THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT


                  This Third Amendment to Credit and Security  Agreement,  dated
as of  April  5,  2004  (this  "AMENDMENT"),  is  made  by  and  between  AG-BAG
INTERNATIONAL LIMITED, a Delaware corporation (the "BORROWER"),  and WELLS FARGO
CREDIT, INC., a Minnesota corporation (the "LENDER").

                                    RECITALS

                  A. The  Borrower  and the Lender are  parties to that  certain
Credit and Security  Agreement  dated as of May 14, 2003,  as it has  previously
been amended (the "CREDIT AGREEMENT").

                  B. Certain  Events of Default have  occurred  under the Credit
Agreement by reason of the  Borrower's  failure to maintain the minimum Book Net
Worth as of December 31, 2003 required by Section 6.2(e) of the Credit Agreement
and the minimum  Earnings  Before Taxes for the period ending  December 31, 2003
required by Section  6.2(h) of the Credit  Agreement  (the "EVENTS OF DEFAULT").
The Borrower has requested that the Lender waive the Events of Default and reset
the Book Net Worth and Earnings Before Taxes covenants.

                  C. The Borrower and the Lender wish to make certain additional
amendments  to the Credit  Agreement  pursuant to the terms and  conditions  set
forth herein.

                  D. Capitalized  terms used in this Amendment which are defined
in the Credit Agreement shall have the same meanings as defined therein,  unless
otherwise defined herein.

                  NOW,  THEREFORE,  in  consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:

                  1. Waiver.  Subject to the Borrower's  execution and return of
this  Amendment  to  the  Lender,  the  Lender  waives  the  Events  of  Default
specifically described in Recital B above. This waiver is effective only in this
specific  instance  and does not  entitle  the  Borrower to any other or further
waiver in any  similar or other  circumstances.  The  Lender  does not waive any
other Events of Default.

                  2.  Minimum  Book Net  Worth.  Section  6.2(e)  of the  Credit
Agreement is amended in its entirety to read as follows:

                  "(e)  Minimum  Book Net Worth.  The  Borrower  will  maintain,
                  during  each  period  set  forth  below,  its Book Net  Worth,
                  determined as of the last day of each month,  at an amount not
                  less than the amount set forth opposite such period below:

              Period                       Minimum Book Net Worth
            ----------                     ----------------------
            March 2004                           $5,575,000








Third Amendment to Credit and Security Agreement - Page 1
<PAGE>
            April 2004                           $5,550,000
             May 2004                            $5,725,000
             June 2004                           $5,850,000
             July 2004                           $5,925,000
            August 2004                          $6,000,000
          September 2004                         $6,175,000
           October 2004                          $6,050,000
           November 2004                         $6,015,000
  December 2004 and each calendar                $6,050,000"
         month thereafter

                  3. Minimum Earnings Before Taxes. Section 6.2(h) of the Credit
Agreement is amended in its entirety to read as follows:

                  "(h) Minimum  Earnings Before Taxes. The Borrower will achieve
                  as of the end of each  fiscal  year-to-date  period  described
                  below, fiscal  year-to-date  Earnings Before Taxes of not less
                  than the amount set forth opposite such period below:

   Fiscal Year-to-Date Period            Minimum Earnings Before Taxes
   --------------------------            -----------------------------

  Three Months Ending March 31,                   ($575,000)
              2004

        Six Months Ending                         ($300,000)
          June 30, 2004

Nine Months Ending September 30,                    $75,000
              2004

      Twelve Months Ending                        ($100,000)"
        December 31, 2004

                  4.  Capital   Expenditures.   Section  6.2(i)  of  the  Credit
Agreement is amended in its entirety to read as follows:

                   "(i) Capital  Expenditures.  The  Borrower  will not incur or
                   contract to incur Capital  Expenditures of more than $200,000
                   in the aggregate  during the fiscal year ending  December 31,
                   2004."

                  5. Fees and Expenses.  The Borrower shall pay all fees,  costs
and expenses, including attorney fees, incurred by the Lender in connection with
this  Amendment.  The Borrower  hereby agrees that the Lender may make a loan to
the Borrower under the Credit Agreement,  or apply the proceeds of any loan, for
the purpose of paying any such fees, costs and expenses.












Third Amendment to Credit and Security Agreement - Page 2
<PAGE>
                  6.   Representations  and  Warranties.   The  Borrower  hereby
represents and warrants to the Lender as follows:

                     (a) The Borrower has all  requisite  power and authority to
execute this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly  executed and delivered by the Borrower and  constitutes
the  legal,  valid  and  binding  obligation  of the  Borrower,  enforceable  in
accordance with its terms.

                     (b) All of the  Borrower's  representations  and warranties
contained  in the Credit  Agreement  are true and  correct on and as of the date
hereof as though  made on and as of such date,  except to the  extent  that such
representations and warranties relate solely to an earlier date.

                  7. References. All references in the Credit Agreement to "this
Agreement"  shall be  deemed  to refer to the  Credit  Agreement  as  previously
amended  and as  amended  hereby,  and any and all  references  in the  Security
Documents  to the  Credit  Agreement  shall be  deemed  to  refer to the  Credit
Agreement as so amended.

                  8. No  Waiver.  Except  as set  forth in  paragraph  1 of this
Amendment,  the  execution of this  Amendment  and  acceptance  of any documents
related hereto shall not be deemed to be a waiver by the Lender of any breach or
default under the Credit Agreement or breach,  default or event of default under
any Security Document or other document held by the Lender, whether or not known
to the Lender and whether or not existing on the date of this Amendment.

                  9. Release. The Borrower hereby absolutely and unconditionally
releases  and forever  discharges  the Lender and any  affiliated  corporations,
together  with all of the present  and former  directors,  officers,  agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind,  nature or description,  whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise,  which the
Borrower  has had, now has or has made claim to have against any such person for
or by reason of any act,  omission,  matter,  cause or thing whatsoever  arising
from the beginning of time to and including the date of this Amendment,  whether
such  claims,  demands and causes of action are matured or unmatured or known or
unknown.

                  10. Counterparts;  Facsimile Signatures. This Amendment may be
executed  in any  number of  counterparts,  each of which when so  executed  and
delivered  shall be  deemed an  original  and all of which  counterparts,  taken
together,  shall constitute one and the same  instrument.  This Amendment may be
delivered  by  facsimile,  and when so  delivered  will have the same  force and
effect as delivery of an original signature.














Third Amendment to Credit and Security Agreement - Page 3
<PAGE>
          IN WITNESS  WHEREOF,  the parties hereto have caused this Amendment to
be duly executed as of the date first written above.

                               AG-BAG INTERNATIONAL LIMITED


                               By: /s/ MIKE WALLIS
                                  ---------------------------------------------

                               Title: Chief Financial Officer


                               WELLS FARGO CREDIT, INC.


                               By: /s/ NORM CHIN
                                   --------------------------------------------

                               Title: Vice President
                                     ------------------------------------------







































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