EXHIBIT 10.24
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT dated as of October 15, 2002 is made by and between GenVec,
Inc. (the "Company"), and Xxxxxx X. Xxxxx (the "Executive").
WHEREAS the Company considers it essential to its best interests and to the
best interests of its stockholders to xxxxxx the continuous employment of its
key management personnel; and
WHEREAS the Company recognizes that the possibility of a Change in Control
(as defined in Section 9.6 hereof) exists, as in the case of any publicly-held
corporation, and that such possibility, and the uncertainty and questions which
it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders; and
WHEREAS the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. DEFINED TERMS. Definitions of certain capitalized terms used in this
Agreement are provided in Section 9 and elsewhere in this Agreement.
2. TERM OF AGREEMENT. This Agreement shall become effective on the date
hereof and shall remain in effect indefinitely thereafter; provided, however,
that (a) except as provided in clause (b) of this sentence, either the Company
or the Executive may terminate this Agreement by giving the other party at least
one (1) year advance written notice of such termination, and (b) if a Change in
Control shall have occurred during the term of this Agreement, this Agreement
may not be terminated until all obligations of either party hereto have been
performed in full and the Coverage Period has expired without the occurrence of
a Triggering Event. Notwithstanding the foregoing, this Agreement shall
terminate upon the Executive's Disability or death, except as to obligations of
the Company hereunder arising from a Change in Control and/or a termination of
the Executive's employment that, in either case, occurred prior to his
Disability or death.
3. AGREEMENT OF THE COMPANY. In order to induce the Executive to remain
in the employ of the Company, the Company agrees, under the terms and conditions
set forth herein, that, upon the occurrence of both a Change in Control and a
Triggering
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Event during the term of this Agreement, the Company shall provide to the
Executive the benefits described in this Section 3 (the "Severance Benefits").
3.1 SEVERANCE PAYMENT. In lieu of any further salary payments to
the Executive for periods subsequent to the Date of Termination, the Company
shall pay to the Executive a lump sum severance payment, in cash, without
discount, equal to the sum of (i) the product of (x) 18 months and (y) the
Executive's Monthly Base Salary and (ii) the Executive's Average Bonus divided
by 12 and multiplied by 18 months.
3.2 CONTINUED BENEFITS. For an 18 month period after the Date of
Termination (the "Benefits Period"), the Company shall provide the Executive
with life insurance and health insurance (together, "Welfare Benefits")
substantially similar in all respects to those which the Executive was receiving
immediately prior to the Notice of Termination. During the Benefits Period, the
Executive shall be entitled to elect to change his level of coverage and/or his
choice of coverage options (such as the Executive only or family medical
coverage) with respect to the Welfare Benefits to be provided by the Company to
the Executive to the same extent that actively employed officers of the Company
are permitted to make such changes; provided, however, that in the event of any
such changes, the Executive shall pay the amount of any cost increase that would
actually be paid by an actively employed officer of the Company by reason of
making the same changes in his level of coverage or coverage options. In the
event that the Executive becomes employed by a new employer and is eligible to
receive health insurance and/or other welfare benefits ("New Coverage"), the
Welfare Benefits coverage provided under this Section 3.2 shall be secondary to
such New Coverage.
3.3 ACCRUED COMPENSATION AND OTHER BENEFITS. To the extent not
theretofore paid or provided, the Company shall timely pay or provide to
Executive his Accrued Compensation and any Other Benefits to which Executive is
entitled.
3.4 BONUS.
(a) TERMINATION YEAR BONUS. The Company shall pay to the Executive a
lump sum cash payment equal to: (x) the product of (i) the Executive's highest
annual base salary in effect during the one (1) year period preceding the
Executive's Date of Termination divided by twelve (12) and (ii) the Executive's
Target Percentage (determined as of the Date of Termination), multiplied by (y)
the number of months (including fractions thereof) elapsed from the first day of
the Termination Year to the Date of Termination.
(b) PRECEDING FISCAL YEAR BONUS. To the extent that as of the Date of
Termination the Company has not yet determined and paid to the Executive any
incentive award to which the Executive is entitled under any Company incentive
plan with respect to the fiscal year preceding the Termination Year, the Company
shall also pay to the Executive a lump sum cash payment at a minimum equal to
the product of (x) the Executive's highest annual base salary in effect during
such fiscal year and (y) the Executive's highest Target Percentage in effect
during such fiscal year.
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4. GROSS-UP PAYMENT; CERTAIN LIMITATIONS ON PAYMENTS AND BENEFITS.
