<PAGE> 1
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Applied Extrusion Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
Applied Extrusion Technologies, Inc.
(Name of Person(s) Filing Proxy Statement)
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:
2) Aggregate number of securities to which transaction applies:
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.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 29, 1997
---------------------
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Applied Extrusion Technologies, Inc. will be held at the 36th
Floor Conference Center, Ropes & Gray, One International Place, Boston,
Massachusetts at 10:30 a.m. on Wednesday, January 29, 1997 for the following
purposes:
1. To elect two Class II directors.
2. To transact any other business that may properly come before the Meeting
or any adjournment thereof.
Stockholders of record at the close of business on December 2, 1996 are
entitled to notice of and to vote at the Meeting.
If you are unable to be present personally, please sign and date the
enclosed proxy and return it promptly in the enclosed envelope.
By Order of the Board of Directors,
Gerald M. Haines, II
Secretary
December 24, 1996
<PAGE> 3
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 29, 1997
--------------
PROXY STATEMENT
--------------
The enclosed form of proxy is solicited on behalf of the Board of Directors
of Applied Extrusion Technologies, Inc. ("AET" or the "Company") to be voted at
the Annual Meeting of Stockholders (the "Meeting") to be held at the 36th Floor
Conference Center, Ropes & Gray, One International Place, Boston, Massachusetts
02110 at 10:30 a.m. on Wednesday, January 29, 1997 or at any adjournment
thereof. A proxy may be revoked by a stockholder at any time before it is voted
(i) by returning to the Company another properly signed proxy bearing a later
date, (ii) by otherwise delivering a written revocation to the Secretary of the
Company or (iii) by attending the Meeting or any adjourned session thereof and
voting the shares covered by the proxy in person. Shares represented by the
enclosed form of proxy properly executed and returned, and not revoked, will be
voted at the Meeting.
The expense of soliciting proxies will be borne by the Company. Officers
and regular employees of the Company (who will receive no compensation therefor
in addition to their regular salaries) may solicit proxies. In addition to the
solicitation of proxies by use of the mails, the Company may use the services of
its directors, officers and regular employees to solicit proxies personally and
by mail, telephone or telegram from brokerage houses and other shareholders. The
Company will also reimburse brokers, banks and other custodians, nominees and
fiduciaries and other persons for their reasonable charges and expenses in
forwarding soliciting materials to their principals.
In the absence of contrary instructions, the persons named as proxies will
vote in accordance with the intentions stated below. The holders of record of
shares of the common stock, $.01 par value (the "Common Stock"), of the Company
at the close of business on December 2, 1996 are entitled to receive notice of
and to vote at the Meeting. As of that date, the Company had issued and
outstanding 10,264,161 shares of Common Stock each of which is entitled to one
vote on each matter to come before the Meeting.
Consistent with state law and under the Company's by-laws, a majority of
the shares entitled to vote on a particular matter, present in person or
represented by proxy at a meeting, constitutes a quorum as to such matter. Votes
cast by proxy or in person at the Meeting will be counted by persons appointed
by the Company to act as election inspectors for the Meeting. The two nominees
for election as directors at the Meeting who receive the greatest number of
votes properly cast for the election of directors shall be elected directors.
The election inspectors will count shares represented by proxies that withhold
authority to vote for a nominee for election as a director, or that reflect
abstentions or "broker non-votes" (i.e., shares represented at the Meeting held
by brokers or nominees as to which (i) instructions have not been received from
the beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular matter) only as
shares that are present and entitled to vote on the matter for purposes of
determining the presence of a quorum, but neither abstentions nor broker
non-votes will have any effect on the outcome of voting on the election of
directors.
<PAGE> 4
The Annual Report to Stockholders for AET's fiscal year ended September 30,
1996 accompanies this proxy statement. This proxy statement and the enclosed
proxy are being mailed to Stockholders on the same date as the date of the
Notice of Annual Meeting. The principal executive offices of AET are located at
3 Centennial Drive, Peabody, Massachusetts 01960.
ITEM NO. 1
----------
ELECTION OF DIRECTORS
The persons named in the enclosed proxy intend to vote each share as to
which a proxy has been properly executed and returned and not revoked in favor
of the election as directors of the two nominees named below, both of whom are
currently directors of the Company, unless authority to vote for the election of
one or both of such nominees is withheld by marking the proxy to that effect.
Pursuant to the Company's Restated Certificate of Incorporation, as
amended, the Board of Directors is divided into three classes, as nearly equal
in number as possible, so that each director will serve for three years, with
one class of directors being elected each year. Hansjorg Wyss has informed the
Company that, due to other commitments, he has chosen not to stand for
reelection upon the expiration of his current term as a Director. Pursuant to
the Restated Certificate of Incorporation and By-laws, the nominees include only
the two directors standing for reelection and designated as Class II Directors,
whose terms expire at the 1997 Annual Meeting. The enclosed proxy cannot be
voted for a greater number of persons than two.
