<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN PACIFIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
AMERICAN PACIFIC CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 10, 1998
Notice is hereby given that the Annual Meeting of the Stockholders of
American Pacific Corporation (the "Company") will be held at the Las Vegas
Country Club, Rotunda Room, located at 3000 Joe W. Brown Drive, Las Vegas,
Nevada, on March 10, 1998, at 10:30 a.m. local time, for the following purposes:
1. To elect four Class A Directors to serve for a term of three years
expiring in 2001 and thereafter until their successors are duly elected and
qualified; and
2. To consider and act upon a proposal to approve the adoption of the
American Pacific Corporation 1997 Stock Option Plan; and
3. To consider and act upon a proposal to approve the grant of non-
qualified stock options to the non-employee members of the Board of Directors
currently holding office; and
4. To consider and act upon a proposal to approve the grant of non-
qualified stock options to John R. Gibson, Chief Executive Officer and
President, and to David N. Keys, Senior Vice President and Chief Financial
Officer; and
5. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Reference is made to the accompanying Proxy Statement for more complete
information concerning the foregoing matters. The Board of Directors has fixed
the close of business on Friday, February 6, 1998, as the date as of which the
stockholders who are entitled to notice of, and to vote at, said meeting and any
adjournment or adjournments thereof, are to be identified. Only persons who
were stockholders of record as of the close of business on February 6, 1998 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
All stockholders of the Company are cordially invited to attend the meeting
in person. However, to assure that each stockholder's vote is counted at the
meeting, stockholders are requested to mark, sign, date and return the enclosed
proxy as promptly as possible in the envelope provided. Stockholders who attend
the Annual Meeting may vote in person at the Annual Meeting even if they have
previously returned a proxy. If you receive more than one proxy because your
shares are registered in different names or at different addresses, please sign
and return each such proxy so that all of your shares may be represented at the
Annual Meeting.
By Order of the Board of Directors
David N. Keys, Secretary
February 9, 1998
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OF
AMERICAN PACIFIC CORPORATION
3770 HOWARD HUGHES PARKWAY, SUITE 300
LAS VEGAS, NEVADA 89109
(702) 735-2200
The enclosed proxy is solicited on behalf of the Board of Directors of
American Pacific Corporation, a Delaware Corporation (the "Company"), for use at
the Company's Annual Meeting of Stockholders (the "Annual Meeting") to be held
on Tuesday, March 10, 1998, at 10:30 a.m., local time, or at any adjournment(s)
thereof. The Annual Meeting will be held at the Las Vegas Country Club, Rotunda
Room, located at 3000 Joe W. Brown Drive, Las Vegas, Nevada. This Proxy
Statement was first mailed to Stockholders of the Company on or about February
9, 1998, accompanied by the Company's Annual Report to Stockholders for the
fiscal year ended September 30, 1997.
At the Annual Meeting, the following matters will be considered and voted
on:
1. Proposal No. 1. Election of four Class A Directors to hold office
until the 2001 Annual Meeting of Stockholders and thereafter until
their successors shall have been duly elected and qualified; and
2. Proposal No. 2. Approval of the adoption of the American Pacific
Corporation 1997 Stock Option Plan; and
3. Proposal No. 3. Approval of the grant of non-qualified stock options
to the non-employee members of the Board of Directors currently
holding office; and
4. Proposal No. 4. Approval of the grant of non-qualified stock options
to John R. Gibson, Chief Executive Officer and President, and to David
N. Keys, Senior Vice President and Chief Financial Officer; and
5. Such other business as may properly come before the Annual Meeting and
any adjournments thereof.
<PAGE>
The Board of Directors recommends that stockholders vote for Proposals Nos.
1, 2, 3 and 4. Officers and Directors of the Company, collectively owning,
directly or indirectly, 476,749 shares, or 5.9 percent, of the Company's $.10
par value common stock (the "Common Stock") as of February 6, 1998 (the "Record
Date"), have indicated that they intend to vote in favor of Proposals Nos. 1, 2,
3 and 4. The Company's principal executive offices are located at 3770 Howard
Hughes Parkway, Suite 300, Las Vegas, Nevada 89109, and its telephone number at
that address is (702) 735-2200.
QUORUM AND VOTING RIGHTS
Stockholders of record as of the close of business on the Record Date are
entitled to notice of and to vote at the Annual Meeting. On February 6, 1998,
8,137,537 shares of Common Stock were issued and outstanding. The holder of
each share is entitled to cast one vote on all matters. The presence, in person
or by proxy, of the holders of a majority of the outstanding Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum at
the Annual Meeting.
SOLICITATION OF PROXIES
The solicitation of Proxies pursuant to this Proxy Statement will be made
primarily by mail. In addition, officers, employees and other representatives
of the Company and its subsidiary corporations, without compensation, may
solicit proxies by telephone, telegraph, facsimile transmission, mail or
personal interview. Arrangements will also be made with banks, brokerage firms
and others to forward solicitation materials to the beneficial owners of shares
held of record by them. The total cost of the solicitation process, including
the reimbursement of the expenses of brokers and nominees, will be borne by the
Company.
VOTING AND REVOCATION OF PROXIES; ADJOURNMENT
Shares represented by valid proxies received by the Company will be voted
in accordance with the specifications made therein by the stockholder. Any
valid proxy that does not specify otherwise will (unless the proxy is validly
revoked) be voted "for" Proposals Nos. 1, 2, 3 and 4 and, in the discretion of
the proxy holders, on such other matters as may properly come before the Annual
Meeting. Proposal No. 1 requires the affirmative vote of 80% of the shares of
Common Stock present and voting at the Annual Meeting. According to the Bylaws
of the Company, in the event that Proposal No. 1 does not receive the
affirmative vote of 80% of such shares present and voting, the incumbent
Directors will remain in office until the next annual meeting, at which time
both the Class A Directors and the Class B Directors will stand for election.
Proposals Nos. 2, 3
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and 4 require the affirmative vote of a majority of the shares present and
voting at the Annual Meeting. The Bylaws of the Company require that a quorum
consisting of majority of the outstanding shares be present at the meeting,
either in person or by proxy, to conduct business.
The Board of Directors does not know of any matters to be considered at the
Annual Meeting other than the Proposals described above. A stockholder may
revoke any proxy given pursuant to this solicitation by attending the Annual
Meeting and voting in person, or by delivering to the Secretary of the Company
at the Company's principal executive offices identified above prior to the
Annual Meeting a written notice of revocation or a duly executed proxy bearing a
later date than that of the previous proxy. The mere presence of a stockholder
at the Annual Meeting will not revoke a proxy previously given.
In the event that sufficient votes in favor of Proposals Nos. 1, 2, 3 and 4
or any other agenda items are not received by the date of the Annual Meeting,
the persons named as proxies may propose one or more adjournments of the Annual
Meeting to permit further solicitation of proxies. Any such adjournments will
require the affirmative vote of the holders of a majority of the Common Stock
present in person or by proxy at the Annual Meeting, whether or not a quorum is
present. The persons named as proxies will vote in favor of any such proposed
adjournments.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Company to act as election inspectors for the
meeting. The election inspectors will treat shares represented by proxies that
"withhold authority to vote" as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, the election of directors or
the outcome of certain other matters.
The election inspectors will treat shares referred to as "broker non-votes"
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum. However, as to any matter as to which the broker has
physically indicated on the proxy that the broker does not have discretionary
authority to vote the shares, those shares will be treated as not present and
not entitled to vote with respect to that matter (even though those shares are
considered entitled to vote for quorum purposes and may be entitled to vote on
other matters).
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of the most recent
practicable date as to six persons known to the Company to own beneficially five
percent or more of the outstanding Common Stock of the Company.
3
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature % of Class
Title of Class of Beneficial Owner of Beneficial Ownership(1) Outstanding
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Public School Employes' 2,142,857 /(2)/ 20.8%
Retirement System of the
Commonwealth of Pennsylvania
Five North 5th Street
Harrisburg, PA 17101
Common Stock Franklin Advisory Services, Inc. 797,800 /(3)/ 9.8%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Common Stock J. Ezra Merkin 764,343 /(4)/ 9.4%
450 Park Avenue
New York, NY 10022
Common Stock Fred D. Gibson, Jr. 499,812 /(5)/ 6.1%
Common Stock Dimensional Fund Advisors, Inc. 476,200 /(4)(6)/ 5.9%
1099 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Common Stock Kennedy Capital Management, Inc. 410,500 /(4)/ 5.0%
10829 Olive Blvd.
St. Louis, MO 63141
</TABLE>
/(1)/ Except as otherwise indicated, each stockholder in the table exercises
sole voting and investment power with respect to the Company's Common
Stock indicated as beneficially owned by such stockholder.
/(2)/ This figure represents the number of shares that can be acquired upon the
exercise of a warrant that was issued to the Public School Employes'
Retirement System of the Commonwealth of Pennsylvania ("PSERS") on
February 21, 1992, at the time PSERS acquired from the Company a
$30,000,000 term note due February 21, 2002. The number of shares that
can be purchased upon exercise of the warrant is the unpaid principal
amount of the note divided by the warrant exercise price, which is $14.00
per share.
/(3)/ Information with respect to this stockholder was obtained from a Schedule
13G filed with the Securities and Exchange Commission on or about January
23, 1998.
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<PAGE>
/(4)/ Information with respect to this stockholder was obtained from a Form 13f
filed with the Securities and Exchange Commission for the period ended
September 30, 1997.
/(5)/ Includes 95,500 shares of Common Stock subject to options granted to Mr.
Gibson pursuant to the Company's employee stock option plans, which
options are exercisable within 60 days after February 6, 1998.
/(6)/ Dimensional Fund Advisors, Inc. has sole investment discretion with
respect to 476,200 shares of the Company's Common Stock and has sole
voting authority with respect to 307,500 of such shares and no voting
authority with respect to 168,700 of such shares.
PROPOSAL NO. 1--ELECTION OF CLASS A DIRECTORS
On January 13, 1998, the Board of Directors nominated the following
persons, all of whom are presently Directors, for re-election to serve in the
class and for the term indicated below, and until their respective successors
have been elected and qualify:
<TABLE>
<CAPTION>
To Serve Until
Name Class of Director Annual Meeting in
- ------------------ ----------------- ------------------
<S> <C> <C>
Thomas A. Turner A 2001
John R. Gibson A 2001
David N. Keys A 2001
Eugene A. Cafiero A 2001
</TABLE>
The Company's Certificate of Incorporation provides that the Company's
Board of Directors is divided into three classes of not less than one nor more
than four Directors. The Company's Board of Directors presently consists of
four Class A Directors, four Class B Directors, and four Class C Directors. One
Class of Directors is elected annually. Directors in a Class are elected for a
term of office of three years and thereafter until a successor is duly elected
and qualifies.
The Board of Directors recommends that the stockholders vote "for" the
above-named nominees. It is intended that the persons named in the accompanying
proxy will vote for the election of those persons, unless the stockholder giving
the proxy withholds authority to vote for one or more of them. The Board of
Directors believes that each of the nominees will be available and able to serve
as a Director, but if for any reason any of them is not, the persons named as
proxy may exercise discretionary authority to vote for a substitute nominee (or
substitute nominees) proposed by the Board of Directors. Proxies cannot be
voted for a number of persons greater than the number of Class A nominees named
herein.
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<PAGE>
Information concerning the Directors of the Company, including the
nominees, is set forth in the table that follows. This table also indicates the
number of shares of Common Stock beneficially owned by each Director, or that
such Director has the right to vote or the right to acquire within 60 days after
February 6, 1998, and by all of the Directors and executive officers of the
Company as a group, as of February 6, 1998.
<TABLE>
<CAPTION>
Stock Ownership
Director Amount and Nature of Percent of
Name Age Since Title of Class Beneficial Ownership Class
=============================================================================================================
NOMINEES FOR ELECTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A DIRECTORS (TERM OF OFFICE EXPIRES IN 1998)
Thomas A. Turner 72 1986 Common Stock 32,633 /(1)/ /(2)/
John R. Gibson 60 1988 Common Stock 108,185 /(3)/ 1.3%
David N. Keys 41 1997 Common Stock 130,000 /(4)/ 1.6%
Eugene A. Cafiero 71 1997 Common Stock 7,500 /(5)/ /(2)/
=============================================================================================================
CONTINUING MEMBERS OF THE BOARD
- -------------------------------------------------------------------------------------------------------------
CLASS B DIRECTORS (TERM OF OFFICE EXPIRES IN 1999)
Norval F. Pohl 54 1986 Common Stock 12,500 /(1)/ /(4)/
C. Keith Rooker 60 1988 Common Stock 76,253 /(6)/ /(4)/
Jane L. Williams 59 1993 Common Stock 10,000 /(1)/ /(4)/
Jan H. Loeb 39 1997 Common Stock 7,500 /(5)/ /(4)/
- -------------------------------------------------------------------------------------------------------------
CLASS C DIRECTORS (TERM OF OFFICE EXPIRES IN 2000)
Fred D. Gibson, Jr. 70 1982 Common Stock 499,812 /(7)/ 6.1%
Victor M. Rosenzweig 59 1988 Common Stock 11,400 /(1)/ /(4)/
Berlyn D. Miller 60 1993 Common Stock 11,655 /(1)/ /(4)/
Dean M. Willard 51 1997 Common Stock 9,500 /(5)/ /(4)/
- -------------------------------------------------------------------------------------------------------------
All Directors and executive officers
as a group (13 persons) Common Stock 945,749 /(8)(9)/ 11.0%
=============================================================================================================
</TABLE>
/(1)/ Includes, with respect to each such Director, 5,000 shares of Common
Stock subject to options, which options are exercisable within 60 days
after February 6, 1998; and 5,000
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<PAGE>
shares of Common Stock subject to options, which options are exercisable
within 60 days after February 6, 1998, subject to the approval by the
stockholders of Proposal No. 3.
/(2)/ Less than 1%.
/(3)/ Includes, with respect to Mr. John R. Gibson, 55,000 shares subject to
options, which options are exercisable within 60 days after February 6,
1998; and 25,000 shares of Common Stock subject to options, which options
are exercisable within 60 days after February 6, 1998, subject to the
approval by the stockholders of Proposal No. 4.
/(4)/ Includes, with respect to Mr. Keys, 110,000 shares of Common Stock
subject to options, which options are exercisable within 60 days after
February 6, 1998; and 20,000 shares of Common Stock subject to options,
which options are exercisable within 60 days after February 6, 1998,
subject to the approval by the stockholders of Proposal No. 4.
/(5)/ Includes, with respect to each such Director, 7,500 shares of Common
Stock subject to options, which options are exercisable within 60 days
after February 6, 1998, subject to the approval by the stockholders of
Proposal No. 3.
/(6)/ Includes, with respect to Mr. Rooker, 65,000 shares subject to options,
which options are exercisable within 60 days after February 6, 1998.
/(7)/ Includes, with respect to Mr. Fred D. Gibson, Jr., 95,500 shares
subject to options, which options are exercisable within 60 days after
February 6, 1998.
/(8)/ Includes, with respect to all Directors and executive officers as a
group, an aggregate of 376,500 shares of Common Stock subject to options,
which options are exercisable by such persons within 60 days after
February 6, 1998; and 92,500 shares of Common Stock subject to options,
which options are exercisable within 60 days after February 6, 1998,
subject to the approval by the stockholders of Proposals Nos. 3 and 4.
/(9)/ Each Director and executive officer exercises sole voting and investment
power with respect to the Common Stock indicated as beneficially owned by
him.
THE DIRECTORS
EUGENE A. CAFIERO was elected a Director of the Company in January 1997.
Mr. Cafiero is currently Chairman of Voltarc Technologies, Inc., a major
manufacturer of specialty lamps and wiring devices. From October 1986 until
December 1993, Mr. Cafiero was Chairman, Chief Executive Officer and President
of KD Holdings, Inc., a diversified manufacturing company specializing in
electronics. Mr. Cafiero was previously Chief Executive Officer of Ariadne
Australia, Ltd., a holding company with a diversified investment portfolio;
President and Chief
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Executive Officer of Mid-American Communications, a long distance telephone
company; and President and Chief Operating Officer, and Vice Chairman of
Chrysler Corporation. Mr. Cafiero also served as a member of the National
Highway Traffic Safety Board during the Nixon Administration.
