EMPLOYMENT AGREEMENT

EX-10.5 2 p73329exv10w5.htm EXHIBIT 10.5 exv10w5

Exhibit 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”), entered into effective October 15, 2006, is between American Pacific Corporation, a Delaware corporation having its principal place of business at 3770 Howard Hughes Parkway, Suite 300, Las Vegas, Nevada 89109 (the “Company”), and Joseph Carleone, an individual residing at the address set forth below his signature at the end of this Agreement (the “Executive”) (collectively, “the parties”).

The Company’s Business

The Company is engaged in the manufacture of specialty chemicals, including perchlorate chemicals, sodium azide and HalotronTM fire suppression agents, the design and manufacture of environmental protection products and other products as may be acquired or developed over time, active pharmaceutical ingredients and registered intermediates for commercial customers in the pharmaceutical industry, and real estate development.

Period of Employment

(a) Basic Term. The Company shall employ Executive to render services to the Company as Executive Vice President and Chief Operating Officer (“COO”), to perform such duties and responsibilities as may be assigned by the Board of Directors and the Chief Executive Officer from the effective date of this Agreement through September 30, 2009 (the “Term Date”), unless Executive’s employment relationship with the Company terminates sooner as provided in Section 5 below.

(b) Annual Renewal. Each year the term and provisions of this Agreement shall automatically extend for a total three-year period and unless either party notified the other in writing to the contrary at least 30 days prior to the applicable October date that it, or he, does not want the term to so extend.

Position, Duties, Responsibilities

(a) Service by Executive as a director on the Board of any organization other than the Company, its subsidiaries or affiliates shall be subject to the written consent of the CEO and AMPAC’s Board of Directors; and such consent may be withdrawn should the CEO or AMPAC’s Board of Directors, in its sole discretion determine Executive’s status as a member of such Board of Directors is not in the best interests of the Company.

(b) During his employment by the Company, except upon the prior written consent of the Company, Executive will not (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be in conflict with, or that might place Executive in a conflicting position to that of, the Company. Without limitation, the Executive shall not act in any advisory or other capacity for any individual, firm, association or corporation other than the Company and its subsidiary corporations in matters in any way pertaining to any business or undertaking in any

way similar to or competitive with the business or activities of the Company and its subsidiary or affiliated corporations or other business, (whatever the form, LLC, LLP, etc.).

(c) Other Activities. Executive represents and warrants that by accepting employment with the Company he is not violating the terms of any agreement, legal obligation, contractual, regulatory or statutory, including but not limited to fiduciary duty implied expressly or by law; and to the extent a contract or contracts exist between Executive and prior employees that contain restrictions on future employment by Executive, such contracts or related documents have been provided to the Company for its review.

(d) Proprietary Information. “Proprietary Information” is all information and any idea in whatever form, tangible or intangible, pertaining in any manner to the business of the Company and its subsidiary corporations, or its employees, clients, consultants, or business associates, which was produced by any employee of the Company or its subsidiary corporations, in the course of his or her employment or otherwise produced or acquired by or on behalf of the Company or its subsidiary corporations. All Proprietary Information not generally known outside of the Company’s organization, and all Proprietary Information so known only through improper means, shall be deemed “Confidential Information.” Without limiting the foregoing definition, Proprietary and Confidential Information shall include, but not be limited to: (i) formulas, teaching and development techniques, processes, trade secrets, computer programs, electronic codes, inventions, improvements, and research projects; (ii) information about costs, profits, markets, sales, and lists of customers or clients; (iii) business, marketing, and strategic plans; and (iv) employee personnel files and compensation information. Executive should consult any Company procedures instituted to identify and protect certain types of Confidential Information, which are considered by the Company to be safeguards in addition to the protection provided by this Agreement. Nothing contained in those procedures or in this Agreement is intended to limit the effect of the other.

(e) General Restrictions on Use. During the Period of Employment, Executive shall use Proprietary Information, and shall disclose Confidential Information, only for the benefit of the Company and as is necessary to carry out his responsibilities under this Agreement. Following termination, Executive shall neither, directly or indirectly, use any Proprietary Information nor disclose any Confidential Information, except as expressly and specifically authorized in writing by the Company. The disclosure or publication to anyone who does not have a need to know, whether employed by the Company or not, of any Proprietary Information through literature, speeches or discussion must be approved in advance in writing by the Company.

Compensation.

