Exhibit K
Amendment Agreement dated as
of May 10, 1996, between the
Mezzanine Fund, the Issuer,
Eagle, Pacific and Arrow.<PAGE>
<PAGE>
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT ("Agreement") is made and
entered into as of May 10, 1996 by and between WILLIAM
BLAIR MEZZANINE CAPITAL FUND, L.P., an Illinois limited
partnership ("Blair"); and EAGLE PLASTICS, INC., a
Nebraska corporation ("Eagle"), PACIFIC PLASTICS, INC.,
an Oregon corporation ("Pacific"), ARROW PACIFIC
PLASTICS, INC., a Utah corporation ("Arrow"), and EAGLE
PACIFIC INDUSTRIES, INC., a Minnesota corporation
("EPII") (Eagle, Pacific, Arrow and EPII are sometimes
referred to herein collectively as the "Company").
R E C I T A L S
A. Pursuant to that certain Plan of
Recapitalization dated as of March 16, 1995 by and among
Blair, Eagle and EPII (f/k/a Black Hawk Holdings, Inc.),
(1) the parties entered into a Debenture Acquisition
Agreement of even date therewith (the "Debenture
Acquisition Agreement"), (2) Blair was issued (a) a
senior subordinated debenture of Eagle having a
principal amount of $7,500,000 (the "Debenture"), the
obligations of which were guaranteed by EPII pursuant to
a guarantee of even date therewith from EPII (the
"Guarantee"), (b) a warrant to purchase 100,000 shares
of the common stock of EPII at $3.00 per share (the
"Warrant") and (c) 210,000 shares of the common stock of
EPII and (3) Blair was granted, among other things, the
right to receive certain cash payments, $970,000 of
which remains outstanding and is due to be paid on or
before September 1, 1996 (the "Deferred Cash Payment").
B. As an inducement for Blair's consent to a
refinancing of the Company's senior indebtedness by
Fleet Capital Corporation (the "New Senior Lender") to
be consummated on the date hereof, the parties hereto
desire to amend selected terms of the Debenture
Acquisition Agreement and the Debenture in exchange for
certain financial accommodations to Blair (including,
without limitation, the prepayment of the Deferred Cash
Payment and a partial prepayment of amounts due under
the Debenture), all as hereinafter set forth.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the agreements
set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is<PAGE>
<PAGE>
hereby acknowledged, the parties hereto agree as
follows:
1. Incorporation of Recitals. The foregoing
recitals are incorporated herein by reference and made a
part of this Agreement.
2. Amendment of the Debenture Acquisition
Agreement and the Debenture. Subject to the Company's
performance of its obligations to Blair hereunder on the
date hereof, Blair hereby consents to the consummation
of the refinancing transaction contemplated by that
certain Loan and Security Agreement of even date
herewith (the "Credit Agreement") by and between the New
Senior Lender and the Company. To facilitate the
consummation of such transaction, the parties hereto
agree to amend the terms of the Debenture Acquisition
Agreement and the Debenture as follows:
(a) The Debenture Acquisition Agreement shall
be amended as follows:
(i) The following (and only the
following) definitions contained in Section
1.1 of the Debenture Acquisition Agreement
shall be deleted in their entirety and
replaced with the following:
"New Guarantee shall mean (a) the
guarantee dated as of March 16, 1995,
executed by one of the Guarantors in
favor of Purchaser in the form of Exhibit
D hereto, and (b) the guarantee dated as
of May 10, 1996, executed by the other
Guarantors in favor of Purchaser.
Purchase Agreement shall mean (a)
that certain agreement dated September
16, 1993 among Acquisition Corp., Eagle
Pacific Industries, Inc. and, prior to
the merger, Eagle Plastics, Incorporated,
and the individual sellers named therein,
and (b) exclusively for purposes of
Section 5.1(q) and 5.2(v) hereof, any
other agreement hereafter entered into by
Borrower or any Guarantor (with
Purchaser's prior consent, as applicable,
hereunder) to acquire any interest in any
business (whether by a purchase of
assets, purchase of stock, merger or
otherwise) or enter into any joint
venture with any Person.<PAGE>
<PAGE>
Registration Rights Agreement shall
mean the registration rights agreement
between Eagle Pacific Industries, Inc.
and Purchaser of even date herewith in
the form of Exhibit E hereto, as
hereafter amended from time to time.
Related Transactions Documents shall
mean the Plan of Recapitalization, this
Agreement, the Senior Subordinated
Debenture, the New Guarantee, the
Registration Rights Agreement, the Common
Stock Warrant, the Subordinated Loan
Documents, the Purchase Agreement, the
Senior Loan Agreement and any and all
other documents, agreements, certificates
and instruments executed or delivered to
Purchaser in connection herewith or
therewith (including, without limitation,
any amendments or modifications thereto).
