Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On August 24, 2016, AEP
Industries Inc., a Delaware corporation (the Company), entered into an Agreement and Plan of Merger (the Merger Agreement) with Berry Plastics Group, Inc., a Delaware corporation (Parent), Berry Plastics
Corporation, a Delaware corporation and a direct, wholly owned subsidiary of Parent (Holdings), Berry Plastics Acquisition Corporation XVI, a Delaware corporation and a direct wholly owned subsidiary of Holdings (Merger Sub),
and Berry Plastics Acquisition Corporation XV, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Holdings (Merger Sub LLC), providing for (i) the merger of Merger Sub with and into the Company (the
First-Step Merger), with the Company surviving the First-Step Merger, and, (ii) thereafter, the merger of the Company with and into Merger Sub LLC (the Second-Step Merger and, together with the First-Step Merger, the
Integrated Mergers), with Merger Sub LLC surviving as a wholly owned subsidiary of Holdings.
The Merger Agreement has been approved by the
board of directors of each of the Company and Parent, and the board of directors of the Company has agreed to recommend that the Companys stockholders vote to approve the Merger Agreement and the transactions contemplated thereby, upon the
terms and subject to the conditions set forth in the Merger Agreement.
At the effective time of the First-Step Merger (the Effective Time),
each share of common stock (including shares underlying Company restricted stock awards), par value $0.01 per share, of the Company (the Company Common Stock) issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock (i) owned by the Company as treasury stock, (ii) owned by Parent, Holdings, Merger Sub or Merger Sub LLC and (iii) shares of Company Common Stock with respect to which holders have properly exercised and
perfected a demand for appraisal rights pursuant to the Delaware General Corporation Law) will be converted into the right to receive, at the stockholders election, $110 in cash (the Cash Consideration) or 2.5011 shares (the
Exchange Ratio) of Parent common stock (the Stock Consideration and, together with the Cash Consideration, the Merger Consideration), subject to the terms and conditions set forth in the Merger Agreement. The
Merger Consideration in the Integrated Mergers will be prorated as necessary to ensure that 50% of the total outstanding shares of the Company entitled to receive Merger Consideration will be exchanged for cash and 50% of such shares will be
exchanged for Parent common stock.
Each Company stock option outstanding as of the Effective Time will be cancelled in exchange for the right to receive
(i) a cash payment equal to the excess of the product of 50% of the Cash Consideration and the total number of shares of Company Common Stock underlying such stock option over the aggregate exercise price of such stock option and (ii) a
number of shares of Parent common stock equal to the product of 50% of the Stock Consideration and the total number of shares of Company Common Stock underlying such stock option, subject to certain conditions. Each holder of a Company
performance unit will be entitled to elect to receive either (i) a cash payment equal to the product of (A) the closing price of a share of Company Common Stock on NASDAQ on the last full trading day prior to the Effective Time and
(B) the total number of shares of Company Common Stock subject to such performance unit or (ii) a combination of (1) a cash payment equal to the product of (A) 50% of the Cash Consideration and (B) the total number of shares
of Company Common Stock subject to such performance unit and (2) a number of shares of Parent common stock equal to the product of (A) 50% of the Stock Consideration and (B) the total number of shares of Company Common Stock subject
to such performance unit, subject to certain conditions. For performance units with a performance period as in effect immediately prior to the Effective Time, the number of performance units will be pro-rated for the period through the Effective
Time based on the level of achievement of such performance condition through the last completed fiscal month prior to the Effective Time in a manner that is consistent with past practice.
Consummation of the Integrated Mergers is subject to customary conditions, including without limitation (i) the approval by the holders of at least a
majority of the outstanding shares of the Company Common Stock entitled to vote on the Integrated Mergers; (ii) the expiration or early termination of the waiting period applicable to the consummation of the Integrated Mergers under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the Required Antitrust Approvals); (iii) the absence of any law, injunction, judgment or ruling restraining, enjoining, preventing or prohibiting the consummation of
the Integrated Mergers; (iv) no governmental
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authority having instituted any legal proceeding (which remains pending) seeking to restrain, enjoin, prevent or prohibit the Integrated Mergers; (v) unless Parent has made the Alternative
Funding Election (as defined below), a registration statement on Form S-4 will have been declared effective by the Securities and Exchange Commission (the SEC) in accordance with the provisions of the Securities Act of 1933 (as amended,
and together with the rules and regulations thereunder, the Securities Act), and no stop order suspending the effectiveness of the Form S-4 shall have been issued by the SEC and remain in effect and no proceedings to that effect
shall have been commenced or threatened by the SEC; and (vi) unless Parent has made the Alternative Funding Election, the shares of Parent common stock to be issued in the Integrated Mergers will have been approved for listing on the New York
Stock Exchange, subject only to official notice of issuance. Moreover, each partys obligation to consummate the Integrated Mergers is subject to certain other conditions, including without limitation (a) the accuracy of the other
partys representations and warranties (in the case of the Company, generally subject to Company Material Adverse Effect (as defined in the Merger Agreement) or materiality qualifiers and, in the case of Parent, Holdings, Merger Sub and Merger
Sub LLC, subject to a Parent Material Adverse Effect (as defined in the Merger Agreement) or materiality qualifiers, (b) the other partys material compliance with its covenants and agreements contained in the Merger Agreement,
(c) there having not been since the date of the Merger Agreement, in the case of the Company, a Company Material Adverse Effect, and, in the case of Parent, a Parent Material Adverse Effect, and (d) each of the Company and Parent having
received written opinions from certain specified parties that the Integrated Mergers will qualify as a tax-free reorganization under the tax code. However, in the event of a Parent Material Adverse Effect or if the written tax opinion required to be
delivered to the Company in connection with the Integrated Mergers cannot be delivered, Parent may elect, in its sole discretion, to pay 100% of the Merger Consideration in cash, subject to certain conditions (the Alternative Funding
Election). If the Integrated Mergers are not consummated on or before February 24, 2017 (the End Date) (to be extended at the election of either party to August 24, 2017 if the only condition not satisfied at such time is
the receipt of the Required Antitrust Approvals), either party may terminate the Merger Agreement. Consummation of the Integrated Mergers is not subject to a financing condition.
