EXHIBIT 10.5
AMERICAN PACIFIC CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Article I
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ESTABLISHMENT & PURPOSE
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1.1 Establishment. Effective as of January 1, 1999, American Pacific
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Corporation (the "Company"), has amended and restated this supplemental
executive retirement plan known as the American Pacific Corporation
Supplemental Executive Retirement Plan (the "Plan") for the benefit of a
select group of highly compensated employees and their Beneficiaries.
The rights and benefits of Participants who are active Participants in the
Plan on or after the Effective Date of this restated Plan shall be as
provided herein, except as specifically provided or changed by subsequent
amendment.
1.2 Purpose. The purpose of the Plan is to provide retirement income and
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supplemental death and disability benefits for eligible Participants to
supplement benefits payable under the American Pacific Corporation Defined
Benefit Pension Plan and to enable the Company to attract and retain
certain key executives.
Article II
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DEFINITIONS
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Definitions. As used herein, the following words and phrases have the meanings
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ascribed to them in Article II unless a different meaning is plainly required by
the context. Some of the words and phrases used in the Plan are not defined in
this Article II, but, for convenience, are defined as they are introduced into
the text. Words in the masculine gender shall be deemed to include the feminine
gender and words in the feminine gender shall be deemed to include the masculine
gender. Any headings used herein are included for ease of reference only, and
are not to be construed so as to alter any of the terms of the Plan.
2.1 "Accrued Benefit" as of a specified date with respect to a Participant
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means a monthly benefit equal to (a) minus (b) below (but not less than
zero) where
(a) means an annual benefit equal to sixty percent (60%) of Final Average
Compensation.
Notwithstanding the above, for the sole Participant who was a Participant
before the Effective Date of this restated Plan, (a) means an annual
benefit equal to three percent (3%) of Final Average Compensation
multiplied by his years of Credited Service (not to exceed 15) plus one
and one-half percent (1.5%) of Final Average Compensation times his years
of Credited Service (exceeding 15, but not to exceed 35).
Except as follows, the benefit described in this subsection (a) shall be
expressed as a Life Annuity commencing at the Participant's Normal
Retirement Date. If the Participant's Annuity Starting Date precedes his
Normal Retirement Date, such benefit shall be expressed as a Life Annuity
commencing at his Annuity Starting Date
Exhibit 10.5 Page 1
and shall be reduced as provided in Section 4.1 of the Plan. If the
Participant's Annuity Starting Date is later than his Normal Retirement
Date, such benefit shall be expressed as a Life Annuity commencing at his
Annuity Starting Date and shall be increased as provided in Section 3.03
of the Qualified Plan.
(b) means the vested benefit payable to the Participant under the Qualified
Plan. Except as follows, the amount described in this subsection shall
be expressed as a Life Annuity commencing on the Participant's Normal
Retirement Date. If the Participant's Annuity Starting Date precedes his
Normal Retirement Date, the benefit described in this subsection shall be
expressed as a Life Annuity commencing at his Annuity Starting Date and
shall be reduced as provided in Section 3.02 or 4.02 (as applicable) of
the Qualified Plan. If the Participant's Annuity Starting Date is later
than his Normal Retirement Date, such benefit shall be expressed as a
Life Annuity commencing at his Annuity Starting Date and shall be
increased as provided in Section 3.03 of the Qualified Plan.
2.2 "Actuarial Equivalent" shall mean a benefit or benefits which are of equal
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value at the date of determination to the benefits for which they are to be
substituted. Actuarial Equivalence shall be based on the interest and
mortality tables used to determine actuarial equivalence under Section 1.03
of the Qualified Plan.
2.3 "Affiliated Group" shall mean the Company and all other entities aggregated
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with the Company under Sections 414(b), (c), (m), or (o) of the Code but
only in the period during which such other entity is so aggregated with the
Company.
2.4 "Annuity Starting Date" shall mean the first day of the first period for
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which an amount is payable as an annuity, or in the case of a benefit not
payable in the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such a benefit.
