<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 JUNE 30, 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 August 3, 1999 was 11,388,597.
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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>
JUNE 30, SEPTEMBER 30,
1999 1998
---------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 5,970 $ 2,279
Accounts receivable, net of allowance for doubtful accounts of $1,674 at June 30,
1999 and $1,056 at September 30, 1998.............................................. 34,742 38,467
Inventory............................................................................ 34,937 39,192
Prepaid expenses and deferred taxes.................................................. 5,466 5,063
---------- -------------
Total current assets............................................................. 81,115 85,001
Property, plant and equipment, net..................................................... 276,161 278,905
Intangibles and deferred finance charges, net.......................................... 3,327 3,636
Other long-term assets................................................................. 6,829 3,184
---------- -------------
$ 367,432 $ 370,726
---------- -------------
---------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable..................................................................... $ 12,820 $ 15,259
Accrued interest..................................................................... 5,095 9,145
Accrued expenses and other current liabilities....................................... 27,824 27,126
---------- -------------
Total current liabilities........................................................ 45,739 51,530
Long-term debt......................................................................... 186,500 185,500
Deferred taxes and other credits....................................................... 37,171 33,259
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000 shares, of which 300 are designated
Junior Preferred Stock; no stock outstanding
Common stock, $.01 par value:
Authorized, 30,000 shares; issued, 11,542 and 11,357 shares
at June 30, 1999 and September 30, 1998, respectively.............................. 115 114
Additional paid-in capital............................................................. 97,232 95,867
Retained earnings...................................................................... 4,533 9,938
Cumulative translation adjustments..................................................... (1,684) (2,396)
---------- -------------
100,196 103,523
Treasury stock, at cost, and other, 246 and 327 shares at June 30, 1999 and September
30, 1998, respectively............................................................... (2,174) (3,086)
---------- -------------
Total stockholders' equity....................................................... 98,022 100,437
---------- -------------
$ 367,432 $ 370,726
---------- -------------
---------- -------------
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
SALES....................................................................................... $ 62,269 $ 66,525
COST OF SALES............................................................................... 48,512 52,582
--------- ---------
GROSS PROFIT................................................................................ 13,757 13,943
OPERATING EXPENSES:
Selling, general and administrative....................................................... 6,903 6,061
Research and development.................................................................. 1,933 2,084
--------- ---------
Total operating expenses................................................................ 8,836 8,145
--------- ---------
OPERATING PROFIT............................................................................ 4,921 5,798
NON-OPERATING EXPENSES:
Interest expense, net..................................................................... 4,597 4,240
--------- ---------
Total non-operating expenses............................................................ 4,597 4,240
--------- ---------
Income before income taxes.................................................................. 324 1,558
Income tax expense.......................................................................... 130 623
--------- ---------
NET INCOME.................................................................................. $ 194 $ 935
--------- ---------
--------- ---------
BASIC AND DILUTED INCOME PER COMMON SHARE................................................... $ .02 $ .08
--------- ---------
--------- ---------
AVERAGE COMMON AND POTENTIAL COMMON SHARES OUTSTANDING:
Basic and diluted......................................................................... 11,439 11,107
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
SALES..................................................................................... $ 176,693 $ 185,380
COST OF SALES............................................................................. 143,343 148,176
---------- ----------
GROSS PROFIT.............................................................................. 33,350 37,204
OPERATING EXPENSES:
Selling, general and administrative..................................................... 19,165 17,931
Research and development................................................................ 5,411 5,583
Start-up costs.......................................................................... -- 1,539
---------- ----------
Total operating expenses.............................................................. 24,576 25,053
---------- ----------
OPERATING PROFIT.......................................................................... 8,774 12,151
NON-OPERATING EXPENSES:
Interest expense, net................................................................... 14,320 11,433
Acquisition costs....................................................................... 3,462 --
---------- ----------
Total non-operating expenses.......................................................... 17,782 11,433
---------- ----------
Income (loss) before income taxes and change in accounting................................ (9,008) 718
