Document:

exv10w1

EXHIBIT 10.1

SETTLEMENT AGREEMENT

     This SETTLEMENT AGREEMENT (this “Agreement”) is made and entered into as of December
14, 2010, by and among GOLCONDA CAPITAL PORTFOLIO, L.P., a Texas limited partnership, GOLCONDA
CAPITAL MANAGEMENT, LLC, a Texas limited liability company and the general partner of Golconda
Capital Portfolio, L.P., and WILLIAM D. SUMMITT (the foregoing entities and individuals
collectively, the “Golconda Group” and each individually, a “Member”) and AMERICAN
PACIFIC CORPORATION, a Delaware corporation (the “Company”).

     WHEREAS, Golconda Capital Portfolio, L.P. and William D. Summitt submitted a letter, dated
October 26, 2010 (the “Nomination Letter”), of their intent to nominate William D. Summitt,
Charlotte E. Sibley, Bart Weiner and David B. Lee (the “Original Four Nominees”) for
election to the Company’s Board of Directors (the “Board”) at the 2011 annual meeting of
stockholders of the Company (such meeting, including any adjournment thereof, the “2011 Annual
Meeting”);

     WHEREAS, on November 12, 2010, the Chairman of the Board of the Company responded to the
Nomination Letter, which response letter was filed as an exhibit to a Current Report on Form 8-K
filed with the U.S. Securities and Exchange Commission (“SEC”) on November 12, 2010;

     WHEREAS, the Company has announced an intention to recommend to the Company’s stockholders
adoption at the 2011 Annual Meeting of an amendment to the Company’s certificate of incorporation
to reduce the percentage of votes required to elect directors from 80% to a simple majority; and

     WHEREAS, the Company, after consultation with a number of its stockholders, including Members
of the Golconda Group, has determined that the interests of the Company and its stockholders would
be best served at this time by, among other things, resolving issues regarding corporate governance
by mutual and constructive agreement, rather than by a proxy solicitation contest and the
substantial expense, disruption of Company activities, distraction of management and adverse
publicity that may result therefrom.

     NOW, THEREFORE, in consideration of and reliance upon the mutual representations, warranties,
covenants and agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Board Composition.

     (a) Prior to December 31, 2010, and in accordance with the certificate of incorporation and
bylaws of the Company, the Board shall increase its size to twelve (12) members. Concurrently with
or promptly following the increase in the size of the Board, the Company shall appoint to the Board
Charlotte E. Sibley, as a Class B director, and Bart Weiner, as a Class C director, after a
determination by the Board’s Corporate Governance Committee that such individuals are qualified and
are independent under the rules and regulations of the SEC and The NASDAQ Stock Market LLC,
provided, however, that if the Corporate Governance Committee does not find such
individuals qualified and independent or if such individuals should withdraw their nomination prior
to accepting their initial appointment to the Board, representatives of the Board and the Golconda
Group shall work together in good faith to propose alternative director nominees to the Board
acceptable to the Board and to the Golconda Group and determined to be qualified and independent by
the Corporate Governance Committee. The Company shall nominate Ms. Sibley for re-election to the
Board at the 2011 Annual Meeting and Mr. Weiner for re-election to the Board at the 2012 annual
meeting of stockholders of the Company (such meeting, including any adjournment thereof, the
“2012 Annual Meeting”). For purposes of this Agreement, Charlotte E. Sibley and Bart
Weiner, or the director nominees in lieu thereof determined to be qualified and independent and
appointed to the Board pursuant to the terms of this Section 1(a), are hereinafter referred to as
the “New Nominees.”

     (b) The Company shall, prior to each of the 2011 Annual Meeting and 2012 Annual Meeting, file
a definitive proxy statement with the SEC which includes such information regarding the applicable
New Nominee nominated for re-election as is required by federal securities laws in connection with
his or her nomination by the Company; provided that it shall be a precondition to each such
nomination that the New Nominees cooperate and provide such required information to the Company as
the Company may request. The Board shall recommend that

 

 

the Company’s stockholders vote directly or by proxy in favor of, and shall otherwise use
reasonable commercial efforts to cause, the election of Charlotte E. Sibley at the 2011 Annual
Meeting and of Bart Weiner at the 2012 Annual Meeting.

     (c) The New Nominees, upon appointment and continuing through their possible re-election to
the Board, will serve as integral members of the Board and be governed by the same protections and
obligations regarding confidentiality, conflicts of interests, fiduciary duties, trading and
disclosure policies and other governance guidelines, including the Company’s Code of Conduct, and
shall have the same rights and benefits, including (but not limited to) with respect to insurance,
indemnification, compensation and fees, as are applicable to all independent directors of the
Company.

     (d) For the avoidance of doubt, the Company intends to nominate for election to the Board:

     (i) at the 2011 Annual Meeting, in addition to four (4) Class B directors (including Charlotte
E. Sibley or other applicable New Nominee), (i) two (2) Class A directors and (ii) one (1) Class C
director;

     (ii) at the 2012 Annual Meeting, in addition to Bart Weiner or other applicable New Nominee,
as a Class C director, Charlotte E. Sibley or other applicable New Nominee (in the event such
person did not receive an 80% vote of stockholders at the 2011 Annual Meeting) as a Class B
director, together with such other individuals as the Board deems appropriate; and

     (iii) at the 2013 annual meeting of stockholders of the Company (such meeting, including any
adjournment thereof, the “2013 Annual Meeting”), and subsequent annual meetings of the
stockholders of the Company, such individuals as the Board deems appropriate.

