<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Applied Extrusion Technologies, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
Applied Extrusion Technologies, Inc.
3 Centennial Drive
Peabody, Massachusetts 01960
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 31, 2001
------------------------
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Applied Extrusion Technologies, Inc. will be held at the 36th
Floor Conference Center, Ropes & Gray, One International Place, Boston,
Massachusetts at 10:30 a.m. on Wednesday, January 31, 2001 for the following
purposes:
1. To elect two Class III directors.
2. To approve the Corporation's 2001 Stock Option Plan for Directors.
3. To transact any other business that may properly come before the Meeting
or any adjournment thereof.
Stockholders of record at the close of business on December 7, 2000 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,
[LOGO]
Anthony J. Allott
ASSISTANT SECRETARY
December 15, 2000
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 31, 2001
------------------------
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
at 10:30 a.m. on Wednesday, January 31, 2001 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 Assistant 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 $3,000 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 December 7, 2000 are entitled to receive notice of
and to vote at the Meeting. As of that date, the Company had issued and
outstanding 11,836,036 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 majority of votes
properly cast shall determine all matters other than elections to office, and
the two nominees for election as directors at the Meeting who receive the
greatest number of votes properly cast for the election of directors shall be
elected directors. The election inspectors will count shares represented by
proxies that withhold authority to vote for a nominee for election as a
director, or that reflect abstentions or "broker non-votes" (i.e., shares
represented at the Meeting held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have or does not
exercise 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 any matter.
The Annual Report to Stockholders for AET's fiscal year ended September 30,
2000 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 two nominees named below, both 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 two directors standing for
reelection and designated as Class III Directors, whose terms expire at the 2001
Annual Meeting. The enclosed proxy cannot be voted for a greater number of
persons than two.
If Item No. I is approved, Richard G.Hamermesh and Joseph J. O'Donnell will
be elected as Class III Directors for a term of three years expiring at the 2004
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 DECEMBER 1, 2000), DIRECTOR TERM
BUSINESS AND CURRENT DIRECTORSHIPS SINCE EXPIRES
----------------------------------- -------- --------
<S> <C> <C>
RICHARD G. HAMERMESH, 52--Director of the Company; since 1986 2001
June 1998, a director of Vialog Corporation, a provider of
audio, video, and internet conferencing services; since
August 1987, Managing Partner, Center for Executive
Development, an independent executive education and
training firm; Director of BE Aerospace, Inc., a
manufacturer of cabin interior products for commercial
aircraft.
JOSEPH J. O'DONNELL, 56--Director of the Company; since 1986 2001
1978, Chairman of the Board and Chief Executive Officer of
Boston Concessions Group, Inc., a company that manages
food service operations in approximately 40 states in the
leisure and recreation markets.
</TABLE>
2
<PAGE>
CURRENT DIRECTORS
<TABLE>
<CAPTION>
NAME, AGE (AS OF DECEMBER 1, 2000), DIRECTOR TERM
BUSINESS AND CURRENT DIRECTORSHIPS SINCE EXPIRES
----------------------------------- -------- --------
<S> <C> <C>
AMIN J. KHOURY, 61--Founder and Chairman of the Board of 1986 2002
Directors of the Company since October 1986; from October
1986 to August 1993, Chief Executive Officer of the
Company; President of the Company from August 1988 through
November 1992; Founder and Chairman of the Board of
Directors of BE Aerospace, Inc., a manufacturer of cabin
interior products for commercial and general aircraft;
Member of the Board of Directors of Brooks Automation,
Inc., a leader in semiconductor tool and factory
automation solutions for the global semiconductor
industry, and a member of the Board of Directors of
Synthes-Stratec, the world's leading orthopedic trauma
company.
THOMAS E. WILLIAMS, 54--Director, President and Chief 1992 2002
Operating Officer of the Company since December 1992;
Chief Executive Officer of the Company since August 1993;
from 1988 until 1992, President and Chief Executive
Officer of Home Innovations, Inc., a home furnishings
company; from 1980 until 1988, held a number of executive
positions with PepsiCo, Inc.
MARK M. HARMELING, 47--Director of the Company; since 1991, 1986 2002
President of Bay State Realty Advisors, a real estate
consulting firm; from 1997 to 1999, an executive of the
A.G. Spanos Corporation, a leading developer of
multi-family residential complexes; 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.
NADER A. GOLESTANEH, 40--Director of the Company; since 1986 2003
1990, President of Centremark Properties, Inc., a real
estate management and development company; since 1986,
attorney in private practice in Boston, Massachusetts.
PAUL W. MARSHALL, 58--Director of the Company; since 1996, 1986 2003
Professor of Management, Harvard 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.
</TABLE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held four meetings during the fiscal year ended
September 30, 2000. 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.
3
<PAGE>
The Audit Committee, which for the fiscal year ended September 30, 2000 was
composed of Richard G. Hamermesh and Joseph J. O'Donnell, held three meetings
during such fiscal year. 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 2000 was composed of Nader A.
Golestaneh and Mark M. Harmeling, held one meeting and acted pursuant to written
consent on eleven occasions during the fiscal year ended September 30, 2000. 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.
