<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 11, 2000
February 28, 2000
TO THE HOLDERS OF COMMON STOCK OF AEP INDUSTRIES INC.:
The Annual Meeting of Stockholders of AEP Industries Inc. will be held at
the Hilton, 650 Terrace Avenue, Hasbrouck Heights, New Jersey, on Tuesday,
April 11, 2000, at 10:00 A.M. local time for the following purposes, as more
fully described in the accompanying proxy statement:
1. To elect three Class B directors for the ensuing three year period (Page
1).
2. To ratify the Board of Directors' selection of Arthur Andersen LLP to
serve as our independent auditors for the fiscal year ending October 31,
2000 (Page 11).
3. To transact such other business as may properly come before the meeting.
Holders of AEP common stock as of the close of business on February 11,
2000, are entitled to vote at the meeting. A list of stockholders entitled to
vote at the meeting may be examined at our 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]
Jean L'Allier
Vice President and Secretary
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, SIGN
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 11, 2000
------------------------
This proxy statement is provided in connection with the solicitation of
proxies on behalf of the Board of Directors of AEP Industries Inc. for use at
the Annual Meeting of Stockholders on April 11, 2000. It will be mailed
beginning on or about February 28, 2000, to the stockholders entitled to vote at
the meeting.
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 11, 2000, the record date for holders
of common stock entitled to notice of, and to vote at, the meeting, we had
outstanding 7,459,650 shares of common stock, $.01 par value. Each share of
common stock is entitled to one vote with respect to each matter to be voted on
at the meeting. We have no class or series of stock outstanding other than
common stock.
On February 11, 2000, Borden, Inc. was the owner of 2,412,818 shares of our
common stock, representing 32.4% of our outstanding shares. We believe that
Borden will vote its shares of common stock in favor of each of the proposals
presented at the meeting.
On February 11, 2000, J. Brendan Barba, Chairman of the Board, President and
Chief Executive Officer and a Class C Director of AEP, members of his immediate
family, and David J. McFarland, Mr. Barba's uncle, together owned approximately
22.6% of our outstanding common stock. We believe that Mr. Barba, 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
Our Certificate of Incorporation provides that our Board of Directors
consist of three classes of directors. Each class is as nearly equal as possible
to one-third of the total number of directors. Each class of directors serves a
three year term. We currently have ten directors. Three Class B Directors are to
be elected at this meeting. The terms of the Class C and Class A Directors
expire at the Annual Meetings of Stockholders to be held in 2001 and 2002,
respectively.
The nominees for election as Class B Directors are William H. Carter, Adam
H. Clammer and Paul M. Feeney. Each Class B Director will serve for three years
or until a successor has been elected and qualified. Unless otherwise
instructed, the persons named in the accompanying form of proxy will vote the
shares of common stock in favor of the nominees. If a nominee is unable or
declines to serve, the persons named in the proxy reserve the right to vote for
another person nominated by the Board of Directors. The Board of Directors has
no reason to believe that the nominees will be unable or will decline to serve.
The nominees are presently serving as Class B Directors. Certain information
provided to us by the nominees and other directors is set forth below.
<PAGE>
NAMES OF NOMINEES AND BIOGRAPHICAL INFORMATION
<TABLE>
<CAPTION>
NAME AND YEAR
FIRST BECAME A
DIRECTOR
OF AEP AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- --------------------- -------- ------------------------------------------------------------
<S> <C> <C>
William H. Carter 46 Executive Vice President and Chief Financial Officer of
1996 Borden, Inc. since 1995; Partner of Price Waterhouse & Co.
from 1975 to 1995; Chairman of the Board of Directors and
Chief Executive Officer of Borden Chemicals & Plastics LP
since January 2000.
Adam H. Clammer 29 Member of KKR & Co., LLC since 1995; investment banker with
September 1999 Morgan Stanley & Co. from 1992 to 1995; member of the Board
of Directors of Borden Chemical, Inc. and Birch Telecom.
