Item 1.01 Entry into a Material Definitive Agreement.
Over the course of April 3 and April 4, 2023,
Avadel Finance Cayman Limited, a Cayman Islands exempted company (the “Issuer”) and an indirect wholly-owned subsidiary
of Avadel Pharmaceuticals plc (the “Company”), closed its previously announced exchange of approximately $96.2 million
in aggregate principal amount of 4.50% Exchangeable Senior Notes due 2023 issued on April 4, 2022 (the “Existing Notes”)
for approximately $106.3 million in aggregate principal amount of new 6.00% Exchangeable Senior Notes due 2027 (the “New Notes”)
(the “Exchange Transactions”), in each case, pursuant to the exemption from registration provided by Section 4(a)(2)
under the Securities Act of 1933, as amended (the “Securities Act”).
The New Notes were issued pursuant to an Indenture
(the “Indenture”), entered into by the Issuer, the Company and The Bank of New York Mellon, as trustee (the “Trustee”).
The New Notes are senior unsecured obligations of the Issuer and are guaranteed by the Company. The New Notes bear interest at a rate
of 6.00% per annum from, and including, April 3, 2023, payable semi-annually in arrears on April 1 and October 1 of each year, beginning
on October 1, 2023. In certain circumstances, the Issuer and the Company may be required to pay additional amounts as a result of any
applicable tax withholding or deductions required in respect of payments on the New Notes. The New Notes will mature on April 1, 2027,
unless earlier repurchased or redeemed by the Issuer or exchanged by the holders.
At any time prior to 5:00 p.m. (New York City
time) on the business day immediately preceding the maturity date, the New Notes are exchangeable at the election of holders at an initial
exchange rate (the “Exchange Rate”) of 102.3018 American Depositary Shares (the “ADSs”) of the Company
(each of which represents as of the date hereof one ordinary share of the Company, nominal value $0.01 per share (the “Ordinary
Shares”)) per $1,000 principal amount of the New Notes (so long as the principal amount of such holder’s New Notes not
exchanged is at least $200,000), which is equal to an initial exchange price of approximately $9.78 per ADS. Upon exchange, the New Notes
may be settled in cash, ADSs, or a combination of cash and ADSs, at the Issuer’s election. The Exchange Rate is subject to adjustment
in some events but will not be adjusted for any accrued and unpaid interest. Following a “Make-Whole Fundamental Change” (as
defined in the Indenture) or upon the Issuer’s issuance of a notice of redemption, the Issuer will increase the Exchange Rate for
a holder who elects to exchange its New Notes in connection with such “make-whole fundamental change” or during the related
redemption period in certain circumstances. In addition, the Issuer will increase the Exchange Rate for a holder who elects to exchange
its New Notes prior to January 15, 2027 or whose New Notes are subject to a Mandatory Exchange (as defined below) in certain circumstances.
The Issuer may cause the then outstanding
principal amount of the New Notes to be exchanged, in whole but not in part, at its option (the “Mandatory Exchange”),
prior to the close of business on January 15, 2027, if the last reported sale price of the ADSs has been at least 130% of the exchange
price then in effect on (x) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending
on, and including, the trading day immediately before the date that the Issuer provides notice of the Mandatory Exchange in accordance
with the Indenture (the “Mandatory Exchange Notice Date”); and (y) the trading day immediately before such Mandatory
Exchange Notice Date, at the then prevailing Exchange Rate, subject to adjustment described above. The Issuer may settle Mandatory Exchanges
in cash, ADSs, or a combination of cash and ADSs, at the Issuer’s election. Accrued and unpaid interest, if any, on New Notes subject
to Mandatory Exchange to but excluding, the exchange date in respect of the Mandatory Exchange shall be paid by the Issuer to holders
of the New Notes in cash concurrently with the delivery of the other exchange consideration.
The Issuer may redeem for cash all of the
New Notes in connection with certain tax-related events at a redemption price equal to 100% of the principal amount of the New Notes to
be redeemed plus accrued and unpaid interest to, but excluding, the redemption date, but may not otherwise redeem the New Notes. No sinking
fund is provided for the New Notes, which means that the Company is not required to redeem or retire the New Notes periodically.
The Indenture includes covenants that, subject
to carveouts and exceptions, limit the ability of (1) the Company and the Issuer to incur secured debt, (2) the Company’s subsidiaries
(other than the Issuer) to incur unsecured debt, (3) the Company and its subsidiaries (including the Issuer) to pay dividends and redeem
equity and (4) the Company and its subsidiaries (including the Issuer) to transfer capital stock of any subsidiary (other than the Issuer)
that does not guarantee the New Notes. Until such time that the Company achieves $25.0 million in quarterly revenue from commercial sales
in the United States of LUMRYZTM, the Indenture will also require that the Company and its subsidiaries (including the Issuer)
maintain, on a consolidated basis, a minimum cash and cash equivalents balance of at least $35.0 million, which will be reduced to $20.0
million after the first commercial sale of LUMRYZTM in the United Sates following receipt of final approval of the Company’s
new drug application for LUMRYZTM by the U.S. Food and Drug Administration in the United States. In addition, in certain
circumstances the Issuer will be required to make an offer to purchase the New Notes with cash equal to 50% of the net proceeds generated
from licensing agreements, if any, with respect to research, the development or the commercialization of LUMRYZTM outside
of the United States for a purchase price equal to 100% of the principal amount repurchased plus accrued and unpaid interest. The Indenture
also includes certain other customary covenants and events of default.
The foregoing descriptions of the New Notes
and the Indenture do not purport to be complete and are qualified in their entirety by reference to the Indenture (which includes the
form of the New Note). A copy of the Indenture (which includes the form of the New Note) is filed as Exhibit 4.1 to this Current Report
on Form 8-K and incorporated by reference in Items 1.01, 2.03 and 3.02.
This Current Report on Form 8-K does
not constitute an offer to sell, or a solicitation of an offer to buy, any security and shall not constitute an offer, solicitation or
sale in any jurisdiction in which such offering would be unlawful.