UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended April 30, 1997
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
--------------------
COMMISSION FILE NUMBER 33-99834
--------------------
DAKOTA GROWERS PASTA COMPANY
(Exact name of registrant as specified in its charter)
NORTH DAKOTA
(State or other jurisdiction of
incorporation or organization)
ONE PASTA AVENUE
CARRINGTON, NORTH DAKOTA
(Address of principal executive offices)
45-0423511
(IRS Employer Identification Number)
58421
(Zip Code)
(701) 652-2855
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No
The number of shares outstanding of the issuer's classes of common
stock was 1,086 shares of membership stock, par value $125.00, and 4,904,034
shares of equity stock, par value $3.85, outstanding as of June 23, 1997.
<PAGE> 2
<PAGE>
FINANCIAL STATEMENTS
DAKOTA GROWERS PASTA COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
1997 July 31,
(Unaudited) 1996
----------- -----------
<C> <C>
<S> (000's omitted)
ASSETS
Current assets:
Cash and cash equivalents ...................... $ $ 1,448
Trade accounts receivable, less allowance for
cash discounts and doubtful accounts of
$67,000 and $70,000 .......................... 6,981 4,874
Accounts receivable from growers ............... 179 207
Other receivables .............................. 126 116
----------- -----------
Total receivables .............................. 7,286 5,197
Inventories .................................... 8,953 6,737
Prepaid expenses ............................... 57 150
----------- -----------
Total current assets ........................ 16,296 13,532
Property and equipment
In service ..................................... 44,886 39,167
Construction in process ........................ 7,950 1,152
Accumulated depreciation ....................... ( 7,885) ( 5,964)
----------- -----------
Net property and equipment .................. 44,951 34,355
Investment in St. Paul Bank for Cooperatives ...... 1,804 1,710
Other assets ...................................... 206 297
----------- -----------
Total assets ................................ $63,257 $49,894
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2<PAGE>
<PAGE> 3
DAKOTA GROWERS PASTA COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
1997 July 31,
(Unaudited) 1996
----------- -----------
<C> <C>
<S> (000's omitted)
LIABILITIES AND MEMBERS' INVESTMENT
Current liabilities:
Notes payable and current portion of long-term
debt ......................................... $ 1,323 $ 72
Accounts payable ............................... 4,420 2,889
Excess outstanding checks over cash on deposit . 268
Accrued grower payments ........................ 408 1,845
Dividends payable .............................. 6 8
Accrued liabilities ............................ 1,257 534
----------- -----------
Total current liabilities ................... 7,682 5,348
Long-term debt, net of current portion ............ 26,504 18,860
Other long-term liabilities ....................... 75
----------- -----------
Total liabilities ........................... 34,261 24,208
----------- -----------
Redeemable preferred stock:
Series A, 6%, $100 par value, issued 4,000
shares at April 30, 1997 and 5,500 shares
at July 31, 1996 ............................. 400 550
Series B, 2% non-cumulative, $100 par value,
issued 2,700 shares .......................... 270 270
----------- -----------
Total redeemable preferred stock ............ 670 820
----------- -----------
Members' investment:
Membership stock, $125 par value, issued 1,086
shares at April 30, 1997 and 1,082 shares
at July 31, 1996 ............................. 136 135
Equity stock, $3.85 par value, issued 4,904,034
shares ....................................... 18,881 18,881
Additional paid in capital ..................... 3,610 3,610
Accumulated allocated earnings ................. 413
Accumulated unallocated earnings ............... 5,286 2,240
----------- -----------
Total members' investment ................... 28,326 24,866
----------- -----------
Total liabilities and members' investment ... $63,258 $49,894
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3<PAGE>
<PAGE> 4
DAKOTA GROWERS PASTA COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
April 30,
(Unaudited)
-----------------------
(000's omitted)
1997 1996
----------- -----------
<C> <C>
<S>
Net revenues (net of discounts and allowances of
$2,028,000 and $1,480,000 for 1997 and 1996,
respectively) .................................. $17,018 $13,026
Cost of product sold .............................. 13,836 11,138
----------- -----------
Gross proceeds .............................. 3,182 1,888
Marketing and general and administrative expenses . 591 480
----------- -----------
Operating proceeds .......................... 2,591 1,408
Other income (expense):
Interest and other income ...................... 3 51
Capitalized interest ........................... 97
Interest expense, net .......................... ( 690) ( 490)
----------- -----------
Income before income taxes ........................ 2,001 969
Income taxes expense .............................. 4
----------- -----------
Net income from patronage and non-patronage
business ....................................... 2,001 965
Dividends on preferred stock ...................... 6 8
----------- -----------
Earnings from patronage and non-patronage business
available for members ........................... $ 1,995 $ 957
=========== ===========
Average equity shares outstanding ................. 4,904 3,712
Earnings from patronage and non-patronage
business per average equity share outstanding... $ .41 $ .26
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4<PAGE>
<PAGE> 5
DAKOTA GROWERS PASTA COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
(Unaudited)
-----------------------
(000's omitted)
1997 1996
----------- -----------
<C> <C>
<S>
Net revenues (net of discounts and allowances of
$5,450,000 and $3,997,000 for 1997 and 1996,
respectively) .................................. $49,875 $35,861
Cost of product sold .............................. 41,991 31,180
----------- -----------
Gross proceeds .............................. 7,884 4,681
Marketing and general and administrative expenses . 1,369 1,208
----------- -----------
Operating proceeds .......................... 6,515 3,473
Other income (expense):
Interest and other income ...................... 31 57
Capitalized interest ........................... 260
Interest expense, net .......................... ( 1,522) ( 1,661)
----------- -----------
Income before income taxes ........................ 5,284 1,869
Income tax expense ................................ 4
----------- -----------
Net income from patronage and non-patronage
business ....................................... 5,284 1,865
Dividends on preferred stock ...................... 25 30
----------- -----------
Earnings from patronage and non-patronage business
available for members ........................... $ 5,259 $ 1,835
=========== ===========
Average equity shares outstanding ................. 4,904 3,315
Earnings from patronage and non-patronage
business per average equity share outstanding... $ 1.07 $ .55
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5<PAGE>
<PAGE> 6
DAKOTA GROWERS PASTA COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
(Unaudited)
-----------------------
(000's omitted)
1997 1996
----------- -----------
<C> <C>
<S>
Cash flows from operating activities:
Net income ..................................... $ 5,284 $ 1,865
Add (deduct) non-cash items:
Depreciation and amortization ................ 1,933 1,817
Non-cash portion of patronage dividend ....... ( 14) ( 286)
Interest capitalized ......................... ( 260)
Changes in assets and liabilities:
Trade receivables ............................ (2,107) (2,349)
Accounts receivable from growers ............. 28 ( 210)
Other receivables ............................ ( 10) 422
Inventories .................................. (2,216) ( 321)
Prepaid expenses and other assets ............ 92 ( 128)
Accounts payable ............................. 1,531 745
Excess outstanding checks over cash on deposit 268 ( 893)
Grower payables .............................. (1,437) (1,057)
Dividends payable and other accrued liabilities 723 641
Other liabilities ............................ 75
----------- -----------
Net cash from (used in) operating activities 3,890 246
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment ............ (12,257) ( 828)
----------- -----------
Cash flows from financing activities:
Issuance of short-term debt ....................