4
<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
December 1, 2000 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 2000
(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
-----------------------
PERCENT OF
NUMBER OF OUTSTANDING
NAMES SHARES SHARES(1)
----- --------- -----------
<S> <C> <C>
Dimensional Fund Advisors Inc .............................. 872,200 7.37%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Goldsmith & Harris, Inc. ................................... 840,950 7.10%
80 Pine Street
New York, NY 10005
J. & W. Seligman & Co. Incorporated ........................ 766,000 6.47%
100 Park Avenue--8th Floor
New York, NY 10006
T. Rowe Price Associates, Inc. ............................. 750,000(2) 6.34%
100 E. Pratt Street
Baltimore, MD 21202
TCW Group, Inc. ............................................ 593,700 5.02%
865 South Figueroa Street
Los Angeles, CA 90017
Thomas E. Williams(*+)...................................... 522,811(3) 4.42%
Amin J. Khoury(*+).......................................... 475,250(4) 4.02%
David N. Terhune(*)......................................... 308,913(5) 2.61%
Anthony J. Allott(*)........................................ 89,023(6) **
Paul W. Marshall(+)......................................... 79,382(7) **
Mark S. Abrahams(*)......................................... 77,339(8) **
Joseph J. O'Donnell(+)...................................... 57,500(9) **
Mark M. Harmeling(+)........................................ 57,500(10) **
Richard G. Hamermesh(+)..................................... 53,375(11) **
Nader A. Golestaneh(+)...................................... 35,000(12) **
All directors and executive officers as a group (10 1,756,093(13) 14.86%
persons)..................................................
</TABLE>
------------------------
* Named Executive Officer
+ Director of the Company
** Less than 1 percent
5
<PAGE>
(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 exercised such options for
Common Stock. As of December 1, 2000, there were 11,836,036 shares of
Common Stock issued and outstanding.
(2) Includes holdings attributable to T. Rowe Price Small Cap Value Fund, Inc.
(3) Includes (i) 443,750 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) 13,508 shares held by the 1996 AET Employee Stock Purchase
Plan, and (iv) 4,253 shares held by the AET Savings and Profit Sharing
Plan, in each case for the benefit of Mr. Williams.
(4) Includes 368,750 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(5) Includes (i) 262,500 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days,
(ii) 8,298 shares held by the AET Executive Deferred Compensation Plan
Trust, (iii) 7,089 shares held by the 1996 AET Employee Stock Purchase
Plan, and (iv) 4,026 shares held by the AET Savings and Profit Sharing
Plan, in each case for the benefit of Mr. Terhune.
(6) Includes (i) 68,750 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) 10,341 shares held by the 1996 AET Employee Stock Purchase Plan, and
(iv) 4,332 shares held by the AET Savings and Profit Sharing Plan, in each
case for the benefit of Mr. Allott.
(7) Includes (i) 10,000 shares held by Mr. Marshall as trustee of the Paul
Marshall Self Employed Retirement Plan and (ii) 57,500 shares of Common
Stock issuable in connection with outstanding stock options exercisable
within the next sixty days.
(8) Includes (i) 65,625 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) 4,033 shares held in the AET Savings and Profit Sharing
Plan, in each case for the benefit of Mr. Abrahams.
(9) Includes 57,500 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(10) Includes 57,500 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.
(11) Includes 31,250 shares of Common Stock issuable in connection with
outstanding stock options exercisable within the next sixty days.
(12) Includes 35,000 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).
6
<PAGE>
AUDIT COMMITTEE
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee is composed of Messrs. Hamermesh and O'Donnell. Each of
the members of the Audit Committee is independent (as defined in NASD's listing
standards).
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing financial
reports and other financial information provided by the Company to governmental
bodies or the public, the Company's systems of internal controls regarding
finance, accounting, legal compliance and ethics that management and the Board
have established, and the Company's auditing, accounting and financial processes
generally. The Audit Committee annually recommends to the Board of Directors the
appointment of a firm of independent auditors to audit the financial statements
of the Company and meets with such independent auditors, the CEO and the
principal financial, accounting and legal personnel of the Company to review the
scope and the results of the annual audit, the amount of audit fees, the
Company's internal accounting controls, the Company's financial statements
contained in the Company's Annual Report to Stockholders and other related
matters. A more detailed description of the functions of the Audit Committee can
be found in the Company's Audit Committee Charter, attached to this proxy
statement as Appendix A.
The Audit Committee has reviewed and discussed with management the financial
statements for fiscal year 2000 audited by Deloitte & Touche LLP, the Company's
independent auditors. The Audit Committee has discussed with Deloitte & Touche
LLP various maters related to the financial statements, including those matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU 380). The Audit Committee has also received the written
disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), and has discussed with
Deloitte & Touche LLP its independence. Based upon such review and discussions
the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ending September 30, 2000 for filing with the Securities and
Exchange Commission.
With respect to the above matters, the Audit Committee submits this report.
AUDIT COMMITTEE
Richard G. Hamermesh
Joseph J. O'Donnell
7
<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 2000.
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 primarily on four compensation components to motivate
executive performance: annual salary, incentive cash bonuses, retirement
benefits, and stock-based incentive compensation. Each of the Executive Officers
of the Company has an employment agreement which establishes an annual base
salary at a level the Company believes is at least comparable to companies in
its industry and consistent with the range for comparable companies. To
determine salary ranges for its executives, each year the Company utilizes a
variety of compensation surveys generated by one or more 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 that is within the range of prevailing market compensation levels,
with a significant portion of the executive's total cash compensation tied to
whether corporate and/or unit performance for the year in question was above,
below, or consistent with the Committee's expectations.
In addition to base salary, each 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 for the purpose of determining executive compensation. Individual
performance is measured by the strategic and financial performance of the
particular officer's operational responsibility in comparison to targeted
performance criteria.
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
8
<PAGE>
objectives. Stock option grants are also made by reference to the number of
stock options an employee already holds.
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 2000 was increased to $515,000, as a result of comparative
salary surveys and the Company having achieved certain strategic objectives in
fiscal 1999 and 2000. Mr. Williams received no bonus compensation for fiscal
2000. Mr. Williams was granted options to purchase 50,000 shares of Common Stock
of the Company, in view of the successful achievement of the above-mentioned
strategic objectives, and to provide additional incentives designed to retain
and motivate Mr. Williams. The new options vest in four equal annual
installments commencing on the first anniversary of the grant date.
With respect to the above matters, the Compensation Committee submits this
report.