Paul M. Feeney 57 Executive Vice President, Finance and Chief Financial
1989 Officer of AEP since 1988; Vice President and Treasurer of
Witco Corporation (a chemical products corporation) from
1980 to 1988.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
J. Brendan Barba 59 President and Chief Executive Officer of AEP since 1971;
1971 Chairman of the Board since 1985.
Lawrence R. Noll 51 Vice President and Controller of AEP since November 1996;
1993 Secretary from 1993 to 1998; Vice President-Finance and
Secretary from 1993 to 1996; Controller from 1980 to 1993.
Lee C. Stewart 51 Vice President of Union Carbide Corporation since 1996;
1996 investment banker with Bear Stearns & Co., Inc. for more
than nine years prior thereto.
William F. Stoll, Jr. 51 Senior Vice President and General Counsel of Borden, Inc.
December 1999 1996 to present; Vice President and Deputy General Counsel
of Westinghouse Electric Corp. from 1993 to 1996; member of
the Board of Directors of Borden Chemicals & Plastics, LP.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Kenneth Avia 57 Executive Vice President of First Data Merchant Services (a
1980 merchant credit card processing company) since 1993;
Divisional Vice President of Automatic Data Processing, Inc.
from 1984 to 1993.
Paul E. Gelbard 69 Of counsel, Warshaw, Burstein, Cohen, Schlesinger & Kuh, LLP
1991 (attorneys) from January 1, 2000; of counsel, Bachner, Tally
& Polevoy LLP (attorneys) from January 1997 to 1999; Partner
of Bacher, Tally, Polevoy & Misher LLP from 1974 to 1996.
Scott M. Stuart 40 Member KKR & Co., LLC since 1996; General Partner Kohlberg
1996 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., The Boyds Collection, Ltd.,
and KSL Recreation Corporation.
</TABLE>
Messrs. Carter, Clammer, Stoll and Stuart are the Borden designated
directors pursuant to the Governance Agreement described below. Mr. Stewart is
the director designated jointly by AEP and Borden. Messrs. Barba, Feeney and
Noll are active in our business on a daily basis.
2
<PAGE>
DIRECTORS COMPENSATION AND BOARD COMMITTEES
During the past fiscal year our Board of Directors met seven times. All
directors named in the table attended at least 75% of these meetings held while
they were directors. Our Board of Directors has an Audit Committee, a Stock
Option Committee, a Compensation Committee and a Nominating Committee. Each
person named in the table attended at least 75% of the meetings of the board
committees on which he serves which were held during the time the person served.
Each of our non-employee directors, other than Borden employees, is paid an
annual retainer of $20,000 and a fee of $1,000 per meeting for each Board of
Directors meeting attended. Each director has the option to defer payment of the
director's annual retainer and fees. Interest accrues on deferred fees at the
rate of 8% per annum until paid.
The Stock Option Committee consists of Messrs. Avia, Gelbard, Stoll and
Stuart. The Stock Option Committee administers our 1985 and 1995 Stock Option
Plans, determines the persons who are eligible to receive options, the number of
shares subject to each option and the terms and conditions under which the
options are granted and exercisable. The Stock Option Committee also administers
our 1995 Stock Purchase Plan. The Stock Option Committee met three times during
the fiscal year ended October 31, 1999.
Messrs. Avia, Barba, Feeney, Stewart, Stoll and Stuart are the members of
our Compensation Committee. The Compensation Committee reviews and approves
compensation arrangements for senior management, directors, and certain other
employees. It also reviews and approves employee bonus plans in which officers
and employees are eligible to participate. The Compensation Committee met once
during the fiscal year ended October 31, 1999.
The Audit Committee consists of Messrs. Carter, Gelbard and Stewart. The
Audit Committee meets with the certified public accounting firm we retain and
our senior financial officers. It discusses the scope of the certified public
accounting firm's audit, the audit results and other financial matters. In
addition to meeting with the certified public accounting firm, the Audit
Committee can also meet with and question our internal audit group and other
employees about company financial matters. The Audit Committee met four times
during the fiscal year ended October 31, 1999.
Although we have a Nominating Committee, whose members are Messrs. Barba,
Carter, Clammer and Feeney, it did not meet during the fiscal year ended
October 31, 1999. Nominations were made by the Board of Directors.
Messrs. Powers and Vegliante are Mr. Barba's sons-in-law. Mr. Barba and
Mr. Cron are cousins. No other family relationships exist between any of the
directors and executive officers.
