NOTICE OF PROPOSED
SETTLEMENT AND DISMISSAL
WITH PREJUDICE OF DERIVATIVE ACTION
|ALL OWNERS OF LANNETT COMPANY, INC. (“LANNETT” OR THE “COMPANY”) STOCK
(TICKER SYMBOL: LCI).
PLEASE READ THIS NOTICE
CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT AND DISMISSAL WITH PREJUDICE OF STOCKHOLDER DERIVATIVE
LITIGATION AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS.
IF THE COURT APPROVES
THE SETTLEMENT OF THE DERIVATIVE ACTION, LANNETT STOCKHOLDERS WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED
SETTLEMENT AND DISMISSAL WITH PREJUDICE, AND FROM PURSUING RELEASED CLAIMS.
THIS ACTION IS NOT A
“CLASS ACTION.” THUS, THERE IS NO COMMON FUND UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY PAYMENT.
PLEASE TAKE NOTICE that
this action is being settled on the terms set forth in a Stipulation and Agreement of Settlement, dated May 22, 2020 (the “Stipulation”).
The purpose of this Notice is to inform you of:
existence of the derivative action captioned In re Lannett Company, Inc. Derivative Litigation, Lead Case No.: 1:19-cv-0088-MN-JLH
(D. Del.) (“Derivative Action”),
proposed settlement between Plaintiffs1
and Defendants reached in the Derivative Action (the “Settlement”),
hearing to be held by the Court to consider the fairness, reasonableness, and adequacy of the Settlement and dismissal of the Derivative
Action with prejudice,
Counsel’s application for fees and expenses, and
This Notice describes
what steps you may take in relation to the Settlement. This Notice is not an expression of any opinion by the Court about the truth
or merits of Plaintiffs’ claims or Defendants’ defenses. This Notice is solely to advise you of the proposed Settlement
of the Derivative Action and of your rights in connection with the proposed Settlement.
On May 22, 2020,
Plaintiffs, Lannett, in its capacity as a nominal defendant, current and former officers and/or members of Lannett’s
Board of Directors, defendants Arthur P. Bedrosian, Timothy C. Crew, Martin P. Galvan, John Kozlowski, David Drabik, Jeffrey
Farber, Patrick Lepore, James M. Maher, Albert Paonessa, III, and Paul Taveira entered into the Stipulation in the Derivative
Action filed derivatively on behalf of Lannett, in the United States District Court for the District of Delaware (the
“Court”) against the Individual Defendants. The Settlement, as documented in the Stipulation, subject to the
approval of the Court, is intended by the Parties to fully, finally, and forever compromise, resolve, discharge, and settle
the Released Claims (including Unknown Claims) and to result in the dismissal of the Derivative Action with prejudice, upon
the terms and subject to the conditions set forth in the Stipulation. As consideration, the Settlement requires the Company
to adopt certain corporate governance modifications, as outlined in Exhibit A to the Stipulation. The Settlement provides
that the Defendants shall pay, or cause their insurer to pay, a Fee and Expense Award to Plaintiffs’ Counsel of
six-hundred thousand ($600,000), from which Fee and Expense Award a Service Award to each of the two Plaintiffs of one
thousand five hundred dollars ($1,500) will be paid.
1 All capitalized terms used
in this notice, unless otherwise defined herein, are defined as set forth in the Stipulation.
This Notice is a summary
only and does not describe all of the details of the Stipulation. For full details of the matters discussed in this summary, please
see the full Stipulation posted on the Company’s website (https://lannett.investorroom.com/derivative-litigation-settlement)
Plaintiffs’ Counsel at the addresses listed below, or inspect the full Stipulation filed with the Clerk of the Court.
What is the
Derivative Action is brought derivatively on behalf of nominal defendant Lannett and alleges that the Individual Defendants violated
the federal securities laws and breached their fiduciary duties by knowingly or recklessly causing the Company to participate in
anti-competitive conduct, by personally making and/or causing the Company
to make to the investing public a series of materially false and misleading statements regarding the Company’s business,
operations, and compliance, and by causing the Company to fail to maintain internal controls.
Why is there
a Settlement of the Derivative Action?