If Proposal I is approved, Nader A. Golestaneh and Paul W. Marshall will be
elected as Class II Directors for a term of three years expiring at the 2000
Annual Meeting, and until their respective successors are elected and shall
qualify to serve.
It is expected that each of the nominees will be able to serve, but if any
nominee is unable to serve, the proxies reserve discretion to vote, or refrain
from voting, for a substitute nominee or nominees or to fix the number of
directors at a lesser number.
2
<PAGE> 5
<TABLE>
NOMINEES
<CAPTION>
NAME, AGE (AS OF DECEMBER 2, 1996), DIRECTOR TERM
BUSINESS AND CURRENT DIRECTORSHIPS SINCE EXPIRES
- ---------------------------------- ------- -------
<S> <C> <C>
NADER A. GOLESTANEH, 35 -- Director of the Company; since 1990, President of 1986 1997
Centremark Properties, Inc., a Real Estate Management and Development Company;
since 1986, attorney in private practice in Boston, Massachusetts.
PAUL W. MARSHALL, 56 -- Director of the Company; Senior Lecturer of Business 1986 1997
Administration, Harvard Business School; since December 1991, Chairman of the
Board and Chief Executive Officer of Rochester Shoe Tree Company, Inc., a
manufacturer and distributor of cedar shoe trees and other cedar and shoe care
products; from 1989 to November 1991, Chairman of Industrial Economic Co., a
management consulting firm; from 1989 TO 1992, Adjunct Professor, Harvard
Business School; Director of Foodbrands America, Incorporated, a manufacturer
and distributor of food products, and Raymond James Financial Corporation, a
regional brokerage firm.
</TABLE>
3
<PAGE> 6
<TABLE>
CURRENT DIRECTORS
<CAPTION>
NAME, AGE (AS OF DECEMBER 2, 1996) DIRECTOR TERM
BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS SINCE EXPIRES
- --------------------------------------------- ------- -------
<S> <C> <C>
ROBERT H. BEEBY, 64 -- Director of the Company; from 1989 to June 1991, 1994 1998
President and Chief Executive Officer of FRITO-LAY, Inc., a United States
manufacturer and distributor of snack foods; from 1984 TO 1988, President and
Chief Executive Officer of Pepsi-Cola International, an international soft drink
manufacturer and distributor; Director of Church & Dwight, a manufacturer of
consumer products and specialty chemicals, and The Columbia Gas System, Inc., A
producer, transmitter and distributor of natural gas in the eastern United
states.
RICHARD G. HAMERMESH, 48 -- Director of the Company; since August 1987, 1986 1998
Managing Partner, Center for Executive Development, an independent executive
education and training firm; Director of BE Aerospace, Inc., a manufacturer of
cabin interior products for commercial aircraft.
JOSEPH J. O'DONNELL, 53 -- Director of the Company; since 1978, Chairman of 1986 1998
the Board and Chief Executive Officer of Boston Concessions Group, Inc., A
Company that manages food service operations in ski areas, amusement parks,
restaurants and theaters.
AMIN J. KHOURY, 57 -- Founder and Chairman of the Board of Directors of the 1986 1999
Company since October 1986; from October 1986 to August 1993, Chief Executive
Officer of the Company; President of the Company from August 1988 through
November 1992; Founder and Chairman of the Board of Directors of BE Aerospace,
Inc., a manufacturer of cabin interior products for commercial aircraft;
Director of Brooks Automation, Inc., a leading worldwide independent supplier of
vacuum substrate handling robots, modules and cluster tool platforms for
semiconductor and flat panel display manufacturing; Director of Aurora
Electronics, Inc., a supplier of spare parts distribution, environmental
recycling and recovery services to the electronics industry.
THOMAS E. WILLIAMS, 50 -- Director, President and Chief Operating Officer of the 1992 1999
Company since December 1992; Chief Executive Officer of the Company since August
1993; from 1988 until 1992, President and Chief Executive Officer of Home
Innovations, Inc., a home furnishings company; from 1980 until 1988, held a
number of executive positions with PepsiCo, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C>
MARK M. HARMELING, 44 -- Director of the Company since 1986; since 1991, 1986 1999
President of Bay State Reality Advisors, a real estate consulting firm; from
1985 to 1991, President of Intercontinental Real Estate Corporation, A real
estate holding and development corporation; Director of Universal Holding
Corporation, an insurance holding company.
