<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for use of the
/ / Definitive Proxy Statement Commission Only (as permitted by
/ / Definitive Additional Materials Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
APPLIED EXTRUSION TECHNOLOGIES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
APPLIED EXTRUSION TECHNOLOGIES, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which
the filing is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
<PAGE>
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 1, 1999
------------------------
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Applied Extrusion Technologies, Inc. will be held at the 36th
Floor Conference Center, Ropes & Gray, One International Place, Boston,
Massachusetts at 10:30 a.m. on Monday, March 1, 1999 for the following purposes:
1. To elect three Class I directors.
2. To increase the aggregate number of option shares available for grant
under the Corporation's 1994 Stock Option Plan.
3. To amend the Corporation's Certificate of Incorporation to increase the
authorized Common Stock of the Corporation.
4. To transact any other business that may properly come before the Meeting
or any adjournment thereof.
Stockholders of record at the close of business on January 8, 1999 are
entitled to notice of and to vote at the Meeting.
If you are unable to be present personally, please sign and date the
enclosed proxy and return it promptly in the enclosed envelope.
By Order of the Board of Directors,
Gerald M. Haines II
Secretary
January 29, 1999
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
MARCH 1, 1999
------------------------
PROXY STATEMENT
------------------------
The enclosed form of proxy is solicited on behalf of the Board of Directors
of Applied Extrusion Technologies, Inc. ("AET" or the "Company") to be voted at
the Annual Meeting of Stockholders (the "Meeting") to be held at the 36th Floor
Conference Center, Ropes & Gray, One International Place, Boston, Massachusetts
02110 at 10:30 a.m. on Monday, March 1, 1999 or at any adjournment thereof. A
proxy may be revoked by a stockholder at any time before it is voted (i) by
returning to the Company another properly signed proxy bearing a later date,
(ii) by otherwise delivering a written revocation to the Secretary of the
Company or (iii) by attending the Meeting or any adjourned session thereof and
voting the shares covered by the proxy in person. Shares represented by the
enclosed form of proxy properly executed and returned, and not revoked, will be
voted at the Meeting.
The expense of soliciting proxies will be borne by the Company. Officers and
regular employees of the Company (who will receive no compensation therefor in
addition to their regular salaries) may solicit proxies. In addition to the
solicitation of proxies by use of the mails, the Company may use the services of
its directors, officers and regular employees to solicit proxies personally and
by mail, telephone or telegram from brokerage houses and other shareholders. The
Company has retained the services of MacKenzie Partners, Inc. to assist with the
solicitation of proxies on behalf of the Company, at an anticipated cost of
approximately $5,000 plus expenses. The Company will also reimburse brokers,
banks and other custodians, nominees and fiduciaries and other persons for their
reasonable charges and expenses in forwarding soliciting materials to their
principals.
In the absence of contrary instructions, the persons named as proxies will
vote in accordance with the intentions stated below. The holders of record of
shares of the common stock, $.01 par value (the "Common Stock"), of the Company
at the close of business on January 8, 1999 are entitled to receive notice of
and to vote at the Meeting. As of that date, the Company had issued and
outstanding 11,280,150 shares of Common Stock each of which is entitled to one
vote on each matter to come before the Meeting. This proxy statement and the
enclosed proxy are being mailed to Stockholders on the same date as the date of
the Notice of Annual Meeting.
Consistent with state law and under the Company's by-laws, a majority of the
shares entitled to vote on a particular matter, present in person or represented
by proxy at a meeting, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Meeting will be counted by persons appointed by the
Company to act as election inspectors for the Meeting. The three nominees for
election as directors at the Meeting who receive the greatest number of votes
properly cast for the election of directors shall be elected directors. The
election inspectors will count shares represented by proxies that withhold
authority to vote for a nominee for election as a director, or that reflect
abstentions or "broker non-votes" (i.e., shares represented at the Meeting held
by brokers or nominees as to which (i) instructions have not been received from
the beneficial owners or persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular matter) only as
shares that are present and entitled to vote on the matter for purposes of
determining the presence of a quorum, but neither abstentions nor broker
non-votes will have any effect on the outcome of voting on the election of
directors.
The Annual Report to Stockholders for AET's fiscal year ended September 30,
1998 accompanies this proxy statement. The principal executive offices of AET
are located at 3 Centennial Drive, Peabody, Massachusetts 01960.
<PAGE>
ITEM NO. 1
ELECTION OF DIRECTORS
The persons named in the enclosed proxy intend to vote each share as to
which a proxy has been properly executed and returned and not revoked in favor
of the election as directors of the three nominees named below, all of whom are
currently directors of the Company, unless authority to vote for the election of
one or more of such nominees is withheld by marking the proxy to that effect.
Pursuant to the Company's Restated Certificate of Incorporation, as amended,
the Board of Directors is divided into three classes, as nearly equal in number
as possible, so that each director will serve for three years, with one class of
directors being elected each year. Pursuant to the Restated Certificate of
Incorporation and By-laws, the nominees include the three directors standing for
reelection and designated as Class I Directors, whose terms expire at the 1999
Annual Meeting. The enclosed proxy cannot be voted for a greater number of
persons than three.
If Proposal I is approved, Amin J. Khoury, Thomas E. Williams, and Mark M.
Harmeling will be elected as Class I Directors for a term of three years
expiring at the 2002 Annual Meeting, and until their respective successors are
elected and shall qualify to serve.
It is expected that each of the nominees will be able to serve, but if any
nominee is unable to serve, the proxies reserve discretion to vote, or refrain
from voting, for a substitute nominee or nominees or to fix the number of
directors at a lesser number.
NOMINEES
<TABLE>
<CAPTION>
NAME, AGE (AS OF JANUARY 8, 1999), DIRECTOR TERM
BUSINESS AND CURRENT DIRECTORSHIPS SINCE EXPIRES
- ----------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
AMIN J. KHOURY, 59--Founder and Chairman of the Board of Directors of the Company since October 1986 1999
1986; from October 1986 to August 1993, Chief Executive Officer of the Company; President of
the Company from August 1988 through November 1992; Founder and Chairman of the Board of
Directors of BE Aerospace, Inc., a manufacturer of cabin interior products for commercial
aircraft; Director of Brooks Automation, Inc., a leading worldwide independent supplier of
vacuum substrate handling robots, modules and cluster tool platforms for semiconductor and
flat panel display manufacturing.
THOMAS E. WILLIAMS, 52--Director, President and Chief Operating Officer of the Company since 1992 1999
December 1992; Chief Executive Officer of the Company since August 1993; from 1988 until
1992, President and Chief Executive Officer of Home Innovations, Inc., a home furnishings
company; from 1980 until 1988, held a number of executive positions with PepsiCo, Inc.
MARK M. HARMELING, 46--Director of the Company since 1986; since 1997, an executive of The A.G. 1986 1999
Spanos Corporation, a leading developer of multi-family residential complexes; since 1991,
President of Bay State Realty Advisors, a real estate consulting firm; from 1985 to 1991,
President of Intercontinental Real Estate Corporation, a real estate holding and development
corporation; Director of Universal Holding Corporation, an insurance holding company.
</TABLE>
2
<PAGE>
CURRENT DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE (AS OF JANUARY 8, 1999) DIRECTOR TERM
BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS SINCE EXPIRES
- ----------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
NADER A. GOLESTANEH, 38--Director of the Company; since 1990, President of Centremark 1986 2000
Properties, Inc., a real estate management and development company; since 1986, attorney in
private practice in Boston, Massachusetts.