Court has not decided in favor of Defendants or Plaintiffs in the Derivative Action. Instead, the parties have agreed to the Settlement
to avoid the distraction, costs, and risks of further litigation, and because the Settlement, including the corporate governance
reforms that the Company will adopt as part of the Settlement, provides a substantial benefit to, and is in the best interests
of, Lannett and its stockholders.
deny each and every allegation of wrongdoing or liability arising out of or relating in any way to the events, conduct, statements,
acts, or omissions alleged in the Derivative Action. Defendants further assert that, at all times, they acted in good faith, and
in a manner they reasonably believed to be and that was in the best interests of Lannett and Lannett’s stockholders. Defendants
assert that they have meritorious defenses to the claims in the Derivative Action. Nonetheless, Defendants have entered into the
Stipulation, without admitting or conceding any fault, liability, wrongdoing, or damage whatsoever, in order to avoid the risks
inherent in any lawsuit and the burden and expense of further litigation.
Hearing and Your Right to Object to the Settlement
August 7, 2020, the Court entered an order preliminarily approving the Stipulation and the Settlement contemplated therein
(the “Preliminary Approval Order”) and providing for the notice of the Settlement to be made to Lannett
stockholders. The Preliminary Approval Order further provides that the Court will hold a hearing (the “Settlement
Hearing”) on October 7, 2020 at 1:00 p.m. before the Honorable Jennifer L. Hall,2 U.S.
District Court, District of Delaware, Courtroom 2B, located at the J. Caleb Boggs Federal Building, 844 N. King Street,
Wilmington, Delaware 19801, to among other things: (i) determine whether the proposed Settlement is fair, reasonable and
adequate and in the best interests of the Company and its stockholders; (ii) consider any objections to the Settlement
submitted in accordance with this Notice; (iii) determine whether a judgment should be entered dismissing all claims in the
Derivative Action with prejudice, and releasing the Released Claims against the Released Persons; (iv) consider the agreed-to
Fee and Expense Award to Plaintiffs’ Counsel of attorneys’ fees and the reimbursement of expenses; (v) consider
the Service Award to Plaintiffs, which shall be funded from the Fee and Expense Award; and (vi) consider any other matters
that may properly be brought before the Court in connection with the Settlement.
The Court may, in
its discretion, change the date and/or time of the Settlement Hearing without further notice to you. The Court also has reserved
the right to hold the Settlement Hearing telephonically without further notice to you. If you intend to attend the Settlement
Hearing, please consult the Court’s calendar and/or the websites of Lannett (https://lannett.investorroom.com/derivative-litigation-settlement)
or any change in date, time or format of the Settlement Hearing.
Any Lannett stockholder
who wishes to object to the fairness, reasonableness, or adequacy of the Settlement as set forth in the Stipulation, or to the
proposed award of attorneys’ fees and expenses, may file with the Court a written objection. An objector must at least fourteen
(14) calendar days prior to the Settlement Hearing: (1) file with the Clerk of the Court and serve upon the below listed counsel
a written objection to the Settlement setting forth (a) the nature of the objection, (b) proof of ownership of Lannett common stock
as of the date of the Stipulation and through the date of the filing of any such objection, including the number of shares of Lannett
common stock held and the date of purchase, (c) any and all documentation or evidence in support of such objection, and (d) the
identities of any cases, by name, court, and docket number, in which the stockholder or his, her, or its attorney has objected
to a settlement in the last three (3) years; and (2) if intending to appear, and requesting to be heard, at the Settlement Hearing,
he, she, or it must, in addition to the requirements of (1) above, file with the Clerk of the Court and serve on the below listed
counsel (a) a written notice of his, her, or its intention to appear at the Settlement Hearing, (b) a statement that indicates
the basis for such appearance, (c) the identities of any witnesses he, she, or it intends to call at the Settlement Hearing and
a statement as to the subjects of their testimony, and (d) any and all evidence that would be presented at the Settlement Hearing.
Any objector who does not timely file and serve a notice of intention to appear in accordance with this paragraph shall be foreclosed
from raising any objection to the Settlement and shall not be permitted to appear at the Settlement Hearing, except for good cause
IF YOU MAKE A WRITTEN
OBJECTION, IT MUST BE ON FILE WITH THE CLERK OF THE COURT NO LATER THAN SEPTEMBER 23, 2020. The Clerk’s address is:
2 Judge Hall will issue a Report
and Recommendation regarding the Proposed Final Order and Judgment at or after the Settlement Hearing.
