<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (THE "ACT")
APPLIED EXTRUSION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NO. 0-19188
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
DELAWARE 51-0295865
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3 CENTENNIAL DRIVE, PEABODY, MASSACHUSETTS 01960
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 538-1500
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: COMMON STOCK ($.01 PAR VALUE)
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K [ ].
The aggregate market value of the Registrant's voting stock held by
non-affiliates was approximately $118,037,852 on December 9, 1996, based on the
closing sales price of the Registrant's common stock, $.01 par value (the
"Common Stock"), as reported on the Nasdaq National Market System as of such
date.
The number of shares of the Registrant's Common Stock outstanding as of December
9, 1996, was 10,264,161 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference:
Part III Proxy Statement to be filed with the Securities and Exchange Commission
in connection with the 1996 Annual Meeting of Stockholders.
<PAGE> 2
FORM 10-K INDEX
PART I
Item 1. Business.......................................................... 1
Item 2. Properties........................................................ 5
Item 3. Legal Proceedings................................................. 5
Item 4. Submission of Matters to a Vote of Security Holders............... 5
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters ........................................................ 5
Item 6. Selected Financial Data........................................... 6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 7-10
Item 8. Financial Statements and Supplementary Data...................... 10
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 10
PART III
Item 10. Directors and Executive Officers of the Registrant............... 11-13
Item 11. Executive Compensation........................................... 13
Item 12. Security Ownership of Certain Beneficial Owners and Management... 13
Item 13. Certain Relationships and Related Transactions................... 13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K............................................................ 14-15
(i)
<PAGE> 3
PART 1
ITEM 1. BUSINESS
GENERAL
Applied Extrusion Technologies, Inc. ("AET" or the "Company") is a leading
developer and manufacturer of highly specialized, multilayer oriented
polypropylene ("OPP") films for use in consumer product labeling and packaging
applications. The Company believes that OPP films have emerged as the premier
specialty films, particularly in higher margin, niche product applications, due
to technological advantages that satisfy customer demand for enhanced
performance attributes and lower costs. End users of AET's films are consumer
product companies whose labels and packages require special attributes such as
vivid graphics, exceptional clarity or oxygen and moisture barriers to preserve
freshness. Based upon internal market data, the Company believes it has
significant market shares of the plastic soft drink bottle label, snack food and
candy packaging and overwrap markets. Labeling applications for AET's OPP films
include labels for Pepsi-Cola [Registered Trademark] and Coca-Cola [Registered
Trademark] plastic bottles, Nestles [Registered Trademark] Sweet Success
[Trademark], General Foods Tang [Trademark] and aerosol cans for products such
as S.C. Johnson Wax Glade [Trademark] Air Freshener. Packaging applications for
AET's OPP films include packaging for Frito-Lay [Registered Trademark] snacks
and M&M/Mars [Registered Trademark] and Hershey [Registered Trademark] candies.
AET is the second largest manufacturer of OPP films in North America, and one of
only two broad line suppliers of such products. Approximately 80% of the
Company's sales are generated by the sale of its OPP film products. The Company
also develops, manufactures and sells oriented, apertured films, or nets, for
health care and other markets. Such products are used in finger bandages,
surgical dressings, tracheotomy pads and other controlled porosity applications.
Certain of the end-use markets for the Company's OPP films are seasonal. For
example, demand in the snack food, soft drink and candy markets is generally
higher in the spring and summer. As a result, sales and net income are generally
higher in the spring and summer.
BUSINESS STRATEGY
The Company's business strategy is to offer a broad line of high-quality,
specialized products for niche consumer product labeling and packaging
applications while remaining one of the lowest cost producers of such products.
Elements of the Company's business strategy include: (i) expanding production
capacity, which will enable the Company to satisfy its customers' growing
demands while at the same time enabling the Company to decrease overall
production costs; (ii) developing additional innovative, high value-added
products and continuing to enhance its existing products; and (iii) expand sales
reach to new markets and geographic regions. Additionally, the Company
continuously evaluates opportunities to make strategic acquisitions in the
specialty film industry.
During fiscal 1996, AET completed one of two new OPP expansion projects which
will position the Company as the largest OPP films supplier in North America.
The Company has embarked on a focused strategic initiative to supply bottle
label, tobacco overwrap and other value-added flexible packaging films to
European converters and end users.
INDUSTRY OVERVIEW
The Company competes principally in the specialty film segment of the
approximately $16 billion flexible packaging industry. In addition to OPP,
specialty films are manufactured from polyester, cellophane, nylon, polystyrene
and certain polyolefin compounds. The overall North American specialty film
segment of the flexible packaging industry approximated $3.0 billion in
shipments in calendar year 1995, of which the largest single component, OPP
films, accounted for an estimated $800 million of shipments.
North American demand for OPP films used in specialty applications grew at an
average annual rate of approximately 6% from 1989 through 1996. The Company
believes that this growth is driven by a number of factors, including: (i) the
shift from glass to plastic beverage containers that use OPP film labels; (ii)
the shift from rigid containers to flexible packaging; (iii) the growth in the
snack food and confectionery industries; and (iv) the substitution of
specialized OPP films with greater barrier and graphics properties for
traditional consumer product labels and packaging.
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COMPETITIVE STRENGTHS
AET is currently the second largest manufacturer of OPP films in North America
with an approximate 26% market share based on volume. AET focuses on serving
niche consumer product markets in which competition is largely based on superior
product attributes and performance. The Company believes its strong competitive
position is attributable to a number of factors, including its technological
leadership, modern and efficient manufacturing capability, broad product lines,
a technically skilled sales force and an experienced management team.
PRODUCTS
The Company's primary OPP packaging film products can be classified into three
broad categories: barrier, clear/slip and opaque films.
Barrier OPP films serve as the inner layer of flexible packaging laminates and
provide enhanced protection from moisture, light and gas to preserve the
freshness and flavor of a wide range of food, tobacco and other products. The
Company offers metallized, polyvinyliden chloride ("saran") coated and polymer
modified barrier OPP films as well as clear barrier overwraps. Metallized
barrier film provides a high performance, visible and ultraviolet light barrier
for the packaging of snacks and confections; saran coated barrier films offer an
outstanding oxygen and moisture barrier for the packaging of cheese, nuts,
coffee and tea, in addition to snacks and confections; and polymer modified
barrier films are used as overwraps for tobacco products, baked goods and other
products due to their ease of machinability and excellent clarity.
Clear/Slip OPP films provide the printable outer layer of the flexible package
and are generally bonded with barrier film to form a complete packaging
application. Slip films may be single or multilayer and heat sealable or
nonsealable, and offer a low coefficient of friction for improved machinability.
Principal applications include snack, confection, condiment and baked goods
packaging.
Opaque OPP films provide a barrier to visible and ultraviolet light or a print
surface for superior graphics and are used primarily in bottle labeling and
confection and snack food packaging. The Company's opaque OPP film products are
used as the label for approximately 85% of the plastic soda bottles sold in the
United States and Canada. For snack food packaging, AET manufactures and sells
metallized, sealable, composite and saran coated versions of opaque OPP film.
End users in confectionery markets often choose opaque packaging for marketing
and manufacturing purposes. The Company's opaque OPP films permit rapid machine
speeds and provide superior printability.
The Company also manufactures other OPP films that are targeted at certain
specialized markets, such as its shrink label films. These films shrink to the
contour of the container, permit superior graphics and offer maximum labeling
flexibility for rigid contoured containers, such as beverage and aerosol cans
and glass and polyester bottles, which increases the marketing appeal of such
containers and eliminates the need for printing directly on the container.
In addition to OPP films, AET develops, manufactures and sells a broad range of
oriented apertured films, or "nets," for a number of markets, including health
care. AET's Delnet product is used widely in health care markets as a porous
facing material for bandages. By permitting one-way fluid flow and two-way
airflow without adhering to the wound, Delnet material enhances the healing
process. In the United States, most finger bandages, including Johnson & Johnson
Band-Aids [Trademark], use Delnet facing.
MARKETING AND CUSTOMERS
The Company maintains a sales and marketing force of highly skilled
professionals, including individuals with considerable technical expertise whose
principal role is to provide customer support. AET's marketing activities have
historically been focused primarily in North America. During 1996, AET announced
its intent to enter into the European OPP films market as part of its long-term
globalization strategy. AET has expanded its sales and marketing organization to
include sales directors in Europe and Latin America and the Asia Pacific region.
AET's OPP film products are sold primarily through its internal sales
organization whereby employees interface with customers and the Company's
research and development technicians to create new applications for OPP films.
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<PAGE> 5
The Company's OPP film sales are predominantly to converters, who print and
laminate films before selling to end users, including one such converter that
accounted for approximately 16% and 19% of sales in fiscal 1996 and 1995,
respectively. The Company considers it an important part of its marketing effort
to maintain direct relations with major end users, who generally provide
detailed specifications to converters as to the performance characteristics of
the film to be used in their labeling and packaging materials. The Company also
sells OPP films directly to end users.
MANUFACTURING, TECHNOLOGY, RESEARCH AND DEVELOPMENT
OPP films are manufactured and processed through two techniques, the tenter and
the tubular processes. In the tenter process, molten resin is extruded from a
flat die into a thick film and chilled, after which it is stretched lengthwise
in the machine direction, and heated and stretched widthwise. This dual
stretching process is known as "biaxial orientation." In addition to a number of
smaller tenter lines, the Company currently operates two eight-meter tenter
production lines, including its newest line which was completed in 1996. The
Company has initiated construction of the world's first ten-meter tenter line,
which is expected to be operational in mid fiscal 1998, and is designed to
produce an estimated 50 million pounds of OPP films annually. These two new
lines, which the Company believes will be among the most efficient in the
industry, will comprise a 60 percent increase in AET's capacity over a two year
period.
In the tubular process, molten resin is extruded from a circular die to form a
thick tube which is stretched lengthwise and widthwise with air pressure and
gravity at controlled temperatures. Tubular processed films offer "balanced
biaxial orientation," resulting in improved stability and a more uniform
thickness in thinner films, while the tenter process provides better operating
economies with thicker films. AET believes that its tubular manufacturing
capacity enables it to "downgauge" or manufacture thinner films that preserve
the barrier protection, machinability and other performance characteristics of
thicker film while using less material, thereby improving performance relative
to cost. AET is the only North American OPP film producer that utilizes both the
tubular and tenter manufacturing processes.
Delnet and other apertured film products are produced by a proprietary process
similar to the tenter process, in which film is forced through high-precision
embossing rollers prior to being biaxially oriented.
The Company conducts product and process research and development through a
staff of approximately 65 chemists, engineers and technicians. Consistent with
AET's strategy to fill the Company's new manufacturing capacity with high-end
films, the research and development group has introduced twelve new or enhanced
products during fiscal 1996 responding to evolving customer and end user
requirements for attributes such as barrier, clarity and machinability. During
fiscal 1996 and 1995, the Company spent approximately $7.4 million and $6.4
million, respectively, on research and development.
POLYPROPYLENE AND OTHER RAW MATERIALS
The Company's principal products are manufactured primarily from polypropylene
resin. The relatively low density and low cost of polypropylene resins allow OPP
films to provide a cost-efficient material for applications such as packaging.
In addition, polypropylene possesses superior clarity and natural barrier
qualities and can be modified to add other qualities such as metallization,
which make it a higher performance and more cost-efficient material than other
plastic resins. The majority of the Company's resin requirements is obtained
from four suppliers; however, these materials are generally available from a
large number of suppliers in sufficient quantities to meet ongoing requirements.
The Company's other raw materials, which are used in the manufacture of its
netting and other products, are generally available from a large number of
suppliers in sufficient quantities to meet current requirements. The Company has
historically not experienced any significant disruptions in supply as a result
of shortages in raw materials.
Polypropylene resin represents a significant percentage of the Company's cost of
sales and these resin costs have historically fluctuated. The cost of these
resins increased 70% from September 1994 through June 1995. Late in the fourth
quarter, these resin costs began to decrease and continued to decline into the
first quarter of fiscal 1996. Resin costs stabilized during the second fiscal
quarter of 1996 and began to rise at a slow rate for the remainder of fiscal
1996. The prices of OPP films have tended to rise in periods when resin costs
increase and, conversely, have tended to decrease in times of declining resin
costs. However, as evidenced in fiscal 1996, there is not a direct correlation
between resin cost fluctuations and OPP films pricing, and there can be no
assurance that future market conditions will ever support a direct correlation.
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<PAGE> 6
COMPETITION
The Company competes with manufacturers of OPP and other specialty films, such
as cellophane and polyester, as well as with producers of traditional packaging
materials, such as paper and foil, and rigid packaging materials, such as glass,
metal and other containers. The flexible packaging industry is very competitive
and many of AET's competitors have significantly greater financial,
technological, manufacturing and marketing resources than the Company. The
Company believes that Mobil Corporation, which is the largest OPP film
manufacturer in North America, is the only other broadline OPP packaging film
supplier based in North America. There are a number of other North American
manufacturers of OPP film; however, only Mobil Corporation and AET have a
greater than 20% market share. Competition in OPP markets is based primarily on
product performance characteristics, machinability, quality, reliability and
price.
With respect to its netting products, the Company competes with the diverse
markets these products serve primarily on the basis of quality, performance and
price. Delnet products compete in certain markets with woven, nonwoven and knit
fabrics, as well as other plastic netting products. The Company generally
competes with these other products by presenting its Delnet products as
technologically superior alternatives.
The Company believes that there are significant factors which provide the
Company with a competitive advantage. These factors relate to the markets into
which the Company sells certain high margin, value-added products, and include:
(i) the advanced proprietary manufacturing processes required to produce a
varied range of such products; (ii) proprietary OPP film product formulations;
(iii) the research and development expertise required to sustain product
innovation; and (iv) the cost to customers of switching product manufacturers.
There can be no assurance, however, that the markets into which the Company
sells its products will not attract additional competitors, including existing
film converters, that could have significantly greater financial, technological,
manufacturing and marketing resources than the Company.
PATENTS AND TRADEMARKS
The Company currently holds approximately 120 active patents and applications
covering certain of its OPP films and netting products and methods of making
them, of which 90 relate to international patents and applications. The Company
also has, or it is in the process of obtaining, federal trademark registration
related to a number of its products. From time to time the Company may engage
in the process of obtaining patents and trademarks covering various other
products. The termination, expiration or infringement of one or more patents or
trademarks would not have a material adverse effect on the business of the
Company.
GOVERNMENT REGULATION
Due to the nature of the Company's business, its operations are subject to a
variety of federal, state and local laws, regulations and licensing
requirements. The Company believes that its operations are in substantial
compliance with those laws, regulations and requirements. Compliance with
federal, state and local requirements relating to the protection of the
environment has not had and is not expected to have a material effect on the
capital expenditures, financial condition, results of operations or competitive
position of the Company.
EMPLOYEES
AET employs approximately 1,270 full-time employees. The United Paper Workers
International Union, Local 884, represents approximately 230 production and
maintenance employees at the Company's Covington, Virginia facility under a
collective bargaining agreement that expires in June, 2000. The Company
considers all employee relations to be satisfactory.
Information with respect to the Executive Officers of the Company may be found
in Item 10 of this report.
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ITEM 2. PROPERTIES
<TABLE>
The following table provides information with respect to AET's facilities:
<CAPTION>
Location Square Feet Owned/Leased
-------- ----------- ------------
<S> <C> <C> <C>
Packaging Films Terre Haute, Indiana 821,000 owned
Covington, Virginia 517,000 owned
Varennes, Quebec, Canada 108,000 owned
Wilmington, Delaware:
Research Center 21,000 leased
Administration 18,000 leased
Specialty Nets & Profiles Salem, Massachusetts 170,000 owned
Orleans, Massachusetts 30,000 leased
Middletown, Delaware 145,000 owned
Corporate Peabody, Massachusetts 7,600 leased
</TABLE>
All of the Company's owned real property secures the Company's obligations under
its $81,600,000 bank credit agreement. The Company has initiated design and
construction of its second new production line at its Terre Haute, Indiana
facility, which is expected to require approximately 91,000 additional square
feet. The Company has entered into a lease agreement effective April 1997 for
approximately 50,000 square feet of office/research space in the Wilmington,
Delaware area to consolidate its existing Wilmington space. Exclusive of the
above described additions, the Company believes that its facilities are suitable
for its present intended purposes and adequate for the Company's level of
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which have arisen in the
ordinary course of its business and have not been fully adjudicated. These
actions, when ultimately concluded and determined, will not, in the opinion of
management, have a material adverse effect upon the financial position and
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
AET did not submit any matters during the fourth quarter of the fiscal year
covered by this report to a vote of the security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
<TABLE>
The Company's Common Stock has been quoted on the Nasdaq National Market System
since June 6, 1991 under the symbol "AETC." Before June 6, 1991, no established
public trading market existed for the Company's Common Stock. Below is the range
of high and low sales information for the Common Stock for the two most recently
completed fiscal years, as quoted on the Nasdaq National Market System:
<CAPTION>
Fiscal Year 1995 Fiscal Year 1996
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Quarter ended December 31 12 3/8 9 18 3/8 11 1/8
Quarter ended March 31 14 1/8 9 7/8 13 7/8 10 1/2
Quarter ended June 30 17 5/8 12 5/8 14 5/8 10 5/8
Quarter ended September 30 20 13 7/8 12 3/4 8
</TABLE>
The Company has not paid any cash dividends on its Common Stock, and the
Company's Board of Directors intends, for the foreseeable future, to retain any
earnings to finance the future growth of the Company.
As of December 9, 1996, there were approximately 169 holders of record and more
than 2,500 beneficial holders of the Company's Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
The following selected financial data of the Company is qualified by reference to, and should be read
in conjunction with, the consolidated financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of Operations" included
elsewhere in this report. On April 7, 1994 the Company purchased the packaging films business of
Hercules, Incorporated. The following information is in thousands, except per share amounts:
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
INCOME STATEMENT DATA:
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales $234,490 $233,935 $131,594 $41,268 $34,823
Cost of sales 181,899 168,664 97,128 30,295 25,733
-------- -------- -------- ------- -------
Gross profit 52,591 65,271 34,466 10,973 9,090
Selling, general and administrative expenses 20,144 20,219 15,415 8,334 7,472
Research and development expenses 7,414 6,352 3,242 655 535
Write-off of intangible assets 3,305
-------- -------- -------- ------- -------
Operating profit 25,033 38,700 12,504 1,984 1,083
Interest, net 13,927 18,609 10,123 591 354
Litigation settlement 1,400
-------- -------- -------- ------- -------
Income before income taxes and
extraordinary items 11,106 18,691 2,381 1,393 729
Provision for income tax 4,442 7,476 954 558 279
-------- -------- -------- ------- -------
Income before extraordinary items 6,664 11,215 1,427 835 450
Extraordinary items, net of taxes 113
-------- -------- -------- ------- -------
Net income $ 6,664 $ 11,215 $ 1,427 $ 835 $ 563
======== ======== ======== ======= =======
EARNINGS PER SHARE:
Primary
Income before extraordinary items $ .61 $ 1.45 $ .24 $ .14 $ .07
Extraordinary items, net of taxes .02
-------- -------- -------- ------- -------
Net income .61 1.45 .24 .14 .09
Fully diluted .61 1.39 .21 .14 .09
BALANCE SHEET DATA:
Working capital $ 35,911 $ 55,441 $ 32,187 $ 8,401 $ 6,529
Total assets 331,704 318,519 263,977 50,233 50,631
Current maturities of long-term debt 4,000
Long-term debt 165,500 156,500 175,500 6,500 6,500
Stockholders' equity 108,335 99,058 36,519 34,332 33,375
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
AET is a leading developer and manufacturer of highly specialized plastic films
used in consumer product labeling, flexible packaging, health care and other
applications. AET was organized in 1986 to acquire, own and operate certain
assets in the plastics products industry. The Company's apertured nets and
profiles business was the result of two acquisitions, one in 1986 and one in
1990. This business develops, manufactures and sells oriented apertured films,
or nets, as well as non-net thermoplastic products for a number of markets. In
April of 1994, the Company acquired the OPP films business from Hercules,
Incorporated (the "Acquisition"). The Company's capital structure was
significantly changed as a result of the indebtedness incurred related to the
Acquisition and by a secondary equity offering completed in August 1995.