PAUL W. MARSHALL, 57--Director of the Company; since 1996, Professor of Management, Harvard 1986 2000
Business School; from 1992 to 1997, Chairman of the Board and Chief Executive Officer of
Rochester Shoe Tree Company, Inc., a manufacturer and distributor of cedar shoe trees and
other cedar and shoe care products; from 1989 to 1991, Chairman of Industrial Economics
Company, a management consulting firm; from 1989 to 1992, Adjunct Professor, Harvard Business
School; Director of Raymond James Financial Corporation, a regional brokerage firm.
RICHARD G. HAMERMESH, 50--Director of the Company; since August 1987, Managing Partner, Center 1986 2001
for Executive Development, an independent executive education and training firm; Director of
BE Aerospace, Inc., a manufacturer of cabin interior products for commercial aircraft.
JOSEPH J. O'DONNELL, 54--Director of the Company; since 1978, Chairman of the Board and Chief 1986 2001
Executive Officer of Boston Concessions Group, Inc., a company that manages food service
operations in ski areas, amusement parks, restaurants and theaters.
</TABLE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held eight meetings during the fiscal year ended
September 30, 1998. Each incumbent director attended at least 75% of the Board
meetings and the meetings held by committees on which he served during such
fiscal year. The Board of Directors currently has two standing committees, the
Audit Committee and the Stock Option and Compensation Committee (the
"Compensation Committee"). The Company does not have a standing Nominating
Committee.
The Audit Committee, composed of Richard G. Hamermesh and Joseph J.
O'Donnell, held one meeting during the fiscal year ended September 30, 1998. The
Audit Committee recommends to the Board of Directors the independent auditors to
be engaged by the Company, reviews with management and with the independent
auditors the Company's internal accounting procedures and controls, and reviews
with the independent auditors the scope and results of their audit, as well as
the scope of the auditor's internal activities.
The Compensation Committee, which in fiscal 1998 was composed of Nader A.
Golestaneh and Mark M. Harmeling, held two meetings and acted pursuant to
written consent on seven occasions during the fiscal year ended September 30,
1998. The Compensation Committee provides recommendations to, and may act on
behalf of, the Board regarding compensation matters, and administers the
Company's stock option and compensation plans.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information with
respect to the beneficial ownership of the Company's Common Stock as of January
8, 1999 by (i) each person who is known to the Company to beneficially own more
than 5% of the outstanding shares of Common Stock of the Company, (ii) each of
the chief executive officer and the Company's four other most highly compensated
executive officers who were serving at the end of fiscal 1998 (collectively, the
"Named Executive Officers") and each director of the Company, and (iii) all
executive officers and directors of the Company as a group. Except as otherwise
indicated, each of the stockholders named below has sole voting and investment
power with respect to the shares of Common Stock beneficially owned:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
-------------------------------
<S> <C> <C>
PERCENT OF
NUMBER OF OUTSTANDING
NAMES SHARES SHARES(1)
- -------------------------------------------------------------------------------- ------------- -----------
T. Rowe Price Associates, Inc................................................... 880,600(2) 7.81%
100 E. Pratt Street
Baltimore, MD 21202
T. Rowe Price Small Cap Value Fund, Inc......................................... 850,000 7.54%
100 E. Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP.............................................. 687,400 6.09%
c/o Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258
Dimensional Fund Advisors Inc................................................... 583,600 5.17%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Mellon Bank Corporation......................................................... 580,500 5.15%
One Mellon Bank Center
Pittsburgh, PA 15258
The Clark Estates, Inc.......................................................... 580,000 5.14%
One Rockefeller Plaza
New York, NY 10020
Thomas E. Williams*+............................................................ 441,843(3) 3.78%
Amin J. Khoury*+................................................................ 346,500(4) 2.98%
David N. Terhune*............................................................... 262,814(5) 2.28%
Paul W. Marshall+............................................................... 69,382(6) **
Mark S. Abrahams*............................................................... 57,626(7) **
Joseph J. O'Donnell+............................................................ 47,500(8) **
Mark M. Harmeling+.............................................................. 47,500(9) **
Anthony J. Allott*.............................................................. 47,107(10) **
Richard G. Hamermesh+........................................................... 33,375(11) **
Nader A. Golestaneh+............................................................ 25,000(12) **
All directors and executive officers as a group (11 persons).................... 1,395,663(13) 11.12%
</TABLE>
- ------------------------
* Named Executive Officer
+ Director of the Company
4
<PAGE>
** Less than 1 percent
(1) For purposes of determining beneficial ownership, owners of options
exercisable within sixty days are considered the beneficial owners of the
shares of Common Stock for which such options are exercisable, and the
reporting herein is based on the assumption (as provided in the applicable
rules of the Securities and Exchange Commission) that only the person or
persons whose ownership is being reported has converted such options into
Common Stock. As of January 8, 1999, there were 11,280,150 shares of Common
Stock actually issued and outstanding.
(2) Includes holdings attributable to T. Rowe Price Small Cap Value Fund, Inc.
(3) Includes (i) 412,500 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days, (ii)
11,300 shares held by the AET Executive Deferred Compensation Plan Trust,
(iii) 5,002 shares held by the 1996 AET Employee Stock Purchase Plan, and
(iv) 3,040 shares held by the AET Savings and Profit Sharing Plan, in each
case for the benefit of Mr. Williams.
(4) Includes 337,500 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(5) Includes (i) 237,000 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days, (ii) 5,773
shares held by the AET Executive Deferred Compensation Plan Trust, (iii)
2,728 shares held by the 1996 AET Employee Stock Purchase Plan, and (iv)
2,813 shares held by the AET Savings and Profit Sharing Plan, in each case
for the benefit of Mr. Terhune.
(6) Includes (i) 10,000 shares held by Mr. Marshall as trustee of the Paul
Marshall Self Employed Retirement Plan and (ii) 47,500 shares of Common
Stock issuable in connection with outstanding stock options exercisable
within the next sixty days.
(7) Includes (i) 48,125 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days, (ii) 2,681
shares held by the AET Executive Deferred Compensation Plan Trust, and (iii)
2,820 shares held in the AET Savings and Profit Sharing Plan, in each case
for the benefit of Mr. Abrahams.
(8) Includes 47,500 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(9) Includes 47,500 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days. Excludes
87,057 shares held in trusts for the benefit of Mr. Harmeling's children, of
which Mr. Harmeling disclaims all beneficial interest.
(10) Includes (i) 39,375 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days, (ii) 600
shares held by the AET Executive Deferred Compensation Plan Trust, (iii)
2,013 shares held by the 1996 AET Employee Stock Purchase Plan, and (iv)
3,119 shares held by the AET Savings and Profit Sharing Plan, in each case
for the benefit of Mr. Allott.
(11) Includes 21,250 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(12) Includes 25,000 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(13) Includes and excludes the shares described in notes (3) through (12).
5
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Stock Option and Compensation Committee (the "Compensation Committee"),
which is responsible for review and approval of compensation matters relating to
executive officers of the Company and administering the Company's stock option
plans, makes the following report on executive compensation for fiscal 1998.
The Company's executive compensation program is designed to recruit, retain,
reward and motivate talented executives who are capable of leading the Company
in achieving its strategic and financial objectives in the competitive and
rapidly changing oriented polypropylene and apertured films industries.
The Company relies on three compensation components to motivate executive
performance: annual salary, incentive cash bonuses and stock-based incentive
compensation. Each of the Named Executive Officers has an annual base salary,
established by an employment agreement or otherwise, at a level the Company
believes is comparable to companies in its industry and consistent with the
range for growth companies traded on the Nasdaq National Market System. To
determine salary ranges for its executives, each year the Company utilizes a
variety of compensation surveys generated by independent consulting firms with
expertise in compensation matters, and examines the compensation levels of
executives with similar responsibilities in comparable organizations. Annual
base salary of executives is targeted at levels which, together with incentive
bonuses, would provide annual cash compensation to individual executives at
below median market compensation levels for poor corporate or unit performance,
at median market compensation levels for good performance, and above median
market compensation levels for excellent performance.