STOCK OPTION AND COMPENSATION COMMITTEE
Mark M. Harmeling
Nader A. Golestaneh
9
<PAGE>
The following tables set forth information with respect to the compensation
of the Named Executive Officers earned during fiscal 2000, 1999 and 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
-------------------------------------------- ------------
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)
--------------------------- -------- ------------ ----------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Williams.............. 2000 465,000 -- -- 50,000 41,226(2)
President and 1999 415,000 -- -- 75,000 40,332(2)
Chief Executive Officer 1998 415,000 -- -- 50,000 36,828(2)
Amin J. Khoury.................. 2000 465,000 -- -- 50,000 23,229(3)
Chairman of the Board 1999 415,000 -- -- 75,000 --
1998 415,000 -- -- 50,000 --
David N. Terhune................ 2000 350,625 -- -- 50,000 26,822(4)
Executive Vice President 1999 315,000 -- -- 50,000 26,735(4)
and Chief Operating Officer 1998 315,000 -- -- 50,000 33,100(4)
Anthony J. Allott............... 2000 230,417 -- -- 10,000 32,262(5)
Senior Vice President, 1999 208,333 110,000 -- 37,500 7,200(5)
Chief Financial Officer and 1998 178,750 50,000 -- 12,500 5,600(5)
Treasurer
Mark S. Abrahams................ 2000 202,794 -- -- 10,000 22,450(5)
Vice President and General 1999 208,000 -- -- 25,000 7,200(5)
Manager, Specialty Nets & 1998 193,333 138,000 -- 12,500 5,600(5)
Nonwovens Division
</TABLE>
------------------------
(1) Includes amounts earned but deferred by the executive officer at the
election of those officers pursuant to the Company's 401(k) Savings and
Profit Sharing Plan or Executive Deferred Compensation Plan.
(2) 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.
(3) Includes life and disability insurance premiums.
(4) 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. Terhune; for 1998 includes moving and relocation expenses
paid to Mr. Terhune.
(5) Includes employer contributions under the Company's 401(k) Savings and
Profit Sharing Plan and Executive Deferred Compensation Plan.
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM($)(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR(1) PRICE($/SH) DATE 5% 10%
---- ---------- -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Williams................ 50,000 7.12% $8.00 03/01/10 $251,558 $637,497
Amin J. Khoury.................... 50,000 7.12% $8.00 03/01/10 $251,558 $637,497
David N. Terhune.................. 50,000 7.12% $8.00 03/01/10 $251,558 $637,497
Mark S. Abrahams.................. 10,000 1.42% $8.00 03/01/10 $ 50,312 $127,499
Anthony J. Allott................. 10,000 1.42% $8.00 03/01/10 $ 50,312 $127,499
</TABLE>
------------------------
(1) Options were granted to over 130 employees through the course of fiscal
2000.
(2) These potential realizable values are based on assumed rates of appreciation
required by applicable regulations of the U.S. Securities and Exchange
Commission. The potential realizable values stated are not discounted to
their net present value.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED OPTIONS
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY-END(#) AT FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- ----------- ------------------- -------------------
<S> <C> <C> <C> <C>
Thomas E. Williams................ -- -- 443,750/131,250 $0/$0
Amin J. Khoury.................... -- -- 368,750/131,250 $0/$0
David N. Terhune.................. -- -- 262,500/112,500 $0/$0
Mark S. Abrahams.................. -- -- 62,500/35,000 $0/$0
Anthony J. Allott................. -- -- 60,625/49,375 $0/$0
</TABLE>
------------------------
(1) The closing price for the Company's Common Stock on the Nasdaq National
Market System on September 30, 2000, the last trading day of the fiscal
year, was $3.188 per share.
COMPENSATION OF DIRECTORS
Directors of the Company who are not officers of the Company (the "Eligible
Directors") receive compensation of $2,500 per quarter, and Eligible Directors
who are also committee members receive an additional $1,250 per quarter for each
committee on which they serve. Eligible Directors also receive a $1,000
attendance fee for each meeting that they attend. In addition, Eligible
Directors are entitled to participate in the Company's 1991 Stock Option Plan
for Directors (the "1991 Directors' Plan"). Under the 1991 Directors' Plan, each
Eligible Director is awarded an option covering 5,000 shares of Common Stock on
June 30 of each year the plan is in effect, provided he or she is an Eligible
Director on that date. In addition, each Eligible Director, excluding those
individuals who are
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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 1991 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, 2000, each Eligible Director was awarded an
option to purchase 5,000 shares of Common Stock at a price of $5.25 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 1, 1999 and extends through March 31, 2003, subject to automatic renewals
for consecutive one-year periods until either party gives the other 90 days'
written notice of its intent not to renew. Under the agreement, Mr. Williams
currently receives an annual base salary of $515,000, and any annual incentive
bonus payable to Mr. Williams is based on criteria established annually by the
Company, with the maximum not to exceed 100% of his then current salary. 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 average bonus (as defined in the agreement), and
provide certain other benefits until the longer of two years or the remaining
term of the agreement. In the event of incapacity or death, Mr. Williams will be
deemed to have been employed through the expiration date of the agreement for
purposes of benefit vesting. Upon a change of control (as defined in the
agreement) of the Company, the employment agreement will automatically extend
for a period of four years from the date of such change of control, all
outstanding and unvested options held by Mr. Williams will immediately vest, and
the ability of the Company to relocate Mr. Williams or terminate him for cause
is limited. Mr. Williams is prohibited for a period of two years following the
termination of his employment with the Company from engaging in any activity
which is competitive with the Company without the Company's written consent.
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 1, 1999 and
extends through March 31, 2003, subject to automatic renewals for consecutive
one-year periods until either party gives the other 90 days' written notice of
its intent not to renew. Under the agreement, Mr. Khoury currently receives an
annual base salary of $515,000, and any annual incentive bonus payable to
Mr. Khoury is based on criteria established annually by the Company, with the
maximum not to exceed 100% of his then current salary. If the Company terminates
Mr. Khoury's employment other than for death, disability or cause (as defined in
the agreement), or if Mr. Khoury terminates his employment for good reason (as
defined in the agreement), the Company will continue to pay his salary and
average bonus (as defined in the agreement), and provide certain other benefits
until the longer of two years or the remaining term of the agreement. In the
event of incapacity or death, Mr. Khoury will be deemed to have been employed
through the expiration date of the agreement for purposes of benefit vesting.