FRED D. GIBSON, JR. has been a Director of the Company since 1982. Mr.
Gibson served as Chief Executive Officer, Chairman of the Board and President of
the Company and Chairman and Chief Executive Officer of each of the Company's
subsidiaries, from 1985 to July 1997. Mr. Gibson has been a Director of Nevada
Power Company for more than five years. Mr. Gibson is the brother of John R.
Gibson.
JOHN R. GIBSON has been a Director of the Company since 1988 and became
Chief Executive Officer and President of the Company in July 1997. Mr. Gibson
has also served as the Chief Executive Officer and President of each of the
Company's subsidiary corporations since that date. Mr. Gibson was the Company's
Vice President--Engineering & Operations from March 1992 to July 1997 and has
been the President of American Azide Corporation, a wholly-owned subsidiary of
the Company, since 1993. Prior to that time, Mr. Gibson was the Director of
Modernization of USS-POSCO Industries, a fabricator of steel products, a
position Mr. Gibson held for more than five years. Mr. Gibson is the brother of
Fred D. Gibson, Jr.
DAVID N. KEYS was elected a Director of the Company in July 1997. Mr. Keys
is the Company's Senior Vice President, Chief Financial Officer, Secretary and
Treasurer and has been employed by the Company since 1989. Prior to that time,
Mr. Keys was a Certified Public Accountant with Deloitte, Haskins & Sells (now
Deloitte & Touche, LLP) for more than five years.
JAN H. LOEB was elected a Director of the Company in January 1997. Mr.
Loeb is a Managing Director of Wasserstein Perella, a New York-based investment
banking firm. He is a special situations analyst, and has previously provided
analyst coverage of American Pacific Corporation to institutional investors and
retail brokers. Mr. Loeb was employed by Legg Mason Wood Walker, Inc. from 1991
to 1994, and operated his own firm, Loeb Financial Services, from 1988 to 1991.
BERLYN D. MILLER was elected a Director of the Company in November 1993.
Mr. Miller was also a Director of Western Electrochemical Company, the Company's
former principal operating subsidiary, from 1989 until 1995. Mr. Miller was the
Chairman, President and Chief Executive Officer of ACME Electric of Las Vegas,
Nevada, a construction contractor, until 1997, a position he held for more than
five years. He is currently a business consultant.
NORVAL F. POHL has been a Director of the Company since 1986. Dr. Pohl was
also a Director of Western Electrochemical Company from 1989 until 1995. Dr.
Pohl is the Vice President of Finance and Administration of the University of
Nevada Las Vegas, and was formerly the Dean of the College of Business at the
University of Nevada Las Vegas, a position he held for more than five years.
Dr. Pohl is also a Director of the Flagstaff Institute, in Flagstaff, Arizona.
8
<PAGE>
C. KEITH ROOKER has been a Director of the Company since 1988. Mr. Rooker
was the Executive Vice President of the Company from 1988 to July 1997, and was
also a Vice President of the Company from 1985 to 1988 and the Company's
Secretary and General Counsel from 1985 to July 1997. Mr. Rooker is a Partner
in the Las Vegas, Nevada law firm of Rooker & Gibson. The Company has retained
and intends to retain this law firm during the current fiscal year.
VICTOR M. ROSENZWEIG has been a Director of the Company since 1988. Mr.
Rosenzweig has been a Partner in the New York, New York law firm of Olshan
Grundman Frome & Rosenzweig LLP for more than five years. The Company has
retained and intends to retain this law firm during the current fiscal year.
THOMAS A. TURNER has been a Director of the Company since 1986. Before his
retirement Mr. Turner was an officer and director of JMA Architects & Engineers,
Inc., of Las Vegas, Nevada, for more than five years.
DEAN M. WILLARD was elected a Director of the Company in January 1997. Mr.
Willard is a consultant, business owner, and investor. He is also Chief
Executive Officer of Advanced Chemistry & Technology, Inc., a manufacturer of
specialty chemicals. From 1989 to 1993 Mr. Willard served as Chief Executive
Officer, and until 1995 as Vice Chairman, of Courtaulds Aerospace, Inc., a
provider of specialty chemical products in the aerospace industry. From 1972 to
1989 Mr. Willard served as President and Chief Executive Officer of Products
Research & Chemical Corporation, a predecessor of Courtaulds Aerospace, Inc.
JANE L. WILLIAMS was elected a Director of the Company in November, 1993.
Ms. Williams was also a Director of Western Electrochemical Company from 1989
until 1995. Ms. Williams is the President, Chairman and Chief Executive Officer
of TechTrans International of Houston, Texas, a provider of technical language
support services, a position she has held for two years. Before founding
TechTrans International, Ms. Williams was a consultant to businesses in the
aerospace industry for more than five years.
STANDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has established several standing
committees to assist the Board of Directors in its functions, namely, the
Executive Committee, the Audit Committee, the Management and Compensation
Committee, the Pension Plan Committee, the Environmental Oversight Committee and
the Nominating Committee. The membership and functions of these committees are
described below.
EXECUTIVE COMMITTEE. The Executive Committee is presently composed of Fred
D. Gibson, Jr., Chairman, John R. Gibson, Norval F. Pohl, Thomas A. Turner, and
Berlyn D. Miller. The Executive Committee is authorized to exercise the power
and authority of the Board of Directors with
9
<PAGE>
respect to the business of the Company to the extent permitted by the General
Corporation Law of the State of Delaware. The Executive Committee operates on a
standby basis when it is impractical for the Board of Directors to meet or to
act by consent in the absence of a meeting. The Executive Committee held no
meetings during the Company's fiscal year ended September 30, 1997.
AUDIT COMMITTEE. The Audit Committee is presently composed of Berlyn D.
Miller, Chairman, Norval F. Pohl, Victor M. Rosenzweig, Jan H. Loeb, Dean M.
Willard and Jane L. Williams. David N. Keys acts as an ex officio member. The
functions of the Audit Committee include making recommendations to the full
Board of Directors concerning the engagement of the Company's independent public
accountants, reviewing with the independent public accountants the results of
the audit engagement, and reviewing the independence of the independent public
accountants. In addition, the Audit Committee may review and represent the
Board of Directors with respect to transactions involving management and related
parties. The Audit Committee held three meetings during the Company's fiscal
year ended September 30, 1997.
MANAGEMENT AND COMPENSATION COMMITTEE. The Management and Compensation
Committee is presently composed of Thomas A. Turner, Chairman, Norval F. Pohl,
Berlyn D. Miller, Jane L. Williams, Fred D. Gibson, Jr., Dean M. Willard and C.
Keith Rooker. John R. Gibson acts as an ex officio member. The functions of
the Management and Compensation Committee include providing independent review
of and making recommendations to the Board of Directors concerning the
remuneration arrangements for senior management, executive officers and
Directors, recommending compensation plans in which senior management and
executive officers are eligible to participate, and assuring the development of
management skills essential to the affairs of the Company. The Management and
Compensation Committee held four meetings during the Company's fiscal year ended
September 30, 1997.
PENSION PLAN COMMITTEE. The Pension Plan Committee presently consists of
Victor M. Rosenzweig, Chairman, John R. Gibson, Fred D. Gibson, Jr., Eugene A.
Cafiero, David N. Keys, Dean M. Willard and Jan H. Loeb. The Pension Plan
Committee administers the Company's defined benefit pension and employee stock
ownership plans and oversees the performance of the managers of pension plan
assets. The Pension Plan Committee held one meeting during the Company's fiscal
year ended September 30, 1997.
ENVIRONMENTAL OVERSIGHT COMMITTEE. The Environmental Oversight Committee
consists of Eugene A. Cafiero, Chairman, Thomas A. Turner, Jan H. Loeb, Jane L.
Williams, Victor M. Rosenzweig and C. Keith Rooker. The Environmental Oversight
Committee oversees the Company's compliance with applicable environmental
standards, statutes and regulations. The Environmental Oversight Committee held
no meetings during the Company's fiscal year ended September 30, 1997.
NOMINATING COMMITTEE. The Nominating Committee consists of Norval F. Pohl,
Chairman, Eugene A. Cafiero, Fred D. Gibson, Jr., Berlyn D. Miller, and C. Keith
Rooker. The
10
<PAGE>
function of the Nominating Committee is to identify and propose candidates to
serve as Directors of the Company. Proposed nominees for membership on the
Board of Directors submitted in writing by stockholders to the Secretary of
the Company will be brought to the attention of the Nominating Committee. The
Nominating Committee held nine meetings during the Company's fiscal year ended
September 30, 1997.
A total of ten regularly scheduled and special meetings of the Company's
Board of Directors was held during the Company's fiscal year ended September 30,
1997. All Directors attended at least 75 percent of the aggregate of the total
number of such meetings and of the total number of meetings of all committees of
the Board of Directors on which each Director served that were held during the
period of time each was a Director.
MANAGEMENT
Executive Officers
The persons who were serving as executive officers of the Company as of
September 30, 1997 are John R. Gibson, David N. Keys and James J. Peveler. All
officers are elected annually by the Board of Directors and serve at the
pleasure of the Board of Directors, or until their respective successors have
been duly elected and qualify.
For certain information concerning JOHN R. GIBSON and DAVID N. KEYS, see
"The Directors," above.
JAMES J. PEVELER, age 61, is the Company's Vice President and General
Manager - Utah Operations. From 1989 to July 1997, Mr. Peveler was the
President of Western Electrochemical Company. Mr. Peveler is the beneficial
owner of 28,811 shares (less than 1%) of the Company's Common Stock (including
26,000 shares subject to options that are exercisable within 60 days after
February 6, 1998), with respect to all of which shares he exercises sole
investment and voting power.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of the Company's Chief Executive Officer and its four most highly compensated
executive officers other than the Chief Executive Officer (the "Named Executive
Officers").
11
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Annual Compensation /(1)/ Compensation
-----------------------------------------------------------------------------------
Awards
---------------------------
Name and Other Annual Securities Underlying
Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#)
- ------------------ ---- ---------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
FRED D. GIBSON, JR. /(2)/ 1997 356,167 --- --- 60,500
Chairman of the Board, and 1996 419,001 --- --- ---
Chief Executive Officer 1995 421,451 --- 35,000
and President (until July
1997)
JOHN R. GIBSON /(2) (3)/ 1997 157,433 --- --- 140,000
Chief Executive Officer 1996 149,033 --- --- ---
and President (from July 1995 148,140 --- --- 15,000
1997)
C. KEITH ROOKER /(4)/ 1997 275,105 --- --- 40,000
Executive Vice President, 1996 339,101 --- --- ---
Secretary and General 1995 339,101 --- --- 25,000
Counsel (until July 1997)
DAVID N. KEYS 1997 199,540 --- --- 120,000
Senior Vice President, 1996 166,975 --- --- ---
Chief Financial Officer, 1995 154,100 --- --- 20,000
Secretary and Treasurer
JAMES J. PEVELER 1997 169,240 --- --- 15,000
Vice President and General 1996 166,200 --- --- ---
Manager - Utah Operations 1995 166,200 --- --- 12,000
</TABLE>
/(1)/ The Company provides automobiles or an automobile allowance for
certain of its executive officers. After reasonable inquiry, the Company has
concluded that the aggregate amount of such compensation does not exceed the
lesser of either $50,000 or 10 percent of the total of annual salary and bonus
reported for the named executive officers.
/(2)/ Fred D. Gibson, Jr. resigned as Chief Executive Officer and
President in July 1997. The cash compensation reported for Fred D. Gibson, Jr.
does not include compensation in the amount of $109,467, $149,267 and $150,250
paid during the Company's fiscal years ended September 30, 1997, 1996 and 1995,
respectively, to Mr. Gibson's son, Fred D. Gibson, III, who resigned as
president of a subsidiary of the Company in June 1997. The cash compensation
reported for Mr. Gibson does not include compensation paid to Mr. Gibson's
brother, John R. Gibson, or to Mr. Gibson's sister, Linda G. Ferguson, who is
the Company's Vice President of Administration.
12
<PAGE>
/(3)/ The cash compensation reported for Mr. John R. Gibson does not
include compensation paid to Mr. Gibson's son, Jeff Gibson, who is employed in
an operating division of the Company.
/(4)/ Mr. Rooker resigned as an officer of the Company in July 1997.
EMPLOYMENT AGREEMENTS
Mr. Rooker was employed under an employment agreement with the Company
entered into in 1986 and provided legal services as general counsel pursuant to
a retainer agreement with the Company. The employment and retainer agreements
provided for the compensation disclosed above, as well as compensation increases
not effected. The term of Mr. Rooker's employment and retainer agreements was
five years (from June 1, 1986), extending automatically, in the absence of
notice to the contrary, from year to year up to age 65. Pursuant to a
settlement and severance agreement, effective July 17, 1997, Mr. Rooker resigned
as an officer and employee of the Company; he will continue to receive payments
thereunder until May 31, 2001 as if he were a full-time employee of the Company,
beginning at a rate of $348,256 per year.
Mr. Keys is employed under an employment agreement entered into in December
1994 providing for the compensation disclosed above, as well as any future
compensation increases. The agreement provides for a term of three years,
extending automatically, in the absence of notice to the contrary, from year to
year up to age 65. Any termination by the Company of the employment agreement
without good cause entitles Mr. Keys to receive all compensation to which he
would be entitled under the employment agreement for the then remaining term of
the agreement. A termination without good cause includes, unless Mr. Keys
accepts such changes in writing, a reduction in title, a substantial change in
duties, or a relocation.
In July 1997, the Company entered into a consulting agreement with Fred D.
Gibson, Jr. providing for payment of $10,000 per month for two years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
C. Keith Rooker filed a Form 4 late. The late Form 4 related to six
transactions with respect to the Company's Common Stock.
STOCK OPTION PLANS
In December 1997, the Board of Directors adopted, subject to stockholder
approval under Proposal No. 2, the American Pacific Corporation 1997 Stock
Option Plan (the "1997 Plan"). See Proposal No. 2 for a summary description of
the 1997 Plan and Appendix A hereto for a complete copy thereof. In December
1997, options with respect to an aggregate of 55,000 shares were granted under
the 1997 Plan to a consultant and to an employee of the Company, and in January
1998, options with respect to an aggregate of 49,000 shares were granted to 17
employees of the Company, in each case subject to stockholder approval of the
1997 Plan.
13
<PAGE>
In September 1991, the Company's Board of Directors adopted the American
Pacific Corporation 1991 Nonqualified Stock Option Plan (the "1991 Plan" and,
together with the 1997 Plan, the "Plans"). The 1991 Plan provided for the grant
of options with respect to an aggregate of 500,000 shares of Common Stock.
Options granted under the 1991 Plan are not intended to qualify for treatment as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The 1991 Plan was approved by a vote of the
stockholders of the Company in March 1992. Under the 1991 Plan options to
purchase shares of Common Stock may be granted to key employees, including
employees who are also Directors of the Company or of any of its subsidiaries.
The 1991 Plan expired on December 31, 1996. As of September 30, 1997, options
with respect to an aggregate of 500,000 shares of Common Stock had been granted
and were outstanding under the 1991 Plan.
In addition to the options outstanding under the Plans, in December 1994
the Company granted non-qualified stock options, at the then current fair market
value of $7.50 per share, in respect of an aggregate of 35,000 shares of Common
Stock to its then seven non-management directors pursuant to a non-discretionary
plan under which 40,000 shares were reserved. All of such options are currently
exercisable. In July 1989, the Company granted options in respect of a total of
100,000 shares to David N. Keys at the then current fair market value of $7.50
per share, 50,000 of which options were outstanding and exerciseable as of
September 30, 1997. In July 1997, the Company granted options in respect of
100,000 shares to John R. Gibson and 80,000 shares to David N. Keys, at the then
current fair market value of $7.125 per share. In May 1997, the Company granted
stock options to its eight non-management Directors at the then current fair
market value of $7.00 per share. The options granted in May and July 1997 were
granted pursuant to separate stock option agreements and not pursuant to the
Plans and are subject to stockholder approval, and are described in more detail,
under Proposals Nos. 3 and 4, below, respectively.
