<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
NANOGEN, INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
10398 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
TEL: (858) 410-4600
FAX: (858) 410-4949
April 28, 2000
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of
Stockholders which will be held on June 6, 2000, at 9:00 a.m. at the Hilton
La Jolla Torrey Pines, located at 10950 North Torrey Pines Road, La Jolla,
California 92037.
The formal notice of the Annual Meeting and the Proxy Statement have
been made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and
return, at an early date, the enclosed proxy in the prepaid envelope to
ensure that your shares will be represented. YOUR SHARES CANNOT BE VOTED
UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL
MEETING IN PERSON.
A copy of our Annual Report to Stockholders is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely yours,
/s/ Howard C. Birndorf
---------------------------------------
Howard C. Birndorf
Chairman of the Board, Chief Executive
Officer and President
<PAGE>
NANOGEN, INC.
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2000
-------------------------
The Annual Meeting of Stockholders of Nanogen, Inc. (the "Company")
will be held at the Hilton La Jolla Torrey Pines, located at 10950 North
Torrey Pines Road, La Jolla, California 92037 on June 6, 2000, at 9:00 a.m.,
for the following purposes:
1. To elect one Class II director.
2. To consider and vote upon a proposal to amend the 1997 Stock
Incentive Plan ("1997 Stock Plan") to increase the number of
shares authorized for issuance under the plan by 1,000,000
shares.
3. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors.
4. To transact such other business as may properly come before
the Annual Meeting and any adjournment of the Annual Meeting.
The Board of Directors has fixed the close of business on April 17,
2000, as the record date for determining the stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournment of the Annual
Meeting. A complete list of stockholders entitled to vote will be available
at the offices of the Secretary of the Company, 10398 Pacific Center Court,
San Diego, California, for ten days before the meeting.
WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, WE
URGE YOU TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By order of the Board of Directors.
/s/ Harry J. Leonhardt
Harry J. Leonhardt, Esq.
Senior Vice President, General Counsel
and Secretary
April 28, 2000
<PAGE>
NANOGEN, INC.
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Nanogen, Inc., a Delaware
corporation ("Nanogen" or the "Company"), of proxies in the accompanying form
to be used at the Annual Meeting of Stockholders to be held at the Hilton La
Jolla Torrey Pines, located at 10950 North Torrey Pines Road, La Jolla,
California 92037 on June 6, 2000, and any adjournment of the Annual Meeting
(the "Annual Meeting"). The shares represented by the proxies received in
response to this solicitation and not revoked will be voted at the Annual
Meeting. A proxy may be revoked at any time before it is exercised by filing
with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by voting in person at the Annual Meeting. On
the matters coming before the Annual Meeting for which a choice has been
specified by a stockholder by means of the ballot on the proxy, the shares
will be voted accordingly. If no choice is specified, the shares will be
voted FOR the election of the nominee for Class II director listed in this
Proxy Statement and FOR approval of proposals 2 and 3 described in the Notice
of Annual Meeting and in this Proxy Statement.
Stockholders of record at the close of business on April 17, 2000
are entitled to notice of and to vote at the Annual Meeting. As of April 17,
2000 the Company had 20,613,315 shares of Common Stock outstanding and
entitled to vote. Each holder of Common Stock is entitled to one vote for
each share held as of the record date.
Directors are elected by a plurality vote. Accordingly, the
director nominee who receives the most votes cast in his or her favor will be
elected. Proposals 2 and 3 will be decided by the affirmative vote of a
majority of shares present in person or represented by proxy and entitled to
vote on each such matter. Abstentions with respect to any matter are treated
as shares present or represented and entitled to vote on that matter and thus
have the same effect as negative votes. If shares are not voted by the broker
who is the record holder of the shares, or if shares are not voted in other
circumstances in which proxy authority is defective or has been withheld with
respect to any matter, these non-voted shares are not deemed to be present or
represented for purposes of determining whether stockholder approval of that
matter has been obtained.
The Company will bear the expense of printing and mailing proxy
materials. In addition to the solicitation of proxies by mail, solicitation
may be made by the Company's directors, officers or other employees by
personal interview, telephone or facsimile. No additional compensation will
be paid to such persons for such solicitation. The Company will reimburse
brokerage firms and others for their reasonable expenses in forwarding
solicitation materials to beneficial owners of the Company's Common Stock.
Employees of Georgeson Shareholder Communications, Inc. will also solicit
proxies at an anticipated fee of approximately $6,500 plus reasonable
out-of-pocket expenses.
This Proxy Statement and the accompanying form of proxy are being
mailed to stockholders on or about April 28, 2000.
IMPORTANT
WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT, WE URGE
YOU TO MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE.
THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL
MEETING.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company has three classes of directors, Class I consisting of
two directors and Class II and Class III each consisting of three directors,
serving staggered three-year terms. Currently, two Class II directors' seats
are vacant, and such seats will remain vacant following the Annual Meeting as
the Nominating Committee of the Board of Directors has not yet identified
suitable candidates for such seats. Shares represented by the enclosed proxy
cannot be voted for a greater number of persons than the number of nominees
named. One Class II director is to be elected at the Annual Meeting for a
term of three years expiring at the Annual Meeting in 2003 or until such
director's successor shall have been elected and qualified. The other
directors of the Company will continue in office for their existing terms,
which expire in 2001 for Class III directors and 2002 for Class I directors,
respectively.
UNLESS AUTHORITY TO VOTE FOR A DIRECTOR IS WITHHELD, IT IS INTENDED
THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY WILL BE VOTED FOR THE
ELECTION OF STELIOS B. PAPADOPOULOS AS A CLASS II DIRECTOR.
Set forth below is information regarding the nominee for Class II
director and the continuing directors of Class I and Class III, including
information furnished by them as to their principal occupations at present
and for the past five years, certain directorships held by each, their ages
as of April 17, 2000, and the year in which each became a director of the
Company.
CLASS II
Stelios B. Papadopoulos.......................................................59
Mr. Papadopoulos has been a director of the Company since November
1999. Mr. Papadopoulos has served as acting Chief Executive Officer and a
director of CN Biosciences, Inc., ("CNBI"), an affiliate of Merck KGaA,
Darmstadt, Germany, since April 2000. He previously served as Chief Executive
Officer and President of CNBI from January 1993 to April 2000 and as Chairman
of the Board of CNBI from October 1985 to April 2000. He previously served as
President of Fisher Scientific Worldwide, Inc. (now Fisher Scientific
International Inc.) from May 1989 to June 1992. From October 1987 to May
1989, he was President of Instrumentation Laboratory. Mr. Papadopoulos
received his B.S. in Aeronautical Engineering from Northrop Institute of
Technology.
CLASS I
Howard C. Birndorf............................................................50
Mr. Birndorf, a founder of the Company, has served as Chairman of
the Board and Chief Executive Officer since October 1993 and has held the
additional title of President since January 2000. Mr. Birndorf also served as
Chief Financial Officer from December 1997 to July 1998 and from September
1993 to October 1997. Mr. Birndorf was a co-founder and Chairman Emeritus of
Ligand Pharmaceuticals, Incorporated, where from January 1988 to November
1991 he was President and Chief Executive Officer. He was also a co-founder,
director and Executive Vice President of Gen-Probe Incorporated, co-founder
and Vice President of Corporate Development at Hybritech, Incorporated,
co-founder and director of IDEC Pharmaceuticals Corporation, and was involved
in the formation of Gensia Pharmaceuticals, Inc. (currently known as Sicor
Inc.) where he was a director. He was a founding director of Neurocrine
Biosciences Inc. and served as a director from 1992 through 1997. From
November 1991 to January 1994, Mr. Birndorf was President of Birndorf
Technology Development, an investment and consulting company. He is a
founding director of Graviton, Inc. and a director of the Cancer Center of
the University of California, San Diego. Mr. Birndorf received a B.A. in
Biology from Oakland University, and an M.S. in Biochemistry from Wayne State
University. Mr. Birndorf received an honorary Doctor of Science degree from
Oakland University in 1999.
