Exhibit 10.1

CONFIDENTIAL TREATMENT REQUESTED. CERTAIN PORTIONS HAVE BEEN OMITTED AND HAVE
BEEN FILED SEPARATELY WITH THE COMMISSION.

CoBANK, ACB

Loan Agreement

Borrower:

DAKOTA GROWERS PASTA COMPANY
CARRINGTON, NORTH DAKOTA

New Loan

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  Present Loans

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$15,000,000.00 - Seasonal Loan   $9,600,000.00  - Term Loan     [9,600,000.00]
 - Letter of Credit Commitment     6,000,000.00  - Term Loan     7,375,000.00

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 - Construction Term Loan     $22,975,000.00  

 

  Total Loans

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  $15,000,000.00  - Seasonal Loan, Note No. A637S01A   9,600,000.00  - Term
Loan, Note No. 39181NP*   [9,600,000.00 ] - Letter of Credit Commitment, Note
No. 39182NP*/**   6,000,000.00  - Term Loan, Note No. 33061   7,375,000.00

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 – Construction Term Loan, Note No. 35062   $37,975,000.00  – Total

* NP indicates a non-patronage note.
** Note No. 39182NP will only be used to repay Note No. 39181NP.

The maximum total indebtedness hereunder will not exceed $37,975,00.00.

CoBank, ACB (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, and to
refinance Seasonal Loan, Note No. A637S01.

B. Term Loan, Note No. 39181NP, was used to refinance Term Loan, Note No. 39180.

C. Letter of Credit Commitment, Note No. 39182NP shall be used in the event that
the Bank of North Dakota draws on the letter of credit in its favor in
accordance with the terms and conditions thereof.

D. Term Loan, Note No. 33061, was used to finance the construction of the pasta
plant.

E. Construction Term Loan, Note No. 35062, was 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, as well as a perfected first security
interest in all of the Borrower’s personal property in Kentucky.

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. Advances on the Seasonal Loan shall not exceed the sum of the 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. Eighty percent (80%) of accounts receivable acceptable to the Bank and not
older than forty-five (45) days from the date of invoice.

  2. Sixty-five percent (65%) of the value under generally accepted accounting
principles (GAAP) of owned inventories of grain, semolina, flours, millfeeds,
ingredients, and finished pasta.

C. Advances on Letter of Credit Commitment, Note No. 39182NP shall support a
letter of credit issued by the Bank in favor of Bank of North Dakota.  The
letter of credit is in a current amount not to exceed $9,600,000.

IV. INTEREST

A. All Seasonal Loan balances hereunder shall bear interest at a variable rate
of interest per annum as determined by the Bank (the “Applicable Rate”)(which
was 8.22% as of December 5, 2000), which rate may vary from time to time in
relationship to the Bank’s cost of funds; provided, however, the fixed amounts
(as defined in the “FIXED RATE SEASONAL ADVANCES AND MATURITIES” section of this
loan agreement) shall bear such rates of interest as described in the
statements.  Variable rate balances (i.e., balances other than fixed amounts)
under this Paragraph A shall be subject to Paragraph C of this Section IV.

B. All outstanding Term Loan balances, excluding Note Nos. 39181NP and 39182NP,
shall bear interest at a variable rate of interest per annum as determined by
the Bank (the “Applicable Rate”)(which was 8.61% as of December 5, 2000); which
rate may vary from time to time in relationship to the Bank’s cost of funds;
provided, however, the fixed amounts (as defined in the “CUSTOMER MANAGED FIXED
RATE TERM ADVANCES AND MATURITIES” section of this loan agreement) shall bear
such rates of interest as described in the statements.  Variable rate balances
(i.e., balances other than fixed amounts) under this Paragraph B shall be
subject to Paragraph C of this Section IV.

