SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 2, 1999
Eagle Pacific Industries, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
0-18050 41-1642846
(Commission File Number) (I.R.S. Employer Identification Number)
2430 Metropolitan Centre
333 South Seventh Street
Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)
(612) 371-9650
(Registrant's Telephone Number, Including Area Code)
--------------------------
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
On September 2, 1999, Eagle Pacific Industries, Inc. (the "Registrant") entered
into an Agreement and Release with Larry D. Schnase. Pursuant to the Agreement,
Mr. Schanse resigned, effective September 2, 1999, from the Registrant's Board
of Directors and completely relinquished all of his equity ownership in the
Registrant. Mr. Schnase sold to the Registrant, all of the Registrant's shares
of Common Stock and options to purchase Common Stock owned by Mr. Schnase for a
net aggregate purchase price of $1,091,454.
The Registrant purchased 555,265 shares of its Common Stock owned by Mr. Schnase
at $2.60 per share, subject to the following adjustment. The Registrant agrees
to pay an additional forty cents ($0.40) per share if the Registrant consummates
its proposed acquisition of Pacific Western Extruded Plastic Company, and the
Registrant agrees to pay an additional twenty cents ($0.20) per share if,
following the closing of the Registrant's proposed acquisition, the average
closing price of the Registrant's Common Stock equals or exceeds $3.625 per
share for the two day period following the consummation of the acquisition. In
addition, if the Registrant closes its proposed acquisition and the average
closing price of its Common Stock equals or exceeds $3.625 per share for the
two-day period following the closing of the acquisition, the Registrant agrees
to purchase from Mr. Schnase, for $7,000, unexercised options to purchase an
aggregate of 48,860 shares of the Registrant's Common Stock.
Item 7. Financial Statement and Exhibits
A. Financial statements of businesses acquired.
Not applicable.
B. Pro forma financial information.
Not applicable.
C. Exhibits.
The following is filed herewith. The exhibit number corresponds with
Item 601(b) of Regulation S-K.
Exhibit No. Description
10.1 Agreement and Release dated September 2, 1999 between the
Registrant and Larry D. Schnase.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Eagle Pacific Industries, Inc.
Date: September 15, 1999 By /s/ William H. Spell
Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBIT INDEX
to
FORM 8-K
Eagle Pacific Industries, Inc.
Exhibit No. Description
10.1 Agreement and Release dated September 2, 1999 between the
Registrant and Larry D. Schnase.
Exhibit 10.1
AGREEMENT AND RELEASE
This Agreement and Release ("Agreement") is entered into by and between
Larry D. Schnase ("Schnase") and Eagle Pacific Industries, Inc. ("EPII").
RECITALS
A. Schnase is a member of the Board of Directors of EPII.
B. Schnase currently owns 398,125 shares of common stock of EPII (the
"Schnase Shares") of which 18,125 shares are pledged to EPII pursuant to EPII's
Leveraged Equity Purchase Plan (the "LEPP Shares") to secure a loan by EPII to
Schnase evidenced by one or more promissory notes made by Schnase which are
payable to EPII (the "Schnase Notes"). The total amount of principal and accrued
interest owing under the Schnase Notes is forty eight thousand five hundred
twenty five dollars ($48,525). As a result, Schnase currently owns 380,000
shares of common stock of EPII, which are not pledged to EPII (the Non-LEPP
Shares"). The Non-LEPP Shares are held by certain brokerage firms for the
benefit of Schnase (the "Brokers").
C. Schnase currently has three option agreements covering in the
aggregate 206,000 shares of common stock of EPII (the "Schnase Options").
D. Schnase desires to resign from his position as a member or the Board
of Directors of EPII and dispose of his entire equity interest in EPII,
consisting of the Schnase Shares and Schnase Options.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. EPII/Eagle Pacific. EPII, as used in this Agreement, shall mean
Eagle Pacific Industries, Inc. only. Eagle Pacific, as used in the Agreement,
shall mean EPII and its subsidiaries, successors and assigns, affiliated,
related and predecessor companies, insurers, and its and their present and
former owners, directors, officers, shareholders, employees, agents, customers,
attorneys, whether in their individual or official capacities, and the current
and former trustees or administrators of any pension or other benefit plan
applicable to the employees or former employees of any of the above-listed
entities, in their official and individual capacities.
