind the heirs, personal
representatives, successors and assigns of both you and the Company, and inure
to the benefit of both you and the Company, their heirs, successors and assigns.
If any provision of this Agreement is determined to be invalid or unenforceable,
in whole or in part, this determination will not affect any other provision of
this Agreement and the provision in question shall be modified by the court so
as to be rendered enforceable in a manner which is consistent with the intent of
the parties insofar as possible. This Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with the laws of
the State of California as applied to contracts made and to be performed
entirely within California.

If this Agreement is acceptable to you, please sign below and return the
original to me.

We wish you all the best in your future endeavors.

Sincerely,

CALIPER TECHNOLOGIES CORP.


By:  /s/ Daniel L. Kisner
   --------------------------------
         Dr. Daniel Kisner


Exhibit A - Proprietary Information and Inventions Agreement

UNDERSTOOD AND AGREED:

  /s/ Calvin Chow
-----------------------------------
Calvin Chow

<PAGE>


                                    EXHIBIT A

                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT






                                       6.


<PAGE>

                           CALIPER TECHNOLOGIES CORP.

                        EMPLOYEE PROPRIETARY INFORMATION
                            AND INVENTIONS AGREEMENT


        In consideration of my employment or continued employment by CALIPER
TECHNOLOGIES CORP. (the "COMPANY"), and the compensation now and hereafter paid
to me, I hereby agree as follows:

I.      NONDISCLOSURE

        1.1    RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times
during my employment and thereafter, I will hold in strictest confidence and
will not disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

        1.2    PROPRIETARY INFORMATION. The term "PROPRIETARY INFORMATION" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "PROPRIETARY
INFORMATION" includes (a) trade secrets, inventions, ideas, processes, formulas,
products, formulations, developmental or experimental work, publications,
clinical data, test data, methods, samples, media and/or call lines, other works
of authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "INVENTIONS"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.

        1.3    THIRD PARTY INFORMATION. I understand, in addition, that the
Company has received and in the future will receive from third parties
confidential or proprietary information ("THIRD PARTY INFORMATION") subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than Company personnel who
need to know such information in connection with their work for the Company) or
use, except in connection with my work for the Company, Third Party Information
unless expressly authorized by an officer of the Company in writing.

        1.4    NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS.
During my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by that former
employer or person. I will use in the performance of my duties only information
which is generally known and used by persons with training and experience
comparable to my own, which is common knowledge in the industry or otherwise
legally in the public domain, or which is otherwise provided or developed by the
Company.

2.      ASSIGNMENT OF INVENTIONS.

        2.1    PROPRIETARY RIGHTS. The term "PROPRIETARY RIGHTS" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

        2.2    PRIOR INVENTIONS. Inventions, if any, patented or unpatented,
which I made prior to the commencement of my employment with the Company are
excluded from the scope of this Agreement. To preclude any possible uncertainty,
I have set forth on Exhibit B (Previous Inventions) attached hereto a complete
list of all Inventions that I have, alone or jointly with others, conceived,
developed or reduced to practice or caused to be conceived, developed or reduced
to practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"PRIOR INVENTIONS"). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Exhibit B but am only to disclose a cursory name for
each such invention, a


                                       1
<PAGE>

listing of the party(ies) to whom it belongs and the fact that full disclosure
as to such inventions has not been made for that reason. A space is provided on
Exhibit B for such purpose. If no such disclosure is attached, I represent that
there are no Prior Inventions. If, in the course of my employment with the
Company, I incorporate a Prior Invention into a Company product, process or
machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.

        2.3    ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I
hereby assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "COMPANY INVENTIONS."

        2.4    NONASSIGNABLE INVENTIONS. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter "SECTION 2870"). I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

        2.5    OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

        2.6    GOVERNMENT OR THIRD PARTY. I also agree to assign all my right,
title and interest in and to any particular Invention to a third party,
including without limitation the United States, as directed by the Company.

        2.7    WORKS FOR HIRE. I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are "works made for
hire," pursuant to United States Copyright Act (17 U.S.C., Section 101).

        2.8    ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Company Inventions in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to such Company Inventions in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.

        In the event the Company is unable for any reason, after reasonable
effort, to secure my signature on any document needed in connection with the
actions specified in the preceding paragraph, I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest, to act for and
in my behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.