 

 

C. This paragraph applies to (and only to) variable rate Seasonal and Term Loan
balances (excluding balances under Note Nos. 39181NP and 39182NP) .  During any
time that the Borrower is not in compliance with the current ratio and debt
service coverage ratio conditions (as defined in Section IX., paragraphs D and
F, respectively, and measured at the times specified therein), all such variable
rate balances shall bear interest at a rate *** basis points (***%) above the
respective Applicable Rate.  During any time that the Borrower is in compliance
with such current ratio and debt service coverage ratio conditions, the interest
rate shall be increased or decreased (or, as applicable, not changed) in
accordance with the following Incentive Interest Rate Matrix based on the
Leverage Ratio (as defined in Section IX, Paragraph D and measured at the times
specified therein):

 

Incentive Interest Rate Matrix

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LEVERAGE RATIO

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INCREASE / DECREASE TO INTEREST RATE

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CHANGE TO INTEREST RATE IN BASIS POINTS

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Greater than ***% *** *** Greater than ***% and less than or equal to ***% ***
*** Greater than ***% and less than or equal to ***% *** *** Greater than ***%
and less than or equal to ***% *** *** Less than or equal to ***% *** ***

(* - Confidential treatment requested.)

The interest rate change shall occur within one month after the Bank’s receipt
of the monthly compliance report.

D. The interest rate on Term Loan, Note No. 39181NP shall be fixed to maturity
at 5.71% per annum.  The interest rate on Term Loan, Note No. 39181NP, shall not
be subject to Paragraph C of this Section IV.

E. Any outstanding draws under the Letter of Credit Commitment, Note No.
39182NP, shall bear interest at the variable rate per annum equal to the highest
prime rate, as published in The Wall Street Journal Money Rate section, plus 200
basis points (2.0%).  Interest rate changes will take place within seven
business days from the time of publication in The Wall Street Journal.  The
interest rate on Letter of Credit Commitment, Note No. 39182NP shall not be
subject to Paragraph C of this Section IV.

F. Interest on the Loans shall be payable on the 20th day of each month and
shall be calculated on the actual number of days each Loan is outstanding on the
basis of a year consisting of 360 days, provided, however, that interest on
fixed-rate balances outstanding as of the date of this loan agreement shall be
paid on the 20th day of the first month of each calendar quarter and shall be
calculated on the actual number of days outstanding on the basis of a year
consisting of 365 days.

V. FEES

A. The Term Loans, except for Letter of Credit Commitment, Note No. 39182NP,
shall be subject to an agency fee of 10 basis points (0.10%) on an annualized
basis, on the daily outstanding balances and commitments payable on the last day
of each calendar quarter, in arrears.

B. The Letter of Credit Commitment, Note No. 39182NP shall be subject to a
commitment fee of 62.5 basis points (0.625%) on an annualized basis (based on a
year consisting of 360 days), on the daily outstanding commitments payable on
the last day of each calendar quarter, in arrears.  This commitment fee shall be
on a non-patronage basis.

VI. 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 30 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 June 30, 2002.

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:

  1. Note No. A637S01A.

  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.

J. Section IV., paragraph C. shall not apply to this Section VI., “FIXED RATE
SEASONAL ADVANCES AND MATURITIES.”

 

VII. 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 maturity.

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 the
following:

  1. Note Nos. 33061 or 35062.

  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.

J. Section IV., paragraph C. shall not apply to this Section VII., “CUSTOMER
MANAGED FIXED RATE TERM ADVANCES AND MATURITIES.”

 

VIII. REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that:

A. The Borrower and its subsidiary Primo Piatto, Inc. (PPI) are duly organized,
existing and in good standing under the laws of North Dakota and Minnesota,
respectively.  They have the power to own their properties and to carry on their
business as now being conducted.  They are duly qualified to do business and are
in good standing in each jurisdiction in which the transaction of their business
makes such qualification necessary, except where the failure to so qualify would
not have a material adverse effect on their business, operations, or properties,
taken as a whole.

