SEVERANCE AGREEMENT
EXHIBIT 10.1
This Severance Agreement (the “Agreement”), entered into effective July 8, 2008, is between
American Pacific Corporation, a Delaware corporation having its principal place of business at 0000
Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000 (the “Company”), and Xxxxx X. Xxxxxxxx,
an individual residing at the address set forth below her signature at the end of this Agreement
and currently the Company’s Vice President, Administration and Secretary (“Executive”)
(collectively, “the parties”).
1. Severance Benefits
Unless Executive’s employment is terminated for Cause or by death or Disability (as defined
below), if the Company terminates Executive’s employment:
(a) The Company, in an attempt to ease Executive’s transition, and upon receipt of a mutually
satisfactory release of potential claims against the Company, shall pay Executive all compensation
due and owing through the last day actually worked, and shall continue to pay to Executive, in
accordance with the Company’s then effective payroll practices, Executive’s then effective base
salary (but not any employee benefits), less applicable withholding, for a period of three (3)
years from the date the employment relationship with the Company terminates (the “Termination
Date”); provided, however, that such payments by the Company shall be offset, during the third year
following the Termination Date, by income paid to Executive by another employer other than the
Company, which income Executive shall promptly report to the Company. For the avoidance of doubt,
for purposes of this Section 1(a), base salary shall not include any perquisites or similar
benefits provided to Executive prior to the Termination Date, including, without limitation, any
automobile allowance, club membership or right to use aircraft otherwise provided by the Company
for the use by the Company’s executives.
(b) If Executive elects to convert her Company group health coverage under COBRA, the Company
will pay Executive’s COBRA premiums until the earlier of (1) the eighteenth (18th) month
anniversary of the Termination Date or (2) Executive becomes covered by another employer’s group
health plans.
(c) All shares of restricted stock granted to Executive, all unexercised options to purchase
Company common stock and any other equity awards of the Company, in each case that are unvested at
the time of such termination of employment of Executive, shall become, immediately prior to the
Termination Date, fully vested and, as applicable, exercisable.
(d) The payments and benefits described in this Section 1 shall be conditioned upon
Executive’s continued compliance with the material obligations described in this Agreement. Should
Executive violate any such obligations, as determined by the Company in good faith, all further
payment obligations shall cease.
2. Other Terminations
(a) Termination by Company for Cause. At any time, and without prior notice, the Company may
terminate Executive’s employment for Cause (as defined below). In such case, the Company shall pay
Executive all compensation then due and owing; thereafter, all of the Company’s obligations under
this Agreement shall cease. Termination for “Cause” shall mean termination of Executive’s
employment because of Executive’s (i) involvement in fraud, misappropriation or embezzlement
related to the business or property of the Company and/or its subsidiaries or affiliates; (ii)
conviction for, or guilty or “no contest” plea to, a felony; and/or (iii) a pattern of failure to
substantially perform her duties to the Company, provided, however, that if such Cause is
reasonably curable, the Company shall not terminate Executive’s employment unless the Company first
gives notice of its intention to terminate and the grounds of such termination, and Executive has
not, within thirty (30) days following receipt of such notice, cured such Cause, to the
satisfaction of the Company.
(b) Termination by Executive. At any time, Executive may terminate her employment with the
Company for any reason, for any or no reason, by providing the Company thirty (30) days’ advance
written notice. The Company shall have the option, in its complete discretion, to make such
termination of employment effective at any
time prior to the end of such notice period, provided that the Company pays Executive all
compensation due and owing through the last day actually worked, plus an amount equal to the then
effective base salary, less applicable withholding, Executive would have earned through the balance
of the above notice period; thereafter, all of the Company’s obligations under this Agreement shall
cease.
(c) Termination by Death. If Executive shall die while still an employee of the Company,
Executive’s employment with the Company shall be deemed to have terminated upon the date of death
of Executive. The Company shall pay to Executive’s beneficiaries or estate, as appropriate,
compensation then due and owing as of the date of death, and shall continue to pay Executive’s
salary and benefits (to the extent consistent with the terms of the relevant benefit plan), through
the second full month after Executive’s death. As of the date of death, all unvested stock options
or other equity awards granted to Executive to the date of death shall become fully vested and, as
applicable, exercisable, and may be exercised by the appropriate representative of Executive’s
estate. Thereafter, all obligations of the Company under this Agreement shall cease. Nothing in
this Section 2(c) shall affect any entitlement of Executive’s heirs to the benefits of any life
insurance, vested funds in plans governed by provisions of state or federal laws, including but not
limited to 401(k), deferred compensation, pension, or other similar employee benefit plans.
