Document:

Exhibit 10.1

 

AEP
INDUSTRIES INC.

 

Amended and Restated AEP
Industries Inc. 2005 Stock Option Plan (Effective November 3, 2008)

 

1.             Purposes of Plan.  The
purposes of this Plan are (a) to provide incentives for key employees of
the Company and its Subsidiary or Parent corporations, and for members of the
Board of Directors of the Company, by encouraging their ownership of Stock and (b) to
aid the Company in retaining such key employees and Board members, upon whose
efforts the Company’s success and future growth depends, and attracting other
such employees and Board members.

 

2.             Definitions.  Except
as otherwise defined in the Plan, the following terms shall have the meanings
set forth below:

 

(a)           “Affiliate”
shall have the meaning ascribed to such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(b)           “Agreement”
 means a written agreement
implementing the grant of each Award signed by an authorized officer of the
Company and by the Participant.

 

(c)           “Award”
means individually or collectively, a grant under this Plan of Non-qualified
Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Performance Units, Performance Shares, or Other Stock Unit Awards,
including a grant of Non-qualified Stock Options pursuant to Section 12
below.  Each Award shall be evidenced by
an Agreement containing such terms and conditions as the Committee may approve,
in addition to any applicable terms and conditions specified in the Plan.

 

(d)           “Award
Date” or “Grant Date”
means the date on which an Award is made by the Committee or the Board of
Directors under this Plan or automatic grant under Section 12.

 

(e)           “Beneficial
Owner” shall have the meaning
ascribed to such term in Rule 13d-3 under the Exchange Act.

 

(f)            “Board”
or “Board of Directors” means
the Board of Directors of the Company.

 

(g)           “Change
in Control” shall be deemed to have occurred if the conditions
set forth in any one of the following paragraphs shall have been satisfied:

 

(i) Any person, corporation or other
entity or group, including any “group” as defined in Section 13(d)(3) of
the Exchange Act other than (A) those persons in control of the Company on
the Effective Date, (B) any person acting on behalf of the Company in a
distribution of stock to the public, or (C) a trustee or other fiduciary
holding securities of the Company under an employee benefit plan of the
Company, becomes the beneficial owner of shares of the Company having 20% or
more of the total number of votes that may be cast for the election of
directors of the Company; or

 

 

(ii) As the result of, or in connection
with, any tender or exchange offer, merger or other business combination, sale
of assets or contested election, or any combination of the foregoing (a “Transaction”),
the persons who were directors of the Company before the Transaction shall
cease to constitute a majority of the Board of Directors of the Company or any
successor to the Company or its assets; or

 

(iii) If at any time, (A) the
Company shall consolidate with, or merge with, any other Person and the Company
shall not be the continuing or surviving corporation, (B) any Person shall
consolidate with, or merge with, the Company, and the Company shall be the
continuing or surviving corporation and in connection therewith, all or part of
the outstanding Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, (C) the
Company shall be a party to a statutory share exchange with any other Person
after which the Company is a Subsidiary of any other Person, or (D) the
Company shall sell or otherwise transfer 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons.

 

(h)           “Code”
means the Internal Revenue Code of 1986 and any successor
statute thereto, as amended.

 

(i)            “Committee”
shall mean the Compensation Committee of the Board of Directors.

 

(j)            “Company”
means AEP Industries Inc., or any successor thereto as provided in Article 18
herein.

 

(k)           “Continuing
Director” means an individual who was a member of the Board of
Directors on the Effective Date or whose subsequent nomination for election or
reelection to the Board of Directors was recommended or approved by the
affirmative vote of two-thirds of the members of the Board on the Effective
Date who were then in office.

 

(l)            “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

(m)          “Fair
Market Value” on a particular day means the last sale price
regular way on such day or if such day is not a business day on the preceding
business day, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading as reported by such exchange, or if the
Common Stock is not listed or admitted to trading on any national securities
exchange, in the over-the-counter market on such day, as reported on the Nasdaq
National Market (“Nasdaq”), or if there are no such prices reported on such
exchange or Nasdaq on such day, the average of the closing high bid and low
asking price of the Stock as reported by such exchange or Nasdaq, and if there
be none, then as furnished to the Committee by any New York Stock Exchange
member selected from time to time by the Committee for such purpose.  If there is no bid or asked price reported on
any such day, the market value shall be determined by the Committee in
accordance with the regulations promulgated under Section 2031 of the
Code, or by any other appropriate method selected by the Committee.

 

In the case of
an Incentive Stock Option, if the foregoing method of determining fair market
value should be inconsistent with Section 422 of the Code, “Fair Market
Value” shall be determined by the Committee in a manner consistent with such
section of the Code and shall 

 

 

mean the value as so determined.

 

(n)           “Incentive
Stock Option” or “ISO” means
an option to purchase Stock, granted under Section 6 herein, which is
designated as an incentive stock option and is intended to meet the
requirements of Section 422 of the Code.

 

(o)           “Key
Employee” means an officer or other key employee of the Company
or its Parent or Subsidiaries, who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or perform
services of major importance to, the Company and its Subsidiaries.

 

(p)           “Non-qualified
Stock Option” or “NQSO”
means an option to purchase Stock, granted under Section 6 or 12 herein,
which is not intended to be an Incentive Stock Option.

 

(q)           “Option”
means an Incentive Stock Option or a Non-qualified Stock Option.

 

(r)            “Other
Stock Unit Award” means awards of Stock or other awards that are
valued in whole or in part by reference to, or are otherwise based on, Shares
or other securities of the Company.

 

(s)           “Outside
Director” means a member of the Board who is not an employee of
the Company or any Subsidiary or Affiliate.

 

(t)            “Parent”
means a parent corporation of the Company within the means of Section 424(c) of
the Code.

 

(u)           “Participant”
means a Key Employee or Outside Director who has been granted an Award under
the Plan.

 

(v)           “Performance
Award” means a performance-based Award, which may be in the form
of either Performance Shares or Performance Units.

 

(w)          “Performance
Share” means an Award, designated as a Performance Share,
granted to a Participant pursuant to Section 9 herein, the value of which
is determined by the Fair Market Value of Company Stock in a manner deemed
appropriate by the Committee and described in the Agreement.

 

(x)            “Performance
Unit” means an Award, designated as a Performance Unit, granted
to a Participant pursuant to Section 9 herein, the value of which is
determined, in whole or in part, by the attainment of preestablished goals
relating to Company financial or operating performance as deemed appropriate by
the Committee and described in the Agreement but which is not determined by
reference to the Fair Market Value of Common Stock.

