Document:

Exhibit
4.1

 

AEP
INDUSTRIES INC.

2005 Stock Option Plan

 

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 Stock
Option 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

 

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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

 

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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).

 

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3.             Administration.

 

(a) The Plan shall be administered by a
Committee, which shall consist of not less than four members of the Board.  Subject to the provisions of the next
sentence, the Committee shall be the Stock Option 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

 

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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

 

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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

 

7

 

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.

 

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(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.

 

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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

 

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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

 

11

 

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

 

12

 

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.

 

13

 

(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

  	
  %

  

 

14

 

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.

 

15

 

(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,

 

16

 

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,

 

17

 

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

 

18

 

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

 

19

 

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.

 

20Exhibit
4.1

 

AEP
INDUSTRIES INC.

2005
EMPLOYEE STOCK PURCHASE PLAN

 

1.                                      Purpose.  The purpose
of the AEP Industries Inc. 2005 Employee Stock Purchase Plan is to enable and
encourage employees of the Company and its Subsidiaries to acquire the Company’s
Common Stock through payroll deductions to enable them to share in the economic
prosperity of the Company.

 

2.                                      Definitions.

 

2.1                                 “Board of Directors” shall mean the
Board of Directors of the Company.

 

2.2                                 “Code” shall mean the Internal
Revenue Code of 1986 and any successor statute thereto, as amended.

 

2.3                                 “Committee” shall mean the Stock
Option Committee of the Board of Directors.

 

2.4                                 “Common Stock” shall mean shares of
the Company’s common stock, $.01 par value.

 

2.5                                 “Company” shall mean AEP Industries
Inc., a Delaware corporation.

 

2.6                                 “Compensation” as used during any
calendar year with respect to an Employee shall mean the amount of salary and
hourly wages (including bonuses, overtime, commissions, sick pay, and other
supplemental compensation) received by such Employee from the Company or a
Subsidiary in respect of such calendar year, as required to be reported to the
Internal Revenue Service (“IRS”) on IRS Form W-2 for such calendar year.

 

2.7                                 “Eligible Employee” shall mean only
those persons who on an Offering Date (a) are Employees and (b) are not deemed
for purposes of Section 423(b)(3) of the Code to own stock possessing 5%
or more of the total combined voting power or value of all classes of stock of
the Company or a Subsidiary.

 

2.8                                 “Employees” shall mean all persons
employed by the Company or any Subsidiary, within the meaning of Section 423(b)(1)
of the Code, excluding persons (a) employed less than one year, or (b) whose
customary employment is 20 hours or less per week or for not more than five months
per year, or (c) who serve on the Committee.

 

2.9                                 “Exercise Date” shall mean the final
day of each Offering Period.

 

 

2.10                           “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 nations 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.

 

2.11                           “Offering” shall mean the offering
of shares of Common Stock to Participants pursuant to this Plan that occurs on
each Offering Date.

 

2.12                           “Offering Date” shall mean the first
day of each Offering Period.

 

2.13                           “Offering Period” shall mean the
periods commencing January 1 and July 1 of each calendar year and
ending, respectively, on June 30 and December 31 of the same calendar
year.  The first Offering Period shall
commence on July 1, 2005.

 

2.14                           “Participant” shall mean an Eligible
Employee who elects to participate in the Plan and gives notice to the Company
of such election in accordance with Section 5 hereof.

 

2.15                           “Plan” shall mean the AEP Industries
Inc. 2005 Employee Stock Purchase Plan as hereafter, from time to time,
amended.

 

2.16                           “Purchase Price” shall mean the cost
of Common Stock acquired pursuant to the Plan as determined under Section 9
hereof.

 

2.17                           “Rules” shall mean the rules for
administering the Plan adopted pursuant to Section 19 hereof.

 

2.18                           “Stock Purchase Account” shall mean
the record of payments made by a Participant in accordance with Section 6
hereof which is required to be maintained in accordance with Section 7
hereof.