(d) Termination by Disability. If, in the sole opinion of the Company, Executive shall suffer
a Disability (as defined below), and, to the extent permitted by law, the Company shall terminate
Executive’s employment, the Company shall pay to Executive all compensation to which Executive is
entitled through the last day of the month in which Executive has been determined to have a
Disability, and, thereafter, there shall be no other obligations of the Company under this
Agreement. Nothing in this Section 2(d) shall affect Executive’s rights under any disability plan
in which she is a participant. For purposes of this Agreement, “Disability” shall mean (i)
Executive’s inability to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months, or (ii) Executive’s
receipt, by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months, of income replacement benefits for a period of not less than three (3) months
under an accident and health plan covering employees of the Company.
3. Termination of Employment Following Corporate Transition
(a) Corporate Transition Defined. For purposes of this Agreement, a “Corporate Transition”
shall include any of the following transactions to which the Company is a party: (A) a merger or
consolidation in which the Company is not the surviving entity and securities representing more
than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities
are transferred to a holder different from those who held such securities immediately prior to such
merger; (B) the sale, transfer or other disposition of all or substantially all of the assets of
the Company in liquidation or dissolution of the Company; (C) any reverse merger in which the
Company is the surviving entity but in which securities representing more than fifty percent (50%)
of the total combined voting power of the Company’s outstanding securities are transferred to a
holder(s) different from those who held such securities immediately prior to such merger; or (D)
any cash dividend paid by the Company that, in the aggregate with all other dividends paid in any
twelve month period, is greater than the combined earnings of the Company for the Company’s two
fiscal years prior to such dividend payment date. In addition, a Corporate Transition shall also
include a “Change in Control” as such term is defined in the Company’s 2008 Stock Incentive Plan.
None of the foregoing events, however, shall be considered a Corporate Transition under this
Agreement unless the event also qualifies as a change in the ownership or effective control of the
Company, or a change in the ownership of a substantial portion of the assets of the Company, under
Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended, the regulations
thereunder, and any other published interpretive authority, as issued or amended from time to time.
Except as provided otherwise in this Section 3, in the event of a Corporate Transition, the
provisions of Section 1 and Section 2(b) above shall not apply.
(b) Acceleration of Vesting at Time of Corporate Transition. Should a Corporate Transition
take place, all unvested shares of restricted stock granted to Executive, all unvested and
unexercised options to purchase Company stock granted to Executive, and all other unvested equity
awards under the 2008 Stock Incentive Plan or
Page 2 of Exhibit 10.1
similar employee benefit plan, in each case at the time of the Corporate Transition, shall
become, immediately prior to such Corporate Transition, fully vested and, as applicable,
exercisable.
(c) Severance Benefits in the Event of Termination Following Corporate Transition. In the
event of Executive’s termination, other than for Cause or by death or Disability, following a
Corporate Transition, and upon receipt of a mutually satisfactory release of potential claims
against the Company and any successor, Executive shall be entitled to the payments and benefits
described in Sections 1(a) and 1(b) above. Such payments and benefits shall be conditioned upon
Executive’s continued compliance with the material obligations described in this Agreement. Should
Executive violate any such obligations, as determined by the Company in good faith, all further
obligations shall cease.
4. Termination Obligations
(a) Return of Company’s Property. Executive hereby acknowledges and agrees that all personal
property, including, without limitation, all books, manuals, records, reports, notes, contracts,
lists, blueprints, and other documents, or materials, or copies thereof, and equipment, furnished
to or prepared by Executive in the course of or incident to Executive’s employment, belong to the
Company and shall be promptly returned to the Company upon termination of Executive’s employment.
(b) Representations and Warranties Survive Termination of Employment. The representations and
warranties contained herein shall survive termination of Executive’s employment and expiration of
this Agreement.
(c) Cooperation in Pending Work. Following termination of Executive’s employment with the
Company for any reason, Executive shall fully cooperate with the Company in all matters relating to
the winding up of pending work on behalf of the Company and the orderly transfer of work to other
employees of the Company. Executive shall also cooperate in the defense of any litigation, whether
judicial or administrative, brought by any third party against the Company that relates in any way
to Executive’s knowledge, acts or omissions or duties while employed by the Company. If Executive’s
cooperation in the defense of any such action requires more than ten (10) hours of Executive’s
time, Executive and the Company shall agree on appropriate remuneration for Executive’s time and
expenses.