AEP's Certificate of Incorporation eliminates a director's personal
liability for monetary damages either to the company or to any of its
stockholders resulting from a breach of fiduciary duty as a director. This
provision does not apply where a director breaches his duty of loyalty, fails to
act in good faith, engages in intentional misconduct, knowingly violates a law,
authorizes payment of a stock dividend or approves a stock repurchase in
violation of Delaware corporate law, or obtains improper personal benefit. We
have purchased directors and officers liability insurance.
GOVERNANCE AGREEMENT
In connection with the acquisition of the Borden packaging business, we
entered into a Governance Agreement with Borden, dated as of June 20, 1996, with
respect to certain matters relating to the corporate governance of our company.
The Governance Agreement provides that our board of directors shall initially
consist of ten members. Borden is entitled to designate four persons to serve on
the board, subject to reduction if Borden's stockholdings are reduced below 25%
of the outstanding
3
<PAGE>
common stock of our company, and to participate in the selection of one
independent director as long as Borden's stockholdings remain at 10%
The Governance Agreement also provides that Borden will have certain rights
to designate directors to serve on specified 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 our outstanding 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 our outstanding shares so long as Borden
stockholdings are 20%
4
<PAGE>
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 by each of our directors and executive officers listed in the
Summary Compensation Table, as of January 31, 2000. The table also provides
information about our directors and executive officers as a group and the name
and address of each person known to us to beneficially own more than 5% of the
shares of our common stock. Unless indicated by footnote, the owner exercises
sole voting and investment power over the shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF
NAME AND BENEFICIAL OWNER TITLE OF SECURITIES OWNED CLASS
- ------------------------- ------------------- ------------------- ----------
<S> <C> <C> <C>
Kenneth Avia Common Stock 82,000(a) 1.1%
J. Brendan Barba................................... Common Stock 1,315,228(b) 17.5%
125 Phillips Avenue
South Hackensack, NJ 07606
William H. Carter.................................. Common Stock 0(c) (d)
Adam H. Clammer.................................... Common Stock 2,412,818(e) 32.4%
Paul M. Feeney..................................... Common Stock 66,426(f) (d)
Paul E. Gelbard.................................... Common Stock 3,000(g) (d)
Lawrence R. Noll................................... Common Stock 6,717(h) (d)
Lee C. Stewart..................................... Common Stock 600(j) (d)
William F. Stoll, Jr............................... Common Stock 0(c) (d)
Scott M. Stuart.................................... Common Stock 2,413,418(e)(j) 32.4%
John J. Powers..................................... Common Stock 72,119(k) 1.0%
David J. Cron...................................... Common Stock 17,256(l) (d)
Edgar Reich........................................ Common Stock 1,000(m) (d)
Officers and Directors as a Group (13 persons)..... Common Stock 3,977,764(n) 52.4%
Borden, Inc........................................ Common Stock 2,412,818(o) 32.4%
180 East Broad Street
Columbus, OH 43215
EGS Partners....................................... Common Stock 1,779,727(p) 23.9%
300 Park Avenue
New York, NY 10022
Dimensional Fund Advisors.......................... Common Stock 379,775(q) 5.1%
1299 Ocean Avenue
Santa Monica, CA 90401
</TABLE>
- ------------------------
(a) Includes 1,200 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 58,000 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Barba and 575 shares credited to
Mr. Barba's ESOP account. See "Employee Benefit Plans: 1985 Stock Option
Plan, 1995 Stock Option Plan and 401(k) Savings and Employee Stock Ownership
Plan." Does not include 115,081 shares owned or issuable upon the exercise
of stock options within 60 days held by Mr. Barba's two daughters and their
families, as to which Mr. Barba disclaims beneficial ownership."
(c) Does not include 2,412,818 shares owned by Borden, a corporation of which
Messrs. Carter and Stoll are executive officers.
(d) Less than 1%.
5
<PAGE>
(e) Includes 2,412,818 shares owned by Borden as to which Messrs. Clammer and
Stuart may each be considered to be the beneficial owner, as general
partners of a general partnership deemed to own such shares.