In addition to base salary, each Named Executive Officer is eligible to
receive an incentive cash bonus at the end of each fiscal year based upon
corporate performance, that officer's individual performance, and in certain
cases group performance. Corporate performance is measured by the Company's
strategic and financial performance in that fiscal year, with particular
reference to operating earnings and net income for the year compared to targets
set forth in the Company's annual Business Plan approved by the Board of
Directors at the beginning of each fiscal year. Because the Compensation
Committee believes that short-term fluctuations in stock price do not
necessarily reflect the underlying strength or future prospects of the Company,
the Compensation Committee does not emphasize year-to-year changes in stock
price in its evaluation of corporate performance. Individual performance is
measured by the strategic and financial performance of the particular officer's
operational responsibility in comparison to targeted performance criteria.
While skeptical about the significance of short-term fluctuations in stock
price, the Compensation Committee believes that long-term stock price
appreciation will reflect the Company's achievement of its strategic goals and
objectives. Accordingly, the Company seeks to create long-term performance
incentives for its key employees by aligning their economic interests with the
interests of the Company's long-term shareholders through the Company's
stock-based incentive compensation program. Stock options are granted to key
employees at a price equal to the fair market value on the date of grant, and
awards are based on the performance of such employees and anticipated
contributions by such employees in helping the Company achieve its strategic
goals and objectives. Stock option grants are also made by reference to the
number of stock options an employee already holds.
6
<PAGE>
During its most recent fiscal year, despite achieving the majority of its
strategic objectives aimed at creating long-term shareholder value, operating
earnings and net income did not meet the Company's projections as a result of
factors affecting the OPP Films industry as a whole, and therefore, for the
third consecutive year, the Company did not pay cash bonuses to the majority of
its Named Executive Officers. The Company did grant stock options to more than
130 employees, including Named Executive Officers, upon recommendation of
management and approval of the Compensation Committee.
The compensation of Thomas E. Williams, the Company's Chief Executive
Officer was determined using the methods described above. Mr. Williams' salary
for fiscal year 1998 remained unchanged from the prior year, and Mr. Williams
received no bonus compensation as a result of the Company's failure to achieve
its operating earnings and net income targets for the year. Mr. Williams was
granted options to purchase 50,000 shares of Common Stock of the Company, in
view of the successful achievement of several strategic objectives in fiscal
1997 and 1998, and to provide additional incentives designed to retain and
motivate to Mr. Williams in view of the fact that all options previously granted
to him had become fully vested in early 1998.
The Company has entered into long-term employment agreements with Amin J.
Khoury, who serves as Chairman of the Board of the Company, Thomas E. Williams,
who serves as President and Chief Executive Officer of the Company, David N.
Terhune, who serves as Executive Vice President and Chief Operating Officer of
the Company, Anthony J. Allott, who serves as Vice President, Chief Financial
Officer and Treasurer, and Mark S. Abrahams, who serves as Vice President and
General Manager, Specialty Nets and Nonwovens Division of the Company. See
"Employment Contracts" below. Prior to entering into the employment agreements
with Messrs. Khoury and Williams, the Company engaged compensation consultants
who provided compensation survey information for executive officers of similarly
situated companies.
With respect to the above matters, the Compensation Committee submits this
report.
STOCK OPTION AND COMPENSATION COMMITTEE
Mark M. Harmeling
Nader A. Golestaneh
7
<PAGE>
The following tables set forth information with respect to the compensation
of the Named Executive Officers earned during fiscal 1998, 1997 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- -------------
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ------------------------------------ --------- ----------- ----------- --------------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Williams.................. 1998 415,000 -- -- 50,000 36,825(3)
President and 1997 404,700 -- -- -- 37,898(3)
Chief Executive Officer 1996 396,128 -- 150,000(2) 36,242(3)
Amin J. Khoury...................... 1998 415,000 -- -- 50,000 --
Chairman of the Board 1997 404,700 -- -- -- --
1996 396,128 -- -- 200,000(2) --
David N. Terhune.................... 1998 315,000 -- -- 50,000 33,100(4)
Executive Vice President 1997 310,000 -- -- -- 113,829(4)
and Chief Operating Officer 1996 241,667 -- -- 160,000(2) 11,250(4)
Mark S. Abrahams.................... 1998 193,333 138,000 -- 12,500 5,600(5)
Vice President and General 1997 184,000 117,000 -- -- 9,750(5)
Manager, Specialty Nets & 1996 178,143 78,000 -- 20,000(2) 11,250(5)
Nonwovens Division
Anthony J. Allott................... 1998 178,750 50,000 -- 12,500 5,600(5)
Vice President, Chief Financial 1997 152,500 -- -- 20,000 9,750(5)
Officer and Treasurer 1996 127,994 -- -- 15,000(2) 50,370(6)
</TABLE>
- ------------------------
(1) Includes amounts earned but deferred by the executive officer at the
election of those officers pursuant to the Company's 401(k) Plan or
Executive Deferred Compensation Plan.
(2) Represents a repricing in fiscal 1996 of options originally granted in
fiscal 1995; no additional options were granted to Named Executive Officers
in fiscal 1996.
(3) Includes employer contributions under the Company's 401(k) savings and
profit sharing plan, and life and disability insurance premiums paid by the
Company pursuant to the terms of the employment agreement between the
Company and Mr. Williams.
(4) Includes employer contributions under the Company's 401(k) savings and
profit sharing plan, and moving and relocation expenses paid to Mr. Terhune
in 1997 and 1998.
(5) Includes employer contributions under the Company's 401(k) savings and
profit sharing plan.
(6) Includes employer contributions under the Company's 401(k) savings and
profit sharing plan, and amounts received in 1996 in connection with Mr.
Allott's relocation.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM($)(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR(1) PRICE($/SH) DATE 5% 10%
- --------------------------------------------- ----------- --------------- ----------- ----------- ---------- ----------
Thomas E. Williams........................... 50,000 8.15% $ 7.00 02/02/08 $ 220,113 $ 557,810
Amin J. Khoury............................... 50,000 8.15% $ 7.00 02/02/08 $ 220,113 $ 557,810
David N. Terhune............................. 50,000 8.15% $ 7.00 02/02/08 $ 220,113 $ 557,810
Mark S. Abrahams............................. 12,500 2.04% $ 8.375 10/02/07 $ 65,639 $ 167,007
Anthony J. Allott............................ 12,500 2.04% $ 8.375 10/02/07 $ 65,639 $ 167,007
</TABLE>
- ------------------------
(1) Options were granted to over 100 employees of the Company through the course
of Fiscal 1998.
(2) These potential realizable values are based on assumed rates of appreciation
required by applicable regulations of the U.S. Securities and Exchange
Commission. The potential realizable values stated are not discounted to
their net present value.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED OPTIONS
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- -------------------------------------- ------------------- ----------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Thomas E. Williams.................... -- -- 400,000/50,000 $1,349,500/$128,125
Amin J. Khoury........................ -- -- 312,500/62,500 $ 591,406/$144,531
David N. Terhune...................... -- -- 222,500/52,500 $ 379,531/$131,406
Mark S. Abrahams...................... -- -- 45,000/17,500 $ 156,563/$21,406
Anthony J. Allott..................... -- -- 31,250/31,250 $ 40,391/$37,578
</TABLE>
- ------------------------
(1) The closing price for the Company's Common Stock on the Nasdaq National
Market System on September 30, 1998, the last trading day of the fiscal
year, was $9.5625 per share.
