Amended Key Employee Agreement-knighton

January 23, 2004


James Knighton c/o Caliper Life Sciences, Inc.("Caliper") 605 Fairchild Dr. Mountain View, CA 94043-2234


Dear Jim:


Pursuant our agreement late last year to extend your employment with Caliper, this amended and restated agreement (the "Agreement") amends and restates the terms and conditions of the Separation Agreement dated July 2, 2003, by and between you and Caliper (the "Prior Agreement"). This Agreement shall be effective as of December 31, 2003. The Prior Agreement shall have no further force or effect as of December 31, 2003, except to the extent that certain obligations set forth therein were performed prior to the date of this Agreement.


1. SEPARATION. Subject to the terms and condition contained herein, your employment with the Company will continue full-time until December 31, 2003,(the "Initial Transition Period") and will continue on a part-time, three days a week basis, during the period (the "Second Transition Period", and together with the Initial Transition Period, the "Transition Period") from January 1, 2004 through March 31, 2004 (the "Separation Date"), at which time your employment with the Company will terminate. On the Separation Date, the Company will pay you all accrued salary and all accrued and unused vacation and flex time earned through the Separation Date, subject to standard payroll deductions and withholdings, except to the extent such payment for accrual of unused vacation and flex-time was previously made to you under the Prior Agreement.


2. TRANSITION PERIOD.


(A) DUTIES. Between now and the Separation Date (the "Transition Period"), you will work for the Company in a senior management role in the Mountain View facility. Specifically, you will serve as the Company's Chief Financial Officer, unless that position is otherwise filled before the Separation Date, in which event you will serve as Senior Executive. You will be expected to perform such tasks as the Company's Chief Executive Officer ("CEO"), or his designee, may request. During the Transition Period, you are expected to comply with the Company's policies, the terms of your Employee Proprietary Information and Inventions Agreement (which is attached hereto as Exhibit A), and the terms of this Agreement. Your employment during the Transition Period will be at will, meaning that either you or the Company may terminate your employment at any time, with or without cause, and with or without advance notice.


(B) COMPENSATION. During the Transition Period, the Company will continue to compensate you for your services based on your current full-time monthly base salary of $29,167 (or annual base salary of $350,004) provided that such compensation shall be pro-rated on a three-fifths basis during the Second Transition Period. These payments will be made on the Company's ordinary payroll dates, and will be subject to standard payroll deductions and withholdings. In addition, in consideration of


James Knighton Page 2


your agreement to remain employed by the Company through the Second Transition Period and as a retention bonus for remaining employed by the Company through the Second Transition Period, effective as of January 21, 2004, the Company shall grant to you (i) fourteen thousand (14,000) shares of restricted stock of the Company (the "Restricted Stock") and (ii) a stock option to purchase fourteen thousand (14,000) shares of the Company's common stock, with a per share exercise price equal to the fair market value of the Company's common stock based on the last sale price of the Company's common stock on January 20, 2004 (the "New Option"), in each case under the Company's 1999 Equity Incentive Plan and subject to the terms and conditions of the applicable plan documents, such Restricted Stock and such New Option to vest on March 31, 2004, provided that you (A) remain as an employee of the Company in good standing as of March 31, 2004 (unless terminated before such date by the Company without cause) and (B) sign a second Employment Termination Release attached hereto as Exhibit B (the "Second Release") on or after March 31, 2004, and allow the Second release to become effective.


(C) BENEFITS. During the Transition Period, you will be eligible to continue your current Company benefits subject to the terms and limitations of the applicable plans. You will not, however, be eligible for benefits under the Company's Change of Control, Sr. Mgmt. Severance/Equity Acceleration Plan.


(D) STOCK OPTIONS. During the Transition Period, your stock option(s) granted by the Company will continue to vest according to the terms of the applicable plan document(s) and stock option agreement(s).


(E) OTHER ACTIVITIES. During the Transition Period, you agree not to undertake or engage in any other employment, occupation or business enterprise, other than ones in which you are a passive investor, except that during the Second Transition Period you may engage in other business activities which do not interfere with your obligations under this Agreement. You may engage in civic and not-for-profit activities so long as such activities do not materially interfere with the performance of your duties hereunder.


