<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 Section 240.14a-11(c) or Section 240.14a-12
Eagle Pacific 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)(4) 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:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
EAGLE PACIFIC INDUSTRIES, INC.
2430 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
-------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 8, 1999
-------------------------------------------------------------
TO THE SHAREHOLDERS OF EAGLE PACIFIC INDUSTRIES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Eagle
Pacific Industries, Inc. will be held on Tuesday, June 8, 1999, at the
Minneapolis Club, 729 Second Avenue South, Minneapolis, Minnesota. The meeting
will convene at 3:15 p.m., Minneapolis Time, for the following purposes:
1. To set the number of directors at seven.
2. To elect three Class I directors to serve until the 2002 Annual Meeting
of Shareholders.
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 3, 1999, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William H. Spell
William H. Spell
Chief Executive Officer
Minneapolis, Minnesota
May 13, 1999
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY SO DESIRE.
<PAGE>
EAGLE PACIFIC INDUSTRIES, INC.
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 1999
----------------
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Eagle Pacific
Industries, Inc. (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the Annual
Meeting of Shareholders to be held on June 8, 1999, or any adjournment or
adjournments thereof. The cost of this solicitation will be borne by the
Company. In addition to solicitation by mail, officers, directors, and
employees of the Company may solicit proxies by telephone, telegraph or in
person. The Company may also request banks and brokers to solicit their
customers who have a beneficial interest in the Company's Common Stock
registered in the names of nominees and will reimburse such banks and brokers
for their reasonable out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by written notice to
the Secretary or any other officer of the Company, or by receipt of a proxy
properly signed and dated subsequent to an earlier proxy, or by revocation of
a written proxy by request in person at the Annual Meeting. Proxies not
revoked will be voted in accordance with the choice specified by shareholders
by means of the ballot provided on the Proxy for that purpose. Proxies which
are signed but which lack any such specification will, subject to the
following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the number and slate of directors proposed by the
Board of Directors and listed herein. If a shareholder abstains from voting as
to any matter, then the shares held by such shareholder shall be deemed
present at the Meeting for purposes of determining a quorum and for purposes
of calculating the vote with respect to such matter, but shall not be deemed
to have been voted in favor of such matter. Abstentions, therefore, as to any
proposal will have the same effect as votes against such proposal. If a broker
returns a "non-vote" proxy, indicating a lack of voting instruction by the
beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
such non-vote shall be deemed present at the Meeting for purposes of
determining a quorum but shall not be deemed to be represented at the Meeting
for purposes of calculating the vote required for approval of such matter.
The Company expects mailing of this Proxy Statement to shareholders of the
Company will commence on or about May 13, 1999. The Company's corporate
offices are located at 2430 Metropolitan Centre, 333 South Seventh Street,
Minneapolis, Minnesota 55402, and its telephone number is (612) 305-0339.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed May 3, 1999, as the record
date for determining shareholders entitled to vote at the meeting. Persons who
were not shareholders on such date will not be allowed to vote at the Annual
Meeting. At the close of business on May 3, 1999, the Company had outstanding
two classes of stock entitled to vote at the Annual Meeting: (i) 7,015,222
shares of $.01 par value Common Stock; and (ii) 18,750 shares of Series A 7%
Convertible Preferred Stock (the "Preferred Stock"). Each share of Common
Stock and Preferred Stock is entitled to one vote at the Annual Meeting.
The presence in person or by proxy of the holders of a combined majority of
the shares of Common Stock and Preferred Stock entitled to vote at the Annual
Meeting of Shareholders constitutes a quorum for the
1
<PAGE>
transaction of business. The shares represented by the enclosed proxy will be
voted if the proxy is properly signed and received prior to the meeting.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table provides information as of May 3, 1999, concerning the
beneficial ownership of the Company's voting securities by persons who are
known to own five percent or more of a class of voting stock of the Company,
by each executive officer named in the Summary Compensation Table, by each
director, and by all directors and executive officers (including the named
individuals) of the Company as a group. Unless otherwise noted, the person
listed as the beneficial owner of the shares has sole voting and investment
power over the shares.
