Exhibit 10.2


 


[Execution]


 


AMENDMENT NO. 7 TO

LOAN AND SECURITY AGREEMENT


 


AMENDMENT NO. 7 TO LOAN AND
SECURITY AGREEMENT (“Amendment No. 7”) dated October 28, 2005 by and
among AEP Industries, Inc. (“Borrower”), the parties from time to time to
the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender”
and collectively, “Lenders”) and Wachovia Bank, National Association, successor
by merger to Congress Financial Corporation, in its capacity as agent for
Lenders (in such capacity, “Agent”).


 


W I  T  N
E  S  S  E  T  H


 


WHEREAS,
Agent, Lenders and Borrower have entered into financing arrangements pursuant
to which Agent and Lenders have made and may make loans and advances and
provide other financial accommodations to Borrower as set forth in the Loan and
Security Agreement, dated November 20, 2001, by and among Agent, Lenders
and Borrower, as amended by Amendment No. 1 to Loan and Security Agreement
dated December 9, 2001, Amendment No. 2 dated July 10, 2002,
Amendment No. 3 dated October 16, 2002, Amendment No. 4 to Loan
and Security dated February 3, 2005, Consent and Amendment No. 5
dated as of February 25, 2005 and Amendment No. 6 dated May 12,
2005 (as amended hereby and as the same may hereafter be further amended,
modified, supplemented, extended, renewed, restated or replaced, the “Loan
Agreement”) and the agreements, documents and instruments at any time executed
and/or delivered in connection therewith or related thereto (collectively,
together with the Loan Agreement, the “Financing Agreements”); and


 


WHEREAS,
Borrower has requested that Agent and Lenders agree to increase the Maximum
Credit and make certain other amendments to the Loan Agreement;


 


NOW, THEREFORE, in
consideration of the mutual conditions and agreements and covenants set forth
herein, and for other good and valuable consideration, the adequacy and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:


 


1. Definitions.


 


(a) Additional Definitions. As used
herein, the following terms shall have the meanings given to them below and the
Loan Agreement and the other Financing Agreements are hereby amended to
include, in addition and not in limitation, the following definitions:


 


(i) “Amendment
No. 7” shall mean this Amendment No. 7 to Loan and Security Agreement
by and between Agent and Borrower as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.


 


(ii) “Borrowing
Base Certificate” shall mean a certificate substantially in the form of Exhibit A
to Amendment No. 7, as such form may from time to time be modified by
Agent,


 





















 


which is duly completed (including all
schedules thereto) and executed by the vice-president-finance, chief financial
officer, treasurer, assistant treasurer, controller or other financial or
senior officer of Borrower and delivered to Agent.


 


(iii) “Capital
Expenditures” shall mean all expenditures for or contracts for any fixed or
capital assets or improvements, or for replacements, substitutions or additions
thereto, which have a useful life of more than one (1) year, including,
but not limited to, the direct or indirect acquisition of such assets by way of
offset items or otherwise and shall include the principal amount of capitalized
lease payments.


 


(b) Amendments to
Definitions.


 


(i) The
definition of “Applicable Margin” set forth in Section 1.6 of the Loan
Agreement is hereby amended by deleting such Section in its entirety and
substituting the following therefor:


 


“1.6
“Applicable Margin” shall mean, at any time, as to the Interest Rate for Prime
Rate Loans and the Interest Rate for Eurodollar Rate Loans, the applicable
percentage (on a per annum basis) set forth below if the Quarterly Average
Excess Availability for the immediately preceding fiscal quarter is at or
within the amounts indicated for such percentage:


 


	
  Quarterly
  Excess

  Average Availability

  	
   

  	
  Applicable Prime Rate

  Margin

  	
   

  	
  Applicable Eurodollar

  Rate Margin

  	
   

  
	
  $40,000,000 or more

  	
   

  	
  0

  	
  %

  	
  1.25

  	
  %

  
	
  Greater than or equal to
  $20,000,000 and less than $40,000,000

  	
   

  	
  0

  	
  %

  	
  1.50

  	
  %

  
	
  Less than $20,000,000

  	
   

  	
  .25

  	
  %

  	
  2.00

  	
  %

  



 


Provided, that, (i) the
Applicable Margin shall be calculated and established once each fiscal quarter
(commencing with the fiscal quarter ending on or about October 31, 2005)
and shall remain in effect until such date thereafter as it may be adjusted in
accordance with Sections 1.58(b) or 1.58(c) hereof.”


