Exhibit 10.1


 


	
  

  	
  INDUSTRIES
  INC.

  



 


2005 MANAGEMENT INCENTIVE PLAN



FOR



SUBSIDIARY COMPANIES AND LINES OF



BUSINESS


 





















 


AEP INDUSTRIES INC.

2005 MANAGEMENT INCENTIVE PLAN


 


 


PLAN
OVERVIEW


 


Each participant will
have a target incentive opportunity, stated as a percentage of salary.  Awards at, above, or below target can be
earned based on financial performance, using the following approach:


 


•                                          Realization
of “MIP Earnings” from operations will determine the participant’s award.  This award can range down to zero and up to
200% of the individual’s target award.  “MIP
Earnings” will be defined as either:


 


(a)          Budgeted
earnings before interest and taxes, depreciation and amortization (EBITDA).


 


- OR -


 


(b)         An amount of
EBITDA agreed and appropriately documented between the participant and either
the CEO or the CFO of the company to be earned by the business unit.


 


DETERMINING
PRELIMINARY INCENTIVE AWARDS BASED ON EBITDA


 


The basis for determining
awards will be “MIP Earnings” as described above.  This measure of earnings reflects business
unit performance and excludes financing and tax considerations.


 


The following procedures
will be followed in measuring “MIP Earnings”:


 


•                                          Negative
“MIP Earnings” budgets will be treated on an absolute basis (i.e., if the
budget is to lose $100, then losing $90 would be treated as a 10% improvement).


 


•                                          Special
situations, such as a provision for the sale or closing of a piece of land, a
plant or business, may be proposed for exclusion.


 


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•                                          “MIP
Earnings” will be calculated in the Business units primary currency.  In cases where “currency exchange rates” have
an impact on Business unit profits, the exchange rate used to calculate the
budget will be used in order to eliminate and effect of currency exchange
variations.


 


•                                          Accounting
policy changes dictated by U.S. Securities and Exchange Commission (SEC), the
U.S. Financial Accounting Standards Board (FASB) or the Chief Financial Officer
of AEP Industries Inc.


 


•                                          Inter-unit
management fees shall be included in “MIP Earnings”.


 


•                                          Inter-unit
royalty fees shall be excluded from “MIP Earnings”.


 


The relationship between incentive awards
relative to actual target and “MIP Earnings” as shown in the following exhibit
will be used:


 


PAY PERFORMANCE RELATIONSHIP

2005 ANNUAL INCENTIVE PLAN


 


Percent of

Target Award

Earned


 





 


Percent of “MIP Earnings” Achieved


 


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The target award is paid
for meeting budgeted “MIP Earnings”.


 


•                                          No
award is paid for achieving less than 80% of budgeted “MIP Earnings”.


 


•                                          50%
of the target award is paid for achieving 80% of budgeted “MIP Earnings”.


 


•                                          Maximum
award of 200% of target is paid for achieving 120% of budgeted “MIP Earnings”.


 


•                                          Increased
or decreased award percentages are used for “MIP Earnings” results between 80%
and 100%, and between 100% and 120%, based on the above graph.


 


As an example of how the
MIP award determination would work, assume that a participant has a salary of
$70,000, and an annual bonus target of 20%. 
His business unit has an “MIP Earnings” budget above $2.5 million, and
the actual “MIP Earnings” is 110% of budget:


 


	
  Salary

  	
   

  	
  $

  	
  70,000

  	
   

  
	
  Annual Incentive Target

  	
   

  	
  20%, or $14,000

  	
   

  
	
  MIP Earnings as a % of Budget

  	
   

  	
  110

  	
  %

  
	
  % Award Earned

  	
   

  	
  150

  	
  %

  
	
  Award

  	
   

  	
  $

  	
  21,000

  	
   

  



 


ADJUSTING
PRELIMINARY AWARDS BASED ON CRITICAL MEASUREMENT


 


In the past, you may have
experienced an MIP program that had a separate incentive component resulting
from subjective or critical measurements such as:


 


•                       Market
Share


•                       Number
or type of customers


•                       Quality


•                       Customer
satisfaction


•                       New
product introductions


•                       Sale
of assets at an attractive price


•                       Health
and safety improvements


•                       New
sales/promotion tracking system


•                       New
financial control system


•                       Improved
distribution system


 


In 2005 AEP is taking the
view that everyone in the company should be motivated to perform in the best
interests of the company.  It is assumed
that people in an MIP are the most committed of all,


 


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therefore a separate, and
subjective encouragement to perform one’s job well is an insult to those who
are, in fact, our best performers. Management does, however, reserve the right
to reduce an award to any individual within a business unit whose
activities during the period has been counterproductive to the efforts of the
business unit or who has not, for other reasons, added to the profit making
goals of this plan.


 


 


If you have any questions
concerning this incentive program, contact your manager or your Human Resources
Manager.