<TABLE>
<CAPTION>
Series A
Common Stock Preferred Stock
------------------------------ -----------------------
Percent of
Common Stock
Shares Shares and Series A
Name and Address of Beneficially Percent of Beneficially Percent of Preferred Stock
Beneficial Owner Owned Class (1) Owned Class (1) Combined
------------------- ------------ ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
George Kosmides......... -- -- 12,500 66.7% *
7103 Amundson Avenue
Edina, MN 55439
Kathryn A. Schuster..... -- -- 6,250 33.3% *
1748 James Road
Mendota Heights, MN
55118
William Blair Mezzanine. 435,000 6.2% -- -- 6.2%
Capital Fund, L.P.
222 West Adams Street
Chicago, IL 60606
William H. Spell........ 568,763(2)(3)(4) 7.8% -- -- 7.8%
2430 Metropolitan
Centre
Minneapolis, MN 55402
Harry W. Spell.......... 385,892(3)(4)(5) 5.4% -- -- 5.4%
2430 Metropolitan
Centre
Minneapolis, MN 55402
Richard W. Perkins...... 159,082(4)(6) 2.3% -- -- 2.3%
730 East Lake Street
Wayzata, MN 55391
George R. Long.......... 243,947(7) 3.5% -- -- 3.4%
29 Las Brisas Way
Naples, FL 33963
Larry D. Schnase........ 597,293(8) 8.3% -- -- 8.3%
146 North Maple
Hastings, NE 68901
G. Peter Konen.......... 308,809(9) 4.3% -- -- 4.3%
146 North Maple
Hastings, NE 68901
Bruce A. Richard........ 177,657(4)(10) 2.5% -- -- 2.5%
2458 Farrington Circle
Roseville, MN 55113
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Series A
Common Stock Preferred Stock
-------------------------- -----------------------
Percent of
Common Stock
Shares Shares and Series A
Name and Address of Beneficially Percent of Beneficially Percent of Preferred Stock
Beneficial Owner Owned Class (1) Owned Class (1) Combined
------------------- ------------ ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
David P. Schnase........ 102,262(11) 1.4% -- -- 1.4%
146 North Maple
Hastings, NE 68901
Patrick M. Mertens...... 54,140(12) * -- -- *
146 North Maple
Hastings, NE 68901
All Directors and
Officers as a
Group (9 persons)...... 2,597,845(13) 32.5% -- -- 32.5%
</TABLE>
- --------
* Less than 1%
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of May 3, 1999 or within sixty days
of such date are treated as outstanding only when determining the percent
owned by such individual and when determining the percent owned by the
group.
(2) Includes 250,800 shares which may be purchased upon exercise of currently
exercisable options and 21,429 shares held by Mr. Spell's wife.
(3) Includes 30,500 shares held by the Spell Family Foundation. Messrs. Harry
Spell and William Spell share voting and dispositive power over such
shares.
(4) Messrs. William H. Spell, Harry W. Spell, Richard W. Perkins and Bruce A.
Richard have individually acquired securities of the Company from the
Company and in open market transactions and each of them individually
anticipates that he will acquire additional securities of the Company in
the future. Such persons have entered into an agreement which requires
that a majority of them approve any sale of securities of the Company by
any of them. This agreement is designed to keep all of such persons
interested and focused on the long-term success of the Company and
recognizes that each of such persons contributes specific expertise to
the Company through their positions as directors and/or officers. The
agreement does not require that such persons vote their shares in any
specific manner or act in concert in connection with any purchase or sale
of securities of the Company.
(5) Includes 73,560 shares which may be purchased upon exercise of currently
exercisable options.
(6) Includes 32,140 shares which may be purchased upon exercise of currently
exercisable options and 11,429 shares held by a Profit Sharing Trust for
Mr. Perkins' benefit. Does not include 335,099 shares held by Perkins
Capital Management, Inc. as to which Mr. Perkins has no voting or
investment power.
(7) Includes 37,140 shares which may be purchased upon exercise of currently
exercisable options.
(8) Includes 192,140 shares which may be purchased upon exercise of currently
exercisable options.
(9) Includes 230,500 shares which may be purchased upon exercise of currently
exercisable options.
(10) Includes 56,060 shares which may be purchased upon exercise of currently
exercisable options.
(11) Includes 74,500 shares which may be purchased upon exercise of currently
exercisable options.
(12) Includes 39,840 shares which may be purchased upon exercise of currently
exercisable options.
(13) Includes 986,680 shares which may be purchased upon exercise of
currently exercisable options.
3
<PAGE>
SET NUMBER OF DIRECTORS
(Proposal No. 1)
The Bylaws of the Company provide that the number of directors shall not be
less than three nor more than twelve, as determined by the shareholders. The
Board of Directors recommends that the number of directors be set at seven.
