Item 1.01
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Entry into a Material Definitive Agreement.
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Memorandum of Understanding
On December 26, 2017, AVEO Pharmaceuticals, Inc. (AVEO or we) entered into a binding Memorandum of Understanding (the
MOU) with class representatives Bob Levine and William Windham (the Plaintiffs), regarding the settlement of a securities class action lawsuit (the Class Action) filed in 2013 and pending in the United States
District Court for the District of Massachusetts (the Court) against us and certain of our former officers (Tuan
Ha-Ngoc,
David Johnston, and William Slichenmyer, together, the Individual
Defendants),
In re AVEO Pharmaceuticals, Inc. Securities Litigation et al.
, No.
1:13-cv-11157-DJC.
As previously
disclosed, the Class Action was purportedly brought on behalf of shareholders who purchased our common stock between May 16, 2012 and May 1, 2013 (the Class).
Under the terms of the MOU, which outlines certain elements of the settlement, we have agreed with counsel for the Plaintiffs to cause certain of our and the
Individual Defendants insurance carriers to provide the Class with a cash payment of $15,000,000, which includes the cash amount of any attorneys fees or litigation expenses that the Court may award Plaintiffs counsel and
costs Plaintiffs incur in administering and providing notice of the settlement. Additionally, we agreed to issue to the Class warrants for the purchase of 2,000,000 shares of AVEO common stock exercisable from the date of issue until the
expiration of a
one-year
period after the date of issue at an exercise price equal to the closing price on December 22, 2017, the trading day prior to the execution of the MOU, which was $3.00. In
consideration of this settlement payment, Plaintiffs have agreed that the settlement will include a dismissal of the Class Action with prejudice and a release of all claims against the Company and the Individual Defendants (the
Release) by the Class.
The settlement is subject to the execution of a definitive settlement agreement, notice to the Class, and final
approval of the Court and shall be effective on the date (the Effective Date) on which all of the following circumstances have occurred: (a) a final judgment containing the Release has been entered by the Court (Final
Judgment); (b) no appeal is pending with respect to the Final Judgment; (c) the Final Judgment has not been reversed, modified, vacated or amended; (d) the time to file any appeal from the Final Judgment has expired without the
filing of an appeal or an order dismissing the appeal or affirming the Final Judgment has been entered, and any time to file a further appeal (including a writ of certiorari or for reconsideration of the appeal) has expired; and (e) the MOU and
any settlement agreement with respect to the claims released in the Final Judgment have not expired or been terminated.
We have agreed to use our best
efforts to issue and deliver the warrants within ten business days following the Effective Date. We anticipate that the warrants, when issued pursuant to the settlement, will be exempt from the registration requirements of the Securities Act of
1933, as amended (the Securities Act) pursuant to Section 3(a)(10) of the Securities Act.
The MOU contains no admission of wrongdoing.
AVEO and the Individual Defendants have always maintained and continue to believe that they did not engage in any wrongdoing or otherwise commit any violation of federal or state securities laws or other laws. However, given the potential cost and
burden of continued litigation, we believe the settlement is in our best interests and the best interests of our stockholders.
The foregoing summary of
the Memorandum of Understanding is qualified in its entirety by the full text of the Memorandum of Understanding, which is attached hereto as Exhibit 10.1 and is hereby incorporated by reference into this Item 1.01.