(d) Noncompetition. Executive acknowledges and agrees that during her employment with the
Company, she has had, and will have, access to Confidential Information (as defined below) and the
activities forbidden by this subsection would necessarily involve the improper use and disclosure
of this Confidential Information. To forestall this use or disclosure, Executive agrees that during
the period described in Section 1(a) or Section 3(c) when payments to Executive are being made, or
for two years after the termination of Executive for Cause or by Disability, Executive shall not,
directly or indirectly, (i) divert or attempt to divert from the Company (or any affiliate thereof)
any business of any kind in which the Company (or any affiliate thereof) is engaged; (ii) employ or
recommend for employment any person employed by the Company (or any affiliate thereof); or (iii)
engage in any business activity that is competitive with the Company (or any affiliate thereof) in
any state where the Company can demonstrate its intention to conduct business, unless Executive can
prove that any of the above actions was done without the use of Confidential Information. In
addition to the above restrictions on competitive activity, and regardless of whether any use of
Confidential Information is involved, Executive agrees that during the payment period referred to
in Section 1(a) or 3(c) Executive shall not, directly or indirectly, (i) solicit any customer of
the Company (or any affiliate thereof) known to Executive (while she was employed by the Company)
to have been a customer with respect to products or services competitive with products or services
offered by the Company; or (ii) solicit for employment any person employed by the Company (or any
affiliate thereof).
(e) Restriction on Use of Proprietary and Confidential Information. Following termination of
employment with the Company for any reason, Executive shall neither, directly or indirectly, use
any Proprietary Information (as defined below) nor disclose any Confidential Information (as
defined below), except as expressly and specifically authorized in writing by the Company. The
disclosure or publication, whether to an individual employed by the Company or not, of any
Proprietary Information, through literature, speeches or discussion, must be approved in advance in
writing by the Company.
Page 3 of Exhibit 10.1
(f) Proprietary and Confidential Information Defined. “Proprietary Information” is all
information and any idea in whatever form, tangible or intangible, pertaining in any manner to the
business of the Company and its subsidiaries and affiliates, or any of their employees, clients,
consultants, or business associates, which was produced by any employee of the Company or its
subsidiaries or affiliates, in the course of his or her employment or otherwise produced or
acquired by or on behalf of the Company or its subsidiaries or affiliates. All Proprietary
Information not generally known outside of the Company’s organization, and all Proprietary
Information so known only through improper means, shall be deemed “Confidential Information.”
Without limiting the foregoing definition, Proprietary and Confidential Information shall include,
but not be limited to: (i) formulas, teaching and development techniques, processes, trade secrets,
computer programs, electronic codes, inventions, improvements, and research projects; (ii)
information about costs, profits, markets, and sales; (iii) customer lists, records of customer
services, usages and requirements, sketches and diagrams of the Company’s or customers’ facilities,
and similar records; (iv) business, marketing, and strategic plans; and (v) employee personnel
files and compensation information. All information disclosed to Executive or to which Executive
obtains access during Executive’s employment with the Company, or to which Executive obtains access
by reason of her employment by the Company, that Executive has a reasonable basis to believe is or
may be Confidential Information, shall be presumed to be Confidential Information. Executive
should consult any Company procedures instituted to identify and protect certain types of
Confidential Information, which are considered by the Company to be safeguards in addition to the
protection provided by this Agreement. Nothing contained in those procedures or in this Agreement
is intended to limit the effect of the other.
5. 409A Provisions
This Agreement is intended to comply with the provisions of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), and shall be construed accordingly; provided,
however, that the Company makes no representation that the amounts or benefits payable under this
Agreement will comply with Code Section 409A and makes no undertaking to prevent Code Section 409A
from applying to any amounts or benefits payable under this Agreement, or to mitigate its effects
on any amounts or benefits payable under this Agreement. The payment of any amounts or benefits
under this Agreement shall be delayed to the extent necessary to comply with Section
409A(a)(2)(B)(i) of the Code (relating to payments made to certain “specified employees” of certain
publicly-traded companies) and in such event, any such amount to which Executive would otherwise be
entitled during the six (6) month period immediately following her termination of employment will
be paid on the first business day following the expiration of such six (6) month period. For all
purposes under this Agreement, “Termination Date”, “termination of employment” and “terminate(s)”
shall mean the occurrence of a “separation from service” as that term is defined in Code Section
409A(a)(2)(A)(i) and Treas. Regs. Section 1.409A-1(h), and as amplified by any other official
guidance.
6. Notices
All notices or other communications required or permitted hereunder shall be made in writing
and shall be deemed to have been duly given if delivered by hand or mailed, postage prepaid, by
certified or registered mail, return receipt requested, and addressed to the Company:
American Pacific Corporation
Attention: Chief Executive Officer
0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Attention: Chief Executive Officer
0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
and addressed to Executive at Executive’s address as set forth on the signature page to this
Agreement.
