<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AEP INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 14, 1998
February 27, 1998
TO THE HOLDERS OF COMMON STOCK OF AEP INDUSTRIES INC.:
Notice is hereby given that the Annual Meeting of Stockholders of AEP
Industries Inc. (the "Company") will be held at the Holiday Inn, 283 Route 17
South, Hasbrouck Heights, New Jersey, on Tuesday, April 14, 1998, at 10:00 A.M.
local time for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. To elect four Class C directors of the Company for the ensuing three
year period (Page 1).
2. To consider and take action upon a proposal to ratify the Board of
Director's selection of Arthur Andersen LLP to serve as the Company's
independent auditors for the fiscal year ending October 31, 1998 (Page
12).
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The close of business on February 13, 1998, has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting. A list of stockholders entitled to vote
at the meeting may be examined at the Company's executive office located in
South Hackensack, New Jersey, during the ten-day period preceding the meeting.
You are cordially invited to attend the meeting in person. If you do not
expect to be present, please sign and date the enclosed form of Proxy and return
it by mail in the envelope provided. No postage is required if mailed in the
United States.
By Order of the Board of Directors,
[LOGO]
Lawrence R. Noll
Vice President and Secretary
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. YOU
CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY RETURNING
YOUR PROXY CARD PROMPTLY.
<PAGE>
AEP INDUSTRIES INC.
125 PHILLIPS AVENUE
SOUTH HACKENSACK, NJ 07606
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 14, 1998
This Proxy Statement is provided in connection with the solicitation of
Proxies on behalf of the Board of Directors of AEP Industries Inc. (the
"Company") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held on April 14, 1998, and at any adjournment or adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders
(the "Notice"). It will be mailed commencing on or about February 27, 1998, to
the persons entitled to receive the Notice.
Any Proxy may be revoked at any time before it is exercised by personally
appearing at the Meeting and casting a contrary vote or by giving a later dated
Proxy.
At the close of business on February 13, 1998, the record date for holders
entitled to notice of, and to vote at, the Meeting, the Company had outstanding
7,225,897 shares of Common Stock, $.01 par value ("Common Stock"), each of which
is entitled to one vote with respect to each matter to be voted on at the
Meeting. The Company has no class or series of stock outstanding other than
Common Stock.
At February 13, 1998, Borden, Inc. ("Borden") was the owner of 2,412,818
shares of the Company's Common Stock, representing 33.4% of the Company's
outstanding shares. To the Company's knowledge Borden will vote its shares of
Common Stock in favor of each of the proposals presented at the Meeting.
At February 13, 1998, J. Brendan Barba, Chairman of the Board, President and
Chief Executive Officer and a Class C Director of the Company, and members of
his immediate family, and David J. McFarland, Mr. Barba's uncle, together owned
approximately 25.4% of the outstanding Common Stock of the Company. To the
Company's knowledge, Mr. Barba and members of his family and Mr. McFarland will
vote their shares of Common Stock in favor of each of the proposals to be
presented at the Meeting.
ITEM NO. 1.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Company's Board
of Directors shall consist of three classes of directors, each class to be as
nearly equal as possible to one-third of the total number of directors and to be
elected to three year terms. The Company currently has ten directors, four
directors, denominated as Class C Directors, are to be elected at this Meeting.
The term of the current Class C Directors expires at the Annual Meeting of
Stockholders to be held on April 14, 1998. The terms of the Class A and B
Directors will expire at the Annual Meetings of Stockholders to be held in 1999
and 2000, respectively.
The nominees for election as Class C Directors are J. Brendan Barba, C.
Robert Kidder, Lawrence R. Noll and Lee C. Stewart. Each Class C Director will
serve for three years or until a successor shall have been elected and
qualified. It is the intention of the persons named in the accompanying form of
Proxy to vote the shares of Common Stock represented in favor of the nominees,
unless otherwise instructed in such Proxy. In case a nominee is unable or
declines to serve, the persons named as Proxies reserve the right to vote the
shares of Common Stock represented by such Proxy for another person duly
nominated by the Board of Directors in such nominee's stead. The Board of
Directors has no reason to believe that the named nominees will be unable or
will decline to serve.
The nominees are presently serving as Class C Directors of the Company.
Certain information concerning the nominees for election and the other directors
of the Company is set forth below. Such information was furnished by them to the
Company.
<PAGE>
NAMES OF NOMINEES AND CERTAIN BIOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
NAME AND YEAR FIRST BECAME A
DIRECTOR OF THE COMPANY AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
J. Brendan Barba..................................... 57 President and Chief Executive Officer of the Company
1971 since 1971; Chairman of the Board of the Company
since 1985.
