<PAGE>
 
                                                                    EXHIBIT 10.1
                                                                                

                          AMERICAN PACIFIC CORPORATION
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN


                                   Article I
                                   ---------
                            ESTABLISHMENT & PURPOSE
                            -----------------------
                                        
1.1  Establishment.  Effective as of January 1, 1999, American Pacific
     -------------                                                    
     Corporation (the "Company"), has amended and restated this supplemental
     executive retirement plan known as the American Pacific Corporation
     Supplemental Executive Retirement Plan (the "Plan") for the benefit of a
     select group of highly compensated employees and their Beneficiaries.

     The rights and benefits of Participants who are active Participants in the
     Plan on or after the Effective Date of this restated Plan shall be as
     provided herein, except as specifically provided or changed by subsequent
     amendment.

1.2  Purpose.  The purpose of the Plan is to provide retirement income and
     -------                                                              
     supplemental death and disability benefits for eligible Participants to
     supplement benefits payable under the American Pacific Corporation Defined
     Benefit Pension Plan and to enable the Company to attract and retain
     certain key executives.


                                   Article II
                                   ----------
                                  DEFINITIONS
                                  -----------

Definitions.  As used herein, the following words and phrases have the meanings
-----------                                                                    
ascribed to them in Article II unless a different meaning is plainly required by
the context.  Some of the words and phrases used in the Plan are not defined in
this Article II, but, for convenience, are defined as they are introduced into
the text.  Words in the masculine gender shall be deemed to include the feminine
gender and words in the feminine gender shall be deemed to include the masculine
gender.  Any headings used herein are included for ease of reference only, and
are not to be construed so as to alter any of the terms of the Plan.

2.1  "Accrued Benefit" as of a specified date with respect to a Participant
      ---------------                                                      
     means a monthly benefit equal to (a) minus (b) below (but not less than
     zero) where

   (a) means an annual benefit equal to sixty percent (60%) of Final Average
       Compensation.

       Notwithstanding the above, for the sole Participant who was a Participant
       before the Effective Date of this restated Plan, (a) means an annual
       benefit equal to three percent (3%) of Final Average Compensation
       multiplied by his years of Credited Service (not to exceed 15) plus one
       and one-half percent (1.5%) of Final Average Compensation times his years
       of Credited Service (exceeding 15, but not to exceed 35).

       Except as follows, the benefit described in this subsection (a) shall be
       expressed as a Life Annuity commencing at the Participant's Normal
       Retirement Date.  If the Participant's Annuity Starting Date precedes his
       Normal Retirement Date, such benefit shall be expressed as a Life Annuity
       commencing at his Annuity Starting Date and shall be reduced as provided
       in Section 4.1 of the Plan.  If the Participant's Annuity Starting Date
       is later than his Normal Retirement Date, such benefit shall be expressed
       as a Life Annuity commencing at his Annuity Starting Date and shall be
       increased as provided in Section 4.14 (added by the Fourth Amendment) of
       the Qualified Plan.

                                       1
<PAGE>
 
   (b) means the vested benefit payable to the Participant under the Qualified
       Plan.  Except as follows, the amount described in this subsection shall
       be expressed as a Life Annuity commencing on the Participant's Normal
       Retirement Date.  If the Participant's Annuity Starting Date precedes his
       Normal Retirement Date, the benefit described in this subsection shall be
       expressed as a Life Annuity commencing at his Annuity Starting Date and
       shall be reduced as provided in Section 4.03 or 4.04 (as applicable) of
       the Qualified Plan.  If the Participant's Annuity Starting Date is later
       than his Normal Retirement Date, such benefit shall be expressed as a
       Life Annuity commencing at his Annuity Starting Date and shall be
       increased as provided in Section 4.14 (added by the Fourth Amendment) of
       the Qualified Plan.

2.2  "Actuarial Equivalent" shall mean a benefit or benefits which are of equal
      --------------------                                                     
     value at the date of determination to the benefits for which they are to be
     substituted. Actuarial Equivalence shall be based on the interest and
     mortality tables used to determine actuarial equivalence under Section 1.01
     of the Qualified Plan.