B. The Borrower has full power and authority to execute, deliver, and perform
under the terms of this loan agreement and the Borrower and PPI each has full
power and authority to execute, deliver and perform under the terms of the
notes, the security agreements, mortgages, and guaranty (collectively referred
to as the “Loan and Security Documents”) and all other documents and agreements
contemplated by this loan agreement, all of which have been duly authorized by
each respective party.

C. All consents or approvals of any person which are necessary for, or are
required as a condition of, the execution, delivery, and performance under the
terms of the Loan and Security Documents have been obtained.

D. The Loan and Security Documents each constitutes the legal, valid, and
binding obligation of the Borrower and PPI, enforceable against the Borrower and
PPI, in accordance with its respective terms.

E. To the best of the Borrower’s knowledge, there are no pending legal or
governmental actions, proceedings, or investigations to which the Borrower or
PPI is a party, or to which any property of the Borrower or PPI is subject,
which might result in any material adverse change in the business or financial
condition of the Borrower or PPI, and to the best of the Borrower’s knowledge,
no such actions or proceedings are threatened or contemplated by governmental
authorities or any other person.

F. There is no provision of the Borrower’s articles of incorporation or bylaws
and, to the best of the Borrower’s knowledge after due inquiry, no provision of
any existing real estate mortgage, indenture, lease, security agreement,
contract, note, instrument, or any other agreement or document binding on the
Borrower or PPI, or affecting their properties, which would conflict with or in
any way prevent the execution, delivery, or performance of the Loan and Security
Documents by the Borrower or PPI.

G. To the best of the Borrower’s knowledge, the Borrower and PPI each has duly
and lawfully obtained, and is duly and lawfully maintaining in effect, all
material, licenses, certificates, permits, qualifications, authorizations, and
approvals which are required or necessary for the operation of its business,
whether federal, state, or local.

H. To the best of the Borrower’s knowledge, neither the Borrower nor PPI has (1)
any direct or contingent liability for any obligation of any other person and
(2) any obligation to make a loan or advance to any person or to own, purchase,
or acquire any stock, obligations, or securities of, or any other interests in,
or to make any capital contribution to, any person.

 

IX. 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 and Revolvement of Equities: The Borrower may not revolve, or
otherwise pay out, any dividends or owner equity if such action would cause one
or more of “FINANCIAL CONDITIONS” C., D., or E. under this loan agreement to be
in a noncompliance position, without the prior written consent of the Bank,
which consent will not be unreasonably withheld.

C. Current Ratio: The Borrower will maintain a current ratio (current assets
divided by current liabilities) of not less than 1.35:1, measured at each month
end.

D. Leverage Ratio:  The Borrower will maintain a leverage ratio (The sum of Long
Term Liabilities minus Deferred Taxes Payable plus the Present Value of
Operating Leases divided by Net Worth) of not greater than 1.10:1.0, measured at
each month end.  Long Term Liabilities may be adjusted to reflect a current
ratio of 1.35:1.

E. Debt Service Coverage Ratio: The Borrower will maintain a debt service
coverage ratio of not less than 1.50:1, measured for the previous twelve month
period ending July 31 of each year.  The debt service coverage ratio shall be
calculated as follows:

 

After-tax net income       Add: Depreciation and Amortization Expense   Capital
Retains Subtract: Non Cash Patronage Income   Cash Patronage or Dividend Payable
in Subsequent Fiscal Year based on the Current Fiscal Year’s Net Income  
Extraordinary Gains or Losses, after taxes income or expense   Gain or (Loss) on
Asset Sales   Retains Revolved Equal to: Adjusted Cashflows from Operations
Divided by: Prior period current portion of Long Term Liabilities plus   Prior
period current portion of Capitalized Leases Equals: Debt Service Coverage Ratio

 

X. 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. Non-Patronage Loans: Term Loan, Note No. 39181NP and Letter of Credit
Commitment, Note No. 39182NP shall be non-patronage loans.  The Borrower
foregoes any opportunity to purchase Bank equities or receive allocations of
patronage earnings on Term Loan, Note No. 39181NP and Letter of Credit
Commitment, Note No. 39182NP.