 

(y)           “Period
of Restriction” means the period during which the transfer of
Shares of Restricted Stock is restricted, pursuant to Section 8 herein.

 

(z)            “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d).

 

 

(aa)         “Plan”
means the AEP Industries Inc. 2005 Stock Option Plan, as hereafter from time to
time amended.

 

(bb)         “Related
Option” means an Incentive Stock Option or a Non-qualified Stock
Option granted in conjunction with the grant of a Stock Appreciation Right.

 

(cc)         “Restricted
Stock” means an Award of Stock granted to a Participant pursuant
to Section 8 herein.

 

(dd)         “Rule 16b-3” means Rule 16b-3 adopted pursuant to Section 16(b) of
the Exchange Act A reference in the Plan to Rule 16b-3 shall include a
reference to any corresponding rule (or number redesignation) of any
amendments to Rule 16b-3 adopted after the effective date of the Plan’s
adoption.

 

(ee)         “Secretary”
means the officer designated as the Secretary of the Company.

 

(ff)           “Section 16
Person” means a Participant who is subject to Section 16(b) of
the Exchange Act with respect to transactions involving Company Stock.

 

(gg)         “Stock”
or “Shares” means the common stock of
the Company, $.01 par value.

 

(hh)         “Stock
Appreciation Right” or “SAR” means
an Award, designated as a Stock Appreciation Right, granted to a Participant
pursuant to Section 7 herein.

 

(ii)           “Subsidiary”
shall mean, a subsidiary of the Company within the meaning of Code Section 424(f).

 

3.             Administration.

 

(a) The
Plan shall be administered by a Committee, which shall consist of not less than
three members of the Board.  Subject to
the provisions of the next sentence, the Committee shall be the Compensation
Committee unless the Board shall appoint another Board committee to administer
the Plan.  Unless the Board determines
otherwise, (i) all members of the Committee shall be “outside directors”
as described in Code Section 162(m), and (ii) no person shall be
appointed to or serve as a member of the Committee unless at the time of such
appointment and service he shall be a “non-employee director,” as defined in Rule 16b-3.  The Committee, subject to the terms of the
Plan, shall have plenary authority to establish such rules and
regulations, make such determinations and interpretations, and take such other
administrative actions as it deems necessary or advisable.

 

(b) The
express grant in this Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee.  In addition to any other powers and, subject
to the provisions of the Plan, the Committee shall have the following specific
powers: (i) to grant Awards and to determine the terms and conditions of
the Awards; (ii) to determine all terms and provisions of each Agreement,
which need not be identical; (iii) to construe and interpret the
Agreements and the Plan; (iv) to establish, amend, or waive rules or
regulations for the Plan’s administration; (v) to accelerate the
exercisability of any Award, the end of a Performance Period or termination of
any Period of Restriction; (vi) to amend the terms of previously granted
Awards so long as the terms as amended are consistent with the terms of the
Plan and provided that the consent of the Participant is obtained with respect
to any 

 

 

amendment that would be detrimental to the Participant, except that
such consent will not be required if such amendment is for the purpose of
complying with Rule 16b-3 or any requirement of the Code applicable to the
Award; and (vii) to make all other determinations and take all other
actions necessary or advisable for the administration of the Plan.  All determinations and interpretations made
by the Committee shall be final, conclusive and binding on all persons,
including Participants and their legal representatives and beneficiaries.  In addition to the automatic grants of
Non-qualified Stock Options to be made annually to Outside Directors pursuant
to Section 12 of the Plan, the Committee or the Board of Directors shall
have the right to make additional grants of Non-qualified Stock Options to
Outside Directors provided that each such grant complies with, and/or is
conditioned upon, compliance with subdivision (d) of Rule 16b-3.

 

(c) The
Board of Directors shall designate one of the members of the Committee as its
Chairman.  The Committee shall hold its
meetings at such times and places as it may determine.  A majority of its members shall constitute a
quorum.  All determinations of the
Committee shall be made by a majority of its members.  Any decision or determination reduced to
writing and signed by all members shall be as effective as if it had been made
by a majority vote at a meeting duly called and held.  The Committee may appoint a secretary (who
need not be a member of the Committee). 
No member of the Committee shall be liable for any act or omission with
respect to his service on the Committee, if he acts in good faith and in a
manner he reasonably believes to be in, or not opposed to, the best interests
of the Company.  Service on the Committee
shall constitute service as a director of the Company for all purposes.

 

4.             Stock Available.  Subject to adjustment as provided in Section 13
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan on or after January 1, 2005, shall not exceed
1,000,000 and the maximum number of Shares that may be issued to any
Participant pursuant to Awards made under the Plan on or after January 1,
2005, shall not exceed 250,000.  Shares
of Stock used for purposes of the Plan may be either authorized and unissued
Shares, or previously issued Shares held in the treasury of the Company, or
both.  Except as provided below in this Section 4,
the issuance of Shares in connection with the exercise of, or as other payment
for, Awards under the Plan shall reduce the number of Shares available for
future Awards under the Plan.  If any
Award granted under this Plan terminates, expires, or lapses for any reason
other than by virtue of exercise of the Awards, or if Shares issued pursuant to
Awards are forfeited, any Shares subject to such Award or forfeiture again
shall be available for the grant of an Award under the Plan; provided that any
such Shares shall be available for the grant of an Award to a Section 16
Person only if the forfeiting employee received no benefits of ownership such
as dividends (but excluding voting rights) from the Shares and Rule 16b-3
would in the opinion of the Committee otherwise be satisfied.  In the event that a Participant pays the
Option Price for Shares pursuant to the exercise of an Option with previously
acquired Shares, the number of Shares available for future Awards under the
Plan shall be reduced only by the net number of new Shares issued upon the
exercise of the Option, provided that the number of Shares available for future
Awards to Section 16 Persons under the Plan shall be reduced only by the
net number of new Shares issued upon the exercise of the Option only if Rule 16b-3
would in the opinion of the Committee be satisfied.

 

5.             Eligibility.  Awards
under the Plan may be granted to Key Employees of the Company or any Subsidiary
or Parent, including Key Employees who are officers or directors of the Company
or any Subsidiary or Parent.  Awards may
be granted to eligible employees whether or not they hold or have held Awards
previously granted under the Plan or otherwise granted or assumed by the
Company.  In selecting employees for
Awards, the Committee may 

 

 

take into consideration any factors it may deem relevant, including its
estimate of the employee’s present and potential contributions to the success
of the Company and its Subsidiaries.