Certain of the end use markets for the Company's OPP films are seasonal. For
example, demand in the snack food, soft drink and candy markets is generally
higher in the spring and summer. As a result, sales and net income are generally
higher in the spring and summer.
For the purposes of this discussion and analysis, the fiscal years ended
September 30, 1996, 1995, and 1994 are referred to as 1996, 1995, and 1994,
respectively. All amounts indicated are in thousands.
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth, for the periods indicated, the percentages of
the Company's sales represented by certain income and expense items in its
income statements:
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales ............................. 100.0% 100.0% 100.0% 100.0%
Cost of sales ..................... 77.6 72.1 73.8 73.4
Gross profit ...................... 22.4 27.9 26.2 26.6
Selling, general and administrative 8.6 8.6 11.3 18.1
Research and development .......... 3.2 2.7 2.5 1.6
Operating profit .................. 10.7 16.5 9.5 4.8
Interest expense, net ............. 5.9 8.0 7.7 1.4
Net income ........................ 2.8 4.8 1.1 2.0
</TABLE>
FISCAL YEAR 1996 COMPARED TO FISCAL 1995
Sales for 1996 of $234,490 were slightly greater than the 1995 level of
$233,935. While unit volume sales of OPP films increased by 3%, revenues were
flat due to insufficient price realization throughout the industry. This
depressed pricing situation was precipitated by an inventory correction on the
part of customers and end-users of OPP films during the first half of 1996, as
they reduced inventory levels and consequently demand in anticipation of lower
films prices. Demand surged late in the second quarter, and the industry is once
again operating at a very high rate of capacity utilization. Overall demand for
the Company's products remains strong as reflected by continued growth in
labeling and flexible packaging applications for consumer products such as
beverages, salty snacks and confectionery. For 1996, foreign operations
accounted for approximately 10% of sales and approximately 11% of operating
profit.
Gross profit as a percent of sales decreased to 22.4% in 1996 versus 27.9% in
1995 due almost entirely to the previously discussed competitive pricing
situation throughout the industry at a time of rising resin costs. Resin costs
increased 24% from April to September 1996 without improvement in OPP films
selling prices. The new eight-meter line brought on-stream during the third
quarter of fiscal 1996 exceeded all internal production plans and resulted in
reduced production costs in the fourth quarter.
Selling, general and administrative expenses remained flat as a percentage of
sales in 1996 versus 1995. Investments in research and development, however,
were increased another 17% over the prior year and aggregated 3.2% of sales. The
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<PAGE> 10
increased research and development expenditures contributed significantly to
the development of twelve new products or enhancements during 1996. The sales
and marketing organization has been expanded to support the Company's growth in
North America as well as its announced initiatives in Europe, Latin America and
the Pacific Rim. The aforementioned increases in operating expenses were
partially offset by reductions during 1996 in general and administrative
expenses of $1,652, primarily as a result of reduced incentive-related
compensation.
Net interest expense for fiscal 1996 decreased $4,682 as compared to fiscal
1995. This decrease is due to increased capitalized interest on the two new
lines under construction. Capitalized interest during 1996 was $5,106 as
compared to $1,668 in fiscal 1995.
Income taxes of $4,442 for the year ended September 30, 1996 were less than the
comparable 1995 period, due to lower pre-tax earnings. Income tax as a percent
of before-tax earnings remained constant for fiscal 1996. Earnings per share
decreased from 1995 proportionately more than net income due to the 35% increase
in shares outstanding resulting from the secondary stock issuance in 1995.
FISCAL YEAR 1995 COMPARED WITH FISCAL YEAR 1994
Sales for fiscal 1995 of $233,935 exceeded fiscal 1994 by $102,341 due primarily
to the inclusion of the packaging films business for the full twelve month
period in 1995 as compared with six months in 1994. Sales increased 8.4% over
fiscal 1994 on a pro forma basis, and were driven largely by the packaging films
business, which experienced increased volume of approximately 3.1%, coupled with
changes in product mix and increased selling prices due to higher resin costs
passed on to customers. The increase in volume was the result of strong demand
for OPP film products during the year, limited to a certain extent by current
capacity constraints. For fiscal 1995, foreign operations accounted for
approximately 14% of sales and approximately 7% of operating profit.
The Company believes that the strong demand for OPP film products has been
caused by the continued migration from rigid to flexible packaging of various
consumer products, the packaging of soft drinks and certain other liquids in
plastic bottles using OPP film labels as opposed to glass bottles using paper
labels, and the substitution of OPP films for other packaging materials such as
paper or polyester foil because of lower costs or enhanced performance
attributes. The strength of demand during this period can be attributed, in
part, to inventory building by customers. The Company experienced some softening
of this demand at the end of the fourth quarter which management attributes to
inventory level corrections by both our customers and end users of the Company's
films. In times of increasing resin costs, customers will tend to buy ahead; and
when they perceive that costs and prices will decrease they work down their
inventories. Beginning in 1994, the costs of polypropylene resin increased
approximately 70% in twelve months, peaked during the summer of 1995, and
started to decrease in August and September.
Gross profit in fiscal 1995 of $65,271 was $30,805 greater than in fiscal 1994
due to higher sales levels resulting from the Acquisition, as well as
manufacturing cost reductions implemented since the Acquisition. The
manufacturing cost reduction programs initiated immediately after the
Acquisition increased productivity. The single greatest contributor was the
headcount reduction which contributed approximately 2.0 percentage points to the
improved gross margin. This increase in gross margin was partially offset by
product mix and pricing pressures in the fourth quarter resulting in a gross
margin of 27.9% in 1995 versus 26.2% in 1994. For the first nine months of the
year, the Company generally passed on increased raw material costs to customers
in the form of price increases. Gross profits decreased in the fourth quarter as
pricing on certain products was reduced in response to competitive pressures
resulting from a decrease in demand caused by the previously discussed inventory
level corrections.
Operating expenses decreased as a percent of sales to 11.3% in 1995 versus 16.7%
in 1994, inclusive of the non-cash charge included in 1994 as discussed below,
as a result of efficiencies gained from administering a larger organization for
the full year. Selling, general and administrative costs increased $4,804 in
1995 versus 1994, while research and development costs increased $3,110, as a
result of the 27 additional weeks of inclusion of the packaging films business
in 1995 as compared to the prior year. In conjunction with the Acquisition, the
Company reassessed its various product lines in light of the shift in management
focus to the OPP films business and de-emphasized certain of its specialty
molding products and industrial netting operations. Accordingly, the related
assets, which were principally intangible in nature, were written down by
$3,305, or $1,983 after taxes, to reflect their then current value. This
noncash, nonrecurring charge was included in operating expense for fiscal 1994.
In January 1995, the Company agreed to a settlement of its previously disclosed
shareholder litigation. The Company's
-8-
<PAGE> 11
portion of the settlement is shown as a nonoperating expense of $1,400, or $840
on an after-tax basis. While the Company believes the litigation was without
merit, management believes it was in the best interest of the Company to settle
the matter.
Net interest expense increased $8,486 in fiscal 1995 versus 1994. This increase
was primarily the result of approximately $170,000 in additional borrowings
incurred in April 1994 to consummate the Acquisition.
Income tax expense increased in 1995 as a result of higher earnings over 1994.
Income tax expense as a percent of before-tax income remained constant for
fiscal years 1995 and 1994.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
Sales for 1994 of $131,594 were $90,326 greater than in 1993 as a result of the
Acquisition. Sales increased 9% over 1993 after including sales from the
packaging films business of $79,163 on a pro forma basis for the comparable
25-week period in fiscal 1993 and excluding sales from the foamed polyethylene
product line that was sold in July 1993. The pro forma increase in sales was
attributable entirely to sales volume increases driven by the Company's
packaging films business, which experienced an increase in demand shortly after
the Acquisition. The increase in demand principally resulted from the
strengthening economy and favorable changes in the packaging industry, including
a move from glass containers to plastic bottles, which resulted in the
accelerated growth of certain of the Company's film products. For fiscal 1994,
foreign operations accounted for approximately 12% of sales and approximately 9%
of operating profit.
Gross profit of $34,466 for fiscal 1994 was $23,493 more than the previous year
due to the increased sales as a result of the Acquisition. The Company's
manufacturing cost reduction programs increased productivity over 22% during the
last six months of fiscal 1994 when measured in terms of pounds produced per
manufacturing employee. The Company recorded a gross margin in the fourth
quarter of fiscal 1994 of 27.3%, primarily as a result of these cost reduction
programs together with a more favorable product mix. The fourth quarter gross
margin represented an increase as a percent of sales of 2.4 percentage points
over the previous quarter and 2.7 percentage points over the comparable quarter
in 1993.
Operating expenses decreased as a percent of sales from 21.8% in fiscal 1993 to
16.7% in fiscal 1994. Exclusive of the noncash, nonrecurring charge included as
write-off of intangible assets discussed below, operating expenses as a percent
of sales decreased 7.6 percentage points primarily as a result of efficiencies
gained from administering a larger organization. While ongoing operating
expenses as a percent of total sales decreased significantly, selling, general
and administrative expenses and research and development expenses increased
$7,081 and $2,587, respectively, for an aggregate increase of $9,668 over fiscal
1993, and were consistent with the five-fold increase in the sales of the
Company due to the Acquisition. In conjunction with the Acquisition, the Company
reassessed its various product lines in light of the shift in management focus
to the OPP film business and de-emphasized certain of its specialty molding
products and industrial netting operations. Accordingly, the related assets,
which were principally intangible in nature, were written down by $3,305, or
$1,983 after taxes, to reflect their then current value. This noncash,
nonrecurring charge was included in operating expenses in the second quarter of
fiscal 1994 as a write-off of intangible assets.
Net interest expense increased $9,532 in fiscal 1994 when compared with the
prior year. This increase was the result of the approximately $170,000 in
additional debt incurred in April 1994 to consummate the Acquisition as
discussed in the Liquidity and Capital Resources section below.
Income tax expense increased in fiscal 1994 as a result of increased earnings
over 1993. Income tax expense as a percent of pre-tax income remained constant
for fiscal years 1994 and 1993.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities in 1996 provided $13,175 in cash, which was the result of
$25,299 of net income before depreciation and amortization and other non-cash
expenditures less a $12,124 net increase in other working capital items due
primarily to the significant increase in capacity in the year. The net increase
in working capital resulted from a $2,976 increase in inventory, a $1,436
increase in accounts receivable, a $410 increase in prepaid and other charges
as well as decreases in accounts payable and accrued expenses of $6,895.
Additions to property, plant and equipment were $51,573 and
-9-
<PAGE> 12
included expenditures related to the two announced capacity expansions. These
capital expenditures were funded in part by $9,000 of borrowings pursuant to the
Company's bank credit facility with the balance funded by cash equivalents and
investment securities.
In April 1994, the Company entered into a bank credit agreement with a group of
lenders to provide the Company with senior bank financing in an amount up to
$81,600. The Credit Agreement provides for a $25,000 Revolving Term Loan
Facility, a $50,000 Revolving Credit Facility and a $6,600 standby letter of
credit in support of the Company's currently outstanding industrial revenue
bond, each of which has a final maturity in 1999 and is secured by all the
assets of the Company. The Revolving Term Loan Facility requires the Company to
make 19 equal quarterly installments of $1,000, and a final payment of $6,000.
To the extent the Company makes optional payments under this facility, the
Company may reborrow such amounts up to the original scheduled availability. The
Company's available credit at September 30, 1996 under this agreement consisted
of $6,000 on the Revolving Term Facility and $50,000 from the Revolving Credit
Facility.
In addition to the bank credit agreement, the Company has $150,000 in Senior
Notes which were used to finance the Acquisition. The Senior Notes are
unsecured, bear interest at 11.5% payable semiannually and do not require
principal payments until they mature in full in 2002.
The Company is in the process of increasing its production capacity for OPP
films by approximately 90 million pounds with the installation of two new tenter
production lines, one eight meters wide and the other ten meters wide. The
eight-meter line was completed in fiscal 1996 and the ten-meter line is
scheduled to be operational in mid fiscal 1998. The total cost of the second new
line is estimated to be approximately $55,000. As of September 30, 1996 the
Company had funded approximately $9,500 of these costs, had entered into
additional commitments of approximately $9,900 and anticipates approximately
$35,600 of additional expenditures over the next two years. In connection with
certain of these commitments and other capital expenditures, the Company has
entered into foreign exchange contracts with nominal amounts of $2,415 to hedge
purchases denominated in foreign currencies. Gains and losses on these contracts
result from market risk associated with changes in the market values of the
underlying currencies which would affect the capitalized value of the asset. The
Company does not enter into foreign exchange contracts for trading purposes. The
Company believes that available cash and equivalents, cash flow from operations,
availability under the Revolving Credit Facility and availability under the
Revolving Term Loan Facility will provide adequate funds over at least the next
twenty-four months to accommodate its working capital needs, capital
expenditures and debt service obligation.
INFLATION
Management reviews the prices charged for its products on a regular basis. When
market conditions allow, adjustments are made to reflect changes in product
costs due to fluctuations in the cost of materials and labor as well as
inflation. The cost of raw materials for most of the Company's products
decreased during the early part of fiscal 1996, and then increased to pre-1996
levels by the end of the fiscal year. Industry estimates are predicting declines
in resin costs during 1997. There can be no assurance, however, that future
market conditions will support a direct correlation between cost fluctuations
and films pricing.
###
Except for the historical information contained herein, the matters discussed
in this report are forward-looking statements that involve risks and
uncertainties, including the timely development and acceptance of new products,
fluctuations in raw materials prices, the loss of one or more significant
customers, the impact of competitive products and pricing, the timely
completion of capital projects, the success of its efforts to expand into new
markets and other risks detailed herein, in the Company's prospectuses dated
August 16, 1995 and May 20, 1994 and from time to time in the Company's other
reports filed with the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required under this Item 8 is set forth on pages F-1 through
F-15 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-10-
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
The directors and executive officers of AET are as follows:
<CAPTION>
OFFICER
DIRECTOR/EXECUTIVE
NAME AGE POSITION SINCE
<S> <C> <C> <C>
Amin J. Khoury 57 Chairman of the Board(1) October 1986
Thomas E. Williams 50 President, Chief Executive Officer
and Director(2) December 1992
Robert H. Beeby 63 Director October 1994
Nader A. Golestaneh+ 34 Director October 1986
Richard G. Hamermesh* 47 Director October 1986
Mark M. Harmeling+ 43 Director October 1986
Paul W. Marshall 54 Director October 1986
Joseph J. O'Donnell* 52 Director October 1986
Hansjorg Wyss 59 Director October 1986
David N. Terhune 50 Executive Vice President and Chief Operating Officer(3) February 1994
Mark S. Abrahams 45 Vice President and General Manager, Specialty
Nets & Profiles Division(4) December 1993
Anthony J. Allott 32 Vice President, Chief Financial Officer and Treasurer July 1994
Gerald M. Haines II 33 General Counsel and Secretary September 1995
<FN>
- -----------------
* Member Audit Committee
+ Member Stock Option and Compensation Committee
(1) The Company has entered into a five-year Employment Agreement dated as of April 26, 1994 with Mr. Khoury pursuant
to which he currently serves as Chairman of the Board of the Company.
(2) The Company has entered into a five-year Employment Agreement dated as of April 26, 1994 with Mr. Williams
pursuant to which he currently serves as Chief Executive Officer and President of the Company.
(3) The Company has entered into a three-year Employment Agreement with Mr. Terhune dated February 1, 1996 pursuant to
which he currently serves as Executive Vice President and Chief Operating Officer of the Company.
(4) The Company has entered into a three-year Employment Agreement dated as of June 1, 1996 with Mr. Abrahams pursuant
to which he currently serves as Vice President and General Manager of the Company's Specialty Nets & Profiles
Division.
</TABLE>
All directors hold office until the next annual meeting of stockholders or until
their successors are duly elected and qualified. The executive officers of the
Company are elected annually by the Board of Directors following the annual
meeting of stockholders and serve at the discretion of the Board of Directors.
-11-
<PAGE> 14
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Amin J. Khoury is the founder of AET and has been Chairman of the Board of
Directors of AET since October 1986. From October 1986 to August 1993, Mr.
Khoury served as the Chief Executive Officer of AET. Additionally, Mr. Khoury
was elected President in August 1988 and served in that capacity through
November 1992. Since 1986, he has been the President of the K.A.D. Companies,
Inc., an investment, venture capital and consulting firm. Mr. Khoury is
currently Chairman of the Board of Directors and Chief Executive Officer of BE
Aerospace, Inc. ("BE Aerospace"), a manufacturer of cabin interior products for
commercial aircraft, and a director of Aurora Electronics, Inc., a supplier of
environmental recycling and recovery services to the electronics industry. Mr.
Khoury is also a 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.
Thomas E. Williams has been President of AET since December 1992. Mr. Williams
served as Chief Operating Officer from December 1992 through July 1996 and has
been Chief Executive Officer of AET since August 1993 and from December 1993
through January 1994 served as Interim Chief Financial Officer and Interim
Treasurer. From 1988 until 1992, Mr. Williams was Chief Executive Officer and
President of Home Innovations, Inc., a home furnishings company. From 1980
through 1988, Mr. Williams was a senior executive with Pepsico, Inc., where he
held a number of positions, most recently Vice President of Operations,
Pepsi-Cola USA.
Robert H. Beeby has been a Director of the Company since 1994. From 1989 to June
1991, Mr. Beeby was President and Chief Executive Officer of Frito-Lay, a United
States manufacturer and distributor of snack foods, and from 1984 to 1988,
President and Chief Executive Officer of Pepsi-Cola International, an
international soft drink manufacturer and distributor. Mr. Beeby is a 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.
Nader A. Golestaneh has been a Director of AET since 1986. Since 1990, Mr.
Golestaneh has been President of Nine Newbury Properties, a real estate
development company. Since 1986, Mr. Golestaneh has been an attorney in private
practice in Boston, Massachusetts.
Richard G. Hamermesh has been a Director of AET since 1986. Since 1987, Mr.
Hamermesh has been the Managing Partner of the Center for Executive Development,
an independent executive education and training firm. Mr. Hamermesh is also a
director of BE Aerospace.
Mark M. Harmeling has been a Director of AET since 1986. From 1985 to December
1993, Mr. Harmeling was president of Intercontinental Real Estate Corporation, a
real estate holding and development corporation. Since January 1994, Mr.
Harmeling has been President of Bay State Realty Advisors, a real estate
consulting corporation. Mr. Harmeling is also a director of Universal Holding
Corporation, an insurance holding company.
Paul W. Marshall has been a Director of AET since 1986 and is Senior Lecturer of
Business Administration, Harvard Business School. Since December 1991, Mr.
Marshall has served as Chairman of the Board and Chief Executive Officer of
Rochester Shoe Tree Co., Inc., a manufacturer and distributor of cedar shoe
trees and other cedar and shoe care products. From 1989 to November 1991, Mr.
Marshall served as Chairman of Industrial Economics Co., and from 1981 to 1989,
Mr. Marshall served as President and Chairman of Marshall Bartlett, Inc., both
management consulting firms. Mr. Marshall served as an Adjunct Professor at
Harvard Business School from 1989 to 1992. Mr. Marshall is also a director of BE
Aerospace, Food Brands America, Inc., a meats products manufacturer, and Raymond
James Financial Corporation, a regional brokerage firm.