C. Robert Kidder..................................... 53 Chairman of the Board and Chief Executive Officer of
1996 Borden, Inc. since 1995; Chairman and Chief Executive
Officer of Duracell International Inc. from 1991 to
1995; member of the Boards of Directors of Electronic
Data Systems Corporation, Morgan Stanley, Dean
Witter, Discover & Co.
Lawrence R. Noll..................................... 49 Vice President, Controller and Secretary of the
1993 Company since November 1996; Vice President-Finance
and Secretary of the Company from 1993 to 1996;
Controller of the Company from 1980 to 1993.
Lee C. Stewart....................................... 49 Vice President of Union Carbide Corporation since
1996 1996; investment banker with Bear Stearns & Co., Inc.
for more than nine years prior thereto.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Kenneth Avia......................................... 55 Executive Vice President of First Data Merchant
1980 Services (a merchant credit card processing company)
since 1993; Divisional Vice President of Automatic
Data Processing, Inc. from 1984 to 1993.
Paul E. Gelbard...................................... 67 Of counsel, Bachner, Tally, Polevoy & Misher LLP
1991 (Attorneys) from January 1997; Partner of the firm
from 1974 to 1996.
Scott M. Stuart...................................... 38 Member KKR & Co., LLC since 1996; General Partner
1996 Kohlberg Kravis Roberts & Co., L.P. in 1995; an
executive of Kohlberg Kravis Roberts & Co. from 1986
to 1994; member of the Boards of Directors of Borden,
Inc., Newsquest Capital PLC, World Color Press, Inc.,
Glenisla Group Ltd. (U.K.), KC Cable, KSL Golf
Holdings, Inc., KSL Land Corporation, KSL Recreation
Corporation and Newsquest Media Group, Ltd.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AND YEAR FIRST BECAME A
DIRECTOR OF THE COMPANY AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
William H. Carter.................................... 44 Executive Vice President and Chief Financial Officer
1996 of Borden, Inc. since 1995; Partner of Price
Waterhouse & Co. from 1974 to 1995.
Paul M. Feeney....................................... 55 Executive Vice President of the Company since 1988;
1989 Vice President and Treasurer of Witco Corporation (a
chemical products corporation) from 1980 to 1988.
Clifton S. Robbins................................... 39 Member of KKR & Co., LLC since 1996; General Partner
1996 of Kohlberg Kravis Roberts & Co., L.P. in 1995; an
executive of Kohlberg Kravis Roberts & Co. from 1987
to 1994; member of the Boards of Directors of Borden,
Inc., Borden Chemicals & Plastics, IDEX Corporation,
Kindercare Learning Centers, Inc., Newsquest Capital
PLC, Newsquest Media Group, Ltd. and Glenisla Group
Ltd. (U.K.).
</TABLE>
Messrs. Carter, Kidder, Robbins and Stuart are the designees of Borden
pursuant to the Governance Agreement described below, and Mr. Stewart is the
director designated jointly by Company management and Borden pursuant thereto.
DIRECTORS COMPENSATION AND BOARD COMMITTEES
During the past fiscal year the Board of Directors of the Company met seven
times. With the exception of Clifton S. Robbins, all directors attended at least
75% of the meetings of the Board of Directors. Each of the persons named in the
table attended at least 75% of the meetings of any committees of the Board on
which such person served which were held during the time that such person
served.
The Company pays each of its outside directors other than employees of
Borden an annual retainer of $20,000 and a fee of $1,000 per meeting for
attending each meeting of the Board of Directors of the Company he attends. Each
director has the option to defer payment of director's annual retainer and fees.
Interest will accrue on deferred director fees at the rate of 8% per annum until
paid.
The Board of Directors of the Company has a Stock Option Committee, whose
members are Messrs. Avia, Gelbard, Kidder and Stuart. The Stock Option Committee
administers the Company's 1985 and 1995 Stock Option Plans and determines the
persons who are eligible to receive options thereunder, the number of shares to
be subject to each option and the other terms and conditions under which options
under such Plans are granted and made exercisable. The Stock Option Committee
also administers the Company's 1995 Stock Purchase Plan. See "Employee Benefit
Plans" below. The Stock Option Committee met five times during the fiscal year
ended October 31, 1997.
The Board of Directors of the Company has a Compensation Committee, whose
members are Messrs. Avia, Barba, Feeney, Kidder, Stewart and Stuart. The
Compensation Committee is authorized to review and approve remuneration
arrangements for senior management, directors, certain other employees and
employee benefit plans in which officers and employees are eligible to
participate. The Compensation Committee met one time during the fiscal year
ended October 31, 1997.
The Board of Directors has an Audit Committee, whose members are Messrs.
Carter, Gelbard and Stewart. The Audit Committee is authorized to meet and
discuss with representatives of any firm of
3
<PAGE>
certified public accountants retained by the Company the scope of the audit by
such firm and the results thereof, to question such representatives with respect
thereto, and to meet with and question employees of the Company with respect to
financial matters pertaining to the Company. The Audit Committee met three times
during the fiscal year ended October 31, 1997.