In consideration of the services to be rendered under this Agreement, Executive shall be entitled to the following:

(a) The Company shall pay Executive as compensation for services a base salary at the annual rate of $306,800 (Three Hundred Six Thousand Eight Hundred Dollars) (which includes an automobile allowance of $16,800), or at such rate as the Compensation

Committee of the Board of Directors may determine from time to time, should automobile cost and operation fluctuate. Such salary shall be payable in accordance with the standard payroll procedures of the Corporation. Once the Corporation’s Compensation Committee of the Board of Directors has increased such salary, it thereafter shall not be reduced. The annual compensation specified in this Section 3, together with any increases in such compensation that the Compensation Committee of the Board of Directors may grant from time to time, is referred to in this Agreement as “Base Compensation.”

(b) The Company shall review the Base Compensation the anniversary each year of employment by Executive or at different intervals at the discretion of the Board of Directors. Any increase in Executive’s Base Compensation shall be made effective as soon as practicable after.

(c) Executive shall be eligible (i) to participate in all of the Company’s benefit plans made available to all employees generally, (ii) to participate in all benefit plans made available to Company officers holding the office of Vice President, Senior Vice President, Executive Vice President, President, Chief Operating Officer, and Chief Executive Officer generally (to the extent there are such generally-applicable benefit plans made available to such company officers), and (iii) to receive perquisites of employment, as established by the Company with the approval of the Board of Directors from time to time.

Termination of Employment

(a) Termination By Death. Executive’s employment shall terminate upon the death of Executive. Company shall pay to Executive’s beneficiaries or estate, as appropriate, compensation then due and owing as of the date of death, and shall continue to pay Executive’s salary and benefits, through the second full month after Executive’s death. As of the date of death, all stock options available to Executive through the Term Date shall be deemed accelerated and vested, and may be exercised by the appropriate representative of Executive’s estate. Thereafter, all obligations of Company under this Agreement shall cease. Nothing in this Section shall affect any entitlement of Executive’s heirs to the benefits of any Life insurance, vested funds in Plans governed by provisions of State or Federal laws, including but not limited to 401(K), deferred compensation, pension, etc.

(b) Termination By Disability. If, in the sole opinion of the Company, Executive shall be prevented from properly performing his duties hereunder by reason of any physical or mental incapacity for a period of more than ninety (90) days in the aggregate in any twelve-month period, then, to the extent permitted by law, Company may terminate Executive’s employment. Company shall pay to Executive all compensation to which Executive is entitled through the last day of the month in which the 90th day of incapacity occurs, and thereafter, all of Company’s obligations under this Agreement shall cease. Nothing in this Section shall affect Executive’s rights under any disability plan in which he is a participant.

(c) Termination For Convenience. The Company may terminate Executive’s employment for its convenience prior to the Term Date. Should the Company exercise that right:

(i) The Company in an attempt to ease the Executive’s transition, and upon receipt of a mutually satisfactory release, shall continue to pay to Executive a sum of money equal to the Base Compensation (less the amount allocated to the Automobile Allowance) for a period of three (3) years from the date the employment relationship with the Company terminates (the “Termination Date”). Provided, however, such payments by the Company shall be offset, during the third year following the Termination Date, by earned income realized by Executive from all sources other than directors’ fees paid by the Company. In addition, the Company will pay the Executive a monthly amount equal to the cost of COBRA under the medical plans offered by the Company for a period of eighteen (18) months.

(ii) All shares of stock granted to Executive and all unexercised options to purchase Company stock that are unvested at the time of the termination of employment shall become fully vested and exercisable.

(iii) The payments described in this Section 5.c shall be conditioned upon Executive’s continued compliance with the material obligations described in this Agreement. Should Executive violate any such obligations, in the good faith belief of the Company all payments shall cease

(d) Termination By Company For Cause. At any time, and without prior notice, the Company may terminate Executive’s employment For Cause (as defined below). The Company shall pay Executive all compensation then due and owing; thereafter, all of the Company’s obligations under this Agreement shall cease. Termination for “Cause” shall mean termination of Executive’s employment because of Executive’s (i) involvement in fraud, misappropriation or embezzlement related to the business or property of the company; (ii) conviction for, or guilty or “no contest” plea to, a felony; (iii) material breach of this Agreement; (iv) a pattern of failure to substantially perform his duties under this Agreement, provided, however, that if such Cause is reasonably curable, the company shall not terminate Executive’s employment hereunder unless the Company first gives notice of its intention to terminate and the grounds of such termination, and the Executive has not, within thirty (30) days following receipt of this notice, cured such Cause, to the satisfaction of the Company.

(e) By Executive For His Convenience. At any time, Executive may terminate the Period of Employment for any reason, with or without cause, by providing Company thirty (30) days’ advance written notice. Company shall have the option, in its complete discretion, to make termination of the Period of Employment effective at any time prior to the end of such notice period, provided Company pays Executive all compensation due and owing through the last day actually worked, plus an amount equal to the base salary Executive would have earned through the balance of the above notice period, thereafter, all of Company’s obligations under this Agreement shall cease.