2. Schnase. Schnase, as used in this Agreement, shall mean Larry D.
Schnase and anyone who has or obtains legal rights or claims through him.
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3. Purchase of Non-LEPP Shares.
(a) EPII hereby purchases and Schnase hereby sells all 380,000 of the
Non-LEPP Shares. Schnase has delivered instructions to the Brokers to
cause certificates representing the Non-LEPP Shares to be delivered to
EPII, or its assigns.
(b) The purchase price for the Non-LEPP Shares shall be $2.60 per
share. Concurrent with the execution of this Agreement, EPII has paid
to Schnase (via the Brokers) nine hundred eighty eight thousand dollars
($988,000). In the event that the transaction contemplated by that
certain letter agreement dated July 29, 1999 between EPII and
Mitsubishi Chemical America, Inc. for the purchase of all of the shares
of outstanding capital stock of Pacific Western Extruded Plastics
Company (the "Transaction") is concluded, EPII and its assigns
hereunder shall pay to Schnase the additional amount of one hundred
fifty two thousand dollars ($152,000) in cash within three business
days after the conclusion of the Transaction. In the event that the
Transaction is concluded and the average closing price for EPII common
stock on all securities exchanges on which EPII common stock trades
equals or exceeds $3.625 per share for the two day period following the
conclusion of the Transaction, EPII and its assigns hereunder shall pay
to Schnase the additional amount of seventy six thousand dollars
($76,000) in cash within five business days after the conclusion of the
Transaction.
(c) EPII is acquiring some of the Non-LEPP Shares on behalf of certain
individuals and will assign a portion of its rights hereunder to such
individuals. Schnase acknowledges and consents to such assignment and
to such individuals being third party beneficiaries of this Agreement
including without limitation the representations and releases made by
Schnase.
4. Purchase of LEPP Shares.
(a) EPII hereby purchases and Schnase hereby sells all 18,125 of the
LEPP Shares. Schnase has delivered the certificates representing the
LEPP Shares to EPII.
(b) The purchase price for the LEPP Shares shall be $2.60 per share.
Concurrent with the execution of this Agreement, EPII has paid to
Schnase forty seven thousand one hundred twenty-five dollars ($47,125)
by reducing the amount owing under the Schnase Notes by that amount. In
the event that the Transaction is concluded, EPII shall pay to Schnase
the additional amount of seven thousand two hundred fifty dollars
($7,250) by reducing the amount owing under the Schnase Notes by one
thousand four hundred dollars ($1,400) as payment in full and paying to
Schnase five thousand eight hundred fifty dollars ($5,850) within three
business days after the conclusion of the Transaction. In the event
that the Transaction is concluded and the average closing price for
EPII common stock on all securities exchanges on which EPII common
stock trades equals or exceeds $3.625 per share for the two day period
following the conclusion of the Transaction, EPII shall pay to Schnase
the additional amount of three thousand six hundred twenty five dollars
($3,625) by reducing the amount due under the Schnase Notes and the
balance in cash within five business days after the conclusion of the
Transaction.
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5. Schnase Options.
(a) As of the date hereof, Schnase has exercised in full his option to
acquire 150,000 shares of EPII common stock at an exercise price of
$2.00 per share and 7,140 shares of his option to acquire 21,000 shares
of EPII common stock at an exercise price of $1.50 per share (the
"Option Shares") and has delivered a check to EPII in the amount of
three hundred ten thousand seven hundred ten dollars ($310,710).
(b) EPII hereby purchases and Schnase hereby sells all 157,140 of the
Option Shares.
(c) The purchase price for the Option Shares shall be $2.60 per share.
