Document:

Exhibit
10.1

 

 

RESTRUCTURING AGREEMENT

 

BY AND AMONG

 

APPLIED EXTRUSION TECHNOLOGIES, INC.,

 

APPLIED EXTRUSION TECHNOLOGIES (CANADA), INC.,

 

APPLIED EXTRUSION TECHNOLOGIES LIMITED

 

- AND -

 

THE PARTICIPATING HOLDERS

 

 

AUGUST 24,
2004

 

 

TABLE OF CONTENTS

 

	
  Agreement
  to Complete the Financial Restructuring

  	
   

  
	
   

  	
   

  
	
  Forbearance

  	
   

  
	
   

  	
   

  
	
  Restructuring

  	
   

  
	
   

  	
   

  
	
  Preparation of
  Restructuring Documents

  	
   

  
	
   

  	
   

  
	
  Related Undertakings

  	
   

  
	
   

  	
   

  
	
  Conduct
  of Business Prior to the Effective Date

  	
   

  
	
   

  	
   

  
	
  Effectiveness

  	
   

  
	
   

  	
   

  
	
  Termination of this
  Agreement

  	
   

  
	
   

  	
   

  
	
  Representations and
  Warranties

  	
   

  
	
   

  	
   

  
	
  Restriction
  on Transfer

  	
   

  
	
   

  	
   

  
	
  Public
  Disclosures

  	
   

  
	
   

  	
   

  
	
  Governing Law; Jurisdiction

  	
   

  
	
   

  	
   

  
	
  Specific Performance

  	
   

  
	
   

  	
   

  
	
  Reservation of Rights

  	
   

  
	
   

  	
   

  
	
  Fees
  and Expenses

  	
   

  
	
   

  	
   

  
	
  Successors and Assigns

  	
   

  
	
   

  	
   

  
	
  Notice

  	
   

  
	
   

  	
   

  
	
  Counterparts

  	
   

  
	
   

  	
   

  
	
  No Third-Party
  Beneficiaries

  	
   

  
	
   

  	
   

  
	
  No
  Solicitation

  	
   

  
	
   

  	
   

  
	
  Further Acquisition of
  Notes

  	
   

  
	
   

  	
   

  
	
  Amendments

  	
   

  
	
   

  	
   

  
	
  Indemnification

  	
   

  

 

 

	
  Further
  Assurances

  	
   

  
	
   

  	
   

  
	
  Headings

  	
   

  
	
   

  	
   

  
	
  Several
  Obligations

  	
   

  
	
   

  	
   

  
	
  Entire
  Agreement

  	
   

  
	
   

  	
   

  
	
  Additional
  Participating Holders

  	
   

  

 

 

RESTRUCTURING AGREEMENT

 

RESTRUCTURING AGREEMENT
(this “Agreement”), dated as of August 24, 2004, by and among
Applied Extrusion Technologies, Inc., a Delaware corporation (“AET”),
Applied Extrusion Technologies, Inc. (Canada), a Delaware corporation (“AET Canada”
and together, with AET, the “Company”), Applied Extrusion Technologies
Limited (“AET/UK”), each of the entities set forth on Schedule 1
hereto, which  entities are either
beneficial owners of AET’s 10-3/4% Senior Notes due 2011 (collectively, the “Notes”)
or investment managers or advisers acting on behalf of certain beneficial
holders (the entities set forth on Schedule 1, the “Ad Hoc Committee”)
and each of the entities set forth on Schedule 2 hereto, which
entities are either beneficial owners of AET’s Notes or investment managers or
advisers acting on behalf of certain beneficial owners of AET’s Notes
(together, with the Ad Hoc Committee, the “Participating Holders”);

 

WHEREAS, the Company and the Holder Representative (as
that term is defined below) have engaged in negotiations with the objective of
reaching an agreement with regard to a financial restructuring of the Company,
including the indebtedness outstanding under the Notes;

 

WHEREAS, the Company and the Participating Holders now
desire to implement a financial restructuring of the Company on the terms and
conditions set forth in the term sheet (the “Term Sheet”) attached
hereto as Exhibit A;

 

WHEREAS, in order to implement the restructuring, the
Company has agreed, on the terms and conditions set forth in this Agreement, to
use its commercially reasonable best efforts to (i) cause votes with respect to
a Reorganization Plan (as that term is defined below) to be solicited prior to
commencing “pre-packaged” cases for AET and AET Canada (collectively, the “Chapter
11 Case”) under chapter 11 of title 11 of the United States Code, 11 U.S.C.
§§ 101-1330 (as amended, the “Bankruptcy Code”) and (ii) seek
confirmation of the Reorganization Plan by the Bankruptcy Court (as that term
is defined below), provided that the conditions set forth herein are satisfied
(consummation of the Reorganization Plan in the Chapter 11 Case in accordance
with the Term Sheet and the terms herein being the “Financial Restructuring”);
and

 

WHEREAS, to expedite and ensure the implementation of
the Financial Restructuring, each of the Participating Holders is prepared to
commit, on the terms and subject to the conditions of this Agreement and
applicable law, if and when solicited to do so in accordance with applicable
law, to vote (or, in the case of managed or advised accounts, instruct its
custodial agents to vote) to accept the Reorganization Plan in the Solicitation
(as defined below) in advance of the Chapter 11 Case.

 

NOW THEREFORE, in consideration of the promises and the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which hereby
acknowledged, the Company, AET/UK and each Participating Holder hereby agree as
follows:

 

 

1.                                       Agreement to Complete the Financial Restructuring. 
Subject to the terms and conditions of this Agreement, the Company will
use its commercially reasonable best efforts to effectuate the Financial
Restructuring through the Chapter 11 Case. 
Specifically:

 

(a)                                  The
Company will commence a solicitation (in accordance with the Term Sheet and
with applicable securities laws) of all of the beneficial holders of the Notes
to vote to accept the Reorganization Plan (the “Solicitation”) on or
before the fortieth (40th) day from the date hereof (the date on
which the mailing of the Solicitation Package (as that term is defined below)
is commenced is the “Solicitation Commencement Date”) and, in
conjunction therewith, deliver to each such holder, the (i) Disclosure
Statement (as that term is defined below), including all schedules and exhibits
thereto, (ii) Reorganization Plan (as that term is defined below), including
all schedules and exhibits thereto, (iii) ballots to vote to accept or reject
the Reorganization Plan and (iv) other documents or materials that the Holder
Representative (as that term is defined below) reasonably requests be delivered
in connection with the Solicitation (all such documents the “Solicitation
Package”); provided however, that the Company shall not be liable
for a failure to satisfy the time periods set forth in this section 1(a)
and/or in section 1(b) below, respectively, if such failure results from
an act or omission of a party other than the Company, AET/UK, and/or any of
their respective officers, employees, agents, advisors or other
representatives.(1)

 

(b)                                 If
votes accepting the Reorganization Plan have been received from holders
constituting (A) a majority in interest of holders of the Notes that voted to
accept or reject the Reorganization Plan in the Large Noteholder Class(2) and
(B) at least two thirds of the aggregate outstanding principal amount of the
Notes held by all holders that voted to accept or reject the Reorganization
Plan in the Large Noteholder Class, on or before the Solicitation Expiration
Date, then the Company shall file with the United States Bankruptcy Court for
the District of Delaware (the “Bankruptcy

 

(1)                                  The
Company may, at its discretion, and concurrently (but only concurrently) with
the distribution of the Solicitation Package to the holders of the Notes,
distribute to holders of the Company’s common stock (for informational purposes
only) the (i) Disclosure Statement, including all schedules and exhibits
thereto, (ii) the Reorganization Plan, including all schedules and exhibits
thereto and (iii) other documents or materials that the Holder Representative
reasonably requests be delivered to such holders of common stock; provided,
however, that the Company shall not under any circumstance solicit the vote
of any of the holders of its common stock with respect to the Financial
Restructuring or the Reorganization Plan. 

 

(2)                                  As
set forth in the Term Sheet, the Large Noteholders Class shall be comprised of
all holders of Notes that hold at least $500,000 in allowed noteholder claims
and who shall receive, in exchange for their allowed noteholder claims, New
Notes and New Common Stock (as each of those terms is defined in the Term
Sheet).

 

5

 

Court”)
within thirty five (35) days of the Solicitation Commencement Date:

 

(i)                                     Petitions
for relief under chapter 11 of the Bankruptcy Code for each of  AET and AET Canada;

 

(ii)                                  The
First Day Pleadings (as defined below);

 

(iii)                               The
DIP Facility Motion (as defined below);

 

(iv)                              The
Confirmation Motion (as defined below); and

 

(v)                                 Any
other motions, pleadings, papers or documents that the Holder Representative
reasonably requests (in a manner that is consistent with the terms and
conditions of this Agreement and the Term Sheet) the Company to file.

