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EXHIBIT 10.1

                                 NVE CORPORATION
                             2000 STOCK OPTION PLAN

1.       ESTABLISHMENT AND PURPOSE.

         1.1      ESTABLISHMENT. NVE Corporation, a Minnesota Corporation, is
                  establishing this 2000 Stock Option Plan (the "PLAN") for
                  employees and others providing services to the Company. The
                  Plan permits the granting of both Nonstatutory Options and
                  Incentive Stock Options.

         1.2      PURPOSE. The purposes of the Plan are to enhance shareholder
                  investment by attracting, retaining and motivating employees
                  and consultants of the Company and to encourage stock
                  ownership by such employees and consultants by providing them
                  with a means to acquire a proprietary interest in the
                  Company's success.

2.       DEFINITIONS. Unless the context clearly requires otherwise, when
         capitalized, the following terms have the meanings set forth below.

         2.1      "AFFILIATE" means a corporation that, for purposes of Section
                  422 of the Code, is a Parent Corporation or Subsidiary
                  Corporation of the Company, direct or indirect.

         2.2      "BOARD" means the Board of Directors of the Company.

         2.3      "CODE" means the Internal Revenue Code of 1986, as amended.

         2.4      "COMMITTEE" means the committee, as specified in Section 6,
                  appointed by the Board to administer the Plan, or the Board if
                  no Committee is appointed. If the Board delegates powers to a
                  Committee, and if the Company is or becomes subject to Section
                  16 of the Exchange Act, then, if necessary to comply with
                  Section 16, the Committee will consist initially of no less
                  than 2 members of the Board, each member being a "non-employee
                  director," within the meaning of the applicable rules of the
                  Exchange Act.

         2.5      "COMPANY" means NVE Corporation, a Minnesota corporation.

         2.6      "CONSULTANT" means any person or entity, including an officer
                  or director of the Company who provides consulting, director
                  or advisory services (other than as an Employee) to the
                  Company.

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         2.7      "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
                  absence of any interruption or termination of employment in
                  the case of an Employee, or provision of services in the case
                  of a Consultant. Continuous Status as an Employee or
                  Consultant will not be deemed to be interrupted in the case of
                  sick leave, military leave or any other absence approved by
                  the Board; provided, however, that such leave is for a period
                  of not more than 90 days or reemployment upon the expiration
                  of such leave is guaranteed by contract or statute.

         2.8      "DATE OF EXERCISE" means the date the Company receives notice
                  by an Optionee of the exercise of an Option under Section 10.1
                  of the Plan. The notice indicates the number of shares of
                  Stock that Optionee intends to exercise an Option.

         2.9      "EMPLOYEE" means any person, including an officer or director
                  of the Company, who is employed by the Company.

         2.10     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
                  amended.

         2.11     "EXERCISE PRICE" means the amount for which one share of Stock
                  may be purchased upon exercise of an Option, as specified in
                  the applicable Option Agreement.

         2.12     "FAIR MARKET VALUE" means (a) if the Stock is listed or
                  admitted to trade on a national securities exchange, the
                  closing price of the Stock, as published in the Midwest
                  Edition of The Wall Street Journal, of the principal national
                  securities exchange on which the Stock is so listed or
                  admitted to trade, on such date, or, if there is no trading of
                  the Stock on such date, then the closing price of the Stock on
                  the next preceding date on which there was trading in such
                  shares; (b) if the Stock is not listed or admitted to trade on
                  a national securities exchange, the last price for the Stock
                  on such date, as furnished by the National Association of
                  Securities Dealers, Inc. ("NASD") through the NASDAQ National
                  Market Reporting System or a similar organization if the NASD
                  is no longer reporting such information; (c) if the Stock is
                  not listed or admitted to trade on a national securities
                  exchange and is not reported on the National Market Reporting
                  System, the mean between the bid and asked price for the Stock
                  on such date, as furnished by the NASD; or (d) if the Stock is
                  not listed or admitted to trade on a national securities
                  exchange, is not reported on the National Market Reporting
                  System and if bid and asked prices for the Stock are not
                  furnished by the NASD or a similar organization, the values
                  established by any means deemed fair and reasonable by

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                  the Committee for purposes of the Plan. In the event that the
                  Fair Market Value of the Stock is established by the Committee
                  for purposes of the Plan, the Committee's determination is
                  final and binding on all parties.

         2.13     "INCENTIVE STOCK OPTION" means an Option granted under the
                  Plan which is designated as an Incentive Stock Option and is
                  intended to qualify as an "incentive stock option" within the
                  meaning of Section 422 of the Code.

         2.14     "NONSTATUTORY OPTION" means an Option granted under the Plan
                  that is not intended to qualify as an incentive stock option
                  within the meaning of Section 422 of the Code. Except as
                  otherwise specified, Nonstatutory Options may be granted at
                  the times and subject to the restrictions as the Board
                  determines without conforming to the statutory rules of
                  Section 422 of the Code applicable to incentive stock options.
                  An Option granted pursuant to this Plan as an Incentive Stock
                  Option which does not qualify as an Incentive Stock Option
                  within the meaning of Section 422 of the Code at time of
                  grant, or ceases to qualify as an Incentive Stock Option
                  within the meaning of Section 422 of the Code, and is not
                  otherwise terminated pursuant to the Plan or the Stock Option
                  Agreement, will be a Nonstatutory Option for purposes of the
                  Plan.

         2.15     "OPTION" means the right, granted under the Plan, to purchase
                  Stock of the Company at the Exercise Price for a specified
                  period of time. For purposes of the Plan, an Option may be
                  either an Incentive Stock Option or a Nonstatutory Option.

         2.16     "OPTIONEE" means a person to whom an Option has been granted
                  under the Plan.

         2.17     "PARENT CORPORATION" has the meaning set forth in Section
                  424(e) of the Code with the Company being treated as the
                  employer corporation for purposes of this definition.

         2.18     "SUBSIDIARY CORPORATION" has the meaning set forth in Section
                  424(f) of the Code with the Company being treated as the
                  employer corporation for purposes of this definition.

