**Exhibit 10.7**

 

MLA No. E539

 

**MASTER LOAN AGREEMENT**

 

 

                **THIS MASTER LOAN AGREEMENT** is entered intoas of June 20, 2001, between **CoBANK, ACB** (successor to the St. Paulfor Cooperatives) ("CoBank") and **DAKOTA GROWERS PASTA COMPANY**, Carrington,North Dakota (the "Company").

 

**BACKGROUND**

 

From time to time CoBank may make loans to the Company.  In order to reduce the amount of paperworkassociated therewith, CoBank and the Company would like to enter into a masterloan agreement.  For that reason, and inconsideration of CoBank making one or more loans to the Company, CoBank and theCompany agree as follows:

 

        **SECTION 1.        Supplements. **In the event the Company desiresto borrow from CoBank and CoBank is willing to lend to the Company, or in theevent CoBank and the Company desire to consolidate any existing loanshereunder, the parties will enter into a Supplement to this agreement (a"Supplement").  EachSupplement will set forth the amount of the loan, the purpose of the loan, theinterest rate or rate options applicable to that loan, the repayment terms ofthe loan, and any other terms and conditions applicable to that particularloan.  Each loan will be governed by theterms and conditions contained in this agreement and in the Supplement relatingto the loan.

 

        **SECTION 2.        Availability. **Loans will be made available onany day on which CoBank and the Federal Reserve Banks are open for businessupon the telephonic or written request of the Company.  Requests for loans must be received no laterthan 12:00 Noon Company’s local time on the date the loan is desired.  Loans will be made available by wiretransfer of immediately available funds to such account or accounts as may beauthorized by the Company.  The Companyshall furnish to CoBank a duly completed and executed copy of a CoBankDelegation and Wire and Electronic Transfer Authorization Form, and CoBankshall be entitled to rely on (and shall incur no liability to the Company inacting on) any request or direction furnished in accordance with the termsthereof.

 

        **SECTION 3.        Repayment. **The Company's obligation to repayeach loan shall be evidenced by the promissory note set forth in the Supplementrelating to that loan or by such replacement note as CoBank shall require.  CoBank shall maintain a record of all loans,the interest accrued thereon, and all payments made with respect thereto, andsuch record shall, absent proof of manifest error, be conclusive evidence ofthe outstanding principal and interest on the loans.  All payments shall be made bywire transfer of immediately available funds, by check, or by automatedclearing house or other similar cash handling processes as specified byseparate agreement between the Company and CoBank.  Wire transfers shall be made to ABANo. 307088754 for advice to and credit of CoBank (or to such other accountas CoBank may direct by notice).  TheCompany shall give CoBank telephonic notice no later than 12:00 Noon Company’slocal time of its intent to pay by wire and funds received after 3:00 p.m.Company’s local time shall be credited on the next business day.  Checks shall be mailed to CoBank, Department167, Denver, Colorado 80291–0167 (or to such other place as CoBank maydirect by notice).  Credit for paymentby check will not be given until the later of: (a) the day on which CoBank receives immediately available funds; or (b)the next business day after receipt of the check.

        **SECTION4.        Capitalization. **The Company agrees topurchase such equity in CoBank as CoBank may from time to time require inaccordance with its Bylaws.  However,the maximum amount of equity which the Company shall be obligated to purchasein connection with any loan may not exceed the maximum amount permitted by theBylaws at the time the Supplement relating to that loan is entered into or suchloan is renewed or refinanced by CoBank.

 

**        SECTION5.        Security. **The Company's obligationsunder this agreement, all Supplements (whenever executed), and all instrumentsand documents contemplated hereby or thereby, shall be secured by a statutoryfirst lien on all equity which the Company may now own or hereafter acquire inCoBank and by a first lien (subject only to exceptions approved in writing byCoBank) pursuant to all security agreements, mortgages, and deeds of trustexecuted by the Company in favor of CoBank (including the St. Paul Bank forCooperatives), whether now existing or hereafter entered into.  As additional security for thoseobligations, the Company agrees to grant to CoBank, by means of such instrumentsand documents as CoBank shall require, a first lien on such of its otherassets, whether now existing or hereafter acquired, as CoBank may from time totime require.

 

        **SECTION 6.        ConditionsPrecedent.**

 

                **(A)        Conditionsto Initial Supplement. **CoBank’sobligation to extend credit under the initial Supplement hereto is subject tothe conditions precedent that CoBank receive, in form and substancesatisfactory to CoBank, each of the following:

 

**                            (i)        This Agreement, Etc. **A duly executed copy ofthis agreement and all instruments and documents contemplated hereby.

 

                            **(ii)                            Guaranteeand Related Documents:**  (a) Aguarantee of payment from Primo Piatto, Inc.; and (b) such certified boardresolutions, evidence of incumbency, and other evidence as CoBank may requirethat the guarantee all instruments and documents executed in connectiontherewith have been duly authorized and executed.

 

                **(B)        Conditionsto Each Supplement. **CoBank’sobligation to extend credit under each Supplement, including the initialSupplement, is subject to the conditions precedent that CoBank receive, in formand content satisfactory to CoBank, each of the following:

 

                            **(i)        Supplement. **A duly executed copy of theSupplement and all instruments and documents contemplated thereby.

 

                        **(ii)   Evidence of Authority. **Such certified board resolutions,evidence of incumbency, and other evidence that CoBank may require that theSupplement, all instruments and documents executed in connection therewith,and, in the case of initial Supplement hereto, this agreement and allinstruments and documents executed in connection herewith, have been dulyauthorized and executed.

 

                        **(iii)Fees and Other Charges.** All fees and other charges provided forherein or in the Supplement.

 

                        **(iv)  Evidence of Perfection, Etc. **Such evidence as CoBank may requirethat CoBank has a duly perfected first priority lien on all security for theCompany’s obligations, and that the Company is in compliance with Section 8(D)hereof.

 

                **(C)        Conditionsto Each Loan. **CoBank’sobligation under each Supplement to make any loan to the Company thereunder issubject to the condition that no “Event of Default” (as defined in Section 11hereof) or event which with the giving of notice and/or the passage of timewould become an Event of Default hereunder (a “Potential Default”), shall haveoccurred and be continuing.

        **SECTION7.        Representations and Warranties.**

 

                **(A)        ThisAgreement. **The Companyrepresents and warrants to CoBank that as of the date of this Agreement:

 

                            **(i)        Compliance. **The Company and, to the extentcontemplated hereunder, each “Subsidiary” (as defined below), is in compliancewith all of the terms of this agreement, and no Event of Default or PotentialDefault exists hereunder.

 

**                        (ii)        Subsidiaries.**  The Company has the followingSubsidiary:  Primo Piatto, Inc.  For purposes hereof, a “Subsidiary” shallmean a corporation of which shares of stock having ordinary voting power toelect a majority of the board of directors or other managers of suchcorporation are owned, directly or indirectly, by the Company.

