Document:

Exhibit 10.3

 

ADVISORY AGREEMENT

 

This Advisory Agreement (this “Agreement”) is
made and entered into as of April 1, 2004, by and between Samsonite
Corporation, a Delaware corporation (the “Company”), and 1448972 Ontario
Limited, trustee of OTPPB 2004 Trust and a corporation incorporated under the
laws of Ontario, (the “Advisor”), and designee of Ontario Teachers’
Pension Plan Board, a non-share capital corporation established under the laws
of Ontario (“OTPP”).

 

WHEREAS, the Company, OTPP (an affiliate of the
Advisor), ACOF Management, L.P., a Delaware limited partnership (“Ares”), and
Bain Capital (Europe) LLC, a Delaware limited liability company (“Bain” and
together with OTPP and Ares, the “Investors”) are parties to a
Recapitalization Agreement dated May 1, 2003 (the “Recapitalization
Agreement”);

 

WHEREAS, prior to completion of the negotiation of the
transactions contemplated by the Recapitalization Agreement, the Investors
notified the Company that following completion of such transactions they would be
requesting, subject to approval of the Company’s board of directors (the
“Board”), that the Company enter into advisory agreements with each of the
Investors or its designee (the “Agreements”);

 

WHEREAS, the shareholders of Samsonite Corporation, in
the proxy statement mailed to the shareholders of the Company seeking approval
of the transactions contemplated by the Recapitalization Agreement, were
informed of the Investors’ intentions;

 

WHEREAS, the Board desires to ratify management’s use
of the services of certain of the Investors prior to the date hereof and to
retain the Advisor with respect to the services described herein;

 

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

 

1.             Term.  Subject to the provisions for termination
set forth herein, this Agreement shall be in effect for a maximum five-year
term commencing as of July 31, 2003 (the “Effective Date”) and ending on
the fifth anniversary of the Effective Date (the “Term”); provided,
however, the Term shall terminate at such time as OTPP and its affiliates no
longer hold at least 33% of the capital stock of the Company that they owned as
of the date of the closing of the transactions under the Recapitalization
Agreement.  If the Advisor has acted
with willful misconduct or gross negligence in the performance of material
services for the Company hereunder or if the Advisor has materially breached
its obligations hereunder, the Board may terminate this Agreement; provided,
however, that such misconduct, gross negligence or material breach shall not
have been cured and shall be continuing for more than 30 days after receipt by
the Advisor from the Board of written notice detailing such misconduct or gross
negligence.

 

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2.             Services. The Advisor shall
perform or cause to be performed solely outside of the United States such
services for the Company and its subsidiaries as mutually agreed by the Advisor
and the Company in connection with the Company’s and its subsidiaries’
operations in Europe, Asia and certain other designated non-United States
jurisdictions (the “Services”), which may include, without limitation,
the following:

 

(a)           general executive and management
services;

 

(b)           services in obtaining and arranging
equity, debt and lease financing and support, identification, negotiation and
analysis of financing alternatives, including, without limitation, in
connection with mergers, acquisitions, divestitures, capital expenditures and
refinancing of existing indebtedness;

 

(c)           finance functions, including
assistance in the preparation of financial projections, and monitoring of
compliance with financing agreements;

 

(d)           marketing functions, including
monitoring of marketing plans and strategies;

 

(e)           human resource functions, including
searching and hiring of executives; and

 

(f)            other services for the Company and
its subsidiaries in such non-United States jurisdictions upon which the Board
and the Advisor may agree from time to time.

 

3.             Advisory Fee.

 

(a)           During the Term, the Advisor and/or
its designees shall receive an aggregate sum of $500,000 per annum (prorated
for partial years), plus VAT where applicable, payable by the Company on a
quarterly basis in advance (the “Advisory Fee”) (except for the first
two quarterly payments which shall be paid within 30 days of presentation of
invoices for the Advisory Fee from the Advisor to the Company); provided that
the parties to this Agreement agree to work in good faith to structure the
transactions contemplated by this Agreement in a manner tax-efficient for all
parties to the extent reasonably practicable. 
The parties to this Agreement further agree to work in good faith to
structure the transactions contemplated by this Agreement in a manner to
minimize United States withholding and other taxes, provided that if the
parties determine that any portion of the Advisory Fee is subject to United
States withholding or other taxes, the Advisory Fee shall be increased by such
amount as is required such that the Advisor receives an aggregate sum equal to
the amount it would have received pursuant to this Agreement if no such
withholding or other taxes were applicable. 
The Advisory Fee is intended to be a flat fee and, as such, shall be
payable by the Company to the Advisor irrespective of the actual level of
services provided.  In addition, the
Company shall reimburse the reasonable out-of-pocket expenses (“Expenses”) of
the Advisor and/or its affiliates incurred in connection with the Services
subject to the receipt of reasonable supporting documentation satisfactory to
the Company in its reasonable discretion. 
An amount equal to VAT paid by the Advisor on Expenses shall be
reimbursed by the Company