</TABLE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held four meetings during the fiscal year ended
September 30, 1996. Each incumbent director attended at least 75% of the Board
meetings and the meetings held by committees on which he served during such
fiscal year. The Board of Directors currently has two standing committees, the
Audit Committee and the Stock Option and Compensation Committee (the
"Compensation Committee"). The Company does not have a standing Nominating
Committee.
The Audit Committee, composed of Richard G. Hamermesh and Paul W. Marshall,
held one meeting during the fiscal year ended September 30, 1996. The Audit
Committee recommends to the Board of Directors the independent auditors to be
engaged by the Company, reviews with management and with the independent
auditors the Company's internal accounting procedures and controls, and reviews
with the independent auditors the scope and results of their audit, as well as
the scope of the auditor's internal activities.
The Compensation Committee, which in fiscal 1996 was composed of Robert H.
Beeby and Mark M. Harmeling, held one meeting and acted pursuant to written
consent on eleven occasions during the fiscal year ended September 30, 1996. The
Compensation Committee provides recommendations to the Board regarding
compensation matters and administers the Company's stock option and compensation
plans.
5
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table and notes thereto set forth certain information with
respect to the beneficial ownership of the Company's Common Stock as of December
12, 1996 by (i) each person who is known to the Company to beneficially own more
than 5% of the outstanding shares of Common Stock of the Company, (ii) each of
the chief executive officer and the Company's four other most highly compensated
executive officers who were serving at the end of fiscal 1996 (collectively, the
"Named Executive Officers") and each director of the Company, and (iii) all
executive officers and directors of the Company as a group. Except as otherwise
indicated, each of the stockholders named below has sole voting and investment
power with respect to the shares of Common Stock beneficially owned:
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
------------------
PERCENT OF
NUMBER OF OUTSTANDING
NAMES SHARES SHARES(1)
- ----- ------ ---------
<S> <C> <C>
T. Rowe Price Associates, Inc.................................... 587,000 5.40%
100 E. Pratt Street
Baltimore, MD 21202
The Prudential Insurance Company of America...................... 571,900 5.30%
Prudential Plaza
Newark, NJ 07102
T. Rowe Price Small Cap Value Fund, Inc.......................... 550,000 5.06%
100 E. Pratt Street
Baltimore, MD 21202
Thomas E. Williams*+............................................. 258,800(2) 2.38%
Hansjorg Wyss+................................................... 213,928(3) 1.97%
Amin J. Khoury*+................................................. 109,000(4) 1.00%
David N. Terhune*................................................ 63,067(5) **
Paul W. Marshall+................................................ 59,382(6) **
Joseph J. O'Donnell+............................................. 37,500(7) **
Mark M. Harmeling+............................................... 37,500(8) **
Mark S. Abrahams*................................................ 33,250(9) **
Richard G. Hamermesh+............................................ 20,375(10) **
Nader A. Golestaneh+............................................. 15,000(11) **
Robert H. Beeby+................................................. 13,750(12) **
Anthony J. Allott*............................................... 13,017(13) **
All directors and executive officers as a group (12 persons)..... 879,554(14) 8.08%
</TABLE>
6
<PAGE> 9
- ----------
* Named Executive Officer
+ Director of the Company
** Less than 1 percent
(1) The number of shares of Common Stock deemed outstanding includes: (i)
10,264,161 shares of Common Stock outstanding as of December112, 1996
and (ii) shares of Common Stock subject to outstanding stock options
which are exercisable by the named individual or group in the next
sixty days (commencing on December 12, 1996).
(2) Includes (i) 237,500 shares issuable upon the exercise of outstanding
stock options and (ii) 11,300 shares held by the AET Executive Deferred
Compensation Plan Trust for the benefit of Mr. Williams. Excludes
options to purchase 162,500 shares of Common Stock which are not
exercisable in the next sixty days.
(3) Includes 37,500 shares issuable upon the exercise of outstanding stock
options. Excludes options to purchase 12,500 shares of Common Stock
which are not exercisable in the next sixty days.
(4) Includes 100,000 shares issuable upon the exercise of outstanding stock
options. Excludes options to purchase 225,000 shares of Common Stock
which are not exercisable in the next sixty days.
(5) Includes (i) 50,000 shares issuable upon the exercise of outstanding
stock options and (ii) 4,000 shares held by the AET Executive Deferred
Compensation Plan Trust for the benefit of Mr. Terhune. Excludes
options to purchase 187,500 shares of Common Stock which are not
exercisable in the next sixty days.
(6) Includes (i) 10,000 shares held by Mr. Marshall as trustee of the Paul
Marshall Self Employed Retirement Plan and (ii) 37,500 shares issuable
upon the exercise of outstanding stock options. Excludes options to
purchase 12,500 shares of Common Stock which are not exercisable in the
next sixty days.
