<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
--------------------
APPLIED EXTRUSION TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-19188 51-0295865
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification
No.)
</TABLE>
3 CENTENNIAL DRIVE
PEABODY, MASSACHUSETTS 01960
(Address of Principal Executive Offices)
(978) 538-1500
(Registrant's Telephone Number, Including Area Code)
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 / /.
The number of shares of the Registrant's Common Stock, $.01 par value per
share, outstanding as of May 6, 1999 was 11,314,989.
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
---------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 6,572 $ 2,279
Accounts receivable, net of allowance for doubtful accounts of $1,271 at March 31,
1999 and $1,056 at September 30, 1998.............................................. 41,704 38,467
Inventory............................................................................ 36,180 39,192
Prepaid expenses and deferred taxes.................................................. 5,707 5,063
---------- -------------
Total current assets............................................................. 90,163 85,001
Property, plant and equipment, net..................................................... 278,196 278,905
Intangibles and deferred finance charges, net.......................................... 3,202 3,636
Long-term note receivable and other assets............................................. 4,232 3,184
---------- -------------
$ 375,793 $ 370,726
---------- -------------
---------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable..................................................................... $ 17,809 $ 15,259
Accrued interest..................................................................... 9,457 9,145
Accrued expenses and other current liabilities....................................... 25,447 27,126
---------- -------------
Total current liabilities........................................................ 52,713 51,530
Long-term debt......................................................................... 199,000 185,500
Deferred taxes and other credits....................................................... 27,127 33,259
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000 shares, of which 150 are designated
Junior Preferred Stock; no stock outstanding
Common stock, $.01 par value:
Authorized, 30,000 shares; issued, 11,498 and 11,357 shares
at March 31, 1999 and September 30, 1998, respectively............................. 115 114
Additional paid-in capital............................................................. 96,940 95,867
Retained earnings...................................................................... 4,340 9,938
Cumulative translation adjustments..................................................... (2,448) (2,396)
---------- -------------
98,947 103,523
Treasury stock, at cost, and other, 244 and 327 shares at March 31, 1999 and September
30, 1998, respectively............................................................... (1,994) (3,086)
---------- -------------
Total stockholders' equity....................................................... 96,953 100,437
---------- -------------
$ 375,793 $ 370,726
---------- -------------
---------- -------------
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
SALES....................................................................................... $ 58,979 $ 62,439
COST OF SALES............................................................................... 47,327 51,025
--------- ---------
GROSS PROFIT................................................................................ 11,652 11,414
OPERATING EXPENSES:
Selling, general and administrative....................................................... 6,383 6,054
Research and development.................................................................. 1,839 1,801
Start-up costs............................................................................ -- 1,402
--------- ---------
Total operating expenses................................................................ 8,222 9,257
--------- ---------
OPERATING PROFIT............................................................................ 3,430 2,157
NON-OPERATING EXPENSES:
Interest expense, net..................................................................... 4,869 3,161
--------- ---------
Total non-operating expenses............................................................ 4,869 3,161
--------- ---------
Loss before income taxes.................................................................... (1,439) (1,004)
--------- ---------
Income tax benefit.......................................................................... (576) (402)
--------- ---------
NET LOSS.................................................................................... $ (863) $ (602)
--------- ---------
--------- ---------
BASIC AND DILUTED LOSS PER COMMON SHARE:.................................................... $ (.08) $ (.05)
--------- ---------
--------- ---------
AVERAGE COMMON AND POTENTIAL COMMON SHARES OUTSTANDING:
Basic and Diluted......................................................................... 11,309 11,119
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
SALES..................................................................................... $ 114,424 $ 118,855
COST OF SALES............................................................................. 94,831 95,594
---------- ----------
GROSS PROFIT.............................................................................. 19,593 23,261
OPERATING EXPENSES:
Selling, general and administrative..................................................... 12,262 11,870
Research and development................................................................ 3,478 3,499
Start-up costs.......................................................................... -- 1,539
---------- ----------
Total operating expenses.............................................................. 15,740 16,908
---------- ----------
OPERATING PROFIT.......................................................................... 3,853 6,353
NON-OPERATING EXPENSES:
Interest expense, net................................................................... 9,721 7,193
Acquisition costs....................................................................... 3,462 --
---------- ----------
Total non-operating expenses.......................................................... 13,183 7,193
---------- ----------
Loss before income taxes and change in accounting......................................... (9,330) (840)
Income tax benefit........................................................................ (3,732) (336)
---------- ----------
Loss before change in accounting.......................................................... (5,598) (504)
Change in accounting, net of related tax benefits of $568................................. -- (852)
---------- ----------
NET LOSS.................................................................................. $ (5,598) $ (1,356)
---------- ----------
---------- ----------
BASIC AND DILUTED LOSS PER COMMON SHARE:.................................................. $ (.50) $ (.12)
---------- ----------
---------- ----------
AVERAGE COMMON AND POTENTIAL COMMON SHARES OUTSTANDING:
Basic and Diluted....................................................................... 11,209 10,900
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................................................ $ (5,598) $ (1,356)
Adjustment to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts....................................................... 180 209
Depreciation and amortization......................................................... 10,133 9,101
Deferred taxes and other credits...................................................... (6,056) (12,969)
Changes in assets and liabilities which provided (used) cash:
Prepaid expenses and other current assets........................................... (1,775) 1,410
Accounts payable and accrued expenses............................................... 1,388 6,033
Accounts receivable and inventory................................................... (405) (6,013)
---------- ----------
Net cash used in operating activities............................................. (2,133) (3,585)
INVESTING ACTIVITIES:
Additions to property, plant and equipment.............................................. (8,907) (26,781)
Proceeds from sale/leaseback transaction................................................ -- 44,625
---------- ----------
Net cash provided by (used in) investing activities............................... (8,907) 17,844
FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit agreement, net............................. 13,500 (13,625)
Proceeds from issuance of stock, net.................................................... 1,885 2,735
---------- ----------
Net cash provided by (used in) financing activities............................... 15,385 (10,890)
Effect of exchange rate changes on cash................................................. (52) (690)
---------- ----------
Increase in cash and cash equivalents, net.............................................. 4,293 2,679
Cash and cash equivalents, beginning.................................................... 2,279 3,054
---------- ----------
Cash and cash equivalents, ending....................................................... $ 6,572 $ 5,733
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including capitalized interest of $1,371 and $4,020, respectively........... $ 10,387 $ 11,288
Income taxes $ -- $ 3,000
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The information set forth in these statements is unaudited and may be
subject to normal year-end adjustments. The information reflects all adjustments
that, in the opinion of management, are necessary to present a fair statement of
the results of operations of Applied Extrusion Technologies, Inc. (the "Company"
or "AET") for the periods indicated. Results of operations for the interim
period ended March 31, 1999 are not necessarily indicative of the results of
operations for the full fiscal year.
Certain information in footnote disclosures normally included in financial
statements has been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These statements should
be read in conjunction with the Company's Annual Report for the year ended
September 30, 1998, filed on Form 10-K with the Securities and Exchange
Commission.
2. INVENTORY
Inventory is valued at the lower of cost or market, with cost determined
using an average-cost method. Inventories consisted of the following on March
31, 1999 and September 30, 1998:
<TABLE>
<CAPTION>
MARCH SEPTEMBER
1999 1998
--------- -----------
<S> <C> <C>
Raw materials.......................................... $ 7,932 $ 8,410
Finished goods......................................... 28,248 30,782
--------- -----------
Total.................................................. $ 36,180 $ 39,192
--------- -----------
--------- -----------
</TABLE>
3. CHANGE IN ACCOUNTING
During the third quarter of 1998, the Company elected early adoption of the
American Institute of Certified Public Accountants' Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). Effective with the
adoption of SOP 98-5, the Company changed its method of accounting for start-up
costs on major projects to expense these costs as incurred. Prior to this
accounting change, the Company capitalized these costs and amortized them over a
five year period. Amounts included in these financial statements for the quarter
and six months ended March 31, 1998 have been revised to reflect this adoption
by recording charges of $1,402 and $1,539, respectively, representing costs
capitalized during the quarter which were expensed upon adoption, and $852, net
of related income tax benefits of $568, resulting from costs incurred in prior
periods. Previously reported net income for the quarter ended March 31, 1998 was
$239 and earnings per share, both basic and diluted, was $0.02.
4. EARNINGS PER SHARE
53,600 and 112,300 potential shares from options for the three months ended
March 31, 1999 and for the six months ended March 31, 1999, respectively, were
excluded from the shares used to calculate diluted earnings per share as the
effect of including these shares in the calculation would be to decrease the
loss per share.
5. COMMITMENTS AND FOREIGN EXCHANGE CONTRACTS
The Company has entered into foreign exchange contracts, the last of which
expires in May 1999, to hedge firm purchase commitments for the purchase of
equipment denominated in German Marks. 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
5
<PAGE>
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
does not expect any losses as a result of counterparty defaults. At March 31,
1999, the Company had outstanding foreign exchange contracts with notional
values of $2,198. These contracts had no carrying value and a net unrealized
loss of $482. The Company does not enter into foreign exchange contracts for
trading purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARATIVE RESULTS OF OPERATIONS FOR THE QUARTER AND SIX MONTHS ENDED MARCH 31,
1999 WITH THE QUARTER AND SIX MONTHS ENDED MARCH 31, 1998
INTRODUCTION
AET is the largest producer of oriented polypropylene ("OPP") films in North
America. Consumer product companies worldwide use the Company's OPP films in
labeling, packaging and overwrap applications that often require special
attributes such as high gloss, vivid graphics, exceptional clarity and barriers
to air, light and moisture to preserve freshness. AET's film products are
generally sold to "converters," which are companies that specialize in processes
such as laminating multiple films or other materials together and printing text
and graphics to form the final label or packaging material for end-users.
Certain of the end-use markets for the Company's OPP films are seasonal. For
example, demand in the snack food and soft drink markets is generally higher in
the spring and summer. As a result, sales and net income are generally higher in
those periods.
For the purposes of this discussion and analysis, the periods ended March
31, 1999 and 1998 are referred to as the second quarters of 1999 and 1998,
respectively.
RESULTS OF OPERATIONS
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 statement:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 80.2 81.7 82.9 80.4
Gross profit......................... 19.8 18.3 17.1 19.6
Selling, general and
administrative..................... 10.8 9.7 10.7 10.0
Research and development............. 3.1 2.9 3.0 2.9
Operating profit..................... 5.8 3.5 3.4 5.3
Interest expense..................... 8.3 5.1 8.5 6.1
Net loss............................. 1.5 1.0 4.9 1.1
</TABLE>
Sales for the second quarter of 1999 were $58,979 versus $62,439 for the
comparable period of fiscal 1998. The $3,460, or 5.5 percent, decrease is due to
divestitures of certain non-core businesses during fiscal 1998 and lower average
selling prices of OPP films. Sales volume increased 17.3 percent over the second
quarter of 1998 and sales revenues increased 3.6 percent, exclusive of the
divested businesses. These volume increases were partially offset by
significantly lower selling prices resulting from continued industry
overcapacity. For the six months ended March 31, 1999, sales were $114,424
versus $118,855 for the comparable period of fiscal 1998. Exclusive of the
aforementioned divestitures, sales increased $6,431 or 6 percent due to strong
volume increases, offset in part by lower average selling prices for OPP films.
Sales and operating profit derived from sales outside the United States were
19.7 percent of sales and 31.7 percent of operating profit, respectively, for
the quarter ended March 31, 1999 compared to 15.6 percent of sales and 30.8
percent of operating profit for the quarter ended March 31, 1998. For the six
months ended March 31, 1999, sales and operating profit derived from sales
outside the United States were 19.5 percent
6
<PAGE>
of sales and 29 percent of operating profit, respectively, compared to 17
percent of sales and 25.4 percent of operating profit for the six months ended
March 31, 1998.
Gross profit for the second quarter of 1999 was $11,652, or 19.8 percent of
total sales, versus $10,416, or 18.3 percent of sales, exclusive of the divested
businesses, for the same quarter of fiscal 1998. This increase is primarily the
result of improved manufacturing efficiencies achieved in the quarter. Exclusive
of the $2,905 of plant shutdown costs incurred in the first fiscal quarter of
1999, gross profit for the six months ended March 31, 1999 was $22,498, or 19.7
percent of total sales versus $21,016 or 19.6 percent of total sales for the six
months ended March 31, 1998 exclusive of the divested businesses. This slight
increase is primarily due to increases in sales volume and lower manufacturing
costs, offset by lower average selling prices.
Total operating expenses were $8,222 and $15,740 for the three months and
six months ended March 31, 1999, respectively, compared to $9,257 and $16,908
for the three and six months ended March 31, 1998. Exclusive of divestitures and
write off of startup costs in 1998, operating expenses were 13.8 percent and
13.4 percent of sales for the six months ended March 31, 1999 and March 31,
1998, respectively, reflecting the company's investment in expanded sales reach
and new product development.
Net interest expense was $4,869 and $9,721 for the second quarter and the
six months ended March 31, 1999, respectively, compared to $3,161 and $7,193 for
the same periods of 1998. Net interest expense was higher in fiscal 1999
primarily as a result of capitalized interest in 1998 associated with a capacity
expansion project which was completed in March 1998. Exclusive of capitalized
interest, interest expense for the six months ended March 31, 1999 and March 31,
1998 was $11,092 and $11,213, respectively.
Net loss for the three and six months ended March 31, 1999 was $863 and
$5,598, respectively, compared to net loss of $602 and $1,356 for the three and
six months ended March 31, 1998, respectively. The net loss increased for the
six months ended March 31, 1999 compared to the six months ended March 31, 1998
primarily as a result of the write off of $2,905 of plant shut down costs and
$3,462 of costs related to terminated acquisition discussions in the first
quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
In conjunction with the Company's 1994 acquisition of the OPP films
business, AET entered into a Credit Agreement with a group of lenders to provide
the Company with senior bank financing. In January 1998, AET amended and
restated this Credit Agreement and combined the revolving credit facility and
revolving term facility thereunder into a $70,000 revolving credit facility (the
"Credit Facility") with a final maturity of the earlier of (i) November 1, 2001,
if the AET Senior Notes are not refinanced prior to such date, or (ii) January
29, 2003. The Credit Agreement was further amended in March 1999. The Credit
Facility is secured by all the assets of AET. It includes covenants which, among
other things, limit borrowings based on certain asset levels, requires AET to
maintain a minimum tangible net worth and specified interest coverage and
leverage ratios, and establishes maximum capital expenditure levels. It also
contains other covenants customary in documents relating to transactions of this
type. At March 31, 1999 the Company had $42,500 in borrowings and $6,910 in
letters of credit outstanding under the Credit Facility. The Company also has
$150,000 of Senior Notes, which bear interest at 11.5 percent payable
semi-annually, which mature in full in 2002 and $6,500 of Industrial Revenue
Bonds outstanding, which are due November 4, 2004.
Operating activities for the six months ended March 31, 1999 used $2,133 of
cash, which was the result of a net loss of $1,341 before depreciation and
amortization and other non-cash expenditures offset slightly by an increase in
working capital of $792. The net working capital increase was primarily the
result of increases in prepaid expenses and other assets and inventory and
accounts receivable of $1,775 and $405, respectively, and an increase in
accounts payable and accrued expenses of $1,388. During the quarter payments
related to restructuring of the Company's Covington, Virginia manufacturing
facility were $1,772, resulting in a restructuring reserve balance of $14,342 at
March 31, 1999.
7
<PAGE>
In April of 1999, the Company acquired certain assets of AEP Industries
Inc.'s OPP film business. The net purchase price of approximately $13,500 in
cash was funded with a portion of the proceeds of a sale/ leaseback transaction
involving other assets of the Company which yielded net proceeds to the Company
of approximately $29,000 and was also completed in April. The proceeds from the
sale/leaseback transaction in excess of the purchase price for the AEP assets
were used to pay down indebtedness outstanding under the Company's Credit
Facility.
YEAR 2000
AET's Company-wide Year 2000 project, which is addressing the issue of
computer programs and embedded computer chips being unable to distinguish
between the year 1900 and the year 2000, is proceeding on schedule. The project
is comprised of five major phases: (1) taking inventory of systems potentially
impacted by the Year 2000 issue; (2) assessing the Year 2000 compliance or
capability of systems determined to be material to the Company; (3) repairing or
replacing material systems that are determined not to be Year 2000 compliant or
capable; (4) testing the critical repaired or replaced systems; and (5)
designing and implementing contingency and business continuation plans.
