Exhibit 10.26

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated January 24, 2003, is made by
and between NANOGEN, INC., a Delaware corporation (hereinafter the “Company”),
and DAVID L. MACDONALD, (hereinafter “Executive”).

 

WHEREAS, the Company and Executive wish to set forth in this Agreement the terms
and conditions under which Executive will be employed by the Company; and

 

WHEREAS, the Company wishes to be assured that Executive will be available to
the Company for an additional three (3) years after January 24, 2003.

 

NOW, THEREFORE, the Company and Executive, in consideration of the mutual
promises set forth herein, agree as follows:

 

ARTICLE I.

 

TERM OF AGREEMENT

 

A.            Commencement Date.  The terms of this Agreement shall govern
Executive’s employment with the Company from January 24, 2003 (“Commencement
Date”) and this Agreement shall expire after a period of three (3) years from
the Commencement Date, unless terminated earlier pursuant to Article 6.

 

B.            Renewal.  The term of this Agreement shall be automatically
renewed for successive, additional three (3) year terms unless either party
delivers written notice to the other at least ninety (90) days prior to the
expiration date of this Agreement of an intention to terminate this Agreement or
to renew it for a term of less than three (3) years but not less than (1) year. 
If the term of this Agreement is renewed for a term of less than three (3)
years, then thereafter the term of this Agreement shall be automatically renewed
for successive, additional identical terms unless either party delivers a
written notice to the other at least ninety (90) days prior to a termination
date of this Agreement of an intention to terminate this Agreement or to renew
it for a different term of not less than one (1) year.  Any renewal bonus will
be negotiated as mutually agreed to at the time of any renewal of this
Agreement.

 

If this Agreement is not renewed at the end of any term hereof by the Company
for any reason except death, disability or retirement of Executive,
notwithstanding anything herein elsewhere contained, Executive shall be paid his
salary, as provided for in Section 3.A hereof, and receive the other benefits
applicable under Article 4 hereof, for an additional six (6) months after the
termination date hereof.

 

ARTICLE II.

 

EMPLOYMENT DUTIES

 

A.            Title/Responsibilities.  Executive hereby accepts employment with
the Company pursuant to the terms and conditions hereof.  Executive agrees to
serve the Company in the position of Senior Vice President of Operations. 
Executive shall have the powers and duties commensurate with such position,
including but not limited to, hiring personnel necessary (in the judgment of the
Board of Directors) to carry out the responsibilities for such position.

 

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B.            Full Time Attention.  Executive shall devote his best efforts and
his full business time and attention to the performance of the services
customarily incident to such office and to such other services as the Board may
reasonably request.

 

C.            Other Activities.  Except upon the prior written consent of the
Board of Directors, Executive shall not during the period of employment engage,
directly or indirectly, in any other business activity (whether or not pursued
for pecuniary advantage) that is or may be competitive with, or that might place
him in a competing position to that of the Company or any other corporation or
entity that directly or indirectly controls, is controlled by, or is under
common control with the Company (an “Affiliated Company”), provided that
Executive may own less than two percent of the outstanding securities of any
such publicly traded competing corporation.

 

ARTICLE III.

 

COMPENSATION

 

A.            Base Salary.  Executive shall receive a Base Salary at an annual
rate of two hundred twenty thousand dollars ($220,000), payable in accordance
with the Company’s customary payroll practices.  The Company’s Board of
Directors shall provide Executive with annual performance reviews, and,
thereafter, Executive shall be entitled to such Base Salary as the Board of
Directors may from time to time establish in its sole discretion.

 

B.            Achievement Bonus.  The Company shall pay Executive an Achievement
Bonus of up to 50% of Executive’s Base Salary annually based upon achievement by
the Company of its corporate goals as established and determined by the Board of
Directors annually and for other achievements by the Company or the Executive
during the year as approved by the Compensation Committee.  The Board of
Directors or Compensation Committee, as applicable, shall, in their respective
sole discretion, determine whether such corporate or other goals have been
attained or other achievements have occurred.