 

**                (B)                Each Supplement. **The execution by theCompany of each Supplement hereto shall constitute a representation andwarranty to CoBank that:

 

                            **(i)        Applications. **Each representation and warrantyand all information set forth in any application or other documents submittedin connection with, or to induce CoBank to enter into, such Supplement, iscorrect in all material respects as of the date of the Supplement.

 

                        **(ii)        Conflicting Agreements, Etc. **This agreement, the Supplements,and all security and other instruments and documents relating hereto andthereto (collectively, at any time, the “Loan Documents”), do not conflictwith, or require the consent of any party to, any other agreement to which theCompany is a party or by which it or its property may be bound or affected, anddo not conflict with any provision of the Company’s bylaws, articles ofincorporation, or other organizational documents.

 

**                       **(**iii)        Compliance. **The Company and, to the extentcontemplated hereunder, each Subsidiary, is in compliance with all of the termsof the Loan Documents (including, without limitation, Section 8(A) of thisagreement on eligibility to borrow from CoBank).

 

                        **(iv)  Binding Agreement. **The Loan Documents create legal, valid, and bindingobligations of the Company which are enforceable in accordance with theirterms, except to the extent that enforcement may be limited by applicablebankruptcy, insolvency, or similar laws affecting creditors’ rights generally.

 

        **SECTION 8.        AffirmativeCovenants. **Unless otherwiseagreed to in writing by CoBank, while this agreement is in effect, the Companyagrees to and with respect to Subsections 8(B) through 8(G) hereof, agrees tocause each Subsidiary to:

 

                **(A)        Eligibility. **Maintain its status as an entityeligible to borrow from CoBank.

 

                **(B)        CorporateExistence, Licenses. Etc. **(i)Preserve and keep in full force and effect its existence and good standing inthe jurisdiction of its incorporation or formation; (ii) qualify and remainqualified to transact business in all jurisdictions where such qualification isrequired; and (iii) obtain and maintain all licenses, certificates, permits,authorizations, approvals, and the like which are material to the conduct ofits business or required by law, rule, regulation, ordinance, code, order, andthe like (collectively, “Laws”).

 

                **(C)        Compliancewith Laws.** Comply in allmaterial respects with all applicable Laws, including, without limitation, allLaws relating to environmental protection and any patron or member investmentprogram that it may have.  In addition,the Company agrees to cause all persons occupying or present on any of itsproperties, and to cause each Subsidiary to cause all persons occupying orpresent on any of its properties, to comply in all material respects with allenvironmental protection Laws.

 

                **(D)        Insurance. **Maintain insurance with insurancecompanies or associations acceptable to CoBank in such amounts and coveringsuch risks as are usually carried by companies engaged in the same or similarbusiness and similarly situated, and make such increases in the type or amountof coverage as CoBank may request.  Allsuch policies insuring any collateral for the Company’s obligations to CoBankshall have mortgagee or lender loss payable clauses or endorsements in form andcontent acceptable to CoBank.  AtCoBank’s request, all policies (or such other proof of compliance with thisSubsection as may be satisfactory to CoBank) shall be delivered to CoBank.

                **(E)        PropertyMaintenance. **Maintainall of its property that is necessary to or useful in the proper conduct of itsbusiness in good working condition, ordinary wear and tear excepted.

 

                **(F)        Booksand Records. **Keep adequaterecords and books of account in which complete entries will be made inaccordance with generally accepted accounting principles ("GAAP")consistently applied.

 

                **(G)        Inspection. **Permit CoBank or its agents, uponreasonable notice and during normal business hours or at such other times asthe parties may agree, to examine its properties, books, and records, and todiscuss its affairs, finances, and accounts, with its respective officers,directors, employees, and independent certified public accountants.

 

        **        (H)        Reports and Notices. **Furnish to CoBank:

 

                            **(i)        AnnualFinancial Statements. **As soonas available, but in no event more than 120 days after the end of each fiscalyear of the Company occurring during the term hereof, annual consolidatedfinancial statements of the Company and its consolidated Subsidiaries, if any,prepared in accordance with GAAP consistently applied.  Such financial statements shall:  (a) be audited by independent certifiedpublic accountants selected by the Company and acceptable to CoBank; (b) beaccompanied by a report of such accountants containing an opinion thereonacceptable to CoBank; (c) be prepared in reasonable detail and in comparativeform; and (d) include a balance sheet, a statement of income, a statementof retained earnings, a statement of cash flows, and all notes and schedulesrelating thereto.

 

                        **(ii)   Interim Financial Statements. **As soon as available, but in noevent more than 50 days after the end of each month (other than the last monthin each fiscal year of the Company), a consolidated balance sheet of theCompany and its consolidated Subsidiaries, if any, as of the end of such month,a consolidated statement of income for the Company and its consolidatedSubsidiaries, if any for such period and for the period year to date, and suchother interim statements as CoBank may specifically request, all prepared inreasonable detail and in comparative form in accordance with GAAP consistentlyapplied and certified by an authorized officer or employee of the Companyacceptable to CoBank.

 

                        **(iii)Notice of Default. **Promptly after becoming aware thereof, notice of theoccurrence of an Event of Default or a Potential Default.

 

                        **(iv)  Notice of Non-Environmental Litigation. **Promptly after the commencementthereof, notice of the commencement of all actions, suits, or proceedingsbefore any court, arbitrator, or governmental department, commission, board,bureau, agency, or instrumentality affecting the Company or any Subsidiarywhich, if determined adversely to the Company or any such Subsidiary, couldhave a material adverse effect on the financial condition, properties, profits,or operations of the Company or any such Subsidiary.

 

**                        (v)    Noticeof Environmental Litigation, Etc. **Promptlyafter receipt thereof, notice of the receipt of all pleadings, orders,complaints, indictments, or any other communication alleging a condition thatmay require the Company or any Subsidiary to undertake or to contribute to acleanup or other response under environmental Laws, or which seek penalties,damages, injunctive relief, or criminal sanctions related to alleged violationsof such Laws, or which claim personal injury or property damage to any personas a result of environmental factors or conditions.

 

                        **(vi)  Bylaws and Articles.**  Promptly after any change in the Company’sbylaws or articles of incorporation (or like documents), copies of all suchchanges, certified by the Company’s Secretary.

 

**                        (vii)        FinancialCovenant Certificates.** Together with each set of financial statements furnished to CoBankpursuant to Section 8(H) hereof, a certificate of an officer or employee of theCompany acceptable to CoBank setting forth calculations showing compliance withthe financial covenants set forth in Section 10 hereof.

                        **(viii)        Annual Budgets.**  As soon as available, but in no event more than 90 days after theend of any fiscal year of the Company occurring during the term hereof, copiesof the Company’s board approved annual budgets and forecasts of operations andcapital expenditures.

 

                        **(ix)**  **Other Information. **Such other information regarding the condition or operations,financial or otherwise, of the Company or any Subsidiaryas CoBank may from time to time reasonablyrequest, including but not limited to copies of all pleadings, notices, andcommunications referred to in Subsections 8(H)(iv) and (v) above.