Clerk of the Court
U.S. DISTRICT COURT, DISTRICT OF DELAWARE
J. Caleb Boggs Federal Building
844 N. King Street, Unit 18
Wilmington, Delaware 19801
YOU ALSO MUST DELIVER
COPIES OF THE MATERIALS TO PLAINTIFFS’ COUNSEL AND DEFENDANTS’ COUNSEL SO THEY ARE RECEIVED NO LATER THAN SEPTEMBER
23, 2020. Counsel’s addresses are:
Counsel for Plaintiffs:
Geoffrey M. Johnson
SCOTT+SCOTT ATTORNEYS AT LAW LLP
12434 Cedar Road, Suite 12
Cleveland Heights, OH 44106
THE BROWN LAW FIRM, P.C.
240 Townsend Square
Oyster Bay, NY 11771
THE ROSEN LAW FIRM, P.A.
275 Madison Avenue, 40th Floor
New York, NY 10016
Counsel for Defendants:
Jay P. Lefkowitz, P.C.
Matthew Solum, P.C.
Terence Y. Leong
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, NY 10022-4611
FOX ROTHSCHILD LLP
2000 Market Street, 20th Floor
Philadelphia, PA 19103-3222
Kasey H. DeSantis
FOX ROTHSCHILD LLP
919 N. Market Street, Suite 3000
Wilmington, Delaware 19899-2323
Anthony S. Barkow
Olivia G. Hoffman
JENNER & BLOCK LLP
919 Third Avenue
New York, NY 10022
Howard S. Suskin
JENNER & BLOCK LLP
353 N. Clark Street
Chicago, IL 60654
David E. Ross
Anne M. Steadman
ROSS ARONSTAM & MORITZ LLP
100 S. West Street, Suite 400
Wilmington, Delaware 19801
An objector may file
an objection on his, her or its own or through an attorney hired at his, her or its own expense. If an objector hires an attorney
to represent him, her or it for the purposes of making such objection, the attorney must serve a notice of appearance on the counsel
listed above and file such notice with the Court no later than fourteen (14) calendar days before the Settlement Hearing. Any Lannett
stockholder who does not timely file and serve a written objection complying with the above terms shall be deemed to have waived,
and shall be foreclosed from raising, any objection to the Settlement, and any untimely objection shall be barred.
Any objector who files
and serves a timely, written objection in accordance with the instructions above, may appear at the Settlement Hearing either in
person or through counsel retained at the objector’s expense. Objectors need not attend the Settlement Hearing, however,
in order to have their objections considered by the Court.
If you are a Lannett
stockholder and do not take steps to appear in this action and object to the proposed Settlement, you will be bound by the Judgment
of the Court and will forever be barred from raising an objection to the settlement in this Derivative Action, and from pursuing
any of the Released Claims.
Release and Related
If the Settlement is
approved, claims will be released pursuant to, among other provisions, the following provisions:
Upon the Effective
Date, Lannett, Plaintiffs, and each of the Lannett stockholders shall be deemed to have, and by operation of the Judgment shall
have, fully, finally, and forever released, relinquished, and discharged the Released Claims against the Released Persons. Lannett,
Plaintiffs, and each of Lannett stockholders shall be deemed to have, and by operation of the Judgment shall have, covenanted not
to sue any Released Person with respect to any Released Claims, and shall be permanently barred and enjoined from instituting,
commencing or prosecuting the Released Claims against the Released Persons except to enforce the releases and other terms and conditions
contained in this Stipulation and/or the Judgment entered pursuant thereto.
Claims” shall mean all Claims (including known and Unknown Claims), including but not limited to, any claims for
damages, injunctive relief, equitable relief, interest, attorneys’ fees, expert or consulting fees, and any and all
other costs, fees, expenses, or liabilities whatsoever, against any of the Released Persons that (i) were asserted or could
have been asserted derivatively in the Derivative Action; (ii) would have been barred by res judicata had the
Derivative Action been fully litigated to final judgment; (iii) that have been, could have been, or could in the future be
asserted derivatively in any forum or proceeding or otherwise against any of the Released Persons that concern, are based
upon, involve, or arise out of, or relate to any of the subject matters, allegations, transactions, facts, events,
occurrences, disclosures, representations, statements, acts, failures to act, alleged mismanagement, misconduct, concealment,
omissions, alleged misrepresentations, alleged violations of foreign or domestic law (including all local, state, and/or
federal laws), sale(s) of stock, or other matters involved, set forth, or referred to, or that could have been alleged in or
encompassed by, the complaint in the Derivative Action; or (iv) arise out of, relate to, or concern the defense, settlement,
or resolution of the Derivative Action or the Released Claims. For clarity, Released Claims shall not include (i) claims to
enforce the terms of the Stipulation and/or the judgment entered pursuant thereto, or (ii) exclusively direct claims
(i.e., as opposed to derivative claims) Lannett shareholders may have in an individual capacity against
means each and all of a Person’s past, present, or future family members, spouses, domestic partners, parents, associates,
affiliates, subsidiaries, officers, directors, stockholders, owners, members, representatives, employees, attorneys, financial
or investment advisors, consultants, underwriters, investment banks or bankers, commercial bankers, insurers, reinsurers, excess
insurers, co-insurers, advisors, principals, agents, heirs, executors, trustees, estates, beneficiaries, distributees, foundations,
general or limited partners or partnerships, joint ventures, personal or legal representatives, administrators, or any other person
or entity acting or purporting to act for or on behalf of any Person, and each of their respective predecessors, successors, and
means, collectively, each and all of the Defendants and their Related Persons, and Defendants’ Counsel.
