Convertible Notes Interest Payment. On April 4, 2023, the Company elected to defer an interest payment on the Company’s Convertible Notes. Failure to make this interest payment within the 30-day grace period constituted an event of default under the Convertible Notes Indenture. Upon an event of default, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. Acceleration of the Convertible Notes would constitute an event of default under the Secured Notes Indenture and the trustee or the holders of not less than 30.0% in aggregate principal amount of the outstanding Secured Notes may declare the principal of the Secured Notes and accrued but unpaid interest thereon to be due and payable immediately and then may exercise rights and remedies under the agreements governing the Secured Notes. Failure to pay the interest on the Convertible Notes by the end of the grace period or acceleration of the Convertible Notes constitutes an event of default under the Second Lien Credit Agreement and the administrative agent, itself or at the request of requisite lenders, may declare the Second Lien Credit Facility and interest thereon due and payable and exercise all rights and remedies under the Second Lien Credit Agreement and related agreements. Failure to pay the interest on the Convertible Notes by the end of the grace period or acceleration of the Convertible Notes also constitutes an event of default under the Amended ABL Credit Agreement and the administrative agent, itself or at the request of requisite lenders, may declare the revolving loans and interest thereon due and payable, terminate commitments and exercise all rights and remedies under the Amended ABL Credit Agreement and related agreements.

Secured Notes Interest Payment. On April 17, 2023, the Company elected to defer an interest payment in respect of its Secured Notes and enter a 30-day grace period. If the Company does not make this interest payment within the 30-day grace period, it will constitute an event of default under Secured Notes Indenture. Upon an event of default, the trustee or the holders of not less than 30% in aggregate principal amount of the outstanding Secured Notes may declare 100% of the principal of, and accrued and unpaid interest on, the Secured Notes to be due and payable immediately. If the Company fails to pay interest on the Secured Notes by the end of the grace period or if the Secured Notes are accelerated, it will also constitute an event of default under the Convertible Notes Indenture, and the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. If the Company fails to pay the interest on the Secured Notes by the end of the grace period or if the Secured Notes are accelerated, it will also constitute an event of default under the Second Lien Credit Facility, and the administrative agent, itself or at the request of requisite lenders, may declare the Second Lien Credit Facility and interest thereon due and payable and exercise all rights and remedies under the Second Lien Credit Facility and related agreements. If the Company fails to pay the interest on the Secured Notes by the end of the grace period or if the trustee or holders of the Secured Notes are entitled to accelerate the Secured Notes, it will also constitute an event of default under the Company’s Amended ABL Credit Facility, and the administrative agent, itself or at the request of requisite lenders, may declare the revolving loans and interest thereon due and payable, terminate commitments and exercise all rights and remedies under the Amended ABL Credit Facility and related agreements.

Second Lien Credit Facility Interest Payment. The Company also elected to defer the interest payment due on April 24, 2023 in respect of its Second Lien Credit Agreement. The Company did not make the interest payment within the ten-business day grace period (such grace period having been extended pursuant to the Restructuring Support Agreement), which constituted an event of default under the Second Lien Credit Facility. Upon an event of default, the administrative agent, itself or at the request of requisite lenders, may declare the Second Lien Credit Facility and interest thereon due and payable and exercise all rights and remedies under the Second Lien Credit Facility and related agreements. Failure to pay the interest on the Second Lien Credit Facility by the end of the grace period also constitutes an event of default under the Secured Notes Indenture, and consequently, the trustee or the holders of not less than 30% in aggregate principal amount of the outstanding Secured Notes could declare 100% of the principal of, and accrued and unpaid interest on, the Notes to be due and payable immediately. Failure to pay the interest on the Second Lien Credit Facility by the end of the grace period also constitutes an event of default under the Convertible Notes Indenture, and consequently, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Convertible Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Convertible Notes to be due and payable immediately. The Company’s failure to pay the interest on the Second Lien Credit Facility by the end of the grace period also constituted an event of default under the Amended ABL Credit Facility, and the administrative agent, itself or at the request of requisite lenders, may declare the revolving loans and interest thereon due and payable, terminate commitments and exercise all rights and remedies under the asset-based revolving credit agreement and related agreements.

For more information related to the effect of the automatic stay on actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Company Parties’ property, see the “Effect of the Automatic Stay” section below.

On April 19, 2023, the Company received a written notice from the NYSE notifying the Company that the NYSE had commenced proceedings to delist the Company’s common stock. The NYSE reached this determination pursuant to Section 802.01(B) of the NYSE’s Listed Company Manual because the Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15 million over a consecutive 30 trading-day period. The NYSE suspended trading in the Company’s common stock immediately after market close on April 19, 2023, and on April 20, 2023, the Company’s common stock began trading in the over-the-counter markets under the symbol “LCIN.” After filing the Chapter 11 Cases, on May 3, 2023, our common stock began trading in the over-the-counter markets under the symbol “LCINQ.” On May 4, 2023, the NYSE filed a Form 25 with the SEC to delist our common stock from trading on the NYSE and to remove it from registration under Section 12(b) of the Exchange Act. The Delisting became effective 10 days after the filing of the Form 25. In accordance with Rule 12d2-2 of the Exchange Act, the de-registration of our common stock under Section 12(b) of the Exchange Act will become effective 90 days, or such shorter period as the SEC may determine, after the date of the Form 25 filing.