 

2.                                       Forbearance. 
Subject to the terms and conditions of this Agreement, for a
period (the “Forbearance Period”) commencing on the date hereof and
ending on the termination of this Agreement, each of the Participating Holders
hereby agrees to forbear from the exercise of any rights or remedies it may
have under the indenture pursuant to which the Notes were issued (the “Indenture”),
applicable law or otherwise with respect to any default or event of default
existing as of the date hereof under the Indenture and any future defaults or
events of default under the Indenture to the extent that such future defaults
or events of default (or any act, omission, event and/or occurrence underlying
any such future default or event of default) do not constitute a Material
Adverse Effect (as that term is defined below).

 

3.                                       Restructuring.  For so long as each of the following conditions is met:

 

(a)                                  The
terms and conditions of the Restructuring Documents (as defined below) shall
either be those set forth in the Term Sheet or otherwise accepted in writing by
the Participating Holders and/or the Holder Representative (as required by
Sections 4(a)(i)-(vii)) and the Company, and

 

(b)                                 This
Agreement shall not have been terminated,

 

then each Participating
Holder shall

 

(i)                                     When
properly solicited to do so pursuant to the Solicitation Package (which
Solicitation Package shall comply with applicable law), vote to accept the
Reorganization Plan; and

 

(ii)                                  Refrain
from supporting any other proposed plan of reorganization for the Company, if
any, or from objecting to or otherwise commencing any proceeding to oppose the
Financial Restructuring or taking any action that is materially inconsistent
with or that would unreasonably delay or impede the Financial Restructuring.

 

6

 

4.                                       Preparation of Restructuring Documents.

 

(a)                                  In
order to effectuate the Financial Restructuring, the Company shall instruct its
counsel to prepare on a timeline agreed upon by the Company and the Holder Representative,
for the review and approval of the Holder Representative, the following:

 

(i)                                     A
voluntary petition for relief under chapter 11 of the Bankruptcy Code for each
of AET and AET Canada in forms agreed upon by the Holder Representative and the
Company;

 

(ii)                                  A
disclosure statement for AET and AET Canada (the “Disclosure Statement”)
that complies with section 1125(b)(1) and section 1125(b)(2) of the
Bankruptcy Code in a form agreed upon by the Holder Representative and the
Company;

 

(iii)                               A
plan of reorganization for AET and AET Canada incorporating the terms and
conditions set forth in the Term Sheet and such other terms and conditions
agreed upon by the Company and the Participating Holders (with such agreement
of the Participating Holders to be communicated to the Company’s counsel (the “Company
Counsel”) by the Holder Representative) (the “Reorganization Plan”);

 

(iv)                              A
motion seeking, inter alia, entry of an order scheduling hearings to (i) confirm the Reorganization Plan, (ii)
find that the Disclosure Statement complied with section 1126(b)(1) of the
Bankruptcy Code and section 1126(b)(2) of the Bankruptcy Code and approve
the solicitation procedures and (iii) establish deadlines and procedures for
filing objections to confirmation of the Reorganization Plan, the Disclosure
Statement and the solicitation procedures (the “Confirmation Motion”) in
a form agreed upon by the Holder Representative and the Company;

 

(v)                                 All
agreements and documentation in respect of a debtor in possession credit
facility (“DIP Facility”) to provide financing during the pendency of
the Chapter 11 Case on terms and subject to the conditions acceptable to the
Company and the Participating Holders (with such acceptance of the
Participating Holders to be communicated to the Company Counsel by the Holder
Representative);

 

(vi)                              A
motion seeking entry of an order authorizing the Company to enter into the DIP
Facility (the “DIP Facility Motion”) in a form agreed upon by the Holder
Representative and the Company;  and

 

(vii)                           All
first day pleadings (“First Day Pleadings”) and such other schedules,
motions, pleadings and other papers and documentation necessary or, in each
case as reasonably requested by the Holder

 

7

 

Representative, in
connection with the Chapter 11 Case and the timely pursuit and achievement of
confirmation of the Reorganization Plan, all in a form agreed upon by the
Holder Representative and the Company.

 

(b)                                 All
documents and instruments prepared in connection with the Financial
Restructuring (including the documents and instruments set forth in
section 4(a) above), together with any and all documents and instruments
prepared in connection with the Reorganization Plan and/or the Chapter 11 Case,
are referred to collectively herein as the “Restructuring Documents.”  The parties hereto shall coordinate with one
another in good faith in the preparation and negotiation of the Restructuring
Documents, and all Restructuring Documents shall be in form and substance
satisfactory to the Participating Holders and/or the Holder Representative (as
required by Sections 4(a)(i)-(vii), as the case may be) and the Company.  Without limiting the generality of the
foregoing the Company will consult with the Holder Representative with respect
to the timing of the filing of all Restructuring Documents prior to filing any
such document.

 

5.                                       Related
Undertakings.  Until such time as this Agreement has been
terminated in accordance with its terms, no Participating Holder shall vote for
or support any other chapter 11 plan in respect of AET and/or AET Canada; provided,
that no Participating Holder shall be barred from taking any action with
respect to such matter, if such action is not inconsistent with the Financial
Restructuring and the terms and conditions of this Agreement; and, provided,
further, that nothing in this Agreement shall be deemed to prevent any
Participating Holder from taking, or failing to take, any action that it is
obligated to take (or not to take) in the performance of any fiduciary duty
that such Participating Holder owes to any other person or entity it being
understood that any actions taken by a Participating Holder in accordance with
the above shall not result in any liability whatsoever to such Participating
Holder.

 

6.                                       Conduct of Business.  AET, AET Canada and AET/UK each agree to
comply with the following covenants at all times prior to the termination of
this Agreement, unless otherwise agreed in writing by the Participating
Holders:

 

(a)                                  AET,
AET Canada and AET/UK each shall not (i) directly or indirectly engage in,
agree to or consummate any transaction outside the ordinary course of its
business (other than the Financial Restructuring) or (ii) enter into any
transaction or perform any act which would constitute any breach by it of any
of its representations, warranties, covenants or obligations hereunder;

 

(b)                                 AET
and AET Canada and AET/UK each shall each maintain their corporate existence
and qualification in good standing under the laws of each state or other jurisdiction
in which it is organized or required to be qualified to do business,
respectively; and

 

(c)                                  AET,
AET Canada and AET/UK each shall promptly, and in any event within two (2)
business days after receipt or knowledge of the same by any of AET, AET Canada
or AET/UK, notify the Holder Representative of any governmental or third party
notices, complaints, investigations, hearings, orders, decrees or judgments (or
communications indicating

 

8

 

that any of the foregoing
may be contemplated or threatened) which could reasonably be anticipated to (i)
have a Material Adverse Effect or (ii) prevent or delay the timely consummation
of the Financial Restructuring.

 

7.                                       Effectiveness. 
This Agreement shall become operative when it has been executed by (i)
the Company, (ii) AET/UK and (iii) Participating Holders that hold, in the
aggregate, at least sixty six and two thirds percent (66-2/3%) of the aggregate
outstanding principal amount of the Notes (collectively, the parties set forth
in (i), (ii) and (iii) are the “Effective Date Parties”).  This Agreement shall have no force or effect
until it has been executed by the Effective Date Parties.

 

8.                                       Termination
of this Agreement.

 

(a)                                  This Agreement shall terminate automatically
at the earlier of:

 

 (i) immediately prior to the filing of any
voluntary petition for relief under Chapter 11 of the Bankruptcy Code for
either AET or AET Canada; and

 

 (ii) upon the occurrence of any Agreement
Termination Event (as defined below), unless, in the case of

 

(A) Sections 8(b)(i),
8(b)(iii), 8(b)(iv), 8(b)(v), 8(b)(vi), 8(b)(vii), 8(b)(viii), 8(b)(ix),
8(b)(x), 8(b)(xi) 8(b)(xiii), 8(b)(xiv), 8(b)(xvi), 8(b)(xviii) and/or
8(b)(xix) the termination of the Agreement in each such instance is waived in
writing by all of the Participating Holders within five days of the occurrence
of such Agreement Termination Event (or the acts, omissions or events
triggering the occurrence of such Agreement Termination Event are cured to the
satisfaction of all of the Participating Holders within five days of the
occurrence of such Agreement Termination Event (as evidenced by a writing
executed by all of the Participating Holders));

 

(B)
Section 8(b)(ii), the termination of the Agreement is waived in writing by
the Company within five days of the occurrence of such Agreement Termination
Event (or the acts, omissions or events triggering the occurrence of such
Agreement Termination Event are cured to the satisfaction of the Company within
five days of the occurrence of such Agreement Termination Event (as evidence by
a writing executed by the Company)); or

 

(C) Sections 8(b)(xii),
8(b)(xv) and/or 8(b)(xvii) the termination is waived in writing by the Company,
AET/UK and all of the Participating Holders within five days of the occurrence
of such Agreement Termination Event (or the acts, omissions or events
triggering the occurrence of such Agreement Termination Event

 

9

 

are cured to the
satisfaction of the Company, AET/UK and all of the Participating Holders within
five days of the occurrence of such Agreement Termination Event (as evidenced
by a writing executed by the Company, AET/UK and all of the Participating
Holders).