         2.19     "SIGNIFICANT STOCKHOLDER" means an individual who, within the
                  meaning of Section 422(b)(6) of the Code, owns Stock
                  possessing more than ten percent (10%) of the total combined
                  voting power of all classes of stock of the Company or of any
                  Parent Corporation or Subsidiary Corporation of the Company.
                  In determining whether an individual is a Significant
                  Stockholder, an individual shall be

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                  treated as owning Stock owned by certain relatives of the
                  individual and certain Stock owned by corporations in which
                  the individual is a shareholder, partnerships in which the
                  individual is a partner and estates or trusts of which the
                  individual is a beneficiary, all as provided in Section 424(d)
                  of the Code.

         2.20     "STOCK" means the common stock of the Company.

3.       GENDER AND NUMBER. Except when otherwise indicated by the context, any
         masculine terminology when used in the Plan also includes the feminine
         gender, and the definition of any term in the singular also includes
         the plural.

4.       SEVERABILITY. Wherever possible, each provision of the Plan is to be
         interpreted to be effective and valid under applicable law. If,
         however, any provision of the Plan is prohibited by or invalid under
         applicable law, that provision is ineffective only to the extent of the
         prohibition or invalidity, without invalidating the remainder of the
         provision or the remaining provisions of the Plan.

5.       ELIGIBILITY AND PARTICIPATION.

         5.1      ELIGIBILITY. All Employees are eligible to participate in the
                  Plan and receive Incentive Stock Options and/or Nonstatutory
                  Options. All Consultants are eligible to participate in the
                  Plan and receive Nonstatutory Options.

         5.2      ACTUAL PARTICIPATION. Subject to the provisions of the Plan,
                  the Committee may, from time to time, select from all
                  Employees and Consultants those to whom it wishes to grant
                  Options. The Committee determines the nature of and number of
                  shares of Stock subject to each Option.

6.       ADMINISTRATION.

         6.1      THE COMMITTEE. Except as provided herein, the Committee
                  administers the Plan. The Board may authorize one or more
                  officers or directors of the Company to assist in the
                  administration of the Plan, acting as a secondary committee
                  within guidelines established from time to time by the Board.
                  Within the limitations of this Section 6.1, any reference in
                  the Plan to the Committee includes the secondary committee.

         6.2      AUTHORITY OF THE COMMITTEE. The Committee has full power
                  except as limited by law or by the Articles of Incorporation
                  or Bylaws of the Company, and subject to this Plan, to
                  determine the size and types of Options; to determine the
                  terms and conditions of the Options in a manner consistent
                  with the Plan; to construe and interpret the Plan and any
                  agreement or instrument entered into under the Plan; to
                  establish, amend,

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                  or waive rules and regulations for the Plan's administration;
                  and (subject to the provisions of Section 13) to amend the
                  terms and conditions of any outstanding Option to the extent
                  that the terms and conditions are within the discretion of the
                  Committee as provided in the Plan. Further, the Committee may
                  take any other action necessary or advisable for the
                  administration of the Plan. As permitted by law, the Committee
                  may delegate its authorities to the secondary Committee.

         6.3      DECISIONS BINDING. All determinations and decisions made by
                  the Committee under the Plan and all related orders or
                  resolutions of the Board of Directors are final, conclusive
                  and binding on all persons, including the Company, its
                  shareholders, Employees, Consultants, Optionees and
                  successors.

7.       STOCK SUBJECT TO THE PLAN.

         7.1      NUMBER. The total number of shares of Stock made available for
                  grant and reserved for issuance under the Plan is 3,620,500
                  shares. The aggregate number of shares of Stock available
                  under the Plan is subject to adjustment as provided in Section
                  14.1.

         7.2      LAPSED OPTIONS. If an Option expires or terminates for any
                  reason without having been exercised in full, the unpurchased
                  shares of Stock become available for other Options under the
                  Plan, unless the Plan has terminated.

8.       DURATION OF THE PLAN. Subject to shareholder approval, the Plan is in
         effect for ten (10) years from the date of its adoption by the Board.
         Any Options outstanding at the end of this period remain in effect in
         accordance with their terms. The Plan terminates before the end of this
         period if all Stock subject to the Plan has been purchased by exercise
         of Options granted under the Plan.

9.       TERMS OF STOCK OPTIONS.

         9.1      GRANT OF OPTIONS.

                  (a)      COMMITTEE DISCRETION. Subject to Section 7.1, Options
                           may be granted to Employees or Consultants at any
                           time and from time to time as determined by the
                           Committee, except that Consultants may only receive
                           Nonstatutory Options. The Committee has complete
                           discretion in determining the recipient of Options
                           among the Employees or Consultants, the number of
                           shares of Stock subject to an Option and the number
                           of Options granted to each Optionee. In making these
                           determinations, the Committee may take into account
                           the nature of services rendered by Employees or
                           Consultants, their present and potential
                           contributions to the

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                           Company, and any other factors as the Committee in
                           its discretion deems relevant. The Committee also
                           determines whether an Option is to be an Incentive
                           Stock Option or a Nonstatutory Option.

                  (b)      $100,000 LIMIT. The Committee may not grant an
                           Optionee Incentive Stock Options exercisable for the
                           first time during any calendar year in excess of
                           $100,000. This limit applies to all plans of the
                           Company under which Incentive Stock Options may be
                           granted, including plans of any Parent Corporations
                           and any Subsidiary Corporations of the Company. The
                           Fair Market Value used for this calculation is the
                           Fair Market Value determined at the date of the
                           grant. This paragraph does not prevent the grant of
                           Options in excess of the maximums established this
                           paragraph, however, such excess will be treated as a
                           Nonstatutory Option.

                  (c)      1,500,000 SHARE LIMIT. No Optionee may be granted
                           Options in any fiscal year to purchase an aggregate
                           number of shares of Stock in excess of 1,500,000
                           shares per Optionee, subject to adjustment under
                           Section 14.1.

                  (d)      AUTHORITY TO AMEND. The Committee has the express
                           authority to issue amended Options for shares of
                           Stock subject to an Option previously granted. An
                           amended Option amends the terms of an Option
                           previously granted and supersedes the previous
                           Option.

                  (e)      STOCKHOLDER APPROVAL. No Options granted under the
                           Plan are exercisable before the approval of the Plan
                           by the shareholders of the Company in accordance with
                           the Bylaws of the Company.