Restricted Investments shall mean
all Investments in any Person or in any
property, except (a) Investments in one
or more subsidiaries of a Guarantor to
the extent existing on May 10, 1996, (b)
Investments constituting Senior
Indebtedness, (c) Investments that
constitute loans or advances (which are
permitted by the terms of the Senior Loan
Agreement) by Borrower to any Guarantor
or by any Guarantor to Borrower or any
other Guarantor, (d) Investments
resulting from the acquisition of shares
of capital stock in Borrower by Eagle
Pacific Industries, Inc. pursuant to that
certain Eagle Stock Agreement dated
December 17, 1993 by and among Eagle
Pacific Industries, Inc. (f/k/a Black
Hawk Holdings, Inc.), Borrower, Larry D.
Schnase, George Peter Konen and David
Schnase (the "Eagle Stock Agreement") as
in effect on May 10, 1996, (e) property
acquired for the business use of Borrower
or any Guarantor and not for investment
in other businesses, (f) current assets
arising from the purchase or sale of
goods and services in the ordinary course
of business, (g) securities issued or
fully guaranteed or insured by the United
States of America or any agency thereof
(supported by the full faith and credit
of the United States of America) and
maturing within one year, (h) time<PAGE>
<PAGE>
deposits and certificates of deposits of
a commercial bank organized under the
laws of the United States of America
having capital and surplus in excess of
$100,000,000 (or up to the Federal
Deposit Insurance Corporation's insured
amount) and maturing within one year, (i)
commercial paper of any United States'
corporation rated at least A-1 by
Standard & Poor's Corporation or at least
P-1 by Moody's Investors Service, Inc.
and maturing within one year, and (j)
Investments in money market funds
substantially all of whose assets are
comprised of securities of the type
described in (g) through (i) above.
Senior Indebtedness shall mean any
and all obligations, indebtedness and
liabilities now or hereafter owing or due
from Borrower and Guarantors to Senior
Lender under the Senior Loan Agreement;
provided, however, that Senior
Indebtedness shall not include:
(a) increases in the principal
amount of the indebtedness of
Borrower to Senior Lender in excess
of Twenty-Eight Million Seven
Hundred Fifty Thousand Dollars
($28,750,000) minus all principal
payments made in respect of the Term
Loan (as defined in the Senior Loan
Agreement);
(b) increases in the portion
of interest that accrues in respect
of the indebtedness of Borrower to
the Senior Lender at a rate in
excess of the otherwise applicable
interest rate (or default rate)
(including any adjustable rate or
rate to be reset pursuant to the
terms of the Senior Loan Agreement)
provided for under the Senior Loan
Agreement as in effect on May 10,
1996; or
(c) increases in the fees,
charges or expenses (regardless of
when incurred) provided for under
the Senior Loan Agreement as in
effect on May 10, 1996, which
increases exceed in the aggregate<PAGE>
<PAGE>
Two Hundred Fifty Thousand Dollars
($250,000).
Senior Lender shall mean Fleet
Capital Corporation or any successor
thereto.
Senior Loan Agreement shall mean the
Loan and Security Agreement dated May 10,
1996 by and between Senior Lender,
Borrower and Guarantors. The Senior Loan
Agreement shall include all other
documents, agreements, certificates and
instruments attached thereto, referred to
therein or delivered in connection
therewith as any or all of the foregoing
may be supplemented or amended from time
to time in accordance with the provisions
hereof."
(ii) Section 2.2 of the Debenture
Acquisition Agreement shall be deleted in its
entirety and replaced with the following:
"Subject to Section 2.4 hereof, on
May 10, 1999, Borrower shall repay the
principal amount of the Senior
Subordinated Debenture in full, together
with all Fixed Interest."
(iii) The following sentence shall be
inserted at the end of Section 2.4(c):
"In connection with any prepayments,
Purchaser shall, and is hereby authorized
by Borrower to, endorse on the schedules
annexed to the Senior Subordinated
Debenture appropriate notations regarding
the Senior Subordinated Debenture as
specifically provided therein, which
notations shall be presumed correct until
the contrary is established."
(iv) Sections 5.1(i), 5.1(j) and 5.2(t)
of the Debenture Acquisition Agreement shall
be deleted in their entirety.
(v) The following shall be inserted at
the end of Section 5.1 of the Debenture
Acquisition Agreement as new subsections (t)
through (v) thereof:
"(t) Consolidated Adjusted Tangible
Net Worth. Borrower and Guarantors shall<PAGE>
<PAGE>
maintain at all times within each of the
following periods, a Consolidated
Adjustable Tangible Net Worth (as defined
in the Senior Loan Agreement) of not less
than the amount shown below for the
period corresponding thereto:
Period Amount
June 30, 1996 through and ($1,200,000)
including September 29, 1996
September 30, 1996 through ($300,000)
and including December 30, 1996
December 31, 1996 through and $0
including March 30, 1997
March 31, 1997 through and $100,000
including June 29, 1997
June 30, 1997 through and $1,100,000
including September 29, 1997
September 30, 1997 through $2,000,000
and including December 30, 1997
December 31, 1997 through $2,300,000
and including March 30, 1998
March 31, 1998 through and $2,400,000
including June 29, 1998
June 30, 1998 through and $3,400,000
including September 29, 1998
September 30, 1998 through $4,300,000
and including December 30, 1998
December 31, 1998 through $4,600,000
and including March 30, 1999
March 31, 1999 through and $4,700,000
including each fiscal quarter thereafter
(u) Consolidated Net Cash Flow.
