PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒

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))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under § 240.14a-12

AVEO PHARMACEUTICALS, 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 all boxes that apply):

 

No fee required

 

Fee paid previously with preliminary materials

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION—NOVEMBER 15, 2022

 

 

LOGO

AVEO PHARMACEUTICALS, INC.

30 WINTER STREET

BOSTON, MASSACHUSETTS 02108

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

                , 2022

Dear Stockholders of AVEO Pharmaceuticals, Inc.:

You are cordially invited to attend a special meeting of the stockholders of AVEO Pharmaceuticals, Inc., a Delaware corporation (referred to as “AVEO,” the “Company,” “we,” “us” or “our”), to be held on                 ,                 , at                 , local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, located at 60 State Street, 26th Floor, Boston, MA 02109 (the special meeting and any adjournments or postponements thereof, referred to as the “Special Meeting”).

We have entered into an Agreement and Plan of Merger (as it may be amended from time to time, referred to as the “Merger Agreement”), dated as of October 18, 2022, with LG Chem, Ltd., a corporation organized and existing under the laws of the Republic of Korea (referred to as “LG Chem”), and Acacia Acquisition Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of LG Chem (referred to as “Merger Sub”). Pursuant to and subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into AVEO, with AVEO surviving the merger as an indirect wholly owned subsidiary of LG Chem (referred to as the “Merger”).

At the Special Meeting, you will be asked to consider and vote on a proposal to adopt the Merger Agreement (referred to as the “Merger Proposal”). The affirmative vote of the holders of a majority of the shares of AVEO common stock issued and outstanding and entitled to vote thereon as of the close of business on                 , 2022 (referred to as the “Record Date”) is required to approve the Merger Proposal. At the Special Meeting, you will also be asked to consider and vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid or become payable to AVEO’s named executive officers that is based on or otherwise relates to the Merger (referred to as the “Merger Compensation Proposal”). At the Special Meeting, you will also be asked to consider and vote on a proposal to approve the adjournment of the Special Meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Special Meeting (referred to as the “Adjournment Proposal”).

If the Merger is consummated, you will be entitled to receive $15.00 in cash, without interest, for each share of AVEO common stock that you own (unless you have properly exercised appraisal rights under Section 262 of the General Corporation Law of the State of Delaware (referred to as “Section 262” and the “DGCL,” respectively), including, among other requirements, by not voting in favor of the Merger Proposal and do not thereafter fail to perfect, effectively withdraw or otherwise lose your appraisal rights). Such Merger Consideration (as defined below) represents a premium of approximately 43% over the AVEO common stock closing price of $10.48 on October 17, 2022, the last trading day before the public announcement that AVEO entered into the Merger Agreement.


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The Board of Directors of AVEO (the “Board”), after considering the factors more fully described in the enclosed proxy statement, has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to, and in the best interests of, AVEO and AVEO’s stockholders, (ii) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby and (iii) resolved to recommend that AVEO’s stockholders adopt the Merger Agreement. The Board unanimously recommends that AVEO stockholders vote “FOR” the Merger Proposal. In addition, the Board unanimously recommends that AVEO stockholders vote “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement and is incorporated herein by reference. The proxy statement also describes the actions and determinations of the Board in connection with its evaluation of the Merger Agreement and the Merger. We encourage you to read the accompanying proxy statement, including all documents incorporated by reference into the proxy statement, and its annexes, including the Merger Agreement, carefully and in their entirety, as they contain important information. You may also obtain more information about AVEO from documents we file with the Securities and Exchange Commission (referred to as the “SEC”) from time to time.

Whether or not you plan to attend the Special Meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying postage prepaid envelope or grant your proxy electronically over the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted.

Your vote is very important, regardless of the number of shares that you own. We cannot consummate the Merger unless the Merger Proposal is approved by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of AVEO’s common stock entitled to vote thereon as of the Record Date.

If you have questions or need assistance voting your shares of AVEO common stock, please contact:

 

 

LOGO

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower,

Stamford, CT 06902,

AVEO.info@investor.morrowsodali.com

Call Collect: (203) 658-9400

or

Toll-Free (800) 662-5200

On behalf of the Board, I thank you for your support and appreciate your consideration of this matter.

Very truly yours,

Michael Bailey

President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the Merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. This proxy statement is dated                 , 2022 and, together with the enclosed form of proxy card, is first being mailed to stockholders on or about                 , 2022.


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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION—NOVEMBER 15, 2022

 

 

LOGO

AVEO PHARMACEUTICALS, INC.

30 Winter Street

Boston, Massachusetts 02108

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON                 ,                 

 

 

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of AVEO Pharmaceuticals, Inc., a Delaware corporation (referred to as “AVEO,” the “Company,” “we,” “us” or “our”), will be held on                 ,                 , at                 , local time, at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, located at 60 State Street, 26th Floor, Boston, MA 02109, for the following purposes:

 

  1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time, referred to as the “Merger Agreement”), dated as of October 18, 2022, among LG Chem, Ltd., a corporation organized and existing under the laws of the Republic of Korea (referred to as “LG Chem”), Acacia Acquisition Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of LG Chem (referred to as “Merger Sub”), and AVEO, pursuant to which Merger Sub will be merged with and into AVEO, with AVEO surviving the merger as an indirect wholly owned subsidiary of LG Chem (referred to as the “Merger”);

 

  2.

To consider and vote on a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid or become payable to AVEO’s named executive officers that is based on or otherwise relates to the Merger; and

 

  3.

To consider and vote on a proposal to approve the adjournment of the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the proposal to adopt the Merger Agreement at the time of the special meeting (the special meeting and any adjournments or postponements thereof, referred to as the “Special Meeting”).

Only stockholders of record as of the close of business on                 , 2022 (referred to as the “Record Date”) are entitled to notice of the Special Meeting and to vote at the Special Meeting (including at any adjournment or postponement thereof).

The Board unanimously recommends that you vote:

 

1.

“FOR” the proposal to adopt the Merger Agreement (referred to as the “Merger Proposal”);

 

2.

“FOR” the proposal to approve, on a non-binding, advisory basis, certain compensation that will or may be paid or become payable to AVEO’s named executive officers that is based on or otherwise relates to the Merger (referred to as the “Merger Compensation Proposal”); and

 

3.

“FOR” the proposal to approve the adjournment of the Special Meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Special Meeting (referred to as the “Adjournment Proposal”).


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Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the Special Meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you fail to return your proxy card, grant your proxy electronically over the Internet or by telephone or vote by ballot at the Special Meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the Merger Proposal.

Under Delaware law, stockholders who do not vote in favor of the Merger Proposal will have the right to seek appraisal of the fair value of their shares of AVEO common stock as determined by the Delaware Court of Chancery if the Merger (referred to as the “Delaware Court”) is consummated, but only if they submit a written demand for such an appraisal before the vote on the Merger Proposal and otherwise comply with the other Delaware law procedures summarized in the accompanying proxy statement.

 

By Order of the Board of Directors,
Michael Bailey
President and Chief Executive Officer
Boston, Massachusetts
                    , 2022


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YOUR VOTE IS VERY IMPORTANT!

If your shares are registered directly in your name: If you are a stockholder of record, you may grant a proxy to vote your shares through the Internet, by telephone or by mail as described below. Please help us save time and postage costs by granting a proxy through the Internet or by telephone. Each such method is generally available twenty four (24) hours a day and will ensure that your proxy to vote your shares is confirmed and posted immediately. To grant a proxy to vote your shares:

 

  1.

BY INTERNET

 

  a.

Go to the website at www.proxypush.com/AVEO, twenty (24) hours a day, seven (7) days a week, until 11:59 p.m. Eastern Time on                     ,                     , the day preceding the Special Meeting.

 

  b.

Please have your proxy card available to verify your identity and create an electronic proxy.

 

  c.

Follow the simple instructions provided.

 

  2.

BY TELEPHONE

 

  a.

On a touch-tone telephone, call toll-free 1-866-230-6355, twenty four (24) hours a day, seven (7) days a week, until 11:59 p.m. Eastern Time on                     ,                     , the day preceding the Special Meeting.

 

  b.

Please have your proxy card available to verify your identity.

 

  c.

Follow the simple instructions provided.

 

  3.

BY MAIL

 

  a.

Mark, sign and date your proxy card.

 

  b.

Return it prior to 11:59 p.m. Eastern Time on                     ,                     , the day preceding the Special Meeting, in the postage-paid envelope provided.

If your shares are held in the name of a bank, broker or other nominee: You will receive instructions on how to vote from the bank, broker or other nominee. You must follow the instructions of such bank, broker or other nominee in order for your shares to be voted. Telephone and Internet voting instructions also may be offered to stockholders owning shares through certain banks and brokers. As a beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote the shares in your account. Your bank, broker or other nominee cannot vote on any of the proposals to be considered at the Special Meeting, including the Merger Proposal, without your instructions.

If you fail to return your proxy card, grant your proxy electronically over the Internet or by telephone or vote by ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you hold your shares through a bank, broker or other nominee, you must obtain from such nominee a valid “legal proxy” issued in your name in order to vote in person at the Special Meeting.

We encourage you to read the accompanying proxy statement, including all documents incorporated by reference into the accompanying proxy statement, and its annexes, carefully and in their entirety. If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or require assistance in submitting your proxy or voting your shares of AVEO common stock, please contact our proxy solicitor or us by using the contact information provided below:


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LOGO

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower,

Stamford, CT 06902,

AVEO.info@investor.morrowsodali.com

Call Collect: (203) 658-9400

or

Toll-Free (800) 662-5200

or

 

 

LOGO

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attn: Corporate Secretary

Call: (857) 400-0101


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS

     1  

SUMMARY

     13  

THE COMPANIES

     24  

THE SPECIAL MEETING

     25  

Date, Time and Place of the Special Meeting

     25  

Purpose of the Special Meeting

     25  

Record Date; Shares Entitled to Vote; Quorum

     25  

Vote Required; Abstentions and Broker Non-Votes

     26  

Shares Held by Directors and Executive Officers

     26  

Voting; Proxies

     26  

Revocability of Proxies

     28  

Abstentions

     28  

Adjournments and Postponements

     29  

Board Recommendation

     29  

Solicitation of Proxies

     29  

Anticipated Date of Consummation of the Merger

     29  

Appraisal Rights

     30  

Householding of Special Meeting Materials

     30  

Questions and Additional Information

     31  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     32  

THE MERGER

     34  

Certain Effects of the Merger on AVEO

     34  

Effect on AVEO if the Merger is Not Consummated

     34  

Merger Consideration

     35  

Background of the Merger

     35  

Recommendation of the Board and Reasons for the Merger

     47  

Opinion of Moelis & Company LLC

     54  

Certain Unaudited Prospective Financial Information

     62  

Interests of the Directors and Executive Officers of AVEO in the Merger

     66  

Financing of the Merger

     69  

Closing and Effective Time of the Merger

     70  

Appraisal Rights

     70  

Material U.S. Federal Income Tax Consequences of the Merger

     75  

Regulatory Approvals Required for the Merger

     78  

Delisting and Deregistration of AVEO Common Stock

     79  

THE MERGER AGREEMENT

     80  

Explanatory Note Regarding the Merger Agreement

     80  

When the Merger Becomes Effective

     80  

Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

     81  

Effect of the Merger on AVEO Common Stock

     81  

Treatment of Equity Awards and the ESPP

     81  

Dissenting Shares

     82  

Payment for AVEO Common Stock

     82  

Representations and Warranties

     83  

Conduct of Business Pending the Merger

     88  

Other Covenants and Agreements

     91  

Conditions to the Merger

     99  

Termination

     101  

 

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Termination Fee; Certain Expenses

     103  

Expenses Generally

     104  

Specific Performance

     104  

Amendments; Waiver

     104  

Governing Law and Jurisdiction

     105  

PROPOSAL NO. 1: APPROVAL OF THE MERGER PROPOSAL

     106  

The Merger Proposal

     106  

Vote Required

     106  

Board Recommendation

     106  

PROPOSAL NO. 2: ADVISORY VOTE ON THE MERGER COMPENSATION PROPOSAL

     107  

The Merger Compensation Proposal

     107  

Quantification of Potential Payments and Benefits to AVEO’s Named Executive Officers

     107  

Vote Required

     109  

Board Recommendation

     109  

PROPOSAL NO. 3: ADJOURNMENT OF THE SPECIAL MEETING

     110  

The Adjournment Proposal

     110  

Vote Required

     110  

Board Recommendation

     110  

MARKET PRICES AND DIVIDEND DATA

     111  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     112  

FUTURE STOCKHOLDER PROPOSALS

     114  

WHERE YOU CAN FIND MORE INFORMATION

     115  

MISCELLANEOUS

     117  

ANNEX A—AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B—OPINION OF MOELIS & COMPANY LLC

     B-1  

 

ii


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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the special meeting (together with any adjournments or postponements thereof, referred to as the “Special Meeting”), the Merger Agreement (as defined below) and the transactions contemplated by the Merger Agreement, pursuant to which Merger Sub (as defined below) will be merged with and into AVEO (as defined below), with AVEO surviving the merger as an indirect wholly owned subsidiary of LG Chem (as defined below) (referred to as the “Merger”). Please refer to the “Summary” beginning on page 13 of this proxy statement and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents incorporated by reference or referred to in this proxy statement, which you should read carefully and in their entirety.

Except as otherwise specifically noted in this proxy statement or as context otherwise requires, “AVEO,” “we,” “our,” “us,” the “Company” and similar words in this proxy statement refer to AVEO Pharmaceuticals, Inc. including, in certain cases, our subsidiaries. Throughout this proxy statement we refer to LG Chem, Ltd. as “LG Chem” and Acacia Acquisition Sub, Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated as of October 18, 2022, as it may be amended from time to time, among LG Chem, Merger Sub and AVEO, as the “Merger Agreement.”

 

Q:

Why am I receiving these materials?

 

A:

On October 18, 2022, AVEO entered into the Merger Agreement providing for the merger of Merger Sub, an indirect wholly owned subsidiary of LG Chem, with and into AVEO, with AVEO surviving the merger as an indirect wholly owned subsidiary of LG Chem. The Board of Directors of AVEO (referred to as the “Board”) is furnishing this proxy statement and form of proxy card to the holders of AVEO common stock as of the Record Date (as defined below) in connection with the solicitation of proxies to be voted at the Special Meeting.

 

Q:

What is the proposed transaction?

 

A:

The proposed transaction is the acquisition of AVEO by LG Chem pursuant to the Merger Agreement. If the proposal to adopt the Merger Agreement is approved by the holders of a majority of the shares of AVEO common stock issued and outstanding and entitled to vote thereon as of the Record Date (as defined below) and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will be merged with and into AVEO, with AVEO surviving the Merger as an indirect wholly owned subsidiary of LG Chem. As a result of the Merger, AVEO common stock will no longer be publicly traded and will be delisted from the Nasdaq Capital Market (referred to as “Nasdaq”). In addition, AVEO common stock will be deregistered under the Securities Exchange Act of 1934, as amended (referred to as the “Exchange Act”), and AVEO will no longer file periodic reports with the U.S. Securities and Exchange Commission (referred to as the “SEC”).

 

Q:

What will I receive if the Merger is consummated?

 

A:

Upon consummation of the Merger, you will be entitled to receive $15.00 in cash, without interest (referred to as the “Merger Consideration”), for each share of AVEO common stock that you own as of the Effective Time (as defined below), unless you have properly exercised and not failed to perfect, effectively withdrawn or otherwise lost your right to appraisal in accordance with Section 262 of the General Corporation Law of the State of Delaware (referred to as the “DGCL”). For example, if you own 100 shares of AVEO common stock as of the Effective Time, you will receive $1,500.00 in cash in exchange for your shares of AVEO common stock (less any applicable withholding taxes). You will not be entitled to receive shares in the surviving corporation or in LG Chem as a result of the Merger.

 

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Q:

How does the Merger Consideration compare to the unaffected market price of AVEO common stock prior to the public announcement that AVEO entered into the Merger Agreement? How does the Merger Consideration compare to the market price of AVEO common stock as of a recent trading date?

 

    

The Merger Consideration represents a premium of approximately 43% over the closing price of AVEO common stock on Nasdaq of $10.48 on October 17, 2022, the last trading day before the public announcement that AVEO entered into the Merger Agreement. On                 , 2022, the last practicable day before the printing of this proxy statement, the closing price of AVEO common stock on Nasdaq was $                 per share. You are encouraged to obtain current market quotations for AVEO common stock.

 

Q:

When and where is the Special Meeting?

 

A:

The Special Meeting will take place on                 ,                  at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, located at 60 State Street, 26th Floor, Boston, MA 02109, at                 , local time.

 

Q:

What am I being asked to vote on at the Special Meeting?

 

A:

You are being asked to consider and vote on the following proposals:

 

   

To adopt the Merger Agreement (referred to as the “Merger Proposal”);

 

   

To approve, on a non-binding, advisory basis, certain compensation that will or may be paid or become payable to AVEO’s named executive officers that is based on or otherwise relates to the Merger (referred to as the “Merger Compensation Proposal”); and

 

   

To approve the adjournment of the Special Meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the proposal to adopt the Merger Agreement at the time of the Special Meeting (referred to as the “Adjournment Proposal”).

 

Q:

Who is entitled to vote at the Special Meeting?

 

A:

Only holders of record of AVEO common stock as of the close of business on                 , 2022 (referred to as the “Record Date”) will be entitled to notice of, and to vote at, the Special Meeting. As of the close of business on the Record Date, there were                  shares of AVEO common stock issued and outstanding. Each outstanding share of AVEO common stock on that date will entitle its holder to one vote, in person or by proxy, on all matters to be voted on at the Special Meeting.

 

Q:

What vote is required to approve the Merger Proposal?

 

A:

The affirmative vote of the holders of a majority of the shares of AVEO common stock issued and outstanding and entitled to vote thereon as of the Record Date is required to approve the Merger Proposal.

The failure to grant a proxy to vote your shares of common stock by submitting a signed proxy card, granting a proxy electronically over the Internet or by telephone or to vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the Merger Proposal. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee on how to vote your shares of AVEO common stock on the Merger Proposal may result in a broker non-vote resulting in the same effect as a vote “AGAINST” the Merger Proposal. Abstentions by you or your bank, broker or other nominee will have the same effect as a vote “AGAINST” the Merger Proposal.

 

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Q:

What factors did the Transaction Committee and the Board consider in deciding to enter into the Merger Agreement and recommending the approval of the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal?

 

A:

The committee of the Board established on April 29, 2022 (the “Transaction Committee”), in reaching its decision to unanimously recommend that the Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, and recommend that our stockholders approve the Merger Proposal consulted with our management, as well as our legal and financial advisors, and considered the terms of the proposed Merger Agreement and the transactions contemplated thereby, including the Merger, as well as other alternatives. The Board, in reaching its decision to unanimously approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, and to recommend that our stockholders approve the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal took into account the unanimous recommendation of the Transaction Committee with respect to the Merger Proposal and also consulted with our management, as well as our legal and financial advisors, and considered the terms of the proposed Merger Agreement and the transactions contemplated thereby, including the Merger, as well as other alternatives. For a more detailed description of these factors, see “The Merger—Recommendations of the Transaction Committee and the Board and Reasons for the Merger” beginning on page 47 of this proxy statement.

 

Q:

What is a quorum and how many shares are needed to constitute a quorum?

 

A:

A quorum of stockholders is the presence of stockholders holding the minimum number of shares necessary to transact business at the Special Meeting. The holders of a majority of the voting power of the issued and outstanding shares entitled to vote at the Special Meeting, either present in person, present by means of remote communication in a manner, if any, authorized by the Board in its sole discretion, or represented by proxy, will constitute a quorum at the Special Meeting. If a quorum is not present, then under our second amended and restated bylaws, either (i) the stockholders present at the Special Meeting in person or represented by proxy and entitled to vote, or (ii) the chairperson of the Special Meeting, may each adjourn the meeting, and it will not be necessary to notify any stockholder of any adjournment of less than thirty (30) days if the time and place of the adjourned meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting.

If you submit a signed proxy card, grant a proxy electronically over the Internet or by telephone, or if you attend the Special Meeting (regardless of whether you indicate how you wish to vote), your shares of AVEO common stock will be counted for purposes of determining the presence of a quorum. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee on how to vote your shares of AVEO common stock on all proposals to be brought before the Special Meeting will result in such shares not being counted for purposes of determining the presence of a quorum. If you hold your shares in “street name,” and provide instructions to your bank, broker or other nominee on how to vote your shares of AVEO common stock on one or more proposals to be brought before the Special Meeting, your shares will be counted for purposes of determining the presence of a quorum. Abstentions by you or your bank, broker or other nominee will be counted for purposes of determining the presence of a quorum.

 

Q:

What vote is required to approve the Merger Compensation Proposal?

 

A:

If a quorum is present at the Special Meeting, the affirmative vote of the holders of shares of AVEO common stock having a majority in voting power of the votes cast by the holders of all shares of AVEO common stock present in person or by proxy at the Special Meeting and voting affirmatively or negatively on such matter is required to approve the Merger Compensation Proposal.

 

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Assuming a quorum is present at the Special Meeting, the failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the Special Meeting will not have any effect on the Merger Compensation Proposal. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee on how to vote your shares on the Merger Compensation Proposal may result in a broker non-vote. Broker non-votes, if any, will not have any effect on the Merger Compensation Proposal and abstentions by you or your bank, broker or other nominee will not have any effect on the Merger Compensation Proposal, in each case assuming a quorum is present at the Special Meeting.

Because the vote on the Merger Compensation Proposal is advisory only, it will not be binding on either AVEO or LG Chem. Accordingly, if the Merger Proposal is approved and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the non-binding, advisory vote of AVEO’s stockholders on the Merger Compensation Proposal.

 

Q:

What vote is required to approve the Adjournment Proposal?

 

A:

If a quorum is present at the Special Meeting, the affirmative vote of the holders of AVEO common stock having a majority in voting power of the votes cast by the holders of all shares of AVEO common stock present in person or by proxy at the Special Meeting and voting affirmatively or negatively on such matter is required to approve the Adjournment Proposal.

Assuming that a quorum is present at the Special Meeting, the failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the Special Meeting will not have any effect on the Adjournment Proposal. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee on how to vote your shares on the Adjournment Proposal may result in a broker non-vote on such proposal. Broker non-votes, if any, will not have any effect on the Adjournment Proposal and abstentions by you or your bank, broker or other nominee will not have any effect on the Adjournment Proposal, in each case assuming that a quorum is present at the Special Meeting.

 

Q:

How does the Board recommend that I vote?

 

A:

The Board, after considering the various factors described under “The Merger—Recommendations of the Transaction Committee and the Board and Reasons for the Merger” beginning on page 47 of this proxy statement, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to, and in the best interests of, AVEO and AVEO’s stockholders, (ii) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby and (iii) resolved to recommend that AVEO’s stockholders adopt the Merger Agreement.

The Board unanimously recommends that you vote “FOR” the Merger Proposal, “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.

 

Q:

What do I need to do now?

 

A:

We encourage you to read this proxy statement, the annexes to this proxy statement, including the Merger Agreement, and the documents we incorporate by reference and refer to in this proxy statement carefully and consider how the Merger affects you, and then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically on the Internet or by telephone, so that your shares can be present and voted at the Special Meeting. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. Please do not send your stock certificates with your proxy card.

 

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Q:

How do I vote?

 

A:

If you are a stockholder of record (that is, if your shares of AVEO common stock are registered in your name with our transfer agent, Computershare Trust Company, N.A. (referred to as “Computershare”)), there are four ways to cause your shares to be voted at the Special Meeting:

 

   

by attending the Special Meeting and voting in person by ballot;

 

   

by visiting the Internet at the address on your proxy card and granting your proxy;

 

   

by calling toll-free (within the United States or Canada) the phone number on your proxy card and granting your proxy; or

 

   

by completing, dating, signing and returning the enclosed proxy card in the accompanying prepaid reply envelope.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal.

A control number, located on your proxy card, is designed to verify your identity and allow you to grant a proxy to vote your shares of common stock, and to confirm that your voting instructions have been properly recorded when granting a proxy electronically over the Internet or by telephone. Please be aware that, although there is no charge for granting a proxy to vote your shares, if you grant a proxy electronically over the Internet or by telephone, you may incur costs such as telephone and Internet access charges for which you will be responsible. Even if you plan to attend the Special Meeting in person, you are strongly encouraged to grant a proxy to vote your shares of common stock.

If your shares are held in “street name” through a bank, broker or other nominee, you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting “AGAINST” the Merger Proposal.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by or on behalf of AVEO.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of such shares of AVEO common stock and are considered to hold them in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee on how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain a valid “legal proxy” from your bank, broker or other nominee.

 

Q:

Will my shares of AVEO common stock held in “street name” or another form of record ownership be combined for voting purposes with shares I hold as the stockholder of record?

 

A:

No. Because any shares of AVEO common stock you may hold in “street name” will be deemed to be held by a different stockholder than any shares of AVEO common stock you hold as the stockholder of record, any shares of AVEO common stock held in “street name” will not be combined for voting purposes with the

 

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  shares of AVEO common stock you hold as the stockholder of record. Similarly, if you own shares of AVEO common stock in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card for those shares of AVEO common stock because they are held in a different form of record ownership. Shares of AVEO common stock held by a corporation or business entity must be voted by an authorized officer of the entity. Shares of AVEO common stock held in an individual retirement account must be voted under the rules governing the account.

 

Q:

If I hold my shares of AVEO common stock in “street name,” will my bank, broker or other nominee vote my shares for me on the proposals to be considered at the Special Meeting?

 

A:

Not without your direction. Your bank, broker or other nominee will only be permitted to vote your shares of AVEO common stock on any “non-routine” proposal if you instruct your bank, broker or other nominee on how to vote. Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote your shares on routine matters if you fail to instruct your bank, broker or other nominee on how to vote your shares of AVEO common stock with respect to such matters. The proposals in this proxy statement are non-routine matters, and banks, brokers and other nominees therefore cannot vote on these proposals without your instructions. Therefore, it is important that you instruct your bank, broker or other nominee on how you wish to vote your shares.

You should follow the procedures provided by your bank, broker or other nominee to instruct them, as applicable, to vote your shares of AVEO common stock. Without such instructions, a broker non-vote may result, and your shares will not be voted at the Special Meeting on any matter as to which you have not given instructions. The failure to instruct your broker on to how vote your shares on the Merger Proposal will have the same effect as if you voted “AGAINST” the Merger Proposal.

 

Q:

What happens if I do not vote?

 

A:

The required vote to approve the Merger Proposal is based on the total number of shares of AVEO common stock issued and outstanding as of the close of business on the Record Date, not just the shares that are voted at the Special Meeting. If you do not vote in person or by proxy, it will have the same effect as a vote “AGAINST” the Merger Proposal.

 

Q:

May I change my vote after I have mailed my signed proxy card or otherwise submitted my vote by proxy?

 

A:

Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time by:

 

   

delivering a written notice of revocation of your proxy to our Corporate Secretary at AVEO Pharmaceuticals, Inc., Attention: Corporate Secretary, 30 Winter Street, Boston, Massachusetts 02108 prior to 11:59 pm Eastern Time on                 ,                 , the day preceding the Special Meeting;

 

   

signing a new proxy card with a date later than the date of the previously submitted proxy card relating to the same shares of AVEO common stock and returning it to us by mail prior to 11:59 pm Eastern Time on                 ,                 , the day preceding the Special Meeting;

 

   

submitting a new proxy by telephone or Internet prior to 11:59 pm Eastern Time on                 ,                 , the day preceding the Special Meeting; or

 

   

attending the Special Meeting and voting in person (simply attending the Special Meeting will not cause your proxy to be revoked).

 

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Please note that if you hold your shares of common stock in “street name,” and you have instructed a broker, bank or other nominee to vote your shares, the above-described options for revoking your voting instructions do not apply, and instead you should contact your bank, broker or other nominee for instructions regarding how to change or revoke your vote. You may also vote in person at the Special Meeting if you obtain a valid “legal proxy” from your bank, broker or other nominee.

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person (referred to as a “proxy”) to vote your shares of AVEO common stock. This written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of AVEO common stock is called a “proxy card.” The Board has designated each of Michael Bailey and Erick Lucera, with full power of substitution, as proxies for the Special Meeting.

 

Q:

If a stockholder gives a proxy, how are the shares voted?

 

A:

Regardless of the method you choose to grant a proxy to vote your shares, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted “FOR” or “AGAINST” or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted (i) “FOR” the Merger Proposal, (ii) “FOR” the Merger Compensation Proposal and (iii) “FOR” the Adjournment Proposal.

 

Q:

May I attend the Special Meeting and vote in person?

 

A:

Yes. All stockholders of AVEO as of the Record Date may attend the Special Meeting and vote in person. Stockholders will need to present proof of ownership of AVEO common stock, such as a bank or brokerage account statement, and a form of personal identification to be admitted to the Special Meeting. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Special Meeting. Even if you plan to attend the Special Meeting in person, we encourage you to complete, sign, date and return the enclosed proxy or grant a proxy electronically over the Internet or via telephone to ensure that your shares will be represented at the Special Meeting. If you hold your shares in “street name,” because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain a valid “legal proxy” from your bank, broker or other nominee.

 

Q:

What happens if I sell or otherwise transfer my shares of AVEO common stock before consummation of the Merger?

 

A:

If you sell or transfer your shares of AVEO common stock before consummation of the Merger, you will have transferred your right to receive the Merger Consideration in the Merger. In order to receive the Merger Consideration, you must hold your shares of AVEO common stock through consummation of the Merger.

The Record Date for stockholders entitled to vote at the Special Meeting is earlier than the date the Merger is anticipated to be consummated. Accordingly, if you sell or transfer your shares of AVEO common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies AVEO in writing of such special arrangements, you will transfer the right to receive the Merger

 

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Consideration, if the Merger is consummated, to the person to whom you sell or transfer your shares of AVEO common stock, but you will have retained your right to vote these shares at the Special Meeting. Even if you sell or otherwise transfer your shares of AVEO common stock after the Record Date, we encourage you to complete, date, sign and return the enclosed proxy card or grant a proxy via the Internet or telephone.

 

Q:

How will I receive the Merger Consideration to which I am entitled, if the Merger is consummated?

 

A:

If you hold your shares of common stock in certificated form, you will receive a letter of transmittal shortly after the Merger is consummated instructing you how to surrender your stock certificates, to an exchange agent to be designated by LG Chem in order to receive the Merger Consideration to which you are entitled. Please do not send in your stock certificates now. If you hold your shares of common stock in book-entry form but not through the Depository Trust Company (referred to as “DTC”), you will receive instructions regarding delivery of an “agent’s message” with respect to such book-entry shares. If your shares of AVEO common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the Merger Consideration.

 

Q:

I do not know where my stock certificate is. How will I get the Merger Consideration for my shares?

 

A:

If the Merger is consummated, the transmittal materials you will receive after the consummation of the Merger will include the procedures that you must follow if you cannot locate your stock certificate. This will include an affidavit that you will need to sign attesting to the loss of your stock certificate. You may also be required to post a bond as indemnity against any potential loss.

 

Q:

When do you expect the Merger to be consummated?

 

A:

Consummation of the Merger is subject to various closing conditions, including, among others, adoption of the Merger Agreement by the holders of a majority of the shares of AVEO common stock issued and outstanding and entitled to vote thereon as of the Record Date, the expiration or termination of the required waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (referred to as the “HSR Act”), receipt of CFIUS Approval (as defined below), and certain other conditions. For a more detailed description of the parties obligations to consummate the Merger, including the parties obligations to obtain the necessary regulatory approval, see “The Merger Agreement—Other Covenants and Agreements—Efforts to Consummate the Merger” beginning on page 91 of this proxy statement.

We currently anticipate that the Merger will be consummated in early 2023, assuming satisfaction or waiver of all of the conditions to the Merger. However, it is possible, including as a result of factors outside the control of AVEO and LG Chem, that the Merger will be consummated at a later time or not at all.

 

Q:

What effects will the Merger have on AVEO?

 

A:

Our common stock is currently registered under the Exchange Act and is listed on Nasdaq under the symbol “AVEO.” As a result of the Merger, AVEO will cease to be a publicly traded company and will become an indirect wholly owned subsidiary of LG Chem. As soon as reasonably practicable following the consummation of the Merger, our common stock will cease trading on and be delisted from Nasdaq and will be deregistered under the Exchange Act, and AVEO will no longer be required to file periodic reports with the SEC.

 

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Q:

Why am I being asked to vote on the Merger Compensation Proposal?

 

A:

In accordance with the rules promulgated under Section 14A of the Exchange Act, we are providing you with the opportunity to cast a non-binding, advisory vote on the compensation that may be payable to our named executive officers in connection with the Merger.

 

Q:

What will happen if the stockholders do not approve the Merger Compensation Proposal at the Special Meeting?

 

A:

Approval of the Merger Compensation Proposal is not a condition to the completion of the Merger. In addition, the vote with respect to the Merger Compensation Proposal is on an advisory basis and will not be binding on AVEO or LG Chem. Further, the underlying compensation plans and agreements are contractual in nature and are not, by their terms, subject to stockholder approval. Accordingly, if the Merger Proposal is approved and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the non-binding, advisory vote of AVEO’s stockholders on the Merger Compensation Proposal.

 

Q:

What happens if the Merger is not consummated?

 

A:

If the Merger Agreement is not adopted by the holders of a majority of the issued and outstanding shares of AVEO common stock entitled to vote thereon as of the Record Date or if the Merger is not consummated for any other reason, AVEO stockholders will not receive any payment for their shares of AVEO common stock pursuant to the Merger Agreement. Instead, AVEO will remain a public company, AVEO common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act and AVEO will continue to file periodic reports with the SEC.

Under specified circumstances, we may be required to pay LG Chem a termination fee of $20.4 million upon the termination of the Merger Agreement as described under “The Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement.

 

Q:

Do any directors or executive officers have interests in the Merger that may differ from those of AVEO stockholders generally?

 

A:

In considering the recommendation of the Board with respect to the Merger Proposal, you should be aware that our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder. The Board was aware of these potential interests and considered them, among other matters, in approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted by our stockholders. For a description of the potential interests of our directors and executive officers in the Merger, see “The Merger—Interests of the Directors and Executive Officers of AVEO in the Merger” beginning on page 66 of this proxy statement.

 

Q:

Who will count the votes obtained at the Special Meeting?

 

A:

The votes will be counted by the inspector of election appointed for the Special Meeting.

 

Q:

Where can I find the voting results of the Special Meeting?

 

A:

We intend to publish final voting results in a Current Report on Form 8-K that we will file with the SEC within four (4) business days following the Special Meeting. All reports that we file with the SEC are publicly available when filed. See “Where You Can Find More Information” beginning on page 115 of this proxy statement.

 

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Q:

Is the Merger expected to be taxable to me?

 

A:

Yes. The exchange of shares of AVEO common stock for cash pursuant to the Merger will generally be a taxable transaction to U.S. holders and certain non-U.S. holders for U.S. federal income tax purposes. A U.S. holder (or a non-U.S. holder that is subject to U.S. federal income tax on its gain from the Merger) who exchanges shares of AVEO common stock for cash in the Merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the stockholder’s adjusted tax basis in such shares. This may also be a taxable transaction under applicable state, local and/or foreign income or other tax laws. You should read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 75 for the definition of “U.S. holder” and “non-U.S. holder” and a more detailed discussion of the material U.S. federal income tax consequences of the Merger. Because individual circumstances may differ, you should also consult your tax advisor for a complete analysis of the effect of the Merger on your U.S. federal, state and local and/or foreign taxes.

 

Q:

What will the holders of AVEO equity awards receive if the Merger is consummated?

 

A:

Effective as of immediately prior to the Effective Time, each option to purchase shares of AVEO common stock that is outstanding and unexercised immediately prior thereto will be cancelled and converted into the right to receive an amount in cash, if any, equal to the product of (i) the excess, if any, of the Merger Consideration over the exercise price of such stock option and (ii) the number of shares of AVEO common stock underlying such option, less any applicable withholding taxes.

For additional information regarding the treatment of AVEO equity awards, see “The Merger Agreement—Treatment of Equity Awards and the ESPP” beginning on page 81 of this proxy statement.

 

Q:

What will happen to the AVEO Amended and Restated 2010 Employee Stock Purchase Plan if the Merger is consummated?

 

A:

The Merger Agreement provides that, except for the offering period under AVEO’s Amended and Restated 2010 Employee Stock Purchase Plan (referred to as the “ESPP”) that was in effect on October 18, 2022 and expires on December 14, 2022 (referred to as the “Final Offering Period”), no new offering periods under the ESPP have commenced or will commence following October 18, 2022, there will be no increase in the amount of payroll deductions or payroll contributions permitted to be made by the participants under the ESPP during the current offering period, except those made in accordance with payroll deduction elections that are in effect as of October 18, 2022, and no individuals will be permitted to commence participation in the ESPP following October 18, 2022. If the Effective Time occurs during the Final Offering Period, such offering period shall automatically terminate and accumulated payroll deductions shall, in AVEO’s sole discretion, be (i) returned to participants or (ii) used to purchase shares of AVEO common stock, in each case, pursuant to the terms and conditions of the ESPP immediately prior to the Effective Time. The Final Offering Period is expected to expire prior to the Effective Time, but, in the event that it does not, AVEO currently expects that it would elect to have such accumulated payroll deductions used to purchase shares of AVEO common stock, pursuant to the terms and conditions of the ESPP immediately prior to the Effective Time. For additional information regarding the ESPP, see “The Merger Agreement—Treatment of Equity Awards and the ESPP” beginning on page 81 of this proxy statement.

 

Q:

Am I entitled to appraisal rights instead of receiving the Merger Consideration for my shares of common stock under the DGCL?

 

A:

Yes. Holders of AVEO common stock immediately prior to the Effective Time are entitled to appraisal rights under Section 262 of the DGCL (referred to as “Section 262”) in connection with the Merger if they

 

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  take certain actions and satisfy the conditions set forth in Section 262 of the DGCL. Under the DGCL, stockholders and beneficial owners who do not vote for the adoption of the Merger Agreement have the right to seek appraisal of the fair value of their shares of AVEO common stock as determined by the Delaware Court of Chancery (referred to as the “Delaware Court”) if the Merger is consummated, but only if they comply fully with all applicable requirements of Section 262 of the DGCL. Any appraisal amount determined by the court could be more than, the same as, or less than the value of the Merger Consideration. Any stockholder or beneficial owner intending to exercise appraisal rights must, among other things, submit a written demand for appraisal to AVEO before the vote on the adoption of the Merger Agreement is taken and must not vote or otherwise submit a proxy to vote in favor of adoption of the Merger Agreement. Because any proxy that is submitted without an indication as to how you wish to vote will be voted “FOR” the Merger Proposal, if you wish to exercise appraisal rights or preserve your right to do so, any proxy submitted by you must provide instructions to vote “AGAINST” or “ABSTAIN” on the Merger Proposal. Failure to follow exactly the procedures specified under Section 262 of the DGCL will result in the loss of appraisal rights. Because of the complexity of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights we encourage you to seek the advice of your own legal counsel. See “The Merger—Appraisal Rights” beginning on page 70 of this proxy statement.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if your shares of common stock are held in more than one brokerage account or are registered differently, you will receive more than one proxy card or voting instruction card. Please complete, date, sign and return (or grant a proxy to vote via the Internet or telephone with respect to) each proxy card and voting instruction card that you receive to ensure that all of your shares of AVEO common stock are voted.

 

Q:

What is householding and how does it affect me?

 

A:

The SEC permits us to send a single set of proxy materials to any household at which two or more stockholders reside, unless contrary instructions have been received, but only if we provide advance notice and follow certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of shares of AVEO common stock held through brokerage firms. If your family has multiple accounts holding shares of AVEO common stock, you may have already received householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement. The broker will arrange for delivery of a separate copy of this proxy statement promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.

 

Q:

Who can help answer my questions?

 

A:

If you have any more questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or enclosed proxy card, or require assistance in submitting your proxy or voting your shares of AVEO common stock, please contact our proxy solicitor or us at the contact information provided below:

 

 

LOGO

 

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Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower,

Stamford, CT 06902,

AVEO.info@investor.morrowsodali.com

Call Collect: (203) 658-9400

or

Toll-Free (800) 662-5200

or

 

 

LOGO

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attn: Corporate Secretary

Call: (857) 400-0101

If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.

 

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SUMMARY

This summary highlights selected information contained in this proxy statement, including with respect to the Merger and the Merger Agreement. This summary may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should read carefully this entire proxy statement, the annexes, including the Merger Agreement, and the documents we incorporate by reference in this proxy statement. You may obtain the documents and information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 115 of this proxy statement. The Merger Agreement is attached as Annex A to this proxy statement and incorporated herein by reference.

The Companies (page 24)

AVEO Pharmaceuticals, Inc.

AVEO is a Delaware corporation with principal executive offices located at 30 Winter Street, Boston, Massachusetts 02108, telephone number (857) 400-0101. AVEO is a commercial stage, oncology-focused biopharmaceutical company committed to delivering medicines that provide a better life for patients with cancer. The common stock of AVEO is listed on Nasdaq under the symbol “AVEO.” See “The Companies—AVEO Pharmaceuticals, Inc.” beginning on page 24 of this proxy statement.

Additional information about AVEO is contained in certain of its public filings that are incorporated herein by reference. See “Where You Can Find More Information” beginning on page 115 of this proxy statement.

LG Chem, Ltd.

LG Chem is a corporation organized and existing under the laws of the Republic of Korea with principal executive offices located at 128, Yeoui-daero, Yeongdeungpo-g, Seoul, Republic of Korea, telephone number +82-2-6987-4030. LG Chem is a South Korean chemicals company publicly-traded on the Korea Exchange. See “The Companies—LG Chem, Ltd.” beginning on page 24 of this proxy statement.

Acacia Acquisition Sub, Inc.