(7) Includes 37,500 shares issuable upon the exercise of outstanding stock
options. Excludes options to purchase 12,500 shares of Common Stock
which are not exercisable in the next sixty days.
(8) Includes 37,500 shares issuable upon the exercise of outstanding stock
options. Excludes (i) 87,057 shares held in trusts for the benefit of
Mr. Harmeling's children, of which Mr. Harmeling disclaims all
beneficial interest, and (ii) options to purchase 12,500 shares of
Common Stock which are not exercisable in the next sixty days.
(9) Includes (i) 27,500 shares issuable upon the exercise of outstanding
stock options and (ii) 1,750 shares held by the AET Executive Deferred
Compensation Plan Trust for the benefit of Mr. Abrahams. Excludes
options to purchase 22,500 shares of Common Stock which are not
exercisable in the next sixty days.
(10) Includes 11,250 shares issuable upon the exercise of outstanding stock
options. Excludes options to purchase 12,500 shares of Common Stock
which are not exercisable in the next sixty days.
(11) Includes 15,000 shares issuable upon the exercise of outstanding stock
options. Excludes options to purchase 12,500 shares of Common Stock
which are not exercisable in the next sixty days.
(12) Includes 13,750 shares issuable upon the exercise of outstanding stock
options. Excludes options to purchase 21,250 shares of Common Stock
which are not exercisable in the next sixty days.
(13) Includes (i) 11,250 shares issuable upon the exercise of outstanding
stock options and (ii) 600 shares held by the AET Executive Deferred
Compensation Plan Trust for the benefit of Mr. Allott. Excludes options
to purchase 38,750 shares of Common Stock which are not exercisable in
the next sixty days.
(14) Includes and excludes the shares described in notes (2) through (13).
7
<PAGE> 10
EXECUTIVE COMPENSATION
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Stock Option and Compensation Committee (the "Compensation Committee"),
which is responsible for review and approval of compensation matters relating to
executive officers of the Company and administering the Company's stock option
plans, makes the following report on executive compensation for fiscal 1996.
The Company's executive compensation program is designed to recruit,
retain, reward and motivate talented executives who are capable of leading the
Company in achieving its strategic and financial objectives in the competitive
and rapidly changing oriented polypropylene and apertured films industries.
The Company relies on three compensation components to motivate executive
performance: annual salary, incentive cash bonuses and stock-based incentive
compensation. Each of the Named Executive Officers has an annual base salary,
established by an employment agreement or otherwise, at a level the Company
believes is comparable to companies in its industry and consistent with the
range for growth companies traded on the Nasdaq National Market System. In
addition to base salary, each Named Executive Officer is eligible to receive an
incentive cash bonus at the end of each fiscal year based upon corporate
performance and that officer's individual performance. Corporate performance is
measured by the Company's strategic and financial performance in that fiscal
year, with particular reference to operating earnings for the year. Because the
Compensation Committee believes that short-term fluctuations in stock price do
not necessarily reflect the underlying strength or future prospects of the
Company, the Compensation Committee does not emphasize year-to-year changes in
stock price in its evaluation of corporate performance. Individual performance
is measured by the strategic and financial performance of the particular
officer's operational responsibility in comparison to targeted performance
criteria.
While skeptical about the significance of short-term fluctuations in stock
price, the Compensation Committee believes that long-term stock price
appreciation will reflect the Company's achievement of its strategic goals and
objectives. Accordingly, the Company seeks to create long-term performance
incentives for its key employees by aligning their economic interests with the
interests of the Company's long-term shareholders through the Company's
stock-based incentive compensation program. Stock options are granted to key
employees at a price equal to the fair market value on the date of grant, and
awards are based on the performance of such employees and anticipated
contributions by such employees in helping the Company achieve its strategic
goals and objectives. Stock option grants are also made by reference to the
number of stock options an employee already holds.
During its most recent fiscal year, despite achieving the majority of its
strategic objectives associated with its strategy for creation of long term
shareholder value, revenues and operating earnings did not meet the Company's
projections as a result of factors affecting the OPP Films industry as a whole,
and therefore the Company did not pay cash bonuses to any of its Named Executive
Officers other than Mark S. Abrahams. The Company did grant stock options to key
employees, other than Named Executive Officers, upon recommendation of
management and approval of the Compensation Committee.
8
<PAGE> 11
The Company has entered into long-term employment agreements with Amin J.
Khoury, who serves as Chairman of the Board of the Company, Thomas E. Williams,
who serves as President and Chief Executive Officer of the Company, David N.