 

C.            Transaction Bonus.  In addition, in the event of a transaction
involving a Change in Control, in a transaction approved by the Company’s Board
of Directors, which transaction results in the receipt by the Company’s
stockholders of consideration with a value representing, in the sole judgment of
the Board of Directors, a significant premium over the average of the closing
prices per share of the Company’s common stock as quoted on the Nasdaq National
Market for 20 trading days ending one day prior to the public announcement of
such transaction (a “Change in Control Transaction”), Executive shall be paid a
Transaction Bonus at the closing of such a transaction in the amount equal to
one (1) times 50% of Executive’s Base Salary in effect immediately preceding the
closing of such a transaction.  Executive shall also be paid said Transaction
Bonus if the Company enters into a transaction approved by the Board of
Directors which is not a Change in Control Transaction, but which, nonetheless,
involves a significant change in the ownership of the Company or the composition
of the Board of Directors of the Company, and which results in significant
additional value for the Company’s stockholders, as determined by the Board of
Directors in its sole discretion and as specifically designated a significant
event by the Board of Directors (a “Significant Event”).  In the event Executive
receives a Transaction Bonus, no Achievement Bonus will be paid to Executive in
the year in which such Transaction Bonus is paid.

 

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If the Company enters into a transaction which is a Change in Control
Transaction, then all of the Executive’s stock options received before the date
of the transaction shall become exercisable in full and all of the shares of the
common stock of the Company awarded to Executive under the Company’s 1997 Stock
Incentive Plan (or any subsequent plan) become fully vested.  If the Company
enters into a transaction which is not a Change in Control Transaction but which
is a Significant Event, then the Board of Directors may, in its sole discretion,
determine that all, or a portion, of the Executive’s stock options received
before the effective date of the transaction shall become exercisable in full
and all, or a portion, of the shares of the common stock of the Company awarded
to Executive under the Company’s 1997 Stock Incentive Plan ( or any subsequent
plan) shall become fully vested.

 

D.            Withholdings.  All compensation and benefits to Executive
hereunder shall be subject to all federal, state, local and other withholdings
and similar taxes and payments required by applicable law.

 

ARTICLE IV.

 

EXPENSE ALLOWANCES AND FRINGE BENEFITS

 

A.            Vacation.  Executive shall be entitled to three (3) weeks, plus
one (1) additional day for each completed year of employment with the Company,
of annual paid vacation during the term of this Agreement.

 

B.            Benefits.  During the term of this Agreement, the Company shall
also provide Executive with the usual health insurance benefits and life
insurance it generally provides to its other senior management employees.  As
Executive becomes eligible in accordance with criteria to be adopted by the
Company, the Company shall provide Executive with the right to participate in
and to receive benefits from accident, disability, medical, pension, bonus,
stock, profit-sharing and savings plans and similar benefits made available
generally to employees of the Company as such plans and benefits may be adopted
by the Company, provided that Executive shall during the term of this Agreement
be entitled to receive at a minimum standard medical and dental benefits similar
to those typically afforded to a Senior Vice President of Operations in similar
sized biotech­nology companies.  The amount and extent of benefits to which
Executive is entitled shall be governed by the specific benefit plan as it may
be amended from time to time.

 

C.            Business Expense Reimbursement.  During the term of this
Agreement, Executive shall be entitled to receive proper reimbursement for all
reasonable out-of-pocket expenses incurred by him (in accordance with the
policies and procedures established by the Company for its senior executive
officers) in performing services hereunder, provided Executive properly accounts
therefor.

 

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ARTICLE V.

 

CONFIDENTIALITY

 

A.            Proprietary Information.  Executive represents and warrants that
he has executed and delivered to the Company the Company’s standard Proprietary
Information, Inventions and Dispute Resolution Agreement in form acceptable to
the Company’s counsel.

 

B.            Return of Property.  All documents, records, apparatus, equipment
and other physical property which is furnished to or obtained by Executive in
the course of his employment with the Company shall be and remain the sole
property of the Company.  Executive agrees that, upon the termination of his
employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information, Inventions
and Dispute Resolution Agreement), and agrees not to make or retain copies,
reproductions or summaries of any such property.

 

ARTICLE VI.

 

TERMINATION

 

A.            By Death.  The period of employment shall terminate automatically
upon the death of Executive.  In such event, the Company shall pay to
Executive’s beneficiaries or his estate, as the case may be, any accrued Base
Salary, any bonus compensation to the extent earned, any vested deferred
compensation (other than pension plan or profit-sharing plan benefits which will
be paid in accordance with the applicable plan), any benefits under any plans of
the Company in which Executive is a participant to the full extent of
Executive’s rights under such plans, any accrued vacation pay and any
appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination (collectively “Accrued
Compensation”), but no other compensation or reimbursement of any kind,
including, without limitation, severance compensation, and thereafter, the
Company’s obligations hereunder shall terminate.

