Exhibit M
Co-Sale Agreement
dated as of May 10,
1996 by and between
the Mezzanine Fund,
Harry W. Spell,
William H. Spell,
Bruce A. Richards,
Richard W. Perkins
and the Spell
Family Foundation.<PAGE>
<PAGE>
CO-SALE AGREEMENT
DATE: May 10, 1996
PARTIES: Harry W. Spell ("H. Spell")
William H. Spell ("W. Spell")
Spell Family Foundation ("Foundation")
Bruce A. Richard ("Richard")
Richard W. Perkins ("Perkins")
William Blair Mezzanine
Capital Fund, L.P. ("Blair")
RECITALS:
A. As of the date hereof the parties hereto are the owners
of the shares of capital stock of Eagle Pacific Industries, Inc.
("EPII") and the options, warrants and other rights to acquire
shares of common stock of EPII as set forth on Exhibit A attached
hereto.
B. The parties hereto desire to provide for certain co-
sale rights in the event of certain significant sales by other
parties hereto.
AGREEMENT:
1. For the purposes of this Agreement the following terms
shall have the meanings indicated below:
(a) "Management Group" shall refer to H. Spell, W. Spell,
Foundation, Richard and Perkins or any two or more of them
acting together.
(b) "Shares" shall mean the shares of capital stock of EPII
listed on Exhibit A hereto and any shares of common stock of
EPII acquired by a party hereto pursuant to the exercise of
any option, warrant or other right to acquire shares of
common stock of EPII listed on Exhibit A hereto.
(c) "Selling Transaction" shall mean the sale, assignment,
transfer or other disposition of more than 500,000 Shares in
a single transaction or series of related transactions that
is not otherwise exempted from the provisions of this
Agreement by Section 4 below.
2. During the term hereof, the Management Group shall not
enter into a Selling Transaction without permitting Blair to
participate as a seller in such transaction(s) on a pro rata basis
according to the common share holdings of EPII listed on Exhibit A
assuming all options, warrants and other rights to acquire shares
of common stock of EPII have been exercised.<PAGE>
<PAGE>
3. The Management Group shall give prompt written notice
to Blair in the event that it has the present intention to enter
into a Selling Transaction. Such notice shall disclose the terms
and conditions of such Selling Transaction. Blair shall advise the
Management Group in writing within thirty days of receipt of such
notice whether or not it desires to be a seller in such Selling
Transaction on the terms and conditions set forth in the notice
from the Management Group and pursuant to Section 2 above. If
Blair does not provide such written response to the notice from the
Management Group within such time period, Blair shall be deemed to
have waived its rights hereunder with respect to such Selling
Transaction and the Management Group may proceed with such Selling
Transaction on substantially the terms set forth in the notice to
Blair.
4. The following sales, assignments, transfers or other
dispositions by the Management Group shall not be considered
Selling Transactions and shall be exempt from the provisions of
this Agreement:
(a) sales of Shares by the Management Group in a bona fide
underwritten public offering pursuant to a registration
statement filed by EPII pursuant to the Securities Act of
1933, as now or hereafter amended (the "Act");
(b) sales of Shares by the Management Group in a market
transaction in a bona fide public market, pursuant to a
registration statement, pursuant to Rule 144 promulgated
under the Act or pursuant to some other exemption from
registration under the Act; and
(c) any transfer of Shares by gift or testamentary
disposition to any person.
5. This Agreement shall terminate on May 31, 1999 or upon
such earlier date as Blair shall dispose of any Shares such that
after all such dispositions Blair owns less than 25% of the Shares
shown on Exhibit A as being owned by Blair.
6. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered in
person, by facsimile transmission, by a recognized courier service
or by the United States Postal Service to party at its/his address
or facsimile number listed on Exhibit A hereto, or at such other
address or facsimile number as such party may specify by written
notice to the other parties hereto. All such notices shall be
deemed to be effective when received at such address or facsimile
number.
7. This Agreement and the rights of the parties hereunder
shall be construed and governed by the laws of the State of
Minnesota.<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
/s/ Harry W. Spell
Harry W. Spell
/s/ William H. Spell
William H. Spell
SPELL FAMILY FOUNDATION
By: William H. Spell
Its: President
/s/ Bruce A. Richard
Bruce A. Richard
/s/ Richard W. Perkins
Richard W. Perkins
WILLIAM BLAIR MEZZANINE CAPITAL FUND, L.P.
By: William Blair Mezzanine Capital Partners,
L.P., its general partner
By: /s/ Terrance M. Shipp
Its: a general partner<PAGE>
<PAGE>
EXHIBIT A
EAGLE PACIFIC INDUSTRIES, INC.
CO-SALE AGREEMENT
Harry W. Spell 26,384 shares of Common Stock
2430 Metropolitan Centre 50,000 shares of Preferred Stock
Minneapolis, MN 55402 Options for 220,000 shares of Common
Stock
(612) 371-9651
William H. Spell 33,864 shares of Common Stock
2430 Metropolitan Centre 25,000 shares of Preferred Stock
Minneapolis, MN 55402 Options for 285,000 shares of Common
Stock
(612) 371-9651
Spell Family Foundation 22,500 shares of Common Stock
2430 Metropolitan Centre
Minneapolis, MN 55402
(612) 371-9651
Bruce A. Richard 25,000 shares of Preferred Stock
2458 Farrington Circle Options for 70,000 shares of Common
Stock
Roseville, MN 55113
(612) 483-1359
Richard W. Perkins 72,727 shares of Common Stock
730 East Lake Street 22,500 shares of Preferred Stock
Wayzata, MN 55391 Options for 70,000 shares of Common
Stock
(612) 473-4701
William Blair Mezzanine 435,000 shares of Common Stock
Capital Fund, L.P. Options for 315,000 shares of Common
Stock
222 West Adams Street
Chicago, IL 60606
Attention: Terrence M. Shipp
(312) 236-8075<PAGE>