Upon a change of control (as defined in the agreement) of the Company, the
employment agreement will automatically extend for a period of four years from
the date of such change of control, all outstanding and unvested
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options held by Mr. Khoury will immediately vest, and the ability of the Company
to relocate Mr. Khoury or terminate him for cause is limited. Mr. Khoury is
prohibited for a period of two years following the termination of his employment
with the Company from engaging in any activity which is competitive with the
Company without the Company's written consent.
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 April 1, 1999 and extends through March 31, 2003, subject to
automatic renewals for consecutive one-year periods until either party gives the
other 90 days' written notice of its intent not to renew. Under the agreement,
Mr. Terhune currently receives an annual base salary of $386,250, and any annual
incentive bonus payable to Mr. Terhune is based on criteria established annually
by the Company, with the maximum not to exceed 100% of his then current salary.
If the Company terminates Mr. Terhune's employment other than for death,
disability or cause (as defined in the agreement), or if Mr. Terhune terminates
his employment for good reason (as defined in the agreement), the Company will
continue to pay his salary and average bonus (as defined in the agreement), and
provide certain other benefits until the longer of two years or the remaining
term of the agreement. In the event of incapacity or death, Mr. Terhune will be
deemed to have been employed through the expiration date of the agreement for
purposes of benefit vesting. Upon a change of control (as defined in the
agreement) of the Company, the employment agreement will automatically extend
for a period of four years from the date of such change of control, all
outstanding and unvested options held by Mr. Terhune will immediately vest, and
the ability of the Company to relocate Mr. Terhune or terminate him for cause is
limited. Mr. Terhune is prohibited for a period of two years following the
termination of his employment with the Company from engaging in any activity
which is competitive with the Company without the Company's written consent.
In addition to the foregoing, the employment agreements between the Company
and each of Messrs. Williams, Khoury, and Terhune entitle these executives to
benefits provided pursuant to the Company's 1999 Supplemental Executive
Retirement Plan, a nonqualified deferred compensation plan adopted by the
Company's Board of Directors in 1999. A participant qualifies for benefits under
this plan after having been employed by the Company for at least ten years, not
less than four of which must occur after adoption of the plan, or upon
termination of employment as a result of death or incapacity. Benefit payments
begin upon the later of the participant's sixtieth birthday or the last date of
employment by the Company.
Participants receive a monthly benefit under the plan, which is paid for ten
years. The aggregate amount of these payments is based on a percentage of the
greater of the participant's base salary at the time of termination or average
compensation over a specified time period (as defined by the Plan), and is
reduced by any amounts received under disability insurance policies paid or
reimbursed by the Company. This percentage is presently equal to 50%. At the
present benefit level, the plan would pay monthly benefits of $28,099, $26,980,
and $15,179 to Messrs. Williams, Khoury, and Terhune, respectively, upon
retirement. Following a participant's death, the participant's designee will
receive the present value of benefits otherwise remaining to be paid in a
discounted lump sum payment. Upon a change of control of the Company, a vested
participant may elect to receive a discounted lump sum payment, and if the
Company fails to meet certain minimum financial criteria, a participant will
receive the aggregate of all benefits payable to him under the plan without
discount.
The Company must make payments into a trust sufficient to fund accrued and
vested benefits under the plan and, upon a change in control, must contribute an
amount equal to all benefits payable
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under this plan, whether vested or not. The trust's assets may be used only to
pay benefits under the plan or, if the Company is insolvent, to make payments to
the Company's creditors.
ANTHONY J. ALLOTT. Mr. Allott and the Company have entered into an
employment agreement pursuant to which he currently serves as Senior Vice
President and Chief Financial Officer of the Company. This Agreement became
effective as of April 1, 1999 and extends through March 31, 2002, subject to
automatic renewals for consecutive one-year periods until either party gives the
other 90 days' written notice of its intent not to renew. Under the agreement,
Mr. Allott currently receives an annual base salary of $275,000, and any annual
incentive bonus payable to Mr. Allott is based on criteria established annually
by the Company, with the maximum not to exceed 100% of his then current salary.
If the Company terminates Mr. Allott's employment for any reason other than
death, incapacity or cause (as defined in the agreement), or if Mr. Allott
terminates his employment for good reason (as defined in the Agreement), the
Company will continue to pay his base salary and average bonus (as defined in
the agreement), and provide certain other benefits for the longer of eighteen
months or the remaining term of the agreement. In the event of incapacity or
death, Mr. Allott will be deemed to have been employed through the expiration
date of the agreement for purposes of benefit vesting. Upon a change of control
(as defined in the agreement) of the Company, the agreement will automatically
extend for a period of three years from the date of such change of control, all
outstanding and unvested options held by Mr. Allott will immediately vest, and
the ability of the Company to relocate Mr. Allott or terminate him for cause
becomes more limited. Mr. Allott is prohibited for a period of two years
following the termination of his employment with the Company from engaging in
any activity which is competitive with the Company without the Company's written
consent.
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 became
effective on April 1, 1999 and extends through March 31, 2002, subject to
automatic renewals for consecutive one-year periods until either party gives the
other 90 days' written notice of its intent not to renew. Under the agreement,
Mr. Abrahams currently receives an annual base salary of $208,000, and any
incentive bonus payable to Mr. Abrahams is based on criteria established
annually by the Company. If the Company terminates Mr. Abrahams' employment for
any reason other than death, incapacity or cause (as defined in the agreement),
or if Mr. Abrahams terminates his employment for good reason (as defined in the
Agreement), the Company will continue to pay his base salary and provide certain
other benefits for the longer of one year or the remaining term of the
agreement. In the event of incapacity or death, Mr. Abrahams will be deemed to
have been employed through the expiration date of the agreement for purposes of
benefit vesting. Upon a change of control (as defined in the agreement) of the
Company, all outstanding and unvested options held by Mr. Abrahams will
immediately vest, and the ability of the Company to relocate Mr. Abrahams or
terminate him for cause becomes more limited. Mr. Abrahams is prohibited for a
period of two years following the termination of his employment with the Company
from engaging in any activity which is competitive with the Company without the
Company's written consent.