 


(ii) The definition of “Borrowing
Base” in Section 1.9(a) of the Loan Agreement is hereby amended by
deleting “sixty (60%)” from clause (B) of such Section and replacing
it with “sixty-five (65%)”.


 


(iii) The definition of
“Commitment” in Section 1.18 of the Loan Agreement is hereby amended by
deleting “below such Lender’s signature on the signature pages hereto” and
replacing it with “opposite such Lender’s name on Schedule 1 to Amendment No. 7”.


 


2





















 


(iv) The
definition of “Consolidated Net Income” in Section 1.20 of the Loan
Agreement is hereby amended by replacing the period at the end of such section with
a semicolon and adding the following clause (i) immediately at the end
thereof:


 


“(i) as
to Borrower, non-cash gains and losses due solely to fluctuations in currency
value shall be excluded.”


 


(v) The
definition of “Equipment Availability” set forth in Section 1.34 of the
Loan Agreement is hereby amended by deleting such Section in its entirety
and replacing it with the following:


 


“1.34
“Equipment Availability” shall mean $14,200,000; as reduced effective as of the
first day of each month commencing November 1, 2005 by an amount equal to
$200,000.”


 


(vi) The
definition of “Inventory Loan Limit” set forth in Section 1.60 of the Loan
Agreement is hereby amended by deleting “$40,000,000” from such Section and
replacing it with “$50,000,000”.


 


(vii) The
definition of “Material Adverse Effect” in Section 1.67 of the Loan
Agreement is hereby amended by deleting such Section in its entirety and
replacing it with the following:


 


“1.67
‘Material Adverse Effect’ shall mean the occurrence of any one or more of the
following events: (i) in any calendar year Borrower shall lose a customer
the sales to whom for the immediately preceding calendar year accounted for
forty (40%) percent or more of Borrower’s total sales volume for such
immediately preceding year; (ii) Borrower is at any time required to
purchase forty (40%) percent or more of its raw materials on a cash on delivery
or cash in advance basis as the result of one or more vendor’s unwillingness to
extend credit to Borrower; (iii) any of the President, Chief Executive
Officer, Chief Financial Officer or Chief Operating Officer of Borrower is
convicted of a felony criminal offense; (iv) the loss of production of
Borrower of twenty (40%) percent or more of Inventory (measured in tons) from
the average weekly amounts produced based on the immediately preceding four (4) weeks
for a period of greater than five (5) consecutive days due to either or
both of equipment failure or labor strike, stoppage, walkout or other labor
related reason; or (v) a “force majeure event” occurs which results in
Borrower’s revenues being forty (40%) percent or more less than Borrower’s
revenues in the immediately preceding fiscal month, which is not fully covered
by insurance.”


 


(viii) The definition
of “Maximum Credit” set forth in Section 1.69 of the Loan Agreement is
hereby amended by deleting “$100,000,000” in such section and replacing it
with “$125,000,000”.


 


(ix) The definition of “New
Equipment Availability” set forth in Section 1.74 of the Loan Agreement is
hereby amended by:


 


3





















 


(A) deleting
each of the references to “sixty (60%)” in such Section and replacing each
such reference with “seventy-five (75%)”;


 


(B) deleting
each of the references to “eighty (80%)” in such Section and replacing
each such reference with “eighty-five (85%)”;


 


(C) deleting “$3,000,000”
from subsection (b) of such Section and replacing it with “$15,000,000”;


 


(D) adding
the following immediately before the semicolon at the end of subsection (b) of
such Section: “and in no event shall the aggregate amount of all tranches of New
Equipment Availability exceed $25,000,000 for the term of this Agreement”; and


 


(E) deleting
“sixty (60)” from subsection (f) of such Section and replacing it
with “seventy two (72)”.


 


(x)
The definition of “Obligations” set forth in Section 1.75 of the Loan
Agreement is hereby amended by adding the following after the last sentence
thereof:


 


“Without limiting the
foregoing, the term “Obligations” shall include, without limitation, all obligations,
liabilities and indebtedness of every kind, nature and description owing by
Borrower to Agent or any Affiliate of Agent arising under or in connection with
cash management or related services provided by Agent or such Affiliate to
Borrower or any swap agreement or similar agreements for the purposes of
protecting against or managing exposure to fluctuations in interest or exchange
rates or currency valuations. Agent may establish Reserves in respect of such
obligations to the extent that Agent or such Affiliate, as the case may be,
agree with Borrower that such Obligations will be paid other than after all of
the other Obligations under Section 6.4(a) hereof; provided,  that,
as of the effective date of Amendment No. 7 Agent has not established such
a Reserve and Agent will not establish such a Reserve unless and until Borrower
has agreed that such Obligations will be paid other than after all other
Obligations. For purposes of Section 5.1 hereof, the term Lenders shall be
deemed to include any Affiliates of Agent providing such services or entering
into such agreements.”


