Document:

EX-10.1

 

Exhibit 10.1

SECOND AMENDMENT

     This Second Amendment (this “Amendment”) is entered into as of March 30, 2007, by and among KENDLE INTERNATIONAL INC., an Ohio corporation (the
“Borrower”), the Guarantors listed
on the signature pages hereof, the Lenders signatory hereto, and UBS AG, STAMFORD BRANCH, as
Administrative Agent for the Lenders (in such capacity, “Administrative Agent”).

RECITALS

     WHEREAS, the Borrower, the Guarantors, the Lenders, the Administrative Agent, UBS SECURITIES LLC, as sole lead arranger and sole bookrunner, UBS AG, STAMFORD
BRANCH, as issuing bank
and collateral agent, UBS LOAN FINANCE LLC, as swingline lender, JPMORGAN CHASE BANK, N.A., as
syndication agent, and KEYBANK NATIONAL ASSOCIATION, LASALLE BANK NATIONAL ASSOCIATION, and
NATIONAL CITY BANK, as co-documentation agents, are parties to that certain Credit Agreement dated
as of August 16, 2006, as amended by that certain First Amendment to Credit Agreement dated as of
December 11, 2006 (the “Credit Agreement”) (capitalized terms used herein without
definition have the meanings ascribed to such terms in the Credit Agreement);

     WHEREAS, the Borrower has requested certain amendments to the Credit Agreement; and

     WHEREAS, the Administrative Agent and the Required Lenders have agreed to amend the Credit
Agreement on the terms and subject to the conditions set forth herein.

     NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the
parties hereto hereby agree as follows:

          Section 1. Section References. Unless otherwise expressly stated herein, all Section
references herein shall refer to Sections of the Credit Agreement.

          Section 2. Amendment to Section 1.01 (Defined Terms). Section 1.01 of the Credit Agreement is
hereby amended by:

               (a) inserting the following new defined terms in the appropriate alphabetical order therein:

          “Convertible Debt Derivative Obligation” means any convertible debt hedge
transaction entered into in connection with a Convertible Debt Issuance, including any call options
related thereto and any related warrant transactions.

          “Second Amendment Effective Date” shall mean March 30, 2007.

               (b) amending clause (g) of the definition of “Consolidated Net Income” by
inserting
the words “or Convertible Debt Derivative Obligations” immediately following the words “Hedging
Obligations” appearing in such clause.

36

 

               (c) amending clause (g) of the definition of “Indebtedness” by inserting the
words “and Convertible Debt Derivative Obligations” immediately following the words “Hedging
Obligations” appearing in such clause.

               (d) amending the definition of “Material Indebtedness” by (1) inserting a comma
and
the words “Convertible Debt Derivative Obligations” immediately following the parenthetical
appearing in the first sentence of such definition, (2) inserting the words “Convertible Debt
Derivative Obligations or” immediately following the words “in respect of any” appearing in the
second sentence of such definition and (3) inserting the words “document evidencing such
Convertible Debt Derivative Obligations or the related” immediately following the word “related”
appearing in the second sentence of such definition.

               (e) amending clause (ix) of the definition of “Permitted Acquisition” by
deleting
“$40.0 million” and replacing it with “$70.0 million.”

          Section 3. Amendment to Section 2.10(e) (Equity Issuance). Section 2.10(e) of the Credit
Agreement is hereby amended by inserting the following text immediately before the period at the
end of Section 2.10(e):

          “provided, further, no prepayments shall be required under this Section 2.10(e) with respect
to any Net Cash Proceeds resulting from any Convertible Debt Derivative Obligation or any part
thereof”

          Section 4. Amendments to Section 2.19(a) (Increase in Commitments). Section 2.19(a) of the
Credit Agreement is hereby amended by deleting “$15.0 million” and replacing it with “$30.0
million.”

          Section 5. Amendments to Section 6.01(c) (Indebtedness). Section 6.01(c) of the Credit
Agreement is hereby amended by inserting, immediately following the words “Indebtedness under” and
immediately preceding the words “Hedging Obligations” first appearing in such Section 6.01(c), the
words “Convertible Debt Derivative Obligations or.”