 

6.             Stock Options.

 

(a)           Grant
of Options to Key Employees. 
Subject to the terms and provisions of the Plan, Options may be granted
to Key Employees at any time and from time to time as shall be determined by the
Committee Subject to Section 4 above, the Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Key Employee, provided, however, that the aggregate Fair Market Value
(determined at the time the Award is made) of Shares with respect to which a
Key Employee may first exercise ISOs granted under the Plan during any calendar
year may not exceed $100,000 or such amount as shall be specified in Section 422
of the Code and the rules and regulations thereunder.  The date of grant of an Option shall be the
date specified by the Committee in its grant of the Option.  The Board of Directors may, in its sole
discretion, grant options to Key Employees under the conditions set forth in
this Section 6.

 

(b)           Option
Agreement.  Each Option
grant shall be evidenced by an Agreement that shall specify the type of Option
granted, the Option Price (as hereinafter defined), the duration of the Option,
the number of Shares to which the Option pertains, any conditions imposed upon
the exercisability of Options in the event of retirement, death, disability, or
other termination of employment, and such other provisions as the Committee
shall determine.  The Agreement shall
specify whether the Option is intended to be an Incentive Stock Option within
the meaning of Section 422 of the Code, or a Non-qualified Stock Option.

 

(c)           Option
Price.  The exercise price
per Share of Stock covered by an Option (“Option Price”) shall be determined by
the Committee subject to the following limitations.  In the case of an ISO, the Option Price shall
not be less than 100% of the Fair Market Value of such Stock on the Grant Date,
or in the case of any Optionee who, at the time such Incentive Stock Option is
granted, owns Stock possessing more than 10% of the total combined voting power
of all classes of stock of his employer corporation or of its parent or
subsidiary corporation, not less than 110% of the Fair Market Value of such
Stock on the date the Incentive Stock Option is granted.  In the case of a NQSO, the Option Price shall
not be less than 100% of the Fair Market Value of the Stock on the Grant
Date.  In no event shall the Option Price
of any Option be less than the par value of the Stock.

 

(d)           Duration
of Options.  Each Option
shall expire at such time as the Committee shall determine at the time of
grant, provided, however, that no Option shall be exercisable later than the
tenth (10th) anniversary date of its Award Date and no Incentive Stock Option
which is granted to any Optionee who, at the time such Option is granted, owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of his employer corporation or of its parent or subsidiary
corporation, shall be exercisable after the expiration of five years from the
date such Option is granted.

 

(e)           Exercisability.  Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine, which need not be the same for all Participants.

 

(f)            Method
of Exercise.  In order to
exercise an option, the holder thereof (the “Optionee”) shall deliver to the
Company written notice specifying the number of shares of Stock 

 

 

to be purchased, together with cash or a certified or bank cashier’s
check payable to the order of the Company in the full amount of the purchase
price therefor, provided that: (i) if so provided in the Option Agreement,
the Participant may deliver a properly executed exercise notice together with
irrevocable instructions to a stockbroker to sell immediately some or all of
the Shares acquired by exercise of the Option and to promptly deliver to the
Company an amount of the sale proceeds (or in lieu of a pending a sale, loan
proceeds) sufficient to pay the purchase price, (ii) such purchase price
may be paid in Shares of Stock owned by the Optionee having a fair market value
on the date of exercise equal to the aggregate purchase price, or in a
combination of cash and whole Shares of Stock, and (iii) for the purpose
of assisting an Optionee to exercise an Option, the Company may, if permitted
by law, make loans to the Optionee or guarantee loans made by third parties to
the Optionee on such terms and conditions as the Board of Directors may
authorize.  If the Optionee so requests,
Shares of Stock purchased upon exercise of an option may be issued in the name
of the Optionee or another person provided that Optionee pays any documentary,
transfer or other tax applicable to such issuance.  An Optionee shall have none of the rights of
a stockholder until the date as of which Shares of Stock are issued to
him.  For purposes of payment described
in (i) above, the exercise shall be deemed to have occurred on the date
the Company receives the exercise notice, accompanied by the stockbroker
instructions, unless the Committee determines otherwise.

 

(g)           Non-trasferability
of Options.

 

(i) Subject
to Sections 6(g)(ii) and 19(b) below, no Option granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution.  During the lifetime of a Participant to whom
an Incentive Stock Option is granted, the Incentive Stock Option may be
exercised only by the Participant or his guardian or legal representative.

 

(ii) The
Committee may grant Non-qualified Stock Options (with or without tandem SARs)
that are transferable during the lifetime of the Participant, provided that (A) no
consideration is paid for the transfer and (B) no Options granted to Section 16
Persons may be transferable unless and except to the extent such
transferability would not result in the loss of any Rule 16b-3 exemptions
for nontransferable Options granted or to be granted under the Plan.  The transferee of an Option shall be subject
to all restrictions applicable to the Option prior to its transfer.  The Agreement granting the Option shall set
forth the transfer conditions and restrictions. 
The Committee may impose on any transferable Option and on Stock issued
upon the exercise of an Option such limitations and conditions as the Committee
deems appropriate.

 

7.             Stock
Appreciation Rights.

 

(a)           Grant
of Stock Appreciation Rights. 
Subject to the terms and conditions of the Plan, Stock Appreciation
Rights may be granted to Participants, at the discretion of the Committee, in
any of the following forms:

 

(i) In connection with the grant, and
exercisable in lieu, of Options (“Tandem SARs”);

 

(ii) In connection with, and exercisable
in addition to, the grant of Options (“Additive SARs”);

 

 

(iii) Independent of the grant of
Options (“Freestanding SARs”); or

 

(iv) In any combination of the
foregoing.

 

(b)           Exercise
of Tandem SARs.  Tandem
SARs may be exercised with respect to all or part of the Shares subject to the
Related Option.  The exercise of Tandem
SARs shall cause a reduction in the number of Shares subject to the Related
Option equal to the number of Shares with respect to which the Tandem SAR is
exercised.  Conversely, the exercise, in
whole or part, of a Related Option, shall cause a reduction in the number of
Shares subject to the Tandem SAR equal to the number of Shares with respect to
which the Related Option is exercised. 
Shares with respect to which the Tandem SAR shall have been exercised
may not be subject again to an Award under the Plan.

 

Notwithstanding any other provision of the
Plan to the contrary, a Tandem SAR shall expire no later than the expiration of
the Related Option and shall be exercisable only when the Related Option is
eligible to be exercised.  In addition,
if the Related Option is an ISO, a Tandem SAR shall be exercised for no more
than 100% of the difference between the Fair Market Value of Shares subject to
the Related Option at the time the Tandem SAR is exercised and the Option Price
of the Related Option.

