Exhibit 10.1


 


EXECUTION VERSION


 




 





 


AEP INDUSTRIES INC.


 


 


(a Delaware corporation)


 


 


$175,000,000 7.875%
Senior Notes due 2013


 


 


PURCHASE AGREEMENT


 


 


Dated:  March 10, 2005


 




 





 





















 


AEP INDUSTRIES INC.

(a Delaware corporation)


 


$175,000,000

7.875% Senior Notes due 2013


 


PURCHASE AGREEMENT


 


	
  March 10, 2005

  



 


MERRILL LYNCH &
CO.


Merrill Lynch, Pierce,
Fenner & Smith

Incorporated


Deutsche Bank Securities
Inc.


c/o Merrill Lynch &
Co.


Merrill Lynch, Pierce,
Fenner & Smith

Incorporated


4 World Financial Center

New York, New York  10080


 


Ladies and Gentlemen:


 


AEP Industries Inc., a
Delaware corporation (the “Company”), confirms its agreement with Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill
Lynch”) and Deutsche Bank Securities Inc. (collectively, the “Initial
Purchasers”, which term shall also include any initial purchaser substituted as
hereinafter provided in Section 11 hereof), for whom Merrill Lynch is acting as representative (in such
capacity, the “Representative”), with respect to the issue and sale by the
Company and the purchase by the Initial Purchasers, acting severally and not
jointly, of the respective principal amounts set forth in Schedule A
hereto of $175,000,000 aggregate principal amount of the Company’s 7.875% Senior
Notes due 2013 (the “Securities”).  The
Securities are to be issued pursuant to an indenture dated as of March 18,
2005 (the “Indenture”) between the Company and The Bank of New York, as trustee
(the “Trustee”).  Securities issued in
book-entry form will be issued to Cede & Co. as nominee of The
Depository Trust Company (“DTC”) pursuant to a letter agreement, to be dated as
of Closing Time (as defined in Section 2(b) hereof) (the “DTC
Agreement”), among the Company, the Trustee and DTC.


 


The Company understands
that the Initial Purchasers propose to make an offering of the Securities on
the terms and in the manner set forth herein and agrees that the Initial
Purchasers may resell, subject to the conditions set forth herein, all or a
portion of the Securities to purchasers (“Subsequent Purchasers”) at any time
after this Agreement has been executed and delivered.  The Securities are to be offered and sold
through the Initial Purchasers without being registered under the Securities
Act of 1933, as amended (the “1933 Act”, which term, as used herein,
includes the rules and regulations of the Commission promulgated
thereunder), in reliance upon exemptions therefrom.  Pursuant to the terms of the Securities and
the Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities are hereafter registered under the
1933 Act or if an exemption from the registration requirements of the
1933 Act is available (including the exemption afforded by Rule 144A
(“Rule 144A”) or Regulation S
(“Regulation S”) of the rules and regulations promulgated
under the 1933 Act by the Securities and Exchange Commission (the “Commission”)).


 


The holders of the
Securities will be entitled to the benefits of a registration rights agreement,
to be dated as of March 18, 2005 (the “Registration Rights Agreement”),
among the Company and the Initial


 





















 


Purchasers,
pursuant to which the Company will agree to file with the Securities and
Exchange Commission (the “Commission”), under the circumstances set forth
therein, (i) a registration statement under the 1933 Act relating to
another series of debt securities of the Company with terms substantially
identical to the Securities (the “Exchange Securities”) to be offered in
exchange for the Securities (the “Exchange Offer”) and (ii) to the extent
required by the Registration Rights Agreement, a shelf registration statement
pursuant to Rule 415 of the 1933 Act relating to the resale by certain
holders of the Securities, and in each case, to use their best efforts to cause
such registration statements (any such registration statement, a “Registration
Statement”) to be declared effective.


 


The Company has prepared and delivered to each Initial
Purchaser copies of a preliminary offering memorandum dated February 25,
2005 (the “Preliminary Offering Memorandum”) and has prepared and will deliver
to each Initial Purchaser, on the date hereof or the next succeeding day,
copies of a final offering memorandum dated March 10, 2005 (the “Final
Offering Memorandum”), each for use by such Initial Purchaser in connection
with its solicitation of purchases of, or offering of, the Securities.  “Offering Memorandum” means, with respect to
any date or time referred to in this Agreement, the most recent offering
memorandum (whether the Preliminary Offering Memorandum or the Final Offering
Memorandum, or any amendment or supplement to either such document), including
exhibits thereto and the Annual Report of the Company on Form 10-K for the fiscal year ended October 31, 2004 filed
with the Commission (the “Form 10-K”) incorporated therein by reference,
which has been prepared and delivered by the Company to the Initial Purchasers
in connection with their solicitation of purchases of, or offering of, the
Securities.  Any statement contained in the Form 10-K
will be deemed to be modified or superseded in the Offering Memorandum to the
extent that a subsequent statement contained in the Offering Memorandum
modifies or supersedes such statement. Any such statement in the Form 10-K
so modified or superseded by the Offering Memorandum will not be deemed, except
as so modified or superseded, to constitute a part of the Offering Memorandum.


 


All
references in this Agreement to financial statements and schedules and other
information which is “contained,” “included” or “stated” in the Offering
Memorandum (or other references of like import) shall be deemed to mean and
include all such information, financial statements and schedules included in
the Form 10-K which is incorporated by reference in the Offering
Memorandum, except to the extent such information has been modified or
superseded as provided above.


 


In connection with the
offering of the Securities by the Company, the Company has commenced a tender
offer to purchase for cash any and all of the $200.0 million aggregate
principal amount outstanding of the Company’s 9.875% Senior Subordinated Notes
due 2007 (the “Subordinated Notes”) and a solicitation of consents (the “Consents”)
from the holders of the Subordinated Notes to amend the indenture among the
Company and The Bank of New York, as trustee, dated as of November 19,
1997 (the “Subordinated Notes Indenture”) relating to the Subordinated Notes
pursuant to its Offer and Purchase and Consent Solicitation Statement dated February 17,
2005 (the “Tender Offer and Consent Solicitation”).  As described in the Offering Memorandum, the
proceeds from the offering of the Securities received by the Company, along
with borrowings under the Company’s Loan and Security Agreement, as amended, dated
November 20, 2001 (the “Senior Credit Facility”) with Wachovia Bank,
National Association, as successor by merger to Congress Financial Corporation,
as agent, are to be used to repurchase the Subordinated Notes tendered in the
Tender Offer and Consent Solicitation and to repay related fees and expenses.


 


SECTION 1.           Representations
and Warranties by the Company.


 


(a) Representations and
Warranties.  The Company
represents and warrants to each Initial Purchaser as of the date hereof and as
of Closing Time referred to in Section 2(b) hereof, and agrees with
each Initial Purchaser, as follows:


 


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(i)            Offering Memorandum.  The Offering Memorandum does not, and at
Closing Time will not, include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading; provided
that this representation, warranty and agreement shall not apply to statements
in or omissions from the Offering Memorandum made in reliance upon and in
conformity with written information furnished to the Company by any Initial
Purchaser through Merrill Lynch expressly for use in the Offering Memorandum.


 


(ii)           Incorporated Document.  The Offering Memorandum as delivered from
time to time shall incorporate by reference the Form 10-K.  The Form 10-K at the time it was filed
with the Commission complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and
regulations of the Commission thereunder (the “1934 Act Regulations”),
and, when read together with the other information in the Offering Memorandum,
at the time the Offering Memorandum was issued and at Closing Time, did not and
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.


 


(iii)          Independent Accountants.  KPMG LLP, who has expressed its opinion with
respect to the financial statements (including the related notes thereto) and
supporting schedules included in the Offering Memorandum are independent
registered public accountants with respect to the Company and its subsidiaries
within the meaning of Regulation S-X under the 1933 Act.


 


(iv)          Financial Statements.  The consolidated financial statements,
together with the related schedules and notes, included in the Offering
Memorandum present fairly the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statement of
operations, stockholders’ equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial statements
have been prepared in conformity with generally accepted accounting principles
(“GAAP”) applied on a consistent basis throughout the periods involved.  The supporting schedules, if any, included in
the Offering Memorandum present fairly in accordance with GAAP the information
required to be stated therein.  The
selected financial data and the summary financial information included in the
Offering Memorandum present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial statements
included in the Form 10-K which is incorporated by reference in the
Offering Memorandum.


