Document:

<PAGE>

                                                                  Exhibit 10.1.6

                                                                  CONFORMED COPY

                                          AMENDMENT NO. 2

     AMENDMENT NO. 2 (the "Amendment") dated as of September 28, 2001 of the
Credit Agreement dated as of April 7, 1994 and amended and restated as of
January 29, 1998, as amended by Waiver and Amendment No. 1 dated as of December
16, 1998, further amended and restated as of March 15, 1999, further amended by
Amendment No. 1 dated as of April 23, 1999, further amended and restated as of
April 12, 2000 and September 30, 2000, further amended by Amendment No. 1 dated
as of December 31, 2000, further amended and restated as of April 15, 2001 and
further amended by Waiver and Amendment No. 1 dated as of June 15, 2001 (the
"Credit Agreement"), among APPLIED EXTRUSION TECHNOLOGIES, INC. (the "Company"),
the LENDERS party thereto (the "Lenders") and THE CHASE MANHATTAN BANK, as
Administrative Agent (the "Administrative Agent").

                              W I T N E S S E T H :

     WHEREAS, the Company and the Lenders have agreed to permit the disposition
of certain assets and make certain related changes and the Administrative Agent
has, with the Lenders' consent, agreed to release the security interests in such
assets, all as more fully set forth below;

     NOW, THEREFORE, the parties hereto agree as follows:

     Section 1. Definitions; References. Unless otherwise specifically defined
in the recitals above, each term used herein which is defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Credit Agreement shall, from and after the date
hereof, refer to the Credit Agreement as amended hereby.

     Section 2. Section 1.01. Section 1.01 of the Credit Agreement is amended by
adding in appropriate alphabetical order the following definition:

     "Specialty Nets and Nonwoven Assets" shall mean the assets used in the
      ----------------------------------
manufacture and sale of (x) nets and embossed film products of the type
currently marketed under the "Delnet", "Stratex" and "Plastinet" names, and (y)
nonwoven fabric and apertured film products of the type currently marketed under
the "Delpore" name for sale to, among others, manufacturers selling products to
the filtration, medical and speciality textile markets, which assets (other than
certain

<PAGE>

inventory located elsewhere) are all currently located at or part of the plant
in Middletown, Delaware or at Applied Extrusion Technologies, Ltd.'s offices at
Suite 28, Aztec Centre, Aztec West, Almondsbury, Bristol, U.K.

     Section 3. Section 9.12. Section 9.12 of the Credit Agreement is amended by
amending clause (viii) to add after the words "of the Terre Haute Tubular
Assets" the following words ", of the Specialty Nets and Nonwoven Assets", and
to add after the words "Section 3.02(b)(i)(4)" the words "(except in the case of
the disposition of the Specialty Nets and Nonwoven Assets, which shall not be
subject to such conditions, notwithstanding anything to the contrary set forth
in Section 3.02(b)(i)(4)".

     Section 4. Release. The Administrative Agent hereby releases the security
interests created by the Security Documents in the Specialty Nets and Nonwoven
Assets (the "Assets") effective upon the consummation of the sale of the Assets
pursuant to the Asset Purchase Agreement between the Company and DelStar
Technologies, Inc. substantially in the form provided to the Administrative
Agent and the Lenders on September 28, 2001. The Lenders consent to such
release.

     Section 5. Representations of Company. The Company represents and warrants
that (i) the representations and warranties of the Company and its Subsidiaries
made in each Basic Document shall be true (or, in the case of Basic Documents
which are not Financing Documents, true in all material respects) on and as of
the Amendment Effective Date (as hereinafter defined) to the same extent as they
would be required to be under Section 7.01(b) on the occasion of any Loan or
issuance of any Letter of Credit and (ii) no Default will have occurred and be
continuing on such date.

     Section 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

     Section 7. Counterparts; Effectiveness. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective on the date (the "Amendment Effective Date")
when the Administrative Agent shall have received from each of the Company, the
Administrative Agent and the Majority Lenders a counterpart hereof signed by
such party or facsimile or other written confirmation (in form satisfactory to
the Administrative Agent) that such party has signed a counterpart hereof.

                                       2

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         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.

                                         APPLIED EXTRUSION TECHNOLOGIES,
                                         INC.