 

(c)           Exercise
of Additive SARs. 
Additive SARs shall be deemed to be exercised upon, and in addition to,
the exercise of the Related Option.  The
deemed exercise of Additive SARs shall not reduce the number of Shares with
respect to which the Related Option remains unexercised.

 

(d)           Exercise
of Freestanding SARs. 
Freestanding SARs may be exercised upon whatever terms and conditions
the Committee, in its sole discretion, imposes upon such SARs.

 

(e)           Other
Conditions Applicable to SARs. In no event shall the term of any
SAR granted under the Plan exceed ten years from the Grant Date.  A SAR may be exercised only when the Fair
Market Value of a Share exceeds either (i) the Fair Market Value per Share
on the Grant Date in the case of a Freestanding SAR or (ii) the Option
Price of the Related Option in the case of either a Tandem or Additive
SAR.  A SAR shall be exercised by
delivery to the Committee of a notice of exercise in the form prescribed by the
Committee.

 

(f)            Payment
Upon Exercise of SARs.  Subject to the provisions of the Agreement,
upon the exercise of a SAR, the Participant shall be entitled to receive,
without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of
Shares with respect to which the SAR is exercised by (ii) an amount equal
to the excess of (A) the Fair Market Value per Share on the date of
exercise of the SAR over (B) either (x) the Fair Market Value per
Share on the Award Date in the case of a Freestanding SAR or (y) the
Option Price of the Related Option in the case of either a Tandem or Additive
SAR.

 

 

Payment to the Participant shall be made in
Shares, valued at the Fair Market Value of the date of exercise, in cash, or a
combination thereof, as the Committee may provide in the SAR Agreement.  To the extent required to satisfy the
conditions of Rule 16b-3(e), or as otherwise provided in the Agreement,
the Committee shall have the sole discretion to consent to or disapprove the
election of any Participant to receive cash in full or partial settlement of an
SAR.  In cases where an election of
settlement in cash must be consented to by the Committee, the Committee may
consent to, or disapprove, such election at any time after such election, or
within such period for taking action as is specified in the election, and
failure to give consent shall be disapproval. 
Consent may be given in whole or as to a portion of the SAR surrendered
by the Participant.  If the election to
receive cash is disapproved in whole or in part, the SAR shall be deemed to
have been exercised for Shares, or, if so specified in the notice of exercise
and election, not to have been exercised to the extent the election to receive
cash is disapproved.

 

(g)           Non-transferability
of SARs.  No SARs granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, otherwise than by will or by the laws of descent and
distribution.  Further, all SARs granted
to a Participant under the Plan shall be exercisable during his lifetime only
by such Participant or his guardian or legal representative.

 

8.             Restricted
Stock.

 

(a)           Grant
of Restricted Stock.  Subject
to the terms and provisions of the Plan, the Committee, at any time and from
time to time, may grant Shares of Restricted Stock under the Plan to such
Participants and in such amounts as it shall determine.  Participants receiving Restricted Stock
Awards shall not be required to pay the Company therefor (except for applicable
tax withholding) other than the rendering of services and/or until other
conditions are satisfied as determined by the Committee in its sole discretion,
unless required by applicable law.

 

(b)           Restricted
Stock Agreement.  Each
Restricted Stock grant shall be evidenced by an Agreement that shall specify
the Period of Restriction, the conditions which must be satisfied prior to
removal of the restriction, the number of Shares of Restricted Stock granted,
and such other provisions as the Committee shall determine.

 

(c)           Transferability.  Except as provided in this Section 8,
the Shares of Restricted Stock granted hereunder may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the termination
of the applicable Period of Restriction or upon earlier satisfaction of such
other conditions as may be specified by the Committee in its sole discretion
and set forth in the Agreement.  All
rights with respect to the Restricted Stock granted to a Participant under the
Plan shall be exercisable during his lifetime only by such Participant or his
guardian or legal representative.

 

(d)           Other
Restrictions.  The Committee shall impose such other restrictions on any
Shares of Restricted Stock granted pursuant to the Plan as it may deem
advisable including, without limitation, restrictions under applicable Federal
or state securities laws, and may legend the certificates representing
Restricted Stock to give appropriate notice of such restrictions. 

 

 

Alternatively,
the Committee, in its sole discretion, may have Shares of Restricted Stock
issued without legend and held by the Secretary until such time that all
restrictions are satisfied.

 

(e)           Certificate
Legend.  In the event that
the Committee elects to legend the certificates representing Restricted Stock, and
in addition to any legends placed on certificates pursuant to Section 8(d) above,
each certificate representing shares of Restricted Stock granted pursuant to
the Plan shall bear the following legend:

 

The sale or other transfer of the Shares of
Stock represented by this certificate, whether voluntary, involuntary, or by
operation of law, is subject to certain restrictions on transfer set forth in
the AEP Industries Inc. 2005 Stock Option Plan, as amended, effective January 1,
2005 and in a Restricted Stock Agreement dated
                                        .  A copy of the Plan and such Restricted Stock
Agreement may be obtained from the Secretary of AEP Industries Inc.

 

(f)            Removal
of Restrictions.  Except
as otherwise provided in this Section 8, Shares of Restricted Stock
covered by each Restricted Stock Award made under the Plan shall become freely
transferable by the Participant after the last day of the Period of Restriction
and/or upon the satisfaction of other conditions as determined by the Committee
in its sole discretion.  Once the Shares
are released from the restrictions, the Participant shall be entitled to have
removed any legend that may have been placed on the certificates representing
such Shares pursuant to Sections 8(d) and 8(e) herein.

 

(g)           Voting
Rights.  During the Period
of Restriction, Participants in whose name Shares of Restricted Stock are
granted hereunder may exercise full voting rights with respect to those Shares.

 

(h)           Dividends
and Other Distributions. 
During the Period of Restriction, Participants in whose name Shares of
Restricted Stock are granted hereunder shall be entitled to receive all
dividends and other distributions paid with respect to those Shares. If any
such dividends or distributions are paid in Shares, the Shares shall be subject
to the same restrictions on transferability as the Shares of Restricted Stock
with respect to which they were distributed and the Shares shall be so
legended.