Cam L. Garner.................................................................52
Mr. Garner has been a director of the Company since September 1997.
Since May 1990, Mr. Garner has been Chief Executive Officer of Dura
Pharmaceuticals, Inc., ("Dura"), from 1990 to 1998 he served as President,
and since 1995 he has served as Dura's Chairman of the Board of Directors.
Prior to joining Dura, Mr. Garner served as President of Syntro Corporation,
a biotechnology company, from November 1987 to June 1989. Mr. Garner is
currently a director of DJ Pharmaceuticals, Inc., Cardio Dynamics
International, a manufacturer of medical devices, and Spiros Development
Corporation II, Inc., a developer of pulmonary drug delivery systems. Mr.
Garner received a B.S. in Biology from Virginia Wesleyan College and an
M.B.A. from Baldwin-Wallace College.
2
<PAGE>
CLASS III
David G. Ludvigson............................................................49
Mr. Ludvigson has been a director of the Company since 1996. Since
October 1999, Mr. Ludvigson has been Senior Vice President and Chief
Operating Officer of Matrix Pharmaceuticals, Inc. ( "Matrix"). In addition,
since 1998 he has also been Chief Financial Officer of Matrix. From February
1996 to June 1998, Mr. Ludvigson was President and Chief Operating Officer of
NeTpower. From 1992 to 1995, Mr. Ludvigson was Senior Vice President and
Chief Financial Officer of IDEC Pharmaceuticals. Prior to that time, he
served as Senior Vice President of Sales and Marketing for Conner Peripherals
and as Executive Vice President, Chief Financial Officer and a director of
MIPS Computer Systems, Inc., a RISC microprocessor developer and systems
manufacturer. Mr. Ludvigson received a B.S. and an M.A.S. from the University
of Illinois.
Thomas G. Lynch...............................................................43
Mr. Lynch has been a director of the Company since February 1997.
Mr. Lynch is Executive Vice President, Chief Financial Officer and a director
of Elan Corporation, plc ("Elan"), a drug delivery and biopharmaceutical
company headquartered in Dublin, Ireland, where he is responsible for
finance, treasury, strategic planning and corporate and investor relations.
He is also a member of the executive committee of Elan's Board of Directors.
Prior to his appointment at Elan in 1993, Mr. Lynch was a partner with KPMG
Peat Marwick where he specialized in securities matters and business advisory
and accounting services. Mr. Lynch is also a director of Pembroke Capital
Limited, Icon plc, Axogen Limited and Warner Chilcott, plc.
Val Buonaiuto ................................................................51
Mr. Buonaiuto has been a director of the Company since November
1999. Since 1997, Mr. Buonaiuto has been a Senior Advisor to Hitachi
Instruments, Inc. He previously served as President and Chief Executive
Officer of Hitachi Instruments, Incorporated from 1991 to 1997. Mr. Buonaiuto
received his B.S. from Western Connecticut State University.
The Board of Directors held four meetings during 1999. Other than
Mr. Lynch, all Directors then in office attended at least 75% of the
aggregate number of meetings of the Board and of the Committees on which such
Directors serve during the periods of their respective Board and Committee
memberships.
Two directors of the Company who served during 1999 on the Board of
Directors have resigned. Brook H. Byers resigned as of October 29, 1999 and
Dr. Tina S. Nova resigned as of February 4, 2000.
The Board of Directors has appointed a Compensation Committee and an
Audit Committee. In addition, during 1999 the Board of Directors appointed
(1) a Special Negotiation Committee ("Special Negotiation Committee") to
evaluate a strategic partnership opportunity under consideration by the
Company at that time and (2) an ad hoc Special Committee ("Ad Hoc Committee")
to evaluate a loan, standstill agreement and license agreement proposed to be
entered into with an entity in which three directors had an interest.
The current members of the Compensation Committee are Cam L. Garner,
David G. Ludvigson and Thomas G. Lynch. The Compensation Committee held five
meetings during 1999. The Compensation Committee's functions are to determine
and supervise compensation to be paid to officers and directors of the
Company. See "Report to Stockholders on Executive Compensation."
The current members of the Audit Committee are David G. Ludvigson,
Thomas G. Lynch and Stelios B. Papadopoulos. The Audit Committee held one
meeting during 1999. The Audit Committee's functions are to monitor the
effectiveness of the audit effort, to supervise the Company's financial and
accounting organization and financial reporting and to select a firm of
certified public accountants whose duty it is to audit the books and accounts
of the Company for the fiscal year for which they are appointed.
The members of the Special Negotiation Committee were Howard C.
Birndorf, Brook H. Byers and Thomas G. Lynch. The Special Negotiation
Committee held one meeting during 1999. The Special Negotiation Committee's
function was to evaluate a partnership opportunity under consideration by the
Company at that time.
3
<PAGE>
The members of the Ad Hoc Committee were Cam L. Garner and David G.
Ludvigson. The Ad Hoc Committee held two meetings during 1999. The Ad Hoc
Committee's functions were to (1) evaluate and approve the terms of a secured
loan by the Company to a corporation in exchange for an exclusive period to
negotiate for a license to certain intellectual property and (2) approve a
collaboration and license agreement between the Company and the corporation.
Director Birndorf and former directors, Byers and Nova, were interested
directors in the transaction. See "Certain Transactions."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF STELIOS
B. PAPADOPOULOS AS A CLASS II DIRECTOR.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 15, 2000
as to shares of Common Stock of the Company beneficially owned by (i) each
director and nominee for director, (ii) the officers of the Company named in
the Summary Compensation Table set forth herein, (iii) the directors and
executive officers of the Company as a group and (iv) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock of the Company. Except as otherwise indicated and
subject to applicable community property laws, each person has sole
investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished by the respective individuals
or entities, as the case may be.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
------------------------------
NUMBER OF SHARES (1) PERCENTAGE OF CLASS (2)
- ------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
CitiGroup, Inc.(3)..................................... 1,916,083 10.07%
Elan Corporation, plc(4)............................... 1,287,878 6.77%
Howard C. Birndorf(5)(15) ............................. 1,286,271 6.75%
Hoechst Research and Technology AG(6).................. 1,029,328 5.37%
Val Buonaiuto ......................................... -- *
Cam L. Garner(7) ...................................... 27,777 *
David G. Ludvigson .................................... 23,194 *
Thomas G. Lynch(4)(7) ................................. 1,326,766 6.96%
Stelios B. Papadopoulos ............................... -- *
Clare L. Bromley III(8)(15) ........................... 170,987 *
Kieran T. Gallahue(9)(15) ............................. 165,326 1.36%
W.J. Kitchen, Sc.D.(10) ............................... 104,720 *
Harry J. Leonhardt, Esq.(11)(15) ...................... 210,153 1.10%
Tina S. Nova, PhD.(12)................................. 345,509 1.82%
James P. O'Connell, PhD.(13)(15) ...................... 255,134 1.34%
All Directors and Executive Officers
as a group
(12 persons)(14)(15) ............................... 3,915,837 20.29%
</TABLE>
* Less than one percent.
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, shares
which such person or group has the right to acquire within 60 days
after such date are deemed to be outstanding, but are not deemed to be
outstanding for the purposes of computing the percentage ownership of
any other person.
(3) Based upon Form 13G filed with the Securities and Exchange Commission
on February 14, 2000.
(4) Includes 1,287,878 shares held by Elan International Services Limited
("Elan International"). Mr. Lynch, a director of the Company, is
Executive Vice President, Chief Financial Officer and a director of
Elan, the parent company of Elan International, and as such, may be
deemed to share voting and investment power with respect to the shares
held by Elan International. Mr. Lynch disclaims beneficial ownership of
all such shares except to the extent of his pecuniary interest therein.