All of the Company's stock option plans and grants are currently
administered by the Board of Directors. A Committee of non-management Directors
will grant and administer incentive stock options under the 1997 Plan. See
Proposal No. 2. The Board of Directors determines the types of options,
identifies who shall receive options, the number of shares of Common Stock that
may be purchased under options, the time and manner of exercise of options, and
the exercise prices of options. The exercise price of options may not be less
than 100% of fair market value of the underlying shares of Common Stock on the
date of grant. The maximum term of each option is five years (10 years under
the 1997 Plan) from the date the option first becomes exercisable. Payment for
shares purchased upon exercise of options may be made in cash, by delivery of
shares of Common Stock previously owned, or in other forms approved by the Board
of Directors.
In the event of a change in the number of outstanding shares of Common
Stock, or in the event of another change affecting the Common Stock, such as a
stock split, merger, consolidation, or declaration or a stock dividend, an
appropriate adjustment will be made in the terms and conditions of options
issued under the Plans and the other options referred to above and an
appropriate adjustment will be made in the number of shares subject to options
issued. Under the 1991 Plan and the non-Plan options referred to above, if the
Company sells all or substantially all of its assets or stock by way of a
14
<PAGE>
sale, merger, consolidation, reorganization or liquidation, the options become
immediately exercisable until the transaction is consummated. Options granted
under the Plans may be exercised only while the optionee is employed by the
Company and for 90 days thereafter unless termination of employment results from
death of the optionee, in which case the options may be exercised within one
year after the date of death.
The following tables provide information with respect to the Named
Executive Officers, concerning options granted and exercised during the
Company's fiscal year ended September 30, 1997, and unexercised options held as
of September 30, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
<TABLE>
<CAPTION>
Potential Realized Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
----------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Granted Employees in Base Price Expiration
Name and (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
Principal Position
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FRED D. GIBSON, JR. 30,250 6.1% $6.375 03/10/99 $19,766 $ 40,496
Chairman of the Board, 30,250 6.1% $6.375 03/10/99 19,766 40,496
Chief Executive Officer
and President (until
July 1997)
JOHN R. GIBSON 20,000 4.1% $6.375 12/30/01 27,477 59,173
Chief Executive Officer 20,000 4.1% $6.375 12/30/02 35,226 77,840
and President (from July 25,000 5.1% $7.125 07/08/02 49,213 108,747
1997) 25,000 5.1% $7.125 07/08/03 60,580 137,434
25,000 5.1% $7.125 07/08/04 72,515 168,990
25,000 5.1% $7.125 07/08/05 85,047 203,702
C. KEITH ROOKER 20,000 4.1% $6.375 12/30/01 27,477 59,173
Executive Vice 20,000 4.1% $6.375 12/30/02 35,226 77,840
President, Secretary
and General Counsel
(until July 1997)
DAVID N. KEYS 20,000 4.1% $6.375 12/30/01 27,477 59,173
Senior Vice President, 20,000 4.1% $6.375 12/30/02 35,226 77,840
Chief Financial 20,000 4.1% $7.125 07/08/02 39,370 86,998
Officer, Secretary and 20,000 4.1% $7.125 07/08/03 48,464 109,947
Treasurer 20,000 4.1% $7.125 07/08/04 58,012 135,192
20,000 4.1% $7.125 07/08/05 68,037 162,961
JAMES J. PEVELER 7,000 1.4% $6.375 12/30/01 9,617 20,710
Vice President and 7,000 1.4% $6.375 12/30/02 12,329 27,244
General Manager - Utah
Operations
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
---------------------------------
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End at Fiscal Year-End(1)
(#) ($)
-----------------------------------------------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred D. Gibson, Jr. --- --- 70,250 / 30,250 $38,110 / $35,922
John R. Gibson --- --- 60,000 / 95,000 $35,626 / $56,562
C. Keith Rooker 43,000 $142,437 45,000 / 20,000 $25,313 / $23,750
David N. Keys --- --- 110,000 / 80,000 $36,875 / $50,000
James J. Peveler --- --- 19,000 / 7,000 $9,063 / $8,313
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ On September 30, 1997, the closing price of the Company's Common Stock
on the Nasdaq National Market was $7.5625.
RETIREMENT BENEFITS
Under the Company's defined benefit pension plan, eligible employees,
including employees who are Directors and executive officers, are entitled to
receive a pension benefit based upon their years of service and their "average
compensation." The term "average compensation" is defined to be the average of
the employee's earnings for the five consecutive years of employment during
which the employee's compensation was the highest, subject to applicable
limitations provided by law. Prior to January 1, 1994 the applicable limitation
on compensation was $200,000, adjusted for inflation. During the calendar year
1993 the $200,000 figure, adjusted for inflation, amounted to $235,840. Tax
legislation that became effective on January 1, 1994 reduced this figure to
$150,000, subject to adjustment for inflation in future years. The 1997
limitation on compensation was $160,000. The annual retirement benefit provided
under the plan is two percent of each employee's "average compensation," plus
0.65 percent of each employee's "average compensation" in excess of the
applicable covered compensation, for each year of service, up to 20. The
covered compensation is derived from social security tables and depends upon
each individual's year of birth. The maximum benefit under the defined benefit
pension plan is limited to the lesser of 100 percent of average compensation or
the sum of $90,000, as adjusted for inflation. The $90,000 limitation, adjusted
for inflation, amounted to $125,000 for the calendar year 1997. Employees
become vested in their pension benefits as they complete years of service in the
employ of the Company or its subsidiary corporations, and are fully vested after
seven years of service with the Company and its subsidiary corporations.
The following table presents the noncontributory annual benefits payable for
life under the Company's pension plan to employees, assuming normal retirement
at age 65 during the Company's current fiscal year under a single life annuity.
The amounts shown below represent
16
<PAGE>
the application of the pension plan formula to the amounts of compensation and
years of service shown. The amounts shown below do not include social security
benefits upon retirement. Nor does the Company's pension plan give credit for
years of service in excess of 20. Benefits payable under the pension plan must
be in compliance with the applicable guidelines or maximums prescribed in the
Employee Retirement Income Security Act of 1974, as currently stated or as
adjusted from time to time. The amounts shown below do not anticipate future
changes in salary levels or inflation. All benefits shown are for an employee
born in 1932 (age 65 in 1997). Benefits for employees born later may be lower.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
------------------
Years of Service
-----------------------------------------------------------
Average Compensation 15 20 25
- -------------------- ------- ------- -------
<S> <C> <C> <C>
$ 125,000 $ 47,231 $ 62,974 $ 62,974
150,000 57,168 76,224 76,224
175,000 57,963 77,284 77,284
200,000 57,963 77,284 77,284
</TABLE>
The credited years of service under the pension plan as of September 30, 1997
for each of the Company's Named Executive Officers is as follows: Fred D.
Gibson, Jr., 41 years; C. Keith Rooker, 12 years; John R. Gibson, 6 years; David
N. Keys, 8 years; and James J. Peveler, 15 years.
On November 7, 1994, the Board of Directors of the Company adopted the
American Pacific Corporation Supplemental Executive Retirement Plan (the
"SERP"). The SERP is designed to provide retirement benefits to designated
executives to supplement the retirement benefits provided by the Company's
pension plan. Fred D. Gibson, Jr., the Company's Chairman and former Chief
Executive Officer and President, is the sole participant in the SERP at this
time. The SERP provides for retirement benefits (inclusive of benefits payable
under the Company's pension plan) equal to three percent of average annualized
compensation during the 36 months of highest compensation ("Final Average
Compensation") for service up to 15 years, plus one and one-half percent of
Final Average Compensation for years of service exceeding 15 years, but not more
than 35 years. Mr. Gibson was employed by the Company for more than 35 years,
and therefore is entitled to the maximum annual benefit payable under the terms
of the SERP, totaling 75 percent of Final Average Compensation. As of July 31,
1997, Mr. Gibson's Final Average compensation equaled $427,400. Using this
figure as Final Average Compensation, Mr. Gibson's annual SERP benefit, in
addition to his pension, was $126,287.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of certain transactions between the Company and certain
executive officers and Directors, see "Compensation Committee Interlocks and
Insider Participation," below.
17
<PAGE>
REPORT OF THE MANAGEMENT AND COMPENSATION COMMITTEE
Executive Compensation Principles
The Company's executive compensation program is based upon guiding principles
designed to align executive compensation with the values, objectives, and
business and financial performance of the Company, and to motivate the Company's
officers and key employees to achieve the Company's goals of providing the
Company's stockholders with a competitive return on their investments, while at
the same time providing the Company's customers with quality products. Toward
that end, the executive compensation program is designed to achieve the
following objectives:
. Attract and retain highly qualified individuals who are capable of making
significant contributions to the long-term success of the Company.
. Promote a performance oriented environment that encourages Company and
individual achievement.
. Reward executive officers for long-term strategic management and the
enhancement of stockholder value.
. Provide levels of total compensation that are competitive with those
provided by other companies with which the Company may compete for executive
talent.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program consists of both cash and equity-
based compensation. The Management and Compensation Committee of the Board of
Directors is responsible for establishing and administering the policies that
govern both cash and equity-based compensation. The Management and Compensation
Committee is responsible for reviewing the executive compensation program on at
least an annual basis to ensure conformance to the Company's executive
compensation principles. Annual base salary increases reflect an individual's
performance and contribution to the Company over several years.
Cash Compensation. The base salaries of the Company's Chief Executive Officer
and other executive officers as a group were established by the Management and
Compensation Committee after considering rates of compensation then being paid
by the Company, as well as salary trends and overall performance. Salary levels
were also influenced by the Company's continuing focus on cost containment.
Consequently, cash compensation paid to executive officers during the September
30, 1997 fiscal year was influenced more by these factors than by compensation
levels for comparable positions in the industry. The Company does not have an
annual bonus plan. Except as provided in the 1997 Plan (see Proposal No. 2), the
Company has not established a policy with regard to Section 162(m) of the Code
because the Company has not
18
<PAGE>
paid, and does not currently anticipate paying, compensation in excess of $1
million per annum to any employee.
Equity-Based Compensation. The Company's stock option plans are designed to
advance the long-term interests of the Company by aligning the long-term
interests of the Company's executive officers with those of the Company's
stockholders by providing executive officers with an opportunity to build a
meaningful equity position in the Company. The Company has in the past made
substantial grants of stock options to its executive officers. The Management
and Compensation Committee may recommend additional grants of stock options in
the future. In July 1997, options in the amount of 100,000 shares and 80,000
shares were granted to John R. Gibson and David N. Keys, respectively, at an
exercise price of $7.125 per share. Those options are subject to stockholder
approval under Proposal No. 4, below. In November and December 1996, options in
respect of 312,000 shares were granted to executives and key employees,
including 60,500 to Mr. Fred D. Gibson, Jr., 40,000 to Mr. Rooker, 40,000 to Mr.
Keys, 40,000 to Mr. John R. Gibson and 14,000 to Mr. Peveler, all at an exercise
price of $6.375 per share. No outstanding stock options were re-priced, amended
or modified during the Company's fiscal year ended September 30, 1997.
Management and Compensation Committee
Thomas A. Turner, Chairman
Fred D. Gibson, Jr.
Norval F. Pohl
Berlyn D. Miller
Dean M. Willard
Jane L. Williams
C. Keith Rooker
COMPENSATION OF DIRECTORS
Directors of the Company (other than Messrs. John R. Gibson, Keys and
Rosenzweig) are compensated at the rate of $2,000 per quarter, plus $700 per
meeting of the Company's Board of Directors attended, and $500 per committee
meeting attended, and are reimbursed for expenses incurred in attending
Directors' meetings. Committee chairmen receive an additional $200 per
committee meeting attended and all non-employee members of the Executive
Committee receive an additional $250 per month. Mr. Rosenzweig bills the
Company at his customary rates for time spent on behalf of the Company (whether
as a Director or in the performance of legal services for the Company) and is
reimbursed for expenses incurred in attending Directors' meetings.
19
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Directors who served on the Management and Compensation Committee of the
Company during the fiscal year ended September 30, 1997 were Fred D. Gibson,
Jr., the Company's former Chief Executive Officer and President until July 1997,
C. Keith Rooker, the Company's former Executive Vice President, Secretary and
General Counsel until July 1997, John R. Gibson, the Company's Chief Executive
Officer and President, Thomas A. Turner, Norval F. Pohl, Berlyn D. Miller, Jane
L. Williams and Dean M. Willard.
Indebtedness of Directors and Executive Officers
On September 28, 1994 Mr. Rooker borrowed the sum of $96,875 from the Company.
Mr. Rooker used the amount borrowed to pay the exercise price of 25,000 options
previously granted to him pursuant to the Company's 1988 Incentive Stock Option
Plan. Mr. Rooker's loan is evidenced by an unsecured promissory note that bears
interest at the prime rate and is payable on demand. The settlement and
severance agreement with Mr. Rooker provides for payment of the balance owing on
a schedule set forth in the agreements. As of December 31, 1997 the balance
owing by Mr. Rooker under the promissory note, including accrued interest, was
$96,875.
During 1994 the Company loaned an aggregate of $552,592 to Fred D. Gibson,
Jr., Chairman, and then President and Chief Executive Officer of the Company.
Mr. Gibson's loan is evidenced by an unsecured promissory note that bears
interest at the prime rate and is payable on demand. As of December 31, 1997,
the balance owing by Mr. Gibson under the promissory note, including accrued
interest, was $371,850.
On June 16, 1993 James J. Peveler borrowed the sum of $100,000 from the
Company. On September 27, 1993 Mr. Peveler borrowed an additional $40,000. Mr.
Peveler's loans are evidenced by his unsecured promissory notes payable to the
Company, which bear interest at the prime rate and are repayable upon demand.
As of December 31, 1997 the total balance owing by Mr. Peveler in respect of the
two loans, including accrued interest, was $140,000.
Transactions with Management and Others
The Company is the General Partner of Gibson Business Park Associates 1986-1,
a Nevada limited partnership (the "Limited Partnership"). The Company owns a 70
percent interest in the capital and profits of the Limited Partnership. The
remaining 30 percent is owned as follows: 10 percent by Fred D. Gibson, Jr., 10
percent by C. Keith Rooker, five percent by the estate of the late Audrey B.
Gibson (the wife of deceased former officer and Director of the Company James I.
Gibson and sister-in-law to Fred D. Gibson, Jr. and John R. Gibson), two percent
by James B. Gibson, (a nephew of Fred D. Gibson, Jr. and John R. Gibson) and
former associate General Counsel of the Company, two percent by Thomas A.
Turner, and one percent by Thomas L. War (a former officer and Director of the
Company).
20
<PAGE>
On July 31, 1990, the Company entered into a lease agreement with 3770
Hughes Parkway Associates Limited Partnership, a Nevada limited partnership
("Hughes Parkway"), pursuant to which the Company leased the third floor of a
three-story building owned by Hughes Parkway. The Company presently utilizes
the third floor of this building as office facilities. Hughes Parkway is a
limited partnership of which Howard Hughes Properties, a Delaware limited
partnership, is the general partner, and of which the Limited Partnership is the
sole limited partner, owning a 33 percent interest in Hughes Parkway. Hughes
Parkway financed the cost of construction of the building through contributions
from its partners and through borrowing from an unrelated lender.
The Limited Partnership purchased its interest in Hughes Parkway in July,
1990, by paying the sum of $1,040,490 in cash. A subsidiary of the Company
contributed 70 percent of this amount and, accordingly, acquired a 70 percent
interest in the Limited Partnership. The remaining 30 percent was contributed
by the aforenamed limited partners in the Limited Partnership. The Limited
Partnership and the limited partners are individually liable with respect to a
portion of the borrowing from the unrelated lender. The partnership agreement
for Hughes Parkway provides that if the lease agreement between the Company and
Hughes Parkway should be terminated due to a default by the Company, Howard
Hughes Properties can purchase the interest of the Limited Partnership in Hughes
Parkway at a discount of as much as 25 percent. The Company has agreed to
indemnify the Limited Partnership on account of any financial loss it may suffer
as a result of this provision. The lease agreement and participation in the
Hughes Parkway transaction were approved by the members of the Board of
Directors who are not limited partners in the Limited Partnership or related
parties.