                                         By /s/ Anthony J. Allott
                                            ------------------------------------
                                            Name:  Anthony J. Allott
                                            Title: Senior Vice President and
                                                   Chief Financial Officer

                                         THE CHASE MANHATTAN BANK, as
                                         Lender and as Administrative Agent

                                         By /s/ Peter A. Dedousis
                                           -------------------------------------
                                           Name:  Peter A. Dedousis
                                           Title: Managing Director

                                         LASALLE BUSINESS CREDIT, INC.

                                         By /s/ John S. Eby
                                           -------------------------------------
                                           Name:  John S. Eby
                                           Title: Vice President

                                         FLEET NATIONAL BANK

                                         By /s/ Daniel Durkin
                                            ------------------------------------
                                            Name:  Daniel Durkin
                                            Title: Authorized Officer

                                       3

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                                          PNC BANK, N.A.

                                          By ___________________________________
                                             Name:
                                             Title:

                                          FIRST UNION NATIONAL BANK

                                          By /s/ John T. Trainor
                                             -----------------------------------
                                             Name:  John T. Trainor
                                             Title: Vice President

                                          PROVIDENT BANK

                                          By /s/ Cary M. Sierzputowski
                                             -----------------------------------
                                             Name:  Cary M. Sierzputowski
                                             Title: Vice President

                                       4<PAGE>

                                                                 Exhibit 10.15.2

                      APPLIED EXTRUSION TECHNOLOGIES, INC.

                 EXECUTIVE DEFERRED COMPENSATION RETIREMENT PLAN

                  (Amended and Restated as of August 10, 2001)

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                      APPLIED EXTRUSION TECHNOLOGIES, INC.
                 EXECUTIVE DEFERRED COMPENSATION RETIREMENT PLAN
                  (Amended and Restated as of August 10, 2001)

Article 1. - INTRODUCTION

     1.1. Amendment and Restatement. This Plan amends, restates and continues,
          -------------------------
effective August 10, 2001, the Applied Extrusion Technologies, Inc. Executive
Deferred Compensation Plan, originally established effective September 1, 1994
and amended, restated and renamed as of December 31, 1999. Except as otherwise
expressly provided herein, the rights of Participants who ceased to be employees
prior to August 10, 2001 and do not subsequently become Eligible Employees shall
be determined in accordance with the terms of the Plan as in effect when they
ceased to be employees.

     1.2. Purpose of Plan. Applied Extrusion Technologies, Inc. has adopted the
          ---------------
Plan set forth herein to provide a competitive level of retirement benefits to
certain designated employees by allowing them to defer receipt of designated
percentages of their compensation and to provide additional Company Credits in
certain cases.

     1.3. Status of Plan. The Plan is intended to be "a plan which is unfunded
          --------------
and is maintained by an employer primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees"
within the meaning of Sections 201(2), 301(a)(3), 401(a)(1), and 4021(b)(6) of
ERISA, and shall be interpreted and administered to the extent possible in a
manner consistent with that intent.

Article 2. - DEFINITIONS

     Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:

     2.1. "Account" means, for each Participant, the account established for his
or her benefit under Section 5.1.

     2.2. "Administrator" means a committee comprised of such members of the
Board of Directors or executive officers of the Company as may be appointed by
its Chief Executive Officer from time to time.

     2.3. "Code" means the Internal Revenue Code of 1986, as amended from time
to time. Reference to any section or subsection of the Code includes reference
to any comparable

                                      -1-

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or succeeding provisions of any legislation which amends, supplements or
replaces such section or subsection.

     2.4. "Company" means Applied Extrusion Technologies, Inc., any affiliates
that adopt the Plan with the knowledge and consent of the Administrator, and any
successor to all or a major portion of the Company's assets or business which
assumes the obligations of the Company generally.

     2.5. "Company Credit" means any credit which is received by a Participant
under Section 4.2.

     2.6. "Company Credit Eligible Employee" means each employee of the Company
selected by the Administrator as eligible for Company Credits under Section 4.2
from among the group of highly compensated or managerial employees of the
Company, provided such individual has been employed by the Company for at least
90 days, and is not a participant in the Applied Extrusion Technologies, Inc.
1999 Supplemental Executive Retirement Plan.

     2.7. "Elective Deferral" means the portion of Compensation which is
deferred by a Participant under Section 4.1.

