Exhibit 10.18

 

Form of Amendment to Employment Agreement (Section 409A)

 

December 23, 2008

 

[Name/Address]

 

Dear _____________:

 

Reference is made to that Employment Agreement, dated as of November 1, 2004,
between you and AEP Industries, Inc. (the “Employment Agreement”) which is
hereby amended as provided below.  Capitalized terms used but not defined in
this letter shall have the meaning specified in the Employment Agreement.

 

1.                                       The third sentence of
Section 2(c)(ii) of the Employment Agreement shall be deleted and replaced with
the following sentence:

 

All Bonuses shall be paid at the time specified in the MIP.

 

2.                                       The following sentence shall be added
at the end of Section 2(c)(iii) of the Employment Agreement:

 

Any additional perquisite allowance for a year shall be paid by the Company to
Executive no later than March 15 of the following calendar year.

 

3.                                       The following shall be added at the end
of Section 2(c)(iv) of the Employment Agreement:

 

The reimbursement policies, practices and procedures applicable to Executive
shall be the most favorable policies, practices and procedures of the Company
relating to reimbursement of employment expenses incurred by Company directors,
officers or employees in effect at any time during the 12 month period preceding
the date Executive incurs the expenses.  Any employment expense reimbursement
shall be made no later than the last day of the calendar year following the
calendar year in which the Executive incurs the expense, the expense
reimbursement for any calendar year shall not affect the expenses eligible for
reimbursement in any other calendar year, and Executive’s right to expense
reimbursement cannot be liquidated or exchanged for any other benefit.

 

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4.                                       Section 4(a)(i) of the Employment
Agreement shall be deleted and replaced with the following:

 

(i)                                    The Company shall pay, subject to
Section 8, to Executive as a severance payment an amount equal to two (2) times
the sum of (x) the Annual Base Salary in effect immediately prior to the event
giving rise to such termination and (y) the Bonus earned, if any, for the fiscal
year immediately preceding the fiscal year in which the event giving rise to
such termination occurs.  Except as otherwise provided in this Employment
Agreement, the severance payment shall be payable in equal pro rata installments
over a period of two (2) years commencing on the Termination Date (subject to
applicable federal and state withholding taxes, social security contributions,
any garnishments, or any deductions required by law and any other deductions) in
accordance with the ordinary payroll practices of the Company, but no less
frequently than semi-monthly following such termination of employment.  In
addition, the Company shall pay to Executive (A) any earned but unpaid Bonus of
Executive with respect to the fiscal year preceding the termination payable at
the time specified in the MIP, (B) any earned but unpaid Bonus of Executive with
respect to the fiscal year in which his termination occurs payable at the time
and calculated in the manner specified in the MIP, and (C) amounts with respect
to accrued and unused vacation through the Date of Termination to the extent not
theretofore paid (“Accrued Obligations”).

 

5.                                       Section 4(b) of the Employment
Agreement shall be deleted and replaced with the following:

 

(b)                                Death; Disability; Cause; Other than for Good
Reason.  If Executive’s employment shall be terminated by reason of Executive’s
death or Disability, by the Company for Cause or by Executive without Good
Reason, Executive shall only be entitled to receive (i) any earned but unpaid
Annual Base Salary through the date of the termination event, payable in 
accordance with the ordinary payroll practices of the Company, (ii) any earned
but unpaid Bonus of Executive with respect to the fiscal year preceding his
termination, payable at the time specified in the MIP, (iii) if other than
Cause, any earned but unpaid Bonus of Executive with respect to the fiscal year
in which his termination occurs calculated in the manner and payable at the time
specified in the MIP, (iv) payment of Accrued Obligations to Executive or his
legal representative in the case of the death or, if applicable, the Disability
of Executive, and (v) the continuance of benefits under the Company’s employee
benefit plans to the Date of Termination and in the case of death or Disability,
the continuance of death or Disability benefits thereafter in accordance with
the terms of such plans and the Company’s perquisite policies as in effect as of
such date.

 

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6.                                       The following sentence shall be added
at the end of Section 4(e) of the Employment Agreement:

 

Any such reimbursement shall be made no later than the last day of the calendar
year following the calendar year in which the Executive incurs the costs and
expenses, the reimbursement for any calendar year shall not affect the costs and
expenses eligible for reimbursement in any other calendar year, and Executive’s
right to reimbursement cannot be liquidated or exchanged for any other benefit.

 

7.                                       A new Section 11 shall be added to the
Employment Agreement as follows:

 

Section 11.                                      Code Section 409A Compliance

 

(a)                                 The intent of the parties is that payments
and benefits under this Agreement comply with Internal Revenue Code Section 409A
and the regulations and guidance promulgated thereunder (collectively “Code
Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement
shall be interpreted to be in compliance therewith. In no event whatsoever shall
the Company be liable for any additional tax, interest or penalty that may be
imposed on Executive by Code Section 409A or damages for failing to comply with
Code Section 409A.

 

(b)                                In the event that any provision of this
Agreement is determined by the Company or Executive to not comply with Code
Section 409A, the Company shall fully cooperate with Executive to reform this
Agreement to correct such noncompliance to the extent permitted under any
guidance, procedure, or method promulgated by the Internal Revenue Service now
or in the future that provides for such correction as a means to avoid or
mitigate any taxes, interest, or penalties that would otherwise be incurred by
Executive on account of such noncompliance.