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total returns
for the Company's common stock, the Wilshire 5000 Index, and the Wilshire
Chemicals Index.
FIVE YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
Measurement Period CHEMICALS WILSHIRE AMER.
(Fiscal Year Covered) RET 5000 PAC. RET.
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 9/30/92 $100 $100 $100
FYE 9/30/93 $105 $117 $ 41
FYE 9/30/94 $128 $120 $ 30
FYE 9/30/95 $147 $155 $ 17
FYE 9/30/96 $180 $185 $ 21
FYE 9/30/97 $229 $255 $ 24
</TABLE>
21
<PAGE>
PROPOSAL NO.2 - APPROVAL OF 1997 STOCK OPTION PLAN
In December 1997, the Board of Directors unanimously approved the American
Pacific Corporation 1997 Stock Option Plan (the "1997 Plan") set forth in
Appendix A to this proxy statement, subject to approval of the 1997 Plan by the
stockholders of the Company. The following discussion of the 1997 Stock Option
Plan is qualified in its entirety by reference to Appendix A.
The purpose of the 1997 Plan is to provide additional incentive to the
officers, directors and employees of the Company and its subsidiaries who are
primarily responsible for the management and growth of the Company, and to
consultants and advisors to the Company and its subsidiaries who otherwise
materially contribute to the conduct and direction of its business, operations
and affairs, in order to strengthen their desire to remain in the employ or
retention of the Company and its subsidiaries and to stimulate their efforts on
behalf of the Company and its subsidiaries, and to retain and attract to the
employ of the Company and its subsidiaries persons of competence. The 1997 Plan
provides for the grant of both "incentive stock options" and "nonqualified stock
options." Any employee shall be eligible to receive incentive stock options or
nonqualified stock options. Consultants and advisors to the Company or any of
its subsidiaries and directors of the Company or any of its subsidiaries who are
not employees shall be eligible to receive nonqualified stock options.
ADMINISTRATION
A Committee (the "Committee"), to be appointed by the Board of Directors and
composed of two or more non-management directors that are "non-employee
directors" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, and "outside directors" under Section 162(m)
of the Code, will administer the granting of stock options under the 1997 Plan
to officers, directors and employees of, and consultants and advisors to, the
Company and its subsidiaries.
COMMON STOCK SUBJECT TO THE 1997 PLAN
The 1997 Plan currently authorizes the issuance of a maximum of 325,000 shares
of Common Stock. The maximum number of shares that may be subject to options
granted under the 1997 Plan to any individual in any calendar year may not
exceed 100,000 and the method of counting such shares shall conform to any
requirements applicable to "performance-based" compensation under Section 162(m)
of the Code. It is intended that compensation realized upon the exercise of
options granted under the 1997 Plan will therefore be regarded as "performance-
based" under Section 162(m) of the Code. See "Performance Based Compensation"
below. If any option under the 1997 Plan shall expire or terminate for any
reason, without having been exercised in full, the unpurchased shares subject
thereto shall again be available for the purposes of the 1997 Plan.
22
<PAGE>
Non-qualified options to purchase an aggregate of 55,000 shares of Common
Stock were granted in December 1997 under the 1997 Plan to a Company employee
and to a consultant to the Company, subject to stockholder approval of the 1997
Plan. In January 1998 non-qualified options to purchase 49,000 shares were
granted to 17 employees subject to stockholder approval of the 1997 Plan. The
1997 Plan will become effective upon such approval.
EXERCISE PRICE AND TERM
The option price per share applicable to options granted under the 1997 Plan
shall be determined by the Committee, but (i) as to an incentive stock option
shall not be less than 100% of the fair market value per share of Common Stock
on the date such option is granted and (ii) as to a nonqualified stock option,
shall not be less than 100% of the fair market value on the date such option is
granted. If an option granted to the Company's Chief Executive Officer or to
any of the Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
the exercise price of such options shall not be less than 100% of the fair
market value on the date such option is granted. The Committee shall fix the
term of each option, provided that the maximum length of the term of each option
granted under the 1997 Plan shall be 10 years.
PERFORMANCE-BASED COMPENSATION
Section 162(m) of the Code, in general, disallows the Company a federal income
tax deduction for total remuneration in excess of $1 million paid to the
Company's Chief Executive Officer or to any of the Company's four most highly
compensated officers other than the Chief Executive Officer in any one year.
However, Section 162(m) exempts "performance-based" compensation, such as stock
option based compensation, if it is awarded under a stockholder-approved plan
that meets certain requirements. In accordance with Treasury regulations issued
under Section 162(m), compensation attributable to stock options will qualify as
"performance-based" compensation, provided that (i) the option plan contains a
per-employee limitation on the number of shares for which options may be granted
during a specific period, (ii) the per-employee limitation is approved by the
stockholders, (iii) the option is granted by a compensation committee comprised
solely of "outside directors," and (iv) the exercise price of the option is no
less than fair market value of the stock on the date of grant. Accordingly, the
1997 Plan provides that the maximum number of shares that may be subject to
options thereunder to any individual in any calendar year shall not exceed
100,000. It is intended that compensation realized upon the exercise of an
option granted under the 1997 Plan to the Company's Chief Executive Officer or
to any of the Company's other four most highly compensated officers will
therefore be regarded as "performance-based" under Section 162(m) of the Code
and that such compensation may be deductible without regard to the limits of
Section 162(m) of the Code.
23
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FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Incentive stock options granted under the 1997 Plan
are intended to be "incentive stock options" within the meaning of Section 422
of the Code. Under present law, the grantee of an incentive stock option will
not incur taxable income upon the grant or the exercise of the incentive stock
option and the Company will not receive an income tax deduction at either such
time. If the optionee does not sell the Common Stock acquired upon exercise of
an incentive stock option within either (i) two years after the grant of the
incentive stock option or (ii) one year after the date of exercise of the
incentive stock option, the gain upon a subsequent sale of the Common Stock will
be taxed as long-term capital gain. If the optionee, within either of the above
periods, disposes of the Common Stock acquired upon exercise of the incentive
stock option, the optionee will recognize as ordinary income an amount equal to
the lesser of (i) the gain realized by the optionee upon such disposition or
(ii) the difference between the exercise price and the fair market value of the
shares on the date of exercise. In such event, the Company would be entitled to
a corresponding income tax deduction equal to the amount recognized as ordinary
income by the optionee. The gain in excess of such amount recognized by the
optionee as ordinary income would be taxed as long-term, mid-term or short-term
capital gain (subject to the holding period requirements for long-term, mid-term
and short-term capital gain treatment).
The exercise of an incentive stock option will generally result in the excess
of the Common Stock's fair market value on the date of exercise over the
exercise price being included in the optionee's alternative minimum taxable
income. Liability for the alternative minimum tax is a complex determination
and depends upon an individual's overall tax situation. Before exercising an
incentive stock option, an employee should discuss the possible application of
the alternative minimum tax with his tax advisor.
Non-Qualified Stock Options. Upon exercise of a non-qualified stock option,
whether granted under the 1997 Plan or otherwise, the optionee will recognize
ordinary income in an amount equal to the excess of the fair market value of the
Common Stock received over the exercise price of such Common Stock. That amount
will increase the optionee's basis in the Common Stock acquired pursuant to the
exercise of the option. Upon a subsequent sale of the Common Stock, the
optionee will recognize short-term, mid-term or long-term gain or loss depending
upon his holding period of the Common Stock and upon the subsequent appreciation
or depreciation in the market value of the Common Stock. The Company will be
allowed a federal income tax deduction for the amount recognized as ordinary
income by the optionee upon the optionee's exercise of the option.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or by proxy, is required for approval of the 1997
Plan.
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<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
1997 STOCK OPTION PLAN.
PROPOSAL NO. 3 - APPROVAL OF THE GRANT OF NON-QUALIFIED STOCK OPTIONS TO THE
NON-EMPLOYEE MEMBERS OF THE BOARD OF DIRECTORS
Grant of Director Options
In May 1997 the Board of Directors granted to the non-employee members of the
Board of Directors stock options (the "Director Options") to purchase an
aggregate of 95,000 shares of the Company's Common Stock at an exercise price of
$7.00 per share, being the last reported sale price of the Company's Common
Stock on the date of grant. Options to purchase an aggregate of 15,000 shares of
the Company's Common Stock were granted to each of Messrs. Cafiero, Loeb and
Willard and options to purchase an aggregate of 10,000 shares of the Company's
Common Stock were granted to each of Messrs. Miller, Pohl, Rosenzweig and Turner
and Ms. Williams. The Director Options are exercisable as to 50% of the shares
covered thereby on each of May 21, 1997 and May 21, 1998. The exercise price is
payable in cash or by delivery of shares of the Company's Common Stock having a
fair market value equal to the exercise price provided such shares have been
held by the optionee for at least six months prior to delivery. The exercise
dates set forth above accelerate, and the Director Options become immediately
exercisable in full, in the event the Company or its stockholders enter into an
agreement to dispose of all or substantially all of the assets or Common Stock
of the Company, by means of sale, merger, reorganization or similar transaction
( a "Disposition Transaction"). The last reported sale price of the Company's
Common Stock on January 22, 1998 was $6.75.
Each of the Director Options expires five years after it first becomes
exercisable, subject to earlier termination upon the earlier of consummation of
a Disposition Transaction or two years after the optionee ceases to serve as an
employee or Director of the Company, provided that an optionee who dies or
becomes disabled while so serving or within 90 days after ceasing to serve is
treated as having continued in the service of the Company until expiration of
the last Director Option granted to such optionee.
The Director Options are not transferable except to family members or trusts
therefor, or by will or by the laws of descent and distribution.
PURPOSE OF DIRECTOR OPTIONS
The purpose of granting the Director Options is to encourage the optionees to
remain in the service of the Company and to give them added incentive to work
toward the long-term growth and profitability of the Company.
25
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FEDERAL INCOME TAX CONSEQUENCES
The Director Options are non-qualified stock options. For a summary of the
federal income tax consequences relating to non-qualified stock options, see
Proposal No. 2 above.
REGISTRATION OF SHARES
The Company intends to file a registration statement under the Securities Act
of 1933, as amended, with respect to the Common Stock issuable upon exercise of
the Director Options, subsequent to approval of the Director Options by the
Company's stockholders.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or by proxy, is required for approval of the grant of
the Director Options.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
GRANT OF THE DIRECTOR OPTIONS.
PROPOSAL NO. 4 - APPROVAL OF THE GRANT OF NON-QUALIFIED STOCK OPTIONS TO TWO
EXECUTIVE OFFICERS
Grant of Options
In July 1997 the Board of Directors granted to John R. Gibson, Chief Executive
Officer and President of the Company, and David N. Keys, Senior Vice President
and Chief Financial Officer of the Company, stock options (the "Options") to
purchase an aggregate of 100,000 and 80,000 shares of the Company's Common
Stock, respectively, at an exercise price of $7.125 per share, being the last
reported sale price of the Company's Common Stock on the date of grant. The
Options are exercisable as to 25% of the shares covered thereby on each of July
8, 1997, July 8, 1998, July 8, 1999, and July 8, 2000. The exercise dates set
forth above accelerate, and the Options become immediately exercisable in full,
in the event the Company or its stockholders enter into an agreement to effect a
Disposition Transaction.
Each of the Options expires five years after it first becomes exercisable,
subject to earlier termination upon the earlier of consummation of a Disposition
Transaction or two years after the optionee ceases to serve as an employee or
Director of the Company, provided that an optionee who dies or becomes disabled
while so serving or within 90 days after ceasing to serve is treated as having
continued in the service of the Company until expiration of the last Option
granted to such optionee.
The Options are not transferable except by will or by the laws of descent and
distribution.
26
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PURPOSE OF OPTIONS
The purpose of granting the Options is to encourage the optionees to remain in
the service of the Company and to give them added incentive to work toward the
long-term growth and profitability of the Company.
FEDERAL INCOME TAX CONSEQUENCES
The Options are non-qualified stock options. For a summary of the federal
income tax consequences relating to non-qualified stock options, see Proposal
No. 2, above.
Registration of Shares
The Company intends to file a registration statement under the Securities Act
of 1933, as amended, with respect to the Common Stock issuable upon exercise of
the Options, subsequent to approval of the Options by the Company's
stockholders.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or by proxy, is required for approval of the grant of
the Options.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
GRANT OF THE OPTIONS.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Deloitte & Touche served as the Company's independent
public accountants for the fiscal year ended September 30, 1997. It is expected
that this firm will serve as such during the current fiscal year. The Audit
Committee met and evaluated the performance of the independent public
accountants and recommended that the Board of Directors approve the audit for
fiscal year ended September 30, 1997. A representative of Deloitte & Touche is
expected to attend the Annual Meeting and to have the opportunity to make a
statement if he so desires, and will be available to respond to appropriate
questions from stockholders.
STOCKHOLDER PROPOSALS
If a stockholder wishes to have a proposal considered for inclusion in the
Company's 1999 Annual Meeting of Stockholders and accompanying proxy
solicitation materials, the proposal must be stated in writing and must be filed
with the Secretary of the Corporation on or before September 30, 1998. The
Board of Directors will review any proposal that is received by
27
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that date and will determine whether it should be included in the Company's 1999
Annual Meeting of Stockholders and proxy solicitation materials.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors does not intend
to present, and has not been informed that any other person intends to present,
any matter for action at the Annual Meeting, other than as set forth herein and
in the Notice of Annual Meeting. If any other matters properly come before the
meeting, it is intended that the holders of the proxies will act in accordance
with their best judgment.
By Order of the Board of Directors
David N. Keys, Secretary
Dated: February 9, 1998
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APPENDIX A
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AMERICAN PACIFIC CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This 1997 Stock Option Plan (the "Plan") is intended as an incentive, to
retain in the employ of and as consultants and advisors to AMERICAN PACIFIC
CORPORATION, a Delaware corporation with its principal office at 3770 Howard
Hughes Parkway, Las Vegas, Nevada 89109 (the "Company") and any Subsidiary of
the Company, within the meaning of Section 424(f) of the United States Internal
Revenue Code of 1986, as amended (the "Code"), persons of training, experience
and ability, to attract new employees, directors, advisors and consultants whose
services are considered valuable, to encourage the sense of proprietorship and
to stimulate the active interest of such persons in the development and
financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant to the Plan
shall constitute incentive stock options within the meaning of Section 422 of
the Code (the "Incentive Options") while certain other options granted pursuant
to the Plan shall be nonqualified stock options (the "Nonqualified Options").
Incentive Options and Nonqualified Options are hereinafter referred to
collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section 16
(b) of the Exchange Act. Further, the Plan is intended to satisfy the
performance-based compensation exception to the limitation on the Company's tax
deductions imposed by Section 162(m) of the code ("Section 162(m)"). In all
cases, the terms, provisions, conditions and limitations of the Plan shall be
construed and interpreted consistent with the Company's intent as stated in this
Section 1.
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee") consisting
of two or more directors that are "Non-Employee Directors" (as such term is
defined in Rule 16b-3) and "Outside Directors"
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(as such term is defined in Section 162 (m)), which shall serve at the pleasure
of the Board. The Committee, subject to Sections 3 and 5 hereof, shall have full
power and authority to designate recipients of Options, to determine the terms
and conditions of respective Option agreements (which need not be identical) and
to interpret the provisions and supervise the administration of the Plan. The
Committee shall have the authority, without limitation, to designate which
Options granted under the Plan shall be Incentive Options and which shall be
Nonqualified Options. To the extent any Option does not qualify as an Incentive
Option, it shall constitute a separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret the
Plan and all Options granted under the Plan, shall make such rules as it deems
necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry into effect the Plan or any
Options. The act or determination of a majority of the Committee shall be the
act or determination of the Committee and any decision reduced to writing and
signed by all of the members of the Committee shall he fully effective as if it
had been made by a majority at a meeting duly held. Subject to the provisions
of the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall he conclusive on all parties.