Issuance of long-term debt ..................... 8,950
Payments on long-term debt ..................... ( 55) (8,183)
Preferred stock retired ........................ ( 150) ( 150)
Dividends on preferred stock ................... ( 27) ( 30)
Membership stock issued (net)................... 1 2
Proceeds of stock offering, net of expenses .... 9,722
Subscriptions forfeited ........................ 1
Patronage distributions ........................ (1,800) ( 935)
----------- -----------
Net cash from financing activities .......... 6,919 427
----------- -----------
Net increase (decrease) in cash and cash
equivalents ..................................... (1,448) ( 155)
Cash and cash equivalents, beginning of period .... 1,448 155
----------- -----------
Cash and cash equivalents, end of period .......... $ $
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6<PAGE>
<[AGE> 7
DAKOTA GROWERS PASTA COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION - Dakota Growers Pasta Company ("the Company" or "the
Cooperative") is organized as a farmers' cooperative for purposes of
manufacturing food for human consumption from durum and other grain products.
Net proceeds are allocated to patrons who are members on the basis of their
participation in the cooperative.
The ownership of membership stock, which signifies membership in the
Cooperative, is restricted to producers of agricultural products. The
ownership of equity stock is restricted to members of the Cooperative.
Preferred stock may be held by persons who are not members of the Cooperative.
NOTE 2. FINANCIAL STATEMENT PRESENTATION - The financial information
included herein as at April 30, 1997, and for the nine and three month periods
ended April 30, 1997 and 1996, is unaudited and, in the opinion of the
Company, reflects all adjustments (which include only normal recurring
accruals) necessary for a fair presentation of the financial position as of
those dates and the results of operations for those periods. The information
in the Balance Sheet at July 31, 1996, was derived from the Company's audited
annual report for 1996. Reclassifications may have been made consistent with
current presentation. Such reclassifications have no effect of the net result
of operations.
NOTE 3. INVENTORIES - Inventories of $8,953,000 at April 30, 1997, include
raw materials of $3,351,000 and finished goods and by-products of $5,602,000.
At July 31, 1996, inventories of $6,737,000 included raw materials of
$2,384,000 and finished goods and by-products of $4,353,000.
NOTE 4. PATRONAGE BUSINESS - The Company's business is conducted on a
cooperative basis. The Company calculates income from patronage sources based
on income derived from bushels of durum delivered by members. Non-patronage
income is derived from the resale of spring wheat flour purchased from non-
members and blended with other flours, the resale of pasta purchased from non-
members, the resale of semolina purchased from non-members, interest income on
invested funds and any income taxes assessed on non-member business. For the
nine months ended April 30, 1997, net income allocable to patronage business
was $5,433,000 compared to $1,947,000 for the comparable period in fiscal year
1996. For the three months ended April 30, 1997 and 1996, net income
allocable to patronage business was $1,910,000 and $1,039,000, respectively.
NOTE 5. EARNINGS AND DIVIDENDS - The Company allocates its patronage
earnings and patronage distributions based on patronage business (bushels of
durum delivered, which approximates one bushel of durum per equity share).
For presentation purposes, it has calculated net income per share by dividing
earnings from patronage and non-patronage business available for members (net
income less preferred dividends) by the weighted average number of equity
shares outstanding during the period. The weighted average number of equity
shares was 4,904,034 for the nine and three months ended April 30, 1997,
3,314,694 for the nine months ended April 30, 1996 and 3,712,034 for the three
months ended April 30, 1996.
A qualified patronage allocation of $1,800,000, $.50 per bushel, was
authorized by the Board of Directors in October 1996 and was distributed in
November 1996. Additionally, $413,000, $.115 per bushel, was allocated to the
members but not distributed, or qualified for income tax purposes.
A qualified patronage allocation of $935,000, $.308 per bushel, was authorized
by the Board of Directors and distributed to members in November 1995.
7<PAGE>
<PAGE> 8
NOTE 6. INCOME TAXES - The Company is a non-exempt cooperative as defined
by Section 1381 (a)(2) of the Internal Revenue Code. Accordingly, net margins
from business transacted with member patrons which are allocated, qualified
and paid as prescribed in Section 1382 of the code will be taxable to the
members and not to the Company. Net margins and member allocations are
determined on the basis of accounting used for financial reporting purposes.
To the extent that net margins are not allocated and paid as stated above or
arise from business done with non-members, the Company shall have taxable
income subject to corporate income tax rates. Cooperative organizations have
8 1/2 months after their fiscal year-end to make such allocations in the form
of written notices of allocation or cash.
The Company has not established any provision for income taxes for the nine
months ended April 30, 1997.
NOTE 7. LOAN AGREEMENT - On March 31, 1997, the Company's loan agreement
with the St. Paul Bank for Cooperatives was modified to extend its seasonal
loan for one year and to extend the expiration date of the $18,000,000
construction term loan to December 31, 1997, with quarterly payments of
$625,000 commencing December 31, 1997.
The Company also modified its mortgage with the St. Paul Bank to increase the
mortgage amount to $42,000,000.
8<PAGE>
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company is a North Dakota agricultural cooperative and has 1,086
members at April 30, 1997. Membership in the Company is limited to
agricultural producers whose operations are located within the states of North
Dakota, Minnesota or Montana. The Company mills durum wheat into semolina,
which is sold or used for the manufacture of the Company's pasta products.
The pasta products are then marketed and sold by the Company. The Company
also sells by-products of the milling process.