Each Proxy will be voted for or against such number, or not voted at all, as
directed in the Proxy.
Vote Required; Recommendation
The adoption of the resolution to set the number of directors requires the
affirmative vote of the greater of (1) a majority of the voting power of
shares represented in person or by proxy at the Meeting with authority to vote
on such matter or (2) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
meeting. The Board of Directors recommends that the shareholders vote in favor
of this Proposal No. 1.
ELECTION OF DIRECTORS
(Proposal No. 2)
General Information
Three directors will be elected at the Annual Meeting of Shareholders. The
Board of Directors consists of three classes of Directors, Class I who hold
office until the 1999 Annual Shareholders Meeting, Class II who hold office
until the 2001 Annual Shareholders Meeting and Class III who hold office until
the 2000 Annual Shareholders Meeting or, in all cases, until their successors
are elected. Richard W. Perkins, George R. Long and Harry W. Spell are current
Class I directors whose terms expire as of this Annual Meeting. Messrs. George
R. Long, Richard W. Perkins and Harry W. Spell have been nominated for
election as Class I Directors by the Board of Directors and each has consented
to being named as a nominee. It is intended that solicited proxies will be
voted for such nominees. The Company believes that each nominee named below
will be able to serve; but in the event any nominee is unable to serve as a
director, the persons named as proxies have advised that they will vote for
the election of such substitute nominee as the Board of Directors may propose
or, in the absence of such proposal, for such fewer directors as results from
the inability of a nominee to serve.
The Board currently consists of seven directors, including the nominees
listed below:
Class I Nominees whose terms of office will be until the 2002 Annual
Meeting of Shareholders if elected by the shareholders of the Company:
George R. Long(3)
Richard W. Perkins(1)(2)
Harry W. Spell (1)
Class II Directors whose terms of office will continue until the 2001
Annual Meeting of Shareholders:
William H. Spell(2)(4)
Bruce A. Richard(1)(3)(4)
Class III Directors whose terms of office will continue until the 2000
Annual Meeting of Shareholders:
Larry D. Schnase(2)(3)
G. Peter Konen(4)
- --------
(1) Member of Compensation Committee
(2) Member of Nominating Committee
(3) Member of Audit Committee
(4) Member of Executive Committee
4
<PAGE>
The following is information concerning the principal occupations for at
least the past five years of the nominees and those directors whose terms will
continue beyond the Annual Meeting:
Harry W. Spell, age 75, has been chairman of the board since January 1992.
He also served as chief executive officer of the Company from January 1992 to
January 1997. In addition, Mr. Spell is the chief financial manager and
chairman of the board of Spell Capital Partners, LLC, a private investment
equity firm which focuses on leveraged acquisitions of established businesses
in the Upper Midwest. Mr. Spell has been involved in private equity investing
since 1988. He was employed by Northern States Power, a Fortune 500 company,
from 1949 until August 1988, where he served as senior vice president, finance
and chief financial officer. Mr. Spell currently serves as a director of
Appliance Recycling Centers of America, Inc., as well as several private
organizations.
William H. Spell, age 42, has been a director of the Company since January
1992 and chief executive officer since January 1997, and served as the
Company's president from January 1992 to January 1997. In addition, Mr. Spell
is the president of Spell Capital Partners, LLC, a private investment equity
firm which focuses on leveraged acquisitions of established businesses in the
Upper Midwest. Mr. Spell has been involved in private equity investing since
1988. From 1981 through 1988, Mr. Spell was vice president and director of
corporate finance at John G. Kinnard & Co., a regional investment banking firm
located in Minneapolis, Minnesota. Mr. Spell has a B.S. and an M.B.A. degree
from the University of Minnesota.
Bruce A. Richard, age 69, has been a director of the Company since March of
1992 and vice chairman since February 1996. He also served as secretary of the
Company from mid-1993 to August 1998, as chief financial officer from mid-1993
to February 1996 and treasurer from mid-1993 to March 1998. In addition, Mr.
Richard is affiliated with Spell Capital Partners, LLC, a private investment
equity firm which focuses on leveraged acquisitions of established businesses
in the Upper Midwest. Mr. Richard has been involved in private equity
investing since 1988. He retired as president and chief operating officer of
Northern States Power Company, a Fortune 500 company, in July of 1986. He is a
former member of the Board of Regents of St. John's University, and is
actively involved in other philanthropic organizations.