Terhune, who serves as Executive Vice President and Chief Operating Officer of
the Company, and Mark S. Abrahams, who serves as Vice President and General
Manager, Specialty Nets and Profiles Division of the Company. See "Employment
Contracts" below. Prior to entering into the employment agreements with Messrs.
Khoury and Williams, the Company engaged compensation consultants who provided
compensation survey information for executive officers of similarly situated
companies.
With respect to the above matters, the Compensation Committee submits this
report.
STOCK OPTION AND COMPENSATION COMMITTEE
Mark M. Harmeling
Nader A. Golestaneh
9
<PAGE> 12
The following tables set forth information with respect to the compensation
of the Named Executive Officers earned during fiscal 1996, 1995 and 1994:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- ------------
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1)(2) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------------- ----------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Williams 1996 396,128 - - 150,000(3) 24,992(4)
President and 1995 377,708 378,000 - 150,000 21,468(4)
Chief Executive Officer 1994 317,431 435,000 - 150,000 15,875(4)
Amin J. Khoury 1996 396,128 - - 200,000(3) -
Chairman of the Board 1995 377,708 189,000 - 200,000 -
1994 330,814 530,000 - 100,000 -
David N. Terhune(5) 1996 241,667 - - 160,000(3) -
Executive Vice President 1995 191,667 200,000 - 160,000 66,842(6)
and Chief Operating Officer 1994 116,667 145,000 - 65,000 -
Mark S. Abrahams(7) 1996 178,143 78,000 - 20,000(3) -
Vice President and General 1995 161,831 128,000 - 20,000 60,375(8)
Manager, Specialty Nets & 1994 128,750 66,000 - 30,000 60,300(8)
Profiles Division
Anthony J. Allott(9) 1996 127,994 - - 15,000(3) 40,000(10)
Vice President, Treasurer and 1995 106,058 69,000 - 15,000 45,026(10)
Chief Financial Officer 1994 11,538 30,000 - 15,000 -
<FN>
- ----------
(1) Includes amounts earned but deferred by the executive officer at the
election of those officers pursuant to the Company's 401(k) plan or
Executive Deferred Compensation Plan.
(2) Includes compensation earned as a Director of the Company in the cases of
Mr. Williams and Mr. Khoury.
(3) Represents a repricing in fiscal 1996 of options originally granted in
fiscal 1995; no additional options were granted to Named Executive Officers
in fiscal 1996. See "Report on Repricing of Options" on page 14.
(4) Includes life and disability insurance premiums paid by the Company
pursuant to the terms of the employment agreement between the Company and
Mr. Williams.
(5) Mr. Terhune was hired by the Company on February 1, 1994.
(6) Includes moving and relocation expenses paid to Mr. Terhune.
(7) Mr. Abrahams was hired by the Company on November 22, 1993.
(8) Includes moving and relocation expenses paid to Mr. Abrahams.
(9) Mr. Allott was hired by the Company on August 15, 1994.
(10) Represents amounts received in connection with Mr. Allott's relocation.
</TABLE>
10
<PAGE> 13
<TABLE>
OPTION GRANTS(1) IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM($)(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED(#) FISCAL YEAR(2) PRICE($/SH) DATE 5% 10%
- ---- ---------- -------------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Williams 150,000(4) 19.67% $8.25 03/23/05 $778,252 $1,972,253
Amin J. Khoury 50,000 6.56% $8.25 10/26/04 $259,417 $657,417
150,000(4) 19.67% $8.25 03/23/05 $778,252 $1,972,253
David N. Terhune 10,000 1.31% $8.25 10/26/04 $51,883 $131,483
150,000(4) 19.67% $8.25 03/23/05 $778,252 $1,972,253
Mark S. Abrahams 20,000 2.62% $8.25 05/17/05 $103,767 $262,967
Anthony J. Allott 15,000 1.97% $8.25 05/17/05 $77,825 $197,225
<FN>
- ----------
(1) All options referenced in this table represent options originally granted
in fiscal 1995 and repriced in fiscal 1996. Applicable regulations of the
U.S. Securities and Exchange Commission require that repriced options be
listed as option grants for reporting purposes herein. The company did not
grant any additional options to the Named Executive Officers set forth
above. See "Report on Repricing of Options" on page 14.
(2) For purposes of this calculation, all previously granted employee stock
options repriced during the fiscal year (covering 762,500 shares of Common
Stock, of which 166,500 were originally granted earlier in the fiscal year)
are treated as new grants (see footnote 1, above). Unless otherwise noted,
all options set forth in the table become exercisable in four equal annual
increments commencing on the first anniversary of the date of grant, and
expire on the tenth anniversary of the date of original grant.