     (e) The Company shall not increase the size of the Board beyond twelve (12) members without
the approval of the Company’s stockholders. The Company will announce a current intention of the
Board to reduce the size of the Board over time through the non-replacement of current directors
who retire or are otherwise unable to serve.

     (f) In furtherance of its recent public disclosures, the Company shall include and the Board
shall recommend the Company’s existing proposal to reduce the percentage of votes required to elect
directors from 80% to a simple majority in its proxy statement for the 2011 Annual Meeting.

2. Withdrawal of Proposals and Termination of Solicitations.

     (a) Golconda Capital Portfolio, L.P. and William D. Summitt hereby irrevocably withdraw the
nominations of the Original Four Nominees for election at the 2011 Annual Meeting. The Golconda
Group and each Member thereof shall immediately cease, and shall cause each of their affiliates,
associates and Representatives (each as defined below) to immediately cease any and all efforts
with respect to the nominations and election of the Original Four Nominees and, to the extent
applicable, the solicitation of proxies in connection therewith.

     (b) From the date hereof until November 28, 2012, no Member shall make, and each shall cause
each of its affiliates, associates and Representatives to not make, any objection to the election
of the Company’s director nominees (which nominees, for the avoidance of doubt, shall include the
New Nominees pursuant to Section 1 above) at the 2011 Annual Meeting and the 2012 Annual Meeting.
Each Member shall, and shall cause each of its associates, affiliates and Representatives to, vote
all shares of common stock of the Company that it is entitled to vote at the 2011 Annual Meeting,
and those that it is entitled to vote at the 2012 Annual Meeting, in favor of (i) the election of
each of the Company’s director nominees (which nominees, for the avoidance of doubt, shall include
the New Nominees pursuant to Section 1 above at the 2011 Annual Meeting and 2012 Annual Meeting)
and (ii) the proposal put forth by the Company for a vote by stockholders and recommended for
approval by the Board at the 2011 Annual Meeting as contemplated in Section 1(f) above.

     (c) Promptly after the date of this Agreement, the Golconda Group shall disable access to and
remove from the internet, including any servers and caches within its control, the domain
www.americanpacificvalue.com and all websites with similar content, all sub-domains thereof and all
information, data and materials thereon, none of which

Exhibit 10.1 Page 2

 

shall be re-posted at any time at the same or different domain by any Member of the Golconda
Group or its affiliates, associates or Representatives.

     (d) Each Member agrees not to allege that the Company’s preliminary or definitive proxy
statement, or any preliminary or additional soliciting materials filed with the SEC in connection
with the 2011 Annual Meeting or 2012 Annual Meeting violates the Securities Exchange Act of 1934,
as amended, or any of the rules and regulations promulgated thereunder (the “Exchange
Act”), or contains any untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein not misleading.

3. Standstill.

     Without the prior written consent of the Board, no Member shall, and each shall cause each of
its respective affiliates, associates and Representatives not to, do any of the following for a
period (the “Restricted Period”) commencing on the date hereof and ending on November 28,
2012 (provided that if any such affiliate, associate or Representative violates this
Section 3 while not acting on behalf of any Member, the Golconda Group, upon becoming aware of such
violation, shall use its reasonable best efforts to promptly remedy or cure such violation;
provided, further, that nothing in this Section 3 shall require any Member of the
Golconda Group who is also a stockholder of the Company to vote in any way (except as required by
Section 2(b) of this Agreement) on matters submitted to stockholders of the Company for their
approval):

     (a) acquire, offer or agree to acquire (except by way of stock dividends or other
distributions or offerings made available to holders of voting securities of the Company generally
on a pro rata basis), directly or indirectly, whether by purchase, tender or exchange offer,
through the acquisition of control of another Person (as defined below), by joining a partnership,
limited partnership, syndicate or other “group” (within the meaning of Section 13(d)(3) of the
Exchange Act), through swap or hedging transactions or otherwise, any voting securities of the
Company or any voting rights decoupled from the underlying voting securities which would result in
the Golconda Group (together with any other Person or “group” referred to in this Section 3(a))
owning, controlling or otherwise having any ownership or voting interest in more than five (5)
percent of the outstanding shares of common stock of the Company;

     (b) (i) engage, or in any way participate, directly or indirectly, in any “solicitation” (as
such term is defined in Rule 14a-1(l) under the Exchange Act) of proxies or consents in any
“election contest” with respect to the Company’s directors (regardless of whether it involves the
election or removal of directors of the Company), (ii) seek to advise, encourage or influence any
Person with respect to the voting of any voting securities of the Company in any “election contest”
with respect to the Company’s directors (regardless of whether it involves the election or removal
of directors of the Company), (iii) initiate, propose or otherwise “solicit” (as such term is
defined in Rule 14a-1(l) under the Exchange Act) stockholders of the Company for the approval of
stockholder proposals in connection with the election or removal of directors of the Company, or
(iv) induce or attempt to induce any other Person to initiate any such stockholder proposal;
provided, however, that nothing herein shall limit the ability of the Golconda
Group to issue any communication contemplated by Rule 14a-1(l)(2)(iv) under the Exchange Act
stating how they intend to vote and the reasons therefor with respect to any extraordinary
transaction of any kind or nature between the Company and any third party unaffiliated with the
Golconda Group; provided, further, that nothing herein shall limit the ability of
the Golconda Group to engage, or in any way participate, directly or indirectly, in any
“solicitation” of proxies or consents relating to a transaction of any kind or nature between the
Company and any third party unaffiliated with the Golconda Group that is being submitted for a vote
of the stockholders;