2.5 "Beneficiary" shall have the same meaning as set forth in Section 1.08 of
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the Qualified Plan.
2.6 "Board of Directors" shall mean the Board of Directors of American Pacific
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Corporation.
2.7 "Change of Control" shall mean
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(i) a merger or consolidation of the Company with or into any other
entity unless after such event at least a majority of the voting
power of the surviving or resulting entity is beneficially owned by
persons who beneficially own a majority of the voting power of the
Company immediately prior to such event, or
(ii) the sale of fifty percent (50%) or more of the voting stock of the
Company, or
(iii) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities and Exchange Act of 1934, as amended (the "Exchange
Act")) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for
purposes of this clause, such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time)
Exhibit 10.5 Page 2
directly or indirectly, of more than 35% of the total voting
power of the voting stock of the Company, or
(iv) the sale of all or substantially all the assets of the Company, or
(v) the dissolution of the Company, or
(vi) a change in the identity of a majority of the members of the
Company's board of directors within any twelve-month period, which
change or changes are not recommended by the incumbent directors
determined immediately prior to any such change or changes.
2.8 "Code" shall mean the Internal Revenue Code of 1986, as amended. Reference
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to a section of the Code shall include that section and any comparable
section or sections of any future legislation that amends, supplements, or
supersedes such section.
2.9 "Company" shall mean American Pacific Corporation.
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2.10 "Compensation" shall mean the Participant's total wages and salary.
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Bonuses are included in the year earned (even though payment might not
occur until the following calendar year) and are prorated over the months
worked during that year. Earnings after Normal Retirement Age are not
included.
2.11 "Credited Service" shall mean the sum of all "Benefit Service" earned under
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the Qualified Plan determined as set forth in Section 2.05 of the Qualified
Plan, including full and partial years. A partial year is calculated in
terms of completed calendar months.
2.12 "Early Retirement Date" shall mean the first day of the month next
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following the date the participant elects to receive his Retirement Benefit
under the Plan where such date is after the Participant has both reached
age fifty-five (55) and completed at least ten (10) years of Vesting
Service but is prior to the Participant's attainment of his Normal
Retirement Age.
2.13 "Effective Date" shall mean January 1, 1999.
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2.14 "Employer" shall mean American Pacific Corporation and any member of the
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Affiliated Group which adopts this Plan.
2.15 "Final Average Compensation" shall mean the average annualized Compensation
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earned during the Participant's thirty-six (36) consecutive months of
employment with the Company that produces the highest average.
2.16 "Hour of Service" shall have the same meaning as set forth in Section
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1.42(d) of the Qualified Plan.
2.17 "Late Retirement Date" shall mean the first day of the month coinciding
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with or next following the date a Participant terminates employment, where
such date is after his Normal Retirement Date.
Exhibit 10.5 Page 3
2.18 "Life Annuity" shall mean a series of monthly installments which will
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continue for the lifetime of the Participant and will cease upon his death.
2.19 "Normal Retirement Date" shall have the same meaning as set forth in
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Section 1.29 of the Qualified Plan.
2.20 "Participant" shall mean any employee of an Employer who becomes eligible
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to participate in the Plan pursuant to Article III and who continues to be
entitled to any benefits under the Plan.
2.21 "Plan" shall mean the American Pacific Corporation Supplemental Executive
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Retirement Plan.
2.22 "Plan Year" shall mean the twelve (12) consecutive month period beginning
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on January 1 and ending on the next following December 31.
2.23 "Qualified Plan" shall mean the American Pacific Corporation Defined
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Benefit Pension Plan. In the event that the Qualified Plan is subsequently
amended, reference to a Section of the Qualified Plan shall be deemed to
refer to the operational successor of such Section.
2.24 "Rabbi Trust" shall mean a trust described in Code Section 671, which shall
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be established in connection with this Plan.
2.25 "Retirement" shall mean termination of employment with all Employers at a
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time when the Participant is eligible for an Early, Normal, Late, or
Disability Retirement Benefit.