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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 (U.S.) Index, the Dow Jones
Containers & Packaging Index, US Index, the Dow Jones Advanced Industrial
Technology Index and the Standard & Poors Manufacturing (Diversified Industry)
Index from September 30, 1995 through September 30, 2000, the last trading day
of fiscal 2000. 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, 1995 (including reinvestment of dividends).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
APPLIED EXTRUSION TECHNOLOGIES
Cumulative Total Return
Sep-95Sep-96Sep-97Sep-98Sep-99Sep-00
APPLIED EXTRUSION TECHNOLOGIES10049.6646.9452.0440.1417.35
NASDAQ STOCK MARKET (U.S.)100118.68162.92165.5270.38358.96
DOW JONES ADVANCED INDUSTRIAL EQUIPMENT100124.16164.81117.74177.63315.24
S & P MANUFACTURING (DIVERSIFIED)100128.82179.33161.69253.42250.53
DOW JONES CONTAINERS & PACKAGING100108.56140.399.47116.5576.79
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This year's Performance Graph includes the Dow Jones Containers & Packaging
Index (the "Packaging Index"), for the first time. The Packaging Index will
replace the Dow Jones Advanced Industrial Technology Index in the Company's
future proxy statements. The Company believes the Packaging Index includes
stocks of companies in lines-of-business that are more similar to the Company's
business than those companies that are included within the Dow Jones Advanced
Industrial Technology Index and thus provides a better comparison for
measurement of performance of the Company's Common Stock.
The stock prices on the Performance Graph are not necessarily indicative of
future stock price performance. Each of the Reports of the Compensation
Committee and the Audit 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, 2000, all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with by those parties.
ITEM NO. 2
ADOPTION OF 2001 STOCK OPTION PLAN FOR DIRECTORS
GENERAL
Subject to the approval of the stockholders, the Board of Directors has
unanimously approved the 2001 Stock Option Plan for Directors (the "Directors'
Plan"). The purpose of the Directors' Plan is to enhance the ability of the
Company to attract and retain highly qualified non-employee directors who are in
a position to make significant contributions to the success of the Company and
to reward directors for such contributions. The Directors' Plan is administered
by a committee of the Board of Directors (the "Committee") and provides for the
grant of non-qualified stock options to directors who are not employees of the
Company ("Eligible Directors"). Directors who are employees of the Company are
not eligible to participate in the Directors' Plan. As of December 15, 2000,
there were five Directors eligible to participate in the Directors' Plan.
Currently, non-employee directors receive options to purchase shares of
Common Stock pursuant to the 1991 Stock Option Plan for Directors (the "1991
Directors' Plan"). The 1991 Directors' Plan specifies that no option shall be
granted under that plan after ten years from the date on which the plan was
adopted by the Board of Directors. The pending expiration of the authority to
grant options
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under the 1991 Directors' Plan has made it necessary to adopt the new Directors'
Plan. The shares reserved for issuance, but not subject to outstanding options
under the 1991 Directors' Plan, will be de-registered.
DESCRIPTION OF DIRECTORS' PLAN
A total of 500,000 shares of Common Stock have been reserved for issuance
under the Directors' Plan. Each Eligible Director who has served as a Director
for not less than ten years shall be awarded a service award option covering
25,000 shares of Common Stock (a "Service Award") on June 30, 2001. A person who
becomes an Eligible Director after the date of adoption of the Directors' Plan
shall be awarded an initial grant covering 25,000 shares of Common Stock (an
"Initial Grant") on the date of his or her first election. In addition, each
Eligible Director shall receive an option covering 10,000 shares of Common Stock
on each June 30, commencing June 30, 2001 (the "Annual Grant Date"), provided
such individual is then an Eligible Director and further provided that such
Eligible Director has not received an Initial Grant in the twelve months
preceding such Annual Grant Date. For fiscal year 2001, it is expected that
Messrs. Hamermesh and O'Donnell, along with the three other Eligible Directors,
will each receive service award options covering 25,000 shares of Common Stock
and annual award grants of 10,000 shares of Common Stock, and that the
non-executive directors as a group, including Messrs. Hamermesh and O'Donnell,
will receive options covering 175,000 shares of Common Stock under the
Directors' Plan. The Company believes such grants to the Eligible Directors
promote ownership by each Eligible Director of a greater proprietary interest in
the Company, thereby aligning such Director's interests more closely with the
interests of the Stockholders of the Company.
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
grant. As of December 7, 2000, the market price of the Common Stock was $2.4063
per share. Eligible Directors may pay for the Common Stock purchased under the
Directors' Plan in cash or by check, with shares of Common Stock, by delivery of
a promissory note or by delivery of an unconditional and irrevocable undertaking
by a broker to pay the exercise price. Options expire 10 years after the date of
grant and become exercisable as to 25% of the shares covered by such option on
each of the first, second, third and fourth anniversaries of the date of the
grant. Unvested options expire upon termination of status as a director or
death. Generally, vested options expire three months after the termination of
status as a director, but in the case of death, such vested options remain
exercisable by the director's heirs or representatives for a period of six
months. The Committee may amend the Directors' Plan or any outstanding award at
any time, provided that no such amendment will, without the approval of the
shareholders of the Company, effectuate a change for which shareholder approval
is required by law.
