TERM LOAN AND CREDIT AGREEMENT


              THIS TERM LOAN AND CREDIT  AGREEMENT is made as of the 24th day of
June,  1998,  and is by and between LA CANASTA OF  MINNESOTA,  INC., a Minnesota
corporation  with offices located in New Brighton,  Minnesota (the  "Borrower"),
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association
with offices located in St. Paul, Minnesota (the "Bank").

                                    RECITALS:

              WHEREAS,  the Borrower has  requested  the Bank (i) to establish a
conditional  revolving  line of credit for the  benefit of the  Borrower  in the
amount of  $1,200,000.00,  and (ii) to make a term loan to the  Borrower  in the
amount of $1,293,352.84; and,

              WHEREAS,  the Bank is  willing to grant the  Borrower's  requests,
subject to the provisions of this Term Loan And Credit Agreement;

              NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, the parties agree as follows:

              SECTION 1  Definitions

              In addition to those terms defined in the above Recitals,  as used
herein:

1.1 "Acceptable  Accounts  Receivable" shall mean Borrower's accounts receivable
which are:  (i) less than 90 days past the  invoice  date;  (ii) not  subject to
offset or dispute;  (iii) not due from the U.S.  Government,  foreign  entities,
employees,  officers,  subsidiaries or affiliates of the Borrower;  (iv) not due
from an account debtor, 10% or more of whose accounts owed to Borrower are older
than 90 days past the invoice  date;  (v) not  representing  booked but unfilled
orders; and (vi) not comprised of cash accounts.

1.2 "Acceptable  Inventory" shall mean the Borrower's inventory comprised of raw
materials,  unlabeled  packaging,  and certain  finished goods acceptable to the
Bank in its sole discretion.

1.3  "Advances" shall mean direct borrowings made by the Borrower under the
Credit.

1.4  "Agreement"  shall  mean  this  Term  Loan And  Credit  Agreement,  and all
amendments and supplements  hereto which may from time to time become  effective
hereafter.

1.5   "Base Rate" shall mean the "base" or "prime" rate of interest established
by the Bank as in effect from time to time.

1.6  "Borrowed  Money"  shall  mean  funds  obtained  by  incurring  contractual
indebtedness,  but shall not include trade  accounts  payable or money  borrowed
from the Bank.
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1.7 "Borrower's  Security Agreement" shall mean a security agreement in form and
content  acceptable to the Bank,  duly executed by the Borrower and delivered to
the Bank pursuant to Section 5.1(H) hereof.

1.8  "Borrowing  Base"  shall  mean  the sum of (i) 80% of  Acceptable  Accounts
Receivable,  plus (ii) the lesser of (A)  $400,000.00,  or (B) 50% of Acceptable
Inventory.

1.9  "Borrowing  Base  Certificate"  shall mean a schedule of Borrower's  assets
comprising the Borrowing  Base,  which  certificate is prepared and furnished to
Bank pursuant to Sections 5.1(J) and 7.3(C) hereof,  and which is executed by an
authorized  officer of  Borrower  and is in form and content  acceptable  to the
Bank.

1.10 "Closing Date" shall mean the date on which this Agreement is executed by
the Borrower and delivered to the Bank.

1.11 "Current Note" shall mean the promissory note of the Borrower substantially
in the form of attached Exhibit A, evidencing indebtedness under the Credit.

1.12 "Credit" shall mean a conditional  revolving line of credit  established by
the Bank for the benefit of the Borrower in the amount of $1,200,000.00.

1.13 "Events of Default" shall mean any and all events of default described in
Section 9 hereof.

1.14  "Guaranty"  shall  mean a  guaranty  by  corporation  in form and  content
acceptable to the Bank, duly executed by the Guarantor and delivered to the Bank
pursuant to Section 5.1(K) hereof.

1.15   "Guarantor" shall mean Sparta Foods, Inc., a Minnesota corporation.

1.16 "Guarantor's Security Agreement" shall mean a security agreement/collateral
pledge  agreement in form and content  acceptable to the Bank,  duly executed by
the Guarantor and delivered to the Bank pursuant to Section 5.1(L) hereof.

1.17  "Maturity Date" shall mean May 30, 2000.

1.18  "NBCI" shall mean Norwest Business Credit, Inc., a Minnesota corporation.

1.19  "Permitted Liens" shall mean:

          A. Liens in favor of the Bank;

          B. Existing  liens  disclosed to the Bank in writing prior to the date
     of this Agreement; and,

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          C. Liens for taxes not  delinquent or which  Borrower is contesting in
     good faith.

1.20  "Tangible  Net Worth" shall mean the sum of the par or stated value of all
outstanding  capital  stock,  surplus  and  undivided  profits  of the  relevant
corporation,  less any amounts attributable to leasehold improvements,  treasury
stock, good will, patents,  copyrights,  mailing lists, catalogues,  trademarks,
bond discount and underwriting  expenses,  organization  expenses and other like
intangibles  (not  including  prepaid  expenses  classified as current assets or
tangible  assets  offset by equal  related  liabilities),  all as  determined in
accordance with Generally Accepted Accounting Principles.

1.21 "Term Loan" shall have the meaning ascribed to it in Section 3.1 hereof.

1.22 "Term Note" shall mean the promissory note of the Borrower substantially in
the form of attached Exhibit B, evidencing the Term Loan.

1.23 "Termination Date" shall mean May 30, 1999.

1.24 "Total Liabilities" shall mean all actual and contingent liabilities of the
Borrower  which, in accordance with Generally  Accepted  Accounting  Principles,
would be shown as liabilities on an audited financial statement of the Borrower.

1.25  "Traditional Cash Flow" shall mean the sum of net profit after taxes, plus
depreciation, amortization, and other non-cash charges.

          SECTION 2  The Credit

2.1  Subject  to the  other  provisions  of this  Agreement,  the  Bank may make
Advances to the Borrower from time to time from the effective  date hereof until
the Termination  Date in an aggregate  principal amount not exceeding the lesser
of the  Borrowing  Base or ONE MILLION TWO HUNDRED  THOUSAND AND NO/100  DOLLARS
($1,200,000.00),  at any one time outstanding. Each Advance will be requested in
writing or in person by an authorized officer of the Borrower, or telephonically
by any person reasonably believed by the Bank to be an authorized officer of the
Borrower.  Requests for Advances must be received by the Bank no later than 2:00
p.m. on the day of such Advance.  Each request shall be deemed a  representation
and warranty by the Borrower that the  representations  and warranties set forth
in Section 6 hereof are true as of the date of such  request.  Each Advance will
be  evidenced  by a notation on the Bank's  records,  which shall be  conclusive
evidence  of such  advance,  and by the Current  Note.  Within the limits of the
Credit and subject to the terms and conditions  hereof, the Borrower may borrow,
prepay pursuant to Section 2.5 hereof and reborrow pursuant to this Section 2.1.

<PAGE>
2.2  Interest on the unpaid  principal  of the Current  Note shall  accrue at an
annual rate equal to the Base Rate in effect from time to time, and shall change
as and when the Base Rate changes.  Interest shall be calculated on the basis of
the actual number of days elapsed in a year of 360 days.

2.3  Interest  on the  Current  Note shall be payable ON DEMAND,  but until such
demand is made, interest shall be payable monthly, commencing June 30, 1998, and
continuing on the last day of each succeeding month, and on the Maturity Date.

2.4 The  principal  of the  Current  Note shall be  repayable  on the earlier of
DEMAND or the Maturity Date.

2.5 The  Borrower  may at any time prepay the Current Note in whole or from time
to time in part without premium or penalty.

2.6 If, at any time and from time to time, the outstanding  principal balance of
the Current Note exceeds the Borrowing Base, the Borrower shall immediately make
a prepayment of principal in an amount sufficient to eliminate such excess.

          SECTION 3  The Term Loan

3.1 Subject to the other  provisions  of this  Agreement,  the Bank shall make a
term  loan  ("Term   Loan")  to  the   Borrower  in  an  amount  not   exceeding
$1,293,352.84,  available in one or more draws on or before June 29,  1998.  The
initial draw under the Term Loan shall be used to pay off all term  indebtedness
owed by the Borrower to NBCI as of the date of such draw. The Term Loan shall be
non-revolving and evidenced by the Term Note.

3.2 Interest on the unpaid  principal of the Term Note shall accrue at an annual
rate equal to the Base Rate in effect from time to time, and shall change as and
when the Base Rate changes. Interest on the Term Note shall be calculated on the
basis of the actual number of days elapsed in a year of 360 days.

3.3  Principal  of and  interest  on the Term  Note  shall be paid  together  as
follows:

               Fifty-nine (59)  installments,  each in the amount of $26,535.11,
          commencing  July  31,  1998  and  continuing  on the  last day of each
          consecutive  month hereafter through and including May 31, 2003; plus,
          one  (1)  final  payment  in an  amount  equal  to all  then-remaining
          outstanding  principal  of the Term  Note,  plus  accrued  but  unpaid
          interest, shall be due and payable on June 30, 2003.

3.4 All payments  received in respect of the Term Note shall first be applied to
accrued  but  unpaid  interest,  with the  remainder  applied  to  reduction  of
principal.

3.5 The  Borrower  may at any time prepay the Term Note in whole or from time to
time in part  without  premium or penalty.  Prepayments  shall be applied to the
principal   portion  of  scheduled   installments  in  inverse  order  of  their
maturities.

          SECTION 4  Security

4.1 The  payment  and  performance  of the  Borrower's  obligations  under  this
Agreement, the Current Note and the Term Note shall be secured by the Borrower's
Security  Agreement,  pursuant to which the Borrower  grants the Bank a security
interest in all personal  property assets of the Borrower,  whether now owned or
hereafter acquired.

4.2 As additional  security for the prompt  satisfaction  of all  obligations of
Borrower  under  this  Agreement,  the  Current  Note,  the  Term  Note  and the
Borrower's Security Agreement,  the Borrower hereby assigns,  transfers and sets
over to the Bank all of its right,  title and interest in and to, and grants the
Bank a lien on and a security  interest  in, all amounts  that may be owing from
time to time by the Bank to the  Borrower  in any  capacity,  including  without
limitation  any  balance or share  belonging  to the  Borrower of any deposit or
other  account  with  the  Bank,  which  lien  and  security  interest  shall be
independent of any right of set-off which the Bank may have.

4.3 The  payment  and  performance  of the  Borrower's  obligations  under  this
Agreement, the Current Note, the Term Note and the Borrower's Security Agreement
shall be unconditionally guaranteed by the Guarantor, pursuant to the provisions
of the Guaranty.

4.4 The payment and  performance of the  obligations of the Guarantor  under the
Guaranty shall be secured by the  Guarantor's  Security  Agreement,  pursuant to
which the Guarantor  grants the Bank a first security  interest in all shares of
stock in the Borrower, whether now owned or hereafter acquired by the Guarantor.

4.5 At any time  requested by the Bank,  the Borrower shall execute and deliver,
or cause to be executed and delivered,  to the Bank such additional documents as
the Bank may  consider to be  necessary  or desirable to evidence or perfect the
security  interests  referred to in the  Borrower's  Security  Agreement and the
Guarantor's Security Agreement.