2.3  "Affiliated Group" shall mean the Company and all other entities aggregated
      ----------------                                                          
     with the Company under Sections 414(b), (c), (m), or (o) of the Code but
     only in the period during which such other entity is so aggregated with the
     Company.

2.4  "Annuity Starting Date" shall mean the first day of the first period for
      ---------------------                                                  
     which an amount is payable as an annuity, or in the case of a benefit not
     payable in the form of an annuity, the first day on which all events have
     occurred which entitle the Participant to such a benefit.

2.5  "Beneficiary" shall have the same meaning as set forth in Section 1.04 of
      -----------                                                             
     the Qualified Plan.

2.6  "Board of Directors" shall mean the Board of Directors of American Pacific
      ------------------                                                       
     Corporation.

2.7  "Code" shall mean the Internal Revenue Code of 1986, as amended.  Reference
      ----                                                                      
     to a section of the Code shall include that section and any comparable
     section or sections of any future legislation that amends, supplements, or
     supersedes such section.

2.8  "Company" shall mean American Pacific Corporation.
      -------                                          

2.9  "Compensation" shall mean the Participant's total wages and salary.
      ------------                                                       
     Bonuses are included in the year earned (even though payment might not
     occur until the following calendar year) and are prorated over the months
     worked during that year. Earnings after Normal Retirement Age are not
     included.

2.10 "Credited Service" shall mean the sum of all Credited Service earned under
      ----------------                                                         
     the Qualified Plan determined as set forth in Section 1.12 of the Qualified
     Plan, including full and partial years. A partial year is calculated in
     terms of completed calendar months.

2.11 "Early Retirement Date" shall mean the first day of the month next
      ---------------------                                            
     following the date the participant elects to receive his Retirement Benefit
     under the Plan where such date is after the Participant has both reached
     age fifty-five (55) and completed at least ten (10) years of Vesting
     Service but is prior to the Participant's attainment of his Normal
     Retirement Age.

2.12 "Effective Date" shall mean January 1, 1999.
      --------------                             

2.13 "Employer" shall mean American Pacific Corporation and any member of the
      --------                                                               
      Affiliated Group which adopts this Plan.

                                       2
<PAGE>
 
2.14  "Final Average Compensation" shall mean the average annualized
       --------------------------                                   
      Compensation earned during the Participant's thirty-six (36) consecutive
      months of employment with the Company that produces the highest average.

2.15  "Hour of Service" shall have the same meaning as set forth in Section 1.21
       ---------------                                                          
      of the Qualified Plan.

2.16  "Late Retirement Date" shall mean the first day of the month coinciding
       --------------------                                                  
      with or next following the date a Participant terminates employment, where
      such date is after his Normal Retirement Date.

2.17  "Life Annuity" shall mean a series of monthly installments which will
       ------------                                                        
      continue for the lifetime of the Participant and will cease upon his
      death.

2.18  "Normal Retirement Date" shall have the same meaning as set forth in
       ----------------------                                             
      Section 1.33 of the Qualified Plan.

2.19  "Participant" shall mean any employee of an Employer who becomes eligible
       -----------                                                             
      to participate in the Plan pursuant to Article III and who continues to be
      entitled to any benefits under the Plan.

2.20  "Plan" shall mean the American Pacific Corporation Supplemental Executive
       ----                                                                    
      Retirement Plan.

2.21  "Plan Year" shall mean the twelve (12) consecutive month period beginning
       ---------                                                               
      on January 1 and ending on the next following December 31.

2.22  "Qualified Plan" shall mean the American Pacific Corporation Defined
       --------------                                                     
      Benefit Pension Plan. In the event that the Qualified Plan is subsequently
      amended, reference to a Section of the Qualified Plan shall be deemed to
      refer to the operational successor of such Section.

2.23  "Rabbi Trust" shall mean a trust described in Code Section 671, which
       -----------                                                         
      shall be established in connection with this Plan.

2.24  "Retirement" shall mean termination of employment with all Employers at a
       ----------                                                              
      time when the Participant is eligible for an Early, Normal, Late, or
      Disability Retirement Benefit.

2.25  "Retirement Date" shall mean the Participant's Normal, Early, or Late
       ---------------                                                     
      Retirement Date.
  