Merger Sub is a Delaware corporation and an indirect wholly owned subsidiary of LG Chem, with a registered office located at 1209 Orange Street, Wilmington, Delaware 19801, telephone number +82-2-6987-4030. Merger Sub was formed solely for the purpose of effecting the Merger and the transactions contemplated by the Merger Agreement. See “The Companies— Acacia Acquisition Sub, Inc.” beginning on page 24 of this proxy statement.

The Special Meeting (page 25)

This proxy statement is furnished in connection with the solicitation by the Board of proxies to be voted at a Special Meeting of AVEO stockholders to be held on                 ,                 , at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, located at 60 State Street, 26th Floor, Boston, MA 02109, at                 , local time.

At the Special Meeting, we will ask our stockholders of record as of the Record Date to vote on (i) the Merger Proposal, (ii) the Merger Compensation Proposal and (iii) the Adjournment Proposal.

The Merger Proposal (page 106)

You will be asked to consider and vote upon the proposal to adopt the Merger Agreement. The Merger Agreement provides, among other things, that, upon the terms and subject to the satisfaction or waiver of the

 

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conditions set forth therein, Merger Sub will be merged with and into AVEO, with AVEO surviving the Merger as an indirect wholly owned subsidiary of LG Chem and that, at the Effective Time and as a result of the Merger, each share of AVEO common stock issued and outstanding immediately prior to the Effective Time (other than shares held by AVEO, LG Chem, any subsidiary of LG Chem, or any stockholder who has properly exercised his, her or its appraisal rights) will be automatically cancelled and converted into the right to receive the Merger Consideration.

Following the Merger, AVEO common stock will no longer be publicly listed and traded on Nasdaq, and existing AVEO stockholders will cease to have any ownership interest in AVEO.

Record Date; Shares Entitled to Vote; Quorum (page 25)

You are entitled to receive notice and to vote at the Special Meeting if you owned shares of AVEO common stock as of the close of business on the Record Date for the Special Meeting.

A quorum of stockholders is necessary to transact business at the Special Meeting. The presence at the Special Meeting, in person or by proxy, of the holders of a majority of the voting power of the issued and outstanding shares entitled to vote at the Special Meeting, will constitute a quorum at the Special Meeting, permitting AVEO to transact business at the Special Meeting.

Vote Required to Approve the Merger (page 26)

Each share of AVEO common stock issued and outstanding as of the close of business on the Record Date is entitled to one vote at the Special Meeting.

Approval of the Merger Proposal requires the holders of a majority of the shares of AVEO common stock issued and outstanding and entitled to vote thereon as of the Record Date to vote “FOR” the Merger Proposal. A failure to vote your shares of common stock or an abstention from voting for the Merger Proposal will have the same effect as a vote “AGAINST” the Merger Proposal.

As of the Record Date, there were                  shares of AVEO common stock outstanding and entitled to vote at the Special Meeting.

Recommendations of the Transaction Committee and the Board and Reasons for the Merger (page 47)

The Board, after considering various factors more fully described under “The Merger—Recommendations of the Transaction Committee and the Board and Reasons for the Merger” beginning on page 47 of this proxy statement, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to, and in the best interests of, AVEO and AVEO’s stockholders, (ii) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby and (iii) resolved to recommend that AVEO’s stockholders adopt the Merger Agreement.

The Board unanimously recommends that AVEO stockholders vote “FOR” the Merger Proposal. In addition, the Board unanimously recommends that AVEO stockholders vote “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.

Opinion of Moelis & Company LLC (page 54)

AVEO retained Moelis & Company LLC (“Moelis”) to act as its exclusive financial advisor in connection with the Merger. At the meeting of the Board on October 17, 2022 to evaluate and consider approval of the Merger Agreement and the Merger, Moelis delivered an oral opinion, which was confirmed by delivery of a written

 

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opinion, dated October 17, 2022, addressed to the Board to the effect that, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken as set forth in the opinion, the Merger Consideration of $15.00 per share to be received by holders of AVEO Common Stock (other than LG Chem and its affiliates, together, the “Excluded Holders”) in the Merger was fair, from a financial point of view, to such holders.

The full text of Moelis’ written opinion dated October 17, 2022, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board (solely in its capacity as such) in its evaluation of the Merger. Moelis’ opinion was limited solely to the fairness, from a financial point of view, of the Merger Consideration to be received by holders of AVEO common stock (other than the Excluded Holders) in the Merger, and does not address AVEO’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to AVEO. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Merger or any other matter. Moelis’ opinion was approved by a Moelis & Company LLC fairness opinion committee.

For a further discussion of Moelis’ opinion, see “The Merger  Opinion of Moelis & Company LLC” beginning on page 54.

Certain Effects of the Merger on AVEO (page 34)

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will be merged with and into AVEO, with AVEO surviving as an indirect wholly owned subsidiary of LG Chem. Throughout this proxy statement, we use the term “surviving corporation” to refer to AVEO as the surviving corporation following the Merger. If the Merger is consummated, you will not own any shares of the capital stock of the surviving corporation.

The effective time of the Merger (referred to as the “Effective Time”) will occur, if it occurs, upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later date and time as we and LG Chem may agree in writing and specify in such certificate of merger). Throughout this proxy statement, we use the term “Closing Date” to refer to the date on which the closing of the Merger occurs.

Effect on AVEO if the Merger is Not Consummated (page 34)

If the Merger Agreement is not adopted by the holders of a majority of the issued and outstanding shares of AVEO common stock entitled to vote thereon as of the Record Date or if the Merger is not consummated for any other reason, AVEO stockholders will not receive any payment for their shares of AVEO common stock pursuant to the Merger Agreement. Instead, AVEO will remain a public company, AVEO common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act, and AVEO will continue to file periodic reports with the SEC. Under specified circumstances, upon termination of the Merger Agreement, AVEO may be required to pay LG Chem a termination fee, as described under “The Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement.

Furthermore, if the Merger is not consummated, and depending on the circumstances that would have caused the Merger not to be consummated, the price of our common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades as of the date of this proxy statement.

 

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Merger Consideration (page 35)

In the Merger, each outstanding share of AVEO common stock (other than Cancelled Shares and Dissenting Shares, each as defined below) will be converted into the right to receive the Merger Consideration. As of the Effective Time, all shares of AVEO common stock converted into the right to receive the Merger Consideration will automatically be cancelled, and will cease to exist, and each holder of a share represented by a certificate (referred to as “Certificates”) or uncertificated shares of AVEO common stock (referred to as “Uncertificated Shares”), which immediately prior to the Effective Time represented shares of AVEO common stock, will cease to have any rights with respect to such shares of AVEO common stock other than the right to receive the Merger Consideration.

As described further under “The Merger Agreement—Payment for AVEO Common Stock” beginning on page 82 of this proxy statement, on the Closing Date, LG Chem will deposit or cause to be deposited cash in an amount necessary to pay the aggregate Merger Consideration with an agent appointed by LG Chem and reasonably acceptable to AVEO (referred to as the “exchange agent”) (which amount will not include any amounts payable to the holders of AVEO equity awards, which amounts will be paid through the payroll system of the surviving corporation). Promptly after consummation of the Merger, holders of Certificates will receive a letter of transmittal instructing them to send their Certificates to the exchange agent in order to receive the Merger Consideration for each share of AVEO common stock represented by such Certificates.

At the Effective Time, any shares of AVEO common stock held, in each case immediately prior to the Effective Time, by AVEO as treasury stock, by LG Chem, by Merger Sub or by any direct or indirect wholly-owned subsidiary of AVEO, LG Chem or Merger Sub (referred to as “Cancelled Shares”) will automatically be cancelled and will cease to exist, and no consideration or payment will be delivered in exchange for such shares.

Further, any shares of AVEO common stock owned by stockholders who did not vote in favor of approving the Merger Proposal and who are entitled to demand and have properly exercised appraisal rights in respect of such shares in accordance with all applicable provisions of Section 262 of the DGCL and do not thereafter fail to perfect, validly withdraw, or otherwise lose their appraisal rights under Delaware law (referred to as “Dissenting Shares”) will not be converted into the right to receive the Merger Consideration, and the holders thereof will be entitled only to such rights as are granted by Section 262 of the DGCL. See “The Merger—Appraisal Rights” beginning on page 70 of this proxy statement.

After the Merger is consummated, under the terms of the Merger Agreement, you will have the right to receive the Merger Consideration, but you will no longer have any rights as an AVEO stockholder as a result of the Merger (except that any holder of Dissenting Shares will have those rights granted under Section 262), nor will you be entitled to receive any shares in LG Chem or the surviving corporation.

Treatment of AVEO Equity Awards (page 81)

Under the Merger Agreement, each Company stock option outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to receive an amount in cash, if any, equal to the product of (i) the excess, if any, of the Merger Consideration over the exercise price of such stock option and (ii) the number of shares of common stock underlying such option, less any applicable withholding taxes.

Treatment of the ESPP (page 81)

The Merger Agreement provides that AVEO will take all actions as may be necessary to ensure that, except for the Final Offering Period, no new offering periods under the ESPP have commenced or will commence following October 18, 2022, there will be no increase in the amount of payroll deductions or payroll contributions

 

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permitted to be made by the participants under the ESPP during the current offering period, except those made in accordance with payroll deduction elections that are in effect as of October 18, 2022, and no individuals will be permitted to commence participation in the ESPP following October 18, 2022. If the Effective Time occurs during the Final Offering Period, such offering period shall automatically terminate and accumulated payroll deductions shall, in AVEO’s sole discretion, be (i) returned to participants or (ii) used to purchase shares of AVEO common stock, in each case, pursuant to the terms and conditions of the ESPP immediately prior to the Effective Time. The Final Offering Period is expected to expire prior to the Effective Time, but, in the event that it does not, AVEO currently expects that it would elect to have such accumulated payroll deductions used to purchase shares of AVEO common stock, pursuant to the terms and conditions of the ESPP immediately prior to the Effective Time. For additional information regarding the ESPP, see “The Merger Agreement—Treatment of Equity Awards and the ESPP” beginning on page 81 of this proxy statement.

Interests of the Directors and Executive Officers of AVEO in the Merger (page 66)

In considering the recommendation of the Board with respect to the Merger Proposal, our stockholders should be aware that members of the Board and AVEO’s executive officers may have various interests in the Merger that may be in addition to, or different from, the interests of AVEO stockholders generally. The members of the Board were aware of these potential interests and considered them at the time they approved the Merger Agreement and in making their recommendation that the AVEO stockholders adopt the Merger Agreement. These potential interests include, but may not be limited to:

 

   

each member of the Board and each of AVEO’s executive officers holds outstanding AVEO equity awards. All such equity awards outstanding as of the date of this proxy statement will be cancelled and converted into the right to receive an amount in cash (if any) at the Effective Time, as described under the section entitled “The Merger Agreement—Treatment of Equity Awards and the ESPP” beginning on page 81;

 

   

each of AVEO’s executive officers is a participant in AVEO’s executive severance and change in control benefits plan which provides for severance payments and benefits upon a qualifying termination in connection with a change in control (including the Merger), as described under the section entitled “The Merger—Interests of the Directors and Executive Officers of AVEO in the Merger—Change in Control Severance Benefits” beginning on page 66; and

 

   

continued indemnification and advancement in favor of the current and former directors and officers of AVEO, as well as certain obligations related to maintenance of directors’ and officers’ liability insurance.

For additional information on the potential interests of members of the Board and AVEO’s executive officers in the Merger, see “The Merger—Interests of the Directors and Executive Officers of AVEO in the Merger” beginning on page 66.

Financing of the Merger (page 69)

The consummation of the Merger is not conditioned upon receipt of financing by LG Chem. However, AVEO has agreed that it will use its reasonable best efforts to provide to LG Chem (at LG Chem’s sole expense) such historical financial information prepared by AVEO in the ordinary course of AVEO’s financial reporting practice as may be reasonably requested by LG Chem to assist with respect to any potential financing arrangements to the extent customary for financing arrangements entered into in connection with transactions of similar size and nature as those contemplated in the Merger Agreement; upon the terms and subject to the conditions and exceptions set forth in the Merger Agreement and as further described in the section of this proxy statement captioned “The Merger—Financing of the Merger” beginning on page 69.

AVEO has also agreed that it will use its best efforts to deliver all notices, cooperate with LG Chem and take all other actions to facilitate the termination at closing of all commitments in respect of AVEO’s existing credit

 

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agreement, the repayment in full on the Closing Date of all obligations in respect of the indebtedness under AVEO’s existing credit agreement (as described in the section of this proxy statement captioned “The Merger—Financing of the Merger” beginning on page 69), and the release on the Closing Date of any liens securing all such indebtedness and guarantees in connection therewith, subject to LG Chem providing all funds required to effect all such repayments at the closing.

Appraisal Rights (page 70)

If the Merger is consummated, persons who do not wish to accept the Merger Consideration are entitled to seek appraisal of their shares of AVEO common stock under Section 262 and, if all procedures described in Section 262 are strictly complied with, to receive payment in cash for the fair value of their shares of AVEO common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court, together with interest, if any, to be paid upon the amount determined to be the fair value. The “fair value” of your shares of AVEO common stock as determined by the Delaware Court may be more or less than, or the same as, the Merger Consideration that you are otherwise entitled to receive under the Merger Agreement. These rights are known as “appraisal rights.” This proxy statement serves as a notice of such appraisal rights pursuant to Section 262.

Persons who exercise appraisal rights under Section 262 will not receive the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. They will receive an amount determined to be the “fair value” of their shares of AVEO common stock following petition to, and an appraisal by, the Delaware Court. Persons considering seeking appraisal should recognize that the fair value of their shares of AVEO common stock determined under Section 262 could be more than, the same as or less than the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. Strict compliance with the procedures set forth in Section 262 is required. Failure to comply strictly with all of the procedures set forth in Section 262 will result in the loss or waiver of appraisal rights. Consequently, and in view of the complexity of the provisions of Section 262, persons wishing to exercise appraisal rights are urged to consult their legal and financial advisors before attempting to exercise such rights.

A holder of record or a beneficial owner of shares of AVEO common stock who (i) continuously holds such shares through the Effective Time, (ii) has not consented to or otherwise voted in favor of the Merger or otherwise waived appraisal rights, (iii) strictly complies with the procedures under Section 262, (iv) does not thereafter withdraw his, her or its demand for appraisal of such shares and (v) in the case of a beneficial owner, a person who (A) reasonably identifies in his, her or its demand the holder of record of the shares for which the demand is made, (B) provides documentary evidence of such beneficial owner’s beneficial ownership and a statement that such documentary evidence is a true and correct copy of what it purports to be and (C) provides an address at which such beneficial owner consents to receive notices given by AVEO and to be set forth on the Chancery List (as defined in the section of this proxy statement entitled “The Merger—Appraisal Rights”), will be entitled to receive the fair value of his, her or its shares of AVEO common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court, together with interest, if any, to be paid upon the amount determined to be the fair value.

A copy of Section 262 may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. The summary contained in the section of this proxy statement entitled “The MergerAppraisal Rights” is not a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to Section 262 and any amendments thereto after the date of this proxy statement. Any person who desires to exercise his, her or its appraisal rights should review carefully Section 262 and is urged to consult his, her or its legal advisor before electing or attempting to exercise such rights. For more information, please see the section of this proxy statement entitled “The MergerAppraisal Rights”.

 

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Material U.S. Federal Income Tax Consequences of the Merger (page 75)

The exchange of shares of AVEO common stock for cash pursuant to the Merger will generally be a taxable transaction to U.S. holders and certain non-U.S. holders for U.S. federal income tax purposes. A U.S. holder (or a non-U.S. holder that is subject to U.S. federal income tax on its gain from the Merger) who exchanges shares of AVEO common stock for cash in the Merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the stockholder’s adjusted tax basis in such shares. This may also be a taxable transaction under applicable state, local and/or foreign income or other tax laws. You should read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 75 for the definition of “U.S. holder” and “non-U.S. holder” and a more detailed discussion of the material U.S. federal income tax consequences of the Merger. You should also consult your tax advisor for a complete analysis of the effect of the Merger on your U.S. federal, state and local and/or foreign taxes.

Regulatory Approvals Required for the Merger (page 78)

Under the Merger Agreement, the Merger cannot be consummated until (i) the applicable waiting period (and any extension thereof) under the HSR Act has expired or been terminated and (ii) receipt of CFIUS Approval (as defined below). AVEO and LG Chem filed their respective HSR Act notifications on November 1, 2022 and delivered the draft joint voluntary notice to CFIUS on November 8, 2022. We currently do not expect that any other clearance, approval or consent would be required under any other applicable antitrust law in connection with the Merger.

No Solicitation; Acquisition Proposals (page 91)

From October 18, 2022, until the earlier to occur of the termination of the Merger Agreement in accordance with its terms and the Effective Time, neither AVEO nor any of its subsidiaries can, and each of them must cause their respective representatives not to, directly or indirectly:

 

   

solicit, initiate or knowingly take any action to facilitate or encourage the submission of, or that would reasonably be expected to result in the submission of, any Acquisition Proposal (as defined and described under “The Merger Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement);

 

   

enter into or participate in any discussions (except solely to notify a person that makes any inquiry or offer with respect to an Acquisition Proposal of the existence of the non-solicitation provisions contained in the Merger Agreement) or negotiations with, furnish any information relating to AVEO or any of its subsidiaries or afford access to the business, properties, assets, books or records of AVEO or any of its subsidiaries to, or otherwise cooperate in any way with, any third party in connection with, or for the purpose of knowingly encouraging or facilitating, an Acquisition Proposal;

 

   

effect an Adverse Recommendation Change (as defined and described under “The Merger Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement); or

 

   

authorize or enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement, option agreement or other similar instrument or agreement, whether written or oral, binding or non-binding, relating to an Acquisition Proposal.

 

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Notwithstanding the foregoing, if before obtaining the affirmative vote of the holders of a majority of the outstanding shares of AVEO common stock entitled to vote thereon as of the Record Date in favor of the Merger Proposal (which is referred to as the “AVEO Stockholder Approval”), AVEO receives a bona fide written Acquisition Proposal that did not result from a breach of AVEO’s covenants and agreements related to non-solicitation as set forth in the Merger Agreement and the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, that such proposal constitutes or would reasonably be expected to lead to a Superior Proposal (as defined and described under “The Merger Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement), AVEO may, subject to certain requirements:

 

   

engage in negotiations or discussions with such third party regarding such Acquisition Proposal; and

 

   

furnish non-public information to such third party so long as such information was or is concurrently made available to LG Chem and such person enters into a confidentiality agreement with AVEO on terms specified in the Merger Agreement. Except as described below, AVEO is not permitted to, and is required to cause its representatives not to, directly or indirectly, effect an Adverse Recommendation Change or authorize or enter into an agreement relating to an Acquisition Proposal, in each case, as described in more detail under “The Merger Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement.

Before obtaining the AVEO Stockholder Approval, the Board, in response to (i) AVEO’s receipt of a bona fide Acquisition Proposal that (A) did not result from a breach of AVEO’s covenants and agreements related to non-solicitation as set forth in the Merger Agreement and (B) the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, constitutes a Superior Proposal or (ii) an Intervening Event (as defined and described under “The Merger Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement), may effect an Adverse Recommendation Change or, in the case of clause (i) above and subject to compliance with certain procedures specified in the Merger Agreement, authorize and cause AVEO to terminate the Merger Agreement and, concurrently with such termination, enter into a definitive agreement with respect to such Superior Proposal.

However, the Board is not permitted to take the actions described in the paragraph immediately above unless, among other things, (i) the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, that the failure to take such action would reasonably be expected to be inconsistent with the Board’s fiduciary duties under applicable law, (ii) we provide LG Chem with at least five (5) business days’ prior written notice of the intention to take such action, (iii) during such five (5) business day period, we negotiate in good faith with LG Chem (if requested by LG Chem) amendments or modifications to the terms of the Merger Agreement and (iv) following such five (5) business day period, the Board concludes, after considering the terms of any amendments or modifications to the Merger Agreement offered by LG Chem, and after consultation with its financial advisor and outside legal counsel, that, in the case of an Acquisition Proposal, the applicable Acquisition Proposal continues to constitute a Superior Proposal, and that the failure to effect an Adverse Recommendation Change or, if applicable, terminate the Merger Agreement and enter into a definitive agreement for a Superior Proposal, would still reasonably be expected to be inconsistent with the fiduciary duties of the Board under applicable law (all as described in more detail under “The Merger Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement).

For a further discussion of the limitations on solicitation of Acquisition Proposals from third parties, the limitations on making an Adverse Recommendation Change, approving or recommending a Superior Proposal, or terminating the Merger Agreement to enter into a definitive agreement for a Superior Proposal, see “The Merger

 

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Agreement—Other Covenants and Agreements—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement.

Conditions to the Merger (page 99)

The obligations of AVEO, LG Chem and Merger Sub to consummate the Merger are subject to the satisfaction or (where permitted by applicable law) written waiver by AVEO and LG Chem of the following conditions:

 

   

the absence of any temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction that remains in effect and prevents the consummation of the Merger, and the absence of any applicable law or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Merger by any governmental authority which directly or indirectly prohibits, or makes illegal the consummation of the Merger;

 

   

receipt of AVEO Stockholder Approval; and

 

   

(i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act and (ii) receipt of CFIUS Approval.

The obligations of LG Chem and Merger Sub to consummate the Merger are subject to the satisfaction or (where permitted by applicable law) written waiver by LG Chem of the following conditions:

 

   

the accuracy of the representations and warranties made by AVEO in the Merger Agreement, subject to certain materiality qualifications and other exceptions;

 

   

AVEO’s performance and compliance in all material respects with all agreements and covenants required to be performed or complied with by AVEO at or prior to the Effective Time;

 

   

the non-occurrence of any Material Adverse Effect (as defined under “The Merger Agreement—Representations and Warranties” beginning on page 83 of this proxy statement) since October 18, 2022, that is continuing as of immediately prior to the Effective Time; and

 

   

delivery of an officer’s certificate by AVEO certifying that the conditions described in the three preceding bullet points have been satisfied.

The obligations of AVEO to consummate the Merger are subject to the satisfaction or (where permitted by applicable law) written waiver by AVEO of the following conditions:

 

   

the accuracy of the representations and warranties made by LG Chem in the Merger Agreement, subject to certain materiality qualifications and other exceptions;

 

   

LG Chem and Merger Sub’s performance and compliance in all material respects with all agreements and covenants required to be performed or complied with by LG Chem or Merger Sub at or prior to the Effective Time; and

 

   

the delivery of an officer’s certificate by LG Chem certifying that the conditions described in the two preceding bullet points have been satisfied.

Termination (page 101)

The Merger Agreement may be terminated and the transactions contemplated thereby may be abandoned, at any time prior to the Effective Time, whether before or after the AVEO Stockholder Approval has been obtained (except as otherwise stated below), as follows:

 

   

by mutual written agreement of AVEO and LG Chem;

 

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by either AVEO or LG Chem if:

 

   

the Merger has not been consummated on or before April 19, 2023 (which date will be automatically extended, under certain circumstances, to October 18, 2023, and is referred to, including as so extended, as the “End Date,” as described in more detail under “The Merger Agreement—Termination” beginning on page 101 of this proxy statement) provided that this right to terminate the Merger Agreement is not available to any party whose material breach of any provision of the Merger Agreement is the primary cause, or resulted in, the failure of the Merger to be consummated by such time; or

 

   

there shall be any applicable law or other legal restraint or prohibition that, in each case, is in effect, has become final and nonappealable and permanently restrains, enjoins, prevents, makes illegal, or otherwise prohibits the consummation of any of the transactions contemplated by the Merger Agreement provided that this right to terminate the Merger Agreement will not be available to any party whose (or whose affiliate’s) material breach of any provision of the Merger Agreement has been the primary cause of, or resulted in, any of the foregoing events; or

 

   

the AVEO Stockholder Approval is not obtained at the Special Meeting at which a vote on the Merger Proposal is taken; or

 

   

by LG Chem, if:

 

   

prior to obtaining the AVEO Stockholder Approval, an Adverse Recommendation Change shall have occurred; or

 

   

prior to obtaining the AVEO Stockholder Approval, AVEO has intentionally and materially breached its covenants and agreements related to non-solicitation as set forth in the Merger Agreement; or

 

   

a breach or failure to be true of any representation or warranty of AVEO set forth in the Merger Agreement or a breach or failure to perform any covenant or agreement set forth in the Merger Agreement on the part of AVEO shall have occurred which breach or failure would cause the conditions to LG Chem’s and Merger Sub’s obligations to consummate the Merger relating to the accuracy of AVEO’s representations and warranties or the performance of AVEO’s agreements and covenants to not be satisfied and such breach or failure cannot be cured by AVEO prior to the End Date or, if capable of being cured, is not cured, following receipt by AVEO from LG Chem of written notice of such breach or failure, by the earlier to occur of (x) thirty (30) days after receipt of such notice from LG Chem and (y) the date that is two (2) days prior to the End Date; provided that LG Chem will not have this right to terminate the Merger Agreement if either LG Chem or Merger Sub is then in material breach of any representation, warranty, covenant or obligation of LG Chem or Merger Sub under the Merger Agreement; or

 

   

by AVEO, if:

 

   

prior to obtaining the AVEO Stockholder Approval, (A) the Board has determined that an Acquisition Proposal constitutes a Superior Proposal, (B) AVEO has complied with certain of its covenants and agreements set forth in the Merger Agreement with respect to, among other matters, non-solicitation of Acquisition Proposals and providing notice to LG Chem of such Acquisition Proposal and AVEO’s intent to terminate the Merger Agreement and, if requested by LG Chem, discussing and negotiating with LG Chem any proposed amendments or modifications to the terms of the Merger Agreement, and as more fully described under “The Merger Agreement—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement, (C) AVEO, substantially concurrently with and as a condition to such termination, pays the Termination Fee payable to LG Chem pursuant to the

 

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Merger Agreement as more fully described under “The Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement and (D) substantially concurrently with such termination, AVEO enters into a definitive agreement in respect of a Superior Proposal in accordance with the Merger Agreement; or

 

   

a breach or failure to be true of any representation or warranty of LG Chem or Merger Sub set forth in the Merger Agreement or a breach or failure to perform any covenant or agreement set forth in the Merger Agreement on the part of LG Chem or Merger Sub shall have occurred which breach or failure would cause the conditions to AVEO’s obligations to consummate the Merger relating to the accuracy of LG Chem’s or Merger Sub’s representations and warranties or the performance of LG Chem’s or Merger Sub’s agreements and covenants to not be satisfied and such breach or failure cannot be cured by LG Chem prior to the End Date or, if capable of being cured, is not cured, following receipt by LG Chem from AVEO of written notice of such breach or failure, by the earlier to occur of (x) thirty (30) days after receipt of such notice from AVEO and (y) the date that is two (2) days prior to the End Date; provided that AVEO will not have this right to terminate the Merger Agreement if AVEO is then in material breach of any representation, warranty, covenant or obligation of AVEO under the Merger Agreement.

Termination Fee and Remedies (page 103)

Under the Merger Agreement, AVEO may be required to pay to LG Chem a termination fee of $20.4 million if the Merger Agreement is terminated under specified circumstances, including, but not limited to, if AVEO terminates the Merger Agreement due to an Adverse Recommendation Change, if AVEO terminates the Merger Agreement in order to enter into a definitive agreement with respect to a Superior Proposal, or if the Merger Agreement is terminated in certain circumstances and within twelve (12) months of such termination an Acquisition Proposal meeting certain conditions set forth in the Merger Agreement is consummated or a definitive agreement is entered into with respect to such an Acquisition Proposal and such an Acquisition Proposal is ultimately consummated, as more fully described under “The Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement.

Generally, if LG Chem actually receives the termination fee in circumstances in which it is payable by AVEO, AVEO will have no further liability to LG Chem or Merger Sub under the Merger Agreement except in certain limited circumstances.

AVEO, LG Chem and Merger Sub are each entitled (in addition to any other remedy to which they may be entitled in law or equity) to an injunction to prevent breaches or threatened breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement.

Expenses Generally (page 104)

Except in specified circumstances, as described in this proxy statement, including under “The Merger Agreement—Expenses Generally” beginning on page 104 of this proxy statement, whether or not the Merger is consummated, AVEO and LG Chem are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the transactions contemplated by the Merger Agreement.

Market Prices and Dividend Data (page 111)

The common stock of AVEO is listed on Nasdaq under the symbol “AVEO.” On October 17, 2022, the last trading day prior to the public announcement of the execution of the Merger Agreement, the closing price of AVEO common stock on Nasdaq was $10.48 per share. On                 , 2022, the latest practicable trading day before the printing of this proxy statement, the closing price of AVEO common stock on Nasdaq was $                 per share. You are encouraged to obtain current market quotations for AVEO common stock.

 

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THE COMPANIES

AVEO Pharmaceuticals, Inc.

AVEO is a Delaware corporation with principal executive offices located at 30 Winter Street, Boston, Massachusetts 02108, telephone number (857) 400-0101. AVEO is commercial stage, oncology-focused biopharmaceutical company committed to delivering medicines that provide a better life for patients with cancer. AVEO currently markets FOTIVDA® (tivozanib) in the United States. FOTIVDA (tivozanib) is AVEO’s first commercial product and was approved by the U.S. Food and Drug Administration (referred to as the “FDA”) for marketing and sale in the United States on March 10, 2021 for the treatment of adult patients with relapsed or refractory advanced renal cell carcinoma following two or more prior systemic therapies. AVEO continues to develop tivozanib in immuno-oncology and other novel targeted combinations in RCC and other indications, and has other investigational programs in clinical development. The common stock of AVEO is listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “AVEO.” Additional information about AVEO is contained in certain of its public filings that are incorporated by reference herein. See “Where You Can Find More Information” beginning on page 115 of this proxy statement.

LG Chem, Ltd.

LG Chem is a corporation organized and existing under the laws of the Republic of Korea with principal executive offices located at 128, Yeoui-daero, Yeongdeungpo-g, Seoul, Republic of Korea, telephone number +82-2-6987-4030. LG Chem is a South Korean chemicals company publicly-traded on the Korea Exchange.

Acacia Acquisition Sub, Inc.

Merger Sub is a Delaware corporation and an indirect wholly owned subsidiary of LG Chem, with a registered office located at 1209 Orange Street, Wilmington, Delaware 19801, telephone number +82-2-6987-4030. Merger Sub was formed solely for the purpose of effecting the Merger and the transactions contemplated by the Merger Agreement.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement to AVEO stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting (including any adjournment or postponement thereof).

Date, Time and Place of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting to be held on                     ,                      at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, located at 60 State Street, 26th Floor, Boston, MA 02109, at                     , local time, or at any adjournment or postponement thereof.

Purpose of the Special Meeting

At the Special Meeting, we will ask our stockholders of record as of the Record Date to vote on (i) the Merger Proposal, (ii) the Merger Compensation Proposal and (iii) the Adjournment Proposal. If holders of AVEO common stock fail to adopt the Merger Agreement by approving the Merger Proposal, the Merger will not occur. A copy of the Merger Agreement is attached to this proxy statement as Annex A and incorporated herein by reference, and the material provisions of the Merger Agreement are described under the section captioned “The Merger Agreement” beginning on page 80 of this proxy statement.

This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about                 , 2022.

Record Date; Shares Entitled to Vote; Quorum

Only stockholders of record as of the close of business on                     , 2022, the Record Date for the Special Meeting, are entitled to notice and to vote at the Special Meeting or at any adjournments or postponements thereof. A list of stockholders entitled to vote at the Special Meeting will be available in our offices located at 30 Winter Street, Boston, Massachusetts 02108, during regular business hours for a period of at least ten (10) days before the Special Meeting and at the place of the Special Meeting during the meeting.

As of the Record Date, there were                      shares of AVEO common stock issued and outstanding and entitled to be voted at the Special Meeting.

A quorum of stockholders is necessary to transact business at the Special Meeting. Our second amended and restated bylaws provide that the presence at the Special Meeting, in person or by proxy, of the holders of a majority of the voting power of our issued and outstanding shares entitled to vote at the meeting will constitute a quorum for AVEO to transact business at a Special Meeting. Shares of AVEO common stock that were outstanding as of the Record Date and are represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the Special Meeting for purposes of determining a quorum. Shares represented by proxies received but marked “ABSTAIN” will be included in the calculation of the number of shares considered to be present at the Special Meeting for purposes of determining a quorum. Broker non-votes rendered on each of the three proposals will not be included in the calculation of the number of shares considered to be present at the Special Meeting for purposes of determining a quorum. Shares that are voted with respect to at least one proposal will, however, be included in the calculation of the number of shares considered to be present at the Special Meeting.

In the event that a quorum is not present at the Special Meeting, it is expected that the meeting would be adjourned to a later date to solicit additional proxies, and a quorum will have to be established at such adjourned date.

 

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Vote Required; Abstentions and Broker Non-Votes

Each share of AVEO common stock issued and outstanding as of the close of business on the Record Date is entitled to one vote at the Special Meeting. Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the shares of AVEO common stock that are issued and outstanding as of the Record Date and entitled to vote thereon. Adoption of the Merger Agreement by our stockholders is a condition to the closing of the Merger.

Approval of the Merger Compensation Proposal requires the affirmative vote of the holders of AVEO common stock having a majority in voting power of the votes cast by the holders of all shares of AVEO common stock present in person or by proxy at the Special Meeting and voting affirmatively or negatively on such matter.

Approval of the Adjournment Proposal requires the affirmative vote of the holders of AVEO common stock having a majority in voting power of the votes cast by the holders of all shares of AVEO common stock present in person or by proxy at the Special Meeting and voting affirmatively or negatively on such matter.

If an AVEO stockholder fails to vote, it will have the same effect as if the stockholder voted “AGAINST” the Merger Proposal, but it will have no effect on the Merger Compensation Proposal or the Adjournment Proposal.

If an AVEO stockholder abstains from voting, it will have the same effect as if the stockholder voted “AGAINST” the Merger Proposal. Assuming a quorum is present at the Special Meeting, AVEO stockholder abstentions from voting, will have no effect on the Merger Compensation Proposal or the Adjournment Proposal.

If you hold your shares in “street name” the failure to instruct your bank, broker or other nominee on how to vote your shares may result in a broker non-vote. Assuming a quorum is present, each broker non-vote will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the Merger Compensation Proposal or the Adjournment Proposal.

Shares Held by Directors and Executive Officers

As of the close of business on the Record Date, directors and executive officers of AVEO and their affiliated entities beneficially owned and were entitled to vote, in the aggregate,                  shares of AVEO common stock, which represented approximately    % of the shares of AVEO common stock issued and outstanding on that date. Our directors and executive officers have informed us that they currently intend to vote all of their shares for which they hold the voting power of AVEO common stock (i) “FOR” the Merger Proposal, (ii) “FOR” the Merger Compensation Proposal and (iii) “FOR” the Adjournment Proposal, although none of them is obligated to do so.

Voting; Proxies

Attendance

All holders of shares of AVEO common stock as of the close of business on the Record Date, including stockholders of record and beneficial owners of common stock registered in the “street name” of a bank, broker or other nominee, are invited to attend the Special Meeting. If you are a stockholder of record, please be prepared to provide proper identification, such as a driver’s license, and proof of ownership of AVEO common stock, such as a bank or brokerage account statement. If you hold your shares in “street name,” you will need to provide proof of ownership, such as a recent account statement or voting instruction form provided by your bank, broker or other nominee or other similar evidence of ownership, along with proper identification and you may not vote your shares in person at the Special Meeting unless you request and obtain a valid “legal proxy” from your bank, broker or other nominee.

 

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Voting in Person

Stockholders of record will be able to vote in person at the Special Meeting. If you plan to attend the Special Meeting and wish to vote in person, you will be given a ballot at the meeting. If you are not a stockholder of record, but instead hold your shares of AVEO common stock in “street name” through a bank, broker or other nominee, you must provide a “legal proxy” executed in your favor from your bank, broker or other nominee in order to be able to vote in person at the Special Meeting.

Providing Voting Instructions by Proxy

To ensure that your shares of AVEO common stock are voted at the Special Meeting, we recommend that you submit your proxy or provide voting instructions for your shares of AVEO common stock held in “street name” to your bank, broker or other nominee promptly, even if you plan to attend the Special Meeting in person.

Shares of AVEO Common Stock Held by Record Holders

If you are a stockholder of record and your shares of AVEO common stock are registered in your name with our transfer agent, Computershare, you may submit your proxy using one of the methods described below.

Submit a Proxy by Telephone or via the Internet. This proxy statement is accompanied by a proxy card with instructions for submitting a proxy. You can grant a proxy by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Your shares of common stock will be voted as you direct, and in the same manner as if you had completed, signed, dated and returned your proxy card, as described below. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy electronically over the Internet or by telephone.

Submit a Proxy Card. If you complete, sign, date and return the enclosed proxy card by mail so that it is received prior to 11:59 p.m. Eastern Time on                 ,                     , the day preceding the Special Meeting, your shares of AVEO common stock will be voted in the manner directed by you on your proxy card.

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. If you sign, date and return your proxy card without indicating how you wish to vote, such shares of AVEO common stock represented by your properly signed proxy will be voted “FOR” each of the Merger Proposal, the Merger Compensation Proposal and the Adjournment Proposal. If you fail to return your proxy card and you are a holder of record as of the close of business on the Record Date, unless you attend the Special Meeting and vote in person, your shares of common stock will not be considered present at the Special Meeting for purposes of determining whether a quorum is present, and your failure to vote will have the same effect as a vote “AGAINST” the Merger Proposal and will have no effect on the vote regarding the Merger Compensation Proposal or the Adjournment Proposal.

Shares of AVEO Common Stock Held in “Street Name”

If your shares of AVEO common stock are held in “street name” through a bank, broker or other nominee, your bank, broker or other nominee will send you instructions as to how to provide voting instructions for your shares. You may cause your shares to be voted through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or by the Internet or telephone through your bank, broker or other nominee by following the instructions provided to you by them if such a service is available.

Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote your shares on “routine” matters if you fail to instruct your bank, broker or other nominee on how to vote your shares with

 

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respect to such matters. The Merger Proposal (as defined below), the Merger Compensation Proposal and the Adjournment Proposal described in this proxy statement are “non-routine” matters, and your bank, broker and other nominee therefore cannot vote on these proposals without your instructions. Accordingly, if you do not return your bank’s, broker’s or other nominee’s voting form, do not provide voting instructions via the Internet or telephone through your bank, broker or other nominee, if applicable, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, such actions will result in a “broker non-vote.” Broker non-votes, if any, will have the same effect as if you voted “AGAINST” the Merger Proposal and will have no effect on the Merger Compensation Proposal or the Adjournment Proposal. For shares of common stock held in “street name,” only shares of common stock affirmatively voted “FOR” the Merger Proposal, Merger Compensation Proposal or the Adjournment Proposal will be counted as a vote in favor of such proposal.

Revocability of Proxies

Any person giving a proxy pursuant to this solicitation has the power to revoke and change it any time before it is voted at the Special Meeting. If you are a stockholder of record, you may change your vote or revoke your proxy by:

 

   

delivering a written notice of revocation of your proxy to our Corporate Secretary at AVEO Pharmaceuticals, Inc., Attention: Corporate Secretary, 30 Winter Street, Boston, Massachusetts 02108 prior to 11:59 p.m. Eastern Time on                     ,                     , the day preceding the Special Meeting;

 

   

signing a new proxy card with a date later than the date of the previously submitted proxy card relating to the same shares of AVEO common stock and returning it to us by mail prior to 11:59 pm Eastern Time on                     ,                     , the day preceding the Special Meeting;

 

   

submitting a new proxy by telephone or Internet prior to 11:59 pm Eastern Time on                     ,                     , the day preceding the Special Meeting; or

 

   

attending the Special Meeting and voting in person (simply attending the Special Meeting will not cause your proxy to be revoked).

Please note, however, that only your last-dated proxy will count. Attending the Special Meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card to AVEO or by sending a written notice of revocation to AVEO, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by AVEO before the Special Meeting. Please note that to be effective, your new proxy card, Internet or telephonic voting instructions or written notice of revocation must be received by our Corporate Secretary prior to 11:59 p.m. Eastern Time on                     ,                     , the day preceding the Special Meeting.                     ,                     .

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote or submit new voting instructions. You may also vote in person at the Special Meeting if you obtain a valid “legal proxy” from your bank, broker or other nominee. Any adjournment or postponement of the Special Meeting for the purpose of soliciting additional proxies will allow AVEO stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting, as adjourned or postponed.

Abstentions

An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting. Abstentions will be included in the calculation of the number of shares of AVEO common stock represented at the Special Meeting for purposes of determining whether a quorum has been achieved. Abstaining from voting will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the Merger Compensation Proposal and the Adjournment Proposal.

 

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Adjournments and Postponements

Although it is not currently expected, subject to certain restrictions in the Merger Agreement, the Special Meeting may be adjourned or postponed, among other reasons, for the purpose of soliciting additional proxies. If a quorum is not present, then under our second amended and restated bylaws, (i) the chairperson of the Special Meeting or (ii) a majority in voting power of the stockholders entitled to vote at the Special Meeting, present in person or represented by proxy, shall have power to adjourn the Special Meeting until a quorum is present or represented, and notice need not be given of the adjourned meeting if the time, place and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. However, our second amended and restated bylaws provide that if any such adjournment is for more than thirty (30) days, or if after such adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting.

In addition, the Board could postpone the Special Meeting before it commences. If the Special Meeting is adjourned or postponed to solicit additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use at the Special Meeting as adjourned or postponed.

In the event that there is present at the Special Meeting, in person or by proxy, sufficient favorable voting power to secure the vote of our stockholders necessary to adopt the Merger Agreement by approving the Merger Proposal, we do not currently anticipate that we will adjourn or postpone the Special Meeting.

Recommendations of the Transaction Committee and the Board

The Board, after considering the various factors more fully described under “The Merger—Recommendations of the Transaction Committee and the Board and Reasons for the Merger” beginning on page 47 of this proxy statement, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to, and in the best interests of, AVEO and AVEO’s stockholders, (ii) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby and (iii) resolved to recommend that AVEO’s stockholders adopt the Merger Agreement.