In the event that (a) the Executive becomes entitled to the Severance
Benefits or any other benefits or payments in connection with a Change in
Control or the termination of the Executive's employment, whether pursuant to
the terms of this Agreement or otherwise (collectively, but excluding the amount
of any Gross-Up Payment under this Section 4, the "Total Benefits"), and (b) any
of the Total Benefits will be subject to the Excise Tax, then the Total Benefits
shall be reduced to the extent necessary so that no portion of the Total
Benefits is subject to the Excise Tax; provided, however that if the amount of
such reduction would exceed $10,000, no such reduction shall be made and the
Company shall instead pay to the Executive an additional amount (the "Gross-Up
Payment") equal to the Excise Tax on the Total Benefits plus an amount equal to
any federal income taxes and FICA and Medicare withholding taxes payable upon
such Gross-Up Payment. For purposes of determining the amount of such Excise
Tax, the amount of the Total Benefits that shall be treated as subject to the
Excise Tax shall be equal to (i) the Total Benefits, minus (ii) the amount of
such Total Benefits that, in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive ("Tax Counsel"), are not excess
parachute payments (within the meaning of Section 280G(b)(1) of the Code).
5. TIMING OF PAYMENTS. The payments provided for in Sections 3.1 and 4
shall be made on the Date of Termination; provided, however, that if the amounts
of such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code from the Date of Termination to the payment of
such remainder) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code from the Date of Termination to the repayment of such excess).
6. REIMBURSEMENT OF LEGAL COSTS. The Company shall pay to the Executive
all reasonable legal fees and expenses incurred by the Executive as a result of
a bona fide dispute regarding the application of any provision of this Agreement
including all such fees and expenses, if any, incurred (a) in disputing any
Notice of Termination under Section 7.1 hereof, (b) in seeking to obtain or
enforce any right or benefit provided by this Agreement or (c) in connection
with any tax audit or proceeding to the extent attributable to the application
of Section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the
Executive's respective written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
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7. TERMINATION PROCEDURES.
7.1 NOTICE OF TERMINATION. After a Change in Control, any
termination of the Executive's employment (other than by reason of death) must
be preceded by a written Notice of Termination from the terminating party to the
other party hereto in accordance with Section 8.5 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall (a) specify
the date of termination (the "Date of Termination") which shall not be more than
sixty (60) days from the date such Notice of Termination is given, (b) indicate
the notifying party's opinion regarding the specific provisions of this
Agreement that will apply upon such termination and (c) set forth in reasonable
detail the facts and circumstances claimed to provide a basis for the
application of the provisions indicated. Termination of the Executive's
employment shall occur on the specified Date of Termination even if there is a
dispute between the parties relating to the provisions of this Agreement
applicable to such termination.
7.2 DISPUTE CONCERNING APPLICABLE TERMINATION PROVISIONS. If within
thirty (30) days of receiving the Notice of Termination the party receiving such
notice notifies the other party that a dispute exists concerning the provisions
of this Agreement that apply to such termination, the dispute shall be resolved
either by mutual written agreement of the parties or by expedited commercial
arbitration under the rules of the American Arbitration Association. The parties
shall pursue the resolution of such dispute with reasonable diligence. Within
five (5) days of such a resolution, any party owing any payments pursuant to the
provisions of this Agreement shall make all such payments together with interest
accrued thereon at the rate provided in Section 1274(b)(2)(B) of the Code.
8. MISCELLANEOUS.
8.1 NO MITIGATION. The Company agrees that, if the Executive's
employment by the Company is terminated in a manner that results in the payment
of Severance Benefits hereunder, the Executive shall not be required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to this Agreement. Further, the amount of any
payment or benefit provided for under this Agreement shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
8.2 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company shall be obligated to require any
successor (whether direct or indirect, by purchase, merger, consolidation,
operation of law, or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place; in the event of
such a succession, references to the "Company" herein shall thereafter be deemed
to include such successor. Failure of the Company to obtain such
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assumption and agreement at or prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to terminate
his employment and thereafter to receive Severance Benefits, except that, for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
8.3 INCOMPETENCY. Any benefit payable to or for the benefit of the
Executive, if legally incompetent, or incapable of giving a receipt therefor,
shall be deemed paid when paid to the Executive's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Company.
8.4 DEATH. This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
8.5 NOTICES. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
GenVec, Inc.
00 Xxxx Xxxxxxx Xxxx Xxxx,
Xxxxxxxxxxxx, XX 00000
Attention: Director of Human Resources
To the Executive:
Xxxxxx X. Xxxxx
GenVec, Inc.
00 Xxxx Xxxxxxx Xxxx Xxxx,
Xxxxxxxxxxxx, XX 00000
8.6 MODIFICATION, WAIVER. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically
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designated by the Board or its delegee. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
8.7 ENTIRE AGREEMENT. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
8.8 GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Maryland without regard to principles of conflicts of laws thereof.