     (c) form, join or in any way participate in a partnership, syndicate, or other group,
including without limitation any “group” as defined under Section 13(d)(3) of the Exchange Act,
with respect to any voting securities of the Company in connection with any “election contest” with
respect to the Company’s directors (regardless of whether it involves the election or removal of
directors of the Company), other than, with respect to Golconda Capital Portfolio, L.P., Golconda
Capital Management, LLC and William D. Summitt, a “group” that includes all or some lesser number
of them but does not include any other Persons;

     (d) deposit any Company voting securities in any voting trust or subject any Company voting
securities to any arrangement or agreement with respect to the voting thereof, except as expressly
set forth in this Agreement;

Exhibit 10.1 Page 3

 

     (e) seek, alone or in concert with others, (1) to call a meeting of stockholders or solicit
consents from stockholders or conduct a nonbinding referendum of stockholders, (2) to obtain
representation on the Board except as otherwise expressly provided in this Agreement, (3) to effect
the removal of any member of the Board, (4) to make a stockholder proposal at any meeting of the
stockholders of the Company except as otherwise expressly provided in this Agreement, or (5) to
amend any provision of the Company’s certificate of incorporation or bylaws;

     (f) effect or seek to effect (including, without limitation, by entering into any discussions,
negotiations, agreements or understandings whether or not legally enforceable with any Person),
offer or propose to effect, cause or participate in, or in any way assist or facilitate any other
Person to effect or seek, offer or propose to effect or participate in, (i) any acquisition of more
than fifteen (15) percent of any securities, or any material assets or businesses, of the Company
or any of its subsidiaries, (ii) any tender offer or exchange offer, merger, acquisition, share
exchange or other business combination involving more than fifteen (15) percent of any of the
voting securities or any of the material assets or businesses of the Company or any of its
subsidiaries, or (iii) any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Company or any of its subsidiaries or any material
portion of its or their businesses, provided that this Section 3(f) shall not prohibit
actions in respect of an acquisition of, offer to acquire or agreement to acquire, all of the
outstanding shares of common stock of the Company;

     (g) enter into any discussions, negotiations, agreements or understandings with any Third
Party (as defined below) with respect to the foregoing, or advise, assist, encourage or seek to
persuade any Third Party to take any action with respect to any of the foregoing, or otherwise take
or cause any action inconsistent with any of the foregoing, through any medium or method
whatsoever, including without limitation, e-mail, printed matter, oral communication, or use of
social media.

     For purposes of this Agreement, the terms “affiliate” and “associate” shall
have the respective meanings set forth in Rule 12b-2 under the Exchange Act, and the term
“Third Party” shall mean any Person that is not (i) a party to this Agreement, (ii) a
director or officer of the Company, or (iii) a legal counsel to any party to this Agreement. For
the purposes of this Agreement, the term “Person” shall mean any individual, partnership,
corporation, limited liability company, or other entity, group, syndicate, trust, government or
agency thereof, or any other association or entity.

     4. Expenses. Following the execution of this Agreement by the Golconda Group and by
the Company, the Company shall promptly reimburse William D. Summitt, Golconda Capital Portfolio,
L.P. and Golconda Capital Management, LLC for the reasonable, documented and actual out-of-pocket
fees and expenses incurred by them on or prior to the date hereof in connection with (i) the
nominations and potential solicitation of proxies in favor of the election of the Original Four
Nominees, including but not limited to travel expenses, any fees related to the identification and
selection of the Original Four Nominees and the preparation and filing of all filings with the SEC
and (ii) the negotiation of this Agreement and the preparation and filing of all filings with the
SEC required hereunder, not to exceed $90,000 in the aggregate. All other fees and expenses
incurred by a party hereto, whether in connection with the matters contemplated by this Agreement
or otherwise, shall be borne by such party.

     5. Confidentiality. Each Member acknowledges that information concerning the business
and affairs of the Company (“Confidential Information”) may be disclosed to the Golconda
Group by the Company or its subsidiaries, or by the Company’s or its subsidiaries’ directors
officers, employees, agents, consultants, advisors or other representatives, including legal
counsel, accountants and financial advisors (collectively, “Representatives”). Each Member
agrees that the Confidential Information will be kept confidential and that the Members and their
Representatives will not disclose any of the Confidential Information in any manner whatsoever
without the specific prior written consent of the Company unless disclosure is required by
applicable laws, regulations or valid legal process; provided, however, that the
term “Confidential Information” shall not include information that (a) was in or enters the public
domain, or was or becomes generally available to the public, other than as a result of disclosure
by any Member or any Representative thereof or (b) was independently acquired by the Member without
violating any of the obligations of any Member, the Golconda Group or their Representatives under
this Agreement or any other confidentiality agreement, or under any other contractual, legal,
fiduciary or binding obligation of any Member or any of their Representatives. Each Member agrees
to undertake reasonable precautions to safeguard and protect the confidentiality of the
Confidential Information, to accept responsibility for any breach of this Section 5 by any
Representatives of any Members, including taking all reasonable measures (including but not limited
to court

Exhibit 10.1 Page 4

 

proceedings) to restrain such Representatives from prohibited or unauthorized disclosures or
uses of the Confidential Information.

     6. Press Release and Other Public Disclosures. As soon as practicable on or after the
date hereof, the Company shall announce this Agreement and the material terms hereof by means of a
press release in the form attached hereto as Exhibit A. None of the parties hereto shall
make any public statements (including in any filing with the SEC or any other regulatory or
governmental agency, including any stock exchange) that are inconsistent with, or otherwise
contrary to, the statements in the press release issued pursuant to this Section 6 or the terms of
this Agreement.