          Section 6. Amendments to Section 6.01(e) (Indebtedness). Section 6.01(e) of the Credit
Agreement is hereby amended by deleting “$20.0 million” in clause (ii) and replacing it with
“€35.0 million.”

          Section 7. Amendments to Section 6.04(d) (Investments, Loans and Advances). Section 6.04(d)
of the Credit Agreement is hereby amended by inserting, immediately following the words
“Hedging Obligations” appearing in such Section 6.04(d), the words “or Convertible Debt Derivative
Obligations.”

          Section 8. Amendments to Section 6.08 (Dividends). Section 6.08 of the Credit Agreement is
hereby amended as follows:

               (a) the word “and” at the end of clause (a) is hereby deleted;

               (b) the period at the end of clause (b) is hereby replaced with “; and”; and

               (c) the following text is inserted as clause “c”:

37

 

     “(c) Dividends payable by the Borrower in connection with any Convertible Debt Derivative
Obligation (including any payment required to terminate such Convertible Debt Derivative
Obligation).”

          Section 9. Amendments to Section 6.10 (Financial Covenants). Section 6.10 of the Credit
Agreement is hereby amended as follows:

               (a) clause (a) is hereby deleted in its entirety and replaced with the following:

     (a)Maximum Total Leverage Ratio. (i) So long as no Convertible Debt Issuance
has occurred, permit the Total Leverage Ratio, at any date during any period set forth in
the table below, to exceed the ratio set forth opposite such period in the table below:

	 	 	 	 	 	 	 
	Test Period	 	Leverage Ratio
	October 1, 2006

	 	-
	 	December 31, 2006
	 	3.90 to 1.0
	January 1, 2007

	 	-
	 	March 31, 2007
	 	4.25 to 1.0
	April 1, 2007

	 	-
	 	June 30, 2007
	 	4.25 to 1.0
	July 1, 2007

	 	-
	 	September 30, 2007
	 	3.85 to 1.0
	October 1, 2007

	 	-
	 	December 31, 2007
	 	3.40 to 1.0
	January 1, 2008

	 	-
	 	March 31, 2008
	 	3.25 to 1.0
	April 1, 2008

	 	-
	 	June 30, 2008
	 	3.00 to 1.0
	July 1, 2008

	 	-
	 	September 30, 2008
	 	2.90 to 1.0
	October 1, 2008

	 	-
	 	December 31, 2008
	 	2.90 to 1.0
	January 1, 2009

	 	-
	 	March 31, 2009
	 	2.25 to 1.0
	April 1, 2009

	 	-
	 	June 30, 2009
	 	2.25 to 1.0
	July 1, 2009

	 	-
	 	September 30, 2009
	 	2.00 to 1.0
	October 1, 2009

	 	-
	 	December 31, 2009
	 	2.00 to 1.0
	January 1, 2010

	 	-
	 	March 31, 2010
	 	1.75 to 1.0
	April 1, 2010

	 	-
	 	June 30, 2010
	 	1.75 to 1.0
	July 1, 2010

	 	-
	 	September 30, 2010
	 	1.60 to 1.0
	October 1, 2010

	 	-
	 	December 31, 2010
	 	1.60 to 1.0
	January 1, 2011 and thereafter	 	1.60 to 1.0

     (ii) On and after the occurrence of a Convertible Debt Issuance, permit the Total
Leverage Ratio, at any date during any period set forth in the table below, to exceed the
ratio set forth opposite such period in the table below:

38

 