5
<PAGE>
(5) Includes 20,311 shares issuable upon the exercise of options within 60
days of February 15, 2000.
(6) Aventis is a subsidiary of Hoechst Research and Technology AG. Includes
120,238 shares issuable upon the exercise of warrants within 60 days of
February 15, 2000.
(7) Includes 16,666 shares issuable to each of Mr. Lynch and Mr. Garner
upon the exercise of options exercisable within 60 days of February 15,
2000, subject to repurchase of unvested shares.
(8) Includes 152,655 shares issuable upon the exercise of options within 60
days of February 15, 2000, subject to repurchase of unvested shares.
(9) Includes 10,936 shares issuable upon the exercise of options within 60
days of February 15, 2000.
(10) Dr. Kitchen's employment with the Company ended effective December 31,
1999.
(11) Includes 10,937 shares issuable upon the exercise of options within 60
days of February 15, 2000.
(12) Dr. Nova's employment with the Company ended effective January 31,
2000.
(13) Includes 40,519 shares issuable upon the exercise of options within 60
days of February 15, 2000, subject to repurchase of unvested shares.
(14) Includes an aggregate of 268,690 shares issuable upon the exercise of
options exercisable within 60 days of February 15, 2000, subject to
repurchase of unvested shares.
(15) Includes unvested shares subject to repurchase by the Company at
February 15, 2000, as follows: Mr. Birndorf, 182,083; Mr. Bromley,
15,000; Mr. Gallahue, 78,069; Mr. Leonhardt, 54,845; Dr. O'Connell,
47,366.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS
The names of and certain biographical information regarding the
Company's executive officers who are not also directors are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Harry J. Leonhardt, Esq. 43 Senior Vice President, General Counsel and Secretary
Kieran T. Gallahue 36 Senior Vice President, Chief Financial Officer and Treasurer
Clare L. Bromley III 51 Senior Vice President, Sales and Marketing
Michael D. Moore 65 Senior Vice President, General Manager
James P. O'Connell, Ph.D. 53 Vice President, Business Development
</TABLE>
HARRY J. LEONHARDT, ESQ. has served as Senior Vice President,
General Counsel and Secretary since July 1999 and prior to that time as Vice
President, General Counsel and Secretary from July 1996 to June 1999. From
1990 to 1996, Mr. Leonhardt served in various capacities at Allergan, Inc.,
as Senior Attorney and Head of Intellectual Property Litigation, Assistant
General Counsel and Head of Worldwide Litigation, and during a two-year
expatriate assignment at its European headquarters in England, served as
General Counsel for Allergan's European Operations. From 1983 to 1990, Mr.
Leonhardt was an associate attorney with the patent firm of Lyon & Lyon LLP
in Los Angeles, where he represented a number of high technology clients in
the fields of biotechnology, pharmaceuticals, diagnostic devices, genetic
probes and genetic engineering. Mr. Leonhardt received a B.Sc. in Pharmacy
from the Philadelphia College of Pharmacy and Science and a J.D. from the
University of Southern California Law Center.
KIERAN T. GALLAHUE has served as Senior Vice President, Chief
Financial Officer and Treasurer since February 2000 and prior to that time as
Vice President, Chief Financial Officer since July 1999. He has also served
as Vice President, Strategic Marketing since January 1998. From 1995 to 1997,
he served as Vice President of the Critical Care Business Unit for
Instrumentation Laboratory, or ("IL"), where he was responsible for the
worldwide strategic sales and marketing, and research and development efforts
for this business unit. From 1992 to 1995, he held a variety of sales and
marketing and finance positions within IL. In addition, Mr. Gallahue held
various marketing and financial positions within Procter & Gamble from 1991
to 1992 and the General Electric Company from 1985 to 1989. Mr. Gallahue
holds an M.B.A. from the Harvard Business School.
CLARE L. BROMLEY III joined the Company in October 1998 as Senior
Vice President, Marketing and Business Development. In 1999, he became
responsible for sales and marketing. Prior to joining the Company, from
November 1995 to October 1998 Mr. Bromley was Senior Vice President, Sales
and Marketing for Molecular Dynamics, Inc. ("Molecular Dynamics"). For 18
years prior to November 1995, he held various positions with Hewlet-Packard
in its Chemical Analysis Group, including Manager of Information
Architecture, Worldwide Bioscience Sales and Marketing Manager, Global
Accounts Marketing Manager, Regional Sales Manager for Japan and Korea, and
Regional Sales Manager for Latin America and South Africa. Mr. Bromley is a
Director of the International Cancer Screening Laboratory, Inc. Mr. Bromley
holds a B.S. in Natural Sciences with a Chemistry concentration from Mercer
University.
MICHAEL D. MOORE has served as Senior Vice President, General
Manager since December 1999. In 1998, he was Chief Executive Officer,
President and a director of the Topometrix Corporation. From 1993 to 1997 he
served as Vice President and General Manager of Hitachi Instruments, Inc.
From 1986 to 1990, he was President, Chief Operating Officer and director of
Fischer Imaging Corporation. He was Senior Vice President and General Manager
of the Instrument Group of Perkin Elmer from 1984 to 1986. Mr. Moore received
a B.S. from Rensselaer Polytechnic Institute and an M.B.A. from Stanford
University.
JAMES P. O'CONNELL, PH.D. has served as Vice President, Business
Development since January 2000. He previously served as Vice President,
Science and Technology from January 1999 to January 2000 and as Vice
President of Research and Product Development from December 1994 to January
1999. From August 1988 to December 1994,
Dr. O'Connell was Vice President, Research and Development and Central
Operations for Ortho Diagnostic Systems, a Johnson & Johnson Company, where
he was responsible for general management of research and development,
manufacturing and industrial engineering, purchasing and procurement.
7
<PAGE>
Dr. O'Connell was also responsible for the research activities of the Johnson
& Johnson Biotechnology Center in La Jolla, California. Prior to October
1988, Dr. O'Connell was Director of Immunodiagnostics Research and
Development at Becton Dickinson. He received a M.S. and Ph.D. in Microbiology
and Public Health from the University of North Carolina.
SUMMARY COMPENSATION INFORMATION
Information is set forth below concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal
years ended December 31, 1997, 1998 and 1999 of those persons who were at
December 31, 1999 (a) the Chief Executive Officer and (b) the other four most
highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 ("Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- --------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPENSATION STOCK UNDERLYING COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) AWARDS ($) OPTIONS (#) ($) (1)
- ------------------------ ------- ------------- ------------ -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Howard C. Birndorf 1999 $320,000 $300,000 -- $362,500 25,000 $810
Chief Executive 1998 300,000 170,000 -- -- -- --
Officer 1997 285,000 75,000 -- -- 437,496 --
Tina S. Nova, Ph.D. 1999 $267,500 $78,142 -- $290,000 20,000 $810
President and Chief 1998 250,000 55,000 -- -- -- --
Operating Officer (11) 1997 225,000 60,000 -- -- 160,378 --
W.J. Kitchen, Sc.D. 1999 $263,760 $132,969 $12,000(3) $108,750 15,000 $102,322(4)
Senior Vice 1998 250,000 143,000 124,798(3) -- -- --
President, 1997 4,808(2) 6,660(3) -- 233,333 --
Operations (10)
Harry J. Leonhardt, Esq. 1999 $235,425 $109,479 -- $217,500 15,000 $540
Senior Vice 1998 210,000 36,000 -- -- -- --
President, 1997 190,000 60,000 (5) $42,138 (6) -- 85,200 87,500(7)
General Counsel and
Secretary
Kieran T. Gallahue 1999 $235,000 $107,199 $9,750(8) $145,000 15,000 $10,454(9)
Senior Vice 1998 223,421 32,000 120,324(8) -- 133,332 --
President,
Chief Financial
Officer and Treasurer
</TABLE>
(1) Includes calculated imputed income attributed to excess group term life
insurance premiums.
