**Exhibit 10.3**

 

Loan No. RIE539T05

 

**NON-REVOLVINGCREDIT SUPPLEMENT**

**(Lettersof Credit)**

 

**THISSUPPLEMENT** to the Master Loan Agreement dated February 24, 2004 (the “MLA”), isentered into as of February 24,2004 between **CoBANK, ACB**(“CoBank”) and **DAKOTA GROWERS PASTA COMPANY, INC., Carrington, North Dakota**(the “Company”), and amends andrestates the Supplement dated October 28, 2003 and numbered E539T05.

 

**SECTION 1.****                            TheNon-Revolving Credit Facility.**  Onthe terms and conditions set forth in the MLA and this Supplement, CoBankagrees to make loans to the Company during the period set forth below in anaggregate principal amount not to exceed $350,000.00at any one time outstanding (the “Commitment”).  Within the limits of the Commitment, amounts borrowed and laterrepaid may not be reborrowed.

 

**SECTION 2.****                            Purpose.**  The purpose of the Commitment is toreimburse CoBank for any drafts that it may honor under letter(s) of creditissued hereunder (“Letter of Credit”). If CoBank honors any such drafts submitted under a Letter of Credit,Company hereby irrevocably authorizes CoBank to make a loan hereunder toreimburse CoBank for such draft payments.

 

**SECTION 3.****                            Term.**  The term of the Commitment shall be from thedate hereof, up to and including September 30,2005, or such later date as CoBank may, in its sole discretion,authorize in writing.

 

**SECTION 4.****                            Interest.**  TheCompany agrees to pay interest on the unpaid balance of the loan(s) inaccordance with the following interest rate:

 

**CoBank Base Rate.**  At arate per annum equal at all times to 2% above the rate of interest establishedby CoBank from time to time as its “CoBank Base Rate”, which Rate is intendedby CoBank to be a reference rate and not its lowest rate.  The CoBank Base Rate will change on the dateestablished by CoBank as the effective date of any change therein and CoBankagrees to notify the Company of any such change.  Interest shall be calculated on the actual number of days eachloan is outstanding on the basis of a year consisting of 360 days and shall bepayable monthly in arrears by the 20th day of the following month or on suchother day in such month as CoBank shall require in a written notice to theCompany.

 

**SECTION 5.****                            PromissoryNote.**  The Company promises to repaythe unpaid principal balance of the loans on demand.  In addition tothe above, the Company promises to pay interest on the unpaid principal balanceof the loans at the times and in accordance with the provisions set forth inSection 4 hereof.  This note replaces and supersedes, but doesnot constitute payment of the indebtedness evidenced by, the promissory noteset forth in the Supplement being amended and restated hereby.

 

**SECTION 6.****                            Lettersof Credit. **If agreeable to CoBankin its sole discretion in each instance, in addition to loans, the Company mayutilize the Commitment to open irrevocable letters of credit for itsaccount.  Each letter of credit will beissued within a reasonable period of time after receipt of a duly completed andexecuted copy of CoBank’s then current form of application or, if applicable,in accordance with the terms of any CoTrade Agreement between the parties, andshall reduce the amount available under the Commitment by the maximum amountcapable of being drawn thereunder.  Anydraw under any letter of credit issued hereunder shall be deemed an advanceunder the Commitment.  Each letter ofcredit must be in form and content acceptable to CoBank and must expire nolater than the maturity date of the loans.

 

1

----

 

**INWITNESS WHEREOF,** the parties have caused thisSupplement to be executed by their duly authorized officers as of the dateshown above.

 

 

| **CoBANK, ACB** | **DAKOTA GROWERS PASTA COMPANY,  INC.** |
|-----------------|-----------------------------------------|
|            |                                    |
| **By:**         | **/s/  Teresa L. Fountain**             |   | **By:** | **/s/  Thomas Friezen** |   |
|            |                                    |   |   |   |   |
| **Title:**      | **Assistant  Corporate Secretary**      |   | **Title:** | **CFO** |   |

 

2

----