 


(v)           No Material Adverse Change in
Business.  Since the respective dates as of which
information is given in the Offering Memorandum, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business (a “Material Adverse
Effect”), (B) there have been no transactions entered into by the Company
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its subsidiaries
considered as one enterprise, and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.


 


(vi)          Good Standing of the Company.  The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum
and to enter into and perform its obligations under this


 


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Agreement, the Indenture, the Securities, the Exchange Securities, the
Registration Rights Agreement and the DTC Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.


 


(vii)         Good Standing of Subsidiaries.  The Company does not own or control, directly
or indirectly, any corporation, association, partnership or other entity other
than the subsidiaries listed in Schedule C to this Agreement (each such
corporation, association, partnership or other entity, a “Subsidiary”).  Each Subsidiary has been duly organized and
is validly existing as an entity in good standing under the laws of the
jurisdiction of its organization, has the requisite power and authority to own,
lease and operate its properties and to conduct its business as described in
the Offering Memorandum and is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Offering Memorandum (including under the caption “Description
of Other Indebtedness”), all of the issued and outstanding capital stock of
each Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company, directly or through subsidiaries,
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; and none of the outstanding shares of capital stock of each
Subsidiary was issued in violation of any preemptive or similar rights of any
securityholder of such Subsidiary.


 


(viii)        Capitalization.  The authorized,
issued and outstanding capital stock of the Company is as set forth in the
financial statements, including the schedules and notes, included or
incorporated in the Offering Memorandum (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to reservations, agreements, employee
benefit plans referred to in the Offering Memorandum or pursuant to the
exercise of convertible securities or options referred to in the Offering
Memorandum).  At October 31, 2004,
on a consolidated basis, after giving pro forma effect to the issuance and
sale of the Securities pursuant hereto, the Company’s additional borrowings
under the Senior Credit Facility and the application of the net proceeds from
the sale of the Securities and the Company’s additional borrowings under the
Senior Credit Facility in the manner described under the caption “Use of Proceeds”
in the Offering Memorandum, the Company would have the capitalization as set
forth under the “As Adjusted” column of the table in the Offering Memorandum
under the caption “Capitalization”.  The
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none
of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any securityholder of
the Company.


 


(ix)           Authorization of Agreement.  This Agreement has been duly authorized,
executed and delivered by the Company, and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of creditors’
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).


 


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(x)            Authorization of the Indenture.  The Indenture has been duly authorized by the
Company and, when executed and delivered by the Company and the Trustee, will
constitute a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors’ rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).


 


(xi)           Authorization of the Securities
and the Exchange Securities.  (A) The Securities have been duly
authorized and, at Closing Time (as defined in Section 2(b) hereof),
will have been duly executed by the Company and, when authenticated, issued and
delivered in the manner provided for in the Indenture and delivered against
payment of the purchase price therefor as provided in this Agreement, will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors’ rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and
will be in the form contemplated by, and entitled to the benefits of, the
Indenture; and (B) the Exchange Securities have been duly and validly
authorized for issuance by the Company, and when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights Agreement
and the Exchange Offer (as defined in the Registration Rights Agreement), will
constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors’ rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and
will be in the form contemplated by, and entitled to the benefits of, the
Indenture.


 


(xii)          Description of the Securities,
the Indenture and the Registration Rights Agreement.  The Securities, the Exchange Securities, the
Indenture and the Registration Rights Agreement will conform in all material
respects to the respective statements relating thereto contained in the
Offering Memorandum and will be in substantially the respective forms last
delivered to the Initial Purchasers prior to the date of this Agreement.


 


(xiii)         The Registration Rights
Agreement and the DTC Agreement.  At the Closing Time
(as defined in Section 2(b) hereof), each of the Registration Rights
Agreement and the DTC Agreement will be duly authorized, executed and delivered
by, and will be a valid and binding agreement of, the Company, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors’ rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).


 


(xiv)        Absence of Defaults and Conflicts.  Neither the Company nor any Subsidiary is in
violation of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any Subsidiary
is a party or by which or any of them may be bound, or to which any


 


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of the property or assets of the Company or any Subsidiary is subject
(collectively, “Agreements and Instruments”) except for such defaults that
would not result in a Material Adverse Effect; and the issuance and delivery of
the Securities and the Exchange Securities, and the execution, delivery and
performance of this Agreement, the Indenture, the Registration Rights
Agreement, the DTC Agreement and any other agreement or instrument entered into
or issued or to be entered into or issued by the Company in connection with the
transactions contemplated hereby or thereby or in the Offering Memorandum and
compliance by the Company with its obligations thereunder, and the consummation
of the transactions contemplated herein or therein and in the Offering
Memorandum (including the issuance and sale of the Securities and the use of
the proceeds from the sale of the Securities and the borrowings under the
Senior Credit Facility as described in the Offering Memorandum under the
caption “Use of Proceeds”) have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any Subsidiary pursuant to, the Agreements and Instruments
except for such conflicts, breaches or defaults or Repayment Events or liens,
charges or encumbrances that, singly or in the aggregate, would not result in a
Material Adverse Effect, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any Subsidiary or any
applicable law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or any of their assets,
properties or operations.  As used
herein, a “Repayment Event” means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any person acting
on such holder’s behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
Subsidiary.


 


(xv)         Absence of Labor Dispute.  No labor dispute with the employees of the
Company or any Subsidiary exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any Subsidiary’s principal
suppliers, manufacturers, customers or contractors, which, in either case,
would result in a Material Adverse Effect.


 


(xvi)        Absence of Proceedings.  Except as otherwise
disclosed in the Offering Memorandum, there is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened, against or affecting the Company or any Subsidiary which might
result in a Material Adverse Effect, or which might materially and adversely
affect the properties or assets of the Company or any Subsidiary or the
consummation of the transactions contemplated by this Agreement or the
performance by the Company of its obligations hereunder.  The aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary is a party or
of which any of their respective property or assets is the subject which are
not described in the Offering Memorandum, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
Material Adverse Effect.


 


(xvii)       Absence of Manipulation.  Neither the Company
nor any person that the Company directly, or indirectly through one or more
intermediaries, controls (each such person, an “Affiliate”) has taken, nor will
the Company or any Affiliate take, directly or indirectly, any action which is
designed to or which has constituted or which would be expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.


 


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(xviii)      Possession of Intellectual Property.  The Company and the Subsidiaries own or
possess, or can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other intellectual
property (collectively, “Intellectual Property”) necessary to carry on the
business now operated by them, and neither the Company nor any Subsidiary has
received any notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any Subsidiary therein,
and which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.


 


(xix)         Absence of Further Requirements.  No filing with, or authorization, approval,
consent, license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required in connection with
the offering, issuance or sale of the Securities or the Exchange Securities
hereunder or for the due execution, delivery or performance of this Agreement,
the Indenture, the Registration Rights Agreement or the DTC Agreement by the
Company, or the consummation of the transactions contemplated thereunder and by
the Offering Memorandum, except such as have been already obtained.


 


(xx)          Compliance with Laws.  Each of the Company and the Subsidiaries is
in compliance in all material respects with all international, foreign,
federal, state and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any governmental
authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any governmental
authority, in each case whether or not having the force of law, except where
the failure to so comply would not, singly or in the aggregate, result in a
Material Adverse Effect.


 


(xxi)         Possession of Licenses and
Permits.  The Company and the Subsidiaries possess such
permits, licenses, approvals, consents and other authorizations (collectively, “Governmental
Licenses”) issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now operated by
them, except where the failure so to possess would not, singly or in the
aggregate, result in a Material Adverse Effect; the Company and the
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not, singly
or in the aggregate, result in a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not, singly or in the aggregate,
result in a Material Adverse Effect; and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.


 


(xxii)        Title to Property.  The Company and the
Subsidiaries have good and marketable title to all real property owned by the
Company and the Subsidiaries and good title to all other properties owned by
them, in each case free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind, except such as (A) are
described in the Offering Memorandum or (B) do not, singly or in the
aggregate, materially affect


 


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the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any Subsidiary; and all
of the leases and subleases material to the business of the Company and the
Subsidiaries, considered as one enterprise, and under which the Company or any
Subsidiary holds properties described in the Offering Memorandum, are in full
force and effect, and neither the Company nor any Subsidiary has any notice of
any material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any Subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or any
Subsidiary to the continued possession of the leased or subleased premises
under any such lease or sublease.