(2) Dr. Kitchen joined the Company in December 1997, and his salary for
1997 reflects a partial month of service.
(3) Amount represents reimbursement of expenses and related income taxes
incurred in relocating to San Diego, including a $12,000 and $9,000
housing allowance in 1999 and 1998, respectively.
(4) Includes $100,000 of principal debt forgiven pursuant to a promissory
note secured by a deed of trust.
(5) $20,000 of Mr. Leonhardt's bonus in 1997 constitutes a bonus granted to
Mr. Leonhardt in connection with his hiring in July 1996.
(6) Amount represents reimbursement of expenses and related income taxes
incurred in relocating to San Diego.
(7) Amount represents stock compensation relating to stock purchased at
lower than fair market value.
(8) Amount represents reimbursement of expenses and related income taxes
incurred in relocating to San Diego, including a $9,750 and $9,000
housing allowance in 1999 and 1998, respectively.
(9) Includes $10,000 of principal debt forgiven pursuant to a promissory
note secured by a deed of trust.
8
<PAGE>
(10) Dr. Kitchen's employment with the Company as Senior Vice President,
Operations ended effective December 31, 1999.
(11) Dr. Nova's employment with the Company as President and Chief Operating
Officer ended effective January 31, 2000.
EMPLOYMENT AND SEVERANCE AGREEMENTS
On October 29, 1999, the Company entered into an agreement with
Howard C. Birndorf relating to his employment as Chairman and Chief Executive
Officer of the Company. The agreement provides for an annual base salary of
$320,000 and a guaranteed bonus of $100,000. The agreement provides for a
transaction bonus in the amount equal to three (3) times 60% of his base
salary in the event of a transaction involving a Change in Control or a
Significant Event. In addition, Mr. Birndorf is also entitled to a severance
payment equal to six months' salary in the event his employment with the
Company is terminated without cause.
On October 29, 1999, the Company entered into an agreement with Dr.
Tina S. Nova relating to her employment as President and Chief Operating
Officer of the Company. The agreement provided for an annual base salary of
$267,000. The agreement provided for a transaction bonus in the amount equal
to three (3) times 55% of her base salary in the event of a transaction
involving a Change in Control or a Significant Event. In addition, Dr. Nova
was also entitled to a severance payment equal to six months' salary in the
event her employment with the Company was terminated without cause. Dr. Nova
resigned from the Company effective January 31, 2000.
On October 28, 1997, the Company entered into an agreement with Dr.
W.J. Kitchen relating to his employment as Senior Vice President, Operations
of the Company. The agreement provided for an initial annual base salary of
$250,000 (since increased to $263,750) and a guaranteed bonus of $110,000. It
also provided for an additional bonus of up to $40,000 upon the achievement
of certain milestones such that Dr. Kitchen would be provided with a minimum
potential of $400,000 in total compensation per year over his first four
years of employment. In addition, Dr. Kitchen was entitled to purchase
233,333 shares of Company Common Stock at $.90 per share, of which 200,000
shares vest ratably on a monthly basis over four years, except that the
initial 25% of such shares would not vest until Dr. Kitchen's first
anniversary of employment, and the remaining 33,333 vest in equal
installments over six years upon the attainment of certain milestones. The
agreement further provided for a relocation loan of $200,000 which was
forgivable over four years and was secured by a deed of trust. Dr. Kitchen
was also entitled to a severance payment of up to two years salary in the
event his employment is terminated without cause during his first two years
of employment. On December 31, 1999, Dr. Kitchen's employment with the
Company ended and the parties entered into a severance agreement and release
of claims. The agreement provides for a lump sum payment and year-end bonus,
as well as acceleration of certain unvested option shares.
On October 29, 1999, the Company entered into an agreement with
Harry J. Leonhardt relating to his employment as Senior Vice President,
General Counsel and Secretary of the Company. The agreement provides for an
annual base salary of $250,000. The agreement provides for a transaction
bonus in the amount equal to three (3) times 50% of his base salary in the
event of a transaction involving a Change in Control or a Significant Event.
In addition, Mr. Leonhardt is also entitled to a severance payment equal to
six months' salary in the event his employment with the Company is terminated
without cause.
On October 29, 1999, the Company entered into an agreement with
Kieran T. Gallahue relating to his employment as Senior Vice President, Chief
Financial Officer and Treasurer of the Company. The agreement provides for an
annual base salary of $235,000. The agreement provides for a transaction
bonus in the amount equal to three (3) times 50% of his base salary in the
event of a transaction involving a Change in Control or a Significant Event.
In addition, Mr. Gallahue is also entitled to a severance payment equal to
six months' salary in the event his employment with the Company is terminated
without cause.
COMPENSATION OF DIRECTORS
Non-Employee Directors receive $1,500 per Board meeting attended or
$500 per meeting participated in by phone, $500 per Committee meeting
attended or participated in by phone, and are reimbursed for certain expenses
incurred in connection with attendance at Board and Committee meetings. In
addition, continuing non-employee Directors receive automatic grants of
options to purchase 10,000 shares of Common Stock on the date of each annual
meeting of stockholders at which they are re-elected, which options vest in
full upon completion of one year of service from the date of grant, and new
non-employee Directors receive a one-time grant of options to purchase 25,000
shares of the Company's Common Stock, which options vest on a monthly basis
over a four (4) year period (provided that no vesting shall occur until the
optionee has completed at least one year of service from the date of grant).
9
<PAGE>
Directors' options are issued pursuant to the Company's 1997 Stock Plan
described below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during 1999 were
Cam L. Garner, David G. Ludvigson and Thomas G. Lynch. Mr. Lynch is Executive
Vice President, Chief Financial Officer and a director of Elan, an entity
with which the Company entered into a collaborative research and development
agreement in December 1997. The Company received $568,000 and $929,000 in
1999 and 1998, respectively, pursuant to such agreement. In addition, in
April 1998, concurrently with its initial public offering, the Company sold
to Elan an aggregate of 454,545 shares of Common Stock for aggregate proceeds
of approximately $5.0 million.
STOCK OPTIONS
The following tables summarize option grants to and exercises by the
Company's Chief Executive Officer and the Named Executive Officers during
fiscal 1999, and the value of the options held by such persons at the end of
fiscal 1999. The Company does not grant stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1999
INDIVIDUAL GRANTS
------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE
SECURITIES GRANTED TO AT ASSUMED ANNUAL RATES OF
UNDERLYING EMPLOYEES IN EXERCISE OR STOCK APPRECIATION FOR
OPTIONS FISCAL YEAR BASE PRICE EXPIRATION OPTION TERM (2)
NAME GRANTED (#) 1999 ($/SH) (1) DATE 5% ($) 10% ($)
-------------- -------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Howard C. Birndorf 25,000 4.2% $4.50 1/22/2009 $70,751 $179,296
Tina S. Nova, Ph.D. 20,000 3.3% $4.50 1/22/2009 $56,601 $143,437
W.J. Kitchen, Sc.D. 15,000 2.5% $4.50 1/22/2009 $42,450 $107,578
Harry J. Leonhardt, 15,000 2.5% $4.50 1/22/2009 $42,450 $107,578
Esq.
Kieran T. Gallahue 15,000 2.5% $4.50 1/22/2009 $42,450 $107,578
</TABLE>
(1) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant.
(2) The 5% and 10% assumed rates of appreciation are suggested by rules of
the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future common stock price.
There can be no assurance that any of the values reflected in the table
will be achieved.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND VALUE OF OPTIONS
AT END OF FISCAL 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
VALUE OPTIONS AT END OF OPTIONS AT END OF
REALIZED- FISCAL 1999 (#) FISCAL 1999 ($)
SHARES ACQUIRED -------------- ------------------------ -------------------------
NAME ON EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------- ------------------ -------------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
Howard C. Birndorf -- -- -- --
Tina S. Nova, Ph.D. -- -- -- --
W.J. Kitchen, Sc.D. -- -- -- --
Harry J. Leonhardt, -- -- -- --
Esq.