 


(xi)
The definition of “Real Property Availability” set forth in Section 1.89
of the Loan Agreement is hereby amended by deleting such Section in its
entirety and replacing it with the following:


 


“1.89
‘Real Property Availability’ shall mean $13,000,000, as reduced effective as of
the first day of each month commencing November 1, 2005 by an amount equal
to $154,500.”


 


(c) Interpretation.
For purposes of this Amendment No. 7, all terms used herein, including but
not limited to, those terms used and/or defined herein or in the recitals
hereto shall have the respective meanings assigned thereto in the Loan
Agreement as amended by this Amendment No. 7.


 


4





















 


2. Letter
of Credit Accommodation Fees. Section 2.2(b) of the Loan
Agreement is hereby amended by: (a) deleting “two (2%)” and replacing it
with “one and one half (1 1/2%)”, (b) by deleting “two and one half (2 1/2%)”
and replacing it with “two (2%)”, (c) by deleting “four (4%)” and
replacing it with “three and one half (3 1/2%)” and (d) by deleting “five
and one half (5 1/2%)” and replacing it with “five (5%)”.


 


3. Unused
Line Fee. Section 3.2(a) of the Loan Agreement is hereby amended
by deleting “the Maximum Credit as then in effect” and replacing it with “$100,000,000”.


 


4. Collection
Accounts. Section 6.3(a) of the Loan Agreement is hereby amended
by deleting “$20,000,000” and replacing it with “$15,000,000”.


 


5. Borrowing
Base Certificate. Section 7. l(a) of the Loan Agreement is hereby
amended by deleting clause (i) of such Section in its entirety and
replacing it with the following:


 


“(i) as
soon as possible after the end of each calendar month (but in any event within
fifteen (15) days after the end thereof), or more frequently as Agent may
request at any time Excess Availability is less than $20,000,000 or a Default
or Event of Default has occurred and is continuing, a Borrowing Base
Certificate setting forth Borrower’s calculation of the Loans and Letter of
Credit Accommodations available to Borrower duly completed and executed by the
vice-president-finance, chief financial officer, treasurer, assistant
treasurer, controller or other financial or senior officer of Borrower, together
with all schedules required pursuant to the terms of the Borrowing Base
Certificate duly completed (including schedules of sales made, credits issued
and cash received);”


 


6. Minimum
EBITDA. Section 9.17 of the Loan Agreement is hereby amended by deleting
such Section in its entirety and replacing it with the following:


 


“9.17
Minimum EBITDA. At any time that Excess Availability is less than
$20,000,000, (a) the EBITDA of Borrower (on a stand-alone basis) for the
twelve (12) consecutive month period ending as of the last day of the month for
which financial statements of Borrower have been received by Agent (treated as
a single accounting period) shall be not less than $30,000,000 and (b) the
EBITDA of Borrower and its Subsidiaries, on a consolidated basis, for the
twelve (12) consecutive month period ending as of the last day of the month for
which financial statements of Borrower have been received by Agent (treated as
a single accounting period) shall be not less than $30,000,000.” ‘


 


7. Indebtedness.
Section 9.9(o) of the Loan Agreement is hereby amended by deleting clause (vi) of
such Section in its entirety and replacing it with the following:


 


“(vi) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, except that Borrower
may redeem, retire, defease, purchase or otherwise acquire such Indebtedness,
either (A) with proceeds of Refinancing Indebtedness with respect thereto
to the extent permitted under Section 9.9(1) hereof, or (B) otherwise
with funds of Borrower, provided,  that, as of


 


5





















 