G. Peter Konen, age 49, has been a director of the Company since December
1993 and president of the Company since January 1997. In addition, he served
as President of the Company's former subsidiary, Eagle Plastics, Inc. ("Eagle
Plastics") from February 1996 until December 1997, when it was merged into the
Company. He was executive vice president and chief operating officer of Eagle
Plastics from 1984 to February 1996. Prior to 1984, he was plant manager with
Western Plastics, a PVC pipe and PE pipe and tubing manufacturer. Mr. Konen
has more than 30 years of experience in the manufacturing and sales of plastic
pipe.
George R. Long, age 68, has been a director of the Company since 1986. He
has served as Chairman of the Board of Directors of the Mayfield Corporation,
a financial advisory firm, since 1973. For over five years, he has been a
private investor. Mr. Long also is a director of the IAI Series of Mutual
Funds, Minneapolis, Minnesota.
Richard W. Perkins, age 68, has been a director of the Company since January
1992. Mr. Perkins has been President of Perkins Capital Management, Inc., a
registered investment adviser, since 1984 and has had over 40 years experience
in the investment business. Prior to establishing Perkins Capital Management,
Inc., Mr. Perkins was a Senior Vice President at Piper Jaffray Inc. where he
was involved in corporate finance and venture capital activities, as well as
rendering investment advice to domestic and international investment managers.
Mr. Perkins is also affiliated with Spell Capital Partners, LLC, which is a
private investment equity firm which focuses on leveraged acquisitions of
established businesses in the Upper Midwest. Mr. Perkins is a director of
various public companies, including: Bio-Vascular, Inc., Lifecore Biomedical,
Inc., Children's Broadcasting Corporation, CNS, Inc., Quantech Ltd., Nortech
Systems, Inc., Vital Images, Inc. and Harmony Holdings, Inc.
Larry D. Schnase, age 67, has been a director of the Company since December
1993. He was Chief Executive Officer of Eagle Plastics from its inception in
1984 until his retirement in January 1997, and served as President of Eagle
Plastics from 1984 to February 1996. Prior to founding Eagle Plastics, Mr.
Schnase served as
5
<PAGE>
Vice President of Sales for Western Plastics, a PVC pipe and PE tubing
manufacturer. Mr. Schnase has over 35 years of experience in the business of
manufacturing and sales of plastic pipe.
Harry W. Spell is William H. Spell's father, and Larry D. Schnase is the
father of David P. Schnase, the Company's Senior Vice President.
Vote Required; Recommendation
The election of each nominee requires the affirmative vote of a majority of
the shares represented in person or by proxy at the Annual Meeting. The Board
recommends that shareholders vote "For" the three nominees for Class I
directors named above.
Committee and Board Meetings
The Company has an Audit Committee whose members during fiscal 1998 were
Messrs. Richard (Chairman), Long and Schnase and which met once during such
fiscal year. The Audit Committee, among other responsibilities, recommends to
the full Board of Directors the selection of auditors and reviews and
evaluates the activities and reports of the auditors, as well as the internal
accounting controls of the Company.
The Company has a Compensation Committee whose members during fiscal 1998
were Messrs. Perkins (Chairman), Harry Spell and Richard. The Compensation
Committee did not meet formally during fiscal 1998. The Compensation Committee
is charged with determining the compensation to be paid to officers of the
Company and to determine other compensation issues if requested by the Board
of Directors.
Finally, the Company has a Nominating Committee whose members during fiscal
1998 were Messrs. William Spell (Chairman), Perkins and Schnase. The
Nominating Committee did not meet formally in fiscal 1998. The Nominating
Committee presents nominees for members on the Board of Directors to the full
Board of Directors for approval. The Nominating Committee does consider
nominees recommended by Company shareholders. Such recommendations should be
submitted in writing to William Spell and include a biography of the nominee.
The directors and committee members communicate informally to discuss the
affairs of the Company and, when appropriate, take formal Board and Committee
action by unanimous written consent of all directors or committee members, in
accordance with Minnesota law, rather than hold formal meetings. The Board of
Directors met formally six times during fiscal 1998. Each director attended at
least 75% of the meetings of the Board of Directors and any committee on which
he served except George R. Long, Richard W. Perkins and Larry D. Schnase.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Compensation Committee's Responsibility. The Compensation Committee of the
Board of Directors is currently composed of directors Richard W. Perkins, who
is the Chairman of the Committee, Bruce A. Richard and Harry W. Spell. Harry
W. Spell was Chairman of the Board of the Company during 1998. Bruce A.
Richard was Vice Chairman of the Board during 1998. The Committee is
responsible for developing and making recommendations to the Board with
respect to compensation of the executive officers of the Company.
