Exhibit L
Warrant dated May
10, 1996,
exercisable by the
Mezzanine Fund for
the purchase of
215,000 shares of
Stock.<PAGE>
<PAGE>
The Warrant represented by this certificate has not been
registered, under either the Securities Act of 1933, as amended, or
applicable state securities laws. It may not be sold, offered for
sale or transferred in the absence of an effective registration
under the Securities Act of 1933, as amended, and the applicable
state securities laws or an opinion of counsel satisfactory in form
and substance to counsel for the Company that such transaction will
not result in a prohibited transaction under the Securities Act of
1933, as amended, or the applicable state securities laws.
WARRANT
To Purchase 215,000 Shares of Common Stock
of
Eagle Pacific Industries, Inc.
THIS CERTIFIES THAT, for good and valuable consideration,
William Blair Mezzanine Capital Fund, L.P. ( "Blair"), or its
registered assigns, is entitled to subscribe for and purchase from
Eagle Pacific Industries, Inc., a Minnesota corporation (the
"Company"), at any time up to and including March 16, 1998, Two
Hundred Fifteen Thousand (215,000) fully paid and nonassessable
shares of the Common Stock of the Company at the price of $3.25 per
share (the "Warrant Exercise Price"), subject to the antidilution
provisions of this Warrant. The shares which may be acquired upon
exercise of this Warrant are referred to herein as the "Warrant
Shares." As used herein, the term "Holder" means Blair, any party
who acquires all or a part of this Warrant as a registered
transferee of Blair, or any record holder or holders of the Warrant
Shares issued upon exercise, whether in whole or in part, of the
Warrant; the term "Common Stock" means and includes the Company's
presently authorized common stock, no par value, and shall also
include any capital stock of any class of the Company hereafter
authorized which shall not be limited to a fixed sum or percentage
in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution, or winding up of the Company;
and the term "Convertible Securities" means any stock or other
securities convertible into, or exchangeable for, Common Stock.
This Warrant is subject to the following provisions, terms
and conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised
by the Holder hereof, in whole or in part (but not as to a
fractional share of Common Stock), by written notice of exercise
(in the form attached hereto) delivered to the Company at the<PAGE>
<PAGE>
principal office of the Company prior to the expiration of this
Warrant and accompanied or preceded by the surrender of this
Warrant along with one of the following methods of payment in the
amount of the Warrant Exercise Price for such shares: (i) if the
Company or any Company subsidiary owes Blair any funds pursuant to
loans, promissory notes or otherwise, Blair may provide appropriate
documentation to reflect the reduction of such indebtedness owed to
Blair from the Company or Company subsidiary by the amount of the
Warrant Exercise Price; (ii) in the event there is insufficient
indebtedness to allow all or part of the offset provided in (i),
then Blair may pay the Warrant Exercise Price of such shares by
assigning and transferring to the Company a number of shares of
Common Stock which when multiplied by the then Fair Market Value
(as defined in Section 9 below) of a share of the Company's Common
Stock (as in effect immediately prior to the time of exercise) is
at least equal to the Warrant Exercise Price for such shares (the
shares of Common Stock so assigned and transferred may be a portion
of the shares of Common Stock acquired in such exercise of this
Warrant); or (iii) a check or other form of cash payment.
(b) This Warrant is transferable in whole or in part,
subject to applicable federal and state securities laws and
regulations. This Warrant may not be sold, transferred, assigned,
hypothecated or divided into two or more Warrants of smaller
denominations, nor may any Warrant Shares issued pursuant to
exercise of this Warrant be transferred, except as provided in
Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7
hereof, this Warrant is exchangeable upon the surrender hereof by
the Holder to the Company at its office for new Warrants of like
tenor and date representing in the aggregate the right to purchase
the number of Warrant Shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of
Warrant Shares (not to exceed the aggregate total number
purchasable hereunder) as shall be designated by the Holder at the
time of such surrender. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like
tenor, in lieu of this Warrant; provided, however, that if Blair
shall be such Holder, an agreement of indemnity by such Holder
shall be sufficient for all purposes of this Section 2. This
Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any exchange or replacement.
The Company shall pay all expenses, taxes (other than stock
transfer taxes), and other charges payable in connection with the
preparation, execution, and delivery of Warrants, exercise of
Warrants and issuance of the Warrant Shares pursuant to this
Section 2.