Joseph J. O'Donnell has been a Director of AET since 1986. Since 1978, Mr.
O'Donnell has been Chairman of 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. Mr. O'Donnell is also a
director of BE Aerospace and The Westwood Group, Inc., a restaurant and racing
park holding company.
Hansjorg Wyss has been a Director of AET since 1986. Since 1977, Mr. Wyss has
been a director, President and Chief Executive Officer of Synthes (U.S.A.), Ltd.
and Synthes (Canada), Ltd., manufacturers and distributors of orthopedic
implants and instruments. Mr. Wyss is also a director of BE Aerospace.
-12-
<PAGE> 15
David N. Terhune has been Executive Vice President and Chief Operating Officer
of AET since July 1996. From February 1994 to June 1996 he was Senior Vice
President and Chief Financial Officer of AET. From 1992 to 1993, Mr. Terhune was
the Chief Financial Officer of Ground Round Restaurants, Inc., an operator and
franchiser of full-service family restaurants. From 1990 to 1992, Mr. Terhune
was Chief Financial Officer of Daka International, Inc., a holding company
serving the food service management and restaurant businesses.
Mark S. Abrahams has been Vice President and General Manager of Specialty Nets
and Profiles since December 1993. From November 1990 through July 1993, Mr.
Abrahams was the President of the Cybex Division of Lumex Corporation, a
manufacturer and distributor of physical therapy and fitness equipment. From
November 1988 through October 1990, Mr. Abrahams was the Chief Operating Officer
of Cambridge Medical Instruments, a manufacturer of diagnostic medical
equipment.
Anthony J. Allott has been Vice President, Chief Financial Officer and Treasurer
of the Company since July 1996. From May 1995 to June 1996, he served as Vice
President and Treasurer of the Company and from July 1994 to April 1995, he was
the Treasurer of the Company. From December 1992 through July 1994, Mr. Allott
was the Corporate Controller with Ground Round Restaurants, Inc., an operator
and franchiser of full-service family restaurants, and from 1986 through 1992 he
was with Deloitte & Touche LLP, an independent auditing firm, most recently as
audit manager.
Gerald M. Haines II has been General Counsel and Secretary of the Company since
September 1995. From September 1990 to August 1995, Mr. Haines was an attorney
with the law firm of Choate, Hall & Stewart.
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement, dated December 24, 1996, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
"Executive Compensation" in the Proxy Statement dated December 24, 1996 is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Beneficial Ownership of Shares" in the Proxy Statement dated December 24, 1996
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Certain Transactions" in the Proxy Statement dated December 24, 1996 is
incorporated herein by reference.
-13-
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
A. FINANCIAL STATEMENTS
Consolidated Balance Sheets, September 30, 1996 and 1995
Consolidated Income Statements for the Years Ended September 30, 1996, 1995
and 1994
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended September 30,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
Schedule II-Valuation and Qualifying Accounts
All other schedules are omitted as the required information is not
applicable or is included in the financial statements or related notes.
B. EXHIBITS
3.1(a) Amended and Restated Certificate of Incorporation.
3.2(a) Amended and Restated By-Laws.
4.1(d) Indenture dated as of April 7,1995 between the Registrant and United
States Trust Company of New York, Trustee.
4.2(d) Form of 11 1/2% Senior Note due 2002 (included in Exhibit 4.2).
4.3(a) Specimen Common Stock Certificate.
10.1(d) Credit Agreement dated as of April 7, 1994 by and between the
Registrant and The Chase Manhattan Bank (National Association), as
agent.
10.1.1* Amendments dated December 30, 1994, July 10, 1995 and June 28, 1996
to the Credit Agreement dated as of April 7, 1994 by and between
the Registrant and The Chase Manhattan Bank (National Association),
as agent.
10.2(b) 1986 Stock Option Plan, as amended.
10.3(c) 1991 Stock Option Plan, as amended.
10.4(e) 1991 Stock Option Plan for Directors, as amended.
10.5(d) 1994 Stock Option Plan, as amended.
10.6(a) Agreement between the Registrant and BE Aerospace, Inc. dated as of
April 17, 1990.
10.7* Employment Agreement dated as of June 1, 1996 between the Registrant
and Mark S. Abrahams.
10.8* Employment Agreement dated as of February 1, 1996 between the
Registrant and David N. Terhune, as amended.
10.9* Agreement dated as of May 1, 1996 between the Registrant and Anthony
J. Allott.
10.10* Employment Agreement dated as of April 26, 1994 between the
Registrant and Amin J. Khoury, as amended.
10.11* Employment Agreement dated as of April 26, 1994 between the Registrant
and Thomas E. Williams, as amended.
10.12(f) Secured promissory notes of NMC in favor of the registrant in the
aggregate principal amount of $1,400,000.
10.13(g) Executive Deferred Compensation Plan dated as of September 1, 1994.
21.1(d) Subsidiaries of the Registrant.
23.1* Consent of Deloitte & Touche LLP
24.1* Powers of Attorney
27* Financial Data Schedule
[FN]
- ---------------
* Filed herewith
-14-
<PAGE> 17
(a) Contained in Exhibits to Registrant's Registration Statement on Form S-1,
as amended (No. 33-40145), filed with the Commission on April 24, 1991.
(b) Contained in Exhibits to the Registrant's Registration Statement on Form
S-8 (No. 33-44449), filed with the Commission on December 18, 1991.
(c) Contained in Exhibits to the Registrant's Registration Statement on Form
S-8 (No. 33-48841), filed with the Commission on June 25, 1992.
(d) Contained in Exhibits to the Registrant's Registration Statement on Form
S-4 (No. 33-78006), filed with the Commission on April 21, 1994.
(e) Contained in Exhibits to the Registrant's Form 10K for the fiscal year
ended September 30, 1992.
(f) Contained in Exhibits to the Registrant's Form 10K for the fiscal year
ended September 30, 1993.
(g) Contained in Exhibits to the Registrant's Form 10K for the fiscal year
ended September 30, 1994.
The above reference exhibits are, as indicated, either filed herewith or have
heretofore been filed with the Commission under the Securities Act and the
Exchange Act and are referred to and incorporated herein by reference to such
filings.
C. REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the fourth quarter of 1996.
-15-
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Anthony J. Allott
-----------------------------------------
Anthony J. Allott, Vice President and
Chief Financial Officer
December 13, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated:
Amin J. Khoury* /s/ Thomas E. Williams
- ------------------------------------- ------------------------------------
Amin J. Khoury, Chairman of the Board Thomas E. Williams, Chief Executive
December 13, 1996 Officer, President and Director
December 13, 1996
Robert H. Beeby* Paul W. Marshall*
- ------------------------------------- ------------------------------------
Robert H. Beeby, Director Paul W. Marshall, Director
December 13, 1996 December 13, 1996
Nader A. Golestaneh* Joseph J. O'Donnell*
- ------------------------------------- ------------------------------------
Nader A. Golestaneh, Director Joseph J. O'Donnell, Director
December 13, 1996 December 13, 1996
Richard G. Hamermesh* Hansjorg Wyss*
- ------------------------------------- ------------------------------------
Richard G. Hamermesh, Director Hansjorg Wyss, Director
December 13, 1996 December 13, 1996
Mark M. Harmeling* /s/ David N. Terhune
- ------------------------------------- ------------------------------------
Mark Harmeling, Director David N. Terhune, Executive Vice
December 13, 1996 President and Chief Operating
Officer
December 13, 1996
*By: /s/ Thomas E. Williams
--------------------------------
Thomas E. Williams
Power of Attorney
Date: December 13, 1996
------------------------------
-16-
<PAGE> 19
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets, September 30, 1996 and 1995................. F-2
Consolidated Income Statements for the Years Ended September 30, 1996,
1995 and 1994............................................................ F-3
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994........................................ F-4
Consolidated Statements of Cash Flows for the Years Ended September 30,
1996, 1995 and 1994...................................................... F-5
Notes to Consolidated Financial Statements............................... F-6
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts for the Years Ended
September 30, 1996, 1995 and 1994 ........................................ F-15
INDEPENDENT AUDITORS' REPORT............................................. F-16
F-1
<PAGE> 20
APPLIED EXTRUSION TECHNOLOGIES, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
(In thousands, except per share amounts)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,266 $ 20,475
Investment securities 12,044
Accounts receivable, net of allowance for doubtful accounts of $750
and $784 at September 30, 1996 and 1995, respectively 34,937 33,467
Inventory 30,582 27,606
Prepaid expenses and deferred taxes 9,407 9,950
-------- --------
Total current assets 78,192 103,542
Property, plant and equipment, net 245,546 206,743
Intangibles and deferred finance charges, net 5,860 7,081
Long-term note receivable and other assets 2,106 1,153
-------- --------
$331,704 $318,519
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable $ 16,294 $ 18,123
Accrued interest 8,978 8,776
Accrued expenses 17,009 21,202
-------- --------
Total current liabilities 42,281 48,101
Long-term debt 165,500 156,500
Deferred taxes and other credits 15,588 14,860
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000 shares,
no shares outstanding
Common stock, $.01 par value:
Voting -- authorized, 14,865 shares; issued, 10,529 and 9,986
shares at September 30, 1996 and 1995, respectively 105 100
Nonvoting -- authorized, issued and outstanding, 135 shares at
September 30, 1995 1
Additional paid-in capital 89,638 84,823
Retained earnings 21,444 14,780
Cumulative translation adjustments 277 501
-------- --------
111,464 100,205
Treasury stock, at cost -- 266 and 149 shares at September 30,
1996 and 1995, respectively (3,129) (1,147)
Total stockholders' equity 108,335 99,058
-------- --------
$331,704 $318,519
======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 21
APPLIED EXTRUSION TECHNOLOGIES, INC.
<TABLE>
CONSOLIDATED INCOME STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(In thousands, except per share amounts)
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
SALES $234,490 $233,935 $131,594
Cost of sales 181,899 168,664 97,128
-------- -------- --------
GROSS PROFIT 52,591 65,271 34,466
OPERATING EXPENSES:
Selling, general and administrative 20,144 20,219 15,415
Research and development 7,414 6,352 3,242
Write-off of intangible assets 3,305
-------- -------- --------
Total operating expenses 27,558 26,571 21,962
-------- -------- --------
OPERATING PROFIT 25,033 38,700 12,504
NON-OPERATING EXPENSES:
Interest expense, net 13,927 18,609 10,123
Litigation settlement 1,400
-------- -------- --------
Total non-operating expenses 13,927 20,009 10,123
-------- -------- --------
Income before income taxes 11,106 18,691 2,381
Income tax expense 4,442 7,476 954
-------- -------- --------
NET INCOME $ 6,664 $ 11,215 $ 1,427
======== ======== ========
EARNINGS PER COMMON SHARE:
Primary $ .61 $ 1.45 $ .24
Fully diluted .61 1.39 .21
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING:
Primary 10,866 7,717 6,014
Fully diluted 10,892 8,066 6,814
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 22
APPLIED EXTRUSION TECHNOLOGIES, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(In thousands, except per share amounts)
<CAPTION>
VOTING NONVOTING ADDITIONAL CUMULATIVE
COMMON STOCK COMMON STOCK PAID-IN RETAINED TRANSLATION TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK
------ ------ ------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1993 5,979 $ 59 135 $ 1 $32,798 $ 2,138 $ 12 $ (676)
Net income 1,427
Exercise of stock options 52 1 172
Exchange rate changes 587
------ ---- ---- --- ------- ------- ----- -------
BALANCE, SEPTEMBER 30, 1994 6,031 60 135 1 32,970 3,565 599 (676)
Net income 11,215
Treasury shares (471)
Stock issued for profit sharing
contribution 70 1 777
Issuance of common stock 3,450 35 47,758
Exercise of stock options, net 435 4 3,318
Exchange rate changes (98)
------ ---- ---- --- ------- ------- ----- -------
BALANCE, SEPTEMBER 30, 1995 9,986 100 135 1 84,823 14,780 501 (1,147)
Net income 6,664
Stock issued for profit sharing
contribution 145 1 1,681
Conversion of non-voting
common stock 135 1 (135) (1)
Common stock issued for
employee stock purchase plan 18 1 173
Treasury shares and other
Exercise of stock options, net 245 2 1,552 (1,982)
Tax benefits related to stock
option plan 1,409
Exchange rate changes (224)
------ ---- ---- --- ------- ------- ----- -------
BALANCE, SEPTEMBER 30, 1996 10,529 $105 $89,638 $21,444 $ 277 $(3,129)
====== ==== ==== === ======= ======= ===== =======
</TABLE>
No preferred stock was issued or outstanding during any period presented.
See notes to consolidated financial statements.
F-4
<PAGE> 23
APPLIED EXTRUSION TECHNOLOGIES, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(In thousands)
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 6,664 $ 11,215 $ 1,427
Adjustment to reconcile net income to net cash provided by operating
activities:
Provision for doubtful accounts 373 206 655
Accretion of discount on investment securities (171) (83)
Depreciation and amortization 13,991 12,400 7,741
Deferred income taxes 4,442 6,113 (535)
Write-off of intangible assets 3,305
Changes in assets and liabilities which provided (used) cash, net of
acquisitions:
Prepaid expenses and other current assets (410) (4,298) (372)
Accounts payable and accrued expenses (6,895) 7,885 18,789
Accounts receivable and inventory (4,819) (6,854) 496
-------- -------- ---------
Net cash provided by operating activities 13,175 26,584 31,506
INVESTING ACTIVITIES:
Purchases of investment securities (4,055) (15,977)
Proceeds from maturities of investment securities 16,270 4,016
Additions to property, plant and equipment (51,573) (36,833) (7,146)
Proceeds from sale of assets 1,177
Acquisition of net assets (172,986)
Deferred costs and other 34
-------- -------- ---------
Net cash used in investing activities (39,358) (47,583) (180,132)
FINANCING ACTIVITIES:
Borrowings (repayments) under bank credit agreement, net 9,000 (23,000) (6,424)
Proceeds from issuance of stock, net 198 50,645 172
Borrowings pursuant to issuance of senior notes 175,000
Financing costs (7,284)
-------- -------- ---------
Net cash provided by financing activities 9,198 27,645 161,464
Effect of exchange rate changes on cash (224) (98) 587
-------- -------- ---------
Increase (decrease) in cash and cash equivalents, net (17,209) 6,548 13,425
Cash and cash equivalents, beginning 20,475 13,927 502
-------- -------- ---------
Cash and cash equivalents, ending $ 3,266 $ 20,475 $ 13,927
======== ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of capitalized interest of $5,106, $1,668 and $216,
respectively $ 13,079 $ 18,001 $ 1,154
Income taxes 1,669 3,125 514
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 24
APPLIED EXTRUSION TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(In thousands, except share and per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Applied Extrusion Technologies, Inc. (AET or the Company) develops, manufactures
and sells a broad range of extruded thermoplastic products utilizing proprietary
manufacturing technologies. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
ACCOUNTING ESTIMATES were made in connection with the preparation of the
Company's consolidated financial statements in conformity with generally
accepted accounting principles. These estimates affect reported amounts and
disclosure of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
CASH AND CASH EQUIVALENTS consist of cash and highly liquid debt instruments
such as commercial paper and money market accounts purchased with an original
maturity date of less than three months.
INVESTMENT SECURITIES are recorded in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. The Company's investment securities include only those in
which the Company has the positive intent and ability to hold to maturity and
are carried at amortized cost. Investment securities at September 30, 1995
consist of U.S. Treasury bills due in three months or less and their carrying
amounts approximate their fair values. The Company holds no securities for
trading or securities available for sale.
FINANCIAL INSTRUMENTS are recorded in accordance with SFAS No. 107, Disclosures
about Fair Value of Financial Instruments, which requires disclosure about fair
value for all financial instruments, whether recognized or not in the balance
sheet, for which it is practicable to estimate that value. A financial
instrument is defined as cash, evidence of an ownership interest in an entity,
and certain contracts to exchange cash or other financial instruments. For
financial instruments, such as accounts receivable, accounts payable and
accrued expenses, which reprice or mature within three months of the reporting
date, carrying amount approximates fair value. At September 30, 1996 and 1995,
the carrying amounts of long-term debt approximate their fair values. SFAS No.
107 excludes from its scope certain financial instruments and all nonfinancial
instruments including inventory, property, plant and equipment, retirement
benefit obligations, deferred compensation agreements and leases. Accordingly,
the aggregate fair value amounts presented do not represent the underlying fair
value of the Company. The carrying amount of cash and equivalents approximates
fair value. For securities available for sale, fair values are based on quoted
market prices or dealer quotes if available. There were no investment
securities at September 30, 1996. At September 30, 1995, the carrying values of
these financial instruments approximated their fair values.
INVENTORY is stated at the lower of cost or market with cost determined using an
average-cost method.
PROPERTY, PLANT AND EQUIPMENT are stated at cost. For financial reporting
purposes, depreciation is provided using the straight-line method over estimated
useful lives. Estimated useful lives are 30 years for building and improvements
and 5 to 15 years for machinery and equipment. Costs associated with the
start-up of new production lines are capitalized and amortized over 18 months.
INTANGIBLES AND DEFERRED FINANCE CHARGES include intellectual property,
patents, licenses, organization costs, covenants not to compete and costs
associated with the issuance of debt. Amortization of intangibles is being
recognized using the straight-line method based upon the economic useful lives
of the assets, principally over ten years. Deferred finance charges are
recognized using the straight-line method over the term of the related debt,
and are included in net interest expense. On an ongoing basis, the Company
evaluates the carrying value of intangible assets versus the cash benefit
expected to be realized from the performance of the underlying operations and
adjusts for any impairment in value.
F-6
<PAGE> 25
INCOME TAXES are recorded under the provisions of SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires an asset and liability approach that
recognizes deferred tax assets and liabilities for the differences between the
financial statement carrying amount and the tax basis of existing assets and
liabilities. These differences arise principally from the use of accelerated
depreciation methods for income tax reporting purposes and the straight-line
method for financial statement purposes. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which these temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in the period that includes the enactment date.
SALES are recognized upon shipment of products to customers, when title and risk
of loss have passed to the customer.
FOREIGN OPERATIONS are reported in accordance with SFAS No. 52, Accounting for
the Translation of Foreign Currency Transactions and Foreign Currency Financial
Statements. The Company periodically enters into foreign currency exchange
contracts to hedge firm purchase commitments denominated in foreign currencies.
Gains or losses are deferred until the period in which the related transactions
occur.
NET EARNINGS PER SHARE is computed using the weighted-average number of shares
outstanding during each year, including common stock equivalents.
CERTAIN RECLASSIFICATIONS have been made to the comparative financial statements
to conform with the current year presentation.
2. ACQUISITION
On April 7, 1994, AET acquired the packaging films business of Hercules,
Incorporated for approximately $168,770 plus acquisition costs of $4,216.
Financing for the acquisition was provided by the issuance of $150,000 of 11.5%
interest only bonds that mature in 2002 and a $81,600 line of credit (see Note
6). In accordance with the Acquisition Agreement, the Company paid $161,000 at
closing and $7,770 in August 1994. Financing costs of $7,284 were incurred in
connection with the issuance of the bonds and the line of credit.
3. INVENTORY
<TABLE>
Inventory consisted of the following at September 30:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials $11,693 $10,926
Finished goods 18,889 16,680
------- -------
$30,582 $27,606
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
Property, plant and equipment consisted of the following at September 30:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 2,915 $ 2,915
Buildings and improvements 36,207 28,236
Machinery and equipment 201,708 162,934
Machinery and equipment in progress 42,193 37,434
-------- --------
283,023 231,519
Less accumulated depreciation 37,477 24,776
-------- --------
$245,546 $206,743
======== ========
</TABLE>
Depreciation expense for the years ended September 30, 1996, 1995 and 1994 was
$12,770, $11,124 and, $6,781, respectively.
