EAGLE PACIFIC INDUSTRIES, INC.

                              Employment Agreement
                                      with
                                  James K. Rash


         THIS EMPLOYMENT AGREEMENT is executed this 15th day of October, 1999,
between James K. Rash (the "Employee") and Eagle Pacific Industries, Inc. (the
"Eagle"), having its corporate headquarters at 2430 Andersen Consulting Tower,
333 South Seventh Street, Minneapolis, MN 55402.

                                   WITNESSETH:

         WHEREAS, Eagle desires to engage the services of the Employee as
President of Eagle and to assure the continued service of the Employee to Eagle
on the terms and conditions set forth below.

         NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:

1.       TERM OF EMPLOYMENT

         The term of this Agreement and Employee's employment under this
Agreement shall begin on October 15, 1999, and continue until December 31, 2000.
At the expiration of the initial term and any renewal term of this Agreement,
the Agreement shall automatically be renewed for an additional one year period
with any amendments as agreed to by the parties, provided that either party may
terminate this Agreement at the expiration of the applicable term by giving
written notice to the other party no later than six months prior to the
expiration of the applicable term of the Agreement.

2.       DUTIES

         Employee is engaged to serve as President of Eagle. He shall perform
such duties and functions commensurate with his position and as directed by
Eagle. During the term of this Agreement, Employee shall devote all of the time,
skills, attention, and energy necessary for the performance of his duties and
shall not be employed by any other entity without the expressed written
permission of the Chief Executive Officer of Eagle.

3.       COMPENSATION

         a.       Base Salary.

                  As full compensation for the performance by the Employee of
         all of his obligations under this Agreement, the Employee shall be
         entitled to receive no less than an annual base salary of $267,500
         payable periodically on the payroll schedule established for Eagle
         employees. Base salary shall be reviewed as of December 31 each year

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         commencing with December 31, 1999, and based on the performance of the
         Employee, the business conditions of Eagle and the competitive market,
         Eagle shall determine the amount, if any, of any increase in base
         salary to be granted as of such dates.

         b.       Annual Bonus.

                  The Employee and Eagle acknowledge that they are entering into
         this Agreement upon the consummation of Eagle's acquisition of Pacific
         Western Extruded Plastics Company ("PW Pipe"), and that the Employee is
         a former employee of PW Pipe. As such, for calendar year 1999 under the
         term of this Agreement, the Employee shall be entitled to a bonus equal
         to the bonus to which he would have been entitled under PW Pipe's bonus
         plan for the remainder of calendar year 1999, which shall be payable at
         such time and under such schedule as set forth under PW Pipe's bonus
         plan. For subsequent calendar years during the term of this Agreement,
         the Employee shall be entitled to participate in Level 1 of Eagle's Key
         Employee Bonus Plan, a summary of which is attached hereto as Exhibit
         A.

         c.       Stock Options and Restricted Stock.

                  As of the date hereof, in further consideration of the
         Employee's employment hereunder, the Employee acknowledges that:

                  (i) the Employee has purchased 43,500 shares of Common Stock
         of Eagle, a portion of the purchase price for which Eagle loaned to the
         Employee subject to the terms of a Promissory Note of even date
         herewith executed in favor of Eagle;

                  (ii) Eagle has granted the Employee 29,000 shares of
         restricted Common Stock of Eagle, subject to the terms of a Restricted
         Stock Agreement of even date herewith between the Employee and Eagle;
         and

                  (iii) Eagle has granted the Employee an incentive stock option
         to acquire 72,500 shares of Eagle's Common Stock at an exercise price
         equal to the fair market value for such Common Stock as of the date
         hereof, subject to the terms of a Incentive Stock Option Agreement
         between the Employee and Eagle. The Employee acknowledges that the
         option granted to the Employee may be treated as an "incentive" stock
         option for federal income tax purposes, only if Eagle's shareholders
         approve the increase in the number of shares of common stock reserved
         under Eagle's stock option plan, as submitted to the shareholders by
         Eagle's Board of Directors.

                  d.       Supplemental Pension Plan.

                  The parties agree that Eagle shall have no obligation for
         payment of any funds to the Employee under PW Pipe's supplemental
         pension plan, or any similar or successor plan thereto, and that Eagle
         shall have no obligations to the Employee with respect to such plan.


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4.       VACATION AND WELFARE BENEFITS

         The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement or the plan. Eagle reserves the right to establish,
modify, or determine the terms and conditions of any such welfare plans at its
own discretion.

5.       TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE

         a.       During the Life of this Agreement.

         If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a material breach of
this Agreement by the Employee, Eagle shall pay to the Employee, in lieu of
continued employment under this Agreement or in lieu of any other policy or
program maintained by Eagle, an amount equal to his base salary for the balance
of the initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.

         b.       Upon the Expiration of this Agreement.

         Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.

         c.       Termination for Cause, Resignation or Retirement.