(F) EMPLOYMENT AGREEMENT. During the Transition Period, the terms and conditions of your employment will be as described herein. Accordingly, the terms set forth in this Agreement shall supersede the terms and conditions set forth in your Key Employee Agreement with the Company dated July 1, 2002 (the "Employment Agreement").


(G) RETENTION BONUS. Provided you perform your Transition Period obligations through December 31, 2003 (except as otherwise provided herein for termination without Cause, for Good Reason, or Constructive Termination), execute the Employment Termination Release attached hereto as Exhibit B (the "Initial Release") on or after December 31, 2003, allow the Initial Release to become effective, and have not breached this Agreement or your Proprietary Information and Inventions Agreement, then the Company will pay you a retention bonus of $175,000, less standard payroll deductions and withholdings ("Retention Bonus"). The Retention Bonus will be paid in a lump sum within ten (10) days of the Initial Release's effective date. In addition, if you perform your Transition Period obligations through March 31, 2004 (except as otherwise provided herein for termination without Cause, for Good Reason, or Constructive Termination), execute Second Release on or after March 31, 2004, allow the Second Release to become effective, and have not breached this Agreement or your Proprietary Information and Inventions Agreement, then the Restricted Shares and New Option granted to you under Section 2(b) will become fully vested as of March 31, 2004.


James Knighton Page 3


(H) SEVERANCE BENEFITS. Provided you perform your Transition Period obligations through December 31, 2003 (except as otherwise provided herein for termination without Cause, for Good Reason, or Constructive Termination), execute the Initial Release on or after December 31, 2003, allow the Initial Release to become effective, and have not breached this Agreement or your Proprietary Information and Inventions Agreement, then the Company will provide you with the following severance benefits:


(I) SEVERANCE PAYMENT. In consideration for the time it may take you to find suitable employment, the Company will pay you, as Severance, the equivalent of twelve (12) months of your base salary ($350,004), subject to standard payroll deductions and withholdings. The Severance will be paid in a lump sum within ten (10) days of the Initial Release's effective date (as defined in the Release). Caliper will also provide you with, as Severance, an executive outplacement package through your choice of Valerie Fredrickson & Co. or TMS Consulting.


(II) ACCELERATED VESTING. The Company will accelerate the vesting of any stock options that you have received from the Company, with the exception of any stock options granted during the Transition Period (including the New Option and the Option described in Section 3(c) of this Agreement), such that all unvested shares will be immediately vested and exercisable as of December 31, 2003 ("Accelerated Vesting").


(I) TERMINATION DURING SECOND TRANSITION PERIOD.


(I) TERMINATION WITH CAUSE OR RESIGNATION. If, during the Second Transition Period, your employment with the Company is terminated with Cause, or you resign from your employment with the Company (unless for Good Reason or upon Constructive Termination after a Change in Control), then you will not be eligible for the accelerated vesting of the Restricted Shares and the New Option.


(II) DEFINITION OF CAUSE. "Cause" for termination shall mean: (1) conduct that constitutes willful gross neglect or willful gross misconduct in carrying out your duties, resulting, in either case, in material economic harm to the Company, unless you believed in good faith that such conduct was in, or not opposed to, the best interest of the Company; (2) any unjustified refusal to follow reasonable directives by the CEO or by the Board; or (3) conviction of a felony crime involving moral turpitude; provided, however, that the Board shall provide written notice of its intent to terminate you under (1) or (2) above and you shall have a 30-day period to correct your actions, if such actions can be corrected, and the termination of your employment for Cause shall require a majority vote by the Board in favor of the termination.


(III) TERMINATION WITHOUT CAUSE. If your employment with the Company is terminated without Cause during the Second Transition Period and provided that you sign the Second Release on or after the last day of your employment with the Company, and allow the Second Release to become effective, then you will be eligible to receive the accelerated vesting of the Restricted Shares and the New Option and Consultancy. You will not be eligible to receive any other severance benefits or other compensation, including the Change in Control Severance Benefits.


(IV) RESIGNATION AFTER CHANGE IN CONTROL. If following a Change in Control, you resign your employment with the Company upon a Constructive Termination, or for Good Reason, and provided that you sign the Second Release on or after the last day of your employment with


James Knighton Page 4


the Company, and allow that Second Release to become effective, then you will be eligible to receive the accelerated vesting of the Restricted Shares and the New Option and Consultancy except, however, that the Option shall not vest during the Consultancy or thereafter.