Income tax expense (benefit).............................................................. (3,603) 287
---------- ----------
Income (loss) before change in accounting................................................. (5,405) 431
Change in accounting, net of related tax benefits of $568................................. -- (852)
---------- ----------
NET LOSS.................................................................................. $ (5,405) $ (421)
---------- ----------
---------- ----------
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
Before change in accounting............................................................. $ (.48) $ .04
Change in accounting.................................................................... -- (.08)
---------- ----------
Net loss................................................................................ $ (.48) (.04)
---------- ----------
---------- ----------
AVERAGE COMMON AND POTENTIAL COMMON SHARES OUTSTANDING:
Basic and diluted....................................................................... 11,287 10,968
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................................................ $ (5,405) $ (421)
Adjustment to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts....................................................... 767 257
Depreciation and amortization......................................................... 14,827 13,450
Deferred taxes and other credits...................................................... (11,315) (14,248)
Change in accounting.................................................................. -- 852
Changes in assets and liabilities which provided (used) cash:
Prepaid expenses and other current assets........................................... (1,080) 234
Accounts payable and accrued expenses............................................... (5,791) 9,577
Accounts receivable and inventory................................................... 7,637 (24,858)
---------- ----------
Net cash used in operating activities............................................. (360) (15,157)
INVESTING ACTIVITIES:
Additions to property, plant and equipment.............................................. (16,460) (39,687)
Acquisition of AEP assets............................................................... (13,316) --
Proceeds from sale/leaseback transaction................................................ 29,940 44,625
Proceeds from sale of assets............................................................ -- 26,500
---------- ----------
Net cash provided by investing activities......................................... 164 31,438
FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit agreement, net............................. 1,000 (19,000)
Proceeds from issuance of stock, net.................................................... 2,175 2,735
---------- ----------
Net cash provided by (used in) financing activities............................... 3,175 (16,265)
Effect of exchange rate changes on cash................................................. 712 (1,541)
---------- ----------
Increase (decrease) in cash and cash equivalents, net................................... 3,691 (1,525)
Cash and cash equivalents, beginning.................................................... 2,279 3,054
---------- ----------
Cash and cash equivalents, ending....................................................... $ 5,970 $ 1,529
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including capitalized interest of $2,182 and $5,175, respectively........... $ 16,904 $ 15,352
Income taxes.......................................................................... $ -- $ 3,000
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 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 June 30, 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 June 30,
1999 and September 30, 1998:
<TABLE>
<CAPTION>
JUNE SEPTEMBER
1999 1998
--------- -----------
<S> <C> <C>
Raw materials.......................................... $ 7,261 $ 8,410
Finished goods......................................... 27,676 30,782
--------- -----------
Total.................................................. $ 34,937 $ 39,192
--------- -----------
--------- -----------
</TABLE>
3. CHANGE IN ACCOUNTING
During the third fiscal quarter of 1998, the Company adopted 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.
4. COMMITMENTS AND FOREIGN EXCHANGE CONTRACTS
The Company has entered into foreign exchange contracts, the last of which
expires in August 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 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 June 30, 1999, the Company had outstanding foreign
exchange contracts with notional values of $2,282. These contracts had no
carrying value and a net unrealized loss of $646. The Company does not enter
into foreign exchange contracts for trading purposes.
5. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
In the fourth quarter of 1998 the Company announced a restructuring of its
Covington, Virginia manufacturing operation, including the shutdown of two
older, less efficient production lines and the elimination of approximately 200
full-time manufacturing and plant administrative positions, 160 of which were
hourly and the remainder of which were salaried. The Company recorded a $18,580
charge in the fourth quarter of 1998 for this restructuring, comprised of
approximately $12,090 for ongoing operating
5
<PAGE>
leases related to idled equipment, $4,100 of employment in severance and
outplacement related costs and $2,390 in other charges primarily related to
idling the equipment. Implementation of this plan is nearing completion, with a
total of 181 positions eliminated and the shutdown of the production lines.
During the third quarter, payments related to the restructuring were $1,600,
primarily comprised of employment related costs. Since September 1998, the
Company has paid out $675 on leases related to idled equipment, $2,810 in
severance and outplacement costs and $2,402 in other restructuring costs,
resulting in an accrued restructuring balance of $12,693 at June 30, 1999. Of
this balance, $11,415 represents lease costs, the majority of which is
classified as a long term liability.