At March 31, 1999, AET had completed the inventory and assessment phases of
the project. Those systems with identified Year 2000 compliance or capability
issues are currently being repaired or replaced, as required. The largest part
of this effort is the continuing implementation of a new enterprise-wide
information system which commenced in 1996. The financial, sales, order entry,
electronic data interchange, and administrative portions of the implementation
are complete. The inventory, shop floor and related manufacturing portions of
the system have been implemented at two production sites, with the remaining two
plants expected to be completed by the end of the fiscal year.
Once Year 2000 compliance repairs or replacements have been made, AET plans
to test critical systems to verify that compliance has been achieved. Third
parties will validate the Year 2000 compliance of our manufacturing control
systems, and internal resources will validate the compliance of the remainder of
our systems. The target completion date for the systems testing is September 30,
1999.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition.
The Company's contingency planning process for Year 2000 problems is
ongoing. Contingency plans could include having arrangements for alternate
suppliers when available, re-running certain processes if errors occur, using
manual intervention to ensure the continuation of operations where possible, and
scheduling activity in December 1999 that would normally occur at the beginning
of January 2000. If it becomes necessary for the Company to take corrective
actions, it is uncertain whether this would result in significant delays in
business operations or have a material adverse effect on the company's results
of operations, financial position or cash flow. AET believes that with the
completion of the Year 2000 project as scheduled, the possibility of significant
interruptions of normal operations should be substantially reduced.
The total cost associated with Year 2000 compliance activities is estimated
to be $10,000, of which $8,000 will be spent on the new enterprise-wide system
which offers many other enhancements in comparison to our current systems.
Approximately $7,000 has been spent to date, and cash flow from operations is
expected to fund the balance of the project. No critical information technology
projects have been deferred due to our Year 2000 compliance efforts.
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 costs of raw materials make up a significant portion of AET's
costs and have historically fluctuated. There can be no assurance, however, that
future market conditions will support any direct correlation between raw
material cost fluctuations and finished product films pricing.
8
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE CONTRACTS
See Note 5, "Commitments and Foreign Exchange Contracts". With respect to
these foreign exchange contracts, an adverse change in the underlying exchange
rates would not have a significant effect on the Company's reported results as
any gain or loss on the contract would be offset by changes in the value of the
firm purchase commitment.
SHORT-TERM AND LONG-TERM DEBT
The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company's policy has been to utilize United States dollar
denominated borrowings to fund its working capital and investment needs.
Short-term debt, if required, is used to meet working capital requirements,
while long-term debt is generally used to finance long-term investments. There
is inherent roll-over risk for borrowings as they mature and are renewed at
current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and the Company's future
financing requirements. At March 31, 1999, the Company had no short-term debt
outstanding and had long-term debt outstanding of $199,000, of which $42,500 was
outstanding on its revolving credit facility, which has a variable interest
rate, based on either LIBOR or prime rates. A 10% adverse change in interest
rates on the portion of the Company's debt bearing interest at a variable rate
would result in an increase in interest expense of approximately $93.
The Company does not enter into financial instrument transactions for
trading or other speculative purposes or to manage interest rate exposure.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
IN THE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE RELATED TO THE TIMELY
DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS, FLUCTUATIONS IN RAW MATERIALS AND
OTHER PRODUCTION COSTS, THE LOSS OF ONE OR MORE SIGNIFICANT CUSTOMERS, THE
IMPACT OF COMPETITIVE PRODUCTS AND PRICING, THE TIMELY COMPLETION OF CAPITAL
PROJECTS, THE SUCCESS OF THE COMPANY'S EFFORTS TO ACCESS CAPITAL MARKETS ON
SATISFACTORY TERMS, AND TO ACQUIRE, INTEGRATE, AND OPERATE NEW BUSINESSES AND
EXPAND INTO NEW MARKETS, AS WELL AS OTHER RISKS DETAILED IN EXHIBIT 99 OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND
FROM TIME TO TIME IN THE COMPANY'S OTHER REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
PART II--OTHER INFORMATION
ITEM 1. 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 or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on March 1, 1999
(the "Annual Meeting"). Proxies for the Annual Meeting were solicited pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended. A total
of 9,725,306 shares of common stock were represented at the meeting by proxy.
At the Annual Meeting, Messrs. Amin J. Khoury, Thomas E. Williams, and Mark
M. Harmeling were elected as Class I directors of the Company for a term of
three years expiring at the Company's 2002 Annual Meeting. In the case of Mr.
Khoury, 8,863,983 shares were voted in favor of his election and 861,323 votes
were withheld; in the case of Mr. Williams, 8,864,087 shares were voted in favor
of his election and 861,219 votes were withheld; and in the case of Mr.
Harmeling, 8,853,990 shares were voted in favor of his election and 871,316
votes were withheld. The following directors' terms continued after the Annual
Meeting: Nader Golestaneh, Paul W. Marshall, Richard G. Hamermesh, and Joseph J.
O'Donnell.
9
<PAGE>
The number of authorized shares of the Corporation's Common Stock, $.01 par
value per share, was increased from 15,000,000 to 30,000,000 shares. The voting
on this matter was as follows: 8,786,680 in favor; 838,157 opposed; 98,237
abstained; and 2,196 did not vote.
In addition, the number of option shares available for grant under the
Company's 1994 Stock Option Plan (the "Option Plan") was increased by 500,000
shares. The voting for the amendment to the Option Plan was as follows:
6,509,871 in favor; 2,897,564 opposed; 286,567 abstained; and 31,304 did not
vote.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
<TABLE>
<S> <C>
3.1.1(a) Amended and Restated Certificate of Incorporation.
3.1.2(i) Amendment dated February 26, 1992 to Amended and Restated Certificate of
Incorporation.
3.1.3* Amendment dated March 26, 1999 to Amended and Restated Certificate of
Incorporation
3.2(i) Amended and Restated By-Laws.
4.1(d) Indenture dated as of April 7,1994 between the Registrant and United States
Trust Company of New York, Trustee.
4.2(d) Form of 11 1/2 percent Senior Note due 2002 (included in Exhibit 4.1).
4.3(a) Specimen Common Stock Certificate.
4.4(m) Rights Agreement dated as of March 2, 1998 between the Company and BankBoston,
N.A., as Rights Agent.
10.1(i) Amended and Restated Credit Agreement dated as of January 29, 1998 by and
between the Registrant and The Chase Manhattan Bank as Administrative Agent and
LaSalle Business Credit, Inc. as Co-Agent.
10.1.1(h) Waiver and Amendment No. 1 dated as of December 16, 1998 to Amended and
Restated Credit Agreement dated as of January 29, 1998 between the Registrant
and The Chase Manhattan Bank as Administrative Agent.
10.1.2(k) Waiver and Amendment No. 2 dated as of December 31, 1998 to Amended and
Restated Credit Agreement dated as of January 29, 1998 between the Registrant
and The Chase Manhattan Bank as Administrative Agent.
10.1.3* Amended and Restated Credit Agreement dated as of March 15, 1999.
10.1.4* Amendment No. 1 dated as of April 23, 1999 to the Credit Agreement dated as of
April 7, 1994 as amended and restated as of January 29, 1998 and March 15,
1999.
10.2(b) 1986 Stock Option Plan, as amended.
10.3(c) 1991 Stock Option Plan, as amended.
10.4(b) 1991 Stock Option Plan for Directors, as amended.
10.5(d) 1994 Stock Option Plan, as amended.
10.6(f) Employment Agreement dated as of June 1, 1996 between the Registrant and Mark
S. Abrahams.
10.7* Employment Agreement dated as of April 1, 1999 between the Registrant and David
N. Terhune.
10.8(g) Agreement dated as of August 22, 1997 between the Registrant and Anthony J.
Allott.
10.9(j) Letter Agreement dated May 18, 1998 between the Registrant and Anthony J.
Allott.
10.10* Employment Agreement dated as of April 1, 1999 between the Registrant and Amin
J. Khoury.
10.11* Employment Agreement dated as of April 1, 1999 between the Registrant and
Thomas E. Williams.
10.12(h) Employment Agreement dated as of August 15, 1998 between the Registrant and
Anthony J. Allott.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
10.13(h) Employment Agreement dated as of September 19, 1998 between the Registrant and
Gerald M. Haines II.
10.14(e) Executive Deferred Compensation Plan dated as of September 1, 1994.
10.15.1(l) Equipment Lease Agreement dated as of December 29, 1997 between Registrant and
LaSalle National Leasing Corporation.
10.15.2* Letter Agreement dated April 28, 1999 Amending Equipment Lease Agreement dated
as of December 29, 1997 between Registrant and LaSalle National Leasing
Corporation.
10.16(j) Asset Purchase and Sale Agreement dated as of April 6, 1998 between the
Registrant and ProNet Corporation.
24(h) Powers of Attorney.
27* Financial Data Schedule.
99(g) Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
</TABLE>
- ------------------------
* Filed herewith
(a) Contained in Exhibits to the 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 10-K for the fiscal year
ended September 30, 1994.
(f) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1996.
(g) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1997.
(h) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1998.
(i) Contained in Exhibits to the Registrant's Form 10-Q for the fiscal quarter
ended December 31, 1997.
(j) Contained in Exhibits to the Registrant's Form 10-Q for the fiscal quarter
ended June 30, 1998.
(k) Contained in Exhibits to the Registrant's Form 10-Q for the fiscal quarter
ended December 31, 1998.
(l) Contained in Exhibits to the Registrant's Form 8-K dated January 2, 1998.
(m) Contained in Exhibits to the Registrant's Form 8-K dated March 6, 1998.
11
<PAGE>
The above referenced 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.
B. REPORTS ON FORM 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
APPLIED EXTRUSION TECHNOLOGIES, INC.
(REGISTRANT)
By: /s/ ANTHONY J. ALLOTT
-----------------------------------------
Anthony J. Allott
Vice President, Chief Financial
Officer and Treasurer
May 7, 1999
</TABLE>
12
<PAGE>
Exhibit 3.1.3
CERTIFICATE OF AMENDMENT
OF
THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
APPLIED EXTRUSION TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation")
is Applied Extrusion Technologies, Inc.
2. Article 4 of the Corporation's Amended and Restated Certificate of
Incorporation is hereby amended to increase the authorized capital stock of
the Corporation from 16,000,000 shares to 31,000,000 shares by increasing the
authorized Common Stock, $.01 per value, of the Corporation from 14,864,502
to 29,864,502 shares.
3. The amendment of the Amended and Restated Certificate of
Incorporation herein certified has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Signed on March 17, 1999.
/s/ Gerald M. Haines II
---------------------------------
Gerald M. Haines II
Secretary
<PAGE>
Exhibit 10.1.3
CONFORMED COPY
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of March 15, 1999,
amending the Credit Agreement dated as of April 7, 1994 and amended and
restated as of January 29, 1998, as amended by Waiver and Amendment No. 1
dated as of December 16, 1998 (the "CREDIT AGREEMENT"), among APPLIED
EXTRUSION TECHNOLOGIES, INC. (the "COMPANY"), the LENDERS party thereto (the
"LENDERS") and THE CHASE MANHATTAN BANK, as Administrative Agent (the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit Agreement to
increase pricing, permit the acquisition and disposition of certain assets,
modify the financial covenants, and make certain related changes, all as more
fully set forth below, and to restate the Credit Agreement in its entirety to
read as set forth in the Credit Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit
Agreement has the meaning assigned to such term in the Credit Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other
similar reference contained in the Credit Agreement shall, from and after the
date hereof, refer to the Credit Agreement as amended and restated hereby.
SECTION 2. SECTION 1.01. Section 1.01 of the Credit Agreement is amended
by
(a) adding in the appropriate alphabetical order the following
definitions:
"AEP ASSETS" shall mean the assets relating to the oriented
polypropylene films business of AEP Industries Inc. ("AEP") purchased
pursuant to the Asset Purchase Agreement dated as of March 4, 1999 between
the Company and AEP.
<PAGE>
"APPLICABLE LEVERAGE RATIO" shall mean, for any day, the ratio, as at
the end of the most recently ended fiscal quarter of the Company for which
the Company has delivered to the Administrative Agent and the Lenders the
Financial statements required to be delivered by the Company pursuant to
Section 9.01(a) or 9.01(b), as the case may be, of Funded Indebtedness as at
the end of the four fiscal quarters then ended to Cash Flow for such four
fiscal quarters; PROVIDED that if the Company shall not have timely delivered
any such financial statements, and the Majority Lenders shall not have agreed
otherwise, the Applicable Leverage Ratio for each day from and including the
day on which such financial statements are required to be delivered to but
excluding the day on which such financial statements are delivered shall be
deemed to be greater than 5.75:1.
"TENTER I PLANT ASSETS" shall mean the three 5.5 meter OPP lines and
slitters, 5.5 meter fully automated tobacco slitter, reclaim unit, in-line
blending and multiple secondary slitters currently operated at the Plant
located in Terre Haute, Indiana.
(b) amending the definition of "Applicable Margin" to read in its
entirety as follows:
"APPLICABLE MARGIN" shall mean, for any day, with respect to any
Base Rate Loan or Eurodollar Loan, or with respect to any letter of
credit fee payable hereunder, as the case may be, the applicable rate
per annum set forth below under the caption "Base Rate Margin",
"Eurodollar Margin" or "Letter of Credit Fee Rate", as the case may be,
based upon the Applicable Leverage Ratio on such day:
<TABLE>
<CAPTION>
===============================================================================
|| | BASE RATE | EURODOLLAR | LETTER OF CREDIT||
|| APPLICABLE LEVERAGE RATIO: | MARGIN | MARGIN | FEE RATE ||
||<S> | <C> | <C> | <C> ||
||---------------------------------------------------------------------------||
|| < or = 5.00 TO 1 | 1.25% | 2.50% | 2.50% ||
||---------------------------------------------------------------------------||
||> 5.00 TO 1 AND < OR = 5.75 TO 1| 1.50% | 2.75% | 2.75% ||
||---------------------------------------------------------------------------||
|| > 5.75 TO 1 | 1.75% | 3.00% | 3.00% ||
===============================================================================
</TABLE>
(c) amending the definition of "Available PP&E Amount" to add the
following clause before the period at the end thereof:
; it being agreed that as of March 15, 1999 the Available PP&E
Amount is $35,000,000
2
<PAGE>
(d) amending clause (y) of the proviso to the definition of "Borrowing
Base" to read in its entirety as follows:
(y) the amount determined pursuant to clause (iii) shall at no time
exceed $35,000,000.
and
(e) amending the definition of "Cash Flow" to add the following sentence
at the end thereof:
For purposes of the definition of "Applicable Margin" and Sections
9.10 and 9.11, Cash Flow shall be calculated without giving effect
to the $2,905,000 in shutdown costs recorded in the fiscal quarter
of the Company ended December 31, 1998.
SECTION 3. SECTION 2.04(b). Section 2.04(b)(i) of the Credit Agreement
is amended by replacing the words "rate of 2.50% per annum" with the words
"Applicable Margin".
SECTION 4. SECTION 8.15. Section 8.15 of the Credit Agreement is amended
by replacing the word "July" with the word "October".
SECTION 5. SECTION 9.01(e). Section 9.01(e)(ii) of the Credit Agreement
is amended by adding after the words "orderly liquidation value" the words
"in place".
SECTION 6. SECTION 9.09. Section 9.09 of the Credit Agreement is amended
by replacing the number "$90,000,000" with the number "$85,000,000".