     2.8. "Elective Deferral Eligible Employee" means each employee of the
Company selected by the Administrator as eligible for Elective Deferrals under
Section 4.1. from among the group of highly compensated or managerial employees
of the Company, provided such individual has been employed by the Company for at
least 90 days.

     2.9. "Eligible Employee" means an employee of the Company who is a Company
Credit Eligible Employee, an Elective Deferral Eligible Employee, or both.

     2.10. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to any section or subsection of ERISA
includes reference to any comparable or succeeding provisions of any legislation
which amends, supplements or replaces such section or subsection.

     2.11. "Participant" means any individual who participates in the Plan in
accordance with Article 3.

     2.12. "Plan" means the Applied Extrusion Technologies, Inc. Executive
Deferred Compensation Retirement Plan set forth herein and all subsequent
amendments hereto.

     2.13. "Plan Year" means the 12-month period ending each September 30.

Article 3. - PARTICIPATION

                                      -2-

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     3.1. Commencement of Participation. Any individual who is an Eligible
          -----------------------------
Employee and who has elected to defer part of his or her regular salary or bonus
for the Plan Year in accordance with Section 4.1, or who has been selected to
receive a Company Credit in accordance with Section 4.2, shall become a
Participant on the date such election or credit is made.

     3.2. Continued Participation. Subject to Section 3.3, an individual who has
          -----------------------
become a Participant in the Plan shall continue to be a Participant so long as
any amount remains credited to his or her Account.

     3.3. Termination of Participation. The Administrator may terminate an
          ----------------------------
employee's participation in the Plan prospectively or retroactively for any
reason, including but not limited to the Administrator's determination that such
termination is necessary in order to maintain the Plan as a "plan which is
unfunded and is maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees" within the meaning of sections 201(2), 301(a)(3), 401(a)(1), and
4021(b)(6) of ERISA. Amounts credited to a Participant's Account shall be paid
out to such Participant in a single lump sum cash payment as soon as reasonably
practical following termination of participation hereunder.

Article 4. - DEFERRALS AND CREDITS

     4.1. Elective Deferrals.
          ------------------

           (a) In general. An Elective Deferral Eligible Employee may elect to
     defer a designated portion of regular salary to be earned during a Plan
     Year, by filing a written election with the Administrator prior to the
     first day of the Plan Year in which such salary is to be earned. Such
     Eligible Employee may also elect to defer a designated portion of any bonus
     to be earned during a Plan Year (which would otherwise be determined and
     payable after the end of the Plan Year) by filing a written election with
     the Plan Administrator no later than March 31st of the Plan Year. An
     individual who first becomes an Elective Deferral Eligible Employee on or
     after the first day of any Plan Year may elect to defer a portion of base
     salary and/or bonus to be earned during the remainder of the Plan Year and
     after the written election is filed with the Administrator.

           (b) Nature of Election. Each election under this Section 4.1 for a
     Plan Year (or the balance of a Plan Year) shall be made on a form approved
     or prescribed by the Administrator, shall be irrevocable by the Participant
     for the Plan Year, and (except as provided in Section 4.1(a)) shall apply
     only to regular salary or bonus earned after the date the election form is
     completed and filed with the Administrator. The election form shall also
     specify whether the deferral election is to apply to payments of base
     salary,

                                      -3-

<PAGE>

     bonuses, or both, and shall specify the whole percentage or flat dollar
     amount of each that is to be deferred. The deferred amounts shall be
     credited to the Participant's Account as of the date such compensation
     would otherwise have been paid to the Participant.

4.2. Company Credits.
     ---------------

          (a) In general. As of June 30, 2002, and each June 30 thereafter, the
     Company will credit to the Account of each individual who is a Company
     Credit Eligible Employee as of such date, a Company Credit equal to either
     (a) if such individual is a Vice President or Senior Vice President of the
     Company, 15.0% (or such other amount determined by the Company's Board of
     Directors) of the Company Credit Eligible Employee's "Compensation" for the
     year or (b) if such individual is not a Vice President or Senior Vice
     President of the Company, 7.5% (or such other amount determined by the
     Company's Board of Directors) of the Company Credit Eligible Employee's
     "Compensation" for the year. "Compensation" for purposes of this section
     4.2 (a) means the sum of (i) the actual amount of base salary paid to the
     eligible Employee for the 12-month period ending on the applicable June 30,
     and (ii) the amount of any cash bonus actually received by the Eligible
     Employee from the Company during the 12-month period ending on the
     applicable June 30."