 

B.            By Disability.  If Executive is prevented from properly performing
his duties hereunder by reason of any physical or mental incapacity for a period
of more than 90 days in the aggregate in any 365-day period, then, to the extent
permitted by law, the Company may terminate the employment on the 90th day of
such incapacity.  In such event, the Company shall pay to Executive all Accrued
Compensation, and shall continue to pay to Executive the Base Salary until such
time (but not more than 90 days following termination), as Executive shall
become entitled to receive disability insurance payments under the disability
insurance policy maintained by the Company, which disability policy shall
provide for full payment of Executive’s Base Salary during the period of
disability, but no other compensation or reimbursement of any kind, including
without limitation, severance compensation, and thereafter the Company’s
obligations hereunder shall terminate.  Nothing in this Section shall affect
Executive’s rights under any disability plan in which he is a participant.

 

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C.            By Company for Cause.  The Company may terminate Executive’s
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive.  The Company shall pay Executive all
Accrued Compensation, but no other compen­sation or reimbursement of any kind,
including without limitation, severance compensation, and thereafter the
Company’s obligations hereunder shall terminate.  Termination shall be for
“Cause” in the event of the occurrence of any of the following:  (a) any
intentional action or intentional failure to act by Executive which was
performed in bad faith and to the material detriment of the Company;
(b) Executive intentionally refuses or intentionally fails to act in accordance
with any lawful and proper direction or order of the Board; (c) gross negligence
by Executive in carrying out the duties of employment; or (d) Executive is
convicted of a felony crime involving moral turpitude, provided that in the
event that any of the foregoing events is capable of being cured, the Company
shall provide written notice to Executive describing the nature of such event
and Executive shall thereafter have five (5) business days to cure such event.

 

D.            At Will.  At any time, the Company may terminate Executive’s
employment without liability other than as set forth below, for any reason not
specified in Section 6.C above, by giving thirty (30) days advance written
notice to Executive.  If the Company elects to terminate Executive pursuant to
this Section 6.D prior to a Change in Control, the Company shall pay to
Executive all Accrued Compensation and shall continue to pay to Executive as
provided herein Executive’s Salary for six (6) months from the date of such
termination as severance compensation.  If the Company or its successor elects
to terminate Executive pursuant to this Section after a Change in Control, the
Company (or its successor) shall continue to pay to Executive as provided herein
Executive’s Salary for six (6) months from the date of such termination as
severance compensation. Upon payment of the severance benefits described herein,
all obligations of the Company (or its successor) shall terminate.

 

During the period when such severance compensation is being paid to Executive,
Executive shall not (i) engage, directly or indirectly, in any other business
activity that is competitive with, or that places him in a competing position to
that of the Company or any Affiliated Company (provided that Executive may own
less than two percent (2%) of the outstanding securities of any publicly traded
corporation), or (ii) hire, solicit, or attempt to hire on behalf of himself or
any other party any employee or exclusive consultant of the Company.  If the
Company terminates this Agreement or the employment of Executive with the
Company other than pursuant to Section 6.A, 6.B or 6.C, then this Section 6.D
shall apply.

 

E.             Constructive Termination.  In the event that the Company shall
materially reduce the powers and duties of employment of Executive resulting in
a material decrease in the responsibilities of Executive which are inconsistent
with Executive acting as a Senior Vice President of Operations of the Company,
such action shall be deemed to be a termination of employment of Executive
without cause pursuant to Section 6.D.  In the event of a Change in Control of
the Company in which the Company shall become a division or subsidiary of a
larger organization, references to the Senior Vice President of Operations of
the Company shall be deemed to mean the Senior Vice President of Operations of
such division or subsidiary for purposes of this Section 6.E.