 


(xxiii)       Environmental Laws.  Except as described
in the Offering Memorandum and except such matters as would not, singly or in
the aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any Subsidiary is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including, without limitation, laws and regulations
relating to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products, asbestos-containing materials or mold (collectively, “Hazardous
Materials”) or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental
Laws”), (B) the Company and the Subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or any
Subsidiary and (D) there are no events or circumstances that would
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any Subsidiary
relating to Hazardous Materials or Environmental Laws.


 


(xxiv)       ERISA Compliance.  The Company and any
“employee benefit plan” (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, “ERISA”)) established or maintained
by the Company or its “ERISA Affiliates” (as defined below) are in compliance
in all material respects with ERISA.  “ERISA
Affiliate” means, with respect to the Company, any member of any group of
organizations described in Section 414, of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the “Code”) of which the Company is a member. 
No “reportable event” (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any “employee benefit plan”
established or maintained by the Company or any of its ERISA Affiliates.  No “employee benefit plan” established or
maintained by the Company or any of its ERISA Affiliates, if such “employee
benefit plan” were terminated, would have any “amount of unfunded benefit liabilities”
(as defined under ERISA).  None of the
Company nor any of its ERISA Affiliates has incurred or reasonably expects to
incur (i) any liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any “employee benefit plan”; or (ii) any
liability under Sections 412, 4971 or 4975 of the Code; or (iii) any
material liability under Section 490B of the Code.  Each “employee benefit plan” established or
maintained by the Company or any of its ERISA Affiliates that is intended to be
qualified under Section 401 of the Code is so qualified


 


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and nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification.


 


(xxiv)       Investment Company Act.  The Company is not
required, and upon the issuance and sale of the offered Securities as herein
contemplated and the application of the net proceeds therefrom as described in
the Offering Memorandum will not be required, to register as an “investment
company” under the Investment Company Act of 1940, as amended (the “1940 Act”).


 


(xxv)        Similar Offerings.  Neither the Company
nor any of its Affiliates, has, directly or indirectly, solicited any offer to
buy, sold or offered to sell or otherwise negotiated in respect of, or will
solicit any offer to buy, sell or offer to sell or otherwise negotiate in
respect of, in the United States or to any United States citizen or resident,
any security which is or would be integrated with the sale of the Securities in
a manner that would require the offered Securities to be registered under the
1933 Act.


 


(xxvi)       Rule 144A Eligibility.  The Securities are
eligible for resale pursuant to Rule 144A and will not be, at Closing
Time, of the same class as securities listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a U.S.
automated interdealer quotation system.


 


(xxvii)      No General Solicitation.  None of the
Company, its Affiliates or any person acting on its or any of their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage, in connection with the offering of
the offered Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the
1933 Act.


 


(xxviii)     No Registration Required.  Subject to
compliance by the Initial Purchasers with the representations and warranties
set forth in Section 2 and the procedures set forth in Section 6
hereof, it is not necessary in connection with the offer, sale and delivery of
the offered Securities to the Initial Purchasers and to each Subsequent
Purchaser in the manner contemplated by this Agreement and the Offering
Memorandum to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the “1939 Act”).


 


(xxix)       No Directed Selling Efforts.  With respect to those offered Securities sold
in reliance on Regulation S, (A) none of the Company, its Affiliates
or any person acting on its or their behalf (other than the Initial Purchasers,
as to whom the Company makes no representation) has engaged or will engage in
any directed selling efforts within the meaning of Regulation S and (B) each
of the Company and its Affiliates and any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) has complied and will comply with the offering restrictions
requirement of Regulation S and, in connection therewith, the Offering
Memorandum will contain the disclosure required by Rule 902 of the 1933
Act.


 


(xxx)        Compliance with Sections 402, 302 and 906 of the
Sarbanes-Oxley Act.  There is and has been no failure on the part
of the Company or any of the Company’s directors or officers, in their
capacities as such, to comply in all material respects with any provision of
the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
in connection therewith (the “Sarbanes-Oxley Act”), including Section 402
related to loans and Sections 302 and 906 related to certifications.


 


9





















 


(xxxi)       Payment of Taxes. The Company and the Subsidiaries have filed all federal,
state, local and foreign income and franchise tax returns required to be filed
through the date hereof or has requested extensions thereof except in any case
in which the failure so to file would not have a Material Adverse Effect and
except as set forth in or contemplated in the Offering Memorandum, and has paid
all taxes required to be paid by it, to the extent that any such tax is due and
payable, except for any such assessment that is currently being contested in
good faith or as would not have a Material Adverse Effect and except as set
forth in or contemplated in the Offering Memorandum.  The charges, accruals and reserves on the
books of the Company in respect of any income and corporation tax liability for
any years not finally determined are adequate to meet any assessments or re-assessments
for additional income tax for any years not finally determined, except to the
extent of any inadequacy that would not result in a Material Adverse Effect.


 


(xxxii)      Internal Accounting Control. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management’s general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management’s general or specific authorization and (D) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.


 


(xxxiii)     No Unlawful Contributions or Other Payments.  Neither the Company nor any of Subsidiary
nor, to the best of the Company’s knowledge, any employee or agent of the
Company or any Subsidiary, has made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office in
violation of any law or of the character necessary to be disclosed in the
Offering Memorandum in order to make the statements therein not misleading.


 


(xxxiv)     Insurance.
The Company and the Subsidiaries carry or are entitled to the benefits of
insurance, with reputable insurers of recognized financial responsibility, in
such amounts and covering such risks as are reasonable in the businesses in
which they are engaged, and all such insurance is in full force and effect.


 


(xxxv)      Absence of Registration Rights. There are no persons with
registration rights or other similar rights to have any securities (other than
the Securities) of the Company registered pursuant to the Registration
Statement.


 


(xxxvi)     Solvency.
The Company is, and immediately after the Closing Time (as defined in Section 2(b) hereof)
will be, Solvent.  As used herein, the
term “Solvent” means, with respect to the Company on a particular date, that on
such date (A) the fair market value of the assets of the Company is
greater than the total amount of liabilities (including contingent liabilities)
of the Company, (B) the present fair salable value of the assets of the
Company is greater than the amount that will be required to pay the probable
liabilities of the Company on its debts as they become absolute and matured, (C) the
Company is able to realize upon its assets and pay its debts and other
liabilities, including contingent obligations, as they mature, and (D) the
Company does not have unreasonably small capital.


 


(xxxvii)    No Distribution of Unauthorized Materials.  The Company has not distributed and, prior to
the later to occur of (i) the Closing Time (as defined in Section 2(b) hereof)
and (ii) completion of the distribution of the Securities, will not
distribute any offering material in


 


10





















 


connection with the offering and sale of the Securities other than the
Offering Memorandum or other materials, if any, approved by the Representative.


 


(xxxviii)   Stabilization. Neither Company nor any of its officers, directors or
controlling persons has taken, directly or indirectly, any action designed to
cause or to result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.


 


(xxxix)      Supply of Merchandise. No supplier of merchandise to the Company or any
Subsidiary has ceased shipments of merchandise to the Company or any
Subsidiary, other than in the normal and ordinary course of business consistent
with past practices, which cessation would not result in a Material Adverse
Effect.


 


(xl)           Senior
Credit Facility.  As of the date hereof, the Company is not aware of any fact
which will prevent it, on or prior to the Closing Time (as defined in Section 2(b) hereof),
to borrow funds under the Senior Credit Facility, in amounts that are
sufficient, together with the proceeds from the proceeds of the offering of
Securities contemplated by this Agreement, as described in the Offering
Memorandum to repurchase the Subordinated Notes pursuant to the terms of the
Tender Offer and Consent Solicitation, or otherwise redeem the Subordinated
Notes.


 


(xli)          Tender Offer and Consent
Solicitation.  The Company has received such number of
Consents irrevocably deposited pursuant to the Tender Offer and Consent Solicitation
as is necessary to amend the Subordinated Notes Indenture as contemplated by
the Tender Offer and Consent Solicitation and the Company shall have entered
into a supplemental indenture amending the Subordinated Notes Indenture as
contemplated in the Tender Offer and Consent Solicitation.