 

(c)                                 A termination of employment shall not be
deemed to have occurred for purposes of any provision of this Agreement
providing for the payment of any amounts or benefits upon or following a
termination of employment unless such termination is also a “separation from
service” within the meaning of Code Section 409A and, for purposes of any such
provision of this Agreement, references to a “termination,” “termination of
employment” or like terms shall mean “separation from service.”

 

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(d)                                Notwithstanding any other payment schedule
provided herein to the contrary, if Executive is deemed on the date of
termination to be a “specified employee” within the meaning of that term under
Code Section 409A(a)(2)(B). then each of the following shall apply:

 

(i)                                     With regard to any payment that is
considered deferred compensation under Code Section 409A payable on account of a
“separation from service,” such payment shall be made on the date which is the
earlier of (A) the expiration of the six (6)-month period measured from the date
of such “separation from service” of Executive, and (B) the date of Executive’s
death (the “Delay Period”) to the extent required under Code Section 409A. Upon
the expiration of the Delay Period, all payments delayed pursuant to this
Section (whether they would have otherwise been payable in a single sum or in
installments in the absence of such delay) shall be paid to Executive in a lump
sum, and all remaining payments due under this Agreement shall be paid or
provided in accordance with the normal payment dates specified for them herein;
and

 

(ii)                                  To the extent that any benefits to be
provided during the Delay Period are considered deferred compensation under Code
Section 409A provided on account of a “separation from service,” and such
benefits are not otherwise exempt from Code Section 409A, Executive shall pay
the cost of such benefits during the Delay Period, and the Company shall
reimburse Executive (to the extent that such costs would otherwise have been
paid by the Company or to the extent that such benefits would otherwise have
been provided by the Company at no cost to Executive) the Company’s share of the
cost of such benefits upon expiration of the Delay Period, and any remaining
benefits shall be reimbursed or provided by the Company in accordance with the
procedures specified herein.

 

(e)                                 To the extent that severance payments or
benefits pursuant to this Agreement are conditioned upon execution and delivery
by Executive of a release of claims, Executive shall forfeit all rights to such
payments and benefits unless such release is signed and delivered (and no longer
subject to revocation, if applicable) within sixty (60) days following the date
of Executive’s termination of employment. If the foregoing release is executed
and delivered and no longer subject to revocation as provided in the preceding
sentence, then the following shall apply:

 

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(i)                                     To the extent any such cash payment or
continuing benefit to be provided is not “deferred compensation” for purposes of
Code Section 409A, then such payment or benefit shall commence upon the first
scheduled payment date immediately after the date the release is executed and no
longer subject to revocation (the “Release Effective Date”). The first such cash
payment shall include payment of all amounts that otherwise would have been due
prior to the Release Effective Date under the terms of this Agreement applied as
though such payments commenced immediately upon Executive’s termination of
employment. and any payments made thereafter shall continue as provided herein.
The delayed benefits shall in any event expire at the time such benefits would
have expired had such benefits commenced immediately following Executive’s
termination of employment.

 

(ii)                                  To the extent any such cash payment or
continuing benefit to be provided is “deferred compensation” for purposes of
Code Section 409A, then such payments or benefits shall be made or commence upon
the sixtieth (60) day following Executive’s termination of employment. The first
such cash payment shall include payment of all amounts that otherwise would have
been due prior thereto under the terms of this Agreement had such payments
commenced immediately upon Executive’s termination of employment, and any
payments made thereafter shall continue as provided herein. The delayed benefits
shall in any event expire at the time such benefits would have expired had such
benefits commenced immediately following Executive’s termination of employment.

 

The Company may provide, in its sole discretion, that Executive may continue to
participate in any benefits delayed pursuant to this Section during the period
of such delay, provided that Executive shall bear the full cost of such benefits
during such delay period. Upon the date such benefits would otherwise commence
pursuant to this Section, the Company may reimburse Executive the Company’s
share of the cost of such benefits, to the extent that such costs would
otherwise have been paid by the Company or to the extent that such benefits
would otherwise have been provided by the Company at no cost to Executive, in
each case had such benefits commenced immediately upon Executive’s termination
of employment. Any remaining benefits shall be reimbursed or provided by the
Company in accordance with the schedule and procedures specified herein.

 

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(f)                                   For purposes of Code Section 409A,
Executive’s right to receive any installment payments pursuant to this Agreement
shall be treated as a right to receive a series of separate and distinct
payments.

 

(g)                                Notwithstanding any other provision of this
Agreement to the contrary, in no event shall any payment under this Agreement
that constitutes “deferred compensation” for purposes of Code Section 409A be
subject to offset, counterclaim or recoupment by any other amount payable to
Executive unless otherwise permitted by Code Section 409A.

 

(h)                                Unless this Agreement provides a specified
and objectively determinable payment schedule to the contrary, to the extent
that any payment of base salary or other compensation is to be paid for a
specified continuing period of time beyond the date of Executive’s termination
of employment in accordance with the Company’s payroll practices (or other
similar term), the payments of such base salary or other compensation shall be
made upon such schedule as in effect upon the date of termination, but no less
frequently than monthly or such shorter interval specified herein.

 

The Employment Agreement, as hereby amended, shall remain in full force and
effect.

 

 

Very truly yours,

 

 

 

 

AEP Industries Inc.

 

 

 

 

 

 

 

By:

 

 

 

 

 

Its:

 

The Above Is Agreed To

And Accepted:

 

 

 

 

 

 

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