          (b) In the event of death. Notwithstanding section 4.2(a), in the
     event that a Company Credit Eligible Employee, who at the time of his death
     is fully vested in his Company Credits pursuant to section 5.4 below, dies
     in service prior to a particular June 30, the Company will credit his
     Account with a Company Credit equal to 7.5% (or such other amount
     determined by the Company's Board of Directors) of his "Compensation."
     "Compensation" for purposes of this section 4.2(b) means the sum of (i) the
     actual amount of base salary paid to the Eligible Employee for the period
     beginning on the July 1 immediately preceding his death and ending on the
     date of his death, and (ii) the amount of any cash bonus actually received
     by the Eligible Employee from the Company during the period beginning on
     the July 1 immediately preceding his death and ending on the date of his
     death. Any Company Credit made pursuant to this section 4.2(b) will be made
     as of either the date of the Company Credit Eligible Employee's death, or
     the immediately following June 30, in the discretion of the Company.

Article 5. - ACCOUNTS; INTEREST

     5.1. Accounts. The Administrator shall establish an Account for each
          --------
Participant reflecting Elective Deferrals, Company Credits, and any adjustments
hereunder. As soon as

                                      -4-

<PAGE>

reasonably practical after the end of each Plan Year, the Administrator shall
provide the Participant with a statement of his or her Account.

     5.2. Earnings Measurement. The Administrator shall identify one or more
          --------------------
funds (such as mutual funds, bank collective funds, or a hypothetical fund
comprised solely of Company common stock) from time to time for the purpose of
measuring earnings credits to Participants' Accounts. Each Participant may
specify which one or more of such funds he or she wishes to be used as a
measuring vehicle for designated percentages of his or her Account, in such form
and manner, and with such notice, as the Administrator may prescribe, provided
that such directions may be given on a prospective basis only. Changes in
Participant directions hereunder may be made as of the first business day of any
calendar quarter (or such other times as the Administrator may prescribe). Each
Participant's Account shall be adjusted from time to time (at least quarterly)
to reflect the fair market value that would be ascribed to the Account if the
amounts credited to the Account were actually invested in the funds as directed
by the Participant. For purposes of Company Credits, earnings credits (if any)
shall begin to accrue as of the actual date of contribution and investment by
the Company of Funds into a grantor trust pursuant to Section 9.1 hereof.

     5.3. Payments. Each Participant's Account shall be reduced by the amount of
          --------
any payment made to or on behalf of the Participant under Article 6 as of the
date such payment is made.

     5.4. Vesting. A Participant will at all times be 100% vested in the portion
          -------
of his or her Account attributable to Elective Deferrals, and will earn a
nonforfeitable interest to be vested in the portion of the Account attributable
to any Company Credits according to the following schedule, based on his or her
aggregate years of service with the Company or its affiliates, including all
service prior to the date Company Credits are first made.

             Years of Service                   % Vested
             ----------------                   --------
             less than 5                            0
             5 or more                            100

Article 6. - PAYMENTS

     6.1. Severe Financial Hardship (Elective Deferrals). A Participant who
          ----------------------------------------------
believes he or she is suffering a severe financial hardship may apply to the
Administrator for a distribution under the Plan in order to alleviate such
hardship. The Administrator, in its sole discretion (but after taking into
account, among other factors, the nature and foreseeability of the alleged
hardship, the Participant's other resources, and the effect of making a
distribution on the intended tax status of the deferrals made under the Plan),
may direct the Company to pay to the Participant an amount which it determines
is necessary or appropriate, not to exceed the

                                      -5-

<PAGE>

     Participant's Account balance attributable to Elective Deferrals under
     Section 4.1, if any, and the Company shall pay such amount to the
     Participant in a single lump sum cash payment.

     6.2. Termination of Employment. As soon as reasonably practical following
          -------------------------
termination of employment for any reason including retirement or death, a
Participant shall receive distributions as follows:

           (a) Payment will normally be made in five annual cash installments,
     the first such installment to be made as soon as reasonably practicable
     following termination of employment, and succeeding installments to be made
     approximately at each of the four following anniversaries thereof. The
     amount of each installment shall be determined by dividing the
     Participant's Account balance (adjusted through the day before the
     installment) by the number of installments remaining.