Beginning late in fiscal year 1996, the Company began an expansion project
which would double its milling and pasta manufacturing capacities. The
Company's second mill became operational in late December 1996, and it has
completed the building addition. The first new pasta line began operation in
early June 1997, and it is anticipated that second the new pasta production
lines will be operational in mid-July 1997.
The cost of durum, ingredients, packaging and freight constitute a major
portion of the cost of product sold. These costs will increase or decrease
with changes in sales volumes. The cost of production is also significantly
impacted by changes in durum wheat prices. Such durum wheat prices are
influenced by the quantity of milling quality durum available as well as the
export practices of Canada. The Company is able to partially offset this risk
through contracts which allow for price adjustments with fluctuations in the
durum/flour markets.
QUARTER ENDED APRIL 30, 1997 COMPARED TO QUARTER ENDED APRIL 30, 1996
Revenues increased by $4.0 million, or 31%, as total pasta produced
increased by 24% and semolina sales increased by 40% as more flour was
available with two mills in operation. Flour sales will decrease as
increasing pasta production absorbs more semolina.
Most of the pasta increase was experienced in the retail segment, but
increases were also experienced in the foodservice and ingredient sectors.
Sales in the retail segment represented 45% of pasta sales for the quarter.
The Company anticipates this segment to increase as a percentage of pasta
sales over the next year as it adds to its customer base and its existing
customers continue the growth trends of the last year. The average sales
price was essentially flat in all segments when compared to last year as
competetion from domestic and imported pasta remains strong.
In the by-products sales, offsetting the increase in semolina sales volumes
was a reduction in pricing for semolina sales, which decreased corresponding
with the durum price decline.
Cost of product sold was up $2.7 million primarily due to a 33% increase in
pasta produced and purchased. The volume change represented $3.7 million of
the increase. Pricing on packaging was essentially flat, and price increases
for ingredients (egg) and freight were offset by reduced durum prices. The
average cost of durum was down $.97 per bushel from last year, reducing
expense by $872,000.
Marketing and general and administrative expenses were up $111,000,
predominantly due to deferred compensation accruals.
Interest expense increased $103,000 due to a $4.6 million increase in
9<PAGE>
<PAGE> 10
average borrowings, the result of borrowing for construction activity,
partially offset by a .86% reduction in the average interest rate. Due to
reduced profits, the St. Paul Bank for Cooperatives reduced its patronage
distribution. For the quarter, the Company recorded a $154,000 reduction in
its patronage accural for the calendar year 1996, and reduced its 1997 accrual
rate by 50%. At this time, the Company anticipates that the Bank will return
to historical profitablilty in 1998. The Company capitalized $97,000 of
interest to the major expansion projects during the quarter.
As a result of the above, net income for the quarter was $2,001,000
compared to $957,000 last year. The Company anticipates a similar change for
the fourth quarter.
NINE MONTHS ENDED APRIL 30, 1997 COMPARED TO NINE MONTHS ENDED APRIL 30, 1996
Revenues increased by $14.0 million, or 39%, as total pasta sales increased
by 37%, with a related decline in lower margin semolina sales prior to the
second mill coming on line. Sales in the retail pasta segment have more than
doubled over last year, while ingredient sales rose 35% and foodservice sales
declined 12%. The retail increase was primarily due to the roll out of three
significant new private label programs and the introduction of one branded
program. Volumes for most existing private label programs increased, offset
by the decline of co-pack and government bid sales. The roll out of one new
significant ingredient customer had a major impact on ingredient volumes, but
sales to most large ingredient customers also rose over last year. The
decline in foodservice can be identified to co-pack and government sales. For
the year, mill feed and second clear flour prices have increased, while
average semolina prices are down.
Cost of product sold was up $10.8 million. The increase in pasta volumes
produced and purchased accounted for $11.4 million of the increase. Price
increases for packaging, ingredients (egg) and freight added to the expense,
but were more than negated by lower durum costs and greater production
efficiencies. The Company anticipated continued improvement in production
efficiencies with the addition of the two new pasta lines. The year to date
average cost of durum was down $.36 from last year.
Marketing and general and administrative expenses increased $161,000,
primarily due to increased marketing costs and deferred compensation accruals.
Interest expense decreased $399,000 due to an $3.8 million decline in
average borrowings, the result of the temporary pay down of debt utilizing the
proceeds of the 1996 stock offering. Average interest rates are unchanged
from last year. The Company has capitalized $260,000 of interest to the major
expansion projects this year.
As a result of the above, net income increased $3.4 million, almost
tripling from $1.8 million last year to $5.3 million for the nine months ended
April 30, 1997. The Company anticipates continued growth as it markets the
additional capacity available through the additional pasta production lines.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations remains positive in spite of increases in
receivables and inventories attributed to the increased sales. The Company's
$5.0 million seasonal line of credit is anticipated to be more than adequate
to fund these working capital increases.
For the nine months ended April 30, 1997, purchases of property and
equipment totalled $12.3 million, financed at April 30, 1997, by a $9.0
10<PAGE>
<PAGE> 11
million increase in outstanding debt and working capital provided by
operations. The Company anticipates expending an additional $8.1 million
completing the pasta production expansion projects through July 1997, with
some payments extending beyond that date. The Company's construction term
loan agreement with the St. Paul Bank for Cooperatives provides $18,000,000 in
construction financing for these projects; $7.2 million is outstanding as of
mid-May, 1997.
11<PAGE>
<PAGE> 12
Part II
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
------- -----------
10.1 Loan Agreement in the aggregate amount of $41,409,007.58
dated March 31, 1997, between the Company and St. Paul Bank
for Cooperatives.
10.2 Nonnegotiable Note of Dakota Growers Pasta Company in the
principal amount of $5,000,000.00 dated March 31, 1997.
10.3 Real Estate Mortgage executed by Dakota Growers Pasta Company
to the St. Paul Bank for Cooperatives in the amount of
$42,000,000.00 dated May 15, 1997.