	 	 	 	 	 	 	 
	Test Period	 	Leverage Ratio
	October 1, 2006

	 	-
	 	December 31, 2006
	 	3.90 to 1.0
	January 1, 2007

	 	-
	 	March 31, 2007
	 	4.95 to 1.0
	April 1, 2007

	 	-
	 	June 30, 2007
	 	4.95 to 1.0
	July 1, 2007

	 	-
	 	September 30, 2007
	 	4.50 to 1.0
	October 1, 2007

	 	-
	 	December 31, 2007
	 	3.75 to 1.0
	January 1, 2008

	 	-
	 	March 31, 2008
	 	3.75 to 1.0
	April 1, 2008

	 	-
	 	June 30, 2008
	 	3.50 to 1.0
	July 1, 2008

	 	-
	 	September 30, 2008
	 	3.25 to 1.0
	October 1, 2008

	 	-
	 	December 31, 2008
	 	3.25 to 1.0
	January 1, 2009

	 	-
	 	March 31, 2009
	 	2.25 to 1.0
	April 1, 2009

	 	-
	 	June 30, 2009
	 	2.25 to 1.0
	July 1, 2009

	 	-
	 	September 30, 2009
	 	2.00 to 1.0
	October 1, 2009

	 	-
	 	December 31, 2009
	 	2.00 to 1.0
	January 1, 2010

	 	-
	 	March 31, 2010
	 	1.75 to 1.0
	April 1, 2010

	 	-
	 	June 30, 2010
	 	1.75 to 1.0
	July 1, 2010

	 	-
	 	September 30, 2010
	 	1.60 to 1.0
	October 1, 2010

	 	-
	 	December 31, 2010
	 	1.60 to 1.0
	January 1, 2011 and thereafter	 	1.60 to 1.0

               (b) clause (b) is hereby deleted in its entirety and replaced with the following:

     (b) Minimum Interest Coverage Ratio. (i) So long as no Convertible Debt
Issuance has occurred, permit the Consolidated Interest Coverage Ratio, for any Test
Period ending during any period set forth in the table below, to be less than the ratio
set forth opposite such period in the table below:

	 	 	 	 	 	 	 
	 	 	Interest
	Test Period	 	Coverage Ratio
	October 1, 2006

	 	-
	 	December 31, 2006
	 	3.00 to 1.0
	January 1, 2007

	 	-
	 	March 31, 2007
	 	2.70 to 1.0
	April 1, 2007

	 	-
	 	June 30, 2007
	 	2.70 to 1.0
	July 1, 2007

	 	-
	 	September 30, 2007
	 	3.10 to 1.0
	October 1, 2007

	 	-
	 	December 31, 2007
	 	3.25 to 1.0
	January 1, 2008

	 	-
	 	March 31, 2008
	 	3.40 to 1.0

39

 

	 	 	 	 	 	 	 
	 	 	Interest
	Test Period	 	Coverage Ratio
	April 1, 2008

	 	-
	 	June 30, 2008
	 	3.40 to 1.0
	July 1, 2008

	 	-
	 	September 30, 2008
	 	3.75 to 1.0
	October 1, 2008

	 	-
	 	December 31, 2008
	 	4.00 to 1.0
	January 1, 2009

	 	-
	 	March 31, 2009
	 	4.00 to 1.0
	April 1, 2009

	 	-
	 	June 30, 2009
	 	4.00 to 1.0
	July 1, 2009

	 	-
	 	September 30, 2009
	 	4.25 to 1.0
	October 1, 2009

	 	-
	 	December 31, 2009
	 	4.25 to 1.0
	January 1, 2010

	 	-
	 	March 31, 2010
	 	4.75 to 1.0
	April 1, 2010

	 	-
	 	June 30, 2010
	 	4.75 to 1.0
	July 1, 2010

	 	-
	 	September 30, 2010
	 	5.00 to 1.0
	October 1, 2010

	 	-
	 	December 31, 2010
	 	5.00 to 1.0
	January 1, 2011 and thereafter	 	5.00 to 1.0

     (ii) Following the occurrence of a Convertible Debt Issuance, permit the
Consolidated Interest Coverage Ratio, for any Test Period beginning with the first day of
the fiscal quarter following the fiscal quarter in which such Convertible Debt Issuance
occurred and ending during any period set forth in the table below, to be less than the
ratio set forth opposite such period in the table below:

	 	 	 	 	 	 	 
	 	 	Interest
	Test Period	 	Coverage Ratio
	October 1, 2006

	 	-
	 	December 31, 2006
	 	3.00 to 1.0
	January 1, 2007

	 	-
	 	March 31, 2007
	 	3.00 to 1.0
	April 1, 2007

	 	-
	 	June 30, 2007
	 	3.00 to 1.0
	July 1, 2007

	 	-
	 	September 30, 2007
	 	3.40 to 1.0
	October 1, 2007

	 	-
	 	December 31, 2007
	 	3.40 to 1.0
	January 1, 2008

	 	-
	 	March 31, 2008
	 	3.40 to 1.0
	April 1, 2008

	 	-
	 	June 30, 2008
	 	3.40 to 1.0
	July 1, 2008

	 	-
	 	September 30, 2008
	 	3.75 to 1.0
	October 1, 2008

	 	-
	 	December 31, 2008
	 	4.00 to 1.0
	January 1, 2009

	 	-
	 	March 31, 2009
	 	4.00 to 1.0
	April 1, 2009

	 	-
	 	June 30, 2009
	 	4.00 to 1.0
	July 1, 2009

	 	-
	 	September 30, 2009
	 	4.25 to 1.0
	October 1, 2009

	 	-
	 	December 31, 2009
	 	4.25 to 1.0

40

 

	 	 	 	 	 	 	 
	 	 	Interest
	Test Period	 	Coverage Ratio
	January 1, 2010

	 	-
	 	March 31, 2010
	 	4.75 to 1.0
	April 1, 2010

	 	-
	 	June 30, 2010
	 	4.75 to 1.0
	July 1, 2010

	 	-
	 	September 30, 2010
	 	5.00 to 1.0
	October 1, 2010

	 	-
	 	December 31, 2010
	 	5.00 to 1.0
	January 1, 2011 and thereafter	 	5.00 to 1.0

          Section 10. Amendments to Section 8.01(f) (Events of Default). Section 8.01(f) of the Credit
Agreement is hereby amended by deleting the end of such Section 8.01(f) starting with the words
“provided that” and replacing it with the following:

          “provided that, in the case of Convertible Debt Derivative Obligations or Hedging Obligations,
the amount counted to determine if such Convertible Debt Derivative Obligations or Hedging
Obligations constitute Material Indebtedness shall be the amount payable by all Companies if such
Convertible Debt Derivative Obligations or Hedging Obligations, as applicable, were terminated at
such time;”

          Section 11. Amended and Restated UK Charge Over Shares. The Required Lenders agree that the
UK Charge Over Shares granted by Kendle NC Inc. in favor of UBS, Stamford Branch, as Collateral
Agent, shall be amended and restated in the form attached hereto as Exhibit A.

          Section 12. Conditions Precedent. The effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions precedent:

               (a) The Administrative Agent shall have received all of the following, in form and substance
satisfactory to the Administrative Agent:

               (i) Amendment Documents. This Amendment, duly executed by the Borrower and
the Guarantors, and the Amended and Restated UK Charge Over Shares, duly executed
by Kendle NC Inc. (the “Amendment Documents”);

               (ii) Consent of Required Lenders. The written consent of the Required
Lenders to this Amendment; and

               (iii) Additional Information. Such additional documents, instruments and
information as the Administrative Agent may reasonably request to effect the
transactions contemplated hereby.

               (b) The representations and warranties contained herein and in the Credit Agreement shall be
true and correct in all material respects as of the date hereof as if made on the date
hereof (except for those which by their terms specifically refer to an earlier date, in which case
such representations and warranties shall be true and correct in all material respects as of such
earlier date).

41

 

               (c) All corporate proceedings taken in connection with the transactions contemplated by this
Amendment and all other agreements, documents and instruments executed or delivered pursuant
hereto, and all legal matters incident thereto, shall be reasonably satisfactory to the
Administrative Agent.

               (d) No Default or Event of Default shall have occurred and be continuing, after giving effect
to this Amendment.

               (e) The Borrower shall have paid an amendment fee to each Lender that consents to this
Amendment by 5:00 p.m., New York City time, on Thursday, March 29, 2007, equal to 0.15% of such
Lender’s outstanding Loans and Commitments immediately prior to the Second Amendment Effective Date
(the “Amendment Fee”), such Amendment Fee to be due and payable on the Second Amendment
Effective Date.