Compensation Philosophy. The Company is concerned with finding and retaining
top quality people. The Committee looks at industry averages and surveys, and
considers location as well in setting salaries.
The executive compensation plan is comprised of base salaries, annual EBITDA
performance bonuses, long-term incentive compensation in the form of stock
option awards and Company loans to purchase stock, and various benefits in
which all qualified employees of the Company participate. In addition, the
Compensation
6
<PAGE>
Committee from time to time may award special cash bonuses or stock options
related to non-recurring, extraordinary performance.
Base Salary. Base salaries for executive officers are reviewed by the
Committee on an annual basis. Each year the Committee assesses the executive
employee's level of responsibility, experience, and external market practices.
For the year ended 1998, salaries increased slightly, and larger bonuses were
awarded pursuant to the Company's Bonus Plan. Each year the Committee reviews
the Company's performance and recommends to the full Board the salaries for
the coming year.
Annual Incentives. In 1996, the Company adopted an EBITDA (earnings before
interest, taxes, depreciation and amortization) Bonus Plan (the "Bonus Plan").
Generally, executives receive a percentage, up to 100%, of potential bonuses
based upon the Company's performance relative to EBITDA goals as well as
subjective goals. Under the Bonus Plan, the Board of Directors establishes the
Company's EBITDA goals and identifies other factors that will be considered in
awarding bonuses. The Compensation Committee presents recommendations to the
Board for executives' potential bonuses for the Board's approval.
Long-Term Incentives. The Company may grant some executive level employees
long-term awards, including stock options pursuant to the Company's 1997 Stock
Option Plan. Prior to 1997 the Company had a 1991 Stock Plan; however
beginning in 1997, awards under the 1991 Stock Plan will no longer be made.
The Company adopted a Leverage Equity Purchase Plan (the "LEPP") in 1996 under
which the Company loans 90% of the cost of purchasing shares of the Company's
common stock to selected employees. The purpose of the LEPP is to more closely
align the goals and motivation of management with those of other shareholders
and to provide key personnel with a long-term capital accumulation
opportunity. No grants were made under the LEPP during fiscal 1998.
Other Compensation Plans. The Company has adopted certain broad-based
employee benefit plans in which all employees, including the named executives,
are permitted to participate on the same terms and conditions relating to
eligibility and generally subject to the same limitation on the amounts that
may be contributed or the benefits payable under those plans. The Company
maintain(s) plan(s) qualified under I.R.C. Section 401(k), and the Company
made aggregate contributions to such plan(s) of $200,000 for the year ended
1998, and a contribution of $150,000 for the year ended 1997.
Chief Executive Officer Compensation. William H. Spell served as the
Company's Chief Executive Officer in 1998. Mr. William Spell received
compensation of $173,200 in 1998. The Compensation Committee has established a
base salary of $120,000 for Mr. William Spell for 1999 and he is eligible for
a cash bonus of up to $53,500.
Richard W. Perkins
Harry W. Spell
Bruce A. Richard
Members of the Compensation
Committee
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or to be paid by
the Company and its former subsidiary, Eagle Plastics, as well as certain
other compensation paid or accrued, during the last three fiscal years to the
Chief Executive Officer of the Company and the executive officers of the
Company who received more than $100,000 during fiscal 1998:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------ ------------
Securities
Underlying
Name And Principal Fiscal Other Annual Options and All Other
Position Year Salary Bonus Compensation (1) SARs Compensation (2)
- ------------------ ------ -------- ------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
William H. Spell 1998 $115,000(3) $51,000 $7,200(3) 120,000 $5,072
Chief Executive Officer 1997 $108,000 $12,750 $7,200 100,000 $3,236
1996 $ 89,188 $55,000 $7,200 -- $5,364
G. Peter Konen 1998 $182,000(4) $81,000 $7,200(4) 75,000 $5,072
President 1997 $175,000 $20,250 $7,200 80,000 $3,469
1996 $145,000 $75,000 $6,000 -- $5,364
David P. Schnase 1998 $130,000(5) $35,000 $6,000(5) -- $5,072
Sr. Vice President 1997 $125,000 $ 8,750 $6,000 44,500 $3,469
1996 $ 87,500 $12,500 $ -- -- $5,364
Patrick M. Mertens 1998 $ 94,000(6) $21,000 $ -- 56,000 $3,673
Chief Financial Officer 1997 $ 90,000 $ 5,250 $ -- -- $2,774
1996 $ 68,000 $24,000 $ -- -- $2,251
</TABLE>
- --------
(1) Amounts reflect car allowances.