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
(b) Reports on Form 8-K
None
12<PAGE>
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dakota Growers Pasta Company
<TABLE>
<S> <C>
Date: June 23, 1997 /s/ Timothy J. Dodd
---------------- ----------------------------------
Timothy J. Dodd (President and
General Manager, and Principal
Executive Officer)
Date: June 23, 1997 /s/ Thomas P. Friezen
---------------- ----------------------------------
Thomas P. Friezen (Vice President,
Finance and Principal Financial
and Accounting Officer)
</TABLE>
13<PAGE>
<PAGE> 14
Exhibit 10.1
Date Approved 11/14/96
ST. PAUL BANK FOR COOPERATIVES
Loan Agreement
Borrower: Application No. S-26506
DAKOTA GROWERS PASTA COMPANY
CARRINGTON, NORTH DAKOTA
New Loans Present Loans
$ 5,000,000.00 - Seasonal Loan
$18,409,007.58 - Term Loan
18,000,000.00 - Construction Term Loan
-------------
$36,409,007.58
Total Loans
------------
$ 5,000,000.00 - Seasonal Loan, Note No. 22140
18,409,007.58 - Term Loan, Note No. 33061
18,000,000.00 - Construction Term Loan & Commitment, Note No. 35061
-------------
$41,409,007.58 - Total
The St. Paul Bank for Cooperatives (the "Bank") and Borrower agree to the
above loans (the "Loans") to the Borrower. The Borrower's present
indebtedness to the Bank and/or commitments outstanding (entitled Present
Loans in the above heading) are consolidated and are made subject to all the
terms and conditions of this loan agreement.
I. PURPOSE
The proceeds of the Loans shall be used as follows:
A. The Seasonal Loan shall be used for general operating purposes.
B. The Term Loan, Note No. 33061, were used to finance the construction
of the pasta plant.
C. The Construction Term Loan, Note No. 35061, shall be used to
finance the mill and pasta line expansion (the "Project")
II. NOTES AND SECURITY
Advances under this loan agreement, together with any existing
indebtedness of the Borrower to the Bank, shall be evidenced by a promissory
note or notes acceptable to the Bank, and shall be secured to the extent of
all collateral presently held by the Bank, including but not limited to all
real estate mortgages and security agreements; and by amending the real estate
mortgage dated August 5, 1992, to increase the dollar amount from $27,400,000
to $42,000,000, in the process of being completed. The Borrower shall provide
the Bank with a mortgagee's title insurance policy, in an amount acceptable to
the Bank. All property under lien to the Bank as security for the Loans shall
be collateral for all indebtedness of the Borrower to the Bank.
III. LIMITATION ON ADVANCES
A. The total Seasonal Loan outstanding under this or any loan agreement
between the Bank and the Borrower shall not exceed the amount shown in the
above heading.
B. The commitment to advance funds under the Seasonal Loan shall become
effective as of April 1, 1997, and shall remain effective until March 31,
1998, after which date the commitment shall expire.
C. Advances on the Seasonal Loan shall not exceed the sum of the
14<PAGE>
<PAGE> 15
following collateral values based on collateral reports to be submitted
monthly (or more often at Borrower's discretion) in such form as required by
the Bank:
1. One hundred percent (100%) of cash on hand.
2. Eighty percent (80%) of accounts receivable acceptable to the
Bank and not older than forty-five (45) days from the date of invoice.
3. Sixty-five percent (65%) of the net market value (market value
less selling expenses) of owned inventories of grain, semolina, flours,
millfeeds, and finished pasta.
D. Construction progress reports shall be submitted to the Bank prior
to each advance being made on the Construction Term Loan, Note No. 35061.
Construction progress reports shall include:
1. A draw request;
2. Inspection reports; and
3. Evidence that mechanics' and materialmen's lien waivers have
been obtained for all work done on, and all materials supplied to, the Project
which were paid for pursuant to the previous disbursement request.
IV. INTEREST
All outstanding balances hereunder shall bear a rate of interest as the
Bank shall from time to time prescribe, provided, however, the fixed amounts
shall bear such rates of interest as described in the statements (as defined
in the "FIXED RATE SEASONAL ADVANCES AND MATURITIES" and "CUSTOMER MANAGED
FIXED RATE TERM ADVANCES AND MATURITIES" sections of this loan agreement).
Interest on the Loans shall be payable on the last day of each calendar
quarter or as the Bank may specify.
V. FIXED RATE SEASONAL ADVANCES AND MATURITIES
In accordance with and subject to the Bank's Fixed Rate Seasonal Loan
Program, and subject to the Bank's overall program funding limitations, it is
agreed the interest rate may be fixed on any seasonal loan indebtedness (the
"fixed amount") made under this loan agreement as follows:
A. The minimum fixed amount shall be $100,000.
B. Each fixed amount and each selected pricing maturity date will be
treated as a separate indebtedness for interest rate designation and interest
billing purposes.
C. Fixed amount pricing maturities shall not be less than 15 days nor
greater than 180 days from the day of advance to be based on the maturity
selection of the Borrower, however, all fixed amounts shall have pricing
maturities no later than September 30, 1998.
D. The Borrower may receive same day interest rate quotes if a firm
request is placed and accepted by the Bank before 12:01 p.m. (Central Time) on
any business day. A firm request is one placed by telephone or in writing by
an authorized representative of the Borrower.
E. Fixed amounts shall be automatically converted to the variable rate
seasonal loan at maturity.
F. Fixed amounts cannot be repaid or repriced by the Borrower prior to
their respective pricing maturity dates without being subject to prepayment
penalties. Such penalties shall be determined according to a methodology
specified by the Bank which preserves the Bank's yield on the fixed amount
prepaid or repriced and which is based upon the difference between the Bank's
cost of like funds to pricing maturity at the time of prepayment and the
existing fixed rate on the fixed amount.
G. Each fixed amount shall be summarized in the Daily Activity
Statement (the "statement") to the Borrower. Each statement shall reference
and confirm at least the following:
15<PAGE>
<PAGE> 16
1. Note No. 25540.
2. The fixed amount and its Contract No.
3. The rate of interest.
4. The effective date.
5. The pricing maturity date.
H. The Borrower agrees that the statement shall verify the
understanding reached by the parties, and that the Borrower shall be bound by
the statement without its signature; provided, however, if there is an error
reflected in the statement, the Borrower shall notify the Bank of the error
within five days after receipt of the statement and an appropriate correction
will be made.
I. If there is a question on the interest rate applicable to the fixed
amount, the rate as established by the Bank for such amounts shall be
controlling.
VI. CUSTOMER MANAGED FIXED RATE TERM ADVANCES AND MATURITIES
In accordance with and subject to the Bank's Customer Managed Fixed Rate
Term Program and subject to the Bank's overall program funding limitations, it
is agreed the interest rate may be fixed on any term loan indebtedness (the
"fixed amount") under this loan agreement as follows:
A. The minimum fixed amount shall be $1,000,000.
B. Each fixed amount and each selected pricing maturity date shall be
treated as a separate indebtedness for interest rate designation and interest
billing purposes.