 

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in addition to
such Expenses to the extent that VAT on such Expenses is irrecoverable for the
Advisor (by credit, set off, reimbursement or otherwise).

 

(b)           Notwithstanding the forgoing four
sentences, if the Company is prohibited from paying any portion of the Advisory
Fee pursuant to the Credit Agreement dated July 31, 2003 between the Company,
Samsonite Europe N.V., General Electric Capital Corporation, KBC Bank N.V.,
GECC Capital Markets Group, Inc., and certain other parties thereto, or any subsequent
credit agreement(s) to which the Company is a party (the “Credit Agreements”),
or pursuant to the Indenture, dated as of June 24, 1998, governing the
Company’s 103⁄4% Senior Subordinated Notes due 2008 and any indenture governing
any future issuance of debt instruments issued by the Company (the “Bond
Indentures”), the non-payment of such portion shall not constitute a
default and such portion shall be paid to the Advisor immediately upon such
dates as such payment is no longer prohibited pursuant to the Credit Agreement
or the Bond Indentures and such unpaid portion of the Advisory Fee shall accrue
interest at a rate of 8% per annum (the “Accrued Advisory Fee”);

 

4.             Personnel.  The Advisor shall provide and devote to the
performance of this Agreement such partners, employees and agents of the
Advisor as the Advisor shall deem appropriate to the furnishing of the
Services, provided, however, that any such partners, employees and agents shall
perform the Services in jurisdictions outside of the United States.

 

5.             Liability.  Neither the Advisor nor any of its
affiliates, partners, members, employees or agents (collectively, the “Advisor
Group”) shall be liable to the Company or its subsidiaries or any of their
affiliates for any loss, liability, damage or expense (including attorney’s
fees and expenses) (collectively, a “Loss”) arising out of or in
connection with the performance of services contemplated by this Agreement,
except to the extent any such Loss results from the gross negligence, willful
misconduct or bad faith of any member of the Advisor Group as determined in a
final, non-appealable order by a court of competent jurisdiction.  The Advisor makes no representations or
warranties, express or implied, in respect of the Services to be provided by
the Advisor Group.  Except as the
Advisor may otherwise agree in writing after the date hereof and Section 7
hereof: (i) each member of the Advisor Group shall have the right to, and shall
have no duty (contractual or otherwise) not to, directly or indirectly: (A)
engage in the same or similar business activities or lines of business as the
Company or its subsidiaries or any of their affiliates and (B) do business with
any client or customer of the Company or its subsidiaries or any of their
affiliates; (ii) no member of the Advisor Group shall be liable to the Company
or its subsidiaries or affiliates for breach of any duty (contractual or
otherwise) by reason of any such activities or of such person’s participation
therein; and (iii) in the event that any member of the Advisor Group acquires
knowledge of a potential transaction or matter (but only to the extent the
Advisor acquires such knowledge outside his capacity as Advisor under this
Agreement) that may be a corporate opportunity for both the Company or any of
its subsidiaries or any of their affiliates, on the one hand, and the Advisor,
on the other hand, or any other person, no member of the Advisor Group shall
have any duty (contractual or otherwise) to communicate or present such
corporate opportunity to the Company or its subsidiaries or any of their
affiliates and, notwithstanding any provision of this Agreement to the
contrary, shall not be liable to the Company, its subsidiaries or any of their

 

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affiliates for
breach of any duty (contractual or otherwise) by reasons of the fact that any
member of the Advisor Group directly or indirectly pursues or acquires such
opportunity for itself, directs such opportunity to another person, or does not
present such opportunity to the Company, its subsidiaries or any of their
affiliates.  In no event will any of the
parties hereto be liable to any other party hereto for any indirect, special,
incidental or consequential damages, including lost profits or savings, whether
or not such damages are foreseeable, or in respect of any liabilities relating
to any third party claims (whether based in contract, tort or otherwise) other
than for the Claims (as defined in Section 6 below) relating to the
Services which may be provided by the Advisor hereunder.

