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”).




	 	1.	 	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.




	 	2.	 	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.




	 	3.	 	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AMPAC’s Board of Directors; and such consent may be withdrawn should the CEO or AMPAC’s Board of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.




	 	4.	 	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



2









 




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.




	 	5.	 	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:



3









 





                    (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



4









 




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.




	 	6.	 	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.



5









 





               (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



6









 




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.





	 	7.	 	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.




	 	8.	 	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.




	 	9.	 	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



7









 




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.



8









 





               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	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 

	 	 	 	 
	 

	 	 	 	 	 	 






9