In the fourth quarter of fiscal 1998, the Company wrote down the value of
certain assets in its Covington, Virginia facility, whose carrying values had
been impaired by an aggregate of $2,926. Of this amount, $1,526 relates to
specialized equipment which is no longer used in the production process and
$1,400 represents an adjustment to the carrying value of the Covington facility
to estimated fair value, resulting from an impairment caused by the shutdown of
the affected production lines.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARATIVE RESULTS OF OPERATIONS FOR THE QUARTER AND NINE MONTHS ENDED JUNE 30,
1999 WITH THE QUARTER AND NINE MONTHS ENDED JUNE 30, 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 moisture, air, and light to preserve product 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 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 June 30,
1999 and 1998 are referred to as the third 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 items in its income statement:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 77.9 79.0 81.1 79.9
Gross profit......................... 22.1 21.0 18.9 20.1
Selling, general and
administrative..................... 11.1 9.1 10.8 9.7
Research and development............. 3.1 3.1 3.1 3.0
Operating profit..................... 7.9 8.7 5.0 6.6
Interest expense..................... 7.4 6.4 8.1 6.2
Net income (loss).................... .3 1.4 (3.1) (.2)
</TABLE>
The third quarter of 1999 represented the Company's third consecutive
quarter of improved operating results and its first profitable quarter in a
year. Sales, volume and profitability all increased compared with the third
quarter of 1998, adjusted for the divestiture of non-core businesses in 1998.
Sales for the third
6
<PAGE>
quarter of 1999 were $62,269, a 1.8 percent increase over sales in the third
quarter of 1998, adjusted for divestitures, and a 5.6 percent increase compared
with the second quarter of 1999. This sales increase was the result of record
OPP film unit volume sales representing a 12.1 percent increase over the third
quarter of 1998, partially offset by significantly lower average selling prices
in fiscal 1999 resulting from industry overcapacity. Demand growth for OPP films
continued steadily in the third quarter and average selling prices began to
stabilize as OPP industry utilization began to tighten. For the nine months
ended June 30, 1999, sales were $176,693 versus $185,380 for the comparable
period of fiscal 1998. Adjusted for the aforementioned divestitures, sales
increased $7,530 or 4.5 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 20.8 percent of sales and 28.9
percent of operating profit, respectively, for the nine months ended June 30,
1999 compared with 17.2 percent of sales and 23.9 percent of operating profit
for the nine months ended June 30, 1998.
Gross profit improved for both the quarter and nine months ended June 30,
1999 compared with the same periods in 1998, adjusted for divestitures, as a
result of OPP film unit volume sales increases and expanded margin levels. Gross
profit for the third quarter of 1999 was $13,757, or 22.1 percent of total
sales, versus $12,937, or 21.1 percent of sales, exclusive of the divested
businesses, for the same quarter of fiscal 1998. The increase in gross margin is
primarily the result of improved manufacturing efficiencies realized through the
Company's investment in highly-efficient assets and restructuring programs,
including the reorganization of the Company's Covington facility, which is
nearing completion. Exclusive of the $2,905 of plant shutdown costs incurred in
the first fiscal quarter of 1999 and divested businesses, gross profit for the
nine months ended June 30, 1999 was $36,255, or 20.5 percent of total sales
versus $34,068 or 20.1 percent of total sales for the nine months ended June 30,
1998. Despite significantly lower selling prices in fiscal 1999, production and
sales volume increases and lower manufacturing costs have driven this
improvement in margins.
Total operating expenses were $8,836 and $24,576 for the three months and
nine months ended June 30, 1999, respectively, compared with $8,145 and $25,053
for the three and nine months ended June 30, 1998. Exclusive of divestitures in
1998, operating expenses were 13.9 percent and 13.1 percent of sales for the
nine months ended June 30, 1999 and June 30, 1998, respectively, reflecting the
company's investment in new product development and an expanded sales reach.
Net interest expense was $4,597 and $14,320 for the third quarter and the
nine months ended June 30, 1999, respectively, compared to $4,240 and $11,433
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.
In the first quarter of 1999, the Company recorded a charge of $3,462,
representing costs incurred in connection with acquisition due diligence and
negotiations which were terminated during the quarter. Income tax as a
percentage of before-tax income remained constant for the quarter and nine
months ended June 30, 1999 compared with the quarter and nine months ended June
30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
In January 1998, AET amended and restated its principal bank lending
agreement to combine the revolving credit facility and revolving term facility
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 that type. At June 30, 1999 the Company
had $30,000 in borrowings and $12,898 in letters of credit outstanding under the
Credit Facility. The Company also had $150,000 of Senior Notes which bear
interest at
7
<PAGE>
11.5 percent payable semi-annually and mature in full in 2002 and $6,500 of
Industrial Revenue Bonds outstanding, which are due November 4, 2004.
Operating activities for the nine months ended June 30, 1999 used $360 of
cash, which was the result of a net loss of $1,126 before depreciation and
amortization and other non-cash expenditures offset by an increase in working
capital of $766. The net working capital increase was primarily the result of
decreases in inventory and accounts receivable of $7,637, offset by increases in
prepaid expenses and other current assets of $1,080 and decreases in accounts
payable and accrued expenses of $5,791.