Borrower and Guarantors shall achieve
Consolidated Net Cash Flow (as defined in the
Senior Loan Agreement) for each of the periods
listed below equal to or greater than the
amount set forth opposite such period:
<PAGE>
Period Amount<PAGE>
January 1, 1996 through and $135,000
including June 30, 1996
January 1, 1996 through and $585,000
including September 30, 1996
January 1, 1996 through and $450,000
including December 31, 1996
January 1, 1997 through and ($550,000)
including March 31, 1997
January 1, 1997 through and $135,000
including June 30, 1997
January 1, 1997 through and $585,000
including September 30, 1997
January 1, 1997 through and $450,000
including December 31, 1997
January 1, 1998 through and ($550,000)
including March 31, 1998
January 1, 1998 through and $135,000
including June 30, 1998
January 1, 1998 through and $585,000
including September 30, 1998
January 1, 1998 through and $450,000
including December 31, 1998
January 1, 1999 through and ($550,000)
including March 31, 1999
(v) Senior Interest Coverage Ratio.
Borrower and Guarantors shall achieve, at the
end of each fiscal quarter within the term
hereof, a Senior Interest Coverage Ratio (as
defined in the Senior Loan Agreement) equal to
or greater than the ratio shown below for the
quarter corresponding thereto:
Fiscal Quarter Ending Ratio
March 31 1.45 to 1
June 30 3.15 to 1
September 30 4.05 to 1
December 31 2.15 to 1"
(vi) The following shall be inserted at
the end of Section 5.2(a) of the Debenture<PAGE>
<PAGE>
Acquisition Agreement as new subsections (iv)
through (viii) thereof:
"(iv) Indebtedness for assets
purchased which is secured by a purchase
money lien and which, when aggregated
with the principal amount of all other
such Indebtedness and Capitalized Lease
Obligations at the time outstanding, does
not exceed (i) $1,250,000 until the
capitalized leases listed on Exhibit K to
the Senior Loan Agreement are retired and
(ii) $400,000 thereafter;
(v) Indebtedness outstanding under
that certain Redevelopment Contract
between the City of Hastings, Nebraska,
and Guarantor, and related promissory
notes as in effect on May 10, 1996;
(vi) Indebtedness incurred in
connection with the acquisition of
approximately 30 acres of vacant land in
Hembree, Oregon, in a principal amount
not to exceed $103,000;
(vii) Indebtedness outstanding
under that certain Promissory Note and
Stock Pledge Agreement dated as of July
10, 1995 between Eagle Pacific
Industries, Inc., Pacific Acquisition
Corp., Pacific Plastics, Inc. and the
selling shareholder signatories thereto,
as in effect on May 10, 1996; and
(viii) Indebtedness not included
in subsections (i) through (vii) above
which does not exceed at any time, in the
aggregate, the sum of $250,000."
(vii) The clause "its fiscal year
does not exceed $175,000" at the end of
Section 5.2(d) of the Debenture Acquisition
Agreement shall be deleted and replaced with
"any current or future period of 12
consecutive months does not exceed $500,000".
(viii) The first two sentences of
Section 5.2(g) of the Debenture Acquisition
Agreement shall be deleted in their entirety
and replaced with the following:
"Neither Borrower nor any Guarantor
shall directly or indirectly (i) declare<PAGE>
<PAGE>
or pay any Dividends on its capital
stock, (ii) make or incur any liability
to make any Stock Purchase or (iii) make
any Restricted Investments.
Notwithstanding the foregoing and
provided that, in any of the following
cases, no Event of Default has then
occurred and is continuing or would
result from the taking of such action,
Borrower and/or Guarantor may: (A) pay up
to $195,000 in annual Dividends on Eagle
Pacific Industries, Inc.'s convertible
preferred stock outstanding on May 10,
1996 (the "EPII Preferred"), until such
time as the EPII Preferred is converted
as provided herein; (B) convert all or a
portion of the shares of EPII Preferred
into common stock of Eagle Pacific
Industries, Inc. at a conversion price
which is not less than $1.75 per share;
and (C) acquire the shares of capital
stock of Borrower held by Larry D.
Schnase and George Peter Konen as of May
10, 1996 pursuant to the Eagle Stock
Agreement as in effect on May 10, 1996,
provided that the aggregate purchase
price for such shares does not exceed (x)
$575,000 for the calendar year ending
December 31, 1996, and (y) the lesser of
(1) the purchase price per share of such
common stock multiplied by 157,000
shares, or (2) $1,000,000, for each
calendar year ending December 31, 1997
and December 31, 1998."