 

F.             Change in Control.  For purposes of this Agreement, a “Change in
Control” shall have occurred if at any time during the term of Executive’s
employment hereunder, any of the following events shall occur:

 

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1.             The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if more than 50%
of the combined voting power of the continuing or surviving entity’s securities
outstanding immediately after such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the Company immediately prior
to such merger, consolidation or other reorganization;

 

2.             A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either (1) had
been directors of the Company 24 months prior to such change; or (2) were
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the directors who had been directors of the Company 24
months prior to such change and who were still in office at the time of the
election or nomination; or

 

3.             Any “person” (as such term is used in Section 13(d) and Section
14 of the Exchange Act) by the acquisition of securities is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the “Base
Capital Stock”) except that any change in the relative beneficial ownership of
the Company’s securities resulting solely from a reduction in the aggregate
number of outstanding shares of Base Capital Stock , and any decrease thereafter
in such person’s ownership of securities shall be disregarded until such person
increases in any manner, directly or indirectly, such person’s beneficial
ownership of any securities of the Company. Thus, for example, any person who
owns less than 50% of the Company’s outstanding shares, shall cause a Change in
Control to occur as of any subsequent date if such person then acquires an
additional interest in the Company which, when added to the person’s previous
holdings, causes the person to hold more than 50% of the Company’s outstanding
shares.

 

The term “Change in Control” shall not include a transaction, the sole purpose
of which is to change the state of the Company’s incorporation.

 

ARTICLE VII.

 

GENERAL PROVISIONS

 

A.            Governing Law.  The validity, interpretation, construc­tion and
performance of this Agreement and the rights of the parties thereunder shall be
interpreted and enforced under California law without reference to principles of
conflicts of laws.  The parties expressly agree that inasmuch as the Company’s
headquarters and principal place of business are located in California, it is
appropriate that California law govern this Agreement.

 

B.            Assignment; Successors; Binding Agreement.

 

1.  Executive may not assign, pledge or encumber his interest in this Agreement
or any part thereof.

 

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2.  The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, operation of law or by agreement in form
and substance reasonably satisfactory to Executive, to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.

 

3.  This Agreement shall inure to the benefit of and be enforceable by
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.  If Executive should die
while any amount is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive’s devisee, legates or other designee or, if there be
no such designee, to his estate.

 

C.            No Waiver of Breach.  The waiver by any party of the breach of any
provision of this Agreement shall not be deemed to be a waiver of any subsequent
breach.

 

D.            Notice.  For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.

 

To the Company:

 

Nanogen, Inc.

 

 

10398 Pacific Center Court

 

 

San Diego, CA 92121

 

 

Attn:  Chief Executive Officer

 

 

 

To Executive:

 

David L. Macdonald

 

 

c/o Nanogen, Inc.

 

 

10398 Pacific Center Court

 

 

San Diego, CA 92121

 

E.             Modification; Waiver; Entire Agreement.  No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Executive and such officer as may
be specifically designated by the Board of the Company.  No waiver by either
party hereto at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or any prior or subsequent time.  No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.

 

F.             Validity.  The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

 

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G.            Controlling Document.  This Agreement supersedes any and all prior
employment agreements or consulting agreements between the Company and
Executive, but does not supersede any other agreements between Company and
Executive, including but not limited to, the Nanogen Inc. Restricted Stock
Purchase Agreement, any stock option agreements or common stock purchase
agreements entered into pursuant to the Company’s 1997 Stock Incentive Plan, and
the Nanogen Employees’ Handbook and Policies, except as expressly provided
herein.  In case of conflict between any of the terms and conditions of this
Agreement and the documents herein referred to, the terms and conditions of this
Agreement shall control.

 

H.            Executive Acknowledgment.  Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement, and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.

 

I.              Remedies.

 

1.             Injunctive Relief.  The parties agree that the services to be
rendered by Executive hereunder are of a unique nature and that in the event of
any breach or threatened breach of any of the covenants contained herein, the
damage or imminent damage to the value and the goodwill of the Company’s
business will be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate.  Accordingly, the parties agree that the
Company shall be entitled to injunctive relief against Executive in the event of
any breach or threatened breach of any such provisions by Executive, in addition
to any other relief (including damages) available to the Company under this
Agreement or under law.

 

2.             Exclusive.  Both parties agree that the remedy specified in
Section 7.I.1 above is not exclusive of any other remedy for the breach by
Executive of the terms hereof.

 

J.             Counterparts.  This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.

 

Executed by the parties as of the day and year first above written.

 

 

 

NANOGEN, INC.

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ HOWARD C. BIRNDORF

 

 

 

 

Howard C. Birndorf

 

 

 

 

Executive Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ DAVID L. MACDONALD

 

 

 

 

David L. Macdonald

 

 

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