 

(b)                                 “Agreement
Termination Event” shall mean any one or more of the following events or
conditions:

 

(i)                                     Any
representation or warranty made by AET, AET Canada and/or AET/UK shall have
been untrue in any material respect when made or shall have become untrue in
any material respect, or any breach of any covenant or material provision
hereof by AET, AET Canada and/or AET/UK shall have occurred;

 

(ii)                                  Upon
the occurrence of a breach by a majority of the Participating Holders
(determined by principal amount of Notes held thereby) of their material
obligations under this Agreement or if any representation or warranty made
hereunder by a majority of the Participating Holders (as so determined) shall
have been untrue in any material respect when made or shall have become untrue
in any material respect;

 

(iii)                               If
the Solicitation Commencement Date has not occurred within forty (40) days of
the date hereof;

 

(iv)                              If
the Solicitation does not expire on 5:00 p.m. (prevailing New York City Time)
on the first business day that is on or after the date that is twenty five (25)
days after the Solicitation Commencement Date (the “Solicitation Expiration
Date”);

 

(v)                                 If,
by the Solicitation Expiration Date, votes accepting the Reorganization Plan
have not been received from holders of Notes (A) constituting a majority of the
holders of the Notes that voted to accept or reject the Reorganization Plan in
the Large Noteholder Class and (B) holding at least two thirds of the face
amount of the Notes held by all holders that voted to accept or reject the
Reorganization Plan in the Large Noteholder Class;

 

(vi)                              If,
pursuant to the terms of this Agreement, voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code (and each of the other pleadings and other
documents specified in Section 1(b) herein) for each of AET and AET Canada
have not been filed with the Bankruptcy Court within thirty five (35) days of
the Solicitation Commencement Date;

 

10

 

(vii)                           Any
term or condition of any of the Term Sheet, the Reorganization Plan, the DIP
Facility, any exit facility and/or the lender’s commitment for the DIP Facility
or any exit facility shall be other than as agreed by all of the Participating
Holders (with such disagreement of any of the Participating Holders to have been
communicated to Company Counsel by the Holder Representative) and the Company; provided
that an immaterial or ministerial change (to which all of the Participating
Holders have not agreed (with such disagreement of any of the Participating
Holders to have been communicated to Company Counsel by the Holder
Representative)) with respect to a term or condition in any of such documents
shall not, by itself, give rise to a right to terminate this Agreement under
this section 8(b)(vii); provided further, however, that any change
to a term or condition of any of the aforementioned documents that can
reasonably be expected to have an adverse financial or economic impact upon the
Financial Restructuring or the Company and/or AET/UK shall, for all purposes,
constitute a material change;

 

(viii)                        Any term
or condition of any of the Restructuring Documents other than those
Restructuring Documents specified in 8(b)(vii) above (such Restructuring
Documents, the “Section 8 Restructuring Documents”)  shall be other than as agreed by the Holder
Representative and the Company; provided that an immaterial or
ministerial change (to which the Holder Representative has not agreed) with
respect to a term or condition in any Section 8 Restructuring Document
shall not, by itself, give rise to a right to terminate this Agreement under
this section 8(b)(viii); provided further, however, that any change
to a term or condition of any of the Section 8 Restructuring Documents
that can reasonably be expected to have an adverse financial or economic impact
upon the Financial Restructuring or the Company and/or AET/UK or upon any
Section 8 Restructuring Document (or the relief requested thereby) shall,
for all purposes, constitute a material change;

 

(ix)                                There
shall have been issued or reinstated any suspension order or similar order by a
court or other governmental body of competent jurisdiction that affects or
could affect the obligations of the Company with respect to the Notes or this
Agreement and (A) such proceeding or order was issued or reinstated at the
request or with the acquiescence of the Company or (B) in all other
circumstances, if such order is not stayed, reversed or vacated within 30 days
after such issuance or reinstatement;

 

(x)                                   AET,
AET Canada and/or AET/UK shall propose, consent to, support or participate in
the formulation of any out-of-court restructuring, any chapter 7 or chapter 11
plan or

 

11

 

reorganization or
liquidation or any other such similar reorganization or liquidation (whether
foreign or domestic) in respect of AET, AET Canada and/or AET/UK (other than
the Financial Restructuring);

 

(xi)                                The
Company and/or AET/UK shall pay any sum on account of (i) any of the Notes or
(ii) any judgment, settlement or compromise in respect of any of the Notes, in
each case without the prior written consent of the Participating Holders;

 

(xii)                             An
involuntary bankruptcy case or similar proceeding is initiated (whether in the
United States of America or otherwise) against AET, AET Canada and/or AET/UK;

 

(xiii)                          The
terms and conditions of the lender’s commitment under the DIP Facility and/or
for any exit facility shall have been amended, terminated or otherwise modified
in any manner adverse to the Company, AET/UK and/or any of the Participating
Holders, without the prior written consent of the Participating Holders and
such consent of the Participating Holders to have been delivered to Company
Counsel by the Holder Representative;

 

(xiv)                         The
occurrence of  a Material Adverse
Effect;

 

(xv)                            Upon
the written consent of AET, AET Canada, AET/UK and all of the Participating
Holders;

 

(xvi)                         The
occurrence of any of the events specified in Sections 501(3), 501(6) and/or
501(7) of the Indenture.

 

(xvii)                      If a
retirement and release agreement consistent with the terms set forth in that
certain side letter of even date herewith by and among the Participating
Holders and Amin J. Khoury (the “Retirement Agreement”) has not been
executed on or before September 10, 2004.

 

(xviii)                   Notwithstanding
anything to the contrary, if any Participating Holder finds, other than the
Term Sheet, any of the final forms of the Restructuring Documents or any other
documents prepared in connection with or 
however related to the Financial Restructuring (including, without
limitation, the Retirement Agreement, any stockholders’ agreement, any
certificate of incorporation, any bylaws, any document concerning the corporate
governance of the Company upon the consummation of the Plan or any document
concerning the rights of Company shareholders or debtholders upon the
consummation of the Plan) to be inconsistent with the Term Sheet or otherwise
unacceptable and such Participating Holder delivers a written notice to such
effect to the Company, the

 

12

 

Holder Representative and
each of the other Participating Holders at any time prior to the termination of
this Agreement.

 

(xix)                           If the
Company fails to deliver to the Holder Representative (X)  by 7:00 a.m. (prevailing New York City Time)
on the first business day after Company Counsel’s receipt of the Participating
Holders’  signature pages to this
Agreement (such time and date the “Press Release Disclosure Deadline”),
a certificate (the “Press Release Certificate”) acknowledging that it
has publicly disseminated a press release with respect to the Term Sheet in a
form agreed upon by Company Counsel and the Holder Representative or (Y)
by 8:00 a.m. (prevailing New York City Time) on the first business day after
Company Counsel’s receipt of the Participating Holders’  signature pages to this Agreement (such time
and date the “8-K Disclosure Deadline”), a certificate (the “8-K
Certificate”) acknowledging that it has filed a Form 8-K (to which this
Agreement and the Term Sheet are exhibits) with the Commission (as that term is
defined below) .(3)

 

(c)                                  The
Company and AET/UK shall immediately advise the Participating Holders in
writing of the occurrence of any of the Agreement Termination Events (other
than the Agreement Termination Events specified in Sections 8(b)(ii) and
8(b)(xv)) or of any breach of any of the Company’s and/or AET/UK’s
representations, warranties, covenants or other obligations.

 

(d)                                 The
Participating Holders shall immediately advise the Company and AET/UK in
writing of the occurrence of the Agreement Termination Event specified in
Section 8(b)(ii) or of any breach of any of their representations,
warranties, covenants or other obligations.

 

(e)                                  If
this Agreement is terminated in accordance with its terms, no party hereto
shall have any further obligation or liability hereunder, except that the
obligations of the

 

(3)                                  The
parties hereto agree that, in the event
that the Company fails to deliver the Press Release Certificate to the Holder
Representative by the Press Release Disclosure Deadline, then after the passing
of one (1) additional hour, one or more of the Participating Holders may,
immediately thereafter, publicly disclose this Agreement and the Term Sheet
and, in such event, the Company shall hold any such disclosing Participating
Holder harmless and indemnify any such Participating Holder and its accounts in
full for any loss occasioned by it or its accounts as a result of any action
against or liability attaching to any such Participating Holder or its accounts
arising from or in connection with such public disclosure.  Additionally, the parties hereto
agree that, in the event that the Company
fails to deliver the 8-K Certificate to the Holder Representative by the 8-K
Disclosure Deadline, then after the passing of thirty (30) additional minutes,
one or more of the Participating Holders may, immediately thereafter, publicly
disclose this Agreement and the Term Sheet and, in such event, the Company
shall hold any such disclosing Participating Holder harmless and indemnify any
such Participating Holder and its accounts in full for any loss occasioned by
it or its accounts as a result of any action against or liability attaching to
any such Participating Holder or its accounts arising from or in connection
with such public disclosure.  