Kieran T. Gallahue -- -- -- --
</TABLE>
10
<PAGE>
REPORT TO STOCKHOLDERS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company
(the "Committee") is pleased to present its report on executive compensation.
This report is provided by the Committee to assist stockholders in
understanding the Committee's objectives and procedures in establishing the
compensation of the Company's executive officers and describes the basis on
which compensation determinations for 1999 were made by the Committee. In
making its determination, the Committee has relied, in part, on geographic
and competitive considerations, independent surveys of compensation of
management of companies in the biotechnology industry, including companies
included in the Nasdaq Pharmaceutical Stock Index used in the Company's Stock
Price Performance Graph set forth in this proxy statement, and
recommendations of management.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee believes that compensation of the Company's executive
officers should:
- Encourage creation of stockholder value and achievement of
strategic corporate objectives.
- Integrate compensation with the Company's annual and long-term
corporate objectives and strategy, and focus executive
behavior on the fulfillment of those objectives.
- Recognize individual initiative, effort and accomplishment.
- Provide a competitive total compensation package that enables
the Company to attract and retain, on a long-term basis, high
caliber personnel.
- Provide a total compensation opportunity that is competitive
with companies in the biotechnology industry, taking into
account relative company size, stage of development,
performance and geographic location as well as individual
responsibilities and performance.
- Align the interests of management and stockholders and enhance
stockholder value by providing management with longer term
incentives through equity ownership by management.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
The Compensation Committee has determined that compensation of
executive officers will be based, in part, on the Company's achievements of
its objectives established with the Board of Directors, the individual
contributions and achievements of each executive officer and the financial
position of the Company. The Company's existing compensation structure for
executive officers generally includes a combination of base salary, bonus and
stock options.
BASE SALARY
Compensation levels are largely determined through comparisons with
companies of similar size and complexity in the biotechnology industry and
companies with which the Company competes for key personnel. Cash
compensation for the Company's executive officers in 1999 was at the higher
end of the range of the companies reviewed. In establishing base salaries for
1999 the Committee considered, among other things, the Company's achievements
in advancing its products and accomplishing other business objectives, and
the individual contributions and achievements of each executive officer.
Actual compensation is based on an evaluation of job responsibilities for the
position, comparisons of compensation levels, Company achievements and
individual performance. Individual performance is evaluated by reviewing
organizational and management development progress against individual
contributions and achievements and the degree to which teamwork and Company
values are fostered. At the beginning of fiscal 1999, goals were established
for the Company and approved by the Board of Directors. Goals set for 1999
included: achievement of certain research and development milestones;
progress in the Company's corporate collaborations; establishment of new
corporate partnerships; continued development of the Company's intellectual
property portfolio; and attainment of certain financial objectives.
Compensation levels for the executive officers are competitive within a range
that the Committee considers to be reasonable and necessary.
11
<PAGE>
BONUS
The Committee may award bonuses at the end of the fiscal year based
on the Company's achievements and the individual's contributions to those
achievements, if it deems such an award to be appropriate. Based on the
Company's achievement of a number of key objectives in 1999 that were
important for the continued growth and development of the Company, including:
achieving the following product development goals: placement of first offsite
units, completion of three active beta site tests and completion of first
research systems functioning reliably and ready for delivery; achieving
research milestones and an expansion of the joint venture with Aventis
Research and Technologies; progress in research and development programs;
execution of a collaboration and license agreement with Graviton, Inc.;
completion of a research instrument partnership with Hitachi, Inc; obtaining
patents covering its microelectronic arrays, electronic synthesis, electronic
stringency and microelectrophoresis technology; and attainment of certain
financial objectives, the Committee decided to award cash bonuses for 1999 to
officers, including the Chief Executive Officer, and certain key employees.
STOCK OPTIONS
The Company's 1997 Stock Plan is administered by the Company's
Compensation Committee, which is a committee of outside directors of the
Company. The Compensation Committee believes that by providing those persons
who have substantial responsibility for the management and growth of the
Company with an opportunity to increase their ownership of Company stock, the
best interests of stockholders and executives will be closely aligned.
Therefore, executive officers, as well as all employees, are eligible to
receive stock options from time to time, giving them the right to purchase
shares of Common Stock of the Company at a specified price. The number of
stock options granted to executive officers, including the Chief Executive
Officer, is based on the Company's achievements during the year and the
individual's contributions to those achievements, individual performance and
a review of data on the range of aggregate annual option grants compared to
the number of shares of stock outstanding for officers with similar duties
and titles at biotechnology companies taking into account differences in such
companies' stock prices, stage of development, achievements and the like.
CHIEF EXECUTIVE OFFICER COMPENSATION
The salary paid to Howard C. Birndorf, the Company's Chief Executive
Officer, was $320,000 in 1999. In establishing Mr. Birndorf's base salary,
the Compensation Committee reviewed the results of a survey of executive
salaries of the officers of similar companies in the biotechnology industry.
In addition, the Committee recognized Mr. Birndorf's efforts in advancing the
development and growth of the Company and the corporate objectives achieved
in 1998. Specifically, corporate objectives achieved in 1998 included: the
initial public offering and concurrent private placement, research and
development milestones, corporate collaborations and financial performance.
The Committee determined that these accomplishments were critical to the
Company's future growth and enhancement of stockholder value and,
accordingly, determined to compensate Mr. Birndorf for his efforts on behalf
of the Company.
Mr. Birndorf is a member of the Board of Directors, but did not
participate in matters involving the evaluation of his own performance or the
setting of his own compensation.
This Compensation Committee Report shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or
under the Securities Exchange Act of 1934, as amended, except to the extent
the Company specifically incorporates this report by reference, and shall not
otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE
Cam L. Garner
David G. Ludvigson
Thomas G. Lynch
12
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a quarterly comparison of the
cumulative total stockholder return (change in stock price plus reinvested
dividends) of the Company's Common Stock with the CRSP Total Return Index for
The Nasdaq Stock Market (U.S. and Foreign) (the "Nasdaq Composite Index") and
the CRSP Total Return Index for Nasdaq Pharmaceutical Stocks (the "Nasdaq
Pharmaceutical Index") since April 14, 1998 (the effective date of the
Company's initial public offering). The comparisons in the graph are required
by the Securities and Exchange Commission and are not intended to forecast or
be indicative of possible future performance of the Company's Common Stock.
[GRAPH]
<TABLE>
<CAPTION>
NANOGEN, INC. NASDAQ COMPOSITE NASDAQ PHARMACEUTICAL
-------------- ---------------- ---------------------
<S> <C> <C> <C>
04/14/98 $ 100.000 $ 100.000 $ 100.000
06/30/98 $ 59.636 $ 101.905 $ 95.286
09/30/98 $ 33.239 $ 90.737 $ 89.837
12/31/98 $ 36.364 $ 117.757 $ 119.219
03/31/99 $ 87.500 $ 132.038 $ 130.809
06/30/99 $ 62.500 $ 144.705 $ 133.258
09/30/99 $ 65.909 $ 147.843 $ 152.200
12/31/99 $ 198.864 $ 221.004 $ 221.823
</TABLE>
Assumes a $100 investment on April 14, 1998 in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the Nasdaq Pharmaceutical Index.
The Nasdaq Pharmaceutical Index includes all companies listed on The
Nasdaq Stock Market within SIC Code 283. A list of those companies included
in the Nasdaq Pharmaceutical Index may be obtained by contacting the
Company's corporate Secretary at Nanogen, Inc., 10398 Pacific Center Court,
San Diego, CA 92121.