(f) By Executive Following Change in Leadership. Executive may terminate, without liability, the Period of Employment if another individual, other than Executive, succeeds the current incumbent as President and Chief Executive Officer of the Company, provided Executive gives Employer ninety (90) days advance written notice of this

reason for termination of his employment. If Executive resigns for this reason, he will receive the benefits owed him upon occurrence of a “corporate transition,” as set forth in Section 5(g) below.

(g) Corporate Transition.

(i) Corporate Transition Defined. For purposes of this Agreement, a “Corporate Transition” shall include any of the following transactions to which the Company is a party: (A) a merger or consolidation in which the Company is not the surviving entity and securities representing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a holder different from those who held such securities immediately prior to such merger; (B) the sale, transfer or other disposition of all or substantially all of the assets of the Company in liquidation or dissolution of the Company; (C) any reverse merger in which the Company is the surviving entity but in which securities representing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to holder different from those who held such securities immediately prior to such merger; or (D) any cash dividend paid by the Company that, in the aggregate with all other dividends paid in any twelve month period, is greater than the combined earnings of the Company for the Company’s two fiscal years prior to such dividend payment date. In addition, a Corporate Transaction shall also include a “Change of Control” as such term is defined in the Company’s 2001 Stock Option Plan, a “Capital Change of the Company” as such term is defined in the Company’s 1997 Stock Option Plan or a “Corporate Capital Transaction” as such term is defined in the Company’s 1991 Stock Option Plan.

(ii) Acceleration of vesting at time of Corporate Transition. Should a Corporate Transition take place, all shares of stock granted to Executive and all unexercised options to purchase Company stock granted to the Executive that are unvested at the time of the Corporate Transition shall become fully vested and exerciseable.

(iii) Benefits Upon Occurrence of Corporate Transition. Upon the occurrence of a Corporate Transition and subject to the obligations in Section 6.d.-e. below, Executive shall be entitled to the benefits described in Section 5.c above, regardless of whether the Executive’s employment is terminated in connection with such Corporate Transition.

Termination Obligations

(a) Return of Company’s Property. Executive hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, blueprints, and other documents, or materials, or copies thereof, and equipment furnished to or prepared by Executive in the course of or incident to Executive’s employment, belong to Company and shall be promptly returned to Company upon termination of Executive’s employment.

(b) Representations and Warranties Survive Termination of Employment. The representations and warranties contained herein shall survive termination of Executive’s employment and expiration of this Agreement.

(c) Cooperation in Pending Work. Following termination of Executive’s employment for any reason, Executive shall fully cooperate with Company in all matters relating to the winding up of pending work on behalf of Company and the orderly transfer of work to other employees of Company. Executive shall also cooperate in the defense of any litigation, judicial or administrative, brought by any third party against Company that relates in any way to Executive’s knowledge, acts or omissions or duties while employed by Company. If Executive’s cooperation in the defense of any such action requires more than ten (10) hours of Executive’s time, the Executive and Company shall agree on appropriate remuneration for Executive’s time and expenses.

(d) Noncompetition. Executive acknowledges and agrees that during his employment with the Company, he has had access to confidential information and the activities forbidden by this subsection would necessarily involve the improper use and disclosure of this confidential information. To forestall this use or disclosure, Executive agrees that during the Period described in Section 5.c when payments to Executive are being made, or for two years after the termination of Executive for reasons other than for Company’s, the Executive shall not, directly or indirectly, (i) divert or attempt to divert from the Company (or any Affiliate) any business of any kind in which it is engaged; (ii) employ or recommend for employment any person employed by the Company (or any Affiliate); or (iii) engage in any business activity that is competitive with the Company (or any Affiliate) in any state where the Company can demonstrate its intention to conduct business, unless Executive can prove that any of the above actions was done without the use of confidential information. In addition to the above restrictions on competitive activity, and regardless of whether any use of confidential information is involved, Executive agrees that during the Payment Period referred to in Section 5(c)(ii) shall not, directly or indirectly, (i) solicit any customer of the Company (or any Affiliate) known to Executive (while he was employed by the Company) to have been a customer with respect to products or services competitive with products or services offered by the Company; or (ii) solicit for employment any person employed by the Company (or any Affiliate).

(e) Confidential Information.

(i) The Executive shall never, either during the Term of the Executive’s Employment by the Company or thereafter, use or employ for any purpose or disclose to any other individual or entity any Confidential Information. The Executive acknowledges and agrees that all Confidential Information is proprietary to the Company, is extremely important to the Company’s business, and that the use by or disclosure of such Confidential Information to a Competitor could materially and adversely affect the Company, its business and its customers.