         9.2      NO TANDEM OPTIONS. Where an Option granted under the Plan is
                  intended to be an Incentive Stock Option, the Option may not
                  contain terms under which the exercise of the Option would
                  affect the Optionee's right to exercise another Option, or
                  vice versa, so that the Option intended to be an Incentive
                  Stock Option would be deemed a tandem stock option within the
                  meaning of the regulations under Section 422 of the Code.

         9.3      OPTION AGREEMENT.

                  (a)      USE OF OPTION AGREEMENT. As determined by the
                           Committee on the date of grant, each Option is
                           evidenced by an Option agreement (the "OPTION
                           AGREEMENT") that includes the nontransferability
                           provisions of Section 12.2 and specifies: whether the
                           Option is an Incentive Stock Option or a Nonstatutory
                           Option; the Exercise Price; the duration of the
                           Option; the number of shares of Stock to which the
                           Option applies; any vesting or serial exercise
                           restrictions

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                           that the Committee may impose; and any other terms or
                           conditions that the Committee may impose. An Option
                           Agreement may provide that a new Option will be
                           granted automatically to the Optionee when the
                           Optionee exercises a prior Option and pays the
                           Exercise Price using Stock under Section 9.7. The
                           Committee may require an Optionee to sign the Option
                           Agreement.

                  (b)      RESTRICTIONS ON STOCK. At the discretion of the
                           Committee, the Company may reserve to itself and/or
                           its assignees in the Option Agreement (a) a right of
                           first refusal to purchase all Stock that an Optionee,
                           or Permitted Transferee (as hereinafter defined), may
                           propose to transfer to a third party, and/or (b) a
                           right to repurchase a portion of or all Stock held by
                           an Optionee following such Optionee's termination at
                           any time within 90 days after the later to occur of
                           the Optionee's Termination Date and the date the
                           Optionee purchases Stock under the Plan, for cash
                           and/or cancellation of purchase money indebtedness,
                           at the Optionee's Exercise Price.

                  (c)      INCORPORATION BY REFERENCE. All Option Agreements
                           incorporate the provisions of the Plan by reference,
                           with different provisions to apply depending upon
                           whether the Option Agreement applies to an Incentive
                           Stock Option or to a Nonstatutory Option.

         9.4      EXERCISE PRICE. No Incentive Stock Option granted under the
                  Plan may have an Exercise Price that is less than the Fair
                  Market Value of the Stock on the date the Option is granted.
                  Incentive Stock Options granted to Significant Stockholders
                  must have an Exercise Price of not less than 110% of the Fair
                  Market Value of the Stock on the date of grant. The Exercise
                  Price for Nonstatutory Options may be less than the Fair
                  Market Value of Stock on the date the Option is granted and
                  are not subject to the restrictions applicable to Incentive
                  Stock Options.

         9.5      TERM OF OPTIONS. Each Option expires at the time determined by
                  the Committee when the Option is granted, but no Option may be
                  exercised after the 10th anniversary date of its grant. By its
                  terms, an Incentive Stock Option granted to a Significant
                  Stockholder may not be exercised after the 5th anniversary
                  date of its grant.

         9.6      EXERCISE OF OPTIONS. Options granted under the Plan are
                  exercisable at the times and subject to the restrictions and
                  conditions as the Committee in each instance approves, which
                  need not be the same for all Optionees.

         9.7      PAYMENT. Payment for all shares of Stock must be made at the
                  time that an Option, or any part thereof, is exercised, and no
                  shares may be issued until full payment has been made. Payment
                  may be made in cash, cash equivalents or other form acceptable
                  to the Committee, including without

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                  limitation, in Stock having a Fair Market Value at the time of
                  the exercise equal to the Exercise Price, provided that the
                  Optionee has held such Stock for more than six months and such
                  Stock has been paid for within the meaning of Rule 144 of the
                  Securities Act of 1933, as amended, or the Optionee obtained
                  such Stock in the public market. In the case of an Incentive
                  Stock Option, the form of payment cannot prevent the Option
                  from qualifying for treatment as an "incentive stock option"
                  within the meaning of the Code. In addition, the Company may
                  establish a cashless exercise program in accordance with
                  Federal Reserve Board Regulation T.

10.      WRITTEN NOTICE, ISSUANCE OF STOCK CERTIFICATES, STOCKHOLDER PRIVILEGES

         10.1     WRITTEN NOTICE. An Optionee wishing to exercise an Option
                  gives written notice to the Chief Executive Officer of the
                  Company, in the form and manner prescribed by the Committee.

         10.2     ISSUANCE OF STOCK CERTIFICATES. As soon as practicable after
                  the receipt of written notice and payment, the Company
                  delivers to the Optionee, or to a nominee of the Optionee, a
                  certificate or certificates for the shares of Stock. The
                  certificate may bear a legend restricting transfer if required
                  under Section 15.

         10.3     RIGHTS OF A STOCKHOLDER. An Optionee or any other person
                  entitled to exercise an Option under the Plan does not have
                  dividend rights, voting rights or other rights or privileges
                  of a shareholder with respect to any Stock covered by an
                  Option until the date of issuance of a stock certificate for
                  the Stock. No adjustment is made for cash dividends or other
                  rights for which the record date is before the issuance date,
                  except as expressly provided in the Plan.

         10.4     ESCROW. To enforce any restrictions on an Optionee's Stock,
                  the Committee may require the Optionee to deposit all
                  certificates representing Stock, together with stock powers or
                  other instruments of transfer approved by the Committee,
                  appropriately endorsed in blank, with the Company or an agent
                  designated by the Company to hold in escrow until such
                  restrictions have lapsed or terminated, and the Committee may
                  cause a legend or legends referencing such restrictions to be
                  placed on the certificates.

11.      TERMINATION OF EMPLOYMENT.

         11.1     DEATH.

                  (a)      Unless otherwise determined by the Committee, if an
                           Optionee's employment in the case of an Employee, or
                           provision of services in the case of a Consultant,
                           terminates by reason of death, and prior to

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                           his or her death the Employee or Consultant had been
                           in Continuous Status as an Employee or Consultant
                           since the date of grant of the Option, the Option may
                           be exercised at any time before the expiration date
                           of the Option or within six months after the date of
                           the death, whichever period is shorter, by the person
                           or persons entitled to do so under the Optionee's
                           will.

