Item 1.01.
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Entry into a Material Definitive Agreement.
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As previously disclosed, on December 26, 2017, AVEO
Pharmaceuticals, Inc. (AVEO, we, or the Company) entered into a binding Memorandum of Understanding (the MOU) with class representatives Robert Levine and William Windham (the Plaintiffs)
regarding the settlement of a securities class action lawsuit (the Class Action), purportedly brought on behalf of shareholders who purchased our common stock, $0.001 par value per share (the Common Stock), between
May 16, 2012 and May 1, 2013 (the Class), 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 and, collectively with the Company and the Plaintiffs, the Parties),
In re AVEO Pharmaceuticals, Inc.
Securities Litigation et al.
, No.
1:13-cv-11157-DJC.
On January 29, 2018, in accordance with the MOU, the Parties entered into a definitive stipulation of settlement (the Stipulation of
Settlement) that reflects terms consistent with those set forth in the MOU. Pursuant to the Stipulation of Settlement, we are required to (i) use our best efforts to cause certain of our and the Individual Defendants insurance carriers
to, within fifteen business days following preliminary approval of the Stipulation of Settlement by the Court provided certain conditions are met, provide the Class with a cash payment of $15,000,000 (the Settlement Cash), including
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 proposed settlement and (ii) issue and deliver to the
Class warrants for the purchase of 2,000,000 shares of our Common Stock (the Settlement Warrants and, collectively with the Settlement Cash, the Settlement Payment), within ten business days after the entry of the Final
Judgment (as defined below) by the Court provided certain conditions are met (the Proposed Issuance Date). The Settlement Warrants are required to be exercisable from the date of issue until the expiration of a
one-year
period after the date of issue at an exercise price of $3.00, which was the closing price for our Common Stock on The Nasdaq Capital Market on December 22, 2017, the trading day prior to the execution
of the MOU. In consideration of the Settlement Payment, the plaintiffs have agreed, on the Effective Date (as defined below), to dismiss the Class Action with prejudice and to release all claims against the Company and the Individual Defendants
by the Class.
The Stipulation of Settlement is subject to the satisfaction of conditions including the filing of the Stipulation of Settlement with the
Court, the provision of notice to the Class, and the final approval of the Stipulation of Settlement by the Court. The Stipulation of Settlement provides that the settlement will be effective on the first date on which all of the following
conditions have been met (the Effective Date): (i) the Court has entered an order preliminarily approving the settlement and directing notice of the settlement to the Class; (ii) we and certain of our and the Individual
Defendants insurance carriers have timely delivered the Settlement Payment; (iii) the Court has approved the Stipulation of Settlement and has entered a final order and judgment approving the settlement, and such judgment is no longer
subject to further appeal or other review (the Final Judgment); and (iv) our right to terminate the Stipulation of Settlement has expired.
We have agreed to use our best efforts to issue and deliver the warrants by the Proposed Issuance Date. We plan to issue the warrants pursuant to the
Stipulation of Settlement under the exemption from the registration requirements of the Securities Act of 1933, as amended (the Securities Act), provided by Section 3(a)(10) of the Securities Act.
The Stipulation of Settlement 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.