(2) Amounts reflect Company contributions to the 401(k) Plan.
(3) William H. Spell, Chief Executive Officer of the Company, entered into a
restated employment contract with the Company for a three year term
beginning January 1, 1997. Under such contract, Mr. Spell will receive an
annual base salary (currently $120,000) and a $600 per month car
allowance. Along with this base salary, he can receive a bonus up to
$53,500 per year if the Company meets certain operating profit levels.
Such employment agreement has a confidentiality provision, a two year
noncompetition clause and provides for a severance payment equal to Mr.
Spell's base salary in the event of his termination other than for cause.
(4) G. Peter Konen, President, entered into a restated employment contract for
a three year term beginning January 1, 1997. Under such contract, Mr.
Konen will receive an annual base salary (currently $190,000) and a $600
per month car allowance. Along with his base salary, Mr. Konen can receive
an annual bonus up to $84,500 if the Company meets certain operating
profit levels. Such employment agreement has a confidentiality provision,
a two year noncompetition clause and provides for a severance payment
equal to Mr. Konen's base salary in the event of his termination other
than for cause.
(5) David P. Schnase, Senior Vice President Sales, entered into an employment
contract for a three year term beginning January 1, 1997. Under such
contract, Mr. Schnase will receive an annual base salary (currently
$135,000). Along with his base salary, Mr. Schnase can receive an annual
bonus up to $35,000 if the Company meets certain operating profit levels.
Such employment agreement has a confidentiality provision, a two-year
noncompetition clause and provides for a severance payment equal to his
then annual base salary in the event of his termination other than for
cause. The final 1996 salary figure shown for Mr. Schnase includes
commissions of $50,297. Amounts shown in Other Annual Compensation reflect
monthly car allowance.
(6) Patrick M. Mertens, Chief Financial Officer, entered into an employment
contract for a three year term beginning January 1, 1997. Under such
contract, Mr. Mertens will receive an annual base salary (currently
$100,000). Along with his base salary, Mr. Mertens can receive an annual
bonus up to $22,500 if the Company meets certain operating profit levels.
Such employment agreement has a confidentiality provision, a one-year
noncompetition clause and provides for a severance payment equal to his
then annual base salary in the event of his termination other than for
cause.
8
<PAGE>
Option Grants In Fiscal Year 1998
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Percent of
Total Potential Realizable Value
Number of Options at Assumed Annual Rates of
Shares /SARs Stock Price Appreciation for
Underlying Granted to Exercise or Option Term
Options Employees in Base Expiration -----------------------------
Name Granted(#) Fiscal Year Price($/Sh) Date 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
William H. Spell........ 120,000(1) 43.0% $ 1.50 08/31/08 $ 113,201 $ 286,874
G. Peter Konen.......... 75,000(1) 26.9% $ 1.50 08/31/08 $ 70,751 $ 179,296
David P. Schnase........ 0 0 -- -- -- --
Patrick M. Mertens...... 5,000(2) 1.8% $2.375 01/06/08 $ 7,468 $ 18,926
51,000(1) 18.3% $ 1.50 08/31/08 $ 48,110 $ 121,921
</TABLE>
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(1) Option was granted on September 1, 1998 and vests at a rate of 34% on
March 2, 1999 and 33% on September 1, 2000 and September 1, 2001.
(2) Option was granted on January 7, 1998 and vests at a rate of 25% on July
8, 1998 and on each January 7 thereafter.