(f) Includes 33,480 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Feeney. and 575 shares credited to
Mr. Feeney's ESOP account. See "Employee Benefit Plans: 1985 Stock Option
Plan, 1995 Stock Option Plan and 401(k) Savings and Employee Stock Ownership
Plan."
(g) Includes 2,750 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 1995 Stock Option Plan."
(h) Includes 6,180 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Noll and 537 shares credited to
Mr. Noll's ESOP account. See "Employee Benefit Plans: 1985 Stock Option
Plan, 1995 Stock Option Plan and 401(k) Savings and Employee Stock Ownership
Plan."
(i) Includes 600 shares issuable upon the exercise of stock options exercisable
within 60 days held by Mr. Stewart. See "Employee Benefit Plans--1995 Stock
Option Plan."
(j) Includes 600 shares issuable upon the exercise of stock options exercisable
within 60 days held by Mr. Stuart. See "Employee Benefit Plans--1995 Stock
Option Plan."
(k) Includes 22,200 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Powers and 575 shares credited to
Mr. Power's ESOP account. See "Employee Benefit Plans: 1985 Stock Option
Plan, 1995 Stock Option Plan and 401(k) Savings and Employee Stock Ownership
Plan." Also includes 16,194 shares held jointly by Mr. Powers and his wife,
23,025 shares held by Mr. Powers' wife and 10,125 shares held by
Mr. Powers' wife as trustee for his minor children.
(l) Includes 15,462 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Cron and 556 shares credited to
Mr. Cron's ESOP account. See "Employee Benefit Plans: 1985 Stock Option
Plan, 1995 Stock Option Plan and 401(k) Savings and Employee Stock Ownership
Plan."
(m) Includes 1,000 shares issuable upon the exercise of stock options
exercisable within 60 days held by Mr. Reich. See "Employee Benefit Plans:
1985 Stock Option Plan, 1995 Stock Option Plan and 401(K) Savings and
Employee Stock Ownership Plan."
(n) Includes 141,472 shares issuable upon the exercise of options exercisable
within 60 days and 2,818 shares held in the 401(k) Savings and Employee
Stock Ownership Plan.
(o) Borden is a wholly owned subsidiary of Borden Holdings, Inc. Borden Holdings
is a wholly owned subsidiary of B.W. Holdings L.L.C. Whitehill Associates is
the managing member of B.W. Holdings. 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. Clammer and Stuart and others are general partners of
KKR Associates and each general partner 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.
(p) Based upon reports on Schedule 13D filed on February 18, 2000, in which EGS
reported that 48,458 shares of common stock were owned with sole voting and
dispositive power and 1,730,269 shares of common stock were owned with
shared voting and dispositive power.
(q) Based upon reports on Schedule 13G filed on February 4, 2000, in which
Dimensional Fund Advisors reported that 379,775 shares of common stock were
owned with sole voting and dispositive power.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation we paid to our Chief
Executive Officer and four highest paid executive officers with aggregate
compensation exceeding $100,000 during the three fiscal years ended October 31,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------------- --------------------------------------
# OF SHARES
OTHER ANNUAL RESTRICTED # OF SHARES ALL OTHER
NAME AND PRINCIPAL COMPENSA- STOCK STOCK COMPENSA-
POSITION YEARS SALARY(1) BONUS(1) TION (2) AWARD(S) OPTIONS(3) TION(4)
- --------------------------------------- -------- --------- -------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Brendan Barba....................... 1999 $520,000 -0- -0- -0- -0- $6,400
Chairman of the Board, 1998 $510,000 -0- -0- -0- 80,000 $6,400
President and Chief 1997 $500,000 -0- -0- -0- -0- $6,000
Executive Officer
Paul M. Feeney......................... 1999 $249,700 -0- -0- -0- 5,000 $6,400
Executive Vice President, 1998 $244,800 -0- -0- -0- 40,000 $6,400
Finance and Chief 1997 $240,000 -0- -0- -0- -0- $6,000
Financial Officer
John J. Powers......................... 1999 $214,000 $44,196 -0- -0- 3,500 $6,400
Executive Vice President, 1998 $204,000 $34,425 -0- -0- 3,000 $6,400
Sales and Marketing 1997 $200,000 $10,000 -0- -0- 6,000 $6,000
David J. Cron.......................... 1999 $164,808 $35,109 -0- -0- 5,000 $6,400
Executive Vice President, 1998 $150,000 $25,313 -0- -0- 3,000 $5,749
Manufacturing 1997 $126,153 $10,000 -0- -0- 2,400 $5,965
Edgar Reich............................ 1999 $150,000 $ 5,000 -0- -0- 3,500 $2,625
Executive Vice President, 1998 $ 68,597 $ 5,132 -0- -0- 5,000 -0-
International Operations 1997 -0- -0- -0- -0- -0- -0-
</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.