The Board of Directors of the Company has a Nominating Committee, whose
members are Messrs. Barba, Carter, Feeney and Robbins. The Nominating Committee
did not meet during the fiscal year ended October 31, 1997, and nominations were
made by the Board of Directors.
Messrs. Barba, Feeney and Noll are active in the business of the Company on
a day-to-day basis. Mr. Powers is Mr. Barba's son-in-law. Mr. Barba and Mr. Cron
are cousins. No other family relationships exist between any of the directors
and executive officers of the Company.
The Company's Certificate of Incorporation contains a provision, authorized
by Delaware law, which eliminates the personal liability of a director of the
Company to the Company or to any of its stockholders for monetary damages for a
breach of his fiduciary duty as a director, except in the case where the
director breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law,
or obtained improper personal benefit. The Company has purchased directors and
officers liability insurance.
GOVERNANCE AGREEMENT
Pursuant to the agreement for the acquisition of the packaging business of
Borden (the "Purchase Agreement"), Borden and the Company entered into a
Governance Agreement, dated as of June 20, 1996, (the "Governance Agreement"),
with respect to certain matters relating to the corporate governance of the
Company. The Governance Agreement provides that the Company's Board of Directors
shall initially consist of ten members. Borden is entitled to designate four
persons to serve on the Board, subject to reduction in the event that Borden's
stockholdings are reduced below 25% of the outstanding Common Stock of the
Company (the "Shares"), and to participate in the selection of one independent
director so long as Borden's stockholdings remain above 10%.
The Governance Agreement also provides that Borden will have certain rights
to designate directors to serve on specific committees, that the approval of a
number of directors that represent at least 66 2/3% of the total number of
directors will be required on certain specific Board actions, and that, as long
as Borden owns in excess of 25% of Shares, a Borden-designated director must be
part of the 66 2/3% majority. The Governance Agreement also provides Borden with
preemptive rights to purchase additional Shares in order to maintain its
percentage ownership of the Shares and that Borden may not acquire Shares such
that for the three year period following the closing of the Borden Acquisition
its percentage ownership of Shares would increase beyond the number of Shares it
acquired pursuant to the Borden Purchase Agreement and that Borden is subject to
certain additional standstill provisions for the three-year period.
INFORMATION CONCERNING CERTAIN STOCKHOLDERS
DIRECTORS, EXECUTIVE OFFICERS AND BENEFICIAL OWNERS OF MORE THAN 5% VOTING STOCK
The following table sets forth the number of shares of Common Stock
beneficially owned as of January 31, 1998, by each director of the Company and
each executive officer of the Company named in the Summary Compensation Table in
this Proxy Statement and all directors and executive officers of the Company as
a group and the name and address of each person known to the Company to be the
beneficial
4
<PAGE>
owner of more than 5% of the voting stock of the Company. Unless otherwise
indicated by footnote, the owner exercises sole voting and investment power over
the shares.
<TABLE>
<CAPTION>
TITLE OF SHARES BENEFICIALLY PERCENT OF
NAME AND BENEFICIAL OWNER SECURITIES OWNED CLASS
- ------------------------------------------------------------------------- ------------ -------------------- ----------
<S> <C> <C> <C>
Kenneth Avia............................................................. Common Stock 80,600(a) 1.1%
J. Brendan Barba......................................................... Common Stock 1,276,310(b)(c)(d)(e) 17.5%
125 Phillips Avenue
South Hackensack, NJ 07606
William H. Carter........................................................ Common Stock 0(f) (g)
Paul M. Feeney........................................................... Common Stock 44,216(h)(i) (g)
Paul E. Gelbard.......................................................... Common Stock 1,600(j) (g)
C. Robert Kidder......................................................... Common Stock 0(k) (g)
Lawrence R. Noll......................................................... Common Stock 2,810(l)(m) (g)
Clifton S. Robbins....................................................... Common Stock 2,412,818(n) 33.4%
Lee C. Stewart........................................................... Common Stock 0 (g)
Scott M. Stuart.......................................................... Common Stock 2,412,818(n) 33.4%
David Cron............................................................... Common Stock 8,405(o)(p) (g)
John Powers.............................................................. Common Stock 65,906(q)(r)(s)(t) (g)
Directors and Officers as a Group
(12 persons)........................................................... Common Stock 3,892,665(u)(v) 53.3%
Borden, Inc.............................................................. Common Stock 2,412,818(w) 33.4%
180 East Broad Street
Columbus, OH 43215
EGS Partners............................................................. Common Stock 771,880(x) 10.7%
300 Park Avenue
New York, NY 10022
</TABLE>
- ------------------------
(a) Includes 600 shares issuable upon the exercise of stock options exercisable
within 60 days held by Mr. Avia. See "Employee Benefit Plans--1995 Stock
Option Plan."