COMPENSATION OF DIRECTORS
Directors of the Company receive compensation of $2,500 per quarter, and
Directors who are also committee members receive an additional $1,250 per
quarter for each committee on which they serve. Directors who are not officers
of the Company (the "Eligible Directors") also receive a $1,000 attendance fee
for each meeting which they attend. In addition, Eligible Directors are entitled
to participate in the Company's 1991 Stock Option Plan for Directors (the
"Directors' Plan"). Under the Directors' Plan, each Eligible Director is awarded
an option covering 5,000 shares of Common Stock on June 30 of each year the plan
is in effect, provided he or she is an Eligible Director on that date. In
addition, each Eligible Director,
9
<PAGE>
excluding those individuals who are currently directors of the Company, is
awarded an initial grant covering 25,000 shares of Common Stock as of the date
of his or her first election as a director.
The exercise price of all options granted under the Directors' Plan may not
be less than 100% of the fair market value of the Common Stock on the date of
the grant. Options expire 10 years after the date of grant and become
exercisable, subject to certain conditions which accelerate vesting, as follows:
25% on the first anniversary of the date of grant and an additional 25% each
anniversary thereafter. On June 30, 1998, each Eligible Director was awarded an
option to purchase 5,000 shares of Common Stock at a price of $7.13 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
THOMAS E. WILLIAMS. Mr. Williams and the Company have entered into an
employment agreement pursuant to which he currently serves as President and
Chief Executive Officer of the Company. The agreement became effective as of
April 26, 1994 and, as amended, extends through April 25, 1999. Under the
agreement, Mr. Williams currently receives an annual base salary of $415,000,
and any bonus payable to Mr. Williams is at the discretion of the Company. If
the Company terminates Mr. Williams' employment other than for death, disability
or cause (as defined in the agreement), or if Mr. Williams terminates his
employment for good reason (as defined in the agreement), the Company will
continue to pay his salary and provide certain other benefits until the earlier
of two years after the end of the Employment Period (as defined in the
agreement) or five years from the actual date of termination. Upon a change of
control (as defined in the agreement) of the Company, the employment agreement
with Mr. Williams will automatically extend for a period of five years from the
date of such change of control, any termination of Mr. Williams thereafter will
be deemed to be without cause, and all outstanding and unvested options held by
him will immediately vest.
AMIN J. KHOURY. Mr. Khoury and the Company have entered into an employment
agreement pursuant to which he currently serves as Chairman of the Board of
Directors of the Company. The agreement became effective as of April 26, 1994
and, as amended, extends through April 25, 1999 (the "Term"). Under the
employment agreement, Mr. Khoury currently receives an annual base salary of
$415,000, and any bonus payable to Mr. Khoury is at the discretion of the
Company. If the Company terminates Mr. Khoury's employment other than for death
or disability, the Company will continue to pay his salary until two years after
the later of the date of termination or the end of the Term. Under the terms of
his current agreement, if Mr. Khoury dies, his designee or estate is entitled to
receive his base salary for the remainder of the term of the employment
agreement. If he becomes disabled, he is entitled to receive his base salary,
plus all benefits owing under the agreement, for the remainder of its term. In
the event of a change of control of the Company, the employment agreement with
Mr. Khoury will automatically renew for a period equal to its initial term, and
all outstanding and unvested options held by him will immediately vest.
DAVID N. TERHUNE. Mr. Terhune and the Company have entered into an
employment agreement pursuant to which he currently serves as Executive Vice
President and Chief Operating Officer of the Company. The agreement became
effective as of February 1, 1996 and extends through January 31, 1999, subject
to annual renewals thereafter (the "Term"). Under the agreement, Mr. Terhune
currently receives an annual base salary of $315,000, and any bonus payable to
Mr. Terhune is at the discretion of the Company. If the Company terminates Mr.
Terhune's employment without cause (as defined in the agreement) after July 31,
1997, the Company will continue to pay his salary and provide certain other
10
<PAGE>
benefits until the earlier of eighteen months after the end of the Term or three
years from the actual date of termination. Upon a change of control (as defined
in the agreement) of the Company, the employment agreement with Mr. Terhune will
automatically extend for a period of three years from the date of such change of
control, any termination of Mr. Terhune thereafter will be deemed to be without
cause, and all outstanding and unvested options held by him will immediately
vest.
MARK S. ABRAHAMS. Mr. Abrahams and the Company have entered into an
employment agreement pursuant to which he currently serves as Vice President and
General Manager, Specialty Nets & Nonwovens Division. The agreement extends
through June 1, 1999, subject to annual renewals thereafter. Under the
agreement, Mr. Abrahams currently receives an annual base salary of $200,000,
and any bonus payable to Mr. Abrahams is at the discretion of the Company. If
the Company terminates Mr. Abrahams' employment without cause (as defined in the
agreement) after June 1, 1998, the Company will continue to pay his base salary
for the shorter of one year or until he commences full time employment with
another employer.
ANTHONY J. ALLOTT. Mr. Allott and the Company have entered into an
employment agreement pursuant to which he currently serves as Vice President and
Chief Financial Officer of the Company. This Agreement became effective as of
August 15, 1998 and extends through August 14, 2001, subject to annual renewals
thereafter. Under the agreement, Mr. Allott currently receives an annual base
salary of $200,000, and any bonus payable to Mr. Allott is at the discretion of
the Company. If the Company terminates Mr. Allott's employment for any reason
other than cause (as defined in the agreement), the Company will continue to pay
his base salary and provide certain other benefits for the longer of twelve
months or the remaining term of the agreement. Mr. Allott and the Company have
also entered into a letter agreement dated May 18, 1998 providing that upon a
change of control (as defined in the agreement) of the Company, all outstanding
and unvested options held by Mr. Allott will immediately vest.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a Supply Agreement dated April 17, 1990 with BE
Aerospace, Inc., a Delaware corporation ("BE Aerospace"), which was terminated
effective September 16, 1997 concurrent with the sale of related manufacturing
assets by the Company. Pursuant to the Supply Agreement, the Company sold to BE
Aerospace its requirements of certain injection-molded plastic components at a
price which resulted in a 33 1/3% gross margin to the Company, after including
in the Company's standard cost for such products all direct and indirect costs
of labor, materials, equipment and overhead. There were no purchases by BE
Aerospace or its affiliates under the Supply Agreement during the fiscal year
ended September 30, 1998, although there were net receivables reflected on the
books of the Company in the amount of approximately $185,000 as of the end of
the fiscal year. Amin J. Khoury is a director and officer of BE Aerospace and
Richard G. Hamermesh is a director of BE Aerospace.
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its Common Stock with the cumulative
total return on the Nasdaq Stock Market-- US Index, the Dow Jones Industrial
Technology Index and the Standard & Poors Manufacturing (Diversified Industry)
Index from September 30, 1993 through September 30, 1998, the last trading day
of fiscal 1998. The cumulative total shareholder return is based on $100
invested in Common Stock of the Company and in the stocks comprising the
respective indices on September 30, 1993 (including reinvestment of dividends).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOW JONES S & P
<S> <C> <C> <C> <C>
APPLIED EXTRUSION NASDAQ STOCK INDUSTRIAL MANUFACTURING
TECHNOLOGIES, INC. MARKET (U.S.) TECHNOLOGY (DIVERSIFIED)
9/93 $100.00 $100.00 $100.00 $100.00
9/94 $191.67 $100.83 $111.81 $111.12
9/95 $306.25 $139.28 $140.37 $148.00
9/96 $152.08 $165.24 $150.65 $190.66
9/97 $143.75 $226.81 $175.82 $265.41
9/98 $159.38 $231.84 $114.69 $239.30
</TABLE>
The stock prices on the Performance Graph are not necessarily indicative of
future stock price performance. Each of the Report of the Compensation Committee
of the Board of Directors and the Performance Graph shall not be deemed
incorporated by reference by any general statement incorporating this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such acts.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission ("SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations, including written
representations of its directors and officers that no other reports were
required, during the fiscal year ended September 30, 1998, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with by those parties, with the
exception that the Company filed a Form 5 one month late on behalf of each of
Messrs. Golestaneh, Hamermesh, Harmeling, Marshall and O'Donnell with respect to
the Company's annual grant of stock options to non-employee directors.