     7. Representations and Warranties.

     (a) Each Member of the Golconda Group, on behalf of himself or itself, as applicable,
represents and warrants that (i) such Member has the power and authority to execute and deliver
this Agreement and to perform all such Member’s obligations and consummate the transactions
contemplated hereby, and (ii) this Agreement has been duly and validly authorized, executed and
delivered by such Member, constitutes a valid and binding obligation and agreement of such Member
and is enforceable against such Member in accordance with its terms.

     (b) The Company hereby represents and warrants that (i) it has the power and authority to
execute and deliver this Agreement and to perform all its obligations and consummate the
transactions contemplated hereby, and (ii) this Agreement has been duly and validly authorized,
executed and delivered by the Company, constitutes a valid and binding obligation and agreement of
the Company and is enforceable against the Company in accordance with its terms.

     8. Notices. All notices, demands and other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (a) when delivered by hand, with written confirmation of receipt, (b) upon sending
if sent by facsimile to the facsimile numbers below, with electronic confirmation of sending, (c)
one (1) day after being sent by nationally recognized overnight carrier to the addresses set forth
below or (d) when actually delivered if sent by any other method that results in delivery, with
written confirmation of receipt:

	 	 	 

	If to the Company:

	 	With a copy to:
	 
	 	 
	American Pacific Corporation

	 	Morrison & Foerster LLP
	3883 Howard Hughes Parkway, Suite 700

	 	425 Market Street
	Las Vegas, Nevada 89169

	 	San Francisco, California 94105
	Attention: Chief Executive Officer

	 	Attention: Zane O. Gresham, Esq.
	Facsimile: (702) 794-0714

	 	Facsimile: (415) 268-7522
	 
	 	 
	If to the Golconda Group or any Member:

	 	With a copy to:
	 
	 	 
	Golconda Capital Management, LLC

	 	Patton Boggs LLP
	P.O. Box 570507

	 	2550 M Street, NW
	Dallas, Texas 75357

	 	Washington, D.C. 20037
	Attention: William D. Summitt

	 	Attention: Philip G. Feigen, Esq.
	Facsimile: (214) 855-4733

	 	Facsimile: (202) 457-6315

     9. Assignments. This Agreement shall not be assignable by operation of law or
otherwise by any Member without the consent of the Company. Subject to the foregoing sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against the
successors and assigns of each party to this Agreement.

     10. Remedies. Each of the Members, on the one hand, and the Company, on the other
hand, acknowledges and agrees that irreparable injury to the other party hereto would occur in the
event any of the provisions of this Agreement were not performed in accordance with its specific
terms or was otherwise breached and that such injury would not be adequately compensable in
damages. It is accordingly agreed that the Members, on the one hand, and the Company, on the other
hand, shall each be entitled to specific enforcement of, and injunctive relief to prevent

Exhibit 10.1 Page 5

 

any violation of, the terms hereof and the other party hereto will not take any action,
directly or indirectly, in opposition to the party seeking relief on the grounds that any other
remedy or relief is available at law or in equity.

     11. Covenant Not to Sue. Except as set forth in Section 10, the Golconda Group and
each of their affiliates, associates and Representatives on the one hand, and the Company and each
of its affiliates, associates and Representatives on the other hand, agrees not to sue or otherwise
commence or continue in any manner, directly or indirectly, any suit, claim, action, right or cause
of action relating to any acts or omissions in connection with the 2011 Annual Meeting, 2012 Annual
Meeting or 2013 Annual Meeting, including, without limitation, the nomination or election of
directors, the solicitation of proxies or any acts or filings in connection therewith;
provided, however, that no party hereto shall be prohibited from enforcing its
rights under and pursuant to this Agreement.

     12. Non-Disparagement. During the Restricted Period, the Golconda Group shall not
disparage the Company or its affiliates, stockholders, officers and/or directors in any way,
including, but not limited to, its name, business reputation, Board decisions or business
practices, except for truthful statements as may be required by law. The Golconda Group and the
Company agree not to, and to cause their associates, affiliates and Representatives not to, make
any public comments or statements to the press, employees and stockholders of the Company if such
statement or comment is disparaging to the other party, except for truthful statements as may be
required by law.

     13. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without regard to any conflicts of laws
principles. The parties agree that any action or proceeding in respect of any claim arising out of
or related to this Agreement exclusively in the United States District Court for the Southern
District of New York or the Chancery Court of the State of Delaware (each, a “Chosen
Court”) and (i) hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of either Chosen Court for any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated hereby, (ii) waive any objection to
laying venue in any such action or proceeding in a Chosen Court and (iii) waive any objection that
a Chosen Court is an inconvenient forum or lacks jurisdiction.

     14. No Waiver. Neither the failure nor any delay by a party in exercising any right,
power or privilege under this Agreement will operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the exercise of any
right, power or privilege hereunder.

     15. Amendments; Counterparts. Any amendment or modification of the terms and
conditions set forth herein or any waiver of such terms and conditions must be agreed to in a
writing signed by each party hereto. This Agreement may be executed in counterparts, each of which
will be deemed an original, but all of which together will constitute one and the same agreement.
Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable
document format” (“.pdf”) form, or by any other electronic means intended to preserve the original
graphic and pictorial appearance of a document, will have the same effect as physical delivery of
the paper document bearing the original signature.

     16. No Third Party Beneficiaries. This Agreement is solely for the benefit of the
parties hereto and is not intended to and does not confer any rights on, and is not enforceable by,
any other Persons.