                  (b)      If an Optionee's employment in the case of an
                           Employee, or provision of service in the case of a
                           Consultant, terminates by reason of death within 30
                           days after such Employee or Consultant terminates his
                           or her Continuous Status as an Employee or
                           Consultant, the Option may be exercised at any time
                           before the expiration date of the Option or within
                           six months after the date of the death, whichever
                           period is shorter, by the person or persons entitled
                           to do so under the Optionee's will.

                  (c)      If the Optionee fails to make a testamentary
                           disposition of an Option or dies intestate, the
                           Optionee's legal representative may exercise the
                           Option. Options are exercisable only to the extent
                           that they were exercisable as of the date of death.

         11.2     TERMINATION OTHER THAN FOR CAUSE OR DUE TO DEATH.

                  (a)      TERMINATION. In the event of an Optionee's
                           termination of Continuous Status as an Employee or
                           Consultant, except when an Employee becomes a
                           Consultant, other than by reason of death or for
                           cause (as defined in Section 11.3), the Optionee may
                           exercise the portion of his Option that was
                           exercisable by the Optionee at the date of the
                           termination (the "TERMINATION DATE") at any time
                           within 30 days after the Termination Date. In any
                           event, the Option cannot be exercised after the
                           expiration of the term of the Option. Options
                           terminate if not exercised within the applicable
                           period.

                  (b)      DISABILITY. If the termination of Continuous Status
                           as an Employee or Consultant occurs due to a
                           disability, as defined in the Code, the Optionee may
                           exercise the portion of any Option that was
                           exercisable by such Optionee on Optionee's
                           Termination Date within six months after such
                           Termination Date. In any event, the Option cannot
                           be exercised after the expiration of the term of
                           the Option. Options terminate if not exercised within
                           the applicable period.

         11.3     TERMINATION FOR CAUSE.

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                  (a)      TERMINATION OF OPTIONS. If the Company terminates the
                           employment, in the case of an Employee, or the
                           provision of services, in the case of a Consultant,
                           for cause (as defined below), any Option or Options
                           held by the Optionee under the Plan, to the extent
                           not exercised before the termination, terminate
                           immediately.

                  (b) DEFINITION OF "CAUSE." The term "cause" means:

                           (i)      Optionee's conviction of a felony which
                                    would materially damage the reputation of
                                    the Company; or

                           (ii)     material misappropriation by Optionee of the
                                    Company's property or other material acts of
                                    dishonesty by Optionee against the Company;
                                    or

                           (iii)    Optionee's gross negligence or willful
                                    misconduct in the performance of Optionee's
                                    duties that has a material adverse effect on
                                    the Company.

12.      RIGHTS OF OPTIONEES.

         12.1     SERVICE. Nothing in the Plan interferes with or limits in any
                  way the right of Company to terminate any Employee's
                  employment, or any Consultant's services, at any time, nor
                  confers upon any Employee any right to continue in the employ
                  of the Company, or upon any Consultant any right to continue
                  to provide services to the Company.

         12.2     RESTRICTIONS ON TRANSFER.

                  (a)      NONTRANSFERABLE. Except as otherwise provided by this
                           Section 12.2, all Options granted under the Plan are
                           nontransferable by the Optionee, other than by will
                           or the laws of descent and distribution, and are
                           exercisable during the Optionee's lifetime only by
                           the Optionee.

                  (b)      COMMITTEE DISCRETION. The Committee may, in its sole
                           discretion and with the consent of the Optionee:

                           (i)      grant Nonstatutory Options which are
                                    transferable within the restrictions of this
                                    Section 12.2;

                           (ii)     amend a then-existing Nonstatutory Option to
                                    allow for transferability of an Option
                                    within the restrictions of this Section
                                    12.2; or

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                           (iii)    amend a then-existing Incentive Stock Option
                                    (whereby an Option will become a
                                    Nonstatutory Option) to allow for
                                    transferability of an Option within the
                                    restrictions of this Section 12.2
                                    (collectively, the "TRANSFERABLE OPTIONS").

                  (c)      LIMITED TRANSFERABILITY. Subject to the conditions in
                           subsection (d) below, the Committee may, in its sole
                           discretion, authorize all or a portion of the
                           Transferable Options to be on terms that permit
                           transfer of an Option by the initial Optionee of the
                           Option (the "INITIAL OPTIONEE") to:

                           (i)      the spouse, children, step-children,
                                    grandchildren, step-grandchildren, siblings
                                    or parents of the Initial Optionee
                                    ("IMMEDIATE FAMILY MEMBERS");

                           (ii)     a trust or trusts for the exclusive benefit
                                    of the Immediate Family Members;

                           (iii)    a partnership or other entity in which the
                                    Immediate Family Members are the only
                                    partners or equity owners; or

                           (iv)     a former spouse of the Initial Optionee
                                    under a qualified domestic relations order
                                    (collectively, a "PERMITTED TRANSFEREE").

                  (d)      CONDITIONS OF TRANSFER. A transfer under Section
                           12.2(c) is subject to the following conditions:

                           (i)      there may be no consideration for the
                                    transfer;

                           (ii)     the Option Agreement under which the Options
                                    are granted, or any amendment thereto, is
                                    approved by the Committee, and expressly
                                    provides for transferability in a manner
                                    consistent with this Section 12.2;

                           (iii)    any  Option or  portion  transferred  by an
                                    Initial  Optionee to a Permitted  Transferee
                                    may be exercised by the Permitted Transferee
                                    only to the same extent as  the  Initial
                                    Optionee would have been entitled to
                                    exercise it, and remains subject to all of
                                    the terms and conditions that would  have
                                    applied to the Option under the provisions
                                    of the Plan and Option Agreement, if the
                                    Initial  Optionee had not transferred the
                                    Option or portion to the Permitted
                                    Transferred;

                           (iv)     subsequent transfers of transferred Options
                                    (including sale, assignment, pledge or other
                                    transfer) are prohibited except by will or
                                    the laws of descent and distribution;