 


(xIiii)       The agreements, contracts or instruments
listed in Exhibit D attached hereto are, as of the date hereof, the only
material agreements, contracts or instruments that are binding upon the Company
and its subsidiaries on the date hereof that are material to the operation of
the business of the Company and its subsidiaries.


 


(b) Officer’s Certificates.  Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representative or to
counsel for the Initial Purchasers shall be deemed a representation and
warranty by the Company to each Initial Purchaser as to the matters covered
thereby.


 


SECTION 2.           Sale
and Delivery to Initial Purchasers; Closing.


 


(a) Securities.  On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Initial Purchaser, severally and not
jointly, and each Initial Purchaser, severally and not jointly, agrees to
purchase from the Company, at the price set forth in Schedule B, the
aggregate principal amount of Securities set forth in Schedule A opposite
the name of such Initial Purchaser, plus any additional principal amount of
Securities which such Initial Purchaser may become obligated to purchase
pursuant to the provisions of Section 11 hereof.


 


(b) Payment.  Payment of the purchase price for, and
delivery of certificates for, the Securities shall be made at the office of Shearman & Sterling LLP, 599
Lexington Avenue, New York, NY 10022, or at such other place as shall be
agreed upon by the Representative and the Company, at 9:00 A.M. (Eastern
time) on the sixth business day after the date hereof (unless postponed in
accordance with the provisions of Section 11), or at such other time not
later than ten business days after such date as shall be


 


11





















 


agreed upon by the Representative and the Company (such time and date
of payment and delivery being herein called “Closing Time”).


 


Payment shall be made to
the Company by wire transfer of immediately available funds to a bank account
designated by the Company, against delivery to the Representative for the
respective accounts of the Initial Purchasers of certificates for the
Securities to be purchased by them.  It
is understood that each Initial Purchaser has authorized the Representative,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Securities which it has agreed to purchase.  Merrill Lynch, individually and not as
representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by Closing Time, but such
payment shall not relieve such Initial Purchaser from its obligations
hereunder.


 


(c) Denominations;
Registration.  Certificates
for the Securities shall be in such denominations ($1,000 or integral multiples
of $1,000 in excess thereof) and registered in such names as the Representative
may request in writing at least one full business day before the Closing
Time.  The certificates representing the
Securities shall be made available for examination and packaging by the Initial
Purchasers in The City of New York not later than 10:00 A.M. on the last
business day prior to Closing Time.


 


SECTION 3.           Covenants
of the Company.  The Company
covenants with each Initial Purchaser as follows:


 


(a) Offering Memorandum.  The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Offering Memorandum and any amendments and supplements thereto and the Form 10-K
incorporated by reference therein as such Initial Purchaser may reasonably
request.


 


(b) Notice and Effect of
Material Events.  The Company
will immediately notify each Initial Purchaser and confirm such notice in
writing (x) of any filing made by the Company of information relating to
the offering of the Securities with any securities exchange or any other
regulatory body in the United States or any other jurisdiction, and
(y) prior to the completion of the placement of the offered Securities by
the Initial Purchasers as evidenced by a notice in writing from the Initial Purchasers
to the Company, of any material changes in or affecting the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and the Subsidiaries considered as one enterprise which (i) make
any statement in the Offering Memorandum false or misleading or (ii) are
not disclosed in the Offering Memorandum. 
In such event or if during such time any event shall occur as a result
of which it is necessary, in the reasonable opinion of any of the Company, its
counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend
or supplement the Offering Memorandum in order that the Offering Memorandum not
include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances then existing, the Company will forthwith amend or
supplement the Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Offering Memorandum will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it
is delivered to a Subsequent Purchaser, not misleading.


 


12





















 


The Company hereby
expressly acknowledges that the indemnification and contribution provisions of
Sections 7 and 8 hereof are specifically applicable and relate to
each offering memorandum, amendment or supplement referred to in this Section 3(b).


 


(c) Amendment to Offering
Memorandum and Supplements. 
The Company will advise each Initial Purchaser promptly of any proposal
to amend or supplement the Offering Memorandum and will not effect such
amendment or supplement without the consent of the Initial Purchasers, which
consent shall not be unreasonably withheld. 
Neither the consent of the Initial Purchasers, nor the Initial Purchaser’s
delivery of any such amendment or supplement, shall constitute a waiver of any
of the conditions set forth in Section 5 hereof.


 


(d) Qualification of
Securities for Offer and Sale. 
The Company will use its reasonable best efforts, in cooperation with
the Initial Purchasers, to qualify the offered Securities for offering and sale
under the applicable Blue Sky or securities laws of such states and other
jurisdictions as the Initial Purchasers may designate and to maintain such
qualifications in effect as long as required for the sale of the Securities; provided,
however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.


 


(e) Rating of Securities.  The Company shall take all reasonable action
necessary to enable Standard & Poor’s Ratings Services, a division of
McGraw Hill, Inc. (“S&P”), and Moody’s Investors Service Inc. (“Moody’s”)
to provide their respective credit ratings of the Securities.


 


(f) DTC.  The Company will cooperate with the Initial
Purchasers and use its best efforts to permit the offered Securities to be
eligible for clearance and settlement through the facilities of DTC.


 


(g) Use of Proceeds.  The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Offering Memorandum under “Use of Proceeds”.


 


(h) Restriction on Sale of
Securities.  During a period
of 180 days from the date of the Offering Memorandum, the Company will not,
without the prior written consent of Merrill Lynch, directly or indirectly,
issue, sell, offer or agree to sell, grant any option for the sale of, or
otherwise dispose of, any other debt securities of the Company or securities of
the Company that are convertible into, or exchangeable for, the offered
Securities or such other debt securities.


 


(i) PORTAL Designation.  The Company will use its reasonable best
efforts to permit the Securities to be designated PORTAL securities in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. (“NASD”) relating to trading in
the PORTAL Market.


 


(j) Reporting Requirements.  Until the offering of the Securities is complete,
the Company will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act and
the 1934 Act Regulations.


 


(k) Subordinated
Notes.  To the extent the
Company has delivered a Notice of Redemption (defined below) as described in Section 5(m)
hereof, the Company shall deposit with the Payment Agent (as such term is
defined in the Subordinated Notes Indenture) such funds that are sufficient to
redeem all Subordinated Notes that remain outstanding following the completion
of the Tender Offer and Consent Solicitation in the manner provided in the
Subordinated Notes Indenture.


 


13





















 


SECTION 4.           Payment
of Expenses.


 


(a) Expenses.  The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including (i) the
preparation, printing, delivery to the Initial Purchasers and any filing of the
Offering Memorandum (including financial statements and any schedules or
exhibits and the Form 10-K which will be delivered therewith) and of each
amendment or supplement thereto, (ii) the preparation, issuance and
delivery of the certificates for the Securities to the Initial Purchasers,
including any transfer taxes, any stamp or other duties payable upon the sale,
issuance and delivery of the Securities to the Initial Purchasers and any
charges of DTC in connection therewith, (iii) the fees and disbursements
of the Company’s counsel, accountants and other advisors, (iv) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Initial Purchasers in
connection therewith and in connection with the preparation of the Blue Sky
Survey, any supplement thereto, (v) the fees and expenses of the Trustee,
including the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Securities, (vi) the costs and expenses of the
Company relating to investor presentations on any “road show” undertaken in
connection with the marketing of the Securities including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road show
presentations, travel and lodging expenses of the representatives and officers
of the Company and any such consultants, and one half of the cost of aircraft
and other transportation chartered in connection with the road show, (vii) any
fees payable in connection with the rating of the Securities, and (viii) any
fees and expenses payable in connection with the initial and continued
designation of the Securities as PORTAL securities under the PORTAL Market Rules pursuant
to NASD Rule 5322.


 


(b) Termination of Agreement.  If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 10(a)(i) hereof,
the Company shall reimburse the Initial Purchasers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.


 


SECTION 5.           Conditions
of Initial Purchasers’ Obligations. 
The obligations of the several Initial Purchasers hereunder are subject
to the accuracy of the representations and warranties of the Company contained
in Section 1 hereof or in certificates of any officer of the Company or
any of its subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder,
and to the following further conditions:


 


(a) Opinion of Counsel for
Company.  At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Mayer, Brown, Rowe & Maw LLP, counsel for the Company, in
form and substance reasonably satisfactory to counsel for the Initial
Purchasers, together with signed or reproduced copies of such letter for each
of the other Initial Purchasers to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the Initial Purchasers may
reasonably request.