          SECTION 5  Conditions Precedent

5.1 On or before the Closing Date,  the Borrower  shall deliver the following to
the Bank, in form and content acceptable to the Bank:

               A. Copies of the  Articles of  Incorporation  of the Borrower and
          the Guarantor, and all amendments thereto,  certified by the Secretary
          of State of Minnesota;

               B.  Copies of the  By-laws  of the  Borrower  and the  Guarantor,
          certified as true and  complete by the  corporate  secretaries  of the
          Borrower and the Guarantor;

               C. Certificates,  as of the most recent date practicable,  of the
          Secretary  of  State  of  Minnesota  as to the  good  standing  of the
          Borrower and the Guarantor;

               D. A Norwest Corporate Certificate Of Authority, duly executed by
          the corporate secretary of the Borrower;

               E.  A  Norwest   Certificate   Of   Authority   For  Guaranty  By
          Corporation,   duly  executed  by  the  corporate   secretary  of  the
          Guarantor;

               F. The Current Note, duly executed by the Borrower;

               G. The Term Note, duly executed by the Borrower;

               H.  The  Borrower's  Security  Agreement,  duly  executed  by the
          Borrower;

               I. UCC-1 (and upon request,  UCC-2)  financing  statements,  duly
          executed by the Borrower;

               J. A Borrowing Base Certificate,  current through the last day of
          the month immediately preceding the Closing Date, and duly executed by
          the Borrower;

               K. The Guaranty, duly executed by the Guarantor; and,

               L. The  Guarantor's  Security  Agreement,  duly  executed  by the
          Guarantor;

               M. Unrestricted stock certificates and stock powers,  relating to
          the  shares of stock in the  Borrower  which are being  pledged by the
          Guarantor pursuant to the Guarantor's Security Agreement;

               N. A certificate, duly executed by an authorized officer of NBCI,
          indicating the principal of and interest on the  indebtedness  owed by
          the  Borrower to NBCI which is being paid off with the proceeds of the
          Term Loan;

               O. UCC-3 termination statements, duly executed by NBCI; and,

               P.  Certificates  of  insurance  indicating  that  Borrower is in
          compliance with the covenants contained in Section 7.5 hereof.

5.2 The Bank shall not  consider  any request for an Advance  under  Section 2.1
hereof, or for a draw under the Term Loan under Section 3.1 hereof, unless:

               A. The  representations  and  warranties  contained  in Section 6
          hereof are true and accurate on and as of such date; and,

               B. No Event of Default,  and no event which might become an Event
          of  Default  after the lapse of time or the  giving of notice  and the
          lapse of time,  has occurred and is  continuing or will exist upon the
          disbursement  of such  Advance  or the  funding of such draw under the
          Term Loan, as the case may be.

<PAGE>
          SECTION 6 Representations and Warranties

     To induce the Bank to enter into this  Agreement,  the Borrower  represents
and warrants to the Bank as follows:

6.1 The Borrower is a corporation duly organized,  existing and in good standing
under the laws of the State of Minnesota.

6.2 The  execution,  delivery and  performance  of this  Agreement and the other
documents  referred to herein by the Borrower are within its  corporate  powers,
have been duly  authorized,  and are not in contravention of law or the terms of
Borrower's  Articles of Incorporation or By-laws, or of any undertaking to which
the Borrower is a party or by which it is bound.

6.3 The  property of the  Borrower  is not subject to any lien except  Permitted
Liens.

6.4 No litigation or governmental  proceeding is pending or, to the knowledge of
the officers of the Borrower, threatened against the Borrower which could have a
material adverse effect on the Borrower's financial condition or business.

6.5 The  following  is an  accurate  schedule  of the  indebtedness  owed by the
Borrower to NBCI as of the date of this Agreement:

          A. Aggregate revolving principal indebtedness: $0_____________;

          B.   Accrued   but  unpaid   interest   on   revolving   indebtedness:
     $0_______________;

          C. Aggregate principal term indebtedness: $1,285,639.00; and,

          D. Accrued but unpaid interest on term indebtedness: $7,713.84.

Such indebtedness  constitutes legal, valid and binding  obligations owed by the
Borrower to NBCI,  subject to no defense,  counterclaim,  offset,  abatement  or
recoupment.

6.6 All  financial  statements  delivered to Bank by or on behalf of  Guarantor,
including  any  schedules and notes  pertaining  thereto,  have been prepared in
accordance with Generally Accepted Accounting  Principles  consistently applied,
and fully and fairly present in all material respects the financial condition of
the Guarantor at the dates thereof and the results of operations for the periods
covered  thereby,  and  there  have  been no  material  adverse  changes  in the
consolidated  financial condition or business of the Borrower from September 30,
1997 to the date hereof.

6.7 As of the date of this  Agreement,  there are 40,000  shares of stock in the
Borrower issued and outstanding, of which the Guarantor owns 40,000 shares.

          SECTION 7  Affirmative Covenants

          The  Borrower  covenants  and agrees  that,  for so long as the Credit
     remains in existence,  or any indebtedness  remains  outstanding  under the
     Current Note or the Term Note,  unless the Bank shall otherwise  consent in
     writing, it will:

7.1 Pay, when due, all taxes assessed against it or its property,  except to the
extent and for so long as contested in good faith.

7.2 Maintain its corporate  existence  and comply with all laws and  regulations
applicable thereto.

7.3 Furnish to the Bank, in form and content acceptable to the Bank:

               A.  Within  120 days  after  the end of each  fiscal  year of the
          Guarantor,  (i) a detailed  report of audit of the  Guarantor  and its
          subsidiaries,  prepared on a consolidated and consolidating  basis for
          such fiscal year,  including  the balance  sheets of the Guarantor and
          its subsidiaries as of the end of such fiscal year, and the statements
          of profit and loss and surplus of the Guarantor  and its  subsidiaries
          for the fiscal year then  ended,  prepared  by  independent  certified
          public  accountants  satisfactory  to the Bank,  (ii) a certificate of
          such  accountants  stating whether,  in making their audit,  they have
          become  aware of any  Event of  Default  or of any event  which  could
          become an Event of Default  after the giving of notice or the lapse of
          time (or both), which has occurred and is then continuing,  and if any
          such event has occurred and is  continuing,  specifying the nature and
          period  of  existence   thereof,   and  (iii)  insurance   certificate
          indicating the Borrower's  compliance  with the covenants set forth in
          Section 7.5 hereof.

<PAGE>
               B.  Within  30  days  after  the  end  of  each  month,  (i)  the
          consolidated  balance sheets of the Guarantor and its  subsidiaries as
          of the end of such  month,  and (ii)  the  consolidated  statement  of
          profit and loss and surplus of the Guarantor and its subsidiaries from
          the beginning of such fiscal year to the end of such month. All of the
          foregoing  shall be unaudited,  but  certified as correct  (subject to
          year-end adjustments) by an appropriate officer of the Guarantor.

               C.  Within 30 days  after the end of each  month  which ends with
          outstanding  indebtedness  under  the  Credit,  (i) a  Borrowing  Base
          Certificate  as of the end of such month,  and (ii) upon  request,  an
          aging of the Borrower's receivables as of the end of such month.

               D. Promptly upon knowledge thereof, notice to the Bank in writing
          of the occurrence of any event which has or might,  after the lapse of
          time or the giving of notice and the lapse of time, become an Event of
          Default.

               E.  Promptly,  such other  information as the Bank may reasonably
          request.

7.4 Maintain its inventory,  equipment, real estate and other properties in good
condition and repair (normal wear and tear excepted), and will pay and discharge
or  cause  to be paid  and  discharged  when  due,  the  cost of  repairs  to or
maintenance of the same, and will pay or cause to be paid all rental or mortgage
payments due on such real estate.

7.5 Cause its  properties  of an insurable  nature to be  adequately  insured by
reputable and solvent insurance  companies  against loss or damages  customarily
insured against by persons operating similar properties and similarly  situated,
and carry such other insurance  (including business  interruption  insurance) as
usually  carried  by  persons  engaged  in the same or  similar  businesses  and
similarly  situated,  with the Bank named as loss payee on all such  policies of
insurance with respect to the Bank's collateral security.

7.6 Keep true,  complete and accurate books,  records and accounts in accordance
with Generally Accepted Accounting Principles consistently applied.

7.7  Permit  any of  Bank's  duly  authorized  employees  or agents  the  right,
following reasonable notice, to visit and inspect the properties of Borrower and
to examine and take abstracts  from its books and records,  with the expenses of
all the  foregoing  to be borne by the  Borrower;  provided,  however,  that the
liability  of the  Borrower to  reimburse  the Bank for  semi-annual  collateral
audits shall not exceed $1,000.00 per fiscal year.

7.8  Continue  to conduct  the same  general  type of  business  as is now being
carried  on  in  compliance  with  all  applicable  statutes,  laws,  rules  and
regulations.

          SECTION 8  Negative Covenants

     Without the Bank's  written  consent,  for so long as the Credit remains in
existence, or any indebtedness remains outstanding under the Current Note or the
Term Note, the Borrower will not:

8.1  Permit any lien,  including  without  limitation  any  pledge,  assignment,
mortgage,  title retaining contract or other type of security interest, to exist
on any of its real or personal property, except Permitted Liens.

8.2 Permit its Tangible Net Worth to be less than $3,000,000.00 as of the end of
any fiscal year, commencing September 30, 1998.

8.3 Permit its ratio of Total  Liabilities  to Tangible  Net Worth to be greater
than 2.0 to 1.0 as of the end of any fiscal year, commencing September 30, 1998.

<PAGE>
8.4 Permit its net profit after taxes to be less than $100,000.00 for any fiscal
year, commencing with the fiscal year ending September 30, 1998.

8.5 Permit its ratio of Traditional Cash Flow to current maturities of long-term
debt to be less than 1.50 to 1.0 for any fiscal year, commencing with the fiscal
year ending September 30, 1998.

8.6 Purchase or otherwise  acquire all or substantially all of the assets of any
legal entity.

8.7  Create,  incur,  assume  or suffer to  exist,  contingently  or  otherwise,
indebtedness for Borrowed Money.

8.8  Become or remain a  guarantor  or  surety,  or pledge  its credit or become
liable in any manner (except by endorsement  for deposit in the ordinary  course
of business) on the other undertakings of another.

8.9 Enter into any  transaction  of merger or  consolidation,  or sell,  assign,
lease or otherwise  dispose of all or a  substantial  part of its  properties or
assets, or any of its notes or accounts receivable, or any stock or indebtedness
of any  subsidiary,  or any assets or properties  necessary or desirable for the
proper  conduct of its  business,  or change the nature of its  business  or its
accounting procedures,  or wind up, liquidate or dissolve, or agree to do any of
the foregoing,  or permit any  subsidiary to do any of the foregoing;  provided,
however, that the provisions of this Section 8.9 shall not prohibit the Borrower
from selling assets in an aggregate amount not exceeding  $250,000.00 per fiscal
year.