 

9.             Performance
Awards.

 

(a)           Grant
of Performance Awards.  Subject to the terms and provisions of the
Plan, Performance Awards in the form of either Performance Units or Performance
Shares may be granted to Participants at any time and from time to time as
shall be determined by the Committee. 
Subject to Section 4 above, the Committee shall have complete
discretion in determining the number of Performance Units or Performance Shares
granted to each Participant, provided that on each date that any cash is paid
to any Participant pursuant to Performance Units, the amount of cash shall be
divided by the Fair Market Value of a Share of Stock on such date, and the
result shall be deducted from the number of Shares that may be issued under the
Plan in the aggregate or to any Participant under Section 4 above.  Participants receiving Performance Awards
shall not be required to pay the Corporation therefor (except for applicable
tax withholding) unless required by applicable law.

 

 

(b)           Value
of Performance Awards.  The
Committee shall determine the number of Performance Units or Performance Shares
granted to each Participant as a Performance Award.  The Committee shall set performance goals in
its discretion for each Participant who is granted a Performance Award.  The extent to which such performance goals
are met will determine the value of the Performance Unit or Performance Share
to the Participant.  Such performance
goals may be particular to a Participant, may relate to the performance of the
Division or Subsidiary which employs him, may be based on the performance of
the Company generally, or a combination of the foregoing.  The performance goals may be based on
achievement of balance sheet or income statement objectives, or any other
objectives established by the Committee. 
The performance goals may be absolute in their terms or measured against
or in relationship to other companies comparably, similarly or otherwise
situated.  The Committee shall determine
the time period during which the performance goals must be met (“Performance
Period”).  Each Performance Award shall
be subject to such other terms and conditions as the Committee may determine
which shall be set forth in an Agreement.

 

(c)           Settlement
of Performance Awards.  After a Performance Period has ended, the
holder of a Performance Unit or Performance Share shall be entitled to receive
the value thereof based on the degree to which the performance goals
established by the Committee and set forth in the Agreement have been
satisfied.

 

(d)           Form of
Payment.  Payment of the
amount to which a Participant shall be entitled upon the settlement of
Performance Award shall be made in cash, Stock, or a combination thereof as
determined by the Committee.  Payment may
be made in a lump sum or installments as prescribed by the Committee.

 

(e)           Non-transferability.
 Unless the Committee
provides otherwise pursuant to Section 19(b) below, no Performance
Units or Performance Shares granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, otherwise than by
will or by the laws of descent and distribution.  All rights with respect to Performance Units
and Performance Shares granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant or his guardian or
personal representative.

 

10.          Other
Stock Unit Awards.

 

(a)           Grant.  The Committee is authorized to
grant to Participants, either alone or in addition to other Awards made under
the Plan, Other Stock Unit Awards to be issued at such times, subject to or
based upon achievement of such performance or other goals and on such other
terms and conditions as the Committee shall deem appropriate and specify in the
Agreement relating thereto, which need not be the same with respect to each
Participant.  Stock or other securities
granted pursuant to Other Stock Unit Awards may be issued for no cash
consideration or for such minimum consideration as may be required by applicable
law.

 

(b)           Sale
and Transferability.  To
the extent an Other Stock Unit Award granted under the Plan is deemed to be a
derivative security within the meaning of Rule 16b-3, it may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution, unless the
Committee provides otherwise 

 

 

pursuant to Section 19(b) below. All rights with respect to
such Other Stock Unit Awards granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant or his guardian or
personal representative.

 

11.          Change
in Control.

 

In the event
of a Change in Control or immediately prior to a Change in Control of the
Company, the Committee may, in its complete discretion, cause: (a) each
Option then outstanding under the Plan to become fully exercisable and remain
so for the duration of the Option as specified in the Agreement; (b) all
restrictions or conditions related to grants of Restricted Stock to be deemed
immediately and fully satisfied and all certificates representing such Shares
of Restricted Stock to be released or issued free of any legend, and thereby
become freely transferable; and (c) any or all restrictions or conditions
related to an Award to be released and accelerated, in such a manner, in the
case of Section 16 Persons, as to conform to the provisions of Rule 16b-3.

 

12.          Option
Grants to Outside Directors.

 

(a)           Option
Grants.  Immediately
following each annual meeting of stockholders of the Company, commencing with
the 2005 meeting and continuing with each annual meeting of stockholders
thereafter until the Plan is terminated or expires pursuant to Section 16
below, or, if any such annual meeting is held on a date for which Fair Market
Value cannot be calculated (because Common Stock is not traded on such date or
for any other reason), then on the next date for which Fair Market Value can be
calculated, each person who is an Eligible Director immediately following such
annual meeting shall be granted a Non-qualified Stock Option to purchase 1,000
shares of Stock.  The price at which
shares may be purchased under any option granted pursuant to this Section 12(a) shall
be their Fair Market Value on the date such option is granted.

 

(b)           Term
of Option and Limitations on Right to Exercise.

 

(i)            Except as otherwise provided in Subsections
12(b)(ii), (iii), and (iv) below, an Option granted to an Outside Director
may be exercised at any time for all or from time to time for any part of the
shares which are subject to purchase under the Option, before the tenth
anniversary of the date on which the Option was granted.  If not sooner exercised or terminated
pursuant to the preceding sentence or the other provisions of this Subsection
12(b)(i), an Option shall expire on the tenth anniversary of the date on which
it was granted.

 

 

(ii)           An Option granted to an Outside Director may
not be exercised in whole or in part until the fifth anniversary of the grant
date of the Option except as follows:

 

	
  Exercise Period

  	
   

  	
  Cumulative Percentage of

  Aggregate Number of Shares of

  Stock Covered by Option Which

  May be Purchased

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Within first year from date of grant

  	
   

  	
  0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning one year from date of grant

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning two years from date of grant

  	
   

  	
  40

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning three years from date of grant

  	
   

  	
  60

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning four years from date of grant

  	
   

  	
  80

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning five years from date of grant

  	
   

  	
  100

  	
  %

  

 

less, in the case of each exercise period, the number of Shares of
Stock, if any, previously purchased under the Option.

 

(iii)          A Participant’s right to exercise an Option
that is otherwise exercisable pursuant to the provisions of Subsections 12(b)(i) and
(ii) above shall terminate one year after the Participant’s service on the
Board of Directors terminates for any reason other than cause within the
meaning of the Company’s by-laws, and upon the termination of the Participant’s
service on the Board of Directors for cause.

 

(iv)          An Option may not be exercised for fewer than
one hundred Shares unless fewer than one hundred Shares remain subject to the
Option at the time, in which case the Option may not be exercised for less than
the full balance of the Shares that remain subject to the Option at the time.