 

13

 

Company under Sections 15
and 23 of this Agreement shall survive the termination of this Agreement.  Notwithstanding anything to the contrary
herein, no party shall be relieved of any liability for damages resulting from
its breach of any representation, warranty, covenant or obligation hereunder
that occurred prior to the termination of this Agreement and each of the
Participating Holders shall have all rights and remedies available to it under
the Indenture, other applicable documents relating to the Notes, applicable law
or otherwise with respect to any default or event of default under such
Indenture that may have occurred at any time prior to such termination or
otherwise.  Notwithstanding anything to
the contrary herein, the Participating Holders have not and shall not be deemed
to have waived any right, cause of action or other remedy or form of relief
(collectively, the “Rights”) that they otherwise may have or may possess
with respect to matters governed by this Agreement (including, in particular by
Sections 2, 3 and 5) and none of the Rights shall be subject to affirmative
defenses based upon principles of waiver, delay, laches, estoppel or other such
principles upon their exercise by one or more of the Participating Holders upon
the termination of this Agreement.

 

9.                                       Representations and Warranties.

 

(a)                                  Representations
and Warranties of AET, AET Canada and AET/UK.  Each of  AET, AET Canada
and AET/UK represents and warrants, jointly and severally, to each of the other
signatories to this Agreement, that the following statements, as applicable to
it, are true, correct, and complete as of the date hereof:

 

(i)                                     It
is a corporation, partnership, or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization.  It has all requisite
corporate, partnership, or limited liability company, as applicable, power and
authority to execute and deliver this Agreement and has duly executed and
delivered this Agreement;

 

(ii)                                  The
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly and validly authorized by all necessary corporate,
partnership or limited liability company action on its part, and no other
proceedings are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby;

 

(iii)                               This
Agreement is its legally valid and binding obligation, enforceable against it
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability (whether enforcement is sought by proceedings in
equity or at law);

 

14

 

(iv)                              To
its knowledge, the execution, delivery and performance by it of this Agreement
does not and shall not require any registration or filing with, consent or
approval of, or notice to, or other action to, with or by, any federal, state,
foreign or other governmental authority or regulatory body;

 

(v)                                 The
execution, delivery and performance by it of this Agreement do not and shall
not (i) violate any provision of law, rule or regulation applicable to it or
any of its subsidiaries or its certificate of incorporation or bylaws or other
organizational documents or those of any of its subsidiaries or (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation to which it or any of
its subsidiaries is a party;

 

(vi)                              There
are no actions, suits, claims, proceedings or, to its knowledge, investigations
pending or, to its knowledge, threatened against it or any of its subsidiaries
or any of its current or former directors or officers that would give rise to a
Material Adverse Effect;

 

(vii)                           AET has
filed with the Securities and Exchange Commission (the “Commission”) all
forms, reports, schedules, statements and other documents required to be filed
by it through the date hereof under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or the Securities Act of 1933, as amended
(the “Securities Act”) (all such documents, as supplemented and amended
since the time of filing, collectively, the “AET SEC Documents”).  The AET SEC Documents, including without
limitation all financial statements and schedules included in the AET SEC
Documents, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any AET SEC Document amended or superseded by
a filing prior to the date of this Agreement, then on the date of such amending
or superseding filing) (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (b) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as applicable.  The
financial statements of AET included in the AET SEC

 

15

 

Documents at the time
filed (and, in the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively, and, in the case
of any AET SEC Document amended or superseded by a filing prior to the date of
this Agreement, then on the date of such amending or superseding filing)
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission
with respect thereto, were prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present in all material respects (subject, in the case of unaudited statements,
to normal, recurring audit adjustments) the consolidated financial position of
AET and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.  For purposes of this
Section 9(a)(vii), the restatement of the Company’s financial statements
for the first, second and third quarters of the fiscal year 2002 and fiscal
years 1998 through 2001  shall be deemed
to amend and supersede the previously filed financial statements for such
periods in all forms, reports, statements and other filings by the Company
prior to the date of such restatement, and shall not render any of the
Company’s representations and warranties herein with respect to any of the AET
SEC Documents untrue, incorrect or incomplete;

 

(viii)                        Except (i)
as and to the extent disclosed or reserved against on the balance sheet of AET
at June 30, 2004 included in AET’s Quarterly Report on Form 10-Q for the
three-month period ended June 30, 2004 or disclosed in that certain press
release dated June 16, 2004 or (ii) as arise in connection with or as a
result of the transactions contemplated by this Agreement or are related to the
performance by the Company of any of its obligations under this Agreement, the
Company does not have any liabilities or obligations of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due, that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. 
For purposes herein, “Material Adverse Effect” shall mean any
change, event, occurrence, effect, or

 

16

 

state of facts that,
individually, or aggregated with other such matters, is materially adverse to
the business, assets (including intangible assets), properties, condition
(financial or otherwise), prospects, or results of operations of AET, AET
Canada and AET/UK taken as a whole; provided, however, that the Default
or the Event of Default (as each such term is defined in the Indenture)
resulting from the non-payment of interest on July 1, 2004 to holders of
the Notes shall not, by itself, constitute a Material Adverse Effect;

 

(ix)                                All
material facts relating to the business or condition of AET, AET Canada and/or
AET/UK have been disclosed to the Participating Holders or the Holder
Representative prior to the date hereof and no representation, warranty or
statement contained in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading; provided however, that no representation or
warranty is made with respect to any projections or forecasts provided by the
Company to the Participating Holders or the Holder Representative other than
that they were prepared in good faith on the basis of reasonable assumptions;

 

(x)                                   AET/UK
does not own, possess, control or have custody over any asset, including
without limitation any contract, leasehold, intellectual property, real
property or personal property, whether tangible or intangible, of any nature
whatsoever, except as set forth on Schedule 3 hereto;

 

17

 

(b)                                 Representations
and Warranties of the Participating Holders.

 

Each of the Participating
Holders represents and warrants, severally and not jointly, as to itself only
(and not on behalf of any beneficial owner of the Notes unless such
Participating Holder is a beneficial owner of Notes (and then only to the
extent that it is a beneficial owner of Notes)), to each of the other
signatories to this Agreement, that, as of the date hereof:

 

(i)                                     It
is a corporation, partnership, or limited liability company duly organized,
validly existing and in good standing under the laws of its state of
organization.  It has all requisite corporate,
partnership, or limited liability company, as applicable, power and authority
to execute and deliver this Agreement and has duly executed and delivered this
Agreement;

 

(ii)                                  The
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly and validly authorized by all necessary corporate,
partnership or limited liability company action on its part, and no other
proceedings are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby;

 

(iii)                               To
its knowledge, the execution, delivery and performance by it of this Agreement
does not and shall not require any registration or filing with, consent or
approval of, or notice to, or other action (collectively, the “Actions”)
to, with or by, any federal, state, foreign or other governmental authority or
regulatory body;(4)

 

(iv)                              This
Agreement is its legally valid and binding obligation, enforceable against it
in accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
limiting creditors’ rights generally or by equitable principles relating to
enforceability (whether enforcement is sought by proceedings in equity or at
law);

 

(4)                                  This
representation and warranty is specifically limited to Actions that may be
required prior to and as a condition precedent to the execution of this
Agreement and does not cover any Actions that may be required to be taken by
one or more of the Participating Holders after the consummation of the
Reorganization Plan.

 

18

 

(v)                                 It
either (A) is the beneficial owner of the principal amount of the Notes set
forth under its name on the signature pages hereof or (B) has investment
discretion and voting authority with respect to the principal amount of such
Notes and has the power and authority to bind the beneficial owner of such
Notes set forth on the signature pages hereof to the terms of this Agreement
(in either case, such Notes are “Held Notes”).