SECTION 7. SECTION 9.10. The chart set forth in Section 9.10 of the
Credit Agreement is amended to read as follows for all periods beginning on
or after January 1, 1999:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
January 1, 1999 through December 31, 1999 1.50:1
January 1, 2000 through March 31, 2000 1.75:1
April 1, 2000 through September 30, 2000 2.00:1
October 1, 2000 through March 31, 2001 2.25:1
April 1, 2001 and thereafter 2.50:1
</TABLE>
3
<PAGE>
SECTION 8. SECTION 9.11. The chart set forth in Section 9.11 of the
Credit Agreement is amended to read as follows for all periods beginning on
or after January 1, 1999:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
January 1, 1999 through September 30, 1999 6.00:1
October 1, 1999 through March 31, 1999 5.50:1
April 1, 2000 through September 30, 2000 5.00:1
October 1, 2000 through March 31, 2001 4.00:1
April 1, 2001 through September 30, 2001 3.50:1
October 1, 2001 and thereafter 3.25:1
</TABLE>
SECTION 9. SECTION 9.12. Section 9.12 of the Credit Agreement is amended
by
(a) amending clause (v) to insert after the word "Company" on the first
line thereof the phrase "(or, in the case of the AEP Assets, by Applied
Extrusion Technologies (Canada), Inc.)", and to replace the number
"$30,000,000" with the following:
the sum of $30,000,000 and the amount paid to purchase the AEP
Assets
(b) amending the proviso to clause (vii) to read in its entirety as
follows:
PROVIDED that such cash proceeds, taken together with all other
cash proceeds received for assets disposed of pursuant to this
clause (vi), and net of the amount of such proceeds used to replace
the assets disposed of, shall not exceed $10,000,000 in the
aggregate; and
and
(c) amending clause (viii) to add after the words "Salem, Massachusetts"
the following:
, of the Tenter I Plant Assets
and to delete the words "in clause (vii)(y) above and".
4
<PAGE>
SECTION 10. SECTION 9.14. Section 9.14 of the Credit Agreement is
amended by deleting the word "and" at the end of clause (v) and adding before
the period at the end of the Section the following:
; and (vi) Investments in Applied Extrusion Technologies
(Canada), Inc. consisting of (x) either the cash required to purchase
the AEP Assets or the contribution of AEP Assets and (y) the cash
required to move AEP Assets
SECTION 11. SECTION 9.18. Section 9.18 of the Credit Agreement is
amended to add after clause (ii) the following paragraph:
In addition to the Capital Expenditures permitted above, the
Company or Applied Extrusion Technologies (Canada), Inc. may
purchase the AEP Assets and incur up to $10,000,000 in Capital
Expenditures to move AEP Assets to one or more Plants.
SECTION 12. EXHIBIT C. Exhibit C to the Credit Agreement is amended to
read in its entirety as set forth in the attached Exhibit C.
SECTION 13. REPRESENTATIONS OF COMPANY. The Company represents and
warrants that after giving effect to the foregoing provisions of this Amended
and Restated Credit Agreement (i) the representations and warranties of the
Company and its subsidiaries made in each Basic Document shall be true (or,
in the case of Basic Documents which are not Financing Documents, true in all
material respects) on and as of the Effective Date (as hereinafter defined)
to the same extent as they would be required to be under Section 7.01(b) on
the occasion of any Loan or issuance of any Letter of Credit and (ii) no
Default will have occurred and be continuing on such date.
SECTION 14. GOVERNING LAW. THIS AMENDED AND RESTATED CREDIT AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.
SECTION 15. COUNTERPARTS. This Amended and Restated Credit Agreement 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.
SECTION 16. EFFECTIVENESS. This Amended and Restated Credit Agreement
shall become effective, and the Credit Agreement shall have been restated to
read as set forth in the Credit Agreement with the amendments specified
herein, as of the date hereof on the date (the "EFFECTIVE DATE") when the
5
<PAGE>
Administrative Agent shall have received (i) from the Company for the account
of each Lender, an amendment fee equal to 0.25% of such Lender's pro rata
share of the aggregate amount of Loans, Letter of Credit Liabilities and
unused Commitments on such date, and (ii) from each of the Company and the
Majority confirmation (in form satisfactory to the Administrative Agent) that
such party has signed a counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be duly executed as of the date first above
written.
APPLIED EXTRUSION
TECHNOLOGIES, INC.
By: /s/ Thomas E. Williams
-----------------------------------
Name: Thomas E. Williams
Title: Chairman and Chief Executive
Officer
THE CHASE MANHATTAN BANK
By: /s/ Mary Elisabeth Swerz
-----------------------------------
Name: Mary Elisabeth Swerz
Title: Vice President
LASALLE BUSINESS CREDIT, INC.
By: /s/ John Baier
-----------------------------------
Name: John Baier
Title: Vice President
FLEET NATIONAL BANK
By: /s/ H. Ellery Perkinson
-----------------------------------
Name: H. Ellery Perkinson
Title: Vice President
6
<PAGE>
PNC BANK, N.A.
By: /s/ Craig T. Sheetz
-----------------------------------
Name: Craig T. Sheetz
Title: Vice-President
FIRST UNION NATIONAL BANK
By: /s/ John T. Trainor
-----------------------------------
Name: John T. Trainor
Title: Vice President
7
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
Reference is made to the Credit Agreement dated as of April 7, 1994 and
amended and restated as of January 29, 1998 (as modified and supplemented and
en effect from time to time, the "Credit Agreement") among Applied Extrusion
Technologies, Inc., a Delaware corporation (the "Company"), the leaders named
therein and The Chase Manhattan Bank, as Administrative Agent. Terms defined
in the Credit Agreement are used herein as defined therein.
Pursuant to Section 9.01(c) of the Credit Agreement, the undersigned,
through an authorized officer of the Company, hereby certifies that, to the
best of its knowledge, attached hereto as Annex 1 is, in all material
respects, a true and accurate calculation of the Borrowing Base as at the
monthly accounting period ended ____________, ____ determined in accordance
with the requirements of the Credit Agreement, together with an inventory
schedule and a summary by client of aging of receivables.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed as of the __ day of ____________, ____.
Applied Extrusion Technologies, Inc.
____________________________________
By:
Title:
<PAGE>
ANNEX 1
Borrowing Base Certificate
(all numbers in thousands
unless otherwise indicated)
******************************************************************************
Gross Receivables -- beginning balance
period ended ____________, 199_ __________
Rebates, credits and offsets __________
Commissions payable to third parties __________
Net Receivables -- beginning balance
period ended ____________, 199_ __________
Plus: total sales for period __________
Less: total cash receipts for period __________
total credits for period
(returns and allowances) __________
total increase (decrease) in
offsets for period __________
total other adjustments
for period (+/-) (details
attached) including rebates
and credits __________
Net Receivables -- ending balance
period ended ____________, 199_
Less: ineligible Receivables at period end
(determined pursuant to definition
of Eligible Receivables in Credit
Agreement, without duplication):
Receivables due more than 60 days from
invoice date __________
Receivables due from an account debtor whose
principal place of business is located outside
the United States of America and Canada __________
Receivables due from (i) an Affiliate
<PAGE>
of the Company or (ii) bankrupt or
insolvent account debtors or account debtors
with unsatisfactory credit standing (as
determined by the Majority Lenders) __________
Receivables remaining unpaid over 60
days from original due date __________
Receivables from account debtors if more than
50% of all REceivables from such account
debtor are otherwise excluded as Eligible
Receivables __________
Receivables subject to dispute __________
Receivables due from any account debtor
that is the United States of America or
any department, or instrumentality thereof,
unless the Federal Assignment of Claims Act
has been compiled with __________
Receivables (i) evidenced by instruments
not in the possession of the Administrative
Agent or (ii) in which the Administrative
Agent does not have a perfected
first priority security interest __________
Receivables from any account debtor to
the extent they exceed 20% of the
aggregate of all Receivables, except
as otherwise provided in Schedule IV __________
Total Ineligible Receivables __________
Total Eligible Receivables __________
******************************************************************************
Inventory at lower of cost or market
(using average cost)
owned by the Company and located
in a jurisdiction in the United States
and Canada covered by appropriate filings: __________
Beginning period Inventory balance
____________, 199_
2
<PAGE>
Ending period Inventory balance
____________, 199_ __________
Less: ineligible Inventory at period end
determined pursuant to definition
of Eligible Inventory in Credit
Agreement): __________
Total Eligible Inventory __________
******************************************************************************
[Total Eligible Machinery and Equipment
(Machinery and equipment
as most recently determined by
Appraisers pursuant to Section 9.01(e)(ii)
of the Credit Agreement owned by the
Company or any Subsidiary Guarantor
and located in the United States or
Quebec covered by appropriate
filings) __________
Total Eligible Real Property
(Real Property as most recently determined
by Appraisers pursuant to Section 9.01(e)(ii)
of the Credit Agreement owned by
the Company or any Subsidiary Guarantor
and located in the United States or
Quebec with appropriate surveys,
title reports, and filings and
recordings) __________
******************************************************************************
25% of Eligible Machinery and Equipment __________
Plus: 25% of Eligible Real Property __________
Available PP&E Amount $35,000,000*
____________________________
*Use $35,000,000 unless a lower value is required based upon a
valuation report requested pursuant to Section 9.01(e)(ii), in which case
bracketed text should be included.
3
<PAGE>
******************************************************************************
Borrowing Base:
85% of Eligible Receivables __________
Plus: 50% of Eligible Inventory
(not in access of 50% of the
Borrowing Base) __________
Plus: Available PP&E Amount
(not in excess of $35,000,000) __________
Borrowing Base: __________
******************************************************************************
Loans Balance
Period beginning ____________, 199_ __________
advances for period __________
reductions for period __________
other adjustments (+/-) __________
Loans Balance
Period ending ___________, 199_ __________
Total outstandings __________
Availability (overadvance) __________
******************************************************************************
4
<PAGE>
INVENTORY SCHEDULE
******************************************************************************
<TABLE>
<CAPTION>
Unit
Cost
Quantity Cents/
Units Unit Value Eligible
-------- ------ ----- --------
<S> <C> <C> <C> <C>
Finished Product
Inventory
- ----------------
Location/Product
Total fin. prod. inv.
Raw Material Inventory
- ----------------------
Location/product
Total raw materials inv.
</TABLE>
All inventory set forth above was produced in compliance with the
requirements of the Fair Labor Standards Act, as amended.
<PAGE>
Summary By Client of Aging of Receivables
[attached]
<PAGE>
Ex. 10.1.4
[EXECUTION COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1 (the "AMENDMENT") dated as of April 23, 1999 of the
Credit Agreement dated as of April 7, 1994 and amended and restated as of
March 15, 1999 (the "Credit Agreement"), among APPLIED EXTRUSION
TECHNOLOGIES, INC. (the "COMPANY"), the LENDERS party thereto (the "LENDERS")
and THE CHASE MANHATTAN BANK, as Administrative Agent (the "ADMINISTRATIVE
AGENT").
W I T N E S S E T H :
WHEREAS, the Company and the Lenders have agreed to increase the maximum
aggregate amount of letter of credit liabilities from $5,000,000 to
$10,000,000;
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
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement.
SECTION 2. AMENDMENT OF SECTION 2.02. Section 2.02(a) of the Credit
Agreement is amended by replacing the number "$5,000,000" with the number
"$10,000,000".
SECTION 3. REPRESENTATIONS OF COMPANY. The Company represents and
warrants that (i) the representations and warranties of the Company and its
Subsidiaries made in each Basic Document shall be true (or, in the case of
Basic Documents which are not Financing Documents, true in all material
respects) on and as of the Amendment Effective Date (as hereinafter defined)
to the same extent as they would be required to be under Section 7.01(b) on
the occasion of any Loan or issuance of any Letter of Credit and (ii) no
Default will have occurred and be continuing on such date.
SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
SECTION 5. 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 (the
"AMENDMENT EFFECTIVE DATE") when the Administrative Agent shall have received
from each of the Company and the Majority Lenders a counterpart hereof signed
by such party or facsimile or other written confirmation (in form satisfactory
to the Administrative Agent) that such party has signed a counterpart hereof.
2
<PAGE>
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/ Gerald M. Haines II
----------------------------------
Name: Gerald M. Haines II
Title: Vice President and
General Counsel
THE CHASE MANHATTAN BANK
By /s/ Peter Dedousis
----------------------------------
Name: Peter Dedousis
Title: Managing Director
LASALLE BUSINESS CREDIT, INC.
By /s/ John C. Baier
----------------------------------
Name: John C. Baier
Title: Vice President
FLEET NATIONAL BANK
By /s/ H. Ellery Perkinson
----------------------------------
Name: H. Ellery Perkinson
Title: Vice President
3
<PAGE>
PNC BANK, N.A.
By /s/ Craig T. Sheetz
----------------------------------
Name: Craig T. Sheetz
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ John T. Trainor
----------------------------------
Name: John T. Trainor
Title: Vice President
4
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS Employment Agreement (the "Agreement") is made as of the 1st day
of April, 1999 by and between Applied Extrusion Technologies, Inc., a Delaware
corporation (the "Employer"), and David N. Terhune (the "Executive").
RECITALS
1. The Executive is currently employed by the Employer as its Chief
Operating Officer and Executive Vice President pursuant to an Employment
Agreement dated as of February 1, 1996, as in effect on the date hereof (the
"Prior Employment Agreement").
2. The Prior Employment Agreement provides that, on or after January
31, 1999, the Prior Employment Agreement continues in effect from year to year
unless either the Executive or the Employer gives notice to the other that such
continuation should not occur.
3. 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.
4. In consideration of the employment to be provided hereby and the
amounts to be paid as provided herein, the Executive desires to continue 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 continue to employ the Executive, and the
Executive shall continue to perform services for and continue in the employment
of the Employer, for the period (the "Employment Period") beginning on the date
hereof and ending on March 31, 2003, subject to extension as set forth herein
(such date, as from time to time in effect, being referred to herein as the
"Expiration Date"); PROVIDED, HOWEVER, that, unless either the Employer or the
Executive shall give notice to the other (which notice may be given in the sole
discretion of either party hereto) no later than 90 days prior to the
then-current Expiration Date (the "Current Expiration Date") that such party
does not wish to have the Employment Period extended for another year past the
Current Expiration Date, then, at the close of business on such date which is 90
days prior to the Current Expiration Date, the Expiration Date shall
automatically become the date which is exactly one year after the Current
Expiration Date; and PROVIDED, FURTHER, that the employment of the Executive by
the Employer may be terminated prior to the Expiration Date in accordance with
all of the terms and conditions hereof.
<PAGE>
2. CAPACITY. During such time as the Executive is employed by the Employer
hereunder:
(a) POSITION AND DUTIES. The Executive shall serve on a full-time basis
in the capacity of the Chief Operating Officer and Executive Vice President,
shall report to the Chief Executive Officer of the Employer (the "Chief
Executive Officer") and 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 Chief Executive
Officer. 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 Employer.
(b) CERTAIN RESIGNATIONS. Should Executive's employment hereunder
terminate for any reason, Executive agrees to resign from the board of directors
of each subsidiary or affiliate of the Employer on which the Executive is then
serving, immediately upon the receipt of a request for such resignation from the
Chief Executive Officer, if the Employer has paid all amounts owed to the
Executive by virtue of the termination of his employment and is not otherwise
then in default hereunder.
3. COMPENSATION.
(a) SALARY. During each year of the Employment Period, the Executive
shall receive an annual salary (the "Salary") of $315,000; PROVIDED, HOWEVER,
that effective April 1, 2000 the Salary shall be increased to $386,250 and on
each April 1 thereafter, beginning April 1, 2001, the Salary then in effect
shall be increased by the greater of (i) such increase as the Board of Directors
of the Employer (the "Board') may specify in its sole discretion or (ii) an
amount equal to the then-current Salary MULTIPLIED BY the percentage increase
(if any) in the Consumer Price Index for All Urban Consumers (CPI-U) - U.S. City
Average during the immediately preceding calendar year.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus (the "Bonus") based
upon criteria that are defined annually by the Employer and will be targeted at
50% of Salary, with a maximum payout potential of 100% of Salary.
(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 consistent with past practices.
(d) FRINGE BENEFITS. During the Employment Period, (i) the Executive
shall be entitled to participate in or receive benefits under each disability
insurance, health, pension, retirement and accident plan or arrangement made
generally available by the Employer 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, (ii) the Executive shall
also be entitled to payments pursuant to a supplemental executive retirement
plan having terms
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no less favorable to the Executive than those set forth in Exhibit A hereto and,
until such time (if any) as such a plan is established by the Employer, shall be
entitled to the benefits set forth in said Exhibit A, and (iii) the Employer
shall provide to the Executive, or at Executive's election reimburse the
Executive on an after tax basis for the cost of, (A) disability insurance
providing not less than 65% Salary replacement until age 65, and (B) insurance
protection over the Executive's life providing death benefits of not less than
$1,875,000 payable to such person as the Executive shall have designated in a
notice filed with the Employer (the "Designee"), or, if no such person shall
have been designated, to his estate (the "Estate"), in each case consistent with
the Employer's past practices regarding such insurance for executives.
