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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