 

10.                                 Restriction on Transfer.  The Participating Holders may sell,
transfer, or dispose of any of their Held Notes; provided, however, that
the transferee thereof (each such transferee, a “Transferee”) must, as a
condition precedent to such sale, transfer or other disposition, either:

 

 (i) execute a counterpart signature page to
this Agreement, in which case it shall be deemed to be a Participating Holder
for all purposes herein from and after the date on which such counterpart
signature page is executed (provided however, that any Notes held
by  Transferee prior to the acquisition
by it of any Held Notes shall not be subject to the terms and conditions of
this Agreement nor, notwithstanding anything to the contrary herein, shall any
such Notes be taken into account for any of the purposes set forth in this
Agreement); or

 

(ii) execute an
assumption agreement in substantially the form set forth hereto as Exhibit B,
in which case the Transferee (A) shall be bound by the obligations set forth in
this Agreement from and after the date on which such assumption agreement is
executed (but only with respect to the Held Notes acquired from a Participating
Holder in such sale, transfer or disposition and not with respect to any other Notes
(whether now held or acquired in the future))(5) and (B) shall not be a
Participating Holder for any of the purposes specified herein and shall not be
entitled to exercise any of the rights accorded to Participating Holders under
the terms hereof.

 

11.                                 Public Disclosures.  Prior to the issuance of any public disclosures regarding the
Financial Restructuring (including this Agreement), the Company shall consult
with the Holder Representative as to the form and substance of such public
disclosures related to the Financial Restructuring (including this Agreement)
or the transactions contemplated hereby. 
Without limiting the generality of the foregoing, unless required by
lawful subpoena issued by a court of competent jurisdiction, the Company shall
not disclose (i) any Participating Holder’s identity or (ii) the amount of such
Participating Holder’s holdings of Notes, without the prior written consent of
such Participating Holder in each case; and, if such announcement or disclosure
is so required, the Company shall afford the Participating Holders a reasonable
opportunity to seek appropriate protective measures and to review and comment
upon any such announcement or disclosure prior to the applicable announcement
or disclosure.  Nothing herein, however,
shall preclude the Company (a) from disclosing in the Disclosure Statement the

 

(5)                                  A
Transferee acquiring Held Notes pursuant to this subsection (ii), however,
shall not be bound by the terms of the Retirement Agreement and shall not be
deemed to be a party to such Retirement Agreement for any purpose. 

 

19

 

identities of the
Participating Holders (with the specific form of disclosure of identities to be
in a form agreed upon by each of the Participating Holders) and the aggregate
amount of Notes held by the Participating Holders as a group and (b) attaching
an executed copy of this Agreement to a Form 8-K filing and disclosing, in such
filing, the identities of the Participating Holders (with the specific form of
disclosure of identities to be in a form agreed upon by each of the
Participating Holders) and the aggregate amount of Notes held by the
Participating Holders as a group (provided that such filing shall not disclose
the amount of Notes held by any Participating Holder on an individual basis).

 

12.                                 Governing
Law; Jurisdiction. 
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to any conflicts of law
provision that would require the application of the law of any other
jurisdiction.  Each party hereto agrees
that it shall bring any action or proceeding in respect of any claim arising
out of or related to this Agreement or the transactions contained in or
contemplated by this Agreement, whether in tort or contract or at law or in
equity, exclusively in a federal or state court of competent jurisdiction
located in the Borough of Manhattan, New York, New York (the “Chosen Court”)
and (A) irrevocably submits to the exclusive jurisdiction of the Chosen Court,
(B) waives any objection to laying of venue in any such action or proceeding in
the Chosen Court, (C) waives any objection that the Chosen Court is an
inconvenient forum or does not have jurisdiction over any party, and (D) agrees
that service of process upon such party in any such action or proceeding shall
be effective if notice is given in accordance with this Agreement.  Notwithstanding the foregoing consent to the
jurisdiction of the Chosen Court, upon the commencement of the Chapter 11
Case, each of the parties hereto hereby agrees that the Bankruptcy Court shall
have concurrent jurisdiction of all matters arising out of or in connection
with this Agreement.

 

13.                                 Specific
Performance.  It is understood and agreed by each of the
parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any party hereto (other than a breach by the
Company of Section 15 hereof) and each non-breaching party shall be
entitled to specific performance and injunctive or other equitable relief as
the exclusive remedy of any such breach without the necessity of showing
damages.

 

14.                                 Reservation
of Rights.  Except as otherwise expressly provided in
this Agreement, the parties hereto fully reserve any and all of their
rights.  Nothing herein is intended to,
or does, in any manner waive, limit, impair or restrict the ability of any of
the Participating Holders to protect and preserve any of its rights, remedies
and interests, including without limitation its claims against the Company, or
its full participation in any bankruptcy case filed by the Company.  Pursuant to Federal Rule of Evidence 408 and
any applicable state rules of evidence, this Agreement shall not be admitted
into evidence in any proceeding other than a proceeding to enforce its terms.

 

15.                                 Fees and
Expenses.

 

(a)                                  The
Company shall pay in full the fees and expenses of the Ad Hoc Committee’s financial and legal
advisors and of the indenture trustee for the Notes.  Without limiting the generality of the foregoing, (i) the Company
will pay the fees and expenses of Milbank, Tweed Hadley & McCloy, LLP, the Ad Hoc
Committee’s counsel (“Milbank”) and Houlihan Lokey

 

20

 

Howard & Zukin, the Ad Hoc
Committee’s financial advisors (“Houlihan Lokey” and collectively, with
Milbank, the “Holder Representative”), respectively, in accordance with
that certain retention agreement by and between the Company and Milbank, dated
June 16, 2004 and that certain retention agreement by and between the
Company and Houlihan Lokey, dated June 16, 2004, as such agreements may be
in effect from time to time; and  (ii)
notwithstanding anything to the contrary in either the Milbank or Houlihan
Lokey retention agreements, all of the foregoing fees and expenses submitted to
the Company prior to the filing by the Company of any petition for relief in
the Chapter 11 Case shall be paid in full before any such petition is filed.

 

(b)                                 Immediately
prior to the filing by the Company of any petition for relief in the Chapter 11
Case, the Company shall reimburse and pay in full the actual, reasonable and
documented out-of-pocket costs and expenses incurred by each Initial
Participating Holder in connection with the negotiation, preparation and documentation
of this Agreement, the Term Sheet, the Financial Restructuring and any other
matters related to the Financial Restructuring from (and including)
June 16, 2004 through the date immediately prior to the filing of such
petition; provided further however, that the Company shall not be
obligated to pay for the costs and expenses of separate counsel or financial
advisors retained by any such Initial Participating Holder.  The Initial Participating Holders shall
submit  statements of their costs and
expenses to the Company at least two business days prior to the filing by the
Company of any petition for relief in the Chapter 11 Case.  For purposes of this section herein, Initial
Participating Holder shall mean those Participating Holders set forth on
Schedules 1 & 2 hereto.

 

16.                                 Successors
and Assigns.  Subject to Section 10, this Agreement
is intended to bind and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs, executors, administrators and
representatives.  The agreements,
representations and obligations of the Participating Holders under this
Agreement are, in all respects, several and not joint.

 

17.                                 Notice. All notices, requests, demands,
claims and other communications hereunder shall be in writing and shall be
(a) transmitted by hand delivery, (b) mailed by registered or
certified mail, postage prepaid, (c) transmitted by overnight courier,
addressed as follows or (d) transmitted by telecopy to the number set
forth below (or at such other address and/or number as shall be designated from
time to time by any party hereto in the manner provided for in this Section):

 

If to AET:

 

Applied
Extrusion Technologies, Inc.

15
Read’s Way

New
Castle, DE 19720

Attention:  Brian P. Crescenzo

Facsimile:  (302) 326-5667

 

21

 

-with
a copy to-

 

Shearman
& Sterling LLP

599
Lexington Avenue

New
York, New York 10022

Attention:  Douglas P. Bartner

Facsimile:  (212) 848-7179

 

If to AET Canada

 

Applied
Extrusion Technologies (Canada), Inc.

15
Read’s Way

New
Castle, DE 19720

Attention:  Brian P. Crescenzo

Facsimile:  (302) 326-5667

 

-with
a copy to-

 

Shearman
& Sterling LLP

599
Lexington Avenue

New
York, New York 10022

Attention:  Douglas P. Bartner

Facsimile:  (212) 848-7179

 

If to Applied Extrusion
Technologies Limited:

 

Applied
Extrusion Technologies Limited

15
Read’s Way

New
Castle, DE 19720

Attention:  Brian P. Crescenzo

Facsimile:  (302) 326-5667

 

-with
a copy to-

 

Shearman
& Sterling LLP

599
Lexington Avenue

New
York, New York 10022

Attention:  Douglas P. Bartner

Facsimile:  (212) 848-7179

 

22

 

If to any Participating
Holder, then to all of the Participating Holders  at the address and facsimile number
specified for each of them on their respective signature pages

 

-with
a copy to-

 

Milbank,
Tweed, Hadley & McCloy LLP

1
Chase Manhattan Plaza

New
York, New York  10005

Attention:  Dennis
F. Dunne, Esq.