2.26 "Retirement Date" shall mean the Participant's Normal, Early, or Late
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Retirement Date.
2.27 "Spouse" shall mean the person to whom the Participant is legally married
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on his Annuity Starting Date, or, if earlier on his date of death.
2.28 "Vesting Service" shall have the same meaning as set forth in Section 2.04
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of the Qualified Plan.
Article III
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PLAN PARTICIPATION
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3.1 Eligibility to Participate in the Plan. Each individual (and only such
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individuals) designated in Appendix A shall be eligible to participate in
the Plan.
3.2 Participation. A Participant shall remain a Participant so long as he is
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entitled to current or contingent benefits under the Plan, but shall cease
to be a Participant if he terminates employment with all Employers prior to
the date he becomes eligible for a vested benefit under Article IV of the
Plan. If a Participant ceases to be an employee after becoming eligible for
a vested benefit, he shall continue to be a Participant only with respect
to his vested Accrued Benefit determined at his termination of employment.
If he is subsequently reemployed, he shall only accrue an additional
benefit or earn additional Vesting Service if he is again designated in
Appendix A. Should a Participant cease to be an employee before
Exhibit 10.5 Page 4
earning a vested benefit, but later become re-employed by an Employer, he
shall again become a Participant only if he is again designated in Appendix
A.
3.3 Select Group of Employees. The Plan is intended to qualify as a plan
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maintained by the Employers primarily for the purpose of providing deferred
compensation for a select group of highly compensated employees, and, as
such, to be exempt from certain provisions of the Employee Retirement
Income Security Act of 1974, as amended. If the Company determines based on
subsequent authority or if an agency or court of competent jurisdiction
determines that the Plan benefits any person other than a member of the
select group of highly compensated employees, the participation of each
employee who is determined not to be included in such group shall be
terminated immediately and such employee shall cease to accrue any benefit
under the Plan. Provided, that in the case of a determination by an agency
or court, the employee's participation shall terminate only after the
period for appeal of such determination has elapsed. As soon as practicable
after such determination, each such employee shall receive a single sum
distribution equal to the Actuarial Equivalent of the benefit he would
receive at his Normal Retirement Date if his employment terminated on the
date his participation terminates.
Article IV
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BENEFITS
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4.1 Retirement Benefits. Except as otherwise provided herein, retirement
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benefits will be computed and paid as follows:
(a) Normal Retirement Benefit shall be equal to the Participant's Accrued
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Benefit determined at the Participant's Normal Retirement Date and
commencing on such date.
(b) Early Retirement Benefit shall be equal to the Participant's Accrued
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Benefit determined at the Participant's Early Retirement Date and
commencing on such date, reduced as follows:
(i) with respect to the sole Participant who was a Participant prior
to the Effective Date of this restated Plan, the early Retirement
benefit shall be reduced five percent (5%) for each year that
payments begin before age sixty-two (62) (prorated for fractional
years) and
(ii) with respect to all other participants, the Early Retirement
Benefit shall be reduced as provided in Section 3.02 or 4.02 (as
applicable) of the Qualified Plan.
(c) Late Retirement Benefit shall be equal to the Participant's Accrued
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Benefit (after any applicable increase under Section 2.1 of the Plan)
determined at the Participant's Late Retirement Date and commencing on
such date.
(d) Change of Control Retirement Benefit shall be equal to the
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Participant's Accrued Benefit determined at the Change of Control and
commencing on the first day of the next month reduced as provided in
Section 3.02 of the Qualified Plan. If the Change
Exhibit 10.5 Page 5
of Control occurs before the Participant reaches his Early Retirement
Date, the Change of Control Retirement Benefit shall be the Actuarial
Equivalent of the Benefit the Participant could receive under this
Section if the Change of Control had occurred at his Early Retirement
Date.
4.2 Termination of Service. A Participant shall be entitled to his monthly
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retirement benefit if he terminates before he is eligible to receive a
Retirement Benefit, provided that the Participant meets the vesting
requirements of Article V. The Participant's benefit on his termination of
employment shall be the Participant's vested Accrued Benefit determined at
the date of termination of employment, commencing as provided in Section
4.5.