2.26  "Spouse" shall mean the person to whom the Participant is legally married
       ------                                                                  
      on his Annuity Starting Date, or, if earlier on his date of death.

2.27  "Vesting Service" shall mean the Participant's "Continuous Employment" as
       ---------------                                                         
      that term is defined in Section 6.01 of the Qualified Plan


                                  Article III
                                  -----------
                               PLAN PARTICIPATION
                               ------------------

3.1  Eligibility to Participate in the Plan.  Each individual (and only such
     --------------------------------------                                 
     individuals) designated in Appendix A shall be eligible to participate in
     the Plan.
   
3.2  Participation.  A Participant shall remain a Participant so long as he is
     -------------                                                            
     entitled to current or contingent benefits under the Plan, but shall cease
     to be a Participant if he terminates employment with all Employers prior to
     the date he becomes eligible for a vested benefit under Article IV of the
     Plan. If a Participant ceases to be an employee after becoming eligible for
     a vested benefit, he 

                                       3
<PAGE>
 
     shall continue to be a Participant only with respect to his vested Accrued
     Benefit determined at his termination of employment. If he is subsequently
     reemployed, he shall only accrue an additional benefit or earn additional
     Vesting Service if he is again designated in Appendix A. Should a
     Participant cease to be an employee before earning a vested benefit, but
     later become re-employed by an Employer, he shall again become a
     Participant only if he is again designated in Appendix A.

3.3  Select Group of Employees.  The Plan is intended to qualify as a plan
     -------------------------                                            
     maintained by the Employers primarily for the purpose of providing deferred
     compensation for a select group of highly compensated employees, and, as
     such, to be exempt from certain provisions of the Employee Retirement
     Income Security Act of 1974, as amended. If the Company determines based on
     subsequent authority or if an agency or court of competent jurisdiction
     determines that the Plan benefits any person other than a member of the
     select group of highly compensated employees, the participation of each
     employee who is determined not to be included in such group shall be
     terminated immediately and such employee shall cease to accrue any benefit
     under the Plan. Provided, that in the case of a determination by an agency
     or court, the employee's participation shall terminate only after the
     period for appeal of such determination has elapsed. As soon as practicable
     after such determination, each such employee shall receive a single sum
     distribution equal to the Actuarial Equivalent of the benefit he would
     receive at his Normal Retirement Date if his employment terminated on the
     date his participation terminates.


                                   Article IV
                                   ----------
                                    BENEFITS
                                    --------

4.1  Retirement Benefits.  Except as otherwise provided herein, retirement
     -------------------                                                  
     benefits will be computed and paid as follows:

     (a) Normal Retirement Benefit shall be equal to the Participant's Accrued
         -------------------------                                            
         Benefit determined at the Participant's Normal Retirement Date and
         commencing on such date.

     (b) Early Retirement Benefit shall be equal to the Participant's Accrued
         ------------------------                                            
         Benefit determined at the Participant's Early Retirement Date and
         commencing on such date, reduced as follows:

         (i)  with respect to the sole Participant who was a Participant prior
              to the Effective Date of this restated Plan, the early Retirement
              benefit shall be reduced five percent (5%) for each year that
              payments begin before age sixty-two (62) (prorated for fractional
              years) and

         (ii) with respect to all other participants, the Early Retirement
              Benefit shall be reduced as provided in Section 4.03 or 4.04 (as
              applicable) of the Qualified Plan.

     (c) Late Retirement Benefit shall be equal to the Participant's Accrued
         -----------------------                                            
         Benefit (after any applicable increase under Section 2.1 of the Plan)
         determined at the Participant's Late Retirement Date and commencing on
         such date.

4.2  Termination of Service.  A Participant shall be entitled to his monthly
     ----------------------                                                 
     retirement benefit if he terminates before he is eligible to receive a
     Retirement Benefit, provided that the Participant meets the vesting
     requirements of Article V. The Participant's benefit on his termination of
     employment shall be the Participant's vested Accrued Benefit determined at
     the date of termination of employment, commencing as provided in Section
     4.5.