(3) These potential realizable values are based on assumed rates of
appreciation required by applicable regulations of the U.S. Securities and
Exchange Commission. The potential realizable values stated are not
discounted to their present value.
(4) The options become exercisable in full on the earlier of: (i) January 1,
1998, (ii) the sale by the Company of all or substantially all of its
assets or properties, or (iii) the sale by all of the stockholders of the
Company of all of their shares of capital stock of the Company.
</TABLE>
11
<PAGE> 14
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED OPTIONS
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Thomas E. Williams - - 175,000/225,000 $818,375/$556,125
Amin J. Khoury 159,048 1,142,919 87,500/237,500 $245,312/$382,812
David N. Terhune - - 35,000/190,000 $91,874/$304,999
Mark S. Abrahams - - 20,000/30,000 $76,250/$90,000
Anthony J. Allott - - 11,250/18,750 $15,468/$25,780
<FN>
- ----------
(1) The closing price for the Company's Common Stock on the NASDAQ National
Market System on September 30, 1996, the last trading day of the fiscal
year, was $9.50 Per share.
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company receive compensation of $2,500 per quarter, and
Directors who are also committee members receive an additional $1,250 per
quarter for each committee on which they serve. Directors who are not officers
of the Company (the "Eligible Directors") also receive a $1,000 attendance fee
for each meeting which they attend. In addition, Eligible Directors are entitled
to participate in the Company's 1991 Stock Option Plan for Directors (the
"Directors' Plan"). Under the Directors' Plan, each Eligible Director is awarded
an option covering 5,000 shares of Common Stock on June 30 of each year the plan
is in effect, provided he or she is an Eligible Director on that date. In
addition, each Eligible Director, excluding those individuals who are currently
directors of the Company, is awarded an initial grant covering 25,000 of Common
Stock as of the date of his or her first election as a director.
The exercise price of all options granted under the Directors' Plan may not
be less than 100% of the fair market value of the Common Stock on the date of
the grant. Options expire 10 years after the date of grant and become
exercisable, subject to certain conditions which accelerate vesting, as follows:
25% on the first anniversary of the date of grant and an additional 25% each
calendar year thereafter. On June 30, 1996, each Eligible Director was awarded
an option to purchase 5,000 shares of Common Stock at a price of $12.75 per
share.
12
<PAGE> 15
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Thomas E. Williams. Mr. Williams and the Company have entered into an
employment agreement pursuant to which he currently serves as President and
Chief Executive Officer of the Company. The agreement became effective as of
April 26, 1994 and extends through April 25, 1999. Under the employment
agreement, Mr. Williams receives an annual base salary, and any bonus payable to
Mr. Williams is at the discretion of the Company. If the Company terminates Mr.
Williams' employment without cause (as defined in the agreement) after April 26,
1999, the Company will continue to pay his salary for the shorter of two years
or until he commences full-time comparable employment with another employer. In
the event of a change of control of the Company, the employment agreement with
Mr. Williams will automatically renew for a period equal to its initial term of
five (5) years.
Amin J. Khoury. Mr. Khoury and the Company have entered into an employment
agreement pursuant to which he currently serves as Chairman of the Board of
Directors of the Company. The agreement became effective as of April 26, 1994
and extends through April 25, 1999. Under the employment agreement, Mr. Khoury
receives an annual base salary, and any bonus payable to Mr. Khoury is at the
discretion of the Company. If the Company terminates Mr. Khoury's employment
without cause (as defined in the agreement) after April 26, 1999, the Company
will continue to pay his salary for the shorter of two years or until he
commences other comparable employment. Under the terms of his current agreement,
if Mr. Khoury dies, his designee or estate is entitled to receive his base
salary for the remainder of the term of the employment agreement. If he becomes
disabled, he is entitled to receive his base salary, plus all benefits owing
under the agreement, for the remainder of its term. In the event of a change of
control of the Company, the employment agreement with Mr. Khoury will
automatically renew for a period equal to its initial term of five (5) years.
David N. Terhune. Mr. Terhune and the Company have entered into an
employment agreement pursuant to which he currently serves as Executive Vice
President and Chief Operating Officer of the Company. The agreement became
effective as of February 1, 1996 and extends through January 31, 1999. Under the
agreement, Mr. Terhune receives an annual base salary, and any bonus payable to
Mr. Terhune is at the discretion of the Company. If the Company terminates Mr.
Terhune's employment without cause (as defined in the agreement) after July 31,
1997, the Company will continue to pay his base salary for the shorter of
eighteen months or until he commences full time employment with another
employer. In the event of a change of control of the Company, the employment
agreement with Mr. Terhune will automatically renew for a period equal to its
initial term.