(b) Includes 60,000 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Barba. See "Employee Benefit
Plans--1985 Stock Option Plan" and "Employee Benefit Plans-- 1995 Stock
Option Plan."
(c) Includes 105 shares credited to Mr. Barba's ESOP account. See "Employee
Benefit Plans--401(k) Savings and Employee Stock Ownership Plan."
(d) Does not include 88,563 shares owned or issuable upon the exercise of stock
options exercisable within 60 days held by Mr. Barba's two daughters and
their families, as to which Mr. Barba disclaims beneficial ownership.
(e) Does not include 237,500 shares owned by Mr. Barba's wife, as to which Mr.
Barba disclaims beneficial ownership.
(f) Does not include 2,412,818 shares owned by Borden, a corporation of which
Mr. Carter is an executive officer.
(g) Less than 1%.
5
<PAGE>
(h) Includes 11,740 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Feeney. See "Employee Benefit
Plans--1985 Stock Option Plan" and "Employee Benefit Plans-- 1995 Stock
Option Plan."
(i) Includes 105 shares credited to Mr. Feeney's ESOP account. See "Employee
Benefit Plans--401(k) Savings and Employee Stock Ownership Plan."
(j) Includes 1,350 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Gelbard. See "Employee Benefit
Plans--1985 Stock Option Plan" and "Employee Benefit Plans--1995 Stock
Option Plan."
(k) Does not include 2,412,818 shares owned by Borden, a corporation of which
Mr. Kidder is an executive officer.
(l) Includes 1,700 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Noll. See "Employee Benefit
Plans--1985 Stock Option Plan" and "Employee Benefit Plans-- 1995 Stock
Option Plan."
(m) Includes 100 shares credited to Mr. Noll's ESOP account. See "Employee
Benefit Plans--401(k) Savings and Employee Stock Ownership Plan."
(n) Includes 2,412,818 shares owned by Borden as to which Messrs. Robbins and
Stuart may each be deemed to be the beneficial owner, as general partners of
a general partnership deemed to own such shares.
(o) Includes 8,300 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Cron. See "Employee Benefit
Plans--1985 Stock Option Plan" and "Employee Benefit Plans-- 1995 Stock
Option Plan."
(p) Includes 105 shares credited to Mr. Cron's ESOP account. See "Employee
Benefit Plans--401(k) Savings and Employee Stock Ownership Plan."
(q) Includes 10,200 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Powers. See "Employee Benefit
Plans--1985 Stock Option Plan" and "Employee Benefit Plans-- 1995 Stock
Option Plan."
(r) Includes 105 shares credited to Mr. Power's ESOP account. See "Employee
Benefit Plans--401(k) Savings and Employee Stock Ownership Plan."
(s) Includes 15,531 shares held jointly by Mr. Powers and his wife and 23,025
shares held by Mr. Powers' wife.
(t) Includes 17,125 shares held by Mr. Powers' wife as trustee for his minor
children.
(u) Includes 93,890 shares issuable upon the exercise of options exercisable
within 60 days.
(v) Includes 520 shares held in the 401(k) Savings and Employee Stock Ownership
Plan.
(w) Borden is a wholly owned subsidiary of Borden Holdings, Inc., ("Borden
Holdings") and Borden Holdings is a wholly owned subsidiary of B.W. Holdings
L.L.C. ("B.W. Holdings"). Whitehill Associates is the managing member of
B.W. Holdings and KKR Associates is the sole general partner of Whitehill
Associates. Therefore, Borden Holdings, B.W. Holdings, Whitehill Associates
and KKR Associates each has the power to direct the voting shares owned by
Borden and may be deemed to be beneficial owners of such shares. Messrs.
Robbins and Stuart and others are general partners of KKR Associates and
each of such general partners may be deemed to beneficially own any shares
of Common Stock that KKR Associates may beneficially own or be deemed to
beneficially own. The address of those who may be deemed to be beneficial
owners of these shares held by Borden is 9 West 57th Street, New York, NY
10019.
