Document:

Exhibit 10.3

 

Loan No. RIE539T05B

 

NON-REVOLVING CREDIT SUPPLEMENT

(Letters of Credit)

 

THIS SUPPLEMENT to the Master Loan Agreement dated May 23, 2005
(the “MLA”), is entered into as of May 23, 2005 between CoBANK, ACB (“CoBank”) and DAKOTA
GROWERS PASTA COMPANY, INC., Carrington, North Dakota (the “Company”),
and amends and restates the Supplement dated October 14, 2004 and numbered
RIE539T05A.

 

SECTION 1.         The Non-Revolving Credit
Facility.  On the terms and conditions set forth in the
MLA and this Supplement, CoBank agrees to make loans to the Company during the
period set forth below in an aggregate principal amount not to exceed
$750,000.00 at any one time outstanding (the “Commitment”).  Within the limits of the Commitment, amounts
borrowed and later repaid may not be reborrowed.

 

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

 

SECTION 3.         Term. 
The term of the Commitment shall be from the date hereof, up to and
including September 30, 2006, or such later date as CoBank may, in its
sole discretion, authorize in writing.

 

SECTION 4.         Interest. 
The Company agrees to pay interest on the unpaid balance of the loan(s)
in accordance with the following interest rate:

 

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

 

SECTION 5.         Promissory Note. 
The Company promises to repay the unpaid principal balance of the loans
on demand.  In addition to the above, the
Company promises to pay interest on the unpaid principal balance of the loans
at the times and in accordance with the provisions set forth in Section 4
hereof.  This note replaces and
supersedes, but does not constitute payment of the indebtedness evidenced by,
the promissory note set forth in the Supplement being amended and restated
hereby.

 

SECTION 6.         Letters of Credit.  If agreeable to CoBank in its sole discretion in each
instance, in addition to loans, the Company may utilize the Commitment to open
irrevocable letters of credit for its account. 
Each letter of credit will be issued within a reasonable period of time
after receipt of a duly completed and executed copy of CoBank’s then current
form of application or, if applicable, in accordance with the terms of any
CoTrade Agreement between the parties, and shall reduce the amount available
under the Commitment by the maximum amount capable of being drawn
thereunder.  Any draw under any letter of
credit issued hereunder shall be deemed an advance under the Commitment.  Each letter of credit must be in form and
content acceptable to CoBank and must expire no later than the maturity date of
the loans.

 

 

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

 

	
  CoBANK, ACB

  	
  DAKOTA GROWERS PASTA COMPANY, INC.

  
	
   

  	
   

  
	
  By:

  	
    /s/ Gary Sloan

  	
   

  	
  By:

  	
    /s/ Thomas Friezen

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
    Vice President

  	
   

  	
  Title:

  	
    CFOExhibit 10.4

 

Loan No. RIE539T06

 

MULTIPLE ADVANCE TERM LOAN SUPPLEMENT

 

THIS
SUPPLEMENT to the
Master Loan Agreement dated May 23, 2005 (the “MLA”), is entered into as of May
23, 2005 between CoBANK, ACB (“CoBank”) and DAKOTA GROWERS PASTA COMPANY, INC., Carrington, North Dakota (the “Company”).

 

SECTION
1.         The Term Loan Commitment.  On the terms
and conditions set forth in the MLA and this Supplement, CoBank agrees to make
loans to the Company from time to time during the period set forth below in an
aggregate principal amount not to exceed $19,000,000.00 (the “Commitment”).  Under the Commitment, amounts borrowed and
later repaid may not be reborrowed.

 

SECTION
2.         Purpose.  The purpose of the Commitment is to
finance the New Hope new pasta line and to provide working capital to the
Company.

 

SECTION
3.         Term.  The term of the Commitment shall be from the
date hereof, up to and including May 1, 2006, or such later date as CoBank may,
in its sole discretion, authorize in writing.