In the fourth quarter of 1998 the Company announced a restructuring of its
Covington, Virginia manufacturing operation, including the shutdown of two
older, less efficient production lines and the elimination of approximately 200
full-time manufacturing and plant administrative positions, 160 of which were
hourly and the remainder were salaried. The Company recorded a $18,580 charge in
the fourth quarter of 1998 for this restructuring, comprised of approximately
$12,090 for ongoing operating leases related to idled equipment, $4,100 of
employment in severance and outplacement related costs and $2,390 in other
charges primarily related to idling the equipment. Implementation of this plan
is nearing completion, with a total of 181 positions eliminated and the shutdown
of the production lines. During the third quarter payments related to the
restructuring were $1,600, primarily comprised of employment related costs.
Since September 1998, the Company has paid out $675 on leases related to idled
equipment, $2,810 in severance and outplacement costs and $2,402 in other
restructuring costs, resulting in an accrued restructuring balance of $12,693 at
June 30, 1999. Of this balance, $11,415 represents lease costs, the majority of
which is classified as a long term liability.
In April of 1999, the Company acquired certain assets of AEP Industries
Inc.'s OPP film business. The net purchase price of $13,316 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 of $29,940 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. AET is
addressing potential Year 2000 issues with respect to non-traditional
information technology, including manufacturing, site support and shop floor
systems, as well as traditional information technology, such as computer
hardware and software. The project is comprised of five major phases: (1) taking
inventory of systems potentially impacted by Year 2000 issues; (2) assessing
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 June 30, 1999, phases one and two have been completed. AET is now
focusing on phases three, four and five, contingency planning, remediation and
testing of both traditional and non-traditional information technology. The
remediation, or repair and replacement, of mission critical systems should be
completed by September 30, 1999. Testing of non-traditional information
technology systems should be completed by September 30, 1999; however, testing
of traditional information technology will carry on into the fourth quarter. AET
is having ongoing discussions regarding Year 2000 issues with certain key
vendors and customers to determine whether critical third parties will be
prepared for the Year 2000. To date, responses have indicated that AET's key
vendors and customers will be prepared; however, there is no guarantee that a
key customer or supplier will not experience a Year 2000 related problem
resulting in a material negative effect on AET's operations. AET will continue
to monitor key partners throughout the balance of the calendar year.
The failure of the Company or one of its key customers or suppliers to
correct a material Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations.
8
<PAGE>
Such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. A worst case scenario would be
the inability of the local electric utilities to supply power to AET's
manufacturing plants, particularly at our largest plant in Terre Haute, Indiana.
Under this scenario, a loss of electricity would result in a shutdown of our
manufacturing equipment. Due to the amount of electricity needed to operate the
equipment, it is not feasible to utilize most alternative sources of
electricity. Therefore AET would be unable to manufacture products for
customers, and thus AET's operations could be materially impacted. While our
customers are reliant on a steady supply of our OPP films, in general the
Company doesn't have guaranteed supply agreements with its customers.
The Company's contingency planning process for Year 2000 problems is
ongoing. Contingency plans include 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 the completion
of the year 2000 project as scheduled should substantially reduce the
possibility of significant interruptions of normal operations.
The total cost associated with Year 2000 compliance activities is estimated
to be $11,000, of which $9,000 relates to the new enterprise-wide system which
offers many other enhancements in comparison to our current systems.
Approximately $8,500 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.
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 June 30, 1999, the Company had no short-term debt
outstanding and had long-term debt outstanding of $186,500, of which $30,000 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 $89.
The Company does not enter into financial instrument transactions for
trading or other speculative purposes or to manage interest rate exposure.
9
<PAGE>
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 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
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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(l) 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(n) 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(l) Amended and Restated Credit Agreement dated as of March 15, 1999.
10.1.4(l) 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* Employment Agreement dated as of April 1, 1999 between the Registrant and Mark
S. Abrahams.
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10.7(l) Employment Agreement dated as of April 1, 1999 between the Registrant and David
N. Terhune.
10.8(l) Employment Agreement dated as of April 1, 1999 between the Registrant and Amin
J. Khoury.
10.9(l) Employment Agreement dated as of April 1, 1999 between the Registrant and
Thomas E. Williams.
10.10(j) Letter Agreement dated May 18, 1998 between the Registrant and Anthony J.
Allott.