 

(c)           Time
and Manner of Option Exercise. . An Option granted under this Section 12
shall be considered exercised if and when written notice, signed by the person
exercising the Option and stating the number of Shares with respect to which
the Option is being exercised, is received by the Secretary on a form approved
for this purpose by the Committee, accompanied by full payment of the Option
exercise price in one or more of the forms described in Section 12(d) below
for the number of Shares to be purchased. No Option may at any time be
exercised with respect to a fractional Share.

 

 

(d)           Payment
of Exercise Price.  The
Option exercise price may be paid in whole or in part (i) in cash, (ii) by
bank-certified check, cashier’s check, or personal check subject to collection,
(iii) in whole Shares valued at their Fair Market Value on the date of
exercise, provided that such Shares have been held by the Participant for at
least six months before the date of exercise or satisfy such other requirement(s) as
the Committee may impose, or (iv) by delivering to the Company a properly
executed exercise notice together with a copy of irrevocable instructions to a
stockbroker to sell immediately some or all of the Shares acquired by exercise
of the Option and to deliver promptly to the Company an amount of sale proceeds
(or, in lieu of or pending a sale, loan proceeds) sufficient to pay the
purchase price.

 

(e)           Exercise
After Death.  Following
the death of an Outside Director any Options that were exercisable at the time
of his death may be exercised prior to their expiration or termination pursuant
to the provisions of Section 12(b) above by the Participant’s
beneficiary designated pursuant to the provision of Section 12(f) below
or, if no such beneficiary has been designated or survives the Participant, by
the Participant’s estate or the person or persons to whom the Options passed by
will or the laws of descent and distribution.

 

(f)            Transferability.  An Option granted to an
Outside Director under the Plan is not transferable by the Participant other
than by will or the laws of descent and distribution and, during the lifetime
of the Participant, is exercisable only by him or his legal
representative.  Notwithstanding the
foregoing, a Participant may designate a beneficiary to whom his Options shall
pass in the event of his death, provided that such beneficiary is designated in
writing on a form approved for that purpose by the Committee and such form is
received by the Secretary prior to the Participant’s death and, provided
further, that the Committee consents to any beneficiary so designated.

 

13.          Adjustment
for Changes in Stock Subject to Plan and Other Events.  In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering, or any other change in the corporate structure
or Shares of the Company, the Committee shall make such adjustments, if any, as
it deems appropriate in the number and kind of Shares subject to the Plan, in
the number and kind of Shares covered by outstanding Awards, in the Option
price per Share of outstanding Options, in the maximum number of Shares that
may be issued to any Participant pursuant to Awards made under the Plan, and in
the number of Shares which shall be optioned annually to each Outside Director
pursuant to Section 12 hereof. If the adjustment would produce fractional
Shares with respect to any then outstanding Awards, the Committee may adjust
appropriately the number of Shares covered by the outstanding Awards so as to
eliminate the fractional Shares.  Any
adjustment to be made with respect to Incentive Stock Options shall comply with
Sections 422 and 424 of the Code.

 

In connection
with any merger or consolidation in which the Company is not the surviving
corporation or any sale or transfer by the Company of all or substantially all
its assets or any tender offer or exchange offer for, or the acquisition,
directly or indirectly, by any person or group of all, or a majority of the
then outstanding voting securities of the Company, all outstanding Options
under the Plan shall become exercisable in full, notwithstanding any other
provision of the Plan or of any outstanding Options granted thereunder, on and
after (a) 15 days prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (b) the date of commencement
of such tender offer or exchange offer, as the case may be.

 

 

14.          (a)           Registration,
Listing and Qualification of Shares of Stock. 
Each Award shall be subject to the requirement that if at
any time the Committee shall determine that the registration, listing, or
qualification of the Shares covered thereby upon any securities exchange or
under any Federal or state law or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the granting of such Award or the purchase, issuance, or transfer of
Shares thereunder, no such Award may be exercised unless and until such
registration, listing, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the
Committee.  The Company may require that
any person exercising an Option shall make such representations and agreements
and furnish such information as it deems appropriate to assure compliance with
the foregoing or any other applicable legal requirement.

 

(b)           Other
Terms and Conditions.  The
Committee may impose such other terms and conditions, not inconsistent with the
terms hereof, on the grant or exercise of Awards, as it deems advisable.

 

15.          Effectiveness
of Plan.  The Plan will not be
effective unless approved by a majority of the votes cast by the stockholders
of the Company at a meeting of stockholders duly called and held for such
purpose within twelve months of adoption by the Board, and no Award granted
hereunder shall be exercisable prior to such approval.

 

16.          Amendment,
Modification, and Termination of Plan.

 

(a)           Amendment,
Modification and Termination.  Unless
the Plan shall theretofore have been terminated as hereinafter provided, the
Plan shall terminate on, and no Award shall be granted hereunder after, the
earlier of (i) the close of business on the next day preceding the tenth
anniversary of the date of adoption of the Plan by the Board of Directors or (ii) the
date on which all Shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of Options granted under the
Plan.  If the date of termination is
determined under (i) above, then Options outstanding on such date shall
continue to have force and effect in accordance with the provisions of the
instruments evidencing such Options.  At
any time and from time to time, the Board may terminate, amend, or modify the
Plan.  The Board is specifically
authorized to amend the Plan and take such other action as it deems necessary
or appropriate to comply with Code Section 162(m) and regulations
issued thereunder, or with Rule 16b-3. Such amendment or modification may
be without shareholder approval except to the extent that such approval is
required by the Code, pursuant to the rules under Section 16 of the
Exchange Act, by any national securities exchange or system on which the Stock
is then listed or reported, by any regulatory body having jurisdiction with
respect thereto, or under any other applicable laws, rules, or regulations.  The Plan provisions that determine the
amount, price and timing of Option grants to Outside Directors may not be
amended more than once every six months, other than to comply with changes in
the Code, the Employee Retirement Income Security Act, or the rules thereunder,
unless the Board determines that Rule 16b-3 will not be rendered
unavailable thereby.

 

(b)           Awards
Previously Granted.  No
termination, amendment, or modification of the Plan, shall adversely affect any
Award theretofore granted under the Plan, without the written consent of the
Participant.

 

 

17.          Withholding.

 

(a)           Tax
Withholding.  The Company
shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes (including the Participant’s FICA obligation) required
by law to be withheld with respect to any grant, exercise, or payment under or
as a result of this Plan.

 

(b)           Stock
Withholding.  To the
extent that the Code requires withholding upon the exercise of Non-qualified
Stock Options, or upon the lapse of restrictions on Restricted Stock, or upon
the occurrence of any other similar taxable event, the Committee may permit or
require, subject to any rules it deems appropriate, the withholding
requirement to be satisfied, in whole or in part, with or without the consent
of the Participant, by having the Company withhold Shares having a Fair Market
Value equal to the amount required to be withheld from the Shares issuable to
the Participant.  The value of the Shares
to be withheld shall be based on Fair Market Value of the Shares on the date
that the amount of tax to be withheld is to be determined.