(e) ADDITIONAL BENEFITS. Without limiting the generality of the
foregoing, during the Employment Period:
(i) the Executive shall be furnished with either an automobile, of a
make and year reasonably satisfactory to the Employer and the Executive
and consistent with the past practices of the Employer and the
Executive in this regard, either owned or leased by the Employer or an
automobile allowance sufficient to permit the Executive to obtain the
use of such an automobile, the choice of providing such automobile or
allowance to be at the sole discretion of the Employer;
(ii) the Employer shall either pay the Executive's membership expenses
(including fees and dues), or otherwise make available to the Executive
at no cost to the Executive, membership at a club chosen by the
Executive with the consent of the Employer (not to be unreasonably
withheld); and
(iii) the Executive shall be entitled to a physical examination each
calendar year by the doctor who is the Executive's primary care
physician, either pursuant to the Employer's health or other plans or
otherwise at the expense of the Employer.
(f) CHANGE IN CONTROL. If a "Change in Control" (as such term is
defined in Exhibit A to the Employer's 1991 Stock Option Plan for Directors)
shall occur, then (i) Section 1 hereof shall be amended by replacing the date
"March 31, 2003" with the date which is exactly four years after the date of the
Change in Control, (ii) all stock options previously granted to the Executive
which, by their terms, have not yet vested, shall immediately vest and become
exercisable, (iii) if such Change in Control occurs prior to March 31, 2000 the
"Performance Target" referred to in Section 3(g) shall be deemed to have been
achieved, and (iv) the Executive shall be entitled to carry out his duties and
responsibilities hereunder primarily from Executive's current office in New
Castle, Delaware (or another facility serving such purpose and located within 15
miles of such current office) and will not be required to locate his primary
place of business outside such area without his consent (which may be given or
withheld in his sole discretion).
(g) PERFORMANCE TARGET. Except as otherwise provided in Section
3(f)(iii) hereof, in the event that the " Performance Target" set forth in
Exhibit A to the minutes of the March 11,
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1999 meeting of the Compensation Committee of Employer's Board shall not have
been achieved by the Company, then upon written notice referencing this Section
3(g) given by the Board to Executive at any time during the sixty day period
commencing March 31, 2000, (i) Section 1 hereof shall be amended by replacing
the date "March 31, 2003" with the date "March 31, 2002", (ii) Section 3(a)
hereof shall be amended by deleting the words "the Salary shall be increased to
$386,250" and the words "beginning April 1, 2001" from the proviso therein,
(iii) Section 3(d) hereof shall be amended by deleting clause (ii) thereof and
re-numbering the remaining clauses of said Section accordingly; and (iv) Section
3(f) hereof shall be amended by deleting clause (i) thereof and re-numbering the
remaining clauses of said Section accordingly.
4. TERMINATION AND COMPENSATION THEREON.
(a) TERMINATION DATE. As used herein, the term (i) "Termination Date"
shall mean the earlier of (A) the Expiration Date or (B) if the Executive's
employment is terminated (1) by his death, the date of his death, or (2) 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, and (ii) "Benefits Termination Date" shall mean the later of (A)
the Expiration Date or (B) the date which is exactly two years after the
Termination Date. The Employment Period shall terminate on the Termination Date;
PROVIDED, HOWEVER, that, unless the Executive's employment is terminated
pursuant to Section 4(d) or 4(g) hereof, the Expiration Date shall not be
changed to the Termination Date if the Executive's employment hereunder
terminates on a date other than the Expiration Date, and, if the Executive's
employment is terminated pursuant to Section 4(d) or 4(g) hereof, the Expiration
Date shall automatically be changed and shall become the Termination Date.
(b) DEATH. The Executive's employment hereunder shall terminate upon
his death. In such event, the Employer shall pay to the Designee or, if no such
person shall have been designated, the Estate, as applicable, (i) as promptly as
practicable after the Termination Date, an amount equal to any unpaid Salary,
Bonus and benefits accrued through the Termination Date, together with an amount
equal to the Average Bonus (pro rated for the period from the beginning of the
fiscal year through the Termination Date) for the fiscal year in which the
Executive's death occurs, and (ii) the Executive shall be deemed for all vesting
requirements contained in any of the Employer's benefit plans, programs and
offerings in which the Executive is participating on the Termination Date
(including without limitation any supplemental executive retirement plan or
benefits, including that benefit referenced in Exhibit A of this Agreement) to
have been employed by the Employer until the Expiration Date. For purposes of
this Agreement, the "Average Bonus" shall mean, with respect to any fiscal year
of the Company, the greater of (A) the Bonus accrued by the Employer as payable
to the Executive with respect to the fiscal year immediately preceding the
Termination Date or (B) 25% of the Salary payable in such fiscal year.
(c) INCAPACITY. If, 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 Employer
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by action of the Board, may terminate the Executive's employment hereunder by
notice to the Executive. In such event, (i) the Employer shall pay the Executive
as promptly as practicable after the Termination Date, an amount equal to any
unpaid Salary, Bonus and benefits accrued through the Termination Date, together
with an amount equal to the Average Bonus (pro rated for the period from the
beginning of the fiscal year through the Termination Date) for the fiscal year
in which the Termination Date occurs, (ii) during the period beginning on the
Termination Date and ending on the Benefits Termination Date, shall extend to
Executive the applicable fringe benefits referred to in Sections 3(d)(i),
3(d)(ii), 3(d)(iii)(B) and 3(e) hereof (or the equivalent thereof in all
material respects if continuation of participation in benefit plans is not able
to be continued under applicable law or the terms of such benefit plans); and
(iii) the Executive shall be deemed for all vesting requirements contained in
any of the Employer's benefit plans, programs or offerings in which the
Executive is participating on the Termination Date (including without limitation
any supplemental executive retirement plan or benefit, including that benefit
referenced in Exhibit A of this Agreement) to have been employed by the Employer
until the Expiration Date. Any dispute between the Board 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 and the Executive,
whose decision shall be binding on all parties.
(d) TERMINATION BY THE EMPLOYER FOR CAUSE. The Employer may terminate
the Executive's employment hereunder for Cause. For purposes of this Agreement,
"Cause" shall mean (i) other than by reason of Executive's incapacity under
Section 4(c) above, willful conduct by the Executive demonstrating gross
misconduct and gross unfitness to serve and which has caused material harm to
the business or interests of the Employer, or (ii) the Executive's conviction
of, or entry into a consent decree or substantially similar arrangement in
connection with, a crime involving fraud, dishonesty or other conduct which
materially and adversely affects the Employer. 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, 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
knowingly and with the intent that such action or inaction would not be in the
best interests of the Employer or otherwise was done or omitted to be done in
bad faith or with reckless disregard for the best interests of the Employer.
(e) TERMINATION BY THE EMPLOYER OTHER THAN FOR DEATH, INCAPACITY OR
CAUSE. The Employer may terminate the Executive's employment hereunder, other
than pursuant to Section 4(b) (relating to death), Section 4(c) (relating to
incapacity), or Section 4(d) (relating to Cause), at any time. In the event of
such termination, or if the Executive's employment hereunder shall terminate on
the Expiration Date because the Employer has given the notice contemplated by
the first proviso to Section 1 hereof, then the Employer (i) shall pay the
Executive (A) as promptly as practicable after the Termination Date, an amount
equal to any unpaid Salary, Bonus and benefits accrued through the Termination
Date, together with an amount equal to the Average Bonus (pro rated for the
period from the beginning of the fiscal year through the Termination Date) for
the fiscal year in which the Termination Date occurs, and (B) a lump sum
payment, within 60 days
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after the Termination Date, equal to the aggregate amount of Salary and Average
Bonus that would have been payable to the Executive over the period from the
Termination Date to the Benefits Termination Date if the Executive had continued
to be employed by the Employer through the Benefits Termination Date and
received Salary and Average Bonus for periods after the Termination Date based
upon the Salary he would have received under Section 3(a) if this Agreement was
extended through the Benefits Termination Date (but excluding any cost of living
or discretionary increases under clauses (i) or (ii) of Section 3(a) that would
have occurred after the Termination Date), and (ii) during the period beginning
on the Termination Date and ending on the Benefits Termination Date, shall
extend to Executive the applicable fringe benefits referred to in Sections 3(d)
and 3(e) hereof on the terms referred to therein (or the equivalent thereof in
all material respects if continuation of participation in benefit plans is not
able to be continued under applicable law or the terms of such benefit plans).
In addition, the Executive shall be deemed for all vesting requirements
contained in any of the Employer's benefit plans, programs or offerings in which
the Executive is participating on the Termination Date (including without
limitation any supplemental executive retirement plan or benefit, including that
benefit referenced in Exhibit A of this Agreement) to have been employed by the
Employer until the Expiration Date.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate his employment hereunder for Good Reason upon notice to the Employer
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for termination by the Executive if the same has
not been cured within 30 days after written notice to the Chairman by the
Executive:
(i) Failure of the Employer to continue the Executive in the position
of Chief Operating Officer and Executive Vice President;
(ii) Material diminution in the nature or scope of the Executive's
responsibilities, duties or authority; or
(iii) Failure to pay Executive on a timely basis, or any other material
breach by the Employer of Section 2 or 3 hereof.
In event of termination in accordance with this Section 4(f), then the Employer
(i) shall pay to the Executive (A) as promptly as practicable after the
Termination Date, an amount equal to any unpaid Salary, Bonus and benefits
accrued through the Termination Date, together with an amount equal to the
Average Bonus (pro rated for the period from the beginning of the fiscal year
through the Termination Date) for the fiscal year in which the Termination Date
occurs, and (B) a lump sum payment, within 60 days after the Termination Date,
equal to the aggregate amount of Salary and Average Bonus that would have been
payable to the Executive over the period from the Termination Date to the
Benefits Termination Date if the Executive had continued to be employed by the
Employer through the Benefits Termination Date and received Salary and Average
Bonus for periods after the Termination Date based upon the Salary he would have
received under Section 3(a) if this Agreement was extended through the Benefits
Termination
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<PAGE>
Date (but excluding any cost of living or discretionary increases under clauses
(i) or (ii) of Section 3(a) that would have occurred after the Termination
Date), and (ii) during the period beginning on the Termination Date and ending
on the Benefits Termination Date, shall extend to Executive the applicable
fringe benefits referred to in Sections 3(d) and 3(e) hereof on the terms
referred to therein (or the equivalent thereof in all material respects if
continuation of participation in benefit plans is not able to be continued under
applicable law or the terms of such benefit plans). In addition, the Executive
shall be deemed for all vesting requirements contained in any of the Employer's
benefit plans, programs or offerings in which the Executive is participating on
the Termination Date (including without limitation any supplemental executive
retirement plan or benefit, including that benefit referenced in Exhibit A of
this Agreement) to have been employed by the Employer until the Expiration Date.
(g) TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The
Executive may terminate his employment hereunder other than for Good Reason. In
the event of termination of the Executive's employment pursuant to this Section
4(g), or if the Executive's employment hereunder shall terminate on the
Expiration Date because the Executive has given the notice contemplated by the
first proviso to Section 1 hereof, the Employer shall have no further
obligations to the Executive hereunder after the Termination Date, except for an
amount equal to any unpaid Salary, Bonus and benefits accrued through the
Termination Date.
(h) EFFECT OF TERMINATION. This Section 4 sets forth all obligations of
the Employer to the Executive upon termination of his employment hereunder;
PROVIDED, HOWEVER, that the benefits provided hereunder shall be in addition to,
and not in lieu of, any benefits provided to the Executive by the Employer under
any plan in which the Executive participates, including without limitation any
stock option or supplemental executive retirement plan or benefit, including
that benefit referenced in Exhibit A of this Agreement but excluding any
severance plans or policies administered by the Employer. The provisions of this
Section 4 and of Sections 5, 6, 7, 8, 10, and 12 hereof shall survive the
Termination Date.
(i) CONSULTING SERVICES. Following termination of his employment
hereunder pursuant to the provisions of Section 4(e) or 4(f) hereof, and in
partial consideration for the payments provided pursuant thereto, during the
period from the Termination Date until the Benefits Termination Date, Executive
shall provide to Employer up to eight hours per month of consulting services as
reasonably requested by Employer. Such consulting services shall be provided
from locations and at times reasonably acceptable to Executive in his sole
discretion. Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by him in connection with the provision of
consulting services to Employer.
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 Employer. Executive understands
that this restriction shall continue to apply after Executive's employment
terminates, regardless of the reason for such termination, and after the
expiration or other termination of this
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Agreement. "Confidential Information" means all confidential, proprietary or
other information relating to the Employer and its subsidiaries and affiliates
and their businesses, and includes without limitation all such information
relating to (i) the development, research, testing, manufacturing and marketing
activities of the Employer, (ii) the products manufactured, sold or distributed
by the Employer, (iii) the costs, sources of supply and strategic plans of the
Employer, (iv) the identity and special needs of the customers of the Employer,
(v) the financial arrangements and capital structure of the Employer, (vi) the
management and operation of the Employer and (vii) people and organizations with
whom the Employer has business relationships and those relationships.
Confidential Information also includes comparable information that the Employer
may receive or has received belonging to customers or others who do business
with the Employer. 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 and other legitimate interests of the
Employer. While Executive is employed by the Employer and for two (2) years
after the Benefits Termination Date (or, in the event the Executive's employment
is terminated pursuant to Section 4(d), 4(g), or if the Executive's employment
hereunder shall terminate on the Expiration Date because the Executive has given
the notice contemplated by the first proviso to Section 1 hereof, for two (2)
years after the Termination Date), Executive shall not, 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 business of the Employer as conducted at any time during Executive's
employment without the Employer's written consent, which consent shall not be
unreasonably withheld. Executive understands that these restrictions shall
continue to apply even if this Agreement expires or otherwise terminates. The
foregoing restriction shall not prevent Executive from owing 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 Employer.
7. DOCUMENTS AND MATERIAL. Upon termination of Executive's employment with the
Employer or at any other time upon the Employer's request, Executive will
promptly deliver to the Employer, without retaining any copies, all documents
and other materials furnished to Executive by the Employer, prepared by
Executive for the Employer or otherwise relating to the Employer's business, if
and to the extent that the information therein constitutes Confidential
Information.
8. RELIEF, INTERPRETATION. Executive agrees that the Employer 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 hereof without having to post bond. In the
event that any provision of Sections 5, 6 and 7 hereof 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
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activities as to which it may be enforceable. For purposes of Sections 5, 6 and
7 hereof the term "Employer" shall mean the Employer and any of its subsidiaries
and affiliates to the extent that such enterprises are, during the term of
Executive's employment by the Employer, engaged in the same line of business as
the Employer.
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
Employer any proprietary information of a third party without such party's
consent. Executive will not enter into any agreement, whether written or oral,
conflicting with the provisions of this Agreement.
10. LEGAL EXPENSES. The Employer shall pay or reimburse Executive on an
after-tax basis for all costs and expenses (including, without limitation, court
costs and reasonable legal fees and expenses incurred by Executive) as a result
of any claim, action or proceeding (i) arising out of the termination of his
employment during the Employment Period, (ii) contesting, disputing or enforcing
any right, benefits or obligations under this Agreement, or (iii) arising out of
or challenging the validity, advisability or enforceability of this Agreement or
any provision thereof. Such payments or reimbursements shall be made promptly,
but in no event later than five business days following, receipt by the Employer
of request by Executive for such payment or reimbursement, including an invoice
detailing any such legal fees and expenses. Requests for payment or
reimbursement hereunder may be delivered no more frequently than monthly.
Notwithstanding the foregoing, the Executive shall reimburse the Employer for
any fees or expenses previously paid or reimbursed by Employer in connection
with a dispute if the relevant trier-of-fact determines that Executive's claim
or position was frivolous and without reasonable foundation.