 


(b) Opinion of Counsel for
Company.  At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Warshaw Burstein Cohen Schlesinger & Kuh, LLP, counsel for
the Company, in form and substance reasonably satisfactory to counsel for the
Initial Purchasers, together with signed or reproduced copies of such letter
for each of the other Initial Purchasers to the effect set forth in Exhibit B
hereto and to such further effect as counsel to the Initial Purchasers may
reasonably request.


 


(c) Opinion of Counsel for
Initial Purchasers.  At
Closing Time, the Representative shall have received the favorable opinion,
dated as of Closing Time, of Shearman & Sterling LLP, counsel for the


 


14





















 


Initial Purchasers, together with signed or reproduced copies of such
letter for each of the other Initial Purchasers satisfactory to the Initial
Purchasers.


 


(d) Officers’ Certificate.  At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Final Offering Memorandum (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, and the Representative shall have received a certificate of the
President or a Vice President of the Company and of the chief financial or
chief accounting officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1 hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time, and (iii) the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to Closing
Time.


 


(e) Accountants’ Comfort
Letter.  At the time of the
execution of this Agreement, the Representative shall have received from KPMG
LLP a letter dated such date, in form and substance satisfactory to the
Representative, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers containing statements and information of
the type ordinarily included in accountants’ “comfort letters” to Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.


 


(f) Bring-down Comfort Letter.  At Closing Time, the Representative shall
have received from KPMG LLP a letter, dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of
this Section, except that the specified date referred to shall be a date not
more than three business days prior to Closing Time.


 


(g) Maintenance of Rating.  Since the date of this Agreement, there shall
not have occurred a downgrading in the rating assigned to the Securities by any
“nationally recognized statistical rating agency”, as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the
1933 Act, and no such securities rating agency shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of the Securities or any of the Company’s other debt
securities.


 


(h) PORTAL.  At Closing Time, the Securities shall have
been designated for trading on PORTAL.


 


(i) Indenture.  The Company and the Trustee shall have
entered into the Indenture and the Initial Purchasers shall have received
executed counterparts thereof.


 


(j) Registration
Rights Agreement.  The Company
shall have entered into the Registration Rights Agreement and the Initial
Purchasers shall have received executed counterparts thereof.


 


(k) Additional Documents.  At Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Representative and counsel for the Initial Purchasers.


 


15





















 


(l) Senior Credit
Facility.  The Senior Credit
Facility shall have been amended pursuant to the amendment to the Senior Credit
Facility, substantially in the form attached hereto as Exhibit C.


 


(m) Subordinated
Notes.  The Subordinated Notes
Indenture shall have been amended as contemplated by the terms of the Tender
Offer and Consent Solicitation.  To the
extent that any Subordinated Notes remain outstanding following the repurchase
of the Subordinated Notes pursuant to the terms of the Tender Offer and Consent
Solicitation, the Company shall have delivered to The Bank of New York, the trustee
under the Subordinated Notes Indenture, irrevocable notice of redemption (the “Notice
of Redemption”) of all such Subordinated Notes that remain outstanding, as
provided by Article Three of the Subordinated Notes Indenture.


 


(n) Termination of Agreement.  If any condition specified in this Section shall
not have been fulfilled when and as required to be fulfilled, this Agreement
may be terminated by the Representative by notice to the Company at any time at
or prior to Closing Time, and such termination shall be without liability of
any party to any other party except as provided in Section 4 and except
that Sections 7 and 8 shall survive any such termination and remain in
full force and effect.


 


SECTION 6.           Subsequent
Offers and Resales of the Securities.


 


(a) Offer and Sale Procedures.  Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:


 


(i)            Offers and Sales.  Offers and sales of the Securities shall be
made to such persons and in such manner as is contemplated by the Offering
Memorandum.  Each Initial Purchaser
severally agrees that it will not offer, sell or deliver any of the Securities
in any jurisdiction outside the United States except under circumstances that
will result in compliance with the applicable laws thereof, and that it will
take at its own expense whatever action is required to permit its purchase and
resale of the Securities in such jurisdictions.


 


(ii)           No General Solicitation.  No general solicitation or general
advertising (within the meaning of Rule 502(c) under the
1933 Act) will be used in the United States in connection with the
offering or sale of the Securities.


 


(iii)          Purchases by Non-Bank
Fiduciaries.  In the case of a non-bank Subsequent
Purchaser of a Security acting as a fiduciary for one or more third parties,
each third party shall, in the judgment of the applicable Initial Purchaser, be
a “qualified institutional buyer” within the meaning of Rule 144A under the
1933 Act (a “Qualified Institutional Buyer”) or a non-U.S. person outside
the United States.


 


(iv)          Subsequent Purchaser
Notification.  Each Initial Purchaser will take reasonable
steps to inform, and cause each of its U.S. affiliates to take reasonable steps
to inform, persons acquiring Securities from such Initial Purchaser or
affiliate, as the case may be, in the United States that the Securities (A) have
not been and will not be registered under the 1933 Act, (B) are being
sold to them without registration under the 1933 Act in reliance on Rule 144A
or in accordance with another exemption from registration under the
1933 Act, as the case may be, and (C) may not be offered, sold or
otherwise transferred, except (1) to the Company, (2) outside the
United States in accordance with Regulation S, or (3) inside the
United States (x) in accordance with Rule 144A to a person whom the
seller reasonably believes is a Qualified Institutional Buyer that is
purchasing such Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the offer, sale or
transfer is being made in


 


16





















 


reliance on Rule 144A or (y) pursuant to another available
exemption from registration under the 1933 Act.


 


(v)           Minimum Principal Amount.  No sale of the Securities to any one
Subsequent Purchaser will be for less than U.S. $1,000 principal amount and no
Security will be issued in a smaller principal amount.  If the Subsequent Purchaser is a non-bank
fiduciary acting on behalf of others, each person for whom it is acting must
purchase at least U.S. $1,000 principal amount of the Securities.


 


(b) Covenants of the Company.  The Company covenants with each Initial
Purchaser as follows:


 


(i)            Integration.  The Company agrees that it will not and will
cause its Affiliates not to, directly or indirectly, solicit any offer to buy,
sell or make any offer or sale of, or otherwise negotiate in respect of,
securities of the Company of any class if, as a result of the doctrine of “integration”
referred to in Rule 502 under the 1933 Act, such offer or sale would
render invalid (for the purpose of (i) the sale of the offered Securities
by the Company to the Initial Purchasers, (ii) the resale of the offered Securities
by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of
the offered Securities by such Subsequent Purchasers to others) the exemption
from the registration requirements of the 1933 Act provided by Section 4(2) thereof
or by Rule 144A or by Regulation S thereunder or otherwise.


 


(ii)           Rule 144A Information.  The Company agrees that, in order to render
the offered Securities eligible for resale pursuant to Rule 144A under the
1933 Act, while any of the offered Securities remain outstanding, it will
make available, upon request, to any holder of offered Securities or
prospective purchasers of Securities the information specified in Rule 144A(d)(4),
unless the Company furnishes information to the Commission pursuant to Section 13
or 15(d) of the 1934 Act.


 


(iii)          Restriction on Repurchases.  Until the expiration of two years after the
original issuance of the offered Securities, the Company will not, and will
cause its Affiliates not to, resell any offered Securities which are “restricted
securities” (as such term is defined under Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or otherwise (except as agent
acting as a securities broker on behalf of and for the account of customers in
the ordinary course of business in unsolicited broker’s transactions).


 


(c) Qualified Institutional
Buyer.  Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Company that it is a Qualified Institutional Buyer.


 


Resale Pursuant to Rule 903
of Regulation S or Rule 144A.  Each Initial Purchaser understands that the
offered Securities have not been and will not be registered under the
1933 Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with
Regulation S under the 1933 Act or pursuant to an exemption from the
registration requirements of the 1933 Act. 
Each Initial Purchaser severally represents and agrees, that, except as
permitted by Section 6(a) above, it has offered and sold Securities
and will offer and sell Securities (i) as part of their distribution at
any time and (ii) otherwise until forty days after the later of the date
upon which the offering of the Securities commences and Closing Time, only in
accordance with Rule 903 of Regulation S, Rule 144A under the
1933 Act or another applicable exemption from the registration
requirements of the 1933 Act. 
Accordingly, neither the Initial Purchasers, their affiliates nor any
persons acting on their behalf have engaged or will engage in any directed
selling efforts with respect to Securities sold hereunder pursuant to
Regulation S, and the Initial Purchasers, their affiliates and any person
acting on their behalf have complied and will comply with the offering restriction
requirements of Regulation S.