     17. Entire Agreement. This Agreement contains the entire agreement of, and supersedes
all prior agreements and understandings, both written and oral, among, the parties with respect to
the subject matter hereof.

[Remainder of page intentionally left blank]

Exhibit 10.1 Page 6

 

     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or caused the same
to be executed by its duly authorized representative, as of the date first above written.

	 	 	 	 	 
	 	AMERICAN PACIFIC CORPORATION

 	 
	 	By:  	/s/ JOSEPH CARLEONE
 	 
	 	 	Name:  	Joseph Carleone 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	GOLCONDA CAPITAL MANAGEMENT, LLC

 	 
	 	By:  	/S/ WILLIAM D. SUMMIT
 	 
	 	 	William D. Summitt, Managing Member 	 
	 	 	 	 
	 
	 	GOLCONDA CAPITAL PORTFOLIO, L.P.

By: Golconda Capital Management, LLC, its general
partner

 	 
	 	By:  	/S/ WILLIAM D. SUMMIT
 	 
	 	 	William D. Summitt, Managing Member 	 
	 	 	 	 
	 
	 	WILLIAM D. SUMMITT

 	 
	 	/S/ WILLIAM D. SUMMIT
 	 
	 	 	 
	 	 	 

Exhibit 10.1 Page 7

 

Exhibit A

Mutually Agreed Form of Press Release

AMERICAN PACIFIC ANNOUNCES NEW DIRECTORS AND

AGREEMENT WITH STOCKHOLDER GOLCONDA

LAS VEGAS, NEVADA, December 14, 2010 — American Pacific Corporation (NASDAQ: APFC) today
announced that it has added two experienced pharmaceutical and health care executives, Charlotte E.
Sibley and Bart Weiner, to its board of directors. These individuals had been recommended
separately by Golconda Capital Portfolio, L.P. and another of the Company’s stockholders. To
accommodate these individuals joining the board, the Company has expanded the size of its board
from 10 to 12 directors. The board has also announced an intention to reduce the size of the board
over time through the non-replacement of current directors who retire or are otherwise unable to
serve.

In addition, the Company reaffirmed its intention to propose at its next annual meeting of
stockholders that the stockholders amend AMPAC’s certificate of incorporation to replace the 80%
vote requirement for director elections with a simple majority vote requirement.

The Company also announced that it has entered into an agreement with Golconda Capital Portfolio,
L.P., Golconda Capital Management, LLC, and William D. Summitt (collectively, “Golconda”) to
resolve a potential proxy contest. Among other agreements among the parties, Golconda will vote
their shares in support of all the Company’s board nominees at the Company’s upcoming annual
meeting.

Dr. Joseph Carleone, President and CEO of American Pacific Corporation, stated, “We are pleased to
have resolved these issues so that management and the board of American Pacific can focus on our
principal goal, enhancing stockholder value, rather than on the expense and distractions of a
potential proxy contest.” Mr. Summitt, Managing Member of Golconda Capital Management, LLC,
stated, “Golconda is pleased that the Company added experienced individuals from the pharmaceutical
industry to the Company’s board of directors, and reaffirmed its commitment to present to
stockholders an amendment to allow a majority vote on director elections.”

The contents of the agreement with Golconda can be found in a Form 8-K to be filed by the Company
with the Securities & Exchange Commission.

RISK FACTORS/FORWARD-LOOKING STATEMENTS

Statements contained in this press release that are not purely historical are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such
as “intention”, “will”, “can” and similar expressions are intended to identify forward-looking
statements. The inclusion of forward-looking statements should not be regarded as a representation
by us that any of our expectations will be achieved. Actual results may differ materially from
future results or outcomes expressed or implied by forward-looking statements set forth in the
release due to risks, uncertainties and other important factors inherent in our business.

Readers of this press release are referred to our Annual Report on Form 10-K for the fiscal year
ended September 30, 2009, our Quarterly Reports on Form 10-Q for the quarters ended December 31,
2009, March 31, 2010 and June 30, 2010 and our other filings with the Securities and Exchange
Commission for further discussion of the various factors that could affect our future results. The
forward-looking statements contained in this press release are made as of the date hereof and we
assume no obligation

Exhibit 10.1 Page 8

 

to update for actual results or to update the reasons why actual results could differ materially
from those projected in the forward-looking statements, except as required by law.

ABOUT AMERICAN PACIFIC CORPORATION

American Pacific Corporation (AMPAC) is a leading custom manufacturer of fine chemicals, specialty
chemicals and propulsion products within its focused markets. We supply active pharmaceutical
ingredients and advanced intermediates to the pharmaceutical industry. For the aerospace and
defense industry we provide specialty chemicals used in solid rocket motors for space launch and
military missiles. AMPAC also designs and manufactures liquid propulsion systems, valves and
structures for space and missile defense applications. We produce clean agent chemicals for the
fire protection industry, as well as electro-chemical equipment for the water treatment industry.
Our products are designed to meet customer specifications and often must meet certain governmental
and regulatory approvals. Additional information about us can be obtained by visiting our web site
at www.apfc.com.

Exhibit 10.1 Page 9exv4w7

EXHIBIT 4.7

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.

ENDOCYTE, INC.