In the event that for any reason the Committee is unable to act or if the
Committee at the time of any grant, award or other acquisition under the Plan of
Options or Stock as hereinafter defined does not consist of two or more Non-
Employee Directors, or if there shall he no such Committee, then the Plan shall
be administered by the Board and any such grant, award or other acquisition may
be approved or ratified in any other manner contemplated by subparagraph (d) of
Rule 16b-3; provided, however, that options granted to the Company' s Chief
-------- -------
Executive officer or to any of the Company's other four most highly compensated
officers that are intended to qualify as performance-based compensation under
Section 162(m) may only be granted by the Committee.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as recipients of options
(the "Optionees") shall include employees, officers and directors of, and
consultants and advisors to, the Company or any Subsidiary; provided that
Incentive Options may only be granted to employees of the Company and the
Subsidiaries. In selecting Optionees, and in determining the number Of shares
to be covered by each Option granted to Optionees, the Committee may consider
the office or position held by the Optionee or the Optionee's relationship to
the Company, the Optionee's degree of responsibility for and contribution to the
growth and success of the Company or any Subsidiary, the Optionee's length of
service, age, promotions, potential and any
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other factors that the Committee may consider relevant. An Optionee who has been
granted an Option hereunder may he granted an additional Option or Options, if
the Committee shall so determine.
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total of 325,000
shares of the Company's Common Stock, $0.10 par value per share (the "Stock"),
shall be subject to the Plan. The maximum number of shares of Stock that may be
subject to options granted under the Plan to any individual in any calendar year
shall not exceed 100,000, and the method of counting such shares shall conform
to any requirements applicable to performance-based compensation under Section
162 (m). The shares of Stock subject to the Plan shall consist of unissued
shares or previously issued shares held by any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the following conditions
and shall contain such additional terms and conditions, not inconsistent with
the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price of each share of Stock
------------
purchasable under an Incentive Option shall be determined by the Committee at
the time of grant, but shall not be less than 100% of the Fair Market Value (as
defined below) of such share of Stock on the date the option is granted;
provided, however, that with respect to an Optionee who, at the time such
- -------- -------
Incentive Option is granted, owns (within the meaning of Section 424 (d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or of any Subsidiary, the purchase price per share of Stock shall
be at least 110% of the Fair Market Value per share of Stock on the date of
grant. The purchase price of each share of Stock purchasable under a
Nonqualified option shall not be less than 100% of the Fair Market Value of such
share of Stock on the date the Option is granted; provided, however, that if an
-------- -------
Option granted to the Company's Chief Executive Officer or to any of the
Company's other four most highly compensated officers is intended to qualify as
performance-based compensation under Section
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162(m), the exercise price of such Option shall not be less than 100% of the
Fair Market Value of such share of Stock on the date the Option is granted. The
exercise price for each Option shall be subject to adjustment as provided in
Section 7 below. Fair Market Value means the closing price of publicly traded
shares of Stock on the principal securities exchange on which shares of Stock
are listed (if the shares of Stock are so listed), or on the NASDAQ Stock Market
(if the shares of Stock are regularly quoted on the NASDAQ Stock Market), or, if
not so listed or regularly quoted, the mean between the closing bid and asked
prices of publicly traded shares of Stock in the over-the-counter market, or, if
such bid and asked prices shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as determined by the
Committee in a manner consistent with the provisions of the Code. Anything in
this Section 5(a) to the contrary notwithstanding, in no event shall the
purchase price of a share of Stock be less than the minimum price permitted
under the rules and policies of the securities exchange or automated quotation
system on which the shares of Stock are listed.
(b) Option Term. The term of each Option shall be fixed by the
-----------
Committee, but no Option shall he exercisable more than 10 years after the date
such Option is granted; provided, however, that the term of an Incentive Option
-------- -------
granted to an Optionee who, at the time such Incentive Option is granted owns
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary
shall not exceed five years.
(c) Exercisability. Subject to Section 5(j) hereof, options shall be
--------------
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant.
(d) Method of Exercise. Options to the extent then exercisable may
------------------
be exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before the
Option is exercised). An optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock purchased upon exercise
of an Option after (i) the Optionee has given written notice of exercise and has
paid in full for such shares and (ii) becomes a stockholder of record with
respect thereto.
(e) Non-transferability of Options. Options are not transferable and
------------------------------
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution. Any attempt to transfer, assign, pledge or otherwise dispose
of, or to subject to execution, attachment or similar process,
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any Option contrary to the provisions hereof shall be void and ineffective and
shall give no right to the purported transferee.
(f) Termination by Death. Unless otherwise determined by the
--------------------
Committee at grant, if any Optionee's employment with or service to the Company
or any Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one year after the date of such death or until the expiration of the
stated term of such Option as provided under the Plan, whichever period is
shorter.
(g) Termination by Reason of Disability. Unless otherwise determined
-----------------------------------
by the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of total and permanent
disability, any Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to Disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after three months after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the optionee Dies
within such three-month period, any unexercised Option held by such Optionee
shall thereafter be exercisable to the extent to which it was exercisable at the
time of death for a period of one year after the date of such death or for the
stated term of such Option, whichever period is shorter.
(h) Termination by Reason of Retirement. Unless otherwise determined
-----------------------------------
by the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of Normal or Early Retirement (as
such terms are defined below), any Option held by such Optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement (or
on such accelerated basis as the Committee shall determine at or after grant),
but may not be exercised after three months after the date of such termination
of employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such three-month period, any unexercised Option held by such Optionee
shall thereafter be exercisable, to the extent to which it was exercisable at
the time of death, for a period of one year after the date of such death or for
the stated term of such Option, whichever period is shorter.
For purposes of this paragraph (h), Normal Retirement shall mean retirement
from active employment with the Company or any subsidiary on or after the normal
retirement date specified in the applicable Company or Subsidiary pension plan
or if no such pension plan, age 65. Early Retirement shall mean retirement from
active employment with the Company or any Subsidiary
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pursuant to the early retirement provisions of the applicable Company or
Subsidiary pension plan or if no such pension plan, age 55.
(i) Other Termination. Unless otherwise determined by the Committee
-----------------
at grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates for any reason other than death, Disability or Normal or
Early Retirement, the Option shall thereupon terminate, except that the portion
of any Option that was exercisable on the date of such termination of employment
may he exercised for the lesser of three months after the date of termination or
the balance of such Option's term if the Optionee's employment or service with
the Company or any Subsidiary is terminated by the Company or such Subsidiary
without cause (the determination as to whether termination was for cause to be
made by the Committee). The transfer of an Optionee from the employ of the
Company to a Subsidiary, or vice versa, or from one Subsidiary to another, shall
not be deemed to constitute a termination of employment for purposes of the
Plan.
(j) Limit on Value of Incentive Option. The aggregate Fair Market
----------------------------------
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
(k) Transfer of Incentive Option Shares. The stock option agreement
-----------------------------------
evidencing any Incentive Options granted under this Plan shall provide that if
the Optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of Stock
issued to him upon exercise of an Incentive Option granted under the Plan within
the two-year period commencing on the day after the date of the grant of such
Incentive Option or within a one-year period commencing on the day after the
date of transfer of the share or shares to him pursuant to the exercise of such
Incentive Option, he shall, within 10 days after such disposition, notify the
Company thereof and immediately deliver to the Company any amount of United
States federal income tax withholding required by law.
6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after December 14,
2007, but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance
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under the Plan and in the number and option price of shares subject to
outstanding Options granted under the Plan, to the end that after such event
each Optionee's proportionate interest shall be maintained as immediately before
the occurrence of such event.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Company has determined that such registration is unnecessary, each person
exercising an Option under the Plan may he required by the Company to give a
representation in writing that he is acquiring the shares for his own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
9. TAXES.
The company may make such provisions as it may deem appropriate, consistent
with applicable law, in connection with any Options granted under the Plan with
respect to the withholding of any taxes or any other tax matters.
10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on December 15, 1997, provided however that the
Plan shall subsequently be approved by majority vote of the Company's
stockholders within one year of the date thereof.
11. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the stockholders of the Company
would:
(a) materially increase the number of shares that may be issued under
the Plan, except as is provided in Section 7;
(b) materially increase the benefits accruing to the Optionee's under
the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
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(d) decrease the exercise price of an Incentive Option to less than
100% of the Fair Market Value per share of Stock on the date of grant thereof or
the exercise price of a Nonqualified Option to less than 100% of the Fair Market
Value per share of Stock on the date of grant thereof; or
(e) extend the term of any Option beyond that provided for in Section
5(b).
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without his consent. The Committee may also substitute new Options
for previously granted Options, including options granted under other plans
applicable to the participant and previously granted Options having higher
option prices, upon such terms as the Committee may deem appropriate.
12. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies, national securities exchanges and automated
quotation systems as may be required.
13. GENERAL PROVISIONS.
(a) Certificates. All certificates for shares of Stock delivered
------------
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any stock exchange or automated quotation system upon which the
Stock is then listed or traded and the Committee may cause a legend or legends
to be placed on any such certificates to make appropriate reference to such
restrictions.
(b) Employment Matters. The adoption of the Plan shall not confer
------------------
upon any Optionee of the Company or any Subsidiary any right to continued
employment or, in the case of an optionee who is a director, continued service
as a director, with the Company or a Subsidiary, as the case may be, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees, the service of any of its
directors or the retention of any of its consultants or advisors at any time.
(c) Limitation of Liability. No member of the Board or the
-----------------------
Committee, or any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action, determination
or interpretation taken or made in good faith with
A-8
<PAGE>
respect to the Plan, and all members of the Board or the Committee and each and
any officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
(d) Registration of Stock. Notwithstanding any other provision in
---------------------
the Plan, no Option may be exercised unless and until the Stock to be issued
upon the exercise thereof has been registered under the Securities Act and
applicable state securities laws, or are, in the opinion of counsel to the
Company, exempt from such registration in the United States. The Company shall
not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder in order to permit the exercise of an Option and the issuance and sale
of the Stock subject to such Option however, the Company may in its sole
discretion register such Stock at such time as the Company shall determine. If
the Company chooses to comply with such an exemption from registration, the
Stock issued under the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of the Stock
represented thereby, and the Committee may also give appropriate stop transfer
instructions to the Company's transfer agents.
A-9
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into effective as of
the 8/th/ day of July, 1997, by and between American Pacific Corporation, a
Delaware corporation (the "Company"), and John R. Gibson, of Las Vegas, Nevada
(the "Optionee").
RECITALS:
A. The Optionee is serving as President and Chief Executive Officer
of the Company. The Company desires to encourage the ownership of its Common
Stock by the Optionee, and to provide an incentive for the Optionee to assist in
expanding and improving the growth, profitability and general prosperity of the
Company and of its Subsidiary Corporations, and to stimulate the efforts of the
Optionee by giving suitable recognition, in the form of compensation, to his
abilities and industry, which contribute materially to the growth and
profitability of the Company and of its Subsidiary Corporations.
B. The Company has decided to grant to the Optionee the option to
purchase shares of the Common Stock of the Company.
C. The Company and the Optionee now desire to set forth the terms and
conditions upon which the Optionee shall have the Option to purchase shares of
the Common Stock of the Company, and certain terms and conditions that will
govern the issuance, holding and exercise of such Options.
PROVISIONS:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties to this Option Agreement agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Option Agreement, the following terms shall have the
indicated meanings:
1.01 Board of Directors. The term Board of Directors shall mean the
------------------
Board of Directors of the Company.
<PAGE>
1.02 Committee shall mean the Stock Option Committee of the Board of
---------
Directors of the Company referred to in Article II of this Option Agreement.
1.03 Common Stock shall mean the common stock of the Company, par
------------
value ten cents ($0.10) per share.
1.04 Company shall mean American Pacific Corporation, a Delaware
-------
corporation.
1.05 Disability shall mean a physical or mental condition that, based
----------
upon medical reports and other evidence satisfactory to the Committee,
presumably permanently prevents the Optionee from satisfactorily performing his
usual duties for the Company.
1.06 Exercise Price shall mean the price for which an Option granted
--------------
hereunder may be exercised, as provided in Section 3.02 of this Option
Agreement.
1.07 Option shall mean the right to purchase shares of the Common
------
Stock of the Company, granted pursuant to the provisions of this Option
Agreement.
1.08 Option Agreement or Agreement shall mean this Stock Option
---------------- ---------
Agreement.
1.09 Optionee shall mean the Optionee identified above, to whom this
--------
Option has been granted, upon the terms and conditions set forth in this Option
Agreement.
1.10 Subsidiary Corporations shall mean and include all corporations
-----------------------
that join with the Company in, or would be eligible to join with the Company in,
if timely and proper elections were made, the filing of a consolidated federal
income tax return, under the applicable provisions of the Internal Revenue Code
in effect from time to time.
1.11 Value of a share of the Common Stock of the Company shall mean
-----
the closing price of a share of the Company's Common Stock, as reported on the
National Market System of the National Association of Securities Dealers, Inc.
If a reported closing price is not available for the date on which the Common
Stock is sought to be valued, the reported closing price for the next preceding
business day shall be used. If reported closing prices are not available for
either such date, the Value of a share of the Company's Common Stock shall be
the arithmetic mean of the bid and asked prices of the Company's Common Stock,
as published by the National Association of Securities Dealers, Inc., as of the
date on which the Company's Common Stock is sought to be valued, or if quoted
prices are not available as of such day, then the bid and asked prices as of the
next preceding business day shall be used. If the Value cannot be determined
under the preceding rules of this Section 1.11, the Value shall be the fair
market value of the Company's Common Stock, determined under the method selected
by the Committee. Unless modified by the Board of Directors, the Committee's
good-faith determination of the Value of a share of the Company's Common Stock
shall be conclusive, and shall be valid and binding upon all persons having any
interest in any Option granted hereunder.
2
<PAGE>
ARTICLE II
ADMINISTRATION
--------------
2.01 Committee. Subject to the terms of the Plan, the Option granted
---------
pursuant to this Option Agreement shall be administered by the Stock Option
Committee of the Board of Directors of the Company. If for any reason a
Committee is not acting, the Board of Directors shall act as the Committee. All
determinations, decisions, interpretations and other action made or taken with
respect to the Option granted hereunder by the Committee shall be final and
binding upon all persons having any interest in any Option granted pursuant
hereto, unless otherwise determined by the Board of Directors. The Board of
Directors shall have the power by appropriate action to reverse or modify any
action taken by the Committee.
2.02 Committee to Construe Agreement. The Committee shall administer
-------------------------------
the Option granted pursuant hereto, and shall have all powers necessary for that
purpose, including but not limited to the power to interpret this Agreement and
the power to determine the rights hereunder of all persons. The Committee shall
maintain the records of the Company that relate to the Option granted pursuant
hereto, and shall have the power to adjust its records as necessary to correct
errors and rectify omissions, in the manner that the Committee believes will
best result in the equitable administration of the Option granted pursuant
hereto.
2.03 Organization of Committee. The Chairman of the Committee shall
-------------------------
be the Chairman of the Board of Directors. The Committee may adopt such rules
as it deems desirable for the conduct of its affairs and for the administration
of the Option. The Committee may appoint agents, who need not be members of the
Committee, to whom it may delegate such powers as it deems appropriate. The
action of a majority of the members of the Committee shall be the action of the
Committee.
2.04 Indemnification of Committee Members. The Company shall defend,
------------------------------------
indemnify and hold harmless each member of the Committee against any and all
claims, loss, damages, expense and liability arising from any actual or alleged
action or failure to act in connection with the administration of the Option
granted pursuant hereto, except when the same is judicially determined to be due
to the gross negligence or willful misconduct of such Committee member.
ARTICLE III
TERMS AND CONDITIONS
--------------------
3.01 Number of Shares Subject to Option. The Company hereby grants to
----------------------------------
the Optionee, upon the terms and conditions set forth in this Option Agreement,
the option to purchase One Hundred Thousand (100,000) shares of the Common Stock
of the Company.
3
<PAGE>
3.02 Exercise Price. The price for which each Option hereby granted
--------------
to the Optionee may be exercised shall be $7.125 per share of the Common Stock
of the Company, which amount represents the Value of a share of the Common Stock
on the date of this Option Agreement.
3.03 Time for Exercise. The Option hereby granted to the Optionee
-----------------
shall be exercisable at the following times:
With respect to Twenty-five Thousand (25,000) shares of common stock,
the Option shall be exercisable on or after the date of this Option
Agreement;
With respect to an additional Twenty-five Thousand (25,000) shares of
common stock, the Option shall be exercisable on or after one year after
the date of this Option Agreement.
