**Exhibit10.27**

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), datedJanuary 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 forthin this Agreement the terms and conditions under which Executive will beemployed by the Company; and

 

WHEREAS, the Company wishes to be assured thatExecutive will be available to the Company for an additional three (3) yearsafter January 24, 2003.

 

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

 

ARTICLE I.

 

TERM OF AGREEMENT

 

A.            CommencementDate.  The terms of this Agreementshall 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 toArticle 6.

 

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

 

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

ARTICLE II.

 

EMPLOYMENT DUTIES

 

A.            Title/Responsibilities.  Executive hereby accepts employment with theCompany pursuant to the terms and conditions hereof.  Executive agrees to serve the Company in the position of SeniorVice President, Research & Development. Executive shall have the powers and duties commensurate with suchposition, including but not limited to, hiring personnel

 

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necessary (in the judgment of the Board of Directors) to carry out theresponsibilities for such position.

 

B.            FullTime Attention.  Executive shalldevote his best efforts and his full business time and attention to theperformance of the services customarily incident to such office and to suchother services as the Board may reasonably request.

 

C.            OtherActivities.  Except upon the priorwritten consent of the Board of Directors, Executive shall not during theperiod of employment engage, directly or indirectly, in any other businessactivity (whether or not pursued for pecuniary advantage) that is or may becompetitive with, or that might place him in a competing position to that ofthe Company or any other corporation or entity that directly or indirectlycontrols, is controlled by, or is under common control with the Company (an“Affiliated Company”), provided that Executive may own less than two percent ofthe outstanding securities of any such publicly traded competing corporation.

 

ARTICLE III.

 

COMPENSATION

 

A.            BaseSalary.  Executive shall receive aBase 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 shallprovide Executive with annual performance reviews, and, thereafter, Executiveshall be entitled to such Base Salary as the Board of Directors may from timeto time establish in its sole discretion.

 

B.            AchievementBonus.  The Company shall payExecutive an Achievement Bonus of up to 50% of Executive’s Base Salary annuallybased upon achievement by the Company of its corporate goals as established anddetermined by the Board of Directors annually and for other achievements by theCompany or the Executive during the year as approved by the CompensationCommittee.  The Board of Directors orCompensation Committee, as applicable, shall, in their respective solediscretion, determine whether such corporate or other goals have been attainedor other achievements have occurred.

 

C.            TransactionBonus.  In addition, in the event ofa transaction involving a Change in Control, in a transaction approved by theCompany’s Board of Directors, which transaction results in the receipt by theCompany’s stockholders of consideration with a value representing, in the solejudgment of the Board of Directors, a significant premium over the average ofthe closing prices per share of the Company’s common stock as quoted on theNasdaq National Market for 20 trading days ending one day prior to the publicannouncement of such transaction (a “Change in Control Transaction”), Executiveshall be paid a Transaction Bonus at the closing of such a transaction in theamount equal to one (1) times 50% of Executive’s Base Salary in effectimmediately preceding the closing of such a transaction.  Executive shall also be paid saidTransaction Bonus if the Company enters into a transaction approved by theBoard of Directors which is not a Change in Control Transaction, but which,nonetheless, involves a significant change in the ownership of the Company orthe composition of the Board of Directors of the Company, and which results insignificant additional value for the Company’s stockholders, as determined bythe Board of Directors in its sole discretion and as specifically designated asignificant 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 bepaid to Executive in the year in which such Transaction Bonus is paid.

 

If the Company enters into a transaction which is aChange in Control Transaction, then all of the Executive’s stock optionsreceived before the date of the transaction shall become exercisable in fulland all of the shares of the common stock of the Company awarded to Executiveunder the Company’s 1997 Stock Incentive Plan (or any subsequent plan) shallbecome fully vested.  If the Companyenters into a transaction which is not a Change in Control Transaction butwhich is a Significant Event, then the Board of Directors may, in its solediscretion, determine that all, or a portion, of the Executive’s stock optionsreceived before the effective date of the transaction shall become exercisablein full and all, or a portion, of the shares of the common stock of the Companyawarded to Executive under the Company’s 1997 Stock Incentive Plan (or anysubsequent plan) shall become fully vested.

 

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

 

ARTICLE IV.

 

EXPENSE ALLOWANCES ANDFRINGE BENEFITS

 

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

 

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

 

C.            BusinessExpense Reimbursement.  During theterm of this Agreement, Executive shall be entitled to receive properreimbursement for all reasonable out-of-pocket expenses incurred by him (inaccordance with the policies and procedures established by the Company for itssenior executive officers) in performing services hereunder, provided Executiveproperly accounts therefor.

 

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ARTICLE V.