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                           (v)      the Initial Optionee remains subject to
                                    applicable withholding taxes upon exercise
                                    of options transferred to a Permitted
                                    Transferee;

                           (vi)     the Company has no obligation to notify the
                                    Permitted Transferee of the expiration or
                                    early termination of any Option;

                           (vii)    the Committee may, in its sole discretion,
                                    require as a condition to the transfer of an
                                    Option, that the Permitted Transferee
                                    execute an agreement under which the
                                    Permitted Transferee would become a party to
                                    the applicable Option Agreement and agree
                                    that in the event the Company merges into or
                                    consolidates with another entity, the
                                    Company sells all or a substantial part of
                                    its assets, or the Company's Stock is
                                    subject to a tender or exchange offer, the
                                    Permitted Transferee will consent to the
                                    transfer or assumption of the Option, or
                                    accept a new option in substitution, if the
                                    Company requests the Permitted Transferee to
                                    do so; and

                           (viii)   the transfer is not effective unless and
                                    until the Initial Optionee has furnished the
                                    Committee written notice of the transfer,
                                    copies of all requested documents evidencing
                                    the transfer, and any other agreements as
                                    may be required by the Committee.

13.      AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN.

         13.1     AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. The
                  Board may at any time terminate, and from time to time may
                  amend or modify, the Plan, except that without stockholder
                  approval, the Board may not:

                  (a)      increase the total amount of Stock that may be
                           purchased through Options granted under the Plan,
                           except as provided in Section 14.1;

                  (b)      change the class of Employees or Consultants eligible
                           to receive Options; or

                  (c)      change the provisions of Section 9.1 above to allow
                           an Optionee to be granted Options in any fiscal year
                           to purchase an aggregate number of shares of Stock in
                           excess of 1,500,000 shares per Optionee, subject to
                           adjustment under Section 14.1.

         13.2     OPTIONS PREVIOUSLY GRANTED. No amendment, modification or
                  termination of the Plan shall in any manner adversely affect
                  any

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                  outstanding Option under the Plan without the consent of the
                  Optionee holding the Option.

14.      CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, REORGANIZATION

         14.1     ADJUSTMENTS. In the event of a subdivision of the outstanding
                  Stock, a declaration of a dividend payable in Stock, a
                  declaration of a dividend payable in a form other than Stock
                  in an amount that has a material effect on the value of the
                  Stock, a combination or consolidation of the outstanding Stock
                  (by reclassification or otherwise) into a lesser number of
                  shares of Stock, a recapitalization, a spin-off or a similar
                  occurrence, the Committee may adjust as appropriate, in its
                  sole discretion, one or more of:

                  (a)      the number of shares of Stock available for future
                           grants under Section 7;

                  (b)      the number of shares of Stock covered by each
                           outstanding Option; or

                  (c)      the Exercise Price under each outstanding Option.

         14.2     OPTIONEE RIGHTS. Except as provided in this Section 14, an
                  Optionee shall have no rights by reason of any issue by the
                  Company of any class of capital stock or securities
                  convertible into capital stock of any class, any subdivision
                  or consolidation of shares of capital stock of any class, the
                  payment of any capital stock dividend or any other increase or
                  decrease in the number of shares of capital stock of any
                  class.

         14.3     DISSOLUTION OR LIQUIDATION. To the extent not previously
                  exercised, Options terminate immediately before the
                  dissolution or liquidation of the Company.

         14.4     MERGER, EXCHANGE OR REORGANIZATION. In the event that the
                  Company is a party to a merger, exchange or reorganization,
                  outstanding Options are subject to the agreement of merger,
                  exchange or reorganization. The agreement must provide for:

                  (a)      the continuation of the outstanding Options by the
                           Company, if the Company is a surviving corporation;

                  (b)      the assumption of the outstanding Options by the
                           surviving corporation or its parent or subsidiary;

                                       13
<PAGE>

                  (c)      the substitution by the surviving corporation or its
                           parent or subsidiary of its own options for the
                           outstanding Options;

                  (d)      full exercisability or vesting and accelerated
                           expiration of the outstanding Options; or

                  (e)      settlement of the full value of the outstanding
                           Options in cash or cash equivalents followed by
                           cancellation of the Options.

         14.5     ASSET SALE. In no event are any Option exercisable during the
                  period immediately following the announcement of the sale and
                  until all revenue resulting from a sale of assets has been
                  distributed to the shareholders. In the event of the sale of
                  all or substantially all of the Company's assets, at the
                  discretion of the Company, the Options will:

                  (a)      remain outstanding;

                  (b)      be substituted for the options of the acquiring
                           corporation or its parent or subsidiary;

                  (c)      become fully vested immediately prior to the sale and
                           cancelled upon closing of the sale; or

                  (d)      be cancelled in exchange for payment of full value of
                           the outstanding Options with cash or cash
                           equivalents.

15.      SECURITIES REGISTRATION. In the event that the Company deems  it
         necessary or desirable to register under the Securities Act of 1933, as
         amended, or any other applicable statute, any Options or any Stock with
         respect to which an Option may be or has been granted or exercised, or
         to qualify any such Options or Stock under the  Securities Act of 1933,
         as amended, or any other statute, then the Optionee must cooperate with
         the Company and take such action as is necessary to permit registration
         or qualification of the Options or Stock.

         Unless the Company has determined that the following representation is
         unnecessary, each person exercising an Option under the Plan may be
         required by the Company, as a condition to the issuance of the shares
         pursuant to exercise of the Option, to make a representation in
         writing: (a) that he or she is acquiring such shares for his or her own
         account for investment and not with a view to, or for sale in
         connection with, the distribution of any part; and (b) that before any
         transfer in connection with the resale of the shares, he or she will
         obtain the written opinion of counsel for the Company, or other counsel
         acceptable to the Company, that the shares may be transferred. The
         Company may also require that the certificates representing the shares
         contain legends reflecting the foregoing. The Company will only require
         the foregoing investment representation from an Optionee,

                                       14
<PAGE>

         inscription of a legend on the Optionee's share certificate and
         placement of a stop order with the Company's transfer agent if a
         registration statement is not in effect with respect to the shares
         issued under the Plan at the time the Optionee exercises the Option.