Upon a merger, consolidation or sale of substantially all of the assets or
stock of the Company or a dissolution or liquidation of the Company (a
"Transaction"), all options which are not exercisable at that time will become
exercisable 20 days prior to the effective date of such Transaction and will
terminate upon consummation of the Transaction, provided however, that the
Company may instead arrange for the granting of replacement options if the
transaction does not constitute a change of control of the Company, as defined
in the Directors' Plan. Upon any change of control of the Company, as defined in
the Directors' Plan, each option held by an Eligible Director will immediately
become fully exercisable.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain federal income tax consequences
associated with participation in the Directors' Plan is based on the law
currently in effect. It does not purport to cover federal employment tax or
other federal tax consequences that may be associated with the Directors' Plan
nor does it cover state, local or non-United States taxes.
The options granted pursuant to the Directors' Plan are non-statutory
options and no income is realized by the Eligible Director at the time the
option is granted. Generally, at exercise, an Eligible Director realizes
ordinary income, which is not subject to withholding, in an amount equal to the
difference between the option price and the fair market value of the shares on
the date of exercise, and a corresponding deduction will be available to the
Company. Any gain or loss recognized upon a later sale is treated as capital
gain or loss, either short-term or long-term depending on the applicable holding
period for the sale.
RECOMMENDATION
The Board of Directors recommends voting to approve the Directors' Plan
because the Directors' Plan enhances the ability of the Company to attract and
retain non-employee directors who can make significant contributions to the
success of the Company and allows the Company to reward these directors for
their contributions.
An affirmative vote of a majority of the shares present, in person or by
proxy, and entitled to vote at the Annual Meeting is required to approve the
2001 Stock Option Plan for Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
ITEM 2.
--------------
AUDIT MATTERS
Deloitte & Touche has been selected to audit the financial statements of the
Company for the fiscal year ending September 30, 2001, 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 2002 Annual
Meeting of Stockholders must be received by the Company no later than
October 2, 2001 in order to be included in the Company's proxy statement for the
2002 Annual Meeting. In addition, if a stockholder wishes to present a proposal
at the Company's 2002 Annual Meeting that will not be included in the Company's
proxy statement and fails to notify the Company by no later than October 31,
2001, then the proxies solicited by the Board of Directors for the 2002 Annual
Meeting will include discretionary authority to vote on the stockholder's
proposal in the event that it is properly brought before the meeting.
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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: Anthony J. Allott, Assistant Secretary, 3 Centennial
Drive, Peabody, Massachusetts 01960.
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1065-PS-01
<PAGE>
APPENDIX A
APPLIED EXTRUSION TECHNOLOGIES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. ORGANIZATION
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall be comprised of directors who are
independent of the management of the corporation and free of any relationships,
which, in the opinion of the Board of Directors, would interfere with their
exercise of independent judgment as a committee member.
II. PURPOSE
The Audit Committee shall provide assistance to the directors of the
corporation in fulfilling their responsibility to shareholders, potential
shareholders, and the investment community relating to corporate accounting,
reporting practices of the corporation, and the quality and integrity of the
financial reports and financial controls of the corporation. The Audit
Committee's primary duties and responsibilities are:
(1) To review the procedures and results of the external audit and to act as
necessary on behalf of the Board of Directors between Board meetings with
respect to the Company's audited financial reports, accounting
procedures, financial controls and ethical practices.
(2) To provide a direct communications link to the Board of Directors from
the external auditors and the chief financial officer, and to help assure
the quality of the Company's financial reporting and control systems.
(3) To maintain free and open communication among the independent auditors,
financial and senior management of the Company, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
III. COMPOSITION
(1) The Audit Committee shall be comprised of two independent members of the
Board of Directors until not later than June 14, 2001, at which time the
committee membership will be increased to three independent members of
the Board of Directors or such greater number of independent members of
the Board of Directors (and/or one additional director who is not
independent as defined in Rule 4200 of the NASD's listing standards, and
is not a current employee or an immediate family member of such
employee, provided that the Board of Directors, under exceptional and
limited circumstances, determines that membership on the committee by
such individual is required by the best interests of the corporation and
its shareholders, and the Board discloses, in the next annual proxy
statement subsequent to such determination, the nature of the
relationship and the reasons for that determination) as the Board of
Directors shall from time to time so specify.
(2) Each Member of the Audit Committee shall be able, or shall become able
within a reasonable period of time after appointment to the Audit
Committee, to read and understand financial statements, including
balance sheets, income statements, and cash flow statements.
<PAGE>
(3) At least one member of the Audit Committee shall have past employment
experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
background which results in the individual's financial sophistication,
including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
(4) The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board. Unless a Chair is elected by
the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
IV. DUTIES AND RESPONSIBILITIES
The Audit Committee, acting, where applicable, by unanimous consent, shall
have the following duties and responsibilities:
(1) Review management's internal control procedures and practices for
safeguarding assets, authorizing and recording transactions and
complying with company policies and ethical practices and the comments
of the auditors' staffs with respect to such policies and practices.
(2) Approve any significant changes in the Company's accounting principles
or financial reporting practices.
(3) Review the Company's audited or unaudited financial statements,
including, but not limited to, those contained in its Annual Report on
Form 10-K before public distribution.
(4) Review the annual audit plan of the independent auditors. Ensure the
receipt from the outside auditors of a formal written statement
delineating all relationships between such auditors and the Company,
consistent with Independence Standards Board Standard 1; actively engage
in a dialogue with such auditors with respect to any disclosed
relationships or services that may impact the objectivity and
independence of such auditors; and take, or recommend that the full
Board take, appropriate action to ensure the independence of such
outside auditors.
(5) Meet with the independent auditors regarding matters involving judgments
about the clarity, consistency and completeness of financial statements
and related disclosures.
(6) Review the Company's organization to accomplish management's financial
reporting and control responsibilities.
(7) Review compliance with applicable regulatory and financial reporting
requirements.
(8) Conduct such other reviews as are necessary or advisable to discharge
the foregoing responsibilities.