Executive and the Company shall be obligated to notify the other party of any change in
address. Notice of a change of address shall be effective only when made in accordance with this
Section 6.
7. Entire Agreement
Page 4 of Exhibit 10.1
This Agreement is intended to be the final, complete, and exclusive statement of the terms of
Executive’s rights to severance from the Company. Except for any stock option agreements, this
Agreement supersedes all other prior and contemporaneous agreements and statements pertaining in
any manner to its subject matter and it may not be contradicted by evidence of any prior or
contemporaneous statements or agreements. To the extent that the practices, policies, or procedures
of the Company, now or in the future, apply to Executive and are inconsistent with the terms of
this Agreement, the provisions of this Agreement shall control.
8. Amendments, Waivers
This Agreement and the terms and conditions herein may not be modified, amended, or waived
except by an instrument in writing, signed by Executive and by the Company’s Chief Executive
Officer pursuant to authorization of the Board of Directors or the Corporate Governance Committee
thereof (or such other committee of the Board of Directors acting as the compensation committee of
the Board of Directors). No failure to exercise and no delay in exercising any right, remedy, or
power under this Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, or power under this Agreement preclude any other or further exercise
thereof, or the exercise of any other right, remedy, or power provided herein or by law or in
equity.
9. Assignment; Successors and Assigns
Executive agrees that she will not assign, sell, transfer, delegate or otherwise dispose of,
whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this
Agreement, nor shall Executive’s rights be subject to encumbrance or the claims of creditors. Any
purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement
shall prevent the consolidation of the Company with, or its merger into, any other corporation or
other legal entity, or the sale by the Company of all or substantially all of its properties or
assets, or the assignment by the Company of this Agreement and the performance of its obligations
hereunder to any successor in interest. In the event of a change in ownership or control of the
Company, the terms of this Agreement will remain in effect and shall be binding upon any successor
in interest. Notwithstanding and subject to the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective heirs, legal representatives,
successors, and permitted assigns, and shall not benefit any person or entity other than those
enumerated above.
10. Severability; Enforcement
If any provision of this Agreement, or the application thereof to any person, place, or
circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable, or
void, the remainder of this Agreement and such provisions as applied to other persons, places, and
circumstances shall remain in full force and effect.
11. Governing Law
The validity, interpretation, enforceability, and performance of this Agreement shall be
governed by and construed in accordance with the law of the State of Nevada.
12. Arbitration
Any claim or controversy between Executive and the Company or its successor arising under or
in connection with this Agreement shall be settled by arbitration in accordance with the then
current Employment Dispute Resolution Rules of the American Arbitration Association and shall be
the exclusive remedy for all arbitrable claims. The Company and Executive agree that arbitration
shall be held in or near Xxxxx County, Nevada, before an arbitrator licensed to practice law in the
State of Nevada. The arbitrator shall have authority to award or grant legal, equitable, and
declaratory relief. Such arbitration shall be final and binding on the parties. The Federal
Arbitration Act shall govern the interpretation and enforcement of this section pertaining to
arbitration.
This Agreement to arbitrate shall survive termination of Executive’s employment with the
Company.
Page 5 of Exhibit 10.1
In any dispute arising under or in connection with this Agreement, the prevailing party shall
be entitled to recover all costs and reasonable attorney’s fees.
In the event Executive elects to file suit over a dispute covered by this Section 12, the
Company shall have the option to seek an order from any court of competent jurisdiction, or proceed
to defend the case filed by Executive, who agrees herein to waive trial by jury and proceed to a
trial by judge without jury.
13. Acknowledgment of Parties
The parties acknowledge (a) that they have consulted with or have had the opportunity to
consult with independent counsel of their own choice concerning this Agreement, and (b) that they
have read and understand the Agreement, are fully aware of its legal effect, and have entered into
it freely based on their own judgment and not on any representations or promises other than those
contained in this Agreement.
14. Execution of Agreement
This Agreement may be signed by the parties hereto in counterparts, each of which shall be
deemed an original and all of which, together, shall constitute one and the same agreement.
Page 6 of Exhibit 10.1
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.
| AMERICAN PACIFIC CORPORATION |
||||
| /s/ XXXX X. XXXXXX | ||||
| Name: | Xxxx X. Xxxxxx | |||
| Title: | Chairman & CEO | |||
| /s/ XXXXX X. XXXXXXXX | ||||
| Name: | Xxxxx X. Xxxxxxxx | |||
| Address: | 0 Xxx Xxxxxx Xxxxx Xxxxxxxxx, XX 00000 |
|||
Page 7 of Exhibit 10.1