the date of any such
redemption, retirement, defeasance, purchase or other acquisition or any
payment in respect thereof (other than pursuant to Refinancing Indebtedness)
and after giving effect thereto, if there are any Loans or Letter of Credit
Accommodations outstanding as of such date after giving effect to any such
payment, (1) as of the date of any such payment and after giving effect
thereto, Excess Availability shall be not less than $20,000,000, (2) as of
the date of any such payment and after giving effect thereto, the aggregate
amount of all payments in respect of Permitted Transactions shall not exceed
$50,000,000 in any fiscal year and (3) as of the date of any such payment
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred and be continuing; except further  that, at any time
the aggregate amount of all such payments together with the aggregate amount of
all payments in respect of Permitted Transactions exceed $50,000,000 in any
fiscal year, Borrower may only redeem, retire, defease, purchase or otherwise
acquire such Indebtedness so long as Borrower shall have received current, updated
projections of the amount of the Borrowing Base and Excess Availability for the
(12) twelve month period after the date of such payment, in a form reasonably
satisfactory to Agent, representing Borrowers’ reasonable best estimate of the
future Borrowing Base and Excess Availability for the period set forth therein
as of the date not more than ten (10) days prior to the date of such
payment, which projections shall have been prepared on the basis of the
assumptions set forth therein which Borrower believes are fair and reasonable
as of the date of preparation in light of current and reasonably foreseeable
business conditions and which projections shall show Excess Availability shall
not be less than $20,000,000 at any time during such period.”


 


8. Acquisitions.


 


(a) Section 9.10(g) of the Loan
Agreement is hereby amended by deleting clause (iii) of such Section in
its entirety and replacing it with the following:


 


“(iii) as
of the date of such loan or investment Agent shall have received current,
updated projections of the amount of the Borrowing Base and Excess Availability
for the six (6) month period after the date of such acquisition, in a form
reasonably satisfactory to Agent, representing Borrower’s reasonable best
estimate of the future Borrowing Base and Excess Availability for the period
set forth therein as of the date not more than ten (10) days prior to the
date of such acquisition, which projections shall have been prepared on the
basis of the assumptions set forth therein which Borrower believes are fair and
reasonable as of the date of preparation in light of current and reasonably
foreseeable business conditions and which projections shall show Excess
Availability shall not be less than $30,000,000 at any time during such period,”;
and


 


(b) Section 9.10(i) of the Loan
Agreement is hereby amended by deleting clause (xi) of such Section in its
entirety and replacing it with the following:


 


“(xi)
as of the date of such acquisition Agent shall have received current, updated
projections of the amount of the Borrowing Base and Excess Availability for the
six (6) month period after the date of such acquisition, in a form
reasonably satisfactory to Agent, representing Borrower’s reasonable best
estimate of the future Borrowing Base and Excess Availability for the period
set forth therein as of the date not more than ten


 


6





















 


(10) days prior to the
date of such acquisition, which projections shall have been prepared on the
basis of the assumptions set forth therein which Borrower believes are fair and
reasonable as of the date of preparation in light of current and reasonably
foreseeable business conditions and which projections shall show Excess
Availability shall not be less than $30,000,000 at any time during such period,”;


 


9. Cost
and Expenses. Section 9.19 of the Loan Agreement is hereby amended by amended
by deleting “on demand” from the first sentence of such Section and
replacing it with “, within two (2) days of written demand from Agent to
Borrower,”.


 


10. Capital
Expenditures. Section 9 of the Loan Agreement is amended by adding the
following Section 9.21 to the end thereto:


 


“9.21
Capital Expenditures. At any time Excess Availability is less than
$20,000,000, Borrower and its Subsidiaries shall not directly or indirectly
make or commit to make, whether through purchase, capital leases or otherwise,
Capital Expenditures in any fiscal year of Borrower in excess of $35,000,000.”


 


11. Term.
Section 13.1 of the Loan Agreement is hereby amended by deleting “three (3)”
and replacing it with “nine (9)”.


 


12. Amendment
Fee. In addition to all other fees, charges, interest and expenses payable
by Borrower to Agent under the Loan Agreement and the other Financing
Agreements, Borrower shall pay to Agent, for the account of Lenders, an
amendment fee in the amount of $250,000 which shall be fully earned, due and
payable as of the date hereof and which may be charged directly to any loan
account of Borrower maintained by Agent.


 


13. Representations
and Warranties. Borrower represents and warrants with and to Agent and
Lenders as follows, which representations and warranties shall survive the
execution and delivery hereof, the truth and accuracy of, or compliance with
each, together with the representations, warranties and covenants in the other
Financing Agreements, being a continuing condition of the making of any Loans
by Agent (or Agent on behalf of Lenders) to Borrower:


 


(a) As of the date hereof
and after giving effect to the consents provided for herein, no Default or
Event of Default exists or has occurred and is continuing.


 


(b) This Amendment No. 7
and each other agreement or instrument to be executed and delivered by Borrower
in connection herewith have been duly authorized, executed and delivered by all
necessary action on the part of Borrower and the agreements and obligations of Borrower
contained herein constitute legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.