(ix) The following paragraph shall be
inserted at the end of Section 5.2 of the
Debenture Acquisition Agreement as Section
5.2(w) thereof:
"(w) Capital Expenditures. Neither
Borrower nor any Guarantor shall, unless
otherwise consented to by Purchaser in
writing, make Capital Expenditures (as
defined in the Senior Loan Agreement)
which, in the aggregate, as to Borrower
and Guarantors during any fiscal year of
Borrower, exceeds the amount set forth
opposite such fiscal year in the
following schedule:
Fiscal Year Ending Capital Expenditure
December 31, 1996 $2,850,000<PAGE>
<PAGE>
December 31, 1997 $1,650,000
December 31, 1998 and each
subsequent fiscal year $1,650,000"
(x) The clause "or any other agreement
to which Purchaser and either Borrower or
Guarantor are parties" shall be inserted
following the term "Senior Subordinated
Debenture" in subsection (iii) of Section
6.1(a) of the Debenture Acquisition Agreement.
(xi) Section 6.4 of the Debenture
Acquisition Agreement shall be deleted in its
entirety and replaced with the following:
"Subordination. This Agreement
(including, without limitation, exercise
of the rights set forth in Section 6.2
hereof) and the Senior Subordinated
Debenture are subject to certain
subordination provisions set forth in
that certain Intercreditor and
Subordination Agreement dated as of May
10, 1996 by and between Purchaser and the
Senior Lender and all of the terms and
provisions thereof are incorporated by
reference into this Agreement and made a
part hereof."
(xii) All references in the Debenture
Acquisition Agreement to the defined term
"Guarantor" shall be construed as a reference
to EPII, Pacific and Arrow collectively or, as
the context may require, any one or more of
EPII, Pacific and Arrow.
(b) The Debenture shall be amended as follows:
(i) The first sentence of Section 3 of
the Debenture shall be deleted in its entirety
and replaced with the following:
"The aggregate principal of this
Debenture shall be payable on May 10,
1999 together with all Fixed Interest."
(ii) Section 6 of the Debenture shall be
deleted in its entirety and replaced with the
following:
"Subordination. This Debenture
shall be subject to the terms and
provisions of that certain Intercreditor
and Subordination Agreement dated as of<PAGE>
<PAGE>
May 10, 1996 by and between Payee and
Senior Lender."
3. Performance of the Company's Obligations. On
the date hereof:
(a) Eagle and EPII shall pay to Blair in
cash, by wire transfer to the account specified in
Section 2.5 of the Debenture Acquisition Agreement,
$970,000 as a prepayment in full of the Deferred
Cash Payment;
(b) Eagle shall pay to Blair in cash, by wire
transfer to the account specified in Section 2.5 of
the Debenture Acquisition Agreement the following:
(i) all accrued Fixed Interest as
defined in and payable pursuant to the
Debenture through and including the date
hereof; and
(ii) $3,000,000, to be treated as a
partial prepayment against the outstanding
principal amount of the Debenture;
(c) that certain Registration Agreement dated
March 16, 1995 (the "Registration Agreement") by
and between EPII and Blair shall be amended as set
forth in Section 5 hereof;
(d) the Warrant shall be amended as set forth
in Section 6 hereof;
(e) the applicable parties shall concurrently
herewith execute and deliver the following
agreements and instruments (the form and substance
of which are satisfactory to Blair and its
counsel):
(i) a Guarantee executed by Pacific and
Arrow in favor of Blair, pursuant to which
Pacific and Arrow guarantee Eagle's
obligations under the Debenture Acquisition
Agreement and the Debenture;
(ii) a Warrant in favor of Blair,
exercisable for 215,000 shares of common stock
of EPII at an exercise price of $3.25 per
share (the "New Common Stock Warrant");
(iii) an Intercreditor and
Subordination Agreement by and between Blair
and the New Senior Lender;<PAGE>
<PAGE>
(iv) a Co-sale Agreement by and between
Blair and Richard W. Perkins, Bruce A.
Richards, Harry W. Spell, William H. Spell and
the Spell Family Foundation;
(v) an Irrevocable Proxy by Blair in
favor of EPII;
(vi) the written opinion of Fredrikson &
Byron, P.A., counsel to the Company;
(vii) certified copies of all
documents evidencing corporate action taken by
the Company with respect to this Agreement and
the other matters contemplated hereby; and
(viii) a certificate, signed by the
secretary or an assistant secretary of EPII,
certifying as to (A) the names of the officers
of the Company authorized to sign the above-
referenced agreements and instruments and all
other documents and instruments executed
and/or delivered in connection herewith or
therewith, (B) specimens of the true
signatures of such officers, on which Blair
may conclusively rely, (C) the truth and
correctness of that certain Eagle Stock
Agreement dated December 17, 1993, between
Eagle Pacific Industries, Inc., Borrower,
Larry D. Schnase, George Peter Konen and David
Schnase as in effect on the date hereof and
(D) the truth and completeness of documents
and instruments executed and/or delivered in
connection with (1) the refinancing of the
senior indebtedness by the New Senior Lender,
(2) the sale of common stock of EPII to
Okabena Partnership K ("Okabena"), (3) the
sale of the common stock of EPII to Kennedy
Capital Management and (4) the amendment to
the registration and stock repurchase rights
of Loyal Sorensen, Zelda Sorensen, Jarred
Thompson and Sharron Thompson.
