Exhibit 10.21

 

SEPARATION AGREEMENT AND RELEASE OF CLAIMS

 

THIS SEPARATION AND RELEASE AGREEMENT (the “Agreement”) is entered into on
January 2, 2003, by KIERAN T. GALLAHUE (“Executive”) and NANOGEN, INC., a
Delaware corporation (the “Company”).

 

WHEREAS, Executive and the Company have had a business relationship wherein
Executive has been an officer and employee of the Company; and

 

WHEREAS, Executive wishes to resign from the Company as described herein; and

 

WHEREAS, Executive and the Company wish to end their relationship with all
actual and potential disputes between them completely and amicably resolved:

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
in consideration of the amounts to be paid by the Company to Executive under
this Agreement, amounts which Executive is not otherwise entitled to receive,
Executive and the Company hereby agree as follows:

 

1.             Resignation from Company.  Executive shall resign from the
Company and shall no longer be employed as an officer and employee of the
Company on January 3, 2003 (“Separation Date”). Executive agrees that at all
times he is employed with the Company, he will fully and faithfully discharge
the duties and responsibilities of his position with the Company, as requested
by the Company’s Executive Chairman.

 

2.             Extend Exercise Date for Certain Stock Options and Restricted
Stock.  On the Separation Date, all of the incentive stock options, nonqualified
stock options and restricted stock received by Executive pursuant to either the
Company’s 1997 Stock Incentive Plan, as amended, or the 1993 Stock Option/Stock
Issuance Plan, as amended (collectively, the “Plans”), shall immediately vest in
their entirety.  Notwithstanding the foregoing, Executive’s incentive stock
options and nonqualified stock options for an aggregate of 100,000 shares of the
Company’s Common Stock with an exercise price of $45.813 shall be exercisable
for only up until three months after the Separation Date and thereafter shall
not be exercisable.  Such options shall be subject to the U.S. tax laws and
depending on such laws and the number of shares that are exercisable by
Executive in any given year, incentive stock options may lose their favorable
tax treatment and become nonqualified stock options.  Executive’s incentive
stock options and nonqualified stock options for an aggregate 315,000 shares of
the Company’s Common Stock with exercise prices at either $1.901, $4.50, $6.00
or $11.938 shall remain exercisable for a period of five (5) years from the
Separation Date, subject to the restrictions described below in Section 5.  Any
incentive stock options held by Executive with an exercise price below the
closing price of the Company’s Common Stock on the Separation Date shall become
nonqualified stock options on the Separation Date and any incentive stock
options with an exercise price above the closing price of the Company’s Common
Stock on the Separation Date shall remain incentive stock options for up to
three (3) months after the Separation Date

 

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and thereafter shall become nonqualified stock options.  Executive acknowledges
and agrees that he must consult with his own tax advisor or attorney regarding
the appropriate tax treatment for all of his incentive stock options,
nonqualified stock options and restricted stock options and that he is not
depending on any employee of the Company to provide such advice.  The Company
agrees that in the event of a reorganization, merger, acquisition or similar
transaction, that the Executive’s stock options shall remain as options in the
new entity (subject to dilution) and Executive shall not be required to exercise
such options in order to participate in such reorganization (it being the intent
of the parties that such options shall remain as options in the new entity);
provided, however that this sentence shall not apply to any such transaction
that is ordered by a Federal or state Court or any such transaction which would
be prohibited by law or regulation if such options were offered in the new
entity.  The Company hereby represents and warrants that: (i) the Company has
all necessary power and authority and has taken all action necessary to enter
into this Agreement and to grant the extensions of option exercise set forth in
this Section 2; (ii) there is no term, condition or restriction contained in the
Plans or in any stock option agreement between the Company and Executive which
would adversely impact the terms of this Section 2; and (iii) during the time
period that Executive’s options are exercisable, the Company will use its best
efforts to maintain an effective registration statement on Form S-8 (or any
successor form) under the Securities Act of 1933, as amended, with respect to
all shares of common stock of the Company subject to options held by Executive.

 

3.             Other Benefits.  From and after the Separation Date, Executive
shall not be eligible to participate in any of the Company’s employee benefit
plans (including, without limitation, the 401(k) plan), fringe benefit programs,
and group insurance arrangements, except pursuant to COBRA, the stock option
agreements and stock vesting programs described in Section 2 for the periods
described therein.

 

4.             Tax Liability.  Executive shall be responsible for all tax
liability associated with any compensation or other consideration made pursuant
to Section 2.

 

5.             Non-Competition.  As consideration for the severance compensation
described in Section 2 and in order to protect the Company’s trade secret and
other “confidential information” of the Company as described below in Section 7,
during a period of six (6) months from the Separation Date, Executive shall not,
other than with the prior written consent of the Board of Directors of the
Company,  engage, directly or indirectly, in any other business activity
(whether or not pursued for pecuniary advantage) with a company currently
commercializing microarray technology for use in clinical molecular diagnostics,
provided that Executive may own less than two percent of the outstanding
securities of any such publicly traded competing corporation.  Any violation by
Executive of this Section 5 shall result in the immediate cancellation of the
extended exercise period for all options described in Section 2 and the Company
may thereafter take whatever other legal steps it deems necessary to enforce
this provision and protect the Company’s confidential information.