 


14. Conditions
Precedent. The effectiveness of the consents contained herein shall only be
effective upon the satisfaction of each of the following conditions precedent
in a manner satisfactory to Agent:


 


7





















 


(a) Agent
shall have received an executed original or executed original counterparts of
this Amendment No. 7 (as the case may be), duly authorized, executed and
delivered by Borrower;


 


(b) Agent
shall have received written appraisals as to the Equipment and Real Property,
in form and substance satisfactory to Agent, addressed to Agent and upon which
Agent is expressly permitted to rely;


 


(c) Agent
shall have received such approvals of the Lenders to the terms of this Amendment
No. 7 as may be required in the determination of Agent under the terms of
the Loan Agreement; and


 


(d) Agent
shall have received a true and correct copy of any consent, waiver or approval
to or of this Amendment No. 7 which Borrower is required to obtain from
any other Person, and such consent, waiver or approval shall be in form and
substance satisfactory to Agent.


 


15. Delivery
of Additional Agreements,  Borrower
hereby agrees that, in addition to all other terms, conditions and provisions
set forth herein and in the other Financing Agreements, Borrower shall deliver
or cause to be delivered the following to Agent, in form and substance satisfactory
to Agent, as soon as possible but in any event by no later than:


 


(a) November 15,
2005, amendments to each of the Mortgages, as duly authorized, executed and
delivered by Borrower that Agent may require to reflect the increase in the
amount of the Maximum Credit as provided in Section 1(b)(viii) above
and, if required by applicable local statute, the extension of the term as
provided in Section 11 above ; and


 


(b) November 15,
2005, endorsements to the existing title insurance policies issued (i) insuring
the priority and amount of the Mortgages and (ii) containing any legally
available endorsements, assurances or affirmative coverage requested by Agent
for the protection of its interest with respect to the Mortgages.


 


16. Provisions of General Application.


 


(a) Effect of this
Amendment, Except as modified pursuant hereto, no other changes or
modifications to the Financing Agreements are intended or implied and in all
other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the effective date hereof.
To the extent of conflict between the terms of this Amendment No. 7 and
the other Financing Agreements, the terms of this Amendment No. 7 shall control.
The Loan Agreement and this Amendment No. 7 shall be read and construed as
one agreement.


 


(b) Governing Law.
The rights and obligations hereunder of each of the parties hereto shall be
governed by and interpreted and determined in accordance with the laws of the State
of New York, but excluding any principles of conflicts of law or other rule of
law that would result in the application of the law of any jurisdiction other
than the laws of the State of New York.


 


8





















 


(c) Binding Effect. This Amendment No. 7
shall be binding upon and inure to the benefit of each of the parties hereto
and their respective successors and assigns.


 


(d) Counterparts. This Amendment No. 7
may be executed in any number of counterparts, but all of such counterparts
shall together constitute but one and the same agreement. In making proof of
this Amendment No. 7, it shall not be necessary to produce or account for
more than one counterpart thereof signed by each of the parties hereto.
Delivery of an executed counterpart of this Amendments No. 7 by
telefacsimile shall have the same force and effect as delivery of an original
manually executed counterpart of this Amendment No. 7. Any party
delivering any executed counterpart of this Amendment No. 7 by telefacsimilc
shall also deliver an original manually executed counterpart, but the failure
to do so shall not affect the validity, enforceability and binding effect of
this Amendment No. 7 as to such party or any other party.


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]


 


9





















 


IN
WITNESS WHEREOF, the parties hereto have caused this Amendment No. 7 to be
duly executed and delivered by their authorized officers as of the date and
year first above written.


 


	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION,

  
	
   

  	
  successor by merger to Congress Financial
  Corporation,

  as Agent and as Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas Grabosky

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AEP INDUSTRIES, INC. 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James B. Rafferty

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President & Treasurer

  	
   

  
					



 


10





















 


SCHEDULE 1


TO


AMENDMENT NO. 7


 


Commitments


 




	
  Wachovia
  Bank, National Association

  	
   

  	
  $

  	
  50,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric Capital Corporation

  	
   

  	
  $

  	
  37,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LaSalle Business Credit, LLC

  	
   

  	
  $

  	
  37,500,000

  	
   

  
						






 


11





















 


SCHEDULE 1


TO


AMENDMENT NO. 7


 


Commitments


 




	
  Wachovia
  Bank, National Association

  	
   

  	
  $

  	
  50,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Electric Capital Corporation

  	
   

  	
  $

  	
  37,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LaSalle Business Credit, LLC

  	
   

  	
  $

  	
  37,500,000

  	
   

  
						






 


12