SUBORDINATED CONVERTIBLE

PROMISSORY NOTE

			
	 	 	 
	$[_______________]
	 	[DATE]

     FOR VALUE RECEIVED, Endocyte, Inc., a Delaware corporation (the “Company”) promises to convert
the principal sum of [__________] Dollars ($[_________]), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of this Subordinated
Convertible Promissory Note (this “Note”) held by [____________________] (“Investor”), or its
registered assigns, on the unpaid principal balance at a simple interest rate equal to 10% per
annum, computed on the basis of the actual number of days elapsed and a year of 365 days. All
unpaid principal, together with any then unpaid and accrued interest and other amounts payable
hereunder, shall be due and payable on the earlier of (i) [________________] (the “Maturity Date”),
or (ii) when, upon the occurrence and during the continuance of an Event of Default, such amounts
are declared due and payable by Investor or made automatically due and payable, in each case, in
accordance with the terms hereof. This Note is one of the “Notes” issued pursuant to the Purchase
Agreement.

     The following is a statement of the rights of Investor and the conditions to which this Note
is subject, and to which Investor, by the acceptance of this Note, agrees:

     1. Payments.

          (a) Interest. Accrued interest on this Note shall be payable at maturity.

          (b) Voluntary Prepayment. This Note may not be prepaid, without the written consent of a
Majority in Interest of Investors.

     2. Events of Default. The occurrence of any of the following shall constitute an “Event of
Default” under this Note and the other Transaction Documents:

 

 

          (a) Failure to Convert. The Company shall fail to convert (i) when due any principal
payment on the due date hereunder or (ii) any interest payment or other payment required under the
terms of this Note or any other Transaction Document; or

          (b) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) admit in writing its inability to pay its debts generally as
they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated, (v) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or consent to any such relief or to the appointment
of or taking possession of its property by any official in an involuntary case or other proceeding
commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or

          (c) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of the Company, or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to the Company or any of its Subsidiaries, if any, or the debts
thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered or such proceeding shall not be dismissed or discharged
within 45 days of commencement.

     3. Rights of Investor upon Default. Upon the occurrence of any Event of Default (other
than an Event of Default described in Sections 2(b) or 2(c)) and at any time thereafter during the
continuance of such Event of Default, Investor may, with the written consent of a Majority in
Interest of Investors, by written notice to the Company, declare all outstanding Obligations
payable by the Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the other Transaction Documents to the contrary notwithstanding. Upon the
occurrence of any Event of Default described in Sections 2(b) and 2(c), immediately and without
notice, all outstanding Obligations payable by the Company hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein or in the other Transaction
Documents to the contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence and during the continuance of any Event of Default, Investor may, with the written
consent of a Majority in Interest of Investors, exercise any other right power or remedy granted to
it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by
action at law, or both.

     4. Conversion.

          (a) Automatic Conversion.

               (i) Next Equity Financing. If the Next Equity Financing occurs on or prior to the Maturity
Date, then the outstanding principal amount of this Note and all accrued and unpaid interest on
this Note shall automatically convert upon the closing of the Next Equity Financing into fully paid
and nonassessable shares of the Financing Stock at the Conversion Price.

               (ii) Change of Control. If a Change of Control occurs on or prior to the Maturity Date
and this Note has not otherwise been converted prior to such time, then the outstanding principal
amount of this Note and all accrued and unpaid interest on this Note shall automatically convert
immediately prior to such Change of Control into fully paid and nonassessable shares of the
Company’s Series C-3 Preferred Stock

 

 

at a price per share equal to $4.25 (as adjusted for any stock dividend, stock split,
combination of shares, reorganization, recapitalization, reclassification or other similar event).

               (iii) Maturity Date. If this Note has not otherwise been converted by the Maturity Date,
then upon the Maturity Date the outstanding principal amount of this Note and all accrued and
unpaid interest on this Note shall automatically convert into fully paid and nonassessable shares
of the Company’s Series C-3 Preferred Stock at a price per share equal to $4.25 (as adjusted for
any stock dividend, stock split, combination of shares, reorganization, recapitalization,
reclassification or other similar event).

          (b) Voluntary Conversion. If an Unqualified Financing occurs on or prior to the Maturity
Date and this Note has not otherwise been converted prior to such time, then the outstanding
principal amount of this Note and all accrued and unpaid interest on this Note shall be
convertible, at the option of the Investor, upon the closing of the Unqualified Financing into
fully paid and nonassessable shares of Preferred Stock issued in the Unqualified Financing at the
original issue price of such shares of Preferred Stock.

          (c) Conversion Procedure.

               (i) General. If this Note is to be automatically converted, written notice shall
be delivered to Investor at the address last shown on the records of the Company for Investor or
given by Investor to the Company for the purpose of notice, notifying Investor of the conversion to
be effected, specifying the conversion price, the principal amount of the Note to be converted,
together with all accrued and unpaid interest, the date on which such conversion is expected to
occur and calling upon such Investor to surrender to the Company, in the manner and at the place
designated, the Note. Upon such conversion of this Note, Investor hereby agrees to execute and
deliver to the Company all transaction documents entered into by other purchasers participating in
the Qualified Financing, including a purchase agreement, an investor rights agreement and other
ancillary agreements, with customary representations and warranties and transfer restrictions
(including, without limitation, a 180-day lock-up agreement in connection with an initial public
offering). Investor also agrees to deliver the original of this Note (or a notice to the effect
that the original Note has been lost, stolen or destroyed and an agreement acceptable to the
Company whereby the holder agrees to indemnify the Company from any loss incurred by it in
connection with this Note) at the closing of the Qualified Financing for cancellation; provided,
however, that upon the closing of the Qualified Financing, this Note shall be deemed converted and
of no further force and effect, whether or not it is delivered for cancellation as set forth in
this sentence. The Company shall, as soon as practicable thereafter, issue and deliver to such
Investor a certificate or certificates for the number of shares to which Investor shall be entitled
upon such conversion, including a check payable to Investor for any cash amounts payable as
described in Section 4(c)(ii). On and after the date of conversion of this Note, the Persons
entitled to receive the shares issuable upon such conversion shall be treated for all purposes as
the record holder of such shares.