Mark S. Abrahams. Mr. Abrahams and the Company have entered into an
employment agreement pursuant to which he currently serves as Vice President and
General Manager, Specialty Nets & Profiles Division. The agreement extends
through June 1, 1999. Under the agreement, Mr. Abrahams receives an annual base
salary, and any bonus payable to Mr. Abrahams is at the discretion of the
Company. If the Company terminates Mr. Abrahams' employment without cause (as
defined in the agreement) after June 1, 1998, the Company will continue to pay
his base salary for the shorter of one year or until he commences full time
employment with another employer.
13
<PAGE> 16
Anthony J. Allott. Mr. Allott and the Company have entered into an
agreement pursuant to which, in the event that the Company terminates Mr.
Allott's employment without cause (as defined in the agreement), the Company
will continue to pay his base salary for the shorter of one year or until he
commences comparable full time employment with another employer.
REPORT ON REPRICING OF OPTIONS
The Stock Option and Compensation Committee makes the following report on
the repricing of options in fiscal 1996:
On September 23, 1996, the Stock Option and Compensation Committee repriced
certain outstanding options of the Company with exercise prices ranging from
$10.875 to $15.50 per share so that such repriced options now have an exercise
price of $8.25, the closing market price of the Company's Common Stock on
September 23, 1996. The repricing affected stock options held by forty-nine (49)
individuals in managerial positions throughout the Company. The Committee
believes that, particularly in view of the fact that no additional options were
granted to Named Executive Officers and only one such officer received a cash
bonus with respect to the most recently completed fiscal year, executives and
other employees of the Company to whom stock options have been granted have a
greater incentive to perform to their maximum potential and to continue their
service with the Company when they perceive their options as having, or being
close to having, an immediate and realizable value.
With respect to the above matter, the Stock Option and Compensation
Committee submits this report.
STOCK OPTION AND COMPENSATION COMMITTEE
Mark M. Harmeling
Robert H. Beeby
14
<PAGE> 17
<TABLE>
TEN-YEAR OPTION REPRICINGS
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
SECURITIES OF STOCK AT PRICE AT OPTION TERM
UNDERLYING TIME OF TIME OF REMAINING AT
OPTIONS REPRICING OR REPRICING OR NEW DATE OF
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED (#) ($) ($) PRICE ($) AMENDMENT
---- ---- ----------- ------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Amin J. Khoury.............. 09/23/96 50,000 8.25 10.875 8.25 8 years, 1 mos.
Chairman 09/23/96 150,000 8.25 13.375 8.25 8 years, 6 mos.
Thomas E. Williams.......... 09/23/96 150,000 8.25 13.375 8.25 8 years, 6. mos.
President and Chief
Executive Officer
David N. Terhune............ 09/23/96 10,000 8.25 10.875 8.25 8 years, 1 mos.
Executive Vice President 09/23/96 150,000 8.25 13.375 8.25 8 years, 6 mos.
and Chief Operating
Officer
Anthony J. Allott........... 09/23/96 15,000 8.25 15.50 8.25 8 years, 6 mos.
Vice President and
Chief Financial Officer
Mark S. Abrahams............ 09/23/96 20,000 8.25 15.50 8.25 8 years, 4 mos.
Vice President and
General Manager
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a Supply Agreement dated April 17, 1990 with
BE Aerospace, Inc., a Delaware corporation ("BE Aerospace"), pursuant to which
the Company has agreed to sell to BE Aerospace its requirements of certain
injection-molded plastic components through March 31, 1998. The price to be paid
to the Company by BE Aerospace for products purchased under the Supply Agreement
is an amount which results in a 33 1/3% gross margin to the Company, after
including in the Company's standard cost for such products all direct and
indirect costs of labor, materials, equipment and overhead. Purchases by BE
Aerospace and its affiliates under the Supply Agreement during the fiscal year
ended September 30, 1996 were approximately $1,649,000. Amin J. Khoury is a
director and officer of BE Aerospace. Messrs. Richard G. Hamermesh and Hansjorg
Wyss are also directors of BE Aerospace.
15
<PAGE> 18
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its Common Stock with the cumulative
total return on the Nasdaq Stock Market - US Index, the Dow Jones Industrial
Technology Index and the Standard & Poors Manufacturing (Diversified Industry)
Index from September 30, 1991, through September 30, 1996, the last trading day
of fiscal 1996. The cumulative total shareholder return is based on $100
invested in Common Stock of the Company and in the stocks comprising the
respective indices on September 30, 1991 (including reinvestment of dividends).