7
<PAGE>
PERFORMANCE GRAPH
Our common stock is traded on the Nasdaq National Market under the symbol
"AEPI." The graph below provides an indicator of the cumulative total
shareholders returns for AEP as compared with the S&P 500 Stock Index, New Peer
Group(1), and Old Peer Group(2). The performance of the Old Peer Group is
displayed for comparative purposes as required by SEC Reg. S-K Item 402(l)(4)
and will not appear in the future.
The graph assumes that the value of the investment in our 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 AEP common stock, S&P 500,
the New Peer Group and the Old Peer Group. The cumulative total return assumes
reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG AEP INDUSTRIES INC., THE S&P 500 INDEX
A NEW PEER GROUP AND AN OLD PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C> <C> <C>
10/94 10/95 10/96 10/97 10/98 10/99
AEP INDUSTRIES, INC. 100 127 272 181 122 181
NEW PEER GROUP 100 127 179 215 186 241
OLD PEER GROUP 100 103 123 131 107 87
S&P 500 100 126 157 207 253 318
</TABLE>
*$100 INVESTED ON 10/31/94 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING OCTOBER 31.
- ------------------------
1 The new Peer Group consists of Applied Extrusion Technology, Inc.; Atlantis
Plastics, Inc.; Bemis Company; Intertape Polymer Group; Ivex Packaging
Corporation; Sealed Air Corporation; and Spartech Corporation.
2 The Old Peer Group consists of Applied Extrusion Technology, Inc.; Aptar
Group, Inc.; Astronics Corp.; Atlantis Plastics, Inc.; Ball Corp.; Bemis
Company, Inc.; BPI Packaging Technologies, Inc.; Crown Cork & Seal, Inc.;
Disc Graphics, Inc.; Intertape Polymer Group; Ivex Packaging Corporation;
Liqui-Box Corp.; Peak International, Ltd.; PVI Container Corp.; Silgan
Holdings, Inc.; Sonoco Products Co.; Spartech Corp.; Suiza Foods Corp.;
Tenneco, Inc.; Triple S Plastics, Inc.; Tuscarora, Inc.; Viskase Cos.; and
West Co., Inc.
8
<PAGE>
EMPLOYEE BENEFIT PLANS
COMBINED PROFIT SHARING AND 401(K) PLAN. We maintain a combined Profit
Sharing and 401(k) Plan for our employees in the United States, other than union
employees at our California plant. The plan became effective as a profit sharing
plan on November 1, 1973, and was amended, effective January 1, 1993, to include
401(k) Plan provisions. 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. We 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 our
401(k) Plan. We make a fixed contribution of 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. The contribution to the
plan for each such participant is equal to 1% of that participant's compensation
up to a maximum annual compensation of $160,000. In addition, we match 75% of
the participant's 401(k) contributions, up to 4% of annual compensation, in
common stock. From year to year, we may make discretionary contributions to the
plan.
1985 STOCK OPTION PLAN. In November 1985, our Board of Directors adopted
and our stockholders approved the 1985 Stock Option Plan, as amended. Under this
plan options to purchase up to 772,500 shares of common stock could be granted
to key employees of our company and its subsidiaries, including officers and
directors, during the period ending October 31, 1995. Options for all shares of
common stock available for grant under the 1985 Stock Option Plan were granted
prior to October 31, 1995, and the plan provisions continue as to the options
issued that are outstanding. At October 31, 1999, 273,982 options were
outstanding.
