Document:

Exhibit 10.1

AEP INDUSTRIES INC.

2006 MANAGEMENT INCENTIVE PLAN

PLAN
OVERVIEW

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

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

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

- OR -

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

DETERMINING PRELIMINARY INCENTIVE
AWARDS BASED ON EBITDA

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

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

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

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

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

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

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

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

 

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

PAY PERFORMANCE RELATIONSHIP

2006 ANNUAL INCENTIVE PLAN

Percent of “MIP Earnings” Achieved

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

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

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

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

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

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

	
  Salary

  	
   

  	
  $

  	
  70,000

  	
   

  
	
  Annual Incentive
  Target

  	
   

  	
  20%, or $14,000

  	
   

  
	
  MIP Earnings as
  a % of Budget

  	
   

  	
  110

  	
  %

  
	
  % Award Earned

  	
   

  	
  150

  	
  %

  
	
  Award

  	
   

  	
  $

  	
  21,000

  	
   

  

 

 2
 

 

ADJUSTING PRELIMINARY AWARDS
BASED ON CRITICAL MEASUREMENT

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

·                       Market
Share

·                       Number or
type of customers

·                       Quality

·                       Customer
satisfaction

·                       New product
introductions

·                       Sale of
assets at an attractive price

·                       Health and
safety improvements

·                       New
sales/promotion tracking system

·                       New
financial control system

·                       Improved
distribution system

In
2006 AEP is taking the view that everyone in the company should be motivated to
perform in the best interests of the company. It is assumed that people in an
MIP are the most committed of all, therefore a separate, and subjective
encouragement to perform one’s job well is an insult to those who are, in fact,
our best performers. Management does, however, reserve the right to reduce
an award to any individual within a business unit whose activities during the
period has been counterproductive to the efforts of the business unit or who
has not, for other reasons, added to the profit making goals of this plan.

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

 3

AEP
INDUSTRIES INC. 2006 MANAGEMENT INCENTIVE PLAN ADMINISTRATIVE GUIDELINES

1. Base Salary
for Bonus Calculations. October 31, 2006 Annual Base Salary will be
used to calculate the incentive.

2. Eligibility.
To be eligible to receive an incentive award under the program, you must be an
active associate as of the end of the measurement period (i.e., October 31,
2006). The only exceptions to this rule are detailed below under item
number 5.

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

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

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

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

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

5. Termination
During the Incentive Period.

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

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

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

6. Death or
Disability During the Incentive Period.

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

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

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

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

8. Timing of
Payments. Bonus awards will be paid in local currency as quickly after the
end of 2006 as possible. Financial results will need to be finalized as
appropriate by the AEP Industries Inc. Vice President, Controller and the
independent auditors before bonuses can be calculated and paid.

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

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

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

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

10. All Plan Payments
Subject to Discretion. Notwithstanding the attainment of financial results,
all awards under the Plan are subject to the approval of the Chief Financial
Officer and the Chief Executive Officer of AEP Industries Inc.Exhibit 10.2

AEP
Industries Inc.

Summary of Non-Employee Director Compensation

The non-employee
directors of AEP Industries Inc. receive the following compensation for service
on the Company’s Board of Directors:

Participation
Fees

 

	
  Annual retainer—Audit
  committee members.

  	
   

  	
  $

  	
  43,000

  	
   

  
	
  Annual retainer—Other

  	
   

  	
  35,000

  	
   

  
	
  Board meeting fee

  	
   

  	
  1,500

  	
   

  
	
  Audit, compensation, and nominating and corporate governance
  committee meetings

  	
   

  	
  1,200

  	
   

  

 

In addition to the
annual retainer referred to above, the Chairman of the Compensation Committee
receives an additional $5,000 annual retainer.

Retainer fees are paid in 12 equal monthly
installments.

Each director has the
option to defer payment of the foregoing compensation. Interest will accrue on
the deferred compensation at a rate of 8% per annum until paid.

Stock
Option Grants

The Company’s non-employee directors each receive an
annual grant of 2,000 non-qualified stock options on the date of the annual
meeting of stockholders. The stock
options will vest in five equal installments on the first through fifth
anniversaries of the grant date, provided such person continues to serve as a
director of the Company on such respective dates.

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