 


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AEP INDUSTRIES INC. 2005 MANAGEMENT INCENTIVE PLAN
ADMINISTRATIVE GUIDELINES


 


1.               Base
Salary for Bonus Calculations.  October 31,
2005 Annual Base Salary will be used to calculate the incentive.


 


2.               Eligibility.  To be eligible to receive an incentive award
under the program, you must be an active associate as of the end of the
measurement period (i.e., October 31, 2005).  The only exceptions to this rule are detailed
below under item number 5.


 


3.               Pro-Rata
Eligibility.  Where incentives are to
be paid for partial periods, the incentive will be calculated on a pro-rata
basis. Eligibility for pro-rata payments is detailed in items number 4, 5, and
6 below.  Pro-rata calculations will be
done on completed quarters only.


 


4.               New
Hires, Transfers or Promotions During the Incentive Period.


 


For New Hires or
participants added to the Plan in the first through third quarters, the bonus
will be calculated on a pro-rated basis from the date of hire, but only in completed
quarters.  Fourth quarter New Hires will
not be eligible for an award.


 


For Promotions and
Transfers, the bonus will be pro-rated from the date of promotion or transfer
in whole quarters.  This pro-ration will
apply to both changes in target incentive percentage and to changes in goals.


 


For all pro-rations under
this item, effective dates as of the first through the fifteenth of the first month
in the quarter will count the full quarter. 
Effective dates after the sixteenth day of the first month will not
include that quarter in the pro-ration calculation.


 


5.               Termination
During the Incentive Period.


 


If it is a Voluntary
Termination, no bonus will be earned.


 


If it is an Involuntary
Termination due to unsatisfactory performance or cause, no bonus will be
earned.  Note: Achieving business results
at the expense of violations of laws, regulations or business ethics or
allowing any individuals to behave in this manner will be considered cause for
termination.


 


If it is an Involuntary
Termination due to job elimination or reorganization, the bonus will be paid on
a pro-rated basis as of the termination date. 
Terminations prior to the fifteenth of the last month in the quarter will
disqualify the termination quarter in the pro-rata calculation.  Terminations effective on the sixteenth
through the last day of the last month of the quarter will include the
termination quarter in the pro-rata calculation.  Payments will be made at the same time as
they are made to participants who continue to work for the Company through the
end of the year.


 


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6.               Death
or Disability During the Incentive Period.


 


The incentive earned as
of the date of death will be paid, on a pro-rated basis, to the estate of the
participant at the same time payments are made to associates who continue to
work for the Company through the end of the year.


 


Disabilities of 30 days
or less will not have an impact on the participant’s ability to continue to be
eligible for an incentive.


 


If a disability lasts
more than 30 days, then the incentive will be earned only in quarters in which
the participant works more than 60 days.


 


7.               Adding
Participants to the Plan.  New
participants will be added to this program during the year as recommended by
the appropriate Vice President/Group Manager and with the approval of the CEO
and/or CFO of AEP Industries Inc.  The
criteria for participation will be based on both similar job classification as
the list of current participants in this program and a responsibility level
commensurate with the participant’s ability to influence goal outcomes.  Approval will be required for both the
addition of a participant to the program and the proposed participant’s target
incentive level.


 


8.               Timing
of Payments.  Bonus awards will be
paid in local currency as quickly after the end of 2005 as possible.  Financial results will need to be finalized
as appropriate by the AEP Industries Inc. Vice President, Controller and the
independent auditors before bonuses can be calculated and paid.


 


9.               Financial
Adjustments.  Actual financial
results as reported on a GAAP basis will be utilized for incentive award
calculation with the following exceptions:


 


•                  Special
situations, such as a provision for the sale of assets, the closing of a plant
or business or other extraordinary transactions which are not a part of normal
operations, may be proposed for inclusion/exclusion if the
proposal is presented when the charge is taken or when the budgets are
presented.  Inclusions/Exclusions
will need to be approved in writing by the CEO and/or CFO of AEP Industries
Inc.


 


•                  Accounting
policy changes dictated by the U.S. Securities and Exchange Commission (SEC),
the U.S. Financial Accounting Standards Board (FASB) or AEP Industries Inc.
Chief Financial Officer may be proposed for exclusion if the
proposal is presented when the change is made.  Inclusions/Exclusions will need to be
approved by AEP Industries Inc. Chief Financial Officer and/or the Chief
Executive Officer.


 


•                  If
earnings were achieved in ways that are considered undesirable (such as
reducing budgeted advertising expenditures where this would hurt the business),
an adjustment may be made at the discretion of the Chief Financial Officer or
the Chief Executive Officer of AEP Industries Inc.


 


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10.         All
Plan Payments Subject to Discretion. 
Notwithstanding the attainment of financial results, all awards under
the Plan are subject to the approval of the Chief Financial Officer and the
Chief Executive Officer of AEP Industries Inc.


 


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