 

2.19                           “Subsidiary” shall mean any
subsidiary corporation of the Company within the meaning of Section 424(f)
of the Code.

 

3.                                      Shares Offered Pursuant To The Plan. 
The number of shares of Common Stock which may be offered
under the Plan on or after July 1, 2005, shall not exceed 250,000, subject
to adjustment in accordance with Section 21 hereof.  Such shares may be authorized but unissued
shares, previously issued shares reacquired by the Company, or any combination
thereof.

 

 

4.                                      Shares
Purchased By Participants.  Each
Participant on an Offering Date shall be entitled to purchase from the Company,
in the manner and on the terms herein provided, whole shares of Common Stock at
the Purchase Price set forth in Section 9 hereof with amounts withheld or
paid pursuant to Section 6 hereof during the Offering Period commencing on
such Offering Date and ending on the next succeeding Exercise Date.  Anything herein to the contrary
notwithstanding, if any person entitled to purchase shares pursuant to any
Offering hereunder would be deemed for purposes of Section 423(b)(3) of
the Code to own stock (including any number of shares which such person would
be entitled to purchase hereunder and under any other such plan maintained by
the Company or any Subsidiary) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company, the maximum
number of shares which such person shall be entitled to purchase pursuant to
this Plan shall be reduced to that number which, when added to the number of
shares of stock of the Company which such person is so deemed to own (excluding
any number of shares which such person would be entitled to purchase hereunder),
is one less than such 5%.

 

5.                                      Participation
in Plan.  Any Eligible Employee may
become a Participant in the Plan by notifying the Company in writing of his
intention to participate prior to the Offering Date on which an Offering
commences as the Committee may prescribe. 
Such notice shall be in the form prescribed by the Rules and shall be
delivered by hand or mailed, postage prepaid, to the secretary of the
Committee, or his designee.

 

6.                                      Method
of Payment For Shares.

 

6.1                                 Payment
for shares of Common Stock purchased hereunder shall be made by authorized
payroll deductions from a Participant’s Compensation pursuant to this Section.

 

6.2                                 In
his written notice to the Company pursuant to Section 5 hereof, a
Participant shall authorize a deduction, stated as a percentage (to tenths of a
percent) from the payment of his Compensation during each Offering Period.  The maximum deduction during any Offering
Period shall not exceed 7.5% of Compensation during that Offering Period or
such lesser amount as the Committee may prescribe.  The minimum deduction is 1.0% of
Compensation.  A Participant may not
change the amount of his deductions during an Offering Period, but may change
the amount to be deducted for any subsequent Offering by filing notice thereof
prior to the Offering Date on which such subsequent Offering commences in the
manner provided in Section 5 hereof.

 

7.                                      Stock
Purchase Accounts.  A Stock Purchase
Account shall be established and maintained in the name of each
Participant.  Amounts deducted from a
Participant’s Compensation pursuant to Section 6 hereof shall be credited
to his Stock Purchase Account.

 

8.                                      Interest.  No interest shall accrue or be payable to
any Participant with respect to any amounts credited to his Stock Purchase
Account.

 

9.                                      Purchase
Price.  The Purchase Price per share
of the shares of Common Stock sold to Participants hereunder for any Offering
shall be the lesser of 85% of the Fair Market Value
per share of Common Stock on (i) the Offering Date or (ii) the Exercise Date.

 

 

10.                               Purchase
of Shares.  If as of any Exercise
Date there is credited to the Stock Purchase Account of a Participant an amount
at least equal to the Purchase Price of one share of Common Stock, as
determined in Section 9 hereof, for the Offering which expires on such
Exercise Date, the Participant shall purchase from the Company at such Purchase
Price the largest number of whole shares of Common Stock which can be purchased
with the amount credited to his Stock Purchase Account, or such lesser number
of shares the Committee may from time to time establish as the maximum number
of shares that a Participant may purchase in such Offering.