Option/SAR Exercises in 1998 Fiscal Year and Fiscal Year End Option Values
The following table sets forth information as to individual exercises of
options, number of options and value of options at December 31, 1998 with
respect to the named executive officers:
<TABLE>
<CAPTION>
Number of
Unexercised Value of
Securities Unexercised In-
Underlying the-Money
Shares Options/SARs at Options/SARs at
Acquired FY-End(#)(2) FY-End($)(1)
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
William H. Spell.............. 140,000 $211,851 210,000/120,000 $125,000/60,000
G. Peter Konen................ 45,000 $ 28,125 165,000/75,000 $100,000/37,500
David P. Schnase.............. 45,000 $ 28,125 74,500/0 $ 51,125/0
Patrick M. Mertens............ 0 N/A 16,250/59,750 $ 0/25,500
</TABLE>
- --------
(1) Based on the difference between the closing price of the Company's Common
Stock as reported by Nasdaq at fiscal year end and the option exercise
price.
Directors' Compensation
In 1998, Harry W. Spell, Chairman of the Board, and Bruce A. Richard, Vice
Chairman of the Board, were each compensated for their services in such
capacities at the annual rate of $30,000. George R. Long and Richard W.
Perkins received fees of $12,000 and $21,000, respectively, for their roles as
non-employee directors. In addition, during 1998 nonemployee directors
received ten-year options under Eagle's 1997 Stock Option Plan as follows: On
March 27, 1998 Bruce Richard received an option to purchase 10,000 shares at
$2.13 per share, vesting at the rate of 25% per year commencing September 27,
1998; and on September 1, 1998 Messrs. George Long, Larry Schnase and Richard
Perkins each received an option to purchase 21,000 shares and Messrs. Harry
Spell and Bruce Richard each received an option to purchase 84,000 shares at
$1.50 per share, vesting at the rate of 34% on March 2, 1999, 33% on September
1, 2000 and 33% on September 1, 2001.
9
<PAGE>
Certain Relationships and Related Transactions
Office Sharing. The Company has an office sharing arrangement with Spell
Capital Partners, LLC pursuant to which the Company pays $10,500 per month for
space and administrative support. William H. Spell and Harry W. Spell are both
members of Spell Capital Partners, LLC.
Employment and Consulting Agreements. The Company has entered into Employment
Agreements with William H. Spell, G. Peter Konen, David P. Schnase and Patrick
M. Mertens, all as more specifically described herein in the notes to the
Summary Compensation Table.
Effective January 1, 1997, Larry Schnase, former Chief Executive Officer of
Eagle Plastics, entered into a two year Consulting Agreement and Release with
the Company. Under such agreement, Mr. Schnase resigned as an officer and
employee of the Company and its subsidiaries. Mr. Schnase received monthly
compensation of $8,333 per month during 1998, and was assigned the Company's
interest in two insurance policies of his life. Along with this compensation,
Mr. Schnase was entitled to receive an annual bonus of up to $30,000, if the
Company met certain operating profit levels. Such consulting agreement has a
confidentiality provision and a five-year noncompetition clause. The Consulting
Agreement has terminated.
Stock Performance Chart
The following chart compares the cumulative total shareholder return on the
Company's Common Stock with the S&P Smallcap 600 Index and an index of peer
companies selected by the Company (the "Peer Group Index"). The comparison
assumes $100 was invested on December 31, 1993 in the Company's Common Stock
and in each of the foregoing indices and assumes reinvestment of dividends.
[GRAPH APPEARS HERE]
INDEXED RETURNS
Years Ending
Base
Period
Company Name/Index Dec93 Dec94 Dec95 Dec96 Dec97 Dec98
- ------------------------------------------------------------------------------
EAGLE PAC INDUSTRIES INC 100 120.00 76.64 146.67 120.00 106.67
S&P SMALLCAP 600 INDEX 100 95.23 123.76 150.14 188.56 186.10
PEER GROUP 100 126.32 163.16 152.63 185.92 178.32
The Peer Group Index includes the following companies: Lamson and Sessions
Co. and Royal Group Tech Ltd.
10
<PAGE>
INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Company's auditors for fiscal 1999.
Deloitte & Touche LLP, independent public accountants, served as the
auditors of the Company for fiscal 1998. On April 30, 1999, the Company
dismissed Deloitte & Touche, LLP as its principal independent public
accountant. The decision to dismiss the Company's certifying accountant was
recommended and approved by the Company's Board of Directors. The report of
Deloitte & Touche, LLP on the Company's financial statements for the past two
fiscal years contain no adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with its audits as of and for the years ended
December 31, 1998 and 1997, there have been no disagreements between the
Company and Deloitte & Touche, LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of Deloitte & Touche,
LLP, would have caused it to make reference thereto in its report on the
financial statements for the Company for such years.