          Section 13. Representations and Warranties. The Borrower hereby represents and warrants to
the Administrative Agent and the Lenders that, as of the date of and after giving effect to this
Amendment, (a) the execution, delivery and performance of this Amendment and any and all other
Amendment Documents executed and/or delivered in connection herewith have been authorized by all
requisite corporate action on the part of the Borrower or any other Loan Party and will not violate
such Loan Party’s Organizational Documents, (b) all representations and warranties set forth in the
Credit Agreement and in any other Loan Document are true and correct in all material respects as if
made again on and as of such date (except those, if any, which by their terms specifically relate
only to an earlier date, in which case such representations and warranties are true and correct in
all material respects as of such earlier date), and (c) no Default or Event of Default has occurred
and is continuing.

          Section 14. Survival of Representations and Warranties. All representations and warranties
made in this Amendment or any other Loan Document shall survive the execution and delivery of this
Amendment and the other Loan Documents, and no investigation by the Administrative Agent or the
Lenders, or any closing, shall affect the representations and warranties or the right of the
Administrative Agent and the Lenders to rely upon them.

          Section 15. Certain Waivers. Each of the Borrower and the Guarantors hereby agrees that
neither the Administrative Agent nor any Lender shall be liable under a claim of, and hereby waives
any claim against the Administrative Agent and the Lenders based on, lender liability (including,
but not limited to, liability for breach of the implied covenant of good faith and fair dealing,
fraud, negligence, conversion, misrepresentation, duress, control and interference, infliction of
emotional distress and defamation and breach of fiduciary duties) as a result of the amendments
contained in Sections 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 above and any discussions or actions taken
or not taken by the Administrative Agent or the Lenders on or before the date hereof or the
discussions conducted in connection therewith, or any course of action taken by the Administrative
Agent or any Lender in response thereto or arising therefrom; provided, that the foregoing waiver
shall not include the waiver of any claims which are based on the gross negligence or willful
misconduct of the Administrative Agent or any Lender or any of their respective agents. This
Section 15 shall survive the execution and delivery of this Amendment and the other Loan Documents
and the termination of the Credit Agreement.

          Section 16. Reference to Agreement. Each of the Loan Documents, including the Credit
Agreement, and any and all other agreements, documents or instruments now or hereafter executed
and/or delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as
amended hereby, are hereby amended so that any reference in such Loan

42

 

Documents to the Credit Agreement, whether direct or indirect, shall mean a reference to the
Credit Agreement as amended hereby.

          Section 17. Costs and Expenses. The Borrower shall pay on demand all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including the reasonable fees, costs and expenses
of counsel to the Administrative Agent) incurred in connection with the preparation, execution and
delivery of this Amendment.

          Section 18. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

          Section 19. Headings. Section Headings in this Amendment are included herein for convenience
of reference only and shall not constitute a part of this Amendment for any other purposes.

          Section 20. Execution. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this Amendment.

          Section 21. Limited Effect. This Amendment relates only to the specific matters covered
herein, shall not be considered to be a waiver of any rights any Lender may have under the Credit
Agreement (other than as expressly set forth herein), and shall not be considered to create a
course of dealing or to otherwise obligate any Lender to execute similar amendments under the same
or similar circumstances in the future.

          Section 22. Ratification By Guarantors. Each Guarantor hereby agrees to this Amendment, and
each Guarantor acknowledges that such Guarantor’s Guarantee shall remain in full force and effect
without modification thereto.

[signature pages follow]

43

 

     IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed by their
respective officers thereunto duly authorized, as of the date first above written.

	 	 	 	 	 	 	 
	 	 	KENDLE INTERNATIONAL INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	ACER/EXCEL INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	AAC CONSULTING GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	KENDLE INTERNATIONAL CPU LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	KENDLE AMERICAS HOLDING INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

	 	 	 	 	 	 	 
	 	 	KENDLE AMERICAS INVESTMENT INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	KENDLE AMERICAS MANAGEMENT INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	KENDLE DELAWARE INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	KENDLE NC INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	KENDLE CLINICAL DEVELOPMENT SERVICES LIMITED
(formerly known as Charles River Laboratories
Clinical Services International Ltd.)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	UBS AG, STAMFORD BRANCH,

as Administrative Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	LENDERS:	 	 
	 
	 	 	 	 	,	 
	 	 	 	 	 
	 	 	as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:exv10w1

 

Exhibit 10.1

AMPAC FINE CHEMICALS LLC

SEVERANCE PAY PLAN

     1. Introduction. The purpose of this Ampac Fine Chemicals LLC Severance Pay Plan (the “Plan”)
is to provide severance benefits to eligible employees of Ampac Fine Chemicals LLC (the “Company”)
whose employment is involuntarily terminated. This document constitutes both the written
instrument under which the Plan is maintained and the summary plan description for the Plan.

