Exhibit 10.5

 

CONTINUING GUARANTEE

 

1.             Absolute Guarantee.  For valuable consideration and to induce
CoBank, ACB (“CoBank”) to extend a loan or loans to DAKOTA GROWERS PASTA
COMPANY, INC., Carrington, North Dakota (“Borrower”), of which PRIMO PIATTO,
INC. (“Guarantor”) is a wholly owned subsidiary, Guarantor unconditionally and
absolutely guarantees and promises to pay to CoBank, or order, on demand, in
lawful money of the United States, any and all Indebtedness of Borrower to
CoBank; provided that the liability of the Guarantor hereunder shall be limited
to the maximum amount of the Indebtedness which Guarantor may guarantee without
rendering this Guarantee void or voidable under any applicable fraudulent
conveyance or fraudulent transfer law.  The word “Indebtedness” is used herein
in its more comprehensive sense, and includes any and all advances, debts,
obligations and liabilities of Borrower, including but not limited to all
principal, interest, fees, expenses and stock subscription charges, heretofore,
now or hereafter made, incurred or created, whether voluntary or involuntary and
however arising, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly with others, or whether recovery upon such Indebtedness
may be or hereafter become barred by any statute of limitation, or whether such
Indebtedness may be or hereafter become otherwise unenforceable.

 

2.             Continuing Guarantee.  No termination by Guarantor shall be
effective except by notice sent to CoBank by registered mail naming a
termination date effective not less than ninety (90) days after the receipt of
such notice by CoBank.  No such termination shall affect (i) any Indebtedness of
Borrower incurred prior to the effective date of termination or (ii) any
Indebtedness for interest, fees, expenses and/or stock subscription charges
incurred after termination related to any Indebtedness outstanding on the
effective date of termination.

 

3.             Guarantee of Payment.  This continuing guarantee is a guarantee
of payment and not of collection.  The obligations hereunder are joint and
several, and independent upon the Indebtedness of Borrower, and a separate
action or actions may be brought and prosecuted against Guarantor whether action
is brought against Borrower or whether Borrower be joined in any such action or
actions; and Guarantor waives the benefit of any statutes of limitations
affecting its liability hereunder or the enforcement thereof.

 

4.             Authorities of CoBank.  Guarantor authorizes CoBank, without
notice or demand and without affecting liability hereunder, from time to time,
to (a) grant additional credit to Borrower, and renew, compromise, extend,
accelerate or otherwise change the time for payment of, or otherwise change the
terms of, the Indebtedness or any part thereof, including increase or decrease
of the rate of interest thereon; (b) take and hold security for the payment of
this Guarantee or the Indebtedness guaranteed, and exchange, enforce, waive and
release any such security; (c) apply such security and direct the order or
manner of sale thereof as CoBank in its discretion may determine; and
(d) release or substitute any one or more endorsers or guarantors of the
Indebtedness.

 

5.             Waivers.  Guarantor waives any right to require CoBank, as a
condition to proceeding against Guarantor, to (a) proceed against Borrower or
any other person; (b) proceed against or exhaust any security held from Borrower
or Guarantor; or (c) pursue any other remedy in CoBank’s power whatsoever. 
Guarantor waives any defense arising by reason of any disability or other
defense or counter-claim that the Borrower may assert on the underlying debt,
including but not limited to failure of consideration, breach of warranty,
fraud, statute of frauds, bankruptcy, statute of limitations, lender liability,
accord and satisfaction, and usury or by reason of the cessation from any cause
whatsoever of the liability of Borrower.  Guarantor waives the pleading or
assertion of any defense based on the failure of CoBank to keep Guarantor
informed of the financial and business status of Borrower, it being expressly
acknowledged by Guarantor that it is Guarantor’s responsibility to keep so
informed.  Until all Indebtedness of Borrower to CoBank shall have been paid in
full, Guarantor shall have no right of

 

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subrogation, and waives any right to enforce any remedy which CoBank now has, or
may hereafter have against Borrower, and waives any benefit of, and any right to
participate in any security now or hereafter held by CoBank.  Guarantor waives
all setoffs and counterclaims, and all presentments, demands for performance,
notices of nonperformance, protests, notices of dishonor, notices of sale of
foreclosure of any security for the payment of the Indebtedness, and notices of
acceptance of this Guarantee and of the existence, creation, or incurring or new
or additional Indebtedness.