C. Fixed amount pricing maturities shall be for a minimum maturity of
60 days and a maximum of ten years.
D. The Borrower shall have indebtedness under the variable rate term
interest rate program or priced maturing fixed amounts against which to apply
scheduled term loan payments as set forth in the "REPAYMENT" section of this
loan agreement.
E. The Borrower's selection of loan interest rate quotes and pricing
maturities must be communicated to the Bank by 2:00 p.m. (Central Time) on the
day prior to the fixed amount advance. If this selection deadline is not met,
maturing fixed amounts shall automatically convert to the variable rate term
loan.
F. Fixed amounts cannot be repaid or repriced by the Borrower prior to
their respective pricing maturity dates without being subject to prepayment
penalties. Such penalties shall be determined according to a methodology
specified by the Bank which preserves the Bank's yield on the fixed amount
prepaid or repriced and which is based upon the difference between the Bank's
cost of like funds to pricing maturity at the time of prepayment and the
existing fixed rate on the fixed amount.
G. Each fixed amount shall be summarized in the Daily Activity
Statement (the "statement") to the Borrower. Each statement shall reference
and confirm at least the following:
1. Note Nos. 33061 / 35061.
2. The fixed amount and its Contract No.
3. The rate of interest.
4. The effective date.
5. The pricing maturity date.
H. The Borrower agrees that the statement shall verify the
understanding reached by the parties, and that the Borrower shall be bound by
the statement without its signature; provided, however, if there is an error
reflected in the statement, the Borrower shall notify the Bank of the error
within five days after receipt of the statement and an appropriate correction
will be made.
I. If there is a question on the interest rate applicable to the fixed
16<PAGE>
<PAGE> 17
amount, the rate as established by the Bank for such amounts shall be
controlling.
VII. FINANCIAL CONDITIONS
While this loan agreement is in effect, the Borrower agrees to comply
with the following financial conditions:
A. Cash Patronage: The Borrower will pay cash patronage in amounts
necessary to qualify its patronage refunds as a qualified patronage dividend
as defined in the Internal Revenue Code.
B. Dividends: The Borrower will not pay cash dividends on capital
stock in excess of minimum requirements, as stated in the Borrower's by-laws
and/or stock certificates, without the prior written consent of the Bank,
which will not be unreasonably withheld.
C. Revolvement of Equities: The Borrower may not revolve, or otherwise
pay out, any owner equity if such action would cause one or more of the
"FINANCIAL CONDITIONS D, E, or F" under this loan agreement to be in a
noncompliance position without the prior written consent of the Bank, which
will not be unreasonably withheld.
D. Current Ratio: The Borrower will maintain a current ratio (current
assets:current liabilities) of not less than 1.25:1.
E. Net Ownership Ratio: The Borrower will maintain a net ownership
ratio (total equity divided by the sum of current assets minus current
liabilities plus net fixed assets plus other assets) of not less than forty
percent (40%).
F. Debt Service Coverage Ratio: The Borrower will maintain a debt
service coverage ratio of not less than 1.25. The debt service coverage ratio
shall be calculated as follows:
After-tax net income
Add: Depreciation and Amortization Expense
Less: Deferred Patronage Received
Cash Patronage Declared Payable
Extraordinary Gains
Equal to: Adjusted Income from Operations
Divided by: Current Maturities of Long-Term Liabilities
(including principal on capitalized and operating leases)
Equals: Debt Service Coverage Ratio
VIII. GENERAL CONDITIONS
While this loan agreement is in effect, the Borrower agrees to comply
with the following conditions:
A. Eligibility Status: The Borrower will maintain its status as an
eligible borrower as defined in the Farm Credit Act of 1971, as amended (12
U.S.C. 2129).
B. Stock Investment: The Borrower will purchase equities of the Bank
in such amounts as prescribed by the Bank's capital plan and any amendments to
the plan.
C. Insurance: The Borrower will maintain:
1. Business and property insurance with financially sound insurers,
in amounts sufficient to protect the Loans.
2. Flood insurance as may be required by the Bank in accordance with
applicable law including, but not limited to, regulations of the Farm Credit
Administration.
3. All appropriate grain licenses and all required grain buyers'
and warehouse bonds.
4. All-risk builder's risk insurance during the construction of the
Project, in an amount equal to 100% of the replacement cost of the Project, in
accordance with industry standards, providing all-risk coverage on the Project
17<PAGE>
<PAGE> 18
and materials stored on the Property and elsewhere, and including the perils
of collapse, damage resulting from error in design or faulty workmanship or
materials, or water damage.
D. Financial Information: The Borrower will furnish the Bank audited
annual financial statements prepared in accordance with GAAP, and acceptable
auditors' reports, within 120 days after the end of each fiscal year, annual
operating budgets within 60 days after the end of each fiscal year, monthly
financial statements prepared in accordance with GAAP within 30 days after the
end of each month, and such other information as the Bank may request relative
to the Borrower's business, and permit such examination of its books and
records as the Bank may specify. The Borrower also agrees that parties
preparing such financial information are authorized to release to the Bank
such financial information as the Bank may request.
E. Collateral Reports: The Borrower will furnish the Bank collateral
reports to be submitted in such form and frequency as required by the Bank.
F. Negative Pledge: The Borrower will not mortgage, pledge, assign, or
grant security interests in any assets to any other party without the prior
written consent of the Bank, which will not be unreasonably withheld.
G. Corporate Documents: The Borrower will not amend its articles of
incorporation, by-laws, growers agreement, nor its grain delivery payment
policies without the consent of the Bank, which will not be unreasonably
withheld.
H. Construction Progress Reports: The Borrower will furnish the Bank
construction progress reports (including draw requests, inspection reports,
and lien waivers) with each Construction Term Loan advance request.
I. Environmental Representations, Conditions, and Indemnity Clause:
Except as disclosed in writing to the Bank, the Borrower represents and agrees
to the following:
1. Hazardous Material Notice: The Borrower represents that it has
not received a notice from any governmental agency or other persons nor is
there any present or threatened suit, investigation, or other proceeding, with
regard to Hazardous Materials (defined in paragraph 7 below) on, in, or
affecting its owned or leased property. It shall immediately give the Bank
oral and written notice if it receives such a notice.
2. No Violation of Environmental Laws: The Borrower has not and
will not violate any federal, state, or local environmental laws relating to
or affecting its owned or leased property, which violation would have a
material affect on the Borrower's business or materially affects the value of
the collateral.