 

6.             Indemnity.  The Company and its subsidiaries shall
defend, indemnify and hold harmless each member of the Advisor Group from and
against any and all Losses (including, without limitation, attorneys’ fees)
arising from any claim by any person with respect to, or in any way related to,
this Agreement (collectively, “Claims”) resulting from any act or
omission of any member of the Advisor Group, except to the extent such Claims
are the result of gross negligence, bad faith or willful misconduct by any
member of the Advisor Group as determined in a final, non-appealable order by a
court of competent jurisdiction.  The
Company and its subsidiaries shall defend at its own cost and expense any and
all suits or actions (just or unjust) which may be brought against the Company
or its subsidiaries and any member of the Advisor Group or in which any member
of the Advisor Group may be impleaded with others upon any Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by the Advisor Group, except to the extent such damage
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by any member of the Advisor Group as determined in a final,
non-appealable order by a court of competent jurisdiction, to which extent the
Advisor shall reimburse the Company for the costs of defense and other costs
incurred by the Company associated therewith. 
The Company shall be liable for reasonable fees and expenses of no more
than one counsel (in addition to local counsel) in connection with the defense
of indemnifiable damages hereunder, except that the Company shall be liable for
the fees and expenses of additional separate counsel to the extent the member
of the Advisor Group concludes reasonably, based upon advice of counsel, that
(a) a conflict of interest exists between the member of the Advisor Group and
the Company or another member of the Advisor Group or (b) the named parties to
such action include both the Company and the member of the Advisor Group and
there may be one or more legal defenses available to such member of the Advisor
Group which are not available to the Company, or available to the Company, but
the assertion of which would be adverse to the interests of the Company.

 

7.             Confidentiality.  All material non-public information
concerning the Company which is given to the Advisor in its capacity as
such,  or to its directors, officers,
employees, agents, advisors (including, without limitation, attorneys,
accountants, consultants, bankers and financial advisors) or other person
associated with or acting on behalf of any such person in such person’s
capacity as such (collectively, “Representatives”), by the Company or
its Representatives from time to time will be used solely in the course of the
performance of the Advisor’s services hereunder or, in the case of any of such
person who is also an officer and/or director of the Company, in such person’s
capacity as an officer and/or director of the Company.  Except as contemplated by this Agreement or
as otherwise required by applicable law or judicial, regulatory or securities
exchange process, the Advisor will not disclose any material non-public
information so provided to it to a third party without the Company’s consent,
which shall not be unreasonably withheld or delayed.

 

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8.             Severability.  Should any provision of this Agreement be or
become invalid in whole or in part or should this Agreement or any provision
thereof be or become incomplete, this shall not affect the validity of the
remaining provisions hereof. In lieu of the invalid provision or in order to
cure any incompleteness, a provision shall apply which, to the extent legally
permissible, comes as close as possible to what the parties had intended or
would have agreed upon, if they had been aware of the invalidity or
incompleteness.

 

9.             Notices.  All notices hereunder shall be in writing
and shall be delivered personally or mailed by first class mail, postage
prepaid, addressed to the parties as follows:

 

To the Company:

 

Samsonite Corporation

11200 East 45th Street

Denver, Colorado 80239

Facsimile: (303) 373-6606

Attn: General Counsel

 

To the Advisor:

1448972 Ontario Limited,

trustee of OTPPB 2004 Trust

c/o Ontario Teachers’ Pension Plan Board

5650 Yonge Street

Toronto, Ontario M2M 4H5

Canada

Attn:  Michael Padfield

 

10.           Assignment.  No party may assign any obligations
hereunder to any other party without the prior written consent of each other
party (which consent shall not be unreasonably withheld); provided that the
Advisor may, without consent of the Company, assign its rights and obligations
under this Agreement to any of its affiliates, including without limitation affiliated
investment funds.  The assignor shall
remain liable for the performance of any assignee.

 

11.           Successors.  This Agreement and all the obligations and
benefits hereunder shall inure to the successors and assigns of the parties.

 

12.           Counterparts.  This Agreement may be executed and delivered
by each party hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.