The Board unanimously recommends that you vote (i) “FOR” the Merger Proposal, (ii) “FOR” the Merger Compensation Proposal and (iii) “FOR” the Adjournment Proposal.

Solicitation of Proxies

The Board is soliciting your proxy, and we will bear the cost of the solicitation of proxies.

We have retained Morrow Sodali LLC, a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $25,000 plus expenses. We will also indemnify the proxy solicitor against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Consummation of the Merger

We currently anticipate that the Merger will be consummated in early 2023, assuming satisfaction or waiver of all of the conditions to the Merger. However, the Merger is subject to various conditions, and it is possible, including as a result of factors outside the control of AVEO and LG Chem, that the Merger will be consummated at a later time or not at all.

 

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Appraisal Rights

If the Merger is consummated, persons who do not wish to accept the Merger Consideration are entitled to seek appraisal of their shares of AVEO common stock under Section 262 and, if all procedures described in Section 262 are strictly complied with, to receive payment in cash for the fair value of their shares of AVEO common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court, together with interest, if any, to be paid upon the amount determined to be the fair value. The “fair value” of your shares of AVEO common stock as determined by the Delaware Court may be more or less than, or the same as, the Merger Consideration that you are otherwise entitled to receive under the Merger Agreement. These rights are known as “appraisal rights”. This proxy statement serves as a notice of such appraisal rights pursuant to Section 262.

Persons who exercise appraisal rights under Section 262 will not receive the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. They will receive an amount determined to be the “fair value” of their shares of AVEO common stock following petition to, and an appraisal by, the Delaware Court. Persons considering seeking appraisal should recognize that the fair value of their shares of AVEO common stock determined under Section 262 could be more than, the same as or less than the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. Strict compliance with the procedures set forth in Section 262 is required. Failure to comply strictly with all of the procedures set forth in Section 262 may result in the withdrawal, loss or waiver of appraisal rights. Consequently, and in view of the complexity of the provisions of Section 262, persons wishing to exercise appraisal rights are urged to consult their legal and financial advisors before attempting to exercise such rights.

A holder of record of shares of AVEO common stock and a beneficial owner who (i) continuously holds such shares through the Effective Time, (ii) has not consented to or otherwise voted in favor of the Merger or otherwise withdrawn, lost or waived appraisal rights, (iii) strictly complies with the procedures under Section 262, (iv) does not thereafter withdraw his, her or its demand for appraisal of such shares and (v) in the case of a beneficial owner, a person who (A) reasonably identifies in his, her or its demand the holder of record of the shares for which the demand is made, (B) provides documentary evidence of such beneficial owner’s beneficial ownership and a statement that such documentary evidence is a true and correct copy of what it purports to be and (C) provides an address at which such beneficial owner consents to receive notices given by AVEO and to be set forth on the Chancery List (as defined in the section of this proxy statement entitled “The Merger—Appraisal Rights”), will be entitled to receive the fair value of his, her or its shares of AVEO common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court, together with interest, if any, to be paid upon the amount determined to be the fair value.

A copy of Section 262 may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. The following summary is not a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to Section 262 and any amendments thereto after the date of this proxy statement. Any person who desires to exercise his, her or its appraisal rights should review carefully Section 262 and is urged to consult his, her or its legal advisor before electing or attempting to exercise such rights. For more information, please see the section of this proxy statement entitled “The Merger—Appraisal Rights”.

Householding of Special Meeting Materials

Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our impact on the environment and our expenses.

 

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We will promptly deliver a separate copy of our proxy statement to any stockholder without charge upon a written request or verbal request to AVEO Pharmaceuticals, Inc. 30 Winter Street, Boston, Massachusetts 02108, Attention: Corporate Secretary, telephone number (857) 400-0101. Stockholders sharing an address that are receiving multiple copies of this proxy statement can request delivery of a single copy of the proxy materials by contacting their broker, bank or other intermediary or sending a written request to AVEO Pharmaceuticals, Inc. at the address above.

Questions and Additional Information

If you have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact our proxy solicitor or us:

 

 

LOGO

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower,

Stamford, CT 06902,

AVEO.info@investor.morrowsodali.com

Call Collect: (203) 658-9400

or

Toll-Free (800) 662-5200

or

 

 

LOGO

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attn: Corporate Secretary

Call: (857) 400-0101

If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us or on our behalf, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. Forward-looking statements can usually be identified by the use of terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “evolve,” “expect,” “forecast,” “intend,” “looking ahead,” “project,” “may,” “opinion,” “plan,” “possible,” “potential,” “project,” “should,” “will” and similar words or expressions. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, factors and matters described or incorporated by reference in this proxy statement, and the following factors:

 

   

the inability to consummate the Merger within the anticipated time period, or at all, due to any reason, including the failure to obtain the AVEO Stockholder Approval or the failure to satisfy the other conditions to the consummation of the Merger, including the termination or expiration of the waiting period applicable to the Merger under the HSR Act and receipt of CFIUS Approval;

 

   

the risk that the Merger Agreement may be terminated in circumstances requiring us to pay LG Chem a termination fee of $20.4 million;

 

   

risks that the proposed Merger disrupts our current plans and operations or affects our ability to retain or recruit key employees;

 

   

the effect of the announcement, pendency or consummation of the Merger on our business relationships (including, without limitation, customers, suppliers and other business partners), operating results and business generally;

 

   

the amount of the costs, fees, expenses and charges related to the Merger Agreement or the Merger;

 

   

risks related to diverting the attention of our management and employees from ongoing business operations;

 

   

the inability to obtain the AVEO Stockholder Approval with respect to the Merger;

 

   

the risk that our stock price may decline significantly if the Merger is not consummated;

 

   

the effect of the restrictions placed on our business activities and the limitations on our ability to pursue alternatives to the Merger during the pendency of the Merger, pursuant to the Merger Agreement;

 

   

the nature, cost and outcome of any litigation and other legal proceedings, including any such proceedings related to the Merger and instituted against us and others;

 

   

the fact that under the terms of the Merger Agreement, we are unable to solicit other Acquisition Proposals during the pendency of the Merger;

 

   

the fact that receipt of the all-cash Merger Consideration would be taxable to our stockholders that are treated as U.S. holders (as defined below) or as certain non-U.S. holders (as defined below) for United States federal income tax purposes; and

 

   

the fact that our stockholders would forego the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent public company.

Consequently, no forward-looking statements may be guaranteed and there can be no assurance that the actual results or developments anticipated by such forward looking statements will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, AVEO or its businesses or operations.

 

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No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. The foregoing review of risks and uncertainties that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in AVEO’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, factors and matters described or incorporated by reference in this proxy statement and AVEO’s other reports filed with the SEC.

Any forward-looking statement made in this communication speaks only as of the date on which it is made. AVEO can give no assurance that the conditions to the Merger will be satisfied. You should not put undue reliance on any forward-looking statements. AVEO undertakes no obligation, and expressly disclaims any obligation, to update, alter or otherwise revise any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as may be required by law. If AVEO does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.

 

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THE MERGER

This discussion of the Merger does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated by reference into this proxy statement. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Certain Effects of the Merger on AVEO

If the Merger Agreement is adopted by AVEO stockholders and the other conditions to the closing of the Merger are either satisfied or waived, Merger Sub will be merged with and into AVEO, with AVEO continuing as the surviving corporation and an indirect wholly owned subsidiary of LG Chem.

At the Effective Time, each share of AVEO common stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares and Dissenting Shares) will be converted automatically into the right to receive the Merger Consideration.

The common stock of AVEO is listed and trades on Nasdaq under the symbol “AVEO.” As a result of the Merger, AVEO will cease to be a publicly traded company and will become an indirect wholly owned subsidiary of LG Chem. Prior to the Effective Time, we will cooperate with LG Chem and use reasonable best efforts to delist our common stock from Nasdaq and deregister our common stock under the Securities Exchange Act of 1934 (referred to as the “Exchange Act”) as promptly as practicable after the Effective Time. Upon such delisting and deregistration, we will no longer be a publicly traded company and will no longer be required to file periodic reports with the SEC, in each case in accordance with applicable law, rules and regulations. If the Merger is consummated, you will not own any shares of the capital stock of the surviving corporation or LG Chem.

Effect on AVEO if the Merger is Not Consummated

If the Merger Agreement is not adopted by the holders of a majority of the issued and outstanding shares of AVEO common stock entitled to vote thereon as of the Record Date or if the Merger is not consummated for any other reason, AVEO stockholders will not receive any payment for their shares of AVEO common stock pursuant to the Merger Agreement. Instead, AVEO will remain a public company, its common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act, and AVEO will continue to file periodic reports with the SEC.

Furthermore, if the Merger is not consummated, and depending on the circumstances that caused the Merger not to be consummated, the price of our common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades prior to the public announcement of the Merger Agreement or as of the date of this proxy statement.

Accordingly, if the Merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of AVEO common stock. If the Merger is not consummated, the Board will continue to evaluate and review our business operations, assets, operating results, financial condition, prospects and business strategy, among other things, and make such changes as are deemed appropriate and continue to seek to enhance stockholder value. If the Merger Agreement is not adopted by the holders of a majority of the issued and outstanding shares of AVEO common stock entitled to vote thereon as of the Record Date or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to AVEO will be offered or that our business, prospects or results of operations will not be adversely impacted.

In addition, under specified circumstances, upon termination of the Merger Agreement, AVEO may be required to pay LG Chem a termination fee, as described under “The Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement.

 

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Merger Consideration

In the Merger, each share of AVEO common stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares and Dissenting Shares) will be converted automatically into the right to receive the Merger Consideration, and without any action by the holders of such shares, will cease to be outstanding, be cancelled and cease to exist, and each Certificate or Uncertificated Share will thereafter represent only the right to receive the Merger Consideration.

After the Merger is consummated, under the terms of the Merger Agreement, you will have the right to receive the Merger Consideration, but you will no longer have any rights as an AVEO stockholder as a result of the Merger (except that any holder of Dissenting Shares will have those rights granted under, and subject to compliance with, Section 262), nor will you be entitled to receive any shares in LG Chem or the surviving corporation.

Each of the exchange agent (as defined below), the surviving corporation, Merger Sub and LG Chem and its affiliates will be entitled to deduct and withhold from any amounts otherwise payable pursuant to the Merger Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If the exchange agent, the surviving corporation, Merger Sub or LG Chem or any of its affiliates, as the case may be, so deducts and withholds amounts and timely and properly remits such amounts to the applicable governmental authority, such amounts shall be treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction and withholding was made.

Background of the Merger

The Board, together with members of senior management of AVEO, regularly reviews and assesses the performance, future growth prospects, business plans and overall strategic direction of AVEO, and considers a variety of strategic alternatives that may be available to AVEO, including continuing as a standalone company or pursuing potential strategic or financing transactions with third parties, in each case with the goal of maximizing stockholder value, particularly in light of the expiration of certain patent rights related to FOTIVDA, AVEO’s only commercial product, in 2028.

To assist the Board in its evaluation of strategic alternatives for AVEO, in December 2020, the Board authorized AVEO to enter into an engagement letter with Moelis & Company LLC (referred to as “Moelis”), pursuant to which Moelis would be engaged by AVEO to serve as the exclusive financial advisor to AVEO in connection with a potential strategic transaction involving AVEO. The Board based its decision to engage Moelis as its exclusive financial advisor on, among other things, Moelis’ qualifications, professional reputation and industry expertise. AVEO entered into an engagement letter with Moelis dated December 10, 2020.

From January 2021 through early November 2021, members of senior management of AVEO and representatives of Moelis, under the supervision and at the direction of the Board, engaged in a series of exploratory discussions, including as part of Moelis’ regular-way industry coverage, with a broad range of large and medium-sized commercial stage pharmaceutical companies, including to gauge third party interest in an acquisition of or strategic combination with AVEO with a view to maximizing stockholder value. Taking into account the advice provided by Moelis and the recommendations of members of senior management of AVEO, the Board deemed these parties to be the most likely to be interested in pursuing such a transaction with AVEO at that time and to have the financial and other resources to complete such transaction on terms acceptable to the Board. However, at the direction of the Board, neither management nor representatives of Moelis indicated that AVEO was for sale and this outreach did not result in the receipt of any proposals for a potential acquisition of or strategic combination with AVEO.

On November 11, 2021, the Board held a regular meeting by videoconference at which members of senior management of AVEO, including Michael P. Bailey, AVEO’s chief executive officer, and Erick J. Lucera,

 

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AVEO’s chief financial officer, and representatives of Moelis were present for portions of the meeting. During the meeting, the representatives of Moelis reviewed a small and mid-cap oncology landscape update and potential candidates to consider for strategic combinations that could be pursued by AVEO. Following discussion, the Board directed AVEO’s management team and Moelis to contact or follow up with seven potential counterparties (four of which had not been part of the discussions from January 2021 through early November 2021 described above) identified by the representatives of Moelis to gauge interest in a potential strategic combination involving AVEO. The seven potential counterparties included a company referred to herein as “Party A”, a company referred to herein as “Party B” and a Company referred to herein as “Party C.” Taking into account the advice of the representatives of Moelis and members of senior management of AVEO and the results of the process conducted to such date by Moelis, the Board deemed these parties, which were small- and mid-cap oncology-focused pharmaceutical companies, to be the most likely to be interested in pursuing a strategic combination with AVEO at that time and to have the financial and other resources to complete such a combination on terms acceptable to the Board.

On February 15, 2022, the Board held a regular meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present for a portion of the meeting. During the meeting, AVEO’s management team reviewed reductions to AVEO’s 2022 internal sales estimates for FOTIVDA due to continued pressure from the COVID-19 pandemic and representatives of Moelis shared analyst and investor perspectives on AVEO, biopharma market trends, historic AVEO stock price performance, preliminary financial information relating to AVEO taking into account a preliminary financial forecast provided by AVEO’s management team, potential strategic opportunities and the discussions between AVEO and the seven potential counterparties identified at the November 11, 2021 meeting of the Board, which discussions had not resulted in AVEO’s receipt of any proposals for a strategic combination at that time. Following discussion, it was the consensus of the Board that AVEO’s management team should continue to work with Moelis to identify and explore potential strategic transactions, including by continuing discussions with Party A and Party B.

On February 17, 2022, AVEO and Party B entered into a nondisclosure agreement, which did not contain a standstill provision. From mid-February 2022 until June 10, 2022, representatives of AVEO and representatives of Party B engaged in preliminary discussions regarding a potential strategic transaction involving the parties and each received access to a virtual data room containing confidential information of the other party. These preliminary discussions and due diligence activities continued until June 10, 2022, when the parties suspended discussions without either party having submitted a proposal to the other.

On March 28, 2022, at the request of the chief executive officer of a company referred to herein as “Party D”, Mr. Bailey spoke with the chief executive officer of Party D. During the discussion, the chief executive officer of Party D expressed Party D’s interest in exploring a potential strategic transaction involving AVEO.

On April 4, 2022, AVEO entered into a nondisclosure agreement with Party C, which did not contain a standstill provision.

On April 5, 2022, AVEO entered into a nondisclosure agreement with Party D, which did not contain a standstill provision.

On April 15, 2022, the chief executive officer of Party D and Mr. Bailey met in person. During the meeting, the chief executive officer of Party D conveyed orally to Mr. Bailey Party D’s interest in pursuing an acquisition of AVEO at an equity valuation that Mr. Bailey understood to be $500 million (or an implied $13.51 per share of AVEO common stock outstanding as of March 31, 2022), of which $200 million would be payable in cash and the remainder of which would be payable in shares of Party D common stock. Mr. Bailey indicated that while AVEO was not for sale he would convey the oral proposal to the Board and encouraged the chief executive officer of Party D to submit a written proposal that could be presented to the Board for consideration.    

On April 16, 2022, Mr. Bailey updated the Board and representatives of Moelis by e-mail regarding Mr. Bailey’s April 15 conversation with the chief executive officer of Party D.

 

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On April 18, 2022, the Board held a special meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present. During the meeting, Mr. Bailey summarized his April 15 conversation with the chief executive officer of Party D and a representative of Moelis reviewed an update on a potential strategic transaction with Party D, recent stock price performance of each of Party D and AVEO and certain preliminary and illustrative financial information relating to the combined company that would result from a combination of AVEO and Party D. Following discussion, it was the consensus of the Board that AVEO’s management team should advise Party D that AVEO was not for sale but that AVEO would consider a written proposal if provided to explore a potential strategic transaction involving the two companies and propose that the parties engage in initial mutual due diligence. The Board directed AVEO’s management team to encourage Party D to submit a written proposal that could be evaluated by the Board and to enter into a revised nondisclosure agreement with AVEO that would contain a customary standstill provision. Mr. Bailey subsequently conveyed the foregoing message to the chief executive officer of Party D.

On April 25, 2022, Mr. Bailey received an unsolicited e-mail from a member of LG Chem’s business development team, independent of the process described above, providing background on LG Chem, noting AVEO’s strong development and commercialization capabilities and asking to schedule a conference call and arrange an in-person meeting in May 2022 to discuss potential business opportunities between the two companies.

On April 28, 2022, at the request of the chief executive officer of a company referred to herein as “Party E,” Mr. Bailey and the chief executive officer of Party E met for an introductory lunch in Boston, Massachusetts. The parties did not discuss a potential strategic transaction at that time.

Also on April 28, 2022, members of senior management of AVEO met by videoconference with members of senior management of Party D during which meeting the parties discussed entering into a revised nondisclosure agreement that included a customary standstill provision, exchanging due diligence request lists and coordinating an in-person meeting between the two management teams.

On April 29, 2022, the Board, acting by unanimous written consent, established a committee (the “Transaction Committee”) consisting of Kenneth M. Bate, Anthony B. Evnin and Gregory T. Mayes, each of whom is an independent director of AVEO, to act on behalf of AVEO to review and evaluate potential transactions for purposes of providing prompt guidance and direction to AVEO’s management team. The Board delegated to the Transaction Committee the power and authority to, among other things, (1) establish, approve, monitor and direct the process and procedures related to the review and evaluation of any possible sale, business combination or other strategic transaction involving AVEO; (2) respond to any communications, inquiries or proposals regarding any such possible transaction; (3) review, evaluate, investigate, pursue and negotiate the terms and conditions of any such possible transaction; (4) solicit expressions of interest or proposals for any such possible transaction and (5) recommend to the Board any proposed rejection or approval of any such possible transaction. The Board retained authority to approve or reject any such transaction, including the Merger.

On May 2, 2022, a member of senior management of AVEO sent to a member of senior management of Party D a proposed mutual nondisclosure agreement, which contained a mutual one (1)-year standstill provision that would cease to restrict a party if, among other things, the other party entered into a definitive agreement to be acquired by a third party.

On May 3, 2022, members of AVEO’s senior management team and business development team and LG Chem’s business development team held a meeting by videoconference to discuss potential commercial arrangements between the parties, and it was determined that the parties would enter into a nondisclosure agreement.

On May 5, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO were present. During the meeting, the Transaction Committee discussed the procedures that the Transaction Committee and management of AVEO would follow in connection with the Transaction

 

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Committee’s evaluation of and responses to proposals that may be received by AVEO, and Mr. Bailey updated the Transaction Committee on preliminary discussions with various parties, including LG Chem, Party D and Party E.

On May 9 and May 10, 2022, members of senior management of AVEO and members of senior management of Party D met in person to discuss the possibility of a strategic transaction involving Party D and AVEO.

On May 10, 2022, AVEO and LG Chem entered into a nondisclosure agreement, which did not contain a standstill provision.

On May 11, 2022, members of AVEO’s senior management team and business development team and members of LG Chem’s senior management team and business development team met in person and discussed the companies’ respective pipelines and AVEO’s commercial organization.

On May 13, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO were present. During the meeting, Mr. Bailey identified various potential counterparties with which AVEO could explore a potential strategic transaction, including LG Chem, Party D and Party E, and reviewed potential advantages and disadvantages of pursuing a strategic transaction with each such party.

On May 19, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and a representative of Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) were present. During the meeting, the representatives of Moelis reviewed the bidding progression in select recent transactions and potential methods for bridging valuation gaps, including contingent value rights, and the representative of WilmerHale reviewed the fiduciary duties of the Transaction Committee in connection with its evaluation of any acquisition proposal that may be received by AVEO, including from Party D. Following discussion, it was the consensus of the Transaction Committee that AVEO’s management team should continue to encourage Party D to submit a written proposal that could be evaluated by the Transaction Committee.

On May 24, 2022, a member of senior management of Party D sent to a member of senior management of AVEO a revised draft of a nondisclosure agreement which, among other proposed changes, reduced the duration of the mutual standstill provision to ninety (90) days and included a ninety (90)-day exclusivity period during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions.    

Also on May 24, 2022, Mr. Bailey met in person with the chief executive officer of Party D. At the meeting, Mr. Bailey and the chief executive officer of Party D discussed the benefits of a potential strategic transaction involving Party D and AVEO and Mr. Bailey encouraged the chief executive officer of Party D to execute the nondisclosure agreement in the form provided by AVEO on May 2, 2022.

On May 25, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO were present. During the meeting, a member of senior management of AVEO reviewed the changes to the revised nondisclosure agreement proposed by Party D. Following discussion, the Transaction Committee directed Mr. Bailey to advise the chief executive officer of Party D that AVEO would not enter into a nondisclosure agreement on the terms proposed by Party D or provide further financial information until Party D submitted a written proposal reflecting economic terms acceptable to the Transaction Committee, which message Mr. Bailey subsequently conveyed to the chief executive officer of Party D.

On May 26, 2022, a member of senior management of LG Chem contacted Mr. Bailey and expressed LG Chem’s interest in making a minority or other strategic investment in AVEO.

On May 27, 2022, AVEO and Party E entered into a nondisclosure agreement, which did not contain a standstill provision.

 

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On June 2, 2022, representatives of Party E were given access to a virtual data room containing confidential information of AVEO.

Also on June 2, 2022, representatives of senior management of AVEO and representatives of senior management of LG Chem met in person at AVEO’s offices in Boston, Massachusetts and discussed various potential commercial arrangements that could be entered into between the parties, as well as a potential strategic investment in AVEO by LG Chem. At the conclusion of the meeting, members of senior management of LG Chem indicated that LG Chem would follow up with a proposal for one or more transaction structures.

On June 3, 2022, the chief executive officer of Party D sent to Mr. Bailey by e-mail a non-binding written proposal for Party D to acquire AVEO for per share consideration for total implied consideration of $5.80 per share as of June 1, 2022, consisting of $4.35 in cash and 0.0310 shares of Party D common stock, which proposal Mr. Bailey sent to the Transaction Committee by e-mail. The proposal was subject to, among other things, completion of Party D’s due diligence and negotiation of a definitive agreement. The proposal also requested an exclusivity period of thirty (30) days, during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions. The proposal stated the implied premium was 46% to the closing price of AVEO common stock on June 1, 2022 and an implied premium of 32% to the thirty (30)-day volume weighed average price of AVEO common stock as of June 1, 2022.

On June 5, 2022, Mr. Bailey and the chief executive officer of Party E met in person to discuss the potential benefits of a strategic transaction involving AVEO and Party E.

On June 6, 2022, the chief executive officer of Party E sent to Mr. Bailey by e-mail a non-binding written proposal for Party E to acquire AVEO for $6.00 to $6.50 per share of AVEO common stock in a mix of cash and Party E common stock, which proposal Mr. Bailey sent to the Transaction Committee by e-mail. The proposal did not specify the mix of cash and Party E common stock and was subject to, among other things, completion of Party E’s due diligence and negotiation of a definitive agreement. The proposal stated the implied premium was 49% to 62% to the closing price of AVEO common stock on June 6, 2022.

On June 7, 2022, the Board held a regular meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present for portions of the meeting. During the meeting, Mr. Bailey and the representatives of Moelis updated the Board on recent communications with potential counterparties, including Party D and Party E, and the representatives of Moelis reviewed the terms of Party D’s June 3 proposal and the terms of Party E’s June 6 proposal and provided certain preliminary financial information relating to AVEO taking into account a revised preliminary financial forecast provided by AVEO management. After discussion, the Board instructed Mr. Bailey to advise each of Party D and Party E that its proposal was inadequate, which message Mr. Bailey subsequently conveyed to each of Party D and Party E. Mr. Bailey also encouraged each of Party D and Party E to continue its due diligence review of AVEO with a view to submitting a proposal at a higher valuation.

During the remainder of June 2022 through early July 2022, each of LG Chem, Party D and Party E continued its due diligence review of AVEO.

During the period from June 2022 to September 2022, at the direction of the Transaction Committee, members of senior management of AVEO, directly or through representatives of Moelis, contacted 13 parties, in addition to LG Chem, Party D and Party E, to gauge their potential interest in pursuing a strategic transaction involving AVEO. These 13 parties included Party A and nine other parties that had been contacted by AVEO or Moelis during AVEO’s prior outreach efforts. Of these 13 parties, two parties entered into mutual nondisclosure agreements with AVEO, neither of which contained a standstill provision, and were given access to a virtual data room that contained confidential information of AVEO, and, along with Party C, received management presentations from AVEO. None of these 13 parties submitted to AVEO a proposal for a strategic transaction.

 

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On June 15, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO were present. Mr. Bailey reviewed recent communications with potential counterparties.

On June 16, 2022, representatives of AVEO and representatives of LG Chem met in person at an industry conference in San Diego, California and discussed whether AVEO would be willing to explore a strategic investment in AVEO by LG Chem.

On June 21, 2022, AVEO issued a press release announcing that the National Comprehensive Cancer Network elevated FOTIVDA to Category 1 status as a subsequent therapy for renal cell carcinoma patients who have received two or more prior therapies in the Kidney Cancer Treatment Guidelines released on June 17, 2022.

Also on June 21, 2022, the chief executive officer of Party D sent to Mr. Bailey by e-mail a non-binding written proposal for Party D to acquire AVEO for per share consideration of $5.09 in cash and 0.0334 shares of Party D common stock, with an implied value as of June 17, 2022 of $6.50 per share of AVEO common stock, which proposal Mr. Bailey sent to the Transaction Committee by e-mail. The proposal was subject to, among other things, completion of Party D’s due diligence and negotiation of a definitive agreement. The proposal also requested an exclusivity period of thirty (30) days, during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions. The proposal stated the implied premium was 44% to the closing price of AVEO common stock on June 17, 2022 and 60% to the thirty (30)-day volume weighed average price of AVEO common stock as of June 17, 2022.

On June 22, 2022, Mr. Bailey provided an update via e-mail to the Transaction Committee on recent communications with potential counterparties, including LG Chem, Party D and Party E, and the terms of the June 21 proposal submitted by Party D. The Transaction Committee members instructed Mr. Bailey by e-mail to advise Party D that its June 21 proposal was inadequate and that it should submit its best and final proposal by July 8, 2022, which message Mr. Bailey subsequently conveyed to Party D by e-mail on June 24, 2022.

On June 30, 2022, members of senior management of AVEO and members of senior management of LG Chem met in person in Boston, Massachusetts and discussed a potential strategic investment by LG Chem in AVEO, as well as potential commercial arrangements between the parties.

On July 6, 2022, Mr. Bailey and other members of senior management of AVEO met in person in Boston, Massachusetts with members of senior management of LG Chem. At the meeting, the members of senior management of LG Chem expressed LG Chem’s interest in pursuing a potential strategic investment in or other strategic transaction involving AVEO and Mr. Bailey encouraged the members of senior management of LG Chem to submit a written proposal regarding such investment or other transaction by July 8, 2022.

On July 8, 2022, the chief executive officer of Party D sent to Mr. Bailey by e-mail a non-binding written proposal for Party D to acquire AVEO for upfront consideration of $6.61 in cash and 0.0303 shares of Party D common stock per share of AVEO common stock and potential contingent cash payments of up to $5.56 per share of AVEO common stock, which contingent cash payments would be payable upon the achievement of specified milestones. Mr. Bailey sent the proposal to the Transaction Committee by e-mail. The proposal was subject to, among other things, completion of Party D’s due diligence and negotiation of a definitive agreement. The proposal also requested an exclusivity period of two weeks, during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions. The proposal indicated that the upfront portion of the consideration had an implied value of $8.00 per share based on the closing price of Party D’s common stock on July 7, 2022 and represented an implied premium of 101% to the closing price of AVEO common stock on June 1, 2022 and an implied premium of 54% to the thirty (30)-day volume weighed average price of AVEO common stock as of July 7, 2022. The proposal indicated that it would expire on July 12, 2022, which date the chief executive officer of Party D confirmed by e-mail would be extended to July 15, 2022.

 

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Also on July 8, 2022, a member of senior management of LG Chem submitted to Mr. Bailey a non-binding expression of interest of LG Chem to acquire AVEO, subject to, among other things, agreement on economic terms, negotiation of a definitive agreement and satisfactory completion of due diligence. The expression of interest indicated that LG Chem would provide a more detailed proposal by the end of August 2022. Mr. Bailey sent the expression of interest to the Transaction Committee by e-mail.

On July 11, 2022, representatives of Moelis spoke to representatives of Party E’s financial advisor by telephone and requested Party E’s best and final proposal by the end of August 2022. Thereafter, Party E continued with due diligence activities until August 26, 2022, when a representative of Party E’s financial advisor advised representatives of Moelis that Party E would not provide a revised proposal, which was subsequently confirmed by the chief executive officer of Party E during a phone call with Mr. Bailey on August 29, 2022. On August 26, 2022, the access of representatives of Party E to AVEO’s virtual data room was terminated.

On July 12, 2022, a representative of Bank of America, LG Chem’s financial advisor, contacted Mr. Bailey regarding due diligence matters and Mr. Bailey directed the representative of Bank of America to contact Moelis.

On July 13, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and a representative of WilmerHale were present. During the meeting, a representative of Moelis reviewed the terms of Party D’s July 8 proposal and the status of discussions with each of the counterparties that had been contacted by management of AVEO or representatives of Moelis. After discussion, the Transaction Committee instructed Mr. Bailey to advise Party D that Party D’s July 8 proposal was inadequate and instructed Moelis to grant LG Chem access to a virtual data room containing confidential information of AVEO to facilitate LG Chem’s due diligence review of AVEO.

Also on July 13, 2022, representatives of Moelis and representatives of Bank of America discussed LG Chem’s access to diligence information and discussed the potential process timeline. Later on July 18, 2022, access to AVEO’s virtual data room was provided to representatives of LG Chem.

On July 15, 2022, Mr. Bailey spoke with the chief executive officer of Party D and advised the chief executive officer of Party D that Party D’s July 8 proposal was inadequate and asked if Party D’s July 8 proposal was, in fact, Party D’s best and final proposal. The chief executive officer of Party D confirmed that Party D’s July 8 proposal was Party D’s best and final proposal. On July 18, 2022, the access of Party D’s representatives to AVEO’s virtual data room was terminated.

From mid-July 2022 through mid-August 2022, representatives of LG Chem engaged in functional due diligence meetings with representatives of AVEO, including with respect to financial, regulatory, legal, commercial, clinical and intellectual property matters.

On August 11, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present. During the meeting, the representatives of Moelis updated the Transaction Committee on recent communications with potential counterparties, including LG Chem, Party D and Party E, and the status of due diligence activities of potential counterparties.

On August 18, 2022, a member of senior management of LG Chem submitted to Mr. Bailey by e-mail a non-binding written proposal for LG Chem to acquire AVEO for $12.00 in cash per share of AVEO common stock. Mr. Bailey sent the proposal to the Transaction Committee by e-mail. The proposal was subject to, among other things, completion of LG Chem’s due diligence and negotiation of a definitive agreement. The proposal also requested an exclusivity period of six (6) weeks, during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions, and attached a proposed exclusivity agreement. The proposal stated the premium was 55% to the closing price of AVEO common stock on August 17, 2022, 50% to the 52-week high of AVEO common stock on August 8, 2022, 62% to the thirty (30)-day volume weighted average price of AVEO common stock as of August 17, 2022

 

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and 103% to the ninety (90)-day volume weighted average price of AVEO common stock as of August 17, 2022. The proposal also indicated that consummation of a transaction would be subject to CFIUS approval.

On August 19, 2022, the Board held a special meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present. During the meeting, the representatives of Moelis provided an overview of the key developments since the spring of 2022, reviewed the terms of LG Chem’s August 18 proposal and updated the Board on recent communications with other potential counterparties. The Board, senior management and Moelis discussed potential responses by AVEO to the LG Chem offer.

On August 22, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present. During the meeting, the representatives of Moelis updated the Transaction Committee on recent communications with potential counterparties and the Transaction Committee discussed a potential response to LG Chem’s August 18 proposal and request for exclusivity. After discussion, the Transaction Committee directed Mr. Bailey to send a message by e-mail to a member of senior management of LG Chem indicating that the Board was taking seriously LG Chem’s proposal and offering to work with LG Chem over the coming weeks to help LG Chem improve its proposal by doing additional diligence on the potential patent issuance to AVEO that could provide patent protection for claimed methods of use of FOTIVDA into 2039 and better understanding the incremental value of AVEO’s TiNivo-2 and pipeline opportunities, which message was transmitted by Mr. Bailey to a member of senior management of LG Chem following the Transaction Committee meeting on August 22, 2022.

On August 26, 2022, at the request of a member of senior management of LG Chem, Mr. Bailey and the member of senior management of LG Chem spoke by telephone. During the conversation, Mr. Bailey conveyed AVEO’s willingness to work with LG Chem to help LG Chem improve its proposal and the member of senior management of LG Chem requested that AVEO enter into a six-week exclusivity period with LG Chem. Mr. Bailey indicated that he believed the Transaction Committee would authorize AVEO to enter into an exclusivity period starting on September 5, 2022 and ending on October 7, 2022 if LG Chem would commit to submitting a revised proposal by the end of the exclusivity period.    

On August 30, 2022, a member of senior management of AVEO sent a revised draft of an exclusivity agreement to Latham & Watkins LLP, LG Chem’s legal advisor (“Latham”).

On September 1, 2022, the chief executive officer of Party A and Mr. Bailey spoke by telephone and discussed Mr. Bailey whether Party A or AVEO might be interested in pursuing a potential strategic transaction between Party A and AVEO. The parties determined they were not interested in pursuing such a strategic transaction at that time.

Also on September 1, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and a representative of WilmerHale were present. During the meeting, representatives of Moelis updated the Transaction Committee on recent communications with potential counterparties, indicating that all potential counterparties, except for LG Chem, had expressly declined to pursue a strategic transaction involving AVEO on terms acceptable to the Transaction Committee or had been unwilling to engage in discussions with AVEO regarding a potential strategic transaction. The representative of WilmerHale then reviewed the terms of the proposed exclusivity agreement to be entered into between AVEO and LG Chem. Following discussion, the Transaction Committee authorized AVEO to enter into the exclusivity agreement on substantially the terms described to the Transaction Committee at the meeting.

On September 7, 2022, representatives of Bank of America transmitted to representatives of Moelis a revised draft of the exclusivity agreement to be entered into between AVEO and LG Chem.

Later on September 7, 2022, representatives of the financial advisor to a company referred to herein as “Party F” contacted, on an unsolicited basis, Messrs. Bailey and Lucera to request a telephone call. During the telephone

 

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call, the representatives of Party F’s financial advisor indicated that Party F would be submitting a proposal for Party F to acquire AVEO for $15.00 in cash per share of AVEO common stock. Mr. Bailey received the proposal and sent a copy of the proposal to the Transaction Committee later on September 7, 2022. The proposal was subject to, among other things, completion of Party F’s due diligence and negotiation of a definitive agreement. The proposal also requested an exclusivity period of eight weeks, during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions. The proposal stated the premium was approximately 107% and 129%, as compared to the average closing price of AVEO common stock over the most recent sixty (60) and ninety (90) trading days, respectively, preceding the date of the proposal. The proposal also indicated that consummation of a transaction would be subject to CFIUS approval.

On September 8, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and a representative of WilmerHale were present. During the meeting, representatives of Moelis reviewed the terms of Party F’s September 7 proposal and the representative of WilmerHale reviewed the fiduciary duties of the Transaction Committee in connection with the Transaction Committee’s evaluation of the proposals from LG Chem and Party F and their respective requests for exclusivity. Following the discussion, the Transaction Committee instructed Mr. Bailey and the representatives of Moelis to inform each party that AVEO was not in a position to enter into exclusivity at that time but that AVEO would facilitate such party’s due diligence review of AVEO (subject in the case of Party F to execution of a nondisclosure agreement) and submission of a best and final proposal by October 7, 2022, which message was subsequently conveyed by Mr. Bailey to a member of senior management of LG Chem and by representatives of Moelis to representatives of Party F’s financial advisor.                

On September 12, 2022, Party F and AVEO entered in a mutual nondisclosure agreement that contained a Twelve (12)-month standstill provision for the benefit of AVEO that would cease to restrict Party F if, among other things, AVEO entered into a definitive agreement to be acquired by a third party. Later on September 12, 2022, representatives of Party F were given access to a virtual data room containing confidential information of AVEO and, during the period from September 12, 2022, through October 16, 2022, Party F engaged in activities related to its due diligence review of AVEO.

On September 14, 2022, the Board held a regular meeting at which representatives of senior management of AVEO and representatives of Moelis were present for a portion of the meeting. During the meeting, Mr. Bailey and Mr. Lucera reviewed a revised preliminary financial forecast. After discussion, the Board directed management to refine the assumptions underlying the preliminary financial forecast and prepare a further revised financial forecast.. The revised forecasts prepared in response to the Board’s direction were presented to the Board on October 17, 2022 and are described in the section of this proxy statement entitled “The Merger—Recommendations of the Transaction Committee and Board and Reasons for the Merger” beginning on page 47 of this proxy statement.

On September 16, 2022, representatives of Bank of America sent to representatives of Moelis by e-mail a draft merger agreement on behalf of LG Chem, which Moelis provided to WilmerHale and AVEO’s management team.

From September 19, 2022 through September 20, 2022, Mr. Bailey and other members of senior management of AVEO and members of senior management of LG Chem met in person in Seoul, South Korea for management presentations and functional due diligence sessions, including with respect to financial, regulatory, legal, commercial, clinical and intellectual property matters. On September 22, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present. During the meeting, Mr. Bailey provided an overview of the members of senior management’s visit to Seoul, South Korea to visit with representatives from LG Chem.

On September 22, 2022, at the direction of AVEO’s management team, a representative of WilmerHale sent a revised draft of a merger agreement to representatives of Latham for review by LG Chem and its advisors.

 

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On September 26, 2022, at the direction of the Transaction Committee, a representative of Moelis sent to representatives of Party F’s financial advisor a draft merger agreement, which had been prepared by WilmerHale and was substantially similar to the September 22 draft merger agreement provided by WilmerHale to Latham.

From September 26, 2022 through September 28, 2022, members of senior management of AVEO, representatives of Moelis and representatives of WilmerHale and members of senior management of LG Chem, representatives of Bank of America and representatives of Latham met in person at the offices of WilmerHale in Boston, Massachusetts to discuss the draft merger agreement provided by WilmerHale to Latham on September 22, 2022 and to conduct functional due diligence sessions, including with respect to financial, regulatory, legal, commercial, clinical, employment and benefits and intellectual property matters. During the intellectual property due diligence session, a member of senior management of AVEO informed members of senior management of LG Chem that AVEO was optimistic that the U.S. Patent and Trademark Office would publish in the coming weeks a notice of allowance indicating that the U.S. Patent and Trademark Office was allowing U.S. Patent Application No. 17/720,619, titled “Use of Tivozanib to Treat Subjects with Refractory Cancer” (the “Application”) and noted to such members of senior management of LG Chem that the issuance of the use patent (referred to as the “Use Patent”) could, subject to various risks and uncertainties, provide patent protection for claimed methods of use of FOTIVDA into 2039. During the meetings, Mr. Bailey advised a member of senior management of LG Chem that LG Chem should put its best foot forward for its anticipated revised offer expected on or around October 7, 2022.

On September 28, 2022, Mr. Bailey met in person with a member of the senior management of Party F, with representatives of Party F’s financial advisor and representatives of Moelis present, to discuss Party F’s interest in pursuing an acquisition of AVEO.

On September 29, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO and representatives of Moelis were present. During the meeting, Mr. Bailey provided an overview of the in-person diligence sessions that took place with members of senior management of AVEO, representatives of Moelis and representatives of WilmerHale and members of senior management of LG Chem, representatives of Bank of America and representatives of Latham. Mr. Bailey indicated that he had advised a senior member of LG’s management team that LG Chem should put its best foot forward for its anticipated revised offer expected on or around October 7, 2022.

On October 7, 2022, representatives of Moelis spoke by telephone with representatives of Party F’s financial advisor. During the conversation, the representatives of Party F’s financial advisor indicated that Party F was working on completing due diligence and that Party F expected to submit to AVEO a revised acquisition proposal by October 14, 2022.

On October 8, 2022, a member of senior management of LG Chem sent to Mr. Bailey by e-mail a non-binding written proposal, dated October 7, 2022, for LG Chem to acquire AVEO for $14.70 in cash per share of AVEO common stock. Mr. Bailey sent the proposal to the Transaction Committee by e-mail. The proposal was subject to, among other things, completion of LG Chem’s due diligence and negotiation of a definitive agreement. The proposal also requested an exclusivity period of three (3) weeks, during which AVEO would be prohibited from, among other activities, engaging in discussions or negotiations with third parties regarding alternative transactions. The proposal stated the premium was 68% to the closing price of AVEO common stock on October 6, 2022, 61% to the 52-week high of AVEO common stock on October 5, 2022, 78% to the one (1)-month volume weighted average price of AVEO common stock as of October 6, 2022 and 100% to the three (3)-month volume weighted average price of AVEO common stock as of October 6, 2022. The proposal also indicated that consummation of a transaction would be subject to CFIUS approval and that LG Chem would submit a revised draft of a merger agreement by October 11, 2022.

Later on October 8, 2022, the Transaction Committee held a meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and a representative of WilmerHale were present.