                                       4
<PAGE>
 
4.3  Form of Retirement Benefit.  Except as provided below, the Accrued Benefit
     --------------------------                                                
     under Section 4.1 or 4.2 of this Plan shall be paid in the form elected by
     the Participant for payment of his benefit under the Qualified Plan.
     Benefits payable under this section other than as a Life Annuity shall be
     the Actuarial Equivalent of the benefit payable in the form of a Life
     Annuity. However, for the sole Participant who was a Participant prior to
     the Effective Date of this restated Plan, the Accrued Benefit under Section
     4.1 of this Plan shall be paid in the form of an annuity for the life of
     the Participant.

     Notwithstanding the above, a Participant who separates from service or
     retires with a vested Accrued Benefit shall be paid the Actuarial
     Equivalent of such benefit in a single sum if such Actuarial Equivalent
     does not exceed $5,000. If the Participant subsequently resumes
     participation in the Plan, such Participant's benefit at his later date of
     termination shall be reduced by his prior Accrued Benefit determined as of
     the date of his previous retirement or termination.

4.4  Death Benefit.  If death occurs before the Participant's Annuity Starting
     -------------                                                            
     Date but after having satisfied the requirements for vested benefit under
     Section 5.1 of this Plan, and the Participant has a surviving spouse, a
     monthly benefit for life equal to 50% of the vested benefit the Participant
     would have received had he retired immediately before his death, without
     any reduction for early payment, shall be paid to the surviving spouse. If
     the surviving spouse is more than five (5) years younger than the
     Participant, benefits will be reduced two percent (2%) for each full year
     that the age difference exceeds five (5) years.

4.5  Time of Payment.  Payment of a Participant's benefit under this Plan shall
     ---------------                                                           
     commence on the same day that the Participant's (or his Beneficiary's)
     benefit commences under the Qualified Plan.

4.6  Reemployment Following Retirement or Termination of Employment.  If a
     --------------------------------------------------------------       
     Participant begins to receive a benefit following termination of employment
     or retirement and is subsequently reemployed on a full-time basis by the
     Employer, benefit payments shall cease during the period of reemployment.
     If a Participant begins to receive a benefit following retirement pursuant
     to Section 4.1 or 4.2, and is subsequently reemployed by the Employer on a
     part-time basis, as defined by personnel practices as uniformly and
     consistently applied, he shall continue receiving benefit payments. Upon
     the resumption of employment with the Employer, benefits shall continue to
     accrue in accordance with the terms of the Plan but only if the Participant
     is again designated in Appendix A. Future benefits paid to such Participant
     shall be adjusted on an Actuarial Equivalent basis to reflect the value of
     any benefits previously paid.


                                   Article V
                                   ---------
                                    VESTING
                                    -------

5.1  Vesting.  A Participant shall be vested in his Accrued Benefit in
     -------                                                          
     accordance with the schedule below that provides the lower Vested
     Percentage.

<TABLE>
<CAPTION>
 
             Schedule A                                   Schedule B
             ----------                                   -----------
Vesting Service      Vested Percentage    Age + Vesting Service   Vested Percentage
<S>                  <C>                  <C>                     <C>
        5                  50%                      50                  50%
        6                  60%                      51                  60%
        7                  70%                      52                  70%
        8                  80%                      53                  80%
        9                  90%                      54                  90%
        10                100%                      55                 100%
</TABLE>

                                       5
<PAGE>
 
                                   Article VI
                                   ----------
                              PLAN ADMINISTRATION
                              -------------------

6.1  Administration of the Plan.  The Plan shall be administered by a Plan
     --------------------------                                           
     Administrator, which shall be appointed by the Board of Directors, subject,
     however, to any action taken by the Board of Directors in respect to the
     Plan. The Plan Administrator shall be responsible for the administration of
     the Plan and shall have all of the powers and duties allocated to the Plan
     Administrator set forth in Article VII of the Qualified Plan including,
     without limitation, the discretionary power to determine eligibility for
     participation in the Plan and to construe the terms of the Plan. The Plan
     Administrator shall file with the Department of Labor and distribute to the
     Participants any reports and other information required by applicable law
     and shall be entitled to rely conclusively upon all tables, valuations,
     certificates, opinions and reports furnished by any actuary, accountant,
     controller, counsel or other person employed or engaged by it with respect
     to the Plan.