With respect to a third Twenty-five Thousand (25,000) shares of common
stock, the Option shall be exercisable on or after two years after the
date of this Agreement.
With respect to the final Twenty-five Thousand (25,000) shares of
common stock, the Option shall be exercisable on or after three years after
the date of this Option Agreement.
The Option granted hereunder shall be exercisable for a period of five years
after such Option first becomes exercisable in accordance with the foregoing
provisions of this Section 3.03, unless the period of exercise is sooner
terminated in accordance with the provisions of this Option Agreement. The
Optionee shall have no right whatsoever to exercise the Option except during the
times provided above.
3.04 Restrictions on Transfers and Encumbrance. During the lifetime
-----------------------------------------
of the Optionee, the Option granted hereunder may not be sold, pledged,
assigned, hypothecated, encumbered or transferred in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, except by will
or by applicable laws of descent and distribution, and may be exercised during
an Optionee's lifetime only by the Optionee or by the Optionee's legal
representative. Any Option that has not expired as of the date of the
Optionee's death may be exercised after the Optionee's death only by the person
or persons to whom the Optionee's interest in the Option have passed by will, by
the terms of a family trust agreement or other like instrument or by applicable
laws of descent and distribution.
3.05 Exercise After Death or Disability. In the event that the
----------------------------------
Optionee dies or becomes Disabled while in, or within ninety days after ceasing
to be a Director of the Company, the Optionee shall be treated for all purposes
of this Agreement as continuing in the service of the Company throughout the
period ending on the date as of which the last Option granted to the Optionee
hereunder would have expired under the provisions of this Article III but for
the Optionee's death or Disability.
4
<PAGE>
3.06 Exercise Subject to Service. The Optionee may exercise the
---------------------------
Option granted hereunder only if the Optionee has remained continuously in the
service of the Company or as a Director since the date on which the Option
sought to be exercised was granted to such Optionee, through a date that is not
more than two years prior to the date on which the Option is sought to be
exercised. The provisions of this Section shall not prevent the individual or
entity to whom an Option has passed by will or by applicable laws of descent and
distribution after the death of an Optionee from exercising the Option within
the period of time during which the Option is otherwise exercisable under the
provisions of this Option Agreement, if the Option was exercisable under all
provisions of this Agreement (including the provisions of this Section 3.06) by
the Optionee as of the date of the Optionee's death.
ARTICLE IV
PROCEDURE FOR EXERCISE
----------------------
4.01 Time for Exercise. Subject to the provisions of this Article IV,
-----------------
the Option granted hereunder shall be exercisable only during the times provided
in this Option Agreement.
4.02 Exercise Upon Corporate Capital Transaction. In the event that
-------------------------------------------
the Company, its shareholders, or both, enter into a written agreement to
dispose of all or substantially all of the assets or Common Stock of the Company
by means of a sale, merger, consolidation, reorganization, liquidation or
similar transaction (other than a reorganization, merger or consolidation
effected solely to change the Company's name or state of incorporation), the
Option issued pursuant to this Option Agreement shall become immediately
exercisable, whether or not such Option was exercisable prior to such event,
during the period of time beginning with the date on which the Company agrees in
writing to enter into such transaction, and ending on the earlier of the date
the Option would otherwise have expired or the date on which the transaction is
consummated. Upon the consummation of the transaction, any unexercised portion
of the Option issued hereunder shall terminate and cease to be effective. In
the event that the agreement to enter into any such transaction is terminated,
all unexercised portions of the Option shall revert to the status they had
before the Company agreed to enter into the transaction in question. Any
exercise of Option made before the agreement to enter into the transaction was
terminated shall remain effective after the termination of the agreement,
notwithstanding that the Option may have become exercisable solely by reason of
the Company entering into the agreement.
4.03 Withholding of Taxes. The Optionee hereby agrees that the
--------------------
Company may, if it elects to do so, withhold federal, state and other taxes
attributable to taxable income realized by the Optionee upon the exercise of
Option from any compensation or other payment payable to such Optionee by the
Company.
4.04 Exercise. Subject to all other terms and provisions of this
--------
Option Agreement, the Option granted hereunder shall be deemed to be exercised
when written notice of
5
<PAGE>
exercise has been given to the Company by the Optionee or other person entitled
to exercise the Option and full payment in cash or cash equivalents for the
shares of Common Stock with respect to which the Option is exercised has been
received by the Company. Until certificates have been issued for the number of
Shares represented by the exercise of the Option, the Optionee shall have no
right to vote, to receive dividends, or other right as a stockholder with
respect to shares of Common Stock purchased through the exercise of the Option.
Except as provided in Section 5.01 hereof, no adjustments shall be made for
dividends or other rights declared or paid with respect to stock acquired
through the exercise of the Option for which the record date is prior to the
date on which a stock certificate for such shares is issued.
4.05 Exercise in Installments. Subject to Section 3.03, the Optionee
------------------------
may exercise the Option in installments, but only in units of whole shares of
the Common Stock of the Company.
4.06 Issuance of Certificates. As soon as practicable after the
------------------------
Option has been exercised in accordance with the provisions of this Option
Agreement, the Company shall, without transfer or issue tax or other charge to
the Optionee, deliver to the Optionee at the principal business office of the
Company, or at such other place as may be agreed, certificates representing the
number of shares of Common Stock as to which the Option has been exercised. The
Company may, however, postpone the time of delivery of certificates for such
period of time as the Company may determine to be necessary for it with
reasonable diligence to comply with any applicable listing requirements of any
national or regional securities exchange, of the National Association of
Securities Dealers, Inc., or with any law or regulation applicable to the
issuance or delivery of shares of the Company's Common Stock.
ARTICLE V
RESTRICTIONS AND ADDITIONAL PROVISIONS
--------------------------------------
5.01 Adjustments Upon Changes in Capitalization. If the number of
------------------------------------------
outstanding shares of the Common Stock of the Company is increased or decreased,
or if the Common Stock of the Company underlying the Option granted pursuant to
the provisions of this Option Agreement is changed into or exchanged for a
different number or kind of shares or securities of the Company through a
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split or reverse stock split, an appropriate and proportionate adjustment
shall be made by the Committee in the terms and conditions of the Options
granted pursuant hereto, including the Exercise Price of the Option; provided,
however, that no such adjustment need be made if, upon the advice of legal
counsel to the Company, the Committee determines that any such adjustment could
result in the recognition of federal taxable income by the Optionee, or by
holders of Common Stock or other securities of the Company.
5.02 Reservation of Shares of Common Stock. The Company shall, at all
-------------------------------------
times during the periods of time during which the Option may be exercised
hereunder, reserve and keep
6
<PAGE>
available for issuance to the Optionee a number of shares of its Common Stock
sufficient to satisfy all obligations of the Company hereunder.
5.03 Restrictions on Issuance of Shares. The Company shall use its
----------------------------------
best efforts to seek and to obtain from appropriate regulatory agencies any
requisite authorization in order to issue and sell such number of shares of its
Common Stock as shall be sufficient to satisfy the obligations of the Company
under this Agreement. The inability of the Company to obtain authorization
deemed to be necessary by the Company's legal counsel to the lawful issuance and
sale of any shares of the Company's Common Stock shall relieve the Company of
any liability for the nonissuance or nonsale of any Common Stock as to which the
requisite approval or authorization shall not have been obtained.
5.04 Representations and Warranties. As a condition to the exercise
------------------------------
of the Option granted hereunder, the Committee may require the person exercising
the Option to make any representations or warranties to the Company that legal
counsel to the Company may determine to be required or advisable under any
applicable law or regulation, including without limitation a representation and
warranty that the shares of the Company's Common Stock being acquired are being
acquired only for investment and without any present intention or view to sell
or distribute any such shares.
5.05 Optionee Rights. No provision of this Agreement shall be deemed
---------------
to constitute a condition of the service or status of any Director. No
provision of this Option Agreement shall be deemed to give to the Optionee any
right to be retained in the service of the Company or of any Subsidiary
Corporation in any capacity (whether as an employee, Director, independent
contractor or otherwise), or to interfere in any way with the right of the
Company and its Subsidiary Corporations at any time to remove any Director, or
to discontinue using the services of any individual. The Optionee shall have no
right or interest in any share of the Company's Common Stock prior to exercise
of the Option, except as provided in this Option Agreement.
5.06 Legends on Stock Certificates. Unless an appropriate
-----------------------------
registration statement is on file and effective with appropriate federal, state
and local governmental authorities, each certificate representing Common Stock
of the Company issued pursuant to the exercise of the Option shall be endorsed
on its face with a legend similar to the following:
Neither the Option pursuant to which the shares represented by this
certificate are issued nor the shares represented hereby have been
registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or with any state securities
agency. The transfer or sale of the shares represented hereby without
appropriate registration, or pursuant to an exemption from
registration, is unlawful.
7
<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
6.01 Notices
-------
(a) All notices, demands or requests provided for or permitted to be
given pursuant hereto must be in writing. All notices, demands and requests
shall be deemed to have been properly given or served when deposited in the
United States mail, addressed to the individual or entity to whom notice is
given, postage prepaid and registered or certified with return receipt
requested, at the last known address of such individual or entity.
(b) By giving at least fifteen (15) days prior written notice, the
Company, a Subsidiary Corporation and the Optionee shall have the right from
time to time to change their addresses and to specify any other address within
the United States of America.
6.02 Titles and Captions. All Article and Section titles and captions
-------------------
in this Option Agreement are for convenience or reference only, and shall not be
deemed part of this Option Agreement, and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.
6.03 Pronouns and Plurals. Whenever the context may require, any
--------------------
pronoun used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
6.04 Applicable Law. This Option Agreement shall be construed in
--------------
accordance with and shall be governed by the laws of the State of Nevada.
6.05 Binding Effect. This Option Agreement shall be binding upon the
--------------
Optionee and upon the Optionee's heirs, executors, administrators, successors,
legal representatives and assigns.
6.06 Creditors. None of the provisions of this Option Agreement shall
---------
be for the benefit of or shall be enforceable by any creditor of the Optionee.
6.07 Severability. In the event that any condition, covenant or other
------------
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Option Agreement and shall in no way affect any other covenant or condition
herein contained. If such condition, covenant or other provision shall be
deemed invalid due to its scope or breadth, such provision shall be deemed valid
to the extent of the scope or breadth permitted by law.
6.08 Plan Controls. This Option Agreement is subject to the terms and
-------------
provisions of the Plan, and in the event of an inconsistency herewith, the terms
of the plan shall control.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Option Agreement as of the date first set forth above.
"Company"
AMERICAN PACIFIC CORPORATION,
a Delaware corporation
By /s/ John R. Gibson
------------------------------------
John R. Gibson
President
Attest:
/s/ C. Keith Rooker
- ----------------------------
C. Keith Rooker
Secretary
"Optionee"
/s/ John R. Gibson
------------------------------------
John R. Gibson
Address: 7409 Doe Avenue
Las Vegas, NV 89117
9
<PAGE>
APPENDIX C
STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into effective as of
the 8/th/ day of July, 1997, by and between American Pacific Corporation, a
Delaware corporation (the "Company"), and David N. Keys, of Las Vegas, Nevada
(the "Optionee").
RECITALS:
A. The Optionee is serving as Chief Financial Officer of the Company.
The Company desires to encourage the ownership of its Common Stock by the
Optionee, and to provide an incentive for the Optionee to assist in expanding
and improving the growth, profitability and general prosperity of the Company
and of its Subsidiary Corporations, and to stimulate the efforts of the Optionee
by giving suitable recognition, in the form of compensation, to his abilities
and industry, which contribute materially to the growth and profitability of the
Company and of its Subsidiary Corporations.
B. The Company has decided to grant to the Optionee the option to
purchase shares of the Common Stock of the Company.
C. The Company and the Optionee now desire to set forth the terms and
conditions upon which the Optionee shall have the Option to purchase shares of
the Common Stock of the Company, and certain terms and conditions that will
govern the issuance, holding and exercise of such Options.
PROVISIONS:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties to this Option Agreement agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Option Agreement, the following terms shall have the
indicated meanings:
1.01 Board of Directors. The term Board of Directors shall mean the
------------------
Board of Directors of the Company.
<PAGE>
1.02 Committee shall mean the Stock Option Committee of the Board of
---------
Directors of the Company referred to in Article II of this Option Agreement.
1.03 Common Stock shall mean the common stock of the Company, par
------------
value ten cents ($0.10) per share.
1.04 Company shall mean American Pacific Corporation, a Delaware
-------
corporation.
1.05 Disability shall mean a physical or mental condition that, based
----------
upon medical reports and other evidence satisfactory to the Committee,
presumably permanently prevents the Optionee from satisfactorily performing his
usual duties for the Company.
1.06 Exercise Price shall mean the price for which an Option granted
--------------
hereunder may be exercised, as provided in Section 3.02 of this Option
Agreement.
1.07 Option shall mean the right to purchase shares of the Common
------
Stock of the Company, granted pursuant to the provisions of this Option
Agreement.
1.08 Option Agreement or Agreement shall mean this Stock Option
---------------- ---------
Agreement.
1.09 Optionee shall mean the Optionee identified above, to whom this
--------
Option has been granted, upon the terms and conditions set forth in this Option
Agreement.
1.10 Subsidiary Corporations shall mean and include all corporations
-----------------------
that join with the Company in, or would be eligible to join with the Company in,
if timely and proper elections were made, the filing of a consolidated federal
income tax return, under the applicable provisions of the Internal Revenue Code
in effect from time to time.
1.11 Value of a share of the Common Stock of the Company shall mean
-----
the closing price of a share of the Company's Common Stock, as reported on the
National Market System of the National Association of Securities Dealers, Inc.
If a reported closing price is not available for the date on which the Common
Stock is sought to be valued, the reported closing price for the next preceding
business day shall be used. If reported closing prices are not available for
either such date, the Value of a share of the Company's Common Stock shall be
the arithmetic mean of the bid and asked prices of the Company's Common Stock,
as published by the National Association of Securities Dealers, Inc., as of the
date on which the Company's Common Stock is sought to be valued, or if quoted
prices are not available as of such day, then the bid and asked prices as of the
next preceding business day shall be used. If the Value cannot be determined
under the preceding rules of this Section 1.11, the Value shall be the fair
market value of the Company's Common Stock, determined under the method selected
by the Committee. Unless modified by the Board of Directors, the Committee's
good-faith determination of the Value of a share of the Company's Common Stock
shall be conclusive, and shall be valid and binding upon all persons having any
interest in any Option granted hereunder.
2
<PAGE>
ARTICLE II
ADMINISTRATION
--------------
2.01 Committee. Subject to the terms of the Plan, the Option granted
---------
pursuant to this Option Agreement shall be administered by the Stock Option
Committee of the Board of Directors of the Company. If for any reason a
Committee is not acting, the Board of Directors shall act as the Committee. All
determinations, decisions, interpretations and other action made or taken with
respect to the Option granted hereunder by the Committee shall be final and
binding upon all persons having any interest in any Option granted pursuant
hereto, unless otherwise determined by the Board of Directors. The Board of
Directors shall have the power by appropriate action to reverse or modify any
action taken by the Committee.
2.02 Committee to Construe Agreement. The Committee shall administer
-------------------------------
the Option granted pursuant hereto, and shall have all powers necessary for that
purpose, including but not limited to the power to interpret this Agreement and
the power to determine the rights hereunder of all persons. The Committee shall
maintain the records of the Company that relate to the Option granted pursuant
hereto, and shall have the power to adjust its records as necessary to correct
errors and rectify omissions, in the manner that the Committee believes will
best result in the equitable administration of the Option granted pursuant
hereto.
2.03 Organization of Committee. The Chairman of the Committee shall
-------------------------
be the Chairman of the Board of Directors. The Committee may adopt such rules as
it deems desirable for the conduct of its affairs and for the administration of
the Option. The Committee may appoint agents, who need not be members of the
Committee, to whom it may delegate such powers as it deems appropriate. The
action of a majority of the members of the Committee shall be the action of the
Committee.