 

11.                               Expiration
of Offering.  As of each Exercise
Date the amount credited to the Stock Purchase Account of each Participant in
the Offering which expires on such Exercise Date shall be charged with the
aggregate Purchase Price of the shares of Common Stock purchased by the
Participant on such Exercise Date.  The
remaining balance credited to his Stock Purchase Account shall be refunded to
each Participant who files notice of his election for refund prior to such
Exercise Date in the manner provided in Section 23 hereof.  If no such notice is filed by a Participant
and he has not withdrawn from the Plan in accordance with Section 13
hereof, any remaining balance credited to his Stock Purchase Account shall be
credited to his Stock Purchase Account for the next succeeding Offering
hereunder.

 

12.                               Issuance
of Shares, Stock Certificate.

 

12.1                           The
shares of Common Stock purchased by a Participant on an Exercise Date shall,
for all purposes, be deemed to have been sold at the close of business on such
Exercise Date.  Prior to that time the
Participant shall have none of the rights or privileges of a stockholder of the
Company with respect to such shares.

 

12.2                           As
soon as practicable after each Exercise Date, the Company shall issue and
deliver a certificate for the number of shares of Common Stock purchased by a
Participant on such Exercise Date, which certificate shall be registered either
in the Participant’s name or jointly in the names of the Participant and his
spouse, with the right of survivorship, as the Participant shall designate in a
written notice to the Company pursuant to Section 23 hereof.  The Participant may change such designation
at any time by filing notice of the change in accordance with Section 23
hereof.

 

13.                               Voluntary
Withdrawal from Plan.  A Participant
other than an officer or director of the Company who is subject to Section 16(b)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) may
withdraw from the Plan at any time by filing notice of withdrawal in the manner
provided in Section 23 hereof.  Upon
a Participant’s withdrawal, the entire amount credited to his Stock Purchase
Account shall be refunded to him.  Any
Participant who withdraws from the Plan may again become a Participant
hereunder with respect to a future Offering Period by filing notice in
accordance with Section 5 hereof. 
An officer or director of the Company who is subject to Section 16(b)
of the Exchange Act may withdraw from the Plan only with respect to a future
Offering Period, unless the Committee shall have made other provision for
exempting transactions under the Plan by such persons from Section 16(b)
of the Exchange Act in advance of the Offering Period in which any such notice
of withdrawal is filed.

 

 

14.                               Involuntary
Withdrawal from Plan.  If a
Participant ceases to be an Employee by reasons of clauses (a), (b) or (c) of Section 2.8
hereof, the entire credit balance in his Stock Purchase Account as of the
effective date on which he so ceased to be an Employee shall be used to
purchase shares of Common Stock pursuant to Sections 9 and 10 hereof as of the
next Exercise Date and any remaining balance credited to his Stock Purchase
Account shall be refunded to him.

 

15.                               Termination
of Employment.  If a Participant
ceases to be an Employee other than by reason of clauses (a), (b) or (c) of Section 2.8
hereof, the entire credit balance in his Stock Purchase Account shall be refunded
to him.  If a Participant dies, the
entire credit balance in his Stock Purchase Account shall be paid over to his
estate.

 

16.                               Procedure
if Insufficient Shares Available.  In
the event that on any Exercise Date the aggregate funds available for the purchase
of shares of Common Stock pursuant to Section 9 hereof would purchase a
number of shares in excess of the number of shares then available for purchase
under the Plan, the Committee shall proportionately reduce the number of shares
which would otherwise be purchased by each Participant on such Exercise Date in
order to eliminate such excess, the Plan shall automatically terminate
immediately after such Exercise Date and any remaining balance credited to the
Stock Purchase Account of a Participant shall be refunded to such Participant.