12
<PAGE>
ITEM NO. 2
APPROVAL OF INCREASE IN NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER 1994 STOCK OPTION PLAN
Under the Company's 1994 Stock Option Plan (the "1994 Plan"), an aggregate
of 1,850,000 shares of Common Stock have been reserved for issuance. The Company
is presently seeking to increase the aggregate number of shares available for
grants of options under the 1994 Plan from 1,850,000 to 2,350,000. The market
value of the remaining 1,777,375 shares reserved for issuance in connection with
unexercised or unissued options under the 1994 Plan was $13,996,828 as of
January 8, 1999.
Management believes that additional shares of Common Stock are needed for
issuance under the 1994 Plan so that sufficient awards can continue to be made
to attract, retain and motivate key employees of the Company and its
subsidiaries. As of January 8, 1999, not taking into account this proposal to
increase the number of shares available for grants, there were 73,000 remaining
shares available for future option grants under the 1994 Plan.
The following table sets forth information with respect to the options
granted pursuant to the 1994 Plan through January 8, 1999:
1994 STOCK OPTION PLAN
OPTION GRANT SUMMARY
<TABLE>
<CAPTION>
<S> <C> <C>
OPTIONS WEIGHTED AVERAGE
NAME GRANTED(#) EXERCISE PRICE
- --------------------------------------------------------------- ----------- -----------------
Thomas E. Williams............................................. 200,000 $ 7.94
Amin J. Khoury................................................. 200,000 $ 7.94
David N. Terhune............................................... 215,000 $ 7.96
Mark S. Abrahams............................................... 32,500 $ 8.30
Anthony J. Allott.............................................. 62,500 $ 8.32
Executive Officers, as a group................................. 740,000 $ 8.16
Non-Executive Directors, as a group............................ 0 --
Non-Executive employees, as a group............................ 1,260,500 $ 7.61
</TABLE>
The 1994 Plan is administered by the Compensation Committee and provides for
the grant of incentive stock options pursuant to Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and non-statutory stock options,
to officers, employees, consultants or advisors of the Company and its
subsidiaries (in total, approximately 1,150 persons as of November 30, 1998).
Directors who are also employees, consultants or advisors are eligible to
participate in the 1994 Plan.
The exercise price of options granted under the 1994 Plan is determined by
the Compensation Committee; provided that the exercise price of stock options
may not be less than 100% (110% in the case of incentive options granted to an
owner of more than 10% of the Company's Common Stock) of the fair market value
of the Common Stock on the date of grant. Options expire no more than 10 years
after the date of grant (5 years after the date of grant for owners of more than
10% of the Company's Common Stock in the case of incentive stock options).
Options generally vest and become exercisable 25% per year over a four year
period from the date of grant. Unvested options expire upon termination of
employment or death. Generally, vested options expire three months after the
termination of employment, subject to special provisions in the case of death.
13
<PAGE>
FEDERAL TAX EFFECTS. The following general summary of federal income tax
consequences, based on the law as currently in effect, does not purport to be a
complete description of federal or other tax aspects of the 1994 Plan. Moreover,
the following summary does not discuss possible foreign, state, estate or other
tax consequences.
INCENTIVE STOCK OPTIONS. Neither the grant nor, in general, the exercise of
an incentive stock option produces taxable ordinary income to the employee or a
deduction to the Company. However, upon exercise of an incentive stock option,
the participant's "alternative minimum taxable income" will be increased,
generally by the excess of the fair market value of the shares at time of
exercise over the option price, and the employee may be required to pay the
alternative minimum tax ("AMT"). Any AMT attributable to the exercise of an
incentive stock option may be applied as a credit against the participant's
regular tax liability in subsequent years, subject to certain limitations.
If the participant does not dispose of stock received upon the exercise of
an incentive stock option within two years from the date the option was granted
or within one year after the date of exercise, any later sale of the shares will
result in a long-term capital gain or loss. However, if shares received upon
exercise of an incentive stock option are disposed of before these holding
period requirements have been satisfied (a "disqualifying disposition"), the
participant will realize ordinary income, and the Company will be entitled to a
deduction, equal in general to the difference between the option price and the
value of the shares on the date of exercise. In the case of a disqualifying
disposition that is a sale with respect to which loss (if sustained) would be
recognized, the amount of ordinary income will not exceed the excess of the
amount realized on such sale over the adjusted basis for the stock. A
disqualifying disposition of shares acquired upon exercise of an incentive stock
option that occurs in the same taxable year of the participant as the date his
or her AMT income was increased by reason of such exercise will eliminate the
AMT effect, if any, of such exercise.
In the event a participant pays the option price of an incentive stock
option by surrendering shares of previously owned stock, the surrender will not,
in general, result in the recognition of gain. However, the exercise of an
incentive stock option by the surrender of shares which were themselves acquired
by the participant upon exercise of an incentive stock option will be a
disqualifying disposition of the surrendered shares if it takes place within two
years after the grant or one year after the exercise of the incentive option
pursuant to which the surrendered shares were acquired.
Incentive stock options granted pursuant to the 1994 Plan are treated for
tax purposes as non-statutory options (see below) to the extent that the
aggregate fair market value of Common Stock with respect to which such options
are exercisable for the first time by an individual during any calendar year
exceeds $100,000. For purposes of the preceding sentence, incentive stock
options under all option plans of the Company and its subsidiaries are
aggregated, and fair market value is determined as of the time of grant of the
option.
NON-STATUTORY STOCK OPTIONS. The grant of a non-statutory stock option does
not produce taxable income to the employee or a deduction to the Company. When a
participant exercises a non-statutory stock option, he or she realizes, for
federal income tax purposes, ordinary income, subject to withholding, in the
amount of the difference between the option price and the then-market value of
the shares, and the Company is entitled to a corresponding deduction (subject to
satisfying its obligation to withhold with respect to such income). The tax is
due regardless of whether the optionee sells the stock acquired upon exercise of
the option.
14
<PAGE>
If a participant exercises a non-statutory stock option in whole or in part
by surrendering previously acquired stock (whether acquired upon exercise of an
incentive or non-statutory stock option or otherwise), no gain or loss is
recognized on the exchange of the previously acquired shares for an equivalent
number of new shares.
SPECIAL RULES APPLICABLE TO EXECUTIVE OFFICERS AND DIRECTORS. The tax rules
described above are subject to modification in the case of optionees subject to
the so-called "short-swing profit" rules of Section 16(b) of the Securities
Exchange Act of 1934, as amended ("Restricted Parties"). In the case of an
option exercised by a Restricted Party within six months of the date of grant of
the option, the ordinary income (or increase AMT income, in the case of an ISO)
associated with exercise will in general be recognized six months following the
date of grant and will be measured by the excess (if any) of the fair market
value of the shares over the option price at that time, rather than being
recognized and measured at time of exercise. Any deduction available to the
Company in connection with the exercise will be similarly deferred. However, a
Restricted Party exercising an option within six months of the date of the
option grant may elect under Section 83(b) of the Code to have the income
associated with exercise measured and taken into account at that time. An
election under Section 83(b) of the Code must be made not later than 30 days
after exercise and must satisfy certain other requirements.