4. Affirmation of Guarantee. EPII hereby
acknowledges that the Debenture Acquisition Agreement is
being amended hereby and hereby also acknowledges and
affirms that (a) the Guarantee is in full force and
effect and the liability of EPII as Guarantor under the
Guarantee continues in accordance with the terms of the
Guarantee and is in no way affected or impaired by such
amendment to the Debenture Acquisition Agreement, (b)
Blair's agreement to such amendment is in Blair's sole
discretion, (c) Blair is not required to provide notice
to anyone of such amendment and (d) Blair's provision of<PAGE>
<PAGE>
such notice to EPII, as guarantor, shall not operate as
a waiver of Blair's right to agree to further amendments
in its sole discretion without notice to EPII or any
other person that is or shall be a guarantor of the
Company's obligations under the Debenture Acquisition
Agreement.
5. Amendment of the Registration Agreement. The
parties hereto agree to amend the terms of the
Registration Agreement as follows:
(a) Section 1(c) of the Registration
Agreement shall be deleted in its entirety and
replaced with the following:
"Registrable Shares" shall mean (i)
the 210,000 Shares of Company Common
Stock issued to the Investor under the
Plan of Recapitalization, (ii) the
225,000 Shares of Company Common Stock
issued to the Investor under that certain
Subordinated Loan Agreement dated
December 17, 1993 by and among the
Investor, the Company and Eagle Plastics,
Inc., (iii) up to 100,000 Shares of
Company Common Stock that may be issued
to the Investor upon exercise of the
Warrant, (iv) up to 215,000 Shares of
Company Common Stock that may be issued
to the Investor upon exercise of that
certain Warrant issued to the Investor
under that certain Amendment Agreement
dated as of May 10, 1996 by and between
the Investor, the Company and certain
other parties thereto (the "New Warrant")
and (v) any further securities issued
with respect thereto upon any stock
split, stock dividend, recapitalization
or similar event, so long as such shares
or other securities are owned by the
Investor or any other person to whom the
Investor shall assign all or a portion of
its rights hereunder.
(b) Section 3(a) of the Registration
Agreement shall be amended by deleting the clause
"On a one-time basis only," in the first sentence
thereof and replacing it with the clause "On no
more than two occasions,".
(c) Clause (1) of Section 3(b) of the
Registration Agreement shall amended by deleting
the words "of the issuance of the Investor's<PAGE>
<PAGE>
Shares" and replacing them with the date "May 10,
1996".
(d) The following Clause (3) of Section 3(b)
of the Registration Agreement shall be inserted at
the end of Section 3(b) before the ".":
"; and (3) three years from the earlier
of complete exercise or termination of the New
Warrant with respect to the Shares of Common
Stock issuable upon exercise of the New
Warrant"
6. Amendment of the Warrant. The parties hereto
agree to amend the terms of the Warrant as follows:
(a) Section 5(a) of the Warrant shall be
amended by inserting the parenthetical "(including
the maximum number of shares of Common Stock
issuable in respect of any securities convertible
into Common Stock)" immediately after the phrase
"prior to such event" in the fourth line following
clause (iii).
(b) Section 5(b) of the Warrant shall be
amended by adding the following at the end of
Section 5(b) before the ".":
"; provided, however, that no such adjustment
in the Warrant Exercise Price shall be made
upon the issuance of shares of Common Stock
pursuant to (i) options, warrants, convertible
securities and other rights to acquire shares
listed on Schedule 1 to that certain Amendment
Agreement dated May 10, 1996 by and between
Blair, the Company, Eagle Plastics, Inc.,
Pacific Plastics, Inc. and Arrow Pacific
Plastics, Inc. or (ii) the conversion or
exercise into shares, and related issuance, of
Common Stock pursuant to any warrant, option
or other right to acquire shares of Common
Stock that, upon the issuance of such warrant,
option or other right did not require an
adjustment to the Warrant Exercise Price
pursuant hereto."
7. Representations and Warranties of the Company.
As a further inducement for Blair to consent to the
refinancing of the Company's senior indebtedness by the
New Senior Lender, the Company hereby represents and
warrants to Blair that:
(a) The Company (and each of them) has the
requisite corporate power and authority to execute,<PAGE>
<PAGE>
deliver and carry out this Agreement, all other
agreements and instruments contemplated or required
by the provisions thereof and to be executed,
delivered or carried out by the Company (or any of
them) (collectively, the "Ancillary Agreements")
and the transactions contemplated hereby and
thereby.
(b) The execution and delivery of this
Agreement and the Ancillary Agreements, and the
consummation by the Company of the transactions
contemplated hereby or thereby has been duly
authorized by all necessary corporate action and
other consents, approvals and the like required on
the part of the Company.
