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Garnitschnig v. Horovitz

United States District Court, Fourth Circuit

November 20, 2013

GEORG GARNITSCHNIG, Plaintiff,
v.
ZOLA HOROVITZ, et al., Defendants.

MEMORANDUM OPINION

ALEXANDER WILLIAMS, Jr., District Judge.

Pending before the Court is Plaintiff Georg Garnitschnig's Motion for Preliminary Injunction. Doc. No. 12. A motion hearing was held on November 15, 2013. The Court ruled at the close of the hearing that Plaintiff's Motion would be denied. This Memorandum Opinion supplements the Court's oral ruling.

I. BACKGROUND

A. Factual Background

GenVec Inc., a Delaware corporation, is a biopharmaceutical company that works with other companies and the U.S. Government to leverage its proprietary gene-delivery technologies to address prevention and treatment of significant health concerns. From 2004 through 2010, GenVec's leading product candidate was TNFerade, a novel product intended to treat patients with cancer. On March 29, 2010, GenVec announced that it was discontinuing its clinical trial for the product because interim results suggested that the product would not obtain FDA approval. After the announcement, GenVec's stock price dropped by more than 72%. This led to the filing of a securities class action in addition to the pending lawsuit. Judge Chasanow dismissed with prejudice the securities class action on September 20, 2013. Shah v. GenVec, Inc., No. DKC 12-0341, 2013 WL 5348133 (D. Md. Sept. 20, 2013).

In early 2011, following the announcement that its clinical trial for TNFerade would cease, GenVec began planning a reverse stock split that would increase the share price of its common stock in order to comply with NASDAQ listing standards. Swirsky Dec., Doc. No. 17-2 ¶ 6. GenVec's stockholders approved a one-to-ten reverse stock split on April 5, 2011. Id. The pending dispute revolves largely around the GenVec Board of Directors' adoption of the 2011 Omnibus Incentive Plan ("the Plan") during the same period in which it considered and passed the reverse stock split. The final Plan-approved by the Board on April 21, 2011- provided the following:

6.2. Limitation on Shares of Stock Subject to Awards and Cash Awards.
During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act:
(a) the maximum number of shares of Stock subject to Options or SARs [stock appreciation rights] that may be granted under the Plan in a calendar year to any person eligible for an Award under Section 6 is 250, 000 shares ["option awards"];
(b) the maximum number of shares of Stock that may be granted under the Plan, other than pursuant to Options or SARs, in a calendar year to any person eligible for an Award under Section 6 is 120, 500 shares ["restricted stock awards"].

Doc. No. 17-2 ¶ 11; Doc. No. 17-2 Ex. A. The Plan also provided the following:

5.3. Amendment and Termination.
The Board may, at any time and from time to time, amend, suspend or terminate the Plan as to any shares of Stock to which Awards have not been made. The effectiveness of any amendment to the Plan shall be contingent on approval of such amendment by the Company's shareholders to the extent provided by the Board or required by Applicable ...

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