              SECTION 9  Events of Default

9.1 Upon the occurrence of any of the following Events of Default:

               A.  Default in any  payment of interest  or of  principal  on the
          Current Note or the Term Note when due, and continuance thereof for 10
          calendar days;

               B. Default in the observance or performance of any one or more of
          the  covenants  set  forth  in  Sections  2.6 or  7.3(C)  hereof,  and
          continuance thereof for 3 calendar days;

               C. Default in the  observance or  performance of any covenant set
          forth in Section 8 hereof;

               D.  Default  in  the  observance  or  performance  of  any  other
          agreement of the Borrower  set forth  herein  (i.e.,  other than those
          addressed  in  Sections   9.1(A),   9.1(B)  or  9.1(C)  hereof),   and
          continuance thereof for 30 calendar days;

               E. The  occurrence  of an event of default  under the  Borrower's
          Security Agreement or the Guarantor's Security Agreement;

               F.   Default  by  the  Borrower  in  the  payment  of  any  other
          indebtedness for Borrowed Money or in the observance or performance of
          any term,  covenant or  agreement  of the  Borrower  in any  agreement
          relating  to any  indebtedness  of the  Borrower,  the effect of which
          default is to permit the holder of such  indebtedness  to declare  the
          same due  prior to the date  fixed  for its  payment  under  the terms
          thereof;

               G. Any representation or warranty made by the Borrower herein, or
          in any  statement  or  certificate  furnished  by the  Borrower or the
          Guarantor hereunder, is untrue in any material respect;

<PAGE>
               H. The recission of the Guaranty; or,

               I. The  Guarantor  becomes  insolvent  or  bankrupt,  or makes an
          appointment  for  the  benefit  of  creditors,   or  consents  to  the
          appointment of a custodian,  trustee or receiver for itself or for the
          greater part of its properties; or a custodian, trustee or receiver is
          appointed for the Guarantor or for the greater part of its  properties
          without its consent, and is not discharged within 60 calendar days; or
          bankruptcy,  reorganization or liquidation  proceedings are instituted
          by or  against  the  Guarantor  and,  if  instituted  against  it, are
          consented to by it or remain undismissed for 60 calendar days;

then, or at any time thereafter,  unless such Event of Default is remedied,  the
Bank may, by notice in writing to the Borrower, terminate the Credit and declare
the Current Note and the Term Note to be due and  payable,  or any or all of the
foregoing,  whereupon the Credit shall terminate forthwith, and the Current Note
and the Term Note shall immediately become due and payable, or any or all of the
foregoing, as the case may be.

9.2 Upon the occurrence of any of the following Events of Default:

          The Borrower  becomes  insolvent or bankrupt,  or makes an appointment
          for the benefit of  creditors,  or consents  to the  appointment  of a
          custodian,  trustee or receiver  for itself or for the greater part of
          its properties;  or a custodian,  trustee or receiver is appointed for
          the  Borrower or for the greater  part of its  properties  without its
          consent, and is not discharged within 30 calendar days; or bankruptcy,
          reorganization or liquidation proceedings are instituted by or against
          the Borrower and, if instituted  against it, are consented to by it or
          remain undismissed for 30 calendar days;

then the Credit shall automatically  terminate and the Current Note and the Term
Note shall automatically  become immediately due and payable,  without notice or
demand.


          SECTION 10  Arbitration

10.1 Except for "Core  Proceedings" under the United States Bankruptcy Code, the
Bank and the  Borrower  agree to  submit  to  binding  arbitration  all  claims,
disputes  and  controversies   between  or  among  them  (and  their  respective
employees,  officers, directors,  attorneys, and other agents), whether in tort,
contract or otherwise,  arising out of or relating to in any way (i) the Credit,
the Term Loan,  the Current Note,  the Term Note,  and related loan and security
documents,    including   all   negotiation,    execution,    collateralization,
administration,  repayment, modification,  extension,  substitution,  formation,
inducement, enforcement, default or termination, or (ii) requests for additional
credit. Any arbitration proceeding will (i) proceed in St. Paul, Minnesota, (ii)
be governed by the Federal  Arbitration Act (Title 9 of the United States Code),
and (iii) be conducted in accordance  with the Commercial  Arbitration  Rules of
the American Arbitration Association ("AAA").

The arbitration  provisions  contained in this Section 10 do not limit the right
of either party (i) to foreclose against real or personal  property  collateral,
(ii) to  exercise  self-help  remedies  relating  to  collateral  or proceeds of
collateral  such as  setoff  or  repossession,  or (iii) to  obtain  provisional
ancillary  remedies  such as  replevin,  injunctive  relief,  attachment  or the
appointment  of  a  receiver,  before  during  or  after  the  pendency  of  any
arbitration proceeding. This exclusion does not constitute a waiver of the right
or  obligation of either party to submit any dispute to  arbitration,  including
those arising from the exercise of the actions detailed in clauses (i), (ii) and
(iii) of this paragraph.  Notwithstanding  any provision to the contrary herein,
any party may apply to any court having  jurisdiction hereof and seek injunctive
relief so as to maintain the status quo until such time as the arbitration award
is rendered or the controversy is otherwise resolved.

Any arbitration proceeding will be before a single arbitrator selected according
to the Commercial Arbitration Rules of the AAA. The arbitrator will be a neutral
attorney or retired judge who has practiced in the area of commercial  law for a
minimum of ten years.  The arbitrator will determine  whether or not an issue is
arbitratable,  and will give effect to the statutes of limitation in determining
any claim.  Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction.

10.2 In any arbitration proceeding the arbitrator will decide (by documents only
or with a hearing at the arbitrator's  discretion) any pre-hearing motions which
are  similar to motions to dismiss  for  failure to state a claim or motions for
summary adjudication.

<PAGE>
10.3 In any  arbitration  proceeding,  discovery  will be permitted  and will be
governed  by the  Minnesota  Rules of Civil  Procedure.  All  discovery  must be
completed  no later than 20 days before the hearing  date and within 180 days of
the  commencement of arbitration  proceedings.  Any requests for an extension of
the  discovery  periods,  or any  discovery  disputes,  will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential  for the  party's  presentation  and  that no  alternative  means  for
obtaining information is available.

10.4 The arbitrator shall award costs and expenses of the arbitration proceeding
in accordance with the provisions of this Agreement.

          SECTION 11  Miscellaneous

11.1 The  provisions  of this  Agreement  shall be in  addition  to those of any
guaranty, pledge or security agreement, note or other evidence of liability held
by the Bank,  all of which shall be  construed as  complementary  to each other.
Nothing herein contained shall prevent the Bank from enforcing any or all of the
rights and remedies available to it at law, in equity or by agreement.

11.2 From time to time,  the Borrower  will execute and deliver to the Bank such
additional  documents and will provide such  additional  information as the Bank
may reasonably  require to carry out the terms of this Agreement and be informed
of the Borrower's status and affairs.  All documentation  executed in connection
with this Agreement,  whether before,  on or after the Closing date, shall be in
form and content acceptable to the Bank.

11.3 The Borrower  will pay all  expenses,  including  the  reasonable  fees and
expenses  of  legal  counsel  for the  Bank,  incurred  in  connection  with the
preparation,  administration,  amendment,  modification  or  enforcement of this
Agreement and the other documents referred to herein.

11.4 All notices or consents required or permitted by this Agreement shall be in
writing  and  shall be deemed  delivered  if  delivered  in person or if sent by
United States mail, postage prepaid,  or telegraph or telex, as follows,  unless
such address is changed by written notice hereunder:

               A. If to the Borrower:

                  La Canasta of Minnesota, Inc.
                  1565 1st Avenue NW
                  New Brighton, Minnesota  55112

                  Attention:  A. Merrill Ayers, CFO

               B. If to the Bank:

                  Norwest Bank Minnesota, National Association
                  St. Paul Office
                  55 East Fifth Street
                  St. Paul, Minnesota  55101

                  Attention:  Paul G. Rebholz

11.5 The Bank  shall have the right at all times to enforce  the  provisions  of
this Agreement and the other documents  referred to herein in strict  accordance
with the terms hereof and thereof,  notwithstanding any conduct or custom on the
part of the Bank in refraining  from so doing at any time or times.  The failure
of the Bank at any time or times to enforce  its rights  under such  provisions,
strictly in accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
as having in any way or manner  modified  or waived  the same.  All  rights  and
remedies of the Bank are  cumulative  and  concurrent,  and the  exercise of one
right or remedy  shall not be deemed a waiver or release  of any other  right or
remedy.

11.6 This  Agreement  shall inure to the benefit of, and shall be binding  upon,
the  respective  successors  and permitted  assigns of the parties  hereto.  The
Borrower  has no right to  assign  any of its  rights or  obligations  hereunder
without the prior written consent of the Bank. This Agreement, and the documents
executed and delivered pursuant hereto or in connection herewith, constitute the
entire  agreement  between  the  parties,  and may be amended  only by a writing
signed on behalf of each party.

11.7 If any  provision  of  this  Agreement  shall  be held  invalid  under  any
applicable  law, such  invalidity  shall not affect any other  provision of this
Agreement that can be given effect without the invalid  provision,  and, to this
end, the provisions hereof are severable.

<PAGE>
11.8 NONE OF THE PROVISIONS OF THIS AGREEMENT,  INCLUDING WITHOUT LIMITATION THE
PROVISIONS  OF SECTION 9, SHALL BE DEEMED TO  DIMINISH  OR  ABROGATE  THE BANK'S
RIGHT TO DEMAND IMMEDIATE REPAYMENT OF THE CURRENT NOTE AT ANY TIME.

11.9 NONE OF THE  PROVISIONS  OF THIS  AGREEMENT  SHALL BE DEEMED TO DIMINISH OR
ABROGATE THE BANK'S RIGHT TO DECLINE TO MAKE AN ADVANCE  UNDER THE CREDIT AT ANY
TIME.

11.10  The  substantive  laws  of  the  State  of  Minnesota  shall  govern  the
construction  of this  Agreement  and the rights  and  remedies  of the  parties
hereto.

              IN WITNESS  WHEREOF,  the parties  hereto have duly  executed this
Agreement as of the day and year first above written.

                                  LA CANASTA OF MINNESOTA, INC.

                                  By:______________________________

                                  Its:_____________________________


                                  By:______________________________

                                  Its:_____________________________


                                  NORWEST BANK MINNESOTA,
                                    NATIONAL ASSOCIATION

                                  By:______________________________
                                     Paul G. Rebholz,
                                     Assistant Vice President
<PAGE>
                                 PROMISSORY NOTE
$1,200,000.00                                             June 24th, 1998

      FOR VALUE  RECEIVED,  the  undersigned,  La Canasta Of Minnesota,  Inc., a
Minnesota corporation with offices in New Brighton,  Minnesota,  promises to pay
on the earlier of DEMAND or May 30, 2000 to the order of Norwest Bank Minnesota,
National  Association (the "Bank") at the Bank's St. Paul Office or at any other
place designated at any time by the holder hereof, in lawful money of the United
States of America,  the  principal  sum of ONE MILLION TWO HUNDRED  THOUSAND AND
NO/100 DOLLARS  ($1,200,000.00),  or so much thereof as is disbursed and remains
outstanding  hereunder  as shown by the  Bank's  liability  record  on the dates
payments are due hereunder,  together with interest on the unpaid balance hereof
from the date  hereof  until this Note is fully paid at an annual  rate equal to
the rate of interest established from time to time by the Bank as its Base Rate.
The interest rate of this Note shall change  simultaneously  with each change in
the Base Rate.  Interest  shall be  calculated  on the basis of actual number of
days elapsed in a 360-day year.

      Interest on this Note is payable ON DEMAND, but until such demand is made,
interest shall be payable  monthly,  commencing June 30, 1998, and continuing on
the last day of each succeeding month, and upon maturity.

      This Note  constitutes  the Current Note issued pursuant to the provisions
of that  certain  Term Loan And  Credit  Agreement  of even date  herewith  (the
"Credit  Agreement")  made between the  undersigned  and the Bank.  Reference is
hereby made to the Credit  Agreement  for  statements  of the terms  pursuant to
which the indebtedness  evidenced hereby was created, is secured, may be prepaid
voluntarily,  may be subject to mandatory prepayment,  may be reborrowed and may
be  accelerated;  PROVIDED,  HOWEVER,  that none of the provisions of the Credit
Agreement  shall be  deemed to  diminish  or  abrogate  the right of the Bank to
demand at any time immediate payment of all indebtedness evidenced by this Note.