 

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During the meeting, representatives of Moelis updated the Transaction Committee on recent communications with each of LG Chem and Party F and reviewed the terms of LG Chem’s October 8 proposal and the representative of WilmerHale reviewed the fiduciary duties of the Transaction Committee in connection with the Transaction Committee’s evaluation of the proposal. The Transaction Committee then discussed various regulatory considerations associated with the proposals received to date from LG Chem and Party F, as well as the forthcoming issuance of a notice of allowance by the U.S. Patent and Trademark Office in respect of the Application, noting that the issuance of the Use Patent could, subject to various risks and uncertainties, provide patent protection for claimed methods of use of FOTIVDA into 2039. After discussion, the Transaction Committee instructed Mr. Bailey and the representatives of Moelis to inform each of LG Chem and Party F of the anticipated notice of allowance, which message was conveyed by Mr. Bailey to LG Chem and by representatives of Moelis to representatives of Party F’s financial advisor. The Transaction Committee also instructed Moelis to inform Party C of the forthcoming notice of allowance because Party C had indicated that it declined to pursue a strategic transaction involving AVEO because of the expiration of certain patent rights related to FOTIVDA in 2028.

On October 11, 2022, a representative of Latham sent to representatives of WilmerHale a revised draft of a merger agreement on behalf of LG Chem.

On October 12, 2022, AVEO issued a press release announcing that the United States Patent and Trademark Office published that it would allow the Application.

On October 13, 2022, representatives of Party F’s financial advisor and representatives of Moelis spoke by telephone. During the conversation, the representatives of Party F indicated orally that, subject to approval by Party F’s investment committee on October 16, 2022, Party F would submit a proposal to acquire AVEO for $15.00 in cash per share of AVEO common stock.

Also on October 13, 2022, a representative of Party C advised a representative of Moelis by phone that Party C was not interested in pursuing a strategic transaction involving AVEO despite the notice of allowance that the United States Patent and Trademark Office published on October 12, 2022.

Also on October 13, 2022, representatives of WilmerHale and representatives of Latham spoke by telephone. During the call, in anticipation of a special meeting of the Board scheduled for October 14, 2022, representatives of WilmerHale asked for and were provided by Latham context and perspective regarding various positions reflected in the draft merger agreement received by WilmerHale from Latham on October 11, 2022.

On October 14, 2022, the Board held a special meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and representatives of WilmerHale were present. During the meeting, the representatives of Moelis updated the Board on recent communications with potential counterparties, including LG Chem and Party F, and reviewed the terms of the proposals received to date from LG Chem and Party F. A representative of WilmerHale then reviewed the material terms reflected in and issues raised by the draft merger agreement received from Latham on October 11, 2022. After discussion, the Board instructed Mr. Bailey to request from LG Chem its best and final proposal, which Mr. Bailey requested from a member of senior management of LG Chem following the Board meeting on October 14, 2022. The Board also instructed WilmerHale to continue negotiating a definitive agreement with Latham and instructed members of senior management of AVEO and representatives of Moelis to continue efforts to facilitate the potential submission of a revised proposal by Party F.

Later on October 14, 2022, at the direction of AVEO’s management team, a representative of WilmerHale sent to representatives of Latham a revised draft of a merger agreement. From October 14 to October 17, 2022, representatives of Latham and representatives of WilmerHale negotiated the terms of the Merger Agreement at the direction of their respective clients, including the provisions relating to (i) the allocation of the risks associated with regulatory approvals, (ii) restrictions on AVEO’s operations between signing and closing,

 

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(iii) the ability of the Board to respond to unsolicited acquisition proposals, change its recommendation and accept a superior proposal, (iv) the amount and triggers for AVEO’s termination fee, (v) the conditions to the Merger, including whether the consummation of the Merger would be conditioned on CFIUS approval, (vi) the definition of “Material Adverse Effect” (as defined below) and (vii) the scope of AVEO’s representations and warranties.

On October 16, 2022, a member of senior management of LG Chem called Mr. Bailey and indicated orally that LG Chem was revising its proposal to $15.00 per share in cash and that such revised proposal was LG Chem’s best and final proposal.

Later on October 16, 2022, the Board held a special meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and a representative of WilmerHale were present. During the meeting, Mr. Bailey updated the Board on the recent developments and communications with potential counterparties, including LG Chem and Party F, and informed the Board of LG Chem’s best and final proposal of $15.00 per share in cash and representatives of Moelis reported on their conversations with representatives of Party F’s financial advisor. The Board also discussed anticipated regulatory risks associated with a potential transaction with Party F and the fact that Party F had not yet submitted a written proposal or markup of the merger agreement and had additional due diligence requirements, the potential benefits of the Use Patent to AVEO’s business and the risks and uncertainties associated with the Use Patent, including the risk that the enforceability of the Use Patent could be successfully challenged by competitors. Following discussion and after taking these factors into account, the Board directed the members of senior management of AVEO, the representatives of Moelis and the representative of WilmerHale to work toward the execution of a definitive merger agreement with LG Chem on the basis of its proposal to acquire AVEO for $15.00 in cash per share of AVEO common stock as expeditiously as possible.

Later on October 16, 2022, representatives of Party F’s financial advisor spoke to representatives of Moelis by telephone and indicated that Party F was withdrawing its October 13 oral proposal because Party F’s investment committee had decided to pursue other priorities.

On the morning of October 17, 2022, the Board held a special meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and representatives of WilmerHale were present. At the meeting, Mr. Lucera reviewed revised financial forecasts, which management had prepared at the direction of the Board on September 14, 2022. The forecasts consisted of an “Upside Case” and a “Base Case.” Mr. Lucera described the material assumptions underlying each of the Upside Case and the Base Case. Following discussion, the Board instructed Moelis to use the Base Case in preparing its financial analysis with respect to the Merger Consideration because the Board determined that the Base Case was better reflective of the likely future financial performance of AVEO. Neither the Upside Case nor the Base Case was provided to LG Chem or any other potential counterparty. For a summary of each of the Upside Case and the Base Case, and a description of the material assumptions underlying each of the Upside Case and the Base Case, see “The Merger—Certain Unaudited Prospective Financial Information” beginning on page 62 of this proxy statement. A representative of Moelis then described the recent communications with each of LG Chem and Party F, noting that Party F had withdrawn its October 13 oral proposal. The representatives of WilmerHale then reviewed the fiduciary duties of the Board in connection with its evaluation of a sale of AVEO to LG Chem and reviewed the terms of the Merger Agreement.

During the remainder of the day on October 17, 2022, representatives of Latham and representatives of WilmerHale finalized the Merger Agreement and related documents.    

Later on October 17, 2022, the Board held a second special meeting by videoconference at which members of senior management of AVEO, representatives of Moelis and representatives of WilmerHale were present. After brief introductory remarks by Mr. Bailey, the representatives of WilmerHale reviewed with the Board the changes to the terms of the Merger Agreement from the prior drafts that had been presented to the Board at the Board meeting earlier that day. The representatives of Moelis then reviewed with the Board Moelis’ financial

 

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analysis of the Merger Consideration and answered questions from the Board regarding its analysis. At the request of the Board, Moelis then rendered to the Board an oral opinion, which was subsequently confirmed by delivery of a written opinion dated October 17, 2022, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered, and limitations on the review undertaken as set forth in the opinion, the Merger Consideration to be paid to the holders of shares of AVEO common stock (other than LG Chem and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. For a summary of Moelis’ opinion, see “The Merger—Opinion of Moelis & Company LLC” beginning on page 54 of this proxy statement. The Transaction Committee and the Board then discussed various factors weighing in favor of approving the Merger, as well as various other factors and countervailing risks and uncertainties, as summarized below in “The Merger—Recommendations of the Board and Reasons for the Merger” beginning on page 47 of this proxy statement. At the conclusion of these discussions, the Transaction Committee unanimously recommended that the Board (i) determine that the Merger Agreement and the transactions contemplated thereby are fair to and in the best interests of AVEO stockholders, (ii) approve, adopt and declare advisable the Merger Agreement and the transactions contemplated thereby, (iii) recommend the adoption of the Merger Agreement by AVEO stockholders and (iv) direct that the adoption of the Merger Agreement be submitted to a vote of AVEO stockholders. Thereafter, the Board unanimously resolved as so recommended by the Transaction Committee.

Early on October 18, 2022, AVEO, LG Chem and Merger Sub executed and delivered the Merger Agreement. Later on October 18, 2022 and prior to the open of trading on Nasdaq, AVEO and LG Chem issued a joint press release announcing the execution of the Merger Agreement.

Recommendations of the Transaction Committee and the Board and Reasons for the Merger

Recommendations of the Transaction Committee and the Board

The Transaction Committee has unanimously recommended that the Board (i) determine that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to and in the best interests of the Company and the Company’s stockholders, (ii) approve, adopt and declare advisable the Merger Agreement and the transactions contemplated thereby, (iii) recommend the adoption of the Merger Agreement by the stockholders of the Company and (iv) direct that the adoption of the Merger Agreement be submitted to a vote of the Company’s stockholders at the Special Meeting.

The Board has unanimously: (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to and in the best interests of the Company and the Company’s stockholders, (ii) approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby, (iii) resolved to recommend the adoption of the Merger Agreement by the stockholders of the Company and (iv) directed that the adoption of the Merger Agreement be submitted to a vote of the Company’s stockholders at the Special Meeting.

The Board unanimously recommends that AVEO stockholders vote “FOR” the Merger Proposal, “FOR” the Merger Compensation Proposal and “FOR” the Adjournment Proposal.

Reasons for the Merger

In evaluating the Merger Agreement and the transactions contemplated thereby, each of the Transaction Committee and the Board consulted with members of AVEO’s senior management, representatives of AVEO’s legal advisor, WilmerHale, and representatives of AVEO’s financial advisor, Moelis.

Transaction Committee

In the course of reaching its determination and recommendation to the Board, the Transaction Committee reviewed, evaluated and considered a significant amount of information and numerous factors and benefits,

 

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including those listed below (which are not listed in any relative order of importance), all of which it viewed as supporting its recommendation that the Board (i) determine that the Merger Agreement and the transactions contemplated thereby are fair to and in the best interests of the Company’s stockholders, (ii) approve, adopt and declare advisable the Merger Agreement and the transactions contemplated thereby, (iii) recommend the adoption of the Merger Agreement by the stockholders of the Company and (iv) direct that the adoption of the Merger Agreement be submitted to a vote of the Company’s stockholders:

 

   

Premium to Market Price. The Transaction Committee considered the relationship of the Merger Consideration to the price of AVEO common stock immediately prior to the execution of the Merger Agreement and the recent historical market price and volatility of AVEO common stock, including the fact that the Merger Consideration represents a premium of approximately 50% to the $10.02 closing price per share of AVEO common stock on Nasdaq on October 14, 2022, the last trading day prior to the date on which the Board approved the Merger Agreement, a premium of approximately 73% to the trailing volume-weighted average price per share of $8.65 for the thirty (30) trading day period ended October 14, 2022, a premium of approximately 80% to the trailing volume-weighted average price per share of $8.33 for the sixty (60) trading day period ended October 14, 2022 and a premium of 95% to the trailing volume-weighted average price per share of $7.70 for the ninety (90) trading day period ended October 14, 2022. The Transaction Committee believed that the Merger Consideration represents the highest value reasonably available for the shares of AVEO common stock for the foreseeable future, taking into account the Transaction Committee’s familiarity with the business strategy, assets and prospects of AVEO, the recent historical market price of AVEO common stock and the challenging capital market conditions.

 

   

Certainty of Value. The Transaction Committee considered the all-cash nature of the Merger Consideration to be received by AVEO’s stockholders in the Merger, which would provide liquidity and certainty of value to AVEO stockholders while avoiding additional exposure to market volatility as well as AVEO’s clinical, regulatory, commercialization and other business risks (including risks associated with obtaining additional financing that AVEO management expected would be required to successfully execute AVEO’s long-term business plan, as well as the anticipated increased competition for FOTIVDA and AVEO’s potential loss of exclusivity with respect to FOTIVDA). Taking into account the business, operations, prospects, strategic and short and long term operating plans, assets, liabilities and financial condition of AVEO, the Transaction Committee weighed the certainty of realizing compelling value for shares of AVEO common stock by virtue of the Merger against the uncertain prospect that the trading value of shares of AVEO common stock would approach the Merger Consideration in the foreseeable future and the risks and uncertainties associated with AVEO’s business generally, including those described below and those discussed in AVEO’s public filings with the SEC. See “Where You Can Find More Information” beginning on page 115 of this proxy statement. In particular, the Transaction Committee carefully considered the anticipated issuance, as publicly announced by AVEO on October 12, 2022, of the Use Patent, the increase in stock price of AVEO common stock following the announcement of the anticipated issuance of the Use Patent, the potential benefits of the Use Patent to AVEO’s business and the risks and uncertainties associated with the Use Patent, including the risk that the validity and enforceability of the Use Patent could be successfully challenged by third parties, including competitors and was given no incremental value by sell-side equity research analysts, and concluded that the Merger was the best alternative reasonably available to AVEO stockholders, including compared to the alternative of remaining a stand-alone public company, notwithstanding the anticipated issuance of the Use Patent, because the Merger would provide liquidity and certainty of value to AVEO stockholders.

 

   

Highest Value Reasonably Obtainable. The Transaction Committee believed that the Merger Consideration of $15.00 per share of AVEO common stock represents the highest value reasonably obtainable for AVEO shares of common stock for the foreseeable future, taking into account the process conducted by AVEO, with the assistance of representatives of Moelis, to identify whether other

 

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potential parties might be interested in pursuing an acquisition of AVEO (which did not result in any proposal to acquire AVEO at a valuation greater than the $15.00 per share of AVEO common stock payable in the Merger) and the business, operations, prospects, business strategy, assets, liabilities and general financial condition of AVEO, including in light of the anticipated issuance of the Use Patent. The Board also considered the progress and the outcome of AVEO’s negotiations with LG Chem, including the increase in the consideration offered by LG Chem from the time of its initial expression of interest to the end of the negotiations, including following the disclosure to LG Chem of the anticipated issuance of the Use Patent, and a number of changes in the terms and conditions of the Merger Agreement from the version initially proposed by LG Chem that were favorable to AVEO. Further, the Transaction Committee believed, based on these negotiations, that the Merger Consideration was the highest price per share that LG Chem was willing to pay and that the Merger Agreement contained the most favorable terms to AVEO to which LG Chem was willing to agree.

 

   

Possible Strategic Alternatives. The Transaction Committee considered the process conducted by AVEO, with the assistance of representatives of Moelis, to identify whether other potential parties might be interested in pursuing an acquisition of AVEO, taking into account the expected interest of such parties generally, and their ability to consummate a transaction with AVEO. In particular, the Transaction Committee considered the extensive outreach by representatives of Moelis and members of AVEO’s senior management with respect to such parties believed to be most likely to have interest in pursuing such an acquisition of AVEO, and considered the responses received from such contacted parties, including the fact that each such party had either declined to engage with AVEO regarding a potential sale transaction, declined to make a proposal to acquire AVEO, withdrawn its proposal to acquire AVEO or submitted a proposal to acquire AVEO at a price per share substantially lower than the $15.00 per share of AVEO common stock payable in the Merger.

 

   

Full and Fair Value. The Transaction Committee believed that the Merger Consideration of $15.00 per share of AVEO common stock represents full and fair value for AVEO shares of common stock, taking into account the Transaction Committee’s familiarity with the business strategy, assets and prospects of AVEO on a standalone basis and the relative certainty of the cash consideration payable in the Merger as compared to the risks and uncertainties of continuing on a standalone basis as an independent public company (including the risk that additional financing that AVEO management believed would be required to successfully execute AVEO’s long-term business plan would be dilutive).

 

   

Likelihood of Consummation. The Transaction Committee considered the anticipated timing of the consummation of the transactions contemplated by the Merger Agreement, including the likelihood of consummation, based upon the scope of the conditions to the consummation of the Merger, the relative likelihood of obtaining required regulatory approvals, the remedies available to AVEO under the Merger Agreement in the event of various breaches by LG Chem, including specific performance, and LG Chem’s reputation in the petrochemicals, advance materials and life sciences industries and its financial capacity to complete an acquisition of this size, which the Transaction Committee believed supported the conclusion that a transaction with LG Chem could be completed relatively expeditiously and in an orderly manner.

 

   

Opinion of Financial Advisor. The Transaction Committee considered the financial analysis of Moelis, as reviewed and discussed with the Board, as well as the opinion of Moelis to the effect that, as of October 17, 2022, and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken as set forth in Moelis’ written opinion, the Merger Consideration to be received by holders of shares of AVEO common stock (other than LG Chem and its affiliates) in the Merger was fair, from a financial point of view, to such holders, as more fully described under “The MergerOpinion of Moelis & Company LLC” beginning on page 54 of this proxy statement.

 

   

Terms of the Merger Agreement. The Transaction Committee considered the terms and conditions of the Merger Agreement, which was the product of arms’-length negotiations with the assistance of

 

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AVEO’s advisors, including the structure of the transaction, the all-cash form of the Merger Consideration, the limited scope of the conditions to the consummation of the Merger, and the customary nature of the representations, warranties, and the covenants and agreements of the parties. For the reasons noted below, the Transaction Committee believed that the provisions of the Merger Agreement were advisable and fair to, and in the best interests of, AVEO and AVEO stockholders. In particular:

 

   

No Financing Condition. The Transaction Committee considered the representation of LG Chem that LG Chem has, and at the Effective Time will have, sufficient cash or other liquid financial resources or undrawn financing commitments to consummate the Merger, and that the consummation of the Merger is not subject to a financing condition.

 

   

No Solicitation Covenants and Fiduciary Outs. The Transaction Committee considered the non-solicitation covenants and “fiduciary out” provisions of the Merger Agreement, which, subject to the terms and conditions thereof and limitations set forth therein, permit AVEO to furnish information to, and to engage in discussions or negotiations with, third parties that make unsolicited Acquisition Proposals (as defined below) meeting certain criteria (including compliance with AVEO’s covenants under the Merger Agreement with respect to soliciting such Acquisition Proposals), permit the Board to change its recommendation to stockholders regarding the Merger Agreement under certain circumstances and permit AVEO to terminate the Merger Agreement in order to enter into a definitive agreement relating to a Superior Proposal (as defined below), subject to, among other things, payment of a termination fee to LG Chem. The Transaction Committee also considered its ability to change its recommendation to stockholders regarding the Merger Agreement in response to an Intervening Event (as defined below) if the failure to do so would be inconsistent with the fiduciary duties of the Board under applicable law. The Transaction Committee further considered the fact that the $20.4 million termination fee payable by AVEO in the event the Merger Agreement is terminated under certain circumstances, in the opinion of the Transaction Committee, (i) is reasonable in light of the overall terms of the Merger Agreement and the expected benefits of the Merger, (ii) is consistent with the amount of such fees payable in comparable transactions on a relative basis and (iii) would not be a substantial impediment or preclude another party from making a competing proposal to acquire AVEO.

 

   

End Date. The Transaction Committee considered the fact that the End Date under the Merger Agreement, on which either party, subject to certain exceptions, can terminate the Merger Agreement, as such End Date may be extended under the Merger Agreement to permit certain conditions to the Merger to be satisfied, allows for sufficient time to consummate the transactions contemplated by the Merger Agreement, but also prevents the Merger Agreement from being extended for an unreasonable amount of time.

 

   

Enforcement. The Transaction Committee considered AVEO’s ability to obtain specific enforcement of the obligations of LG Chem and Merger Sub under the Merger Agreement, thereby ensuring that AVEO has an appropriate remedy in the event LG Chem and Merger Sub were to decline to comply with their obligations under the Merger Agreement.

 

   

Stockholder Approval; Appraisal Rights. The Transaction Committee considered that the adoption of the Merger Agreement would be subject to the approval of AVEO stockholders, that stockholders would be free to vote against the adoption of the Merger Agreement, and that stockholders who do not vote to adopt the Merger Agreement and who properly exercise their appraisal rights under Delaware law will be entitled to such appraisal rights in connection with the Merger.

 

   

Conditions to Closing; Interim Operations. The Transaction Committee considered the fact that the terms and conditions of the Merger Agreement minimize, to the extent reasonably practical, the risk that a condition to consummation of the Merger would not be satisfied and also provide reasonable flexibility to operate AVEO’s business during the pendency of the Merger.

 

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The Transaction Committee, in consultation with members of AVEO’s senior management, also assessed AVEO’s prospects for substantially increasing stockholder value as a standalone company in excess of the Merger Consideration, given the risks and uncertainties in AVEO’s business, including, but not limited to, the following (which are not listed in any relative order of importance) and those discussed in AVEO’s public filings with the SEC (see “Where You Can Find More Information” beginning on page 115 of this proxy statement):

 

   

the fact that AVEO has incurred significant operating losses, anticipates that it will continue to incur significant operating expenses for the foreseeable future and may never generate significant revenue or achieve or sustain profitability;

 

   

the risks and uncertainties associated with AVEO’s heavy dependence on the success of its commercial product, FOTIVDA, and on its clinical stage assets, including tivozanib (in other combination regimens and earlier-line settings), ficlatuzumab, AV-380 and AV-203, and the risk that AVEO would suffer material harm if it is unable to complete the clinical development of, obtain marketing approval for or successfully commercialize its product candidates;

 

   

the substantial harm to AVEO’s business that would result from the loss of exclusivity with respect to FOTIVDA, which could occur in November 2028 if the Application (which is expected to issue as U.S. Patent No. 11,504,365 on November 22, 2022) faced a third-party challenge after issuance, and the patent is rendered invalid, unenforceable or found not to be infringed;

 

   

the significant risks and challenges associated with substantial competition from existing approved products and the potential for competitors to commercialize new competing products;

 

   

the challenges, potential shareholder dilution and other uncertainties associated with securing additional funding which AVEO may require to advance its pipeline of clinical stage assets, a failure to which obtain when needed would force AVEO to delay, limit, reduce or terminate AVEO’s research, product development or commercialization efforts;

 

   

the possible failure or delays of current or future clinical trials, including as a result of delays or difficulties in the enrollment of patients in clinical trials, or which may prevent or delay successful completion of the study and/or receipt of necessary regulatory approvals (including in connection with unanticipated safety signals);

 

   

AVEO’s reliance in part on third parties to produce preclinical and clinical product candidate supplies and to conduct clinical trials of AVEO’s internally-developed product candidates, and the risk that those third parties may not perform satisfactorily, including by failing to deliver supplies on time or to meet deadlines for the completion of such trials, research or testing;

 

   

risks and potential delays relating to the manufacturing and supply of FOTIVDA and AVEO’s drug product candidates, including due to the failure of third party manufacturers to comply with manufacturing regulations;

 

   

uncertainties relating to AVEO’s ability to obtain or maintain adequate patent protection for one or more of its product candidates, or a sufficiently broad scope of its patent protection, which could result in competition and a decrease in the potential market share for such product candidate;

 

   

risks and uncertainties associated with the COVID-19 pandemic and related variants, and the potential impact of such risks and uncertainties on a standalone strategy-basis and the trading price of AVEO common stock, including the uncertainty related to the spread of the COVID-19 pandemic and the potential consequences of the pandemic on the financial markets and AVEO’s current and future business and operations, which could include: delays of AVEO’s ongoing and planned clinical trials; decreases and delays in supplier, vendor and collaboration partner interactions as a result of government and other restrictions; delays in interactions with and responses from governmental authorities; and disruptions in the operations of clinical research organizations and other third parties upon whom AVEO relies;

 

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the risk that countries that impose price controls or reimbursement limitations for pharmaceutical products will not allow favorable reimbursement and pricing arrangements for any products approved in those countries; and

 

   

the current state of the U.S. and global economies, including the recent downward trend in the biopharmaceutical financial markets, increased volatility resulting from escalating political and global trade tensions, and the current and potential impact in both the near term and long term on the biopharmaceutical industry and the future commercialization efforts required with respect to AVEO’s drug products and drug product candidates that are or become approved for sale, including the numerous risks, costs and uncertainties associated with research, development and commercialization of AVEO’s pipeline programs, all of which risks are enhanced by the COVID-19 pandemic and may remain present following the resolution of the COVID-19 pandemic.

In the course of its deliberations, the Transaction Committee, in consultation with members of AVEO’s senior management and representatives of AVEO’s outside financial and legal advisors, also considered a variety of uncertainties, risks and other potentially negative factors concerning the Merger Agreement and the transactions contemplated by the Merger Agreement, including, but not limited to, the following (which are not listed in any relative order of importance):

 

   

No Stockholder Participation in Future Earnings or Growth. The Transaction Committee considered that the nature of the Merger as a cash transaction means that, if the Merger is consummated, AVEO stockholders will not participate in future earnings or growth of AVEO and will not benefit from any appreciation in the value of AVEO’s business or the shares of the surviving corporation.

 

   

Risk Associated with Failure to Consummate the Merger. The Transaction Committee considered the possibility that the transactions contemplated by the Merger Agreement, including the Merger, might not be consummated, and that consummation of the Merger is subject to the satisfaction of certain conditions that may not be within AVEO’s control, including receipt of the necessary regulatory clearances and approvals and that no Material Adverse Effect with respect to AVEO has occurred. The Transaction Committee considered the fact that there can be no assurance that all conditions to the parties’ obligations to consummate the Merger will be satisfied and, as a result, it is possible that the Merger may not be consummated even if the Merger Agreement is adopted by AVEO stockholders. The Transaction Committee considered the fact that if the Merger is not consummated (i) AVEO will have incurred significant transaction and opportunity costs, including the possibility of disruption to AVEO’s operations, diversion of management and employee attention, employee attrition and a potentially negative effect on AVEO’s business and customer relationships, (ii) the trading price of AVEO common stock may be adversely affected and (iii) the market’s perceptions of AVEO’s prospects could be adversely affected.

 

   

Interim Operating Covenants. The Transaction Committee considered the restrictions on the conduct of AVEO’s business during the pendency of the Merger, which may delay or prevent AVEO from undertaking potential business opportunities that may arise, may have a material adverse effect on AVEO’s ability to respond to changing market and business conditions in a timely manner (or at all) or may negatively affect AVEO’s ability to attract, retain and motivate key personnel. The Transaction Committee also considered that the focus and resources of AVEO’s management may become diverted from other important business opportunities and operational matters while working to consummate the Merger, which could adversely affect AVEO’s business.

 

   

No Solicitation Covenants and Termination Fee. The Transaction Committee considered the fact that, subject to certain exceptions, the Merger Agreement precludes AVEO and its representatives from soliciting, or entering into or participating in discussions or negotiations relating to, alternative acquisition proposals, and requires AVEO to pay to LG Chem a termination fee of $20.4 million if the Merger Agreement is terminated under certain circumstances, including a termination of the Merger Agreement by AVEO to enter into a definitive agreement for a Superior Proposal, as described in “The

 

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Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement. The Transaction Committee also considered, but did not consider preclusive, the fact that the right afforded to LG Chem under the Merger Agreement to propose amendments or modifications to the terms and conditions of the Merger Agreement in response to a Superior Proposal may discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, AVEO. Nevertheless, the Transaction Committee considered that the amount of the termination fee, as compared to termination fees in transactions of a similar size, in the opinion of the Transaction Committee, was reasonable, and would not likely deter competing bids. The Transaction Committee also recognized that the provisions in the Merger Agreement relating to non-solicitation and the termination fee were required by LG Chem as conditions to entering into the Merger Agreement.

 

   

Effect of Transaction Announcement. The Transaction Committee considered the potential effect of the announcement of the Merger Agreement, including effects on AVEO’s stock price and operations, including AVEO’s relationships with suppliers, distributors, vendors, collaborators and employees, and AVEO’s ability to attract and retain key personnel during the pendency of the transactions contemplated by the Merger Agreement, as well as the possibility of a suit, action or proceeding in respect of the Merger Agreement or the transactions contemplated thereby.

 

   

Transaction Costs. The Transaction Committee considered the fact that AVEO has incurred and will continue to incur significant transaction costs and expenses in connection with the Merger, regardless of whether the Merger is consummated.

 

   

Taxable Transaction. The Transaction Committee considered that receipt of the all-cash Merger Consideration would be taxable to AVEO stockholders that are treated as U.S. holders for United States federal income tax purposes.

 

   

Interests of Directors and Executive Officers. The Transaction Committee considered the possibility that AVEO’s directors and executive officers may have interests in the transactions contemplated by the Merger Agreement that may be different from, or in addition to, those of AVEO’s stockholders generally. See “The Merger—Interests of the Directors and Executive Officers of AVEO in the Merger” beginning on page 66 of this proxy statement.

After considering all of the factors discussed above, the Transaction Committee concluded that the potential benefits of the Merger substantially outweighed the risks or potential negative consequences of the Merger.

Board

The Board considered and relied upon the analyses and recommendation of the Transaction Committee in arriving at its determinations and recommendation to the Company’s stockholders. In considering the Transaction Committee’s analyses and recommendation, the Board discussed the Transaction Committee’s recommendation with the members of the Transaction Committee and the financial and legal advisors of the Company. The following are some of the significant factors that supported the Board’s determination and recommendation:

 

   

the anticipated timing of the consummation of the transactions contemplated by the Merger Agreement, including the likelihood of consummation, based upon the scope of the conditions to the consummation of the Merger, the relative likelihood of obtaining required regulatory approvals, the remedies available to AVEO under the Merger Agreement in the event of various breaches by LG Chem, including specific performance, and LG Chem’s reputation in the petrochemicals, advance materials and life sciences industries and its financial capacity to complete an acquisition of this size, which the Board believed supported the conclusion that a transaction with LG Chem could be completed relatively expeditiously and in an orderly manner;

 

   

the financial analysis of Moelis, as reviewed and discussed with the Board, as well as the opinion of Moelis to the effect that, as of October 17, 2022, and based upon and subject to the assumptions made,

 

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procedures followed, matters considered and limitations on the review undertaken as set forth in Moelis’ written opinion, the Merger Consideration to be received by holders of shares of AVEO common stock (other than LG Chem and its affiliates) in the Merger was fair, from a financial point of view, to such holders, as more fully described under “The MergerOpinion of Moelis & Company LLC” beginning on page 54 of this proxy statement;

 

   

the business and financial condition of the Company, and the risks associated with continuing as an independent company;

 

   

the consideration of the other strategic alternatives available to the Company;

 

   

the process for considering strategic alternatives conducted by the Transaction Committee;

 

   

the specific terms of the Merger Agreement and the structure of the Merger, and the related benefits to the Company and to the stockholders of the Company;

 

   

each of the above listed as described in further detail, as well as the other factors considered by the Transaction Committee, in the section entitled “The MergerReasons for the MergerTransaction Committee” above; and

 

   

the fact that the Transaction Committee, formed to act on behalf of AVEO to review and evaluate potential transactions for purposes of providing prompt guidance and direction to AVEO management, is comprised of three independent directors of AVEO, and the fact that, other than any compensation for their service on the Board and their interests described under “The MergerInterests of the Directors and Executive Officers of AVEO in the Merger” beginning on page 54 of this proxy statement, neither the members of the Transaction Committee nor any other members of the Board have an interest in Merger different from, or in addition to, that of the holders of the Company common stock generally.

The Board also considered a number of potentially negative factors in its deliberations concerning the Offer and the Merger, including the same potentially negative factors considered by the Transaction Committee that are listed in the Section entitled “The MergerReasons for the MergerTransaction Committee” Beginning on page 47 of this proxy statement.

The foregoing discussion of the information and factors considered by the Transaction Committee and the Board, respectively, is intended to be illustrative and not exhaustive, but includes material reasons and factors considered by the Transaction Committee and the Board, respectively, in reaching its conclusions and recommendation in relation to the Merger, the Merger Agreement and the transactions proposed thereby. In light of the variety of reasons and factors considered and the complexity of these matters, neither the Transaction Committee nor the Board found it practicable to, and neither did, quantify or otherwise assign relative weights to the specific reasons or factors considered in reaching their respective determinations and recommendations. Each of the Transaction Committee and the Board based its recommendations on the totality of the information presented, including thorough discussions with, and questioning of, members of AVEO’s senior management and representatives of AVEO’s outside financial advisor and legal counsel. Individual directors may have given differing weights to different factors or may have had different reasons for their ultimate determination. In addition, neither the Transaction Committee nor the Board reached any specific conclusion with respect to any of the factors or reasons considered. Instead, each of the Transaction Committee and the Board conducted an overall analysis of the factors and reasons described above and determined in its business judgment that, in the aggregate, the potential benefits of the Merger to the stockholders of AVEO outweighed the risks or potential negative consequences. It should be noted that this explanation of the reasoning of the Transaction Committee and the Board, respectively, and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 32 of this proxy statement.

Opinion of Moelis & Company LLC

At the meeting of the Board on October 17, 2022 to evaluate and consider approval of the Merger Agreement and the Merger, Moelis delivered an oral opinion, which was confirmed by delivery of a written opinion, dated

 

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October 17, 2022, addressed to the Board (solely in its capacity as such) to the effect that, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken as set forth in the opinion, the Merger Consideration to be received by holders of AVEO common stock (other than the Excluded Holders) in the Merger was fair, from a financial point of view, to such holders.

The full text of Moelis’ written opinion dated October 17, 2022, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. Moelis’ opinion was provided for the use and benefit of the Board (solely in its capacity as such) in its evaluation of the Merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of AVEO common stock (other than the Excluded Holders) in the Merger, and does not address AVEO’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to AVEO. Moelis’ opinion does not constitute a recommendation as to how any holder of securities should vote or act with respect to the Merger or any other matter. Moelis’ opinion was approved by a Moelis & Company LLC fairness opinion committee.

In arriving at its opinion, Moelis, among other things:

 

   

reviewed certain publicly available business and financial information relating to AVEO, including publicly available research analysts’ financial forecasts;

 

   

reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities, financing and prospects of AVEO furnished to Moelis by AVEO, including the Base Case and the Upside Case, each of which were provided to or discussed with Moelis by the management of AVEO (described on page 62 of this proxy statement/prospectus under the caption “—Certain Unaudited Prospective Financial Information”);

 

   

reviewed information regarding AVEO’s federal and state net operating losses and federal tax credits provided to or discussed with Moelis by management of AVEO;

 

   

reviewed information regarding the capitalization of AVEO furnished to Moelis by AVEO;

 

   

conducted discussions with members of the senior management and representatives of AVEO, including the information described above as well as the business and prospects of AVEO generally;

 

   

reviewed the reported prices and trading activity for AVEO’s common stock;

 

   

reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant;

 

   

reviewed the financial terms of certain other transactions that Moelis deemed relevant;

 

   

reviewed a draft, dated October 17, 2022, of the Merger Agreement;

 

   

participated in certain discussions and negotiations among representatives of AVEO and LG Chem and their respective advisors; and

 

   

conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate.

In connection with its analysis and opinion, Moelis, at the direction of the Board, relied on the information supplied to, discussed with or reviewed by Moelis for purposes of its opinion being complete and accurate in all material respects. Moelis did not independently verify any such information (or assume any responsibility for the independent verification of any of such information). With the consent of the Board, Moelis also relied on the representation of AVEO’s management that they were not aware of any facts or circumstances that would make

 

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any such information inaccurate or misleading. With the consent of the Board, Moelis relied upon, without independent verification, the assessment of AVEO and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. With respect to the financial forecasts referred to above, at the direction of the Board, Moelis utilized the Base Case for purposes of its opinion, and, Moelis assumed, at the direction of the Board, that the Base Case was reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of AVEO as to the future performance of AVEO. In addition, Moelis relied, with the consent of the Board, on the assessments of the management of AVEO as to the existing products and services of AVEO and the validity of, and risks associated with, the future intellectual property, products and services of AVEO and the marketability, commercial viability, regulatory approval and market adoption of AVEO’s current and future products or services. Moelis assumed, with the consent of the Board, that there will be no developments with respect to any of the foregoing that would affect its analyses or opinion. Moelis expressed no views as to the reasonableness of any financial forecasts or the assumptions on which they are based. In addition, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of AVEO, nor was Moelis furnished with any such evaluation or appraisal.

Moelis’ opinion did not address AVEO’s underlying business decision to effect the Merger or the relative merits of the Merger as compared to any alternative business strategies or transactions that might be available to AVEO and did not address any legal, regulatory, tax or accounting matters. Moelis was not asked to, and did not, offer any opinion as to any terms of the Merger Agreement or any aspect or implication of the Merger, except for the fairness of the Merger Consideration from a financial point of view to the holders of AVEO common stock (other than Excluded Holders). Moelis did not express any opinion as to fair value, viability or the solvency of AVEO or LG Chem following the closing of the Merger. In rendering its opinion, Moelis assumed, with the consent of the Board, that the final executed form of the Merger Agreement would not differ in any material respect from the draft that Moelis reviewed, that the Merger would be consummated in accordance with its terms without any waiver or modification that could be material to Moelis’ analysis, that the representations and warranties of each party set forth in the Merger Agreement were accurate and correct, and that the parties to the Merger Agreement would comply with all the material terms of the Merger Agreement. Moelis assumed, with the consent of the Board, that all governmental, regulatory or other consents or approvals necessary for the completion of the Merger would be obtained, except to the extent that could not be material to its analysis.

Moelis’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, October 17, 2022 and Moelis assumed no responsibility to update its opinion for developments after that date. Moelis noted that the credit, financial and stock markets have been experiencing unusual volatility and expressed no opinion as to any potential effects of such volatility on AVEO, LG Chem or the Merger.

Moelis’ opinion did not address the fairness of the Merger or any aspect or implication thereof to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of AVEO, other than the fairness of the Merger Consideration from a financial point of view to the holders of AVEO common stock (other than the Excluded Holders). In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any of the officers, directors or employees of any parties to the Merger, or any class of such persons, whether relative to the Merger Consideration or otherwise. Moelis’ opinion was approved by a Moelis & Company LLC fairness opinion committee.

Summary of Financial Analyses

The following is a summary of the material financial analyses presented by Moelis to the Board at their meeting held on October 17, 2022, in connection with delivery of its opinion. This summary describes the material analysis underlying Moelis’ opinion but does not purport to be a complete description of the analyses performed by Moelis in connection with its opinion.

 

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Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Moelis’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Moelis’ analyses.

For purposes of Moelis’ analysis:

 

   

EBIT” was generally calculated as earnings before interest and taxes.

 

   

Total Enterprise Value” (or “TEV”) was generally calculated as the market value of the relevant company’s fully diluted common equity based on its closing stock price as of October 14, 2022 (the “equity value”) (i) plus preferred stock, if any, (ii) plus debt, excluding lease obligations and (iii) less cash and cash equivalents (in each of the foregoing cases (i) through (iii), as of the relevant company’s most recently reported quarter end, with pro forma adjustments for any reported capitalization events subsequent to the relevant company’s most recently reported quarter end).

Discounted Cash Flow Analysis – Base Case

Utilizing the Base Case, Moelis performed a discounted cash flow (“DCF”) analysis of AVEO to calculate the present value of the estimated future unlevered free cash flows projected by management of AVEO to be generated by AVEO for the calendar years ending December 31, 2023 through December 31, 2038 and the present value of the estimated terminal value of AVEO as of December 31, 2022.

Moelis calculated AVEO’s pro forma unlevered free cash flow as EBIT, less cash taxes, plus depreciation and amortization, less capital expenditures, less increases in net working capital and plus decreases in net working capital, each as set forth under “The Merger—Certain Unaudited Prospective Financial Information” on page 62).

Moelis utilized a range of discount rates of 13.00% to 17.00% based on an estimated range of weighted average cost of capital (“WACC”) for AVEO. The WACC range reflected a derived cost of equity using (i) a risk-free rate based on twenty (20)-year U.S. government bonds, (ii) an equity risk premium, (iii) a size premium and (iv) a selected range of unlevered betas and debt to total capitalization ratios informed by the Selected Companies (as defined below). Moelis used the foregoing range of discount rates to calculate estimated present values as of December 31, 2022 of (i) estimated after-tax unlevered free cash flows of AVEO for the calendar years ending December 31, 2023 through December 31, 2038 (in each case, discounted using a mid-year discounting convention) and (ii) estimated terminal values derived by applying a range of perpetuity growth rates of negative 75.0% to negative 25.0%, reflecting future decline in revenue and negative free cash flow post-patent expiry, as projected by AVEO management, and taking into account AVEO management’s view related to replicability of molecule, competition, size of market opportunity and availability of an authorized generic.

In calculating the implied equity value of AVEO, Moelis separately valued, as of December 31, 2022, AVEO’s (i) U.S. federal and state net operating losses (“NOLs”) and (ii) U.S. federal R&D tax credits, in each case, using estimates of tax cash savings provided by AVEO and taking into account a U.S. federal corporate tax rate of 21% and an assumed state tax rate of 5%, in each case as provided by AVEO management.

For purposes of its analysis, Moelis took into account the dilutive impact of a projected $75 million equity financing in 2023 at a 20% discount to current market prices and warrant coverage and costs of financing based on assumptions provided by AVEO management.

The DCF analysis yielded an implied range of share prices for AVEO common stock of $12.47 to $15.39, which Moelis compared to the Merger Consideration.

 

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Selected Publicly Traded Companies Analysis

Moelis performed a selected publicly traded companies analysis of AVEO. Financial data for the selected publicly traded companies was based on public filings and other publicly available information available as of October 14, 2022. In performing its analysis, Moelis reviewed and analyzed certain financial information and stock market trading information of the selected publicly traded companies listed below (the “Selected Companies”). Moelis chose the Selected Companies because they are oncology companies with TEV of up to $1 billion that have small molecule or antibody-based pipelines. The Selected Companies also have lead programs that are either marketed (and early in launch cycle) or in late-stage clinical development, and the Selected Companies have similar total revenue opportunities across their marketed and development-stage portfolios.