                                  Article VII
                                  -----------
                           AMENDMENT AND TERMINATION
                           -------------------------

7.1  Amendment and Termination of the Plan.  The Board of Directors may amend or
     -------------------------------------                                      
     terminate the Plan at any time. However, no such amendment or termination
     shall deprive any Participant or Beneficiary of any portion of any
     Retirement or Death Benefit which has become vested prior to the effective
     date of such amendment or termination or which would be payable if the
     Participant terminated for any reason, including death, on such effective
     date.


                                  Article VIII
                                  ------------
                               GENERAL PROVISIONS
                               ------------------
                                        
8.1  Nature of Company's Obligation.  Benefits under this Plan shall be paid
     ------------------------------                                         
     solely from the general assets of the Company. The Company's obligation
     under this Plan shall be limited to an unfunded and unsecured promise to
     pay. The rights of a Participant and his or her spouse or Beneficiary with
     respect to benefits under this Plan are the same of those of an unsecured
     creditor of the Company, and neither the Participant nor his or her spouse
     or Beneficiary shall have a secured interest in any assets that may be
     designated by the Company to pay such benefits.

8.2  Rabbi Trust.  The Company shall establish a trust described in Code Section
     -----------                                                                
     671 with respect to which the Company is the grantor (the "Rabbi Trust") to
     hold assets in connection with this Plan. However, the Company shall not be
     obligated to make contributions to the Rabbi Trust or otherwise fund its
     financial obligations under the Plan.

8.3  Nonalienation of Benefits under this Plan.  Except for claims of
     -----------------------------------------                       
     indebtedness owing to an Employer, the interests of Participants and their
     Beneficiaries are not subject to claims, indebtedness, attachment,
     execution, garnishment, or other legal or equitable process and such
     interests may not be voluntarily or involuntarily sold, transferred or
     assigned. Any attempt by a Participant or his Beneficiary or any other
     person to sell, transfer, alienate, assign, pledge, anticipate, encumber,
     charge, or otherwise dispose of any right to benefits payable hereunder
     shall be void. The restrictions set out in the preceding subsection shall
     not apply to an order determined to be qualified domestic relations order
     as defined in Section 414(p) of the Code.

8.4  Plan not a Contract of Employment.  This Plan shall not be deemed to
     ---------------------------------                                   
     constitute a contract between any Employer and any Participant or to be a
     consideration or an inducement for the employment of any Participant or
     Employee. Nothing contained in this Plan shall be deemed to 

                                       6
<PAGE>
 
     give any Participant or Employee the right to be retained in the service of
     any Employer or to interfere with the right of any Employer to discharge
     any Participant or employee at any time regardless of the effect which such
     discharge shall have upon such individual as a Participant in the Plan.

8.5  Required Notification to Plan Administrator.  Each Participant entitled to
     -------------------------------------------                               
     benefits hereunder shall file with the Plan Administrator from time to time
     in writing his post office address and each change of post office address,
     and any check representing payment hereunder and any communication
     addressed to a Participant or a former Participant hereunder at his last
     address filed with the Plan Administrator, or if no such address has been
     filed, then at his last address as indicated on the records of the Company
     shall be binding on such person for all purposes of the Plan, and neither
     the Plan Administrator nor the Company or other payor shall be obliged to
     search for or ascertain the location of any such person. If the Plan
     Administrator for any reason is in doubt as to the address of any
     Participant or former Participant entitled to benefits hereunder or as to
     whether benefit payments are being received by the person entitled thereto,
     it shall, by registered mail addressed to the person concerned at his
     address last known to the Plan Administrator, notify such person that:

      (a) All unmailed and future retirement income payments shall be henceforth
          withheld until he provides the Plan Administrator with evidence of his
          continued life and his proper mailing address; and

      (b) His right to any retirement income whatsoever shall, at the option of
          the Plan Administrator, be canceled forever, if, at the expiration of
          two (2) years from the date of such mailing, he shall not have
          provided the Plan Administrator with evidence of his continued life
          and his proper mailing address.