     2. Important Terms. To help you understand how this Plan works, it is important to know the
following terms:

          2.1 “Administrator” means American Pacific Corporation, acting through the Vice President,
Administration, or any person to whom the Administrator has delegated authority and responsibility
pursuant to Section 6, but only to the extent of such delegation.

          2.2 For purposes of this Agreement, “For Cause” shall mean: (i) Employee commits a crime
involving dishonesty, breach of trust, or physical harm to any person; (ii) Employee willfully
engages in conduct that is in bad faith and materially injurious to the Company, including but not
limited to, misappropriation of trade secrets, fraud or embezzlement; (iii) Employee commits a
material breach of this Agreement, which breach is not cured within twenty days after written
notice to Employee from the Company; or (iv) Employee willfully refuses to implement or follow a
lawful policy or directive of the Company, which breach is not cured within twenty days after
written notice to Employee from the Company.

          2.3 “Company” means Ampac Fine Chemicals, a California limited liability company.

          2.4 “Covered Employee” means any employee of the Company who receives a written Notice of
Eligibility from the Company.

          2.5 “Eligible Termination” means an involuntary termination (other than for permanent
disability or death) of a Covered Employee’s employment with the Company. Accordingly, for
example, an Eligible Termination does not occur if the Covered Employee:

               (a) Voluntarily resigns, even if such voluntary resignation occurred after he or
she received
a written Notice of Eligibility;

               (b) Is transferred to, or is terminated (including by resignation) after declining
to accept
an offer of a comparable position with the Company or any of its subsidiaries or affiliates;

               (c) Resigns or is involuntarily terminated for Cause as defined in 2.2.

               (d) Fails to return to active employment with the Company on or before the last day
of an
approved leave of absence; or

 

 

               (e) Dies prior to the date of his or her Eligible Termination.

          2.6 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

          2.7 “Notice of Eligibility” means a written notice from the Company delivered to an individual
(which may, but is not required to be in the form of an offer of employment with the Company) to
establish that the individual is eligible for severance benefits from the Company, and the amount,
nature and timing of such severance benefits.

          2.8 “Plan” means the Ampac Fine Chemicals LLC Severance Pay Plan, as set forth in this
document, and as hereafter amended from time to time.

          2.9 “Severance Benefit” means the benefits the Covered Employee will be provided pursuant to
Section 4 and his or her Notice of Eligibility.

     3. Eligibility for Severance Benefit. An individual is eligible for a Severance Benefit under
the Plan, in the amount and for the duration set forth in the Covered Employee’s Notice of
Eligibility, only if he or she is a Covered Employee on the date of his or her Eligible
Termination.

     4. Payment of Severance Benefit.

          4.1 Severance Benefit. A Covered Employee who is eligible to receive a Severance Benefit
under and subject to the terms of Section 3 will receive such benefit in the amount specified in
the Covered Employee’s written Notice of Eligibility. Benefits will be payable monthly, subject to
the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the
regulations thereunder, and any other published interpretive authority, as issued or amended from
time to time. Notwithstanding the preceding provisions of this Section 4.1, the Company shall have
the authority to delay the payment of any Severance Benefit to the extent it deems necessary or
appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to
certain “key employees” of certain publicly-traded companies) and in such event, any such Severance
Benefit to which the Covered Employee would otherwise be entitled during the six (6) months
following such Covered Employee’s termination of employment from the Company will be paid on the
first business day of the seventh (7th) month following such termination of employment.

          4.2 Release. As a condition to receiving any Severance Benefit under this Plan, each Covered
Employee will be required to sign a waiver and release of all claims arising out of his or her
Eligible Termination and employment with the Company and its subsidiaries and affiliates, in a form
satisfactory to the Company.