 

CONFIDENTIALITY

 

A.            ProprietaryInformation.  Executive representsand warrants that he has executed and delivered to the Company the Company’sstandard Proprietary Information, Inventions and Dispute Resolution Agreementin form acceptable to the Company’s counsel.

 

B.            Returnof Property.  All documents,records, apparatus, equipment and other physical property which is furnished toor obtained by Executive in the course of his employment with the Company shallbe and remain the sole property of the Company.  Executive agrees that, upon the termination of his employment, heshall return all such property (whether or not it pertains to ProprietaryInformation as defined in the Proprietary Information, Inventions and DisputeResolution Agreement), and agrees not to make or retain copies, reproductionsor summaries of any such property.

 

ARTICLE VI.

 

TERMINATION

 

A.            ByDeath.  The period of employmentshall terminate automatically upon the death of Executive.  In such event, the Company shall pay toExecutive’s beneficiaries or his estate, as the case may be, any accrued BaseSalary, any bonus compensation to the extent earned, any vested deferredcompensation (other than pension plan or profit-sharing plan benefits whichwill be paid in accordance with the applicable plan), any benefits under anyplans of the Company in which Executive is a participant to the full extent ofExecutive’s rights under such plans, any accrued vacation pay and anyappropriate business expenses incurred by Executive in connection with hisduties hereunder, all to the date of termination (collectively “AccruedCompensation”), but no other compensation or reimbursement of any kind,including, without limitation, severance compensation, and thereafter, the Company’sobligations hereunder shall terminate.

 

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

 

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C.            ByCompany for Cause.  The Company mayterminate Executive’s employment for Cause (as defined below) without liabilityat any time with or without advance notice to Executive.  The Company shall pay Executive all AccruedCompensation, but no other compen­sation or reimbursement of any kind,including without limitation, severance compensation, and thereafter theCompany’s obligations hereunder shall terminate.  Termination shall be for “Cause” in the event of the occurrenceof any of the following:  (a) anyintentional action or intentional failure to act by Executive which wasperformed in bad faith and to the material detriment of the Company;(b) Executive intentionally refuses or intentionally fails to act inaccordance 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 beingcured, the Company shall provide written notice to Executive describing thenature of such event and Executive shall thereafter have five (5) business daysto cure such event.

 

D.            AtWill.  At any time, the Company mayterminate Executive’s employment without liability other than as set forthbelow, 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 thisSection 6.D prior to a Change in Control, the Company shall pay toExecutive all Accrued Compensation and shall continue to pay to Executive asprovided herein Executive’s Salary for six (6) months from the date of suchtermination as severance compensation. If the Company or its successor elects to terminate Executive pursuantto this Section after a Change in Control, the Company (or its successor) shallcontinue to pay to Executive as provided herein Executive’s Salary for six (6)months from the date of such termination as severance compensation. Uponpayment of the severance benefits described herein, all obligations of theCompany (or its successor) shall terminate.

 

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

 

E.             ConstructiveTermination.  In the event that theCompany shall materially reduce the powers and duties of employment ofExecutive resulting in a material decrease in the responsibilities of Executivewhich are inconsistent with Executive acting as Senior Vice President, Research& Development of the Company, such action shall be deemed to be atermination of employment of Executive without cause pursuant toSection 6.D.  In the event of aChange in Control of the Company in which the Company shall become a divisionor subsidiary of a larger organization, references to the Senior VicePresident, Research & Development of the Company shall be deemed to meanthe Senior Vice President, Research & Development of such division orsubsidiary for purposes of this Section 6.E.

 

F.             Changein Control.  For purposes of thisAgreement, a “Change in Control” shall have occurred if at any time during theterm of Executive’s employment hereunder, any of the following events shalloccur:

 

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1.             Theconsummation of a merger or consolidation of the Company with or into anotherentity or any other corporate reorganization, if more than 50% of the combinedvoting power of the continuing or surviving entity’s securities outstandingimmediately after such merger, consolidation or other reorganization is ownedby persons who were not stockholders of the Company immediately prior to suchmerger, consolidation or other reorganization;

 

2.             Achange in the composition of the Board, as a result of which fewer thanone-half of the incumbent directors are directors who either (1) had beendirectors 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 leasta majority of the directors who had been directors of the Company 24 monthsprior to such change and who were still in office at the time of the electionor nomination; or

 

3.             Any“person” (as such term is used in Section 13(d) and Section 14 of the ExchangeAct) by the acquisition of securities is or becomes the beneficial owner,directly or indirectly, of securities of the Company representing 50% or moreof the combined voting power of the Company’s then outstanding securitiesordinarily (and apart from rights accruing under special circumstances) havingthe right to vote at elections of directors (the “Base Capital Stock”) exceptthat any change in the relative beneficial ownership of the Company’ssecurities resulting solely from a reduction in the aggregate number ofoutstanding shares of Base Capital Stock , and any decrease thereafter in suchperson’s ownership of securities shall be disregarded until such personincreases in any manner, directly or indirectly, such person’s beneficialownership of any securities of the Company. Thus, for example, any person whoowns less than 50% of the Company’s outstanding shares, shall cause a Change inControl to occur as of any subsequent date if such person then acquires anadditional interest in the Company which, when added to the person’s previousholdings, causes the person to hold more than 50% of the Company’s outstandingshares.