11. TAXES. All payments made by the Employer under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Employer
under applicable law. Notwithstanding the immediately preceding sentence, in the
event that it is determined that any payment or benefit provided by the Employer
to or for the benefit of the Executive, either under any Section of this
Agreement, any stock option, any supplemental executive retirement plan or
otherwise, will be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any successor provision ("Section 4999"), the Employer
will, prior to the date on which any amount of the excise tax must be paid or
withheld, make an additional lump-sum payment (the "gross-up payment") to the
Executive. The gross-up payment will be sufficient, after giving effect to all
federal, state and other taxes (including any excise tax under Section 4999) and
charges (including interest and penalties, if any) with respect to the gross-up
payment, to make the Executive whole for all taxes (including withholding taxes)
and any associated interest and penalties, imposed under or as a result of
Section 4999 with respect to all payments and benefits provided by the Employer
to or for the benefit of the Executive under any Section of this Agreement, any
stock option, any supplemental executive retirement plan or otherwise.
Determinations under this Section 11 will be made by the Employer's independent
auditors
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unless the Executive has reasonable objections to the use of that firm, in which
case the determinations will be made by a comparable firm chosen by the
Executive after consultation with the Employer (the firm making the
determinations to be referred to as the "Firm"). The determinations of the Firm
will be binding upon the Employer and the Executive except as the determinations
are established in resolution (including by settlement) of a controversy with
the Internal Revenue Service to have been incorrect. All fees and expenses of
the Firm will be paid by the Employer. If the Internal Revenue Service asserts a
claim that, if successful, would require the Employer to make a gross-up payment
or an additional gross-up payment, the Employer and the Executive will cooperate
fully in resolving the controversy with the Internal Revenue Service. The
Employer will make or advance such gross-up payments as are necessary to prevent
the Executive from having to bear the cost of payments made to the Internal
Revenue Service in the course of, or as a result of, the controversy. The Firm
will determine the amount of such gross-up payments or advances and will
determine after resolution of the controversy whether any advances must be
returned by the Executive to the Employer. The Employer will bear all expenses
of the controversy and will gross the Executive up for any additional taxes that
may be imposed upon the Executive as a result of its payment of such expenses.
12. INDEMNIFICATION. To the maximum extent permitted under the laws of The
Commonwealth of Massachusetts, as from time to time in effect, the Employer
hereby agrees to indemnify Executive and hold him harmless from, against and in
respect of any and all damages, deficiencies, actions, suits, proceedings,
demands, assessments, judgements, claims, losses, costs, expenses, obligations
and liabilities arising from or related to the performance of this Agreement by
Executive, other than for gross negligence, willful misconduct or willful
violation of this Agreement.
13. WAIVER. The waiver by either party of a breach of any provision of this
Agreement by the other party will not operate or be construed as a waiver of any
other subsequent breach by the other party.
14. 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.
15. 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:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: President
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with a copy to:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: General Counsel
and to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Winthrop G. Minot
(ii) if to the Executive, to him at:
Applied Extrusion Technologies, Inc.
15 Read's Way
New Castle, Delaware 19720
with a copy to him at:
Box 299
Montchanin, Delaware 19710
16. ASSIGNMENT. Neither the Employer 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
Employer may assign its rights and obligations under this Agreement without the
consent of Executive in the event that the Employer 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 Employer and
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
17. MISCELLANEOUS. The Prior Employment Agreement is hereby terminated with
respect to the employment of the Executive by the Employer on and after the date
hereof, and shall be of no further force or effect with respect to such
employment; PROVIDED, HOWEVER, that the Prior Employment Agreement shall
continue to govern the terms of the Executive's employment by the Employer with
respect to all periods ending on or prior to the date hereof. 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
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unenforceability of any term or provision hereof shall not affect 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 domestic substantive laws of The
Commonwealth of Massachusetts without regard to any choice or conflicts of laws
rules or principles that would cause the application of the domestic substantive
laws of any jurisdiction other than 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: /s/ Thomas E. Williams
---------------------------------
Thomas E. Williams
CHIEF EXECUTIVE OFFICER AND PRESIDENT
/s/ David N. Terhune
---------------------------------
David N. Terhune
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EXHIBIT A
TERMS OF THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Executive shall be entitled to the following benefits after his
employment by the Employer has terminated for any reason, provided Executive has
no less than ten Years of Service with the Employer at least 48 months of which
shall be after the effective date of this Agreement (subject to the provisions
regarding vesting of benefits upon termination as contained in Sections 4(b)
(Death), 4(c) (Incapacity), 4(e) (Termination by the Employer Other Than for
Death, Incapacity, or Cause), and 4(f) (Termination by Executive for Good
Reason) of the Employment Agreement to which this Exhibit A is attached, as from
time to time in effect (the "Employment Agreement")): During the period
beginning on the date (the "Retirement Payment Commencement Date") which is the
later of (i) the Termination Date, or (ii) the date on which the Executive
attains age 60, and ending on the tenth anniversary of the Retirement Payment
Commencement Date, the Employer shall pay to the Executive, in accordance with
the Employer's current payroll practices for its executive employees generally,
an annual amount equal to the product of the Benefit Percentage multiplied by
the Average Compensation; PROVIDED, HOWEVER, that amounts payable to the
Executive pursuant to this sentence shall be reduced by amounts received by the
Executive as proceeds received concurrently from any disability insurance paid
or reimbursed by the Employer for the benefit of the Executive. In the event of
the Executive's death, a lump sum payment of his remaining benefits shall be
made to his Designee or Estate (determined by using a discount factor of 5% per
annum) under this provision. The value of the Executive's benefits under this
provision shall be at all times fully funded by the Employer as they accrue and
become vested, through contributions by the Employer to a rabbi trust. In the
event of a Change in Control, or if a Change in Control is imminent, the
Employer shall immediately make an additional contribution to the rabbi trust in
an amount sufficient to fully fund the Executive's benefits under the Plan,
whether or not vested, and upon the later of the Retirement Payment Commencement
Date or the date of the Change in Control, Executive may elect to receive a lump
sum payment of his benefits (determined by using a discount factor of 5% per
annum) under this provision.
As used in this Exhibit A:
(i) Terms defined in the Employment Agreement and not
otherwise defined herein are used herein with the meanings
so defined;
(ii) "Years of Service" shall mean the number of calendar
months of Executive's employment with Employer DIVIDED BY
twelve, with any remainder rounded up to the next whole
number;
(iii) "Benefit Percentage" means (A) 25% if vesting occurs
subsequent to March 31, 2000 and the Performance Target
has not been achieved, and (B) 50%
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if vesting occurs subsequent to March 31, 2000 and the
Performance Target has been achieved; PROVIDED, HOWEVER, the
Benefit Percentage shall be 50% in the event that the
Executive's employment is terminated pursuant to Sections
4(b),4(c), 4(e), or 4(f) of the Employment Agreement,
notwithstanding the date of vesting, and
(iv) "Average Compensation" means the average annual Salary
and Bonus paid by the Employer to the Executive pursuant to
the Employment Agreement determined by averaging the three
fiscal years in which the Executive earned the highest
aggregate Salary and incentive bonus during any fiscal year
prior to the Termination Date; PROVIDED, HOWEVER, the that
the Average Compensation shall never be less than the
Executive's current Salary.
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Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS Employment Agreement (the "Agreement") is made as of the 1st day
of April, 1999 by and between Applied Extrusion Technologies, Inc., a Delaware
corporation (the "Employer"), and Amin J. Khoury (the "Executive").
RECITALS
1. The Executive is currently employed by the Employer as the Chairman
(the "Chairman") of its Board of Directors (the "Board") pursuant to an
Employment Agreement dated as of April 26, 1994, as in effect on the date hereof
(the "Prior Employment Agreement").
2. The Prior Employment Agreement provides that, on or after April 25,
1999, either the Executive or the Employer may, by notice given to the other,
terminate the employment of the Executive by the Employer.
3. 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.
4. In consideration of the employment to be provided hereby and the
amounts to be paid as provided herein, the Executive desires to continue 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 continue to employ the Executive, and the
Executive shall continue to perform services for and continue in the employment
of the Employer, for the period (the "Employment Period") beginning on the date
hereof and ending on March 31, 2003, subject to extension as set forth herein
(such date, as from time to time in effect, being referred to herein as the
"Expiration Date"); PROVIDED, HOWEVER, that, unless either the Employer or the
Executive shall give notice to the other (which notice may be given in the sole
discretion of either party hereto) no later than 90 days prior to the
then-current Expiration Date (the "Current Expiration Date") that such party
does not wish to have the Employment Period extended for another year past the
Current Expiration Date, then, at the close of business on such date which is 90
days prior to the Current Expiration Date, the Expiration Date shall
automatically become the date which is exactly one year after the Current
Expiration Date; and PROVIDED, FURTHER, that the employment of the Executive by
the Employer may be terminated prior to the Expiration Date in accordance with
all of the terms and conditions hereof.
<PAGE>
2. CAPACITY. During such time as the Executive is employed by the Employer
hereunder:
(a) POSITION AND DUTIES. The Executive shall serve as the Chairman of
the Board, shall report and be accountable to the Board, and shall have such
other powers, duties and responsibilities, consistent with his position and
experience, and consistent in {both} time required, scope and place of
performance, with those services rendered by the Executive pursuant to the prior
Employment Agreement. The Executive shall devote his business judgment, skill
and knowledge to the discharge of his duties and responsibilities hereunder. The
Executive shall be required to devote only so much time as the Executive
determines is reasonably necessary to discharge his duties as the Chairman, and,
subject to the provisions of Sections 5 and 6, may engage in other business
activities during the Employment Period.
(b) BOARD MEMBERSHIP. The Employer agrees to propose to the
shareholders of the Employer at each appropriate Annual Meeting of such
shareholders the reelection of the Executive as a member of the Board, provided
that the Executive is otherwise eligible for such election; PROVIDED, HOWEVER,
that should Executive's employment hereunder terminate for any reason, Executive
agrees to resign from the Board, and from the board of directors of each
subsidiary or affiliate of the Employer, immediately upon the receipt of a
request for such resignation from the Board, if the Employer has paid all
amounts owed to the Executive by virtue of the termination of his employment and
is not otherwise then in default hereunder.
3. COMPENSATION.
(a) SALARY. During each year of the Employment Period, the Executive
shall receive an annual salary (the "Salary") of $415,000; PROVIDED, HOWEVER,
that effective April 1, 2000 the Salary shall be increased to $515,000 and on
each April 1 thereafter, beginning April 1, 2001, the Salary then in effect
shall be increased by the greater of (i) such increase as the Board may specify
in its sole discretion or (ii) an amount equal to the then-current Salary
MULTIPLIED BY the percentage increase (if any) in the Consumer Price Index for
All Urban Consumers (CPI-U) - U.S. City Average during the immediately preceding
calendar year.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus (the "Bonus") based
upon criteria that are defined annually by the Employer and will be targeted at
50% of Salary, with a maximum payout potential of 100% of Salary.
(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 consistent with past practices.
(d) FRINGE BENEFITS. During the Employment Period, (i) the Executive
shall be entitled to participate in or receive benefits under each disability
insurance, health, pension,
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retirement and accident plan or arrangement made generally available by the
Employer 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, (ii) the Executive shall also be entitled to payments
pursuant to a supplemental executive retirement plan having terms no less
favorable to the Executive than those set forth in Exhibit A hereto and, until
such time (if any) as such a plan is established by the Employer, shall be
entitled to the benefits set forth in said Exhibit A, and (iii) the Employer
shall provide to the Executive, or at Executive's election reimburse the
Executive on an after tax basis for the cost of, (A) disability insurance
providing not less than 65% Salary replacement until age 65, and (B) insurance
protection over the Executive's life providing death benefits of not less than
$2,500,000 payable to such person as the Executive shall have designated in a
notice filed with the Employer (the "Designee"), or, if no such person shall
have been designated, to his estate (the "Estate"), in each case consistent with
the Employer's past practices regarding such insurance for executives.
(e) CHANGE IN CONTROL. If a "Change in Control" (as such term is
defined in Exhibit A to the Employer's 1991 Stock Option Plan for Directors)
shall occur, then (i) Section 1 hereof shall be amended by replacing the date
AMarch 31, 2003" with the date which is exactly four years after the date of the
Change in Control, (ii) all stock options previously granted to the Executive
which, by their terms, have not yet vested, shall immediately vest and become
exercisable, (iii) if such Change in Control occurs prior to March 31, 2000 the
"Performance Target" referred to in Section 3(f) shall be deemed to have been
achieved, and (iv) the Executive shall be entitled to carry out his duties and
responsibilities hereunder primarily from his then current primary place of
business and will not be required to locate his primary place of business
outside such area without his consent (which may be given or withheld in his
sole discretion).
(f) PERFORMANCE TARGET. Except as otherwise provided in Section
3(e)(iii) hereof, in the event that the "Performance Target" set forth in
Exhibit A to the minutes of the March 11, 1999 meeting of the Compensation
Committee of Employer's Board shall not have been achieved by the Company, then
upon written notice referencing this Section 3(f) given by the Board to
Executive at any time during the sixty day period commencing March 31, 2000, (i)
Section 1 hereof shall be amended by replacing the date "March 31, 2003" with
the date "March 31, 2002", (ii) Section 3(a) hereof shall be amended by deleting
the words "the Salary shall be increased to $515,000" and the words "beginning
April 1, 2001" from the proviso therein (iii) Section 3(d) hereof shall be
amended by deleting clause (ii) thereof and re-numbering the remaining clauses
of said Section accordingly; and (iv) Section 3(e) hereof shall be amended by
deleting clause (i) thereof and re-numbering the remaining clauses of said
Section accordingly.
4. TERMINATION AND COMPENSATION THEREON.
(a) TERMINATION DATE. As used herein, the term (i) "Termination Date"
shall mean the earlier of (A) the Expiration Date or (B) if the Executive's
employment is terminated (1) by his death, the date of his death, or (2) 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
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relationship, and (ii) "Benefits Termination Date" shall mean the later of (A)
the Expiration Date or (B) the date which is exactly two years after the
Termination Date. The Employment Period shall terminate on the Termination Date;
PROVIDED, HOWEVER, that, unless the Executive's employment is terminated
pursuant to Section 4(d) or 4(g) hereof, the Expiration Date shall not be
changed to the Termination Date if the Executive's employment hereunder
terminates on a date other than the Expiration Date, and, if the Executive's
employment is terminated pursuant to Section 4(d) or 4(g) hereof, the Expiration
Date shall automatically be changed and shall become the Termination Date.
(b) DEATH. The Executive's employment hereunder shall terminate upon
his death. In such event, the Employer shall pay to the Designee or, if no such
person shall have been designated, the Estate, as applicable, (i) as promptly as
practicable after the Termination Date, an amount equal to any unpaid Salary,
Bonus and benefits accrued through the Termination Date, together with an amount
equal to the Average Bonus (pro rated for the period from the beginning of the
fiscal year through the Termination Date) for the fiscal year in which the
Executive's death occurs, and (ii) the Executive shall be deemed for all vesting
requirements contained in any of the Employer's benefit plans, programs and
offerings in which the Executive is participating on the Termination Date
(including without limitation any supplemental executive retirement plan or
benefits, including that benefit referenced in Exhibit A of this Agreement) to
have been employed by the Employer until the Expiration Date. For purposes of
this Agreement, the "Average Bonus" shall mean, with respect to any fiscal year
of the Company, the greater of (A) the Bonus accrued by the Employer as payable
to the Executive with respect to the fiscal year immediately preceding the
Termination Date or (B) 25% of the Salary payable in such fiscal year.
(c) INCAPACITY. If, 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 Employer, by action of the Board,
may terminate the Executive's employment hereunder by notice to the Executive.
In such event, (i) the Employer shall pay the Executive as promptly as
practicable after the Termination Date, an amount equal to any unpaid Salary,
Bonus and benefits accrued through the Termination Date, together with an amount
equal to the Average Bonus (pro rated for the period from the beginning of the
fiscal year through the Termination Date) for the fiscal year in which the
Termination Date occurs, (ii) during the period beginning on the Termination
Date and ending on the Benefits Termination Date, shall extend to Executive the
applicable fringe benefits referred to in Sections 3(d)(i) and 3(d)(ii) and
3(d)(iii)(B) hereof (or the equivalent thereof in all material respects if
continuation of participation in benefit plans is not able to be continued under
applicable law or the terms of such benefit plans), and (iii) the Executive
shall be deemed for all vesting requirements contained in any of the Employer's
benefit plans, programs or offerings in which the Executive is participating on
the Termination Date (including without limitation any supplemental executive
retirement plan or benefit, including that benefit referenced in Exhibit A of
this Agreement) to have been employed by the Employer until the Expiration Date.