8.6  Successors.  The provisions of this Plan shall be binding upon each
     ----------                                                         
     Employer, and their successors and assigns and upon each Participant and
     his heirs, spouses, estates, and legal representatives.

8.7  Facility of Payment.  Whenever and as often as any person entitled to
     -------------------                                                  
     payments hereunder shall be under a legal disability, or in the sole
     judgment of the Plan Administrator shall otherwise be unable to apply such
     payments to his own best interest and advantage, the Plan Administrator, in
     the exercise of its discretion, may direct all or any portion of such
     payments to be made to any person receiving benefits on behalf of the
     Participant or other Beneficiary under Section 10.09 of the Qualified Plan.

8.8  Required Information to Plan Administrator.  Each Participant will furnish
     ------------------------------------------                                
     to the Plan Administrator such information as the Plan Administrator
     considers necessary or desirable for purposes of administering the Plan,
     and the provisions of the Plan respecting any payments thereunder are
     conditional upon the Participant's furnishing promptly such true, full and
     complete information as the Plan Administrator may request. Each
     Participant will submit proof of his age to the Plan Administrator at such
     time as required by the Plan Administrator. The Plan Administrator will, if
     such proof of age is not submitted as required, use as conclusive evidence
     thereof such information as is deemed by it to be reliable, regardless of
     the lack of proof, or the misstatement of the age of persons entitled to
     benefits hereunder, by the Participant or otherwise, will be in such manner
     as the Plan Administrator deems equitable. Any notice or information which,
     according to the terms of the Plan or the rules of the Plan Administrator,
     must be filed with the Plan Administrator, shall be deemed so filed if
     addressed and either delivered in person or mailed to and received by the
     Plan Administrator, in care of the Company at:

                                       7
<PAGE>
 
                          American Pacific Corporation
                                   Suite 300
                           3770 Howard Hughes Parkway
                              Las Vegas, NV  89109

8.9   Claims Procedure.  In the event that any claim for benefits, which must
      ----------------                                                       
      initially be submitted in writing to the Plan Administrator, is denied (in
      whole or in part) hereunder, the claimant shall receive from the Company
      notice in writing, written in a manner calculated to be understood by the
      claimant, setting forth the specific reasons for denial, with specific
      reference to pertinent provisions of this Agreement. Such notice shall be
      provided within 90 days of the Participant's claim for benefits. Any
      disagreements about such interpretations and construction may be appealed
      within 90 days to the Board of Directors. The Board shall respond to such
      appeal within 60 days with a notice in writing fully disclosing its
      decision and the reasons therefore. No member of the Board of Directors
      shall be liable to any person for any action taken hereunder except those
      actions undertaken with lack of good faith.

8.10  Controlling State Law.  To the extent not superseded by the laws of the
      ---------------------                                                  
      United States, the Plan will be construed and enforced according to the
      laws of the State of Delaware.

8.11  Severability.  In case any provision of this Plan shall be held illegal or
      ------------                                                              
      invalid for any reason, such illegality or invalidity shall not affect the
      remaining provisions of the Plan, and the Plan shall be construed and
      enforced as if such illegal and invalid provisions had never been set
      forth.

8.12  Adoption of Plan.  Any Employer may adopt this Plan for all or a portion
      ----------------                                                        
      of its employees, provided that the Board of Directors of the Company
      approves such participation. The administrative powers and control of the
      Company as provided in the Plan shall not be deemed diminished under the
      Plan by reason of the participation of other companies in the Plan.


IN WITNESS WHEREOF, American Pacific Corporation has adopted this plan on this
12th day of   January     , 1999.
----        -------------------- 

ATTEST (SEAL):                                     AMERICAN PACIFIC CORPORATION



                                                   By /s/ DAVID N. KEYS
                                                      ---------------------

                                       8
<PAGE>
 
                                   APPENDIX A
                                   ----------
                                        
                               PLAN PARTICIPANTS

Participant                                        Social Security Number
-----------                                        ----------------------
Fred D. Gibson, Jr.                                     ###-##-####
(sole Participant prior to January 1, 1999)
 
John R. Gibson                                          ###-##-####
 
David Keys                                              ###-##-####
 

                                       9