 

   

ADC Therapeutics SA (“ADC”)

 

   

Deciphera Pharmaceuticals, Inc. (“Deciphera”)

 

   

G1 Therapeutics, Inc. (“G1”)

 

   

Karyopharm Therapeutics Inc. (“Karyopharm”)

 

   

MacroGenics, Inc. (“MacroGenics”)

 

   

Zymeworks Inc. (“Zymeworks”)

In performing its analysis, Moelis reviewed and analyzed, among other things, market capitalization as of October 14, 2022, closing price as of October 14, 2022 as a percentage of 52-week-high trading price, total cash, TEV as a multiple of risk-adjusted net revenue for calendar year 2026 (“2026E Adjusted Net Revenue”) and risk-adjusted net revenue for calendar year 2027 (“2027E Adjusted Net Revenue”). Financial data for the Selected Companies were based on publicly available median consensus research estimates and public filings. In the case of estimated Adjusted Net Revenue for AVEO, Moelis reviewed both the median consensus research analyst estimates and the Base Case. The Selected Companies used in this analysis and their implied trading values to estimated Adjusted Net Revenue for calendar years 2026 and 2027 are summarized in the following table:

 

     % of
52-Wk
High
    Market
Cap.
($ in
millions)
     Total
Cash
($ in
millions)
    TEV
($ in
millions)
     TEV/
2026E
Adj. Net
Revenue
     TEV/
2027E
Adj. Net
Revenue
 

Selected Companies

               

ADC

     14.7   $ 376      $ 543     $ 183        0.4x        0.3x  

Deciphera

     44.0   $ 1,207      $ 393 1    $ 814        2.1x        2.0x  

G1

     63.5   $ 482      $ 144 2    $ 413        1.0x        0.7x  

Karyopharm

     32.5   $ 465      $ 171 3    $ 717        1.8x        1.4x  

MacroGenics

     15.5   $ 217      $ 134     $ 84        0.8x        0.5x  

Zymeworks

     20.4   $ 372      $ 242 4    $ 130        0.5x        0.4x  

Mean

     31.8             1.1x        0.9x  

Median

     26.4             0.9x        0.6x  

AVEO

               

Median Wall Street consensus estimates

     100   $ 369      $ 77     $ 334        0.9x        0.8x  

Base Case

     100   $ 369      $ 77     $ 334        0.8x        0.7x  

 

1 

Includes long-term marketable securities of $9.2mm (corporate debt securities and U.S. government securities); does not include long-term assets (restricted and other) of $3.3mm.

2 

Does not include short- and long-term restricted cash of $0.1mm and $0.3mm.

3

Excludes short- and long-term restricted cash of $1.1mm and $0.6mm, respectively.

4 

Does not include long-term investments (equity securities acquired for strategic purposes or in connection with licensing and collaboration agreements) of $0.9mm.

 

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For purposes of selecting its reference ranges for this analysis, Moelis utilized (i) the median trading multiples for the Selected Companies (given the wide range of trading multiples observed for the Selected Companies) and (ii) AVEO’s current trading multiples. Moelis noted that AVEO was trading at a 52-week high, while the rest of the Selected Companies had recently traded lower over that same period, which informed Moelis’ approach. Moelis did not utilize Deciphera’s trading multiples in its range because Deciphera’s portfolio has meaningful additional mid-stage clinical assets, as compared to the Selected Companies and AVEO, that are expected to drive diversification and long-term revenue beyond 2026, and these risk-adjusted revenues were not yet fully captured in Street consensus estimates for 2026 or 2027 revenues. Similarly, Moelis did not utilize Karyopharm’s trading multiples in its range because Karyopharm has significant mid-stage and late-stage clinical programs (including follow-on indications for its lead product), as compared to the Selected Companies and AVEO, that are expected to expand the long-term revenue base that are not yet fully captured in Street consensus estimates for 2026 or 2027 revenues.

In light of the foregoing review and based on its professional judgment and experience, Moelis selected reference ranges of (i) 0.7x to 1.1x for 2026E and (ii) 0.5x to 0.9x for 2027E. Moelis applied these ranges to the 2026E and 2027E Adjusted Net Revenue of AVEO included in the Base Case.

The Selected Publicly Traded Companies analysis yielded an implied range of share prices for AVEO common stock based on the selected multiple ranges described above of $8.59 to $12.60 based on 2026E Adjusted Net Revenue, and $7.57 to $12.42 based on 2027E Adjusted Net Revenue, which Moelis compared to the Merger Consideration.

Other Information

Moelis also noted for the AVEO Board certain additional factors that were not considered part of Moelis’ financial analysis with respect to its opinion but were referenced for informational purposes only, including, among other things:

Discounted Cash Flow Analysis – Upside Case

Utilizing the Upside Case (including with respect to utilization of NOLs and R&D tax credits), Moelis performed a DCF analysis of AVEO using the same methodology described above under “—Discounted Cash Flow Analysis –Base Case” to calculate the present value of the estimated future unlevered free cash flows projected by management of AVEO to be generated by AVEO and the present value of the estimated terminal value of AVEO.

This DCF analysis yielded an implied range of share prices for AVEO common stock of $14.98 to $18.16, which for reference only, Moelis compared to the Merger Consideration.

Selected Precedent Transactions Analysis

Moelis performed a selected precedent transactions analysis with respect to AVEO for informational purposes only. For its selected precedent transaction analysis, Moelis reviewed certain financial information related to recent transactions focusing on peak revenue multiples relating to companies that, among other things, met the following criteria: (i) target company with lead asset either marketed or in mid-late stage clinical development (expected to launch within the next one (1) to two (2) years) targeting oncology, (ii) identified lead program as core value driver, with some value assigned to pipeline upside/optionality, with platform acquisitions (e.g., cell therapy) excluded and (iii) focused on lead assets with similar mechanisms of action to AVEO’s portfolio and included small molecule and/or monoclonal antibody assets.

For informational purposes only, Moelis noted, to the extent information was publicly available (i) the number of years until loss of exclusivity (“LOE”) and (ii) the implied TEV (including contingent consideration) of the

 

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precedent transaction as a multiple of the relevant acquired company’s peak risk-adjusted net revenue (“TEV/Peak Sales”). The information noted by Moelis with respect to the selected precedent transactions is summarized below:

 

Date Announced

  Target   Acquiror   Indication   #Years
to LOE
 

TEV

($ in
millions)

    TEV/Peak
Sales
 

06/27/2022

  Epizyme, Inc.   Ipsen Pharma SAS   Follicular Lymphoma   10   $ 492       0.3x  

04/13/2022

  Sierra Oncology, Inc.   GSK plc   Myelofibrosis   6-8   $ 1,593       2.0x  

06/02/2021

  Constellation Pharmaceuticals, Inc.   MorphoSys AG   Myelofibrosis   10-20   $ 1,358       0.9x  

05/04/2020

  Stemline Therapeutics Inc.   Menarini Group   BPDCN   7   $ 561       1.0x  

01/31/2018

  Cascadian Therapeutcis, Inc.   Seattle Genetics, Inc.   HER2+ Breast Cancer   13   $ 508       0.8x  

Mean

          $ 902       1.0x  

Median

          $ 561       0.9x  
  AVEO at $15.00     Renal Cell Carcinoma   61   $ 566       1.1x  

 

1 

Does not account for any implications of the USPTO’s notice of allowance for FOTIVDA methods of use patent.

Moelis noted that if a range of selected multiples of 0.8x to 1.0x were to be applied to the Base Case estimated peak sales for AVEO the resulting range of implied price per share of AVEO common stock would be $10.88 to $13.97 per share. For reference only, Moelis compared this implied range of share prices to the Merger Consideration. Moelis did not rely on the precedent transaction analysis because it determined that none of the selected precedent transactions were relevant or directly comparable to the Merger due to the unique portfolio composition of AVEO and lack of close comparability based on a variety of factors including (i) a limited number of transactions of comparable stage and target indication, with targets involved in select precedent transactions at time of transaction carrying significant clinical risk in the lead program, (ii) AVEO management’s uncertainty as to whether AVEO’s pending new patent could potentially extend FOTIVDA’s commercial opportunity beyond 2028, and as a result the currently shorter relative duration of AVEO’s commercial product FOTIVDA versus the targets involved in the selected precedent transactions and (iii) several transactions included contingent consideration and/or had limited financial disclosure.

Premiums Paid Analysis

For informational purposes only, Moelis reviewed and analyzed, using publicly available information, the acquisition premia for 87 all-cash transactions (including 12 healthcare transactions) announced since 2015 involving a public company in all industries (excluding financial institutions and real estate) with a target based in the United States where the disclosed enterprise value for the transaction was between $300 million and $750 million. For the entire period, using publicly available information, Moelis calculated the mean, median, high and low premia of the price paid in each of the transactions relative to the closing price per share one (1) day, One (1) week and one (1) month prior to announcement (excluding transactions with negative premiums to the share price One (1) day prior). Moelis also calculated adjusted mean and median premia by excluding all transactions where the One (1)-day premium exceeded 150%.

 

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The information noted by Moelis with respect to these transactions is summarized below:

 

     All Transactions  
     1 Day     1 Week     1 Month  

High

     366     416     450

Mean

     52     55     57

Median

     40     41     39

Low

     0.6     5.0     0.3

Adjusted Mean

     41     42     45

Adjusted Median

     38     39     38
     Healthcare Transactions  
     1 Day     1 Week     1 Month  

High

     182     171     157

Mean

     67     63     68

Median

     56     50     59

Low

     1     6     20

Adjusted Mean

     46     47     51

Adjusted Median

     54     50     39

Moelis applied ranges of premiums of 40% to 60% to the $10.02 closing price per share of AVEO common stock on October 14, 2022. Moelis noted this implied a range of share prices for AVEO common stock of $14.03 to $16.03 per share. For reference only, Moelis compared this implied range of share prices to the Merger Consideration.

Analyst Share Price Target Analysis

Moelis also reviewed publicly available Wall Street research analysts’ stock price targets for shares of AVEO common stock published of October 14, 2022, which ranged from $12.00 to $19.00 per share with a median of $15.00 per share. For reference only, Moelis compared this range with the Merger Consideration.

52-Week Low/High Share Price Analysis

Moelis reviewed the historical trading performance of the AVEO common stock over a 52-week period ending October 14, 2022, which ranged from a closing trading price low of $3.15 per share on January 27, 2022 to a high of $10.02 per share on October 14, 2022. For reference only, Moelis compared this range with the Merger Consideration.

Miscellaneous

This summary of the analyses is not a complete description of Moelis’ opinion or the analyses underlying, and factors considered in connection with, Moelis’ opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Moelis’ opinion. In arriving at its fairness determination, Moelis considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Rather, Moelis made its fairness determination on the basis of its experience and professional judgment after considering the results of all of its analyses.

No company used in the analyses described above is identical to AVEO. In addition, such analyses do not purport to be appraisals, nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because the analyses

 

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described above (including much of the information used therein) are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither Frank’s nor Moelis or any other person assumes responsibility if future results are materially different from those forecast.

Except as described in this summary, the Board imposed no other instructions or limitations on Moelis with respect to the investigations made or procedures followed by Moelis in rendering its opinion. The Merger Consideration was determined through arms’ length negotiations between AVEO, on the one hand, and LG Chem on the other, and was approved by the Board. Moelis did not recommend any specific consideration to the Board, or that any specific amount or type of consideration constituted the only appropriate consideration for the Merger.

Moelis acted as exclusive financial advisor to AVEO in connection with the Merger. AVEO agreed to pay Moelis certain fees for its services, comprised of a non-creditable opinion fee of $750,000 upon delivery of any opinion (regardless of the conclusion reached in that opinion) and a transaction fee upon consummation of the Merger. The transaction fee is calculated by reference to the gross consideration payable in exchange for AVEO’s equity in the Merger, and is currently estimated to be approximately $15.6 million. In addition, AVEO has agreed to reimburse Moelis for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Moelis and related persons against various liabilities, including certain liabilities under the federal securities laws.

Moelis’ affiliates, employees, officers and partners may at any time own securities (long or short) of AVEO, LG Chem or their respective affiliates. Moelis had not provided investment banking or other services unrelated to the Merger to AVEO or LG Chemin the two (2) years prior to the date of its opinion. In the future Moelis may provide such services to AVEO or LG Chem or their affiliates and may receive compensation for such services.

AVEO selected Moelis as its exclusive financial advisor in connection with the Merger because Moelis has substantial experience in similar transactions and familiarity with AVEO. Moelis is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic transactions, corporate restructurings, and valuations for corporate and other purposes.

Certain Unaudited Prospective Financial Information

AVEO does not, as a matter of course, make public projections as to AVEO’s future financial position or performance, due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, AVEO’s management regularly prepares and reviews with the Board estimates regarding the success and timing of the development of, regulatory filings and approvals for, and the commercialization of AVEO’s products and product candidates, as well as various partnership prospects for the development and commercialization of AVEO’s product candidates outside of the United States. In connection with AVEO’s strategic planning process and the Board’s evaluation of the Merger, as described further in the section of this proxy statement captioned “The MergerBackground of the Merger” AVEO’s management prepared and reviewed with the Board certain unaudited prospective financial information of AVEO as an independent company for 2023 through 2038, as prepared and used as described below (referred to as the “Unaudited Prospective Financial Information)”. The Unaudited Prospective Financial Information was prepared for internal use only and not for public disclosure and was provided to the Board for the purposes of considering, analyzing and evaluating the Merger.

The Unaudited Prospective Financial Information was also provided to Moelis, AVEO’s financial advisor, for the purposes of Moelis’ financial analyses and fairness opinion in connection with the Merger (as described in more detail in the section of this proxy statement captioned “The MergerOpinion of Moelis & Company LLC”). The Unaudited Prospective Financial Information includes risk-adjusted profit and loss estimates for AVEO. With the consent of the AVEO Board, Moelis assumed that the Base Case was reasonably prepared on bases reflecting the

 

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best currently available estimates and judgments of AVEO’s management as to AVEO’s future financial performance, and, with the consent of the AVEO Board, relied on AVEO’s management’s assessments as to the validity of, and risks associated with, the future intellectual property, products and services of AVEO and the marketability, commercial viability, regulatory approval and market adoption of AVEO’s current and future products or services. The Unaudited Prospective Financial Information was developed based on AVEO’s management’s knowledge of and assumptions with respect to AVEO’s business, including with respect to (1) the commercialization of FOTIVDA for the treatment of adult patients with relapsed or refractory advanced renal cell carcinoma (RCC) following two or more prior systemic therapies (Tivo-3), (2) the commercialization of (including the probability of success in the clinic and in obtaining regulatory approvals for) AVEO’s clinical stage assets, including tivozanib in other combination regimens and earlier-line settings, ficlatuzumab, AV-380, (3) royalty and milestone payments and (4) operating expenses.

The Unaudited Prospective Financial Information was developed without giving effect to the Merger, including any impact of the negotiation or execution of the Merger Agreement or the Merger, the expenses that have already or may be incurred in connection with completing the Merger or any changes to AVEO’s operations or strategy that may be implemented during the pendency of or following the consummation of the Merger. The Unaudited Prospective Financial Information also does not consider the effect of any failure of the Merger to be completed; it should not be viewed as accurate or continuing in that context.

The Unaudited Prospective Financial Information was not prepared with a view toward public disclosure or complying with accounting principles generally accepted in the United States (referred to as “GAAP”). In addition, the Unaudited Prospective Financial Information was not prepared with a view toward complying with the guidelines established by the SEC or the American Institute of Certified Public Accountants with respect to prospective financial information. Neither AVEO’s independent registered public accounting firm nor any other independent accountants have (1) compiled, reviewed, audited, examined or performed any procedures with respect to the Unaudited Prospective Financial Information, (2) expressed any opinion or any other form of assurance on such information or the achievability of the Unaudited Prospective Financial Information or (3) assumed any responsibility for the Unaudited Prospective Financial Information.

Because the Unaudited Prospective Financial Information reflects estimates and judgments, it is susceptible to sensitivities and assumptions, as well as multiple interpretations based on actual experience and business developments. The Unaudited Prospective Financial Information also covers multiple years, and such information by its nature becomes less predictive with each succeeding year. The Unaudited Prospective Financial Information is not, and should not be considered to be, a guarantee of future operating results. Further, the Unaudited Prospective Financial Information is not fact and should not be relied upon as being necessarily indicative of AVEO’s future results.

Although the Unaudited Prospective Financial Information is presented with numerical specificity, it reflects numerous assumptions and estimates as to future events. The Unaudited Prospective Financial Information will be affected by, among other factors, AVEO’s ability to achieve its goals for the development, regulatory approval and commercialization of its products and product candidates, including on the timeline assumed for purposes of the Unaudited Prospective Financial Information. The Unaudited Prospective Financial Information reflects assumptions and uncertainties that are subject to change. Important factors that may affect actual results and cause the Unaudited Prospective Financial Information not to be achieved are described in various risk factors described in the sections of this proxy statement captioned “Cautionary Statement Regarding Forward-Looking Statements,” and in AVEO’s other filings with the SEC, including those listed under the section captioned “Where You Can Find More Information.” All of these factors are difficult to predict, and many of them are outside of AVEO’s control. As a result, there can be no assurance that the Unaudited Prospective Financial Information will be realized, and actual results may be materially better or worse than those contained in the Unaudited Prospective Financial Information, whether or not the Merger is consummated. The Unaudited Prospective Financial Information also reflects assumptions as to certain business decisions that are subject to change. The Unaudited Prospective Financial Information may differ from publicized analyst estimates and

 

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forecasts and does not consider any events or circumstances after the date that it was prepared, including the announcement of the entry into the Merger Agreement. The Unaudited Prospective Financial Information has not been updated or revised to reflect information or results after the date it was prepared or as of the date of this proxy statement. Except to the extent required by applicable federal securities laws, AVEO does not intend to update or otherwise revise the Unaudited Prospective Financial Information to reflect circumstances existing after the date that such information was prepared or to reflect the occurrence of future events. AVEO may report results of operations for periods included in the Unaudited Prospective Financial Information that will be completed following the preparation of the Unaudited Prospective Financial Information. Stockholders and investors are urged to refer to AVEO’s periodic filings with the SEC for information on AVEO’s actual historical results.

Certain of the financial measures included in the Unaudited Prospective Financial Information are “non-GAAP financial measures.” These are financial performance measures that are not calculated in accordance with GAAP. These non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. In certain circumstances, including those applicable to the Unaudited Prospective Financial Information, financial measures included in forecasts provided to a financial advisor and a board of directors in connection with a business combination transaction are excluded from the definition of “non-GAAP financial measures” under applicable SEC rules and regulations. As a result, the Unaudited Prospective Financial Information is not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not provided to or relied upon by the Board or Moelis. Accordingly, no reconciliation of the financial measures included in the Unaudited Prospective Financial Information is provided in this proxy statement. The Unaudited Prospective Financial Information includes earnings operating income and unlevered free cash flow, which are (subject to the disclosure above) non-GAAP financial measures.

The Unaudited Prospective Financial Information constitutes forward-looking statements. By including the Unaudited Prospective Financial Information in this proxy statement, neither AVEO nor any of its representatives has made or makes any representation to any person regarding AVEO’s ultimate performance as compared to the information contained in the Unaudited Prospective Financial Information. The inclusion of the Unaudited Prospective Financial Information should not be regarded as an indication that the Board, AVEO, Moelis or any other person considered, or now considers, the Unaudited Prospective Financial Information to be predictive of actual future results. Further, the inclusion of the Unaudited Prospective Financial Information in this proxy statement does not constitute an admission or representation by AVEO that the information presented is material. The Unaudited Prospective Financial Information is included in this proxy statement solely to give AVEO’s stockholders access to the information that was provided to the Board and Moelis. The Unaudited Prospective Financial Information is not included in this proxy statement in order to influence any AVEO stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares.

Unaudited Prospective Financial Information

The Unaudited Prospective Financial Information consists of two forecasts prepared by AVEO management: (1) a forecast that reflects a FOTIVDA sales ramp based on emerging launch metrics and real world treatment dynamics (e.g., duration of therapy), impact from potential increased competitive pressure in third line therapy for renal cell carcinoma by large pharmaceutical companies as soon as 2023 and evolving treatment dynamics in earlier-line settings potentially impacting the third line therapy competitive landscape (the “Base Case”); and (2) a forecast that includes a faster uptake assumption for FOTIVDA and assumes no incremental near-term competition for FOTIVDA in third line therapy for renal cell carcinoma (the “Upside Case”). At the direction of the Board, Moelis utilized the Base Case for purposes of Moelis’ opinion. Neither the Upside Case nor the Base Case was provided to LG Chem or any other potential counterparty.

 

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On October 12, 2022 the U.S. Patent and Trademark Office, issued a Notice of Allowance indicating the Application was allowable for grant as a U.S. patent, which is expected to issue as U.S. Patent No. 11,504,365 on November 22, 2022 (the “Use Patent”). While the Use Patent could, subject to various risks and uncertainties, provide patent protection for the claimed methods of use of FOTIVDA into 2039, both the Base Case and the Upside Case assume the expiration of patent protection with respect to FOTIVDA in November 2028 because AVEO’s management believes the ability to defend FOTIVDA’s intellectual property beyond the November 2028 expiration of certain of its current patent protection remains uncertain because the Use Patent could be found invalid, unenforceable or not infringed.

Both the Base Case and the Upside Case assume a “go it alone” strategy (without strategic partnerships) for AVEO’s clinical stage assets.

In addition to those noted above, various other judgments and assumptions by AVEO management were made when preparing the Unaudited Prospective Financial Information, including, among others (1) revenue estimates in the United States based on various assumptions, including with respect to pricing and exclusivity, addressable patient population, market penetration, launch date, time to peak sales, peak sales, erosion rate, probability of success as a function of clinical development stage and inflationary factors, and potential outcomes with respect thereto for the commercialization of FOTIVDA for the treatment of adult patients with relapsed or refractory advanced renal cell carcinoma (RCC) following two or more prior systemic therapies, and the development and regulatory success of our clinical stage assets, including tivozanib (in other combination regimens and earlier-line settings), ficlatuzumab, AV-380 and AV-203, (2) identification and projection of product costs of goods sold and royalties on a per-product basis, according to existing license terms and manufacturing minimums, (3) assumptions concerning general and administrative expenses, which are projected on a whole company bases and then allocated to products according to risk-adjusted forecasted revenues, (4) assumptions with respect to unallocated research and development expenses and commercial operating expenses, which are projected on an unadjusted, per-product basis, and then adjusted according to each product’s respective commercial probability of success, (5) projections of commercial expenses by product on an unadjusted basis, sized according to needed infrastructure to support unadjusted revenues, and adjusted by product probability of success, (6) estimated benefits of AVEO’s net operating losses and (7) the assumed completion of an equity financing in the second quarter of 2023 resulting in net proceeds to AVEO of approximately $75 million via a follow-on equity offering in accordance with current market conditions and terms.

The following table presents the Base Case and consists of estimates of revenue and EBIT with respect to the commercialization of FOTIVDA monotherapy and the probability of success for commercializing tivozanib in combination with nivolumab in the second line RCC setting through a Phase 3 clinical trial designed to evaluate the safety and efficacy of tivozanib in combination with nivolumab as compared to tivozanib monotherapy in RCC patients who have progressed following one or two lines of therapy, one of which was an immune checkpoint inhibitor (the TiNivo-2 trial), ficlatuzumab and AV-380 pipeline drug candidates, as well as royalty revenue and milestones, for fiscal years 2023-2038, in each case as reflected in the Unaudited Prospective Financial Information, and estimates of unlevered free cash flow with respect to the commercialization of FOTIVDA monotherapy and TiNivo-2, ficlatuzumab and AV-380 pipeline drug candidates for the same period, as approved by AVEO.

 

($MM, Risk
Adjusted)

  2023E     2024 E     2025 E     2026 E     2027 E     2028 E     2029 E     2030 E     2031 E     2032 E     2033 E     2034 E     2035 E     2036 E     2037 E     2038 E  

Revenue

  $ 173     $ 221     $ 314     $ 397     $ 477     $ 491     $ 312     $ 286     $ 261     $ 261     $ 263     $ 269     $ 262     $ 267     $ 274     $ 137  

EBIT(1) (3)

  $ 6     $ 21     $ 74     $ 192     $ 244     $ 249     $ 147     $ 137     $ 129     $ 135     $ 139     $ 144     $ 135     $ 136     $ 139     $ 50  

Unlevered Free Cash Flow(2) (3)

  ($ 12   $ 11     $ 42     $ 132     $ 171     $ 182     $ 130     $ 105     $ 99     $ 100     $ 103     $ 106     $ 101     $ 100     $ 102     $ 53  

 

 

(1) 

Earnings before interest and taxes.

 

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(2) 

Unlevered Free Cash Flow is defined as EBIT less income tax expenses, plus depreciation and amortization, plus decreases in net working capital, less increases in net working capital, less capital expenditures.

(3) 

EBIT and Unlevered Free Cash Flow are non-GAAP measures and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

The following table presents the Upside Case and consists of estimates of total revenue and EBIT with respect to the commercialization of FOTIVDA monotherapy and TiNivo-2, ficlatuzumab and AV-380 pipeline drug candidates, as well as royalty revenue and milestones, for fiscal years 2023-2038, in each case as reflected in the Unaudited Prospective Financial Information, and estimates of unlevered free cash flow with respect to the commercialization of FOTIVDA monotherapy and TiNivo-2, ficlatuzumab and AV-380 pipeline drug candidates for the same period, as approved by AVEO.

 

($MM, Risk
Adjusted)

  2023E     2024 E     2025 E     2026 E     2027 E     2028 E     2029 E     2030 E     2031 E     2032 E     2033 E     2034 E     2035 E     2036 E     2037 E     2038 E  

Total Revenue

  $ 210     $ 290     $ 379     $ 439     $ 505     $ 512     $ 323     $ 293     $ 264     $ 262     $ 264     $ 270     $ 263     $ 267     $ 274     $ 137  

EBIT(1) (3)

  $ 37     $ 81     $ 131     $ 227     $ 267     $ 268     $ 157     $ 144     $ 132     $ 137     $ 140     $ 145     $ 135     $ 136     $ 139     $ 50  

Unlevered Free Cash Flow(2) (3)

  $ 12     $ 55     $ 84     $ 161     $ 190     $ 197     $ 139     $ 110     $ 101     $ 101     $ 104     $ 107     $ 101     $ 100     $ 102     $ 53  

 

 

(1) 

Earnings before interest and taxes.

(2) 

Unlevered Free Cash Flow is defined as EBIT less income tax expenses, plus depreciation and amortization, plus decreases in net working capital, less increases in net working capital, less capital expenditures.

(3) 

EBIT and Unlevered Free Cash Flow are non-GAAP measures and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity.

Interests of the Directors and Executive Officers of AVEO in the Merger

Members of the Board and AVEO’s executive officers may have various interests in the Merger that may be in addition to, or different from, the interests of AVEO stockholders generally. The members of the Board were aware of these potential interests and considered them at the time they approved the Merger Agreement and in making their recommendation that AVEO stockholders adopt the Merger Agreement. These potential interests are described below.

Treatment of Equity Awards

Each of our directors and executive officers hold outstanding AVEO stock options. The AVEO stock options held by our directors and executive officers immediately prior to the Effective Time will be treated in the Merger in the same manner as AVEO stock options held by employees generally. Effective as of immediately prior to the Effective Time, each option to purchase shares of AVEO common stock will be cancelled and converted into the right to receive an amount in cash, if any, equal to the product of (i) the excess, if any, of the Merger Consideration over the exercise price of such stock option and (ii) the number of shares of AVEO common stock underlying such option, less any applicable withholding taxes.

The following table sets forth, for each of AVEO’s directors and executive officers, (i) the number and value of shares of AVEO common stock subject to vested AVEO stock options, (ii) the number and value of shares of AVEO common stock subject to unvested AVEO stock options and (iii) the total value of shares of AVEO common stock subject to AVEO stock options held by such director or executive officer as of November 11, 2022. These amounts do not attempt to forecast any additional equity award grants, issuances or forfeitures that may occur prior to the Effective Time following the date of this proxy statement. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, the actual amounts to be received by AVEO’s directors and executive officers may materially differ from the amounts set forth below. This table also does not include any outstanding rights to purchase shares under the ESPP held by our executive officers or any outstanding stock options the exercise price of which is in excess of $15.00 per share and which

 

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will be cancelled for no consideration at the Effective Time. This table also does not include information regarding Michael Needle, who was a named executive officer for the year ended December 31, 2021, as he terminated employment with AVEO on November 19, 2021 and will not receive any compensation that is based on or otherwise related to the Merger. For additional information regarding the ESPP, see “The Merger Agreement—Treatment of Equity Awards and the ESPP” beginning on page 81 of this proxy statement.

 

Name    Vested
Stock
Options
(#)
     Value of
Vested
Stock
Options
($)(1)
     Unvested
Stock
Options
(#)
     Value of
Unvested
Stock
Options
($)(1)
     Total Value of
Outstanding
Stock
Options
Stock ($)(2)
 

Non-Employee Directors

                                  

Kenneth Bate

     44,062      $ 356,150        13,125      $ 140,831      $ 496,982  

Anthony Evnin

     44,062        356,150        13,125        140,831        496,982  

Gregory Mayes

     35,875        316,139        13,125        140,831        456,970  

Scarlett Spring

     35,596        308,795        13,404        143,175        451,970  

Corinne Epperly

     24,636        231,838        22,864        224,587        456,425  

Kevin Cullen

     22,555        215,260        24,945        243,665        458,925  

 

Name    Vested
Stock
Options
(#)
     Value of
Vested
Stock
Options
($)(1)
     Unvested
Stock
Options
(#)
     Value of
Unvested
Stock
Options
($)(1)
     Total Value of
Outstanding
Stock
Options
($)(2)
 

Executive Officer

                                  

Michael Bailey

     659,042      $ 5,436,522        858,164      $ 8,787,671      $ 14,224,192  

Michael Ferraresso

     142,495        1,236,496        255,068        2,552,158        3,788,654  

Jebediah Ledell

     4,617        52,311        193,085        1,805,153        1,857,464  

Erick Lucera

     115,628        964,329        253,172        2,517,675        3,482,004  

 

 

(1) 

For purposes of this table, the value of each stock option is the product obtained by multiplying (A) the number of shares of AVEO common stock underlying the vested or unvested portion, as applicable, of such stock option by (B) the excess, if any, of (i) $15.00, over (ii) the exercise price of such AVEO stock option.

(2) 

For information regarding beneficial ownership of shares of common stock, which generally excludes AVEO compensation awards described above, held by each of the AVEO’s directors and executive officers and all of such directors and executive officers as a group, see the section entitled “Security Ownership of Certain Beneficial Owners and Management”, beginning on page 112 of this proxy statement. Each of the AVEO’s directors and executive officers will be entitled to receive, for each share of common stock he or she holds, the same per share merger consideration in cash in the same manner as other AVEO stockholders.

Change in Control Severance Benefits

Each of AVEO’s current executive officers is entitled to certain benefits under AVEO’s executive severance and change in control benefits plan (the “Severance Benefits Plan”). If the employment of an executive officer is terminated without cause, by reason of such executive officer’s disability, or by the executive officer for good reason, in any case prior to or more than eighteen (18) months following a change of control, provided that such executive officer is not otherwise ineligible to receive severance benefits under the Severance Benefits Plan and subject to such executive officer’s execution and non-revocation of a general release of claims in AVEO’s favor, AVEO will (i) continue to pay such executive officer’s then-current base salary for a period of twelve (12) months, (ii) make contributions to the cost of COBRA coverage on behalf of such officer and his or her applicable dependents for a period of up to twelve (12) months, and (iii) in the case of Michael Bailey, our chief executive officer, pay, in a single lump-sum, an amount equal to Mr. Bailey’s target bonus for the year in which his date of termination occurs, pro-rated to reflect the portion of the year during which he was employed by us.

Further, under the terms of the Severance Benefits Plan, if any executive officer’s employment is terminated by AVEO without cause or by the executive officer for good reason on the date of or within eighteen (18) months

 

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following a change in control, provided that the executive officer is not otherwise ineligible to receive severance benefits under the Severance Benefits Plan and subject to the executive officer’s execution and non-revocation of a general release of claims in AVEO’s favor, AVEO will (i) pay, in the case of Mr. Bailey, AVEO’s chief executive officer, an amount equal to the sum of twenty four (24) months’ of Mr. Bailey’s then-current base salary (or his salary in effect prior to the change in control, if greater), plus an amount equal to 200% of Mr. Bailey’s target annual bonus for the year in which such termination occurs (or, if greater, his target annual bonus for the year in which the change in control occurs), plus a pro rata portion, based on the portion of the year during which he was employed by us, of Mr. Bailey’s target annual bonus for the year in which such termination occurs (or, if greater, his target annual bonus for the year in which the change in control occurs), such total amount to be paid in substantially equal installments over the course of twenty four (24) months and (ii) pay, in the case of each of Erick Lucera, Michael Ferraresso and Jebediah Ledell, AVEO’s other executive officers, an amount equal to the sum of eighteen (18) months’ of such executive officer’s then-current base salary (or his salary in effect prior to the change in control, if greater), plus an amount equal to 150% of such executive officer’s target annual bonus for the year in which such termination occurs (or, if greater, his target annual bonus for the year in which the change in control occurs), plus a pro rata portion, based on the portion of the year during which he was employed by us, of such executive officer’s target annual bonus for the year in which such termination occurs (or, if greater, his target annual bonus for the year in which the change in control occurs), such total amount to be paid in substantially equal installments over the course of eighteen (18) months. Each AVEO executive officer would also be entitled to receive (x) any earned but unpaid annual bonus for the most recently completed fiscal year, (y) contributions to the cost of COBRA coverage on behalf of such executive officer and his applicable dependents for a period of up to eighteen (18) months in the case of Mr. Bailey and twelve (12) months in the case of Messers. Lucera, Ferraresso and Ledell and (z) vesting in full of any then-outstanding AVEO equity awards granted to such executive officer that vest based solely on the passage of time. The Merger will constitute a change in control for purposes of the Severance Benefits Plan.

For purposes of the Severance Benefits Plan:

 

   

“cause” means conduct involving one or more of the following: (i) the conviction of the executive officer of, or, plea of guilty or nolo contendere to, any crime involving dishonesty or any felony; (ii) the willful misconduct by the executive officer resulting in material harm to AVEO; (iii) fraud, embezzlement, theft or dishonesty by the executive officer against AVEO resulting in material harm to AVEO; (iv) the repeated and continuing failure of the executive officer to follow the proper and lawful directions of AVEO’s chief executive officer or the Board after a written demand is delivered to the executive officer that specifically identifies the manner in which the chief executive officer or the Board believes that the executive officer has failed to follow such instructions; (v) the executive officer’s current alcohol or prescription drug abuse affecting work performance, or current illegal use of drugs regardless of the effect on work performance; (vi) material violation of AVEO’s code of conduct by the executive officer that causes harm to AVEO or (vii) the executive officer’s material breach of any term of any employment agreement or offer letter with AVEO, or any applicable written proprietary information and inventions, nondisclosure, non-competition, non-solicitation (or similar) agreement(s) with AVEO.

 

   

“good reason” means the occurrence, without the executive officer’s written consent of any of the following events: (i) any material diminution in the executive officer’s duties, responsibilities or authority; (ii) a material reduction in the executive officer’s base salary (unless such reduction is effected in connection with a general and proportionate reduction of compensation for all employees of his level) or (iii) following a change in control, a change in the principal location at which the executive officer provides services to AVEO to a location more than fifty (50) miles from such principal location; provided, however, that a termination for good reason can only occur if (A) the executive officer has given AVEO a written notice of termination indicating the existence of a condition giving rise to good reason and AVEO has not cured the condition giving rise to good reason within thirty (30) days after receipt of such notice of termination, and (B) such notice of termination is given within ninety (90) days after the initial occurrence of the condition giving rise to good reason and further provided that a termination for good reason shall occur no more than one hundred eighty (180) days after the initial occurrence of the condition giving rise to good reason.

 

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For an estimate of the amounts that would be payable to each of AVEO’s named executive officers upon a qualifying termination at the Effective Time of the Merger under their employment agreements, see “Proposal No. 2: Advisory Vote on the Merger Compensation Proposal—The Merger Compensation Proposal—Quantification of Potential Payments and Benefits to AVEO’s Named Executive Officers” beginning on page 107 of this proxy statement.

New LG Chem Arrangements

Certain of AVEO’s executive officers may continue to provide employment or other services to LG Chem after the Effective Time and may enter into new agreements, arrangements or understandings with LG Chem to set forth the terms and compensation of such post-closing service. As of the date of this proxy statement, no such agreements, arrangements or understandings with LG Chem exist.

Indemnification of Directors and Officers; Insurance

Under the Merger Agreement, for six (6) years after the Effective Time, LG Chem is required to cause the surviving corporation to (i) observe the obligations of AVEO and its subsidiaries under (a) certain indemnification agreements entered into between AVEO or its subsidiaries, on the one hand, and certain of its directors and executive officers, on the other hand and (b) the indemnification, expense advancement and exculpation provisions in the certificate of incorporation or second amended and restated bylaws or comparable organizational documents of AVEO or such Subsidiary, in each case, in effect on October 18, 2022, and (ii) indemnify and hold harmless each present and former (as of October 18, 2022) director and officer of AVEO or any of its subsidiaries in their capacities as such against any losses incurred by such person in connection with any pending or threatened litigation, action, suit, claim, demand or proceeding based on or arising out of, in whole or in part, the fact that such person is or was a director or officer of AVEO at or prior to the Effective Time and pertaining to any and all matters pending, existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, including any such matter arising under any claim with respect to the transactions contemplated by the Merger Agreement, to the fullest extent permitted by the DGCL and any other applicable law, and the certificate of incorporation and second amended and restated bylaws (or other similar organizational documents) of AVEO and its subsidiaries in effect on October 18, 2022 and not amend, repeal or otherwise modify such rights in any manner that would adversely affect the rights of such directors and officers thereunder.

In addition, prior to the Effective Time AVEO, or in the event AVEO does not prior to the Effective Time, LG Chem will, or will cause the surviving corporation to, obtain and fully pay the premium (subject to limitations set forth in the Merger Agreement) for the non-cancellable extension of the directors’ and officers’ liability coverage of AVEO’s existing directors’ and officers’ insurance policies for a claims reporting or discovery period of six (6) years from and after the Effective Time with respect to any claim related to any period of time at or prior to the Effective Time and with terms, conditions, retentions and limits of liability no less favorable than the coverage provided under AVEO’s directors’ and officers’ and fiduciary liability insurance policies in effect as of October 18, 2022. For a detailed description of these requirements, please see “The Merger Agreement—Other Covenants and Agreements—Indemnification of Directors and Officers; Insurance” beginning on page 91 of this proxy statement.

Financing of the Merger

LG Chem’s receipt of financing is not a condition to the closing of the Merger. It is anticipated that the total amount of funds necessary to consummate the Merger and the related transactions, not including repayment of AVEO’s existing credit agreement, fees and expenses, will be approximately $566 million, including the estimated funds needed to (i) pay AVEO stockholders the Merger Consideration due to them under the Merger Agreement and (ii) make payments in respect of outstanding option awards of AVEO pursuant to the Merger Agreement.

 

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AVEO has agreed that it will use its reasonable best efforts to provide to LG Chem (at LG Chem’s sole expense) such historical financial information prepared by AVEO in the ordinary course of AVEO’s financial reporting practice as may be reasonably requested by LG Chem to assist with respect to any potential financing arrangements to the extent customary for financing arrangements entered into in connection with transactions of similar size and nature as those contemplated in the Merger Agreement; upon the terms and subject to the conditions and exceptions set forth in the Merger Agreement and as further described in the section of this proxy statement captioned “The Merger Agreement—Other Covenants and Agreements—Financing Covenants” beginning on page 91.

AVEO has also agreed that it will use its best efforts to deliver all notices, cooperate with LG Chem and take all other actions to facilitate the termination at closing of all commitments in respect of AVEO’s existing credit agreement, the repayment in full on the Closing Date of all obligations in respect of the indebtedness under AVEO’s existing credit agreement (as described in the section of this proxy statement captioned “The Merger Agreement—Other Covenants and Agreements—Financing Covenants”), and the release on the Closing Date of any liens securing all such indebtedness and guarantees in connection therewith, subject to LG Chem providing all funds required to effect all such repayments at the closing.

Closing and Effective Time of the Merger

Unless another date is agreed by the parties, the closing of the Merger will take place as soon as practicable (but in any event no later than the third (3rd) business day) after the date the conditions to the Merger set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at such time) have been satisfied or (to the extent permissible) waived in accordance with the Merger Agreement.

At the closing of the Merger, AVEO and Merger Sub will cause to be filed a certificate of merger with respect to the Merger with the Secretary of State of the State of Delaware in accordance with the DGCL and will make all other filings or recordings required by the DGCL in connection with the Merger. The Merger will become effective at such time as such certificate of merger has been duly filed with the Secretary of State of the State of Delaware (or at such later date and time as specified in the certificate of merger).

Appraisal Rights

If the Merger is consummated, persons who do not wish to accept the Merger Consideration are entitled to seek appraisal of their shares of AVEO common stock under Section 262 and, if all procedures described in Section 262 are strictly complied with, to receive payment in cash for the fair value of their shares of AVEO common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court, together with interest, if any, to be paid upon the amount determined to be the fair value. The “fair value” of your shares of AVEO common stock as determined by the Delaware Court may be more or less than, or the same as, the Merger Consideration that you are otherwise entitled to receive under the Merger Agreement. These rights are known as “appraisal rights”. This proxy statement serves as a notice of such appraisal rights pursuant to Section 262.

Persons who exercise appraisal rights under Section 262 will not receive the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. They will receive an amount determined to be the “fair value” of their shares of AVEO common stock following petition to, and an appraisal by, the Delaware Court. Persons considering seeking appraisal should recognize that the fair value of their shares of AVEO common stock determined under Section 262 could be more than, the same as or less than the Merger Consideration they would otherwise be entitled to receive pursuant to the Merger Agreement. Strict compliance with the procedures set forth in Section 262 is required. Failure to comply strictly with all of the procedures set forth in Section 262 will result in the loss or waiver of appraisal rights. Consequently, and in view of the complexity of the provisions of Section 262, persons

 

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wishing to exercise appraisal rights are urged to consult their legal and financial advisors before attempting to exercise such rights.