Pursuant to the Convertible Notes Indenture, the Delisting of the Company’s common stock constituted a Fundamental Change (as defined therein). Upon the occurrence of a Fundamental Change, the Company must provide all holders of Convertible Notes and the trustee a Fundamental Change Company Notice of the occurrence of the Fundamental Change and of the holder’s option to require the Company to repurchase for cash all of such holder’s notes at 100% of the principal amount, plus accrued and unpaid interest. Failure by the Company to issue a Fundamental Change Company Notice within 20 days following the Fundamental Change constitutes an event of default and, if the trustee or holders of at least 25% in aggregate principal amount of the Convertible Notes declared 100% of the principal of, and accrued and unpaid interest on, all the Notes to be due and payable immediately, the Convertible Notes would become immediately due and payable.

If holders were to exercise their option to accelerate the maturity of either of the Notes, it would also constitute an event of default under the other series of Notes, as well as the Second Lien Credit Facility and the Amended ABL Credit Agreement. For additional information related to the effect of the automatic stay on actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Company Parties’ property, see the “Effect of the Automatic Stay” section below.

On April 30, 2023, the Company Parties and the Consenting Stakeholders entered into the Restructuring Support Agreement to facilitate the Restructuring of the existing debt of, existing equity interests in and certain other obligations of the Company Parties. In connection therewith, on the Petition Date, the Company Parties commenced the Chapter 11 Cases in the Bankruptcy Court.

In accordance with the Restructuring Support Agreement, the Consenting Stakeholders agreed, among other things, to:

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use commercially reasonable efforts to cooperate with and assist the Company Parties in obtaining additional support for the Restructuring Transactions from the Company Parties’ other stakeholders;

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subject to the consent rights provided in the Restructuring Support Agreement, negotiate in good faith and use commercially reasonable efforts to execute, deliver, and implement any other necessary agreements that are consistent with the Restructuring Support Agreement to which it is to be a party in a timely manner to effectuate and consummate the Restructuring Transactions as contemplated by the Restructuring Support Agreement; and

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with respect to the Consenting Second Lien Term Lenders (as defined in the Restructuring Support Agreement) and the interest payment due on April 24, 2023 pursuant to the Second Lien Credit Agreement, extend the five-business day grace period provided in Section 8.1(c) of the Second Lien Credit Agreement to ten-business days.

In accordance with the Restructuring Supporting Agreement, the Company Parties agreed, among other things, to:

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support and take all steps reasonably necessary and desirable to consummate the Restructuring Transactions in accordance with the Restructuring Support Agreement;

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to the extent any legal or structural impediment arises that would prevent, hinder, or delay the consummation of the Restructuring Transactions contemplated by the Restructuring Support Agreement, take all steps reasonably necessary and desirable to address any such impediment;

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use commercially reasonable efforts to obtain any and all required regulatory and/or third-party approvals for the Restructuring Transactions;

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negotiate in good faith and use commercially reasonable efforts to execute and deliver any required agreements to effectuate and consummate the Restructuring Transactions as contemplated by the Restructuring Support Agreement;

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continue ordinary course practices to maintain good standing under the jurisdiction in which each Company Party and each of its subsidiaries is incorporated or organized and continue to operate the business in the ordinary course of business customary in the normal course of ordinary operations consistent with past practice taking into account the Chapter 11 Cases and Restructuring Transactions; and

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negotiate in good faith and use commercially reasonable efforts to execute and deliver any appropriate additional or alternative provisions or agreements to address any legal, financial, strategic or structural impediment that may arise that would prevent, hinder, impede, delay, or be reasonably necessary to effectuate the consummation of the Restructuring Transactions.

The Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet specified milestones related to consummation of the Prepackaged Plan. In addition, the Restructuring Support Agreement shall automatically terminate on the Effective Date of the Prepackaged Plan once all conditions precedent to the Prepackaged Plan have been satisfied.

Chapter 11 Cases, Prepackaged Plan and Disclosure Statement

As an initial step towards implementation of the Prepackaged Plan, on the Petition Date, the Company Parties filed the Chapter 11 Cases in the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re Lannett Company, Inc., et al., Case No. 23-10559 (JKS).

To ensure the Company Parties’ ability to continue operating in the ordinary course of business and minimize the effect of the Restructuring on the Company Parties’ customers and employees, the Company Parties filed motions with the Bankruptcy Court seeking a variety of “first-day” relief, including authority to pay employee wages and benefits and pay vendors and suppliers for all goods and services, each of which was approved on an interim basis by the Bankruptcy Court.