 

SECTION 4.         Interest. 
The Company agrees to pay interest on the unpaid balance of the loans in
accordance with one or more of the following interest rate options, as selected
by the Company:

 

(A)      Weekly Quoted Variable Rate.  At a rate per
annum equal at all times to the rate of interest established by CoBank on the
first Business Day of each week.  The
rate established by CoBank shall be effective until the first Business Day of
the next week.  Each change in the rate
shall be applicable to all balances subject to this option and information
about the then current rate shall be made available upon telephonic request.

 

(B)      Quoted Rate.  At a fixed
rate per annum to be quoted by CoBank in its sole discretion in each
instance.  Under this option, rates may
be fixed on such balances and for such periods, as may be agreeable to CoBank
in its sole discretion in each instance, provided that:  (1) the minimum fixed period shall be 180
days; (2) amounts may be fixed in increments of $500,000.00 or multiples
thereof; and (3) the maximum number of fixes in place at any one time shall be
10.

 

(C)      LIBOR.  At a fixed rate per annum equal
to “LIBOR” (as hereinafter defined) plus the Performance Pricing Adjustments
set forth in Section 4(D) below.  Under
this option:  (1) rates may be fixed for “Interest
Periods” (as hereinafter defined) of 1, 2, 3 or 6 months as selected by the
Company; (2) amounts may be fixed in increments of $500,000.00 or multiples
thereof; (3) the maximum number of fixes in place at any one time shall be 10;
and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on
3 Banking Days’ prior written notice. 
For purposes hereof:  (a) “LIBOR”
shall mean the rate (rounded upward to the nearest sixteenth and adjusted for
reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for
banks subject to “FRB Regulation D” (as herein defined) or required by any
other federal law or regulation) quoted by the British Bankers Association (the
“BBA”) at 11:00 a.m. London time 2 Banking Days before the commencement of the
Interest Period for the offering of U.S. dollar deposits in the London
interbank market for the Interest Period designated by the Company; as
published by Bloomberg or another major information vendor listed on BBA’s
official website; (b) “Banking Day” shall mean a day on which CoBank is open
for business, dealings in U.S. dollar deposits are being carried out in the
London interbank market, and banks are open for business in New York City and
London, England; (c) “Interest Period” shall mean a period commencing on the
date this option is to take effect and ending on the numerically corresponding
day in the next calendar month or the month that is 2, 3 or 6 months
thereafter, as the case may be; provided, however, that:  (i) in the event such ending day is not a
Banking Day, such period shall be extended to the next Banking Day

 

 

unless such next
Banking Day falls in the next calendar month, in which case it shall end on the
preceding Banking Day; and (ii) if there is no numerically corresponding day in
the month, then such period shall end on the last Banking Day in the relevant
month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB
Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as
promulgated by the Board of Governors of the Federal Reserve System, 12 CFR
Part 204, as amended.

 

(D)      Performance Pricing Adjustments. 
The interest rate spread parameters set forth in Subsection (C) above
shall be either increased or decreased in accordance with the following schedule:

 

	
  Total Debt to EBITDA (MLA,
  Section 10(B))

  	
   

  	
  Interest Rate Spread

  
	
   

  	
   

  	
   

  
	
  Equal to or greater than 4.00 to 1.00

  	
   

  	
  + 275 basis points

  
	
  Equal to or greater than 3.50 to 1.00 but less than 4.00 to 1.00

  	
   

  	
  + 250 basis points

  
	
  Equal to or greater than 3.00 to 1.00 but less than 3.50 to 1.00

  	
   

  	
  + 225 basis points

  
	
  Equal to or greater than 2.50 to 1.00 but less than 3.00 to 1.00

  	
   

  	
  + 200 basis points

  
	
  Less than 2.50 to 1.00

  	
   

  	
  + 175 basis points

  

 

The applicable interest rate adjustment shall:  (i) be considered as of each fiscal quarter
end based on the quarterly Compliance Certificate provided by the Company under
Section 8(H)(vii) of the MLA; (ii) become effective as of the first day of
the fiscal quarter following receipt of such information by CoBank, and (iii)
shall be effective on a prospective basis only and shall not affect existing
fixed rate pricing.  Notwithstanding the
forgoing, the initial Performance Pricing Adjustment hereunder shall be +250
basis points, continuing through and including October 31, 2005, with the first
adjustment effective November 1, 2005, based on the Compliance Certificate for
fiscal quarter ending July 31, 2005. 
Subsequent adjustments shall be as stated above.