Facsimile:  212-822-5770

 

A notice shall be deemed
to have been given: (i) in the case of hand delivery, at the time of delivery;
(ii) in the case of registered or certified mail, when delivered or the first
attempted delivery on a business day; (iii) in the case of overnight courier,
upon the first attempted delivery on a business day; or (iv) in the case of a
telecopy transmission, on the date sent, as confirmed by written confirmation
of receipt.  Notices by the
Participating Holders or Ad Hoc
Committee may be given by counsel thereto.

 

18.                                 Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Agreement.  Delivery of an executed
counterpart of a signature page by telecopier shall be effective as delivery of
a manually executed counterpart hereof. 
Any holder of the Notes may become party to this Agreement on or after
the date of this Agreement by executing a signature page to this Agreement.

 

19.                                 No
Third-Party Beneficiaries.  Unless otherwise expressly stated herein,
this Agreement shall be solely for the benefit of the parties hereto, and no
other person or entity shall be a third-party beneficiary hereof.

 

20.                                 No Solicitation.  This Agreement is not and shall not be deemed to be a solicitation
for votes in favor of the Reorganization Plan in the Chapter 11 Case.  Each of the Participating Holders’ votes
with respect to the Reorganization Plan will not be solicited until such
Participating Holder has received the Solicitation Package.  Each party hereto acknowledges that it has been
represented by counsel in connection with this Agreement and the transactions
contemplated hereby.  The provisions of
this Agreement shall be interpreted in a reasonable manner to effectuate the
intent of the parties hereto.

 

21.                                 Further Acquisition of Notes.  This Agreement shall in no way be construed
to preclude any Participating Holder from acquiring additional Notes.  However, any such additional Notes so
acquired by a Participating Holder shall automatically be deemed to be subject
to the terms of this Agreement.

 

23

 

22.                                 Amendments.  This Agreement may not be modified, amended or supplemented
without the prior written consent of all of the parties hereto.

 

23.                                 Indemnification.  AET and AET Canada jointly and severally agree to indemnify and
hold harmless each Participating Holder, each beneficial owner of the Notes and
each of their respective officers, directors, members partners, employees,
agents, and advisors (including Milbank and Houlihan Lokey) and each of their
respective successors and assigns from and against any and all claims, suits,
actions, liabilities, and judgments and costs related thereto (including any
defense costs associated therewith on an as-incurred basis) arising under or in
connection with this Agreement or the transactions contemplated hereby or by
the Restructuring Documents or any act or failure to act taken in
contemplation, furtherance or connection herewith, except if such claim or
liability is determined by a competent court in a final, non-appealable
decision to have arisen solely to the extent of such Participating Holder’s
willful misconduct or gross negligence.

 

24.                                 Further Assurances.  Each of the parties hereto agrees to execute
and deliver, or to cause to be executed and delivered, all such instruments,
and to take all such action as the other parties hereto may reasonably request,
in order to effectuate the intent and purposes of, and to carry out the terms
of, this Agreement.

 

25.                                 Headings.  The
headings of the sections, paragraphs and subsections of this Agreement are
inserted for convenience only and shall not affect the interpretation hereof.

 

26.                                 Several Obligations.  All covenants and other obligations of the
Participating Holders are several and not joint.

 

27.                                 Entire Agreement.  This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all other prior
negotiations, agreements and understandings, both written and oral, among the
parties hereto with respect to the subject matter hereof.

 

28.                                 Additional Participating Holders.  Notwithstanding anything to the contrary,
subsequent to the effectiveness of this Agreement, one or more holders of Notes
who are not signatories hereto (and who are not transferees of any Held Notes)
may, with the consent of all of the Participating Holders and the Company,
execute a counterpart signature page to this Agreement and become Participating
Holders for all purposes herein from and after the execution of such signature
page.

 

[Remainder of Page Left Intentionally Blank]

 

24

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  APPLIED EXTRUSION
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David N. Terhune

  	
   

  
	
   

  	
   

  	
  Name:  David N. Terhune

  
	
   

  	
   

  	
  Title:  President

  
	
   

  	
   

  
	
   

  	
  APPLIED EXTRUSION
  TECHNOLOGIES

  (CANADA), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David N. Terhune

  	
   

  
	
   

  	
   

  	
  Name:  David N. Terhune

  
	
   

  	
   

  	
  Title:  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  APPLIED EXTRUSION
  TECHNOLOGIES LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David N. Terhune

  	
   

  
	
   

  	
   

  	
  Name:  David N. Terhune

  
	
   

  	
   

  	
  Title:  President

  

 

25

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  PARTICIPATING HOLDER:

  
	
   

  	
   

  
	
   

  	
  Barclays Bank PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Steven J. Landzberg

  	
   

  
	
   

  	
   

  	
  Name: Steven J.
  Landzberg

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  
	
   

  	
  Face Amount of Notes
  Held:  (set forth in

  accompanying memorandum).

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
   

  
	
   

  	
  Attention:  Damien Miller &
  Steven J. Landzberg

  
	
   

  	
  200 Park Avenue, 5th
  floor

  
	
   

  	
  New York, NY 10166

  
	
   

  	
  Facsimile:  (212) 412-1706

  

 

 

 IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its duly authorized officer as of the date first
above written.

 

 

	
   

  	
  PARTICIPATING HOLDER:

  
	
   

  	
   

  
	
   

  	
  DDJ
  Capital Management, LLC, as investment manager

  or adviser acting on behalf of certain funds and

  accounts it manages or advises.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David J. Breazzano

  	
   

  
	
   

  	
   

  	
  Name: David J.
  Breazzano

  
	
   

  	
   

  	
  Title: Member

  
	
   

  	
   

  
	
   

  	
  Face Amount of Notes
  Held:  (set forth in

  accompanying memorandum).

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
   

  
	
   

  	
  Attention:  Jackson Craig

  
	
   

  	
  141 Linden Street

  
	
   

  	
  Wellesley, MA  02482

  
	
   

  	
  Facsimile:  (781) 283-8555

  

 

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  PARTICIPATING HOLDER:

  
	
   

  	
   

  
	
   

  	
  Post Advisory Group,
  LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Lawrence A. Post

  	
   

  
	
   

  	
   

  	
  Name: Lawrence A. Post

  
	
   

  	
   

  	
  Title: Chief Investment
  Officer

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
   

  
	
   

  	
  Attention:  Lawrence A. Post

  
	
   

  	
  11755 Wilshire Blvd.,
  Ste. 1400

  
	
   

  	
  Los Angeles, CA 90025

  
	
   

  	
  Facsimile:  (310) 996-9669

  

 

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  PARTICIPATING HOLDER:

  
	
   

  	
   

  
	
   

  	
  Silver Point Capital
  L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Edward Mule

  	
   

  
	
   

  	
  Name: Edward Mule

  
	
   

  	
  Title: 

  
	
   

  	
   

  
	
   

  	
  Face Amount of Notes
  Held:  (set forth in

  accompanying  memorandum).

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
   

  
	
   

  	
  Parag Vora

  
	
   

  	
  Silver Point Capital

  
	
   

  	
  600 Steamboat Road

  
	
   

  	
  Greenwich, CT 06830

  

 

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  PARTICIPATING HOLDERS:

  
	
   

  	
   

  
	
  TCW Shared Opportunity
  Fund III, L.P.

  	
  TCW Shared Opportunity
  Fund IV, L.P.

  
	
   

  	
   

  
	
  Face Amount of Notes
  Held: (set forth in

  accompanying memorandum)

  	
  Face Amount of Notes
  Held: (set forth in

  accompanying memorandum)

  
	
   

  	
   

  
	
  By: TCW Asset
  Management Company, its

  Investment Adviser

  	
  By: TCW Asset
  Management Company, its

  Investment Adviser

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gary Hobart

  	
   

  	
  By: 

  	
  /s/ Gary Hobart

  	
   

  
	
  Name:  Gary Hobart

  	
  Name:  Gary Hobart

  
	
   

  	
   

  
	
  By:

  	
  /s/ C. Shawn Bookin

  	
   

  	
  By: 

  	
  /s/ C. Shawn Bookin

  	
   

  
	
  Name:  C. Shawn Bookin

  	
  Name:  C. Shawn Bookin

  
	
   

  	
   

  
	
  TCW Shared Opportunity Fund IVB, L.P.