An affirmative vote of a majority of the shares present, in person or by
proxy, and entitled to vote at the Meeting, is required to approve the amendment
to the 1994 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL NO. 2.
ITEM NO. 3
APPROVAL OF AMENDMENT TO AET
CERTIFICATE OF INCORPORATION
The AET Certificate of Incorporation presently provides that AET is
authorized to issue 16,000,000 shares of capital stock, of which 15,000,000
shares are designated Common Stock, $.01 par value per share, and 1,000,000 are
designated Preferred Stock, $.01 par value per share. As of January 8, 1999,
there were (i) 11,280,150 shares of AET Common Stock outstanding, (ii) 3,272,675
shares reserved for future issuance upon the exercise of options and rights to
acquire AET Common Stock, including under AET's stock option and employee stock
purchase plans, and through AET's Savings and Profit Sharing Plan, (iii) 182,801
shares held in treasury, (iv) no shares of preferred stock outstanding, and (v)
150,000 shares of preferred stock reserved in connection with AET's Shareholder
Rights Plan. All outstanding shares of AET Common Stock are fully paid and
nonassessable and the holders thereof are entitled to one vote for each share
held. The Corporation is proposing to increase the number of shares of
authorized AET Common Stock by 15,000,000 shares to an aggregate of 30,000,000
shares.
If the increase in authorized shares is approved, the additional shares of
AET Common Stock would be available for use in acquisitions, for sale in public
offerings, for stock dividends, for issuance pursuant to stock options and other
rights to purchase or receive shares and for any other purpose for which shares
of common stock may be issued under the laws of the State of Delaware. AET has
no immediate plans for the issuance of any of its authorized but unissued and
unreserved shares of AET Common Stock. To effect the increase in authorized
shares, AET would file an amendment to its Certificate of Incorporation with the
Delaware Secretary of State.
15
<PAGE>
The AET Board believes that approval of the increase in the authorized
shares is in the best interest of AET's stockholders because it would facilitate
AET's business and financial purposes in the future without the necessity of
delaying such activities for further stockholder approvals, except as may be
required in a particular case by its charter documents, applicable law, or the
rules of any stock exchange or other system on which AET Common Stock may be
listed.
The authorization of additional shares of AET Common Stock could make more
difficult, and thereby discourage, attempts to acquire control of AET and
thereby discourage a third party from attempting to do so. For example, such
additional shares could be used to dilute the stock ownership of parties seeking
to obtain control of AET, to increase the total amount of consideration
necessary for a party to obtain control, or to increase the voting power of
friendly third parties. These uses could have the effect of making it more
difficult for a third party to remove incumbent management or to accomplish a
given transaction, even if such actions would generally be beneficial to
shareholders. The AET Board of Directors has concluded, however, that the
advantages of the additional authorized shares outweigh any potential
disadvantages. Assuming the proposed increase is approved by the stockholders,
AET has no present intention to use the additional shares to deter takeovers.
The affirmative vote of a majority of the shares of AET Common Stock
outstanding is necessary to approve the increase in authorized shares. Votes
cast by proxy or in person at the AET Annual Meeting will be counted by persons
appointed by AET to act as election inspectors for the meeting. Because the
increase in authorized shares must receive the affirmative vote of a majority of
the outstanding AET Common Stock, abstentions and broker non-votes will have the
effect of a vote against the proposal. Shares represented by proxies in the form
enclosed, if properly executed and returned and not revoked, will be voted as
specified, but where no specification is made, the shares will be voted in favor
of the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL NO. 3.
------------------------
AUDIT MATTERS
Deloitte & Touche has been selected to audit the financial statements of the
Company for the fiscal year ending September 30, 1999, and to report the results
of their examination.
A representative of Deloitte & Touche is expected to be present at the
Meeting and will be afforded the opportunity to make a statement if he or she
desires to do so and to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders submitted for consideration at the 2000 Annual
Meeting of Stockholders must be received by the Company no later than December
15, 1999 in order to be included in the Company's proxy statement for the 2000
Annual Meeting. In addition, if a stockholder wishes to present a proposal at
the Company's 2000 Annual Meeting that will not be included in the Company's
proxy statement and fails to notify the Company by no earlier than November 2,
1999 and no later than December 2, 1999, then the proxies solicited by the Board
of Directors for the 2000 Annual Meeting will include discretionary authority to
vote on the stockholder's proposal in the event that it is properly brought
before the meeting.
16
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no business that will come before the
meeting for action except as described in the accompanying Notice of Meeting.
However, as to any such business, the persons designated as proxies will have
discretionary authority to act in their best judgment.
FORM 10-K
A COPY OF AET'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE BY WRITING TO: APPLIED EXTRUSION
TECHNOLOGIES, INC., ATTN: GERALD M. HAINES II, SECRETARY, 3 CENTENNIAL DRIVE,
PEABODY, MASSACHUSETTS 01960.
17
<PAGE>
[1066 - APPLIED EXTRUSION TECHNOLOGIES, INC.][FILE NAME: AET91B.ELX][VERSION -
1][1/11/99]
DETACH HERE
...............................................................................
ANNUAL MEETING OF
APPLIED EXTRUSION TECHNOLOGIES, INC.
MARCH 1, 1999
The undersigned hereby constitutes and appoints Messrs. Anthony J. Allott and
Gerald M. Haines II, or either of them, with power of substitution to each,
proxies to vote and act at the Annual Meeting of Stockholders of Applied
Extrusion Technologies, Inc. to be held on March 1, 1999 at the Conference
Center, 36th Floor, Ropes & Gray, One International Place, Boston, Massachusetts
02110 at 10:30 a.m., and at any adjournments thereof, upon and with respect to
the number of shares of Common Stock, par value $.01 per share, that the
undersigned would be entitled to vote if personally present. The undersigned
instructs such proxies, or their substitutes, to vote in such manner as they may
determine on any matters which may come before the meeting, all as indicated in
the accompanying Notice of Meeting and Proxy Statement, receipt of which is
acknowledged, and to vote on the following as specified by the undersigned. All
proxies heretofore given by the undersigned in respect of said meeting are
hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless otherwise
specified in the boxes provided on the reverse side hereof, the proxy will be
voted IN FAVOR of all nominees for director, the addition of shares to the
Applied Extrusion Technologies, Inc. 1994 Stock Option Plan, and the amendment
to the Certificate of Incorporation, and in the discretion of the named proxies
as to any other matter that may come before this meeting or any adjournment
thereof.
<TABLE>
<S> <C> <C>
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
</TABLE>
<PAGE>
[1066 - APPLIED EXTRUSION TECHNOLOGIES, INC.][FILE NAME: AET91B.ELX][VERSION -
1][1/11/99]
DETACH HERE
...............................................................................
<TABLE>
<C> <C> <S>
PLEASE
MARK
VOTES AS
IN
THIS
/X/ EXAMPLE.
</TABLE>
PLEASE DO NOT FOLD THIS PROXY.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS.
THE UNDERSIGNED HEREBY GRANTS AUTHORITY TO ELECT THE FOLLOWING NOMINEES:
NOMINEES: AMIN J. KHOURY, THOMAS E. WILLIAMS, MARK M. HARMELING
FOR / / / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ /
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
2. TO APPROVE AN INCREASE IN THE NUMBER OF
OPTION SHARES AVAILABLE FOR GRANT UNDER
THE COMPANY'S 1994 STOCK OPTION PLAN. / / / / / /
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
3. TO AMEND THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF
SHARES OF AUTHORIZED COMMON STOCK, $.01
PAR VALUE, TO 30,000,000 SHARES. / / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE SIGN EXACTLY AS NAME(S) APPEAR(S) HEREON. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE SIGN YOUR FULL TITLE AS SUCH.