     5. Withholding. The Company will withhold from any Severance Benefit all federal, state,
local and other taxes required to be withheld therefrom and any other required payroll deductions.

 

 

     6. Administration. The Plan will be administered and interpreted by the Administrator (in its
sole discretion). The Administrator is the “named fiduciary” of the Plan for purposes of ERISA and
will be subject to the fiduciary standards of ERISA when acting in such capacity. Any decision
made or other action taken by the Administrator with respect to the Plan, and any interpretation by
the Administrator of any term or condition of the Plan, or any related document, will be conclusive
and binding on all persons and be given the maximum possible deference allowed by law. The
Administrator may delegate in writing to any other person all or any portion of his or her
authority or responsibility with respect to the Plan.

     7. Amendment or Termination. The Board of Directors of American Pacific Corporation (the
“Board”) reserves the right (in its sole discretion), to amend, modify or terminate the Plan at any
time, without advance notice to any Covered Employee; provided, that the Board shall not reduce
benefits payable to any Covered Employee under the Plan without such Covered Employee’s consent,
until the expiration of the term of such Covered Employee’s participation in the Plan. The term of
a Covered Employee’s participation in the Plan shall expire as of the November 30th
following the date the Covered Employee commences participation in the Plan; provided that a
Covered Employee’s term of participation in the Plan will be extended automatically at the
expiration of each term for an additional two-year period (without any action by either the Company
or the Covered Employee) until either the Company or the Covered Employee gives the other party
written notice at least forty-five (45) days in advance of any expiration of the term that the term
of participation in the Plan shall not be extended for another two-year period. Any action of the
Board in amending or terminating the Plan or any Covered Employee’s term of participation in the
Plan will be taken in a non-fiduciary capacity.

     8. Claims Procedure. Any employee or other person who believes he or she is entitled to any
payment under the Plan may submit a claim in writing to the Administrator. If the claim is denied
(in full or in part), the claimant will be provided a written notice explaining the specific
reasons for the denial and referring to the provisions of the Plan on which the denial is based.
The notice will also describe any additional information needed to support the claim. The denial
notice will be provided within 90 days after the claim is received. If special circumstances
require an extension of time (up to 90 days), written notice of the extension will be given within
the initial 90-day period.

     9. Appeal Procedure. If the claimant’s claim is denied, the claimant (or his or her
authorized representative) may apply in writing to the Administrator for a review of the decision
denying the claim. The claimant (or representative) then has the right to review pertinent
documents and to submit issues and comments in writing. The Administrator will provide written
notice of his or her decision on review within 60 days after it receives a review request. If
additional time (up to 60 days) is needed to review the request, the claimant (or representative)
will be given written notice of the reason for the delay.

     10. Source of Payments. All Severance Benefits will be paid in cash from the general funds of
the Company; no separate fund will be established under the Plan; and the Plan will have no assets. No right of any person to receive any payment under the Plan will be any
greater than the right of any other general unsecured creditor of the Company.

 

 

     11. Inalienability. In no event may any current or former employee of the Company or any of
its subsidiaries or affiliates sell, transfer, anticipate, assign or otherwise dispose of any right
or interest under the Plan. At no time will any such right or interest be subject to the claims of
creditors nor liable to attachment, execution or other legal process.

     12. No Enlargement of Employment Rights. Neither the establishment or maintenance of the
Plan, any amendment of the Plan, nor the making of any benefit payment hereunder, will be construed
to confer upon any individual any right to be continued as an employee of the Company. The Company
expressly reserves the right to discharge any of its employees at any time, with or without cause,
absent an express contract which provides that termination must be for cause or provides a stated
termination date.

     13. Applicable Law. The provisions of the Plan will be construed, administered and enforced
in accordance with ERISA and, to the extent applicable, the laws of the State of Nevada.

     14. Severability. If any provision of the Plan is held invalid or unenforceable, its
invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will
be construed and enforced as if such provision had not been included.

     15. Headings. Headings in this Plan document are for purposes of reference only and will not
limit or otherwise affect the meaning of the terms of the Plan.