1995 STOCK OPTION PLAN. On April 11, 1995, our stockholders approved the
1995 Stock Option Plan previously adopted by the Board of Directors. On
April 13, 1999, stockholders approved amendments to the 1995 Stock Option Plan.
Under this plan, as amended, we have reserved 1,000,000 shares of common stock
for the granting of options to our key employees, including officers and
directors and employees of our subsidiaries. The 1995 Stock Option Plan became
effective as of January 1, 1995, and will terminate December 31, 2004. The 1995
Stock Option Plan provides for grants of incentive stock options which may be
exercised over a ten year period, the issuance of SARS, restricted stock, and
performance shares and a fixed annual grant of 1,000 nonqualified stock options
to non-employee directors. The options granted to non-employee 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 on the date of
grant. As of October 31, 1999, 463,850 options were available for grant and
536,150 options were outstanding.
The Stock Option Committee is made up entirely of non-employee directors,
who administer the 1995 Stock Option Plan, the 1985 Stock Option Plan and the
1995 Stock Purchase Plan described below.
The service time at Borden of former employees of Borden who became
employees of AEP is taken into account for eligibility and vesting purposes for
the 1995 Stock Option Plan and the 1995 Stock Purchase Plan.
The following table shows information about options granted in the last
fiscal year to our Chief Executive Officer and the four executive officers named
in the Compensation Table. No stock appreciation rights, restricted stock or
performance shares have been granted.
9
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT
- --------------------------------------------------------------------------------------- ASSUMED RATE OF STOCK
PERCENT OF PRICE
TOTAL OPTIONS APPRECIATION FOR OPTION
NUMBER OF GRANTED TO EXERCISE TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) (A) 10%($) (A)
- ---- --------- ------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Brendan Barba.................... -0- N/A N/A N/A N/A N/A
Paul M. Feeney...................... 5,000 2.72 $26.63 04/12/09 $ 83,737 $ 212,207
John J. Powers...................... 3,500 1.91 $26.63 04/12/09 $ 58,616 $ 148,545
David J. Cron....................... 5,000 2.72 $26.63 04/12/09 $ 83,737 $ 212,207
Edgar Reich......................... 3,500 1.91 $26.63 04/12/09 $ 58,616 $ 148,545
</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.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT OCTOBER 31, 1999 MONEY OPTIONS AT OCTOBER 31, 1999
SHARES (SHARES) (A)
ACQUIRED ON VALUE ------------------------------ --------------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE (B) UNEXERCISABLE(B)
- ---- ----------- -------- ----------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Brendan Barba........ -0- -0- 128,000 72,000 $1,374,742 $ 78,960
Paul M. Feeney.......... -0- -0- 29,479 36,371 $ 268,184 $ 51,866
John J. Powers.......... -0- -0- 21,600 11,900 $ 234,720 $ 45,435
David J. Cron........... 2,138 $49,815 13,362 11,100 $ 122,299 $ 50,855
Edgar Reich............. -0- -0- 1,000 7,500 $ 10,560 $ 61,035
</TABLE>
- ------------------------
(a) Computed based upon the difference between aggregate fair market value and
aggregate exercise price.
(b) Amount does not include options where the exercise price was greater than
market value on October 31, 1999.
1995 EMPLOYEE STOCK PURCHASE PLAN. On April 11, 1995, our stockholders
approved the 1995 Employee Stock Purchase Plan which had previously been adopted
by the Board of Directors, effective July 1, 1995. Under the 1995 Stock Purchase
Plan 300,000 shares of common stock are available to eligible employees,
including officers, through payroll deductions over successive six-month
offering periods. Participating employees may authorize withholding of up to
7.5% of their compensation for the purpose of purchasing shares of common stock
under the 1995 Stock Purchase Plan. Employees who have been employed 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. The 1995 Stock 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 Stock 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
trading day of each six month offering period.
During the fiscal year ended October 31, 1999, John J. Powers was the only
officer who participated in the 1995 Stock Purchase Plan, purchasing 663 shares
at $18.49 per share. In total for the fiscal year, 124 employees participated
and purchased an aggregate of 18,470 shares at $18.49 per share. A total of
60,300 shares has been sold under the 1995 Stock Purchase Plan.