Any dispute between the Board and the Executive with
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respect to the Executive's incapacity shall be settled by reference to a
competent medical authority mutually agreed to by the Board and the Executive,
whose decision shall be binding on all parties.
(d) TERMINATION BY THE EMPLOYER FOR CAUSE. The Employer may terminate
the Executive's employment hereunder for Cause. For purposes of this Agreement,
"Cause" shall mean the Executive's conviction of, or entry into a consent decree
or substantially similar arrangement in connection with, a felony crime
involving fraud, dishonesty or other conduct which materially and adversely
affects the Employer. 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, Bonus
and benefits accrued through the Termination Date.
(e) TERMINATION BY THE EMPLOYER OTHER THAN FOR DEATH, INCAPACITY OR
CAUSE. The Employer may terminate the Executive's employment hereunder, other
than pursuant to Section 4(b) (relating to death), Section 4(c) (relating to
incapacity), or Section 4(d) (relating to Cause), at any time. In the event of
such termination, or if the Executive's employment hereunder shall terminate on
the Expiration Date because the Employer has given the notice contemplated by
the first proviso to Section 1 hereof, then the Employer (i) shall pay the
Executive (A) as promptly as practicable after the Termination Date, an amount
equal to any unpaid Salary, Bonus and benefits accrued through the Termination
Date, together with an amount equal to the Average Bonus (pro rated for the
period from the beginning of the fiscal year through the Termination Date) for
the fiscal year in which the Termination Date occurs, and (B) a lump sum
payment, within 60 days after the Termination Date, equal to the aggregate
amount of Salary and Average Bonus that would have been payable to the Executive
over the period from the Termination Date to the Benefits Termination Date if
the Executive had continued to be employed by the Employer through the Benefits
Termination Date and received Salary and Average Bonus for periods after the
Termination Date based upon the Salary he would have received under Section 3(a)
if this Agreement was extended through the Benefits Termination Date (but
excluding any cost of living or discretionary increases under clauses (i) or
(ii) of Section 3(a) that would have occurred after the Termination Date), and
(ii) during the period beginning on the Termination Date and ending on the
Benefits Termination Date, shall extend to Executive the applicable fringe
benefits referred to in Section 3(d) hereof on the terms referred to therein (or
the equivalent thereof in all material respects if continuation of participation
in benefit plans is not able to be continued under applicable law or the terms
of such benefit plans). In addition, the Executive shall be deemed for all
vesting requirements contained in any of the Employer's benefit plans, programs
or offerings in which the Executive is participating on the Termination Date
(including without limitation any supplemental executive retirement plan or
benefit, including that benefit referenced in Exhibit A of this Agreement) to
have been employed by the Employer until the Expiration Date.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate his employment hereunder for Good Reason upon notice to the Employer
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for
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termination by the Executive if the same has not been cured within 30 days after
written notice to the Employer by the Executive:
(i) Failure of the Employer to continue the Executive in the
position of Chairman of the Board;
(ii) Material diminution in the nature or scope of the Executive's
responsibilities, duties or authority; or
(iii) Failure to pay Executive on a timely basis, or any other
material breach by the Employer of Section 2 or 3 hereof.
In event of termination in accordance with this Section 4(f), then the Employer
(i) shall pay the Executive (A) as promptly as practicable after the Termination
Date, an amount equal to any unpaid Salary, Bonus and benefits accrued through
the Termination Date, together with an amount equal to the Average Bonus (pro
rated for the period from the beginning of the fiscal year through the
Termination Date) for the fiscal year in which the Termination Date occurs, and
(B) a lump sum payment, within 60 days after the Termination Date, equal to the
aggregate amount of Salary and Average Bonus that would have been payable to the
Executive over the period from the Termination Date to the Benefits Termination
Date if the Executive had continued to be employed by the Employer through the
Benefits Termination Date and received Salary and Average Bonus for periods
after the Termination Date based upon the Salary he would have received under
Section 3(a) if this Agreement was extended through the Benefits Termination
Date (but excluding any cost of living or discretionary increases under clauses
(i) or (ii) of Section 3(a) that would have occurred after the Termination
Date), and (ii) during the period beginning on the Termination Date and ending
on the Benefits Termination Date, shall extend to Executive the applicable
fringe benefits referred to in Section 3(d) hereof on the terms referred to
therein (or the equivalent thereof in all material respects if continuation of
participation in benefit plans is not able to be continued under applicable law
or the terms of such benefit plans). In addition, the Executive shall be deemed
for all vesting requirements contained in any of the Employer's benefit plans,
programs or offerings in which the Executive is participating on the Termination
Date (including without limitation any supplemental executive retirement plan or
benefit, including that benefit referenced in Exhibit A of this Agreement) to
have been employed by the Employer until the Expiration Date.
(g) TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The
Executive may terminate his employment hereunder other than for Good Reason. In
the event of termination of the Executive's employment pursuant to this Section
4(g), or if the Executive's employment hereunder shall terminate on the
Expiration Date because the Executive has given the notice contemplated by the
first proviso to Section 1 hereof, the Employer shall have no further
obligations to the Executive hereunder after the Termination Date, except for an
amount equal to any unpaid Salary, Bonus and benefits accrued through the
Termination Date.
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(h) EFFECT OF TERMINATION. This Section 4 sets forth all obligations of
the Employer to the Executive upon termination of his employment hereunder;
PROVIDED, HOWEVER, that the benefits provided hereunder shall be in addition to,
and not in lieu of, any benefits provided to the Executive by the Employer under
any plan in which the Executive participates, including without limitation any
stock option or supplemental executive retirement plan or benefit, including
that benefit referenced in Exhibit A of this Agreement but excluding any
severance plans or policies administered by the Employer. The provisions of this
Section 4 and of Sections 5, 6, 7, 8, 10, and 12 hereof shall survive the
Termination Date.
(i) CONSULTING SERVICES. Following termination of his employment
hereunder pursuant to the provisions of Section 4(e) or 4(f) hereof, and in
partial consideration of the payments provided pursuant thereto, during the
period from the Termination Date until the Benefits Termination Date, Executive
shall provide to Employer up to one day per month of consulting services as
reasonably requested by Employer. Such consulting services shall be provided
from locations and at times reasonably acceptable to Executive in his sole
discretion. Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by him in connection with the provision of
consulting services to Employer.
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 Employer. Executive understands
that this restriction shall continue to apply after Executive's employment
terminates, regardless of the reason for such termination, and after the
expiration or other termination of this Agreement. "Confidential Information"
means all confidential, proprietary or other information relating to the
Employer and its subsidiaries and affiliates and their businesses, and includes
without limitation all such information relating to (i) the development,
research, testing, manufacturing and marketing activities of the Employer, (ii)
the products manufactured, sold or distributed by the Employer, (iii) the costs,
sources of supply and strategic plans of the Employer, (iv) the identity and
special needs of the customers of the Employer, (v) the financial arrangements
and capital structure of the Employer, (vi) the management and operation of the
Employer and (vii) people and organizations with whom the Employer has business
relationships and those relationships. Confidential Information also includes
comparable information that the Employer may receive or has received belonging
to customers or others who do business with the Employer. 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 and other legitimate interests of the
Employer. While Executive is employed by the Employer and for two (2) years
after the Benefits Termination Date (or, in the event the Executive's employment
is terminated pursuant to Section 4(d), 4(g), or if the Executive's employment
hereunder shall
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terminate on the Expiration Date because the Executive has given the notice
contemplated by the first proviso to Section 1 hereof, for two (2) years after
the Termination Date), Executive shall not, 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
business of the Employer as conducted at any time during Executive's employment
without the Employer's written consent, which consent shall not be unreasonably
withheld. Executive understands that these restrictions shall continue to apply
even if this Agreement expires or otherwise terminates. The foregoing
restriction shall not prevent Executive from owing 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
Employer.
7. DOCUMENTS AND MATERIAL. Upon termination of Executive's employment with the
Employer or at any other time upon the Employer's request, Executive will
promptly deliver to the Employer, without retaining any copies, all documents
and other materials furnished to Executive by the Employer, prepared by
Executive for the Employer or otherwise relating to the Employer's business, if
and to the extent that the information therein constitutes Confidential
Information.
8. RELIEF, INTERPRETATION. Executive agrees that the Employer 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 hereof without having to post bond. In the
event that any provision of Sections 5, 6 and 7 hereof 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 hereof the term "Employer" shall mean the
Employer and any of its subsidiaries and affiliates to the extent that such
enterprises are, during the term of Executive's employment by the Employer,
engaged in the same line of business as the Employer.
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
Employer any proprietary information of a third party without such party's
consent. Executive will not enter into any agreement, whether written or oral,
conflicting with the provisions of this Agreement.
10. LEGAL EXPENSES. The Employer shall pay or reimburse Executive on an
after-tax basis for all costs and expenses (including, without limitation, court
costs and reasonable legal fees and expenses incurred by Executive) as a result
of any claim, action or proceeding (i) arising out of the termination of his
employment during the Employment Period, (ii) contesting, disputing or enforcing
any right, benefits or obligations under this Agreement, or (iii) arising out of
or
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challenging the validity, advisability or enforceability of this Agreement or
any provision thereof. Such payments or reimbursements shall be made promptly,
but in no event later than five business days following, receipt by the Employer
of request by Executive for such payment or reimbursement, including an invoice
detailing any such legal fees and expenses. Requests for payment or
reimbursement hereunder may be delivered no more frequently than monthly.
Notwithstanding the foregoing, the Executive shall reimburse the Employer for
any fees or expenses previously paid or reimbursed by Employer in connection
with a dispute if the relevant trier-of-fact determines that Executive's claim
or position was frivolous and without reasonable foundation.
11. TAXES. All payments made by the Employer under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Employer
under applicable law. Notwithstanding the immediately preceding sentence, in the
event that it is determined that any payment or benefit provided by the Employer
to or for the benefit of the Executive, either under any Section of this
Agreement, any stock option, any supplemental executive retirement plan or
otherwise, will be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any successor provision ("Section 4999"), the Employer
will, prior to the date on which any amount of the excise tax must be paid or
withheld, make an additional lump-sum payment (the "gross-up payment") to the
Executive. The gross-up payment will be sufficient, after giving effect to all
federal, state and other taxes (including any excise tax under Section 4999) and
charges (including interest and penalties, if any) with respect to the gross-up
payment, to make the Executive whole for all taxes (including withholding taxes)
and any associated interest and penalties, imposed under or as a result of
Section 4999 with respect to all payments and benefits provided by the Employer
to or for the benefit of the Executive under any Section of this Agreement, any
stock option, any supplemental executive retirement plan or otherwise.
Determinations under this Section 11 will be made by the Employer's independent
auditors unless the Executive has reasonable objections to the use of that firm,
in which case the determinations will be made by a comparable firm chosen by the
Executive after consultation with the Employer (the firm making the
determinations to be referred to as the "Firm"). The determinations of the Firm
will be binding upon the Employer and the Executive except as the determinations
are established in resolution (including by settlement) of a controversy with
the Internal Revenue Service to have been incorrect. All fees and expenses of
the Firm will be paid by the Employer. If the Internal Revenue Service asserts a
claim that, if successful, would require the Employer to make a gross-up payment
or an additional gross-up payment, the Employer and the Executive will cooperate
fully in resolving the controversy with the Internal Revenue Service. The
Employer will make or advance such gross-up payments as are necessary to prevent
the Executive from having to bear the cost of payments made to the Internal
Revenue Service in the course of, or as a result of, the controversy. The Firm
will determine the amount of such gross-up payments or advances and will
determine after resolution of the controversy whether any advances must be
returned by the Executive to the Employer. The Employer will bear all expenses
of the controversy and will gross the Executive up for any additional taxes that
may be imposed upon the Executive as a result of its payment of such expenses.
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12. INDEMNIFICATION. To the maximum extent permitted under the laws of The
Commonwealth of Massachusetts, as from time to time in effect, the Employer
hereby agrees to indemnify Executive and hold him harmless from, against and in
respect of any and all damages, deficiencies, actions, suits, proceedings,
demands, assessments, judgements, claims, losses, costs, expenses, obligations
and liabilities arising from or related to the performance of this Agreement by
Executive, other than for gross negligence, willful misconduct or willful
violation of this Agreement.
13. WAIVER. The waiver by either party of a breach of any provision of this
Agreement by the other party will not operate or be construed as a waiver of any
other subsequent breach by the other party.
14. 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.
15. 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:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: President
with a copy to:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: General Counsel
and to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Winthrop G. Minot
(ii) if to the Executive, to him at:
c/o BE Aerospace, Inc.
1300 Corporate Way
Suite 202
Wellington, Florida 33414
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16. ASSIGNMENT. Neither the Employer 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
Employer may assign its rights and obligations under this Agreement without the
consent of Executive in the event that the Employer 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 Employer and
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
17. MISCELLANEOUS. The Prior Employment Agreement is hereby terminated with
respect to the employment of the Executive by the Employer on and after the date
hereof, and shall be of no further force or effect with respect to such
employment; PROVIDED, HOWEVER, that the Prior Employment Agreement shall
continue to govern the terms of the Executive's employment by the Employer with
respect to all periods ending on or prior to the date hereof. 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 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 domestic substantive laws
of The Commonwealth of Massachusetts without regard to any choice or conflicts
of laws rules or principles that would cause the application of the domestic
substantive laws of any jurisdiction other than 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: /s/ Thomas E. Williams
-------------------------------
Thomas E. Williams
President and Chief Executive Officer
/s/ Amin J. Khoury
---------------------------------
Amin J. Khoury
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EXHIBIT A
TERMS OF THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Executive shall be entitled to the following benefits after his
employment by the Employer has terminated for any reason, provided Executive has
no less than ten Years of Service with the Employer at least 48 months of which
shall be after the effective date of this Agreement (subject to the provisions
regarding vesting of benefits upon termination as contained in Sections 4(b)
(Death), 4(c) (Incapacity), 4(e) (Termination by the Employer Other Than for
Death, Incapacity, or Cause), and 4(f) (Termination by Executive for Good
Reason) of the Employment Agreement to which this Exhibit A is attached, as from
time to time in effect (the "Employment Agreement")): During the period
beginning on the date (the "Retirement Payment Commencement Date") which is the
later of (i) the Termination Date, or (ii) the date on which the Executive
attains age 60, and ending on the tenth anniversary of the Retirement Payment
Commencement Date, the Employer shall pay to the Executive, in accordance with
the Employer's current payroll practices for its executive employees generally,
an annual amount equal to the product of the Benefit Percentage multiplied by
the Average Compensation; PROVIDED, HOWEVER, that amounts payable to the
Executive pursuant to this sentence shall be reduced by amounts received by the
Executive as proceeds received concurrently from any disability insurance paid
or reimbursed by the Employer for the benefit of the Executive. In the event of
the Executive's death, a lump sum payment of his remaining benefits shall be
made to his Designee or Estate (determined by using a discount factor of 5% per
annum) under this provision. The value of the Executive's benefits under this
provision shall be at all times fully funded by the Employer as they accrue and
become vested, through contributions by the Employer to a rabbi trust. In the
event of a Change in Control, or if a Change in Control is imminent, the
Employer shall immediately make an additional contribution to the rabbi trust in
an amount sufficient to fully fund the Executive's benefits under the Plan,
whether or not vested, and upon the later of the Retirement Payment Commencement
Date or the date of the Change in Control, Executive may elect to receive a lump
sum payment of his benefits (determined by using a discount factor of 5% per
annum) under this provision.
As used in this Exhibit A:
(i) Terms defined in the Employment Agreement and not
otherwise defined herein are used herein with the meanings so
defined;
(ii) "Years of Service" shall mean the number of calendar
months of Executive's employment with Employer DIVIDED BY
twelve, with any remainder rounded up to the next whole
number;
(iii) "Benefit Percentage" means (A) 25% if vesting occurs
subsequent to March 31, 2000 and the Performance Target has
not been achieved, and (B) 50%
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if vesting occurs subsequent to March 31, 2000 and the
Performance Target has been achieved; PROVIDED, HOWEVER, the
Benefit Percentage shall be 50% in the event that the
Executive's employment is terminated pursuant to Sections
4(b),4(c), 4(e), or 4(f) of the Employment Agreement,
notwithstanding the date of vesting, and
(iv) "Average Compensation" means the average annual Salary
and Bonus paid by the Employer to the Executive pursuant to
the Employment Agreement determined by averaging the three
fiscal years in which the Executive earned the highest
aggregate Salary and incentive bonus during any fiscal year
prior to the Termination Date; PROVIDED, HOWEVER, the that the
Average Compensation shall never be less than the Executive's
current Salary.