 

18.          Successors.

 

All
obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.

 

19.          General.

 

(a)           Requirements
of Law.  The granting of
Awards and the issuance of Shares under this Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies as may be required. 
No Shares shall be issued or transferred pursuant to this Plan unless
and until all legal requirements applicable to such issuance or transfer have,
in the opinion of counsel to the Company, been complied with.  In connection with any such issuance or transfer,
the person acquiring the Shares shall, if requested by the Company, give
assurances satisfactory to counsel to the Company in respect to such matters as
the Company may deem desirable to assure compliance with all applicable legal
requirements.

 

(b)           Effect
of the Plan.  The
establishment of the Plan shall not confer upon any Participant any legal or
equitable right against the Company, a Subsidiary, a Parent, or the Committee,
except as expressly provided in the Plan. 
The Plan is does not intended to constitute a contract of employment
between the Company or any of its Subsidiaries or Affiliates and any
Participant. Participation in the Plan shall not give any Participant any right
to be retained in the service of the Company or any of its Subsidiaries or
Affiliates.  No Award and no right under
the Plan, contingent or otherwise, shall be subject to any encumbrance, pledge
or charge of any nature or shall be assignable except that, under such rules and
regulations as the Committee may establish pursuant to the terms of the Plan, a
beneficiary may be designated in respect to the Award in the event of the death
of the holder of the Award and except, also, that if the beneficiary shall be
the executor or administrator of the estate of the holder of the Award, any
rights in respect to such Award may be transferred to the person or persons or
entity (including a trust) entitled thereto under the will of the holder of
such Award or under the laws relating to descent and distribution.

 

 

(c)           Certain
Hardship Distribution Provisions.  No Participant may exercise an Award or engage
in any other transaction with respect to an Award or the Plan during the
balance of the calendar year after the Participant receives a hardship
distribution from a plan of the Company or a related party within the
provisions of Code sections 414(b),(c), (m) or (o) containing a cash
or deferred arrangement under Section 401(k) of the Code, or during
the following calendar year, if such exercise or other transaction would
constitute an elective contribution or employee contribution to the Plan within
the meaning of Treasury Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4).  The preceding sentence shall not apply if and
to the extent that the Committee determines it is not necessary to qualify any
such plan as a cash or deferred arrangement under Section 401(k) of
the Code.

 

(d)           Creditors.  The interests of any
Participant under the Plan or any Agreement shall not be subject to the claims
of creditors and may not, in any way, be assigned, alienated, or encumbered.

 

(e)           Governing
Law. . The Plan, and all Agreements made pursuant hereto, shall
be governed, construed, and administered in accordance with and governed by the
laws of the State of New Jersey and the intention of the Company that ISOs granted
under the Plan qualify as such under Section 422 of the Code.

 

(f)            Severability.
 In the event that any
provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

 

(g)           Rule 16b-3
Requirements; Code Section 162(m).  Any
provision of the Plan to the contrary notwithstanding: (i) the Committee
may impose such conditions on any Award as the Committee may determine, on the
advice of counsel, are necessary or desirable to satisfy the provisions of Rule 16b-3;
(ii) transactions by and with respect to Section 16 Persons shall
comply with any applicable conditions of Rule 16b-3 unless the Committee
determines otherwise; (iii) transactions with respect to persons whose
remuneration is subject to the provisions of Section 162(m) of the
Code shall conform to the requirements of Section 162(m)(4)(C) of the
Code unless the Committee determines otherwise; (iv) the Plan is intended
to give the Committee the authority to grant Awards that qualify as
performance-based compensation under Code Section 162(m)(4)(C) as
well as Awards that do not so qualify; and (v) any provision of the Plan
that would prevent the Committee from exercising the authority referred to in
clause (iv) hereof or that would prevent an Award that the Committee
intends to qualify as performance-based compensation under Code Section 162(m)(4)(C) from
so qualifying shall be administered, interpreted and construed to carry out the
Committee’s intention, and any provision that cannot be so administered,
interpreted and construed shall to that extent be disregarded.

 

20.          Other
Actions.  Nothing contained in the Plan
shall be construed to limit the authority of the Company to exercise its
corporate rights and powers, including but not by way of limitation, the right
of the Company to grant or issue options for proper corporate purposes other
than under the Plan with respect to any employee or other person, firm,
corporation, or association.Exhibit 10.3

 

AEP
INDUSTRIES INC.

Performance
Unit Grant Certificate

Under 2005
Stock Option Plan

 

Date of Grant:

 

Name of Employee:

 

Grant Amount:

 

This is to certify that, effective on the date of grant specified
above, the Board of Directors/Compensation Committee of AEP Industries Inc.
(the “Company”) has granted to the above-named employee (the “Employee”) the
number of Performance Units of the Company (the “Performance Units”) set forth
above pursuant to the Company’s 2005 Stock Option Plan (the “Plan”).  Each Performance Unit represents the right to
receive, upon vesting and the satisfaction of any required withholding
obligation, one share of Stock or the Unit Value of one share of Stock.

 

The terms and conditions of the award granted hereby, in addition to
the terms and conditions contained in the Plan, are as follows:

 

1.                                       As
used herein, the following terms shall have the following meanings:

 

“Adjusted Grant Amount” shall mean the actual number of shares of Performance
Units granted to the Employee pursuant to this Agreement (rounded to the
nearest whole share), as finally determined as of the end of the current fiscal
year of the Company as follows:

 

(i)                                     in
the event that the Company’s actual EBITDA for such fiscal year equals or
exceeds Forecasted EBITDA for such fiscal year, the Adjusted Grant Amount shall
mean the Grant Amount set forth above;

 

(ii)                                  in
the event that the Company’s actual EBITDA for such fiscal year is less than
Forecasted EBITDA for such fiscal year, but is not less than eighty percent
(80%) of such forecast, the Adjusted Grant Amount shall mean the Grant Amount
set forth above, reduced by the same percentage by which actual EBITDA is lower
than Forecasted EBITDA for such fiscal year; or

 

(ii)                                  in
the event that the Company’s actual EBITDA for such fiscal year is less than
eighty percent (80%) of Forecasted EBITDA, the Adjusted Grant Amount shall be
zero.

 

“Change of Control” shall have the meaning ascribed to such term in the
Plan.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended from time to time.

