Exhibit

10.27




 




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 GRAHAM LIDGARD (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, Research & Development. 

Executive shall have the powers and duties commensurate with such

position, including but not limited to, hiring personnel




 




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necessary (in the judgment of the Board of Directors) to carry out the

responsibilities for such position.




 




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 ten thousand dollars ($210,000),

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




 




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Executive receives a Transaction Bonus, no Achievement Bonus will be

paid to Executive in the year in which such Transaction Bonus is paid.




 




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) shall

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, Research & Development 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 Senior Vice President, Research

& Development 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, Research & Development of the Company shall be deemed to mean

the Senior Vice President, Research & Development 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:


  	

   


  	

  Dr. Graham Lidgard


  
	

   


  	

   


  	

  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/ GRAHAM LIDGARD


  	

   


  
	

   


  	

   


  	

   


  	

  Graham

  Lidgard


  





 




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