10.11(h) Employment Agreement dated as of August 15, 1998 between the Registrant and
Anthony J. Allott.
10.12* Employment Agreement dated as of April 1, 1999 between the Registrant and
Anthony J. Allott.
10.13(h) Employment Agreement dated as of September 19, 1998 between the Registrant and
Gerald M. Haines II.
10.14* Employment Agreement dated as of April 1, 1999 between the Registrant and
Gerald M. Haines II.
10.15(e) Executive Deferred Compensation Plan dated as of September 1, 1994.
10.16.1(m) Equipment Lease Agreement dated as of December 29, 1997 between the Registrant
and LaSalle National Leasing Corporation.
10.16.2(l) Letter Agreement dated April 28, 1999 Amending Equipment Lease Agreement dated
as of December 29, 1997 between Registrant and LaSalle National Leasing
Corporation.
10.17(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.
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* 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 10-Q for the fiscal quarter
ended March 31, 1999.
(m) Contained in Exhibits to the Registrant's Form 8-K dated January 2, 1998.
(n) Contained in Exhibits to the Registrant's Form 8-K dated March 6, 1998.
11
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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.
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APPLIED EXTRUSION TECHNOLOGIES, INC.
(REGISTRANT)
By: /s/ ANTHONY J. ALLOTT
-----------------------------------------
Anthony J. Allott
Vice President, Chief Financial
Officer and Treasurer
August 6, 1999
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Exhibit 10.6
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 Mark S. Abrahams (the "Executive").
RECITALS
1. The Executive is currently employed by the Employer as its Vice
President and general Manager of the Employer's Speciality Nets & Nonwovens
Division pursuant to an Employment Agreement dated as of June 1, 1996, as in
effect on the date hereof (the "Prior Employment Agreement").
2. The Prior Employment Agreement provides that, on or after June 1,
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, 2002, 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 Vice President and General Manager of the Employer's
Specialty Nets & Nonwovens Division or in such other senior executive
position as the Chief Executive Officer of the Employer (the "Chief Executive
Officer") may designate from time to time, and shall perform such duties and
responsibilities on behalf of the Employer as may be designated from time to
time by the Chief Executive Officer or his designee. The Executive shall
report to 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 his full time and best efforts, business
judgement, skill and knowledge to the advancement of the Employer's interests
and to the discharge of his duties and responsibilities hereunder. Executive
shall not engage in any other business activity during the term of this
Agreement, except as may be approved in advance in writing by the Chief
Executive Officer.
(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.
3. COMPENSATION.
(a) SALARY. During each year of the Employment Period, the
Executive shall receive an annual salary (the "Salary") of $200,000 which,
from time to time, shall be subject to upward adjustment only as recommended
by the Chief Executive Officer or his designee consistent with the Employer's
compensation policies and guidelines.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus based upon criteria
that are defined annually by the Employer.
(c) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable business expenses
incurred by him on behalf of the Employer.
(d) FRINGE BENEFITS. During the Employment Period, (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,
and shall be entitled to four weeks of paid vacation in any fiscal year
during the Employment Period, (ii) the Executive
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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, (iii) 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 (iv) 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.
(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) all stock options previously granted to the Executive
which, by their terms, have not yet vested, shall immediately vest and become
exercisable, (ii) Section 4(d) hereof shall be amended by deleting clauses
4(d)(iii) and 4(d)(iv), and (iii) the Executive shall be entitled to carry
out his duties and responsibilities hereunder primarily from Executive's
current office in Middletown, 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).
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 one year 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, and
(ii) the Executive shall be deemed for all vesting requirements contained in
any of the
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Employer's benefit plans, programs and offerings in which the Executive is
participating on the Termination Date to have been employed by the Employer
until the Expiration Date.
(c) INCAPACITY. If in the reasonable judgment of the Employer, 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 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, (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)(i) 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 to have been employed by the Employer until the Expiration
Date. Any dispute between the Employer 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 Employer 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; (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 reflects materially and adversely on the Employer;
(iii) other material breach by Executive of any provision of this Agreement;
or (iv) other conduct by Executive that is materially harmful to the business
or interests of 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 knowing 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
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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 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 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 his current Salary for periods 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)(i) 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 to
have been employed by the Employer until the Expiration Date.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. After a Change in
Control has occurred, 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 Vice President and General Manager of the
Employer's Specialty Nets & Nonwovens Division or in
another position of similar scope, authority and
responsibility;
(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 the 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 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 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 his current Salary
for periods 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)(i)
hereof on the terms referred to therein (or the equivalent thereof in all
material respects if continuation of participation in
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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 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
unpaid Salary, Bonus and benefits accrued through the Termination Date.