 

GUARANTOR WARRANTS AND AGREES THAT EACH OF THE WAIVERS SET FORTH IN THIS
AGREEMENT IS MADE WITH GUARANTOR’S FULL KNOWLEDGE OF ITS SIGNIFICANCE AND
CONSEQUENCES AND THAT, UNDER THE CIRCUMSTANCES, THE WAIVERS ARE REASONABLE AND
NOT CONTRARY TO PUBLIC POLICY OR LAW.  IF ANY SUCH WAIVER IS DETERMINED TO BE
CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY, SUCH WAIVER SHALL BE EFFECTIVE
ONLY TO THE EXTENT PERMITTED BY LAW OR PUBLIC POLICY.

 

6.             Lien; Right of Setoff.  In addition to all liens upon, and all
rights of setoff against the monies, securities or other property of Guarantor
given to CoBank by law or by contract, CoBank shall have a lien upon and a right
to setoff against all monies securities and other property of Guarantor now or
hereafter in the possession of or on deposit with CoBank, whether held in a
general or special account of deposit, or for safekeeping or otherwise; and
every such lien and right of setoff may be exercised without demand upon or
notice to Guarantor.  No lien or right of setoff shall be deemed to have been
waived by any act or conduct on the part of CoBank, or by any neglect to
exercise such right of setoff or to enforce such lien, or by any delay in so
doing, and every right of setoff and lien shall continue in full force and
effect until such right of setoff or lien is specifically waived or released by
an instrument in writing executed by CoBank.

 

7.             No Waiver.  No exercise or nonexercise of any right hereby given
CoBank, no dealing by CoBank with Borrower or any other Guarantor, no change,
impairment, or suspension of any of CoBank’s rights or remedies, shall in any
way affect any of the obligations of Guarantor hereunder or any security
furnished by Guarantor or give Guarantor any recourse against CoBank.  The
Guarantor represents to CoBank that he is now and will be completely familiar
with the business, operation, and condition of Borrower, and Guarantor waives
any right to require CoBank to notify Guarantor of any facts concerning
Borrower, unknown to Guarantor, material or otherwise, which might affect the
relationship of CoBank, Guarantor, and Borrower, or which might cause Guarantor
to give CoBank notice of termination of this Guarantee as herein provided.

 

8.             Subordination.  Any Indebtedness of Borrower to Guarantor now or
hereafter held by Guarantor is hereby subordinated to the Indebtedness of
Borrower to CoBank; and such Indebtedness of Borrower to Guarantor, if CoBank so
requests, shall be collected, enforced and received by Guarantor as trustee for
CoBank and be paid over to CoBank on account of the Indebtedness of Borrower to
CoBank but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this Guarantee.

 

9.             Corporate Authority.  Although Borrower is a corporation, it is
not necessary for CoBank to inquire into the powers of Borrower, or the
officers, directors, or agents acting or purporting to act on its behalf, and
any Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.

 

10.          Attorneys’ Fees.  Guarantor agrees to pay the attorneys’ fees of
CoBank and all other costs and expenses which may be incurred by CoBank in the
enforcement of this Guarantee.  This Guarantee shall be interpreted and enforced
in accordance with the laws of the State of Colorado.

 

11.          Remedies Cumulative.  CoBank’s rights under this Guarantee are
cumulative and not alternative, and shall not be exhausted by CoBank’s exercise
of any one or more rights hereunder, or

 

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otherwise, or by any number of successive actions, unless and until all
obligations of Borrower and Guarantor have been paid or performed.  The
liability under this Guarantee shall continue notwithstanding the incapacity or
disability of Guarantor, and its benefits shall inure to CoBank’s successors and
assigns.  CoBank may assign this Guarantee, in whole or in part, without notice
to Guarantor.  Guarantor waives all exemptions and all setoffs and
counterclaims.  Only to the extent that this Guarantee is inconsistent with any
prior guarantee given by Guarantor to CoBank, or contains additional provisions,
does this Guarantee supersede such prior guarantees; otherwise, such prior
guarantees remain in full force and effect.