2.04 Indemnification of Committee Members. The Company shall defend,
------------------------------------
indemnify and hold harmless each member of the Committee against any and all
claims, loss, damages, expense and liability arising from any actual or alleged
action or failure to act in connection with the administration of the Option
granted pursuant hereto, except when the same is judicially determined to be due
to the gross negligence or willful misconduct of such Committee member.
ARTICLE III
TERMS AND CONDITIONS
--------------------
3.01 Number of Shares Subject to Option. The Company hereby grants to
----------------------------------
the Optionee, upon the terms and conditions set forth in this Option Agreement,
the option to purchase Eighty Thousand (80,000) shares of the Common Stock of
the Company.
3
<PAGE>
3.02 Exercise Price. The price for which each Option hereby granted
--------------
to the Optionee may be exercised shall be $7.125 per share of the Common Stock
of the Company, which amount represents the Value of a share of the Common Stock
on the date of this Option Agreement.
3.03 Time for Exercise. The Option hereby granted to the Optionee
-----------------
shall be exercisable at the following times:
With respect to Twenty Thousand (20,000) shares of common stock, the
Option shall be exercisable on or after the date of this Option Agreement;
With respect to an additional Twenty Thousand (20,000) shares of
common stock, the Option shall be exercisable on or after one year after
the date of this Option Agreement.
With respect to a third Twenty Thousand (20,000) shares of common
stock, the Option shall be exercisable on or after two years after the
date of this Agreement.
With respect to the final Twenty Thousand (20,000) shares of common
stock, the Option shall be exercisable on or after three years after the
date of this Option Agreement.
The Option granted hereunder shall be exercisable for a period of five years
after such Option first becomes exercisable in accordance with the foregoing
provisions of this Section 3.03, unless the period of exercise is sooner
terminated in accordance with the provisions of this Option Agreement. The
Optionee shall have no right whatsoever to exercise the Option except during the
times provided above.
3.04 Restrictions on Transfers and Encumbrance. During the lifetime
-----------------------------------------
of the Optionee, the Option granted hereunder may not be sold, pledged,
assigned, hypothecated, encumbered or transferred in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, except by will
or by applicable laws of descent and distribution, and may be exercised during
an Optionee's lifetime only by the Optionee or by the Optionee's legal
representative. Any Option that has not expired as of the date of the
Optionee's death may be exercised after the Optionee's death only by the person
or persons to whom the Optionee's interest in the Option have passed by will, by
the terms of a family trust agreement or other like instrument or by applicable
laws of descent and distribution.
3.05 Exercise After Death or Disability. In the event that the
----------------------------------
Optionee dies or becomes Disabled while in, or within ninety days after ceasing
to be a Director of the Company, the Optionee shall be treated for all purposes
of this Agreement as continuing in the service of the Company throughout the
period ending on the date as of which the last Option granted to the Optionee
hereunder would have expired under the provisions of this Article III but for
the Optionee's death or Disability.
4
<PAGE>
3.06 Exercise Subject to Service. The Optionee may exercise the
---------------------------
Option granted hereunder only if the Optionee has remained continuously in the
service of the Company or as a Director since the date on which the Option
sought to be exercised was granted to such Optionee, through a date that is not
more than two years prior to the date on which the Option is sought to be
exercised. The provisions of this Section shall not prevent the individual or
entity to whom an Option has passed by will or by applicable laws of descent and
distribution after the death of an Optionee from exercising the Option within
the period of time during which the Option is otherwise exercisable under the
provisions of this Option Agreement, if the Option was exercisable under all
provisions of this Agreement (including the provisions of this Section 3.06) by
the Optionee as of the date of the Optionee's death.
ARTICLE IV
PROCEDURE FOR EXERCISE
----------------------
4.01 Time for Exercise. Subject to the provisions of this Article IV,
-----------------
the Option granted hereunder shall be exercisable only during the times provided
in this Option Agreement.
4.02 Exercise Upon Corporate Capital Transaction. In the event that
-------------------------------------------
the Company, its shareholders, or both, enter into a written agreement to
dispose of all or substantially all of the assets or Common Stock of the Company
by means of a sale, merger, consolidation, reorganization, liquidation or
similar transaction (other than a reorganization, merger or consolidation
effected solely to change the Company's name or state of incorporation), the
Option issued pursuant to this Option Agreement shall become immediately
exercisable, whether or not such Option was exercisable prior to such event,
during the period of time beginning with the date on which the Company agrees in
writing to enter into such transaction, and ending on the earlier of the date
the Option would otherwise have expired or the date on which the transaction is
consummated. Upon the consummation of the transaction, any unexercised portion
of the Option issued hereunder shall terminate and cease to be effective. In
the event that the agreement to enter into any such transaction is terminated,
all unexercised portions of the Option shall revert to the status they had
before the Company agreed to enter into the transaction in question. Any
exercise of Option made before the agreement to enter into the transaction was
terminated shall remain effective after the termination of the agreement,
notwithstanding that the Option may have become exercisable solely by reason of
the Company entering into the agreement.
4.03 Withholding of Taxes. The Optionee hereby agrees that the
--------------------
Company may, if it elects to do so, withhold federal, state and other taxes
attributable to taxable income realized by the Optionee upon the exercise of
Option from any compensation or other payment payable to such Optionee by the
Company.
4.04 Exercise. Subject to all other terms and provisions of this
--------
Option Agreement, the Option granted hereunder shall be deemed to be exercised
when written notice of
5
<PAGE>
exercise has been given to the Company by the Optionee or other person entitled
to exercise the Option and full payment in cash or cash equivalents for the
shares of Common Stock with respect to which the Option is exercised has been
received by the Company. Until certificates have been issued for the number of
Shares represented by the exercise of the Option, the Optionee shall have no
right to vote, to receive dividends, or other right as a stockholder with
respect to shares of Common Stock purchased through the exercise of the Option.
Except as provided in Section 5.01 hereof, no adjustments shall be made for
dividends or other rights declared or paid with respect to stock acquired
through the exercise of the Option for which the record date is prior to the
date on which a stock certificate for such shares is issued.
4.05 Exercise in Installments. Subject to Section 3.03, the Optionee
------------------------
may exercise the Option in installments, but only in units of whole shares of
the Common Stock of the Company.
4.06 Issuance of Certificates. As soon as practicable after the
------------------------
Option has been exercised in accordance with the provisions of this Option
Agreement, the Company shall, without transfer or issue tax or other charge to
the Optionee, deliver to the Optionee at the principal business office of the
Company, or at such other place as may be agreed, certificates representing the
number of shares of Common Stock as to which the Option has been exercised. The
Company may, however, postpone the time of delivery of certificates for such
period of time as the Company may determine to be necessary for it with
reasonable diligence to comply with any applicable listing requirements of any
national or regional securities exchange, of the National Association of
Securities Dealers, Inc., or with any law or regulation applicable to the
issuance or delivery of shares of the Company's Common Stock.
ARTICLE V
RESTRICTIONS AND ADDITIONAL PROVISIONS
--------------------------------------
5.01 Adjustments Upon Changes in Capitalization. If the number of
------------------------------------------
outstanding shares of the Common Stock of the Company is increased or decreased,
or if the Common Stock of the Company underlying the Option granted pursuant to
the provisions of this Option Agreement is changed into or exchanged for a
different number or kind of shares or securities of the Company through a
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split or reverse stock split, an appropriate and proportionate adjustment
shall be made by the Committee in the terms and conditions of the Options
granted pursuant hereto, including the Exercise Price of the Option; provided,
however, that no such adjustment need be made if, upon the advice of legal
counsel to the Company, the Committee determines that any such adjustment could
result in the recognition of federal taxable income by the Optionee, or by
holders of Common Stock or other securities of the Company.
5.02 Reservation of Shares of Common Stock. The Company shall, at all
-------------------------------------
times during the periods of time during which the Option may be exercised
hereunder, reserve and keep
6
<PAGE>
available for issuance to the Optionee a number of shares of its Common Stock
sufficient to satisfy all obligations of the Company hereunder.
5.03 Restrictions on Issuance of Shares. The Company shall use its
----------------------------------
best efforts to seek and to obtain from appropriate regulatory agencies any
requisite authorization in order to issue and sell such number of shares of its
Common Stock as shall be sufficient to satisfy the obligations of the Company
under this Agreement. The inability of the Company to obtain authorization
deemed to be necessary by the Company's legal counsel to the lawful issuance and
sale of any shares of the Company's Common Stock shall relieve the Company of
any liability for the nonissuance or nonsale of any Common Stock as to which the
requisite approval or authorization shall not have been obtained.
5.04 Representations and Warranties. As a condition to the exercise
------------------------------
of the Option granted hereunder, the Committee may require the person exercising
the Option to make any representations or warranties to the Company that legal
counsel to the Company may determine to be required or advisable under any
applicable law or regulation, including without limitation a representation and
warranty that the shares of the Company's Common Stock being acquired are being
acquired only for investment and without any present intention or view to sell
or distribute any such shares.
5.05 Optionee Rights. No provision of this Agreement shall be deemed
---------------
to constitute a condition of the service or status of any Director. No
provision of this Option Agreement shall be deemed to give to the Optionee any
right to be retained in the service of the Company or of any Subsidiary
Corporation in any capacity (whether as an employee, Director, independent
contractor or otherwise), or to interfere in any way with the right of the
Company and its Subsidiary Corporations at any time to remove any Director, or
to discontinue using the services of any individual. The Optionee shall have no
right or interest in any share of the Company's Common Stock prior to exercise
of the Option, except as provided in this Option Agreement.
5.06 Legends on Stock Certificates. Unless an appropriate
-----------------------------
registration statement is on file and effective with appropriate federal, state
and local governmental authorities, each certificate representing Common Stock
of the Company issued pursuant to the exercise of the Option shall be endorsed
on its face with a legend similar to the following:
Neither the Option pursuant to which the shares represented by this
certificate are issued nor the shares represented hereby have been
registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or with any state securities
agency. The transfer or sale of the shares represented hereby without
appropriate registration, or pursuant to an exemption from
registration, is unlawful.
7
<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
6.01 Notices
-------
(a) All notices, demands or requests provided for or permitted to be
given pursuant hereto must be in writing. All notices, demands and requests
shall be deemed to have been properly given or served when deposited in the
United States mail, addressed to the individual or entity to whom notice is
given, postage prepaid and registered or certified with return receipt
requested, at the last known address of such individual or entity.
(b) By giving at least fifteen (15) days prior written notice, the
Company, a Subsidiary Corporation and the Optionee shall have the right from
time to time to change their addresses and to specify any other address within
the United States of America.
6.02 Titles and Captions. All Article and Section titles and captions
-------------------
in this Option Agreement are for convenience or reference only, and shall not be
deemed part of this Option Agreement, and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.
6.03 Pronouns and Plurals. Whenever the context may require, any
--------------------
pronoun used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
6.04 Applicable Law. This Option Agreement shall be construed in
--------------
accordance with and shall be governed by the laws of the State of Nevada.
6.05 Binding Effect. This Option Agreement shall be binding upon the
--------------
Optionee and upon the Optionee's heirs, executors, administrators, successors,
legal representatives and assigns.
6.06 Creditors. None of the provisions of this Option Agreement shall
---------
be for the benefit of or shall be enforceable by any creditor of the Optionee.
6.07 Severability. In the event that any condition, covenant or other
------------
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Option Agreement and shall in no way affect any other covenant or condition
herein contained. If such condition, covenant or other provision shall be
deemed invalid due to its scope or breadth, such provision shall be deemed valid
to the extent of the scope or breadth permitted by law.
6.08 Plan Controls. This Option Agreement is subject to the terms and
-------------
provisions of the Plan, and in the event of an inconsistency herewith, the terms
of the plan shall control.
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Option Agreement as of the date first set forth above.
"Company"
AMERICAN PACIFIC CORPORATION,
a Delaware corporation
By /s/ John R. Gibson
-------------------------------
John R. Gibson
President
Attest:
/s/ C. Keith Rooker
- -----------------------------
C. Keith Rooker
Secretary
"Optionee"
/s/ David N. Keys
---------------------------------
David N. Keys
Address: 1824 Glenview Drive
Las Vegas, NV 89134
9
<PAGE>
APPENDIX D
STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into effective as of
the 21/st/ day of May, 1997, by and between American Pacific Corporation, a
Delaware corporation (the "Company"), and (INSERT NAME & ADDRESS OF DIRECTOR)
(the "Optionee").
RECITALS:
A. The Optionee is serving as a Director of the Company. The Company
desires to encourage the ownership of its Common Stock by the Optionee, and to
provide an incentive for the Optionee to assist in expanding and improving the
growth, profitability and general prosperity of the Company and of its
Subsidiary Corporations, and to stimulate the efforts of the Optionee by giving
suitable recognition, in the form of compensation, to his abilities and
industry, which contribute materially to the growth and profitability of the
Company and of its Subsidiary Corporations.
B. The Company has decided to grant to the Optionee the option to
purchase shares of the Common Stock of the Company.
C. The Company and the Optionee now desire to set forth the terms and
conditions upon which the Optionee shall have the Option to purchase shares of
the Common Stock of the Company, and certain terms and conditions that will
govern the issuance, holding and exercise of such Options.
PROVISIONS:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties to this Option Agreement agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Option Agreement, the following terms shall have the
indicated meanings:
1.01 Board of Directors. The term Board of Directors shall mean the
------------------
Board of Directors of the Company.
1.02 Committee shall mean the Stock Option Committee of the Board of
---------
Directors of the Company referred to in Article II of this Option Agreement.
1.03 Common Stock shall mean the common stock of the Company, par
------------
value ten cents ($0.10) per share.
1.04 Company shall mean American Pacific Corporation, a Delaware
-------
corporation.
1.05 Disability shall mean a physical or mental condition that, based
----------
upon medical reports and other evidence satisfactory to the Committee,
presumably permanently prevents the Optionee from satisfactorily performing his
usual duties for the Company.
1.06 Exercise Price shall mean the price for which an Option granted
--------------
hereunder may be exercised, as provided in Section 3.02 of this Option
Agreement.
<PAGE>
1.07 Option shall mean the right to purchase shares of the Common
------
Stock of the Company, granted pursuant to the provisions of this Option
Agreement.
1.08 Option Agreement or Agreement shall mean this Stock Option
---------------- ---------
Agreement.
1.09 Optionee shall mean the Optionee identified above, to whom this
--------
Option has been granted, upon the terms and conditions set forth in this Option
Agreement.
1.10 Subsidiary Corporations shall mean and include all corporations
-----------------------
that join with the Company in, or would be eligible to join with the Company in,
if timely and proper elections were made, the filing of a consolidated federal
income tax return, under the applicable provisions of the Internal Revenue Code
in effect from time to time.
1.11 Value of a share of the Common Stock of the Company shall mean
-----
the closing price of a share of the Company's Common Stock, as reported on the
National Market System of the National Association of Securities Dealers, Inc.
If a reported closing price is not available for the date on which the Common
Stock is sought to be valued, the reported closing price for the next preceding
business day shall be used. If reported closing prices are not available for
either such date, the Value of a share of the Company's Common Stock shall be
the arithmetic mean of the bid and asked prices of the Company's Common Stock,
as published by the National Association of Securities Dealers, Inc., as of the
date on which the Company's Common Stock is sought to be valued, or if quoted
prices are not available as of such day, then the bid and asked prices as of the
next preceding business day shall be used. If the Value cannot be determined
under the preceding rules of this Section 1.11, the Value shall be the fair
market value of the Company's Common Stock, determined under the method selected
by the Committee. Unless modified by the Board of Directors, the Committee's
good-faith determination of the Value of a share of the Company's Common Stock
shall be conclusive, and shall be valid and binding upon all persons having any
interest in any Option granted hereunder.
ARTICLE II
ADMINISTRATION
--------------
2.01 Committee. Subject to the terms of the Plan, the Option granted
---------
pursuant to this Option Agreement shall be administered by the Stock Option
Committee of the Board of Directors of the Company. If for any reason a
Committee is not acting, the Board of Directors shall act as the Committee. All
determinations, decisions, interpretations and other action made or taken with
respect to the Option granted hereunder by the Committee shall be final and
binding upon all persons having any interest in any Option granted pursuant
hereto, unless otherwise determined by the Board of Directors. The Board of
Directors shall have the power by appropriate action to reverse or modify any
action taken by the Committee.