 

**        SECTION9.        Negative Covenants. **Unless otherwise agreed toin writing by CoBank, while this agreement is in effect the Company will notand will not permit its Subsidiary to:

 

**                (A)        Borrowings.** Create, incur, assume, or allow to exist,directly or indirectly, any indebtedness or liability for borrowed money(including trade or bankers’ acceptances), letters of credit, or the deferredpurchase price of property or services (including capitalized leases), exceptfor:  (i) debt to CoBank;(ii) accounts payable to trade creditors incurred in the ordinary courseof business; (iii) current operating liabilities (other than for borrowedmoney) incurred in the ordinary course of business; (iv) debt of the Company toMassachusetts Mutual Life Insurance Company, Baystate Health Systems, Inc., C.M. Life Insurance Company, The Security Mutual Life Insurance Company ofLincoln, Nebraska, and the Canada Life Assurance Company in an aggregate amountnot to exceed $27,000,000.00, debt of the Company to the City of Carrington in anamount not to exceed $172,000.00, debt of the Company to Northern PlainsCooperative in an amount not to exceed $30,000.00, and debt of the Company toDakota Central Telecommunications in an amount not to exceed to $30,000.00, andall extensions, renewals, and refinancings thereof; (v) purchase moneyindebtedness for real property, plant, and equipment, provided that suchindebtedness does not exceed 100% of the purchase price of the asset(s) beingacquired, and provided the aggregate principal amount does not exceed$1,000,000.00; and (vi) capitalized leases in existence from time to time.

 

                **(B)        Liens. **Create, incur, assume, or allowto exist any mortgage, deed of trust, pledge, lien (including the lien of anattachment, judgment, or execution), security interest, or other encumbrance ofany kind upon any of its property, real or personal (collectively,“Liens”).  The foregoing restrictionsshall not apply to:  (i) Liens in favorof CoBank; (ii) Liens for taxes, assessments, or governmental charges that arenot past due; (iii) Liens and deposits under workers' compensation,unemployment insurance, and social security Laws; (iv) Liens and depositsto secure the performance of bids, tenders, contracts (other than contracts forthe payment of money), and like obligations arising in the ordinary course ofbusiness as conducted on the date hereof; (v) Liens imposed by Law in favor ofmechanics, materialmen, warehousemen, and like persons that secure obligationsthat are not past due; and (vi) easements, rights-of-way, restrictions,and other similar encumbrances which, in the aggregate, do not materiallyinterfere with the occupation, use, and enjoyment of the property or assetsencumbered thereby in the normal course of its business or materially impairthe value of the property subject thereto; (vi) Liens existing on the datehereof in favor of Massachusetts Mutual Life Insurance Company, Baystate HealthSystems, Inc., C.M. Life Insurance Company, The Security Mutual Life InsuranceCompany of Lincoln, Nebraska, Canada Life Assurance Company, the City ofCarrington, Northern Plains Cooperative, and Dakota Central Telecommunicationsto secure indebtedness permitted hereunder; and (vii) purchase money Liens onreal property, plant, and equipment permitted under Section 9(A)(v).

 

                **(C)        Mergers,Acquisitions, Etc. **Merge orconsolidate with any other entity or acquire all or a material part of theassets of any person or entity, or form or create any new Subsidiary oraffiliate, or commence operations under any other name, organization, orentity, including any joint venture.

 

                **(D)        Transferof Assets. **Sell, transfer,lease, or otherwise dispose of any of its assets, except in the ordinary courseof business.

 

                **(E)        Loans. **Lend or advance money, credit, orproperty to any person or entity, except for: (i) trade credit extended in the ordinary course of business; and (ii)miscellaneous loans in an aggregate principal amount not to exceed, at any onetime outstanding, $1,000,000.00.

                **(F)        ContingentLiabilities. **Assume,guarantee, become liable as a surety, endorse, contingently agree to purchase,or otherwise be or become liable, directly or indirectly (including, but notlimited to, by means of a maintenance agreement, an asset or stock purchaseagreement, or any other agreement designed to ensure any creditor againstloss), for or on account of the obligation of any person or entity, except bythe endorsement of negotiable instruments for deposit or collection or similartransactions in the ordinary course of the Company's business.

 

                **(G)        Changein Business. **Engage in anybusiness activities or operations substantially different from or unrelated tothe Company's present business activities or operations.

 

        **SECTION 10.  FinancialCovenants. **Unless otherwiseagreed to in writing, while this agreement is in effect:

 

                **(A)        CurrentRatio.**  The Company and itsconsolidated Subsidiary will, on a combined basis, have at the end of eachperiod for which financial statements are required to be furnished pursuant toSection 8(H) hereof, a ratio of consolidated current assets to consolidatedcurrent liabilities (both as determined in accordance with GAAP consistentlyapplied) of not less than 1.35 to 1.

 

**                (B)        Long Term Debt To Net Worth.**  The Company and its consolidated Subsidiary,on a combined basis, will have at the end of each period for which financialstatements are required to be furnished pursuant to Section 8(H) hereof, aratio of consolidated Long Term Debt to consolidated Net Worth of not more than1.10 to 1.  Long Term Debt means the sumof long-term liabilities, minus deferred taxes payable, plus currentliabilities, minus the quotient of current assets divided by 1.35, plus thepresent value of operating leases (all, together with Net Worth, as calculatedin accordance to GAAP consistently applied).

 

**                (C)        Debt Service Coverage Ratio.**  The Company and its consolidated Subsidiary,on a combined basis, will have at the end of each fiscal year of the Company, a"Debt Service Coverage Ratio" (as defined below) for that year of notless than 1.50 to 1.  For purposeshereof, the term "Debt Service Coverage Ratio" shall mean thefollowing (all as calculated for the applicable year in accordance with GAAPconsistently applied):  (i) net income(after taxes), minus cash patronage refunds and dividends, minus patronageincome, minus retains revolved, plus equity retains, plus depreciation andamortization, plus lease payments, plus (or minus) extraordinary losses (orgains); to (ii) all principal payments due within the year on all long-termdebt, plus lease payments.

 

        **SECTION 11.  Eventsof Default. **Each of thefollowing shall constitute an "Event of Default" under thisagreement:

 

                **(A)        PaymentDefault. **The Company shouldfail to make any payment to, or to purchase any equity in, CoBank when due.

 

                **(B)        Representationsand Warranties. **Anyrepresentation or warranty made or deemed made by the Company herein or in anySupplement, application, agreement, certificate, or other document related toor furnished in connection with this agreement or any Supplement, shall proveto have been false or misleading in any material respect on or as of the datemade or deemed made.

 

                **(C)        CertainAffirmative Covenants. **TheCompany or, to the extent required hereunder, any Subsidiary should fail toperform or comply with Sections 8(A) through 8(H)(ii), 8(H)(vi), (vii), and(viii), or any reporting covenant set forth in any Supplement hereto, and suchfailure continues for 15 days after written notice thereof shall have beendelivered by CoBank to the Company.