  	
  TCW/PCG Special Situation Partners, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  Face Amount of Notes
  Held: (set forth in

  accompanying memorandum)

  	
  Face Amount of Notes
  Held: (set forth in

  accompanying memorandum)

  
	
   

  	
   

  
	
  By: TCW Asset
  Management Company, its

  Investment Adviser

  	
  By: TCW Asset
  Management Company, its

  Investment Adviser

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Gary Hobart

  	
   

  	
  By: 

  	
  /s/ Gary Hobart

  	
   

  
	
  Name:  Gary Hobart

  	
  Name: Gary Hobart

  
	
   

  	
   

  
	
  By:

  	
  /s/ C. Shawn Bookin

  	
   

  	
  By: 

  	
  /s/ C. Shawn Bookin

  	
   

  
	
  Name:  C. Shawn Bookin

  	
  Name:  C. Shawn Bookin

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
  Attention:  Nick Tell

  
	
   

  	
  11100 Santa Monica
  Blvd., Suite 2050

  
	
   

  	
  Los Angeles, CA 90025

  
	
   

  	
  Facsimile:  (310) 235-5965

  
								

 

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  PARTICIPATING HOLDER:

  
	
   

  	
   

  
	
   

  	
  Xerion Partners I LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Daniel J. Arbess

  	
   

  
	
   

  	
   

  	
  Name: Daniel J. Arbess

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  
	
   

  	
   

  
	
   

  	
  Face Amount of Notes
  Held:  (set forth in

  accompanying  memorandum).

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
   

  
	
   

  	
  Attention:  Daniel J. Arbess

  
	
   

  	
  450 Park Avenue, 27th Floor

  
	
   

  	
  New York NY 10022

  
	
   

  	
  Facsimile:  (212) 940-9858

  

 

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its duly authorized
officer as of the date first above written.

 

	
   

  	
  PARTICIPATING HOLDER:

  
	
   

  	
   

  
	
   

  	
  [

  	
   

  	
  ]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  
	
   

  	
   

  
	
   

  	
  [

  	
   

  	
  ]

  	
   

  
	
   

  	
   

  
	
  Transferor:

  	
   

  
	
   

  	
   

  
	
  [

  	
   

  	
  ]

  	
   

  	
  Face Amount of Notes:

  
	
   

  	
  [$

  	
   

  	
  ]

  
	
   

  	
   

  
	
   

  	
  Face Amount of Notes:

  
	
   

  	
  [$

  	
   

  	
  ]

  
											

 

 

EXHIBIT
A

 

 

TERM SHEET FOR
PROPOSED RECAPITALIZATION OF

APPLIED EXTRUSION
TECHNOLOGIES, INC.

 

This term sheet is not an
offer with respect to any securities or solicitation of acceptances of a
chapter 11 plan.  Such offer or
solicitation will be made only in compliance with all applicable securities
laws and/or provisions of the Bankruptcy Code. 
This term sheet is being provided in furtherance of settlement
discussions and is entitled to protection pursuant to Fed. R. Evid. 408 and any
similar rule of evidence.

 

	
  Company:

  	
   

  	
  Applied Extrusion
  Technologies, Inc. (“AET”) and Applied Extrusion Technologies
  (Canada), Inc. (together with AET, the “Company”).

  
	
   

  	
   

  	
   

  
	
  Transaction  Summary:

  	
   

  	
  A recapitalization
  effected through a prepetition solicitation of all of the beneficial holders
  (the “Noteholders”) of AET’s 103⁄4% senior notes (the “Notes”)
  for a prepackaged plan of reorganization for the Company (the “Plan”)
  under chapter 11, whereby (i) Noteholders holding at least $500,000 (such
  Noteholders, the “Large Noteholders”) in Noteholder claims shall
  receive (on the effective date of the Plan (the “Effective Date”))common
  stock (the “New Common Stock”) in Reorganized AET (“Reorganized AET”)
  and new senior notes to be issued by Reorganized AET (the “New Senior
  Notes”) upon the terms and conditions specified herein and (ii)
  Noteholders holding less than $500,000 (such Noteholders, the “Small
  Noteholders”) in Noteholder claims shall receive (on the Effective Date)
  cash upon the terms and conditions specified herein.  The holders (the “Stockholders”) of
  existing common stock (the “Old Common Stock”) will receive cash (upon
  the terms and conditions specified herein) on the Effective Date unless an
  official committee of equity holders (an “Equity Committee”) is
  appointed in the Company’s bankruptcy case (the “Case”), in which
  instance there shall be no recovery for the Stockholders.

  
	
   

  	
   

  	
   

  
	
  Allowed
  Noteholder Claims:

  	
   

  	
  All Noteholder claims
  shall be allowed claims.

  
	
   

  	
   

  	
   

  
	
  Large
  Noteholders Recovery:

  	
   

  	
  100% of New Common
  Stock

  100% of New Senior Notes

  
	
   

  	
   

  	
   

  
	
  Small
  Noteholders Recovery:

  	
   

  	
  Small Noteholders shall
  receive, on account of their Noteholder claims, cash in an amount equal to
  the Cashout Value of the Notes(1) (such cash recovery, the “Small
  Noteholders Cash Recovery”).  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Small Noteholders
  Cash Recovery shall be funded by the Participating Holders (as that term is
  defined in the Restructuring

  
	
   

  	
   

  	
   

  
	
  
  

  

  

  
	
  (1)The “Cashout Value
  of the Notes” shall be based upon a methodology to be determined.

  

 

1

 

	
   

  	
   

  	
  Agreement) who,
  immediately prior to the occurrence of the Effective Date (but after all
  other conditions precedent to the occurrence of the Effective Date have been
  satisfied), shall purchase all of the Noteholder claims of the Small
  Noteholders in exchange for the Small Noteholders Cash Recovery in accordance
  with the terms of a commitment letter between the Participating Holders and
  AET (which commitment letter shall be in a form acceptable to the
  Participating Holders and AET) to be executed prior to the commencement of
  the solicitation.  The Noteholder
  claims purchased by the Participating Holders from the Small Noteholders
  shall receive the same treatment under the Plan as afforded to Noteholder
  claims held by the Large Noteholders. 
  

  
	
   

  	
   

  	
   

  
	
  Stockholder
  Recovery:

  	
   

  	
  No recovery under the
  Plan; provided that the accepting Noteholder classes shall distribute
  to the Stockholders, on a ratable basis, up to $2,500,000 on the Effective
  Date, unless an Equity Committee is appointed in the Case, in which instance
  there shall be no recovery for the Stockholders.  The Plan shall acknowledge that the current equity value is
  zero and that the stockholders are not receiving any distribution under the
  Plan on account of their equity.

  
	
   

  	
   

  	
   

  
	
  Dilution:

  	
   

  	
  The New Common Stock
  will be subject to dilution from management stock options issued or issuable
  pursuant to the terms specified herein.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  New
  Senior Notes:

  	
   

  	
  •  $50,000,000
  aggregate principal amount

  •  Senior
  Unsecured Notes that will be subordinate in payment and priority only to the
  Exit Financing as the principal committed amount of such Exit Financing (i.e.,
  $125,000,000) exists on the Effective Date (subject to certain permitted
  indebtedness exceptions that are acceptable to the Participating Holders and
  AET).

  •  7-year
  term

  •  12.00%
  interest which will be paid, at Reorganized AET’s option, in cash or in kind
  unless both of the following financial criteria are satisfied, in which case
  interest shall be paid in cash:

  •  ratio
  of total debt to EBITDA for trailing twelve months of not more than 3.50x,
  and

  •  minimum
  liquidity of $25,000,000 after giving effect to the interest payment on the
  New Senior Notes.

  •  Call
  protection:

  •  Year
  1: no call

  •  Year
  2: 106.00%

  •       Year 3: 103.00%

  

 

2

 

	
   

  	
   

  	
  •       Year 4: 101.00%

  •       Years 5-7: 100.00%

  •  Other
  terms and conditions as are acceptable to the Participating Holders and the
  Company.

  
	
   

  	
   

  	
   

  
	
  Pro Forma Debt:

  	
   

  	
  The reorganized Company will have up to a maximum of
  $175,000,000 of total debt on the Effective Date, comprised of an Exit
  Facility of up to $125,000,000 and the New Senior Notes.

  

 

I.                                         Prepackaged
Plan of Reorganization

 

	
  Separate
  Classification of Large Noteholders & Small Noteholders

  	
   

  	
  The Large Noteholders
  and the Small Noteholders shall be separately classified.

  
	
   

  	
   

  	
   

  
	
  Required
  Noteholder Approval:

  	
   

  	
  After termination of
  the solicitation period and any applicable time periods in the Restructuring
  Agreement, upon the approval of a majority in number and 662/3%
  in amount of those voting in the Large Noteholders Class, the Case will be
  commenced.  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The approval of the
  Small Noteholders Class shall not be required to commence the Case or to seek
  confirmation of the Plan.

  
	
   

  	
   

  	
   

  
	
  Required
  Stockholder Approval:

  	
   

  	
  The Stockholders shall
  not be solicited for votes accepting or rejecting the Plan; provided,
  however, that the Company may send informational materials to the
  Stockholders in the form and manner described in the Restructuring Agreement.