A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting of Shareholders and will have an opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10 percent of
the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than 10% shareholders ("Insiders") are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such reports
furnished to the Company, during the fiscal year ended December 31, 1998 all
Section 16(a) filing requirements applicable to Insiders were complied with.
SHAREHOLDER PROPOSALS
The proxy rules of the Securities and Exchange Commission permit
shareholders of a Company, after timely notice to the Company, to present
proposals for shareholder action in the Company's proxy statements where such
proposals are consistent with applicable law, pertain to matters appropriate
for shareholder action and are not properly omitted by Company action in
accordance with the proxy rules. The Company did not receive from its
shareholders any proposals for action at the 1999 Annual Meeting. Any
appropriate proposal submitted by a shareholder of the Company and intended to
be presented at the 2000 Annual Meeting of Shareholders must be received by
the Company on or before January 12, 2000 to be includable in the Company's
proxy statement and related proxy for the 2000 annual meeting.
Also, if a shareholder proposal intended to be presented at the 2000 annual
meeting but not included in the Company's proxy statement and proxy is
received by the Company after March 28, 2000, then management named in the
Company's proxy form for the 2000 annual meeting will have discretionary
authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
11
<PAGE>
GENERAL
Management knows of no other matters that will be presented at the Annual
Meeting of Shareholders. However, the enclosed proxy gives discretionary
authority in the event that any additional matters should be presented.
A copy of the Company's Form 10-K Annual Report for the past fiscal year
(without exhibits) accompanies this Notice of Annual Meeting and Proxy
Statement. No portion of such Report is incorporated herein or is considered
to be proxy soliciting material. The Company will furnish to any shareholder,
upon written request, any exhibit described in the list accompanying the Form
10-K upon the payment in advance of reasonable fees related to the Company's
furnishing such exhibit(s). Any such request should include a representation
that the shareholder was the beneficial owner of shares of Eagle Common Stock
on May 3, 1999, the record date for the 1999 Annual Meeting, and should be
directed to: Investor Relations, Eagle Pacific Industries, Inc., 2430
Metropolitan Centre, 333 South Seventh Street, Minneapolis, Minnesota 55402.
BY ORDER OF THE BOARD OF DIRECTORS
William H. Spell
Chief Executive Officer
12
<PAGE>
EAGLE PACIFIC INDUSTRIES, INC.
June 8, 1999 Annual Meeting of Stockholders
- --------------------------------------------------------------------------------
EAGLE PACIFIC INDUSTRIES, INC.
PROXY
for 1999 Annual Meeting of Shareholders to be held June 8, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harry W. Spell and William H. Spell, and
each of them acting alone, with full power of substitution, his or her Proxies
to represent and vote, as designated below, all shares of Eagle Pacific
Industries, Inc. (the "Company") registered in the name of the undersigned, at
the Company's 1999 Annual Meeting of Shareholders to be held at the Minneapolis
Club, 729 Second Avenue South, Minneapolis, Minnesota, at 3:15 p.m., Minneapolis
Time, on Tuesday, June 8, 1999, and at any adjournment thereof, and the
undersigned hereby revokes all proxies previously given with respect to the
Meeting.
Please mark this proxy as indicated on the reverse side to vote on any item.
(Continued and to be signed on other side.)
<PAGE>
. Please detach here .
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. To set the number of directors at seven. [ ] For [ ] Against [ ] Abstain
2. ELECTION OF CLASS I 01 George R. Long 02 Richard W. Perkins [ ] Vote FOR [ ] Vote WITHHELD
DIRECTORS: 03 Harry W. Spell all nominees from all nominees
(Instructions: To withhold authority to vote for any indicated nominee, -----------------------------------------------------
write the number(s) of the nominee(s) in the box provided to the right.)
-----------------------------------------------------
3. OTHER MATTERS. In their discretion, the appointed Proxies are: [ ] Authorized [ ] Not Authorized
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL AND, IN THE
CASE OF PROPOSAL #3 WILL BE DEEMED TO GRANT AUTHORITY UNDER PROPOSAL #3.
Address Change? Mark Box [ ] Indicate changes below:
Date
--------------------------------
-----------------------------------------------------
-----------------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy.
If held in joint tenancy, all persons must sign.
Trustees, administrators, etc., should include title and
authority. Corporations should provide full name of
corporation and title of authorized officer signing the
proxy.
</TABLE>