8.9 STATUTORY CHANGES. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections.
8.10 WITHHOLDING. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law and
any additional withholding to which the Executive has agreed.
8.11 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
8.12 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this Agreement
shall be deemed to give any Executive the right to be retained in the employ of
the Company, or to interfere with the right of the Company to discharge the
Executive at any time and for any lawful reason, subject in all cases to the
terms of this Agreement.
8.13 NO ASSIGNMENT OF BENEFITS. Except as otherwise provided herein
or by law, no right or interest of any Executive under the Agreement shall be
assignable or transferable, in whole or in part, either directly or by operation
of law or otherwise, including without limitation by execution, levy,
garnishment, attachment, pledge or in any manner; no attempted assignment or
transfer thereof shall be effective; and no right or interest of any Executive
under this Agreement shall be liable for, or subject to, any obligation or
liability of such Executive.
8.14 REDUCTION OF BENEFITS BY LEGALLY REQUIRED BENEFITS.
Notwithstanding any other provision of this Agreement to the contrary, if the
Company is obligated by law or by contract (other than under this Agreement), to
pay severance pay, a termination indemnity, notice pay, or the like, or if the
Company is obligated by law or by contract to provide advance notice of
separation ("Notice Period"), then any Severance Benefits hereunder shall be
reduced by the amount of any such severance pay, termination indemnity, notice
pay or the like, as applicable, and by the amount of any pay received with
respect to any Notice Period.
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8.15 NONDISCLOSURE. During the Executive's employment with the
Company and thereafter, the Executive shall not disclose or use in any way any
confidential business or technical information or trade secret acquired in the
course of such employment, other than (i) information that is generally known in
the Company's industry or acquired from public sources, (ii) as required in the
course of such employment, (iii) as required by any court, supervisory authority
administrative agency or applicable law, or (iv) with the prior written consent
of the Company.
8.16 HEADINGS. The headings and captions herein are provided for
reference and convenience only, shall not be considered part of this Agreement,
and shall not be employed in the construction of this Agreement.
9. DEFINITIONS.
9.1 "ACCRUED COMPENSATION" means all amounts of compensation for
services rendered by Executive to the Company or any affiliate that have been
earned or accrued through the Date of Termination but that have not been paid as
of the Date of Termination, including (i) Base Salary, (ii) reimbursement (in
accordance with the Company' expense reimbursement policy) for reasonable and
necessary business expenses incurred by Executive on behalf of the Company
during the period ending on the Date of Termination, and (iii) vacation pay.
9.2 "AVERAGE BONUS" means the greater of (a) the Executive's
average annual bonus for the two fiscal years (or such shorter period (which
shall be annualized) during which the Executive has been employed by the
Company) immediately preceding the fiscal year in which a Change in Control
occurs and (b) the Executive's average bonus for the two fiscal years (or such
shorter period (which shall be annualized) during which the Executive has been
employed by the Company) immediately preceding the fiscal year which includes
the Executive's Date of Termination.
9.3 "BASE AMOUNT" shall have the meaning ascribed to such term in
Section 280G(b)(3) of the Code.
9.4 "BOARD" means the Board of Directors of the Company.
9.5 "CAUSE" means:
(a) the willful and continued failure of the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board of the Company which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed the
Executive's duties;
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(b) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to the
Company;
(c) personal dishonesty or breach of fiduciary duty to the
Company that in either case results or was intended to result in personal profit
to the Executive at the expense of the Company; or
(d) willful violation of any law, rule or regulation (other
than traffic violations, misdemeanors or similar offenses) or cease-and-desist
order, court order, judgment or supervisory agreement, which violation is
materially and demonstrably injurious to the Company.
For purposes of the preceding clauses, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith and without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon prior approval given by the Board or upon the
instructions or with the approval of the Executive's superior or based upon the
advice of counsel for the Company, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the Executive,
as part of the Notice of Termination, a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board called and held for the purpose of
considering such termination (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board) finding that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in clause (a), (b), (c), or (d)
above, and specifying the particulars thereof in detail.
9.6 A "CHANGE IN CONTROL" means the occurrence of any of the
following events:
(a) any Person or Persons acting together, excluding
employee benefit plans of the Company, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act or any successor
provisions thereto), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of the
Company's then outstanding securities;
(b) the Company's stockholders approve (or, in the event no
approval of the Company's stockholders is required, the Company consummates) a
merger, consolidation, share exchange, division or other reorganization or
transaction of the Company (a "Fundamental Transaction") with any other
corporation, other than a Fundamental Transaction which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least sixty percent (60%) of
the combined voting power immediately after such Fundamental
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Transaction of (i) the Company's outstanding securities, (ii) the surviving
entity's outstanding securities, or (iii) in the case of a division, the
outstanding securities of each entity resulting from the division;
(c) the stockholders of the Company approve a plan of
complete liquidation or winding-up of the Company or an agreement for the sale
or disposition (in one transaction or a series of transactions) of all or
substantially all of the Company's assets (other than a transfer to a
Subsidiary); or
(d) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who were directors at the beginning of
such period) cease for any reason to constitute at least a majority of the
Board.