13
<PAGE>
CERTAIN TRANSACTIONS
In June 1995, Howard C. Birndorf and Dr. Tina S. Nova each purchased
100,000 shares of Common Stock at $.15 per share. In connection with the
purchase of these shares, the Company loaned $15,000 to each of Mr. Birndorf
and Dr. Nova at an interest rate of 6.7% per annum pursuant to a five-year
full recourse promissory note, which notes are secured by their respective
shares purchased. In August 1996, Mr. Birndorf purchased an additional
183,333 shares and Dr. Nova purchased an additional 50,000 shares of Common
Stock at $.15 per share. In connection with such purchases, the Company
loaned $27,500 and $7,500 to Mr. Birndorf and Dr. Nova, respectively, at an
interest rate of 6.3% per annum pursuant to five-year full recourse
promissory notes, which notes are secured by their respective shares
purchased. In connection with Dr. Nova's severance agreement entered into in
January 2000, Dr. Nova repaid her promissory notes of $22,500 and accrued
interest.
In November and December 1997 and March 1998, certain officers and
directors of the Company exercised options to purchase an aggregate of
1,155,837 shares of the Company's Common Stock. As consideration for such
shares the Company received full recourse promissory notes, bearing interest
at 6.01%, from directors and officers Howard C. Birndorf (an aggregate of
437,496 shares for $393,747) and Dr. Tina Nova (an aggregate of 160,379
shares for $144,341) and executive officers Harry J. Leonhardt (85,200 shares
for $76,680), Dr. James P. O'Connell (106,096 shares for $95,486), Dr. W.J.
Kitchen (233,333 shares for $209,650) and Kieran T. Gallahue (133,333 shares
for $399,800). The principal and accrued interest on such promissory notes
will be payable in 2002 or December 2003, as appropriate. The payment of each
promissory note is secured by a pledge of the shares purchased by such
director and/or executive officer. In connection with Dr. Nova's and Dr.
Kitchen's severance agreements entered into in January 2000 and December
1999, Dr. Nova and Dr. Kitchen repaid the full recourse promissory notes of
$144,341 and $209,650, respectively, and accrued interest.
In March 1998, the Company loaned Dr. Kitchen $200,000 pursuant to a
four-year promissory note in connection with his relocation to San Diego. The
loan, which bears interest at 6.01% per annum and is secured by a deed of
trust, is forgivable by the Company over four year years. In connection with
Dr. Kitchen's severance agreement dated December 31, 1999, Dr. Kitchen repaid
the unforgiven principal portion plus accrued interest on his loan.
In April 1998, the Company made a relocation loan to Mr. Gallahue of
$40,000 pursuant to a four-year promissory note. The loan, which bears
interest at 6.01% per annum and is secured by a second deed of trust, is also
forgivable by the Company over four years.
As of February 15, 2000, aggregate outstanding indebtedness of
directors and executive officers in favor of the Company was as follows: Mr.
Birndorf, $497,685; Mr. Gallahue, $467,697; Dr. O'Connell $107,491 and Mr.
Leonhardt, $86,321.
In December 1997, the Company entered into a collaborative research
and development agreement with Elan. Thomas G. Lynch, a director of the
Company, is Executive Vice President, Chief Financial Officer and a director
of Elan. The Company received $568,000 and $929,000 in 1999 and 1998,
respectively, pursuant to such agreement.
In November 1998, the Company entered into a Standstill Agreement
and Right of First Negotiation (the "Agreement") with Graviton, Inc.
("Graviton"), granting the Company an exclusive period of time to negotiate a
license to certain technologies licensed to and/or developed by Graviton. In
exchange for the Agreement, the Company advanced to Graviton through a
secured loan the sum of $500,000. In May 1999, the Company advanced to
Graviton through a secured loan an additional $500,000, the proceeds of which
were to be used by Graviton in part to secure additional intellectual
property rights which the Company could license. In December 1999, the
Company entered into a Collaboration and License Agreement with Graviton.
Pursuant to this agreement, the total loans of $1.0 million, plus accrued
interest, were credited in full against the upfront license fee to secure
exclusive license rights to certain Graviton intellectual property for
biological applications. Mr. Birndorf is a director of and an investor in
Graviton. Additionally, Dr. Tina Nova, a former director and the Company's
President and Chief Operating Officer during 1999, is the spouse of Dr.
Michael Nova, the President of Graviton. Together, Mr. Birndorf, Brook H.
Byers, a former director of the Company, and Dr. Michael Nova hold a
controlling ownership interest in Graviton.
On July 27, 1999, the Board of Directors authorized the issuance of
an aggregate of 251,000 shares of the Company's common stock to some officers
and key employees at a price per share of par value ($.001). All of these
shares were purchased by the respective officers and key employees and are
subject to repurchase if the officer or key employee leaves the Company prior
to July 26, 2001.
14
<PAGE>
Repurchase rights of the Company as to certain of the shares lapse upon the
attainment of performance milestones or upon a change in control.
The Company believes that the foregoing transactions were in its
best interests. It is the Company's current policy that all transactions by
the Company with officers, directors, 5% stockholders or their affiliates
will be entered into only if such transactions are approved by a majority of
the disinterested directors, and are on terms no less favorable to the
Company than could be obtained from unaffiliated parties.
15
<PAGE>
PROPOSAL 2
APPROVAL OF THE AMENDMENT OF THE
NANOGEN, INC. 1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan (the "1997 Stock Plan") was adopted by
the Board of Directors and was approved by the Company's stockholders as of
August 1, 1997. The 1997 Plan replaced the 1993 Stock Plan and 1995 Stock
Option/Stock Issuance Plans (collectively, the "Prior Stock Plans"). At the
date of adoption of the 1997 Stock Plan a total of 342,419 shares of Common
Stock were available for future issuance under the Prior Stock Plans, which
shares are available for grants under the 1997 Stock Plan, and a further
2,241,341 shares were authorized by the Board of Directors and approved by
the Company's stockholders for further issuance thereunder. If any option
granted under the Prior Stock Plans expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will become available for additional option grants under the 1997
Stock Plan. Although all future awards will be made under the 1997 Stock
Plan, awards made under the Prior Stock Plans will continue to be
administered in accordance with the 1993 Stock Plan or the 1995 Stock
Option/Issuance Plan, as applicable (the 1997 Stock Plan together with the
Prior Stock Plans are referred to as the "Stock Option Plans"). On January
22, 1999, the Board of Directors amended the 1997 Stock Plan to reserve an
additional 925,000 shares of Common Stock for issuance thereunder and the
Company's stockholders approved the amendment on June 30, 1999. On April 14,
2000, the Board of Directors amended the 1997 Stock Plan to reserve an
additional 1,000,000 shares of Common Stock for issuance under the 1997 Stock
Plan subject to the approval of the Company's stockholders at the Annual
Meeting.
The following is a summary of the material terms and provisions of
the 1997 Stock Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 1997 Stock Plan. Copies of the
actual plan document may be obtained by any stockholder upon written request
to the Secretary of the Company at the corporate offices in San Diego,
California.
DESCRIPTION OF THE 1997 STOCK PLAN
PURPOSE
The purpose of the 1997 Stock Plan is to promote the interests of
the Company and its stockholders by encouraging key individuals to acquire
stock or to increase their proprietary interest in the Company. By providing
the opportunity to acquire stock or receive other incentives, the Company
seeks to attract and retain those key employees upon whose judgment,
initiative and leadership the success of the Company largely depends. The
Company's Board of Directors believes that the 1997 Stock Plan will
constitute an important means of compensating key employees.