F-7
<PAGE> 26
The Company leases certain property and equipment under agreements generally
with terms of five years and certain renewal options. Rental expense for the
years ended September 30, 1996, 1995 and 1994 was approximately $857, $972 and
$613, respectively.
The minimum annual rental commitments under noncancelable operating leases are
as follows for each of the five years subsequent to September 30, 1996:
1997 $ 776
1998 552
1999 582
2000 531
2001 523
------
$2,954
======
5. INTANGIBLES AND DEFERRED FINANCE CHARGES
<TABLE>
Intangibles and deferred finance charges consisted of the following at September
30:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Patents and licenses $ 1,072 $ 1,072
Organization costs 418 418
Covenants not to compete 109 109
Deferred financing charges 7,305 7,305
Intellectual property 1,611 1,611
------- -------
10,515 10,515
Less accumulated amortization 4,655 3,434
------- -------
$ 5,860 $ 7,081
======= =======
</TABLE>
F-8
<PAGE> 27
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consisted of the following on September 30: 1996 1995
---- ----
<S> <C> <C>
Industrial Revenue Bond payable November 4, 2004 at prime minus 3% $ 6,500 $ 6,500
(5.25% effective rate at September 30, 1996).
Senior notes payable on April 7, 2002 at 11.5% interest due semi-
annually on October 1 and April 1. 150,000 150,000
Five-year Revolving Term Facility with availability of $15,000 at September 30,
1996 and $19,000 at September 30, 1995, with required quarterly reductions of
$1,000; balance due on March 31, 1999. Interest is due quarterly at LIBOR
plus 2.75% or at Prime (effective rate of 8.19% at September 30, 1996 on
LIBOR-related debt; Prime was 8.25% at September 30, 1996) on outstanding
portion and .5% on unused commitments. 9,000
Revolving Credit Facility of $50,000 bearing interest at prime plus 1.25% on
utilized portions and .5% for unused commitments. -------- --------
$165,500 $156,500
======== ========
</TABLE>
On April 7, 1994, in conjunction with the Acquisition (see Note 2) the Company
entered into a bank credit agreement with a group of lenders to provide the
Company with senior bank financing in an amount up to $81,600. The Credit
Agreement provides for a $25,000 Revolving Term Loan Facility, a $50,000
Revolving Credit Facility and a $6,600 standby letter of credit in support of
the Company's currently outstanding industrial revenue bond, each of which has a
final maturity in 1999 and is secured by all assets of the Company. At September
30, 1996, the total $50,000 Revolving Credit was available to the Company. The
Credit Agreement contains covenants which limit borrowings based on certain
asset levels and require the Company to maintain a minimum tangible net worth, a
specified fixed charge coverage and interest coverage ratios, and establishes
maximum capital expenditure levels.
In addition to the Bank Credit Agreement, the Company issued $150,000 in Senior
Notes to finance the Acquisition. The Senior Notes are unsecured, bear interest
at 11.5% payable semiannually and do not require periodic principal payments
until they mature in full in 2002.
<TABLE>
The aggregate amount of long-term debt maturing in years subsequent to
September 30, 1996 is as follows:
<CAPTION>
<S> <C>
1997 $
1998 2,000
1999 4,000
2000 3,000
2001
2002 and thereafter 156,500
--------
$165,500
========
</TABLE>
F-9
<PAGE> 28
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
Accrued expenses consisted of the following at September 30:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Payroll and benefits $ 6,513 $ 6,841
Market development 3,739 3,680
Taxes and other 6,757 10,681
------- -------
$17,009 $21,202
======= =======
</TABLE>
Included in accounts payable are outstanding checks of $7,547 and $2,318 at
September 30, 1996 and 1995, respectively.
8. INCOME TAXES
<TABLE>
The provision for income taxes consisted of the following for the years ended
September 30:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
U.S. Federal $ $1,361 $1,489
Deferred:
U.S. Federal 3,887 5,297 (624)
State 555 818 89
------ ------ ------
Total deferred 4,442 6,115 (535)
------ ------ ------
Total $4,442 $7,476 $ 954
====== ====== ======
</TABLE>
<TABLE>
The components of the net deferred liability were as follows at September 30:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Deferred Tax Assets:
Accounts receivable $ 326 $ 284 $ 322
Inventory 2,265 623 1,422
Other assets 979 1,067 1,163
Other liabilities 3,776 4,325 4,754
Tax credits and loss carryforwards 15,918 11,124 6,093
Valuation allowance (435) (435) (345)
------- ------- -------
Total 22,829 16,988 13,409
------- ------- -------
Deferred Tax Liabilities:
Property, plant and equipment 32,595 23,744 14,074
Other assets 235 211 187
------- ------- -------
Total 32,830 23,955 14,261
------- ------- -------
Total net tax liability $10,001 $ 6,967 $ 852
======= ======= =======
</TABLE>
A valuation allowance has been established for certain state deferred tax assets
resulting from temporary differences for which the potential to realize the tax
benefit was not considered more likely than not.
At September 30, 1996, the Company has, for income tax reporting purposes, a
federal net operating loss carryforward of $24,040 (expiration commencing in
2005) and state net operating loss carryforwards of $26,220 (limited by certain
state tax statutes and expiration). The Company also has research and
development credit carryforwards of $185, alternative minimum tax credit
carryforward of $3,599 and state investment tax credits of $242 (expiration
commencing in 2005).
F-10
<PAGE> 29
<TABLE>
A reconciliation of the statutory federal income tax rate to the effective rate
of the provisions for income taxes for the years ended September 30, 1996, 1995
and 1994 was as follows:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 34.0%
State income taxes, net of federal tax benefits 3.6% 4.9% 3.8%
Other, net 1.4% .1% 2.2%
---- ---- ----
40.0% 40.0% 40.0%
==== ==== ====
</TABLE>
9. WRITE-OFF OF INTANGIBLE ASSETS
In conjunction with the Acquisition (see Note 2), the Company de-emphasized and
divested certain of its non-core product lines. Accordingly, the discounted cash
flows generated from the related underlying assets, which were principally
intangible in nature, were written down by $3,305 to reflect their realizable
value. This non-recurring, non-cash charge is included as a component of
operating expenses in the accompanying 1994 consolidated income statement.
10. STOCKHOLDERS' EQUITY
In August 1995, the Company issued 3,450,000 shares of common stock in a
secondary public offering at $15.00 per share. Issuance costs associated with
the offering amount to $3,957. The Company has used the net proceeds of
approximately $48,000 from the offering to fund a portion of its planned
capacity expansion projects, which will increase film production by
approximately 90 million pounds at a total estimated cost of $95 million (see
Note 13). The first of two capacity expansions was completed during fiscal 1996
as the Company brought a new eight-meter tenter line on-stream. During fiscal
1996, treasury shares were issued in connection with the exercise of certain
employee stock options. Tax benefits resulting from compensation expense
allowable for U.S. Federal income tax purposes in excess of the expense recorded
in the consolidated income statement have been credited to additional paid-in
capital in the accompanying statements of stockholders' equity.
11. STOCK OPTIONS
The Company maintains common stock option plans for key employees and directors
under which the exercise price is generally not less than the fair value of the
shares at the date of grant. The options generally vest at a rate of 25% per
year. Vested employee options generally terminate within three months of
employment termination or three years after the death of the employee. Vested
director options generally terminate within three months of the resignation or
within six months of the death of a director. All options terminate upon the
occurrence of the tenth anniversary of the grant date or upon other termination
events specified in the plans. During fiscal 1996, the Company repriced 762,500
outstanding employee stock options to $8.25, the closing market price on the
date of repricing. The revised option prices have been reflected for all
applicable years in the stock option schedule to follow. The repricing affected
only those stock options originally granted with an exercise price in excess of
the closing price of the Company's common stock on the date of repricing. As of
September 30, 1996, approximately 2,590,250 shares had been reserved for
issuance under the plans.
The Company will be required to adopt SFAS No. 123, Accounting for Stock Based
Compensation, in 1997. This standard requires certain disclosure about the
value of stock options.
F-11
<PAGE> 30
<TABLE>
Information concerning the Company's option plans are as follows:
<CAPTION>
SHARES UNDER OPTION
OPTION PRICES EXERCISABLE
------------ ------ -----------
<S> <C> <C> <C>
As of September 30, 1993 1,140,250 $1.00-8.25* 573,750
=======
Granted 1,147,000 4.63-8.25*
Exercised (51,625) 1.00-7.25
Cancelled (94,625) 5.50-8.25*
---------
As of September 30, 1994 2,141,000 1.00-8.25* 692,250
=======
Granted 816,000 8.25*
Exercised (435,989) 1.00-9.50
Cancelled (192,875) 5.50-8.25*
---------
As of September 30, 1995 2,328,136 1.00-8.25* 789,886
=======
Granted 166,500 8.25-8.375*
Exercised (243,386) 5.125-8.25
Canceled (32,000) 1.00-8.25 *
---------
As of September 30, 1996 2,219,250 1.00-8.375 948,000
========= =======
<FN>
* Reflects repricing of certain options to $8.25 per share as discussed above.
</TABLE>
12. RELATED PARTY TRANSACTIONS
In 1989, the Company entered into a supply agreement with an affiliated company,
BE Aerospace, Inc., pursuant to which the Company agreed to sell to the
affiliate its requirements of certain components through March 31, 1998. The
Company had sales resulting from this agreement of $1,649, $952 and $1,254
during the years ended September 30, 1996, 1995 and 1994, respectively. Total
receivables from affiliated companies as of September 30, 1996, 1995 and 1994
were $578, $653 and $667, respectively.
The Company has entered into employment agreements extending for periods of up
to five years with certain key officers of the Company. These officers, who in
some cases also serve on the Board of Directors and are stockholders of the
Company, are eligible for performance bonuses. In addition, one officer and
director received a one-time fee of $350 for services rendered related to the
Acquisition and related debt refinancing. In connection with the Acquisition,
the Company entered into a consulting agreement with Apex Partners, Inc. (Apex).
Pursuant to this agreement and in consideration for the provisions of consulting
services thereunder, the Company paid $1,000 in connection with the successful
consummation of the Acquisition. Two of the stockholders of Apex are former
officers and one is a former director of the Company. Pursuant to the consulting
agreement, these individuals were granted options to purchase 50,000 shares of
the Company's common stock at an exercise price of $4.625 per share, the fair
value per share on the date of grant. These options became exercisable in full
on August 8, 1994 and were exercised during fiscal year 1996.
13. COMMITMENTS AND FOREIGN EXCHANGE CONTRACTS
In connection with a plant expansion project, the Company has entered into
commitments of future capital expenditures of approximately $9,900 at September
30, 1996 and anticipates approximately $35,600 of additional expenditures over
the next two years.
The Company has entered into foreign exchange contracts, the last of which
expires in May 1997, to hedge firm purchase commitments denominated in German
Marks, Pounds Sterling and Japanese Yen. Gains and losses on the contracts which
result from market risk associated with changes in the market values of the
underlying currencies are deferred and reported as part of the capitalized
asset. In entering into these contracts, the Company has assumed the risk which
might arise from the possible inability of counterparties to meet the terms of
their contracts. The Company
F-12
<PAGE> 31
does not expect any losses as a result of counterparty defaults. At September
30, 1996 and 1995, the Company had outstanding foreign exchange contracts with
notional values of $2,415 and $4,133, respectively. These contracts had no
carrying value and a net unrealized loss of $36 and a net unrealized gain of
$61 as of September 30, 1996 and 1995, respectively. The Company does not enter
into foreign exchange contracts for trading purposes.
14. EMPLOYEE BENEFIT PLANS
Substantially all employees with more than three months of service (as defined)
are eligible to participate in a Company profit sharing and savings plan. The
plan provides for board-approved matching contributions in varying amounts based
on employee contribution percentages up to 3.5% of gross salary. The plan also
provides for profit sharing contributions at the Board's discretion. The plan
allows for funding in either cash or Company stock and is fully accrued in the
accompanying consolidated financial statements. Aggregate contributions were
made with Company stock in the amount of $1,682 and $778 in 1996 and 1995,
respectively, and cash of $541 in 1994.
The Company also has a non-qualified deferred compensation plan for certain
executive employees. This plan allows these employees to defer all or a portion
of their salary and bonus until retirement or termination of their employment.
Under the terms of the Company's 1996 Employee Stock Purchase Plan, eligible
employees may purchase shares of the Company's common stock based on
compensation through payroll deductions. The purchase price for payroll
deductions is the lower of 85% of the fair market value of the stock on the
first or last day of the purchasing period. Purchases through payroll deductions
are made on a semi-annual basis. Activity in the plan during fiscal 1996 is
disclosed in the accompanying statement of changes in stockholders' equity. At
September 30, 1996, there were 500,000 shares available for future offerings.
15. LITIGATION SETTLEMENT
In addition to routine legal proceedings incidental to the conduct of its
business which are not material in the aggregate, AET was named in a
consolidated action in 1992 related to its initial public offering as well as
subsequent periodic reports, press releases and public statements. The
Company's portion of the settlement is shown as a non-operating expense of
$1,400 in the accompanying 1995 consolidated income statement. While the
Company believes the litigation was without merit, management believes it was
in the best interest of the Company to settle the matter.
16. CONCENTRATION OF CREDIT RISK AND EXPORT SALES
The Company sells its products under normal credit terms to a diverse base of
customers in the packaging film conversion, environmental and health care
markets, as well as other industries. The Company performs on-going credit
evaluations of its customers and generally does not require collateral, although
letters of credit may be required on certain foreign sales. A significant amount
of sales in 1996 and 1995 were to converters of packaging film for end users in
the beverage, candy and snack food industries. One converter customer accounted
for approximately 16% and 19% of sales in fiscal 1996 and 1995, respectively,
with no other customer accounting for more than 10% of sales in fiscal 1996,
fiscal 1995, or fiscal 1994.
<TABLE>
Information by geographic location was as follows for the three years ended
September 30:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales:
United States $211,768 $201,442 $115,603
Foreign 22,722 32,493 15,991
-------- -------- --------
$234,490 $233,935 $131,594
======== ======== ========
Operating Profit:
United States $ 22,338 $ 36,053 $ 11,408
Foreign 2,695 2,647 1,096
-------- -------- --------
$ 25,033 $ 38,700 $ 12,504
======== ======== ========
</TABLE>
F-13
<PAGE> 32
17. SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
Summarized quarterly financial data for fiscal 1996, 1995 and 1994 were as
follows:
<CAPTION>
NET
NET INCOME
NET GROSS INCOME (LOSS)
SALES PROFIT (LOSS) PER SHARE
----- ------ ------ ---------
<S> <C> <C> <C> <C>
September 30, 1996
1st quarter $50,251 $11,345 $ 1,403 $ .13
2nd quarter 62,565 12,478 1,504 .14
3rd quarter 61,043 13,818 1,981 .18
4th quarter 60,631 14,950 1,776 .17
September 30, 1995
1st quarter 50,742 14,456 1,327 .19
2nd quarter 58,105 17,025 3,065 .43
3rd quarter 64,143 18,036 3,615 .48
4th quarter 60,945 15,754 3,208 .34
September 30, 1994
1st quarter 9,423 2,482 163 .03
2nd quarter 9,153 2,472 (2,092) (.34)
3rd quarter 55,062 13,696 1,331 .21
4th quarter 57,956 15,816 2,025 .30
</TABLE>
F-14
<PAGE> 33
APPLIED EXTRUSION TECHNOLOGIES, INC.
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED SEPTEMBER 30, 1996
(In thousands)
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS ACQUISITION DEDUCTIONS END OF PERIOD
----------- --------- -------- -------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1996 $784 $373 $407 $750
1995 806 206 228 784
1994 153 655 520 522 806
</TABLE>
F-15
<PAGE> 34
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Applied Extrusion Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Applied
Extrusion Technologies, Inc. and its subsidiaries as of September 30, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended September 30,
1996. Our audits also included the financial statement schedule listed in Item
14. These consolidated financial statements and the financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements and the financial
statement schedule present fairly, in all material respects, the financial
position of Applied Extrusion Technologies, Inc. and its subsidiaries at
September 30, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1996, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
/s/ Deloitte & Touche LLP
- -------------------------
Boston, Massachusetts
November 14, 1996
F-16
<PAGE> 1
Exhibit 10.1.1
[CONFORMED COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1 (the "AMENDMENT") dated as of December 30, 1994 among:
APPLIED EXTRUSION TECHNOLOGIES, INC. (the "COMPANY") and the LENDERS listed on
the signature pages hereof (the "LENDERS").
W I T N E S S E T H :
WHEREAS, the parties hereto and The Chase Manhattan Bank (National
Association), as Administrative Agent (the "ADMINISTRATIVE AGENT"), have
heretofore entered into a Credit Agreement dated as of April 7, 1994 (the
"AGREEMENT"); and
WHEREAS, the Company and the Lenders have agreed to amend the
Agreement (i) to permit, in certain circumstances, the principal amount of term
loans prepaid by the Company to be reborrowed by the Company, (ii) to provide
for the payment of a commitment fee by the Company in connection with the
availability of term loans contemplated by clause (i) above, (iii) to delete the
requirement that an excess cash flow payment be required to be made for the
period commencing on April 7, 1994 and ending on September 30, 1994, (iv) to
modify certain financial covenants and (v) to make certain related changes, all
as more fully set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined in the recitals above, each term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement.
SECTION 2. AMENDMENT OF SECTION 1.01 OF THE AGREEMENT. The following
definitions are either amended and restated in their entirety to read as follows
or added in the appropriate alphabetical order, as the case may be:
"AMENDMENT NO. 1 EFFECTIVE DATE" shall mean the date as of which
Amendment No. 1 dated as of December 30, 1994 to this Agreement shall have
become effective.
<PAGE> 2
"AVAILABLE PP&E AMOUNT" shall mean, as at any date of determination
thereof, the amount by which the sum of (x) 75% of Eligible Machinery and
Equipment PLUS (y) 70% of Eligible Real Property, in each case determined
as provided in the respective definition thereof, exceeds the sum of (a)
the aggregate outstanding amount of Term Commitments PLUS (b) the aggregate
amount of Letter of Credit Liabilities in respect of the IRB Letter of
Credit, in each case at said date.
"SYSTEMS AND IMPLEMENTATION PROJECT" shall mean a computer-based
information system for the entire Company to replace the temporary
information system provided by Hercules Incorporated.
"TENTER LINE #65 PROJECT" shall mean an eight meter tenter line for
the production of oriented polypropylene to be located at the Company's
Terre Haute facility.
"TERM COMMITMENT AVAILABILITY PERIOD" shall mean the period from and
including the Amendment No. 1 Effective Date to but not including March 31,
1999.
"TERM COMMITMENT" shall mean, as to any Lender, the obligation of such
Lender to make Term Loans to the Company in an aggregate principal amount
up to but not exceeding the amount set forth opposite such Lender's name on
Annex I hereto under the caption "Term Commitment" (as the same may be
reduced from time to time pursuant to Section 2.03).
SECTION 3. AMENDMENT OF SECTION 2.01 OF THE AGREEMENT. (a) Clause (i)
of Section 2.01 is amended to add the following at the end thereof:
In addition, from time to time during the Term Commitment Availability
Period, each Lender shall make Loans to the Company in an aggregate
principal amount at any one time outstanding which shall not exceed its
Term Commitment, as reduced from time to time pursuant to Section 2.03
hereof.
(b) Clause (ii) of Section 2.01 is amended to add the following
proviso before the period at the end of the first sentence:
; PROVIDED that no such Loans shall be made at any time pursuant to this
clause (ii) to the extent that any Term Commitments are unused at such time
2
<PAGE> 3
SECTION 4. AMENDMENT OF SECTION 2.03 OF THE AGREEMENT. (a) Clause (ii)
of Section 2.03(a) is amended and restated in its entirety to read as follows:
The Term Commitments shall terminate on the last day of the Term Commitment
Availability Period, and shall be reduced in the respective aggregate
amounts and on the dates set forth in Schedule III.