(x) Based upon reports on Schedule 13D filed on December 16, 1997, in which EGS
reported that 100,482 shares of Common Stock were owned with sole voting and
dispositive power and 671,398 shares of Common Stock were owned with shared
voting and dispositive power.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the cash compensation
paid by the Company for services rendered during the three fiscal years ended
October 31, 1997, to the Chief Executive Officer and the four highest paid
Executive Officers of the Company whose aggregate compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------------
---------------------------------------------------------- # OF SHARES # OF SHARES
NAME AND OTHER ANNUAL RESTRICTED STOCK
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION 2) STOCK AWARD(S) OPTIONS(3)
- --------------------------- --------- ----------- ----------- --------------------- ------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Brendan Barba........... 1997 $ 500,000 -0- -0- -0- -0-
Chairman of the Board, 1996 $350,000 $ 187,000 -0- -0- 130,000(5)
President and Chief 1995 $350,000 $ 150,000 -0- -0- 90,000
Executive Officer
Paul M. Feeney............. 1997 $ 240,000 -0- -0- -0- -0-
Executive Vice President 1996 $170,000 $ 85,000 -0- -0- 50,000(6)
and Chief Financial 1995 $157,500 $ 67,500 -0- -0- 11,850
Officer
John Powers................ 1997 $ 200,000 $ 10,000 -0- -0- 6,000(7)
Executive Vice President 1996 $154,800 $ 35,000 -0- -0- 12,500
Sales and Marketing 1995 $ 134,500 $ 34,192 -0- -0- 8,000
David Cron................. 1997 $ 126,153 $ 10,000 -0- -0- 2,400(8)
Executive Vice President 1996 $115,000 $ 35,000 -0- -0- 3,000
Manufacturing 1995 $90,000 $ 25,000 -0- -0- 12,500
Lawrence R. Noll........... 1997 $ 125,000 $ 7,500 -0- -0- 2,000(9)
Vice President, 1996 $103,000 $ 30,000 -0- -0- 2,500
Controller 1995 $99,000 $ 17,500 -0- -0- 3,500
and Secretary
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION(4)
- --------------------------- -----------------
<S> <C>
J. Brendan Barba........... $ 6,000
Chairman of the Board, $ 7,660
President and Chief $ 2,310
Executive Officer
Paul M. Feeney............. $ 6,000
Executive Vice President $ 7,577
and Chief Financial $ 2,310
Officer
John Powers................ $ 6,000
Executive Vice President $5,249
Sales and Marketing $2,310
David Cron................. $ 5,965
Executive Vice President $4,590
Manufacturing $1,085
Lawrence R. Noll........... $ 5,960
Vice President, $ 3,773
Controller $ 1,059
and Secretary
</TABLE>
- ------------------------
(1) See "Compensation Committee Report."
(2) Excludes perquisites and other benefits, unless the aggregate amount of such
compensation is more than the lesser of either $50,000 or 10% of the total
of annual salary and bonus reported for the named executive officer.
(3) Stock options granted were determined by the Stock Option Committee.
(4) "All Other Compensation" represents the allocation of the Company's
contribution to its 401(k) Savings Plan and Employee Stock Ownership Plan
for each executive officer based upon the distribution formula in the Plan.
(5) On November 21, 1997, 100,000 of these options which had previously been
granted at exercise prices ranging from $46.50 to $51.15 were voluntarily
surrendered and 80,000 options were granted at exercise prices ranging from
$31.00 to $46.50 per share.
(6) On November 21, 1997, these options which had previously been granted at an
exercise price of $46.50 were voluntarily surrendered and 40,000 options
were granted at exercise prices ranging from $31.00 to $46.50 per share.
(7) On September 18, 1997, 7,500 options which had previously been granted at an
exercise price of $46.50 per share were voluntarily surrendered and 6,000
options were granted at an exercise price of $31.00 per share.
(8) On September 18, 1997, these options which had previously been granted at an
exercise price of $46.50 per share were voluntarily surrendered and 2,400
options were granted at an exercise price of $31.00 per share.
(9) On September 18, 1997, these options which had previously been granted at an
exercise price of $46.50 per share were voluntarily surrendered and 2,000
options were granted at an exercise price of $31.00 per share.
7
<PAGE>
PERFORMANCE GRAPH
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "AEPI". The following performance graph compares the performance of the
Company's Common Stock to the S & P 500 Index and a Peer Group, including
Atlantis Plastics Inc., Bemis Co., Liquid Box Corp., Tredegar Industries, Inc.,
and Tyco International Ltd. The graph assumes that the value of the investment
in the Company's Common Stock and each index was $100 at the close of trading on
the last trading day preceding the first day of the fifth preceding fiscal year
in Company Common Stock, S & P 500 and the Peer Group. The cumulative total
return assumes reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
<S> <C> <C> <C>
AMONG AEP INDUSTRIES, INC., THE S & P 500 INDEX AND A PEER GROUP
DOLLARS
AEP INDUSTRIES, INC. PEER GROUP S & P 500
10/92 100 100 100
10/93 171 113 115
10/94 228 121 119
10/95 291 145 151
10/96 622 230 187
10/97 414 206 247
* $100 INVESTED ON 10/31/92 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
</TABLE>
EMPLOYEE BENEFIT PLANS
COMBINED PROFIT SHARING AND 401(K) PLAN. The Company maintained a combined
Profit Sharing and 401(k) Plan for its employees in the United States (other
than union employees at the Company's California plant). The Plan became
effective as a profit sharing plan on November 1, 1973, and was amended to
include 401(k) Plan provisions effective January 1, 1993. The Plan was changed,
effective January 1, 1996, to the combined 401(k) Savings and Employee Stock
Ownership Plan described below.