SHARES SUBJECT TO THE 1997 STOCK PLAN
The total number of restricted shares, stock units, options and SARs
authorized for grant under the 1997 Stock Plan is 4,508,760 (which number
includes the 1,000,000 share increase that stockholders are being asked to
approve). This amount will be increased by any forfeited or unexercised
shares under the Prior Stock Plans. Also, forfeited or unexercised shares
under the 1997 Stock Plan generally become available for new grants under the
1997 Stock Plan. If any restricted shares, stock units, options or SARs are
forfeited, or if options or SARs terminate for any other reason prior to
exercise (other than the exercise of a related SAR or option, and including
any forfeiture or termination under the 1997 Stock Plan), then they again
become available for awards under the 1997 Stock Plan.
OUTSTANDING GRANTS
As of April 17, 2000, options for an aggregate of 1,828,636 shares
of Common Stock were outstanding under the Stock Option Plans. As of April
17, 2000, approximately 135 employees, 5 directors and 10 consultants or
advisors were eligible to participate in the 1997 Stock Plan. On April 17,
2000, the closing price of the Company's Common Stock on the Nasdaq National
Market was $15.50 per share. Of the options for 5,867,021 shares of Common
Stock granted under the Stock Option Plans, options for 3,144,462 shares of
Common Stock have been exercised. As of April 17, 2000, an aggregate of
2,077,061 shares of Common Stock (which number excludes the 1,000,000 share
increase that stockholders are being asked to approve) are authorized, but
unissued under the Stock Option Plans.
As of April 17, 2000, the following persons or groups had in total
received restricted stock, stock units and/or options for shares of Common
Stock under the Stock Option Plans: (i) the Chief Executive Officer and the
16
<PAGE>
other remaining officers named in the Summary Compensation Table: Mr.
Birndorf 995,828 shares; Mr. Leonhardt 296,866 shares; and Mr. Gallahue
268,332 shares; (ii) all current executive officers of the Company as a
group: 2,147,954 shares; (iii) all current directors who are not executive
officers as a group: 109,998 shares; (iv) the nominee for Class II director:
Mr. Papadopoulos 25,000 shares; (v) each associate of any of such current
directors, executive officers or nominee: no shares; (vi) each person who has
received 5% of options granted other than those included above: no shares;
and (vii) all employees and consultants of the Company: approximately
5,757,023 shares.
ADMINISTRATION
The 1997 Stock Plan is administered by the Board of Directors or its
delegate, currently the Compensation Committee. The Board of Directors, or
its delegate, selects the employees of the Company who will receive awards,
determines the size of any award and establishes any vesting or other
conditions. Employees, directors, consultants and advisors of the Company (or
any subsidiary of the Company) are eligible to participate in the 1997 Stock
Plan, although incentive stock options may be granted only to employees. No
individual may receive options or SARs covering more than 500,000 shares in
any calendar year. The participation of the outside directors of the Company
is limited to 25% of the shares available under the 1997 Stock Plan.
The 1997 Stock Plan provides for awards in the form of restricted
shares, stock units, options or SARs, or any combination thereof. No payment
is required upon receipt of an award, except that a recipient of newly issued
restricted shares must pay the par value of such restricted shares to the
Company.
RESTRICTED STOCK
Restricted shares are shares of Common Stock that are subject to
repurchase by the Company at the employee's purchase price in the event that
the applicable vesting conditions are not satisfied, and they are
nontransferable prior to vesting (except for certain transfers to a trustee).
Restricted shares have the same voting and dividend rights as other shares of
Common Stock.
The recipient of restricted shares or stock units may pay all
projected withholding taxes relating to the award with Common Stock rather
than cash if permitted by the Compensation Committee.
OPTIONS
Options may include nonstatutory stock options ("NSOs") as well as
incentive stock options ("ISOs") intended to qualify for special tax
treatment. The term of an ISO cannot exceed 10 years (five years for 10%
stockholders), and the exercise price of an ISO must be equal to or greater
than the fair market value of the Common Stock on the date of grant (or 110%
of fair market value at the date of grant for 10% stockholders). The exercise
price of an NSO must be equal to or greater than the par value of the Common
Stock on the date of grant.
The exercise price of an option may be paid in any lawful form
permitted by the Board of Directors or its delegate, including (without
limitation) the surrender of shares of Common Stock or restricted shares
already owned for at least six months by the optionee. The Board of Directors
or its delegate may likewise permit optionees to satisfy their withholding
tax obligation upon exercise of an NSO by surrendering a portion of their
option shares to the Company. The 1997 Stock Plan also allows the optionee to
pay the exercise price of an option by giving "exercise/sale" or
"exercise/pledge" directions or by promissory note.
STOCK APPRECIATION RIGHTS
A SAR permits the participant to elect to receive any appreciation
in the value of the underlying stock from the Company, either in shares of
Common Stock or in cash or a combination of the two, with the Board of
Directors or its delegate having the discretion to determine the form in
which such payment will be made. The amount payable on exercise of a SAR is
measured by the difference between the market value of the underlying stock
at exercise and the exercise price. SARs may, but need not, be granted in
conjunction with options. Upon exercise of a SAR granted in tandem with an
option, the corresponding portion of the related option must be surrendered
and cannot thereafter be exercised. Conversely, upon exercise of an option to
which a SAR is attached, the SAR may no longer be exercised to the extent
that the corresponding option has been exercised. A participant may receive
not more than 200,000 SARs within one calendar year. Unless otherwise
permitted by the Board of Directors or its delegate, all options and SARs are
nontransferable prior to the optionee's death.
17
<PAGE>
VESTING
The Board of Directors or its delegate determines the number of
restricted shares, stock units, options or SARs to be included in the award
as well as the vesting and other conditions. The vesting conditions may be
based on the employee's service, his or her individual performance, the
Company's performance or other appropriate criteria. In general, the vesting
conditions will be based on the employee's service after the date of grant.
Vesting may be accelerated in the event of the employee's death, disability
or retirement or in the event of a change in control with respect to the
Company. The Board of Directors has in the past granted and may in the future
grant options which provide for mandatory acceleration of vesting in the
event of a change in control.
OTHER PROVISIONS
For purposes of the 1997 Stock Plan, the term "change in control" is
defined as any one of the following: (i) any person is or becomes the
beneficial owner, directly or indirectly, of at least 50% of the combined
voting power of the Company's outstanding securities ordinarily having the
right to vote at elections of directors; (ii) upon a merger or consolidation
of the Company with or into another corporation or entity or any other
corporate reorganization in which over 50% of the combined voting power of
the continuing or surviving entity immediately after the merger,
consolidation or reorganization is owned by persons who were not stockholders
of the Company immediately prior to the merger, consolidation or
reorganization; or (iii) a change in the composition of the Board of
Directors in which fewer than half of the incumbent Directors had been
Directors 24 months prior to the change or were elected or nominated with the
affirmative votes of Directors 24 months prior to the change.
The 1997 Stock Plan provides that if any payment (or transfer) by
the Company causes the employee to recognize a "golden parachute" excise tax
under Section 4999 of the Internal Revenue Code, then the Company shall make
such cash payments as are necessary to reimburse the employee for all
additional taxes caused thereby.
The Board of Directors is authorized, within the provisions of the
1997 Stock Plan, to amend the terms of outstanding restricted shares or stock
units, to modify or extend outstanding options or SARs or to exchange new
options for outstanding options, including outstanding options with a higher
exercise price than the new options.
Members of the Company's Board of Directors who are not employees of
the Company are eligible for awards under the 1997 Stock Plan. However, such
outside directors are not eligible for ISO grants. Total shares available to
outside directors is limited to 25% of total shares available under the 1997
Stock Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of
the 1997 Stock Plan as it relates to share awards, nonqualified stock options
and incentive stock options is intended to be a summary of applicable federal
law. State and local tax consequences may differ.