(c) Neither the execution and delivery by the
Company (or any of them) of this Agreement or any
of the Ancillary Agreements, nor the consummation
of the transactions contemplated hereby or thereby,
nor compliance by the Company with the terms,
conditions and provisions hereof or thereof, shall
(i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute
a default under, (iii) result in the creation of
any lien, security interest, charge or encumbrance
upon its capital stock or assets pursuant to, (iv)
give any third party the right to accelerate any
obligation under, (v) result in a violation of or
(vi) require any authorization, consent, approval,
exemption or other action by or notice to any court
or administrative or governmental body pursuant to,
the articles of incorporation or bylaws of the
Company (or any of them) or any law, statute, rule
or regulation to which the Company (or any of them)
is subject, or any agreement, instrument, order,
judgment or decree to which the Company (or any of
them) is subject.
(d) This Agreement and each of the Ancillary
Agreements to which the Company (or any of them) is
a party have been duly and validly executed and
delivered by Eagle, Pacific, Arrow and/or EPII (as
the case may be) and constitute legal, valid and
binding obligations, and all such obligations of
the Company (or any of them) are enforceable in
accordance with their respective terms.
(e) Except for fees payable to BA Securities,
Inc. in an amount not to exceed $345,000, there are
no claims for brokerage commissions, finders' fees
or similar compensation in connection with the
transactions contemplated by this Agreement based<PAGE>
<PAGE>
on any arrangement or agreement binding upon the
Company (or any of them).
(f) At the time of their issuance, the shares
issuable pursuant to the New Common Stock Warrant
and the Warrant (the "Warrant Shares") shall be
validly issued, fully paid and nonassessable and
free and clear of any and all liens, claims,
encumbrances and the like.
(g) The issuance of the Warrant Shares has
been duly authorized by all necessary corporate
action on the part of the Company and no vote,
authorization, consent or approval of the
shareholders of the Company (or any of them) is
necessary for the issuance of the Warrant Shares.
(h) (i) All of the outstanding shares of
capital stock of EPII, as of the date hereof,
are validly issued, fully paid and
nonassessable. Except as set forth on
Schedule 1 attached hereto, there are not
outstanding any shares of stock, securities,
rights or options convertible or exchangeable
into or exercisable for any shares of EPII's
capital stock, stock appreciation rights or
phantom stock, nor is or was EPII under any
obligation (contingent or otherwise) to redeem
or otherwise acquire any shares of its capital
stock or any securities, rights or options to
acquire such capital stock, stock appreciation
rights or phantom stock. To the best of the
Company's knowledge, Schedule 1 hereto sets
forth a complete and accurate list as of the
date hereof of the names of, and the
respective ownership of any person or group of
persons holding 5% or more of such capital
stock of EPII other than Blair.
(ii) There are no statutory or
contractual stockholders' preemptive rights
with respect to the issuance of the New Common
Stock Warrant, EPII has not violated any
applicable federal or state securities laws in
connection with the offer, sale or issuance of
any of its capital stock or warrants (which,
in the case of EPII for periods prior to
January 1, 1986, could result in a material
adverse effect on its business, operations,
properties, financial condition, operating
results or business prospects) and, assuming
the truth and accuracy of Blair's
representations and warranties under Section
9(b) hereof, the issuance of the New Common<PAGE>
<PAGE>
Stock Warrant does not require registration
under the Securities Act of 1933, as amended
from time to time (together with any rules and
regulations thereunder)(the "Securities Act")
or any applicable state securities laws.
Except as set forth on Schedule 1 hereto,
there are no agreements between EPII's
stockholders with respect to the voting or
transfer of EPII's capital stock or with
respect to any other aspect of EPII's affairs
(it being understood that, unless the contrary
is known by EPII on the date hereof, the
representation and warranty in this sentence
shall not apply to any person or group of
persons holding less than 5% of EPII's common
stock).
(iii) EPII has filed all forms,
statements, schedules, exhibits, reports and
other documents with the SEC required by it
pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all
of which have complied as of their respective
filing dates with all applicable requirements
of the Securities Act and the Securities
Exchange Act of 1934, as amended from time to
time (the "Exchange Act"), and any rules or
regulations promulgated thereunder. The
representation and warranty in the immediately
preceding sentence shall not apply to EPII for
periods prior to January 1, 1986, unless its
failure to so file or comply could result in a
material adverse effect on its business,
operations, properties, financial condition,
operating results or business prospects.
(i) Neither this Agreement nor any of the
Ancillary Agreements contains any untrue statement
of a material fact or omits to state a material
fact necessary in order to make the statements
contained herein and therein not misleading. There
is no fact known to the Company (or any of them)
(other than general conditions which are a matter
of public knowledge) which materially adversely
affects the business, operations, properties,
financial condition, operating results or business
prospects of the Company (or any of them). All
documents filed by EPII pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act contain all
statements that are required by the Exchange Act
and do not contain any untrue statement of a
material fact or omits to state a material fact
necessary in order to make the statements contained
therein not misleading.<PAGE>
<PAGE>
8. Waiver of Breach. Blair hereby waives any and
all breaches of the terms of the Debenture Acquisition
Agreement and the Debenture resulting from (a) the
execution and delivery by the Company of this Agreement
and the other agreements and instruments to be executed
and delivered hereunder, (b) the refinancing transaction
contemplated by the Credit Agreement and the use of
proceeds permitted thereby, (c) the sale of common stock
of EPII to Okabena, (d) the sale of common stock of EPII
to Kennedy Capital Management and (e) the consummation
of the transactions contemplated hereby including,
without limitation, the payments contained in Section 3
hereof.