 

                **(D)        OtherCovenants and Agreements. **TheCompany or, to the extent required hereunder, any Subsidiary should fail toperform or comply with any other covenant or agreement contained herein or inany other Loan Document or shall use the proceeds of any loan for anunauthorized purpose.

 

                **(E)        Cross-Default. **The Company should, after anyapplicable grace period, breach or be in default under the terms of any otheragreement between the Company and CoBank.

                **(F)        OtherIndebtedness. **The Companyor any Subsidiary should fail to pay when due any indebtedness to any otherperson or entity for borrowed money or any long-term obligation for thedeferred purchase price of property (including any capitalized lease), or anyother event occurs which, under any agreement or instrument relating to suchindebtedness or obligation, has the effect of accelerating or permitting theacceleration of such indebtedness or obligation, whether or not suchindebtedness or obligation is actually accelerated or the right to accelerateis conditioned on the giving of notice, the passage of time, or otherwise.

 

                **(G)        Judgments.** A judgment, decree, or orderfor the payment of money shall be rendered against the Company or anySubsidiary and either:  (i) enforcement proceedingsshall have been commenced; (ii) a Lien prohibited under Section 9(B)hereof shall have been obtained; or (iii) such judgment, decree, or ordershall continue unsatisfied and in effect for a period of 20 consecutive dayswithout being vacated, discharged, satisfied, or stayed pending appeal.

 

                **(H)        Insolvency,Etc. **The Company or anySubsidiary shall:  (i) become insolventor shall generally not, or shall be unable to, or shall admit in writing itsinability to, pay its debts as they come due; or (ii) suspend its businessoperations or a material part thereof or make an assignment for the benefit ofcreditors; or (iii) apply for, consent to, or acquiesce in the appointmentof a trustee, receiver, or other custodian for it or any of its property or, inthe absence of such application, consent, or acquiescence, a trustee, receiver,or other custodian is so appointed; or (iv) commence or have commenced againstit any proceeding under any bankruptcy, reorganization, arrangement,readjustment of debt, dissolution, or liquidation Law of any jurisdiction.

 

                **(I)        MaterialAdverse Change. **Any materialadverse change occurs, as reasonably determined by CoBank, in the Company'sfinancial condition, results of operation, or ability to perform itsobligations hereunder or under any instrument or document contemplated hereby.

 

                **(J)        Guarantees,Etc.** Any guarantee,suretyship, subordination agreement, maintenance agreement, or other agreementfurnished in connection with the Company’s obligations hereunder and under anySupplement (including the Continuing Guarantee dated June 20, 2001, of PrimoPiatto, Inc.) shall, at any time, cease to be in full force and effect, orshall be revoked or declared null and void, or the validity or enforceabilitythereof shall be contested by the guarantor, surety or other maker thereof (the“Guarantor”), or the Guarantor shall deny any further liability or obligationthereunder, or shall fail to perform its obligations thereunder, or anyrepresentation or warranty set forth therein shall be breached, or theGuarantor shall breach or be in default under the terms of any other agreementwith CoBank (including any loan agreement or security agreement), or a defaultset forth in Subsections (F) through (I) hereof shall occur with respect to theGuarantor.

 

        **SECTION 12.  Remedies. **Upon the occurrence and duringthe continuance of an Event of Default or any Potential Default, CoBank shallhave no obligation to continue to extend credit to the Company and maydiscontinue doing so at any time without prior notice.  In addition, upon the occurrence and duringthe continuance of any Event of Default, CoBank may, upon notice to theCompany, terminate any commitment and declare the entire unpaid principalbalance of the loans, all accrued interest thereon, and all other amountspayable under this agreement, all Supplements, and the other Loan Documents tobe immediately due and payable.  Uponsuch a declaration, the unpaid principal balance of the loans and all suchother amounts shall become immediately due and payable, without protest,presentment, demand, or further notice of any kind, all of which are herebyexpressly waived by the Company.  Inaddition, upon such an acceleration:

 

                **(A)        Enforcement. **CoBank may proceed to protect,exercise, and enforce such rights and remedies as may be provided by thisagreement, any other Loan Document or under Law.  Each and every one of such rights and remedies shall becumulative and may be exercised from time to time, and no failure on the partof CoBank to exercise, and no delay in exercising, any right or remedy shalloperate as a waiver thereof, and no single or partial exercise of any right orremedy shall preclude any other or future exercise thereof, or the exercise ofany other right.  Without limiting theforegoing, CoBank may hold and/or set off and apply against the Company'sobligations to CoBank the proceeds of any equity in CoBank, any cash collateralheld by CoBank, or any balances held by CoBank for the Company’s account(whether or not such balances are then due).

**                (B)        Application of Funds.** CoBank may apply all payments received by itto the Company’s obligations to CoBank in such order and manner as CoBank mayelect in its sole discretion.

 

                In addition to the rights andremedies set forth above:  (i) ifthe Company fails to purchase any equity in CoBank when required or fails tomake any payment to CoBank when due, then at CoBank’s option in each instance,such payment shall bear interest from the date due to the date paid at 4% perannum in excess of the rate(s) of interest that would otherwise be in effect onthat loan; and (ii) after the maturity of any loan (whether as a result ofacceleration or otherwise), the unpaid principal balance of such loan(including without limitation, principal, interest, fees and expenses) shallautomatically bear interest at 4% per annum in excess of the rate(s) ofinterest that would otherwise be in effect on that loan.  All interest provided for herein shall be payableon demand and shall be calculated on the basis of a year consisting of 360days.

 

        **SECTION 13.  BrokenFunding Surcharge. **Notwithstandingany provision contained in any Supplement giving the Company the right to repayany loan prior to the date it would otherwise be due and payable, the Companyagrees that in the event it repays any fixed rate balance prior to itsscheduled due date or prior to the last day of the fixed rate period applicablethereto (whether such payment is made voluntarily, as a result of anacceleration, or otherwise), the Company will pay to CoBank a surcharge in anamount which would result in CoBank being made whole (on a present value basis)for the actual or imputed funding losses incurred by CoBank as a resultthereof.  Notwithstanding the foregoing,in the event any fixed rate balance is repaid as a result of the Companyrefinancing the loan with another lender or by other means, then in lieu of theforegoing, the Company shall pay to CoBank a surcharge in an amount sufficient(on a present value basis) to enable CoBank to maintain the yield it would haveearned during the fixed rate period on the amount repaid.  Such surcharges will be calculated inaccordance with methodology established by CoBank (a copy of which will be madeavailable to the Company upon request).