EACH JOINT OWNER SHOULD SIGN.
</TABLE>
SIGNATURE: ____________________ DATE: ____ SIGNATURE: ________________ DATE:____
<PAGE>
EXHIBIT 99.1
APPLIED EXTRUSION TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN AS AMENDED
1.PURPOSE
The purpose of this 1994 Stock Option Plan (the "Plan") is to advance the
interests of Applied Extrusion Technologies, Inc. (the "Company") by enhancing
the ability of the Company and its subsidiaries to attract and retain employees,
consultants or advisers who are in a position to make significant contributions
to the success of the Company; to reward such individuals for their
contributions; and to encourage such individuals to take into account the
long-term interests of the Company through interests in shares of the Company's
common stock (the "Stock"). Any employee, consultant or adviser designated to
participate in the Plan is referred to as a "participant".
Options granted pursuant to the Plan may be incentive stock options as
defined in section 422 of the Internal Revenue Code of 1986 (as from time to
time amended, the "Code") (any option that is intended so to qualify as an
incentive stock option being referred to herein as an "incentive option"), or
options that are not incentive options, or both. Except as otherwise expressly
provided with respect to an option grant, no option granted pursuant to the Plan
shall be an incentive option.
2.ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board") of
the Company. The Board shall have authority, not inconsistent with the express
provisions of the Plan, (a) to grant awards consisting of options or stock
appreciation rights ("SARs"), or both, to such participants as the Board may
select; (b) to determine the time or times when awards shall be granted and the
number of shares of Stock subject to each award; (c) to determine which options
are, and which options are not, incentive options; (d) to determine the terms
and conditions of each award; (e) to prescribe the form or forms of any
instruments evidencing awards and any other instruments required under the Plan
and to change such forms from time to time; (f) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (g) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations of the Board
shall be conclusive and shall bind all parties. Subject to Section 8 the Board
shall also have the authority, both generally and in particular instances, to
waive compliance by a participant with any obligation to be performed by him
under an award, to waive any condition or provision of an award, and to amend or
cancel any award (and if an award is canceled, to grant a new award on such
terms as the Board shall specify) except that the Board may not take any action
with respect to an outstanding award that would adversely affect the rights of
the participant under such award without such participant's consent. Nothing in
the preceding sentence shall be construed as limiting the power of the Board to
make adjustments required by Section 4(c) and Section 6(j).
The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. On and after registration ofthe Stock under the Securities
Exchange Act of 1934, the Board shall delegate the power to select directors and
officers to receive awards under the Plan and the timing, pricing and amount of
such awards to a committee, all members of which shall be disinterested persons
within the meaning of Rule 16b-3 under that Act and "outside
-1-
<PAGE>
directors" within the meaning of Section 162(m)(4)(C)(i) of the Code.
3.EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which it is approved by the
shareholders of the Company. Grants of awards under the Plan may be made prior
to that date (but after Board adoption of the Plan), subject to approval of the
Plan by such shareholders.
No awards shall be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board, but awards previously
granted may extend beyond that date.
4.SHARES SUBJECT TO THE PLAN
(a)NUMBER OF SHARES. Subject to adjustment as provided in Section 4(c), the
aggregate number of shares of Stock that may be delivered upon the exercise of
awards granted under the Plan shall be 1,850,000. If any award granted under the
Plan terminates without having been exercised in full, or upon exercise is
satisfied other than by delivery of Stock, the number of shares of Stock as to
which such award was not exercised shall be available for future grants within
the limits set forth in this Section 4(a).
The maximum number of shares of Stock for which options may be granted
under the Plan to any individual during any calendar year shall be 250,000. The
maximum number of shares of Stock for which SARs may be granted under the Plan
to any individual during any calendar year shall likewise be 250,000. For
purposes of the preceding two sentences, the regrant of a canceled award or a
change in the exercise price of an outstanding award (other than pursuant to the
first paragraph of Section 4(c) below) shall be considered an additional grant
subject to the 250,000 annual limit.
(b)SHARES TO BE DELIVERED. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired by the Company and held in its
treasury. No fractional shares of Stock shall be delivered under the Plan.
(c)CHANGES IN STOCK. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in the Company's capital
stock, the number and kind of shares of stock or securities of the Company
subject to awards then outstanding or subsequently granted under the Plan, the
exercise price of such awards, the maximum number of shares or securities that
may be delivered under the Plan, and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons.
The Board may also adjust the number of shares subject to outstanding
awards, the exercise price of outstanding awards and the terms of outstanding
awards, to take into consideration material changes in accounting practices or
principles, extraordinary dividends, consolidations or mergers (except those
described in Section 6(j)), acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an incentive option, without the
consent of the participant, if it would constitute a modification, extension or
renewal of the option within the meaning of section 424(h) of the Code.
5.ELIGIBILITY FOR AWARDS
Persons eligible to receive awards under the Plan shall be those
participants who, in the opinion of the Board, are in a position to make a
significant contribution to the success of the Company and its subsidiaries. A
subsidiary for purposes of the Plan shall be a corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
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Incentive options shall be granted only to "employees" as defined in the
provisions of the Code or regulations thereunder applicable to incentive stock
options.
6.TERMS AND CONDITIONS OF OPTIONS AND SARS
(a)EXERCISE PRICE OF OPTIONS. The exercise price of each option shall be
determined by the Board but in any case shall not be less than 100% (110%, in
the case of an incentive option granted to a ten-percent shareholder) of the
fair market value of the Stock at the time the option is granted; nor shall the
exercise price be less, in the case of an original issue of authorized stock,
than par value. For this purpose, "fair market value" in the case of incentive
options shall have the same meaning as it does in the provisions of the Code and
the regulations thereunder applicable to incentive options; and "ten-percent
shareholder" shall mean any participant who at the time of grant owns directly,
or by reason of the attribution rules set forth in section 424(d) of the Code is
deemed to own, stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any of its parent or subsidiary
corporations.
(b)DURATION OF OPTIONS. An option shall be exercisable during such period
or periods as the Board may specify. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years (five
years, in the case of an incentive option granted to a "ten-percent shareholder"
as defined in (a) above) from the date the option was granted or such earlier
date as may be specified by the Board at the time the option is granted.
(c)EXERCISE OF OPTIONS.
(1)An option shall become exercisable at such time or times and upon such
conditions as the Board shall specify. In the case of an option not immediately
exercisable in full, the Board may at any time accelerate the time at which all
or any part of the option may be exercised.
(2)Any exercise of an option shall be in writing, signed by the proper
person and furnished to the Company, accompanied by (i) such documents as may be
required by the Board and (ii) payment in full as specified below in Section
6(d) for the number of shares for which the option is exercised.
(3)In the case of an option that is not an incentive option, the Board
shall have the right to require that the participant exercising the option remit
to the Company an amount sufficient to satisfy any federal, state, or local
withholding tax requirements (or make other arrangements satisfactory to the
Company with regard to such taxes) prior to the delivery of any Stock pursuant
to the exercise of the option. If permitted by the Board, either at the time of
the grant of the option or the time of exercise, the participant may elect, at
such time and in such manner as the Board may prescribe, to satisfy such
withholding obligation by (i) delivering to the Company Stock owned by such
individual having a fair market value equal to such withholding obligation, or
(ii) requesting that the Company withhold from the shares of Stock to be
delivered upon the exercise a number of shares of Stock having a fair market
value equal to such withholding obligation.