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Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS Employment Agreement (the "Agreement") is made as of the 1st day
of April, 1999 by and between Applied Extrusion Technologies, Inc., a Delaware
corporation (the "Employer"), and Thomas E. Williams (the "Executive").
RECITALS
1. The Executive is currently employed by the Employer as its Chief
Executive Officer and President pursuant to an Employment Agreement dated as of
April 26, 1994, as in effect on the date hereof (the "Prior Employment
Agreement").
2. The Prior Employment Agreement provides that, on or after April 25,
1999, either the Executive or the Employer may, by notice given to the other,
terminate the employment of the Executive by the Employer.
3. 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.
4. In consideration of the employment to be provided hereby and the
amounts to be paid as provided herein, the Executive desires to continue 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 continue to employ the Executive, and the
Executive shall continue to perform services for and continue in the employment
of the Employer, for the period (the "Employment Period") beginning on the date
hereof and ending on March 31, 2003, subject to extension as set forth herein
(such date, as from time to time in effect, being referred to herein as the
"Expiration Date"); PROVIDED, HOWEVER, that, unless either the Employer or the
Executive shall give notice to the other (which notice may be given in the sole
discretion of either party hereto) no later than 90 days prior to the
then-current Expiration Date (the "Current Expiration Date") that such party
does not wish to have the Employment Period extended for another year past the
Current Expiration Date, then, at the close of business on such date which is 90
days prior to the Current Expiration Date, the Expiration Date shall
automatically become the date which is exactly one year after the Current
Expiration Date; and PROVIDED, FURTHER, that the employment of the Executive by
the Employer may be terminated prior to the Expiration Date in accordance with
all of the terms and conditions hereof.
<PAGE>
2. CAPACITY. During such time as the Executive is employed by the Employer
hereunder:
(a) POSITION AND DUTIES. The Executive shall serve on a full-time basis
in the capacity of the Chief Executive Officer and President, shall report to
the Chairman (the "Chairman") of the Board of Directors of the Employer (the
"Board") and 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 or the Board. 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 Employer.
(b) BOARD MEMBERSHIP. The Employer agrees to propose to the
shareholders of the Employer at each appropriate Annual Meeting of such
shareholders the reelection of the Executive as a member of the Board, provided
that the Executive is otherwise eligible for such election; PROVIDED, HOWEVER,
that should Executive's employment hereunder terminate for any reason, Executive
agrees to resign from the Board, and from the board of directors of each
subsidiary or affiliate of the Employer, immediately upon the receipt of a
request for such resignation from the Chairman or the Board, if the Employer has
paid all amounts owed to the Executive by virtue of the termination of his
employment and is not otherwise then in default hereunder.
3. COMPENSATION.
(a) SALARY. During each year of the Employment Period, the Executive
shall receive an annual salary (the "Salary") of $415,000; PROVIDED, HOWEVER,
that effective April 1, 2000 the Salary shall be increased to $515,000 and on
each April 1 thereafter, beginning April 1, 2001, the Salary then in effect
shall be increased by the greater of (i) such increase as the Board may specify
in its sole discretion or (ii) an amount equal to the then-current Salary
MULTIPLIED BY the percentage increase (if any) in the Consumer Price Index for
All Urban Consumers (CPI-U) - U.S. City Average during the immediately preceding
calendar year.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus (the "Bonus") based
upon criteria that are defined annually by the Employer and will be targeted at
50% of Salary, with a maximum payout potential of 100% of Salary.
(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 consistent with past practices.
(d) FRINGE BENEFITS. During the Employment Period, (i) the Executive
shall be entitled to participate in or receive benefits under each disability
insurance, health, pension, retirement and accident plan or arrangement made
generally available by the Employer to its executives and key management
employees, subject to and on a basis consistent with the terms,
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conditions and overall administration of such plans and arrangements, (ii) the
Executive shall also be entitled to payments pursuant to a supplemental
executive retirement plan having terms no less favorable to the Executive than
those set forth in Exhibit A hereto and, until such time (if any) as such a plan
is established by the Employer, shall be entitled to the benefits set forth in
said Exhibit A, and (iii) the Employer shall provide to the Executive, or at
Executive's election reimburse the Executive on an after tax basis for the cost
of, (A) disability insurance providing not less than 65% Salary replacement
until age 65, and (B) insurance protection over the Executive's life providing
death benefits of not less than $2,500,000 payable to such person as the
Executive shall have designated in a notice filed with the Employer (the
"Designee"), or, if no such person shall have been designated, to his estate
(the "Estate"), in each case consistent with the Employer's past practices
regarding such insurance for executives.
(e) ADDITIONAL BENEFITS. Without limiting the generality of the
foregoing, during the Employment Period:
(i) the Executive shall be furnished with either an automobile, of
a make and year reasonably satisfactory to the Employer and
the Executive and consistent with the past practices of the
Employer and the Executive in this regard, either owned or
leased by the Employer or an automobile allowance sufficient
to permit the Executive to obtain the use of such an
automobile, the choice of providing such automobile or
allowance to be at the sole discretion of the Employer;
(ii) the Employer shall either pay the Executive's membership
expenses (including fees and dues), or otherwise make
available to the Executive at no cost to the Executive,
membership at clubs chosen by the Executive with the consent
of the Employer (consistent with the past practices of the
Employer and the Executive in this regard); and
(iii) the Executive shall be entitled to a physical examination each
calendar year by the doctor who is the Executive's primary
care physician, either pursuant to the Employer's health or
other plans or otherwise at the expense of the Employer.
(f) CHANGE IN CONTROL. If a "Change in Control" (as such term is
defined in Exhibit A to the Employer's 1991 Stock Option Plan for Directors)
shall occur, then (i) Section 1 hereof shall be amended by replacing the date
AMarch 31, 2003" with the date which is exactly four years after the date of the
Change in Control, (ii) all stock options previously granted to the Executive
which, by their terms, have not yet vested, shall immediately vest and become
exercisable, (iii) if such Change in Control occurs prior to March 31, 2000 the
"Performance Target" referred to in Section 3(g) shall be deemed to have been
achieved, and (iv) the Executive shall be entitled to carry out his duties and
responsibilities hereunder primarily from his current office in Peabody,
Massachusetts (or another facility serving such purpose and located within 15
miles of such current office) and will not be required to locate his primary
place of business outside such area without his consent (which may be given or
withheld in his sole discretion).
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(g) PERFORMANCE TARGET. Except as otherwise provided in Section
3(f)(iii) hereof, in the event that the "Performance Target" set forth in
Exhibit A to the minutes of the March 11, 1999 meeting of the Compensation
Committee of Employer's Board shall not have been achieved by the Company, then
upon written notice referencing this Section 3(g) given by the Board to
Executive at any time during the sixty day period commencing March 31, 2000, (i)
Section 1 hereof shall be amended by replacing the date AMarch 31, 2003" with
the date "March 31, 2002", (ii) Section 3(a) hereof shall be amended by deleting
the words Athe Salary shall be increased to $515,000" and the words "beginning
April 1, 2001" from the proviso therein (iii) Section 3(d) hereof shall be
amended by deleting clause (ii) thereof and re-numbering the remaining clauses
of said Section accordingly; and (iv) Section 3(f) hereof shall be amended by
deleting clause (i) thereof and re-numbering the remaining clauses of said
Section accordingly.
4. TERMINATION AND COMPENSATION THEREON.
(a) TERMINATION DATE. As used herein, the term (i) "Termination Date"
shall mean the earlier of (A) the Expiration Date or (B) if the Executive's
employment is terminated (1) by his death, the date of his death, or (2) 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, and (ii) "Benefits Termination Date" shall mean the later of (A)
the Expiration Date or (B) the date which is exactly two years after the
Termination Date. The Employment Period shall terminate on the Termination Date;
PROVIDED, HOWEVER, that, unless the Executive's employment is terminated
pursuant to Section 4(d) or 4(g) hereof, the Expiration Date shall not be
changed to the Termination Date if the Executive's employment hereunder
terminates on a date other than the Expiration Date, and, if the Executive's
employment is terminated pursuant to Section 4(d) or 4(g) hereof, the Expiration
Date shall automatically be changed and shall become the Termination Date.
(b) DEATH. The Executive's employment hereunder shall terminate upon
his death. In such event, the Employer shall pay to the Designee or, if no such
person shall have been designated, the Estate, as applicable, (i) as promptly as
practicable after the Termination Date, an amount equal to any unpaid Salary,
Bonus and benefits accrued through the Termination Date, together with an amount
equal to the Average Bonus (pro rated for the period from the beginning of the
fiscal year through the Termination Date) for the fiscal year in which the
Executive's death occurs, and (ii) the Executive shall be deemed for all vesting
requirements contained in any of the Employer's benefit plans, programs and
offerings in which the Executive is participating on the Termination Date
(including without limitation any supplemental executive retirement plan or
benefits, including that benefit referenced in Exhibit A of this Agreement) to
have been employed by the Employer until the Expiration Date. For purposes of
this Agreement, the "Average Bonus" shall mean, with respect to any fiscal year
of the Company, the greater of (A) the Bonus accrued by the Employer as payable
to the Executive with respect to the fiscal year immediately preceding the
Termination Date or (B) 25% of the Salary payable in such fiscal year.
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(c) INCAPACITY. If, 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 Employer by action of the Board,
may terminate the Executive's employment hereunder by notice to the Executive.
In such event, (i) the Employer shall pay the Executive as promptly as
practicable after the Termination Date, an amount equal to any unpaid Salary,
Bonus and benefits accrued through the Termination Date, together with an amount
equal to the Average Bonus (pro rated for the period from the beginning of the
fiscal year through the Termination Date) for the fiscal year in which the
Termination Date occurs, (ii) during the period beginning on the Termination
Date and ending on the Benefits Termination Date, shall extend to Executive the
applicable fringe benefits referred to in Sections 3(d)(i) and 3(d)(ii),
3(d)(iii)(B) and 3(e) hereof (or the equivalent thereof in all material respects
if continuation of participation in benefit plans is not able to be continued
under applicable law or the terms of such benefit plans); and (iii) the
Executive shall be deemed for all vesting requirements contained in any of the
Employer's benefit plans, programs or offerings in which the Executive is
participating on the Termination Date (including without limitation any
supplemental executive retirement plan or benefit, including that benefit
referenced in Exhibit A of this Agreement) to have been employed by the Employer
until the Expiration Date. Any dispute between the Board 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 and the Executive,
whose decision shall be binding on all parties.
(d) TERMINATION BY THE EMPLOYER FOR CAUSE. The Employer may terminate
the Executive's employment hereunder for Cause. For purposes of this Agreement,
"Cause" shall mean (i) other than by reason of Executive's incapacity under
Section 4(c) above, willful conduct by the Executive demonstrating gross
misconduct and gross unfitness to serve and which has caused material harm to
the business or interests of the Employer, or (ii) the Executive's conviction
of, or entry into a consent decree or substantially similar arrangement in
connection with, a crime involving fraud, dishonesty or other conduct which
materially and adversely affects {on} the Employer. 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, 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 knowingly and with the intent that such action or inaction would
not be in the best interests of the Employer or otherwise was done or omitted to
be done in bad faith or with reckless disregard for the best interests of the
Employer.
(e) TERMINATION BY THE EMPLOYER OTHER THAN FOR DEATH, INCAPACITY OR
CAUSE. The Employer may terminate the Executive's employment hereunder, other
than pursuant to Section 4(b) (relating to death), Section 4(c) (relating to
incapacity), or Section 4(d) (relating to Cause), at any time. In the event of
such termination, or if the Executive's employment hereunder shall terminate on
the Expiration Date because the Employer has given the notice contemplated by
the first proviso to Section 1 hereof, then the Employer (i) shall pay the
Executive (A) as promptly as practicable after the Termination Date, an amount
equal to any unpaid Salary, Bonus and benefits
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accrued through the Termination Date, together with an amount equal to the
Average Bonus (pro rated for the period from the beginning of the fiscal year
through the Termination Date) for the fiscal year in which the Termination Date
occurs, and (B) a lump sum payment, within 60 days after the Termination Date,
equal to the aggregate amount of Salary and Average Bonus that would have been
payable to the Executive over the period from the Termination Date to the
Benefits Termination Date if the Executive had continued to be employed by the
Employer through the Benefits Termination Date and received Salary and Average
Bonus for periods after the Termination Date based upon the Salary he would have
received under Section 3(a) if this Agreement was extended through the Benefits
Termination Date (but excluding any cost of living or discretionary increases
under clauses (i) or (ii) of Section 3(a) that would have occurred after the
Termination Date), and (ii) during the period beginning on the Termination Date
and ending on the Benefits Termination Date, shall extend to Executive the
applicable fringe benefits referred to in Sections 3(d) and 3(e) hereof on the
terms referred to therein (or the equivalent thereof in all material respects if
continuation of participation in benefit plans is not able to be continued under
applicable law or the terms of such benefit plans). In addition, the Executive
shall be deemed for all vesting requirements contained in any of the Employer's
benefit plans, programs or offerings in which the Executive is participating on
the Termination Date (including without limitation any supplemental executive
retirement plan or benefit, including that benefit referenced in Exhibit A of
this Agreement) to have been employed by the Employer until the Expiration Date.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may
terminate his employment hereunder for Good Reason upon notice to the Employer
setting forth in reasonable detail the nature of such Good Reason. The following
shall constitute "Good Reason" for termination by the Executive if the same has
not been cured within 30 days after written notice to the Chairman by the
Executive:
(i) Failure of the Employer to continue the Executive in the
position of Chief Executive Officer and President;
(ii) Material diminution in the nature or scope of the Executive's
responsibilities, duties or authority; PROVIDED, HOWEVER, that
the Employer's failure to continue the Executive's appointment
or election as a member of the Board shall not constitute Good
Reason; or
(iii) Failure to pay Executive on a timely basis, or any other
material breach by the Employer of Section 2 or 3 hereof.
In event of termination in accordance with this Section 4(f), then the Employer
(i) shall pay to the Executive (A) as promptly as practicable after the
Termination Date, an amount equal to any unpaid Salary, Bonus and benefits
accrued through the Termination Date, together with an amount equal to the
Average Bonus (pro rated for the period from the beginning of the fiscal year
through the Termination Date) for the fiscal year in which the Termination Date
occurs, and (B) a lump sum payment, within 60 days after the Termination Date,
equal to the aggregate amount
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of Salary and Average Bonus that would have been payable to the Executive over
the period from the Termination Date to the Benefits Termination Date if the
Executive had continued to be employed by the Employer through the Benefits
Termination Date and received Salary and Average Bonus for periods after the
Termination Date based upon the Salary he would have received under Section 3(a)
if this Agreement was extended through the Benefits Termination Date (but
excluding any cost of living or discretionary increases under clauses (i) or
(ii) of Section 3(a) that would have occurred after the Termination Date), and
(ii) during the period beginning on the Termination Date and ending on the
Benefits Termination Date, shall extend to Executive the applicable fringe
benefits referred to in Sections 3(d) and 3(e) hereof on the terms referred to
therein (or the equivalent thereof in all material respects if continuation of
participation in benefit plans is not able to be continued under applicable law
or the terms of such benefit plans). In addition, the Executive shall be deemed
for all vesting requirements contained in any of the Employer's benefit plans,
programs or offerings in which the Executive is participating on the Termination
Date (including without limitation any supplemental executive retirement plan or
benefit, including that benefit referenced in Exhibit A of this Agreement) to
have been employed by the Employer until the Expiration Date.
(g) TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The
Executive may terminate his employment hereunder other than for Good Reason. In
the event of termination of the Executive's employment pursuant to this Section
4(g), or if the Executive's employment hereunder shall terminate on the
Expiration Date because the Executive has given the notice contemplated by the
first proviso to Section 1 hereof, the Employer shall have no further
obligations to the Executive hereunder after the Termination Date, except for an
amount equal to any unpaid Salary, Bonus and benefits accrued through the
Termination Date.