 

**        SECTION14.  Complete Agreement, Amendments. **This agreement, allSupplements, and all other instruments and documents contemplated hereby andthereby, are intended by the parties to be a complete and final expression oftheir agreement.  No amendment,modification, or waiver of any provision hereof or thereof, and no consent toany departure by the Company herefrom or therefrom, shall be effective unlessapproved by CoBank and contained in a writing signed by or on behalf of CoBank,and then such waiver or consent shall be effective only in the specificinstance and for the specific purpose for which given.  In the event this agreement is amended orrestated, each such amendment or restatement shall be applicable to allSupplements hereto.

 

**        SECTION15.  Other Types of Credit.** From time to time, CoBank may issue lettersof credit or extend other types of credit to or for the account of theCompany.  In the event the partiesdesire to do so under the terms of this agreement, such extensions of creditmay be set forth in any Supplement hereto and this agreement shall beapplicable thereto.

 

        **SECTION 16.  ApplicableLaw. **Except to the extentgoverned by applicable federal law, this agreement and each Supplement shall begoverned by and construed in accordance with the laws of the State of Colorado,without reference to choice of law doctrine.

 

        **SECTION 17.  Notices. **All notices hereunder shall be inwriting and shall be deemed to be duly given upon delivery if personallydelivered or sent by telegram or facsimile transmission, or 3 days aftermailing if sent by express, certified or registered mail, to the parties at thefollowing addresses (or such other address for a party as shall be specified bylike notice):

 
| If to CoBank, as follows:  CoBank, ACB  P.O. Box 5110  Denver, Colorado 80217-5110  Attention:  Credit Information  Services  Fax No:  303-224-6101 |   | If to the Company, as follows:  DAKOTA GROWERS PASTA COMPANY  One Pasta Avenue  Carrington, North Dakota 58421  Attention:  Chief Financial Officer  Fax No:  701-652-3552 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

        **SECTION 18.  Taxesand Expenses. **To the extentallowed by law, the Company agrees to pay all reasonable out-of-pocket costsand expenses (including the fees and expenses of counsel retained by CoBank)incurred by CoBank and any participants from CoBank in connection with theorigination, administration, collection, and enforcement of this agreement andthe other Loan Documents, including, without limitation, all costs and expensesincurred in perfecting, maintaining, determining the priority of, and releasingany security for the Company’s obligations to CoBank, and any stamp,intangible, transfer, or like tax payable in connection with this agreement orany other Loan Document.

 

        **SECTION 19.  Effectivenessand Severability. **Thisagreement shall continue in effect until: (i) all indebtedness and obligations of the Company under thisagreement, all Supplements, and all other Loan Documents shall have been paidor satisfied; (ii) CoBank has no commitment to extend credit to or for theaccount of the Company under any Supplement; and (iii) either party sendswritten notice to the other terminating this agreement.  Any provision of this agreement or any otherLoan Document which is prohibited or unenforceable in any jurisdiction shall,as to such jurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof orthereof.

 

        **SECTION 20.  Successorsand Assigns. **This agreement,each Supplement, and the other Loan Documents shall be binding upon and inureto the benefit of the Company and CoBank and their respective successors andassigns, except that the Company may not assign or transfer its rights orobligations under this agreement, any Supplement or any other Loan Documentwithout the prior written consent of CoBank.

 

        **SECTION 21.        Participations,Etc.**  From time to time,CoBank may sell to one or more banks, financial institutions or other lenders aparticipation in one or more of the loans or other extensions of credit madepursuant to this agreement.  However, nosuch participation shall relieve CoBank of any commitment made to the Companyunder any Supplement hereto.  Inconnection with the foregoing, CoBank may disclose information concerning theCompany and its Subsidiaries to any participant or prospective participant,provided that such participant or prospective participant agrees to keep suchinformation confidential.  CoBank agreesthat all Loans that are made by CoBank and that are retained for its ownaccount and are not included in a sale of participation interest shall beentitled to patronage distributions in accordance with the bylaws of CoBank andits practices and procedures related to patronage distribution.  Accordingly, all Loans that are included ina sale of participation interest shall not be entitled to patronagedistributions.  A sale of participationinterest may include certain voting rights of the participants regarding theloans hereunder (including without limitation the administration, servicing andenforcement thereof).  CoBank agrees togive written notification to the Company of any sale of participationinterests.

 

        **IN WITNESS WHEREOF**, the parties have causedthis agreement to be executed by their duly authorized officers as of the dateshown above.

** **
| **CoBANK,  ACB** | **DAKOTA GROWERS PASTA COMPANY** |
|------------------|----------------------------------|
|             |                             |
| By:              | /s/ Gary Sloan                   |   | By: | /s/ Thomas Friezen |
|             |                             |   |   |   |
| Title:           | Vice President                   |   | Title: | CFO |

 

No. E539S01

 

**STATUSED****REVOLVING CREDIT SUPPLEMENT**

 

 

**                THIS SUPPLEMENT**to the Master Loan Agreement dated June 20, 2001 (the "MLA"), isentered into as of June 20, 2001, between **CoBANK, ACB**("CoBank") and **DAKOTAGROWERS PASTA COMPANY**, Carrington, North Dakota (the"Company").

 

**                SECTION 1.         The Revolving Credit Facility.**  On the terms and conditions set forth in theMLA and this Supplement, CoBank agrees to make loans to the Company during theperiod set forth below in an aggregate principal amount not to exceed, at anyone time outstanding, the lesser of the “Borrowing Base” (as calculatedpursuant to the Borrowing Base Report attached hereto as Exhibit A) or$19,000,000.00 (the "Commitment"). Within the limits of the Commitment, the Company may borrow, repay andreborrow.

 

**                SECTION 2.         Purpose.**The purpose of the Commitment is to financethe inventory and receivables referred to in the Borrowing Base Report, and to renew, extend, and refinance theCompany’s obligations to CoBank under the Company’s existing seasonal loan (the“Existing Seasonal Loan”) pursuant to Note No. A637S01A (the “Note”) and theLoan Agreement dated December 5, 2000 (the “Existing Agreement”).  The Company agrees that on the date when allconditions precedent to CoBank’s obligation to extend credit hereunder havebeen satisfied:  (a) the principalbalance outstanding under the Existing Seasonal Loan shall be transferred toand charged against the Commitment; (b) all accrued obligations of the Companyunder the Existing Seasonal Loan for the payment of interest or other chargesshall be transferred to and become part of the Company’s obligations under thisSupplement as if fully set forth herein; and (c) the Note and the ExistingAgreement shall be deemed replaced and superseded as applicable to thisSupplement, but the indebtedness evidenced by such Note shall not be deemed tohave been paid off, by this Supplement and the MLA.  In addition, in the event any balances bearing interest at afixed rate are outstanding on the date such loans are being transferred hereto,then such balances shall continue to be subject to such rates for the remainingagreed upon fixed rate periods but shall otherwise be subject to the termshereof.

 

**                SECTION 3.         Term.**  The term of the Commitment shall be fromJune 20, 2001, up to but not including January 1, 2002, or such later date asCoBank may, in its sole discretion, authorize in writing.