means any Claims that any Party or any Lannett stockholder (claiming in the right of, or on behalf of, the Company) does not know
or suspect to exist at the time of the release of the Released Claims and Defendants’ Released Claims that, if known by him,
her, or it, might have affected his, her, or its settlement with and release of the Released Claims and Defendants’ Released
Claims, or might have affected his, her, or its decision not to object to this Settlement. Unknown Claims include those Claims
in which some or all of the facts comprising the Claim may be unsuspected, or even undisclosed or hidden. With respect to any and
all Released Claims and Defendants’ Released Claims, including Unknown Claims, the Parties stipulate and agree that, upon
the Effective Date, they shall expressly waive, and every Lannett stockholder shall be deemed to have, and by operation of the
Judgment shall have, expressly waived the provisions, rights, and benefits of California Civil Code § 1542, which provides:
RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT
THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE
DEBTOR OR RELEASED PARTY.
The Parties shall
expressly waive, and every Lannett stockholder who is not a Plaintiff shall be deemed to have, and by operation of the
Judgment shall have, expressly waived any and all provisions, rights, and benefits conferred by any law of any state or
territory of the United States, or principle of common law or foreign law, which is similar, comparable or equivalent in
effect to California Civil Code § 1542. The Parties may hereafter discover facts in addition to or different from
those which he, she, or it now knows or believes to be true with respect to the subject matter of the Released Claims or
Defendants’ Released Claims, but the Parties shall expressly have, and every Lannett stockholder shall be deemed to
have, and by operation of the Judgment shall have, fully, finally, and forever settled and released any and all Released
Claims and Defendants’ Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent,
whether or not concealed or hidden, which now exist, or heretofore have existed, upon any theory of law or equity now
existing or coming into existence in the future, including, but not limited to, conduct which is negligent, reckless,
intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or
existence of such different or additional facts. The Parties acknowledge, and every Lannett stockholder who is not a
Plaintiff shall be deemed by operation of the Judgment to have acknowledged, that the foregoing waivers were separately
bargained for and a key element of the Settlement of which this release is a material and essential part.
Interim Stay and Injunction
Pending the Court’s
determination as to final approval of the Settlement, Plaintiffs and Plaintiffs’ Counsel, and any Lannett stockholders, derivatively
on behalf of Lannett, are barred and enjoined from commencing, prosecuting, instigating, or in any way participating in the commencement
or prosecution of any action asserting any Released Claims against any of the Released Persons in any court or tribunal.
Scope of the Notice
This Notice is a summary
description of the Derivative Action, the complaints, the terms of the Settlement, and the Settlement Hearing. For a more detailed
statement of the matters involved in the Derivative Action, reference is made to the Stipulation, a copy of which may be reviewed
and downloaded at (https://lannett.investorroom.com/derivative-litigation-settlement).
* * *
You may obtain further
information by contacting counsel for Plaintiffs at: Geoffrey M. Johnson, Scott+Scott Attorneys at Law LLP, 12434 Cedar Road,
Suite 12, Cleveland Heights, OH 44106, Telephone: (216) 229-6088, E-mail firstname.lastname@example.org or Timothy Brown, The
Brown Law Firm, P.C., 240 Townsend Square, Oyster Bay, NY 11771, Telephone: (516) 922-5427, E-mail: email@example.com
or Phillip Kim, The Rosen Law Firm, P.A., 275 Madison Avenue, 40th Floor, NY 10016, Telephone: (212) 686-1060, E-mail: firstname.lastname@example.org.
Please Do Not Call the Court or Defendants with Questions About the Settlement.