401(K) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN The Company established an
Employee Stock Ownership Plan ("ESOP"), effective January 1, 1996, for all
non-bargaining unit employees in the United States and combined it with the
Company's 401(k) Plan. The Company makes a fixed contribution of Company Common
Stock to the account of each employee participant who has completed 1,000 hours
of service during the Plan year and is employed on the last day of the Plan
year. Each such participant will receive a contribution equal to 1% of that
participant's compensation up to a maximum annual compensation of $150,000. In
addition, the Company will match 75% of the employee's 401(k) contributions up
to 4% of annual compensation in Company Common Stock. The Company may from year
to year make discretionary contributions to the Plan.
8
<PAGE>
1985 STOCK OPTION PLAN. In November 1985, the Board of Directors adopted
and the stockholders of the Company approved the Company's 1985 Stock Option
Plan, as amended (the "1985 Option Plan"). Under the 1985 Option Plan options to
purchase up to 772,500 shares of Common Stock could be granted to key employees
of the Company or its subsidiaries, including the directors and officers, during
the period ending October 31, 1995. All shares of Common Stock available for
grant under the 1985 Stock Option Plan were granted prior to October 31, 1995,
but its provisions continue as to options issued thereunder which are
outstanding by their terms. At October 31, 1997, 353,290 options were
outstanding.
1995 STOCK OPTION PLAN. On April 11, 1995, stockholders of the Company
approved the Company's 1995 Stock Option Plan ("1995 Option Plan") previously
adopted by the Board of Directors, under which the Company has reserved 500,000
shares of Common Stock for the granting of options to key employees of the
Company, including directors and officers. The 1995 Option Plan became effective
as of January 1, 1995, and will terminate December 31, 2004. The 1995 Option
Plan provides for the grant of incentive stock options which may be exercised
over a period of ten years, the issuance of SARS, restricted stock, and
performance shares and the fixed annual grant of 1,000 nonqualified stock
options to non-employee directors. The options granted to outside directors are
exercisable over ten years from date of grant and in no event can the option
price be lower than the fair market value of the Common Stock at the date of
grant. As of October 31, 1997, 164,020 options were available for grant and
335,980 options were outstanding.
The Stock Option Committee is made up entirely of outside directors, who
administer the 1995 Option Plan, the 1985 Option Plan and the 1995 Purchase Plan
described below.
The former employees of Borden who became employees of the Company on
October 11, 1996, are eligible to participate in the Plans. Their service time
at Borden is taken into account for eligibility and vesting purposes.
The following table shows as to the Chief Executive Officer and the four
Executive Officers of the Company named in the Compensation Table, information
about options granted in the last fiscal year. The Company did not grant any
stock appreciation rights, restricted stock or performance shares.
9
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED RATE OF STOCK
------------------------------------------------------ PRICE
PERCENT OF APPRECIATION FOR
TOTAL OPTIONS OPTION TERM
NUMBER GRANTED TO EXERCISE ----------------------
OF OPTIONS EMPLOYEES IN PRICE EXPIRATION 5%($) 10%($)
NAME GRANTED FISCAL YEAR ($/SH) DATE (A) (A)
- ---------------------------------------------- ----------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Brendan Barba.............................. -0- -0- -- N/A -- --
Paul M. Feeney................................ -0- -0- -- N/A -- --
John Powers................................... 6,000(b) 0.06 $ 31.00 09/17/07 $ 116,974 $ 296,436
David Cron.................................... 2,400(b) 0.02 $ 31.00 09/17/07 $ 46,790 $ 118,574
Lawrence R. Noll.............................. 2,000(b) 0.02 $ 31.00 09/17/07 $ 38,991 $ 98,812
</TABLE>
- ------------------------
(a) The actual value, if any, an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised.
(b) See notes (7), (8) and (9) to "Compensation of Executive Officers."
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT OCTOBER 31, VALUE OF UNEXERCISED
1997 IN-THE-MONEY OPTIONS AT
(SHARES) OCTOBER 31, 1997(A)
-------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------- --------- ----------- ------------- ------------- -------------
J. Brendan Barba........... -0- -0- 62,000(b) 158,000(c) $ 541,200.96(d) $ 880,501.44(d)
Paul M. Feeney............. -0- -0- 20,740(e) 50,110(f) $ 154,155(d) $ 123,045(d)
John Powers................ -0- -0- 9,600 17,400 $ 133,128 $ 217,122
David Cron................. -0- -0- 8,100 10,500 $ 120,072 $ 101,265
Lawrence R. Noll........... 2,700 $ 72,900 2,500 8,000 $ 29,675 $ 77,075
</TABLE>
- ------------------------
(a) Computed based upon the difference between aggregate fair market value and
aggregate exercise price.