 

The Company shall select the applicable rate option at
the time it requests a loan hereunder and may, subject to the limitations set
forth above, elect to convert balances bearing interest at the variable rate
option to one of the fixed rate options. 
Upon the expiration of any fixed rate period, interest shall
automatically accrue at the variable rate option unless the amount fixed is
repaid or fixed for an additional period in accordance with the terms
hereof.  Notwithstanding the foregoing,
rates may not be fixed in such a manner as to cause the Company to have to
break any fixed rate balance in order to pay any installment of principal.  All elections provided for herein shall be
made electronically (if applicable), telephonically or in writing and must be
received by CoBank not later than 12:00 Noon Company’s local time in order to
be considered to have been received on that day; provided, however, that in the
case of LIBOR rate loans, all such elections must be confirmed in writing upon
CoBank’s request.  Interest shall be
calculated on the actual number of days each loan is outstanding on the basis
of a year consisting of 360 days and shall be payable monthly in arrears by the
20th day of the following month or on such other day in such month as CoBank
shall require in a written notice to the Company; provided, however, in the
event the Company elects to fix all or a portion of the indebtedness
outstanding under the LIBOR interest rate option above, at CoBank’s option upon
written notice to the Company, interest shall be payable at the maturity of the
Interest Period and if the LIBOR interest rate fix is for a period longer than
3 months, interest on that portion of the indebtedness outstanding shall be
payable quarterly in arrears on each three-month anniversary of the
commencement date of such Interest Period, and at maturity. 

 

SECTION 5.         Promissory Note. 
The Company promises to repay the loans as follows:  (1) in four equal, consecutive quarterly
installments of $500,000.00, with the first such installment due on August 20,
2006, and the last such installment due on May 20, 2007; (2) in 15 equal,
consecutive quarterly installments of $1,100,000.00, with the first such
installment due on August 20, 2007, and the last such installment due on
February 20, 2011; and (3) followed by a final installment in an amount equal
to the remaining unpaid principal balance of the loans on May 20, 2011.  If any installment due date is not a day on
which CoBank is open for business, then such installment shall be due and
payable on the next day on which CoBank is open for business.  In addition to the above, the Company
promises to pay 

 

 

interest on the
unpaid principal balance hereof at the times and in accordance with the
provisions set forth in Section 4 hereof.

 

SECTION
6.         Prepayment.  Subject to the
broken funding surcharge provision of the MLA, the Company may on one Business
Day’s prior written notice prepay all or any portion of the loan(s).  Unless otherwise agreed by CoBank, all
prepayments will be applied to principal installments in the inverse order of
their maturity and to such balances, fixed or variable, as CoBank shall
specify.

 

SECTION 7.         Advance Request Form
Requirements.  Notwithstanding the foregoing, any
request for an advance that would cause the outstanding principal balance
hereunder to exceed $5,000,000.00, as well as any request for an advance after
the outstanding balance hereunder exceeds $5,000,000.00, shall be accompanied
by, and subject to receipt by CoBank of, a status report showing the Company’s
expenditures of funds to date on the construction of the New Hope pasta line,
all in a form and substance acceptable to CoBank.

 

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

 

	
  CoBANK, ACB

  	
  DAKOTA GROWERS PASTA

    COMPANY, INC.

  
	
   

  	
   

  
	
  By:

  	
    /s/ Gary Sloan

  	
   

  	
  By:

  	
    /s/ Thomas Friezen

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
    Vice President

  	
   

  	
  Title:

  	
    CFO

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