Caramel Granola Bites

7 oz. caramel candies
1/4 c. (1/2 stick) butter
1/4 c. water
1 (16 oz.) pkg. granola cereal
1 (11 1/2 oz.) pkg. (2 c.) Nestles Toll House milk chocolate morsels

Line 9-inch square pan with foil. In a large heavy gauge saucepan, combine caramels, butter and water. Stir over low heat until caramels are melted and mixture is smooth. Remove from heat. Stir in cereal and milk, chocolate morsels until well mixed. Press into prepared pan. Refrigerate until firm, about 1 hour. Cut into 1-inch squares. Makes about 80 squares.