 


17





















 


Each Initial Purchaser
severally agrees that, at or prior to confirmation of a sale of offered
Securities pursuant to Regulation S it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration that
purchases offered Securities from it or through it during the restricted period
a confirmation or notice to substantially the following effect:


 


“The Securities
covered hereby have not been registered under the United States Securities Act
of 1933 (the “Securities Act”) and may not be offered or sold within the United
States or to or for the account or benefit of U.S. persons (i) as part of
their distribution at any time and (ii) otherwise until forty days after
the later of the date upon which the offering of the Securities commenced and
the date of closing, except in either case in accordance with Regulation S
or Rule 144A under the Securities Act. 
Terms used above have the meaning given to them by Regulation S.”


 


Terms used in the above
paragraph have the meanings given to them by Regulation S.


 


SECTION 7.           Indemnification.


 


(a) Indemnification of Initial
Purchasers.  The Company
agrees to indemnify and hold harmless each Initial Purchaser, its affiliates,
as such term is defined in Rule 501(b) under the 1933 Act (each, an “Initial
Purchaser Affiliate”), its selling agents and each person, if any, who controls
any Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:


 


(i)            against any and all loss,
liability, claim, damage and expense whatsoever, as incurred, arising out of
any untrue statement or alleged untrue statement of a material fact contained
in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;


 


(ii)           against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section 7(d) below)
any such settlement is effected with the written consent of the Company; and


 


(iii)          against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above;


 


provided,
however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment thereto); provided, further, that
the Company will not be liable to the Initial


 


18





















 


Purchasers with
respect to any Offering Memorandum to the extent that the Company shall sustain
the burden of proving that any such loss, liability, claim, damage or expense
resulted from the fact that such Initial Purchaser, in contravention of a
requirement of this Agreement or applicable law, sold Securities to a person to
whom such Initial Purchaser failed to send or give, at or prior to the Closing
Time, a copy of the Final Offering Memorandum, as then amended or supplemented
if: (i) the Company has previously furnished the necessary number of
copies thereof (sufficiently in advance of the Closing Time to allow for
distribution by the Closing Time) to the Initial Purchaser and the loss,
liability, claim, damage or expense of such Initial Purchaser resulted from an
untrue statement or omission of a material fact contained in or omitted from
the Preliminary Offering Memorandum which was corrected in the Final Offering
Memorandum as, if applicable, amended or supplemented prior to the Closing Time
and such Final Offering Memorandum was required by law to be delivered at or
prior to the written confirmation of sale to such person and (ii) such
failure to give or send such Final Offering Memorandum by the Closing Time to
the party or parties asserting such loss, liability, claim, damage or expense
would have constituted the sole defense to the claim asserted by such person.


 


(b) Indemnification of Company.  Each Initial Purchaser severally agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of
this Section 7, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Offering
Memorandum in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum.


 


(c) Actions Against Parties;
Notification.  Each
indemnified party shall give notice as promptly as reasonably practicable to each
indemnifying party of any costs and expenses incurred by such indemnified party
or any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this
indemnity agreement.  In the case of
parties indemnified pursuant to Section 7(a) above, counsel to the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company.  An indemnifying party may participate at its
own expense in the defense of any such action; provided, however,
that counsel to the indemnifying party shall not (except with the consent of
the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.  No indemnifying party
shall, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7 or Section 8
hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.


 


(d) Settlement Without Consent
if Failure to Reimburse.  If
at any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature


 


19





















 


contemplated by Section 7(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.


 


SECTION 8.           Contribution.  If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the
one hand and of the Initial Purchasers on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.


 


The relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
hand in connection with the offering of the Securities pursuant to this
Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Securities pursuant to this Agreement
(before deducting expenses) received by the Company and the total underwriting discount
received by the Initial Purchasers, bear to the aggregate initial offering
price of the Securities.


 


The relative fault of the
Company on the one hand and the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Initial Purchasers and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.


 


The Company and the
Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section.  The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred to
above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.


 


Notwithstanding the
provisions of this Section, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities purchased and sold by it hereunder exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.


 


No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.


 


For purposes of this
Section, each person, if any, who controls an Initial Purchaser within the
meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act and each Initial Purchaser Affiliate


 


20





















 


and selling agents
shall have the same rights to contribution as such Initial Purchaser, and each
person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the
same rights to contribution as the Company. 
The Initial Purchasers’ respective obligations to contribute pursuant to
this Section are several in proportion to the principal amount of
Securities set forth opposite their respective names in Schedule A hereto
and not joint.


 


SECTION 9.           Representations,
Warranties and Agreements to Survive. 
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of
any Initial Purchaser or Initial Purchaser Affiliate or selling agents, any
person controlling any Initial Purchaser, its officers or directors or any
person controlling the Company and (ii) delivery of and payment for the
Securities.


 


SECTION 10.         Termination
of Agreement.


 


(a) Termination; General.  The Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if
there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Final Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if
there has occurred any material adverse change in the financial markets in the
United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which
is such as to make it, in the judgment of the Representative, impracticable or
inadvisable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has
been suspended or materially limited by the Commission or the NASDAQ System, or
if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the NASDAQ System has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc.
or any other governmental authority, or (iv) if a material disruption has
occurred in commercial banking or securities settlements or clearance services
in the United States or (v) if a banking moratorium has been declared by
either Federal or New York authorities.


 


(b) Liabilities.  If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided  further
that Sections 7 and 8 shall survive such termination and remain in full
force and effect.


 


SECTION 11.         Default
by One or More of the Initial Purchasers. 
If one or more of the Initial Purchasers shall fail at Closing Time to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the “Defaulted Securities”), the Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Initial Purchasers, or any other initial purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth; if, however,
the Representative shall not have completed such arrangements within such 24-hour
period, then:


 


(a)           if
the number of Defaulted Securities does not exceed 10% of the aggregate
principal amount of the Securities to be purchased hereunder, each of the
non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the


 


21





















 


proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Initial Purchasers, or


 


(b)           if
the number of Defaulted Securities exceeds 10% of the aggregate principal
amount of the Securities to be purchased hereunder, this Agreement shall
terminate without liability on the part of any non-defaulting Initial
Purchaser.


 


No action taken pursuant
to this Section shall relieve any defaulting Initial Purchaser from
liability in respect of its default.


 


In the event of any such
default which does not result in a termination of this Agreement, either the
Representative or the Company shall have the right to postpone Closing Time for
a period not exceeding seven days in order to effect any required changes in
the Offering Memorandum or in any other documents or arrangements.  As used herein, the term “Initial Purchaser”
includes any person substituted for an Initial Purchaser under this Section 11.


 


SECTION 12.         Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication.  Notices to the Initial Purchasers shall be
directed to the Representative at 4 World Financial Center, New York, New York
10080, attention of Purna Saggurti, notices to the Company shall be directed to
it at AEP Industries Inc., 125 Phillips Avenue, South Hackensack, New Jersey
07606, Telecopier No. (201) 807-6801, attention of Paul Feeney.


 


SECTION 13.         Parties.  This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers and the Company and their respective
successors.  Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Initial Purchasers and the Company
and their respective successors and the controlling persons and officers and
directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained.  This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Initial Purchasers and the Company and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or
corporation.  No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely
of such purchase.


 


SECTION 14.         GOVERNING
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.


 


SECTION 15.         TIME.  TIME SHALL BE OF THE ESSENCE OF THIS
AGREEMENT.  EXCEPT AS OTHERWISE SET FORTH
HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.


 


SECTION 16.         Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.


 


SECTION 17.         Effect
of Headings.  The Section headings
herein are for convenience only and shall not affect the construction hereof.


 


22





















 


If the foregoing is in
accordance with your understanding of our agreement, please sign and return to
the Company a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the Initial Purchasers
and the Company in accordance with its terms.