(9) Review and reassess, on an annual basis, the adequacy of this Audit
Committee Charter.
(10) Recommend annually to the Board of Directors the firm of independent
auditors to examine the Company's financial statements.
(11) Meet semi-annually, or more frequently as needed, to carry out the
foregoing duties and responsibilities.
(12) Report to the Board of Directors at the next Board meeting after each
Audit Committee meeting.
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APPENDIX B
APPLIED EXTRUSION TECHNOLOGIES, INC
2001 STOCK OPTION PLAN FOR DIRECTORS
1. PURPOSE
The purpose of this 2001 Stock Option Plan for Directors (the "Plan") is to
advance the interest of Applied Extrusion Technologies, Inc. (the "Company") by
enhancing the ability of the Company to attract and retain non-employee
directors who are in a position to make significant contributions to the success
of the Company and to reward directors for such contributions through ownership
of shares of the Company's common stock (the "Stock").
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the Board
of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. The Committee shall have authority, not
inconsistent with the express provisions of the Plan, (a) to grant options in
accordance with the Plan to such directors as are eligible to receive options;
(b) to prescribe the form or forms of instruments evidencing options and any
other instruments required under the Plan and to change such forms from time to
time; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) 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 Committee shall be conclusive and
shall bind all parties. Subject to Section 8, the Committee shall also have the
authority, both generally and in particular instances, to waive compliance by a
director with any obligation to be performed by him or her under an option and
to waive any condition or provision of an option.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is approved by
the Board of Directors of the Company, but the Plan and any options granted
pursuant to the Plan shall be subject to the later approval thereof by the
shareholders of the Company. No option 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 options 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
options granted under the Plan shall be 500,000.
(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
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 options then outstanding or subsequently granted under the Plan, the
maximum number of shares or securities that may be delivered under the Plan, the
exercise price, and other relevant provisions shall be appropriately adjusted by
the Committee, whose determination shall be binding on all persons.
<PAGE>
5. ELIGIBILITY FOR OPTIONS.
Directors eligible to receive options under the Plan ("Eligible Directors")
shall be any director who is not an employee of the Company.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) NUMBER OF OPTIONS.
Each Eligible Director who has served as a Director of the Company for not
less than ten years (measured as of the date of the Board's adoption of the
Plan) shall be awarded an option covering 25,000 shares of Stock on June 30,
2001 (a "Service Grant"). In addition, each Eligible Director, excluding those
who are directors on the date of adoption of the Plan, shall be awarded an
initial grant governing 25,000 shares of Stock on the date of his or her first
election (an "Initial Grant"). Each Eligible Director that is a director of the
Company on each June 30 commencing June 30, 2001 shall be awarded on such
June 30 an option covering 10,000 shares of Stock (an "Annual Grant"); provided,
that if such Eligible Director has received an Initial Grant in the twelve
months preceeding such June 30, then such Eligible Director shall not be
entitled to the Annual Grant on such June 30.
(b) EXERCISE PRICE. The exercise price of each option shall be 100% of the
fair market value per share of the Stock at the time the option is granted, but
not less, in the case of an original issue of authorized stock, than par value
per share.
(c) DURATION OF OPTIONS. The latest date on which an option may be exercised
(the "Final Exercise Date") shall be the date which is ten years from the date
the option was granted.
(d) EXERCISE OF OPTIONS.
(1) The awards of options granted under this Plan shall become exercisable
in the following manner: Each Service Grant, Annual Grant and Initial
Grant shall become exercisable as to twenty-five percent (25%) of the
shares covered thereby on each of the first, second, third and fourth
anniversaries of the date of such grant.
(2) Any exercise of an option shall be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (a) the
option certificate and any other documents required by the Committee and
(b) payment in full for the number of shares for which the option is
exercised.
(3) To the extent the Company must satisfy any federal, state or local
withholding tax requirement in connection with an individual exercising
an option, upon such exercise the Company shall withhold from the shares
of stock to be delivered upon the exercise of the option the number of
shares of stock having a fair market value equal to such withholding
obligation.
(4) If an option is exercised by the executor or administrator of a deceased
director, or by the person or person to whom the option has been
transferred by the director's will or the application 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.
(e) PAYMENT FOR AND DELIVERY OF STOCK. Stock purchased under the Plan shall
be paid for as follows: (i) in cash or by check (acceptable to the Company in
accordance with the guidelines established for this purpose), bank draft or
money order payable to the order of the Company or (ii) if so permitted by the
original terms of the option or by the Committee after grant of the option,
(A) through the
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delivery of shares of Stock (which, in the case of shares of Stock acquired from
the Company, have been outstanding for at lease 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 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 exercise equal to the purchase price or (C) by
delivery of a promissory note of the option holder to the Company, such note to
be payable on such terms as are specified or (D) 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 (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 option holder.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.
The Company shall not be obligated to deliver any shares of Stock
(a) until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, and (b) 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 (c) 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 option, 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.
(f) LIMITED TRANSFERABILITY OF OPTIONS. No option may be transferred, except
(i) by will or by the laws of descent and distribution or (ii) to parties that
are eligible to have such transferred options and the underlying securities
registered on the Plan's existing Form S-8 Registration Statements, such
eligibility to be determined in accordance with the General Instructions to
Form S-8 and other rulings and pronouncements of the Securities and Exchange
Commission as may be in effect from time to time.
(g) DEATH. Upon the death of any Eligible Director granted options under
this Plan, all options not then exercisable shall terminate. All options held by
the director that are exercisable immediately prior to death may be exercised by
his or her executor or administrator, or by the person or persons to whom the
option is transferred by will or the applicable laws of descent and
distribution, at any time within six months after the director's death (subject,
however, to the limitations of Section 6(c) regarding the maximum exercise
period for such option). After completion of that six-month period, such options
shall terminate to the extent not previously exercised.