           (b) Notwithstanding paragraph (a) above at least 13 months prior to
     the Participant's termination of employment he or she may elect to receive
     payment:

                (i)  in either three or ten annual cash installments, such
          installments to be determined in a manner similar to that described in
          Section 6.2(a) above, adjusted appropriately to reflect the three-year
          or ten-year term, or

                (ii) in a single lump sum cash payment to be received as soon as
          reasonably practicable following such termination, provided, however,
          that if the Participant's total Account balance exceeds $50,000 a lump
          sum payment shall not be made without the approval of the
          Administrator in its sole discretion after taking into account the
          Participant's other resources, the financial obligations of
          Participant with respect to which the lump sum is sought, and the
          impact of such payment on the cash needs and tax position of the
          Company.

     Any election made under this Section 6.2 shall be made in writing on a form
     prescribed or approved by the Administrator, and may be similarly revoked
     at any time prior to the beginning of the 13-month period described above.
     In addition, if a Participant dies prior to the complete distribution of
     his or her Account, the remaining balance shall be distributed to his or
     her beneficiary as determined under Section 6.3 below as soon as reasonably
     practicable following the Participant's death.

     6.3. Beneficiary Designation. A Participant shall designate a beneficiary
          -----------------------
who shall be entitled to receive the single lump sum payment due the Participant
under the Plan in the event of the Participant's death. Such designation shall
be made in writing on a form approved or prescribed by the Administrator, and
may be changed by the Participant at any time. If there is no such designation
or no designated beneficiary survives the Participant, payment shall be made to
the Participant's estate.

                                      -6-

<PAGE>

Article 7. - ADMINISTRATOR

         7.1. Plan Administration and Interpretation. The Administrator shall
              --------------------------------------
oversee the administration of the Plan. The Administrator shall have complete
discretionary control and authority to administer all aspects of the Plan,
including without limitation the power to appoint agents and counsel, and to
determine the rights and benefits and all claims, demands and actions arising
out of the provisions of the Plan of any Participant, beneficiary, deceased
Participant, or other person having or claiming to have any interest under the
Plan, in a manner consistent with Section 7.2. The Administrator shall have the
exclusive discretionary power to interpret the Plan and to decide all matters
under the Plan. Such interpretation and decision shall be final, conclusive and
binding on all Participants and any person claiming under or through any
Participant, in the absence of clear and convincing evidence that the
Administrator acted arbitrarily and capriciously. Any individual serving as
Administrator, or on a committee acting as Administrator, who is a Participant
will not vote or act on any matter relating solely to himself or herself. When
making a determination or calculation, the Administrator shall be entitled to
rely on information furnished by a Participant, a beneficiary, or any other
person or entity. The Administrator shall be deemed to be the Plan administrator
with responsibility for complying with any reporting and disclosure requirements
of ERISA.

         7.2. Claims Procedure.
              ----------------

                  (a) In general. If any person believes he or she is being
         denied any rights or benefits under the Plan, such person may file a
         claim in writing with the Administrator. If any such claim is wholly or
         partially denied, the Administrator will notify such person of its
         decision in writing. Such notification will contain (i) specific
         reasons for the denial, (ii) specific reference to pertinent plan
         provisions, (iii) a description of any additional material or
         information necessary for such person to perfect such claim and an
         explanation of why such material or information is necessary and (iv)
         information as to the steps to be taken if the person wishes to submit
         a request for review. Such notification will be given within 90 days
         after the claim is received by the Administrator (or within 180 days,
         if special circumstances require an extension of time for processing
         the claim, and if written notice of such extension and circumstances is
         given to such person within the initial 90 day period). If such
         notification is not given within such period, the claim will be
         considered denied as of the last day of such period and such person may
         request a review of his or her claim.