16.      TAX WITHHOLDING.

         16.1     TAX WITHHOLDING. Company has the power and the right to deduct
                  or withhold, or require an Optionee to remit to the Company,
                  an amount sufficient to satisfy federal, state, and local
                  taxes (including the Optionee's FICA obligation) required by
                  law to be withheld with respect to any grant, exercise or
                  payment made under or as a result of the Plan. The Company is
                  not required to issue any Stock under the Plan until these
                  obligations are satisfied.

         16.2     SHARE WITHHOLDING. With respect to withholding required upon
                  the exercise of Options, or upon any other taxable event
                  hereunder, Optionees may elect, subject to the approval of the
                  Committee and compliance with applicable laws and regulation,
                  to satisfy the minimum withholding requirement, in whole or in
                  part, by having the Company withhold shares having a Fair
                  Market Value, on the date the tax is to be determined, equal
                  to the minimum withholding requirement.

17.      INDEMNIFICATION. To the extent permitted by law, each person
         who is or will have been a member of the Committee or of the
         Board is indemnified by the Company against and from any loss,
         cost, liability or expense that may be imposed upon or
         reasonably incurred by him in connection with or resulting
         from any claim, action, suit or proceeding to which he may be
         a party or in which he may be involved by reason of any action
         taken or failure to act under the Plan and against and from
         any and all amounts paid by him in settlement, with the
         Company's approval, or paid by him in satisfaction of judgment
         in any action, suit, or proceeding against him, if he gives
         the Company an opportunity, at its own expense, to handle and
         defend before he undertakes to handle and defend it on his own
         behalf. The foregoing right of indemnification is not
         exclusive of any other rights of indemnification to which
         these persons may be entitled under the Company's Articles of
         Incorporation or Bylaws, as a matter of law, or otherwise, or
         any power that the Company may have to indemnify them.

18.      REQUIREMENTS OF LAW

         18.1     REQUIREMENTS OF LAW. The granting of Options and the issuance
                  of shares of Stock upon the exercise of an Option is subject
                  to all applicable laws, rules and regulations, and to
                  approvals by any governmental agencies or national securities
                  exchanges, as may be required.

                                       15
<PAGE>

         18.2     GOVERNING LAW. To the extent not preempted by federal law, the
                  Plan, and all agreements under the Plan, are governed by the
                  laws of the State of Minnesota.

         18.3     COMPLIANCE WITH THE EXCHANGE ACT AND THE CODE. The Plan is
                  intended to comply in all respects with applicable law and
                  regulations including (a) with respect to those Optionees who
                  are officers or directors for purposes of Section 16 of the
                  Exchange Act, Rule 16b-3 of the Securities and Exchange
                  Commission, if applicable, and (b) with respect to Incentive
                  Stock Options, Code Section 422. If any provision of the Plan
                  is susceptible to more than one interpretation, the
                  interpretation should be given as is consistent with all
                  applicable law (including Rule 16b-3 and Code Section 422).
                  Notwithstanding anything herein to the contrary, with respect
                  to Optionees who are officers and directors of the Company for
                  purposes of Section 16 of the Exchange Act, no grant of an
                  Option will permit unrestricted ownership of Stock by the
                  Optionee for at least six months from the date of the grant of
                  such Option, unless the Board determines that the grant of
                  such Option otherwise satisfies the then current Rule 16b-3
                  requirements.

19.      EFFECTIVE DATE OF PLAN. Subject to Stockholder Approval of the Plan,
         the Plan shall be effective as of November 20, 2000, the date of its
         adoption by the Board.

                                       16<PAGE>

                                                                    Exhibit 4.4

                      APPLIED EXTRUSION TECHNOLOGIES, INC.
                          AET 2001 SHARE INCENTIVE PLAN

1. PURPOSE

     The purpose of this AET 2001 Share Incentive Plan (the "Plan") is to
advance the interests of Applied Extrusion Technologies, Inc. ("AET") by
enhancing the ability of AET and its subsidiaries (the "Company") to attract and
retain employees who are in a position to make significant contributions to the
success of the Company, to reward them for their contributions and to encourage
them to take into account the long-term interests of the Company.

     The Plan provides for the award of shares (the "Shares") of the Company's
authorized common stock (the "Common Stock"), subject to certain terms and
conditions as specified in a share incentive agreement ("Incentive Agreement")
to be entered into by the Company and each employee receiving a grant hereunder
and which shall be in substantially the form of Exhibit A hereto, with such
modifications thereto as the Company's Board of Directors (the "Board") may
approve.

2. ELIGIBILITY FOR AWARDS

     Persons eligible to receive awards under the Plan shall be those
employees of the Company, excluding the directors and the executive officers,
and those consultants of the Company (the "Employee" or "Employees") who, in
the opinion of the Board are in a position to make a significant contribution
to the success of the Company and its subsidiaries. A subsidiary for purposes
of the Plan shall be a corporation that would be treated as a "subsidiary" of
AET for purposes of Section 424(f) of the Internal Revenue Code (the "Code").

3. ADMINISTRATION

     The Plan shall be administered by the Board, which shall have authority,
not inconsistent with the express provisions of the Plan, to grant awards to
such Employees as the Board may select; to determine the time or times when
awards shall be granted and the number of shares of Common Stock subject to each
award; to determine the terms and conditions of each award; to prescribe the
form or forms of any instruments evidencing awards and any other instruments
required under the Plan and to change such forms from time to time; to adopt,
amend and rescind rules and regulations for the administration of the Plan; and
to interpret the Plan and to decide any questions and settle all controversies
and disputes that may arise in connection with the Plan. Such determinations of
the Board shall be conclusive and shall bind all parties. Subject to Section 8
the Board shall also have the authority, both generally and in particular
instances, to waive compliance by an Employee with any obligation to be
performed by the Employee under an award, to waive any condition or provision of
an award, and to amend or cancel any award (and if an award is canceled, to
grant a new award on such terms as the Board shall specify) except that the
Board may not take any action with respect to an outstanding award that would
adversely affect the rights of the holder of such award without such holder's
consent. Nothing in

<PAGE>

the preceding sentence shall be construed as limiting the power of the Board to
make adjustments contemplated by Section 5(c).

