November 4, 1998
Xx. Xxxxxx Xxxxxxx, Vice President of Finance
Xxxxxx Xxxxxxx Pasta Company
Xxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Dear Xx. Xxxxxxx:
The loan agreement between the St. Xxxx Bank and Dakota Growers Pasta Company
(DGPC) includes condition E, which requires DGPC to maintain a minimum net
ownership ratio of 40%. Based on your financial projections, DGPC may not
comply with this condition through December 1998 as a result of a potential
value added payment of approximately $7.4 million.
It is also our understanding that DGPC intends to sell stock that is expected to
provide at least $10.0 million of additional equity. Furthermore, this
additional equity is expected to bring DGPC into compliance with the net
ownership ratio and all loan agreement conditions. Based on these factors, the
Bank waives DGPC's expected non-compliance with the minimum net ownership
requirement through December 31, 1998.
As we previously discussed, if DGPC is unable to raise $10.0 million of
additional equity and restore compliance with the loan agreement requirements by
January 6, 1999, DGPC will implement a unit retain program. This program would
commence with the first marketing period of the current fiscal year (deliveries
from August 1 to November 30) and would continue until loan agreement compliance
is achieved and maintained. Please consider holding unit retains from this
year's durum deliveries until the board has determined the feasibility of
attaining and maintaining compliance with the loan agreement.
Your correspondence and meetings with the Bank that have kept us well-informed
are sincerely appreciated. If you have any questions regarding this waiver or
if I can provide any additional service, please call me at (000) 000-0000.
Sincerely,
Xxxx X. Xxxxx
Assistant Vice President
cc: Xx. Xxx Xxxxxxx, Bank of North Dakota
Xx. Xxxxx Xxxxxxx, FCS Commercial Finance Group
Xx. Xxxxxx Xxxxxxx, for Spp Hambro & Company LLC and the Private Placement
Investors