9.7 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
9.8 "COVERAGE PERIOD" means the period commencing on the date on
which a Change in Control occurs and ending on the second anniversary date
thereof.
9.9 "DATE OF TERMINATION" has the meaning assigned to such term in
Section 7.1 hereof.
9.10 "DISABILITY" means the Executive's total and permanent
disability under the Company's long-term disability plan or policy applicable to
the Executive such that the Executive becomes eligible to receive long-term
disability benefits thereunder.
9.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
9.12 "EXCISE TAX" means any excise tax imposed under Section 4999 of
the Code.
9.13 "GOOD REASON" means:
(a) the determination by the Executive made in good faith
within the first twelve (12) months immediately following a Change in Control
that the Executive cannot effectively carry out his duties to the Company, which
determination shall be made in a writing delivered to the Company; or
(b) the occurrence during the Coverage Period of any of the
following events:
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(i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position, authority,
duties or responsibilities immediately prior to a Change in Control or any other
action by the Company which results in a diminution in any material respect in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated and inadvertent action not taken in bad faith that is remedied by
the Company promptly after receipt of notice thereof given by the Executive;
(ii) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the Company's requiring the Executive to be
based at any office or location that is more than thirty-five (35) miles from
the Executive's office or location immediately prior to a Change in Control;
(iv) the failure by the Company (a) to continue in
effect any compensation plan in which the Executive participates immediately
prior to a Change in Control that is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or (b) to continue
the Executive's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Executive's participation relative to
other participants, than existed immediately prior to the Change in Control;
(v) the failure by the Company to continue to
provide the Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company's pension, life insurance, medical,
health and accident, disability or other welfare plans in which the Executive
was participating immediately prior to the Change in Control; or
(vi) the failure by the Company to pay to the
Executive any deferred compensation when due under any deferred compensation
plan or agreement applicable to the Executive; or
(vii) the failure by the Company to honor all the
terms and provisions of this Agreement.
9.14 "MONTHLY BASE SALARY" means the greater of one twelfth of (a)
the Executive's highest annual base salary in effect during the one (1) year
period preceding a Change in Control and (b) the Executive's highest annual base
salary in effect during the one (1) year period preceding the Executive's Date
of Termination.
9.15 "NOTICE OF TERMINATION" shall have the meaning assigned to such
term in Section 6.1 hereof.
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9.16 "PERSON" shall have the meaning given in Section 3(a)(9) of the
Exchange Act and shall also include any syndicate or group deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
9.17 "SEVERANCE BENEFITS" has the meaning assigned to such term in
Section 3 hereof.
9.18 "SUBSIDIARY" means any corporation controlled by the Company,
directly or indirectly.
9.19 "TARGET PERCENTAGE" means the highest percentage that the
annual bonus paid to the Executive for each of the three most recently completed
fiscal years of the Company represented of the Executive's annual base salary
for such fiscal years.
9.20 "TERMINATION YEAR" means the Company's fiscal year during which
the Executive's Date of Termination occurs.
9.21 "TRIGGERING EVENT" means (a) the termination of the Executive's
employment by the Company at any time during the Coverage Period, other than a
termination for Cause or a termination due to the Executive's Disability or
death or (b) a termination of the Executive's employment by the Executive at any
time during the Coverage Period for Good Reason.
10. MODIFICATION OF OPTION AGREEMENTS.
While this Agreement is in effect, the definition of "Cause" and "Good
Reason" herein shall apply for purposes of all stock option agreements entered
into between the Company and the Executive on or after the date hereof and (a)
the Executive's employment shall not be treated as having been terminated
without Cause for purposes of any such stock option agreements unless the
Executive has been terminated for Cause hereunder, and (b) the Executive shall
be deemed to have terminated employment for Good Reason for purposes of such
stock option agreements if the Executive has terminated employment hereunder for
Good Reason.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officer, thereunto duly authorized, and the Executive has executed this
Agreement, all as of the day and year first above written.
GENVEC, INC.
/s/Xxxx X. Xxxxxxx
--------------------------------------------
By: Xxxx X. Xxxxxxx
Title: President and Chief Executive Officer
EXECUTIVE:
s/Xxxxxx X. Xxxxx
--------------------------------------------
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