 


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AEP INDUSTRIES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Jim Rafferty

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim Rafferty

  
	
   

  	
   

  	
  Title:

  	
  Vice President and
  Treasurer

  
	
   

  	
   

  
	
  CONFIRMED AND ACCEPTED,

  	
   

  
	
    as of the
  date first above written:

  	
   

  
	
   

  	
   

  
	
  MERRILL LYNCH &
  CO.

  	
   

  
	
  MERRILL LYNCH, PIERCE,
  FENNER & SMITH

  	
   

  
	
  INCORPORATED

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Greg
  Margolies

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  For itself and
  as Representative of the other Initial Purchaser named in Schedule A
  hereto.

  
								



 





















 


SCHEDULE A


 


	
  Name of Initial Purchaser

  	
   

  	
  Principal

  Amount of

  Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Merrill Lynch Pierce, Fenner & Smith
  Incorporated

  	
   

  	
  $

  	
  148,750,000

  	
   

  
	
  Deutsche Bank Securities Inc.

  	
   

  	
  26,250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  175,000,000

  	
   

  



 


Sch A-1





















 


SCHEDULE B


 


AEP INDUSTRIES INC.

$175,000,000 Senior Notes


 


1.             The
initial public offering price of the Securities shall be 100% of the principal
amount thereof, plus accrued interest, if any, from the date of issuance.


 


2.             The
purchase price to be paid by the Initial Purchasers for the Securities shall be
97.25% of the principal amount thereof.


 


3.             The
interest rate on the Securities shall be 7.875% per annum.


 


Sch B-1





















 


SCHEDULE C


 


List of Subsidiaries


 


	
  Subsidiary

  	
   

  	
  Country of

  Incorporation

  
	
  1.

  	
  AEP Belgium SA

  	
   

  	
  Belgium

  
	
  2.

  	
  AEP Bordex BV

  	
   

  	
  Netherlands

  
	
  3.

  	
  AEP Canada Inc.

  	
   

  	
  Canada

  
	
  4.

  	
  AEP Industries
  (Australia) Pty. Limited

  	
   

  	
  Australia

  
	
  5.

  	
  AEP Films &
  Laminates Pty. Limited

  	
   

  	
  Australia

  
	
  6.

  	
  AEP Industries
  (Netherlands) BV

  	
   

  	
  Netherlands

  
	
  7.

  	
  AEP Industries
  (NZ) Limited

  	
   

  	
  New Zealand

  
	
  8.

  	
  AEP Industries
  Packaging (Espana) SA

  	
   

  	
  Spain

  
	
  9.

  	
  AEP Rigid
  Packaging Beuningen BV

  	
   

  	
  Netherlands

  
	
  10.

  	
  AEP Rigid
  Packaging Venlo BV

  	
   

  	
  Netherlands

  
	
  11.

  	
  AEP Industries
  (UK) Ltd.

  	
   

  	
  UK

  
	
  12.

  	
  Duplas Pty. Ltd.

  	
   

  	
  Australia

  
	
  13.

  	
  AEP Italia SrL

  	
   

  	
  Italy

  
	
  14.

  	
  Termofilm SpA

  	
   

  	
  Italy

  
	
  15.

  	
  Fiap SpA

  	
   

  	
  Italy

  
	
  16.

  	
  Termofin srl

  	
   

  	
  Italy

  
	
  17.

  	
  Fiap Hellas SA

  	
   

  	
  Greece

  
	
  18.

  	
  AEP Industries
  Polska.Sp. zoo.

  	
   

  	
  Poland

  



 


Sch C-1





















 


EXHIBIT A


 


FORM OF OPINION OF MAYER, BROWN, ROWE &
MAW, LLP, COMPANY’S

COUNSEL TO BE DELIVERED PURSUANT TO SECTION 5(a)


 


(i)            The
Purchase Agreement has been duly authorized, executed and delivered by the
Company.


 


(ii)           The
Indenture has been duly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery thereof by the Trustee)
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other similar
laws relating to or affecting enforcement of creditors’ rights generally, or by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).


 


(iii)          The
Registration Rights Agreement has been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and delivery
thereof by the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors’ rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).


 


(iv)          The
DTC Agreement has been duly authorized, executed and delivered by the Company
and (assuming the due authorization, execution and delivery thereof by the
Trustee and the DTC) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors’ rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).


 


(v)           The
Securities are in the form contemplated by the Indenture, have been duly
authorized by the Company and, when executed by the Company and authenticated
by the Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee) and
issued and delivered against payment of the purchase price therefor will constitute
valid and binding obligations of the Company, enforceable against the Company
in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium (including,
without limitation, all laws relating to fraudulent transfers), or other
similar laws relating to or affecting enforcement of creditor’s rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and will be
entitled to the benefits of the Indenture.


 


(vi)          The
Exchange Securities are in the form contemplated by the Indenture, have been
duly and validly authorized for issuance by the Company, and when issued and
authenticated in accordance with the terms of the Indenture, the Registration
Rights Agreement and the Exchange Offer (as defined in the Registration Rights
Agreement), will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors’ rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether


 


A-1





















 


enforcement is considered
in a proceeding in equity or at law), and will be entitled to the benefits of
the Indenture.


 


(vii)         The
Securities, the Indenture and the Registration Rights Agreement conform in all
material respects to the descriptions thereof contained in the Offering
Memorandum.


 


(viii)        The
information in the Offering Memorandum under “Management—Third Point Agreement”,
“Description of Other Indebtedness”, “Description of the Notes”, and “Certain
United States Federal Income Tax Considerations” and to the extent that the
information in such sections of the Offering Memorandum constitutes matters of
law, summaries of legal matters or agreements, has been reviewed by us and is
correct in all material respects.


 


(ix)           No
filing with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any New York, Delaware or Federal court or
governmental authority or agency, (other than such as may be required under the
applicable securities laws of the various jurisdictions in which the Securities
will be offered or sold, as to which we need express no opinion) that, in our experience, are normally
applicable to the transactions of the type contemplated by the Purchase
Agreement, the Indenture, the Registration Rights Agreement and the DTC
Agreement is necessary or required in connection with the offering,
issuance, sale or delivery of the Securities to the Initial Purchasers or the
resale of the Securities by the Initial Purchasers in accordance with the terms
of the Purchase Agreement, or the due execution and delivery or performance of
the Purchase Agreement, the Registration Rights Agreement or the DTC Agreement by the Company, the due execution and
delivery of, and repayment of the obligations under, the Indenture by the
Company or the use of the proceeds from the sale of the Securities and the
borrowings under the Senior Credit Facility as described in the Offering
Memorandum under the caption “Use of Proceeds,” except for the filing of the
registration statements with the Securities and Exchange Commission (the “Commission”)
as required by the terms of the Registration Rights Agreement and the order of
the Commission declaring such registration statements effective and except
where the failure to obtain or make any such filing, authorization, approval,
consent, license, order, registration, qualification or decree would not materially
adversely affect the ability of the Company to offer, issue, sell or deliver
the Securities to the Initial Purchasers, the ability of the Initial Purchasers
to resell the Securities in accordance with the terms of the Purchase
Agreement, the due execution, delivery or performance of the Purchase
Agreement, the Registration Right Agreement or the DTC Agreement by the
Company, the due execution and delivery of, and repayment of the obligations
under, the Indenture by the Company or the use of the proceeds from the
sale of the Securities and the borrowings under the Senior Credit Facility as
described in the Offering Memorandum under the caption “Use of Proceeds”.


 


(x)            It
is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and to each Subsequent Purchaser in the
manner contemplated by the Purchase Agreement and the Offering Memorandum to
register the Securities under the Securities Act of 1933, as amended (the “Securities
Act”) or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended.