 

**                SECTION 4.         Interest.**  The Company agrees to pay interest on theunpaid principal balance of each loan in accordance with one or more of thefollowing interest rate options, as selected by the Company:

 

                        **(A)                        VariableRate Option.**  At a rate perannum equal at all times to the rate of interest established by CoBank on thefirst Business Day of each week.  Therate established by CoBank may not exceed CoBank’s National Variable Rate (ashereinafter defined) on that day plus 1% (100 basis points) and shall beeffective until the first Business Day of the next week.  Each change in the rate shall be applicableto all balances subject to this option and information about the then currentrate shall be made available upon telephonic request.  For purposes hereof, the National Variable Rate shall mean therate of interest established by CoBank from time to time as its NationalVariable Rate, which Rate is intended by CoBank to be a reference rate and notits lowest rate.  The National VariableRate will change on the date established by CoBank as the effective date of anychange therein and CoBank agrees to notify the Company promptly after any suchchange.

                        **(B)                        Fixed Rate Option.** At a fixed rate per annum to be quoted byCoBank in its sole discretion in each instance.  Under this option, rates may be fixed on such balances and forsuch periods (including periods extending beyond the maturity date of the loans(as set forth in Section 5 hereof)) as may be agreeable to CoBank in its solediscretion in each instance.  In theevent CoBank consents to one or more balances being fixed for a period orperiods extending beyond the maturity date but the Commitment is not renewed,then each such balance shall be due and payable on the last day of its fixedrate period and Section 5 hereof shall, for each such balance, be deemedamended accordingly.

 

The Company shall select the applicable rate option atthe time it requests a loan hereunder and may, on any Business Day, elect toconvert balances bearing interest at the variable rate option to the fixed rateoption.  In addition, prior to theexpiration of any fixed rate period, the Company may, subject toSection 13 of the MLA, repay any fixed rate balance, convert any fixedrate balance to the variable rate option, or refix the rate at a new rate to bequoted by CoBank.  Upon the expirationof any fixed rate period, the Company may, subject to the terms hereof, refixthe rate or convert the rate to the variable rate option.  In the absence of any such election,interest shall automatically accrue at the variable rate option.  All elections provided for herein shall bemade telephonically or in writing and must be received by 12:00 Noon Company'slocal time.  Interest shall becalculated on the actual number of days each loan is outstanding on the basisof a year consisting of 360 days and shall be payable monthly in arrearsby the 20th day of the following month.

 

**                SECTION 5.                Promissory Note.**  The Company promises to repay the unpaidprincipal balance of the loans on the first CoBank business day following thelast day of the term of the Commitment. In addition to the above, the Company promises to pay interest on theunpaid principal balance of the loans at the times and in accordance with theprovisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment ofthe indebtedness evidenced by, the promissory note dated December 5, 2000, andnumbered Note No. A637S01A.

 

                **SECTION 6.                Borrowing Base Reports,Etc. **The Company agrees tofurnish a Borrowing Base Report to CoBank at such times or intervals as CoBankmay from time to time request.  Untilreceipt of such a request, the Company agrees to furnish a Borrowing BaseReport to CoBank within 45 days after each month end calculating the BorrowingBase as of the last day of the month for which the Report is beingfurnished.  However, if no balance isoutstanding hereunder on the last day of such month, then no Report need befurnished.  Regardless of the frequencyof the reporting, if at any time the amount outstanding under the Commitmentexceeds the Borrowing Base, the Company shall immediately notify CoBank andrepay so much of the loans as is necessary to reduce the amount outstandingunder the Commitment to the limits of the Borrowing Base.

 

*                **SECTION 7.         Letters of Credit.** In addition to loans and if agreeable to CoBank in its solediscretion in each instance, the Company may utilize the Commitment to openirrevocable letters of credit for its account. Each letter of credit shall reduce the amount available under theCommitment by the maximum amount capable of being drawn thereunder.  The rights and obligations of the partieswith respect to each letter of credit will be governed by the ReimbursementAgreement attached hereto as Exhibit B (which rights and obligations shall bein addition to the rights and obligations of the parties hereunder and underthe MLA).  Notwithstanding the foregoingor any other provision hereof, the maximum amount capable of being drawn undereach letter of credit must be statused against the Borrowing Base in the samemanner as if it were a loan, and in the event that (after repaying all loans)the maximum amount capable of being drawn under the letters of credit exceedsthe Borrowing Base, then the Company shall immediately notify CoBank and pay toCoBank (to be held as cash collateral) an amount equal to such excess.*

**                IN WITNESS WHEREOF,**the parties have caused this Supplement to be executed by their duly authorizedofficers as of the date shown above.

 
| **CoBANK,  ACB** |           | **DAKOTA  GROWERS PASTA COMPANY** |
|------------------|----------------|-----------------------------------|
|             |           |                              |   |   |
| By:              | /s/ Gary Sloan |                              | By: | /s/ Thomas Friezen |
|             |           |                              |   |   |
| Title:           | Vice President |                              | Title: | CFO |

 

No. E539T01

 

**CONSOLIDATING SUPPLEMENT**

**(Variable and Quoted Fixed Rate Term Loan)**

 

 

                **THISSUPPLEMENT** to the Master Loan Agreement dated June 20, 2001 (the"MLA"), is entered into as of June 20, 2001, between **CoBANK, ACB**("CoBank") and **DAKOTA GROWERS PASTA COMPANY**, Carrington,North Dakota (the "Company").

 

                **SECTION 1.                Consolidation. **The loan made by CoBank under theLoan Agreement dated December 5, 2000, and numbered Note No. 33061 is herebyconsolidated under the MLA.  Henceforth,the loan will be governed by the terms hereof and the MLA.  As of the date hereof, the unpaid principalbalance of the loan is $6,000,000.00.

 

                **SECTION 2.         Interest. **The Company agrees to pay interest on the unpaidprincipal balance of each loan in accordance with one or more of the followinginterest rate options, as selected by the Company:

 

                **(A)                Variable Rate Option.**  At a rate per annum equal at all times tothe rate of interest established by CoBank on the first Business Day of eachmonth.  The rate established by CoBankmay not exceed CoBank’s National Variable Rate (as hereinafter defined) on thatday plus 1% (100 basis points) and shall be effective until the first BusinessDay of the next month.  Each change inthe rate shall be applicable to all balances subject to this option andinformation about the then current rate shall be made available upon telephonicrequest.  For purposes hereof, theNational Variable Rate shall mean the rate of interest established by CoBankfrom time to time as its National Variable Rate, which Rate is intended byCoBank to be a reference rate and not its lowest rate.  The National Variable Rate will change on thedate established by CoBank as the effective date of any change therein andCoBank agrees to notify the Company promptly after any such change.

 

                **(B)                Fixed Rate Option.**  At a fixed rate per annum to be quoted byCoBank in its sole discretion in each instance.  Under this option, rates may be fixed on such balances and forsuch periods as may be agreeable to CoBank in its sole discretion in eachinstance.