         If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company; revealing
material trade secrets of Eagle, any affiliated company, to anyone except as
expressly authorized by Eagle in the performance of the Employee's duties or as
required by law; willful dishonesty, gross misconduct, or fraud toward Eagle, or
any affiliated company or conviction of a felony involving moral turpitude.

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         d.       Severance.

                  (i) Anything contained herein to the contrary notwithstanding,
         Eagle's obligation to the Employee to make severance payments under
         this Agreement shall cease upon the termination of the Employee's
         employment with Eagle for reason of retirement by the Employee, his
         death, his disability for a period exceeding six (6) months, or under
         any other circumstances as would constitute a material breach of this
         Agreement by the Employee, including, but not limited to, his
         resignation from his employment.

                  (ii) Any payment of severance payments provided herein may, at
         Eagle's discretion, be conditioned upon the execution of a release by
         the Employee of all claims against Eagle arising out of his employment
         and the termination thereof.

6.       CONFIDENTIAL INFORMATION AND NON-COMPETITION

         a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:

                  (i) The Employee shall not disclose or furnish to anyone,
         either directly or indirectly, either during his employment under this
         Agreement or at any time after his employment, any such trade secret of
         Eagle or any other company controlling, controlled by, or under common
         control with Eagle that comes into his possession during the course of
         his employment.

                  (ii) To the extent that the Employee has knowledge of such
         trade secrets or any other information concerning Eagle which has not
         been disclosed to the public by Eagle and is material under applicable
         securities laws, the Employee acknowledges and agrees that the effect
         of the applicable securities laws prohibit the Employee from trading in
         Eagle's stock unless and until Eagle voluntarily discloses such
         material information to the general public.

                  (iii) Upon termination of the Employee's employment for any
         reason, the Employee agrees not to compete in the manner described
         hereinafter, with the business currently conducted by Eagle in the
         United States for a period of twelve months following such termination.
         The Employee agrees that, during such period, he will not be employed
         by, work for, advise, consult with, serve, or assist in any way,
         directly or indirectly, any party whose activities or business are
         similar to or in competition with the business of Eagle.

                  (iv) Upon termination of the Employee's employment for any
         reason, the Employee agrees not to solicit, cause or assist to solicit
         for a period of twelve months following such termination, on behalf of
         himself or any business or organization with which he becomes directly
         or indirectly associated by ownership, employment, consultancy or

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         otherwise, regardless of whether or not he receives compensation
         therefrom, (1) any person employed or compensated in any manner by
         Eagle, or to work, consult for or otherwise become associated with him
         or any such business or organization, or (2) any customer who has done
         business with Eagle at any time within the one (1) year period
         preceding the date of his termination of employment, to purchase or
         otherwise acquire a product similar to a product sold by Eagle.

The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.

         b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.

         c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.

7.       DISCOVERIES

The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.

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8.       MISCELLANEOUS

         a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.

         b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.

         c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.

         d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.

         e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party. Any notice to Eagle shall be mailed to
corporate headquarters that is currently located at 2430 Andersen Consulting
Tower, 333 South Seventh Street, Minneapolis, MN 55402, and any notice to
Employee shall be mailed to his home address as recorded on the books of Eagle,
currently 1315 Corum Street, Eugene, OR 97401.

         f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.

9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof. In any such arbitration, the
Arbitrator may require a party to pay all or an appropriate portion of the
substantially prevailing party's reasonable attorneys' fees and other expenses
incurred in connection with the arbitration.

10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.

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IN WITNESS WHEREOF, this Employment Agreement has been executed by a duly
authorized officer of Eagle on this 15th day of October, 1999.

EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")


By:_______________________________
      William H. Spell, CEO


         IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 15th day of October, 1999 and the Employee attests that he is in
full agreement with all terms and conditions herein and has exercised his legal
right to have this Agreement reviewed by an Attorney if he so chooses.


By:_______________________________
(the "Employee")



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                                    Exhibit A

                         EAGLE PACIFIC INDUSTRIES, INC.
                             KEY EMPLOYEE BONUS PLAN


o        The Board of Directors will determine the employees that will
         participate in the Key Employee Bonus Plan and will designate the Level
         of Participation.

o        The Levels of Participation are:

         o        Level 1 - 100% of bonus based on EBITDA goal, and the bonus
                  potential is 50% of base salary.

         o        Level 2 - 75% of bonus is based on EBITDA goal and 25% on
                  individual goals, and the bonus potential is 40% of base
                  salary.

         o        Level 3 - 75% of bonus is based on EBITDA goal and 25% on
                  individual goals, and the bonus potential is 35% of base
                  salary.

         o        Level 4 - 50% of bonus is based on EBITDA goal and 50% on
                  individual goals, and the bonus potential is 25% of base
                  salary.

o        If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
         portion of the bonus will be 115% of the bonus based on obtaining the
         EBITDA goal.

o        Each year the Board of Directors will establish an EBITDA goal and the
         individual goals for the following year.