Concurrent with the execution of this Agreement, EPII has paid to
Schnase four hundred eight thousand five hundred sixty four dollars
($408,564). In the event that the Transaction is concluded, EPII shall
pay to Schnase the additional amount of sixty two thousand eight
hundred fifty six dollars ($62,856) in cash within three business days
after the conclusion of the Transaction. In the event that the
Transaction is concluded and the average closing price for EPII common
stock on all securities exchanges on which EPII common stock trades
equals or exceeds $3.625 per share for the two day period following the
conclusion of the Transaction, EPII and its assigns hereunder shall pay
to Schnase the additional amount of thirty one thousand four hundred
twenty eight dollars ($31,428) in cash within five business days after
the conclusion of the Transaction.
(d) In consideration for surrender of the Schnase Options which were
not exercised to acquire the Option Shares, in the event that the
Transaction is concluded and the average closing price for EPII common
stock on all securities exchanges on which EPII common stock trades
equals or exceeds $3.625 per share for the two day period immediately
following the conclusion of the Transaction, EPII shall pay to Schnase
the amount of seven thousand dollars ($7,000) in cash within five
business days after the conclusion of the Transaction.
6. Final Settlement. This Agreement and the payments described above
are in full, final, and complete settlement of Schnase's interests in the
Schnase Shares, the Option Shares and the Schnase Options and of any and all
Schnase's actual or potential claims against Eagle Pacific. Schnase agrees that
neither he nor his attorneys will make any claim against Eagle Pacific for
damages, attorneys' fees, costs, interest, or any other amounts. Schnase shall
not be entitled to any other payments or benefits except as expressly set forth
in this Agreement.
7. Mutual Releases.
(a) Schnase covenants not to sue and hereby releases and forever
discharges Eagle Pacific of and from any and all actions or causes of
action, suits, debts, claims, complaints, contracts (expressed or
implied), controversies, agreements, promises, damages, judgments, and
demands whatsoever, known or unknown, in law or equity, he ever had,
now has, or shall have as of the date of this Agreement in any
capacity, including but not limited to a director, shareholder, option
holder, consultant or employee. Schnase releases and discharges Eagle
Pacific not only from any and all claims that he could bring on his own
behalf, but also those that may or could be brought by any other person
or organization on his behalf, and agrees not to become a member of any
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class in any proceeding or case in which a claim or claims against
Eagle Pacific arise, in whole or in part, from any event that occurred
before or as of the date of this Agreement. Schnase affirms that he has
not caused or permitted, and will not cause or permit, to be filed any
charge, complaint, or action of any nature or type against Eagle
Pacific.
(b) Eagle Pacific covenants not to sue and hereby releases and
forever discharges Schnase of and from any and all actions or causes of
action, suits, debts, claims, complaints, contracts (expressed or
implied), controversies, agreements, promises, damages, judgments, and
demands whatsoever, known or unknown, in law or equity, it ever had,
now has, or shall have as of the date of this Agreement in any capacity
other than any claim Eagle Pacific may have as a result of Schnase's
breach of any of the representations, warranties or covenants contained
in this Agreement. Eagle Pacific releases and discharges Schnase not
only from any and all claims that it could bring on its behalf, but
also those that may or could be brought by any other person or
organization on its behalf.
8. Resignation from Board of Directors. Effective upon the execution of
this Agreement, Schnase hereby resigns as a member of the Board of Directors of
EPII, and EPII hereby accepts Schnase's resignation.
9. Representations. Schnase represents and warrants to Eagle Pacific
that the following statements are true and acknowledges that such
representations are a material inducement for Eagle Pacific to enter into this
Agreement:
(a) Schnase owns the Schnase Shares, the Option Shares and the Schnase
Options free and clear from all liens, claims and third party interests
whatsoever except for the pledge of the LEPP Shares to EPII. Schnase
does not own any securities of EPII other than the Schnase Shares, the
Option Shares and the Schnase Options.