 

The Company shall selectthe applicable rate option at the time it requests each loan hereunder and may,on any Business Day, elect to convert balances bearing interest at the variablerate option to the fixed rate option. In addition, prior to the expiration of any fixed rate period, theCompany may, subject to Section 13 of the MLA, convert any fixed ratebalance to the variable rate option or refix the rate at a new rate to bequoted by CoBank.  Upon the expirationof any fixed rate period, the Company may, subject to the terms hereof, refixthe rate or convert the rate to the variable rate option. In the absence of anysuch election, interest shall automatically accrue at the variable rateoption.  All elections provided forherein shall be made telephonically or in writing and must be received by 12:00Noon Company's local time.  Interestshall be calculated on the actual number of days each loan is outstanding onthe basis of a year consisting of 360 days and shall be payable monthly inarrears by the 20th day of the following month.

 

                **SECTION 3.                Promissory Note. **The Company promises to repay theloan as follows:  (1) in one quarterlyinstallment of $610,000.00 on December 30, 2002; (2) in 7 equal,consecutive quarterly installments of $685,000.00, with the first suchinstallment due on March 31, 2003, and the last such installment  due on September  30, 2004;  and (3)  followed  by a final installment in an amount  equalto the  remaining  unpaid principal  balance of the  loans on December  31,  2004. If any installment due date is not a day on which CoBank is open forbusiness, then such installment shall be due and payable on the next day onwhich CoBank is open for business. In addition to the above, the Companypromises to pay interest on the unpaid principal balance of the loan inaccordance with the rate options and at the times set forth above.  This note replaces and supersedes, but doesnot constitute payment of the indebtedness evidenced by, the promissory notedated December 5, 2000, and numbered Note No. 33061.

                **SECTION 4.                Prepayment. **TheLoan may be prepaid in whole or in part on one CoBank business day’s priorwritten notice. Unless otherwise agreed, all prepayments will be applied toprincipal installments in the inverse order of their maturity and to suchbalances, fixed or variable, as CoBank shall specify.

 

                **SECTION 5.         Agency Fee.** The Company agrees to pay to CoBank an agencyfee on the average daily balance at the rate of 1/10 of 1% per annum(calculated on a 360 day basis), payable quarterly in arrears by the 20th dayfollowing each calendar quarter.

 

                **IN WITNESSWHEREOF,**the parties have caused this Supplement to be executed bytheir duly authorized officers as of the date shown above.

 
| **CoBANK,  ACB** |           | **DAKOTA  GROWERS PASTA COMPANY** |
|------------------|----------------|-----------------------------------|
|             |           |                              |   |   |
| By:              | /s/ Gary Sloan |                              | By: | /s/ Thomas Friezen |
|             |           |                              |   |   |
| Title:           | Vice President |                              | Title: | CFO |

 

Loan No. E539T02

 

**CONSOLIDATING SUPPLEMENT**

**(Variable and Quoted Fixed Rate Term Loan)**

 

 

                **THISSUPPLEMENT** to the Master Loan Agreement dated June 20, 2001 (the"MLA"), is entered into as of June 20, 2001, between **CoBANK, ACB**("CoBank") and **DAKOTA GROWERS PASTA COMPANY**, Carrington,North Dakota (the "Company").

 

                **SECTION 1.                Consolidation. **The loan made by CoBank under theLoan Agreement dated December 5, 2000, and numbered Note No. 35062 is herebyconsolidated under the MLA.  Henceforth,the loan will be governed by the terms hereof and the MLA.  As of the date hereof, the unpaid principalbalance of the loan is $7,375,000.00.

 

                **SECTION 2.         Interest. **The Company agrees to pay interest on the unpaidprincipal balance of each loan in accordance with one or more of the followinginterest rate options, as selected by the Company:

 

                **(A)                Variable Rate Option.**  At a rate per annum equal at all times tothe rate of interest established by CoBank on the first Business Day of eachmonth.  The rate established by CoBankmay not exceed CoBank’s National Variable Rate (as hereinafter defined) on thatday plus 1% (100 basis points) and shall be effective until the first BusinessDay of the next month.  Each change inthe rate shall be applicable to all balances subject to this option andinformation about the then current rate shall be made available upon telephonicrequest.  For purposes hereof, theNational Variable Rate shall mean the rate of interest established by CoBankfrom time to time as its National Variable Rate, which Rate is intended byCoBank to be a reference rate and not its lowest rate.  The National Variable Rate will change onthe date established by CoBank as the effective date of any change therein andCoBank agrees to notify the Company promptly after any such change.

 

                **(B)                Fixed Rate Option.**  At a fixed rate per annum to be quoted byCoBank in its sole discretion in each instance.  Under this option, rates may be fixed on such balances and forsuch periods as may be agreeable to CoBank in its sole discretion in eachinstance.

 

The Company shall selectthe applicable rate option at the time it requests each loan hereunder and may,on any Business Day, elect to convert balances bearing interest at the variablerate option to the fixed rate option. In addition, prior to the expiration of any fixed rate period, theCompany may, subject to Section 13 of the MLA, convert any fixed ratebalance to the variable rate option or refix the rate at a new rate to bequoted by CoBank.  Upon the expirationof any fixed rate period, the Company may, subject to the terms hereof, refixthe rate or convert the rate to the variable rate option. In the absence of anysuch election, interest shall automatically accrue at the variable rateoption.  All elections provided forherein shall be made telephonically or in writing and must be received by 12:00Noon Company's local time.  Interestshall be calculated on the actual number of days each loan is outstanding onthe basis of a year consisting of 360 days and shall be payable monthly inarrears by the 20th day of the following month.

 

                **SECTION 3.                Promissory Note. **The Company promises to repay theloan as follows:  (1) in 11 equal,consecutive quarterly installments of $625,000.00, with the first suchinstallment due on March 31, 2002, and the last such installment due onSeptember 30, 2004; and (2) followed by a final installment in an amount equalto the remaining unpaid principal balance of the loans on December 31,2004.  If any installment due date isnot a day on which CoBank is open for business, then such installment shall bedue and payable on the next day on which CoBank is open for business. Inaddition to the above, the Company promises to pay interest on the unpaidprincipal balance of the loan in accordance with the rate options and at thetimes set forth above.  This notereplaces and supersedes, but does not constitute payment of the indebtednessevidenced by the promissory note dated December 5, 2000, and numbered Note No.35062.

 

                ** SECTION 4.                Prepayment. **The Loan may be prepaid in wholeor in part on one CoBank business day’s prior written notice. Unless otherwiseagreed, all prepayments will be applied to principal installments in theinverse order of their maturity and to such balances, fixed or variable, asCoBank shall specify.

                **SECTION 5.         Agency Fee.** The Company agrees to pay to CoBank an agency fee on the averagedaily balance at the rate of 1/10 of 1% per annum (calculated on a 360 daybasis), payable quarterly in arrears by the 20th day following each calendar quarter.