               (ii) Fractional Shares; Interest; Effect of Conversion. No fractional shares shall
be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to
the Investor upon the conversion of this Note, the Company shall pay to Investor an amount equal to
the product obtained by multiplying the applicable conversion price by the fraction of a share not
issued pursuant to the previous sentence. In addition, to the extent not converted into shares of
capital stock, the Company shall pay to Investor any interest accrued on the amount converted and
on the amount to be paid by Company pursuant to the previous sentence. Upon conversion of this
Note in full and the payment of the amounts specified in this paragraph, Company shall be forever
released from all its obligations and liabilities under this Note and this Note shall be deemed of
no further force or effect, whether or not the original of this Note has been delivered to the
Company for cancellation.

 

 

     5. Subordination. The Obligations evidenced by this Note are hereby expressly
subordinated in right of payment to the prior payment in full of all of the Senior Indebtedness and
any liens on property of the Company in favor of Investor are hereby expressly subordinated in
priority to any liens on the Company’s property in favor of any holders of Senior Indebtedness. By
acceptance of this Note, Investor agrees to execute and deliver customary forms of subordination
agreement requested from time to time by holders of Senior Indebtedness, and as a condition to
Investor’s rights hereunder, the Company may require that Investor execute such forms of
subordination agreement. Notwithstanding the foregoing, Investor shall be entitled to receive (i)
equity securities of the Company from the conversion of all or any part of the Obligations and
payments of cash in lieu of issuing fractional shares in connection with any such conversions, (ii)
any note, instrument or other evidence of indebtedness which may be issued by the Company in
exchange for or in substitution of this Note, provided that such note, instrument or other evidence
of indebtedness is subordinated to the Senior Indebtedness on the same terms and conditions as set
forth in this Section 5 and (iii) other payments consented to in writing by holders of Senior
Indebtedness.

     6. Definitions. As used in this Note, the following capitalized terms have the following
meanings:

          “Change of Control” shall mean (i) any “person” or “group” (within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of more than 50% of the outstanding voting securities of the Company having the right
to vote for the election of members of the Board of Directors, (ii) any reorganization, merger or
consolidation of the Company, other than a transaction or series of related transactions in which
the holders of the voting securities of the Company outstanding immediately prior to such
transaction or series of related transactions retain, immediately after such transaction or series
of related transactions, at least a majority of the total voting power represented by the
outstanding voting securities of the Company or such other surviving or resulting entity or (ii) a
sale, lease or other disposition of all or substantially all of the assets of the Company.

          “Conversion Price” shall mean a price per share equal to the product of (X) either (i) 85%, if
the Next Equity Financing occurs on or before June 30, 2011, or (ii) 80%, if the Next Equity
Financing occurs after June 30, 2011, multiplied by (Y) the original issue price of the shares of
Financing Stock.

     “Event of Default” has the meaning given in Section 2 hereof.

          “Financing Stock” shall mean (i) if the Next Equity Financing is the Qualified IPO, shares of
restricted Common Stock of the Company, which shall not be included in the registration of shares
that are the subject of the registration statement cleared by the Securities and Exchange
Commission in connection with the Qualified IPO, or (ii) if the Next Equity Financing is the
Qualified Financing, shares of Preferred Stock issued in the Next Equity Financing.

          “Investor” shall mean the Person specified in the introductory paragraph of this Note or any
Person who shall at the time be the registered holder of this Note.

          “Investors” shall mean the investors that have purchased Notes.

          “Lien” shall mean, with respect to any property, any security interest, mortgage, pledge,
lien, claim, charge or other encumbrance.

          “Majority in Interest of Investors” shall mean Investors holding more than 50% of the
aggregate outstanding principal amount of the Notes.

 

 

          “Next Equity Financing” shall mean either (i) a Qualified IPO, or (ii) a Qualified Financing.

          “Obligations” shall mean and include all loans, advances, debts, liabilities and obligations,
howsoever arising, owed by the Company to Investor of every kind and description, now existing or
hereafter arising under or pursuant to the terms of this Note and the other Transaction Documents,
including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees
and costs chargeable to and payable by the Company hereunder and thereunder, in each case, whether
direct or indirect, absolute or contingent, due or to become due, and whether or not arising after
the commencement of a proceeding under Title 11 of the United States Code (11 U. S. C. Section 101
et seq.), as amended from time to time (including post-petition interest) and whether or not
allowed or allowable as a claim in any such proceeding.

          “Notes” shall mean the subordinated convertible promissory notes issued pursuant to the Note
Purchase Agreement.

          “Person” shall mean and include an individual, a partnership, a corporation (including a
business trust), a joint stock company, a limited liability company, an unincorporated association,
a joint venture or other entity or a governmental authority.

          “Purchase Agreement” shall mean the Note Purchase Agreement, dated as of the date hereof (as
amended, modified or supplemented), by and among the Company and the Investors (as defined in the
Purchase Agreement) party thereto.

          “Qualified Financing” shall mean the next Preferred Stock financing of the Company in which
the Company raises new cash proceeds of at least $30.0 million in a single transaction or series of
related transactions (excluding conversion of principal and interest outstanding on any Notes
issued pursuant to the Purchase Agreement or any additional promissory issued on the same terms).