 

13.           Entire Agreement; Modification;
Governing Law, Dispute Resolution. 
The terms and conditions hereof constitute the entire agreement between
the parties hereto with respect to the subject matter of this Agreement and
supersede all previous communications, either oral or written, representations
or warranties of any kind whatsoever, except as expressly set forth herein.

 

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The parties to
this Agreement may amend its terms and conditions, however, no modifications of
this Agreement nor waiver of the terms or conditions thereof shall be binding
upon either party unless approved in writing by an authorized representative of
such party.  All issues concerning this
agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of New York or any other jurisdiction) that
would cause the application of the law of any jurisdiction other than the State
of New York.

 

14.           Joint and Several Liability.  Each obligation described herein of the
Company shall be a joint and several obligation of the Company and its
subsidiaries.  If requested by the
Advisor, then the Company shall cause any of its respective subsidiaries to
sign a counterpart signature page to this Agreement to evidence such joint and
several liability.

 

*     *    
*     *     *

 

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IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.

 

 

	
   

  	
  SAMSONITE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  1448972
  ONTARIO LIMITED,

  TRUSTEE OF OTPPB 2004 TRUST

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:Exhibit
10.1

 

MLA No. RIE539

 

MASTER
LOAN AGREEMENT

 

THIS
MASTER LOAN AGREEMENT is entered into as of February 24, 2004, between CoBANK, ACB
(“CoBank”) and DAKOTA GROWERS PASTA COMPANY, INC., Carrington, North
Dakota (the “Company”).

 

BACKGROUND

 

CoBank
and the Company are parties to a Master Loan Agreement dated June 20,
2001, as amended (the “Existing Agreement”). 
Pursuant to the terms of the Existing Agreement, the parties entered
into one or more Supplements thereto. 
CoBank and the Company now desire to amend and restate the Existing
Agreement and to apply such new agreement to the Existing Supplements, as well
as any new Supplements that may be issued thereunder.  For that reason and for valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), CoBank and the Company hereby
agree that the Existing Agreement shall be amended and restated to read as
follows:

 

SECTION 1.                            Supplements.  In the event the Company desires to
borrow from CoBank and CoBank is willing to lend to the Company, or in the
event CoBank and the Company desire to consolidate any existing loans
hereunder, the parties will enter into a Supplement to this agreement (a
“Supplement”).  Each Supplement will set
forth the amount of the loan,
the purpose of the loan, the interest rate or rate options applicable to that
loan, the repayment terms of the loan, and any other terms and conditions
applicable to that particular loan. 
Each loan will be governed by the terms and conditions contained in this
agreement and in the Supplement relating to the loan.  As of the date hereof,
the following Supplements are outstanding hereunder and shall be governed by
the terms and conditions hereof:  (a)
the Statused Revolving Credit Supplement dated February 24, 2004 and numbered
RIE539S01; (b) the Consolidating Supplement (Variable and Quoted Fixed Rate
Term Loan dated February 24, 2004 and numbered RIE539T01; (c) the
Consolidating Supplement (Variable and Quoted Fixed Rate Term Loan dated
February 24, 2004 and numbered RIE539T02; (d) the Single Advance Term Loan
Supplement Loan dated February 24, 2004 and numbered RIE539T03; (e) the
Single Advance Term Loan Supplement dated February 24, 2004 and numbered
RIE539T04; and (f) the Non-Revolving Credit Supplement (used for Various
Letter(s) of Credit) dated February 24, 2004 and numbered RIE539T05.

 

SECTION 2.                            Availability.  Loans will be made available on any day
on which CoBank and the Federal Reserve Banks are open for business upon the
telephonic or written request of the Company. 
Requests for loans must be received no later than 12:00 Noon Company’s
local time on the date the loan is desired. 
Loans will be made
available by wire transfer of immediately available funds to such account or
accounts as may be authorized by the Company. 
The Company shall furnish to CoBank a duly completed and executed copy
of a CoBank Delegation and Wire and Electronic Transfer Authorization Form, and
CoBank shall be entitled to rely on (and shall incur no liability to the
Company in acting on) any request or direction furnished in accordance with the
terms thereof.