(h) OTHER TERMINATION OF STATUS OF DIRECTOR. If a director's service with
the Company terminates for any reason other than death, all options held by the
director that are not then exercisable shall terminate. Options that are
exercisable on the date of termination shall continue to be exercisable for a
period of three months (subject to Section 6(c)), but shall terminate
immediately if the director was removed for cause or resigned under
circumstances which in the opinion of the Committee casts such discredit on him
or her as to justify termination of his or her options. After completion of that
three-month period, such options shall terminate to the extent not previously
exercised, expired or terminated.
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(i) MERGERS, ETC. Subject to Section 7, in the event of any merger or
consolidation involving the Company, any sale of substantially all of the
Company's assets or stock or a dissolution or liquidation of the Company, all
options hereunder will terminate, but at least 20 days prior to the effective
date of any such merger, sale, dissolution, or liquidation, the Committee shall
make all options outstanding hereunder immediately exercisable, provided that,
unless the event will give rise to a Change of Control (as hereinafter defined)
or it is anticipated that a Change of Control will coincide with or follow the
event, the Committee may instead arrange that the successor or surviving
corporation, if any, grant replacement options.
7. CHANGE OF CONTROL
Notwithstanding any other provision of this Plan, in the event of a Change
of Control of the Company as defined in Exhibit A hereto each option held by
each Eligible Director will immediately become fully exercisable.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, TERMINATION AND
EFFECTIVENESS
Neither adoption of the Plan nor the grant of options to a director shall
affect the Company's right to grant to such director options that are not
subject to the Plan, to issue to such directors Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
directors.
The Committee may at any time discontinue granting options under the Plan.
The Committee may at any time or times amend the Plan for the purpose of
satisfying any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of options, provided that (except to the
extent expressly required or permitted herein above) no such amendment shall,
without the approval of the shareholders of the Company, (a) increase the
maximum number of shares available under the Plan, (b) increase the number of
options granted to Eligible Directors, (c) amend the definition of Eligible
Director so as to enlarge the group of directors eligible to receive options
under the Plan, (d) reduce the price at which options may be granted,
(e) change or extend the times at which options may be granted, or (f) amend the
provisions of this Section 8, and no such amendment shall adversely affect the
rights of any director (without his or her consent) under any option previously
granted.
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EXHIBIT A
A Change of Control will occur for purposes of this Plan if (i) any
individual, corporation, partnership, company or other entity (including a
"group" of the type referred to in Rule 13d-5 under the Securities Exchange Act
of 1934, as amended (the "Act"), (a "Person") becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act) of securities of the Company representing
more than 30% of the combined voting power of the Company's then-outstanding
securities (other than as a result of acquisitions of such securities from the
Company), (ii) there is a change of control of the Company of a kind which would
be required to be reported under Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Act (or a similar item in a similar schedule or form),
whether or not the Company is then subject to such reporting requirement,
(iii) the Company is a party to, or the stockholders approve, a merger,
consolidation, or other reorganization (other than (a) a merger, consolidation
or other reorganization which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent, either by
remaining outstanding or by being converted into voting securities of the
surviving entity, more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger, consolidation, or other reorganization, or (b) a merger,
consolidation, or other reorganization effected to implement a recapitalization
of the Company, or similar transaction, in which no Person acquires more than
20% of the combined voting power of the Company's then outstanding securities),
a sale of all or substantially all assets, or a plan of liquidation, or
(iv) individuals who, at the date hereof, constitute the Board cease for any
reason to constitute a majority thereof; PROVIDED, HOWEVER, that any director
who is not in office at the date hereof but whose election by the Board or whose
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the directors then still in office who either were
directors at the date hereof or whose election or nomination for election was
previously so approved (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company) shall
be deemed to have been in office at the date hereof for purposes of this
definition.
Notwithstanding the foregoing provisions of this Exhibit A, a "Change of
Control" will not be deemed to have occurred solely because of the acquisition
of securities of the Company (or any reporting requirements under the Act
relating thereto) by an employment benefit plan maintained by the Company for
its employees.
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ZAET4B DETACH HERE
ANNUAL MEETING OF
APPLIED EXTRUSION TECHNOLOGIES, INC.
JANUARY 31, 2001
The undersigned hereby constitutes and appoints Messrs. Anthony J. Allott and
John R. Dudek, 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 January 31, 2001 at the Conference Center, 36th
Floor, Ropes & Gray, One International Place, Boston, Massachusetts 02110 at
10:30 a.m., and at any adjournments thereof, upon and with respect to the number
of shares of Common Stock, par value $.01 per share, that the undersigned would
be entitled to vote if personally present. The undersigned instructs such
proxies, or their substitutes, to vote in such manner as they may determine on
any matters which may come before the meeting, all as indicated in the
accompanying Notice of Meeting and Proxy Statement, receipt of which is
acknowledged, and to vote on the following as specified by the undersigned. All
proxies heretofore given by the undersigned in respect of said meeting are
hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Unless otherwise
specified in the boxes provided on the reverse side hereof, the proxy will be
voted IN FAVOR of all nominees for director and of the adoption of the 2001
Stock Option Plan for Directors, and in the discretion of the named proxies as
to any other matter that may come before this meeting or any adjournment
thereof.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
APPLIED EXTRUSION TECHNOLOGIES, INC.
(NASDAQ NMS - AETC)
ZAET4A DETACH HERE
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
PLEASE DO NOT FOLD THIS PROXY.
1. Election of Directors.
The undersigned hereby GRANTS authority to elect the following nominees:
NOMINEES: (01) Richard G. Hamermesh and (02) Joseph J. O'Donnell
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ /
---------------------------------------------
For both nominees except as noted above
2. To approve the Company's 2001 FOR AGAINST ABSTAIN
Stock Option Plan for Directors. / / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name(s) appear hereon. When signing as attorney,
executor, administrator, trustee, or guardian, please sign your full title as
such. Each joint owner should sign.
Signature: Date: Signature: Date:
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