      Unless  prohibited  by law,  the  undersigned  agrees  to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the holder hereof in the event this Note is not duly paid. The holder hereof may
change  any terms of  payment of this  Note,  including  extensions  of time and
renewals,  and release  any  security  for, or any party to, this Note,  without
notifying or  releasing  any  accommodation  maker,  endorser or guarantor  from
liability in connection with this Note. Presentment or other demand for payment,
notice of dishonor  and protest are hereby  waived by the  undersigned  and each
endorser or guarantor.
This Note shall be governed by the substantive laws of the State of Minnesota.

                                            LA CANASTA OF MINNESOTA, INC.

                                            By:_________________________________

                                            Its:________________________________

<PAGE>
                                    EXHIBIT A
                                 PROMISSORY NOTE

$1,200,000.00                                                    June ____, 1998

      FOR VALUE  RECEIVED,  the  undersigned,  La Canasta Of Minnesota,  Inc., a
Minnesota corporation with offices in New Brighton,  Minnesota,  promises to pay
on the earlier of DEMAND or May 30, 2000 to the order of Norwest Bank Minnesota,
National  Association (the "Bank") at the Bank's St. Paul Office or at any other
place designated at any time by the holder hereof, in lawful money of the United
States of America,  the  principal  sum of ONE MILLION TWO HUNDRED  THOUSAND AND
NO/100 DOLLARS  ($1,200,000.00),  or so much thereof as is disbursed and remains
outstanding  hereunder  as shown by the  Bank's  liability  record  on the dates
payments are due hereunder,  together with interest on the unpaid balance hereof
from the date  hereof  until this Note is fully paid at an annual  rate equal to
the rate of interest established from time to time by the Bank as its Base Rate.
The interest rate of this Note shall change  simultaneously  with each change in
the Base Rate.  Interest  shall be  calculated  on the basis of actual number of
days elapsed in a 360-day year.

      Interest on this Note is payable ON DEMAND, but until such demand is made,
interest shall be payable  monthly,  commencing June 30, 1998, and continuing on
the last day of each succeeding month, and upon maturity.

      This Note  constitutes  the Current Note issued pursuant to the provisions
of that  certain  Term Loan And  Credit  Agreement  of even date  herewith  (the
"Credit  Agreement")  made between the  undersigned  and the Bank.  Reference is
hereby made to the Credit  Agreement  for  statements  of the terms  pursuant to
which the indebtedness  evidenced hereby was created, is secured, may be prepaid
voluntarily,  may be subject to mandatory prepayment,  may be reborrowed and may
be  accelerated;  PROVIDED,  HOWEVER,  that none of the provisions of the Credit
Agreement  shall be  deemed to  diminish  or  abrogate  the right of the Bank to
demand at any time immediate payment of all indebtedness evidenced by this Note.

      Unless  prohibited  by law,  the  undersigned  agrees  to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the holder hereof in the event this Note is not duly paid. The holder hereof may
change  any terms of  payment of this  Note,  including  extensions  of time and
renewals,  and release  any  security  for, or any party to, this Note,  without
notifying or  releasing  any  accommodation  maker,  endorser or guarantor  from
liability in connection with this Note. Presentment or other demand for payment,
notice of dishonor  and protest are hereby  waived by the  undersigned  and each
endorser or guarantor.
This Note shall be governed by the substantive laws of the State of Minnesota.

                                            LA CANASTA OF MINNESOTA, INC.

                                            By:_________________________________
                                            Its:________________________________
<PAGE>
                                 PROMISSORY NOTE
$1,293,352.84                                                    June 24th, 1998

      FOR VALUE  RECEIVED,  the  undersigned,  La Canasta Of Minnesota,  Inc., a
Minnesota corporation with offices in New Brighton,  Minnesota,  promises to pay
to the order of Norwest Bank Minnesota, National Association (the "Bank") at the
Bank's  St.  Paul  Office or at any other  place  designated  at any time by the
holder  hereof,  in lawful money of the United States of America,  the principal
sum of ONE MILLION TWO HUNDRED NINETY THREE THOUSAND THREE HUNDRED FIFTY TWO AND
84/100  DOLLARS  ($1,293,352.84),  together with interest on the unpaid  balance
hereof  from the date  hereof  until this Note is fully  paid at an annual  rate
equal to the rate of interest  established  from time to time by the Bank as its
Base Rate. The interest rate of this Note shall change  simultaneously with each
change in the Base Rate.  Interest  shall be  calculated  on the basis of actual
number of days elapsed in a 360-day year.

      Principal of and interest on this Note shall be paid together as follows:

              Fifty-nine  (59)  installments,  each in the amount of $26,535.11,
              commencing  July 31, 1998 and  continuing  on the last day of each
              consecutive  month  hereafter  through and including May 31, 2003;
              plus  one  (1)  final   payment   in  an   amount   equal  to  all
              then-remaining  outstanding  principal of this Note,  plus accrued
              but unpaid interest, shall be due and payable on June 30, 2003.

      This Note  constitutes  the Term Note issued pursuant to the provisions of
that certain Term Loan And Credit  Agreement of even date  herewith (the "Credit
Agreement") made between the undersigned and the Bank.  Reference is hereby made
to the  Credit  Agreement  for  statements  of the terms  pursuant  to which the
indebtedness   evidenced  hereby  was  created,  is  secured,   may  be  prepaid
voluntarily, and may be accelerated.

      Unless  prohibited  by law,  the  undersigned  agrees  to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the holder hereof in the event this Note is not duly paid. The holder hereof may
change  any terms of  payment of this  Note,  including  extensions  of time and
renewals,  and release  any  security  for, or any party to, this Note,  without
notifying or  releasing  any  accommodation  maker,  endorser or guarantor  from
liability in connection with this Note. Presentment or other demand for payment,
notice of dishonor  and protest are hereby  waived by the  undersigned  and each
endorser or guarantor.
This Note shall be governed by the substantive laws of the State of Minnesota.

                                            LA CANASTA OF MINNESOTA, INC.

                                            By:_________________________________

                                            Its:________________________________

<PAGE>
                                    EXHIBIT B
                                 PROMISSORY NOTE

$1,293,352.84                                                    June ____, 1998

      FOR VALUE  RECEIVED,  the  undersigned,  La Canasta Of Minnesota,  Inc., a
Minnesota corporation with offices in New Brighton,  Minnesota,  promises to pay
to the order of Norwest Bank Minnesota, National Association (the "Bank") at the
Bank's  St.  Paul  Office or at any other  place  designated  at any time by the
holder  hereof,  in lawful money of the United States of America,  the principal
sum of ONE MILLION TWO HUNDRED NINETY THREE THOUSAND THREE HUNDRED FIFTY TWO AND
84/100  DOLLARS  ($1,293,352.84),  together with interest on the unpaid  balance
hereof  from the date  hereof  until this Note is fully  paid at an annual  rate
equal to the rate of interest  established  from time to time by the Bank as its
Base Rate. The interest rate of this Note shall change  simultaneously with each
change in the Base Rate.  Interest  shall be  calculated  on the basis of actual
number of days elapsed in a 360-day year.

      Principal of and interest on this Note shall be paid together as follows:

              Fifty-nine  (59)  installments,  each in the amount of $26,535.11,
              commencing  July 31, 1998 and  continuing  on the last day of each
              consecutive  month  hereafter  through and including May 31, 2003;
              plus  one  (1)  final   payment   in  an   amount   equal  to  all
              then-remaining  outstanding  principal of this Note,  plus accrued
              but unpaid interest, shall be due and payable on June 30, 2003.

      This Note  constitutes  the Term Note issued pursuant to the provisions of
that certain Term Loan And Credit  Agreement of even date  herewith (the "Credit
Agreement") made between the undersigned and the Bank.  Reference is hereby made
to the  Credit  Agreement  for  statements  of the terms  pursuant  to which the
indebtedness   evidenced  hereby  was  created,  is  secured,   may  be  prepaid
voluntarily, and may be accelerated.

      Unless  prohibited  by law,  the  undersigned  agrees  to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the holder hereof in the event this Note is not duly paid. The holder hereof may
change  any terms of  payment of this  Note,  including  extensions  of time and
renewals,  and release  any  security  for, or any party to, this Note,  without
notifying or  releasing  any  accommodation  maker,  endorser or guarantor  from
liability in connection with this Note. Presentment or other demand for payment,
notice of dishonor  and protest are hereby  waived by the  undersigned  and each
endorser or guarantor.  This Note shall be governed by the substantive laws of
the State of Minnesota.

                                            LA CANASTA OF MINNESOTA, INC.
 
                                            By:_________________________________

                                            Its:________________________________
<PAGE>
                               SECURITY AGREEMENT


DATE:  June 24, 1998

DEBTOR:                                              SECURED PARTY:
LaCanasta Of Minnesota, Inc.                         Norwest Bank Minnesota,
1565 1st Avenue North West                             National Association
New Brighton, Minnesota  55112                       55 East Fifth Street
                                                     St. Paul, Minnesota  55101

1. Security  Interest and  Collateral.  To secure the payment and performance of
each and every debt,  liability  and  obligation  of every type and  description
which Debtor may now or at any time hereafter owe to Secured Party (whether such
debt,  liability or obligation  now exists or is hereafter  created or incurred,
whether it is currently  contemplated  by the Debtor and Secured Party,  whether
any documents evidencing it refer to this Security Agreement,  whether it arises
with or without any  documents  (e.g.  obligations  to Secured  Party created by
checking overdrafts),  and whether it is or may be direct or indirect, due or to
become  due,  absolute  or  contingent,  primary  or  secondary,  liquidated  or
unliquidated,   or  joint,  several  or  joint  and  several;  all  such  debts,
liabilities  and  obligations  being  herein  collectively  referred  to as  the
"Obligations"),  Debtor hereby grants Secured Party a security  interest (herein
called the "Security  Interest") in the following  property  (herein  called the
"Collateral") (check applicable boxes and complete information):

         (a)      INVENTORY:

                  |X|      All inventory of Debtor, whether now owned or
                           hereafter acquired and wherever located;

         (b)      EQUIPMENT, FARM PRODUCTS AND CONSUMER GOODS:

                  |X|      All  Equipment  of  Debtor,   whether  now  owned  or
                           hereafter acquired,  including but not limited to all
                           present and future  machinery,  vehicles,  furniture,
                           appliances,  fixtures,  manufacturing  and processing
                           equipment,   farm  machinery  and   equipment,   shop
                           equipment,   office  and   recordkeeping   equipment,
                           computer  hardware  and  software,  parts and  tools,
                           goods,   and  types  of  goods  of  every   kind  and
                           description.