4.3 Form of Retirement Benefit. Except as provided below, the Accrued Benefit
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under Section 4.1 or 4.2 of this Plan shall be paid in the form elected by
the Participant for payment of his benefit under the Qualified Plan.
Benefits payable under this section other than as a Life Annuity shall be
the Actuarial Equivalent of the benefit payable in the form of a Life
Annuity. However, for the sole Participant who was a Participant prior to
the Effective Date of this restated Plan, the Accrued Benefit under Section
4.1 of this Plan shall be paid in the form of an annuity for the life of
the Participant.
Notwithstanding the above, a Participant who separates from service or
retires with a vested Accrued Benefit shall be paid the Actuarial
Equivalent of such benefit in a single sum if such Actuarial Equivalent
does not exceed $5,000. If the Participant subsequently resumes
participation in the Plan, such Participant's benefit at his later date of
termination shall be reduced by his prior Accrued Benefit determined as of
the date of his previous retirement or termination.
Upon a Change of Control, each Participant or Beneficiary will have the
option to receive a single sum distribution, in the form of either cash or
an Actuarially Equivalent annuity with an acceptable third party, in an
amount equal to the benefits determined under Section 4.1(d). Upon a Change
of Control, the Trustee will provide written notice to each Participant or
Beneficiary of his or her rights under such option. Such option will expire
one year following a Change in Control.
4.4 Death Benefit. If death occurs before the Participant's Annuity Starting
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Date but after having satisfied the requirements for vested benefit under
Section 5.1 of this Plan, and the Participant has a surviving spouse, a
monthly benefit for life equal to 50% of the vested benefit the Participant
would have received had he retired immediately before his death, without
any reduction for early payment, shall be paid to the surviving spouse. If
the surviving spouse is more than five (5) years younger than the
Participant, benefits will be reduced two percent (2%) for each full year
that the age difference exceeds five (5) years.
4.5 Time of Payment. Payment of a Participant's benefit under this Plan shall
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commence on the same day that the Participant's (or his Beneficiary's)
benefit commences under the Qualified Plan.
4.6 Reemployment Following Retirement or Termination of Employment. If a
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Participant begins to receive a benefit following termination of employment
or retirement and is subsequently reemployed on a full-time basis by the
Employer, benefit payments shall cease during the period of reemployment.
If a Participant begins to receive a benefit
Exhibit 10.5 Page 6
following retirement pursuant to Section 4.1 or 4.2, and is subsequently
reemployed by the Employer on a part-time basis, as defined by personnel
practices as uniformly and consistently applied, he shall continue
receiving benefit payments. Upon the resumption of employment with the
Employer, benefits shall continue to accrue in accordance with the terms of
the Plan but only if the Participant is again designated in Appendix A.
Future benefits paid to such Participant shall be adjusted on an Actuarial
Equivalent basis to reflect the value of any benefits previously paid.
Article V
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VESTING
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5.1 Vesting. A Participant shall be vested in his Accrued Benefit in
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accordance with the schedule below that provides the lower Vested
Percentage.
Schedule A Schedule B
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Vesting Service
Service Vested Percentage Vested Percentage Age + Vesting
5 50% 50 50%
6 60% 51 60%
7 70% 52 70%
8 80% 53 80%
9 90% 54 90%
10 100% 55 100%
In addition, following a Change of Control, Vesting Service will include
years and partial years, if any, required to be credited in the event of a
Change of Control pursuant to the terms of any employment agreement between
the Company and the Participants.
Article VI
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PLAN ADMINISTRATION
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6.1 Administration of the Plan. The Plan shall be administered by a Plan
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Administrator, which shall be appointed by the Board of Directors, subject,
however, to any action taken by the Board of Directors in respect to the
Plan. The Plan Administrator shall be responsible for the administration of
the Plan and shall have all of the powers and duties allocated to the Plan
Administrator set forth in Article VII of the Qualified Plan including,
without limitation, the discretionary power to determine eligibility for
participation in the Plan and to construe the terms of the Plan. The Plan
Administrator shall file with the Department of Labor and distribute to the
Participants any reports and other information required by applicable law
and shall be entitled to rely conclusively upon all tables, valuations,
certificates, opinions and reports furnished by any actuary, accountant,
controller, counsel or other person employed or engaged by it with respect
to the Plan.