(h) EFFECT OF TERMINATION. Payment in full by the Employer of the
amount that it may be required to pay Executive pursuant to this Section 4 upon
termination of his employment hereunder shall constitute the entire obligation
of the Employer to Executive under this Agreement, and performance by the
Employer shall constitute full settlement of any claim that Executive might
otherwise assert against the Employer or any of those connected with it on
account of such termination; 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 and 10 hereof shall survive the Termination Date.
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,
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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 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
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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. ARBITRATION. Any dispute, controversy or claim between the parties
arising out of or related to any term or condition of the Executive's
employment or the termination of his employment shall be settled by
arbitration conducted in Boston, Massachusetts in accordance with the
Commercial Rules of the American Arbitration Association then in force (the
"Rules") and the laws of The Commonwealth of Massachusetts. In the event that
a party requests arbitration, it shall serve upon the other party (the
"Non-Requesting Party") a written demand for arbitration stating the
substance of the controversy, dispute or claim, the contention of the party
requesting arbitration and the name and address of the arbitrator appointed
by it. The Non-Requesting Party, within twenty (20) days of such demand,
shall accept the arbitrator or appoint a second arbitrator and notify the
other party of the name and address of this second arbitrator so selected, in
which case the two arbitrators shall appoint a third. The decision or award
of the single arbitrator or, in the case of three arbitrators, the decision
or award of any two arbitrators, shall be final and binding upon the parties.
In the event that the two arbitrators fail in any instance to appoint a third
arbitrator within twenty (20) days of the appointment of the second
arbitrator, either arbitrator or any party to the arbitration may apply to
the American Arbitration Association for appointment of the third arbitrator
in accordance with the Rules. Should the Non-Requesting Party (upon whom a
demand for arbitration has been served) fail or refuse to accept the
arbitrator appointed by the other party or to appoint an arbitrator within
twenty (20) days, the single arbitrator shall have the right to decide alone,
and such arbitrator's decision or award shall be final and binding upon the
parties. The decision of the arbitrator or arbitrators shall be in writing
and shall set forth the basis therefor. The parties shall abide by all awards
rendered in the arbitration proceedings, and all such awards may be enforced
and executed upon in any court having jurisdiction over the party against
whom enforcement of such award is sought. The parties involved in the dispute
shall divide equally the administrative charges, arbitrator's fees and
related expenses of the arbitration, but each party shall pay its own legal
fees incurred in connection with such arbitration.
11. 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.
12. 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 such other party.
13. AMENDMENTS. No amendment to this Agreement shall be effective unless
it shall be in writing and signed by each party hereto. No oral waiver,
amendment or modification will be effective under any circumstances
whatsoever.
14. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or three days
after being mailed by registered or
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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:
3495 Montchanin Road
Wilmington, Delaware 19807
with a copy to him at:
Applied Extrusion Technologies, Inc.
601 Industrial Drive
Middletown, Delaware 19709
15. 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.
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16. 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
CHIEF EXECUTIVE OFFICER AND PRESIDENT
/s/ Mark S. Abrahams
-------------------------------------
Mark S. Abrahams
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Exhibit 10.12
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 Anthony J. Allott (the "Executive").
RECITALS
1. The Executive is currently employed by the Employer as its Vice
President and Chief Financial Officer pursuant to an Employment Agreement dated
as of August 15, 1998, as in effect on the date hereof (the "Prior Employment
Agreement").
2. The Prior Employment Agreement provides that, on or after August 14,
2001, 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, 2002, 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.
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 Vice President and Chief Financial Office or in such
other senior executive position as the
<PAGE>
Chief Executive Officer of the Employer (the "Chief Executive Officer") may
designate from time to time, and shall perform such duties and responsibilities
on behalf of the Employer as may be designated from time to time by the Chief
Executive Officer or his designee. The Executive shall report to 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 his full
time and best efforts, business judgement, skill and knowledge to the
advancement of the Employer's interests and to the discharge of his duties and
responsibilities hereunder. Executive shall not engage in any other business
activity during the term of this Agreement, except as may be approved in advance
in writing by the Chief Executive Officer.
(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.
3. COMPENSATION.
(a) SALARY. During each year of the Employment Period, the
Executive shall receive an annual salary (the "Salary") of $200,000 which,
from time to time, shall be subject to upward adjustment only as recommended
by the Chief Executive Officer or his designee consistent with the Employer's
compensation policies and guidelines.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus based upon criteria
that are defined annually by the Employer and will be targeted at 40% of
Salary, with a maximum payout potential of 80% 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.