 


(xi)           The
issuance and delivery of the Securities and the Exchange Securities, the
execution, delivery and performance of the Purchase Agreement, the Indenture,
the Registration Rights Agreement, the DTC Agreement and compliance by the
Company with its obligations thereunder, and the use of the proceeds from the
sale of the Securities and the borrowings under the Senior Credit Facility as
described in the Offering Memorandum under the caption “Use of Proceeds” (a) do
not and will not result in any violation of the Restated Certificate of
Incorporation or By-laws of the Company, and (b) do not and will not,
whether with or without the giving of notice or lapse of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as defined in Section 1(a)(xiii)
of the Purchase Agreement)


 


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under, or result in the
creation or imposition of, any lien, charge or encumbrance upon any property or
assets of the Company under, (i) any agreement set forth on Annex I
hereto, (ii) the existing Delaware General Corporation Law and those
existing laws, statutes, rules or regulations of the State of New York
(other than state securities laws) and the existing Federal laws of the United
States of America, in each case which, in our experience, are normally
applicable to transactions of the type contemplated by the Purchase Agreement,
the Registration Rights Agreement, the Indenture and the DTC Agreement, or (iii) any
judgment, order or decree known to such counsel of any government, governmental
or regulatory instrumentality or agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or assets (except for
such conflicts, breaches, defaults or Repayment Events or liens, charges or
encumbrances that could not reasonably be expected to have a Material Adverse
Effect).


 


(xii)          The
Company is not required, and upon the issuance and sale of the Securities as
herein contemplated and the application of the net proceeds therefrom as
described in the Offering Memorandum will not be required, to register as “investment
company” under the Investment Company Act of 1940, as amended.


 


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ANNEX I TO OPINION OF MAYER, BROWN, ROWE & MAW, LLP


 


1.             Indenture, dated as of November 19,
1997, as amended through the date of this opinion between the Company and The
Bank of New York, as Trustee, as amended by the Supplemental Indenture dated as
of March 8, 2005.


 


2.             Agreement, dated as of February 4, 2005,
by and among the Company, Third Point Offshore Fund, Ltd., Banzai Partners
L.P., Third Point Partners L.P., Third Point Partners Qualified L.P., Points
West International Investments Ltd., Banzai Offshore Fund, Ltd., Bradley Louis
Radoff and J. Brendan Barba.


 


3.             Irrevocable Proxy, dated February 4,
2005, from Third Point Partners Qualified L.P., Third Point Partners L.P.,
Banzai Partners L.P., Points West International Investments Ltd. and Banzai
Offshore Fund, Ltd. to J. Brendan Barba.


 


4.             Loan
and Security Agreement, dated as of November 20, 2001, as amended or
otherwise modified through the date of this opinion, among the Company,
Wachovia Bank, National Association, as successor by merger to Congress
Financial Corporation, as Agent, and the financial institutions party thereto.


 


A-4





















 


EXHIBIT B


 


FORM OF OPINION OF WARSHAW BURSTEIN COHEN 

SCHLESINGER & KUH, LLP, COMPANY’S COUNSEL

TO BE DELIVERED PURSUANT TO SECTION 5(b)


 


(i)            The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware.


 


(ii)           The
Company has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum
and to enter into and perform its obligations under the Purchase Agreement, the
Indenture, the Securities, the Exchange Securities, the Registration Rights
Agreement and the DTC Agreement.


 


(iii)          The
Company is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect.


 


(iv)          All
descriptions in the Offering Memorandum of contracts and other documents to
which the Company or any of its subsidiaries are a party (other than those
contracts or other documents described under “Management—Third Point Agreement”,
“Description of Other Indebtedness”, “Description of Notes” and “Plan of
Distribution”, as to which we express no opinion) are accurate in all material
respects; to the best of our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments that
would be required to be described or referred to in the Offering Memorandum
that are not described or referred to in the Offering Memorandum other than
those described or referred to therein, and the descriptions thereof or
references thereto are correct in all material respects.


 


(v)           To
the best of our knowledge, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or any subsidiary is
a party, or to which the property of the Company or any subsidiary thereof is
subject, before or brought by any court or governmental agency or body, domestic
or foreign, which would reasonably be expected to result in a Material Adverse
Effect, or which would reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the transactions
contemplated in the Purchase Agreement or the performance by the Company of its
obligations thereunder or the transactions contemplated by the Offering
Memorandum.


 


(vi)          To
the best of our knowledge, neither the Company nor any Subsidiary is in
violation of its charter or by-laws or any law, administrative regulation or
administrative or court decree applicable to the Company or any Subsidiary or
is in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any under any agreement set forth on Annex
II hereto, except in each such case for such violations or defaults as would
not, individually or in the aggregate, result in a Material Adverse Effect.


 


(vii)         No
stockholder of the Company nor any other person has any preemptive right, right
of first refusal or other similar right to subscribe for or purchase securities
of the Company arising (A) by operation of the charter or by-laws of the
Company or the General Corporation Law of the State of Delaware or (B) to
the best knowledge of such counsel, otherwise.


 


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(viii)        The
material franchises, permits and rights of the Company in each jurisdiction in
which such franchise, permit or right is required are valid and adequate for
the business in which it is engaged, and there do not exist, to the best of
such counsel’s knowledge, any restrictions in connection therewith that, solely
or in the aggregate, would result in a Material Adverse Effect.


 


(ix)           The
information in the Offering Memorandum under “Risk Factors—Business Risks—A
violation of European competition law could adversely affect us”, “Business—Properties”,
“Business—Legal Proceedings”, “Certain Relationships and Related Party
Transactions” and to the extent that the information in such sections of the
Offering Memorandum constitutes matters of law, summaries of legal matters,
legal proceedings, or legal conclusions, has been reviewed by us and is correct
in all material respects.


 


(x)            The
Form 10-K incorporated by reference in the Offering Memorandum (other than
the financial statements and supporting schedules therein, as to which no
opinion need be rendered), when they were filed with the U.S. Securities and
Exchange Commission complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
U.S. Securities and Exchange Commission thereunder.


 


(xi)           Nothing
has come to our attention that would lead us to believe that the Offering
Memorandum or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom and the section of the Offering
Memorandum entitled “Certain United States Federal Tax Considerations” as to which
we express no opinion), at the time the Offering Memorandum was issued, at the
time any such amended or supplemented Offering Memorandum was issued or at
Closing Time, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.


 


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ANNEX I TO OPINION OF


WARSHAW BURSTEIN COHEN SCHLESINGER & KUH, LLP


 


1.       1985 Stock
Option Plan of the Company.


 


2.       Employee
Profit Sharing and 401(k) Retirement Plan and Trust of the Company, as adopted March 3,
1993.


 


3.       1995 Stock
Option Plan of the Company


 


4.       1995 Employee
Stock Purchase Plan of the Company


 


5.       Lease, dated
as of March 20, 1990, between the Company and Huyler Assoc., L.P.


 


6.       Employment
Agreement, dated as of October 11, 1996, between the Company and J.
Brendan Barba, as amended.


 


7.       Employment
Agreement, dated as of October 11, 1996, between the Company and Paul M.
Feeney, as amended.


 


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EXHIBIT C


 


 


FORM OF
AMENDMENT TO SENIOR CREDIT FACILITY, DATED FEBRUARY 25, 2005


 


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EXHIBIT D


 


1.             Indenture, dated as of November 19,
1997, between the Company and The Bank of New York, as trustee.


 


2.             Supplemental Indenture No. 1, dated as
of March 8, 2005, between the Company and The Bank of New York, as
trustee.


 


3.             Agreement, dated as of February 4, 2005,
by and among the Company, Third Point Offshore Fund, Ltd., Banzai Partners
L.P., Third Point Partners L.P., Third Point Partners Qualified L.P., Points
West International Investments Ltd., Banzai Offshore Fund, Ltd., Bradley Louis
Radoff and J. Brendan Barba.


 


4.             Irrevocable Proxy, dated February 4,
2005, from Third Point Partners Qualified L.P., Third Point Partners L.P.,
Banzai Partners L.P., Points West International Investments Ltd. and Banzai
Offshore Fund, Ltd. to J. Brendan Barba.


 


5.             1985 Stock Option Plan of the Company.


 


6.             Employee
Profit Sharing and 401(k) Retirement Plan and Trust of the Company, as adopted March 3,
1993.


 


7.             1995
Stock Option Plan of the Company


 


8.             1995
Employee Stock Purchase Plan of the Company


 


9.             Lease,
dated as of March 20, 1990, between the Company and Huyler Assoc., L.P.


 


10.           Employment
Agreement, dated as of October 11, 1996, between the Company and J.
Brendan Barba, as amended.


 


11.           Employment
Agreement, dated as of October 11, 1996, between the Company and Paul M.
Feeney, as amended.


 


12.           Loan and
Security Agreement, dated as of November 20, 2001, as amended, among the
Company, the Congress Financial Corporation, as Agent, and the financial
institutions party thereto.


 


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