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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