The full text of Section 262 may be accessed without subscription or cost at the Delaware Code Online (available at https://.delcode.delaware.gov/title8/c001/sc09/index.html#262). The following summary is not a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to Section 262 and any amendments thereto after the date of this proxy statement. In the event of any inconsistency between the information contained in this summary and the actual text of Section 262, the actual text of Section 262 controls. All references in Section 262 and in this summary to a “stockholder” are to the record holder of shares of AVEO common stock unless otherwise expressly noted herein, and all such references to a “beneficial owner” mean a person who is the beneficial owner of shares of AVEO common stock held either in voting trust or by a nominee on behalf of such person unless otherwise expressly noted herein. Failure to follow any of the procedures of Section 262 may result in termination or waiver of appraisal rights under Section 262. Any person who desires to exercise his, her or its appraisal rights, or preserve the ability to do so, should review carefully Section 262, since failure to comply with the procedures of the statute will result in the loss of appraisal rights. The following summary does not constitute legal or other advice, nor does it constitute a recommendation that persons seek to exercise their appraisal rights under Section 262. A person who loses his, her or its appraisal rights will be entitled to receive the Merger Consideration under the Merger Agreement. Stockholders and beneficial owners are urged to consult his, her or its legal advisor before electing or attempting to exercise appraisal rights.

A holder of record or beneficial owner of shares of AVEO common stock who (i) makes a written demand for appraisal (ii) continuously holds such shares through the Effective Time, (iii) has not consented to or otherwise voted in favor of the Merger or otherwise lost or waived appraisal rights, (iv) strictly complies with the procedures under Section 262, (v) does not thereafter validly withdraw his, her or its demand for appraisal of such shares and (vi) in the case of a beneficial owner, a person who (A) reasonably identifies in his, her or its demand the holder of record of the shares for which the demand is made, (B) provides documentary evidence of such beneficial owner’s beneficial ownership and a statement that such documentary evidence is a true and correct copy of what it purports to be and (C) provides an address at which such beneficial owner consents to receive notices given by AVEO and to be set forth on the Chancery List (as defined below), will be entitled to receive the fair value of his, her or its shares of AVEO common stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court, together with interest, if any, to be paid upon the amount determined to be the fair value. However, after an appraisal petition has been filed, Section 262 provides that the Delaware Court will dismiss appraisal proceedings as to all AVEO stockholders and beneficial owners who have asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of AVEO common stock as measured in accordance with subsection (g) of Section 262; or (b) the value of the aggregate Merger Consideration in respect of the shares of AVEO common stock for which appraisal rights have been pursued and perfected exceeds $1 million.

Section 262 requires that where a merger agreement is to be submitted for adoption at a meeting of stockholders, the stockholders be notified that appraisal rights will be available not less than twenty (20) days before the meeting to vote on the merger. Such notice must include either a copy of Section 262 or information directing the stockholders to a publicly available electronic resource at which Section 262 may be accessed without subscription or cost. This proxy statement constitutes AVEO’s formal notice of appraisal rights under Section 262, the full text of which may be accessed without subscription or cost at the Delaware Code Online (available at https://.delcode.delaware.gov/title8/c00 1/sc09/index.html#262)

If you elect to demand appraisal of your shares of AVEO common stock, you must satisfy each of the following conditions: you must deliver to AVEO a written demand for appraisal of your shares of AVEO common stock before the vote is taken on the Merger Proposal at the Special Meeting, which must reasonably inform us of the identity of the holder of record of shares of AVEO common stock or beneficial owner who intends to demand appraisal of his, her or its shares of AVEO common stock and, for beneficial owners only, such demand must be

 

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accompanied by documentary evidence of such beneficial owner’s beneficial ownership (such as a brokerage or securities account statement containing such information or a letter from the broker or other record holder of such shares confirming such information) and a statement that such documentary evidence is a true and correct copy of what it purports to be, and must provide an address at which such beneficial owner consents to receive notices given by AVEO and to be set forth on the Chancery List; you must not vote or submit a proxy in favor of the proposal to adopt the Merger Agreement; you must hold your shares of AVEO common stock continuously through the Effective Time; and you must comply with the other applicable requirements of Section 262. In addition, one of the ownership thresholds in 262(g) must be met.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a holder of record of AVEO common stock who wishes to exercise appraisal rights must provide instructions when granting a proxy to vote against the adoption of the Merger Agreement, abstain or not vote the shares. In the case of a beneficial owner of AVEO common stock, such person must not instruct such person’s broker, bank or other nominee to vote such person’s shares in favor of the proposal to adopt the Merger Agreement.

An AVEO stockholder or beneficial owner who elects to exercise appraisal rights must mail or deliver his, her or its written demand for appraisal to the following address:

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attention: Corporate Secretary

If the shares of AVEO common stock are owned of record or beneficially in a fiduciary capacity, such as by a trustee, guardian or custodian, the demand must be made in that capacity, and if the shares of AVEO common stock are owned of record or beneficially by more than one person, as in a joint tenancy or tenancy in common, the demand must be made by or for all owners of record or beneficial owners. An authorized agent, including one or more joint owners, may execute the demand for appraisal for a stockholder of record or beneficial owner; however, such agent must identify the record or beneficial owner or owners and expressly disclose in such demand that the agent is acting as agent for the record or beneficial owner or owners of such shares of AVEO common stock, as applicable.

A written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the adoption of the Merger Agreement. Voting “AGAINST” or failing to vote “FOR” the adoption of the Merger Agreement by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL.

Within ten (10) days after the Effective Time, the surviving corporation must give written notice that the Merger has become effective to each AVEO stockholder or beneficial owner who has properly made a written demand for appraisal and who did not vote in favor of the proposal to adopt the Merger Agreement. At any time within sixty (60) days after the Effective Time, any person who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the demand and accept the Merger Consideration specified by the Merger Agreement for that person’s shares of AVEO common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than sixty (60) days after the Effective Time will require written approval of the surviving corporation. No appraisal proceeding in the Delaware Court will be dismissed as to any person without the approval of the Delaware Court, with such approval conditioned upon such terms as the Delaware Court deems just, provided, however, that this provision will not affect the right of any AVEO stockholder or beneficial owner who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s or beneficial owner’s demand for appraisal and to accept the Merger Consideration within sixty (60) days after the Effective Time. If the surviving corporation does not approve a request to withdraw a demand for appraisal

 

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when that approval is required, or if the Delaware Court does not approve the dismissal of an appraisal proceeding, the person will be entitled to receive only the fair value of such person’s shares of AVEO common stock determined by the Delaware Court in any such appraisal proceeding, which value could be less than, equal to or more than the Merger Consideration offered pursuant to the Merger Agreement.

Within one hundred twenty (120) days after the Effective Time, but not thereafter, the surviving corporation and any person who has properly and timely demanded appraisal of such person’s shares of AVEO common stock and otherwise complied with Section 262 and is otherwise entitled to appraisal rights under Section 262, may commence an appraisal proceeding by filing a petition in the Delaware Court , with a copy served on the surviving corporation in the case of a petition filed by a person other than the surviving corporation, demanding a determination of the fair value of the shares of AVEO common stock held by all persons entitled to appraisal. There is no present intent on the part of AVEO or the surviving corporation to file an appraisal petition and persons seeking to exercise appraisal rights should assume that AVEO and the surviving corporation will not file such a petition or initiate any negotiations with respect to the fair value of shares of AVEO common stock. Accordingly, persons who desire to have their shares of AVEO common stock appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262. If, within one hundred twenty (120) days after the Effective Time, no petition has been filed as provided above, all rights to appraisal will cease and any person that previously demanded appraisal will become entitled only to the Merger Consideration under the Merger Agreement.

In addition, within one hundred twenty (120) days after the Effective Time, any person who has theretofore complied with the requirements for exercise of appraisal rights under Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares of AVEO common stock not consented in writing or otherwise voted in favor of the Merger and with respect to which demands for appraisal were received by the surviving corporation and the aggregate number of stockholders or beneficial owners of such shares. Such statement must be mailed within ten (10) days after the written request therefore has been received by the surviving corporation or within ten (10) days after the expiration of the period for the delivery of demands as described above, whichever is later.

Upon the filing of a petition by a person other than the surviving corporation, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation shall be required to, within twenty (20) days after such service, file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all persons who have demanded appraisal of their shares of AVEO common stock and with whom the surviving corporation has not reached agreements as to the value of such shares (referred to as the “Chancery List”). The Register in Chancery, if so ordered by the Delaware Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving corporation and to all such person set forth on the Chancery List. The costs relating to these notices will be borne by the surviving corporation.

If a petition for an appraisal is timely filed by a person, the Delaware Court is empowered to conduct a hearing on the petition to which persons have complied with the provisions of Section 262 and have become entitled to appraisal rights provided thereby. The Delaware Court may require the persons who have demanded an appraisal of their shares of AVEO common stock and who hold shares represented by certificates to submit their certificates of shares of AVEO common stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any person fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such person.

Upon application by the surviving corporation or any person entitled to participate in the appraisal proceedings, the Delaware Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the persons entitled to appraisal. Any person whose name appears on the Chancery List and may participate fully in all proceedings until it is finally determined that such person is not entitled to appraisal rights under Section 262.

 

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Where proceedings are not dismissed, the appraisal proceeding shall be conducted in accordance with the rules of the Delaware Court, including any rules specifically governing appraisal proceedings. Through such proceedings the Delaware Court shall determine the fair value of shares of AVEO common stock taking into account all relevant factors, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each person entitled to appraisal an amount in cash, in which case interest shall accrue after such payment only on the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares of AVEO common stock as determined by the Delaware Court, and (y) interest theretofore accrued, unless paid by the surviving corporation as part of the pre-judgment payment to the person.

When the fair value of the shares of AVEO common stock is determined, the Delaware Court will direct the payment of such value, with interest thereon, if any, to the persons entitled to receive the same.

Although AVEO believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court and persons should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Moreover, the surviving corporation does not anticipate offering more than the Merger Consideration to any person exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of the relevant shares of AVEO common stock is less than the Merger Consideration.

In determining “fair value”, the Delaware Court is to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which were known or could be ascertained as of the date of the Merger which throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting person’s exclusive remedy.

The cost of the appraisal proceeding may be determined by the Delaware Court and taxed upon the parties as the Delaware Court deems equitable in the circumstances. However, costs do not include attorneys’ and expert witness fees. Each person is responsible for his, her or its attorneys’ and expert witness fees, although, upon application of a person whose name appears on the Chancery List who participated in the proceeding and incurred expenses in connection therewith, the Delaware Court may order that all or a portion of such expenses, including, without limitation, reasonable attorneys’ and expert witness fees, be charged pro rata against the value of all shares of AVEO common stock entitled to appraisal not dismissed pursuant to Section 262(k) of the DGCL or subject to such and award pursuant to a reservation of jurisdiction under Section 262(k) of the DGCL. Determinations by the Delaware Court are subject to appellate review by the Delaware Supreme Court.

 

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From and after the Effective Time, any person who has duly demanded and perfected appraisal in compliance with Section 262 will not be entitled to vote his, her or its shares of AVEO common stock for any purpose and will not be entitled to receive payment of dividends or other distributions in respect to such shares, except for dividends or distributions payable to AVEO stockholders of record at a date prior to the Effective Time.

To the extent there are any inconsistencies between the foregoing summary, on the one hand, and Section 262, on the other hand, Section 262 will govern.

Failure to comply strictly with all of the procedures set forth in Section  262 will result in the loss of a stockholder’s statutory appraisal rights.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a summary of the material U.S. federal income tax consequences of the Merger to certain U.S. holders and certain non-U.S. holders (both terms defined below) whose shares of AVEO common stock are converted into the right to receive Merger Consideration. This summary is for information purposes only and is not tax advice. It does not purport to consider all aspects of U.S. federal income taxation that might be relevant for holders of AVEO common stock. This summary is based on the Internal Revenue Code of 1986, as amended, (referred to as the “Code”), the applicable U.S. Treasury regulations promulgated under the Code, published rulings by the Internal Revenue Service (referred to as the “IRS”), and judicial authorities and administrative decisions, all as in effect as of the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change could alter the tax consequences to the holders described herein. This summary is not binding on the IRS or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged. No ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered, as to the U.S. federal income tax consequences of the Merger.

For purposes of this summary, the term “U.S. holder” means a beneficial owner of shares of AVEO common stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

   

a trust that (a) is subject to the primary supervision of a court within the United States and all substantial decisions of which are controlled by one or more U.S. persons or (b) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

   

an estate the income of which is subject to U.S. federal income tax regardless of its source.

As used herein, a “non-U.S. holder” means a beneficial owner of shares of AVEO common stock that is neither a U.S. holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds AVEO common stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partner of a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holding AVEO common stock should consult the partner’s tax advisor regarding the U.S. federal income tax consequences of the Merger to such partner.

This summary applies only to holders who hold shares of AVEO common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), and does not address or consider all of the U.S. federal income tax consequences that may be applicable to holders of AVEO common stock in light of their particular circumstances. For instance, this summary does not address the alternative minimum tax

 

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or the tax consequences to stockholders who validly exercise dissenters’ rights under the DGCL. In addition, this summary does not address the U.S. federal income tax consequences of the Merger to holders who are subject to special treatment under U.S. federal income tax rules, including, for example, banks and other financial institutions; insurance companies; securities dealers or broker-dealers; mutual funds; traders in securities who elect to use the mark-to-market method of accounting; tax-exempt investors; S corporations; holders classified as partnerships or other flow-through entities under the Code; U.S. expatriates; holders who hold their shares of AVEO common stock as part of a hedge, straddle, conversion transaction, or other integrated investment or constructive sale transaction; holders whose functional currency is not the U.S. dollar; holders who acquired their shares of AVEO common stock through the exercise of AVEO stock options or otherwise as compensation; and, except to the extent described below, holders who actually or constructively own 5% or more of the outstanding shares of AVEO common stock. In addition, this summary does not address the impact of the Medicare contribution tax, any aspects of foreign, state, local, estate, gift, or other tax laws (or any U.S. federal tax laws other than those pertaining to income tax) that may be applicable to a particular holder in connection with the Merger.

Further, this summary does not address any tax consequences of the Merger to holders of options cancelled in exchange for Merger Consideration, participants in the ESPP or holders of any other interests to acquire stock of the AVEO. Such holders should consult their tax advisors regarding the tax consequences of the Merger to them. Moreover, this summary does not discuss any other matters relating to equity compensation or benefit plans.

U.S. Holders

A U.S. holder’s receipt of the Merger Consideration in exchange for shares of AVEO common stock will generally be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of common stock are converted into the right to receive Merger Consideration will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (determined before deduction of any applicable withholding taxes) with respect to such shares and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares. The amount of gain or loss must be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered by the U.S. holder in the Merger. Such gain or loss will generally be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than twelve (12) months at the Effective Time of the Merger. Long-term capital gains recognized by individual and certain other non-corporate U.S. holders are generally taxed at preferential U.S. federal income tax rates. A U.S. holder’s ability to deduct capital losses may be limited.

Non-U.S. Holders

A non-U.S. holder’s receipt of the Merger Consideration in exchange for shares of AVEO common stock generally will not be subject to U.S. withholding tax (other than potentially to backup withholding tax or FATCA (as defined below) withholding, as discussed below) and will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if an income tax treaty applies, is attributable to a United States permanent establishment maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as if it were a U.S. holder, and, if the non-U.S. holder is a foreign corporation, such gain may also be subject to an additional branch profits tax at a rate of 30% or at such lower rate as may be specified by an applicable income tax treaty;

 

   

the non-U.S. holder is an individual who was present in the United States for one hundred eighty three (183) days or more in the taxable year of the Merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain derived from the disposition, which may be offset by certain U.S.-source capital losses of the non-U.S. holder recognized in the taxable year of the disposition, if any; or

 

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AVEO was a “United States real property holding corporation”, (referred to as “USRPHC,”) within the meaning of Section 897(c)(2) of the Code for U.S. federal income tax purposes

within the five (5) years preceding the Merger and the non-U.S. holder owned, actually or constructively, more than 5% of AVEO common stock at any time during the five (5)-year period preceding the Merger. In general, AVEO would be a USRPHC if interests in U.S. real estate comprised more than half of its assets, based on fair market value. Although there can be no assurances in this regard, AVEO does not believe it is, or has been during the five (5) years preceding the Merger, a USRPHC for U.S. federal income tax purposes.

Non-U.S. holders should consult their own tax advisors regarding the tax consequences to them of the Merger.

Backup Withholding and Information Reporting

A U.S. holder may be subject to backup withholding on all payments to which such U.S. holder is entitled in connection with the Merger, unless the U.S. holder provides its correct taxpayer identification number and complies with applicable certification procedures or otherwise establishes an exemption from backup withholding. In addition, if the exchange agent is not provided with a U.S. holder’s correct taxpayer identification number or other adequate basis for exemption, the U.S. holder may be subject to certain penalties imposed by the IRS. Each U.S. holder should complete and sign the IRS Form W-9 included as part of the letter of transmittal and timely return it to the exchange agent in order to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the exchange agent.

Certain non-U.S. holders may also be subject to backup withholding unless they establish an exemption from backup withholding in a manner satisfactory to the exchange agent (such as by completing and signing an appropriate IRS Form W-8) and otherwise comply with the backup withholding rules. Non-U.S. holders should consult their own tax advisors regarding these matters.

Backup withholding is not an additional tax. Rather, any amounts withheld under the backup withholding rules will generally be allowable as a refund or credit against a holder’s U.S. federal income tax liability; provided that certain required information is timely furnished to the IRS.

Payments made pursuant to the Merger will also be subject to information reporting unless an exemption applies.

FATCA

Provisions of the Code commonly referred to as the Foreign Account Tax Compliance Act (referred to as “FATCA”), may impose a 30% withholding tax on gross proceeds received in the Merger if paid to a foreign entity unless (i) if the foreign entity is a “foreign financial institution,” the foreign entity undertakes certain due diligence, reporting, withholding, and certification obligations, (ii) if the foreign entity is not a “foreign financial institution,” the foreign entity identifies certain of its U.S. investors, or (iii) the foreign entity is otherwise excepted under FATCA. Under proposed U.S. Treasury Regulations, withholding on payments of gross proceeds is not required. Although such regulations are not final, applicable withholding agents may rely on the proposed regulations until final regulations are issued. Non-U.S. holders should consult their own tax advisors regarding the possible implications of FATCA on their receipt of cash in the Merger.

This summary is provided for general information only and is not tax advice. The U.S. federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the Merger. Because individual circumstances may differ, each stockholder should consult the stockholder’s tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the Merger in light of such stockholder’s particular circumstances and the application of state, local, foreign, estate, gift and other tax laws (or any U.S. federal tax laws other than those pertaining to income tax).

 

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Regulatory Approvals Required for the Merger

HSR Act and U.S. Antitrust Matters

Completion of the Merger is conditioned on the expiration or termination of any waiting period (and any extension thereof) applicable to the completion of the Merger under the HSR Act. AVEO and LG Chem filed their respective HSR Act notifications on November 1, 2022, which triggered the start of the HSR Act waiting period.

Under the HSR Act, and the rules promulgated thereunder by the Federal Trade Commission (referred to as the “FTC”), the Merger cannot be consummated until AVEO and LG Chem each file a notification and report form with the FTC and the Antitrust Division of the U.S. Department of Justice (referred to as the “DOJ”) under the HSR Act and the applicable waiting period thereunder has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a thirty (30)-calendar-day waiting period following the parties’ filing of their respective HSR Act notification forms or the early termination of that waiting period.

At any time before or after consummation of the Merger, notwithstanding the expiration or termination of the waiting period under the HSR Act, the Antitrust Division of the DOJ or the FTC could take such action under applicable antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the consummation of the Merger, and notwithstanding the expiration or termination of the waiting period under the HSR Act, any state could take such action under its applicable antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the consummation of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under applicable antitrust laws under certain circumstances.

Subject to the terms of the Merger Agreement, AVEO, LG Chem and Merger Sub have agreed to use their reasonable best efforts to promptly take, and to obtain all approvals, clearances and expirations or terminations of waiting periods from governmental authorities under antitrust laws or other applicable law necessary to consummate the transactions contemplated the Merger Agreement. Other than the filings required under the HSR Act as described above, we currently do not expect that any clearance, approval or consent would be required under any other applicable antitrust law in connection with the Merger.

For a more detailed description of the parties obligations to obtain HSR Act clearance, see “The Merger Agreement—Other Covenants and Agreements—Efforts to Consummate the Merger” beginning on page 91 of this proxy statement.

CFIUS Approval

Completion of the Merger is conditioned on the receipt of CFIUS Approval. The Merger Agreement provides for the parties to file a joint voluntary notice with CFIUS under the Defense Production Act of 1950, as amended (the “DPA”). The DPA provides for national security reviews and, where appropriate, investigations by CFIUS of transactions in which a foreign person or entity acquires control of a U.S. business (a “covered transaction”). The parties made a draft filing of such notice on November 8, 2022. After receipt of confirmation that CFIUS has no further comments or inquiries related to the draft filing, the parties shall submit a final filing of such notice as soon as practicable.

Once the final filing is accepted, CFIUS review of a covered transaction is subject to an initial forty-five (45) day review period that may be extended by CFIUS for an additional forty-five (45) day investigation period. If during the initial review period or investigation period and the investigation period LG Chem and AVEO fail to respond to additional questions or requests from CFIUS within the timeframe specified by CFIUS (normally, within three business days of the request), CFIUS may reject the filing. Receipt of additional questions or requests from

 

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CFIUS during the CFIUS process does not extend the 45-day review or investigation periods. At the conclusion of its review or investigation, CFIUS may determine that the acquisition is not a covered transaction; may find that the covered transaction presents no unresolved national security concerns; may propose mitigation terms to resolve any national security concerns presented by the covered transaction; may send a report to the President of the United States (as defined below) recommending that the acquisition be suspended or prohibited; or may send a report notifying the President of the United States that CFIUS cannot agree on a recommendation related to the covered transaction. In some circumstances, CFIUS may allow the parties to withdraw and refile the notice if additional time is needed to reach a conclusion, which would restart the statutory review and/or investigation period. Should CFIUS send a report to the President of the United States, the President of the United States then has fifteen (15) days to decide whether to block the acquisition or to take other action. Further, while CFIUS’s decisions are not public, a final determination on the transaction by the President of the United States would be public.

For a more detailed description of the parties obligations to obtain CFIUS Approval, see “The Merger Agreement—Other Covenants and Agreements—Efforts to Consummate the Merger” beginning on page 91 of this proxy statement.

Delisting and Deregistration of AVEO Common Stock

If the Merger is consummated, following the Effective Time, the common stock of AVEO will cease trading on Nasdaq and will be deregistered under the Exchange Act. As such, AVEO would no longer file periodic reports with the SEC.

 

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THE MERGER AGREEMENT

The following summary describes certain material provisions of the Merger Agreement. This summary is not complete and is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.

Explanatory Note Regarding the Merger Agreement

The Merger Agreement and this summary of its terms have been included to provide you with information regarding the terms of the Merger Agreement. Factual disclosures about AVEO contained in this proxy statement or in AVEO’s public reports filed with the SEC may supplement, update or modify the factual disclosures about AVEO contained in the Merger Agreement and described in this summary. The representations, warranties, covenants, and agreements made in the Merger Agreement by AVEO and LG Chem were qualified and subject to important limitations agreed to by AVEO and LG Chem in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations, warranties, covenants, and agreements contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations, warranties, covenants, and agreements were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right to not close the Merger if the representations and warranties of the other party prove to be untrue (or such covenants and agreements were not complied with), due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts. The representations, warranties, covenants, and agreements may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and in some cases were qualified by disclosures contained in the disclosure schedules delivered by, respectively, AVEO to LG Chem, and by LG Chem to AVEO, in connection with the Merger Agreement (together referred to as the “Disclosure Schedules”), which disclosures are not reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since October 18, 2022, and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement or in the respective public filings made by each of AVEO or LG Chem with the SEC. For the foregoing reasons, the representations, warranties, covenants, and agreements and any descriptions of those provisions should not be read alone or relied upon as characterizations of the actual state of facts or condition of AVEO, LG Chem or any of their respective subsidiaries or affiliates. Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this proxy statement or incorporated by reference into this proxy statement.

Additional information about AVEO may be found elsewhere in this proxy statement and AVEO’s other public filings. See “Where You Can Find More Information” beginning on page 115 of this proxy statement.

When the Merger Becomes Effective

The closing of the Merger will take place at the offices of Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or remotely by exchange of documents and signatures (or their electronic counterparts), as soon as practicable (but in any event no later than the third (3rd) business day) after the date the conditions to the Merger set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the satisfaction or waiver, to the extent permissible, of such conditions at such time) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, unless another time, date or place is mutually agreed by AVEO and LG Chem.

 

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At the closing of the Merger, AVEO and Merger Sub will file a certificate of merger with respect to the Merger with the Secretary of State of the State of Delaware in accordance with the DGCL and will make all other filings or recordings required by the DGCL in connection with the Merger. The Merger will become effective upon the filing of such certificate of merger, or at such later date and time as may be specified in such certificate of merger.

Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

Pursuant to the terms and conditions of the Merger Agreement, at the Effective Time, Merger Sub will be merged with and into AVEO, the separate corporate existence of Merger Sub will cease, and AVEO will continue as the surviving corporation and an indirect wholly-owned subsidiary of LG Chem. At the Effective Time, subject to the terms of the Merger Agreement, by virtue of the consummation of the Merger the certificate of incorporation of the surviving corporation will be amended and restated in its entirety to read in its entirety as set forth on an exhibit to the Merger Agreement, and as so amended and restated shall be the certificate of incorporation of the surviving company until thereafter amended. At the Effective Time, subject to the terms of the Merger Agreement, the bylaws of the surviving corporation will be amended and restated such that the bylaws of Merger Sub in effect immediately prior to the Effective Time will be the bylaws of the surviving corporation until thereafter amended (provided that the name of the surviving corporation will be “AVEO Pharmaceuticals, Inc.”). From and after the Effective Time, the directors of Merger Sub at the Effective Time will be the initial directors of, and the officers of Merger Sub at the Effective Time will be the initial officers of, the surviving corporation and, in each case, will hold office until their respective successors are duly elected or appointed and qualified in accordance with applicable law.

Effect of the Merger on AVEO Common Stock

At the Effective Time, each share of AVEO common stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares and Cancelled Shares, if any, which Cancelled Shares shall be automatically cancelled and will cease to exist, and no consideration or payment will be made with respect thereto) will automatically be cancelled and cease to exist and will be converted into the right to receive the Merger Consideration in cash.

If, during the period between October 18, 2022 and the Effective Time, the outstanding shares of AVEO common stock are changed into a different number of shares or a different class (including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares or similar transaction, or any stock dividend with a record date occurring during such period, but excluding any change that results from any exercise of any AVEO stock option award outstanding as of October 18, 2022), the Merger Consideration and any other amounts payable pursuant to the Merger Agreement will be appropriately adjusted to reflect the effect of such change as set forth in the Merger Agreement in order to provide LG Chem and the holders of shares of AVEO common stock and AVEO equity awards the same economic effect for the aggregate shares of AVEO common stock and equity awards of AVEO held thereby, as applicable, as contemplated by the Merger Agreement prior to any such event.

Treatment of Equity Awards and the ESPP

Stock Options

Effective as of immediately prior to the Effective Time, each option (an “AVEO Option Award”) to purchase shares of AVEO common stock granted under AVEO’s Second Amended and Restated 2010 Stock Incentive Plan, as amended, or AVEO’s 2019 Equity Incentive Plan, as amended (collectively referred to as the “AVEO Stock Plans”), that is outstanding and unexercised immediately prior thereto will be cancelled and converted into the right to receive an amount of cash, if any, equal to the product of (i) the aggregate number of shares of AVEO common stock underlying such AVEO Option Award immediately prior to the Effective Time, multiplied by (ii) the excess (if any) of the Merger Consideration over the per share exercise price of such AVEO Option

 

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Award, less applicable withholding Taxes. Any AVEO Option Award, whether vested or unvested, with a per share exercise price greater than or equal to the Merger Consideration will be cancelled for no consideration as of immediately prior to the Effective Time.

ESPP

AVEO will take such action as may be necessary under the ESPP to ensure, provide for or cause the following to occur: (i) no new offering periods under the ESPP will commence during the period from October 18, 2022 through the Effective Time; (ii) there will be no increase in the amount of payroll deductions or payroll contributions permitted to be made by the participants under the ESPP during the current offering period, except those made in accordance with payroll deduction elections that are in effect as of October 18, 2022; and (iii) no individuals will be permitted to commence participation in the ESPP during the period from October 18, 2022 through the Effective Time. If there is any offering period under the ESPP in progress as of immediately prior to the Effective Time, such offering period shall automatically terminate and accumulated payroll deductions shall, in AVEO’s sole discretion, be (i) returned to participants or (ii) used to purchase shares of AVEO common stock, in each case, pursuant to the terms and conditions of the ESPP immediately prior to the Effective Time. The Final Offering Period is expected to expire prior to the Effective Time, but, in the event that it does not, AVEO currently expects that it would elect to have such accumulated payroll deductions used to purchase shares of AVEO common stock, pursuant to the terms and conditions of the ESPP immediately prior to the Effective Time.

Dissenting Shares

The Merger Agreement provides that Dissenting Shares will not be converted into the right to receive the Merger Consideration, but instead at the Effective Time will be entitled to payment for such shares determined in accordance with Section 262. If any AVEO stockholder fails to perfect, effectively withdraws or otherwise loses the right to appraisal of the fair value of such Dissenting Shares under Section 262, or if a court of competent jurisdiction shall determine that such holder is not entitled to relief provided by Section 262, then such Dissenting Shares will be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration.

Payment for AVEO Common Stock

Prior to the Effective Time, LG Chem will cause LG Chem Life Sciences Innovation Center, Inc., a Delaware corporation, or another wholly-owned subsidiary of LG Chem that is a Delaware corporation to deposit with an agent appointed by LG Chem and reasonably acceptable to AVEO (referred to as the “exchange agent”) cash in an amount necessary to pay the aggregate Merger Consideration payable to holders of AVEO common stock.

Promptly (and in any event not later than the third (3rd) business day) after the Effective Time, LG Chem will cause the exchange agent to send to each holder of record of certificates representing shares of AVEO common stock (“Certificates”) or uncertificated shares of AVEO common stock (“Uncertificated Shares”) that immediately prior to the Effective Time represented outstanding shares of AVEO common stock (i) in the case of holders of Certificates, a letter of transmittal in reasonable and customary form, which will specify that delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, and instructions for use in effecting the surrender of the Certificates (or affidavits of loss in lieu thereof) pursuant to such letter of transmittal and (ii) in the case of Uncertificated Shares not held through DTC, reasonable and customary provisions regarding delivery of an “agent’s message” with respect to such Uncertificated Shares.

Each holder of a Certificate will be entitled to receive, upon surrender of a Certificate (or an affidavit of loss in lieu thereof) to the exchange agent, together with a properly completed letter of transmittal, the Merger Consideration payable for each Share represented by such Certificate.

 

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Each holder of an Uncertificated Share not held through DTC will be entitled to receive, upon receipt of an “agent’s message” by the exchange agent or such other evidence of transfer as may reasonably be requested by the exchange agent, the Merger Consideration payable for each Share represented by such Uncertificated Share not held through DTC.

All Merger Consideration paid upon the surrender of Certificates or Uncertificated Shares in accordance with the terms of the Merger Agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formally represented by such Certificate or Uncertificated Shares.

With respect to any shares of AVEO common stock that are held through DTC, AVEO, Merger Sub and LG Chem will cooperate to establish procedures with the exchange agent and DTC with the objective that the Exchange Agent will transmit to DTC or its nominees on the first (1st) business day after the Closing Date, an amount in cash, by wire transfer of immediately available funds, equal to (i) the number of shares of AVEO common stock that have been converted into the right to receive the Merger Consideration that are held of record by DTC or such nominee immediately prior to the Effective Time, multiplied by (ii) the Merger Consideration (it being understood that no holder of Uncertified Shares held through DTC shall be required to provide a Certificate or an executed letter of transmittal to the exchange agent in order to receive the payment that such holder is entitled to receive pursuant to the terms of the Merger Agreement).

Each of the exchange agent, the surviving corporation, Merger Sub and LG Chem and its affiliates will be entitled to deduct and withhold from amounts otherwise payable pursuant to the Merger Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, or local tax law or non-U.S. tax law. If the exchange agent, the surviving corporation, Merger Sub or LG Chem or any of its affiliates, as the case may be, so deducts and withholds amounts and timely and properly remits such amounts to the applicable governmental authority, such amounts shall be treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction and withholding was made.

Representations and Warranties

The Merger Agreement contains representations and warranties of each of AVEO and LG Chem (which representations and warranties are subject to certain qualifications or exceptions in the Merger Agreement and the Disclosure Schedules) as to, among other things:

 

   

corporate organization, existence, good standing and corporate power and authority to conduct such party’s business as presently conducted;

 

   

corporate power and authority to enter into the Merger Agreement, to perform such party’s obligations thereunder and to complete the transactions contemplated thereby (subject, in the case of AVEO, to receipt of the affirmative vote (in person or by proxy) of the holders of a majority of the outstanding shares of AVEO common stock, voting together as a single class);

 

   

required regulatory filings or actions and authorizations, consents or approvals of governmental entities;

 

   

the absence of certain violations, defaults or consent requirements under certain contracts, organizational documents and applicable law, in each case arising out of the execution, delivery or performance of, or consummation of the transactions contemplated by, the Merger Agreement;

 

   

matters relating to information to be included in required filings with the SEC in connection with the Merger; and

 

   

the absence of any fees owed to investment bankers or brokers in connection with the Merger, other than those specified in the Merger Agreement.

 

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The Merger Agreement also contains representations and warranties of AVEO (which representations and warranties are subject to certain qualifications or exceptions in the Merger Agreement and the Disclosure Schedules) as to, among other things:

 

   

the capitalization of AVEO, including the authorized and outstanding capital stock, shares of AVEO common stock reserved for issuance under the AVEO Stock Plans and shares of AVEO common stock reserved for issuance under the ESPP;

 

   

all shares of AVEO common stock having been, or being when issued pursuant to any, AVEO Stock Plan or the ESPP in accordance with the respective terms thereof, duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights;

 

   

the exercise price of each AVEO Option Award as compared to fair market value under Section 409A of the Code and the Treasury Regulations promulgated thereunder of the underlying shares on the date of grant;

 

   

the issuance of shares of AVEO common stock or other equity interests;

 

   

the absence of (i) other equity interests of AVEO or securities convertible into equity interests of AVEO, (ii) subscriptions, warrants, calls, options or other rights to acquire equity interests from AVEO or obligations of AVEO to issue equity interests, or (iii) restricted shares, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar rights;

 

   

the absence of (i) stockholder agreements or voting trusts or other agreements restricting the transfer or affecting the voting rights of AVEO equity interests, (ii) obligations of AVEO or any of its subsidiaries to repurchase, redeem or otherwise acquire any of the equity interests of AVEO, or granting any preemptive rights, (iii) a stockholder rights plan or “poison pill” or (iv) outstanding bonds, debentures, notes or other similar obligations, the holders of which have the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote);

 

   

all outstanding shares, capital stock or other voting securities of, or ownership interests in, each subsidiary of AVEO having been duly authorized and validly issued, fully paid and non-assessable and free of preemptive rights;

 

   

the absence of other equity interests of any subsidiary of AVEO;

 

   

the issuance of equity interests in any subsidiary of AVEO;

 

   

the corporate actions required to be taken, and taken, in connection with the execution, delivery and performance of the Merger Agreement by AVEO, including with respect to the approval by AVEO stockholders of the Merger Proposal;

 

   

compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act;

 

   

the timeliness and accuracy of AVEO’s filings with the SEC and of the financial statements included in its SEC filings, and the compliance of such filings and financial statements with SEC rules, GAAP (in the case of financial statements), the Sarbanes-Oxley Act of 2002, and the applicable rules and regulations of Nasdaq;

 

   

the absence of outstanding or unresolved comments received from the SEC staff with respect to AVEO’s SEC filings;

 

   

AVEO’s disclosure controls and procedures and internal control over financial reporting;

 

   

absence of certain changes from December 31, 2021 through October 18, 2022, including the conduct of the businesses of AVEO and its subsidiaries in the ordinary course, and the absence of a Material Adverse Effect (as defined below) with respect to AVEO;

 

   

the absence of certain undisclosed liabilities of AVEO, known or unknown;

 

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the compliance by AVEO, its subsidiaries and any third party which, pursuant to a contract or other arrangement with AVEO or any of its subsidiaries, co-develops, commercializes, or otherwise has a license or other right to research, develop, seek regulatory approval for, manufacture, supply, test, or import any product or product candidate of AVEO or any of its subsidiaries (each, a “Development Partner”) in connection with any product or product candidate of AVEO or any of its subsidiaries with applicable laws, permits and other authorizations; and the absence of threats to be charge with or notice of by any governmental authority any violation of applicable law, permits and other authorizations;

 

   

the absence of threats to be charged with, or receipt of notice by any governmental authority of, any violation of applicable law, permits and other authorizations as it pertains to AVEO, its subsidiaries, and any Development Partner in connection with any product or product candidate of AVEO or any of its subsidiaries;

 

   

books and records of AVEO and its subsidiaries accurately and fairly reflecting all transactions and dispositions of all transactions and dispositions of funds or assets;

 

   

the absence of any investigations, inquiries or enforcements from a governmental authority during the past five (5) years regarding (i) applicable laws relating to trade, export control, import and anti-boycott imposed, administered or enforced by the U.S. Government, including the Arms Export Control Act (22 U.S.C. § 1778), the International Emergency Economic Powers Act (50 U.S.C. §§ 1701–1706), the Export Control Reform Act of 2018 (50 U.S.C. § 4801-4861), Section 999 of the Internal Revenue Code, Title 19 of the U.S. Code, the International Traffic in Arms Regulations (22 C.F.R. Parts 120-130), the Export Administration Regulations (15 C.F.R. Parts 730-774), the U.S. customs regulations at 19 C.F.R. Chapter 1 and the Foreign Trade Regulations (15 C.F.R. Part 30) (ii) applicable laws relating to trade, export control, import and anti-boycott imposed, administered or enforced by any other country, except to the extent inconsistent with applicable U.S. laws, and (iii) applicable economic or financial sanctions or trade embargoes imposed, administered or enforced by relevant governmental authorities, including those administered by the U.S. Government through OFAC or the U.S. Department of State, the European Union or its Member States, the United Kingdom, or the United Nations Security Council;

 

   

the maintenance and enforcement, during the past five (5) years, of policies and procedures reasonably designed to ensure compliance by AVEO, its subsidiaries, and their directors, officers, employees and third parties acting on their behalf, with Trade Control Laws and Sanctions Laws;

 

   

the absence of (a) the production, design, testing, manufacture, fabrication, or development of “critical technologies,” as defined in 31 C.F.R. Section 800.215; (b) the performance of the functions as set forth in column 2 of Appendix A to 31 C.F.R. part 800 with respect to covered investment “critical infrastructure; and (c) the maintenance or collection, directly or indirectly, of “sensitive personal data” as defined in 31 C.F.R. 800.241;

 

   

the maintenance of all material permits required to own, lease, maintain, operate, and conduct its business as it is currently conducted;

 

   

the provision (or making available) by AVEO to LG Chem of complete and correct copies of each investigational new drug application or clinical trial application (or any comparable foreign governmental authority) filed with respect to any product candidate of AVEO currently being developed by AVEO;

 

   

certain regulatory matters, including with respect to regulatory approvals from the FDA, and the compliance with various applicable rules of such regulatory authorities applicable to the conduct of the business of AVEO and its subsidiaries;

 

   

AVEO, its subsidiaries, and all Development Partners having implemented compliance programs that conform to and ensure material compliance with applicable healthcare-related laws and industry standards;

 

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the absence of certain litigation, orders and judgments and governmental proceedings and investigations related to AVEO and its subsidiaries;

 

   

real property owned or leased by AVEO or any of its subsidiaries;

 

   

AVEO’s intellectual property rights and unregistered trademarks used in AVEO’s business or that of its subsidiaries;

 

   

the absence of any failures by AVEO or its subsidiaries, licensors or licensees to take any action that would limit the enforceability of any patent within AVEO’s registered intellectual property;

 

   

the absence of transferred ownership or grants of exclusive licenses of any AVEO intellectual property;

 

   

the absence of the Merger causing LG Chem or its affiliates to grant any other person any right with respect to intellectual property owned or licensed to LG or its affiliates;

 

   

the payment of taxes, filing of tax returns, absence of tax audits or proceedings and other tax matters related to AVEO and its subsidiaries;

 

   

AVEO’s employee benefit plans and other agreements with its employees;

 

   

labor matters related to AVEO and its subsidiaries and AVEO’s employees;

 

   

data protection and privacy matters related to AVEO and its subsidiaries;

 

   

environmental matters and compliance with environmental laws by AVEO and its subsidiaries;

 

   

certain categories of specified material contracts, including as to effectiveness and absence of breach or default under such contracts, and the absence of related party transactions of AVEO and its subsidiaries;

 

   

the receipt by the Board of an opinion of Moelis as to the fairness of the Merger Consideration, from a financial point of view, to the holders of shares of AVEO common stock (other than the Excluded Holders);

 

   

non-applicability of certain anti-takeover laws to the Merger Agreement and the Merger; and

 

   

insurance policies of AVEO or any of its subsidiaries.

The Merger Agreement also contains representations and warranties of LG Chem (which representations and warranties are subject to certain qualifications or exceptions in the Merger Agreement) as to, among other things:

 

   

the availability to LG Chem of sufficient funds to consummate the Merger and the other transactions contemplated by the Merger Agreement that require payment on the Closing Date;

 

   

the absence of certain litigation, orders and judgments and governmental proceedings and investigations related to LG Chem or Merger Sub; and

 

   

the fact that during the three (3) years prior to October 18, 2022, none of LG Chem, Merger Sub or any of their respective subsidiaries have been an “interested stockholder” (as defined in Section 203 of the DGCL) of AVEO.

Some of the representations and warranties in the Merger Agreement are qualified by limitations, including knowledge and materiality qualifications or a “Material Adverse Effect” clause.