 

12.          Reinstatement of Payment.  If any payment received by CoBank and
applied to the Indebtedness is subsequently set aside, recovered, rescinded, or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of Borrower), the Indebtedness to which
such payment was applied shall for the purposes of this continuing guarantee be
deemed to have continued in existence, and this continuing guarantee shall be
enforceable as to such Indebtedness as fully as if such applications had never
been made.

 

13.          Indemnification.  Guarantor expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against Borrower or any other person
directly or contingently liable for the Indebtedness guaranteed hereunder, or
against or with respect to Borrower’s property, including without limitation,
any property securing its Indebtedness to CoBank, arising from the existence or
performance of this Guarantee.  In furtherance, and not in limitation, of the
preceding waiver, Guarantor agrees that any payment to CoBank by guarantor
pursuant to this Guarantee shall be deemed to be a contribution to the capital
of Borrower or other obligated party and such payment shall not cause Guarantor
to be a creditor of Borrower or any other obligated party.  In addition to, and
not in substitution for, any other rights granted to CoBank by this Guarantee,
including but not limited to any rights set forth in Paragraph 11 above, in the
event that a bankruptcy court determines that any monies paid by Borrower to
CoBank are avoidable preferences because they were made for the benefit of
Guarantor, then Guarantor shall indemnify and hold CoBank harmless from any
losses, including, but not limited to all costs and expenses, including
reasonable attorneys’ fees, which CoBank may incur as a result of such
determination.

 

14.          Right of Foreclosure.  The Guarantor agrees that if all or a
portion of the Indebtedness is, at any time, secured by a deed of trust or
mortgage covering interests in real property, CoBank, in its sole discretion,
without notice or demand, and without affecting the liability of the Guarantor,
may foreclose the deed of trust or mortgage, and the interest in real property,
secured thereby by nonjudicial sale; and the Guarantor hereby waives any defense
to the recovery by CoBank against the Guarantor of any deficiency after a
nonjudicial sale.

 

15.          Amendment.  Neither this Agreement, nor any provision hereof, may
be amended, modified, waived, or discharged except by an instrument in writing
duly signed by, or on behalf of, CoBank.

 

16.          Severability.  In case any right of CoBank herein shall be held to
be invalid, illegal, or unenforceable, such invalidity, illegality and/or
unenforceability shall not affect any other right granted hereby.

 

17.          Guarantor’s Representations.  Guarantor represents and warrants
that:  (a) no representations or agreements of any kind have been made to the
Guarantor which would limit or qualify in any way the terms of this Guarantee;
(b) the Guarantor has not and will not, without CoBank’s prior written consent,
sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of any
of the Guarantor’s assets, or any interest therein, other than in the ordinary
course of business; (c) CoBank has made no representation to the Guarantor as to
the creditworthiness of the Borrower; (d) the Guarantor will provide to CoBank
financial and credit information in form acceptable to CoBank, including balance

 

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sheets and income statements no less frequently than annually, as soon as they
become available, not later than 120 days after each fiscal year end or at such
other times as CoBank may request.

 

18.          This Guarantee is secured by a Security Agreement of even date
herewith, executed by Guarantor as well as the following deed(s) of trust: dated
February 13, 1998 and recorded in the office of the Hennepin County, Minnesota,
Recorder as document no. 6855008, and also recorded in the office of the
Hennepin County, Minnesota, Registrar of Titles as document no. 2891901; and
dated August 5, 1998 and recorded in the office of the Hennepin County,
Minnesota, Recorder as document no. 6947302, and also recorded in the office of
the Hennepin County, Minnesota, Registrar of Titles as document no. 3060990;
including any replacements, modifications or amendments thereto.  In addition,
at CoBank’s request, the Guarantor agrees to grant to CoBank, by means of such
instruments and documents as CoBank shall require, a first lien on such of the
Guarantor’s other assets, whether now existing or hereafter acquired, as CoBank
may from time to time require.

 

IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guarantee this
23rd day of May, 2005.

 

 

 

PRIMO PIATTO, INC.

 

New Hope, Minnesota

 

 

 

By

    /s/Thomas Friezen

 

 

Title:

      VP Finance

 

 

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