Article VII
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AMENDMENT AND TERMINATION
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Exhibit 10.5 Page 7
7.1 Amendment and Termination of the Plan. The Board of Directors may amend or
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terminate the Plan at any time. However, no such amendment or termination
shall deprive any Participant or Beneficiary of any portion of any
Retirement or Death Benefit which has become vested prior to the effective
date of such amendment or termination or which would be payable if the
Participant terminated for any reason, including death, on such effective
date.
Article VIII
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GENERAL PROVISIONS
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8.1 Nature of Company's Obligation. Benefits under this Plan shall be paid
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solely from the general assets of the Company. The Company's obligation
under this Plan shall be limited to an unfunded and unsecured promise to
pay. The rights of a Participant and his or her spouse or Beneficiary with
respect to benefits under this Plan are the same of those of an unsecured
creditor of the Company, and neither the Participant nor his or her spouse
or Beneficiary shall have a secured interest in any assets that may be
designated by the Company to pay such benefits.
8.2 Rabbi Trust. The Company shall establish a trust described in Code Section
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671 with respect to which the Company is the grantor (the "Rabbi Trust") to
hold assets in connection with this Plan. However, the Company shall not be
obligated (except as otherwise provided below) to make contributions to the
Rabbi Trust or otherwise fund its financial obligations under the Plan.
Upon a Change of Control, the Company shall, as soon as possible, but in no
event longer than 30 days following the Change of Control, as defined
herein, make an irrevocable contribution to the Trust in an amount that is
sufficient to pay each Plan Participant or Beneficiary the benefits to
which Plan Participants or Beneficiaries would be entitled pursuant to the
terms of the Plan as of the date on which the Change of Control occurred.
8.3 Nonalienation of Benefits under this Plan. Except for claims of
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indebtedness owing to an Employer, the interests of Participants and their
Beneficiaries are not subject to claims, indebtedness, attachment,
execution, garnishment, or other legal or equitable process and such
interests may not be voluntarily or involuntarily sold, transferred or
assigned. Any attempt by a Participant or his Beneficiary or any other
person to sell, transfer, alienate, assign, pledge, anticipate, encumber,
charge, or otherwise dispose of any right to benefits payable hereunder
shall be void. The restrictions set out in the preceding subsection shall
not apply to an order determined to be qualified domestic relations order
as defined in Section 414(p) of the Code.
8.4 Plan not a Contract of Employment. This Plan shall not be deemed to
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constitute a contract between any Employer and any Participant or to be a
consideration or an inducement for the employment of any Participant or
Employee. Nothing contained in this Plan shall be deemed to give any
Participant or Employee the right to be retained in the service of any
Employer or to interfere with the right of any Employer to discharge any
Participant or employee at any time regardless of the effect which such
discharge shall have upon such individual as a Participant in the Plan.
Exhibit 10.5 Page 8
8.5 Required Notification to Plan Administrator. Each Participant entitled to
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benefits hereunder shall file with the Plan Administrator from time to time
in writing his post office address and each change of post office address,
and any check representing payment hereunder and any communication
addressed to a Participant or a former Participant hereunder at his last
address filed with the Plan Administrator, or if no such address has been
filed, then at his last address as indicated on the records of the Company
shall be binding on such person for all purposes of the Plan, and neither
the Plan Administrator nor the Company or other payor shall be obliged to
search for or ascertain the location of any such person. If the Plan
Administrator for any reason is in doubt as to the address of any
Participant or former Participant entitled to benefits hereunder or as to
whether benefit payments are being received by the person entitled thereto,
it shall, by registered mail addressed to the person concerned at his
address last known to the Plan Administrator, notify such person that:
(a) All unmailed and future retirement income payments shall be
henceforth withheld until he provides the Plan Administrator with
evidence of his continued life and his proper mailing address;
and
(b) His right to any retirement income whatsoever shall, at the
option of the Plan Administrator, be canceled forever, if, at the
expiration of two (2) years from the date of such mailing, he
shall not have provided the Plan Administrator with evidence of
his continued life and his proper mailing address.