(b) Includes 20,000 options exercisable as of October 31, 1997, pursuant to a
grants issued October 21, 1996, which were voluntarily surrendered on
November 21, 1997.
(c) Includes 80,000 options unexercisable as of October 31, 1997, pursuant to
grants issued October 21, 1996, which were voluntarily surrendered on
November 21, 1997, at which time 80,000 new options were granted.
(d) Amount does not include options where grant price was greater than market
value on October 31, 1997.
(e) Includes 10,000 options exercisable as of October 31, 1997, pursuant to
grants issued on October 21, 1996, which were voluntarily surrendered on
November 21, 1997.
10
<PAGE>
(f) Includes 40,000 options unexercisable as of October 31, 1997, pursuant to
grants issued October 21, 1996, which were voluntarily surrendered on
November 21, 1997, at which time 40,000 new options were granted.
1995 EMPLOYEE STOCK PURCHASE PLAN. On April 11, 1995, the stockholders of
the Company approved the 1995 Employee Stock Purchase Plan ("1995 Purchase
Plan") previously adopted by the Board of Directors, effective July 1, 1995.
Under the 1995 Purchase Plan 300,000 shares of Common Stock are made available
to eligible employees of the Company, including officers, through payroll
deductions over successive six-month offering periods. Participating employees
may authorize the Company to withhold up to 7.5% of their compensation for the
purpose of purchasing shares of Common Stock under the 1995 Purchase Plan.
Employees who have been employed by the Company for less than one year or whose
customary employment is not more than 20 hours per week or five months per year
are not eligible to participate in the 1995 Purchase Plan. The 1995 Purchase
Plan is intended to qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Code. The purchase price of the Common Stock under
the 1995 Purchase Plan is 85% of the lower of the last sales price per share of
Common Stock on the Nasdaq National Market on either the first or last day of
each six month offering period.
The former employees of Borden who became employees of the Company on
October 11, 1996, are eligible to participate in the Plan. Their service time at
Borden is taken into account for eligibility and vesting purposes.
During the fiscal year ended October 31, 1997, Mr. Noll participated in the
1995 Stock Purchase Plan and purchased 73 shares at a cost of $34.00 per share;
also during this period 178 employees participated in the 1995 Purchase Plan and
purchased an aggregate of 10,682 shares of Common Stock at an average price of
$34.00 per share. As of October 31, 1997, a total of 25,858 shares had been sold
under the 1995 Purchase Plan to employees of the Company.
COMPENSATION COMMITTEE REPORT. The Company's Compensation Committee is
composed of Kenneth Avia, a Senior Vice President of an independent corporation,
J. Brendan Barba, President and CEO of the Company, Paul M. Feeney, Executive
Vice President and CFO of the Company, C. Robert Kidder, Chairman and CEO of
Borden, Lee C. Stewart, Vice President of an independent corporation and Scott
M. Stuart, an executive of KKR & Co., LLC. The Compensation Committee's informal
executive compensation philosophy considers a number of factors, including
competitive compensation by like-sized companies in similar businesses and
linking executive compensation to achievement of performance goals. The
Committee has access to national compensation surveys and public compensation
information for executives in manufacturing companies both larger and smaller
than the Company, including direct competitors of the Company. All of these
sources are used by the Committee in reviewing compensation.
Effective October 11, 1996, pursuant to the Company's Purchase Agreement
with Borden, and as a condition of the closing thereunder, the Company entered
into employment agreements with J. Brendan Barba and Paul M. Feeney. Each
Agreement is for a term of five years and calls for a base salary of $500,000
and $240,000 for Messrs. Barba and Feeney, respectively. Future increases to
each base salary will be commensurate to the percentage increase of the Consumer
Price Index for all Urban Consumers for the New York-Northeastern New Jersey
Metropolitan Area. Additional increases to each base salary are at the
discretion of the Compensation Committee. The salaries of Messrs. Barba and
Feeney were increased to $510,000 and $244,800, respectively, effective November
1, 1997.
In November 1997, the Compensation Committee determined that Messrs. Noll
and Powers salaries be increased to $132,500 and $219,000 respectively. Mr.
Cron's salary was increased to $150,000 in July 1997 in conjunction with his
promotion to Executive Vice President--Manufacturing.
In November 1996, the Compensation Committee adopted a Management Incentive
Plan ("MIP") for determining bonuses for executives and other employees.
Pursuant to the MIP, the Compensation Committee established certain performance
criteria for the year ended October 31, 1997 ("Fiscal 1997").
11
<PAGE>
Since these performance criteria for the executive officers were not met for
Fiscal 1997, no MIP bonuses were given to them. However, the Compensation
Committee did award discretionary bonuses to Messrs. Cron, Noll and Powers of
$10,000, $7,500 and $10,000, respectively.