9. Transfer.
(a) Transfer of Restricted Securities.
(i) Restricted Securities (as herein
defined) are transferable pursuant to (A)
public offerings registered under the
Securities Act, (B) Rule 144 of the Securities
Act (or any similar rule then in force) if
such rule is available and (C) subject to the
conditions specified in Section 9(a)(ii)
hereof, any other legally available means of
transfer.
(ii) In connection with the transfer of
any Restricted Securities (other than a
transfer described in clause (A) or (B) of
Section 9(a)(i) hereof), the holder thereof
shall deliver written notice to EPII
describing in reasonable detail the transfer
or proposed transfer, together with
information as to such holder's compliance
with applicable securities laws as reasonably
may be requested by EPII, and such transfer
only shall be made in compliance with the
Securities Act and any applicable state
securities laws. EPII shall cooperate in
connection with any such transfer, including
providing such information to any holder of
Restricted Securities or such holder's
proposed transferee as may be necessary to
satisfy the requirements of Rule 144A of the
Securities Act in connection with any transfer
to a "Qualified Institutional Buyer" under
such rule. Upon any transfer, the transferee
shall, to the extent of such transfer, be
entitled to exercise the rights hereunder of
the person making such transfer. To the
extent the holder of the Restricted Securities
complies with the first sentence of this<PAGE>
<PAGE>
Section 9(a)(ii), EPII shall promptly upon
such contemplated transfer deliver new
certificates for such Restricted Securities
which do not bear the Securities Act legend
set forth in Section 9(b) hereof unless such
legend is still required. If EPII is not
required to deliver new certificates for such
Restricted Securities not bearing such legend,
the holder thereof shall not transfer the same
until the prospective transferee has confirmed
to EPII in writing its agreement to be bound
by the conditions contained in this paragraph
and Section 9(b) hereof.
(iii) "Restricted Securities" means (x)
the New Common Stock Warrant, (y) any
securities issued pursuant to the New Common
Stock Warrant and (z) any securities issued
with respect to the securities referred to in
clauses (x) or (y) above by way of a stock
dividend or stock split or in connection with
a combination of shares, modification, merger,
consolidation or other reorganization. As to
any particular Restricted Securities, such
securities shall cease to be Restricted
Securities when they have (A) been effectively
registered under the Securities Act and
disposed of in accordance with the
registration statement covering them, (B)
become eligible for sale pursuant to Rule 144
(or any similar provision then in force) under
the Securities Act or (C) been otherwise
transferred and new certificates for them not
bearing the Securities Act legend set forth in
Section 9(b) hereof have been delivered by
EPII in accordance with Section 9(b) hereof.
Whenever any particular securities cease to be
Restricted Securities, the holder thereof
shall be entitled to receive from EPII,
without expense, new securities of like tenor
not bearing a Securities Act legend of the
character set forth in Section 9(b) hereof.
(b) Blair hereby represents that it is (a) an
"accredited investor" within the meaning of Rule
501(a) of Regulation D under the Securities Act and
(b) acquiring the Restricted Securities acquired
pursuant hereto for its own account with the
present intention of holding such securities for
purposes of investment and that it has no intention
of selling such securities in a public distribution
in violation of the federal securities laws or any
applicable state securities laws; provided that
nothing contained herein will prevent Blair and any<PAGE>
<PAGE>
subsequent holders of Restricted Securities from
transferring such securities in compliance with the
provisions of Section 9(a) hereof. Each
certificate for shares will be imprinted with a
legend in substantially the following form:
"The securities represented by this
certificate have not been registered
under the Securities Act of 1933, as
amended, or any state securities laws.
The transfer of the securities
represented by this certificate is
subject to the conditions specified in
that certain Amendment Agreement dated as
of May 10, 1996 by and among William
Blair Mezzanine Capital Fund, L.P., Eagle
Plastics, Inc. Pacific Plastics, Inc.,
Arrow Pacific Plastics, Inc. and Eagle
Pacific Industries, Inc. (f/k/a Black
Hawk Holdings, Inc.) ("EPII"), and EPII
reserves the right to refuse the transfer
of such securities until such conditions
have been fulfilled with respect to such
transfer. A copy of such conditions will
be furnished by EPII to the holder hereof
upon written request and without charge."
10. Miscellaneous.
(a) Further Assurances. The Company shall,
from time to time at the request of Blair, do all
further acts and things as may in the opinion of
Blair be necessary or advisable to effectuate the
transaction and other matters contemplated hereby,
including, without limitation, the modification of
or amendment to any other agreements, certificates
or instruments to which the Company is a party.
(b) Joint and Several. The Company's
obligations hereunder shall be joint and several.
(c) Successors. This Agreement and the
agreements and obligations contained herein shall,
as applicable, be binding upon and inure to the
benefit of the Company and Blair and their
respective successors and permitted assigns.