(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,
and shall be entitled to four weeks of paid vacation in any fiscal year
during the Employment Period, (ii) 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
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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, (iii) 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 (iv) 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.
(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
"March 31, 2002" with the date which is exactly three 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) Section 4(d) hereof shall be amended by
deleting clause 4(d)(iii), and (iv) the Executive shall be entitled to carry
out his duties and responsibilities hereunder primarily from Executive's
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).
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 eighteen months 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
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<PAGE>
the Employer's benefit plans, programs and offerings in which the Executive is
participating on the Termination Date 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) 20% of the
Salary payable in such fiscal year.
(c) INCAPACITY. If in the reasonable judgment of the Employer, 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 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 Section 3(d) 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 to have been
employed by the Employer until the Expiration Date. Any dispute between the
Employer 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 Employer 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; (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 reflects materially and adversely on the Employer; or
(iii) other material breach by Executive of any provision of this Agreement,
which breach has not been cured within 30 days after written notice to
Executive from 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 knowing 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.
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<PAGE>
(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
his current Salary and Average Bonus for periods 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 to have been employed by the Employer
until the Expiration Date.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. After a Change in
Control has occurred, the Executive may terminate his employment hereunder
for Good Reason upon notice to the Employer. The following shall constitute
"Good Reason" for termination by the Executive if the same has not been cured
within 30 days after the Employer has received written notice from the
Executive setting forth in reasonable detail the nature of such Good Reason:
(i) Failure of the Employer to continue the Executive in the
position of Vice President and Chief Financial Office or
in another position of similar scope, authority and
responsibility;
(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 the 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
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<PAGE>
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 his current Salary
and Average Bonus for periods 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 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
unpaid Salary, Bonus and benefits accrued through the Termination Date.
(h) EFFECT OF TERMINATION. Payment in full by the Employer of the
amount that it may be required to pay Executive pursuant to this Section 4
upon termination of his employment hereunder shall constitute the entire
obligation of the Employer to Executive under this Agreement, and performance
by the Employer shall constitute full settlement of any claim that Executive
might otherwise assert against the Employer or any of those connected with it
on account of such termination; 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 and 10 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 8 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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<PAGE>
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.
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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. 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 such other party.
12. 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.
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13. 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:
18 Washington Street
Marblehead, Massachusetts 01945
with a copy to him at:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
14. 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
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shall inure to the benefit of and be binding upon the Employer and Executive,
their respective successors, executors, administrators, heirs and permitted
assigns.
15. 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
CHIEF EXECUTIVE OFFICER AND PRESIDENT
/s/ Anthony J. Allott
-------------------------------------
Anthony J. Allott
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Exhibit 10.14
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 Gerald M. Haines II (the "Executive").
RECITALS
1. The Executive is currently employed by the Employer as its Vice
President and General Counsel pursuant to an Employment Agreement dated as of
September 19, 1998, as in effect on the date hereof (the "Prior Employment
Agreement").
2. The Prior Employment Agreement provides that, on or after September
19, 2001, 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, 2002, 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 Vice President and General Counsel or in such other
senior executive position as the Chief Executive Officer of the Employer (the
"Chief Executive Officer") may designate from time to time, and shall perform
such duties and responsibilities on behalf of the Employer as may be
designated from time to time by the Chief Executive Officer. The Executive
shall report to 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 his full time and best efforts,
business judgement, skill and knowledge to the advancement of the Employer's
interests and to the discharge of his duties and responsibilities hereunder.
Executive shall not engage in any other business activity during the term of
this Agreement, except as may be approved in advance in writing by the Chief
Executive Officer.
(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.
3. COMPENSATION.
(a) SALARY. During each year of the Employment Period, the
Executive shall receive an annual salary (the "Salary") of $150,000 which,
from time to time, shall be subject to upward adjustment only as recommended
by the Chief Executive Officer or his designee consistent with the Employer's
compensation policies and guidelines.
(b) INCENTIVE BONUS. During each year of the Employment Period, the
Executive shall be eligible to receive an incentive bonus based upon criteria
that are defined annually by the Employer and will be targeted at 40% of
Salary, with a maximum payout potential of 80% 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.
(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,
and shall be entitled to four weeks of paid vacation in any fiscal year
during the Employment Period , and (ii) the
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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.