(1) DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement, Change in Control means the occurrence of any of the following:


A. a sale of substantially all of the assets of the Company;


B. a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation in which the Company's stockholders immediately before the merger or consolidation have, immediately after the merger or consolidation, more than fifty percent (50%) of the voting power of the surviving corporation);


C. 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 either not converted or by virtue of the merger are converted into other property, whether in the form of securities, cash or otherwise, in each case (in which the Company's stockholders immediately before the merger do not have, immediately after the merger more than fifty percent (50%) of the voting power of the Company); or


D. any transaction or series of related transactions in which in excess of fifty percent (50%) of the Company's voting power is transferred.


(2) DEFINITION OF CONSTRUCTIVE TERMINATION. "Constructive Termination" shall occur if you resign your employment with the Company following a Change in Control and within thirty (30) days after any of the following: (a) a material reduction in your duties, responsibilities or position; (b) a material reduction in your compensation or benefits, except for reductions in compensation and benefits that are concurrent with and consistent with reductions for all executives of the acquiring or surviving corporation; or (c) you do not maintain the exact position in the parent company including title and reporting structure. Constructive Termination is triggered by your effective resignation within thirty (30) days after the above change, and absent a termination by the Company with Cause.


(3) DEFINITION OF GOOD REASON. Your resignation of employment with the Company shall be for "Good Reason" if it occurs after a Change in Control, and takes effect within thirty (30) days after the occurrence of any one of the following events without your consent and in the absence of a termination with Cause: (a) a substantial reduction of your then existing annual base salary; (b) a substantial reduction in the package of benefits and incentives, taken as a whole, provided to you (although employee contributions may be raised to the extent of any cost increases imposed by third parties), except to the extent that such benefits and incentives of all other executive officers of the Company are similarly reduced; (c) any substantial diminution of your duties, responsibilities, authority, or reporting structure; or (d) you are required to relocate to a working location such distance that a relocation from current residence would be required.


3. CONSULTANCY. Provided you perform your Transition Period obligations through the Separation Date (except as otherwise provided herein), execute the Second Release on or after your last


James Knighton Page 5


day of employment with the Company, allow the Second Release to become effective, and have not breached this Agreement or your Proprietary Information and Inventions Agreement, then the Company agrees to retain you to provide consulting services under the terms specified below.


(A) CONSULTING PERIOD. The consulting relationship ("Consultancy") shall commence on the day following your last day of employment with the Company and continue for thirty-three (33) months thereafter, unless the Company terminates the Consultancy earlier due to your breach of obligations under this Agreement or your engagement in any activity that is competitive with the interests of the Company (the "Consulting Period").


(B) CONSULTING DUTIES. You agree to make yourself available during the Consulting Period, upon the Company's reasonable request, to provide consulting services in any area of your experience or expertise, for a minimum of ten (10) hours per month ("Consulting Duties"). You shall perform your Consulting Duties at the request and direction of the CEO, exercising the highest degree of professionalism and utilizing your expertise and creative talents.


(C) CONSULTING FEES. During the Consulting Period, the Company will pay you $400 per hour for your services. (These hourly amounts are the "Consulting Fees"). These payments will be made based on invoices submitted by you and approved by the CEO on terms of net 30. Additionally, provided that you have performed your Transition Period obligations through the Separation Date, the option granted to you upon the closing of the Company's acquisition of Zymark Corporation on July 14, 2003 to purchase 75,000 shares of the Company's common stock (the "Option"), will vest monthly in equal installments over eighteen (18) months starting January 1, 2004, and will be governed in all respects by the applicable stock option plan documents and stock option agreement. The Company will also pay the premiums necessary to continue your health care coverage through the Consulting Period if you timely elect COBRA continuation coverage; provided, however, that this payment obligation will cease if you become eligible for comparable benefits under another employer's medical benefit plan. You agree to notify the Company within three (3) days of such eligibility.


(D) TAXES AND WITHHOLDING. Because you will perform the Consulting Duties as an independent contractor, the Company will not withhold from the Consulting Fees any amount for taxes, social security or other payroll deductions. The Company will report your Consulting Fees on an IRS Form 1099. You acknowledge that you will be entirely resp ...