         The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee") consisting of one or
more members of the Board, in which event, except as the context otherwise
clearly requires, all references in this Plan to the Board shall be deemed to
refer to the Committee. If the Committee consists of two more members, (i) a
majority of its members shall constitute a quorum, (ii) all determinations of
the Committee shall be made by a majority of its members, and (iii) any
determination of the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by a majority of the Committee
members. References to the Board (including, for the avoidance of doubt, the
Committee, if one is appointed) shall also include such other delegates as the
Board may determine, but only to the extent of any delegation by the Board to
such other delegates of its administrative responsibilities hereunder.

4. EFFECTIVE DATE AND TERM OF THE PLAN

     The Plan shall become effective on the date on which it is approved by the
Board.

     No awards shall be granted under the Plan after the completion of ten years
from the date on which the Plan was adopted by the Board, but restrictions and
conditions with respect to previously granted awards may extend beyond that
date.

5. SHARES SUBJECT TO THE PLAN

     (a) NUMBER OF SHARES. Subject to adjustment as provided in Section 5(c),
the aggregate number of shares of Common Stock that may be delivered under the
Plan shall be 1,000,000. If any award of Shares is forfeited, the number of
shares of Common Stock as to which such award was forfeited shall be available
for future grants within the limits set forth in this Section 5(a).

     (b) SHARES TO BE DELIVERED. Shares delivered under the Plan shall be
authorized but unissued Common Stock or, if the Board so decides in its sole
discretion, previously issued Common Stock acquired by the Company and held in
its treasury. No fractional shares of Common Stock shall be delivered under the
Plan.

     (c) CHANGES IN STOCK. In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in AET's capital stock,
the number and kind of Shares subject to awards then outstanding or subsequently
granted under the Plan, the maximum number of shares of Common Stock that may be
delivered under the Plan, and other relevant provisions shall be appropriately
adjusted by the Board, whose determination shall be binding on all persons.

     The Board may also adjust the number of Shares subject to outstanding
awards and the terms of outstanding awards to take into consideration material
changes in accounting practices or principles, extraordinary dividends,
consolidations or mergers, acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan.

                                      -2-

<PAGE>

6. RESTRICTED STOCK

     The Board may grant or sell Common Stock to any Employee on such conditions
and with such restrictions as the Board determines. Subject to the provisions of
this Plan and the restrictions contained in the Incentive Agreement, an Employee
shall have all the rights of a shareholder with respect to the Shares granted or
sold to the Employee hereunder. Except as the Board may otherwise determine, any
certificates representing such Shares shall remain in the possession of the
Company until such Shares are free of restrictions under the Plan and the
Incentive Agreement. The Shares may not be sold, assigned, transferred, pledged
or otherwise encumbered or disposed of except as specifically provided in the
Incentive Agreement. In connection with the grant or sale of the Shares, the
Employee shall pay to the Company in cash or make arrangements satisfactory to
the Company to pay, including, if the Board so permits, by the use of Shares
involved in the grant or sale or other shares of Common Stock owned by the
Employee, any withholding taxes arising by reason of such grant or sale,
including arrangements for the payment of any such taxes arising by reason of
the lapse of restrictions with respect to such Common Stock.

7. NO RIGHT TO CONTINUED SERVICE WITH THE COMPANY

     Neither the adoption of the Plan nor the grant of awards shall confer upon
any Employee any right to continue as an employee of the Company or affect in
any way the right of the Company to terminate the Employee at any time. Except
as specifically provided by the Board in any particular case, the loss of
existing or potential profit in awards granted under this Plan shall not
constitute an element of damages in the event of termination of the relationship
of an Employee even if the termination is in violation of an obligation of the
Company to the Employee by contract or otherwise.

8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION

     Neither adoption of the Plan nor the grant of awards to an Employee shall
affect the right of the Company to make awards to such Employee that are not
subject to the Plan, to issue to such Employee Common Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Common Stock may
be issued.

     The Board may at any time discontinue granting awards under the Plan. With
the consent of the Employee, the Board may at any time cancel an existing award
in whole or in part and grant another award for such number of shares as the
Board specifies. The Board may at any time or times amend the Plan or any
outstanding award for the purpose of satisfying applicable laws or regulations
or for any other purpose that may at the time be permitted by law, or may at any
time terminate the Plan as to further grants of awards, but no such amendment
shall adversely affect the rights of any award holder (without such award
holder's consent) under any award previously granted.

                                      -3-

<PAGE>

                                                                       EXHIBIT A

                            SHARE INCENTIVE AGREEMENT

          This SHARE INCENTIVE AGREEMENT is dated as of ________, 2001 between
Applied Extrusion Technologies, Inc. of 3 Centennial Drive, Peabody,
Massachusetts 01960 (the "Company"), and [____________] (the "Employee"). In
connection with the Employee's past service to the Company, the parties wish to
provide for the issuance to the Employee of restricted shares of the Company's
Common Stock, $0.01 par value (the "Common Stock").

          SECTION 1. Grant of Restricted Stock.

          (a)  The Company hereby agrees to issue to the Employee a total of
               [_____] shares (the "Shares") of the Company's authorized Common
               Stock in consideration for the Employee's past services to the
               Company, which have a value in excess of the par value of such
               shares. The issuance of the Shares hereunder is being made
               pursuant to and subject to the terms of the Company's AET 2001
               Share Incentive Plan (the "Plan").

          (b)  The Shares granted under this Agreement are subject to certain
               restrictions and conditions as set forth in this Agreement.

          SECTION 2. Vesting.

          (a)  The Shares shall vest in accordance with the following schedule,
               if and only if the Employee is employed by the Company or any of
               its subsidiaries (as defined in the Plan) from the date hereof
               through such dates: (1) fifty percent (50%) of the Shares shall
               vest on the first (1st) annual anniversary of the date hereof,
               and (2) the remaining fifty percent (50%) of the Shares shall
               vest on the second (2nd) annual anniversary of the date hereof.

          (b)  Notwithstanding the foregoing, if a Change of Control of the
               Company occurs, then one hundred percent (100%) of the Shares
               shall become vested immediately upon such Change of Control, as
               defined in Exhibit A hereto.