<PAGE>
                  |_|      All farm  products of Debtor,  whether now owned or
                           hereafter acquired,  including  but  not  limited
                           to (i) all  poultry  and livestock and their young,
                           products thereof and produce thereof, all holding
                           marks and brands and branding irons of Debtor that at
                           any time cover any such livestock, and, if the
                           livestock includes sheep,  all wool  pulled,  clipped
                           or shorn  therefrom,  (ii) all crops,  whether annual
                           or perennial,  and the products  thereof, (iii) all
                           feed, seed, fertilizer,  medicines and other supplies
                           used or  produced by Debtor in farming  operations,
                           and (iv) all crop  insurance  payments and storage 
                           payments and all rights to payment and payments under
                           any government agricultural diversion, assistance or
                           support  program,  Farm Services Agency program and
                           any other such government agricultural program
                           including, without limitation, any diversion or
                           deficiency payments. The real estate concerned with
                           the above  described  crops growing or to be grown
                           is:__________________________________________________
                           _____________________________________________________
                           _____________________________________________________
                           and the name of the record owner is:_________________
                           _____________________________________________________

                  |_|      The following goods or types of goods:_______________
                           _____________________________________________________
                           _____________________________________________________

         (c)      ACCOUNTS AND OTHER RIGHTS TO PAYMENT:

                  |X|      Accounts and each and every right of Debtor to the
                           payment of money, whether such right to payment now
                           exists or hereafter arises, whether such right to
                           payment arises out of a sale, lease or other
                           disposition of goods or other property by Debtor,
                           out of a rendering of services by Debtor, out of a
                           loan by Debtor, out of the overpayment of taxes or
                           other liabilities of Debtor, or otherwise arises
                           under any contract or agreement, whether such right
                           to payment is or is not already earned by
                           performance, and howsoever such right to payment
                           may be evidenced, together with all other rights
                           and interests (including all liens and security
                           interests) which Debtor may at any time have by law
                           or agreement against any account debtor or other
                           obligor obligated to make any such payment or against
                           any of the property of such account debtor or other
                           obligor; all including but not limited to all present
                           and future debt instruments, chattel papers,
                           accounts, contract rights, loans and obligations
                           receivable, tax refunds, unearned insurance premiums,
                           rebates, and negotiable documents.
<PAGE>
                  |-|      _____________________________________________________
                           _____________________________________________________
                           _____________________________________________________

         (d)      GENERAL INTANGIBLES:

                  |X|      All general intangibles of Debtor,  whether now owned
                           or hereafter acquired, including, but not limited to,
                           certificates  of deposit,  applications  for patents,
                           patents, copyrights,  trademarks, trade secrets, good
                           will,  tradenames,   customers'  lists,  permits  and
                           franchises,  and  the  right  to use  Debtor's  name,
                           together with all other  intangible  property  rights
                           such as the right to redeem or accept  payment  under
                           an annuity contract or a  non-negotiable  certificate
                           of deposit issued by a bank.

together with all  substitutions and replacements for and products of any of the
foregoing property not constituting consumer goods and together with proceeds of
any and all of the foregoing  property  including without  limitation  insurance
proceeds and any rights of subrogation  resulting from the damage or destruction
thereof,  and,  in the  case  of all  tangible  Collateral,  together  with  all
accessions  and,  except in the case of consumer  goods,  together  with (i) all
accessories, attachments, parts, equipment and repairs now or hereafter attached
or affixed to or used in connection with any such goods,  and (ii) all warehouse
receipts, bills of lading and other documents of title now or hereafter covering
such goods.

2. Representations,  Warranties and Agreements. Debtor represents,  warrants and
agrees that:

         (a)      Debtor is |_|  an individual,  |_|  a partnership,  |X|  a
                  corporation |_| _____________________________.

         (b)      The Collateral will be used primarily for |_| personal, family
                  or household purposes; |_| agricultural purposes; |X| business
                  purposes.

         (c)      |_| If any part or all of the tangible  Collateral will become
                  so related to  particular  real estate as to become a fixture,
                  the real estate concerned is:_________________________________
                  ______________________________________________________________
                  ______________________________________________________________
                  _________________________ and the name of the record owner is:
                  ______________________________________________________________
                  ______________________________________________________________

         (d)      Debtor's chief executive office is located at:________________
                  ______________________________________________________________
                  or, if left  blank,  at the  address  of Debtor  shown at the
                  beginning of this Agreement.  If Debtor is an individual,  the
                  Debtor's  residence  is at the address of Debtor  shown at the
                  beginning of this Agreement.

3. Additional  Representations,  Warranties and Agreements.  Debtor  represents,
warrants and agrees that:

         (a)  Debtor  has (or will have at the time  Debtor  acquires  rights in
Collateral hereafter arising) absolute title to each item of Collateral free and
clear of all security  interests,  liens and  encumbrances,  except the Security
Interest,  and any other security interest permitted under the terms of the term
loan and credit agreement,  and will defend the Collateral against all claims or
demands  of all  persons  other  than  Secured  Party.  Debtor  will not sell or
otherwise  dispose of the Collateral or any interest  therein  without the prior
written consent of Secured Party,  except that, until the occurrence of an Event
of Default  and the  revocation  by Secured  Party of  Debtor's  right to do so,
Debtor may sell any inventory constituting  Collateral to buyers in the ordinary
course of business and use and consume any farm products constituting Collateral
in Debtor's farming  operation.  If Debtor is not an individual,  this Agreement
has been duly and validly  authorized  by all  necessary  action of the Debtor's
governing body.

<PAGE>
         (b) Debtor will not permit any tangible Collateral to be located in any
state (and,  if county  filing is required,  in any county) in which a financing
statement  covering such Collateral is required to be, but has not in fact been,
filed in order to perfect the Security Interest.

         (c) Each  account and right to payment and each  instrument,  document,
chattel paper and other agreement  constituting or evidencing  Collateral is (or
will be when  arising or issued)  the valid,  genuine  and  legally  enforceable
obligation,  subject to no defense,  set-off or  counterclaim  (other than those
arising in the  ordinary  course of  business)  of the  account  debtor or other
obligor  named  therein  or in  Debtor's  records  pertaining  thereto  as being
obligated  to pay such  obligation.  Debtor will  neither  agree to any material
modification  or amendment nor agree to any  cancellation of any such obligation
without Secured Party's prior written consent, and will not subordinate any such
right to payment to claims of other  creditors of such  account  debtor or other
obligor.

         (d)  Debtor  will (i)  keep all  tangible  Collateral  in good  repair,
working order and condition,  normal depreciation  excepted, and will, from time
to time, replace any worn, broken or defective parts thereof; (ii) promptly pay,
when due, all taxes and other  governmental  charges  levied or assessed upon or
against  any  Collateral  or  upon  or  against  the  creation,   perfection  or
continuance of the Security  Interest;  (iii) keep all Collateral free and clear
of all security interests,  liens and encumbrances except the Security Interest;
(iv) at all  reasonable  times,  following  notice,  permit Secured Party or its
representatives to examine or inspect any Collateral,  wherever located,  and to
examine,  inspect  and  copy  Debtor's  books  and  records  pertaining  to  the
Collateral and its business and financial  condition and to discuss with account
debtors and other obligors requests for verifications of amounts owed to Debtor;
(v)  keep  accurate  and  complete  records  pertaining  to the  Collateral  and
pertaining to Debtor's  business and  financial  condition and submit to Secured
Party such periodic reports  concerning the Collateral and Debtor's business and
financial  condition as Secured Party may from time to time reasonably  request;
(vi)  promptly  notify  Secured  Party of any loss of or material  damage to any
Collateral or of any adverse change, known to Debtor, in the prospect of payment
of  any  sums  due  on or  under  any  instrument,  chattel  paper,  or  account
constituting Collateral; (vii) if Secured Party at any time so requests (whether
the  request is made  before or after the  occurrence  of an Event of  Default),
promptly  deliver to Secured  Party any  instrument,  document or chattel  paper
constituting  Collateral,  duly  endorsed or  assigned by Debtor;  (viii) at all
times keep all tangible  Collateral  insured  against  risks of fire  (including
so-called extended coverage), theft, collision (in case of Collateral consisting
of motor vehicles) and such other risks and in such amounts as Secured Party may
reasonably request,  with any loss payable to Secured Party to the extent of its
interest and with the  commitment  of the issuer to notify  Secured Party before
cancellation;  (ix) from time to time  execute  such  financing  statements  and
effective  financing  statements,  and furnish lists of potential buyers of farm
products  as  Secured  Party may  reasonably  require  in order to  perfect  the
Security  Interest and, if any Collateral  consists of a motor vehicle,  execute
such documents as may be required to have the Security  Interest  properly noted
on a certificate of title; (x) pay when due or reimburse Secured Party on demand
for  all  costs  of  collection  of  any  of  the   Obligations  and  all  other
out-of-pocket  expenses (including in each case all reasonable  attorney's fees)
incurred  by  Secured  Party  in  connection  with  the  creation,   perfection,
satisfaction, protection, defense or enforcement of the Security Interest or the
creation,  continuance,  protection, defense or enforcement of this Agreement or
any or all of the Obligations,  including expenses incurred in any litigation or
bankruptcy,  receivership or insolvency  proceedings;  (xi) execute,  deliver or
endorse any and all instruments, documents, assignments, security agreements and
other  agreements  and writings  which Secured Party may at any time  reasonably
request in order to secure,  protect,  perfect or enforce the Security  Interest
and Secured  Party's rights under this  Agreement;  (xii) not use the Collateral

<PAGE>
for hire, use or keep any  Collateral,  or permit it to be used or kept, for any
unlawful  purpose or in violation of any federal,  state or local law,  statute,
ordinance, or insurance policy; (xiii) permit Secured Party at any time and from
time to time to send request  (both before and after the  occurrence of an Event
of Default) to account  debtors or other  obligors for  verification  of amounts
owed to Debtor; (xiv) not permit any tangible Collateral to become part of or to
be  affixed  to any real  property  without  first  assuring  to the  reasonable
satisfaction  of Secured  Party  that the  Security  Interest  will be prior and
senior to any interest or lien then held or thereafter acquired by any mortgagee
of such real  property or the owner or purchaser of any interest  therein;  (xv)
upon Secured Party's request,  obtain a waiver or consent from the owner and any
mortgagee of any real property where the Collateral may be located that provides
that the Security  Interest  will at all times be senior to any such interest or
lien;  and (xvi) if any  Collateral  consists of farm  products,  if applicable,
sell,  cosign or transfer the  Collateral  only to those persons whose names and
addresses  have been  furnished  to Secured  Party as  potential  buyers of farm
products.  If Debtor at any time  fails to  perform  or  observe  any  agreement
contained in this Section 3(d),  and if such failure shall continue for a period
of ten calendar  days after Secured Party gives Debtor  written  notice  thereof
(or, in the case of the agreements  contained in clauses (viii) and (ix) of this
Section 3(d), immediately upon the occurrence of such failure, without notice or
lapse of  time),  Secured  Party  may (but need not)  perform  or  observe  such
agreement  on behalf and in the name,  place and stead of Debtor (or, at Secured
Party's option, in Secured Party's own name) and may (but need not) take any and
all other actions which Secured Party may  reasonably  deem necessary to cure or
correct such failure (including,  without limitation,  the payment of taxes, the
satisfaction of security interests,  liens, or encumbrances,  the performance of
obligations  under  contracts  or  agreements  with  account  debtors  or  other
obligors,  the  procurement  and  maintenance  of  insurance,  the  execution of
financing  statements,  the endorsement of  instruments,  and the procurement of
repairs, transportation or insurance); and, except to the extent that the effect
of such payment would be to render any loan or  forbearance of money usurious or
otherwise  illegal under any applicable  law. Debtor shall thereupon pay Secured
Party on demand  the amount of all moneys  expended  and all costs and  expenses
(including  reasonable  attorneys' fees) incurred by Secured Party in connection
with or as a result of Secured  Party's  performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured  Party at the  highest  rate then  applicable  to any of the
Obligations.  To facilitate  the  performance  or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is  coupled  with  an  interest)   Secured  Party,  or  its  delegate,   as  the
attorney-in-fact  of Debtor  with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments,  documents,  financing statements,
applications  for insurance  and other  agreements  and writings  required to be
obtained,  executed,  delivered  or endorsed by Debtor  under this Section 3 and
Section 4. Unless not permitted by  applicable  law,  Debtor hereby  irrevocably
authorizes Secured Party to create, prepare,  complete, execute and file, in the
name and on behalf of Debtor,  such  financing  statements as may be required to
perfect the Security Interest.