For purposes of the Merger Agreement, “Material Adverse Effect” means, with respect to AVEO, any effect, change, event, circumstance or occurrence (each referred to as an “effect”, and collectively, “effects”) that, individually or in the aggregate:

 

  (i)

would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by the Merger Agreement; or

 

  (ii)

has or would reasonably be expected to have a material adverse effect on the financial condition, business, assets, liabilities or results of operations of AVEO and its subsidiaries, taken as a whole; provided that, for purposes of this clause (ii) of the definition of “Material Adverse Effect,” none of the following shall be deemed in and of themselves, either alone or in combination, to constitute, and none

 

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  of the following shall be taken into account in determining whether there is, or would reasonably be expected to be, a Material Adverse Effect:

 

   

changes or prospective changes in GAAP or the regulatory accounting requirements applicable to the industry in which AVEO and its subsidiaries operate;

 

   

general changes in the financial, securities, credit or other capital markets or general economic, regulatory legislative or political conditions (including changes in interest or exchange rates) generally affecting the industry in which AVEO and its subsidiaries operate;

 

   

changes or prospective changes in applicable law or the interpretation thereof occurring after October 18, 2022;

 

   

changes after October 18, 2022 in geopolitical conditions, acts of war, sabotage or terrorism (including cyberterrorism), outbreak of hostilities, trade war, natural disasters, acts of God, weather or health emergencies, pandemics or epidemics (including COVID-19) and any governmental or industry responses thereto, including any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut-down, closure, sequester, safety or other law, directive, guidelines or recommendations promulgated by any governmental authority, including the Centers for Disease Control and Prevention and the World Health Organization, or by any U.S. industry group, in each case, in connection with or in response to COVID-19 (“COVID-19 Measures”) (or the escalation of any of the foregoing) occurring after October 18, 2022;

 

   

any effect directly resulting from the execution, announcement or pendency of the Merger Agreement and the transactions contemplated by the Merger Agreement, including any effect resulting from the identity of LG Chem, or facts and circumstances resulting therefrom and any loss or threatened loss of, or adverse change or threatened adverse change in, the relationship of AVEO or any of its subsidiaries with any of its current or prospective suppliers, customers, wholesalers, service providers, distributors, licensors, licensees, regulators, employees, creditors, stockholders or other third parties, in each case resulting therefrom; provided, that such exception shall not apply for purposes of representations and warranties intended to address the consequence of the announcement or consummation of the transactions contemplated by the Merger Agreement;

 

   

changes in the market price or trading volume of AVEO common stock (it being understood that such exception shall exclude any effect that may have contributed to such change that independently constitutes or contributes to a Material Adverse Effect);

 

   

any failure by AVEO and its subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance for any period (it being understood that such exception shall not exclude any effect that may have contributed to such failure that independently constitutes or contributes to a Material Adverse Effect);

 

   

any action taken (or omitted to be taken) by AVEO or any of its subsidiaries at the written request or express approval of LG Chem or Merger Sub; or

 

   

any action taken by AVEO or any of its subsidiaries that is expressly required to be taken pursuant to the Merger Agreement,

provided, that with respect to the exclusions set forth in the foregoing 1st, 2nd, 3rd and 4th bullets, any such exclusion shall apply only to the extent such effect does not have a disproportionate impact on AVEO and its subsidiaries, taken as a whole, compared to other companies that operate in the industry in which AVEO and its subsidiaries operate that are of a similar size to AVEO (in which case, such effect shall only be taken into account to the extent of such disproportionate effect on AVEO and its subsidiaries, taken as a whole).

For purposes of the Merger Agreement, a “Material Adverse Effect” with respect to LG Chem means any effect, change, event, circumstance or occurrence that, individually or in the aggregate, would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by the Merger Agreement.

 

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Conduct of Business Pending the Merger

The Merger Agreement provides that except (i) as required by applicable law (including any action to be taken, or omitted to be taken, pursuant to COVID-19 Measures), (ii) as consented to in writing by LG Chem (such consent not to be unreasonably withheld, conditioned or delayed), (iii) as expressly contemplated by the Merger Agreement, or (iv) as set forth in the Disclosure Schedules, during the period from October 18, 2022 until the Effective Time or the earlier termination of the Merger Agreement in accordance with its terms, AVEO is required to, and to cause each of its subsidiaries to (a) conduct in all material respects its business in the ordinary course of business, (b) use reasonable best efforts to conduct its business in material compliance with applicable law, and (c) use commercially reasonable efforts to preserve intact the material components of its current business organizations and relationships and goodwill with suppliers, customers, Governmental Authorities and other material business relations and to keep available the services of its present officers and employees.

In addition, except (i) as required by applicable law (including any action to be taken, or omitted to be taken, pursuant to COVID-19 Measures), (ii) as consented to in writing by LG Chem (such consent not to be unreasonably withheld, conditioned or delayed), (iii) as expressly contemplated by the Merger Agreement, or (iv) as set forth in the Disclosure Schedules, during the period from October 18, 2022 until the Effective Time or the earlier termination of the Merger Agreement in accordance with its terms, AVEO will not, and will cause its subsidiaries not to:

 

   

amend AVEO’s certificate of incorporation or bylaws or amend the certificate or articles of incorporation, bylaws or other similar organizational documents of any subsidiary of AVEO;

 

   

(i) split, combine or reclassify any shares of AVEO capital stock or other equity or voting interests, (ii) establish a record date for, declare, accrue, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof or otherwise) in respect of AVEO capital stock or other equity or voting interests or securities of AVEO or its subsidiaries, except for dividends by any of AVEO’s wholly-owned subsidiaries to AVEO or any other wholly-owned subsidiary or (iii) redeem, repurchase or otherwise acquire or offer to redeem, repurchase or otherwise acquire any securities of AVEO or its subsidiaries, other than the withholding of AVEO common stock to satisfy tax withholding obligations or payment of the applicable exercise price with respect to AVEO Option Awards outstanding October 18, 2022 or granted in compliance with the Merger Agreement thereafter;

 

   

(i) issue, deliver, encumber, pledge, grant, transfer or sell, or authorize the issuance, delivery, encumbrance, pledge, grant, transfer or sale of, any shares of its capital stock or other equity or voting interests or any securities of AVEO or its subsidiaries, other than the issuance of (A) any AVEO common stock issued upon the exercise of AVEO Option Awards that are outstanding on October 18, 2022 or issued in compliance with the Merger Agreement after October 18, 2022, in each case in accordance with the terms of the applicable AVEO Stock Plan and award agreement (B) shares of AVEO common stock upon the exercise of purchase rights under the ESPP in accordance with the Merger Agreement or (C) any securities of AVEO subsidiaries to AVEO or any other wholly-owned subsidiary of AVEO; or (ii) amend any term of any security of AVEO or any subsidiary of AVEO;

 

   

form any subsidiary;

 

   

acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities, properties, interests or businesses for an amount in excess of $500,000 in the aggregate, other than acquisitions of raw materials, supplies, equipment, inventory and third-party software in the ordinary course of business;

 

   

sell, lease, encumber, license, sublicense or otherwise transfer or dispose of, waive, relinquish or permit to lapse, fail to protect or enforce, or otherwise subject to any lien (other than any permitted lien) any of its material rights, assets, securities, properties (including intellectual property rights), interests or businesses or any assets or property the value or purchase price which exceeds $500,000

 

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individually or $1,000,000 in the aggregate, except, in the case of any of the foregoing in the ordinary course of business (including entering into non-exclusive license agreements in the ordinary course of business); fail to maintain or allow any rights in any AVEO registered intellectual property to lapse or enter into the public domain (i) sell, license or assign to any person any rights to any AVEO intellectual property; (ii) buy or license any intellectual property right of any other person; or (iii) license or sell any product or product candidate of AVEO or any of its subsidiaries;

 

   

subject to certain exceptions, make any loans, advances or capital contributions to, or investments in, any other person, other than advances for reimbursable employee expenses in the ordinary course of business;

 

   

enter into any new line of business or abandon or discontinue any existing line of business, it being understood that clinical trials planned as of October 18, 2022, and conducted in the ordinary course of business shall not constitute new lines of business;

 

   

incur any indebtedness (including any borrowing of money, capital leases and reimbursement obligations in respect of letters of credit) or guarantees thereof, or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of any person (other than AVEO or any of its subsidiaries), other than any borrowings incurred between AVEO and any of its wholly-owned subsidiaries or between any of such wholly-owned subsidiaries;

 

   

make or authorize, or make any commitment with respect to, capital expenditures that, in the aggregate, exceed 115% of the aggregate total of the capital expenditures budget of AVEO in effect on October 18, 2022;

 

   

(i) enter into or terminate, or (ii) materially amend, renew, extend, materially modify or waive any material rights or obligations under any material contract (or any contract that if entered into prior to October 18, 2022, would be a material contract), including any letter agreement, schedule, exhibit or similar document ancillary to such material contract, except (x) in the case of clause (i), for normal expirations of material contracts in the ordinary course of business and (y) in the case of clause (ii), subject to certain restrictions, amendments, renewals, extensions, modifications and waivers in the ordinary course of business;

 

   

except to the extent required by the terms of an AVEO benefit plan in effect on October 18, 2022, in the ordinary course of business, as required by applicable law, or under plans sponsored or provided through contract with a professional employer organization to the extent the changes are not solely with respect to AVEO: (i) increase (or commit to increase) the compensation, bonus, severance, termination pay or other benefits payable to any service provider, (ii) enter into, establish, adopt, terminate or materially amend any AVEO benefit plan (or any arrangement that would be an AVEO benefit plan if in effect on October 18, 2022), other than de minimis administrative amendments or ordinary course renewals of coverage for benefit plans providing solely for health and welfare benefits that do not materially increase the cost or expense of maintaining, or increase the benefits payable under, such benefit plans, (iii) make any contributions or payments to any trust or other funding vehicle, (iv) change any actuarial or other assumptions used to calculate funding obligations with respect to any benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, (v) pay, grant or award, or commit to pay, grant or award, any AVEO Option Award, bonuses or other incentive awards, (vi) accelerate the payment or vesting of, or otherwise deviate from the terms provided in the applicable award agreement with respect to vesting, payment, settlement or exercisability of, any AVEO Option Award, (vii) loan or advance any money or other property to any service provider, (viii) hire or appoint or engage or promote any service provider with an annual base salary or annual base compensation of $200,000 or more or, in the case of an employee, who is at or above the level of director, or (ix) terminate (other than for cause or due to death or disability) the employment or services of any service provider whose annual base salary or annual base fee is or would be in excess of $200,000 or, in the case of an employee, who is at or above the level of director;

 

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change AVEO’s financial accounting methods, principles or practices, except as required by changes in GAAP, applicable law or in Regulation S-X of the 1934 Act, as agreed to by AVEO’s independent public accountants;

 

   

settle, release, waive or compromise, or offer or propose to settle, release, waive or compromise, (i) any litigation, investigation, arbitration, proceeding, dispute or other claim involving or against AVEO or any of its subsidiaries except for settlements requiring payment of not more than $250,000 in the aggregate and that do not impose any restrictions on the business or operations of AVEO or any of its subsidiaries (other than customary confidentiality and non-disclosure obligations) or involve any injunctive or other non-monetary relief or any license, cross license or similar agreement with respect to intellectual property rights, and in each case that do not involve the admission of wrongdoing by AVEO or any of its subsidiaries or (ii) any litigation, investigation, arbitration, proceeding, demand dispute or other claim that relates to the transactions contemplated hereby;

 

   

adopt a plan or agreement of, or effect any, complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of AVEO or any of its subsidiaries;

 

   

enter into any collective bargaining agreement or other agreement with any labor organization or recognize or certify any labor union, works council or other labor organization as the bargaining representative for any employees of AVEO or any of its subsidiaries;

 

   

implement a “mass layoff” or effectuate a “plant closing” (each as defined in the Worker Adjustment and Retraining Notification Act of 1988, as amended or any similar applicable law) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of AVEO or any of its subsidiaries;

 

   

make, change or revoke any material tax election; adopt or change any material tax accounting method; change any tax accounting period; file any material amended tax return; enter into any closing agreement with respect to a material amount of taxes; request any material tax ruling; settle or compromise any material tax proceeding, examination, audit or assessment; enter into any tax agreement or arrangement relating to the apportionment, sharing, assignment, allocation or indemnification of or for any tax or tax asset (other than pursuant to an agreement entered into in the ordinary course of business that does not have as a principal purpose addressing tax matters); extend or waive any statute of limitations with respect to, taxes (other than in the ordinary course of a tax audit) or surrender any claim for a material refund of taxes; or

 

   

agree, resolve or commit to do any of the foregoing.

Notwithstanding the foregoing, nothing contained in the Merger Agreement is intended to give LG Chem, directly or indirectly, the right to control or direct the operations of AVEO or its subsidiaries prior to the Effective Time, and nothing contained in the Merger Agreement is intended to give AVEO, directly or indirectly, the right to control or direct LG Chem’s operations. Prior to the Effective Time, each of LG Chem and AVEO will exercise, consistent with and subject to the terms and conditions of the Merger Agreement, control and supervision of its and its respective subsidiaries’ respective operations.

From October 18, 2022, until the earlier of the termination of the Merger Agreement and the Effective Time, except for the transactions contemplated hereby, LG Chem will not permit its controlled affiliates to, acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion thereof, or otherwise acquire or agree to acquire any assets, if the entering into a definitive agreement relation to (or the consummation of) such acquisition, merger or consolidation would reasonably be expected to (i) impose any material delay in obtaining, or significantly increase the risk of not obtaining, the expiration or termination of any applicable waiting period under the HSR Act or (ii) significantly increase the risk of any governmental authority under the HSR Act entering an order prohibiting the consummation of the transactions contemplated herby.

 

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Other Covenants and Agreements

Special Meeting and Related Actions

Unless the Merger Agreement is terminated in accordance with its terms, AVEO must, as promptly as reasonably practicable after the date on which AVEO learns that this proxy statement will not be reviewed or that the SEC staff has no further comments on this proxy statement, duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of obtaining the AVEO Stockholder Approval and AVEO is required to use its reasonable best efforts to obtain the AVEO Stockholder Approval.

Pursuant to the Merger Agreement, AVEO may postpone or adjourn the Special Meeting (and will, upon LG Chem’s written request, postpone or adjourn the Special Meeting) on no more than two (2) occasions and for no longer than ten (10) business days from the prior scheduled date of the Special Meeting and to a date no later than five (5) business days prior to the End Date, (i) after consultation with LG Chem (x) due to the absence of a quorum at the Special Meeting or (y) to solicit additional proxies if AVEO has not received proxies sufficient to obtain the AVEO Stockholder Approval or (ii) after consultation with LG Chem, to allow reasonable additional time for (x) the filing and mailing of supplemental or amended disclosure that the Board in good faith after consultation with outside legal counsel determines is reasonably likely to be required by applicable law and (y) for such supplemental or amended disclosure to be disseminated in a manner suitable under applicable law and reviewed by AVEO’s stockholders prior to the Special Meeting.

Notwithstanding any Adverse Recommendation Change, unless the Merger Agreement is terminated in accordance with its terms, AVEO must submit the Merger Agreement to its stockholders for adoption at the Special Meeting and is not permitted to submit any Acquisition Proposal (as defined below) for adoption or approval of AVEO’s stockholders at the Special Meeting.

Access and Information

Subject to certain exceptions and limitations, from October 18, 2022, until the Effective Time, AVEO is required to (i) give LG Chem and its representatives reasonable access during normal business hours of AVEO, upon reasonable advance notice, to the offices, properties and books and records of AVEO and its subsidiaries, (ii) furnish to LG Chem and its representatives such financial and operating data, personnel records, human resources data and other information as LG Chem may reasonably request and (iii) cause the employees, counsel, financial advisors, auditors and other representatives of AVEO and its subsidiaries to reasonably cooperate with LG Chem in its investigation of AVEO and its subsidiaries.

No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change

From October 18, 2022, until the earlier to occur of the termination of the Merger Agreement in accordance with its terms and the Effective Time, neither AVEO nor any of its subsidiaries are permitted to, and AVEO and its subsidiaries must cause their respective representatives not to, directly or indirectly:

 

   

solicit, initiate or knowingly take any action to facilitate or encourage the submission of, or that would reasonably be expected to lead to the submission of, any Acquisition Proposal;

 

   

enter into or participate in any discussions (except solely to notify a person that makes any offer, proposal, inquiry or indication of interest with respect to an Acquisition Proposal of the existence of the relevant non-solicitation restrictions of the Merger Agreement) or negotiations with, furnish any information relating to AVEO or any of its subsidiaries or afford access to the business, properties, assets, books or records of AVEO or any of its subsidiaries to, or otherwise cooperate in any way with any third party in connection with, or in a manner that would reasonably be expected to lead to, an Acquisition Proposal;

 

   

(A) fail to make, withdraw, qualify or modify in a manner adverse to LG Chem the recommendation of the Board in favor of the Merger Proposal (referred to as the “AVEO Board Recommendation”),

 

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(B) fail to include the AVEO Board Recommendation in this proxy statement, (C) approve, adopt or recommend an Acquisition Proposal, (D) fail to (1) publicly and without qualification recommend against any Acquisition Proposal within five (5) business days after such Acquisition Proposal is made public (or such fewer number of days as remains prior to the Special Meeting so long as such Acquisition Proposal is made at least one business day prior to the Special Meeting) or (2) fail to reaffirm the AVEO Board Recommendation within five (5) business days after any request by LG Chem to do so (or such fewer number of days as remains prior to the Special Meeting so long as such request is made at least one business day prior to the Special Meeting), subject to the limitations contained in the Merger Agreement or (E) publicly propose to do any of the foregoing in clauses (A) through (D) (each of the actions set forth in the foregoing clauses (A) through (E) is referred to as an “Adverse Recommendation Change”); or

 

   

authorize or enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement, option agreement or other similar instrument or agreement, whether written or oral, binding or non-binding, relating to an Acquisition Proposal.

Notwithstanding the limitations in the preceding paragraphs, at any time prior to obtaining the AVEO Stockholder Approval:

 

   

AVEO may (A) engage in negotiations or discussions with any third party that has made a bona fide Acquisition Proposal after the execution of the Merger Agreement and (B) furnish to such third party non-public information relating to AVEO or any of its subsidiaries pursuant to a confidentiality agreement with such third party with terms no less favorable to AVEO in the aggregate than those contained in the confidentiality agreement with LG Chem and provided that all such information has been or is made available to LG Chem prior to or concurrently with the time such information is provided to such third party and, in the case of each of clause (A) and clause (B), that (1) such Acquisition Proposal was not solicited in violation of and did not otherwise result from AVEO’s breach of the non-solicitation provisions of the Merger Agreement and (2) the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, that such Acquisition Proposal constitutes or would reasonably be expected to lead to a Superior Proposal;

 

   

subject to compliance with the non-solicitation provisions and the termination procedures set forth in the Merger Agreement, the Board may make an Adverse Recommendation Change or AVEO may terminate the Merger Agreement to concurrently enter into a definitive agreement with respect to such Superior Proposal, if, in each case, AVEO receives after the execution of the Merger Agreement, a bona fide Acquisition Proposal that was not solicited in violation of and did not otherwise result from AVEO’s breach of the non-solicitation provisions of the Merger Agreement and that the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, constitutes a Superior Proposal, and that the failure to take such action would be inconsistent with the fiduciary duties of the Board under applicable law; provided that prior to effecting such Adverse Recommendation Change or terminating the Merger Agreement to concurrently enter into a definitive agreement with respect to such Superior Proposal, (A) AVEO has given LG Chem at least five (5) business days’ prior written notice of its intention to effect an Adverse Recommendation Change or terminate the Merger Agreement (which notice, in and of itself, will not constitute an Adverse Recommendation Change), (B) AVEO has provided LG Chem with the identity of the third party making the Acquisition Proposal, the terms and conditions thereof and an unredacted copy of any written materials, proposals or agreements received in connection with such Acquisition Proposal, and all correspondence relating thereto in accordance with the Merger Agreement, (C) if requested to do so by LG Chem, for a period of five (5) business days following delivery of such notice, AVEO has discussed and negotiated in good faith, and has made its representatives available to discuss and negotiate in good faith, with LG Chem and its representatives, any proposed amendments or modifications to the terms and conditions of the Merger Agreement and (D) no earlier than the end of such five (5) business day period, the Board has concluded, after considering the terms of any proposed

 

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amendment or modification to the Merger Agreement proposed by LG Chem during such period, and after consultation with its financial advisor and outside legal counsel, that such Superior Proposal continues to constitute a Superior Proposal and that the failure to either effect an Adverse Recommendation Change or terminate the Merger Agreement and enter into a definitive agreement with respect to such Superior Proposal would continue to be inconsistent with the fiduciary duties of the Board under applicable law (and provided that any change to the financial or other material terms of a proposal that was previously the subject of a notice from AVEO to LG Chem pursuant to the non-solicitation provisions of the Merger Agreement requires an additional notice to LG Chem and the procedures set forth in the Merger Agreement shall apply again with respect to such additional notice); and

 

   

if an Intervening Event occurs, the Board may make an Adverse Recommendation Change in respect of such Intervening Event so long as (A) the Board determines, in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with the fiduciary duties of the Board under applicable law and (B) prior to effecting such adverse recommendation change, (1) AVEO has given LG Chem at least five (5) business days’ prior written notice of its intention to affect an Adverse Recommendation Change (which notice, in and of itself, will not constitute an Adverse Recommendation Change), which notice shall include a reasonably detailed description of such Intervening Event and the reasons for the Board’s intention to effect such Adverse Recommendation Change, (2) if requested to do so by LG Chem, during the period of five (5) business days following delivery of such notice, AVEO has discussed and negotiated in good faith and has made its representatives available to discuss and negotiate in good faith, with LG Chem and its representatives, any proposed amendments or modifications to the terms and conditions of the Merger Agreement and (3) no earlier than the end of such five (5) business day period, the Board has concluded, after considering the terms of any amendment or modification to the Merger Agreement offered by LG Chem during such period, and after consultation with its outside legal counsel, that such Superior Proposal continues to constitute a Superior Proposal and the failure to effect an Adverse Recommendation Change in respect of such Intervening Event would continue to be inconsistent with the fiduciary duties of the Board under applicable law (and provided that any material change to the changes, events, circumstances or developments constituting the Intervening Event that was previously the subject of a notice from AVEO to LG Chem described in this bullet requires an additional notice to LG Chem and the procedures set forth in the Merger Agreement shall apply again with respect to such additional notice).

Notwithstanding the foregoing, nothing contained in the Merger Agreement prevents the Board or AVEO from (i) taking and disclosing to the stockholders of AVEO a position contemplated by, Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act with regard to an Acquisition Proposal or (ii) making any “stop, look and listen” communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act; provided that, any such communication or disclosure made will be deemed to be an Adverse Recommendation Change unless the Board publicly and without qualification reaffirms the AVEO Board Recommendation in such communication or disclosure.

AVEO is required to notify LG Chem promptly (but in no event later than twenty-four (24) hours) after receipt by AVEO (or any of its representatives) of any bona fide Acquisition Proposal or any offers, proposals, inquiries or indications of interest with respect thereto or that AVEO believes is or that would reasonably be expected to lead to an Acquisition Proposal, including (i) the identity of the third party making the Acquisition Proposal or offer, proposal, inquiry or indication of interest, (ii) a summary of the material terms and conditions thereof and (iii) an unredacted copy of any written proposal, written offer, or other written material received from such third party or its representatives in connection with an Acquisition Proposal, and AVEO is required to keep LG Chem reasonably informed as to the status (including changes to the material terms or other material developments) of such Acquisition Proposal, offer, proposal, inquiry or indication of interest on a reasonably prompt basis and within twenty-four (24) hours of (x) any such material changes or material developments or (y) any written

 

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request of LG Chem for such information. AVEO is also required to notify LG Chem reasonably promptly (but in no event later than twenty-four (24) hours) after receipt by AVEO of any initial request for non-public information relating to AVEO or any of its subsidiaries or for access to the business, properties, assets, books or records of AVEO or any of its subsidiaries by any third party that AVEO reasonably expects may be considering making, or has made, an Acquisition Proposal.

AVEO is also required to, and is required to cause its subsidiaries and representatives to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any third party and its representatives conducted prior to October 18, 2022 with respect to any Acquisition Proposal or offer, proposal, inquiry or indication of interest that would reasonably be expected to lead to an Acquisition Proposal and to promptly (and in any event within one (1) business day of October 18, 2022) terminate access by any such third party and its representatives to any physical or electronic data room relating to any such activities, discussions or negotiations and request the return or destruction of all information furnished by AVEO or on its behalf to any such third party and its representatives, and must enforce and not waive, amend or release any third party from the provisions of its confidentiality agreements with such third parties (provided, however, that the Board may, or may authorize AVEO to, waive any standstill agreement with any third party, or any standstill provision included in a confidentiality agreement with any third party, in each case, subject to compliance with the non-solicitation provisions of the Merger Agreement, in response to any request from a third party not solicited in violation of the non-solicitation provisions of the Merger Agreement, in the event that the Board determines in good faith, after consultation with AVEO’s outside legal counsel, that the failure to do so would be inconsistent with the fiduciary duties of the Board under applicable law).

For purposes of the Merger Agreement:

 

   

Acquisition Proposal” means other than the transactions contemplated by the Merger Agreement, any offer, proposal, inquiry or indication of interest of any third party relating to, in a single transaction or a series of related transactions, (i) any direct or indirect acquisition, purchase, exchange, transfer or license of 15% or more of the consolidated assets of AVEO and its subsidiaries or to which 15% or more of the consolidated revenues or earnings of AVEO and its subsidiaries are attributable; (ii) any direct or indirect issuance, acquisition, purchase, exchange or transfer of 15% or more of any class of equity or voting securities of AVEO or any of its subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of AVEO and its subsidiaries; (iii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in such third party or the equityholders of such third party beneficially owning 15% or more of any class of equity or voting securities of AVEO or any of its subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of AVEO and its subsidiaries; or (iv) a merger, consolidation, share exchange, business combination, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving AVEO or any of its subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of AVEO and its subsidiaries or to which 15% or more of the consolidated revenues or earnings of AVEO and its subsidiaries are attributable.

 

   

Intervening Event” means any material change, event, occurrence or development with respect to AVEO and its subsidiaries first occurring after the execution of the Merger Agreement and prior to AVEO stockholder approval that was not known to, or reasonably foreseeable by, the Board as of October 18, 2022, and does not relate to (i) any Acquisition Proposal or consequence thereof; (ii) any change in the market price or trading volume of shares of AVEO common stock or the fact that AVEO meets or exceeds any internal or published budgets, projections, forecasts or predictions of financial performance for any period (but the underlying causes of such change or fact are not excluded by this clause (ii));(iii) the timing of any licenses, authorizations, permits, consents or approvals required pursuant to the Merger Agreement to be obtained prior to the closing of the Merger in connection with the transactions contemplated by the Merger Agreement; (iv) any effect resulting from any breach of the Merger Agreement by AVEO; or any action taken by any party pursuant to and compliance with

 

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the covenants and agreements set forth in the Merger Agreement and any consequences of such actions.

 

   

Superior Proposal” means a bona fide written Acquisition Proposal obtained not in breach of the Merger Agreement that (i) if any cash consideration is payable pursuant to such Acquisition Proposal, such cash consideration is fully financed or, to the extent financing is required for such Acquisition Proposal, is fully committed pursuant to customary certain funds financing commitments from financial institutions of nationally recognized reputation, (ii) is not subject to any due diligence condition, and (iii) the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, taking into account all relevant aspects of such proposal and any revisions to the Merger Agreement made or offered in writing by LG Chem prior to the time of such determination, would be more favorable to AVEO’s stockholders from a financial point of view than the Merger; provided, that for purposes of the definition of Superior Proposal, the references to “15%” in the definition of Acquisition Proposal are references to “50%.”

Employee Matters

For a period of not less than twelve (12) months after the Effective Time, LG Chem or the surviving corporation will provide the employees of AVEO or its subsidiaries as of immediately prior to the Effective Time (referred to as a “Covered Employees”) during the period they continue to be employed by LG Chem, the surviving corporation and/or its subsidiaries on or after the Effective Time with:

 

   

a base salary (or base wages, as the case may be) and short-term cash incentive compensation opportunities (including, but not limited to, bonuses and commissions), each of which is no less favorable than the base salary (or base wages, as the case may be) and incentive compensation opportunities provided to such Covered Employee immediately prior to October 18, 2022; and

 

   

health, welfare, retirement and employee benefits (including severance benefits but excluding equity and equity-based incentive compensation) that are, in the aggregate and at a minimum, substantially equivalent to those provided to such Covered Employees immediately prior to the Effective Time.

For purposes of determining eligibility, vesting, participation and benefit accrual under LG Chem’s and its affiliates’ plans and programs providing employee benefits (including, without limitation, severance) to Covered Employees after the Closing Date (referred to as the “parent plans”), each Covered Employee will be credited with his or her years of service with AVEO or its subsidiaries (or any predecessor entities) prior to the Closing Date to the same extent as such Covered Employee was entitled, before the Closing Date, to credit for such service under similar AVEO benefit plans, except to the extent providing such credit would result in any duplication of benefits, and other than for benefit accrual purposes under any defined benefit pension plan. In addition, LG Chem will use commercially reasonable efforts to cause (i) each Covered Employee to be immediately eligible to participate, without any waiting time, in any and all parent plans; (ii) all pre-existing condition exclusions and actively-at-work requirements of such parent plan to be waived for such Covered Employee and their covered dependents (except to the extent that such exclusions or requirements applied to the Covered Employee under comparable AVEO benefit plans); and (iii) any co-payments, deductibles and other eligible expenses incurred by such Covered Employee and/or his or her covered dependents during the plan year ending on the Closing Date to be credited for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Covered Employee and his or her covered dependents for the applicable plan year of each comparable parent plan (to the extent such credit would have been given under comparable AVEO benefit plans prior to the closing of the Merger).

Efforts to Consummate the Merger

Subject to the terms and conditions of the Merger Agreement, each of AVEO, LG Chem and Merger Sub are required to use their respective reasonable best efforts to take, or cause to be taken, all actions, to file, or cause to

 

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be filed, all documents and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary to consummate and make effective the transactions contemplated by the Merger Agreement as promptly as reasonably practicable, including using reasonable best efforts to: (i) obtain all necessary actions or nonactions, waivers, consents, clearances, decisions, declarations, approvals and expirations or terminations of waiting periods from governmental authorities pursuant to antitrust laws or other applicable law and make all necessary registrations and filings and take all steps as may be reasonably necessary to obtain any such consent, decision, declaration, approval, clearance or waiver, or expiration or termination of a waiting period by or from, or to avoid an action or proceeding by, any governmental authority in connection with any antitrust law; (ii) obtain all other approvals, consents, ratifications, permissions, waivers or authorizations from governmental authorities or other third parties necessary, proper or advisable in connection with the transactions contemplated by the Merger Agreement; and (iii) execute and deliver any additional instruments necessary to consummate the transactions contemplated by the Merger Agreement; provided, that, in connection with any of the foregoing clauses (i) through (iii), AVEO shall not agree to (x) make any payment of a consent fee, “profit sharing” payment or other consideration (including increased or accelerated payment) or concede anything of monetary or economic value or (y) amend, supplement or modify any contract in any manner that would be adverse to the interest of AVEO or, after the Merger, LG Chem and its affiliates, in each case, without the prior written consent of LG Chem.

AVEO, LG Chem and the Merger Sub are also required to use their reasonable best efforts to obtain all approvals, clearances and expirations or terminations of waiting periods from governmental authorities under antitrust laws or other applicable law necessary to consummate the transactions contemplated hereby. Notwithstanding anything to the contrary in the Merger Agreement, in no event shall LG Chem or Merger Sub be required to (or be required to cause their subsidiaries or affiliates to) offer, propose, negotiate, commit to, agree to or effect, by consent decree, hold separate order or otherwise, (i) the sale, lease, license, divestiture, transfer or other disposition of any assets, rights, interests, product lines or businesses of AVEO, LG Chem or any of their respective subsidiaries or affiliates, (ii) the termination, amendment or modification of existing relationships, contractual rights or obligations of AVEO, LG Chem or any of their respective subsidiaries or affiliates, (iii) the termination, amendment or modification of any venture or other arrangement, (iv) the creation of any relationship, contractual rights or obligations of the AVEO, LG Chem or any of their respective subsidiaries or affiliates, (v) any other change or restructuring of AVEO, LG Chem or any of their respective subsidiaries or affiliates, (vi) any other actions with respect to the businesses, product lines or assets of AVEO, LG Chem or any of their respective subsidiaries or affiliates or (vii) any other remedy, condition, commitment or undertaking of any kind; provided, further, that (x) at the request of LG Chem, AVEO shall agree to, and shall cause its subsidiaries and affiliates to agree to, take any actions described in this sentence, provided that such actions may be conditioned upon the consummation of the Merger, (y) AVEO shall not take, and shall cause its subsidiaries and affiliates not to take, any action described in this sentence without the prior written consent of LG Chem and (z) notwithstanding anything in the Merger Agreement to the contrary, LG Chem and Merger Sub shall, and shall cause their respective subsidiaries to, and AVEO and each of its subsidiaries shall be permitted to, take (or agree to take), any action described in this sentence (other than clause (i) of this sentence) to the extent such action (1) concerns only AVEO or any of its subsidiaries (or any of their respective businesses or assets) and (2) would not reasonably be expected to materially diminish the benefits expected to be realized by LG Chem and its affiliates from the transactions contemplated hereby. Notwithstanding anything to the contrary in the Merger Agreement, the parties shall not be required to (or to cause their subsidiaries or affiliates to) defend, contest, resist or appeal any litigation, action, suit, claim, proceeding or applicable law, including any administrative or judicial action or proceeding, challenging, seeking to restrict, prevent, delay, prohibit, condition or make or deem unlawful, or enjoining, preventing, prohibiting or making unlawful, the consummation of any of the transactions contemplated by the Merger Agreement.

AVEO and LG Chem were required to, promptly, but in no event later than ten (10) business days following October 18, 2022 (unless otherwise agreed to in writing by AVEO and LG Chem), make their respective filings under the HSR Act. Moreover, AVEO and LG Chem were required to, promptly, but in no event later than fifteen (15) business days following October 18, 2022 (unless otherwise agreed to in writing by AVEO and LG

 

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Chem), make their draft filing of a joint voluntary notice to obtain CFIUS Approval. AVEO and LG Chem filed their respective HSR Act and their draft joint voluntary notice to obtain CFIUS Approval notifications on November 1, 2022 and November 8, 2022, respectively.

CFIUS Approval” as used in the Merger Agreement means (i) the parties shall have received written notice from Committee on Foreign Investment in the United States, or any U.S. governmental authority acting in its capacity as a member thereof (“CFIUS”) that it has concluded its review, assessment, or, if applicable, investigation, and has determined that there are no unresolved national security concerns with respect to the transactions contemplated by this Agreement and that action under Section 721 of the Defense Production Act of 1950, as amended, including all implementing regulations thereof (the “DPA”) is concluded; (ii) the parties shall have received written notice from CFIUS that the transactions contemplated by this Agreement do not constitute a “covered transaction,” as defined in the DPA; (iii) CFIUS has determined, pursuant to 31 C.F.R. § 800.407(a)(2), that it is not able to conclude action under the DPA with respect to the transactions contemplated by this Agreement pursuant to a declaration filing with respect to the Merger submitted to CFIUS by the parties hereto pursuant to 31 C.F.R. Part 800 Subpart D but has not requested the submission of a notice filing with respect to the Merger submitted to CFIUS pursuant to 31 C.F.R. Part 800 Subpart E; or (iv) if CFIUS has sent a report to the President of the United States (“President”) requesting the President’s decision with respect to the transactions contemplated by this Agreement, either (A) the President has announced a decision not to take any action to suspend, prohibit or place any limitations on the transactions contemplated by this Agreement; or (B) the time permitted under the DPA for the President to take action to suspend or prohibit the transactions contemplated by this Agreement shall have lapsed.

From October 18, 2022 until the earlier of the Effective Time or the termination or the Merger Agreement in accordance with its terms, each of AVEO and LG Chem (on its and Merger Sub’s behalf) are required to use their respective reasonable best efforts to (i) cooperate in all respects and consult with each other in connection with any filing or submission in connection with any investigation or other inquiry regarding the transactions contemplated by the Merger Agreement and allow the other party a reasonable opportunity to review in advance and comment on drafts of such filings and submissions, (ii) give the other party prompt notice of the making or commencement of any request, inquiry, investigation, action or legal proceeding brought by a governmental authority or brought by a third party before any governmental authority, in each case, with respect to the transactions contemplated by the Merger Agreement, (iii) keep the other party promptly informed as to the status of any such request, inquiry, investigation, action or legal proceeding, (iv) promptly inform the other party of any substantive communication to or from any governmental authority in connection with any such request, inquiry, investigation, action or legal proceeding, (v) promptly furnish to the other party, subject to an appropriate confidentiality agreement to limit disclosure to outside counsel and consultants retained by such counsel, with copies of documents provided to or received from any governmental authority in connection with any such request, inquiry, investigation, action or legal proceeding, (vi) subject to an appropriate confidentiality agreement to limit disclosure to counsel and outside consultants retained by such counsel, consult in advance and cooperate with the other party and consider in good faith the views of the other party in connection with any substantive communication, analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal to be made or submitted in connection with any such request, inquiry, investigation, action or legal proceeding and (vii) except as may be prohibited by any governmental authority or by applicable law, and subject to certain exceptions in the Merger Agreement, in connection with any such request, inquiry, investigation, action or legal proceeding in respect of the transactions contemplated by the Merger Agreement, provide advance notice of and permit authorized representatives of the other party to be present at each meeting or conference, including any virtual or telephonic meetings, relating to such request, inquiry, investigation, action or legal proceeding and to have access to and be consulted in advance in connection with any argument, opinion or proposal to be made or submitted to any governmental authority in connection with such request, inquiry, investigation, action or legal proceeding.

 

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Indemnification of Directors and Officers; Insurance

For six (6) years after the Effective Time, LG Chem is required to cause the surviving corporation to (i) observe the obligations of AVEO and its subsidiaries under (a) certain indemnification agreements entered into between AVEO or its subsidiaries, on the one hand, and certain of its directors and executive officers, on the other hand and (b) the indemnification, expense advancement and exculpation provisions in the certificate of incorporation or second amended and restated bylaws or comparable organizational documents of AVEO or such subsidiary, in each case, in effect on October 18, 2022, and (ii) indemnify and hold harmless each present and former (as of October 18, 2022) director and officer of AVEO or any of its subsidiaries in their capacities as such against any losses incurred by such person in connection with any pending or threatened litigation, action, suit, claim, demand or proceeding based on or arising out of, in whole or in part, the fact that such person is or was a director or officer of AVEO at or prior to the Effective Time and pertaining to any and all matters pending, existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, including any such matter arising under any claim with respect to the transactions contemplated by the Merger Agreement, to the fullest extent permitted by the DGCL and any other applicable law, and the certificate of incorporation and second amended and restated bylaws (or other similar organizational documents) of AVEO and its subsidiaries in effect on October 18, 2022 and not amend, repeal or otherwise modify such rights in any manner that would adversely affect the rights of such directors and officers thereunder.

Prior to the Effective Time, AVEO is permitted to, and to the extent AVEO does not do so, LG Chem is required to, or to cause the surviving corporation to, purchase, obtain and fully pay the premium for a non-cancellable extension of the directors’ and officers’ liability coverage of AVEO’s existing directors’ and officers’ insurance policies with a claims reporting or discovery period of six (6) years from the Effective Time. In each case, such policies must have terms, conditions, retentions and limits of liability that are no less favorable than those contained in AVEO’s existing directors’ and officers’ insurance policies in effect as of October 18, 2022, with respect to matters arising on or before the Effective Time. However, in no event will AVEO be permitted prior to the Effective Time, nor shall LG Chem or the surviving corporation be required to expend for such policies an aggregate premium amount in excess of 300% of the current annual premium amount currently paid or payable by AVEO with respect to its existing directors’ and officers’ insurance policies as in effect on the date of the Merger Agreement. If the aggregate premium amount of such insurance coverage cannot be obtained at an annual premium equal to or less than such amount and to the extent that AVEO does not do so prior to the Effective Time, the surviving corporation is required to obtain a policy with the greatest coverage available for a cost not exceeding such amount. From the Effective Time until the sixth anniversary of the Effective Time, the surviving corporation is required to maintain in effect, and LG Chem will cause the surviving corporation to maintain in effect, such directors’ and officers’ tail policy.

Financing Covenants

Financing and Closing Date Payments

LG Chem’s receipt of financing is not a condition to the closing of the Merger. Prior to the closing date, AVEO shall use its reasonable best efforts to provide to LG Chem (at LG Chem’s sole expense) such historical financial information prepared by AVEO in the ordinary course of AVEO’s financial reporting practice as may be reasonably requested by LG Chem to assist with respect to any potential financing arrangements to the extent customary for financing arrangements entered into in connection with transactions of similar size and nature as those contemplated in the Merger Agreement; provided, that such requested cooperation does not require AVEO or any of its affiliates to (i) engage in any action that would adversely interfere with the business or operations of AVEO or such affiliate or (ii) pay any fee or incur any other liability in connection with such financing.

It is anticipated that the total amount of funds necessary to consummate the Merger and the related transactions, not including repayment of AVEO’s existing credit agreement, fees and expenses, will be approximately $566 million, including the estimated funds needed to (i) pay AVEO stockholders the Merger Consideration due to them under the Merger Agreement and (ii) make payments in respect of outstanding option awards of AVEO pursuant to the Merger Agreement.

 

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Existing Credit Agreement

AVEO has also agreed that it will use its best efforts to deliver all notices, cooperate with LG Chem and take all other actions to facilitate the termination at closing of all commitments in respect of AVEO’s existing credit agreement, the repayment in full on the Closing Date of all obligations in respect of the indebtedness under AVEO’s existing credit agreement, and the release on the Closing Date of any liens securing all such indebtedness and guarantees in connection therewith. Additionally, AVEO has agreed that it will use reasonable best efforts and will cooperate with LG Chem to obtain and deliver to LG Chem at least three (3) business days prior to the Closing Date an executed payoff letter with respect to AVEO’s existing credit agreement, in form and substance customary for transactions of this type, from the applicable agent on behalf of the persons to whom such indebtedness is owed, subject to LG Chem providing all funds required to effect all such repayments at the closing.