                  (b) Appeals. Within 60 days after the date on which a person
         receives a written notice of a denied claim (or, if applicable, within
         60 days after the date on which such denial is considered to have
         occurred) such person (or his or her duly authorized representative)
         may (i) file a written request with the Administrator for a review of
         his or her denied claim and of pertinent documents and (ii) submit
         written issues and comments to the Administrator. The Administrator
         will notify such person of its

                                      -7-

<PAGE>

         decision in writing. Such notification will be written in a manner
         calculated to be understood by such person and will contain specific
         reasons for the decision as well as specific references to pertinent
         plan provisions. The decision on review will be made within 60 days
         after the request for review is received by the Administrator (or
         within 120 days, if special circumstances require an extension of time
         for processing the request, such as an election by the Administrator to
         hold a hearing, and if written notice of such extension and
         circumstances is given to such person within the initial 60 day
         period). If the decision on review is not made within such period, the
         claim will be considered denied.

         7.3. Indemnification of Administrator. The Company agrees to indemnify
              --------------------------------
and to defend to the fullest extent permitted by law any director, officer or
employee of the Company or any affiliated company who serves as the
Administrator or as a member of a committee appointed to serve as Administrator,
or who assists the Administrator in carrying out its duties as part of his
employment (including any such individual who formerly served in any such
capacity) against all liabilities, damages, costs and expenses (including
attorneys' fees and amounts paid in settlement of any claims approved by the
Company) occasioned by any act or omission to act in connection with the Plan,
if such act or omission is in good faith.

Article 8. - AMENDMENT, TERMINATION OR ASSIGNMENT

         8.1. Amendments. Prior to a Change of Control as defined in Appendix A
              ----------
hereof the Company shall have the right to amend this Plan (including Appendix
A) from time to time, subject to Section 8.4, by an instrument in writing which
has been executed on its behalf by an officer thereof or by vote of its Board of
Directors. No amendment to the Plan with respect to any Participant may be made
after a Change in Control without the written consent of such Participant (or
beneficiary, if applicable).

         8.2. Net Worth Test. Notwithstanding any provision to the contrary in
              --------------
this Plan, in the event that as of the last day of any fiscal quarter of the
Company that occurs after the Effective Date, either (i) the Tangible Net Worth
of the Company is less the $25,000,000, or (ii) the Interest Coverage Ratio of
the Company shall be below 0.9:1, then the Plan immediately shall terminate, and
the Company shall distribute to each Participant his or her Account balance, in
a lump sum payment, as soon as practicable thereafter. For purposes of this
Plan:

              (a) "Tangible Net Worth" shall mean at any date the consolidated
         stockholders' equity of the Company and its subsidiaries determined as
         of such date, less any intangible assets included on the balance sheet
         at the same date;

              (b) "Interest Coverage Ratio" shall mean the Cash Flow of the
         Company for the trailing four quarters divided by the Interest Expense
         of the Company for the trailing four quarters;

                                      -8-

<PAGE>

          (c) "Cash Flow" shall mean for any period, (i) the sum (without
     duplication), determined on a consolidated basis for the Company and its
     subsidiaries, of (x) the operating profit of the Company and its
     subsidiaries (calculated before provision for income taxes, interest
     expense, extraordinary and non-recurring items and income attributable to
     equity in affiliates) for such period, plus (y) depreciation, amortization
     and other non-cash items (to the extent deducted in determining operating
     profit) for such period minus (ii) proceeds received by the Company and its
     subsidiaries during such period (to the extent included in determining
     operating profit) of any property insurance policy.

          (d) "Interest Expense" shall mean for any period, the sum (determined
     without duplication) of the aggregate amount of interest accruing during
     such period on indebtedness of the Company and its subsidiaries (on a
     consolidated basis), including the interest portion of payments under
     capital lease obligations and any capitalized interest, and excluding
     amortization of debt discount and expense.

     8.3. Termination of Plan. This Plan is strictly a voluntary undertaking on
          -------------------
the part of the Company and shall not be deemed to constitute a contract between
the Company and any Eligible Employee (or any other employee) or a consideration
for, or an inducement or condition of employment for, the performance of
services by any Eligible Employee (or other employee). The Company reserves the
right to terminate this Plan at any time, subject to Section 8.4, by an
instrument in writing which has been executed its behalf by an officer thereof
or by vote of its Board of Directors.

     8.4. Existing Rights. No amendment or termination of the Plan shall
          ---------------
adversely affect the rights of any Participant with respect to amounts credited
to his or her Account as of the date of such amendment or termination (subject
to future adjustments as a result of investment measurements).