<PAGE>
4. Lock Box,  Collateral  Account.  If  Secured  Party so  requests  at any time
(whether  before or after the  occurrence  of an Event of Default),  Debtor will
direct  each of its  account  debtors to make  payments  due under the  relevant
account or chattel paper  directly to a special lock box to be under the control
of Secured Party.  Debtor hereby authorizes and directs Secured Party to deposit
into a special  collateral account to be established and maintained with Secured
Party all  checks,  drafts and cash  payments,  received  in said lock box.  All
deposits in said collateral account shall constitute  proceeds of Collateral and
shall not constitute  payment of any  Obligation.  At its option,  Secured Party
may, at any time,  apply finally  collected  funds on deposit in said collateral
account  to the  payment of the  Obligations  in such  order of  application  as
Secured Party may determine, or permit Debtor to withdraw all or any part of the
balance on deposit in said  collateral  account.  If a collateral  account is so
established,  Debtor agrees that it will promptly  deliver to Secured Party, for
deposit into said collateral account, all payments on accounts and chattel paper
received by it. All such  payments  shall be delivered  to Secured  Party in the
form  received  (except for  Debtor's  endorsement  where  necessary).  Until so
deposited,  all payments on accounts and chattel paper  received by Debtor shall
be held in trust by Debtor for and as the  property  of Secured  Party and shall
not be commingled with any funds or property of Debtor.

5. Collection  Rights of Secured Party.  Notwithstanding  Secured Party's rights
under Section 4 with respect to any and all debt  instruments,  chattel  papers,
accounts,  and  other  rights  to  payment  constituting  Collateral  (including
proceeds),  Secured Party may, at any time (both before and after the occurrence
of an Event of Default) notify any account debtor, or any other person obligated
to pay any amount  due,  that such  chattel  paper,  account,  or other right to
payment has been assigned or transferred to Secured Party for security and shall
be paid  directly to Secured  Party.  If Secured  Party so requests at any time,
Debtor will so notify  such  account  debtors and other  obligors in writing and
will indicate on all invoices to such account debtors or other obligors that the
amount due is payable directly to Secured Party. At any time after Secured Party
or Debtor gives such notice to an account debtor or other obligor, Secured Party
may (but  need  not),  in its own name or in  Debtor's  name,  demand,  sue for,
collect or receive any money or property at any time  payable or  receivable  on
account of, or securing,  any such  chattel  paper,  account,  or other right to
payment,  or grant any extension to, make any  compromise or settlement  with or
otherwise agree to waive,  modify,  amend or change the  obligations  (including
collateral obligations) of any such account debtor or other obligor.

6.  Assignment  of  Insurance.  Debtor  hereby  assigns  to  Secured  Party,  as
additional  security  for the  payment  of the  Obligations,  any and all moneys
(including  but not  limited to proceeds  of  insurance  and refunds of unearned
premiums)  due or to become due under,  and all other  rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral,  and
Debtor  hereby  directs  the  issuer of any such  policy to pay any such  moneys
directly to Secured  Party.  Both before and after the occurrence of an Event of
Default,  Secured Party may (but need not), in its own name or in Debtor's name,
execute and deliver proofs of claim, receive all such moneys, endorse checks and
other instruments  representing  payment of such moneys,  and adjust,  litigate,
compromise or release any claim against the issuer of any such policy.

7. Events of Default.  Each of the  following  occurrences  shall  constitute an
event of default under this Agreement  (herein  called "Event of Default"):  (i)
Debtor shall fail to pay any or all of the  Obligations  when due or (if payable
on demand) on demand,  or shall  fail to  observe  or perform  any  covenant  or
agreement binding on it; (ii) any representation or warranty by Debtor set forth
in  this  Agreement  or  otherwise  made to  Secured  Party,  including  without
limitation in any financial statements or reports submitted to Secured Party, by
or on behalf of Debtor,  shall prove  materially  false or  misleading;  (iii) a
garnishment,  summons or a writ of attachment  shall be issued against or served
upon the Secured  Party for the  attachment of any property of the Debtor or any
indebtedness  owing to Debtor;  (iv) Debtor or any  guarantor of any  Obligation
shall (A) be or become insolvent (however defined);  or (B) voluntarily file, or
have  filed  against  it  involuntarily,  a  petition  under the  United  Stated
Bankruptcy  Code; or (C) if a  corporation,  partnership,  or  organization,  be
dissolved or liquidated or, if a partnership,  suffer the death of a partner or,
if an individual,  die; or (D) go out of business; or (v) Secured Party shall in
good faith  believe that the prospect of due and punctual  payment of any or all
of the Obligations is impaired.

<PAGE>
8.  Remedies upon Event of Default.  Upon the  occurrence of an Event of Default
under Section 7 and at any time  thereafter,  Secured Party may exercise any one
or  more of the  following  rights  and  remedies:  (i)  declare  all  unmatured
Obligations to be immediately  due and payable,  and the same shall thereupon be
immediately due and payable, without presentment or other notice or demand; (ii)
exercise and enforce any or all rights and remedies  available upon default to a
secured party under the Uniform  Commercial  Code,  including but not limited to
the right to take  possession of any  Collateral,  proceeding  without  judicial
process or by judicial process (without a prior hearing or notice thereof, which
Debtor  hereby  expressly  waives),  and the right to sell,  lease or  otherwise
dispose of any or all of the Collateral,  and in connection  therewith,  Secured
Party may require Debtor to make the Collateral  available to Secured Party at a
place to be designated  by Secured Party which is reasonably  convenient to both
parties,  and if notice to Debtor of any intended  disposition  of Collateral or
any other  intended  action is required by law in a  particular  instance,  such
notice shall be deemed commercially reasonable if given (in the manner specified
in  Section  10) at  least  10  calendar  days  prior  to the  date of  intended
disposition  or other action;  (iii) exercise or enforce any or all other rights
or  remedies  available  to  Secured  Party  by law  or  agreement  against  the
Collateral,  against  Debtor or against any other person or  property.  Upon the
occurrence  of  the  Event  of  Default  described  in  Section  7(iv)(B),   all
Obligations  shall be  immediately  due and  payable  without  demand  or notice
thereof.  Secured  Party  is  hereby  granted  a  nonexclusive,   worldwide  and
royalty-free license to use or otherwise exploit all trademarks,  trade secrets,
franchises,  copyrights and patents of Debtor that Secured Party deems necessary
or appropriate to the disposition of any Collateral.

9. Other Personal Property. Unless at the time Secured Party takes possession of
any tangible Collateral,  or within seven days thereafter,  Debtor gives written
notice to Secured Party of the existence of any goods,  papers or other property
of Debtor,  not affixed to or constituting a part of such Collateral,  but which
are located or found upon or within such  Collateral,  describing such property.
Secured Party shall not be  responsible or liable to Debtor for any action taken
or  omitted  by or on behalf of Secured  Party  with  respect  to such  property
without actual knowledge of the existence of any such property or without actual
knowledge that it was located or to be found upon or within such Collateral.

10.  Miscellaneous.  This Agreement does not contemplate a sale of accounts,  or
chattel paper. Debtor agrees that each provision whose box is checked is part of
this Agreement. This Agreement can be waived, modified,  amended,  terminated or
discharged,  and the Security  Interest can be released,  only  explicitly  in a
writing  signed by Secured  Party.  A waiver  signed by Secured  Party  shall be
effective only in the specific instance and for the specific purpose given. Mere
delay or failure to act shall not preclude the exercise or enforcement of any of
Secured  Party's  rights or remedies.  All rights and remedies of Secured  Party
shall be cumulative and may be exercised singularly or concurrently,  at Secured
Party's option,  and the exercise or enforcement of any one such right or remedy
shall  neither be a  condition  to nor bar the  exercise or  enforcement  of any
other. All notices to be given to Debtor shall be deemed  sufficiently  given if
delivered or mailed by registered or certified mail, postage prepaid,  to Debtor
at its address set forth  above or at the most recent  address  shown on Secured
Party's records.  Secured Party's duty of care with respect to Collateral in its
possession  (as  imposed by law)  shall be deemed  fulfilled  if  Secured  Party
exercises  reasonable care in physically  safekeeping such Collateral or, in the
case of  Collateral  in the  custody or  possession  of a bailee or other  third
person,  exercises reasonable care in the selection of the bailee or other third
person, and Secured Party need not otherwise preserve,  protect,  insure or care
for any Collateral.  Secured Party shall not be obligated to preserve any rights
Debtor may have against prior parties, to realize on the Collateral at all or in
any particular  manner or order,  or to apply any cash proceeds of Collateral in
any particular  order of  application.  This Agreement shall be binding upon and
inure to the benefit of Debtor and  Secured  Party and their  respective  heirs,
representatives,  successors  and  assigns  and shall take effect when signed by
Debtor and  delivered  to Secured  Party,  and Debtor  waives  notice of Secured
Party's  acceptance  hereof.   Secured  Party  may  execute  this  Agreement  if
<PAGE>
appropriate  for the  purpose of  filing,  but the  failure of Secured  Party to
execute this Agreement shall not affect or impair the validity or  effectiveness
of  this  Agreement.  A  carbon,  photographic  or  other  reproduction  of this
Agreement or of any financing statement signed by the Debtor shall have the same
force and effects as the  original  for all  purposes of a financing  statement.
Except to the extent otherwise required by law, this Agreement shall be governed
by the  internal  laws of the state  named as part of  Secured  Party's  address
above.  If any provision or  application  of this  Agreement is held unlawful or
unenforceable  in any respect,  such  illegality or  unenforceability  shall not
affect other  provisions or  applications  which can be given  effect,  and this
Agreement  shall be construed as if the unlawful or  unenforceable  provision or
application  had  never  been  contained  herein  or  prescribed   hereby.   All
representations  and warranties  contained in this  Agreement  shall survive the
execution,  delivery  and  performance  of this  Agreement  and the creation and
payment of the Obligations.  If this Agreement is signed by more than one person
as Debtor,  the term "Debtor" shall refer to each of them separately and to both
or all of them  jointly;  all such  persons  shall be bound both  severally  and
jointly  with  the  other(s);  and the  Obligations  shall  include  all  debts,
liabilities  and  obligations  owed to Secured  Party by any Debtor solely or by
both or  several  or all  Debtors  jointly or  jointly  and  severally,  and all
property  described  in Section 1 shall be included  as part of the  Collateral,
whether it is owned jointly or by both or all Debtors or is owned in whole or in
part by one (or more) of them.