 

6.             Nonsolicitation.  During a period of two (2) years after the
Separation Date,

 

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 without written permission from the Company, Executive will not directly or
indirectly engage, or participate in the solicitations of any employee or
consultant of the Company to leave the Company for any reason or to devote less
than all of any such employee’s efforts to the affairs of the Company.

 

7.             Nondisclosure. During the term of this Agreement and thereafter,
Executive shall not, without the prior written consent of management, disclose
or use for any purpose (except in the course of his service under this Agreement
and in furtherance of the business of the Company) confidential information or
proprietary data of the Company, except as required by applicable law or legal
process; provided, however, that “confidential information” shall not include
any information known generally to the public or ascertainable from public or
published information (other than as a result of unauthorized disclosure by
Executive) or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that conducted by
the Company.  Executive agrees to deliver to the Company at the termination of
his service, or at any other time that the Company may request, all memoranda,
notes, plans, records, reports and other documents (and copies thereof) relating
to the business of the Company which he may then possess or have under his
control (with the exception of Executive’s list of industry and business
contacts, which the Company acknowledges shall be retained by Executive). 
Executive’s obligations to the Company under the Proprietary Information,
Inventions and Dispute Resolution Agreement, dated January 23, 1998 by and
between the Company and Executive (the “Proprietary Inventions Agreement”) shall
remain in full force and effect, notwithstanding the release contained herein,
except that Section 2(f) of the Proprietary Inventions Agreement shall be
replaced by Section 6 herein.

 

8.             Mutual Release.   Executive acknowledges that the severance
package described herein is given in exchange for his signing this Agreement,
and he is not otherwise entitled to receive such benefits from the Company. 
Executive agrees that the severance package is in full satisfaction of any
claims, liabilities, demands or causes of action, known or unknown and he hereby
releases and forever discharges the Company and each of its past and present
directors, managers, officers, shareholders, agents, consultants, advisers,
employees, attorneys, servants, parents, subsidiaries, employee benefit plans,
predecessors, successors and assigns, and each of them separately and
collectively (the “Releasees”) from any and all claims, liens, demands, causes
of action, obligations, damages and liabilities of any nature whatsoever, known
or unknown, that he ever had, now has or may hereafter claim to have against the
Releasees.  The release includes, but is not limited to:

 

(a) any and all claims relating to mental, physical or emotional injuries
sustained from invasion of privacy, to defamation, to interference with
prospective economic advantage, to intentional or negligent infliction of
emotional distress, to Executive’s employment or nonemployment by the Company,
to the termination of his employment, to any status, term or condition in such
employment, or to any physical or mental harm or distress from such employment
or from termination of such employment;:

 

(b) any and all claims under California statutory or decisional law pertaining
to

 

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wrongful discharge, discrimination, retaliation or breach of contract or breach
of public policy;

 

(c) any and all claims under the Fair Employment and Housing Act, Title VII of
the Civil Rights Act of 1964 or the Americans with Disabilities Act;

 

(d) any and all claims for costs, expenses or attorneys’ fees;

 

(e) any claims to rehire rights; provided, however, that claims for vested
benefits and claims for workers’ compensation and unemployment insurance
benefits are not waived; and

 

(f) any and all claims relating to the tax obligation for which Executive may
become liable as a result of this Agreement.

 

Execution of this Agreement does not bar any claims for breach of this Agreement
or the Proprietary Inventions Agreement. The Company hereby releases and forever
discharges Executive and each of his predecessors, successors, representatives
and assigns from any and all claims, liens, demands, causes of action,
obligations, damages and liabilities of any nature whatsoever, known or unknown,
that the Company ever had, now has or may hereafter claim to have against
Executive, including (but not limited to) such claims as are specified in this
Section 8.  This Agreement recognizes the rights and responsibilities of the
Equal Employment Opportunity Commission (“EEOC”) to enforce the statutes which
come under its jurisdiction and is not intended to prevent Executive from
participating in any investigation or proceeding conducted by the EEOC;
provided, however, that nothing in this section limits or affects the finality
or the scope of the release provided in this Section 8, the waiver provided in
Section 9 or the agreement to submit claims to final and binding arbitration.

 

(g) Opportunity to Revoke.  Executive acknowledges that he is aware that he has
twenty-one (21) calendar days to decide whether to enter into this agreement and
release of claims, and return this executed agreement to the Company.  Executive
agrees that he was offered twenty-one (21) calendar days to consider this
agreement and release.  This period is designed to allow Executive to consult
with a financial advisor, accountant, attorney or anyone else whose advice
Executive needs.  Executive should consult appropriate advisors, including an
attorney, during this period.

 

Executive further acknowledges that he is aware that he may revoke this
agreement and release of claims within seven (7) business days after it is
signed and received by the Company.  He further agrees that he is aware that in
the event he timely exercises his right of rescission he will have no rights to
the severance payment or other rights under this Agreement offered by the
Company.  If this agreement and release is not revoked in a writing delivered to
the Company in the time period set forth above, any severance payments due will
be made on or before January 10, 2003.