2.02 Committee to Construe Agreement. The Committee shall administer
-------------------------------
the Option granted pursuant hereto, and shall have all powers necessary for that
purpose, including but not limited to the power to interpret this Agreement and
the power to determine the rights hereunder of all persons. The Committee shall
maintain the records of the Company that relate to the Option granted pursuant
hereto, and shall have the power to adjust its records as necessary to correct
errors and rectify omissions, in the manner that the Committee believes will
best result in the equitable administration of the Option granted pursuant
hereto.
2.03 Organization of Committee. The Chairman of the Committee shall
-------------------------
be the Chairman of the Board of Directors. The Committee may adopt such rules as
it deems desirable for the conduct of its affairs and for the administration of
the Option. The Committee may appoint agents, who need not be members of the
Committee, to whom it may delegate such powers as it deems appropriate. The
action of a majority of the members of the Committee shall be the action of the
Committee.
2
<PAGE>
2.04 Indemnification of Committee Members. The Company shall defend,
------------------------------------
indemnify and hold harmless each member of the Committee against any and all
claims, loss, damages, expense and liability arising from any actual or alleged
action or failure to act in connection with the administration of the Option
granted pursuant hereto, except when the same is judicially determined to be due
to the gross negligence or willful misconduct of such Committee member.
ARTICLE III
TERMS AND CONDITIONS
--------------------
3.01 Number of Shares Subject to Option. The Company hereby grants to
----------------------------------
the Optionee, upon the terms and conditions set forth in this Option Agreement,
the option to purchase Fifteen Thousand (15,000) shares of the Common Stock of
the Company.
3.02 Exercise Price. The price for which each Option hereby granted
--------------
to the Optionee may be exercised shall be $7.00 per share of the Common Stock of
the Company, which amount represents the Value of a share of the Common Stock on
the date of this Option Agreement.
3.03 Time for Exercise. The Option hereby granted to the Optionee
-----------------
shall be exercisable at the following times:
With respect to (INSERT NUMBER OF SHARES) (####) shares of common
stock, the Option shall be exercisable on or after the date of this Option
Agreement;
With respect to the remaining (INSERT NUMBER OF SHARES) (####) shares
of common stock, the Option shall be exercisable on or after one year after
the date of this Option Agreement.
The Option granted hereunder shall be exercisable for a period of five years
after such Option first becomes exercisable in accordance with the foregoing
provisions of this Section 3.03, unless the period of exercise is sooner
terminated in accordance with the provisions of this Option Agreement. The
Optionee shall have no right whatsoever to exercise the Option except during the
times provided above.
3.04 Restrictions on Transfers and Encumbrance. During the lifetime
-----------------------------------------
of the Optionee, the Option granted hereunder may not be sold, pledged,
assigned, hypothecated, encumbered or transferred in any manner, either
voluntarily or involuntarily, by operation of law or otherwise, except to family
members or trusts for such family members, affiliates of the Optionee or by will
or by applicable laws of descent and distribution, and may be exercised during
an Optionee's lifetime only by the Optionee, a permitted transferee or by the
Optionee's legal representative. Any Option that has not expired as of the date
of the Optionee's death may be exercised after the Optionee's death only by the
person or persons to whom the Optionee's interest in the Option have passed by
will, by the terms of a family trust agreement or other like instrument or by
applicable laws of descent and distribution.
3.05 Exercise After Death or Disability. In the event that the
----------------------------------
Optionee dies or becomes Disabled while in, or within ninety days after ceasing
to be a Director of the Company, the Optionee shall be treated for all purposes
of this Agreement as continuing in the service of the Company throughout the
period ending on the date as of which the last Option granted to the Optionee
hereunder would have expired under the provisions of this Article III but for
the Optionee's death or Disability.
3.06 Exercise Subject to Service. The Optionee may exercise the
---------------------------
Option granted hereunder only if the Optionee has remained continuously in the
service of the Company or as a Director since the date on which the Option
sought to be exercised was granted to such Optionee, through a date that is not
more than two years prior to the date on which the Option is sought to be
exercised. The provisions of this Section shall not prevent the individual or
entity to whom an Option has passed by will or by applicable laws of descent and
distribution after the death of an
3
<PAGE>
Optionee from exercising the Option within the period of time during which the
Option is otherwise exercisable under the provisions of this Option Agreement,
if the Option was exercisable under all provisions of this Agreement (including
the provisions of this Section 3.06) by the Optionee as of the date of the
Optionee's death.
ARTICLE IV
PROCEDURE FOR EXERCISE
----------------------
4.01 Time for Exercise. Subject to the provisions of this Article IV,
-----------------
the Option granted hereunder shall be exercisable only during the times provided
in this Option Agreement.
4.02 Exercise Upon Corporate Capital Transaction. In the event that
-------------------------------------------
the Company, its shareholders, or both, enter into a written agreement to
dispose of all or substantially all of the assets or Common Stock of the Company
by means of a sale, merger, consolidation, reorganization, liquidation or
similar transaction (other than a reorganization, merger or consolidation
effected solely to change the Company's name or state of incorporation), the
Option issued pursuant to this Option Agreement shall become immediately
exercisable, whether or not such Option was exercisable prior to such event,
during the period of time beginning with the date on which the Company agrees in
writing to enter into such transaction, and ending on the earlier of the date
the Option would otherwise have expired or the date on which the transaction is
consummated. Upon the consummation of the transaction, any unexercised portion
of the Option issued hereunder shall terminate and cease to be effective. In
the event that the agreement to enter into any such transaction is terminated,
all unexercised portions of the Option shall revert to the status they had
before the Company agreed to enter into the transaction in question. Any
exercise of Option made before the agreement to enter into the transaction was
terminated shall remain effective after the termination of the agreement,
notwithstanding that the Option may have become exercisable solely by reason of
the Company entering into the agreement.
4.03 Withholding of Taxes. The Optionee hereby agrees that the
--------------------
Company may, if it elects to do so, withhold federal, state and other taxes
attributable to taxable income realized by the Optionee upon the exercise of
Option from any compensation or other payment payable to such Optionee by the
Company.
4.04 Exercise. Subject to all other terms and provisions of this
--------
Option Agreement, the Option granted hereunder shall be deemed to be exercised
when written notice of exercise has been given to the Company by the Optionee or
other person entitled to exercise the Option and full payment in cash or cash
equivalents for the shares of Common Stock with respect to which the Option is
exercised has been received by the Company. In lieu of cash, the purchase price
may be satisfied by the delivery of common stock of the Company (in proper form
for transfer and accompanied by all requisite stock transfer stamps or cash in
lieu thereof) owned by the Optionee for at least six months prior to such
delivery and having a fair market value equal to the exercise price applicable
to that portion of the Option being exercised. The fair market value of the
common stock so delivered shall be the value of such common stock determined in
accordance with Section 1.11 hereof on the date of delivery. Until certificates
have been issued for the number of Shares represented by the exercise of the
Option, the Optionee shall have no right to vote, to receive dividends, or other
right as a stockholder with respect to shares of Common Stock purchased through
the exercise of the Option. Except as provided in Section 5.01 hereof, no
adjustments shall be made for dividends or other rights declared or paid with
respect to stock acquired through the exercise of the Option for which the
record date is prior to the date on which a stock certificate for such shares is
issued.
4.05 Exercise in Installments. Subject to Section 3.03, the Optionee
------------------------
may exercise the Option in installments, but only in units of whole shares of
the Common Stock of the Company.
4.06 Issuance of Certificates. As soon as practicable after the
------------------------
Option has been exercised in accordance with the provisions of this Option
Agreement, the Company shall, without transfer or issue tax or other charge to
the Optionee, deliver to the Optionee at the principal business office of the
Company, or at such other place as may be agreed, certificates representing the
number of shares of Common Stock as to which the Option has been exercised. The
Company may, however, postpone the time of delivery of certificates for such
period of time as the Company may determine to be necessary for it with
reasonable diligence to comply with any applicable listing
4
<PAGE>
requirements of any national or regional securities exchange, of the National
Association of Securities Dealers, Inc., or with any law or regulation
applicable to the issuance or delivery of shares of the Company's Common Stock.
ARTICLE V
RESTRICTIONS AND ADDITIONAL PROVISIONS
--------------------------------------
5.01 Adjustments Upon Changes in Capitalization. If the number of
------------------------------------------
outstanding shares of the Common Stock of the Company is increased or decreased,
or if the Common Stock of the Company underlying the Option granted pursuant to
the provisions of this Option Agreement is changed into or exchanged for a
different number or kind of shares or securities of the Company through a
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split or reverse stock split, an appropriate and proportionate adjustment
shall be made by the Committee in the terms and conditions of the Options
granted pursuant hereto, including the Exercise Price of the Option; provided,
however, that no such adjustment need be made if, upon the advice of legal
counsel to the Company, the Committee determines that any such adjustment could
result in the recognition of federal taxable income by the Optionee, or by
holders of Common Stock or other securities of the Company.
5.02 Reservation of Shares of Common Stock. The Company shall, at all
-------------------------------------
times during the periods of time during which the Option may be exercised
hereunder, reserve and keep available for issuance to the Optionee a number of
shares of its Common Stock sufficient to satisfy all obligations of the Company
hereunder.
5.03 Restrictions on Issuance of Shares. The Company shall use its
----------------------------------
best efforts to seek and to obtain from appropriate regulatory agencies any
requisite authorization in order to issue and sell such number of shares of its
Common Stock as shall be sufficient to satisfy the obligations of the Company
under this Agreement. The inability of the Company to obtain authorization
deemed to be necessary by the Company's legal counsel to the lawful issuance and
sale of any shares of the Company's Common Stock shall relieve the Company of
any liability for the nonissuance or nonsale of any Common Stock as to which the
requisite approval or authorization shall not have been obtained.
5.04 Representations and Warranties. As a condition to the exercise
------------------------------
of the Option granted hereunder, the Committee may require the person exercising
the Option to make any representations or warranties to the Company that legal
counsel to the Company may determine to be required or advisable under any
applicable law or regulation, including without limitation a representation and
warranty that the shares of the Company's Common Stock being acquired are being
acquired only for investment and without any present intention or view to sell
or distribute any such shares.
5.05 Optionee Rights. No provision of this Agreement shall be deemed
---------------
to constitute a condition of the service or status of any Director. No
provision of this Option Agreement shall be deemed to give to the Optionee any
right to be retained in the service of the Company or of any Subsidiary
Corporation in any capacity (whether as an employee, Director, independent
contractor or otherwise), or to interfere in any way with the right of the
Company and its Subsidiary Corporations at any time to remove any Director, or
to discontinue using the services of any individual. The Optionee shall have no
right or interest in any share of the Company's Common Stock prior to exercise
of the Option, except as provided in this Option Agreement.
5.06 Legends on Stock Certificates. Unless an appropriate
-----------------------------
registration statement is on file and effective with appropriate federal, state
and local governmental authorities, each certificate representing Common Stock
of the Company issued pursuant to the exercise of the Option shall be endorsed
on its face with a legend similar to the following:
Neither the Option pursuant to which the shares represented by this
certificate are issued nor the shares represented hereby have been
registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or with any state securities
agency. The transfer or sale of the shares represented hereby without
appropriate registration, or pursuant to an exemption from
registration, is unlawful.
5
<PAGE>
It is understood however that upon stockholder approval of this Option as
contemplated in Section 6.08 hereof, the Company will file a registration
statement with the Securities and Exchange Commission registering the common
stock issuable pursuant to this Option on Form S-8.
ARTICLE VI
MISCELLANEOUS PROVISIONS
------------------------
6.01 Notices
-------
(a) All notices, demands or requests provided for or permitted to be
given pursuant hereto must be in writing. All notices, demands and requests
shall be deemed to have been properly given or served when deposited in the
United States mail, addressed to the individual or entity to whom notice is
given, postage prepaid and registered or certified with return receipt
requested, at the last known address of such individual or entity.
(b) By giving at least fifteen (15) days prior written notice, the
Company, a Subsidiary Corporation and the Optionee shall have the right from
time to time to change their addresses and to specify any other address within
the United States of America.
6.02 Titles and Captions. All Article and Section titles and captions
-------------------
in this Option Agreement are for convenience or reference only, and shall not be
deemed part of this Option Agreement, and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.
6.03 Pronouns and Plurals. Whenever the context may require, any
--------------------
pronoun used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
6.04 Applicable Law. This Option Agreement shall be construed in
--------------
accordance with and shall be governed by the laws of the State of Nevada.
6.05 Binding Effect. This Option Agreement shall be binding upon the
--------------
Optionee and upon the Optionee's heirs, executors, administrators, successors,
legal representatives and assigns.
6.06 Creditors. None of the provisions of this Option Agreement shall
---------
be for the benefit of or shall be enforceable by any creditor of the Optionee.
6.07 Severability. In the event that any condition, covenant or other
------------
provision herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Option Agreement and shall in no way affect any other covenant or condition
herein contained. If such condition, covenant or other provision shall be
deemed invalid due to its scope or breadth, such provision shall be deemed valid
to the extent of the scope or breadth permitted by law.
6.08 Stockholder Approval. This Option Agreement is subject to
--------------------
approval and ratification by the stockholders of the Company, together with
similar Option Agreements granted to non-management Directors on the date
hereof.
6
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Option Agreement as of the date first set forth above.
"Company"
AMERICAN PACIFIC CORPORATION,
a Delaware corporation
By
------------------------------------
Fred D. Gibson, Jr.
President
Attest:
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C. Keith Rooker
Secretary
"Optionee"
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Address:
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7
<PAGE>
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AMERICAN PACIFIC CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS IN CONNECTION WITH THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 10, 1998
The undersigned hereby appoints John R. Gibson and David N. Keys, and each of
them, with full power of substitution and revocation, the attorneys and
proxies of the undersigned to attend and vote all shares of Common Stock of
American Pacific Corporation that the undersigned would be entitled to vote if
then personally present at the Annual Meeting of Stockholders of American
Pacific Corporation, a Delaware corporation, to be held on March 10, 1998 at
10:30 a.m., local time, at the Las Vegas Country Club, Rotunda Room, located
at 3000 Joe W. Brown Drive, Las Vegas, Nevada, and at any adjournment or
adjournments thereof, hereby revoking any proxy heretofore given.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
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[X] Please mark your
votes as in this
example.
WITHHOLD
FOR AUTHORITY NOMINEES: Thomas A. Turner
Proposal (1): [_] [_] John R. Gibson
To elect Thomas David N. Keys
A. Turner, John R. Eugene Caflero
Gibson, David N. Keys and Eugene A. Cafiero, each to hold office until the
2001 Annual Meeting of Stockholders and thereafter until their successors
have been duly elected and qualified: Approve the
FOR AGAINST ABSTAIN
PROPOSAL (2): Approve the adoption of [_] [_] [_]
the American Pacific Corporation
1997 Stock Option Plan.
PROPOSAL (3): Approve the grant of non- [_] [_] [_]
qualified stock options to the
non-employee members of the Board
of Directors currently holding
office.
PROPOSAL (4): Approve the grant of non- [_] [_] [_]
qualified stock options to John R.
Gibson, Chief Executive Officer
and President, and to David N.
Keys, Senior Vice President and
Chief Financial Officer.
For, all nominees except as noted below,
_______________________________________________________________
_______________________________________________________________
MARK BOX AT RIGHT IF ADDRESS CHANGE HAS BEEN [_]
NOTED BELOW
NEW ADDRESS ______________________________________
___________________________________________________
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE,
DATE AND SIGN THE ABOVE PROXY CARD AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE.
Signature(s) of Stockholder(s) ____________________________ Date: _____________
NOTE: Please insert the date and sign your name exactly as it appears hereon.
If shares are held jointly, each joint owner should sign. Executors,
administrators, trustees, guardians, etc., should so indicate when signing.
Corporations should sign full corporate name by an authorized officer.
Partnerships should sign partnership name by an authorized person.
Unless the date has been inserted below, this Proxy shall be deemed to be dated
for all purposes as of the date appearing on the postmark on the envelope with
which it is enclosed. In such a case the Proxies named above are authorized to
insert the date in accordance with these instructions.
THIS PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS.
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