3. No Releases of Hazardous Material: There has been no release,
nor shall the Borrower permit any release, of such nature requiring
notification to proper authorities of any Hazardous Material onto the
Borrower's owned or leased property.
4. Storage Tank Registered; No Leaks: All above ground and
underground storage tanks have been duly registered with all applicable
federal, state and local government authorities. The Borrower has no
knowledge of any leaks from any of its above ground or underground storage
tanks.
5. Investigation of Released Hazardous Materials: If there is a
suspected release of Hazardous Materials, the Borrower shall, at its own
expense conduct all investigations, testing, and other actions, including an
environmental audit made at the Bank's request, necessary to determine the
extent (if any) of the release of Hazardous Materials and to clean up and
remove all Hazardous Material in accordance with environmental laws.
6. Indemnity: The Borrower agrees to indemnify, hold harmless, and
defend the Bank against all claims of whatever kind (including attorneys'.
consultants', and experts' fees) paid or asserted against the Bank as a direct
result of the Borrower's violation of any environmental law. This indemnity
shall continue for the benefit of the Bank after the termination of this loan
agreement or other loan or security documents.
18<PAGE>
<PAGE> 19
7. Definition: Hazardous Material is defined as any toxic,
radioactive, or hazardous substance, material, waste, pollutant, emission, or
contaminant, including but not limited to : (a) asbestos, (b) urea
formaldehyde, (c) the group of organic compounds known as polychlorinated
biphenyls (PCBs), (d) any petroleum product and byproduct including but not
limited to gasoline, fuel oil, crude oil, and the various constituents of such
products, and (e) pesticides, fertilizers, and other agricultural chemicals.
IX. REPAYMENT
The indebtedness arising from the Loans shall be repaid as follows:
A. The Seasonal Loan, Note No. 25540, of not to exceed $5,000,000 shall
mature on March 31, 1998; provided, however, the Borrower shall make such
payments from time to time as may be required to maintain the loan within the
limits set forth in the "LIMITATION ON ADVANCES" section of this loan
agreement; provided further, any balances outstanding under the fixed rate
seasonal loan provisions shall mature as specified in the statement. Any
outstanding fixed amounts as of March 31, 1998 shall be repaid no later than
September 30, 1998.
B. The Term Loan Note No. 33061, of $18,409,007.58 shall be repaid by
quarterly principal payments of Six Hundred Eighty-Five Thousand Dollars
($685,000) each, to be remitted to the Bank on or before March 31, June 30,
September 30, and December 31 of each year commencing June 30, 1998; provided,
however, that if the Borrower is not in default, it shall not be required to
make payments that would accelerate the repayment of fixed interest rate
balances. All outstanding balances shall be repaid by December 31, 2004.
C. The Construction Term Loan, Note No. 35061, of $18,000,000 shall be
repaid by quarterly principal payments of Six Hundred Twenty-Five Thousand
Dollars ($625,000) each, to be remitted to the bank on or before March 31,
June 30, September 30, and December 31 of each year commencing December 31,
1997; provided, however, that if the Borrower is not in default, it shall not
be required to make payments that would accelerate the repayment of fixed
interest rate balances. All outstanding balances shall be repaid by December
31, 2004.
In the absence of instructions from the Borrower, or if the Borrower is
in default, the Bank at its discretion, may apply repayments to the reduction
of any of the indebtedness outstanding between the Bank and the Borrower.
X. LATE FEE PENALTY
Payments received fifteen (15) calendar days after the scheduled
repayment date are subject to a late payment penalty equal to 1% of the past
due amount but not less than $25.00 per transaction.
XI. EXPIRATION
The unadvanced portion of the Loans shall be cancelled as indicated
below; provided, however, the Bank may, at its option, extend the expiration
date of the Loans and the maturity date of the Seasonal Loan without notice to
or consent of the Borrower.
Seasonal Loan, Note No. 25540 - March 31, 1998
Construction Term Loan, Note No. 35061 - December 31, 1997
XII. REINSTATEMENT
In order to facilitate repayments and reborrowings under this loan
agreement, the bank is authorized to reinstate all sums repaid on the Seasonal
Loan through the expiration date specified in this loan agreement; provided,
however, that the total amount outstanding under this loan agreement shall not
exceed the face amount of the Seasonal Loan, and provided, further, that the
right of the Borrower to such reinstatement may be denied and cancelled at any
time at the option of the Bank.
19<PAGE>
<PAGE> 20
XIII. DEFAULT PROVISION
If the Borrower shall fail to pay when due any amount on any of the
Loans under this loan agreement, or on any other indebtedness of the Borrower
secured hereby, or fail to observe or perform any of the provisions or
representations of this loan agreement, or of any security agreement or
mortgage, or shall be subject to the jurisdiction of a bankruptcy court
whether by a voluntary filing or involuntary action, the Borrower shall be in
default. When the Borrower is in default, the Bank may declare by written
notice to the Borrower that the Loans and other indebtedness are immediately
due and payable. The Bank may then terminate its commitment to lend and
cancel any reinstatement rights provided to the Borrower under this loan
agreement, and proceed to enforce payment and exercise any or all of the
rights afforded to the Bank by law or agreement. Upon demand, and as
permitted by law, the Borrower shall reimburse the Bank for all attorneys'
fees and costs incurred by the Bank in protecting or enforcing its rights or
collateral, including reasonable attorneys' fees incurred by the Bank in a
bankruptcy or receivership proceeding or in enforcing any judgment against the
Borrower.
XIV. ACCEPTANCE
This loan agreement is the full agreement under the terms and
conditions of the Loans. It shall not be modified except in writing, and
shall not become effective unless the Borrower shall, within 60 days from
date, signify its acceptance of these terms and conditions by signing and
returning a copy of this loan agreement to the Bank.
BY DIRECTION of the loan committee this 31st day of March, 1997.