NORWEST BANK MINNESOTA,                             LACANASTA OF MINNESOTA, INC.
  NATIONAL ASSOCIATION

By:______________________                            By:________________________
       Paul Rebholz,
       Assistant Vice President                      Title:_____________________


                                                      By:_______________________

                                                      Title:____________________


<PAGE>
                                    GUARANTY


  City                            State                                 Date
St. Paul                        Minnesota                          June 24, 1998

         For good and valuable  consideration,  the receipt and  sufficiency  of
which are hereby  acknowledged,  and to induce Norwest Bank Minnesota,  National
Association  (herein,  with its  participants,  successors  and assigns,  called
"Bank"), at its option, at any time or from time to time to make loans or extend
other  accommodations  to or for the account of  LaCanasta  Of  Minnesota,  Inc.
(herein called "Borrower") or to engage in any other transactions with Borrower,
the undersigned a Minnesota  corporation  hereby absolutely and  unconditionally
guarantees to the Bank the full and prompt payment when due, whether at maturity
or earlier by reason of acceleration or otherwise, of the debts, liabilities and
obligations described as follows:

         A. If this  |X| is  checked,  the  undersigned  guarantees  to Bank the
payment and  performance  of each and every debt,  liability  and  obligation of
every type and  description  which Borrower may now or any time hereafter owe to
Bank  (whether  such debt,  liability or  obligation  now exists or is hereafter
created or incurred,  and whether it is or may be direct or indirect,  due or to
become  due,  absolute  or  contingent,  primary  or  secondary,  liquidated  or
unliquidated,  joint, several, or joint and several; all such debts, liabilities
and   obligations   being   hereinafter   collectively   referred   to  as   the
"Indebtedness").

     B. If this |_| is checked,  the undersigned  guarantees to Bank the payment
and  performance  of the debt,  liability  or  obligation  of  Borrower  to Bank
evidenced by or arising out of the following:___________________________________
________________________________________________________________________________
___________________    and   any    extensions,    renewals   or    replacements
thereof(hereinafter referred to as the "Indebtedness").

         The undersigned further acknowledges and agrees with Bank that:

         1. No act or  thing  need  occur  to  establish  the  liability  of the
undersigned hereunder, and no act or thing, except full payment and discharge of
all the  Indebtedness,  shall in any way  exonerate the  undersigned  or modify,
reduce, limit or release the liability of the undersigned hereunder.

         2. If paragraph A is checked,  this is an absolute,  unconditional  and
continuing  guaranty of payment of the  Indebtedness and shall continue to be in
force and be binding upon the  undersigned,  whether or not all  Indebtedness is
paid in  full,  until  this  Guaranty  is  revoked  prospectively  as to  future
transactions,  by  written  notice  actually  received  by the  Bank,  and  such
revocation  shall not be effective as to Indebtedness  existing or committed for
at the time of actual receipt of such notice by the Bank, or as to any renewals,
extensions and refinancings thereof. The undersigned  represents and warrants to
the Bank that the undersigned has a direct and substantial  economic interest in
Borrower and expects to derive substantial benefits therefrom and from any loans
and  financial   accommodations   resulting  in  the  creation  of  Indebtedness
guaranteed  hereby,  and that this Guaranty is given for a purpose that directly
benefits the  undersigned.  The  undersigned  agrees to rely  exclusively on the
right to  revoke  this  Guaranty  prospectively  as to future  transactions,  in
accordance with this paragraph, if at any time, in the opinion of the authorized
representatives  of the undersigned,  the benefits to the undersigned then being
received by the  undersigned in connection with this Guaranty are not sufficient
to  warrant  the  continuance  of  this  Guaranty  as  to  future  Indebtedness.
Accordingly, so long as this Guaranty is not revoked prospectively in accordance
with this paragraph,  the Bank may rely  conclusively on a continuing  warranty,
hereby made, that the undersigned continues to be benefited by this Guaranty and
the Bank shall have no duty to inquire  into or confirm  the receipt of any such
benefits,  and this  Guaranty  shall be effective  and  enforceable  by the Bank
without regard to the receipt, nature or value of any such benefits.

<PAGE>
         3.  If the  undersigned  shall  be  dissolved  or  shall  be or  become
insolvent  (however  defined)  then the Bank  shall  have the  right to  declare
immediately due and payable, and the undersigned will forthwith pay to the Bank,
the full amount of all  Indebtedness,  whether due and payable or unmatured.  If
the  undersigned  voluntarily  commences  or  there is  commenced  involuntarily
against the undersigned a case under the United States Bankruptcy Code, the full
amount of all  Indebtedness,  whether  due and  payable or  unmatured,  shall be
immediately due and payable without demand or notice thereof.

         4. The  liability of the  undersigned  hereunder  shall be limited to a
principal  amount of  $_______________  (if unlimited or if no amount is stated,
the undersigned shall be liable for all Indebtedness,  without any limitation as
to amount),  plus accrued interest  thereon and all attorneys' fees,  collection
costs and enforcement  expenses referable  thereto,  Indebtedness may be created
and continued in any amount,  whether or not in excess of such principal amount,
without affecting or impairing the liability of the undersigned  hereunder.  The
Bank may apply any sums  received by or  available to the Bank on account of the
Indebtedness  from Borrower or any other person (except the  undersigned),  from
their  properties,  out of any  collateral  security or from any other source to
payment of the excess. Such application of receipts shall not reduce,  affect or
impair the  liability  of the  undersigned  hereunder.  If the  liability of the
undersigned  is limited to a stated  amount  pursuant to this  paragraph  4, any
payment made by the undersigned under this Guaranty shall be effective to reduce
or  discharge  such  liability  only if  accompanied  by a  written  transmittal
document,  received  by the Bank,  advising  the Bank that such  payment is made
under this Guaranty for such purpose.

         5.  The  undersigned   will  not  exercise  or  enforce  any  right  of
contribution,   reimbursement,   recourse  or   subrogation   available  to  the
undersigned against any person liable for payment of the Indebtedness,  or as to
any collateral security therefor, unless and until all of the Indebtedness shall
have been fully paid and discharged.

<PAGE>
         6. The  undersigned  will pay or  reimburse  the Bank for all costs and
expenses (including  reasonable  attorneys' fees and legal expenses) incurred by
the Bank in  connection  with the  protection,  defense or  enforcement  of this
Guaranty in any litigation or bankruptcy or insolvency proceedings.

         7. Whether or not any existing relationship between the undersigned and
Borrower  has been  changed or ended and whether or not this  Guaranty  has been
revoked,  the Bank may, but shall not be obligated  to, enter into  transactions
resulting in the creation or continuance of Indebtedness, without any consent or
approval  by the  undersigned  and without  any notice to the  undersigned.  The
liability  of the  undersigned  shall not be  affected or impaired by any of the
following acts or things (which the Bank is expressly  authorized to do, omit or
suffer from time to time,  both before and after  revocation  of this  Guaranty,
without  notice  to or  approval  by the  undersigned):  (i) any  acceptance  of
collateral security,  guarantors,  accommodation  parties or sureties for any or
all of Indebtedness; (ii) any one or more extensions or renewals of Indebtedness
(whether or not for longer than the original  period) or any modification of the
interest  rates,  maturities  or  other  contractual  terms  applicable  to  any
Indebtedness;  (iii) any waiver or indulgence granted to Borrower,  any delay or
lack  of  diligence  in the  enforcement  of  Indebtedness,  or any  failure  to
institute  proceedings,  file a claim,  give any  required  notices or otherwise
protect any Indebtedness;  (iv) any full or partial release of, settlement with,
or agreement not to sue,  Borrower or any other guarantor or other person liable
in  respect  of  any  Indebtedness;   (v)  any  discharge  of  any  evidence  of
Indebtedness  or  the  acceptance  of  any  instrument  in  renewal  thereof  or
substitution therefor; (vi) any failure to obtain collateral security (including
rights of setoff) for the  Indebtedness,  or to see to the proper or  sufficient
creation and perfection  thereof,  or to establish the priority  thereof,  or to
protect,  insure,  or enforce  any  collateral  security;  or any  modification,
substitution,  discharge,  impairment, or loss of any collateral security; (vii)
any foreclosure or enforcement of any collateral  security;  (viii) any transfer
of any  Indebtedness or any evidence  thereof;  (ix) any order of application of
any  payments or credits  upon  Indebtedness;  and (x) any  election by the Bank
under ss.1111(b)(2) of the United States Bankruptcy Code.

         8. The undersigned  waives any and all defenses,  claims and discharges
of  Borrower,  or any other  obligor,  pertaining  to  Indebtedness,  except the
defense of discharge by payment in full.  Without limiting the generality of the
foregoing,  the undersigned  will not assert,  plead or enforce against the Bank
any defense of waiver, release, discharge in bankruptcy, statute of limitations,
res judicata,  statute of frauds,  anti-deficiency  statute, fraud,  incapacity,
minority,  usury,  illegality  or  unenforceability  which may be  available  to
Borrower  or any other  person  liable in  respect of any  Indebtedness,  or any
setoff available against the Bank to Borrower or any such other person,  whether
or not on account of a related  transaction.  The undersigned  expressly  agrees
that the  undersigned  shall be and remain liable for any  deficiency  remaining
after   foreclosure   of  any  mortgage  or  security   interest   securing  the
Indebtedness,  whether or not the liability of Borrower or any other obligor for
such deficiency is discharged pursuant to statute or judicial decision.

<PAGE>
         9. The undersigned waives  presentment,  demand for payment,  notice of
dishonor or nonpayment,  and protest of any instrument evidencing  Indebtedness.
The Bank shall not be required  first to resort for payment of the  Indebtedness
to Borrower or other persons or their properties,  or first to enforce,  realize
upon or exhaust any collateral security for Indebtedness,  before enforcing this
Guaranty.

         10. If any payment  applied by the Bank to  Indebtedness  is thereafter
set aside,  recovered,  rescinded  or  required  to be  returned  for any reason
(including, without limitation, the bankruptcy,  insolvency or reorganization of
Borrower  or any other  obligor),  the  Indebtedness  to which such  payment was
applied shall for the purposes of this  Guaranty be deemed to have  continued in
existence,   notwithstanding  such  application,  and  this  Guaranty  shall  be
enforceable as to such  Indebtedness  as fully as if such  application had never
been made.

         11. The liability of the undersigned under this Guaranty is in addition
to and shall be cumulative with all other  liabilities of the undersigned to the
Bank as guarantor or otherwise,  without any limitation as to amount, unless the
instrument or agreement evidencing or creating such other liability specifically
provides to the contrary.

         12. The  undersigned  represents  and warrants to the Bank that (i) the
undersigned  is duly  organized and existing in good standing and has full power
and authority to make and deliver this Guaranty;  (ii) the  execution,  delivery
and performance of this Guaranty by the undersigned have been duly authorized by
all necessary  action of its governing  body and do not and will not violate the
provisions  of, or constitute a default under,  any presently  applicable law or
its  organizational  documents or any agreement  presently  binding on it; (iii)
this  Guaranty  has  been  duly   executed  and  delivered  by  the   authorized
representative(s)  of the undersigned  and  constitutes its lawful,  binding and
legally enforceable obligation (subject to the United States Bankruptcy Code and
other similar laws generally  affecting the  enforcement of creditors'  rights);
and (iv) the authorization, execution, delivery and performance of this Guaranty
do not require  notification to,  registration  with, or consent or approval by,
any federal, state or local regulatory body or administrative agency.

         13. This Guaranty shall be effective upon delivery to the Bank, without
further act,  condition  or  acceptance  by the Bank,  shall be binding upon the
undersigned and the successors and assigns of the undersigned and shall inure to
the  benefit  of the Bank and its  participants,  successors  and  assigns.  Any
invalidity or  unenforceability of any provision or application of this Guaranty
shall not affect other lawful  provisions and applications  hereof,  and to this
end the provisions of this Guaranty are declared to be severable.  This Guaranty
may not be waived, modified, amended, terminated,  released or otherwise changed
except by a writing  signed by the  undersigned  and the Bank.  This Guaranty is
issued  in the state set forth  above  and shall be  governed  by its laws.  The
undersigned  waives notice of the Bank's  acceptance hereof and waives the right
to a trial by jury in any action based on or pertaining to this Guaranty.