(b) Clause (iv) of Section 2.03(a) is amended and restated in its
entirety to read as follows:
(iv) In addition, (x) the Term Commitments shall be reduced in the
amount and on the date of each prepayment applied to the Term Loans and
(y) the Working Capital Commitments shall be reduced in the amount and on
the date of each prepayment applied to the Working Capital Loans (or to
provide cover for Letter of Credit Liabilities), in each case pursuant to
paragraph (2), (3), (4), (5) or (6) of Section 3.02(b)(i) .
SECTION 5. AMENDMENT OF SECTION 2.04(a) OF THE AGREEMENT. Section
2.04(a) is amended to add "(x)" immediately before "the daily average unused
amount" and by adding the following text immediately after, "Working Capital
Availability Period":
and (y) the daily average unused amount of such Lender's Term Commitment,
for the period from the Amendment No. 1 Effective Date to and including the
earlier of the date the Term Commitments are terminated or the last day of
the Term Commitment Availability Period, in each case
SECTION 6. AMENDMENT OF SECTION 2.08 OF THE AGREEMENT. Section 2.08 is
amended and restated in its entirety to read as follows:
The proceeds of the Term Loans and the Working Capital Loans made on the
Closing Date shall be used by the Company to finance the consummation of
the Acquisitions and the payment of related fees, commissions and expenses.
The proceeds of the Term Loans and the Working Capital Loans made after the
Closing Date shall be used by the Company for working capital, capital
expenditures, acquisitions and other general corporate purposes.
3
<PAGE> 4
SECTION 7. AMENDMENT OF SECTION 3.02(b)(i)(6) OF THE AGREEMENT.
Section 3.02(b)(i)(6) is amended by deleting "(a) the period commencing on the
Closing Date and ending on September 30, 1994, or (b)".
SECTION 8. AMENDMENT OF SECTION 4.01 OF THE AGREEMENT. (a) Section
4.01(a) is amended and restated in its entirety to read as follows:
(a) The Term Loans shall mature on each date on which the Term
Commitments shall be reduced pursuant to Section 2.03(a)(ii) (a "Term
Commitment Reduction Date") in an aggregate principal amount equal to the
amount by which the aggregate principal amount of the Term Loans
outstanding on such Term Commitment Reduction Date exceeds the aggregate
amount of the Term Commitments as so reduced on such Term Commitment
Reduction Date.
(b) The first sentence of Section 4.01(c) is deleted.
SECTION 9. AMENDMENT OF SECTION 7.03 OF THE AGREEMENT. Section 7.03 is
amended (i) to delete "and" at the end of clause (a), (ii) to replace the period
at the end of clause (b) with "; and", and (iii) to add the following new clause
(c):
(c) in the case of any Working Capital Loan, the fact that the Term
Commitments shall be fully used.
SECTION 10. AMENDMENT OF SECTION 8.02 OF THE AGREEMENT. (a) Section
8.02(b) is amended to add the following new clauses (v) and (vi) immediately
after clause (iv):
(v) The audited consolidated balance sheet of the Company and its
Subsidiaries as of September 30, 1994 and the related consolidated
statements of operations, stockholders' equity and cash flows for the
fiscal year then ended fairly present in all material respects the
consolidated financial condition and results of operations of the Company
and its Subsidiaries in accordance with GAAP consistently applied, as at
the end of, and for, such year.
(vi) The Company and its Subsidiaries did not on the date of the
balance sheet referred to in clause (v) above, and will not on the
Amendment No. 1 Effective Date, have any material contingent liabilities,
material liabilities for taxes, unusual and material forward or long-term
commitments or material unrealized
4
<PAGE> 5
or anticipated losses from any unfavorable commitments, except as referred
to or reflected or provided for in said balance sheets or the notes
thereto.
(b) Section 8.02(d) is amended by replacing "December 31, 1993" with
"September 30, 1994".
SECTION 11. AMENDMENT OF SECTION 8.10 OF THE AGREEMENT. (a) The first
sentence of Section 8.10(a) is amended to replace "as of the date of this
Agreement" with "as of the Amendment No. 1 Effective Date."
(b) Section 8.10(b) of the Agreement is amended to replace (i) "as of
the Closing Date" in the first sentence with "as of the Amendment No. 1
Effective Date" and (ii) "as in effect on the date hereof" in the last sentence
with "as in effect on the Amendment No. 1 Effective Date".
SECTION 12. AMENDMENT OF SECTION 9.11 OF THE AGREEMENT. Section 9.11
is amended to add the following parenthetical immediately after "MINUS Capital
Expenditures":
(other than Capital Expenditures incurred in connection with (x) the Tenter
Line #65 Project, up to an aggregate amount not to exceed, during the term
of this Agreement, an amount equal to the sum of $45,000,000 plus the
amount of related capitalized interest expense, and (y) the Systems and
Implementation Project, up to an aggregate amount not to exceed $4,000,000
during the term of this Agreement)
SECTION 13. AMENDMENT OF SECTION 9.18 OF THE AGREEMENT. Section 9.18
is amended (i) to replace in clause (i)(x) the reference to "December 31, 1994"
with a reference to "September 30, 1994", (ii) to replace in clause (i)(y)
"each year ending after December 31, 1994" with "each fiscal year ending after
September 30, 1994", (iii) to replace in clause (ii) the reference to "December
31, 1994" with a reference to "September 30, 1994", (iv) to replace the period
at the end of clause (ii) with "; PLUS" and (v) to add the following new clause
(iii) after clause (ii):
(iii) for the term of this Agreement, Capital Expenditures incurred in
connection with (x) the Tenter Line #65 Project, up to an aggregate amount
not to exceed an amount equal to the sum of $45,000,000 plus the amount of
related capitalized interest expense, and (y) the Systems and
Implementation Project, up to an aggregate amount not to exceed $4,000,000.
5
<PAGE> 6
SECTION 14. AMENDMENT OF SCHEDULE III TO THE AGREEMENT. Schedule III
to the Agreement is amended and restated in its entirety to read as attached
hereto.
SECTION 15. AMENDMENT OF EXHIBIT A TO THE AGREEMENT. Exhibit A to the
Agreement is amended and restated in its entirety to read as attached hereto.
SECTION 16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 17. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective on the date when all of the following
conditions shall have been fulfilled to the satisfaction of the Administrative
Agent:
(a) CORPORATE ACTION. The Administrative Agent shall have received
certified copies of the certificate of incorporation and by-laws of the
Company and of all corporate action taken by the Company authorizing the
execution, delivery and performance of this Amendment and each other
agreement or document to which it is a party being executed in connection
with this Amendment (including, without limitation, a certificate of the
Company setting forth the resolutions of its Board of Directors authorizing
the transactions contemplated thereby).
(b) INCUMBENCY. The Company shall have delivered to the Administrative
Agent a certificate in respect of the name and signature of each of the
officers (i) who is authorized to sign on its behalf the Basic Documents to
which it is a party and (ii) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other
communications in connection with such Basic Documents. The Administrative
Agent and each Lender may conclusively rely on such certificates until it
receives notice in writing from the Company to the contrary.
(C) NOTES. The Administrative Agent shall have received new Term Notes
for each Lender substantially in the form of Exhibit A hereto, duly
completed and executed.
6
<PAGE> 7
(d) FEES AND EXPENSES. The Company shall have paid to the
Administrative Agent all amounts payable under Section 12.03 of the
Agreement on or before the date of this Amendment.
(e) OPINION OF COUNSEL TO THE COMPANY. The Administrative Agent shall
have received an opinion of Ropes & Gray, Massachusetts counsel to the
Company, in form and substance satisfactory to the Administrative Agent.
(f) COUNTERPARTS. The Administrative Agent shall have received
counterparts of this Amendment executed and delivered by or on behalf of
each of the parties hereto (or, in the case of any Lender as to which the
Administrative Agent shall not have received such a counterpart, the
Administrative Agent shall have received evidence satisfactory to it of the
execution and delivery by such Lender of a counterpart hereof).
(g) OTHER DOCUMENTS. The Administrative Agent shall have received such
other documents relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request.
SECTION 18. AUTHORIZATION. Each of the Lenders hereby authorizes the
Administrative Agent to execute any and all amendments or supplements to the
Security Documents necessary or advisable to reflect the provisions set forth in
this Amendment.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/ David N. Terhune
----------------------------------
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION)
By /s/ Peter Dedousis
----------------------------------
Title: Managing Director
LASALLE BUSINESS CREDIT, INC.
By /s/ J. David Kommalan
----------------------------------
Title: Regional Vice President
PNC BANK, N.A.
By /s/ Patrick J. Clerihan
----------------------------------
Title: Vice President
SHAWMUT BANK, N.A.
By /s/ Jeanie Leet
----------------------------------
Title: Relationship Manager
SIGNET BANK/VIRGINIA
By /s/ John Scott
----------------------------------
Title: Vice President
8
<PAGE> 9
ANNEX I
Lender Term Commitment
- ------ ---------------
The Chase Manhattan Bank
(National Association) $4,692,444.46
LaSalle Business Credit, Inc. $5,633,093.99
PNC Bank, N.A. $4,224,820.52
Shawmut Bank, N.A. $5,633,094.02
Signet Bank/Virginia $2,816,547.01
<PAGE> 10
SCHEDULE III
Scheduled Term Commitment Reductions
------------------------------------
Term Commitment
Reduction
---------------
Each Quarterly Date Falling in
the Period from and including
December 31, 1994 through and
including December 31, 1998 $1,000,000
March 31, 1999 $6,000,000
<PAGE> 11
Exhibit 10.1.1
[CONFORMED COPY]
WAIVER AND AMENDMENT NO. 2
WAIVER AND AMENDMENT NO. 2 (the "AMENDMENT") dated as of July 10, 1995
among: APPLIED EXTRUSION TECHNOLOGIES, INC. (the "COMPANY") and the LENDERS
listed on the signature pages hereof (the "Lenders").
W I T N E S S E T H :
WHEREAS, the parties hereto and The Chase Manhattan Bank (National
Association), as Administrative Agent (the "ADMINISTRATIVE AGENT"), have
heretofore entered into a Credit Agreement dated as of April 7, 1994 (as amended
by Amendment No. 1 thereto dated as of December 30, 1994, the "AGREEMENT"); and
WHEREAS, the Company and the Lenders have agreed (i) to amend the
Agreement to increase the amount of capital expenditures permitted under the
Agreement in connection with building a new tenter line, provided that the
Company has received certain net cash proceeds from a public offering of its
common stock, (ii) to make certain related changes and (iii) to grant a waiver
in connection with the sale of certain assets by the Company, all as more fully
set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined in the recitals above, each term used herein which is defined in the
Agreement shall have the meaning assigned to such term in the Agreement.
SECTION 2. AMENDMENT OF SECTION 1.01 OF THE AGREEMENT. The following
definitions are added in the appropriate alphabetical order:
"AMENDMENT NO. 2 EFFECTIVE DATE" shall mean the date as of which
Amendment No. 2 dated as of July 10, 1995 to this Agreement shall have
become effective.
"NET EQUITY PROCEEDS" shall mean the amount of gross cash proceeds
received by the Company from the
<PAGE> 12
issuance of its common stock less all out-of-pocket expenses, discounts and
commissions.
"TENTER LINE #66 PROJECT" shall mean an eight meter tenter line for
the production of oriented polypropylene to be located at the Company's
Terre Haute, Indiana facility.
SECTION 3. AMENDMENT OF SECTION 9.11 OF THE AGREEMENT. Section 9.11 is
amended (i) to delete the word "and" immediately before the reference to clause
(y) in the parenthetical immediately following "MINUS Capital Expenditures" and
(ii) to add the following text immediately after clause (y) in such
parenthetical:
and (z) the Tenter Line #66 Project, up to an aggregate amount not to
exceed, during the term of this Agreement, the amount by which the sum of
$50,000,000 plus the amount of related capitalized interest expense exceeds
the Net Equity Proceeds from the issuance by the Company of its common
stock during the 90-day period commencing on the Amendment No. 2 Effective
Date; PROVIDED that Capital Expenditures pursuant to this clause (z) shall
be excluded from the calculation of Capital Expenditures for purposes of
this Section 9.11 only if such Net Equity Proceeds shall be at least
$30,000,000O
SECTION 4. AMENDMENT OF SECTION 9.12(vii) OF THE AGREEMENT. Section
9.12(vii) is amended to replace "the aggregate outstanding principal amount of
the Term Loans" with "the Term Commitments".
SECTION 5. AMENDMENT OF SECTION 9.18 OF THE AGREEMENT. Section 9.18 is
amended (i) to delete the word "and" immediately before the reference to clause
(y) in clause (iii) and (ii) to add the following text immediately after clause
(y) in clause (iii):
and (z) the Tenter Line #66 Project, up to an aggregate amount not to
exceed, during the term of this Agreement, an amount equal to the sum of
$50,000,000 plus the amount of related capitalized interest expense;
PROVIDED that the Company shall be permitted to make Capital Expenditures
pursuant to this clause (z) only if the Net Equity Proceeds from the
issuance by the Company of its common stock during the 90-day period
commencing on the Amendment No. 2 Effective Date shall be at least
$30,000,000
2
<PAGE> 13
SECTION 6. WAIVER OF SECTION 9.12(vii) OF THE AGREEMENT. Each of the
Lenders hereby waives the Company's compliance with the requirement set forth in
Section 9.12(vii) that the Board of Directors determine in good faith that the
amount of cash proceeds of approximately $1,400,000, received by the Company for
the sale of fixed assets and inventory relating to the Company's drainage net
business pursuant to the Asset Purchase Agreement dated April 1995 by and
between the Company and The Tensar Corporation, is not less than the fair market
value of such fixed assets and inventory.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective on the date when the Administrative Agent
shall have received counterparts of this Amendment executed and delivered by or
on behalf of the Majority Lenders and the Company (or, in the case of any Lender
as to which the Administrative Agent shall not have received such a counterpart,
the Administrative Agent shall have received evidence satisfactory to it of the
execution and delivery by such Lender of a counterpart hereof).
3
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/ Anthony Allott
----------------------------------
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION)
By /s/ Peter Dedousis
----------------------------------
Title: Managing Director
LASALLE BUSINESS CREDIT, INC.
By /s/ Herbert M. Kidd II
----------------------------------
Title: Vice President
PNC BANK, N.A.
By /s/ Craig Sheetz
----------------------------------
Title: Vice President
SHAWMUT BANK, N.A.
By /s/ Jeanie Leet
----------------------------------
Title: Assistant Vice President
SIGNET BANK/VIRGINIA
By /s/ John D. Scott
----------------------------------
Title: Vice President
4
<PAGE> 15
Exhibit 10.1.1
[CONFORMED COPY]
AMENDMENT NO. 3
AMENDMENT NO. 3 (the "AMENDMENT") dated as of June 28, 1996 among: APPLIED
EXTRUSION TECHNOLOGIES, INC. (the "COMPANY") and the LENDERS listed on the
signature pages hereof (the "LENDERS").
W I T N E S S E T H:
WHEREAS, the parties hereto and The Chase Manhattan Bank (National
Association), as Administrative Agent (the "ADMINISTRATIVE AGENT"), have
heretofore entered into a Credit Agreement dated as of April 7, 1994 (as amended
by Amendment No. 1 thereto dated as of December 30, 1994 and Waiver and
Amendment No. 2 dated as of July 10, 1995, the "AGREEMENT"); and
WHEREAS, the Company and the Lenders have agreed (i) to correct references
to one of the Company's tenter line projects, (ii) to amend the interest
coverage ratio covenant for the period ended June 30, 1996 and the next five
periods thereafter and (iii) to amend the capital expenditures covenant, all as
more fully set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
in the recitals above, each term used herein which is defined in the Agreement
shall have the meaning assigned to such term in the Agreement.
SECTION 2. Amendment of Section 1.01 of the Agreement. Section 1.01 is
amended to replace the definition of "Tenter Line #66 Project" with the
following definition:
"TENTER LINE #71 PROJECT" shall mean a ten meter tenter line for the
production of oriented polypropylene located at the Company's Terre
Haute facility.
SECTION 3. Amendment of Section 9.10 of the Agreement. Section 9.10 is
amended to replace the word "year" with the word "period" and to replace the
table set forth therein with the following table:
<PAGE> 16
PERIOD RATIO
1994 1.75:1
1995 2.00:1
January 1, 1996-
March 31, 1996 2.25:1
April 1, 1996-
December 31, 1996 2.00:1
January 1, 1997-
September 30, 1997 2.25:1
October 1, 1997-
December 31, 1997 2.50:1
1998 and at all times thereafter 2.75:1
SECTION 4. Amendment of Section 9.11 of the Agreement. Section 9.11 is
amended to replace the words "Tenter Line #66 Project" with the words "Tenter
Line #71 Project".
SECTION 5. Amendment of Section 9.18 of the Agreement. Section 9.18 is
amended to replace the number "$12,000,000" with the number "$15,000,000" in
clause (i); to add the words "pursuant to clause (i) above" immediately after
the words "such period" in clause (ii); and to replace the words "Tenter Line
#66 Project" with the words "Tenter Line #71 Project" in clause (iii).
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS of THE STATE OF NEW YORK.
SECTION 7. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective as of the date first above written when the
Administrative Agent shall have received counterparts of this Amendment executed
and delivered by or on behalf of the Majority Lenders and the Company (or, in
the case of any Lender as to which the Administrative Agent shall not have
received such a counterpart, the Administrative Agent shall have received
evidence satisfactory to it of the execution and delivery by such Lender of a
counterpart hereof).
2
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/Anthony Allott
---------------------------------
Title: Vice President and
Treasurer
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION)
By /s/Peter Dedousis
---------------------------------
Title: Managing Director
LASALLE BUSINESS CREDIT, INC.
By /s/John C. Baier
---------------------------------
Title: Assistant Vice President
PNC BANK, N.A.
By /s/Craig T. Sheetz
---------------------------------
Title: Vice President
FLEET NATIONAL BANK.
By /s/Joseph Becker
---------------------------------
Title: Vice President
3
<PAGE> 18
SIGNET BANK/VIRGINA
By /s/John Scott
---------------------------------
Title: Vice President
4
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of June 1, 1996 by
and between Applied Extrusion Technologies, Inc., a Delaware corporation (the
"Company"), and Mark S. Abrahams ("Employee").
For and in consideration of the mutual promises, terms, provisions and
conditions contained in this Agreement, the Company and Employee hereby agree as
follows:
1. EMPLOYMENT. The Company offers and Employee accepts employment subject
to the terms and conditions set forth in this Agreement.
2. TERM. Subject to earlier termination as hereinafter provided, Employee's
employment hereunder shall be for a term of three years, commencing on June 1,
1996 and ending June 1, 1999, and shall automatically renew thereafter for
subsequent one year periods (the initial term and any renewal terms being
hereafter referred to collectively as the "Employment Term").
3. CAPACITY AND PERFORMANCE. Employee shall serve on a full-time basis as
the Vice President and General Manager, Specialty Nets and Profiles or in such
other senior executive position as the President of the Company may designate
from time to time, and shall perform such duties and responsibilities on behalf
of the Company as may be designated from time to time by the President of the
Company or by his designee. During the Employment Term, Employee shall devote
his full time and best efforts, business judgement, skill and knowledge to the
advancement of the Company's interests and to the discharge of his duties and
responsibilities hereunder. Employee shall not engage in any other business
activity during the term of this Agreement, except as may be approved in advance
in writing by the President.