SHARE AWARDS
If a participant is awarded or purchases shares, the amount by which
the fair market value of the shares on the date of award or purchase exceeds
the amount paid for the shares will be taxed to the participant as ordinary
income. The Company will be entitled to a deduction in the same amount
provided it makes all required withholdings on the compensation element of
the sale or award. The participant's tax basis in the shares acquired is
equal to the share's fair market value on the date of acquisition. Upon a
subsequent sale of any shares, the participant will realize capital gain or
loss (long-term or short-term, depending on whether the shares were held for
more than one year before the sale) in an amount equal to the difference
between his or her basis in the shares and the sale price.
If a participant is awarded or purchases shares that are subject to
a vesting schedule, the participant is deemed to receive an amount of
ordinary income equal to the excess of the fair market value of the shares at
the time they vest over the amount (if any) paid for such shares by the
participant. The Company is entitled to a deduction equal to the amount of
the income recognized by the participant.
Code Section 83(b) permits a participant to elect, within 30 days
after the transfer of any shares subject to a vesting schedule to him or her,
to be taxed at ordinary income rates on the excess of the fair market value
of the shares at the time of the transfer over the amount (if any) paid by
the participant for such shares. Withholding taxes apply at
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that time. If the participant makes a Section 83(b) election, any later
appreciation in the value of the shares is not taxed as ordinary income, but
instead is taxed as capital gain when the shares are sold or transferred.
OPTIONS
Incentive stock options and nonqualified stock options are treated
differently for federal income tax purposes. Incentive stock options are
intended to comply with the requirements of Section 422 of the Code.
Nonqualified stock options need not comply with such requirements.
An optionee is generally not taxed on the grant or exercise of an
incentive stock option. The difference between the exercise price and the
fair market value of the shares on the exercise date will, however, be a
preference item for purposes of the alternative minimum tax. If an optionee
holds the shares acquired upon the exercise of an incentive stock option
final for at least two years following grant and at least one year following
exercise, the optionee's gain, if any, upon a subsequent disposition of such
shares is a capital gain (or loss). The measure of the gain is the difference
between the proceeds received on disposition and the optionee's basis in the
shares (which generally equals the exercise price). If an optionee disposes
of stock acquired pursuant to exercise of an incentive stock option before
satisfying the one and two-year holding periods described above, the optionee
will recognize both ordinary income and capital gain (or loss) in the year of
disposition. The amount of the ordinary income will be the lesser of (i) the
amount realized on disposition less the optionee's adjusted basis in the
stock (usually the option price) or (ii) the difference between the fair
market value of the stock on the exercise date and the option price. The
balance of the consideration received on such a disposition will be capital
gain if the stock had been held for at least one year following exercise of
the incentive stock option. The Company is not entitled to an income tax
deduction on the grant or exercise of an incentive stock option or on the
optionee's disposition of the shares after satisfying the holding period
requirement described above. If the holding periods are not satisfied, the
Company will be entitled to a deduction in the year the optionee disposes of
the shares, in an amount equal to the ordinary income recognized by the
optionee.
An optionee is not taxed on the grant of a nonqualified stock
option. On exercise, however, the optionee recognizes ordinary income equal
to the difference between the option price and the fair market value of the
shares on the date of exercise. The Company is entitled to an income tax
deduction in the year of exercise in the amount recognized by the optionee as
ordinary income. Any gain on subsequent disposition of the shares is a
capital gain if the shares are held for at least one year following exercise.
The Company does not receive a deduction for this gain.
STOCK INCENTIVE PLAN BENEFITS
The Board is authorized, within the provisions of the 1997 Stock
Plan, to amend the terms of outstanding restricted shares or stock units, to
modify or extend outstanding options or SARs or to exchange new options for
outstanding options, including outstanding options with a higher exercise
price than the new options. Therefore, the benefits and amounts that will be
received by each of the Named Executive Officers as a group and all other key
employees are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE
AMENDMENT TO THE NANOGEN, INC. 1997 STOCK INCENTIVE PLAN.
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PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee,
has appointed the firm of Ernst & Young LLP ("Ernst & Young") as the
Company's independent auditors for the fiscal year ended December 31, 2000,
subject to ratification by the stockholders. Representatives of Ernst & Young
are expected to be present at the Company's Annual Meeting. They will have an
opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP.
STOCKHOLDER PROPOSALS
Proposals of stockholders submitted pursuant to Rule 14a-8 under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
intended to be presented for consideration at the Company's 2001 Annual
Meeting of Stockholders must be received by the Company not later than
December 31, 2000 in order to be considered for inclusion in the Company's
proxy materials for that meeting.
The Company's bylaws also establish an advance notice procedure with
respect to certain stockholder proposals and director nominations. If a
stockholder wishes to have a stockholder proposal considered at the Company's
next annual meeting, the stockholder must give timely notice of the proposal
in writing to the Secretary of the Company. To be timely, a stockholder's
notice of the proposal must be delivered to, or mailed and received at the
executive offices of the Company not less than 50 days nor more than 75 days
prior to the proposed date of the annual meeting; provided, however, that if
less than 65 days notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, notice of the proposal to be timely
must be received no later than the 15th day following the day on which such
notice of the date of the annual meeting is mailed or public disclosure of
the meeting date is given.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors,
executive officers, and any persons holding more than 10% of the Company's
Common Stock are required to report their initial ownership of the Company's
Common Stock and any subsequent changes in that ownership to the SEC.
Specific due dates for these reports have been established and the Company is
required to identify in this Proxy Statement those persons who failed to
timely file these reports. In 1999, all of the Company's directors and
executive officers and to the Company's knowledge, the 10% stockholders of
the Company, timely filed such reports, with the exception of Howard C.
Birndorf, who filed on October 12, 1999 a Form 4 that was due on September
10, 1999.
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented at the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form
will be voted in accordance with the judgment of the persons voting the
proxies.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her
to participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Nanogen, Inc., 10398 Pacific
Center Court, San Diego, California 92121, (858) 410-4600. To provide the
Company sufficient time to arrange for reasonable assistance or
accommodation, please submit all requests by May 22, 2000.
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Whether you intend to be present at the Annual Meeting or not, we
urge you to return your signed proxy promptly.
By order of the Board of Directors.
/s/ Harry J. Leonhardt
Harry J. Leonhardt, Esq.
Senior Vice President, General Counsel
and Secretary
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PROXY
NANOGEN, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON JUNE 6, 2000
HARRY J. LEONHARDT, ESQ. and KIERAN T. GALLAHUE, or each of them,
each with the power of substitution, are hereby authorized to represent as
proxies and vote all shares of stock of Nanogen, Inc. (the "Company") the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Hilton La Jolla Torrey Pines, located at 10950
North Torrey Pines Road, La Jolla, California 92037 on June 6, 2000 at 9:00
a.m. or at any postponement or adjournment thereof, and instructs said
proxies to vote as follows:
Shares represented by this proxy will be voted as directed by the
stockholder. IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXIES WILL HAVE
AUTHORITY TO VOTE FOR THE ELECTION OF THE NOMINEE FOR CLASS II DIRECTOR AND
FOR ITEMS 2 AND 3.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE SEE REVERSE
SIDE ------------------------------------------------------ SIDE
<PAGE>
/X/ Please mark
votes as in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEE FOR CLASS II DIRECTOR AND FOR ITEMS 2 AND 3.
<TABLE>
<CAPTION>
<S><C>
1. Election of Director.
NOMINEE: Stelios B. Papadopoulos 2. To approve an amendment of the 1997 / / / / / /
Stock Incentive Plan to increase the
number of shares authorized for
FOR WITHHELD issuance thereunder by 1,000,000
shares
/ / / /
3. To ratify the appointment of Ernst & / / / / / /
Young LLP as the Company's
independent auditors
/ / ___________________ MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided above.)
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name(s) appear on this proxy.
[Stockholder Name And When signing as attorney, executor, administrator, trustee, or
Address To Be Inserted] guardian, please give full title as such. If shares are held
jointly, each holder should sign.
Signature:__________________________ Date:_______________ Signature:__________________________ Date:__________________
</TABLE>