ST. PAUL BANK FOR COOPERATIVES
By /s/ Marvin L. Lindo
Its Senior Vice President
ACCEPTED AND AGREED TO:
DAKOTA GROWERS PASTA COMPANY
CARRINGTON, NORTH DAKOTA
By /s/ Tim Dodd
Its President
Date 4/17/97
20<PAGE>
<PAGE> 21
Exhibit 10.2
NONNEGOTIABLE NOTE OF
DAKOTA GROWERS PASTA COMPANY
CARRINGTON, NORTH DAKOTA
Note No. 25540
$5,000,000.00 March 31, 1997
For value received, the undersigned ("Maker") promises to pay to the St.
paul Bank for Cooperatives ("Bank"), at its office in the City of St. Paul,
Minnesota, the sum of Five Million no/100 Dollars ($5,000,000.00) with
interest on the unpaid balance at a variable rate of interest which may
increase or decrease as the Bank may, from time to time, determine as provided
in the Loan Agreement of even date between the Maker and the Bank. The unpaid
balance of this note, with accrued interest, and required equity purchases,
may be paid at any time subject to a prepayment penalty, if any, in accordance
with the terms of the Loan Agreement between the Bank and Maker.
This note shall at all times evidence and constitute prima facie proof of
the indebtedness of the Maker to the bank or its successors or assigns, of
such amount of money (not in excess of the amount of the principal
indebtedness stated above plus accrued interest and required equity purchases)
as shown to be owing by the records of the Bank, or its successors or assigns.
In the event that suit is brought on this note, the Maker agrees to pay
such reasonable attorneys' fees and costs of collection as permitted by law to
be charged.
The maker hereby waives presentment for payment, demand, protest, notice
of protest, and notice of dishonor and nonpayment of this note.
If requested by the Bank, its successors or assigns, the Maker agrees to
deliver in substitution for this note, a negotiable note for the amount of the
unpaid balance of Maker's indebtedness, plus accrued interest and required
equity purchases.
DAKOTA GROWERS PASTA COMPANY
By /s/ Timothy J. Dodd
Its President
By /s/ Curtis R. Trulson
Its Secretary
21<PAGE>
<PAGE> 22
Exhibit 10.3
REAL ESTATE MORTGAGE
THIS MORTGAGE, made and executed as of the 15th day of May, 1997, by
DAKOTA GROWERS PASTA COMPANY
a corporation, organized under the laws of the State of North Dakota
(hereinafter called the Mortgagor), whose post-office address is One Pasta
Avenue, P.O. Box 21, Carrington, North Dakota 58421 to the ST. PAUL BANK FOR
COOPERATIVES, a federally chartered corporation, (hereinafter called the
Mortgagee), whose post office address is 375 Jackson Street, St. Paul,
Minnesota 55101.
WITNESSETH
That for the purpose of securing payment of an indebtedness from the Mortgagor
to the Mortgagee in the principal sum of Forty-two Million and No/100
($42,000,000.00), interest thereon, and any future advances or readvances made
by the Mortgagee to the Mortgagor not exceeding in the aggregate amount
outstanding at any one time the above principal sum, and interest thereon, the
Mortgagor does by these presents grant, bargain, sell, convey, and mortgage to
the Mortgagee, its successors and assigns, forever, all that certain real
estate described as follows (the "Property"):
Premises situated in FOSTER County, North Dakota, more particularly described
as follows:
Auditor's Lot No. 117-A, being described as a tract of land within the
Southwest 1/4 of Section 18, Township 146 North of Range 66 West of the 5th
Principal Meridian, Foster County, North Dakota, being more particularly
described as follows: Commencing at the South quarter corner of said Section
18; thence North 00 degrees 07 minutes 04 seconds West along the North-South
quarter line of said Section 18, 1,392.27 feet to a point; thence North 58
degrees 26 minutes 03 seconds West, 778.91 feet to the point of beginning;
thence South 31 degrees 33 minutes 57 seconds West, 600.00 feet to a point;
thence North 58 degrees 26 minutes 03 seconds West, 1,100.00 feet to a point;
thence North 31 degrees 33 minutes 57 seconds East, 600.00 feet to a point;
thence South 58 degrees 26 minutes 03 seconds East, 1,100.00 feet plus or
minus, to the point of beginning. Said Auditor's Lot 117-A contains 15.15
acres more or less.
Block 4, First Industrial Park Subdivision, located within the South 1/2
of Section 18, Township 146 North of Range 66 West of the 5th Principal
Meridian, and in the City of Carrington, all in Foster County, North Dakota;
according to the certified plat thereof recorded in Book C-7 of Miscellaneous,
on Page 428, in the Office of the Register of Deeds, Foster County, North
Dakota. Parcel contains 2.67 acres more or less.
Subject to highways, easements and rights-of-way of record.
TO HAVE AND TO HOLD THE SAME, together with all the tenements, hereditaments,
fixtures, and appurtenances belonging thereto. Mortgagor does covenant with
the Mortgagee, its successors and assigns, as follows: First, that it is
lawfully seized of the Property; Second, that it has good right to convey the
Property; and that Mortgagor will WARRANT and DEFEND the title to the Property
against all lawful claims. When recorded, this Mortgage is effective as a
fixture financing statement.
The indebtedness which this Mortgage is given to secure is evidenced by a note
22<PAGE>
<PAGE> 23
or notes signed by the Mortgagor, and payable to the order of the Mortgagee,
described as follows:
Amount: Due and Payable: Interest Rate:
$5,000,000.00 December 31, 2004 The interest rate is a variable rate
$18,409,007.58 specified by the Mortgagee from time
$18,000,000.00 to time in accordance with the Farm
Credit Act of 1971 and amendments
thereto. Each time the interest rate
is raised or lowered, the rate on all
outstanding principal shall be subject
to the new rate from the date it
becomes effective. The variable
interest rate as of April 29, 1997 is
8.20%;
with interest payable quarterly on the last day of March, June, September, and
December of each year, or such other times as the Mortgagor and Mortgagee
shall agree.
This mortgage is further given to secure such advances and readvances as the
Mortgagee may make to the Mortgagor from time to time at Mortgagee's option,
and any guarantees of Mortgagor to Mortgagee. It is understood and agreed
that if partial payments on the indebtedness shall be made at any time, then,
and in that event, readvances may be made by the Mortgagee to the Mortgagor,
and that all advances, readvances, and loans shall be secured by this Mortgage
within the limits of the principal sum.
The future advances or readvances may be evidenced by a promissory note or
notes executed and delivered by the Mortgagor to the Mortgagee. This Mortgage
is given to secure any future note or notes and interest thereon as well as
the note or notes now existing.
The Mortgagor further covenants and agrees:
1. That it will pay both principal and interest to the Mortgagee at its
banking office in the City of St. Paul, Minnesota, according to the terms and
conditions of the note or notes secured by this Mortgage, at the times and in
the manner specified in the notes, together with all costs and expenses of
collection.