3.      RECORDS. I agree to keep and maintain adequate and current records (in
the form of notes, sketches, drawings and in any other form that may be required
by the Company)


                                       2
<PAGE>

of all Proprietary Information developed by me and all Inventions made by me
during the period of my employment at the Company, which records shall be
available to and remain the sole property of the Company at all times.

4.      ADDITIONAL ACTIVITIES. I agree that during the period of my employment
by the Company I will not, without the Company's express written consent, engage
in any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment by the Company I will not induce any employee of
the Company to leave the employ of the Company.

5.      NO CONFLICTING OBLIGATION. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.

6.      RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company Inventions,
Third Party Information or Proprietary Information of the Company. I further
agree that any property situated on the Company's premises and owned by the
Company, including disks and other storage media, filing cabinets or other work
areas, is subject to inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's termination statement.

7.      LEGAL AND EQUITABLE REMEDIES. Because my services are personal and
unique and because I may have access to and become acquainted with the
Proprietary Information of the Company, the Company shall have the right to
enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to any
other rights and remedies that the Company may have for a breach of this
Agreement.

8.      NOTICES. Any notices required or permitted hereunder shall be given to
the appropriate party at the address specified below or at such other address as
the party shall specify in writing. Such notice shall be deemed given upon
personal delivery to the appropriate address or if sent by certified or
registered mail, three (3) days after the date of mailing.

9.      NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of
the Company, I hereby consent to the notification of my new employer of my
rights and obligations under this Agreement.

10.     GENERAL PROVISIONS.

        10.1   GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement
will be governed by and construed according to the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in San Diego County, California for any lawsuit filed there against me
by Company arising from or related to this Agreement.

        10.2   SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.

        10.3   SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.

        10.4   SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

        10.5   EMPLOYMENT. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.

        10.6   WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be


                                       3
<PAGE>

required to give notice to enforce strict adherence to all terms of this
Agreement.

        10.7   ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the parties
with respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.

        This Agreement shall be effective as of the first day of my employment
with the Company, namely: Sept. 15, 1995.

        I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.


Dated:  Sept. 15, 1995
      -----------------------------

 /s/ Calvin Y.H. Chow
-----------------------------------
SIGNATURE

Calvin Y.H. Chow
-----------------------------------
(PRINTED NAME)


ACCEPTED AND AGREED TO:

CALIPER TECHNOLOGIES CORP.


By:  /s/ Lawrence A. Bock
   --------------------------------
         Lawrence A. Bock

Title: President
      -----------------------------

3180 Porter Drive
-----------------------------------
(Address)

Palo Alto, CA 94304
-----------------------------------



                                       4
<PAGE>

                                    EXHIBIT A

                         LIMITED EXCLUSION NOTIFICATION


        THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:

        (1)    Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;

        (2)    Result from any work performed by you for the Company.

        To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

        This limited exclusion does not apply to any patent or invention covered
by a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

        I ACKNOWLEDGE RECEIPT of a copy of this notification.

                            By: /s/ Calvin Y.H. Chow
                                ------------------------------------------------
                                    Calvin Y. H. Chow (Printed Name of Employee)

                            Date: Sept. 15, 1995
                                  ----------------------------------------------


WITNESSED BY:


/s/ Lawrence A. Bock
-------------------------------------------------
(Printed Name of Representative) Lawrence A. Bock

Dated: Sept. 15, 1995
      -------------------------------------------



                                      A-1.
<PAGE>

                                    EXHIBIT B


     TO:  CALIPER TECHNOLOGIES CORP.

   FROM:  CALVIN CHOW
          ------------------------------

   DATE:  9-15-95
          ------------------------------

SUBJECT:  PREVIOUS INVENTIONS

        1.     Except as listed in Section 2 below, the following is a complete
list of all inventions or improvements relevant to the subject matter of my
employment by Caliper Technologies Corp. (the "COMPANY") that have been made or
conceived or first reduced to practice by me alone or jointly with others prior
to my engagement by the Company:

        [X]    No inventions or improvements.
                (carat) major relevant

        [ ]    See below:


[ ]  Additional sheets attached.


        2.     Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies):

    INVENTION OR IMPROVEMENT          PARTY(IES)                RELATIONSHIP

1.  ____________________________      ____________________      _________

2.  ____________________________      ____________________      _________

3.  ____________________________      ____________________      _________


[ ]  Additional sheets attached.



                                      B-1.