The Merger Agreement provides that, without Parents agreement, the closing of the Integrated Mergers shall not occur earlier than the third business day
immediately following the final day of the Marketing Period, a term which is defined in the Merger Agreement to be the first period of 15 consecutive business days throughout which (i) Parent shall have received certain financial information
regarding the Company required in connection with Parent obtaining debt financing for the transactions contemplated by the Merger Agreement and (ii) the conditions to each partys obligation to consummate the Integrated Mergers have been
satisfied throughout such 15 business day period (other than those conditions that by their nature are to be satisfied on the closing date and, with respect to the Company shareholder approval condition, as if such condition had been satisfied on
the tenth business day preceding the date such meeting is held and approval obtained). The Marketing Period will not include certain black-out periods centered around the Thanksgiving and Christmas holidays and is subject to customary
terms and conditions.
The Company has made customary representations and warranties in the Merger Agreement and has agreed to customary covenants
regarding the operation of the business of the Company and its subsidiaries prior to the closing. The Company is also subject to customary restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide
information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals. However, prior to approval of the Integrated Mergers by the Companys stockholders, the solicitation
restrictions are subject to a customary fiduciary-out provision which allows the Company, under certain circumstances, to provide information to, and participate in discussions and engage in negotiations with, third parties with respect
to an unsolicited alternative acquisition proposal that the Companys board of directors has determined is or could reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement). The parties have also agreed to use
their reasonable best efforts to consummate the Integrated Mergers.
The Merger Agreement contains certain termination rights for the Company and Parent,
including the right of the Company in certain circumstances to terminate the Merger Agreement and accept a Superior Proposal (as defined in the Merger Agreement). If the Merger Agreement is terminated (i) by either party because the
stockholders of the Company fail to adopt the Merger Agreement or (ii) by Parent as a result of fraud or willful and material breach of any covenant, agreement, representation or warranty of the Merger Agreement by the Company, then in the case
of either clause (i) or (ii), the Company will be required to pay the documented expenses of Parent, Holdings, Merger Sub, Merger Sub LLC and their affiliates up to $5 million. In addition, the Company will be required to pay Parent a
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termination fee equal to $20 million if the Merger Agreement is terminated under certain circumstances, including by the Company to enter into an acquisition agreement that constitutes a Superior
Proposal or because the Company Board adversely changed its recommendation to stockholders to vote in favor of the Integrated Mergers or took certain other related adverse actions. The Company also would be required to pay Parent a termination fee
equal to $20 million if the Merger Agreement is terminated due to either the failure to obtain approval of the Companys stockholders or the conditions to close were not satisfied before the End Date, and an alternative acquisition proposal is
consummated within 12 months of the termination, subject to certain conditions. Further, if the Merger Agreement is terminated by the Company as a result of fraud or willful and material breach of any covenant, agreement, representation, warranty of
the Merger Agreement by Parent, Parent will be required to pay the documented expenses of the Company and its affiliates up to $5 million. The Merger Agreement also provides that either party may specifically enforce the other partys
obligations under the Merger Agreement.
Subject to the terms and conditions of the Merger Agreement, Parent has agreed to use its reasonable best efforts
to take or cause to be taken all actions necessary or advisable to arrange and obtain debt financing for the transactions contemplated by the Merger Agreement. In connection with the execution of the Merger Agreement, on August 24, 2016,
Holdings obtained financing commitments as described in Item 8.01 below.
The representations, warranties and covenants of the Company contained in
the Merger Agreement have been made solely for the benefit of Parent, Holdings, Merger Sub and Merger Sub LLC. In addition, such representations, warranties and covenants (i) have been made only for purposes of the Merger Agreement,
(ii) have been qualified by (a) matters specifically disclosed in the Companys filings with the SEC prior to the date of the Merger Agreement and (b) confidential disclosures made to Parent, Holdings, Merger Sub and Merger Sub
LLC in the disclosure letter delivered in connection with the Merger Agreement, (iii) are subject to materiality qualifications contained in the Merger Agreement which may differ from what may be viewed as material by investors, (iv) were
made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement and (v) have been included in the Merger Agreement for the purpose of allocating risk between the contracting parties rather than
establishing matters as fact. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information
regarding the Company or its business.
Investors should not rely on the representations, warranties and covenants or any descriptions thereof as
characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in the Companys public disclosures. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the
Company that is or will be contained in, or incorporated by reference into, the Annual Reports on Form 10-K, Current Reports on Form 10-Q and other documents that the Company files with the SEC.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified
in its entirety by, the full text of the Merger Agreement attached hereto as Exhibit 2.1, which is incorporated herein by reference.