          “Qualified IPO” shall mean the sale of shares of Common Stock by the Company pursuant to an
underwritten offering to the general public pursuant to a registration statement cleared by the
Securities and Exchange Commission with gross proceeds of at least $50.0 million (excluding
conversion of principal and interest outstanding on any Notes issued pursuant to the Purchase
Agreement or any additional promissory issued on the same terms).

          “Securities Act” shall mean the Securities Act of 1933, as amended.

          “Senior Indebtedness” shall mean, unless expressly subordinated to or made on a parity with
the amounts due under this Note, the principal of (and premium, if any), unpaid interest on and
amounts reimbursable, fees, expenses, costs of enforcement and other amounts due in connection
with, (i) indebtedness for borrowed money of the Company that is owed to or may become owing to
Mid-Cap Financial and Silicon Valley Bank, and (ii) any extension, refinance, renewal, replacement,
defeasance or refunding of any indebtedness described in clause (i) above.

          “Transaction Documents” shall mean this Note, each of the other Notes and the Purchase
Agreement.

          “Unqualified Financing” shall mean any single transaction or series of related transactions
pursuant to which the Company either (A) sells its Preferred Stock in a bona fide financing that is
not a Qualified Financing or (B) sells its Common Stock in a bona fide public offering that is not
a Qualified IPO.

     7. Miscellaneous.

 

 

          (a) Successors and Assigns; Transfer of this Note or Securities Issuable on Conversion
Hereof.

               (i) Subject to the restrictions on transfer described in this Section 7(a), the rights and
obligations of the Company and Investor shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.

               (ii) With respect to any offer, sale or other disposition of this Note or securities into
which such Note may be converted, Investor will give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of Investor’s counsel, or
other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or
other distribution may be effected without registration or qualification (under any federal or
state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion,
if so requested, or other evidence, the Company, as promptly as practicable, shall notify Investor
that Investor may sell or otherwise dispose of this Note or such securities, all in accordance with
the terms of the notice delivered to the Company. If a determination has been made pursuant to
this Section 7(a) that the opinion of counsel for Investor, or other evidence, is not reasonably
satisfactory to the Company, the Company shall so notify Investor promptly after such determination
has been made. Each Note thus transferred and each certificate representing the securities thus
transferred shall bear a legend as to the applicable restrictions on transferability in order to
ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such
legend is not required in order to ensure compliance with the Securities Act. The Company may
issue stop transfer instructions to its transfer agent in connection with such restrictions.
Subject to the foregoing, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company as provided in the Purchase Agreement.
Prior to presentation of this Note for registration of transfer, the Company shall treat the
registered holder hereof as the owner and holder of this Note for the purpose of receiving all
payments of principal and interest hereon and for all other purposes whatsoever, whether or not
this Note shall be overdue and the Company shall not be affected by notice to the contrary.

          (b) Waiver and Amendment. Any provision of this Note may be amended, waived or modified
upon the written consent of the Company and a Majority in Interest of Investors; provided,
however, that no such amendment, waiver or consent shall: (i) reduce the principal amount
of this Note without Investor’s written consent, or (ii) reduce the rate of interest of this Note
without Investor’s written consent.

          (c) Notices. All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall be in writing and faxed, mailed or delivered
to each party at the respective addresses of the parties as set forth in the Purchase Agreement, or
at such other address or facsimile number as the Company shall have furnished to Investor in
writing. All such notices and communications will be deemed effectively given the earlier of (i)
when received, (ii) when delivered personally, (iii) one business day after being delivered by
facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited
with an overnight courier service of recognized standing or (v) four days after being deposited in
the U.S. mail, first class with postage prepaid.

          (d) Pari Passu Notes. Investor acknowledges and agrees that the payment of all or any
portion of the outstanding principal amount of this Note and all interest hereon shall be pari
passu in right of payment and in all other respects to the other Notes. In the event Investor
receives payments in excess of its pro rata share of the Company’s payments to the Investors of all
of the Notes, then Investor shall hold in trust all such excess payments for the benefit of the
holders of the other Notes and shall pay such amounts held in trust to such other holders upon
demand by such holders.

 

 

          (e) Payment. Unless converted into the Company’s equity securities pursuant to the terms
hereof, payment shall be made in lawful tender of the United States.

          (f) Usury. In the event any interest is paid on this Note which is deemed to be in excess
of the then legal maximum rate, then that portion of the interest payment representing an amount in
excess of the then legal maximum rate shall be deemed a payment of principal and applied against
the principal of this Note.

          (g) Waivers. The Company hereby waives notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to
this instrument.

          (h) Governing Law. This Note and all actions arising out of or in connection with this
Note shall be governed by and construed in accordance with the laws of the State of Delaware,
without regard to the conflicts of law provisions of the State of Delaware, or of any other state.

          (i) Waiver of Jury Trial; Judicial Reference. By acceptance of this Note, Investor hereby
agrees and the Company hereby agrees to waive their respective rights to a jury trial of any claim
or cause of action based upon or arising out of this Note or any of the Transaction Documents.

          (j) Counterparts. This Note may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall constitute but one and the
same Note.

(Signature Page Follows)

 

 

     The Company has caused this Note to be issued as of the date first written above.

	 	 	 	 	 
	 	ENDOCYTE, INC.
 a Delaware corporation

 	 
	 	By:  	 	 
	 	 	P. Ron Ellis 	 
	 	 	President 	 

	 	 	 	 	 
	 	

INVESTOR

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[Signature page for Endocyte, Inc. Subordinated Convertible Promissory Note]

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