 

                **IN WITNESSWHEREOF,**the parties have caused this Supplement to be executed bytheir duly authorized officers as of the date shown above.

 

 
| **CoBANK,  ACB** |           | **DAKOTA  GROWERS PASTA COMPANY** |
|------------------|----------------|-----------------------------------|
|             |           |                              |   |   |
| By:              | /s/ Gary Sloan |                              | By: | /s/ Thomas Friezen |
|             |           |                              |   |   |
| Title:           | Vice President |                              | Title: | CFO |

 

No. E539T03

 

**CONSOLIDATING SUPPLEMENT**

**(Variable Rate Term Loan)**

 

 

                **THISSUPPLEMENT** to the Master Loan Agreement dated June 20, 2001 (the"MLA"), is entered into as of June 20, 2001, between **CoBANK, ACB**("CoBank") and **DAKOTA GROWERS PASTA COMPANY, Carrington, North Dakota**,(the "Company").

 

                **SECTION 1.                Consolidation. **The loan made by CoBank under theLoan Agreement dated December 5, 2000, and numbered 39181NP, is herebyconsolidated under the MLA.  Henceforth,the loan will be governed by the terms hereof and the MLA.  As of the date hereof, the unpaid principalbalance of the loan is $9,600,000.00.

 

                **SECTION 2.         Interest. **The unpaid principal balance of the loan shall bearinterest at 5.71% per annum.  Interestwill be calculated on the actual number of days the loan is outstanding on thebasis of a year consisting of 360 days, and shall be payable monthly in arrearsby the 20th day of the following month.

 

                **SECTION 3.                Promissory Note. **The Company promises to repay theloan in 8 equal, consecutive annual installments of $1,200,000.00, with thefirst such installment due on September 30, 2001, and the last such installmentdue on September 30, 2008.  If anyinstallment due date is not a day on which CoBank is open for business, thensuch installment shall be due and payable on the next CoBank business day. Inaddition to the above, the Company promises to pay interest on the unpaidprincipal balance hereof at the rate and at the times set forth above.  This note replaces and supersedes, but doesnot constitute payment of the indebtedness evidenced by, the promissory notedated December 5, 2000, and numbered Note No. 39181NP.

 

                **SECTION 4.                Prepayment. **The loan may be prepaid in wholeor in part on one CoBank business day's prior written notice.  Unless otherwise agreed, all prepaymentswill be applied to principal installments in the inverse order of theirmaturity.

 

                **SECTION 5.                Nonpatronage Designation.**  The loan shall be on a nonpatronagebasis.  Hence, no patronage shall bepaid with respect to such loan.

 

**                SECTION 6.         Agency Fee.** The Company agrees to pay to CoBank an agencyfee on the average daily balance at the rate of 1/10 of 1% per annum(calculated on a 360 day basis), payable quarterly in arrears by the 20th dayfollowing each calendar quarter.

 

 

                **IN WITNESSWHEREOF,**the parties have caused this Supplement to be executed bytheir duly authorized officers as of the date shown above.

 

 
| **CoBANK,  ACB** |           | **DAKOTA  GROWERS PASTA COMPANY** |
|------------------|----------------|-----------------------------------|
|             |           |                              |   |   |
| By:              | /s/ Gary Sloan |                              | By: | /s/ Thomas Friezen |
|             |           |                              |   |   |
| Title:           | Vice President |                              | Title: | CFO |

 

Loan No. E539T04

 

**SINGLE ADVANCE TERM LOAN SUPPLEMENT**

 

 

**                THIS SUPPLEMENT**to the Master Loan Agreement dated June 20, 2001 (the "MLA"), isentered into as of June 20, 2001, between **CoBANK, ACB**("CoBank") and **DAKOTAGROWERS PASTA COMPANY, Carrington, North Dakota** (the"Company").

 

**                SECTION 1.         The Term Loan.**  On the terms and conditions set forth in theMLA, CoBank agrees to make a loan to the Company in an amount not to exceed$9,600,000.00 (the "Commitment"). The available Commitment shall be decreased by $1,200,000.00 on the 31stday of December each year.  TheCommitment shall expire upon any advance being made hereunder (regardless ofamount) or at 12:00 noon (Company’s local time) on December 31, 2008, whicheveroccurs earlier, or on such later date as CoBank may, in its sole discretion,authorize in writing.

 

**                SECTION 2.         Purpose.**  The purpose of the Commitment is to financethe Bank of North Dakota draws on the letter of credit in its favor inaccordance with the terms and conditions thereof.  In addition, the purpose of the Commitment is to consolidateunder this Supplement the Company's existing indebtedness to CoBank underCompany's existing Term Loan (the "Existing Term Loan") pursuant toNote No. 39182NP (the "Note") and the Loan Agreement dated December5, 2000 (the "Existing Agreement"). The Company agrees that on the date when all conditions precedent toCoBank's obligation to extend credit hereunder have been satisfied:  (a) all accrued obligations of the Companyunder the Existing Term Loan for the payment of interest or other charges shallbe transferred to and become part of the Company's obligations under thisSupplement as if fully set forth herein; and (b) the Note and the ExistingAgreement shall be deemed replaced and superseded as applicable to thisSupplement, but the indebtedness evidenced by such note shall not be deemed tohave been paid off, by this Supplement and the MLA.

 

**                SECTION 3.                Availability.**  The loan will be made available as providedin Section 2 of the MLA.

 

**                SECTION 4.         Interest.**  The unpaid principal balance of each loanshall bear interest at a rate per annum equal at all times to 2% (200 basispoints) above the rate of interest established by CoBank from time to time asits National Variable Rate, which Rate is intended by CoBank to be a referencerate and not its lowest rate. The National Variable Rate will change on thedate established by CoBank as the effective date of any change therein andCoBank agrees to notify the Company promptly after any such change.  Interest shall be calculated on the actualnumber of days each loan is outstanding on the basis of a year consisting of360 days and shall be payable on demand.

 

**                SECTION 5.                Promissory Note.**  The Company promises to repay the loan ondemand.  In addition to the above, theCompany promises to pay interest on the unpaid principal balance of the loan ondemand at the rate set forth above. This note replaces and supersedes, but does not constitute payment ofthe indebtedness evidenced by, the promissory note dated December 5, 2000, andnumbered Note No. 39182NP.

                **SECTION 6.                Nonpatronage Designation.**  The loan shall be on a nonpatronagebasis.  Hence, no patronage shall bepaid with respect to such loan.

 

**                IN WITNESS WHEREOF,**the parties have caused this Supplement to be executed by their duly authorizedofficers as of the date shown above.

 
| **CoBANK,  ACB** |           | **DAKOTA  GROWERS PASTA COMPANY** |
|------------------|----------------|-----------------------------------|
|             |           |                              |   |   |
| By:              | /s/ Gary Sloan |                              | By: | /s/ Thomas Friezen |
|             |           |                              |   |   |
| Title:           | Vice President |                              | Title: | CFO |