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG APPLIED EXTRUSION TECHNOLOGIES, INC., THE NASDAQ STOCK MARKET-US INDEX,
THE DOW JONES INDUSTRIAL TECHNOLOGY INDEX
AND THE S&P MANUFACTURING (DIVERSIFIED) INDEX
<CAPTION>
9/91 9/92 9/93 9/94 9/95 9/96
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Applied Extrusion Technologies, Inc. 100 69 62 118 188 94
NASDAQ Stock Market -- U.S. 100 112 147 148 204 237
Dow Jones Industrial Technology 100 103 101 113 142 152
S&P Manufacturing (Diversified) 100 105 125 138 184 243
* $100 Invested on 9/30/91 in stock or index -- including Reinvestment of
Dividends. Fiscal year ending September 30.
</TABLE>
The stock prices on the Performance Graph are not necessarily indicative of
future stock price performance. Each of the Report of the Compensation Committee
of the Board of Directors and the Performance Graph shall not be deemed
incorporated by reference by any general statement incorporating this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
16
<PAGE> 19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission ("SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with by those parties,
except that (i) Mr Abrahams reported one month late on Form 4 his May 1996
acquisition of Common Stock through the Company's Executive Deferred
Compensation Plan; and (ii) each of Messrs. Abrahams and Allott reported one
month late on Forms 4 their February 1996 acquisition of Common Stock through
Executive Deferred Compensation Plan, and five months late on Forms 5 their May
1995 stock option grants.
In making the above statements, the Company has relied on the written
representations of its directors and officers and copies of the reports that
have been filed with the Commission.
----------
AUDIT MATTERS
Deloitte & Touche has been selected to audit the financial statements of
the Company for the fiscal year ending September 30, 1997, and to report the
results of their examination.
A representative of Deloitte & Touche is expected to be present at the
Meeting and will be afforded the opportunity to make a statement if he or she
desires to do so and to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders submitted for consideration at the Annual Meeting
of Stockholders in 1998 must be received by the Company no later than August 1,
1997.
OTHER BUSINESS
The Board of Directors knows of no business that will come before the
meeting for action except as described in the accompanying Notice of Meeting.
However, as to any such business, the persons designated as proxies will have
discretionary authority to act in their best judgment.
17
<PAGE> 20
FORM 10-K
A COPY OF AET'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE BY WRITING TO: APPLIED EXTRUSION
TECHNOLOGIES, INC., ATTN: GERALD M. HAINES, II, SECRETARY, 3 CENTENNIAL DRIVE,
PEABODY, MASSACHUSETTS 01960.
18
<PAGE> 21
DETACH HERE EXT F
ANNUAL MEETING OF APPLIED EXTRUSION TECHNOLOGIES, INC.
JANUARY 29, 1997
P
R The undersigned hereby constitutes and appoints Messrs. Anthony J.
O Allott and Gerald M. Haines, II, or either of them, with power of
X substitution to each, proxies to vote and act at the Annual Meeting of
Y Stockholders of Applied Extrusion Technologies, Inc. to be held on January
29, 1997 at the Conference Center, 36th Floor, Ropes & Gray, One
International Place, Boston, Massachusetts 02110 at 10:30 a.m., and at any
adjournments thereof, upon and with respect to the number of shares of
Common Stock, par value $.01 per share, that the undersigned would be
entitled to vote if personally present. The undersigned instructs such
proxies, or their substitutes, to vote in such manner as they may determine
on any matters which may come before the meeting, all as indicated in the
accompanying Notice of Meeting and Proxy Statement, receipt of which is
acknowledged, and to vote on the following as specified by the undersigned.
All proxies heretofore given by the undersigned in respect of said meeting
are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless
otherwise specified in the boxes provided on the reverse side hereof, the
proxy will be voted IN FAVOR of all nominees for director, and in the
discretion of the named proxies as to any other matter that may come before
this meeting or any adjournments thereof.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE> 22
APPLIED EXTRUSION TECHNOLOGIES, INC.
(NASDAQ NMS - AETC)
DETACH HERE EXT F
[X] Please mark
votes as in
this example.
PLEASE DO NOT FOLD THIS PROXY.
1. Election of Directors
The undersigned hereby GRANTS authority to elect the following nominees:
Nader A. Golastanch and Paul W. Marshall
FOR BOTH WITHHELD FROM
NOMINEES BOTH NOMINEES
[ ] [ ]
[ ]____________________________________
For both nominees except as noted above
MARK HERE
FOR ADDRESS
CHANGE AND [ ]
NOTE AT LEFT
Please sign exactly as name(s) appear
hereon. When signing as attorney,
executor, administrator, trustee, or
guardian, please sign your full title as
such. Each joint owner should sign.
Signature: Date: Signature: Date:
----------------- -------- ---------------- --------