     8.5. Assignment. The rights and obligations of the Company shall enure to
          ----------
the benefit of and shall be binding upon the its successors and assigns.

Article 9. - MISCELLANEOUS

                                      -9-

<PAGE>

     9.1. Grantor Trust. The Company shall establish a trust of which the
          -------------
Company is treated as the owner under Subpart E of Subchapter J, Chapter 1 of
the Internal Revenue Code of 1986, as amended (a "grantor trust") and as soon as
practicable (but in any event within 30 days) after an amount is credited to an
Account hereunder, shall deposit with the trustee of the trust an amount of cash
or marketable securities (including, in the Company's discretion, Company stock
to the extent such stock is an earnings measurement under the Plan) sufficient
to cause the fair market value of the assets held in the trust to be not less
than the sum of the Account balances under the Plan. Any such deposits shall be
irrevocable and for the exclusive purpose of paying benefits under the Plan and
such other purposes as may be set forth in the trust. Except for the foregoing,
nothing in this Plan will be construed to create a trust or to obligate the
Company or any other person to segregate a fund, purchase an insurance contract,
set aside any shares of Company stock, or in any other way currently to fund the
future payment of any benefits hereunder, nor will anything herein be construed
to give any employee or any other person rights to any specific assets of the
Company or of any other person. Any benefits which become payable hereunder that
are not paid out of the grantor trust shall be paid from the general assets of
the Company.

     9.2. Nature of Claim for Payment. Each Participant and beneficiary will be
          ---------------------------
an unsecured general creditor of the Company with respect to all benefits
payable under the Plan. Except with respect to amounts deposited in a grantor
trust and consistent with the terms of any such trust, nothing in this Plan will
be construed to give any individual rights to any specific assets of the Company
or other person or entity.

     9.3. Nonalienation of Benefits. None of the benefits, payments, proceeds or
          -------------------------
claims of any Participant or beneficiary shall be subject to any claim of any
creditor and, in particular, the same shall not be subject to attachment or
garnishment or other legal process by any creditor, nor shall any Participant or
beneficiary have any right to alienate, anticipate, commute, pledge, encumber or
assign any of the benefits or payments or proceeds which he may expect to
receive, contingently or otherwise, under this Plan.

     9.4. No Contract of Employment. Participation in this Plan shall not give
          -------------------------
any Eligible Employee the right to be retained in the employ of the Company or
any right or interest in the Plan other than as herein provided. The Company
reserves the right to dismiss any Eligible Employee without any liability for
any claim against the Company, except to the extent provided herein.

     9.5. Receipt and Release. Any payment to any Participant or beneficiary in
          -------------------
accordance with the provisions of this Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Company and the Administrator under
this Plan, and the Administrator may require such Participant or beneficiary, as
a condition precedent to such payment, to execute a receipt and release to such
effect. If any Participant or beneficiary is determined by the Administrator to
be incompetent by reason of physical or mental disability (including minority)
to give a valid receipt and release, the Administrator may cause the payment or

                                     -10-

<PAGE>

payments becoming due to such person to be made to another person for his or her
benefit without responsibility on the part of the Administrator or the Company
to follow the application of such funds.

     9.6. Severability of Provision. If any provision of this Plan shall be held
          -------------------------
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and this Plan shall be construed and enforced as if
such provision had not been included.

     9.7. Government Regulations. It is intended that this Plan will comply with
          ----------------------
all applicable laws and government regulations, and the Company shall not be
obligated to perform an obligation hereunder in any case where, in the opinion
of the Company's counsel, such performance would result in the violation of any
law or regulation.

     9.8. Governing Law. This Plan shall be construed, administered, and
          -------------
governed in all respects under and by the laws of the Commonwealth of
Massachusetts. If any provision shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.

     9.9. Headings and Subheadings. Headings and subheadings in this Plan are
          ------------------------
inserted for convenience only and are not to be considered in the construction
of the provisions hereof.

     IN WITNESS WHEREOF, Applied Extrusion Technologies, Inc. has caused this
Plan to be executed by its duly authorized officer this 10th day of August,
2001.

                                            APPLIED EXTRUSION TECHNOLOGIES. INC.

                                            By: ________________________________

                                      -11-

<PAGE>

                                    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, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act)
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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