The Compensation Committee feels that the Company's compensation adequately
reflects its philosophy and policies and that none of the executive officers of
the Company is overcompensated.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports of holdings and transactions
with the Securities and Exchange Commission. To the Company's knowledge, based
solely on its review of stock ownership reports on Form 4 provided to the
Company, the Company believes with respect to Fiscal 1997 that there was
compliance with the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934.
ITEM NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
In December 1997, the Board of Directors of the Company selected Arthur
Andersen LLP to serve as independent auditors for the Company for the fiscal
year ending October 31, 1998. The Board of Directors considers Arthur Andersen
LLP to be eminently qualified.
A representative of Arthur Andersen LLP will be present at the Meeting, with
an opportunity to make a statement if such representative desires to do so, and
will be available to respond to appropriate questions.
Although it is not required to do so, the Board of Directors is submitting
its selection of the Company's auditors for ratification at the Meeting, in
order to ascertain views of stockholders regarding such selection. If the
selection is not ratified, the Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP TO EXAMINE THE FINANCIAL STATEMENTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING OCTOBER 31, 1998.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
which may be brought before the Meeting. However, if any such other matters are
properly presented for action, it is the intention of the persons named in the
accompanying form of Proxy to vote the shares represented thereby in accordance
with their judgment on such matters.
MISCELLANEOUS
If the accompanying form of Proxy is executed and returned, the shares of
Common Stock represented thereby will be voted in accordance with the terms of
Proxy, unless the Proxy is revoked. If no directions are indicated in such
Proxy, the shares represented thereby will be voted FOR the nominees proposed by
the Board of Directors and FOR the ratification of the Board of Directors'
selection of Arthur Andersen LLP as independent auditors for the Company.
All costs relating to the solicitation of Proxies will be borne by the
Company. Proxies may be solicited by officers, directors and regular employees
of the Company, personally, by mail, by telephone or by fax, and the Company may
pay brokers and other persons holding shares of stock in their names or those of
their nominees for their reasonable expenses in sending soliciting materials to
their principals.
It is important that Proxies be returned promptly. Stockholders who do not
expect to attend the Meeting in person are urged to mark, sign and date the
accompanying form of Proxy and mail it in the
12
<PAGE>
enclosed return envelope, which requires no postage if mailed in the United
States, so that their votes can be recorded.
ANNUAL REPORT ON FORM 10-K.
A copy of the Company's Annual Report on Form 10-K, including the financial
statements and financial statement schedules for the fiscal year ended October
31, 1997, which was filed with the Securities and Exchange Commission, has been
sent without charge to stockholders to whom this Proxy Statement is mailed.
STOCKHOLDER PROPOSALS.
Stockholder proposals intended to be presented at the Annual Meeting of
Stockholders of the Company to be held in 1999 must be received by the Company
by October 24, 1998, in order to be considered for inclusion in the Company's
Proxy Statement relating to such meeting.
By Order of the Board of Directors,
[LOGO]
Lawrence R. Noll
Vice President and Secretary
February 27, 1998
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PROXY ANNUAL MEETING OF STOCKHOLDERS -- APRIL 14, 1998 COMMON STOCK
The undersigned, a stockholder of AEP INDUSTRIES INC., does hereby appoint Paul E. Gelbard and Paul M. Feeney, or
either of them, with full power of substitution, the undersigned's proxies, to appear and vote all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on Tuesday, April 14, 1998, at
10:00 A.M., local time, or at any adjournments thereof, upon such matters as may properly come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby instructs said proxies or their substitutes to vote as specified below on each of the
following matters in accordance with their judgment and on any other matters which may properly come before the Meeting.
1. Election of Class C Directors FOR all the nominees listed // WITHHOLD AUTHORITY //
(except as marked to the contrary) to vote for all the nominees listed below
J. Brendan Barba, C. Robert Kidder, Lawrence R. Noll and Lee C. Stewart
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in the space provided below.)
- ---------------------------------------------------------------------------------------------------------------------------------
2. Ratification of the appointment of Arthur Andersen LLP as the Company's independent auditors for the fiscal year ending
October 31, 1998.
FOR // AGAINST // ABSTAIN //
The Board of Directors favors a vote "FOR" Item No. 2.
The shares represented by this Proxy will be voted as directed. If no direction is indicated as to either Items 1 or 2, the
shares will be voted in favor of the Item(s) for which no direction is indicated.
IMPORTANT: Before returning this Proxy, please sign your name or names on the line(s) below exactly as shown on this Proxy.
Executors, administrators, trustees, guardians or corporate officers should indicate their full titles when signing. Where
shares are registered in the name of joint tenants, each joint tenant or trustee should sign.
PLEASE MARK, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
DATED______________________________, 1998
___________________________________(L.S.)
___________________________________(L.S.)
Stockholder(s) Sign Here
</TABLE>