     16. Indemnification. American Pacific Corporation hereby agrees to indemnify and hold
harmless the officers and employees of the Company and of American Pacific Corporation and its
affiliates, and the members of their boards of directors, from all losses, claims, costs or other
liabilities arising from their acts or omissions in connection with the administration, amendment
or termination of the Plan, to the maximum extent permitted by applicable law. This indemnity will
cover all such liabilities, including judgments, settlements and costs of defense. The Company
will provide this indemnity from its own funds to the extent that insurance does not cover such
liabilities.

     17. Additional Information.

	 	 	 	 	 	 	 
	 

	 	Plan Name:
	 	 	 	Ampac Fine Chemicals LLC Severance Pay Plan
	 
	 	 	 	 	 	 
	 

	 	Plan Sponsor:
	 	 	 	Ampac Fine Chemicals LLC
	 

	 	 	 	 	 	P O Box 1718
	 

	 	 	 	 	 	Rancho Cordova, CA 95741
	 
	 	 	 	 	 	 
	 

	 	Identification Numbers:
	 	 	 	EIN: 20-3451631
	 

	 	 	 	 	 	PLAN: 501

 

 

	 	 	 	 	 	 	 
	 

	 	Plan Year:
	 	 	 	Calendar year
	 
	 	 	 	 	 	 
	 

	 	Plan Administrator:
	 	 	 	American Pacific Corporation
	 

	 	 	 	 	 	Attention: VP, Administration
	 

	 	 	 	 	 	3770 Howard Hughes Pkwy, STE 300
	 

	 	 	 	 	 	Las Vegas, NV 89169
	 

	 	 	 	 	 	(702) 735-2200
	 
	 	 	 	 	 	 
	 

	 	Agent for Service of	 	 	 	 
	 

	 	Legal Process:
	 	 	 	American Pacific Corporation
	 

	 	 	 	 	 	Attention: VP, Administration
	 

	 	 	 	 	 	3770 Howard Hughes Pkwy, STE 300
	 

	 	 	 	 	 	Las Vegas, NV 89169
	 

	 	 	 	 	 	(702) 735-2200

     18. Statement of ERISA Rights.

          As a Covered Employee under the Plan, you have certain rights and protections under ERISA:

               (a) You may examine (without charge) all Plan documents, including any amendments
and copies
of all documents filed with the U.S. Department of Labor, such as the Plan’s annual report (IRS
Form 5500). These documents are available for your review in the Company’s Human Resources
Department.

               (b) You may obtain copies of all Plan documents and other Plan information upon
written
request to the Plan Administrator. A reasonable charge may be made for such copies.

          In addition to creating rights for Covered Employees, ERISA imposes duties upon the people who
are responsible for the operation of the Plan. The people who operate the Plan (called
“fiduciaries”) have a duty to do so prudently and in the interests of you and the other Covered
Employees. No one, including the Company or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining a benefit under the Plan or
exercising your rights under ERISA. If your claim for a severance benefit is denied, in whole or
in part, you must receive a written explanation of the reason for the denial. You have the right
to have the denial of your claim reviewed. (The claim review procedure is explained in Sections 8
and 9 above.)

          Under ERISA, there are steps you can take to enforce the above rights. For instance, if you
request materials and do not receive them within 30 days, you may file suit in a federal court. In
such a case, the court may require the Plan Administrator to provide the materials and to pay you
up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a
claim which is denied or ignored, in whole or in part, you may file suit in a state or federal
court.

 

 

If it should happen that you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a federal court.

          In any case, the court will decide who will pay court costs and legal fees. If you are
successful, the court may order the person you have sued to pay these costs and fees. If you lose,
the court may order you to pay these costs and fees, for example, if it finds that your claim is
frivolous.

          If you have any questions regarding the Plan, please consult the Company’s Human Resources
Department. If you have any questions about this statement or about your rights under ERISA, you
may contact the nearest area office of the Pension and Welfare Benefits Administration, U.S.
Department of Labor.

     19. Execution.

          In Witness Whereof, American Pacific Corporation and the Company, by their duly authorized
officers, have executed this Plan on the date indicated below.

	 	 	 	 	 
	 	 	AMERICAN PACIFIC CORPORATION
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	AMPAC FINE CHEMICALS LLC
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date

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