  
	
   

  	
   

  	
   

  
	
  DIP
  Financing:

  	
   

  	
  DIP Facility providing
  incremental liquidity of up to $20,000,000 to be provided by the existing
  prepetition lenders, upon terms and conditions agreed upon by the
  Participating Holders and the Company.

  
	
   

  	
   

  	
   

  
	
  Exit
  Financing:

  	
   

  	
  Exit Financing of up to
  $125,000,000 to be provided by the DIP Lender upon terms and conditions
  agreed upon by the Participating Holders and the Company.

  
	
   

  	
   

  	
   

  
	
  Notes,
  Old Common Stock and Stock Options:

  	
   

  	
  On the Effective Date,
  all Notes, Old Common Stock, stock options, warrants, or other rights
  exercisable into equity securities of the Company will be canceled.  Treatment of AET’s equity interest in
  Applied Extrusion Technologies (Canada), Inc. to be agreed upon by the
  Company and Participating Holders.

  
	
   

  	
   

  	
   

  
	
  Other
  Unsecured Claims:

  	
   

  	
  Customer and vendor
  contracts and holders of other unsecured claims will be unimpaired under the
  Plan; provided, however, that the 

  

 

3

 

	
   

  	
   

  	
  Company and the
  Participating Holders may agree to impair claims related to certain unexpired
  leases or contracts with entities other than customers or vendors.(2)

  

 

II.                                     Corporate
Governance of the Company

 

	
  Boards of Directors of
  Reorganized AET and Reorganized AET Canada:

  	
   

  	
  The composition of the
  Board of Directors of Reorganized AET (the “Reorganized AET Board”)
  and Reorganized AET Canada (including, in each case, the number of directors)
  shall be determined by the Participating Holders.

  
	
   

  	
   

  	
   

  
	
  Appointment of David N. Terhune
  as Chief Executive Officer :

  	
   

  	
  On the Effective Date,
  David N. Terhune shall become the Chief Executive Officer of Reorganized
  AET.(3)  The terms of Amin J. Khoury’s
  retirement are as set forth in the separate side letter dated as of the date
  of the Restructuring Agreement.  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mr. Terhune’s current
  employment contract with AET shall be (i) amended and restated to reflect
  such terms and conditions as may be agreed upon by Mr. Terhune and the
  Participating Holders and (ii) assumed, in such amended and restated form,
  immediately prior to the confirmation hearing on the Plan.

  
	
   

  	
   

  	
   

  
	
  Senior Management:

  	
   

  	
  The composition of the
  senior management team of the Reorganized Company will be agreed upon by the
  Company and the Participating Holders.

  
	
   

  	
   

  	
   

  
	
  Management Incentive Program:

  	
   

  	
  On or within 30 days of
  the Effective Date, the Reorganized AET Board will establish a stock option
  program, representing a number of shares of New Common Stock equal to 3% of
  the New Common Stock issued and outstanding on the Effective Date.  Additionally, a number of shares of New
  Common Stock equal to 2% of the New Common Stock issued and outstanding on
  the Effective Date (but without taking into account the 3% reserved for stock
  options) will be held in reserve for such incentive program.

  

 

III.                                 Other
Provisions

 

	
  Other Terms:

  	
   

  	
  The Plan will provide
  for other matters customary for prepackaged 

  

 

(2)                                  Rejection
damage claims arising from such impaired contracts and leases shall be placed
in the same class as the “Other Unsecured Claims;” provided however,
that the as a condition precedent to the effectiveness of the Plan, the allowed
rejection damage claims shall not be greater than an amount to be agreed upon
by the Company and the Participating Holders.

 

(3)                                  Mr.
Terhune shall continue to serve as President of Reorganized AET; however,
immediately prior to occurrence of the Effective Date, he shall resign from his
position as Chief Operating Officer. 

 

4

 

 

	
   

  	
   

  	
  plans of
  reorganization, including, but not limited to, classification and treatment
  of claims, releases of the Company’s officers, directors and advisors,
  releases of the Participating Holders and their advisors, a stockholders’
  agreement, restated charter and bylaws and other terms, in each case upon
  terms and conditions agreed upon by the Participating Holders and the
  Company.

  

 

5

 

EXHIBIT
B

 

 

Assumption Agreement

 

The undersigned
                       
(the “Transferee”), as a condition precedent to becoming the beneficial
holder or owner of  [                     ]
dollars
($              )
in face amount of 10-3/4% Senior Notes due 2011 (such Senior Notes, the
“Purchased Notes”) issued by Applied Extrusion Technologies, Inc. (“AET”),
hereby agrees to become, with respect to the Purchased Notes (and only with
respect to the Purchased Notes), bound by the obligations set forth in that
certain Restructuring Agreement by and among AET, Applied Extrusion
Technologies Canada, Inc., Applied Extrusion Technologies Limited and the
Participating Holders, dated August [  ], 2004 (the “Agreement”);
provided, however, that it shall not be bound by the terms of the
Retirement Agreement (as that term is defined in the Agreement) for any purpose
and shall not be deemed to be a party to the Retirement Agreement.  This Assumption Agreement shall take effect
and shall become an integral part of the Agreement immediately upon its
execution and the Transferee shall be deemed to be bound by all of the obligations
of the Agreement with respect to the Purchased Notes (and only with respect to
the Purchased Notes) from and after the date set forth below; provided
however, that the Transferee shall not be deemed to be a Participating
Holder (as that term is defined in the Agreement) for any of the purposes
specified therein and shall not be entitled to exercise any of the rights
accorded to Participating Holders under the terms thereof .

 

IN WITNESS WHEREOF, this ASSUMPTION AGREEMENT
has been duly executed by each of the undersigned as of the date specified
below.

 

	
   

  	
  Dated:

  	
   

  	
  , 2004.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Transferee:

  	
  Transferor:

  
	
   

  	
   

  	
   

  
	
   

  	
  [

  	
   

  	
  ]

  	
  [

  	
   

  	
  ]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
  Face Amount of
  Purchased Notes:

  
	
   

  	
  Name:

  	
  [$

  	
   

  	
  ]

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Contact Information for
  Notice:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [

  	
   

  	
  ]

  	
   

  	
   

  	
   

  
												

 

 

SCHEDULE 1

 

DDJ
Capital Management, LLC

 

Post
Advisory Group, LLC

 

TCW Shared Opportunity Fund III, L.P.

 

TCW Shared Opportunity Fund IV, L.P.

 

TCW Shared Opportunity Fund
IVB, L.P.

 

TCW/PCG Special Situation
Partners, LLC

 

Xerion Partners I LLC

 

 

SCHEDULE 2

 

Barclays
Bank PLC

 

Silver
Point Capital L.P.

 

 

SCHEDULE 3

 

AET/UK
Assets

 

	
  Bank Account

  Number

  	
   

  	
  Balance at

  6/30/2004

  	
   

  	
  Exch.

  Rate

  	
   

  	
  Balance in
  USD

  	
   

  
	
  30118575

  	
   

  	
  £

  	
  5,000.00

  	
   

  	
  1.8194

  	
   

  	
  $

  	
  9,097.00

  	
   

  
	
  30118583

  	
   

  	
  £

  	
  11,999.06

  	
   

  	
  1.8194

  	
   

  	
  $

  	
  21,831.09

  	
   

  
	
  44760877

  	
   

  	
  €

  	
  5,387.23

  	
   

  	
  1.1296

  	
   

  	
  $

  	
  6,085.42

  	
   

  
	
  67743866

  	
   

  	
  $

  	
  42.90

  	
   

  	
   

  	
   

  	
  $

  	
  42.90

  	
   

  
	
  83195233

  	
   

  	
  $

  	
  6,828.43

  	
   

  	
   

  	
   

  	
  $

  	
  6,828.43

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  43,884.83Exhibit 10.21

 

PUBLIC MEDIA WORKS, INC.

 

PROMISSORY NOTE

 

This PROMISSORY NOTE AGREEMENT (this
“Agreement”) is made as of the 1st day of June, 2004 by and among PUBLIC MEDIA WORKS, INC., a Delaware
corporation (the “Company”), and Mike Wittlin (“Mr. Wittlin”.)

 

THE PARTIES HEREBY AGREE AS FOLLOWS:

 

 

PROMISSORY NOTE.

 

Mr. Wittlin
agrees to contribute as debt under the terms of this Promissory Note the amount
of Two Hundred  and Twenty Five Thousand
Dollars ($225,000.00) for a period of one year.  This Promissory Note shall accrue interest at a rate of six
percent per annum (6%) which shall be added to the principal investment amount
at the end of the term.

 

 

IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date first above written.

 

 

	
   

  	
  PUBLIC MEDIA
  WORKS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ TOM
  SZABO

  
	
   

  	
  Name:

  	
  TOM SZABO

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  /s/ MIKE
  WITTLIN

  
	
   

  	
  MIKE WITTLIN

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}]]