          SECTION 3. Transfer Restrictions/Repurchase Rights/Restrictive
          Legends.

          (a)  Subject to subsection (b) below and any other restrictions on
               transfer of the Shares, including, but not limited to, those
               restrictions set forth in the Plan, a Share covered by this grant
               shall become freely transferable by the Employee upon completion
               of the vesting period applicable to such share set forth in
               Section 2(a) hereof.

          (b)  Upon the termination of Employee's employment for any reason
               (including without limitation by reason of disability, death,
               retirement, voluntary resignation or termination by the Company
               with or without cause) prior to the completion of the vesting
               period for all or a portion of the Shares, such unvested Shares
               shall be automatically forfeited to the Company.

<PAGE>

          (c)  For so long as this Agreement remains in effect, all certificates
               representing Shares will bear appropriate restrictive legends
               referring to the restrictions set forth in this Section 3 and
               shall be held by the Company.

          SECTION 4. Voting Rights, Dividend and Other Distributions. During the
period in which the Shares remain unvested, the Employee may exercise full
voting rights and shall receive all regular cash dividends paid with respect to
such Shares. Except as the Board shall otherwise determine, any other dividends
and other distributions paid to participants with respect to the Shares in the
Company's capital stock, shall be subject to the same restrictions and
conditions as the Shares with respect to which they were paid.

          SECTION 5. Tax Issues. The issuance of the shares to the Employee
pursuant to this agreement involves complex and substantial tax considerations,
including, without limitation, consideration of the advisability of the Employee
making an election under Section 83(b) of the Internal Revenue Code within 30
days of the purchase. The Employee is urged to consult his tax advisor with
respect to the transactions described in this agreement. The Company makes no
warranties or representations whatsoever to the Employee regarding the tax
consequences of the Employee's receipt of the Shares or this Agreement.

          SECTION 6. Employment Relationship. Nothing in this Agreement shall
interfere with or limit in any way the right of the Company to terminate the
Employee at any time (with or without cause), or confer upon the Employee any
right to continue in the employ of the Company for any period of time or to
continue to receive the Employee's current (or other) rate of compensation.

          SECTION 7. Withholding of Taxes. The Company may, if necessary or
desirable, withhold from any amounts due and payable by the Company to the
Employee (or secure payment from you in lieu of withholding) the amount of any
withholding or other tax due from the Company with respect to the issuance of
the Shares, and the Company may defer such issuance unless indemnified by the
Employee to its satisfaction against the payment of any such amount. To the
extent permitted by law, such withholding may be effected through the delivery
by the Employee of shares of Common Stock held by the employee for at least six
months and valued at fair market value.

          SECTION 8. Adjustments. In the event of a reorganization,
recapitalization, stock dividend, stock split or combination or other change in
the Company's capital stock, appropriate adjustments shall be made to the
repurchase price and number of the Shares issued hereunder.

          SECTION 9. Terms and Conditions.

          (a)  The award of Shares evidenced by this Agreement is subject to the
               terms, conditions and definitions of the Plan, a copy of which is
               attached to this Agreement. To the extent that the terms,

                                      -2-

<PAGE>

               conditions and definitions of this Agreement are inconsistent
               with those of the Plan, those of the Plan shall govern. All
               decisions under, and interpretations of, such provisions of the
               Plan by the Board or the Committee, as defined in the Plan,
               shall be final, binding and conclusive upon the Employee and his
               or her heirs. On and after the commencement of the Committee's
               duties under the Plan, all references to the Board in Sections 2
               and 3 of this Agreement shall mean and relate to such Committee.

          (b)  The Company is not obligated to deliver any Shares or to remove
               any restrictions from shares previously delivered under the Plan
               (1) until all conditions hereunder have been satisfied or
               removed, (2) until, in the opinion of the Company's counsel, all
               applicable federal and state laws and regulations have been
               complied with, (3) until the shares to be delivered have been
               listed or authorized to be listed on The Nasdaq National Market
               upon official notice of the notice of issuance, and (4) until all
               other legal matters in connection with the issuance and delivery
               of such shares have been approved by the Company's counsel. If
               the sale of Common Stock has not been registered under the
               Securities Act of 1933, as amended, as a condition to the
               purchase of the Shares, the Employee shall make such
               representations and agreements as counsel for the Company may
               consider appropriate to avoid violation of such Act and shall
               require that the certificates evidencing the Common Stock bear an
               appropriate legend restricting transfer.

          SECTION 10. Waivers and Amendments. The Company, in its sole
discretion, shall have the right at any time immediately to waive or amend all
or any of the terms of the Agreement, provided, however, that no such waiver or
amendment shall adversely affect the rights of any award holder (without such
award holder's consent) under any award previously granted.

          SECTION 11. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware (without giving effect to any
conflicts or choice of law provisions thereof that would cause the application
of the domestic substantive laws of any other jurisdiction).

          SECTION 12. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.

          SECTION 13. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and supersedes all prior agreements and understandings, whether
oral or written, with respect thereto. Without limiting the foregoing, the
Employee agrees that the provisions of this Agreement fulfill all obligations
that the Company may have to issue to the Employee stock, options or equity
interests in the Company or any of its subsidiaries.

                                      -3-

<PAGE>

          SECTION 14. Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby, and each provision of this Agreement shall
be enforced to the fullest extent permitted by law.

          SECTION 15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
constitute one agreement.

                                      -4-

<PAGE>

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.

                                         APPLIED EXTRUSION
                                         TECHNOLOGIES, INC.

                                         By:
                                             ---------------------------
                                         Name:
                                         Title:

                                         -------------------------------
                                         [Employee]

                                      -5-

<PAGE>

                                    EXHIBIT A

                  A Change of Control will occur for the purposes of this
         Agreement if (1) any individual, corporation, partnership, company or
         other entity, or group of any such entities, (a "Person") becomes the
         owner of securities of the Company representing more than 50% of the
         combined voting power of the Company's then-outstanding securities, (2)
         the Company is a party to, or the stockholders of the Company 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 (3) 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 shall be deemed to have been in office at the date hereof
         for purposes of this definition.

                                      -6-

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