10
<PAGE>
COMPENSATION COMMITTEE REPORT. Our Compensation Committee is composed of
Kenneth Avia, Executive Vice President of an independent corporation, J. Brendan
Barba, Chairman, President and CEO of AEP, Paul M. Feeney, AEP's Executive Vice
President, Finance and CFO, Lee C. Stewart, Vice President of an independent
corporation, William F. Stoll, Jr., General Counsel of Borden, Inc. 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 links
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 AEP,
including direct competitors. All of these sources are used by the Committee in
reviewing compensation.
Effective October 11, 1996, pursuant to our Purchase Agreement with Borden
and as a condition of the closing, we 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 for Mr. Barba and $240,000 for Mr. Feeney.
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 $535,000 and $257,200, respectively,
effective November 1, 1999.
In November 1999, the Compensation Committee determined that the salaries of
Messrs. Powers, Cron and Reich be increased to $224,600, $180,000 and $165,000
respectively.
In November 1996, the Compensation Committee adopted a Management Incentive
Plan for determining bonuses for executives and other employees. Pursuant to the
MIP, the Compensation Committee established certain performance criteria for the
fiscal year ended October 31, 1999. Messrs. Powers and Cron met certain criteria
of the MIP during fiscal 1999 to earn prorated MIP bonuses and received $44,196
and $35,109, respectively. Mr. Reich received a discretionary bonus of $5,000
for fiscal 1999.
The Compensation Committee feels that our compensation adequately reflects
its philosophy and policies and that none of the executive officers is
overcompensated.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers to file reports of holdings and transactions with the
Securities and Exchange Commission. To our knowledge, based solely on its review
of stock ownership reports on Form 4 provided to us, we believe with respect to
fiscal 1999 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 February 2000 our Board of Directors selected Arthur Andersen LLP to
serve as our independent auditors for the fiscal year ending October 31, 2000.
Our Board considers Arthur Andersen LLP to be eminently qualified.
A representative of Arthur Andersen LLP will be present at the meeting, will
be given an opportunity to make a statement and will be available to respond to
appropriate questions.
11
<PAGE>
Although it is not required to do so, in order to determine the opinion of
our stockholders, our Board of Directors is submitting its selection of the
auditors for ratification at the meeting. If the selection is not ratified, our
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 AEP FOR
THE FISCAL YEAR ENDING OCTOBER 31, 2000.
OTHER MATTERS
The Board of Directors does not know of any other matters that may be
brought before the meeting. However, if any other matters are properly presented
for action, the persons named in the proxy will vote the shares represented in
accordance with their judgment.
MISCELLANEOUS
If the accompanying proxy is executed and returned, the shares of common
stock represented will be voted in accordance with the proxy instructions,
unless the proxy is revoked. If no directions are indicated on the proxy, the
shares represented 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 our independent auditors.
We will bear all costs relating to the solicitation of proxies. Proxies may
be solicited by officers, directors and regular employees of AEP, personally, by
mail, telephone or fax. We 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 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 our Annual Report on Form 10-K, including the financial statements
and financial statement schedule for the fiscal year ended October 31, 1999,
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.
In order to be considered for inclusion in the proxy statement for the
Annual Meeting of Stockholders to be held in 2001, we must receive stockholder
proposals by October 25, 2000.
<TABLE>
<S> <C>
By Order of the Board of Directors,
[LOGO]
Jean L'Allier
Vice President and Secretary
February 28, 2000
</TABLE>
12
<PAGE>
PROXY ANNUAL MEETING OF STOCKHOLDERS--APRIL 11, 2000
COMMON STOCK
The undersigned, a stockholder of AEP INDUSTRIES INC., does hereby appoint
Paul E. Gelbard and Jean L'Allier, 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 11, 2000, 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 the 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.
<TABLE>
<S> <C> <C>
1. Election of Class B Directors FOR all the nominees listed WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all the nominees listed
below
</TABLE>
William H. Carter, Adam H. Clammer and Paul M. Feeney
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
(CONTINUED ON REVERSE SIDE)
<PAGE>
2. Ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending
October 31, 2000.
/ / 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 ______________________, 2000
___________________________ (L.S.)
___________________________ (L.S.)
Stockholder(s) Sign Here