(ii) For purposes of this Agreement, the term “Company” shall refer to the Company and subsidiary corporations, and any other corporation or entity that is owned, controlled or affiliated, directly or indirectly, by the Company or that is under common ownership or control with the Company.

(iii) For purposes of this Agreement, the term “Confidential Information” shall mean information in any form that is not generally known to the public that relates to the Company’s past, present or future operations, processes, products or services, or to

any research, development, manufacture, purchasing, accounting, engineering, marketing, merchandising, advertising, selling, leasing, financing or business methods or techniques (including without limitation customer lists, records of customer services, usages and requirements, sketches and diagrams of Company or customer facilities and like and similar information relating to actual or prospective customers) that is or may be related thereto. All information disclosed to the Executive or to which the Executive obtains access during any Term of the Executive’s Employment with the Company, whether pursuant to this Agreement or otherwise, or to which the Executive obtains access by reason of his employment by the Company, that the Executive has a reasonable basis to believe is or may be Confidential Information, shall be presumed for purposes of this Agreement to be Confidential Information.

Notices

All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered by hand or mailed, postage prepaid, by certified or registered mail, return receipt requested, and addressed to the Company:

American Pacific Corporation
3770 Howard Hughes Parkway, Suite 300
Las Vegas, NV 89109

and to Executive at:

The Executive’s address as set forth on the signature page to this Agreement.

Executive and the Company shall be obligated to notify the other party of any change in address. Notice of change of address shall be effective only when made in accordance with this Section.

Entire Agreement

This Agreement is intended to be the final, complete, and exclusive statement of the terms of Executive’s employment by The Company. Except for any stock option agreements and other agreements independently evidencing a loan or other obligation, to or by the parties hereto, this Agreement supersedes all other prior and contemporaneous agreements and statements pertaining in any manner to the employment of Executive and it may not be contradicted by evidence of any prior or contemporaneous statements or agreements. To the extent that the practices, policies, or procedures of Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control.

Amendments, Waivers

This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and by the CEO pursuant to authorization signed by

the CEO. No failure to exercise and no delay in exercising any right, remedy, or power under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power under this Agreement preclude any other or further exercise thereof, or the exercise of any other right, remedy, or power provided herein or by law or in equity.

10.

Assignment; Successors and Assigns

Executive agrees that he will not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall Executive’s rights be subject to encumbrance or the claims of creditors. Any purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets, or the assignment by the Company of this Agreement and the performance of its obligations hereunder to any successor in interest. In the event of a change in ownership or control of the Company, the terms of this Agreement will remain in effect and shall be binding upon any successor in interest. Notwithstanding and subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above.

11.

Severability; Enforcement

If any provision of this Agreement, or the application thereof to any person, place, or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable, or void, the remainder of this Agreement and such provisions as applied to other persons, places, and circumstances shall remain in full force and effect.

12.

Governing Law

The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the law of the State of Nevada.

13.

Arbitration

Any claim or controversy between Executive and Company or its successor arising under or in connection with this Agreement shall be settled by arbitration in accordance with the then current Employment Dispute Resolution Rules of the American Arbitration Association and shall be the exclusive remedy for all Arbitrable Claims. Company and Executive agree that arbitration shall be held in or near Clark County, Nevada, before an arbitrator licensed to practice law in the State of Nevada. The arbitrator shall have authority to award or grant legal, equitable, and declaratory relief. Such arbitration shall be final and binding on the parties. The Federal Arbitration Act shall govern the interpretation and enforcement of this section pertaining to Arbitration.

This Agreement to arbitrate survives termination of Executive’s employment.

In any dispute arising under or in connection with this Agreement, the prevailing party shall be entitled to recover all costs and reasonable attorney’s fees.

In the event Executive elects to file suit over a dispute covered by this Section, the Company shall have the option to seek an order from any court of competent jurisdiction, or proceed to defend the case filed by the Executive who agrees herein to waive trial by jury and proceed to a trial by judge without jury.

14.

Acknowledgment of Parties

The parties acknowledge (a) that they have consulted with or have had the opportunity to consult with independent counsel of their own choice concerning this Agreement, and (b) that they have read and understand the Agreement, are fully aware of its legal effect, and have entered into it freely based on their own judgment and not on any representations or promises other than those contained in this Agreement, with the exception of the Offer Letter dated September 5, 2006 which is incorporated herein by reference and attached hereto.

15.

Date of Agreement

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.


		“Company”
		AMERICAN PACIFIC CORPORATION

		/s/ John R. Gibson

		By: John R. Gibson

		Title: Chairman, President and CEO

		“Executive”

		/s/ Joseph Carleone

		Joseph Carleone