In the case of an incentive option, if at the time the option is exercised
the Board determines that under applicable law and regulations the Company could
be liable for the withholding of any federal or state tax with respect to a
disposition of the Stock received upon exercise, the Board may require as a
condition of exercise that the participant exercising the option agree (i) to
inform the Company promptly of any disposition (within the meaning of section
424(c) of the Code and the regulations thereunder) of Stock received upon
exercise, and (ii) to give such security as the Board deems adequate to meet the
potential liability of the Company for the withholding of tax, and to augment
such security from time to time in any amount reasonably deemed necessary by the
Board to preserve the adequacy of such security.
(4)If an option is exercised by the executor or administrator of a deceased
participant, or by the person or persons
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to whom the option has been transferred by the participant's will or the
applicable laws of descent and distribution, the Company shall be under no
obligation to deliver Stock pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons exercising the option.
(d)PAYMENT FOR STOCK. Stock purchased upon exercise of an option under the
Plan shall be paid for as follows: (i) in cash or by personal check, certified
check, bank draft or money order payable to the order of the Company or (ii) if
so permitted by the Board (which, in the case of an incentive option, shall
specify such method of payment at the time of grant), (A) through the delivery
of shares of Stock (which, in the case of Stock acquired from the Company, shall
have been held for at least six months) having a fair market value on the last
business day preceding the date of exercise equal to the purchase price or (B)
by delivery of a promissory note of the participant to the Company, such note to
be payable on such terms as are specified by the Board or (C) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (D) by having the Company
hold back from the shares transferred upon exercise Stock having a fair market
value on the last business day preceding the date of the exercise equal to the
purchase price or (E) by any combination of the permissible forms of payment;
PROVIDED, that if the Stock delivered upon exercise of the option is an original
issue of authorized Stock, at least so much of the exercise price as represents
the par value of such Stock shall be paid other than with a personal check or
promissory note of the person exercising the option.
(e)STOCK APPRECIATION RIGHTS. The Board in its discretion may grant SARs
either in tandem with or independent of options awarded under the Plan. Except
as hereinafter provided, each SAR will entitle the participant to receive upon
exercise, with respect to each share of Stock to which the SAR relates, the
excess of (i) the share's value on the date of exercise, over (ii) the share's
fair market value on the date it was granted. For purposes of clause (i),
"value" shall mean fair market value; PROVIDED, that the Board may adjust such
value to take into account dividends on the Stock and may also grant SARs that
provide, in such limited circumstances following a change in control of the
Company (as determined by the Board) as the Board may specify, that "value" for
purposes of clause (i) is to be determined by reference to an average value for
the Stock during a period immediately preceding the change in control, all as
determined by the Board. The amount payable to a participant upon exercise of an
SAR shall be paid either in cash or in shares of Stock, as the Board determines.
Each SAR shall be exercisable during such period or periods and on such terms as
the Board may specify. No SAR shall be exercisable after the date which is ten
years from the date of grant.
(f)DELIVERY OF STOCK. A participant shall not have the rights of a
shareholder with regard to awards under the Plan except as to Stock actually
received by him under the Plan.
The Company shall not be obligated to deliver any shares of Stock (i)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (ii) if the outstanding Stock
is at the time listed on any stock exchange, until the shares to be delivered
have been listed or authorized to be listed on such exchange upon official
notice of issuance, and (iii) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
award, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
(g)NONTRANSFERABILITY OF AWARDS. No award may be transferred other than by
will or by the laws of descent and distribution, and during a participant's
lifetime an award may be exercised only by him.
(h)DEATH. If a participant dies, each award held by the participant
immediately prior to death may be exercised, to the extent it was exercisable
immediately prior to death, by his executor or administrator, or by the person
or persons to whom the award is transferred by will or the applicable laws of
descent and distribution, at any time
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within the period ending with the third anniversary of the participant's death
but in no event beyond the Final Exercise Date. All awards held by a participant
immediately prior to death that are not then exercisable shall terminate on the
date of death.
(i)OTHER TERMINATION OF SERVICE. If an employee's employment with the
Company and its subsidiaries terminates for any reason, other than death, all
awards held by the employee that are not then exercisable shall terminate.
Awards that are exercisable on the date employment terminates shall continue to
be exercisable for a period of three months (or such longer period as the Board
may determine, but in no event beyond the Final Exercise Date) unless the
employee was discharged for cause which in the opinion of the Board casts such
discredit on him as to justify termination of his awards. After completion of
that three-month period such awards shall terminate to the extent not previously
exercised, expired or terminated. For purposes of this Section 6(i), employment
shall not be considered terminated (i) in the case of sick leave or other bona
fide leave of absence approved for purposes of the Plan by the Board, so long as
the employee's right to reemployment is guaranteed either by statute or by
contract, or (ii) in the case of a transfer of employment between the Company
and a subsidiary or between subsidiaries, or to the employment of a corporation
(or a parent or subsidiary corporation of such corporation) issuing or assuming
an award in a transaction to which section 424(a) of the Code applies.
In the case of a participant who is not an employee, provisions relating to
the exercisability of awards following termination of service shall be specified
in the award. If not so specified, all awards held by such participant that are
not then exercisable shall terminate upon termination of service. Awards that
are exercisable on the date the participant's service as a consultant terminates
shall continue to be exercisable for a period of three months (or such longer
period as the Board may determine, but in no event beyond the Final Exercise
Date) unless the participant was terminated for cause which in the opinion of
the Board casts such discredit on him as to justify termination of his awards.
After completion of that three-month period such awards shall terminate to the
extent not previously exercised, expired or terminated.
(j)MERGERS, ETC. In the event of a consolidation or merger in which the
Company is not the surviving corporation or which results in the acquisition of
substantially all the Company's outstanding Stock by a single person or entity
or by a group of persons and/or entities acting in concert, or in the event of
the sale or transfer of substantially all the Company's assets, all outstanding
awards shall thereupon terminate, provided that at least 20 days prior to the
effective date of any such merger, consolidation or sale of assets, the Board
shall either (i) make all outstanding awards exercisable immediately prior to
consummation of such merger, consolidation or sale of assets or (ii) if there is
a surviving or acquiring corporation, arrange, subject to consummation of the
merger, consolidation or sale of assets, to have that corporation or an
affiliate of that corporation grant to participants replacement awards which in
the case of incentive awards satisfy, in the determination of the Board, the
requirements of section 424(a) of the Code.
The Board may grant awards under the Plan in substitution for awards held
by employees, consultants or advisers of another corporation who concurrently
become employees, consultants or advisers of the Company or a subsidiary of the
Company as the result of a merger or consolidation of that corporation with the
Company or a subsidiary of the Company, or as the result of the acquisition by
the Company or a subsidiary of the Company of property or stock of that
corporation. The Company may direct that substitute awards be granted on such
terms and conditions as the Board considers appropriate in the circumstances.
7.EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of awards shall confer upon
any participant any right to continue as an employee of, or consultant or
adviser to, the Company or any parent or subsidiary or affect in any way the
right of the Company or parent or subsidiary to terminate them at any time.
Except as specifically provided by the Board in any particular case, the loss of
existing or potential profit in awards granted under this Plan shall not
constitute an element of damages in the event of termination of the relationship
of a participant even if the
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termination is in violation of an obligation of the Company to the participant
by contract or otherwise.
8.EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of awards to a participant shall
affect the Company's right to make awards to such participant that are not
subject to the Plan, to issue to such participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued.
The Board may at any time discontinue granting awards under the Plan. With
the consent of the participant, the Board may at any time cancel an existing
award in whole or in part and grant another award for such number of shares as
the Board specifies. The Board may at any time or times amend the Plan or any
outstanding award for the purpose of satisfying the requirements of section 422
of the Code or of any changes in applicable laws or regulations or for any other
purpose that may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of awards, no such amendment shall adversely
affect the rights of any participant (without his consent) under any award
previously granted.
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