 

9.             Waiver.  The parties expressly waive all rights under
Section 1542 of the Civil Code

 

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of California which provides:

 

“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 agree that the possibility that such unknown claims exist was taken
into account in determining the amount of consideration to be paid for the
giving of this Agreement.

 

10.           Covenant Not To Sue.  Each party covenants and agrees that such
party will never, individually or with any person or in any way, commence or aid
in any way, except as required by due legal process, prosecute or cause or
permit to be commenced or prosecuted, any action or other proceeding based upon
any claim which is released by Section 8 of this Agreement.  This Agreement
shall be deemed breached and a cause of action shall be deemed to have accrued
immediately upon the commencement or prosecution of any action or proceeding
contrary to this Agreement.

 

In the event of any breach of this Section 10, the non-breaching party shall be
entitled to recover not only the amount of judgment which may be awarded against
such releasee, but also all such other damages, costs and expenses as may be
incurred by such releasee, including court costs, attorneys’ fees and all costs
and expenses, taxable or otherwise, in preparing the defense of or defending
against, or seeking or obtaining an abatement of or injunction against, any
action or proceeding brought in violation of this Section 10 and in prosecuting
any claim, counterclaim or cross-claim based hereon.

 

11.           No Assignment; Authority.  The parties represent and warrant that
no other person had or has or claims any interest in the claims referred to in
Section 8 above; that they have the sole right and exclusive authority to
execute this Agreement; that they have the sole right to receive the
consideration paid therefor; and that they have not sold, assigned, transferred,
conveyed or otherwise disposed of any claim or demand relating to any matter
covered by this Agreement.

 

12.           No Admission.  The parties acknowledge that the payment of
consideration, referred to herein, is made solely for the purpose of purchasing
peace and eliminating possible involvement in protracted litigation based upon
disputed claims that the other could make and does not constitute an admission
or concession of any liability on account of any of said claims, liability for
which is expressly denied by all releasees.

 

13.           Indemnification.  Notwithstanding the termination of his
employment with the Company, Executive shall continue to be entitled to
indemnification in accordance with the Certificate of Incorporation (as amended)
and the Bylaws of the Company in effect, as well as any contractual
indemnification agreements between Executive and the Company.  Executive shall
remain covered under the Company’s directors and officers insurance policy for
as long as any such policy covers any other Company executive with respect to
acts occurring prior to

 

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termination of Executive’s service as an officer of the Company.

 

14.       Miscellaneous Provisions.

 

(a)           Notice.  Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. certified mail, return receipt
requested and postage prepaid.  In the case of Executive, mailed notices shall
be addressed to him at the home address which he most recently communicated to
the Company in writing.  In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Assistant Secretary.

 

(b)           Waiver.  No provision of this Agreement shall be modified, waived
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by Executive and by an authorized officer of the Company.  No
waiver by either party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a waiver of
any other condition or provision or of the same condition or provision at
another time.

 

(c)           Whole Agreement.  No agreements (including any employment
agreement), representations or understandings (whether oral or written and
whether express or implied) which are not expressly set forth in this Agreement
have been made or entered into by either party with respect to the subject
matter hereof, except that the Proprietary Inventions Agreement shall remain in
full force and effect.

 

(d)           Choice of Law.  The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (other than choice-of-law provisions).

 

(e)           Arbitration.  Any dispute arising out of or relating to this
Agreement, or the breach termination or validity thereof (including the
determination of the interpretation or scope of this agreement to arbitrate),
shall be resolved first by mediation pursuant to the Employment Mediation Rules
of the American Arbitration Association.  If mediation is not successful, then
the dispute shall be resolved by a single neutral arbitrator in binding
arbitration administered by the American Arbitration Association under its Rules
for the Resolution of Employment Disputes.  The arbitration shall take place in
San Diego, California, and judgment upon the award rendered by the arbitrator
may be entered by any court having jurisdiction thereof.  The Company shall bear
the costs of arbitration if Executive prevails.  If the Company prevails,
Executive shall pay half the cost of the arbitration or $500.00, whichever is
less.  Each party shall pay its own attorneys’ fees, unless the arbitrator
orders otherwise, pursuant to applicable law, except as provided in Section 10.

 

(f)            Consultation with Counsel.   Executive acknowledges that he has
been advised and had the opportunity to consult legal counsel prior to signing
this Agreement and

 

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that he is entering into this Agreement knowingly and voluntarily.

 

(g)           Severability.  The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect.

 

(h)           Assignment and Successors.  Neither party shall assign any right
or delegate any obligation hereunder without the other party’s written consent,
and any purported assignment or delegation by a party hereto without the other
party’s written consent shall be void.  This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and Executive, his heirs,
executors, administrators and legal representatives.

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer.

 

 

 

 

By:

/s/ KIERAN T. GALLAHUE

 

 

 

 

Kieran T. Gallahue

 

 

 

 

 

 

NANOGEN, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ HOWARD C. BIRNDORF

 

 

 

 

Howard C. Birndorf

 

 

 

Executive Chairman

 

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