(h) EFFECT OF TERMINATION. This Section 4 sets forth all obligations of
the Employer to the Executive upon termination of his employment hereunder;
PROVIDED, HOWEVER, that the benefits provided hereunder shall be in addition to,
and not in lieu of, any benefits provided to the Executive by the Employer under
any plan in which the Executive participates, including without limitation any
stock option or supplemental executive retirement plan or benefit, including
that benefit referenced in Exhibit A of this Agreement but excluding any
severance plans or policies administered by the Employer. The provisions of this
Section 4 and of Sections 5, 6, 7, 8, 10, and 12 hereof shall survive the
Termination Date.
(i) CONSULTING SERVICES. Following termination of his employment
hereunder pursuant to the provisions of Section 4(e) or 4(f) hereof, and in
partial consideration for the payments provided pursuant thereto, during the
period from the Termination Date until the Benefits Termination Date, Executive
shall provide to Employer up to eight hours per month of consulting services as
reasonably requested by Employer. Such consulting services shall be provided
from locations and at times reasonably acceptable to Executive in his sole
discretion. Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by him in connection with the provision of
consulting services to Employer.
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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 Employer. Executive understands
that this restriction shall continue to apply after Executive's employment
terminates, regardless of the reason for such termination, and after the
expiration or other termination of this Agreement. "Confidential Information"
means all confidential, proprietary or other information relating to the
Employer and its subsidiaries and affiliates and their businesses, and includes
without limitation all such information relating to (i) the development,
research, testing, manufacturing and marketing activities of the Employer, (ii)
the products manufactured, sold or distributed by the Employer, (iii) the costs,
sources of supply and strategic plans of the Employer, (iv) the identity and
special needs of the customers of the Employer, (v) the financial arrangements
and capital structure of the Employer, (vi) the management and operation of the
Employer and (vii) people and organizations with whom the Employer has business
relationships and those relationships. Confidential Information also includes
comparable information that the Employer may receive or has received belonging
to customers or others who do business with the Employer. 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 and other legitimate interests of the
Employer. While Executive is employed by the Employer and for two (2) years
after the Benefits Termination Date (or, in the event the Executive's employment
is terminated pursuant to Section 4(d), 4(g), or if the Executive's employment
hereunder shall terminate on the Expiration Date because the Executive has given
the notice contemplated by the first proviso to Section 1 hereof, for two (2)
years after the Termination Date), Executive shall not, 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 business of the Employer as conducted at any time during Executive's
employment without the Employer's written consent, which consent shall not be
unreasonably withheld. Executive understands that these restrictions shall
continue to apply even if this Agreement expires or otherwise terminates. The
foregoing restriction shall not prevent Executive from owing 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 Employer.
7. DOCUMENTS AND MATERIAL. Upon termination of Executive's employment with the
Employer or at any other time upon the Employer's request, Executive will
promptly deliver to the Employer, without retaining any copies, all documents
and other materials furnished to Executive by the Employer, prepared by
Executive for the Employer or otherwise relating to the Employer's business, if
and to the extent that the information therein constitutes Confidential
Information.
-8-
<PAGE>
8. RELIEF, INTERPRETATION. Executive agrees that the Employer 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 hereof without having to post bond. In the
event that any provision of Sections 5, 6 and 7 hereof 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 hereof the term "Employer" shall mean the
Employer and any of its subsidiaries and affiliates to the extent that such
enterprises are, during the term of Executive's employment by the Employer,
engaged in the same line of business as the Employer.
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
Employer any proprietary information of a third party without such party's
consent. Executive will not enter into any agreement, whether written or oral,
conflicting with the provisions of this Agreement.
10. LEGAL EXPENSES. The Employer shall pay or reimburse Executive on an
after-tax basis for all costs and expenses (including, without limitation, court
costs and reasonable legal fees and expenses incurred by Executive) as a result
of any claim, action or proceeding (i) arising out of the termination of his
employment during the Employment Period, (ii) contesting, disputing or enforcing
any right, benefits or obligations under this Agreement, or (iii) arising out of
or challenging the validity, advisability or enforceability of this Agreement or
any provision thereof. Such payments or reimbursements shall be made promptly,
but in no event later than five business days following, receipt by the Employer
of request by Executive for such payment or reimbursement, including an invoice
detailing any such legal fees and expenses. Requests for payment or
reimbursement hereunder may be delivered no more frequently than monthly.
Notwithstanding the foregoing, the Executive shall reimburse the Employer for
any fees or expenses previously paid or reimbursed by Employer in connection
with a dispute if the relevant trier-of-fact determines that Executive's claim
or position was frivolous and without reasonable foundation.
11. TAXES. All payments made by the Employer under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Employer
under applicable law. Notwithstanding the immediately preceding sentence, in the
event that it is determined that any payment or benefit provided by the Employer
to or for the benefit of the Executive, either under any Section of this
Agreement, any stock option, any supplemental executive retirement plan or
otherwise, will be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any successor provision ("Section 4999"), the Employer
will, prior to the date on which any amount of the excise tax must be paid or
withheld, make an additional lump-sum payment
-9-
<PAGE>
(the "gross-up payment") to the Executive. The gross-up payment will be
sufficient, after giving effect to all federal, state and other taxes (including
any excise tax under Section 4999) and charges (including interest and
penalties, if any) with respect to the gross-up payment, to make the Executive
whole for all taxes (including withholding taxes) and any associated interest
and penalties, imposed under or as a result of Section 4999 with respect to all
payments and benefits provided by the Employer to or for the benefit of the
Executive under any Section of this Agreement, any stock option, any
supplemental executive retirement plan or otherwise. Determinations under this
Section 11 will be made by the Employer's independent auditors unless the
Executive has reasonable objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by the Executive after
consultation with the Employer (the firm making the determinations to be
referred to as the "Firm"). The determinations of the Firm will be binding upon
the Employer and the Executive except as the determinations are established in
resolution (including by settlement) of a controversy with the Internal Revenue
Service to have been incorrect. All fees and expenses of the Firm will be paid
by the Employer. If the Internal Revenue Service asserts a claim that, if
successful, would require the Employer to make a gross-up payment or an
additional gross-up payment, the Employer and the Executive will cooperate fully
in resolving the controversy with the Internal Revenue Service. The Employer
will make or advance such gross-up payments as are necessary to prevent the
Executive from having to bear the cost of payments made to the Internal Revenue
Service in the course of, or as a result of, the controversy. The Firm will
determine the amount of such gross-up payments or advances and will determine
after resolution of the controversy whether any advances must be returned by the
Executive to the Employer. The Employer will bear all expenses of the
controversy and will gross the Executive up for any additional taxes that may be
imposed upon the Executive as a result of its payment of such expenses.
12. INDEMNIFICATION. To the maximum extent permitted under the laws of The
Commonwealth of Massachusetts, as from time to time in effect, the Employer
hereby agrees to indemnify Executive and hold him harmless from, against and in
respect of any and all damages, deficiencies, actions, suits, proceedings,
demands, assessments, judgements, claims, losses, costs, expenses, obligations
and liabilities arising from or related to the performance of this Agreement by
Executive, other than for gross negligence, willful misconduct or willful
violation of this Agreement.
13. WAIVER. The waiver by either party of a breach of any provision of this
Agreement by the other party will not operate or be construed as a waiver of any
other subsequent breach by the other party.
14. 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.
-10-
<PAGE>
15. 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 a copy to:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
Attention: General Counsel
and to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Winthrop G. Minot
(ii) if to the Executive, to him at:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
16. ASSIGNMENT. Neither the Employer 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
Employer may assign its rights and obligations under this Agreement without the
consent of Executive in the event that the Employer 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 Employer and
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
17. MISCELLANEOUS. The Prior Employment Agreement is hereby terminated with
respect to the employment of the Executive by the Employer on and after the date
hereof, and shall be of no
-11-
<PAGE>
further force or effect with respect to such employment; PROVIDED, HOWEVER, that
the Prior Employment Agreement shall continue to govern the terms of the
Executive's employment by the Employer with respect to all periods ending on or
prior to the date hereof. 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 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 domestic substantive laws of The
Commonwealth of Massachusetts without regard to any choice or conflicts of laws
rules or principles that would cause the application of the domestic substantive
laws of any jurisdiction other than 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: /s/ Amin J. Khoury
-------------------------------
Amin J. Khoury
Chairman of the Board
/s/ Thomas E. Williams
---------------------------------
Thomas E. Williams
-12-
<PAGE>
EXHIBIT A
TERMS OF THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Executive shall be entitled to the following benefits after his
employment by the Employer has terminated for any reason, provided Executive has
no less than ten Years of Service with the Employer at least 48 months of which
shall be after the effective date of this Agreement (subject to the provisions
regarding vesting of benefits upon termination as contained in Sections 4(b)
(Death), 4(c) (Incapacity), 4(e) (Termination by the Employer Other Than for
Death, Incapacity, or Cause), and 4(f) (Termination by Executive for Good
Reason) of the Employment Agreement to which this Exhibit A is attached, as from
time to time in effect (the "Employment Agreement")): During the period
beginning on the date (the "Retirement Payment Commencement Date") which is the
later of (i) the Termination Date, or (ii) the date on which the Executive
attains age 60, and ending on the tenth anniversary of the Retirement Payment
Commencement Date, the Employer shall pay to the Executive, in accordance with
the Employer's current payroll practices for its executive employees generally,
an annual amount equal to the product of the Benefit Percentage multiplied by
the Average Compensation; PROVIDED, HOWEVER, that amounts payable to the
Executive pursuant to this sentence shall be reduced by amounts received by the
Executive as proceeds received concurrently from any disability insurance paid
or reimbursed by the Employer for the benefit of the Executive. In the event of
the Executive's death, a lump sum payment of his remaining benefits shall be
made to his Designee or Estate (determined by using a discount factor of 5% per
annum) under this provision. The value of the Executive's benefits under this
provision shall be at all times fully funded by the Employer as they accrue and
become vested, through contributions by the Employer to a rabbi trust. In the
event of a Change in Control, or if a Change in Control is imminent, the
Employer shall immediately make an additional contribution to the rabbi trust in
an amount sufficient to fully fund the Executive's benefits under the Plan,
whether or not vested, and upon the later of the Retirement Payment Commencement
Date or the date of the Change in Control, Executive may elect to receive a lump
sum payment of his benefits (determined by using a discount factor of 5% per
annum) under this provision.
As used in this Exhibit A:
(i) Terms defined in the Employment Agreement and not
otherwise defined herein are used herein with the meanings so
defined;
(ii) "Years of Service" shall mean the number of calendar
months of Executive's employment with Employer DIVIDED BY
twelve, with any remainder rounded up to the next whole
number;
(iii) "Benefit Percentage" means (A) 25% if vesting occurs
subsequent to March 31, 2000 and the Performance Target has
not been achieved, and (B) 50%
-13-
<PAGE>
if vesting occurs subsequent to March 31, 2000 and the
Performance Target has been achieved; PROVIDED, HOWEVER, the
Benefit Percentage shall be 50% in the event that the
Executive's employment is terminated pursuant to Sections
4(b),4(c), 4(e), or 4(f) of the Employment Agreement,
notwithstanding the date of vesting, and
(iv) "Average Compensation" means the average annual Salary
and Bonus paid by the Employer to the Executive pursuant to
the Employment Agreement determined by averaging the three
fiscal years in which the Executive earned the highest
aggregate Salary and incentive bonus during any fiscal year
prior to the Termination Date; PROVIDED, HOWEVER, the that the
Average Compensation shall never be less than the Executive's
current Salary.
-14-
<PAGE>
Exhibit 10.15.2
LASALLE NATIONAL LEASING CORPORATION
- -------------------------------------------------------------------------------
LASALLE BANKS
502 Washington Avenue
Towson, Maryland 21204
(410) 769-8900
April 28, 1999
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
RE: EQUIPMENT LEASE AGREEMENT DATED AS OF DECEMBER 29, 1997
Gentlemen:
This will confirm the collateral understanding which has been reached
between us with respect to the above-referenced Equipment Lease Agreement
(the "Lease"), between LaSalle National Leasing Corporation, as lessor, and
Applied Extrusion Technologies, Inc., as lessee. Capitalized terms used
herein without definition shall have the meaning given such term in the Lease.
In consideration of the sum of Ten Dollars ($10.00) in hand paid, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. The following new Section 3(g) is added to the Lease:
"(g) Lessee has reviewed the areas within its business and
operations which could be adversely affected by, and has developed
or is developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications used by
Lessee may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any
date on or after December 31, 1999), and has made related
appropriate inquiry of material suppliers and vendors. Based on such
review and program, Lessee believes that the "Year 2000 Problem"
will not have a Material Adverse Effect. From time to time, at the
request of Lessor, Lessee shall provide to Lessor such updated
information or documentation as is requested regarding the status of
its efforts to address the Year 2000 Problem. As used herein,
"Material Adverse Effect" shall mean (1) a materially adverse effect
on the business, condition (financial or otherwise), operations,
performance or properties of Lessee, or (2) a material impairment of
the ability of Lessee to perform its obligations under or to remain
in compliance with the Lease Documents."
2. The following new Section 5(a)(8) is added to the Lease: "and (8)
such appraisals, bringdown certificates and bringdown opinions as Lessor
reasonably may require".
<PAGE>
LASALLE NATIONAL LEASING CORPORATION
- -------------------------------------------------------------------------------
LASALLE BANKS
Applied Extrusion Technologies, Inc.
April 28, 1999
Page 2
3. In Section 5(e) of the Lease, the last sentence is deleted and the
following substituted in lieu thereof:
"Lessee's obligations under each Equipment Schedule designated
as a Series B Equipment Schedule (collectively, the "Series B
Equipment Schedules"), this Lease (solely to the extent
incorporated by reference in the Series B Equipment Schedules)
and each Bill of Sale (collectively, the "Series B Bill of Sale")
executed with respect to the Equipment to be leased pursuant to
the Series B Equipment Schedules (the "Series B Equipment"),
including Lessee's obligation to sell the Series B Equipment to
Lessor pursuant to the Series B Bill of Sale, are conditioned
upon Lessee's receipt from Lessor by Federal wire transfer or
other immediately available funds in the amount of the Total
Invoice Cost set forth on the applicable Series B Equipment
Schedules, which aggregate amounts shall not be less than Twenty
Million Dollars ($20,000,000)."
4. In Section 10(b)(ii)(D) of the Lease, the following words are added
to the end thereof: "with respect to Equipment Schedules Nos. 1 through 8
executed pursuant hereto, and to a balloon payment of twenty (20) percent at
the twentieth (20th) quarter of the term with respect to each Equipment
Schedule executed pursuant hereto and designated as a Series B Equipment
Schedule."
5. Rider No. 1 attached to the Lease shall be applicable solely with
respect to the Equipment described on Equipment Schedules Nos. 1 through 8
executed pursuant to the Lease.
6. Riders Nos. 5 and 6 attached hereto, applicable solely with respect
to the Equipment described on those Equipment Schedules executed pursuant to
the Lease which are designated as Series B Equipment Schedules, are
incorporated in the Lease as fully as if originally set forth therein.
7. Except as expressly set forth herein, the terms and conditions of
the Lease remain unmodified and in full force and effect.
If the foregoing accurately sets forth our understanding with respect to
the subject matter hereof, please sign and return the enclosed copy of this
letter and it will constitute an amendment of the Lease pursuant to
Section 18(a) thereof.
LASALLE NATIONAL LEASING CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>
LASALLE NATIONAL LEASING CORPORATION
- -------------------------------------------------------------------------------
LASALLE BANKS
Applied Extrusion Technologies, Inc.
April 28, 1999
Page 3
AGREED:
APPLIED EXTRUSION TECHNOLOGIES, INC.
By: /s/ Anthony J. Allott
________________________________
Name: Anthony J. Allott
______________________________
Title: Vice President and Chief Financial Officer
_____________________________
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<PAGE>
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<NAME> APPLIED EXTRUSION
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<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> JAN-01-1999
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<COMMON> 115
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<TOTAL-LIABILITY-AND-EQUITY> 375,793
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<INCOME-PRETAX> (1,439)
<INCOME-TAX> (576)
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