 

“EBITDA” shall mean, for any fiscal year, the
Company’s earnings for such fiscal year before provision for interest, taxes,
depreciation and amortization, as determined in accordance with United States
generally accepted accounting principals (“GAAP”).

 

“Fair
Market Value” shall have the meaning ascribed to such term in the Plan.

 

 

“Forecasted EBITDA” shall mean, for any
fiscal year, the Company’s forecast of EBITDA for such fiscal year, as approved
by the Board of Directors of the Company and as provided to the Employee as of
the date of the grant hereunder.

 

“Parent” shall
have the meaning set forth in section 425(e) of the Code.

 

“Subsidiary” shall have the meaning set forth
in section 425(f) of the Code.

 

“Termination Due to Business Divestiture”
shall mean the termination of employment of the Employee due to a transaction
or series of related transactions (other than a transaction or series of
transactions that are part of a Change of Control) that result in a divestiture,
sale, transfer, assignment or other disposition of any division, subsidiary,
business unit, product line or group, or any other asset of the Company or any
of its affiliates.

 

“Unit Value” shall mean, as of any date of
determination, the Adjusted Grant Amount multiplied by the Fair Market Value.

 

2.                                       The
Employee may not sell, assign, transfer, pledge, hypothecate, mortgage or
otherwise dispose of, by gift or otherwise, or in any way encumber all or any
of the Performance Units granted hereby until such time as such Performance
Unit becomes vested pursuant to the provisions of this Agreement.

 

3.                                       Subject
to the terms and conditions set forth herein, the Performance Units covered by
this grant shall vest and become deliverable only in accordance with the following
schedule:

 

	
  Vesting Period

  	
   

  	
  Percentage of Adjusted Grant

  Amount to be Issued to Employee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Within first year from date of grant:

  	
   

  	
  0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning one year from date of grant:

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning two years form date of grant:

  	
   

  	
  40

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning three years from date of grant:

  	
   

  	
  60

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning four years from date of grant:

  	
   

  	
  80

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning five years from date of grant:

  	
   

  	
  100

  	
  %

  

 

4.                                       The
Employee shall not be entitled to any rights as a stockholder of the Company in
respect of any Performance Units covered by this grant until such Performance
Units become vested pursuant to the provisions of this Agreement.

 

5.                                       At
the end of each vesting period or the earlier vesting date provided in Section 7
below, the Employee shall be entitled to receive the shares of Stock vested as
of such period or date or the Unit Value of such shares of Stock or any
combination thereof, at the Employee’s option. 
The Employee shall notify the Company in writing of its desire to receive
either the shares, the Unit Value thereof or any combination thereof.  As soon as practicable after receipt of such
notice, the Company shall deliver either (i) the certificate for the
shares of Stock vested as of such period or date to the Employee, which
certificate shall be registered in the Employee’s name, (ii) pay the
Employee the Unit Value of such 

 

2

 

vested shares of Stock, or (iii) any combination thereof as
designated by the Employee.  Any shares
or cash to be delivered will be delivered as soon as practicable after vesting,
but no later than the date that is 2-1/2 months after the end of the Employee’s
tax year in which the vesting date occurs.

 

6.                                       In
the event that the Employee’s employment as an employee of the Company or of
any Parent or Subsidiary  (hereinafter
the “Employee’s employment”) is terminated prior to the time that the shares of
Stock granted hereby have fully vested (other than as set forth in Section 7
below), the unvested portion of the grant will terminate automatically and will
be forfeited to the Company immediately and without further notice.

 

7.                                       A.                                   All
Performance Units granted hereunder shall become immediately vested in the
event of:

 

(i)                                     the
death of the Employee;

(ii)                                  the
permanent disability (within the
meaning of section 22(e)(3) of the Code) of the Employee; or

(iii)                               a
Termination Due to Business Divestiture.

 

B.                                     In the event of a
Change of Control or immediately prior to a Change of Control, the Company may,
in its complete discretion as provided in the Plan, cause all Performance Units
granted hereunder not then vested to become immediately vested, provided that
should the Company elect to exercise that discretion, it must do so during the
calendar year in which the Change of Control occurs.

 

In the event that any of the foregoing occurs
before the end of the current fiscal year in which the grant was made, for the
purposes of determining the Adjusted Grant Amount for such Employee,
year-to-date EBITDA as of the end of the fiscal quarter immediately preceding
to date of the event shall be annualized and compared to Forecasted EBITDA for
such fiscal year.

 

8.                                       The grant of Performance
Units hereunder shall terminate and shall have no further force or effect in
the event that the Company’s actual EBITDA for the current fiscal year is less
than eighty percent (80%) of Forecasted EBITDA for such fiscal year.

 

9.                                       This
grant does not confer on the Employee any right to continue in the employ of
the Company or interfere in any way with the right of the Company to determine
the terms of the Employee’s employment.

 

10.                                 In
the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Company, the Committee shall
make such adjustments, if any, as it deems appropriate in the number and kind
of shares covered by this grant.

 

11.                                 The
Company currently has an effective registration statement on file with the Securities
and Exchange Commission with respect to the shares of Common Stock. The Company
intends to maintain this registration but has no obligation to do so. If the
registration ceases to be effective, you will not be able to transfer or sell Common
Stock issued to you pursuant to this grant unless an exemption from
registration under applicable securities laws is available.  You agree that any resale by you of the
shares of Common Stock issued pursuant to this grant shall comply in all
respects with the requirements of all applicable securities laws, rules and
regulations (including, without limitation, the provisions of the Securities
Act, the Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law, rule or regulation applicable thereto, as
such laws, rules, and regulations may be amended 

 

3

 

from time to time. The Company shall not be obligated to either issue
the Common Stock or permit the resale of any Common Stock if such issuance or
resale would violate any such requirements.

 

12.                                 This
grant and the terms and conditions herein set forth are subject in all respects
to the terms and conditions of the Plan, which shall be controlling.  All interpretations or determinations of the
Committee shall be binding and conclusive upon the Employee and his legal
representatives on any question arising hereunder or under the Plan.

 

13.                                 All
notices hereunder to the Company shall be delivered or mailed to the following
address:

 

AEP Industries Inc.

Attention: 
Secretary

125 Phillips Avenue

South Hackensack, NJ  07606

 

Such address may be changed at any time provided notice of such change
is furnished in advance to the Employee.

 

14.                                 All
notices hereunder to the Employee shall be to the Employee’s address as appearing on the records of the Company.

 

 

	
   

  	
  AEP INDUSTRIES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Secretary

  

 

4

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