On May 2, 2023, the Company Parties filed the Prepackaged Plan and related Disclosure Statement. On May 3, 2023, the Company Parties also filed a proposed order approving various plan solicitation materials, including the solicitation and voting procedures, and scheduling a combined hearing for approval of the Disclosure Statement and confirmation of the Prepackaged Plan for June 8, 2023. The Court entered the scheduling order on May 4, 2023.

The Prepackaged Plan, as proposed, provides that:

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trade claims will be paid in the ordinary course of business during and after the Chapter 11 Cases;

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on the effective date of the Restructuring Transactions, Reorganized LCI will issue a single class of common equity interests to the Consenting Stakeholders pursuant to the Prepackaged Plan;

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on the effective date of the Restructuring Transactions, the Company Parties will enter into a new revolving credit facility on terms to be agreed upon;

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on the effective date of the Restructuring Transactions, Reorganized LCI will enter into a “takeback” exit financing facility in the principal amount of $60 million and such other terms as set forth in the Restructuring Support Agreement (the “Takeback Exit Facility”);

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on the effective date of the Restructuring Transactions, Reorganized LCI will distribute new warrants issued pursuant to a new warrant agreement to holders of Second Lien Term Loan Claims (as defined in the Restructuring Support Agreement);

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following the effective date of the Restructuring Transactions, Reorganized LCI will establish a customary management equity incentive plan;

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on the effective date of the Restructuring Transactions, there will be no recovery for holders of the Company’s Convertible Notes or existing equity interests; and

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the effective date of the Restructuring Transactions will be reached within 45 days of filing the Chapter 11 Cases.

The Prepackaged Plan provides that the executory contracts and unexpired leases that are not assumed or rejected as of the Effective Date (either pursuant to the Prepackaged Plan or a separate motion) will be deemed assumed pursuant to Section 365 of the Bankruptcy Code.

Effect of the Automatic Stay

Pursuant to Section 362 of the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed most actions against or on behalf of the Company Parties, including actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Company Parties’ property. Subject to certain exceptions under the Bankruptcy Code, the filing of the Company Parties’ Chapter 11 Cases also automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Company Parties or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Company Parties’ bankruptcy estates, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

Payoff Letter

To facilitate the Restructuring, on May 1, 2023, Amended ABL Credit Agreement was terminated (other than with respect to provisions of the Amended ABL Credit Agreement regarding Letters of Credit that remain outstanding and customary obligations that expressly survived by their terms) upon receipt by the administrative agent of a $1.95 million payment from LCI, comprising (i) a payoff amount representing principal, interest and expenses and fees of the administrative agent and the lenders and (ii) cash to collateralize the outstanding Letters of Credit to be held by the administrative agent for the benefit of the lenders with Revolving Commitments (as defined in the Amended ABL Credit Agreement). The payment made by LCI in connection with the termination of the Amended ABL Credit Agreement was pursuant to a payoff letter with the administrative agent.

CEO STI Letter Agreement

On April 30, 2023, the Company and Timothy C. Crew, the Company’s chief executive officer, entered into a letter agreement (the “CEO STI Letter Agreement”), modifying Mr. Crew’s individual payment terms under the Company’s 2023 Short-Term Incentive Plan (the “STIP”). Under the CEO STI Letter Agreement, the Company and Mr. Crew agreed to amend the STIP with respect to the provisions governing the remaining incentive amount, if any, earned by, and payable to, Mr. Crew under the terms of the STIP (determined after giving effect to the terms of the STIP in effect as of the date of the CEO STI Letter Agreement regarding continued service requirements and approval of the board of directors or compensation committee of the board of directors) for excess EBITDA and cash performance objectives in the Company’s full fiscal year ending June 30, 2023 (the “Payment”). Pursuant to the CEO STI Letter Agreement:

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50% of any Payment will be settled by the Company’s issuance to Mr. Crew on the Payment Date (as defined below) of a number of fully vested shares of New Common Stock (as defined in the Restructuring Support Agreement) equal to 0.5% of the total number of shares of New Common Stock outstanding as of the Payment Date (on a fully diluted and fully distributed basis and treating the Management Incentive Plan (as defined in the Restructuring Support Agreement) as fully allocated) (such payment, the “Stock Payment”). The Payment Date is the date that payments under the STIP for the Company’s final full fiscal year 2023 are made to other participants generally.

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The balance of any Payment (the “Cash Payment”) will be paid in cash as follows: (i) the Company will pay Mr. Crew on the Payment Date (the “First Installment”) an amount in cash equal to the greater of 25% of the aggregate Cash Payment and an amount sufficient to pay all federal, state and local employment and income taxes on the First Installment and the Stock Payment and (ii) one-third of the remaining amount of the Cash Payment will be paid on each of November 1, 2023, February 1, 2024, and March 14, 2024.