(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
"March 31, 2002" with the date which is exactly three 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) Section 4(d) hereof shall be amended by
deleting clause 4(d)(iii), and (iv) the Executive shall be entitled to carry
out his duties and responsibilities hereunder primarily from Executive's
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).
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 one year 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, 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 to have been employed by
the Employer until the Expiration Date.
(c) INCAPACITY. If in the reasonable judgment of the Employer, 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 may terminate the Executive's
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<PAGE>
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, (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 (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 to
have been employed by the Employer until the Expiration Date. Any dispute
between the Employer 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 Employer 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; (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 reflects materially and adversely on the Employer; or
(iii) other material breach by Executive of any provision of this Agreement,
which breach has not been cured within 30 days after written notice to
Executive from 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 knowing 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 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 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 his current
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<PAGE>
Salary for periods 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 to have been employed by the
Employer until the Expiration Date.
(f) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. After a Change in
Control has occurred, the Executive may terminate his employment hereunder
for Good Reason upon notice to the Employer. The following shall constitute
"Good Reason" for termination by the Executive if the same has not been cured
within 30 days after the Employer has received written notice from the
Executive setting forth in reasonable detail the nature of such Good Reason:
(i) Failure of the Employer to continue the Executive in the
position of Vice President and General Counsel or in another
position of similar scope, authority and responsibility;
(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 the 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 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 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 his current Salary
for periods 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 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
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<PAGE>
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 unpaid Salary, Bonus and
benefits accrued through the Termination Date.
(h) EFFECT OF TERMINATION. Payment in full by the Employer of the
amount that it may be required to pay Executive pursuant to this Section 4
upon termination of his employment hereunder shall constitute the entire
obligation of the Employer to Executive under this Agreement, and performance
by the Employer shall constitute full settlement of any claim that Executive
might otherwise assert against the Employer or any of those connected with it
on account of such termination; 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 and 10 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 8 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 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
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<PAGE>
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 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
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<PAGE>
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. ARBITRATION; LEGAL EXPENSES.
(a) Provided that no Change of Control has occurred, any dispute,
controversy or claim between the parties arising out of or related to any term
or condition of the Executive's employment or the termination of his employment
shall be settled by arbitration conducted in Boston, Massachusetts in accordance
with the Commercial Rules of the American Arbitration Association then in force
(the "Rules") and the laws of The Commonwealth of Massachusetts. In the event
that a party requests arbitration, it shall serve upon the other party (the
"Non-Requesting Party") a written demand for arbitration stating the substance
of the controversy, dispute or claim, the contention of the party requesting
arbitration and the name and address of the arbitrator appointed by it. The
Non-Requesting Party, within twenty (20) days of such demand, shall accept the
arbitrator or appoint a second arbitrator and notify the other party of the name
and address of this second arbitrator so selected, in which case the two
arbitrators shall appoint a third. The decision or award of the single
arbitrator or, in the case of three arbitrators, the decision or award of any
two arbitrators, shall be final and binding upon the parties. In the event that
the two arbitrators fail in any instance to appoint a third arbitrator within
twenty (20) days of the appointment of the second arbitrator, either arbitrator
or any party to the arbitration may apply to the American Arbitration
Association for appointment of the third arbitrator in accordance with the
Rules. Should the Non-Requesting Party (upon whom a demand for arbitration has
been served) fail or refuse to accept the arbitrator appointed by the other
party or to appoint an arbitrator within twenty (20) days, the single arbitrator
shall have the right to decide alone, and such arbitrator's decision or award
shall be final and binding upon the parties. The decision of the arbitrator or
arbitrators shall be in writing and shall set forth the basis therefor. The
parties shall abide by all awards rendered in the arbitration proceedings, and
all such awards may be enforced and executed upon in any court having
jurisdiction over the party against whom enforcement of such award is sought.
The parties involved in the dispute shall divide equally the administrative
charges, arbitrator's fees and related expenses of the arbitration, but each
party shall pay its own legal fees incurred in connection with such arbitration.
(b) After a Change in Control has occurred, 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 a request by Executive for such
payment or reimbursement, including an invoice detailing any such legal fees
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<PAGE>
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. 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 such other party.
12. 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.
13. 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: Chief Executive Officer
and to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Winthrop G. Minot
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<PAGE>
(ii) if to the Executive, to him at:
57 Alderbrook Drive
Topsfield, Massachusetts 01983
with a copy to him at:
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
14. 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.
15. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
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/ Gerald M. Haines II
-------------------------------------
Gerald M. Haines II
-11-
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