3. Issuance of the Warrant Shares.<PAGE>
<PAGE>
(a) The Company agrees that the shares of Common Stock
purchased hereby shall be and are deemed to be issued to the Holder
as of the close of business on the date on which this Warrant shall
have been surrendered and the payment made for such Warrant Shares
as aforesaid. Subject to the provisions of the next section,
certificates for the Warrant Shares so purchased shall be delivered
to the Holder within a reasonable time, not exceeding fifteen (15)
days after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant
representing the right to purchase the number of Warrant Shares, if
any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Company
shall not be required to deliver any certificate for Warrant Shares
upon exercise of this Warrant except in accordance with exemptions
from the applicable securities registration requirements or
registrations under applicable securities laws. Nothing herein,
however, shall obligate the Company to effect registrations under
federal or state securities laws. If registrations are not in
effect and if exemptions are not available when the Holder seeks to
exercise the Warrant, the Warrant exercise period will be extended,
if need be, to prevent the Warrant from expiring, until such time
as either registrations become effective or exemptions are
available, and the Warrant shall then remain exercisable for a
period of at least 30 calendar days from the date the Company
delivers to the Holder written notice of the availability of such
registrations or exemptions. The Holder agrees to execute such
documents and make such representations, warranties, and agreements
as may be reasonably required solely to comply with the exemptions
relied upon by the Company, or the registrations made, for the
issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and
agrees that all Warrant Shares will, upon issuance, be duly
authorized and issued, fully paid, nonassessable, and free from all
taxes, liens, charges and preemptive or similar rights with respect
to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.
5. Antidilution Adjustments. The provisions of this
Warrant are subject to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time
to time such that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the
Company payable in Common Stock or securities convertible
into Common Stock;
(ii) subdivide its then outstanding shares of Common
Stock into a greater number of shares; or<PAGE>
<PAGE>
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect
immediately prior to such event shall (until adjusted again
pursuant hereto) be adjusted immediately after such event to a
price (calculated to the nearest full cent) determined by dividing
(a) the number of shares of Common Stock outstanding immediately
prior to such event (including the maximum number of shares of
Common Stock issuable in respect of any securities convertible into
Common Stock), multiplied by the then existing Warrant Exercise
Price, by (b) the total number of shares of Common Stock
outstanding immediately after such event (including the maximum
number of shares of Common Stock issuable in respect of any
securities convertible into Common Stock), and the resulting
quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become
effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or reclassification. If, as a result of an adjustment made
pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of
two or more classes of capital stock or shares of Common Stock and
other capital stock of the Company, the Board of Directors shall
determine the allocation of the adjusted Warrant Exercise Price
between or among shares of such classes of capital stock or shares
of Common Stock and other capital stock. All calculations under
this Subsection shall be made to the nearest cent or to the nearest
1/100 of a share, as the case may be. In the event that at any
time as a result of an adjustment made pursuant to this Subsection,
the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than
shares of Common Stock, thereafter the Warrant Exercise Price of
such other shares so receivable upon exercise of any Warrant shall
be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect
to Common Stock contained in this Section.
(b) If and whenever the Company shall (1) issue or sell any
shares of its Common Stock for a consideration per share less than
the Fair Market Value of the Company's Common Stock (as adjusted
for appropriate discounts due to the restricted nature of the
securities) in effect immediately prior to the time of such
issuance or sale, (2) issue or sell any warrants, options or other
rights to acquire shares of its Common Stock at a purchase price
less than the Fair Market Value of the Company's Common Stock (as
adjusted for appropriate discounts due to the restricted nature of
the securities) in effect immediately prior to the time of such
issuance or sale, or (3) issue or sell any other securities that
are convertible into shares of its Common Stock for a purchase or
exchange price less than the Fair Market Value of the Company's
Common Stock (as adjusted for appropriate discounts due to the
restricted nature of the securities) in effect immediately prior to
the time of such issuance or sale (except for the issuance of
options or warrants approved by the Board of Directors of the
Company to employees, director and consultants), then, upon such<PAGE>
<PAGE>
issuance or sale, the Warrant Exercise Price shall be reduced to
the price at which such shares of Common Stock are being issued or
sold by the Company or the price at which such other securities are
exercisable or convertible into shares of the Company's Common
Stock; 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.
(c) Upon each adjustment of the Warrant Exercise Price
pursuant to Section 5(a) above, the Holder of each Warrant shall
thereafter (until another such adjustment) be entitled to purchase
at the adjusted Warrant Exercise Price the number of shares,
calculated to the nearest full share, obtained by multiplying the
number of shares specified in such Warrant (as adjusted as a result
of all adjustments in the Warrant Exercise Price in effect prior to
such adjustment) by the Warrant Exercise Price in effect prior to
such adjustment and dividing the product so obtained by the
adjusted Warrant Exercise Price.
(d) In case of any consolidation or merger to which the
Company is a party other than a merger or consolidation in which
the Company is the continuing corporation, or in case of any sale
or conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, or in the case of
any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment
under Subsection (a) of this Section above but the Holder of each
Warrant then outstanding shall have the right thereafter to convert
such Warrant into the kind and amount of shares of stock and other
securities and property which he would have owned or have been
entitled to receive immediately after such consolidation, merger,
statutory exchange, sale, or conveyance had such Warrant been
converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale, or conveyance and
in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section
with respect to the rights and interests thereafter of any Holders
of the Warrant, to the end that the provisions set forth in this
Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and
other securities and property thereafter deliverable on the
exercise of the Warrant. The provisions of this Subsection shall
similarly apply to successive consolidations, mergers, statutory
exchanges, sales or conveyances.