2. That no extension, assignment, or transfer of the note or notes shall be
considered as a discharge or waiver of any default hereunder. No delay of the
Mortgagee in asserting any right accruing by virtue of any default of any
condition hereof shall be construed as a waiver of such default.
3. That it will insure and keep insured buildings and other improvements now
on, or which may hereafter be placed on, the Property against loss or damage
by fire in companies and amounts satisfactory to Mortgagee. Any policy
evidencing such insurance is to be payable to Mortgagee as its interest may
appear. At the option of Mortgagee, sums so received by the Mortgagee may be
used to pay for reconstruction of the destroyed improvement(s), or, if not so
applied, shall be applied in payment of any indebtedness secured by this
Mortgage.
4. That it will pay when due all taxes, liens, judgments, or assessments
which have been or may be lawfully assessed or levied against the Property.
5. That in the event it fails to maintain insurance or fails to pay when due
any taxes, liens, judgments, or assessments legally owing, the Mortgagee may
provide such insurance and/or make such payment, and the sum paid shall become
a part of the indebtedness secured hereby and shall be immediately due and
payable.
23<PAGE>
<PAGE> 24
6. That it will keep all buildings and equipment subject to the Mortgage in
good repair and will not cause, suffer, or permit waste of the Property.
7. That is will execute such further and additional documents or
instruments, or do or perform all such acts as may be reasonably requested by
the Mortgagee, to perfect its title as Mortgagor to any of the Property.
8. That it will not sell, lease, or assign all or any part of the Property,
without the prior written consent of the Mortgagee.
9. That if there be any security other than this Mortgage for the
indebtedness secured hereby, then upon default, the Mortgagee may proceed upon
this and any other security, either concurrently or separately, in any order
that the Mortgagee may elect.
10. That no remedy conferred on or reserved to the Mortgagee is intended to
be exclusive of any other remedy or remedies, and each and every remedy shall
be cumulative and shall be cumulative and shall be in addition to every other
remedy given hereunder or by law.
11. That all of the right, privileges, and powers vested in the Mortgagee
shall inure to, and may be exercised by, any subsequent holder of the note or
notes, or any renewals, and this Mortgage shall be binding upon the successors
and assigns of the Mortgagor.
12. That the Mortgagee shall receive any sums payable or arising out of any
eminent domain proceedings affecting the whole or any part of, or any interest
in, the Property. All such sums are hereby assigned by the Mortgagor to the
Mortgagee, and when received by the Mortgagee may be applied on the
indebtedness secured by this Mortgage in such manner as the Mortgagee may
elect.
13. As additional security hereunder, Mortgagor hereby assigns to Mortgagee
the rents, profits, and issue (the "Rents") of the Property, provided that
Mortgagor shall, prior to acceleration, have the right to collect and retain
the Rents as they become due and payable. Upon acceleration under paragraph
14, and at any time prior to the expiration of any period of redemption
following judicial sale, Mortgagee, in person, by agent or by judicially
appointed receiver, shall be entitled to enter upon, take possession of and
manage the Property and to collect the Rents of the Property, including those
past due. All rents collected by Mortgagee or the receiver shall be applied
first to payment of the costs of management of the Property and collection of
Rents, including, but not limited to, receiver's fees, premiums on receiver's
bonds and reasonable attorney's fees, and then to the sums secured by this
Mortgage. Mortgagee and the receiver shall be liable to account only for
those Rents actually received. This provision is effective only if permitted
by law in the state this Mortgage is recorded.
14. In case of default in any of the foregoing covenants, the Mortgagor
confers upon the Mortgagee the option of declaring the unpaid balance of the
note or notes and the interest accrued thereon, together with all sums
advanced hereunder, immediately due and payable without notice, and hereby
authorizes and empowers the Mortgagee, its successors and assigns, to
foreclose this Mortgage by judicial proceedings or to sell the Property at
public auction and convey the Property to the purchaser in fee simple in
accordance with the statute. Out of the moneys from such sale, or sale under
decree of court, the Mortgagee shall retain (a) the principal and interest
which shall then be due on the note or notes, (b) any sums advanced by the
Mortgagee, its successors or assigns, and secured by this Mortgage, with
interest thereon, at the rate provided herein, and (c) all costs and charges,
24<PAGE>
<PAGE> 25
together with attorneys' fees in such amount as shall be allowed by law or the
practice of the court, or in a reasonable amount; and the surplus money, if
any, shall be paid to the Mortgagor, its successors or assigns. The
Mortgagor, for itself and all successors in interest, expressly agrees that at
any sale held pursuant to the power of sale herein, or pursuant to decree of
court, all of the Property may, at the option of the Mortgagee, be offered and
sold in bulk and as one parcel.
IN WITNESS WHEREOF, the Mortgagor has caused this Mortgage to be executed in
its corporate name by its duly authorized officers on the day and year first
above written.
Signed, Sealed, and Delivered in the
Presence of: DAKOTA GROWERS PASTA COMPANY
/s/ Thomas Friezen By /s/ Timothy J. Dodd
Its President
Print or type name: Thomas Friezen Print or type name: Tim Dodd
/s/ Maria Harmon By /s/ Curtis R. Trulson
Its Secretary
Print or type name: Maria Harmon Print or type name: Curt Trulson
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM
10-Q AND IS QUALIFIED IN IS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON
FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUL-31-1997 JUL-31-1997
<PERIOD-START> FEB-01-1997 AUG-01-1996
<PERIOD-END> APR-30-1997 APR-30-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 7,353 5,267
<ALLOWANCES> 67 67
<INVENTORY> 8,953 8,953
<CURRENT-ASSETS> 16,296 16,296
<PP&E> 52,836 52,836
<DEPRECIATION> 7,885 7,885
<TOTAL-ASSETS> 63,257 63,257
<CURRENT-LIABILITIES> 7,682 7,682
<BONDS> 26,504 26,504
400 400
270 270
<COMMON> 19,017 19,017
<OTHER-SE> 9,309 9,309
<TOTAL-LIABILITY-AND-EQUITY> 63,258 63,258
<SALES> 17,018 49,875
<TOTAL-REVENUES> 17,018 49,875
<CGS> 13,836 41,991
<TOTAL-COSTS> 13,836 41,991
<OTHER-EXPENSES> 591 1,369
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 690 1,522
<INCOME-PRETAX> 2,001 5,284
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 2,001 5,284
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,001 5,284
<EPS-PRIMARY> .41 1.07
<EPS-DILUTED> .41 1.07
</TABLE>