     This  Guaranty  is |_|  unsecured;  |X|  secured by a mortgage  or security
agreement dated of even date |_| secured by ____________________________________


                                               SPARTA FOODS, INC.


                                               By_______________________________

                                               Title____________________________
 

                                               By_______________________________

                                               Title____________________________

<PAGE>
                               SECURITY AGREEMENT
                           COLLATERAL PLEDGE AGREEMENT


DATE:  June 24, 1998

DEBTOR:                                              SECURED PARTY:

Sparta Foods, Inc.                                   Norwest Bank Minnesota,
1565 1st Avenue NW                                     National Association
New Brighton, MN 55112                               55 East Fifth Street
                                                     St. Paul, Minnesota  55101

1.   Security Interest and Collateral.

To secure (check one):

|_|  the  payment  and  performance  of  each  and  every  debt,  liability  and
     obligation  of every type and  description  which  Debtor may now or at any
     time  hereafter  owe to Secured  Party  (whether  such debt,  liability  or
     obligation now exists or is hereafter  created or incurred,  and whether it
     is or may  be  direct  or  indirect,  due or to  become  due,  absolute  or
     contingent,  primary or secondary,  liquidated or  unliquidated,  or joint,
     several or joint and several;  all such debts,  liabilities and obligations
     being herein collectively referred to as the "Obligations"),

|X|  the debt, liability or obligation of the Debtor to Secured Party evidenced
     by the following:  Guaranty of even date, and all extensions, renewals or
     replacements thereof (herein referred to as the "Obligations"),

Debtor  hereby  grants  Secured  Party a security  interest  (herein  called the
"Security Interest") in (check one):

|_|  all property of any kind now or at any time hereafter  owned by Debtor,  or
     in which Debtor may now or hereafter have an interest,  which may now be or
     may at any time hereafter come into  possession or control of Secured Party
     or  into  the   possession  or  control  of  Secured   Party's   agents  or
     correspondents,  or into the  possession or control of a bailee or into the
     possession or control of any party that has an agreement with Secured Party
     granting  Secured Party control whether such possession or control is given
     for  collateral  purposes or for  safekeeping,  together with all rights in
     connection with such property (herein called the "Collateral").  Collateral
     includes, but is not limited to:___________________________________________
     ___________________________________________________________________________

<PAGE>
|X|  the property  owned by Debtor and held by Secured  Party or held by Secured
     Party's agents or  correspondents or held by a bailee or any party that has
     an agreement  with Secured  Party  granting  Secured  Party control that is
     described as follows: all shares of stock in LaCanasta Of Minnesota,  Inc.,
     whether now owned or hereafter acquired by Debtor, together with all rights
     in connection with such property (herein called the "Collateral").

2.   Representations, Warranties and Covenants.

Debtor represents, warrants and covenants that:

(i)  Debtor will  execute and  deliver or endorse  any  instruments,  documents,
     assignments,  control  agreements,  or other  agreements and writings which
     Secured  Party may  reasonably  request in order to perfect or enforce  the
     Security  Interest  and Secured  Party's  rights under this  Agreement  and
     endorse,  in blank,  each and every instrument  constituting  Collateral by
     signing on said instrument or by signing a separate  document of assignment
     or transfer, if required by Secured Party.

(ii) Debtor is the owner of the  Collateral and has (or will have at the time it
     acquires  rights in the  Collateral)  absolute right to the Collateral free
     and clear of all liens, encumbrances,  security interests and restrictions,
     except the Security  Interest and any restrictive  legend  appearing on any
     instrument  constituting  Collateral and will defend the Collateral against
     all claims by any persons other than Secured Party.

(iii)Debtor has filed all federal, state and local tax returns it is required to
     file  and  has  paid or made  provision  for  payment  of all  amounts  due
     thereunder  and will  keep the  Collateral  free  and  clear of all  liens,
     encumbrances and security interests, except the Security Interest.

(iv) Debtor will pay, when due, all taxes and other governmental  charges levied
     or assessed upon or against any Collateral.

(v)  At any time, upon request by Secured Party,  Debtor will deliver to Secured
     Party all notices,  financial  statements,  reports or other communications
     received by Debtor as an owner or holder of the Collateral.

(vi) Debtor will upon receipt  deliver to Secured  Party in pledge as additional
     Collateral all securities  distributed on account of the Collateral such as
     stock dividends and securities resulting from stock splits, reorganizations
     and recapitalizations.

<PAGE>
3.   Rights of Secured Party.

Debtor  agrees that Secured Party may at any time,  whether  before or after the
occurrence of an Event of Default and without notice or demand of any kind,

(i)  notify  the  obligor  on or issuer of any  Collateral  to make  payment  to
     Secured Party of any amounts due or distributable thereon,

(ii) in  Debtor's  name  or  Secured  Party's  name  enforce  collection  of any
     Collateral by suit or otherwise,  or surrender,  release or exchange all or
     any  part  of it,  or  compromise,  extend  or  renew  for any  period  any
     obligation evidenced by the Collateral,

(iii)take delivery of and receive all proceeds of the Collateral, and,

(iv) hold any increase or profits  received  from the  Collateral  as additional
     security  for the  Obligations,  except  that any money  received  from the
     Collateral shall, at Secured Party's option, be applied in reduction of the
     Obligations,  in such order of  application as Secured Party may determine,
     or be remitted to Debtor.

4.   Events of Default.

Each of the  following  occurrences  shall  constitute an event of default under
this Agreement (herein called "Event of Default"):

(i)  Debtor  shall  fail to pay any or all of the  Obligations  when  due or (if
     payable  on demand)  on  demand,  or shall  fail to observe or perform  any
     covenant or agreement herein binding on it;

(ii) Any  representation  or warranty by Debtor set forth in this  Agreement  or
     otherwise  made to  Secured  Party,  including  without  limitation  in any
     financial statements or reports submitted to Secured Party, by or on behalf
     of Debtor shall prove materially false or misleading;

(iii)A garnishment,  summons or a writ of attachment  shall be issued against or
     served upon the Secured  Party for the  attachment  of any  property of the
     Debtor or any indebtedness owing to Debtor;

(iv) Debtor shall:

     (a) Be or become insolvent (however defined); or

     (b) Have a custodian, trustee or receiver appointed for the majority of its
         property,  voluntarily file, or have filed against it involuntarily,  a
         petition under the United States Bankruptcy Code; or

<PAGE>
     (c) Be dissolved or liquidated; or

     (d) Go out of business.

5.       Remedies Upon Event of Default.

Upon the occurrence of an Event of Default and at any time  thereafter,  Secured
Party may exercise any one or more of the following rights and remedies:

  (i) declare all unmatured  Obligations to be immediately  due and payable, and
      the  same  shall  thereupon  be immediately   due  and  payable,   without
      presentment or other notice or demand;

 (ii) exercise all voting and other rights as a holder of the Collateral;

(iii) take  possession  of the  Collateral  and  exercise and enforce any or all
     rights and remedies  available  upon  default to a secured  party under the
     Uniform  Commercial  Code,  including  the  right  to  offer  and  sell the
     Collateral  privately  to  purchasers  who will  agree to take the take the
     Collateral for investment and not with a view to distribution  and who will
     agree  to  the  imposition  of  restrictive  legends  on  the  certificates
     representing  the  Collateral,  and the right to  arrange  for a sale which
     would  otherwise  qualify  as  exempt  from  the  registration   under  the
     Securities Act of 1933; and if notice to Debtor of any intended disposition
     of  Collateral  or  any  other  intended  action  is  required  by law in a
     particular instance, such notice shall be deemed commercially reasonable if
     given at least ten calendar days prior to the date of intended  disposition
     or other action;

(iv) exercise  or  enforce  any or all other  rights or  remedies  available  to
     Secured Party by law or agreement against the Collateral, against Debtor or
     against any other person or property.  Upon the  occurrence of the Event of
     Default described in Section 4(iv)(b), all Obligations shall be immediately
     due and payable without demand or notice thereof.

<PAGE>
6.       Miscellaneous.

Any  disposition of the Collateral in the manner  provided in Section 5 shall be
deemed commercially reasonable. This Agreement can be waived, modified, amended,
terminated  or  discharged,  and the Security  Interest  can be  released,  only
explicitly  in a writing  signed by Secured  Party.  A waiver  signed by Secured
Party shall be  effective  only in the  specific  instance  and for the specific
purpose  given.  Mere delay or failure to act shall not preclude the exercise or
enforcement  of any of  Secured  Party's  rights or  remedies.  All  rights  and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently,  at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement  of any other.  All  notices  to be given to Debtor  shall be deemed
sufficiently  given if delivered  or mailed by  registered  or  certified  mail,
postage prepaid,  to Debtor at its address set forth above or at the most recent
address  shown on Secured  Party's  records.  Secured  Party's duty of care with
respect to  Collateral  in its  possession  (as  imposed by law) shall be deemed
fulfilled if Secured Party exercises  reasonable care in physically  safekeeping
such  Collateral or, in the case of Collateral in the custody or possession of a
bailee or other third person,  exercises reasonable care in the selection of the
bailee or other third person,  and Secured  Party need not  otherwise  preserve,
protect, insure or care for any collateral. Secured Party shall not be obligated
to preserve any rights Debtor may have against prior parties, to exercise at all
or in any  particular  manner  any voting  rights  which may be  available  with
respect  to  any  Collateral,  to  realize  on the  Collateral  at all or in any
particular  manner or order,  or to apply any cash proceeds of Collateral in any
particular  order of  application.  Debtor will reimburse  Secured Party for all
expenses (including  reasonable  attorneys' fees and legal expenses) incurred by
Secured  Party  in the  protection,  defense  or  enforcement  of  the  Security
Interest,  including  expenses  incurred  in any  litigation  or  bankruptcy  or
insolvency  proceedings.  This Agreement  shall be binding upon and inure to the
benefit of Debtor and Secured Party and their respective heirs, representatives,
successors and assigns and shall take effect when signed by Debtor and delivered
to Secured Party, and Debtor waives notice of Secured Party's acceptance hereof.
This Agreement shall be governed by the internal laws of the state named as part
of Secured Party's address above and, unless the context otherwise requires, all
terms used  herein  which are  defined in  Articles  1,8,  and 9 of the  Uniform
Commercial  Code,  as in effect in said state,  shall have the meanings  therein
stated.  If any provision or  application  of this Agreement is held unlawful or
unenforceable  in any respect,  such  illegality or  unenforceability  shall not
affect other  provisions or  applications  which can be given  effect,  and this
Agreement  shall be construed as if the unlawful or  unenforceable  provision or
application  had  never  been  contained  herein  or  prescribed   hereby.   All
representations  and warranties  contained in this  Agreement  shall survive the
execution,  delivery  and  performance  of this  Agreement  and the creation and
payment of the Obligations.  If this Agreement is signed by more than one person
as Debtor,  the term "Debtor" shall refer to each of them separately and to both
or all of them  jointly;  all such  persons  shall be bound both  severally  and
jointly  with  the  other(s);  and the  Obligations  shall  include  all  debts,
liabilities  and  obligations  owed to Secured  Party by any Debtor solely or by
both or  several  or all  Debtors  jointly or  jointly  and  severally,  and all
property  described  in Section 1 shall be included  as part of the  Collateral,
whether it is owned jointly or by both or all Debtors or is owned in whole or in
part by one (or more) of them.


Debtor's name
SPARTA FOODS, INC.

By________________________                         Title________________________

By________________________                         Title________________________