(e) Upon any adjustment of the Warrant Exercise Price, then
and in each such case, the Company shall give written notice<PAGE>
<PAGE>
thereof, by first-class mail, postage prepaid, addressed to the
Holder as shown on the books of the Company, which notice shall
state the Warrant Exercise Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares of Common
Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
(f) In case at any time:
(i) The Company shall pay any dividend upon its
Common Stock payable in stock or make any distribution (other
than cash dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of
stock of any class or any other rights; or
(iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale,
conveyance, lease or other transfer of all or substantially
all of its assets to, another corporation; or
(iv) There shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then in any one or more of such cases, the Company shall give prior
written notice, by first class mail, postage prepaid, addressed to
each registered Holder at the address of such Holder as shown on
the books of the Company, of the date on which (a) the books of the
Company shall close or a record shall be taken for such stock
dividend, distribution or subscription rights or (b) such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the
case may be. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said
dividend, distribution or subscription rights or shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding
up, as the case may be. Such written notice shall be given at
least twenty (20) days prior to the action in question and not less
than twenty (20) days prior to the record date or the date on which
the Company's transfer books are closed in respect thereto.
6. No Voting Rights. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the
Company.
7. Notice of Transfer of Warrant or Resale of the Warrant
Shares.
(a) Subject to the sale, assignment, hypothecation, or
other transfer restrictions set forth in Section 1 hereof, the
Holder, by acceptance hereof, agrees to give written notice to the
Company before transferring this Warrant or transferring any<PAGE>
<PAGE>
Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon
receiving such written notice, the Company shall present copies
thereof to the Company's counsel and to counsel to the original
purchaser of this Warrant. If in the reasonable opinion of each
such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state
securities laws), the Company, as promptly as practicable, shall
notify the Holder of such opinion, whereupon the Holder shall be
entitled to transfer this Warrant or to dispose of Warrant Shares
received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to
the Company; provided that an appropriate legend may be endorsed on
this Warrant or the certificates for such Warrant Shares respecting
restrictions upon transfer thereof necessary or advisable in the
opinion of counsel and satisfactory to the Company to prevent
further transfers which would be in violation of Section 5 of the
1933 Act and applicable state securities laws; and provided further
that the prospective transferee or purchaser shall execute such
documents and make such representations, warranties, and agreements
as may be reasonably required solely to comply with the exemptions
relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to
in this Section 7, the proposed transfer or disposition of this
Warrant or such Warrant Shares described in the written notice
given pursuant to this Section 7 may not be effected without
registration or qualification of this Warrant or such Warrant
Shares the Company shall promptly give written notice thereof to
the Holder, and the Holder will limit its activities in respect to
such as, in the opinion of both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be
issued upon the exercise of this Warrant, but in any case where the
holder would, except for the provisions of this Section, be
entitled under the terms hereof to receive a fractional share, the
Company shall, upon the exercise of this Warrant for the largest
number of whole shares then called for, pay a sum in cash equal to
the sum of (a) the excess, if any, of the Fair Market Value (as
defined in Section 9 below) of such fractional share over the
proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant
Exercise Price represented by such fractional share.
9. For purposes of this Agreement, "Fair Market Value" of
a share of the Company's Common Stock as of a particular date (the
"Determination Date") shall mean:
(a) If the Company's Common Stock is traded on an exchange
or is quoted on the Nasdaq National Market, then the average
closing or last sale prices, respectively, reported for the thirty
(30) business days immediately preceding the Determination Date,
and
(b) If the Common Stock is not traded on an exchange or on
the Nasdaq National Market but is traded on the Nasdaq SmallCap<PAGE>
<PAGE>
Market or other over-the-counter market, then the average
(arithmetic mean) closing bid and asked prices reported for the
thirty (30) business days immediately preceding the Determination
Date.<PAGE>
<PAGE>
IN WITNESS WHEREOF, Eagle Pacific Industries, Inc. has caused
this Warrant to be signed by its duly authorized officer and this
Warrant to be dated May 10, 1996.
"Company"
EAGLE PACIFIC INDUSTRIES, INC.
/s/ William H. Spell
William H. Spell, President<PAGE>
<PAGE>
To: Eagle Pacific Industries, Inc.
NOTICE OF EXERCISE OF WARRANT -- To Be Executed by the
Registered Holder in Order to
Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase for cash, _________________ of the shares
issuable upon the exercise of such Warrant, and requests that
certificates for such shares (together with a new Warrant to
purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
______________________________
(Print Name)
Please insert social security
or other identifying number
of registered holder of
certificate (______________) Address:
______________________________
______________________________
Date: _________, 19__ ______________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond
to the name as written upon the face of the Warrant in every
particular without alteration or enlargement or any change
whatsoever. When signing on behalf of a corporation, partnership,
trust or other entity, PLEASE indicate your position(s) and
title(s) with such entity.<PAGE>
<PAGE>
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns,
and transfers unto _____________________________ the right to
purchase the securities of Eagle Pacific Industries, Inc. to which
the within Warrant relates and appoints _____________, attorney, to
transfer said right on the books of Eagle Pacific Industries, Inc.
with full power of substitution in the premises.
Dated:________________ _____________________________
(Signature)
Address:
______________________________
______________________________<PAGE>