<PAGE> 2
4. COMPENSATION AND BENEFITS. Subject to performance of Employee's duties
and of the obligations of Employee to the Company, pursuant to this Agreement or
otherwise:
(a) BASE SALARY. As compensation for all services performed under and
during that portion of the Employment Term commencing on June 1, 1996, the
Company shall pay Employee an annual base salary of $182,000 effective June 1,
1996 and thereafter. The base salary payable to Employee in periods after June
1, 1997 shall be subject to upward adjustment only as recommended by the
President of the Company or his designee consistent with the Company's
compensation policies and guidelines. The base salary in effect from time to
time is hereafter referred to as the "Base Salary." The Base Salary shall be
payable in accordance with the payroll practices of the Company for its
executives.
(b) BONUSES. The Employee's position with the Company will at all times
be a bonus-eligible position. Bonuses will be based upon objective criteria that
are defined annually by the Company.
(c) BENEFITS. Employee shall be entitled to participate in any and all
employee benefit plans, medical insurance plans, life insurance plans,
disability income plans, retirement plans, incentive compensation plans and
other benefit plans from time to time in effect for executives of the Company
generally, except to the extent such plans are duplicative of benefits otherwise
provided to Employee under this Agreement. In accordance with Company's policy,
Employee shall also be entitled to three weeks of paid vacation in any fiscal
year during his employment hereunder.
(d) BUSINESS EXPENSES. The Company shall pay or reimburse Employee for
all reasonable business expenses incurred or paid by him in the performance of
his duties and
2
<PAGE> 3
responsibilities hereunder, subject to such reasonable substantiation and
documentation as may be requested by the Company.
(e) COUNTRY CLUB DUES. The Company shall pay or reimburse Employee for
reasonable annual dues at a country club to be agreed upon by the Company and
Employee.
5. TERMINATION AND TERMINATION BENEFITS. Notwithstanding the provisions of
Section 2, Employee's employment hereunder shall terminate under the following
circumstances:
(a) DEATH. In the event of Employee's death, Employee's employment
hereunder shall immediately and automatically terminate. In such event, the
Company shall pay to the Employee's estate an amount equal to any unpaid Base
Salary and declared bonus and benefits accrued through the date of Employee's
death.
(b) Disability.
----------
(i) The Company may terminate Employee's employment hereunder,
upon written notice to Employee, in the event that Employee becomes disabled
through any illness, injury, accident or condition of either a physical or
psychological nature and, as a result, is unable to perform substantially all of
his duties and responsibilities hereunder for one hundred eighty (180) days
during any period of three hundred and sixty-five (365) consecutive calendar
days.
(ii) The President of the Company may designate another employee to
act in Employee's place during any period of his disability. Notwithstanding any
such designation, Employee shall continue to receive his full salary and
benefits in accordance with Section 4 of this Agreement until he becomes
eligible for disability income under the Company's disability income plan or
until the termination of his employment hereunder, whichever shall first occur.
(iii) While receiving disability income payments under the Company's
3
<PAGE> 4
disability income plan, Employee shall not be entitled to receive any Base
Salary under Section 4(a) or any bonus under Section 4(b), but shall continue to
participate in Company benefit plans in accordance with Section 4(c) until the
termination of his employment hereunder. The terms of the disability plan
maintained by the Company, if any, will govern the Employee's entitlement to and
the payment of disability income to Employee.
(iv) If any question shall arise as to whether during any period
Employee is disabled, Employee may, and at the request of the Company shall,
submit to a medical examination by a physician selected by the Company to whom
Employee or his guardian has no reasonable objection to determine whether
Employee is so disabled and such determination shall for the purposes of this
Agreement be conclusive of this issue. If such question shall arise and Employee
shall fail to submit to such medical examination, the Company's determination of
the issue shall be binding on Employee.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
Employee's employment hereunder for cause at any time upon written notice to
Employee setting forth in reasonable detail the nature of such cause. The
following shall constitute "cause" for termination:
(i) Employee's willful and material failure to perform (except by
reason of disability or death), or willful and material
negligence in the performance of, his duties and
responsibilities;
(ii) other material breach by Employee of any provision of this
Agreement; or
(iii) other conduct by Employee that is materially harmful to the
business or interests of the Company,
as determined by the Company in its reasonable judgment. Upon the giving of
written notice of
4
<PAGE> 5
termination of Employee's employment hereunder for cause, the Company shall have
no further obligation to Employee other than for Base Salary earned to the date
of termination.
(d) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate Employee's employment hereunder other than for cause at any time upon
written notice to Employee. In the event of such termination, (i) the Company
shall continue to pay Employee the Base Salary at the rate in effect at the date
of termination for the remaining balance of the term of his employment hereunder
payable at such times and in such amounts as Employee would have received if his
employment hereunder had not been terminated, and (ii) Employee may, subject to
applicable employee contribution, continue participation in the Company's group
medical insurance plan; PROVIDED, HOWEVER, that if such termination is after
June 1, 1998, then until the earliest of (iii) the date after June 1, 1999 on
which Employee has commenced full-time employment and (iv) one year from the
date of termination, the Company shall continue to pay to Employee the Base
Salary at the rate in effect at the date of termination, payable at such times
and in such amounts as Employee would have received if his employment hereunder
had not been terminated.
(e) TERMINATION BY EMPLOYEE. The Employee may terminate his employment
hereunder at any time upon 90 days written notice to the Company.
6. EFFECT OF TERMINATION. Payment by the Company of any amount that it may
be required to pay Employee pursuant to Section 5 upon termination of his
employment hereunder shall constitute the entire obligation of the Company to
Employee, and performance by the Company shall constitute full settlement of any
claim that Employee might otherwise assert against the Company or any director,
officer or employee of the Company as a result of or in connection
5
<PAGE> 6
with such termination. The provisions of Sections 6, 7, 8 and 9 of this
Agreement shall survive termination.
7. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Employee shall not
disclose to any other person (except as required by applicable law or in
connection with the performance of his duties and responsibilities hereunder),
or use for his own benefit or gain, any Confidential Information (as defined
below) relating to the business conducted or proposed to be conducted by the
Company. Employee understands that this restriction shall continue to apply
after Employee's employment terminates, regardless of the reason for such
termination. "Confidential Information" includes without limitation such
information relating to (i) the development, research, testing, manufacturing
and marketing activities of the Company, (ii) the products manufactured, sold or
distributed by the Company, (iii) the costs, sources of supply and strategic
plans of the Company, (iv) the identity and special needs of the customers of
the Company and (v) people and organizations with whom the Company has business
relationships and the existence or nature of those relationships. Confidential
Information also includes comparable information that the Company may receive or
has received belonging to customers or others who do business with the Company.
8. RESTRICTED ACTIVITIES. Employee agrees that some restrictions on his
activities during and after his employment with the Company are necessary to
protect the goodwill, Confidential Information and other legitimate business
interests of the Company. In recognition thereof, while he is employed by the
Company and for a period of two years immediately following termination of his
employment with the Company (the "Restricted Period"), Employee shall not,
directly or indirectly, whether as owner, partner, investor, consultant, agent,
employee,
6
<PAGE> 7
co-venturer or otherwise, compete with the Company. Specifically, but without
limiting the foregoing, Employee agrees not to engage in any manner in any
activity that is directly or indirectly competitive or potentially competitive
with the business of the Company as conducted at any time during his employment
by the Company. The foregoing restriction shall not prevent Employee from owning
5% or less of the equity securities of any publicly traded company or from
accepting employment from or providing consulting services to any person who
does not compete with the Company.
9. RELIEF, INTERPRETATION. Employee agrees that the Company shall, in
addition to any other remedies available to it, be entitled to preliminary and
permanent injunctive relief against any breach by him of the covenants contained
in Sections 6, 7 and 8, without having to post bond. In the event that any
provision of Sections 6, 7, and 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area or too great a range of activities, it shall
be interpreted to extend only over the maximum period of time, geographic area
or range of activities as to which it may be enforceable. For purposes of
Sections 6, 7 and 8, the term "Company" shall mean the Company and any of its
subsidiaries and affiliates who are such during the term of the Employee's
employment with the Company.
10. CONFLICTING AGREEMENTS. Employee hereby represents and warrants that
the execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which he is a
party or is bound, and that he is not subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder. Employee will not disclose to or use on behalf of the
Company any proprietary information of a third party without such party's
consent.
7
<PAGE> 8
11. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
12. ASSIGNMENT. Neither the Company nor Employee may make any assignment of
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party; PROVIDED, HOWEVER, that the
Company may assign its rights and obligations hereunder without the consent of
Employee in the event that the Company shall hereafter effect a reorganization,
consolidate with, or merge into any other person or transfer all or
substantially all of its properties or assets to any other person. This
Agreement shall inure to the benefit of and be binding upon the Company and
Employee, their respective successors, executors, administrators, heir and
permitted assigns.
13. ENFORCEABILITY. If any portion or provision of this Agreement shall be
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provisions in circumstances other than those as to which is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
14. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. NOTICES. Any notices, requests, demands or other communications
provided for by
8
<PAGE> 9
this Agreement shall be in writing and shall be effective when delivered in
person or deposited in the United States mail, postage prepaid, registered or
certified mail, and addressed to Employee at his address set forth under his
signature on the last page hereof or such other address as Employee shall have
notified the Company of in writing, or, in the case of notice to the Company,
addressed to it at its main office, to the attention of the President.
16. MISCELLANEOUS. This Agreement constitutes the entire agreement between
the parties and supersedes any prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment. This Agreement may be amended or modified only by a
written instrument signed by Employee and by a duly authorized representative of
the Company. This is a Massachusetts contract and shall be construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts,
without regard to the conflict of laws principles thereof.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by Employee, as of the date
first above written.
EMPLOYEE: APPLIED EXTRUSION TECHNOLOGIES, INC.
/s/ Mark S. Abrahams By: /s/ Thomas E. Williams
- ---------------------------- ---------------------------------
Address: 3495 Montchemin Rd. Title: President and Chief Executive
Wilmington, DE 19807 Officer
Date: 10/02/96
9
<PAGE> 1
Exhibit 10.8
CONFIDENTIAL
------------
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of February 1, 1996
by and between Applied Extrusion Technologies, Inc., a Delaware corporation (the
"Company"), and David N. Terhune ("Employee").
For and in consideration of the mutual promises, terms, provisions and
conditions contained in this Agreement, the Company and Employee hereby agree as
follows:
1. EMPLOYMENT. The Company offers and Employee accepts employment subject
to the terms and conditions set forth in this Agreement.
2. TERM. Subject to earlier termination as hereinafter provided, Employee's
employment hereunder shall be for a term of three years, commencing on February
1, 1996 and ending January 31, 1999, and shall automatically renew thereafter
for subsequent one year periods (the initial term and any renewal terms being
hereafter referred to collectively as the "Employment Term").
3. CAPACITY AND PERFORMANCE. Employee shall serve on a full-time basis as
the Company's Executive Vice President and Chief Operating Officer or in such
other senior executive position as the President of the Company may designate
from time to time, and shall perform such duties and responsibilities on behalf
of the Company as may be designated from time to time by the President of the
Company or by his designee. During the Employment Term, Employee shall devote
his full time and best efforts, business judgement, skill and knowledge to the
advancement of the Company's interests and to the discharge of his duties and
responsibilities hereunder. Employee shall not engage in any other business
activity
<PAGE> 2
during the term of this Agreement, except as may be approved in advance in
writing by the President.
4. COMPENSATION AND BENEFITS. Subject to performance of Employee's duties
and of the obligations of Employee to the Company, pursuant to this Agreement or
otherwise:
(a) BASE SALARY. As compensation for all services performed under and
during his employment hereunder, the Company shall pay Employee an annual base
salary of $300,000. The base salary payable to Employee in periods after
February 1, 1997 shall be subject to upward adjustment only as recommended by
the President of the Company or his designee consistent with the Company's
compensation policies and guidelines. The base salary in effect from time to
time is hereafter referred to as the "Base Salary." The Base Salary shall be
payable in accordance with the payroll practices of the Company for its
executives.
(b) BONUSES. The Employee's position with the Company will at all times
be a bonus-eligible position. Bonuses will be based upon objective criteria that
are defined annually by the Company and will be targeted at 50% of Base Salary.
(c) BENEFITS. Employee shall be entitled to participate in any and all
employee benefit plans, medical insurance plans, life insurance plans,
disability income plans, retirement plans, incentive compensation plans and
other benefit plans from time to time in effect for executives of the Company
generally, except to the extent such plans are duplicative of benefits otherwise
provided to Employee under this Agreement. Employee shall be entitled to
receive, at the Company's expense, a complete physical examination by a
physician of his choice. In accordance with Company's policy, Employee shall
also be entitled to four weeks of paid vacation in any fiscal year during his
employment hereunder.
2
<PAGE> 3
(d) BUSINESS EXPENSES. The Company shall pay or reimburse Employee for
all reasonable business expenses incurred or paid by him in the performance of
his duties and responsibilities hereunder, subject to such reasonable
substantiation and documentation as may be requested by the Company.
(e) AUTOMOBILE. During the Employment Term, the Employee shall be
furnished with an automobile either owned or leased by the Company or an
automobile allowance, at the discretion of the Company.
(f) COUNTRY CLUB MEMBERSHIP. During the Employment Term, the Company
shall either pay the Employee's membership expenses (including fees, dues and
related expenses) or otherwise make available to the Employee at no cost to the
Employee, membership at a country club to be agreed upon by the Employee and the
Company.
5. TERMINATION AND TERMINATION BENEFITS. Notwithstanding the provisions of
Section 2, Employee's employment hereunder shall terminate under the following
circumstances:
(a) DEATH. In the event of Employee's death, Employee's employment
hereunder shall immediately and automatically terminate. In such event, the
Company shall pay to the Employee's estate an amount equal to any unpaid Base
Salary and declared bonus and benefits accrued through the date of Employee's
death.
(b) Disability.
----------
(i) The Company may terminate Employee's employment hereunder,
upon written notice to Employee, in the event that Employee becomes disabled
through any illness, injury, accident or condition of either a physical or
psychological nature and, as a
3
<PAGE> 4
result, is unable to perform substantially all of his duties and
responsibilities hereunder for one hundred eighty (180) days during any period
of three hundred and sixty-five (365) consecutive calendar days.
(ii) The President of the Company may designate another employee to
act in Employee's place during any period of his disability. Notwithstanding any
such designation, Employee shall continue to receive his full salary and
benefits in accordance with Section 4 of this Agreement until he becomes
eligible for disability income under the Company's disability income plan or
until the termination of his employment hereunder, whichever shall first occur.
(iii) While receiving disability income payments under the Company's
disability income plan, Employee shall not be entitled to receive any Base
Salary under Section 4(a) or any bonus under Section 4(b), but shall continue to
participate in Company benefit plans in accordance with Section 4(c) until the
termination of his employment hereunder. The terms of the disability plan
maintained by the Company, if any, will govern the Employee's entitlement to and
the payment of disability income to Employee.
(iv) If any question shall arise as to whether during any period
Employee is disabled, Employee may, and at the request of the Company shall,
submit to a medical examination by a physician selected by the Company to whom
Employee or his guardian has no reasonable objection to determine whether
Employee is so disabled and such determination shall for the purposes of this
Agreement be conclusive of this issue. If such question shall arise and Employee
shall fail to submit to such medical examination, the Company's determination of
the issue shall be binding on Employee.
4
<PAGE> 5
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
Employee's employment hereunder for cause at any time upon written notice to
Employee setting forth in reasonable detail the nature of such cause. The
following shall constitute "cause" for termination:
(i) Employee's willful and material failure to perform (except by
reason of disability or death), or willful and material
negligence in the performance of, his duties and
responsibilities;
(ii) other material breach by Employee of any provision of this
Agreement; or
(iii) other conduct by Employee that is materially harmful to the
business or interests of the Company,
as determined by the Company in its reasonable judgment. Upon the giving of
written notice of termination of Employee's employment hereunder for cause, the
Company shall have no further obligation to Employee other than for Base Salary
earned to the date of termination.
(d) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. The Company may
terminate Employee's employment hereunder other than for cause at any time upon
written notice to Employee. In the event of such termination, (i) the Company
shall continue to pay Employee the Base Salary at the rate in effect at the date
of termination for the remaining balance of the term of his employment hereunder
payable at such times and in such amounts as Employee would have received if his
employment hereunder had not been terminated, and (ii) Employee may, subject to
applicable employee contribution, continue participation in the Company's group
medical insurance plan; PROVIDED, HOWEVER, that if such termination is after
July 31, 1998, then until the earliest of (iii) the date after January 31, 1999
on which Employee has commenced full-time employment and (iv) eighteen months
from the date of termination,
5
<PAGE> 6
the Company shall continue to pay to Employee the Base Salary at the rate in
effect at the date of termination, payable at such times and in such amounts as
Employee would have received if his employment hereunder had not been
terminated. Employee agrees to use his best efforts to find other employment
acceptable to Employee under the preceding sentence.
6. EFFECT OF TERMINATION. Payment by the Company of any amount that it may
be required to pay Employee pursuant to Section 5 upon termination of his
employment hereunder shall constitute the entire obligation of the Company to
Employee, and performance by the Company shall constitute full settlement of any
claim that Employee might otherwise assert against the Company or any director,
officer or employee of the Company as a result of or in connection with such
termination. The provisions of Sections 6, 7, 8 and 9 of this Agreement shall
survive termination.
7. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Employee shall not
disclose to any other person (except as required by applicable law or in
connection with the performance of his duties and responsibilities hereunder),
or use for his own benefit or gain, any Confidential Information (as defined
below) relating to the business conducted or proposed to be conducted by the
Company. Employee understands that this restriction shall continue to apply
after Employee's employment terminates, regardless of the reason for such
termination. "Confidential Information" includes without limitation such
information relating to (i) the development, research, testing, manufacturing
and marketing activities of the Company, (ii) the products manufactured, sold or
distributed by the Company, (iii) the costs, sources of supply and strategic
plans of the Company, (iv) the identity and special needs of the customers of
the Company and (v) people and organizations with whom the Company has business
6
<PAGE> 7
relationships and the existence or nature of those relationships. Confidential
Information also includes comparable information that the Company may receive or
has received belonging to customers or others who do business with the Company.
8. RESTRICTED ACTIVITIES. Employee agrees that some restrictions on his
activities during and after his employment with the Company are necessary to
protect the goodwill, Confidential Information and other legitimate business
interests of the Company. In recognition thereof, while he is employed by the
Company and for a period of two years immediately following termination of his
employment with the Company (the "Restricted Period"), Employee shall not,
directly or indirectly, whether as owner, partner, investor, consultant, agent,
employee, co-venturer or otherwise, compete with the Company. Specifically, but
without limiting the foregoing, Employee agrees not to engage in any manner in
any activity that is directly or indirectly competitive or potentially
competitive with the business of the Company as conducted at any time during his
employment by the Company. The foregoing restriction shall not prevent Employee
from owning 5% or less of the equity securities of any publicly traded company
or from accepting employment from or providing consulting services to any person
who does not compete with the Company.
9. RELIEF, INTERPRETATION. Employee agrees that the Company shall, in
addition to any other remedies available to it, be entitled to preliminary and
permanent injunctive relief against any breach by him of the covenants contained
in Sections 6, 7 and 8, without having to post bond. In the event that any
provision of Sections 6, 7, and 8 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area or too great a range of activities, it shall
be interpreted to extend only over the maximum period of time, geographic area
or range of
7
<PAGE> 8
activities as to which it may be enforceable. For purposes of Sections 6, 7 and
8, the term "Company" shall mean the Company and any of its subsidiaries and
affiliates who are such during the term of the Employee's employment with the
Company.
10. CONFLICTING AGREEMENTS. Employee hereby represents and warrants that
the execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which he is a
party or is bound, and that he is not subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder. Employee will not disclose to or use on behalf of the
Company any proprietary information of a third party without such party's
consent.
11. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
12. ASSIGNMENT. Neither the Company nor Employee may make any assignment of
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party; PROVIDED, HOWEVER, that the
Company may assign its rights and obligations hereunder without the consent of
Employee in the event that the Company shall hereafter effect a reorganization,
consolidate with, or merge into any other person or transfer all or
substantially all of its properties or assets to any other person. This
Agreement shall inure to the benefit of and be binding upon the Company and
Employee, their respective successors, executors, administrators, heir and
permitted assigns.
13. ENFORCEABILITY. If any portion or provision of this Agreement shall be
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provisions in circumstances
8
<PAGE> 9
other than those as to which is so declared illegal or unenforceable, shall not
be affected thereby, and each portion and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
14. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
15. NOTICES. Any notices, requests, demands or other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified mail, and addressed to Employee at his address set forth
under his signature on the last page hereof or such other address as Employee
shall have notified the Company of in writing, or, in the case of notice to the
Company, addressed to it at its main office, to the attention of the President.
16. MISCELLANEOUS. This Agreement constitutes the entire agreement between
the parties and supersedes any prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment, with the exception of previously granted stock options
and a separate three year incentive-based deferred compensation program between
the employee and the Company. This Agreement may be amended or modified only by
a written instrument signed by Employee and by a duly authorized representative
of the Company. This is a Massachusetts contract and shall be construed and
enforced in accordance with the laws of The Commonwealth of Massachusetts,
without regard to the conflict of laws principles thereof.
9
<PAGE> 10
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by Employee, as of the date
first above written.
EMPLOYEE: APPLIED EXTRUSION TECHNOLOGIES, INC.
/s/ David N. Terhune By: /s/ Thomas E. Williams
- --------------------------- --------------------------------
Address: 16 Powderhouse Ln. Title: President and Chief Executive
Boxford, MA Officer
Date: March 8, 1996
10
<PAGE> 11
July 3, 1996
David N. Terhune
Executive Vice President and
Chief Operating Officer
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, MA 01960
Dear David:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms the agreement between you and the Company, as approved by
resolution of the Board of Directors dated May 8, 1996, providing that in the
event of a change of control of the Company (as "change of control" is defined
in Exhibit A to the Company's 1991 Stock Option Plan for Directors, as of May
8, 1996) occurring at any time prior to May 9, 1998, (i) your Employment
Agreement will automatically be renewed for a period equal to its original
term, (ii) all outstanding options held by you will vest (to the extent not
already vested) immediately upon such change of control.
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
/s/ Thomas E. Williams
By:______________________________________
Thomas E. Williams
President and Chief Executive Officer
Agreed and accepted this 8th day of July, 1996
/s/ David N. Terhune
- ---------------------------------------------
David N. Terhune
cc: Gerald M. Haines, II, General Counsel
<PAGE> 1
Exhibit 10.9
SEVERANCE AGREEMENT
This Agreement is dated as of May 1, 1996 by and between Applied Extrusion
Technologies, Inc., a Delaware corporation (the "Company"), and Anthony J.
Allott, an individual residing at 18 Washington Street, Marblehead,
Massachusetts, 01945 ("Employee").
For and in consideration of the mutual promises, terms, provisions and
conditions contained in this Agreement, the Company and Employee hereby agree as
follows:
1. TERMINATION AND TERMINATION BENEFITS. In the event that Employee's
employment with the Company is terminated by the Company at any time, the
following provisions shall apply with respect to such termination:
(A) TERMINATION BY THE COMPANY FOR CAUSE. In the event that the Company
terminates Employee's employment hereunder for cause, the Company shall have no
further obligation to Employee other than for base salary earned up to the date
of termination. Any such termination for cause shall be given by written notice
to Employee setting forth in reasonable detail the nature of such cause. As used
herein, the term "cause" shall mean:
(i) Employee's willful and material failure to perform (except by
reason of disability or death), or willful and material negligence
in the performance of, his duties and responsibilities;
(ii) other material breach by Employee of any provision of this
Agreement; or
(iii) other conduct by Employee that is materially harmful to the
business or interests of the Company;
as determined by the Company in its reasonable judgment.
(B) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. In the event that
the Company terminates Employee's employment hereunder at any time other than
for cause, (i) the Company shall continue to pay Employee his base salary at the
rate in effect at the date of termination, payable at such times and in such
amounts as Employee would have received if his employment hereunder had not been
terminated, until the earliest of (a) the date on which Employee commences other
comparable full-time employment, and (b) one year from the date of termination;
and (ii) Employee may, subject to applicable employee contribution, continue
participation in the Company's group medical and dental insurance plans.
Employee agrees to use his best reasonable efforts to find other comparable
full-time employment as referenced in the preceding sentence.
2. EFFECT OF TERMINATION. Payment by the Company of any amount that it may
be required to pay Employee pursuant to Section 1 upon termination of his
employment hereunder shall constitute the entire obligation of the Company to
Employee, and performance by the Company shall constitute full settlement of any
claim that Employee might otherwise assert against the Company or any director,
officer or employee of the Company as a result of or in connection with such
<PAGE> 2
termination. The provisions of Sections 2, 3, and 4 of this Agreement shall
survive termination.
3. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Employee shall not
disclose to any other person (except as required by applicable law or in
connection with the performance of his duties and responsibilities hereunder),
or use for his own benefit or gain, any Confidential Information (as defined
below) relating to the business conducted or proposed to be conducted by the
Company. Employee understands that this restriction shall continue to apply
after Employee's employment terminates, regardless of the reason for such
termination. "Confidential Information" includes, without limitation,
information relating to (i) the development, research, testing, manufacturing,
marketing and financial activities of the Company, (ii) the products
manufactured, sold or distributed by the Company, (iii) the costs, sources of
supply and strategic plans of the Company, (iv) the identity and special needs
of the customers of the Company, and (v) people and organizations with whom the
Company has business relationships and the existence or nature of those
relationships. Confidential Information also includes comparable information
that the Company may receive or has received belonging to customers or others
who do business with the Company.
4. RESTRICTED ACTIVITIES. Employee agrees that some restrictions on his
activities during and after his employment with the Company are necessary to
protect the goodwill, Confidential Information and other legitimate business
interests of the Company. In recognition thereof, while he is employed by the
Company and for a period of one year immediately following termination of his
employment with the Company (the "Restricted Period"), Employee shall not (i)
directly or indirectly, whether as owner, partner, investor, consultant, agent,
employee, co-venturer or otherwise, compete with the Company, or (ii) solicit
any individual who is or has been within the prior six months employed by the
Company to leave the employment of the Company or to become associated, whether
as an owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, with any individual or entity selling products which compete with the
products sold by the Company. Specifically, but without limiting the foregoing,
Employee agrees not to engage in any manner in any activity that is directly or
indirectly competitive or potentially competitive with the business of the
Company as conducted at any time during his employment by the Company. The
foregoing restrictions shall not prevent Employee from owning 5% or less of the
equity securities of any publicly traded company or from accepting employment
from or providing consulting services to any person who does not compete with
the Company.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by Employee, as of the date
first above written.
EMPLOYEE: APPLIED EXTRUSION TECHNOLOGIES, INC.
/s/ Anthony J. Allott By: /s/ Thomas E. Williams
- --------------------- --------------------------------
Anthony J. Allott Thomas E. Williams,
President and Chief Executive
Officer
2
<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of April 26,
1994 between Applied Extrusion Technologies, Inc. (the "Company") and Amin J.
Khoury ("Executive").
Recitals
--------
1. The Executive is presently employed by the Company as its Chairman of
the Board.
2. The services and ability of the Executive have constituted a major
factor in the growth and development of the Company.
3. The Company desires to continue to employ and retain Executive and to
make secure for itself the experience, abilities and services of the Executive
and to prevent the loss of such experience, services and abilities.
4. In consideration of the employment to be provided hereby and the amounts
to be paid as provided herein, the Executive desires to be employed by the
Company, and to agree with the Company as further provided herein.
NOW, THEREFORE, for and in consideration of the mutual promises, terms,
provisions and conditions contained in this Agreement, the Company and Executive
agree as follows:
1. EMPLOYMENT. The Company offers and Executive accepts employment subject
to the terms and conditions set forth in this Agreement.
2. TERM. Executive's employment hereunder shall be for a period (the
"Term") of five (5) years, commencing on the date hereof, which Term shall be
extended after the fifth anniversary of the date hereof from day to day,
provided that this Agreement shall expire on or after the fifth anniversary
hereof upon thirty (30) days notice from either the Company or the Executive,
which notice may first be given on April 25, 1999 and thereafter on the last
business day of any month (such date of expiration referred to hereinafter as
(the "Expiration Date"), unless such employment shall have been sooner
terminated as hereinafter set forth.
3. CAPACITY AND PERFORMANCE. Executive shall serve the Company as Chairman
of the Board of Directors and shall perform such duties and responsibilities on
behalf of the Company as may
<PAGE> 2
be designated from time to time by the Board of Directors. During the Term,
Executive shall devote his best efforts, business judgment, skill and knowledge
to the advancement of the Company's interests and to the discharge of his duties
and responsibilities hereunder; provided that Executive shall be required only
to devote so much time as Executive determines is reasonably necessary to
discharge his duties [as non-executive] Chairman of the Board, and, subject to
the provisions of Sections 5 and 6, may engage in other business activities
during the Term.
4. Compensation and Benefits.
-------------------------
(a) BASE SALARY AND BONUS. As compensation for services performed, the
Company shall pay Executive an annual base salary of $360,000, subject to annual
increases at the discretion of the Board of Directors. Such base salary as so
adjusted is hereinafter referred to as the "Base Salary". The Base Salary shall
be payable in accordance with the Company's practice for its executive employees
generally.
(b) BENEFITS. In addition to Base Salary, Executive shall be entitled
to participate in all employees benefit plans, medical insurance plans, life
insurance plans, disability income plans, profit sharing plans and similar plans
from time to time in effect for the Company's executives generally.
5. Termination and Compensation Thereon.
------------------------------------
(a) DEATH. The Executive's employment hereunder shall terminate upon
his death. In such event, the Company shall pay to such person as the Executive
shall have designated in a notice filed with the Company, or, if no such person
shall have been designated, to his estate, an amount equal to the Base Salary
that would have been due to the Executive had this Agreement been in effect from
the date of his death until the Expiration Date.
(b) DISABILITY. If in the reasonable judgment of the Board of
Directors of the Company, as a result of Executive's incapacity due to physical
or mental illness or otherwise, Executive shall for at least nine consecutive
months during the term have been unable to perform his duties under this
Agreement, the Company may terminate Executive's employment hereunder by notice
to Executive. In such event, the Company shall continue to pay Executive the
Base Salary he would have been entitled to until the Expiration Date, and
Executive shall continue to participate in the Company's employee benefit plans
and disability plans. Any dispute between the Board of Directors of the Company
and Executive with respect to Executive's incapacity shall be settled by
reference to a competent medical authority mutually agreed to by the Board of
Directors and the Executive, whose decision shall be binding on all parties.
- 2 -
<PAGE> 3
(c) TERMINATION BY THE COMPANY. On or after April 26, 1999, the
Company may terminate the Executive's employment hereunder in accordance with
the terms and provisions of Section 1 hereof. In the event of such termination,
then until the earliest of (i) the date the Executive commences other comparable
employment in addition to any other employment that the Executive may have at
the time of notice of termination and (ii) twenty-four (24) months from the
Expiration Date, the Company shall continue to pay the Executive the Base Salary
and, subject to any employee contribution applicable to the Executive on the
Expiration Date, shall continue to provide to the Executive the benefits
provided for in Section 4(b) hereof, provided that, as applicable, the Executive
is entitled to continue such participation under applicable law and benefit plan
terms. The Executive expressly agrees to use his reasonable best efforts to find
other comparable employment under clause (i) above.
6. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Executive shall
not disclose to any other Person (except as required by applicable law or in
connection with the performance of his duties and responsibilities hereunder),
or use for his own benefit or gain, any Confidential Information (as defined
below) relating to the business conducted by the Company. Executive understands
that this restriction shall continue to apply after Executive's employment
terminates, regardless of the reason for such termination. "Confidential
Information" includes without limitation such information relating to (i) the
development, research, testing, manufacturing and marketing activities of the
Company, (ii) the products manufactured, sold or distributed by the Company,
(iii) the costs, sources of supply and strategic plans of the Company, (iv) the
identity and special needs of the customers of the Company, (v) the financial
arrangements and capital structure of the Company, (vi) the management and
operation of the Company and (vii) people and organizations with whom the
Company has business relationship and those relationships. Confidential
Information also includes comparable information that the Company may receive or
has received belonging to customers or others who do business with the
Company.
7. RESTRICTED ACTIVITIES. Executive agrees that some restrictions on his
activities during and after his employment. are necessary to protect the
goodwill, Confidential Information and other legitimate interests of the
Company. While Executive is employed by the Company and for two (2) years after
such employment is terminated for any reason (the "Noncompetition Period"),
Executive shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, engage in any
activity that is directly or
-3-
<PAGE> 4
indirectly competitive or potentially competitive with the business of the
Company as conducted at any time during Executive's employment without the
Company's written consent, which consent shall not be unreasonably withheld.
8. RELIEF; INTERPRETATION. Executive agrees that the Company shall, in
addition to any other remedies available to it, be entitled to preliminary and
permanent injunctive relief against any breach by him of the covenants contained
in Sections 6 and 7, without having to post bond. In the event that any
provision of Section 6 or 7 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area or too great a range of activities, it shall
be interpreted to extend only over the maximum period of time, geographic area
or range of activities as to which it may be enforceable.
The Company acknowledges that Executive is currently a consultant to and
director of a number of companies, including without limitation BE Aerospace,
Inc. of which he is also chairman and CEO, Rochester Shoe Tree Co., Inc. and
Synthes, Ltd. The Company agrees that Executive shall not be in violation of the
provisions of Section 6 or 7 by reason of such relationships and the discharge
of his duties and performance of his obligations to such companies.
9. CONFLICTING AGREEMENTS. Executive hereby represents and warrants that
the execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which he is a
party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder. Executive will not disclose to or use on behalf of the
Company any proprietary information of a third party without such party's
consent.
10. WITHHOLDING. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
11. ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
12. ASSIGNMENT. Neither the Company nor Executive may make any assignment
of this Agreement or any interest herein, by
- 4 -
<PAGE> 5
operation of law or otherwise, without the prior written consent of the other
party. This Agreement shall inure to the benefit of and be binding upon the
Company and Consultant, their respective successors, executors, administrators,
heirs and permitted assigns.
13. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
14. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, and addressed to Executive at his address set forth
under his signature on the last page hereof or such other address as Executive
shall have notified the Company in writing or, in the case of the Company, at
its main office, attention of the President.
15. MISCELLANEOUS. This Agreement constitutes the entire agreement between
the parties and supersedes any prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Executive's employment. This Agreement may be amended or modified only by a
written instrument signed by Executive and by a duly authorized representative
of the Company. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original and shall constitute one and the same
instrument, and shall be governed by and construed in accordance with the laws
of The Commonwealth of Massachusetts.
-5-
<PAGE> 6
IN WITNESS WHEREOF, this Employment Agreement has been executed as a sealed
instrument by the Company, by its duly authorized officer, and by Executive, as
of the date first above written.
EXECUTIVE: APPLIED EXTRUSION
TECHNOLOGIES, INC.
/s/ Amin J. Khoury,
Chairman By: /s/ Thomas E. Williams
- -------------------------------------- ------------------------------
Address: c/o BE Aerospace, Inc. Title: President
1300 Corporate Way
Suite 202
Wellington, FL 33414
- 6 -
<PAGE> 7
July 3, 1996
Amin J. Khoury
Chief Executive Officer and Chairman
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, FL 33414
Dear Amin:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms our mutual understanding that, under the terms of the Employment
Agreement dated April 26, 1994 between you and the Company, (i) your employment
may not be terminated prior to April 26, 1999 except by virtue of disability or
death, and (ii) if your employment is terminated by the Company after April 26,
1999 by virtue of notice of expiration, you will be entitled to continued
payment of your base salary and provision of specified employee benefits in
accordance with the terms of said Employment Agreement until the earliest of (a)
twenty-four (24) months from the Expiration Date, or (b) until you commence
other comparable employment in addition to such other employment as you may have
at the time of notice of termination.
In addition, this will confirm the agreement between you and the Company,
as approved by resolution of the Board of Directors dated May 8, 1996, providing
that in the event of a change of control of the Company (as "change of control"
is defined in Exhibit A to the Company's 1991 Stock Option Plan for Directors,
as of May 8, 1996) occurring at any time prior to May 9, 1996, (i) your
Employment Agreement will automatically be renewed for a period equal to its
original term, and (ii) all outstanding options held by you will vest (to the
extent not already vested) immediately upon such change of control.
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Thomas E. Williams
---------------------------------
Thomas E. Williams,
President and Chief Executive
Officer
Agreed and accepted this 13th day of July, 1996
/s/ Amin J. Khoury
- -----------------------------------------------
Amin J. Khoury
cc: Gerald M. Haines, II, General Counsel
<PAGE> 1
Exhibit 10.11
EMPLOYMENT AGREEMENT
--------------------
THIS Employment Agreement (the "Agreement") is made as of the 26th day of
April, 1994 by and between Applied Extrusion Technologies, Inc., a Delaware
corporation (the "Company" or "Employer"), and Thomas E. Williams (the
"Executive").
RECITALS
--------
1. The Executive is currently employed by the Company as its Chief
Executive Officer, President and Chief Operating Officer.
2. The Employer desires to continue to employ the Executive and to make
secure for itself the experience, abilities and services of the Executive and to
prevent the loss of such experience, services and abilities.
3. The Executive has submitted to a physical examination by a physician
approved by the Company, and the Company has received the results of such
examination.
4. In consideration of the employment to be provided hereby and the amounts
to be paid as provided herein, the Executive desires to be employed by the
Employer and to agree with the Employer as further provided herein.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Employer shall employ the Executive, and the Executive shall
perform services for and continue in the employment of the Employer, for a
period of five (5) years commencing on the date hereof (the "Employment
Period"), which Employment Period shall be extended after the fifth anniversary
of the date hereof from day to day, provided that this Agreement shall expire on
or after the fifth anniversary hereof upon thirty (30) days notice from either
the Company or the Executive, which notice may first be given on April 25, 1999
and thereafter on the last business day of any month subsequent thereto (such
date of expiration referred to hereinafter as the "Expiration Date"), unless
such employment shall have been sooner terminated as hereinafter set forth.
2. Capacity.
--------
(a) POSITION AND DUTIES. The Executive shall serve on a full-time basis in
the capacity of the Chief Executive Officer and in such other senior executive
position as the Chairman of the Board of the Company or the Board of Directors
of the Company
<PAGE> 2
may designate from time to time, shall report to the Chairman of the Board of
the Company, shall be accountable to, and shall have such other powers, duties
and responsibilities, consistent with his position and experience, as may from
time to time be prescribed by the Chairman of the Board or the Board of
Directors. The Executive shall perform and discharge, faithfully, diligently and
to the best of his ability, such duties and responsibilities. The Executive
shall devote substantially all of his working time and efforts to the business
and affairs of the Company. The Executive shall carry out the aforementioned
duties and responsibilities primarily from AET's Salem, Massachusetts facility
and will not, during the Employment Period, be required to relocate from
the greater Boston area without his consent.
(b) BOARD MEMBERSHIP. The Company agrees to propose to the shareholders of
the Company at each appropriate Annual Meeting of such shareholders during the
Employment Term the reelection of the Executive as a member of the Board of
Directors of the Company, provided that the Executive is employed hereunder and
is otherwise eligible for such election; PROVIDED, HOWEVER, that should
Executive's employment hereunder terminate for any reason while Executive is
serving as a member of the Company's Board of Directors, Executive agrees to
resign from the Board of Directors upon such termination.