 

17.                               Limitation
on Right to Purchase.  Anything
herein to the contrary notwithstanding, if at any time when any person is
entitled to complete the purchase of any shares pursuant to this Plan, taking
into account such person’s rights, if any, to purchase stock under all other
stock purchase plans of the Company or any Subsidiary, the result would be that
during the then current calendar year such person would have first become
entitled to purchase under this Plan and all such other plans a number of
shares of stock which would exceed the maximum number of shares permitted by
the provisions of Section 423(b)(8) of the Code, then the number of shares
which such person shall be entitled to purchase pursuant to this Plan shall be
reduced by the number which is one more than the number of shares which
represents the excess.

 

18.                               Rights
Not Transferable.  Rights to purchase
shares under this Plan are exercisable only by the Participant during his
lifetime and are not transferable.  If a
Participant attempts to transfer his rights to purchase shares under the Plan,
he shall be deemed to have requested withdrawal from the Plan and the
provisions of Section 13 hereof shall apply with respect to such
Participant.

 

19.                               Administration
of the Plan.  Subject to the general
control of, and superseding action by, the Board of Directors, the Committee
shall have full power to administer the Plan. 
The Committee shall adopt Rules not inconsistent with the provisions of
the Plan for its administration, including the form of all notices required
hereunder.  The Committee’s
interpretation and construction of the Plan and Rules shall, subject as
aforesaid, be final and conclusive.

 

20.                               Amendment
of the Plan.  The Board of Directors
may at any time, or from time to time, alter or amend the Plan in any respect,
except that, without approval of the stockholders, no amendment may (i) change
the number of shares reserved under the Plan other than as provided in Section 21
hereof, (ii) reduce the Purchase Price per share as determined under Section 9
hereof other than as provided in Section 21

 

 

hereof,
or (iii) permit any person who is not an Employee to participate in the Plan.

 

21.                               Recapitalization
and Corporate Reorganization.

 

21.1                           The
aggregate number of shares of Common Stock reserved for purchase under the Plan
as provided in Section 3 hereof and the Purchase Price per share as
provided in Section 9 hereof shall be appropriately adjusted to reflect
any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend, or other increase or decrease
in such shares effected without receipt of consideration by the Company.

 

21.2                           Subject
to any required action by the stockholders, if the Company shall be the
surviving or resulting corporation in any merger or consolidation, any Offering
hereunder shall pertain to and apply to the shares of stock of the Company, but
a dissolution or liquidation of the Company or a merger or consolidation in
which the Company is not the surviving or the resulting corporation, shall
cause the Plan and any Offering hereunder to terminate and the entire amount
credited to the Stock Purchase Account of each Participant hereunder shall be
paid to such Participant.

 

22.                               Expiration
and Termination of the Plan.  The
Plan shall continue in effect through June 30, 2015, unless terminated
prior thereto pursuant to Section 21 hereof, provided that the Board of
Directors shall have the right to terminate the Plan at any time.  In the event of the expiration of the Plan or
its termination pursuant to Section 21 hereof, the entire amount credited
to the Stock Purchase Account of each Participant hereunder shall be refunded
to the Participant.

 

23.                               Notice.  Any notice which a Participant files pursuant
to this Plan shall be in the appropriate form prescribed by the Rules or, if no
provision is made in such Rules for the particular kind of notice in question,
such notice shall be in writing and shall be delivered by hand or mailed,
postage prepaid, to the secretary of the Committee, or his designee.

 

24.                               Repurchase
of Stock.  The Company shall not be
required to repurchase from any Participant shares of Common Stock which he
acquires under this Plan.

 

25.                               Alternative
Contribution Methods.  Anything
herein to the contrary notwithstanding, in the event that authorized payroll
deductions from Employees’ Compensation are not permitted by reason of the
provisions of local law applicable to the Company or any Subsidiary, the
Committee shall adopt an appropriate alternative method pursuant to which
affected Employees may make payment for shares of Common Stock purchased
hereunder which would otherwise have been made pursuant to Section 6
hereof. Payments made hereunder shall be deemed to have been made pursuant to Section 6
hereof.

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