Miscellaneous Covenants

The Merger Agreement contains additional agreements among AVEO, LG Chem and Merger Sub relating to, among other matters:

 

   

the filing by AVEO of this proxy statement with the SEC and cooperation in response to any comments from the SEC with respect to this proxy statement;

 

   

notification upon the occurrence of certain matters;

 

   

the coordination of press releases and other public announcements or filings relating to the transactions contemplated by the Merger Agreement;

 

   

the notification and opportunity to comment on certain communications to AVEO directors, officers, employees or consultants pertaining to compensation or benefit matters relating to the Merger;

 

   

the resignation of directors of AVEO;

 

   

actions necessary to cause Merger Sub to perform its obligations under the Merger Agreement;

 

   

exemptions under Section 16 of the Exchange Act;

 

   

the de-listing of the shares of AVEO common stock from Nasdaq and the deregistration of AVEO common stock under the Exchange Act;

 

   

antitakeover statutes that become applicable to the transactions contemplated by the Merger Agreement; and

 

   

any litigation against AVEO or its directors or officers relating to the transactions contemplated by the Merger Agreement.

Conditions to the Merger

The obligations of AVEO, LG Chem and Merger Sub to consummate the Merger are subject to the satisfaction or (where permitted by applicable law) written waiver by AVEO and LG Chem of the following conditions:

 

   

the absence of any governmental authority of competent jurisdiction enacting, issuing, promulgating, enforcing or entering any injunction or other order (whether temporary, preliminary or permanent) that is in effect and that restrains, enjoins, prevents, makes illegal or otherwise prohibits the consummation of any of the transactions contemplated by the Merger Agreement;

 

   

receipt of AVEO Stockholder Approval; and

 

   

(i) the expiration or termination of all waiting periods (and any extension thereof) applicable to the transactions contemplated by the Merger Agreement under the HSR Act and any commitment to, or agreement (including any timing agreement) with, any governmental authority to delay the

 

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consummation of, or not to consummate before a certain date, any of the transactions contemplated by the Merger Agreement and (ii) the receipt of certain consents, approvals and authorizations of governmental authorities set forth AVEO’s Disclosure Schedule, which shall remain in full force and effect.

The obligations of LG Chem and Merger Sub to consummate the Merger are subject to the satisfaction or (where permitted by applicable law) written waiver by LG Chem of the following conditions:

 

   

the representations and warranties made by AVEO in the Merger Agreement with respect to the non-occurrence of a Material Adverse Effect being true and correct as of October 18, 2022 and as of the Closing Date with the same force and effect as if made on and as of such date (other than any such representation and warranty that by its terms addresses matters only as of another specified time, which must be true and correct in all respects as of such specified time);

 

   

except for any de minimis inaccuracies, certain of the representations and warranties made by AVEO in the Merger Agreement with respect to the capitalization of AVEO being true and correct as of October 18, 2022, and as of the Closing Date with the same force and effect as if made on and as of such date (other than any such representation and warranty that by its terms addresses matters only as of another specified time, which must be true and correct in all respects except for any de minimis inaccuracies as of such specified time);

 

   

certain representations and warranties made by AVEO in the Merger Agreement with respect to corporate existence and power, corporate authorization, certain capitalization matters, certain subsidiary matters, finder’s fees and the opinion of Moelis (in each case, disregarding all materiality qualifications, other than Material Adverse Effect qualifications, contained therein), in each case, being true and correct in all material respects as of October 18, 2022 and as of the Closing Date with the same force and effect as if made on and as of such date (other than any such representation and warranty that by its terms addresses matters only as of another specified time, which must be true and correct in all material respects as of such specified time);

 

   

each of the other representations and warranties made by AVEO in the Merger Agreement being true and correct (disregarding all materiality and Material Adverse Effect qualifications contained therein) as of October 18, 2022, and as of the Closing Date with the same force and effect as if made on and as of such date (other than any such representation and warranty that by its terms addresses matters only as of another specified time, which must be true and correct (disregarding all materiality and Material Adverse Effect qualifications contained therein) as of such specified time), except where the failure of such representations and warranties to be so true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on AVEO;

 

   

AVEO having performed and complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by AVEO at or prior to the Effective Time;

 

   

the absence, since October 18, 2022, of a Material Adverse Effect with respect to AVEO; and

 

   

the delivery by AVEO of a certificate signed by an executive officer of AVEO, dated as of the Closing Date, certifying as to the satisfaction of the conditions described in the preceding six bullets.

The obligations of AVEO to consummate the Merger are subject to the satisfaction or (where permitted by applicable law) written waiver by AVEO of the following conditions:

 

   

certain representations and warranties made by LG Chem with respect to corporate existence and power and corporate authorization (in each case, disregarding all materiality qualifications, other than Material Adverse Effect qualifications, contained therein), in each case, being true and correct in all material respects as of October 18, 2022 and as of the Closing Date with the same force and effect as if made on and as of such date (other than any such representation and warranty that by its terms

 

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addresses matters only as of another specified time, which must be true and correct in all material respects as of such specified time);

 

   

each of the other representations and warranties of LG Chem and Merger Sub made in the Merger Agreement being true and correct (disregarding all materiality and Material Adverse Effect qualifications contained therein) as of October 18, 2022 and as of the Closing Date with the same force and effect as if made on and as of such date (other than any such representation and warranty that by its terms addresses matters only as of another specified time, which must be true and correct (disregarding all materiality and Material Adverse Effect qualifications contained therein) as of such specified time), except where the failure of such representations and warranties to be so true and correct has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LG Chem;

 

   

LG Chem and Merger Sub having performed and complied in all material respects with all agreements and covenants contained in the Merger Agreement that are to be performed or complied with by them at or prior to the Effective Time; and

 

   

the delivery by LG Chem of a certificate signed by an executive officer of LG Chem, dated as of the Closing Date, certifying as to the satisfaction of the conditions described in the preceding three (3) bullet points.

Termination

The Merger Agreement may be terminated and the transactions contemplated thereby, including the Merger, may be abandoned, at any time prior to the Effective Time, whether before or after the AVEO Stockholder Approval has been obtained (except as otherwise stated below), as follows:

 

   

by mutual written agreement of AVEO and LG Chem; or

 

   

by either AVEO or LG Chem, if:

 

   

the Effective Time has not occurred on or before the End Date; provided that if, as of such date, any of the conditions to the closing with respect to (i) the expiration or termination of the waiting period applicable to the consummation of the Merger under the HSR Act and any commitment to, or agreement (including any timing agreement) with, any governmental authority to delay the consummation of, or not to consummate before a certain date, any of the transactions contemplated by the Merger Agreement or (ii) the absence of any temporary restraining order, preliminary or permanent injunction, other order, applicable law or order issued by any governmental authority that directly or indirectly prevents, prohibits or makes illegal the consummation of the Merger is not satisfied but all other conditions to the closing of the Merger set forth in the Merger Agreement have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the closing, but provided that such conditions are then be capable of being satisfied if the closing were to take place on such date), then the End Date will be automatically extended to October 18, 2023 (the “Extension Date”), and such case, the Extension Date will become the End Date for purposes of the Merger Agreement; and provided, further, that this right to terminate the Merger Agreement will not be available to any party whose (or whose affiliate’s) material breach of any provision of the Merger Agreement has been the primary cause of, or resulted in, the failure of the Merger to be consummated by such time; or

 

   

there shall be any applicable law or other legal restraint or prohibition that, in each case, is in effect, has become final and nonappealable and permanently restrains, enjoins, prevents, makes illegal, or otherwise prohibits the consummation of any of the transactions contemplated by the Merger Agreement provided that this right to terminate the Merger Agreement will not be available to any party whose (or whose affiliate’s) material breach of any provision of the Merger Agreement has been the primary cause of, or resulted in, any of the foregoing events; or

 

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the AVEO Stockholder Approval is not obtained at the Special Meeting at which a vote on the Merger Proposal is taken; or

 

   

by LG Chem, if:

 

   

at any time prior to obtaining the AVEO Stockholder Approval, an Adverse Recommendation Change has occurred; or

 

   

prior to obtaining the AVEO Stockholder Approval, AVEO has materially breached the non-solicitation covenants or the covenants concerning this proxy statement and the Special Meeting applicable to AVEO pursuant to the Merger Agreement; or

 

   

a breach or failure to be true of any representation or warranty of AVEO set forth in the Merger Agreement or a breach or failure to perform any covenant or agreement set forth in the Merger Agreement on the part of AVEO shall have occurred which breach or failure would cause the conditions to LG Chem’s and Merger Sub’s obligations to consummate the Merger relating to the accuracy of AVEO’s representations and warranties or the performance of AVEO’s agreements and covenants to not be satisfied and such breach or failure cannot be cured by AVEO prior to the End Date or, if capable of being cured, is not cured, following receipt by AVEO from LG Chem of written notice of such breach or failure, by the earlier to occur of (x) thirty (30) days after receipt of such notice from LG Chem and (y) the date that is two (2) days prior to the End Date; provided that LG Chem will not have this right to terminate the Merger Agreement if either LG Chem or Merger Sub is then in material breach of any representation, warranty, covenant or obligation of LG Chem or Merger Sub under the Merger Agreement; or

 

   

by AVEO, if:

 

   

prior to obtaining the AVEO Stockholder Approval, (A) the Board has determined that an Acquisition Proposal constitutes a Superior Proposal, (B) AVEO has complied with certain of its covenants and agreements set forth in the Merger Agreement with respect to, among other matters, non-solicitation of Acquisition Proposals and providing notice to LG Chem of such Acquisition Proposal and AVEO’s intent to terminate the Merger Agreement and, if requested by LG Chem, discussing and negotiating with LG Chem any proposed amendments or modifications to the terms of the Merger Agreement, and as more fully described under “The Merger Agreement—No Solicitation; AVEO Acquisition Proposals; Adverse Recommendation Change” beginning on page 91 of this proxy statement, (C) AVEO, substantially concurrently with and as a condition to such termination, pays the Termination Fee payable to LG Chem pursuant to the Merger Agreement as more fully described under “The Merger Agreement—Termination Fee; Certain Expenses” beginning on page 103 of this proxy statement and (D) substantially concurrently with such termination, AVEO enters into a definitive agreement in respect of a Superior Proposal in accordance with the Merger Agreement; or

 

   

a breach or failure to be true of any representation or warranty of LG Chem or Merger Sub set forth in the Merger Agreement or a breach or failure to perform any covenant or agreement set forth in the Merger Agreement on the part of LG Chem or Merger Sub shall have occurred which breach or failure would cause the conditions to AVEO’s obligations to consummate the Merger relating to the accuracy of LG Chem’s or Merger Sub’s representations and warranties or the performance of LG Chem’s or Merger Sub’s agreements and covenants to not be satisfied and such breach or failure cannot be cured by LG Chem prior to the End Date or, if capable of being cured, is not cured, following receipt by LG Chem from AVEO of written notice of such breach or failure, by the earlier to occur of (x) thirty (30) days after receipt of such notice from AVEO and (y) the date that is two (2) days prior to the End Date; provided that AVEO will not have this right to terminate the Merger Agreement if AVEO is then in material breach of any representation, warranty, covenant or obligation of AVEO under the Merger Agreement.

 

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Termination Fee; Certain Expenses

AVEO must pay to LG Chem a termination fee of $20.4 million (referred to as the “Termination Fee”) in cash in the event that the Merger Agreement is validly terminated:

 

   

by LG Chem because, prior to obtaining the AVEO Stockholder Approval, (i) an Adverse Recommendation Change has occurred or (ii) there has been a material breach of the non-solicitation covenants or the covenants concerning this proxy statement and the Special Meeting, in each case as applicable to AVEO under the Merger Agreement;

 

   

by AVEO prior to obtaining AVEO Stockholder Approval to accept a Superior Proposal and, substantially concurrently with such termination, enter into a definitive agreement with respect to such Superior Proposal;

 

   

by (i) either AVEO or LG Chem because the Merger has not been consummated by the End Date (subject, in the case of such a termination by AVEO, to certain conditions set forth in the Merger Agreement) or (ii) LG Chem because AVEO breached or failed to perform any representation, warranty, covenant or agreement set forth in the Merger Agreement and fails to timely cure such breach or failure, if curable, and in each case:

 

   

after October 18, 2022, and prior to such termination, a bona fide Acquisition Proposal has been publicly announced or otherwise communicated to the Board and such Acquisition Proposal has not been publicly withdrawn prior to the time of the termination of the Merger Agreement; and

 

   

prior to the date that is twelve (12) months following the date of such termination, AVEO enters into a definitive agreement with respect to an Acquisition Proposal or an Acquisition Proposal is consummated (in either case, whether or not the same Acquisition Proposal referred to above); provided that, for purposes of this provision, each reference to “15%” in the definition of Acquisition Proposal is a reference to “50%”; and provided further that the Termination Fee payable pursuant to this provision will be payable by AVEO only upon consummation of an Acquisition Proposal;

 

   

by either AVEO or LG Chem because the AVEO Stockholder Approval is not obtained at the Special Meeting at which a vote on the Merger Proposal is taken and:

 

   

after October 18, 2022, and prior to such termination, a bona fide Acquisition Proposal is publicly announced and such Acquisition Proposal is not publicly withdrawn at least two (2) business days prior to the Special Meeting, and

 

   

prior to the date that is twelve (12) months following the date of such termination, AVEO enters into a definitive agreement with respect to an Acquisition Proposal or an Acquisition Proposal is consummated (in either case, whether or not the same Acquisition Proposal referred to above); provided that, for purposes of this provision, each reference to “15%” in the definition of Acquisition Proposal is a reference to “50%”); and provided further that the Termination Fee payable pursuant to this provision will be payable by AVEO only upon consummation of an Acquisition Proposal.

If the Merger Agreement is terminated by AVEO because the Merger has not been consummated by the End Date or by either AVEO or LG Chem because the AVEO Stockholder Approval is not obtained at the Special Meeting at which a vote on the Merger Proposal is taken, and at the time of such termination, LG Chem had the right to terminate the Merger Agreement because an Adverse Recommendation Change had taken place prior to the AVEO Stockholder Approval, then AVEO shall pay or cause to be paid to LG Chem in immediately available finds the Termination Fee within two (2) business days after such termination.

Other than in the case of fraud or willful breach, if the Merger Agreement is terminated in circumstances in which the Termination Fee is due and payable, LG Chem’s receipt of the Termination Fee (and applicable costs,

 

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expenses and interest as set forth in the Merger Agreement and described below) will be deemed to be liquidated damages for any and all losses or damages suffered or incurred by LG Chem, Merger Sub, any of their respective affiliates and representatives or any other person in connection with the Merger Agreement (or its termination) or the transactions contemplated by the Merger Agreement, and none of LG Chem, Merger Sub, or any of their respective former, current or future officers, directors, partners, stockholders, optionholders, managers, members, affiliates or representatives (referred to, collectively, as the “LG Chem Related Parties”) or any other person will be entitled to bring or maintain any claim, action or proceeding against AVEO and any of its former, current or future officers, directors, partners, stockholders, optionholders, managers, members, affiliates or representatives (referred to, collectively, as the “AVEO Related Parties”) arising out of, relating to, or in connection with, the Merger Agreement (or its termination) or the transactions contemplated by the Merger Agreement.

The Merger Agreement further provides that, other than in the case of fraud or willful breach, LG Chem’s right to receive payment from AVEO of the Termination Fee (and applicable costs, expenses and interest as set forth in the Merger Agreement and described below) is the sole and exclusive remedy of the LG Chem Related Parties against the AVEO Related Parties in circumstances in which the Termination Fee becomes due and payable, and that upon payment of the Termination Fee (and any such applicable costs, expenses and interest), none of the AVEO Related Parties will have any further liability or obligation relating to, arising out of, or in connection with, the Merger Agreement or the transactions contemplated by the Merger Agreement.

AVEO shall not be obligated to pay the Termination Fee on more than one occasion.

Expenses Generally

Except as otherwise described above or provided in the Merger Agreement, whether or not the Merger is consummated, AVEO and LG Chem are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the transactions contemplated by the Merger Agreement.

The Merger Agreement provides that, if AVEO fails to pay LG Chem the Termination Fee when due and payable, (i) AVEO will also pay any costs and expenses incurred by LG Chem or Merger Sub in connection with a legal action to enforce the Merger Agreement that results in a judgment against AVEO for payment of the Termination Fee and (ii) AVEO will also pay to LG Chem interest on such overdue amount (for the period commencing as of the date that such overdue amount was originally required to be paid and ending on the date that such overdue amount is actually paid in full) at a rate per annum equal to the prime rate published in The Wall Street Journal on the date such payment was required to be made plus 5%, or such lesser rate per annum that is the maximum permitted under applicable law.

Specific Performance

AVEO, LG Chem and Merger Sub are each entitled (in addition to any other remedy to which they may be entitled in law or equity) to an injunction to prevent breaches or threatened breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement.

Amendments; Waiver

Any provision of the Merger Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective. After the AVEO Stockholder Approval is obtained, if any such amendment would under applicable law require further approval of AVEO’s stockholders, the effectiveness of such amendment will be subject to the approval of AVEO’s stockholders.

 

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Governing Law and Jurisdiction

The Merger Agreement is governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, the Merger Agreement or the transactions contemplated thereby (whether brought by any party or any of its affiliates or against any party or any of its affiliates) is required to be brought in the Delaware Chancery Court or, if such court does not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court.

LG Chem further irrevocably consents to process being served on it in any action or proceeding by mailing a copy thereof in the manner for delivery of notices specified in the Merger Agreement to LG Chem’s address set forth in the LG Chem Disclosure Schedules for the purpose of accepting service of any process in the United States. LG Chem agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon LG Chem in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and personal delivery to LG Chem.

 

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PROPOSAL NO. 1: APPROVAL OF THE MERGER PROPOSAL

The Merger Proposal

We are asking you to approve a proposal to adopt the Merger Agreement, referred to as the “Merger Proposal”). For a detailed discussion of the terms and conditions of the Merger Agreement, see “The Merger Agreement” beginning on page 80 of this proxy statement. A copy of the Merger Agreement is attached to this proxy statement as Annex A and incorporated herein by reference. See also “The Merger” beginning on page 34 of this proxy statement.

Vote Required

As described under “The Merger—Recommendation of the Board and Reasons for the Merger” beginning on page 47 of this proxy statement, after considering various factors described in such section, the Board has unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, AVEO and our stockholders. The Board has unanimously approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby, and the Board unanimously recommends that you vote “FOR” the Merger Proposal.

Under Delaware law, approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the issued and outstanding shares of AVEO common stock entitled to vote thereon as of the Record Date. Each share of AVEO common stock issued and outstanding as of the close of business on the Record Date is entitled to one vote at the Special Meeting. If a stockholder signs and returns a proxy and does not indicate how he, she or it wishes to vote on the Merger Proposal, such stockholder’s shares of AVEO common stock will be voted in favor of the Merger Proposal.

Abstentions and broker non-votes, if any, will have the same effect as a vote “AGAINST” the Merger Proposal.

Board Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE MERGER PROPOSAL.

 

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PROPOSAL NO. 2: ADVISORY VOTE ON THE MERGER COMPENSATION PROPOSAL

The Merger Compensation Proposal

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation that is based on or otherwise relates to the Merger that has been paid or may become payable to each of AVEO’s named executive officers, in accordance with SEC rules. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use this term to describe the Merger-related compensation payable to those named executive officers of AVEO for the year ended December 31, 2021, who are currently employed by AVEO. These named executive officers are Michael Bailey, Erick Lucera and Michael Ferraresso (the “Named Executive Officers”). Michael Needle, who was a named executive officer for the year ended December 31, 2021, terminated employment with AVEO on November 19, 2021 and will not receive any compensation that is based on or otherwise related to the Merger. The amounts set forth in the table are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement and in the footnotes to the table. As a result, the actual amounts, if any, that a Named Executive Officer receives may materially differ from the amounts set forth in the table.

The table below describes the estimated potential payments to each of AVEO’s Named Executive Officers pursuant to the terms of their outstanding AVEO Option Awards and under the Severance Benefits Plan. The amounts shown in the table do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that have vested or would vest pursuant to their terms, on or prior to the Effective Date or the value of payments or benefits that are not based on or otherwise related to the Merger. In addition, the table does not reflect any increases in salary that may be approved by the Board and/or the Compensation Committee of the Board in connection with its annual compensation review process prior to the Closing Date to the extent permitted by the terms of the Merger Agreement or that may be agreed to by AVEO and LG Chem pursuant to the terms of the Merger Agreement.

For purposes of calculating the potential payments set forth in the table below, AVEO has assumed that (i) the Closing will occur on January 31, 2023 (which is the date assumed solely for the purposes of this disclosure); (ii) each Named Executive Officer’s employment will terminate at the Effective Time (which is assumed solely for purposes of this disclosure); (iii) any termination of employment of a Named Executive Officer would be a change in control termination pursuant to, and as that term is defined in, the Severance Benefits Plan; and (iv) the AVEO stock price is $15.00 per share, which is the per share Merger Consideration. The amounts shown in the table are estimates only and are based on assumptions and information available to date. The actual amounts that may be paid in the event of an individual’s termination of employment can only be determined at the actual time of such termination.

Quantification of Potential Payments and Benefits to AVEO’s Named Executive Officers

Golden Parachute Compensation

 

Name

   Cash($)(1)      Equity($)(2)      Perquisites/
Benefits($)(3)
     Total($)  

Michael Bailey

     2,013,333        8,069,663        57,865        10,140,861  

Erick Lucera

     845,739        2,320,943        38,577        3,205,509  

Michael Ferraresso

     853,329        2,342,343        38,577        3,234,249  

 

 

1)

The amounts listed in this column represent cash severance amounts that would become payable pursuant to the Severance Benefits Plan if, within the first eighteen (18) months following the Closing Date, AVEO terminates the Named Executive Officer’s employment without cause or he resigns his employment for good reason, as such terms are defined in the Severance Benefits Plan, and therefore such amounts are “double trigger” benefits. For Mr. Bailey, such cash severance amounts would be paid over a period of

 

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  twenty four (24) months and would include (a) 200% of his annual base salary, (b) 200% of his target annual bonus and (c) an amount equal to a pro-rated portion of his target annual bonus for the year in which his termination occurs based on the number of days during such year that he was employed by the Company. For each of Messrs. Lucera and Ferraresso, such cash severance amounts would be paid over a period of eighteen (18) months and would include (a) 150% of his annual base salary, (b) 150% of his target annual bonus and (c) an amount equal to a pro-rated portion of his target annual bonus for the year in which his termination occurs based on the number of days during such year that he was employed by the Company. Payment of these amounts is subject to such Named Executive Officer’s execution and non-revocation of a general release of claims in AVEO’s favor.

The following table quantifies each separate form of compensation included in the aggregate total reported in this column.

 

Name

   Base
Salary($)
     Target
Annual
Bonus ($)
     Pro-Rata
Annual
Bonus($)
 

Michael Bailey

     1,280,000        704,000        29,333  

Erick Lucera

     594,660        237,864        13,215  

Michael Ferraresso

     599,997        239,999        13,333  

 

2) 

The amounts listed in this column represent, in accordance with the terms of the Merger Agreement, the payments in cancellation of the unvested AVEO Option Awards held, as of November 11, 2022, by each of the Named Executive Officers, to the extent they are in-the-money, calculated as the difference between $15.00 per share of AVEO common stock and the applicable exercise price per share, multiplied by the number of shares of AVEO common stock subject to the unvested AVEO Option Award as of January 31, 2023. Amounts payable to each of the Named Executive Officers will be paid within ten (10) business days following the day the Closing Date. These payments represent “single trigger” benefits.

The number of AVEO Option Awards held by each Named Executive Officer as of November 11, 2022 that will be unvested as of January 31, 2023 and treated as described in this note 2 and the cash payments payable with respect to such options are as follows:

 

Name

   Unvested
Options
at
Closing
     Exercise
Price
per
Share
     Value of
Unvested
Options at
Closing
 

Michael Bailey

     2,500        6.20        22,000  
     32,781        5.60        308,141  
     143,282        9.12        842,498  
     608,740        3.67        6,897,024  

Erick Lucera

     12,504        6.70        103,783  
     52,084        9.12        306,254  
     168,659        3.67        1,910,903  

Michael Ferraresso

     731        6.20        6,433  
     11,578        5.60        108,269  
     52,084        9.12        306,254  
     169,584        3.67        1,921,387  

 

3) 

The amounts in this column represent, for each of Messrs. Bailey, Lucera and Ferraresso, the total estimated COBRA premiums required to continue the Named Executive Officer’s group health care coverage for him and his eligible dependents for a period of eighteen (18) months, in the case of Mr. Bailey, and twelve (12) months, in the case of each of Mr. Lucera and Mr. Ferraresso, based on the employer-portion of the estimated COBRA costs for each executive under the Company’s current group health and dental plans. The actual COBRA premiums for Messrs. Bailey, Lucera, and Ferraresso may be different from the estimates above depending on the cost of AVEO’s group health and dental plans and the benefit elections in effect for

 

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  each Named Executive Officer at the time of his termination. These amounts are “double trigger” in nature and are payable, subject to such Named Executive Officer’s execution and non-revocation of a general release of claims in AVEO’s favor, in accordance with the terms of the Severance Benefits Plan, if AVEO terminates the Named Executive Officer’s employment without cause or if he resigns his employment for good reason, as such terms are defined in the Severance Benefits Plan, within eighteen (18) months following the Closing Date.

Vote Required

The Board unanimously recommends that the stockholders of AVEO approve the following resolution:

BE IT RESOLVED THAT:

the compensation that may be paid or become payable to AVEO’s named executive officers in connection with the Merger, as disclosed pursuant to Item 402(t) of Regulation S-K under the section entitled “Proposal No. 2: Advisory Vote on the Merger Compensation Proposal—The Merger Compensation Proposal—Quantification of Potential Payments and Benefits to AVEO’s Named Executive Officers” beginning on page          of the proxy statement dated                 , including the table, associated footnotes and narrative discussion, is hereby approved, ratified and confirmed on a non-binding, advisory basis.”

Approval of the Merger Compensation Proposal requires the affirmative vote of the holders of AVEO common stock having a majority in voting power of the votes cast by the holders of all shares of AVEO common stock present in person or by proxy at the Special Meeting and voting affirmatively or negatively on such matter is required to approve the Adjournment Proposal. Each share of AVEO common stock issued and outstanding as of the close of business on the Record Date is entitled to one vote at the Special Meeting. If a stockholder signs and returns a proxy and does not indicate how he, she or it wishes to vote on the Merger Compensation Proposal, such stockholder’s shares of AVEO common stock will be voted in favor of the Merger Compensation Proposal. If an AVEO stockholder abstains from voting or fails to vote, it will have the no effect on the Merger Compensation Proposal. Broker non-votes, if any, will have no effect on the Merger Compensation Proposal.

The vote on the Merger Compensation Proposal is a vote separate and apart from the vote on the Merger Proposal. Accordingly, you may vote to approve the Merger Proposal and vote against or abstain with respect to the Merger Compensation Proposal and vice versa. Because the vote on the Merger Compensation Proposal is advisory only, it will not be binding on either AVEO or LG Chem. Accordingly, if the Merger Proposal is approved and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto, regardless of the outcome of the non-binding, advisory vote of AVEO’s stockholders on the Merger Compensation Proposal.

Board Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE MERGER COMPENSATION PROPOSAL.

 

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PROPOSAL NO. 3: ADJOURNMENT OF THE SPECIAL MEETING

The Adjournment Proposal

We are asking you to approve a proposal to approve the adjournment of the Special Meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the Merger Proposal at the time of the Special Meeting, referred to as the “Adjournment Proposal.” If our stockholders approve the Adjournment Proposal, we could adjourn the Special Meeting to solicit additional proxies, including the solicitation of proxies from stockholders that have previously returned properly executed proxies voting against the Merger Proposal. Among other things, approval of the Adjournment Proposal could mean that, even if we had received proxies representing a sufficient number of votes against the Merger Proposal such that the Merger Proposal would be defeated, we could adjourn the Special Meeting without a vote on the Merger Proposal and seek to convince the holders of those shares to change their votes to vote in favor of the Merger Proposal. In addition, under our second amended and restated bylaws, the chairperson of the Special Meeting without a vote of the stockholders.

Notwithstanding the foregoing, AVEO’s right to adjourn or postpone the Special Meeting, and the number of times that AVEO may adjourn or postpone the Special Meeting, and the duration of any such adjournment or postponement, is subject to the terms of the Merger Agreement as described further under “The Merger Agreement—Other Covenants and Agreements—Special Meeting and Related Actions” beginning on page 91 of this proxy statement.

If the Special Meeting is adjourned or postponed to solicit additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use at the Special Meeting as adjourned or postponed. If a stockholder signs and returns a proxy and does not indicate how he, she or it wishes to vote on the Adjournment Proposal, such stockholder’s shares of AVEO common stock will be voted in favor of the Adjournment Proposal. AVEO does not intend to call a vote on the Adjournment Proposal if the Merger Proposal is approved at the Special Meeting.

The Board believes that it is in the best interests of AVEO and our stockholders to be able to adjourn the Special Meeting if necessary for the purpose of soliciting additional proxies in respect of the Merger Proposal if there are insufficient votes to approve the Merger Proposal at the time of the Special Meeting.

Vote Required

Approval of the Adjournment Proposal requires the affirmative vote of the holders of AVEO common stock having a majority in voting power of the votes cast by the holders of all shares of AVEO common stock present in person or by proxy at the Special Meeting and voting affirmatively or negatively on such matter is required to approve the Adjournment Proposal. Each share of AVEO common stock issued and outstanding as of the close of business on the Record Date is entitled to one vote at the Special Meeting. If a stockholder signs and returns a proxy and does not indicate how he, she or it wishes to vote on the Adjournment Proposal, such stockholder’s shares of AVEO common stock will be voted in favor of the Adjournment Proposal. If an AVEO stockholder abstains from voting or fails to vote, it will have no effect on the Adjournment Proposal. Broker non-votes, if any, will have no effect on the Adjournment Proposal.

The vote on the Adjournment Proposal is a vote separate and apart from the vote on the Merger Proposal. Accordingly, you may vote to approve the Merger Proposal and vote against or abstain with respect to the Adjournment Proposal and vice versa.

Board Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT PROPOSAL.

 

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MARKET PRICES AND DIVIDEND DATA

AVEO common stock has been listed on Nasdaq under the symbol “AVEO.”

As of                 , 2022, there were                  shares of AVEO common stock outstanding, held by approximately                  stockholders of record.

We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay, nor under the Merger Agreement may we pay without the prior written consent of LG Chem, any cash dividends on our capital stock in the foreseeable future.

On October 17, 2022, the last trading day before we publicly announced the execution of the Merger Agreement, the high and low sale prices for AVEO common stock as reported on Nasdaq were $10.59 and $10.18 per share, respectively. The closing price of AVEO common stock on Nasdaq on October 17, 2022 was $10.48 per share.

On                 , 2022, the latest practicable trading day before the printing of this proxy statement, the closing price of AVEO common stock on Nasdaq was $                 per share. You are encouraged to obtain current market quotations for AVEO common stock.

Upon the consummation of the Merger, there will be no further market for AVEO common stock and, as promptly as practicable thereafter, AVEO common stock will cease trading on and be delisted from Nasdaq and deregistered under the Exchange Act. As a result, following the Merger and such deregistration, we will no longer file periodic reports with the SEC.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information relating to the beneficial ownership of AVEO common stock as of November 11, 2022, by:

 

   

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of common stock;

 

   

each of our directors;

 

   

each of our named executive officers; and

 

   

all directors and executive officers as a group.

The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within sixty (60) days of November 11, 2022 through the exercise of any stock options. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by that person.

The percentage of shares beneficially owned is computed on the basis of 34,763,127 shares of AVEO common stock outstanding as of November 11, 2022. Shares of AVEO common stock that a person has the right to acquire within sixty (60) days of November 11, 2022 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address for each beneficial owner listed is c/o AVEO Pharmaceuticals, Inc., 30 Winter Street, Boston, Massachusetts 02108.

 

Name and Address of Beneficial Owner

   Number of
Common
Shares
Beneficially
Owned
    Common
Stock
Underlying
Options
Exercisable
Within
60 Days
     Total
Equity
Securities
Beneficially
Owned
     Percentage
of Shares
Beneficially
 

Holders of more than 5% of our voting securities

          

Entities affiliated with AIGH Capital Management, LLC(1)

     1,931,351       —          1,931,351        5.3

Directors and Named Executive Officers

          

Kenneth Bate

     375       58,827        59,202        *  

Anthony Evnin

     41,851 (2)      58,827        100,678        *  

Gregory Mayes

     —         39,625        39,625        *  

Scarlett Spring

     —         39,625        39,625        *  

Corinne Epperly

     —         29,774        29,774        *  

Kevin Cullen

     —         27,692        27,692        *  

Michael Bailey

     53,410       852,947        906,357        2.5

Michael Ferraresso

     13,334 (3)      182,812        196,146        *  

Erick Lucera

     —         130,995        130,995        *  

Jebediah Ledell

     —         51,812        51,812        *  

All current executive officers and directors as a group (10 persons)

     108,970       1,472,936        1,581,906        4.4

 

*

Represents beneficial ownership of less than 1% of our outstanding common stock.

 

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(1) 

This information is derived from information regarding AVEO common stock in a Schedule 13G/A filed with the SEC by Mr. Orin Hirschman (“Mr. Hirschman”) on October 20, 2022. The shares of common stock are held by (i) AIGH Capital Management, LLC, a Maryland limited liability company (“AIGH LP”), as an Advisor or Sub-Advisor with respect to shares of common stock held by AIGH Investment Partners, L.P. and WVP Emerging Manger Onshore Fund, LLC; (ii) AIGH Investment Partners, L.L.C., a Delaware limited liability company (“AIGH LLC”), with respect to shares of common stock directly held by it; and (iii) Mr. Hirschman, who is the Managing Member of AIGH LP and president of AIGH LLC, with respect to shares of common stock indirectly held by AIGH LP, directly by AIGH LLC and Mr. Hirschman and his family directly. The address for the Entities affiliated with AIGH LLC is 6006 Berkeley Avenue, Baltimore, MD 21209.

(2) 

Consists of (a) 10 shares of common stock held by Venrock Entrepreneurs Fund Management III, LLC, or VEFM III and (b) 41,841 shares of common stock held directly by Dr. Anthony Evnin. Dr. Evnin is a partner of VR Management, LLC, an affiliate of VEFM III. Dr. Evnin expressly disclaims beneficial ownership over all shares held by or on behalf of VEFM III, except to the extent of his indirect pecuniary interest therein. The address of VEFM III is c/o Venrock, 3340 Hillview Avenue, Palo Alto, CA 94304.

(3) 

Consists of (a) 12,417 shares of common stock held by Mr. Ferraresso, and (b) 917 shares of common stock held by Mr. Ferraresso’s wife.

 

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FUTURE STOCKHOLDER PROPOSALS

If the Merger is consummated, we will have no public stockholders and there will be no public participation in any future meetings of our stockholders. However, if the Merger is not consummated, our stockholders will continue to be entitled to attend and participate in meetings of our stockholders.

We intend to hold an annual meeting of stockholders in 2023 only if the Merger is not consummated.

Proposals of stockholders intended to be presented at our annual meeting of stockholders to be held in 2023 must be received by us no later than December 27, 2022, which is one hundred twenty (120) days prior to the first anniversary of the mailing date of AVEO’s proxy statement for its annual meeting of stockholders held on June 7, 2022, in order to be included in our proxy statement and form of proxy relating to that meeting, unless the date of the 2023 annual meeting of stockholders is changed by more than thirty (30) days from the anniversary of our 2022 annual meeting, in which case the deadline for such proposals will be a reasonable time before we begin to print and send our proxy materials. These proposals must comply with the requirements as to form and substance established by the SEC for such proposals in order to be included in the proxy statement.

In addition, our second amended and restated bylaws establish an advance notice procedure with regard to certain matters, including stockholder proposals not included in our annual meeting proxy statement, to be brought before an annual meeting of stockholders. In general, notice must be received at our principal executive offices not less than ninety (90) calendar days before nor more than one hundred twenty (120) calendar days before the one (1) year anniversary of the previous year’s annual meeting of stockholders. Therefore, to be presented at our 2023 annual meeting of stockholders, such a proposal must be received by us no earlier than February 7, 2023 and no later than March 9, 2023. However, if the date of the 2023 annual meeting is more than twenty (20) days earlier or more than sixty (60) days later than such anniversary date, notice must be received not later than the close of business on the later of ninety (90) calendar days in advance of such annual meeting or, if later, ten (10) calendar days following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. If the stockholder fails to give notice by these dates, then the persons named as proxies in the proxies solicited by the board of directors for the 2023 annual meeting may exercise discretionary voting power regarding any such proposal. Stockholders are advised to review our second amended and restated bylaws which also specify requirements as to the form and content of a stockholder’s notice.

In addition to satisfying the foregoing requirements under our second amended and restated bylaws, to comply with the SEC’s universal proxy rules, stockholders who wish to solicit proxies in support of director nominees to be voted upon at the 2023 annual meeting other than our proposed nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 8, 2023.

Except as otherwise set forth above, proposals should be addressed to:

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attention: Corporate Secretary

Call: (857) 400-0101

 

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WHERE YOU CAN FIND MORE INFORMATION

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated by reference into this proxy statement. Statements contained in this proxy statement, or in any document incorporated by reference in this proxy statement, regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC.

The following AVEO filings with the SEC are incorporated by reference:

 

   

AVEO’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 14, 2022;

 

   

AVEO’s Definitive Proxy Statement on Schedule 14A with respect to the 2022 annual meeting of stockholders, which was filed with the SEC on April 26, 2022 (solely to the extent specifically incorporated by reference into AVEO’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021);

 

   

AVEO’s Quarterly Reports on Form 10-Q for fiscal quarters ended March 31, 2022, June 30, 2022 and September 30, 2022, filed with the SEC on May 5, 2022, August 4, 2022 and November 8, 2022, respectively; and

 

   

AVEO’s Current Reports on Forms 8-K filed with the SEC on April 8, 2022, June 8, 2022 and October 18, 2022 (other than the portions of such documents not deemed to be filed).

We also incorporate by reference into this proxy statement any documents filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this proxy statement and the earlier of the date of the Special Meeting or the termination of the Merger Agreement. The information provided on our website is not part of this proxy statement and therefore is not incorporated by reference herein.

Information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated by reference into this proxy statement.

Stockholders may obtain free copies of the documents filed with the SEC by AVEO through the SEC’s website, www.sec.gov, or through the Investors section of our website, www.aveooncology.com, and the “SEC Filings” section therein. The information contained on, or accessible through, AVEO’s website is not incorporated by reference into this proxy statement, and you should not consider any information contained in, or that can be accessed through, AVEO’s website as part of this proxy statement or in deciding whether to support the approval of the proposed Merger. AVEO has included its website in this proxy statement solely as an inactive textual reference.

You may obtain any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attention: Corporate Secretary

Call: (857) 400-0101

 

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If you would like to request documents from us, please do so by                 , 2022, to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail or another equally prompt method, within one (1) business day after we receive your request.

If you have any questions about this proxy statement, the Special Meeting or the Merger or need assistance with voting procedures, you should contact our proxy solicitor or us at:

 

 

LOGO

Morrow Sodali LLC

333 Ludlow Street, 5th Floor, South Tower,

Stamford, CT 06902,

AVEO.info@investor.morrowsodali.com

Call Collect: (203) 658-9400

or

Toll-Free (800) 662-5200

or

 

 

LOGO

AVEO Pharmaceuticals, Inc.

30 Winter Street

Boston, Massachusetts 02108

Attn: Corporate Secretary

Call: (857) 400-0101

 

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MISCELLANEOUS

AVEO has supplied all information relating to AVEO, and LG Chem has supplied, and AVEO has not independently verified, all of the information relating to LG Chem and Merger Sub contained in “Summary—The Companies” beginning on page 24 of this proxy statement and “The Companies” beginning on page 24 of this proxy statement.

If you hold any certificates representing shares of AVEO common stock, you should not send in such certificates until you receive transmittal materials after the Merger is consummated.

You should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents incorporated by reference into this proxy statement to vote on the Merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated                 , 2022. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement) and the mailing of this proxy statement to stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

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Annex A

AGREEMENT AND PLAN OF MERGER

dated as of

October 18, 2022

among

AVEO PHARMACEUTICALS, INC.,

LG CHEM, LTD.

and

ACACIA ACQUISITION SUB, INC.

 


Table of Contents

TABLE OF CONTENTS

 

         Page  

ARTICLE 1 DEFINITIONS

     A-2  

Section 1.01

  Definitions      A-2  

Section 1.02

  Other Definitional and Interpretative Provisions      A-11  

ARTICLE 2 THE MERGER

     A-13  

Section 2.01

  The Merger      A-13  

Section 2.02

  Conversion of Shares      A-13  

Section 2.03

  Surrender and Payment      A-13  

Section 2.04

  Dissenting Shares      A-15  

Section 2.05

  Treatment of Company Option Awards; Treatment of Company ESPP      A-15  

Section 2.06

  Adjustments      A-16  

Section 2.07

  Withholding Rights      A-16  

Section 2.08

  Lost Certificates      A-16  

ARTICLE 3 THE SURVIVING CORPORATION

     A-17  

Section 3.01

  Certificate of Incorporation      A-17  

Section 3.02

  Bylaws      A-17  

Section 3.03

  Directors and Officers      A-17  

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     A-18  

Section 4.01

  Corporate Existence and Power      A-18  

Section 4.02

  Corporate Authorization      A-18  

Section 4.03

  Governmental Authorization      A-19