(b) Schnase no longer desires to hold securities of EPII, including the
Schnase Shares, the Option Shares and the Schnase Options, and Schnase
approached EPII to acquire the Schnase Shares, the Option Shares and
the Schnase Options.
(c) Schnase does not want or need any additional information in order
to execute this Agreement to effect the sale of the Schnase Shares and
the Option Shares and the cancellation of the Schnase Options, has had
an opportunity to ask questions of and receive answers from individuals
at EPII concerning the terms and conditions of an investment in the
Schnase Shares, the Option Shares and the Schnase Options and
concerning all matters respecting EPII's present and proposed
operations and financial condition, including the Transaction, and all
questions have been answered to his full satisfaction.
(d) Schnase has not at any time filed or had filed against him a
petition in bankruptcy.
(e) Schnase has not assigned, voluntarily or involuntarily, to any
person or entity whatsoever any rights or claims he has or may have
against Eagle Pacific.
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(f) Schnase is legally able to receive the payments and benefits that
are set forth in this Agreement and he knows of no claims any third
party has or may have against such payments and benefits that he is
receiving from his settlement of claims.
(g) Schnase has returned to EPII all tangible evidence of EPII's
property and confidential information.
(h) Schnase has not disclosed any confidential information of EPII to
any person other than to his advisors on a confidential basis.
10. Public Statements. Schnase shall not issue press releases or make
public statements regarding Eagle Pacific, including without limitation
statements to members of the press and media and statements on the internet.
11. Confidentiality. Schnase shall not disclose or discuss, directly or
indirectly, in any manner whatsoever, any information concerning EPII and the
operations of its business, except to the extent that such information can be
shown to have been in the public domain through no fault of Schnase. If Schnase
breaches the terms of this paragraph, EPII may commence an action at law and
pursue its available legal and equitable remedies, as well as reasonable
attorney fees. If EPII takes steps to seek relief from an alleged breach of this
paragraph, all of the provisions of this Agreement shall remain in full force
and effect.
12. Nondisparagement. Schnase shall not disparage Eagle Pacific in any
way to any of EPII's employees, manufacturer's representatives, customers,
competitors or distributors or any persons or entities known to Schnase to be
shareholders, securities holders or lenders of EPII.
13. Quiet Period. Schnase shall not purchase or sell, for his account
or the account of others, or agree to purchase or sell, shares of common stock
of EPII for a period of 12 months commencing on the date hereof.
14. Remedies. If Schnase breaches of any of his representations or
covenants hereunder, Eagle Pacific shall have to commence an action at law and
pursue its available legal and equitable remedies as well as reasonable attorney
fees.
15. Governing Law. Any disputes arising under this Agreement shall be
governed by the laws of the State of Minnesota.
16. Assignment. Except as set forth above, this Agreement may not be
assigned by either party unless agreed to in writing by EPII and Schnase.
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17. Full Agreement. Schnase, by signing this Agreement, acknowledges
and agrees that he has carefully read and understands all provisions of this
Agreement, that he has been advised by counsel regarding the terms and effects
of this Agreement, and that he has entered into this Agreement knowingly and
voluntarily. Schnase acknowledges and agrees that he has not relied on any
representations or statements by Eagle Pacific, whether oral or written, other
than the express statements of this Agreement, in executing this Agreement. This
Agreement contains the full and binding agreement of the parties and may not be
modified, altered, or changed in any way except by written agreement signed by
both parties. The parties agree that this Agreement supersedes and terminates
any and all oral and written prior agreements, understandings, and negotiations
between the parties; provided, however Schnase shall remain bound by the
provisions of Sections 2, 4 and 6 of that certain consulting agreement dated as
of January 1, 1997 by and between Schnase and EPII.
Dated: September 2, 1999
EAGLE PACIFIC INDUSTRIES, INC.
/s/ Laryy D. Schnase By /s/ William H. Spell
Larry D. Schnase Its Chief Executive Officer