3. Compensation.
------------
(a) SALARY. During each year of the Employment Period, the Executive shall
receive an annual salary (the "Salary") of $360,000, subject to annual increases
at the discretion of the Board of Directors. The Salary shall be payable in
accordance with the Company's current payroll practices for its executive
employees generally.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus of up to 50% of salary
(the "Bonus") as determined by the Board of Directors of the Company in its sole
discretion.
(c) EXPENSES. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable business expenses incurred by
him on behalf of the Employer.
(d) FRINGE BENEFITS. During the Employment Period, the Executive shall be
entitled to participate in or receive benefits under any disability insurance,
health, pension, retirement and accident plans or arrangements made generally
available by the Company to its executives and key management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements with such
- 2 -
<PAGE> 3
modifications as the Company deems reasonably necessary in light of the results
of the physical examination referred to in recital (3) above. Without limiting
the foregoing, Executive shall also be entitled to receive, at the Company's
expense, a complete physical examination by a physician of his choice. In
accordance with the Company policy, the Executive shall also be entitled to four
weeks paid vacation in any fiscal year during the Employment Period as well as
all paid holidays given by the Company to its employees.
(e) AUTOMOBILE. Without limiting the generality of the foregoing, during
the Employment Period, the Executive shall be furnished with an automobile
either owned or leased by the Company or an automobile allowance, at the
discretion of the Company.
(f) COUNTRY CLUB MEMBERSHIP. During the Employment Period, the Company
shall either pay the Executive's membership expenses (including fees, dues and
related expenses) or otherwise make available to the Executive at no cost to the
Executive, membership at one (1) country club to be agreed upon by the Executive
and the Company.
4. Termination and Compensation Thereon.
------------------------------------
(a) TERMINATION DATE. The term "Termination Date" shall mean the earlier of
(i) the Expiration Date or (ii) if the Executive's employment is terminated (A)
by his death, the date of his death, or (B) for any other reason, the date on
which such termination is to be effective pursuant to the notice of termination
given by the party terminating the employment relationship.
(b) DEATH. The Executive's employment hereunder shall terminate upon his
death. In such event, the Company shall pay to such person as the Executive
shall have designated in a notice filed with the Company (the "Designee"), or,
if no such person shall have been designated, to his estate (the "Estate"), an
amount equal to any unpaid Salary, together with any prorated Bonus and benefits
accrued through the Termination Date. Additionally, subject to the results of
annual physical examinations, the Company will maintain insurance protection
over Executive's life providing death benefits of $1,500,000 payable to the
Designee or Estate, as the case may be.
(c) INCAPACITY. If in the reasonable judgment of the Board of Directors of
the Company, as a result of the Executive's incapacity due to physical or mental
illness, the Executive shall for at least six consecutive months during the term
of this Agreement have been unable to perform his duties under this Agreement on
a full-time basis, the Company may terminate the Executive's employment
hereunder by notice to the Executive. In
-3 -
<PAGE> 4
such event, and to the extent not otherwise covered by the long-term disability
insurance referred to below, the Employer shall continue to pay the Executive
his Salary (at the rate in effect as of the Termination Date), together with any
prorated Bonus and (to the extent legally practicable) extend to him the
applicable fringe benefits referred to in Section 3(d) hereof for a period of
six (6) months subsequent to the Termination Date. The Company's obligation to
pay the Executive his Salary, together with any prorated Bonus and extend to him
such benefits shall terminate if the Executive subsequently takes other
employment to the extent of the Executive's salary and benefits from such other
employment. Without limiting the foregoing, the Company shall provide Executive
with long-term disability insurance protection on terms mutually agreed upon by
the Company and the Executive. Any dispute between the Board of Directors of the
Company and the Executive with respect to the Executive's incapacity shall be
settled by reference to a competent medical authority mutually agreed to by the
Board of Directors and the Executive, whose decision shall be binding on all
parties.
(d) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment hereunder for "cause". For purposes of this Agreement,
"cause" shall mean (A) other than by reason of Executive's incapacity under
Section 4(C) above, the Executive's willful and material failure or refusal or
his substantial and material neglect to perform and discharge his duties and
responsibilities hereunder (including duties prescribed by the Board of
Directors pursuant to Section 2), other material breach of Sections 5 or 6
hereof, or breach of his fiduciary duties as an officer or member of the Board
of Directors of the Company or any subsidiary or affiliate thereof, as
applicable, (B) other than by reason of Executive's incapacity under Section
4(C) above, other willful conduct by Executive that is materially harmful to the
business or interests of the Company or (C) a felony conviction or a conviction
for any crime involving the Executive's personal dishonesty or moral turpitude.
If the Executive's employment is terminated pursuant to this Section 4(d), the
Employer shall have no further obligations to the Executive hereunder after the
Termination Date, except for unpaid Salary, together with any prorated Bonus and
benefits accrued through the Termination Date. For purposes of this Section
4(d), no act, or failure to act, on Executive's part shall be considered
"willful" unless done, or omitted to be done, by him knowing and with the intent
that such action or inaction would not be in the best interests of the Company
or otherwise was done or omitted to be done in bad faith or with reckless
disregard for the best interests of the Company.
(e) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. On or after April 26,
1999, the Company may terminate the Executive's employment hereunder other than
for cause in accordance with the terms and provisions of Section 1 hereof. In
the event of such
-4 -
<PAGE> 5
termination, then until the earliest of (i) the date the Executive commences
other full-time comparable employment and (ii) twenty-four (24) months from the
Termination Date, the Company shall continue to pay the Executive the Salary,
together with any prorated Bonus and, subject to any employee contribution
applicable to the Executive on the Termination Date, shall continue to provide
to the Executive the benefits provided for in Sections 3(d) and 3(e) hereof,
provided that, as applicable, the Executive is entitled to continue such
participation under applicable law and benefit plan terms. The Executive
expressly agrees to use his reasonable best efforts to find other comparable
employment under clause (i) above.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate his employment hereunder for Good Reason (as defined below), upon
notice to the Company setting forth in reasonable detail the nature of such Good
Reason. The following shall constitute "Good Reason" for termination by the
Executive:
(i) Failure of the Company to continue the Executive in the position
of Chief Executive Officer;
(ii) Material diminution in the nature or scope of the Executive's
responsibilities, duties or authority other than as is materially
consistent with the Executive's assignment to another senior executive
position in accordance with Section 2(a) hereof; provided, however, that
(i) the Company's failure to continue the Executive's appointment or
election as a member of the Board of Directors and (ii) any diminution of
the business of the Company, including without limitation the sale or
transfer of any or all of the assets of the Company, shall not constitute
Good Reason; or
(iii) any other material breach by the Company of Sections 2, 3(a),
3(b) or 3(d) hereof.
In event of termination in accordance with this Section 4(f), then until
the earliest of (i) the date the Executive commences other full-time employment
and (ii) twenty-four (24) months from the Termination Date, the Company shall
continue to pay the Executive the Salary, together with any Bonus, and, subject
to any employee contribution applicable to the Executive on the Termination
Date, shall continue to provide to the Executive the benefits provided for in
Sections 3(d) and 3(e) hereof, provided that, as applicable, the Executive is
entitled to continue such participation under applicable law and benefit plan
terms. The Executive expressly agrees to use his reasonable best efforts to find
comparable employment under clause (i) above.
(g) TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. On or after
April 26, 1999, the Executive may terminate
- 5 -
<PAGE> 6
his employment hereunder other than for Good Reason in accordance with the terms
and provisions of Section 1 hereof. In the event of termination of the
Executive's employment pursuant to this Section 4(g), the Employer shall have no
further obligations to the Executive hereunder after the Termination Date,
except for unpaid Salary, together with any prorated Bonus and benefits accrued
through the Termination Date.
(h) EFFECT OF TERMINATION. Payment in full by the Company of the amount
that it may be required to pay Executive pursuant to this Section 4 upon
termination of his employment hereunder shall constitute the entire obligation
of the Company to Executive, and performance by the Company shall constitute
full settlement of any claim that Executive might otherwise assert against the
Company or any of those connected with it on account of such termination. The
provisions of Sections 4(e), 4(f), 4(g), 4(h), 5, 6, 7, 8 and 10 shall survive
termination.
5. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Executive shall not
disclose to any other person (except as required by applicable law or in
connection with the performance of his duties and responsibilities hereunder),
or use for his own benefit or gain, any Confidential Information (as defined
below) relating to the business conducted by the Company. Executive understands
that this restriction shall continue to apply after Executive's employment
terminates, regardless of the reason for such termination. "Confidential
Information" includes without limitation such information relating to (i) the
development, research, testing, manufacturing and marketing activities of the
Company, (ii) the products manufactured, sold or distributed by the Company,
(iii) the costs, sources of supply and strategic plans of the Company, (iv) the
identity and special needs of the customers of the Company, (v) the financial
arrangements and capital structure of the Company, (vi) the management and
operation of the Company and (vii) people and organizations with whom the
Company has business relationships and those relationships. Confidential
Information also includes comparable information that the Company may receive or
has received belonging to customers or others who do business with the Company.
Confidential Information shall not include information which (a) is publicly
known, or becomes publicly known through no fault of Executive or {b) is
generally known or readily obtainable by the public.
6. RESTRICTED ACTIVITIES. Executive agrees that some restrictions on his
activities during and after his employment are necessary to protect the
goodwill, Confidential Information (as defined in Section 5) and other
legitimate interests of the Company. While Executive is employed by the Company
and for one (1) year after such employment is terminated for any reason,
Executive shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or
6
<PAGE> 7
otherwise, engage in any activity that is competitive or potentially competitive
with the business of the Company as conducted at any time during Executive's
employment without the Company's written consent, which consent shall not be
unreasonably withheld; PROVIDED, HOWEVER, that notwithstanding the preceding
clause, Executive shall not, while employed by the Company and for two (2) years
after such employment is terminated for any reason, directly or indirectly,
whether as owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, engage in any activity that is competitive or potentially competitive
with the PACKAGING FILMS or NETTING businesses of the Company, as conducted at
any time during Executive's employment without the Company's written consent,
which consent shall not be unreasonably withheld.
7. DOCUMENTS AND MATERIAL. Upon termination of Executive's employment with the
Company or at any other time upon the Company's request, Executive will promptly
deliver to the Company, without retaining any copies, all documents and other
materials furnished to Executive by the Company, prepared by Executive for the
Company or otherwise relating to the Company's business, including without
limitation all written and tangible material in his possession incorporating
any Confidential Information (as defined in Section 5).
8. RELIEF, INTERPRETATION. Executive agrees that the Company shall, in addition
to any other remedies available to it, be entitled to preliminary and permanent
injunctive relief against any breach by him of the covenants and agreements
contained in Sections 5, 6 and 7 without having to post bond. In the event that
any provision of Sections 5, 6 and 7 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its being extended over
too great a time, too large a geographic area or too great a range of
activities, it shall be interpreted to extend only over the maximum period of
time, geographic area or range of activities as to which it may be enforceable.
For purposes of Sections 5, 6 and 7 the term "Company" shall mean the Company
and any of its subsidiaries and affiliates to the extent that such enterprises
are, during the term of Executive's employment by the Company, engaged in the
same line of business as the Company.
9. CONFLICTING AGREEMENTS. Executive hereby represents and warrants that the
execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which he is a
party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder. Executive will not disclose to or use on behalf of the
Company any proprietary information of a third party without such party's
consent. Executive will not enter
- 7 -
<PAGE> 8
into any agreement, whether written or oral, conflicting with the provisions of
this Agreement.
10. ARBITRATION. Any dispute, controversy or claim between the parties arising
out of or related to any term or condition of the Executive's employment or the
termination of his employment shall be settled by arbitration conducted in
Boston, Massachusetts in accordance with the Commercial Rules of the American
Arbitration Association then in force (the "Rules") and the laws of The
Commonwealth of Massachusetts. In the event that a party requests arbitration,
it shall serve upon the other party (the "Non-Requesting Party") a written
demand for arbitration stating the substance of the controversy, dispute or
claim, the contention of the party requesting arbitration and the name and
address of the arbitrator appointed by it. The Non-Requesting Party, within
twenty (20) days of such demand, shall accept the arbitrator or appoint a second
arbitrator and notify the other party of the name and address of this second
arbitrator so selected, in which case the two arbitrators shall appoint a third.
The decision or award of the single arbitrator or, in the case of three
arbitrators, the decision or award of any two arbitrators, shall be final and
binding upon the parties. In the event that the two arbitrators fail in any
instance to appoint a third arbitrator within twenty (20) days of the
appointment of the second arbitrator, either arbitrator or any party to the
arbitration may apply to the American Arbitration Association for appointment of
the third arbitrator in accordance with the Rules. Should the Non-Requesting
Party (upon whom a demand for arbitration has been served) fail or refuse to
accept the arbitrator appointed by the other party or to appoint an arbitrator
within twenty (20) days, the single arbitrator shall have the right to decide
alone, and such arbitrator's decision or award shall be final and binding upon
the parties. The decision of the arbitrator or arbitrators shall be in writing
and shall set forth the basis therefor. The parties shall abide by all awards
rendered in the arbitration proceedings, and all such awards may be enforced and
executed upon in any court having jurisdiction over the party against whom
enforcement of such award is sought. The parties involved in the dispute shall
divide equally the administrative charges, arbitrator's fees and related
expenses of the arbitration, but each party shall pay its own legal fees
incurred in connection with such arbitration.
11. WITHHOLDING. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company under
applicable law.
12. WAIVER. The waiver by the Company of a breach of any provision of this
Agreement by Executive will not operate or be construed as a waiver of any other
subsequent breach by Executive.
- 8 -
<PAGE> 9
13. AMENDMENTS. No amendment to this Agreement shall be effective unless it
shall be in writing and signed by each party hereto. No oral waiver, amendment
or modification will be effective under any circumstances whatsoever.
14. NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed given when delivered personally or three days after being
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(i) if to Employer, to it at:
c/o BE Aerospace, Inc.
1300 Corporate Way
Suite 202
Wellington, Florida 33414
Attention: Amin J. Khoury
with copies to
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: C. Dean Dusseault
(ii) if to the Executive, to him at:
Applied Extrusion Technologies, Inc.
96 Swampscott Road
Salem, Massachusetts 01970
15. ASSIGNMENT. Neither the Company nor Executive may make any assignment of
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other party; PROVIDED, HOWEVER, that the
Company may assign its rights and obligations under this Agreement without the
consent of Executive in the event that the Company shall hereafter effect a
reorganization, consolidate with, or merge into any other person or transfer all
or substantially all of its properties or assets to any other person. This
Agreement shall inure to the benefit of and be binding upon the Company and
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
16. MISCELLANEOUS. This Agreement constitutes the entire agreement between the
parties and supersedes all prior and contemporaneous communications, agreements,
representations, understandings and negotiations, whether oral or written, with
respect to the subject matter hereof. The invalidity or unenforceability of any
term or provision hereof shall not affect
- 9 -
<PAGE> 10
the validity or enforceability of any other term or provision hereof. The
headings in this Agreement are for convenience of reference only and shall not
alter or otherwise affect the meaning hereof. This Agreement may be executed in
any number of counterparts which together shall constitute one instrument and
shall be governed and construed in accordance with the laws (other than the
conflict of laws rules) of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
APPLIED EXTRUSION TECHNOLOGIES, INC.
BY:
---------------------------------
Amin J. Khoury
Chairman of the Board
------------------------------------
Thomas E. Williams
-10-
<PAGE> 11
July 3, 1996
Thomas E. Williams
President and Chief Executive Officer
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Dear Tom:
On behalf of Applied Extrusion Technologies, Inc. (the "Company"), this
letter confirms our mutual understanding that, under the terms of the Employment
Agreement dated April 26, 1994 between you and the Company, (i) your employment
may not be terminated prior to April 26, 1999 except for cause, or by virtue of
disability or death, and (ii) the Company may terminate your employment for any
reason after April 26, 1999, by giving 30 days' notice. In the event that your
employment is terminated by the Company after April 26, 1999 other than for
cause (and other than by reason of your death or incapacity), you will be
entitled to, among other things, continued payment of your base salary in
accordance with the terms of said Employment Agreement until the earliest of (a)
twenty-four (24) months from the Termination Date, or (b) the date you commence
other full-time comparable employment.
In addition, this will confirm the agreement between you and the Company,
as approved by resolution of the Board of Directors dated May 8, 1996, providing
that in the event of a change of control of the Company (as "change of control"
is defined in Exhibit A to the Company's 1991 Stock Option Plan for Directors,
as of May 8, 1996) occurring at any time prior to May 9, 1996, (i) your
Employment Agreement will automatically be renewed for a period equal to its
original term, and (ii) all outstanding options held by you will vest (to the
extent not already vested) immediately upon such change of control.
Sincerely yours,
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Amin J. Khoury
---------------------------------
Amin J. Khoury, Chairman
Agreed and accepted this 8th day of July, 1996
/s/ Thomas E. Williams
- ----------------------------------------------
Thomas E. Williams
cc: Gerald M. Haines, II, General Counsel
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-44449, 33-48841, 33-64656 and 33-80804 of Applied Extrusion Technologies,
Inc. On Form S-8 of our report dated November 14, 1996, appearing in this Annual
Report on Form 10-K of Applied Extrusion Technologies, Inc. for the year ended
September 30, 1996.
/s/ Deloitte and Touche LLP
- ---------------------------
Boston, Massachusetts
December 12, 1996
<PAGE> 1
POWER OF ATTORNEY
-----------------
The undersigned, each being a Director of Applied Extrusion Technologies,
Inc. ("AET"), does hereby constitute and appoint Thomas E. Williams his true and
lawful attorney and agent, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments that said
attorney and agent may deem necessary or advisable or which may required to
enable AET to comply with the Securities Exchange Act of 1934, as amended (the
"Act"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing of AET's
Annual Report on Form 10-K for the fiscal year ended September 30, 1996,
including specifically without limiting the generality of the foregoing, the
power and authority to sign in the name of and on behalf of the undersigned as a
Director of AET. The undersigned does hereby ratify and confirm all that said
attorney and agent shall do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Amin J. Khoury December 4, 1996
- ------------------------- Chairman of the Board ---------------
Amin J. Khoury
/s/ Paul W. Marshall December 4, 1996
- ------------------------- Director ---------------
Paul W. Marshall
/s/ Richard G. Hamermesh December 4, 1996
- ------------------------- Director ---------------
Richard G. Hamermesh
/s/ Mark Harmeling December 4, 1996
- ------------------------- Director ---------------
Mark Harmeling
/s/ Nader A. Golestaneh December 4, 1996
- ------------------------- Director ---------------
Nader A. Golestaneh
/s/ Joseph J. O'Donnell December 4, 1996
- ------------------------- Director ---------------
Joseph J. O'Donnell
/s/ Hansjorg Wyss December 4, 1996
- ------------------------- Director ---------------
Hansjorg Wyss
/s/ Richard H. Beeby December 3, 1996
- ------------------------- Director ---------------
Richard H. Beeby
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 3,266
<SECURITIES> 0
<RECEIVABLES> 35,687
<ALLOWANCES> 750
<INVENTORY> 30,582
<CURRENT-ASSETS> 78,192
<PP&E> 283,023
<DEPRECIATION> 37,477
<TOTAL-ASSETS> 331,704
<CURRENT-LIABILITIES> 42,281
<BONDS> 165,500
<COMMON> 105
0
0
<OTHER-SE> 108,230
<TOTAL-LIABILITY-AND-EQUITY> 331,704
<SALES> 234,490
<TOTAL-REVENUES> 234,490
<CGS> 181,899
<TOTAL-COSTS> 181,899
<OTHER-EXPENSES> 27,197
<LOSS-PROVISION> 361
<INTEREST-EXPENSE> 13,927
<INCOME-PRETAX> 11,106
<INCOME-TAX> 4,442
<INCOME-CONTINUING> 6,664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,664
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