 

 

D. Insurance: The Borrower and PPI 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.

E. Financial Information: The Borrower will furnish the Bank audited annual
financial statements prepared in accordance with Generally Accepted Accounting
Principles (“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 45 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.

F. Collateral Reports: The Borrower will furnish the Bank collateral reports to
be submitted in such form and frequency as required by the Bank.

G. Negative Pledge, Merger, etc.: 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 consent will not be unreasonably
withheld, or allow to exist any non-consensual or statutory lien or judgment
against it or its assets.  The Borrower will not sell, lease or dispose of its
assets except in the ordinary course of business.  The Borrower will not merge
or consolidate with any other entity, or form or create any new subsidiary, or
purchase all or a material part of the assets of any person or entity, or
commence operations under any other name or organization.

H. Corporate Documents: The Borrower will not amend its articles of
incorporation, by-laws, growers agreement, nor its grain delivery payment
policies without the prior written consent of the Bank, which consent will not
be unreasonably withheld.

I. Environmental Representations, Conditions, and Indemnity Clause: Except as
disclosed in writing to the Bank, the Borrower and PPI 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.

  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.

 

XI. REPAYMENT

The indebtedness arising from the Loans shall be repaid as follows:

A. The Seasonal Loan, Note No. A637S01A, of not to exceed $15,000,000 shall
mature on December 31, 2001; 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 December 31, 2001 shall be repaid no later than June 30, 2002.

B. The present Term Loan, Note No. 39181NP, of $9,600,000, shall be repaid by
annual principal payments of One Million Two Hundred Thousand Dollars
($1,200,000) each, to be remitted to the Bank on or before September 30 of each
year.  All outstanding balances shall be repaid by September 30, 2008.

C. Advances made in support of Letter of Credit Commitment, Note No. 39182NP, of
not to exceed $9,600,000, shall be payable on demand.

D. The present Term Loan, Note No. 33061, of $6,000,000 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 on September 30, 2001;
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.

 

 

E. The present Construction Term Loan, Note No. 35062, of $7,3750,000 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; 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.

XII. LATE FEE PENALTY

Payments received twenty (20) 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.

XIII. 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. A637S01A - December 31, 2001.
Letter of Credit Commitment, Note No. 39182NP - December 31, 2008, subject to
decreased amounts provided for in the letter of credit.

XIV. 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.

XV. 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 to the Bank,
or fail to observe or perform any of the provisions or representations of this
loan agreement, or of any security agreement, mortgage, or other security
document, or shall be subject to the jurisdiction of a bankruptcy court whether
by a voluntary filing or involuntary action, or shall be in default of the Note
Purchase Agreement executed by Borrower dated as of July 15, 1998, or any of the
documents evidencing such Note Purchase Agreement or securing the obligation
thereunder, 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.

XVI. 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 90 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 5th day of December, 2000.

CoBank, ACB

By ___________________________________

Its ___________________________________

ACCEPTED AND AGREED TO:

DAKOTA GROWERS PASTA COMPANY
CARRINGTON, NORTH DAKOTA

By __________________________________

Its _________________________________

Date ________________________________

ACKNOWLEDGED BY AND AGREED TO
AS TO SECTION VIII; AND SECTION X.,
PARAGRAPHS D. AND I.:

PRIMO PIATTO, INC.
NEW HOPE, MINNESOTA

By _________________________________

Its _________________________________

Date _______________________________

 

NONNEGOTIABLE NOTE OF

DAKOTA GROWERS PASTA COMPANY

CARRINGTON, NORTH DAKOTA

Note No. A637S01A

$15,000,000.00 December 5, 2000

                    For value received, the undersigned (“Maker”) promises to
pay to CoBank, ACB, (the “Bank”), at its office in the City of Denver, Colorado,
the sum of Fifteen Million and no/100 Dollars ($15,000,000.00) 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___________________________                         Its President

  By___________________________                         Its Secretary