8.6 Successors. The provisions of this Plan shall be binding upon each
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Employer, and their successors and assigns and upon each Participant and
his heirs, spouses, estates, and legal representatives.
8.7 Facility of Payment. Whenever and as often as any person entitled to
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payments hereunder shall be under a legal disability, or in the sole
judgment of the Plan Administrator shall otherwise be unable to apply such
payments to his own best interest and advantage, the Plan Administrator, in
the exercise of its discretion, may direct all or any portion of such
payments to be made to any person receiving benefits on behalf of the
Participant or other Beneficiary under Section 12.02 of the Qualified Plan.
8.8 Required Information to Plan Administrator. Each Participant will furnish
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to the Plan Administrator such information as the Plan Administrator
considers necessary or desirable for purposes of administering the Plan,
and the provisions of the Plan respecting any payments thereunder are
conditional upon the Participant's furnishing promptly such true, full and
complete information as the Plan Administrator may request. Each
Participant will submit proof of his age to the Plan Administrator at such
time as required by the Plan Administrator. The Plan Administrator will, if
such proof of age is not submitted as required, use as conclusive evidence
thereof such information as is deemed by it to be reliable, regardless of
the lack of proof, or the misstatement of the age of persons entitled to
benefits hereunder, by the Participant or otherwise, will be in such manner
as the Plan Administrator deems equitable. Any notice or information which,
according to the terms of the Plan or the rules of the Plan Administrator,
must be filed with the Plan Administrator, shall be deemed so filed if
addressed and either delivered in person or mailed to and received by the
Plan Administrator, in care of the Company at:
Exhibit 10.5 Page 9
American Pacific Corporation
Suite 300
3770 Howard Hughes Parkway
Las Vegas, NV 89109
8.9 Claims Procedure. In the event that any claim for benefits, which must
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initially be submitted in writing to the Plan Administrator, is denied (in
whole or in part) hereunder, the claimant shall receive from the Company
notice in writing, written in a manner calculated to be understood by the
claimant, setting forth the specific reasons for denial, with specific
reference to pertinent provisions of this Agreement. Such notice shall be
provided within 90 days of the Participant's claim for benefits. Any
disagreements about such interpretations and construction may be appealed
within 90 days to the Board of Directors. The Board shall respond to such
appeal within 60 days with a notice in writing fully disclosing its
decision and the reasons therefore. No member of the Board of Directors
shall be liable to any person for any action taken hereunder except those
actions undertaken with lack of good faith.
8.10 Controlling State Law. To the extent not superseded by the laws of the
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United States, the Plan will be construed and enforced according to the
laws of the State of Delaware.
8.11 Severability. In case any provision of this Plan shall be held illegal or
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invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and
enforced as if such illegal and invalid provisions had never been set
forth.
8.12 Adoption of Plan. Any Employer may adopt this Plan for all or a portion
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of its employees, provided that the Board of Directors of the Company
approves such participation. The administrative powers and control of the
Company as provided in the Plan shall not be deemed diminished under the
Plan by reason of the participation of other companies in the Plan.
IN WITNESS WHEREOF, American Pacific Corporation has adopted this plan on this
23 day of November, 1999.
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ATTEST (SEAL): AMERICAN PACIFIC CORPORATION
By /s/ Linda G. Ferguson
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Exhibit 10.5 Page 10
APPENDIX A
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PLAN PARTICIPANTS
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Participant Social Security Number
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Fred D. Gibson, Jr. ###-##-####
(sole Participant prior to January 1, 1999)
John R. Gibson ###-##-####
David Keys ###-##-####
Exhibit 10.5 Page 11