(d) Costs and Expenses. The Company agrees
to pay all costs and expenses, including, without
limitation, attorney's fees and expenses, expended
or incurred by Blair in connection with (i) the
preparation and structuring of this Agreement and
the Ancillary Agreements, (ii) the enforcement of
this Agreement or any of the Ancillary Agreements,<PAGE>
<PAGE>
(iii) the collection of any amounts due hereunder
and (iv) any actions for declaratory relief in any
way related to this Agreement or the agreements,
certificates and instruments described herein or
contemplated hereby (including, without limitation,
the Ancillary Agreements), or the protection or
preservation of any rights of Blair hereunder.
(e) Notices. All notices and other
communications given to or made upon any party
hereto in connection with this Agreement shall,
except as otherwise expressly herein provided, be
in writing (including telexed or telecopied
communication) and mailed, telexed, telecopied or
delivered by hand or by reputable overnight courier
service to the respective parties, as follows:
If to Blair, to:
William Blair Mezzanine Capital Fund,
L.P.
222 West Adams Street
Chicago, Illinois 60606
Attention: Terrance M. Shipp
Telecopy: (312) 236-8075
with copy to:
Altheimer & Gray
10 S. Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: Robert L. Schlossberg, Esq.
Telecopy: (312) 715-4800
If to the Company to:
c/o Eagle Pacific Industries, Inc.
2430 Lincoln Center
333 S. 7th Street
Minneapolis, Minnesota 55402
Attention: William H. Spell
Telecopy: (612) 371-9651
with copy to:
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, Minnesota 55402-3397
Attention: Dobson West, Esq.
Telecopy: (612) 347-7077<PAGE>
<PAGE>
or in accordance with any subsequent written
direction from the recipient party to the sending
party. All such notices and other communications
shall, except as otherwise expressly herein
provided, be effective upon delivery if delivered
by hand; when deposited with a reputable courier
service, delivery charges prepaid; when deposited
in the mail, postage prepaid; or in the case of
telex or telecopy, when received.
(f) Survival. All representations,
warranties, covenants and agreements contained
herein or made in writing in connection herewith
shall survive indefinitely the execution and
delivery of this Agreement.
(g) Assignability. This Agreement shall not
be assignable by either party without the prior
written consent of the other party.
(h) Entire Agreement. This Agreement and the
instruments to be delivered by the parties pursuant
to the provisions hereof constitute the entire
agreement between the parties hereto with respect
to the subject matter hereof. Any amendments or
alternative or supplementary provisions to this
Agreement must be made in writing and duly executed
by an authorized representative of each of the
parties hereto.
(i) Counterparts. This Agreement may be
executed in any number of counterparts and by any
party hereto on separate counterparts, each of
which, when so executed and delivered, shall be an
original, but all such counterparts shall together
constitute one and the same instrument.
(j) Captions. Section captions used in this
Agreement are for convenience only, and shall not
affect the construction of this Agreement.
(k) No Further Amendments. Except as
specifically amended hereby, the terms and
provisions of the Debenture Acquisition Agreement,
the Debenture, the Registration Agreement and the
Warrant shall remain in full force and effect.<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed and delivered by their
duly authorized officers as of the day and year first
above written.
EAGLE PLASTICS, INC.
By: /s/ William H. Spell
Title: Chairman
EAGLE PACIFIC INDUSTRIES, INC.
By: /s/ William H. Spell
Title: President
PACIFIC PLASTICS, INC.
By: /s/ William H. Spell
Title: Chairman
ARROW PACIFIC PLASTICS, INC.
By: /s/ William H. Spell
Title: Chairman
WILLIAM BLAIR MEZZANINE CAPITAL FUND,
L.P.
By: William Blair Mezzanine Capital
Partners, L.P., its general partner
By: /s/ Terrance M. Shipp
Title: a general partner<PAGE>
<PAGE>
SCHEDULE 1
AMENDMENT AGREEMENT
1,383,500 shares of Preferred Stock of EPII convertible
into 1,383,500 shares of Common Stock of EPII. It is
the intention of EPII to offer the holders of the
1,383,500 shares of Preferred Stock of EPII to convert
such shares into 1,581,143 shares of Common Stock of
EPII if done within a designated time.
Attached hereto are the following lists:
Warrants to purchase shares of EPII Common Stock
Nonqualified Stock Options Granted Outside the 1991
Stock Option Plan to acquire shares of EPII Common Stock
Nonqualified Stock Options Granted Pursuant to the
1991 Stock Option Plan to acquire shares of EPII Common
Stock
Incentive Stock Options Granted Pursuant to the
1991 Stock Option Plan to acquire shares of common stock
of Eagle Plastics, Inc.
By agreement dated December 17, 1993 by and among EPII,
Eagle Plastics, Inc., Larry D. Schnase, George Peter
Konen and David Schnase, EPII may from time to time be
obligated to acquire shares of Eagle Plastics, Inc. for
cash or by issuing shares of Common Stock of EPII.
The section of EPII's Proxy Statement for Annual Meeting
of Shareholders to be held April 30, 1996 entitled
"Security Ownership of Principal Shareholders and
Management" is incorporated herein by reference.<PAGE>