 

The term “Change in Control” shall not include atransaction, the sole purpose of which is to change the state of the Company’sincorporation.

 

ARTICLE VII.

 

GENERAL PROVISIONS

 

A.            GoverningLaw.  The validity, interpretation,construc­tion and performance of this Agreement and the rights of the partiesthereunder shall be interpreted and enforced under California law withoutreference to principles of conflicts of laws. The parties expressly agree that inasmuch as the Company’s headquartersand principal place of business are located in California, it is appropriatethat California law govern this Agreement.

 

B.            Assignment;Successors; Binding Agreement.

 

1.  Executivemay not assign, pledge or encumber his interest in this Agreement or any partthereof.

 

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2.  The Companywill require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business and/orassets of the Company, operation of law or by agreement in form and substancereasonably satisfactory to Executive, to assume and agree to perform thisAgreement in the same manner and to the same extent that the Company would berequired to perform it if no such succession had taken place.

 

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

 

C.            NoWaiver of Breach.  The waiver by anyparty of the breach of any provision of this Agreement shall not be deemed tobe a waiver of any subsequent breach.

 

D.            Notice.  For the purposes of this Agreement, noticesand all other communications provided for in this Agreement shall be in writingand shall be deemed to have been duly given when delivered or mailed bycertified or registered mail, return receipt requested, postage prepaid,addressed to the respective addresses set forth below or to such other addressas either party may have furnished to the other in writing in accordanceherewith, except that notice of change of address shall be effective only uponreceipt.

 
| 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.  Noprovisions of this Agreement may be modified, waived or discharged unless suchwaiver, modification or discharge is agreed to in writing signed by Executiveand such officer as may be specifically designated by the Board of theCompany.  No waiver by either partyhereto at any time of any breach by the other party of, or compliance with, anycondition or provision of this Agreement to be performed by such other partyshall be deemed a waiver of similar or dissimilar provisions or conditions atthe 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 whichare not expressly set forth in this Agreement.

 

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

 

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G.            ControllingDocument.  This Agreement supersedesany and all prior employment agreements or consulting agreements between theCompany and Executive, but does not supersede any other agreements betweenCompany and Executive, including but not limited to, the Nanogen Inc.Restricted Stock Purchase Agreement, any stock option agreements or commonstock purchase agreements entered into pursuant to the Company’s 1997 StockIncentive Plan, and the Nanogen Employees’ Handbook and Policies, except asexpressly provided herein.  In case ofconflict between any of the terms and conditions of this Agreement and thedocuments herein referred to, the terms and conditions of this Agreement shallcontrol.

 

H.            ExecutiveAcknowledgment.  Executiveacknowledges (a) that he has consulted with or has had the opportunity toconsult 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 andunderstands the Agreement, is fully aware of its legal effect, and has enteredinto it freely based on his own judgment.

 

I.              Remedies.

 

1.             InjunctiveRelief.  The parties agree that theservices to be rendered by Executive hereunder are of a unique nature and thatin the event of any breach or threatened breach of any of the covenantscontained herein, the damage or imminent damage to the value and the goodwillof the Company’s business will be irreparable and extremely difficult toestimate, making any remedy at law or in damages inadequate.  Accordingly, the parties agree that theCompany shall be entitled to injunctive relief against Executive in the eventof any breach or threatened breach of any such provisions by Executive, inaddition to any other relief (including damages) available to the Company underthis Agreement or under law.

 

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

 

J.             Counterparts.  This Agreement may be executed in one ormore counterparts, all of which taken together shall constitute one and thesame Agreement.

 

Executed by the parties as of the day and year firstabove written.

 
|   |   | NANOGEN, INC. |
|--------|--------|---------------|
|   |   |          |
|   |   |          |
|   |   | By:           | /s/ HOWARD C. BIRNDORF |   |
|   |   |          | Howard  C. Birndorf |
|   |   |          | Executive  Chairman |
|   |   |          |
|   |   |          |
|   |   | EXECUTIVE:    |
|   |   |          |
|   |   |          |
|   |   | By:           | /s/ GRAHAM LIDGARD |   |
|   |   |          | Graham  Lidgard |

 

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