 

SECTION 3.                            Repayment.  The Company’s obligation to repay each
loan shall be evidenced by the promissory note set forth in the Supplement
relating to that loan or by such replacement note as CoBank shall require.  CoBank shall maintain a record of all loans,
the interest accrued thereon, and all payments made with respect thereto, and
such record shall, absent proof of manifest error, be conclusive evidence of
the outstanding principal and interest on the loans.  All payments shall be made by
wire transfer of immediately available funds, by check, or by automated
clearing house or other similar cash handling processes as specified by
separate agreement between the Company and CoBank.  Wire transfers shall be made to ABA
No. 307088754 for advice to and credit of CoBank (or to such other account
as CoBank may direct by notice).  The
Company shall give CoBank telephonic notice no later than 12:00 Noon Company’s
local time of its intent to pay by wire and funds received after 3:00 p.m.
Company’s local time shall be credited on the next business day.  Checks shall be mailed to CoBank, Department 167, Denver, Colorado
80291-0167 (or to such other place as CoBank may direct by notice).  Credit for payment by check will not be
given until the later of:  (a) the day
on which CoBank receives immediately available funds; or (b) the next business
day after receipt of the check.

 

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SECTION 4.                            Capitalization.  The Company agrees to purchase such participation certificates in CoBank
as CoBank may from time to time require in accordance with its Bylaws.  However, the maximum amount of participation certificates which the
Company shall be obligated to purchase in connection with any loan may not
exceed the maximum amount permitted by the Bylaws at the time the Supplement
relating to that loan is entered into or such loan is renewed or refinanced by
CoBank.

 

SECTION 5.                            Security.  The Company’s obligations under this agreement,
all Supplements (whenever executed), and all instruments and documents
contemplated hereby or thereby, shall be secured by a statutory first lien on
all equity which the Company may now own or hereafter acquire in CoBank.  In
addition, the Company’s obligations under each Supplement (whenever executed)
and this agreement shall be secured by a first lien (subject only to exceptions
approved in writing by CoBank) pursuant to all security agreements, mortgages,
and deeds of trust executed by the Company in favor of CoBank (including the
St. Paul Bank for Cooperatives), whether now existing or hereafter entered
into.  As additional security for those
obligations:  (i) the Company agrees to
grant to CoBank, by means of such instruments and documents as CoBank shall
require a first priority lien on such of its other assets, whether now existing
or hereafter acquired, as CoBank may from time to time require; and (ii) the
Company agrees to grant to CoBank, by means of such instruments and documents
as CoBank shall require, a first priority lien on all realty which the Company
may from time to time acquire after the date hereof.

 

SECTION 6.                            Conditions
Precedent.

 

(A)       Conditions
to Initial Supplement.  CoBank’s
obligation to extend credit under the initial Supplement hereto is subject to
the conditions precedent that CoBank receive, in form and content satisfactory
to CoBank, each of the following:

 

This
Agreement, Etc.  A
duly executed copy of this agreement and all instruments and documents
contemplated hereby.

 

(B)       Conditions
to Each Supplement.  CoBank’s
obligation to extend credit under each Supplement, including the initial
Supplement, is subject to the conditions precedent that CoBank receive, in form
and content satisfactory to CoBank, each of the following:

 

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

 

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

 

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

 

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

 

(C)       Conditions
to Each Loan.  CoBank’s obligation
under each Supplement to make any loan to the Company thereunder is subject to
the condition that no “Event of Default” (as defined in Section 11 hereof)
or event which with the giving of notice and/or the passage of time would
become an Event of Default hereunder (a “Potential Default”), shall have
occurred and be continuing.

 

SECTION 7.                            Representations
and Warranties.

 

(A)       This
Agreement.  The Company represents
and warrants to CoBank that as of the date of this agreement:

 

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(i)            Compliance.  The Company and, to the extent contemplated hereunder, each “Subsidiary” (as
defined below), is in compliance with all of the terms of this agreement, and
no Event of Default or Potential Default exists hereunder.

 

(ii)        Subsidiaries.  The Company has the following “Subsidiary(ies)” (as defined below):  Primo Piatto, Inc..  For purposes hereof, a “Subsidiary” shall
mean a corporation of which shares of stock having ordinary voting power to
elect a majority of the board of directors or other managers of such
corporation are owned, directly or indirectly, by the Company.

 

(B)       Each
Supplement.  The execution by the
Company of each Supplement hereto shall constitute a representation and
warranty to CoBank that:

 

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

 

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

 

(iii)    Compliance.  The Company and, to the extent
contemplated hereunder, each Subsidiary, is in compliance with all of the terms
of the Loan Documents (including, without limitation, Section 8(A) of this
agreement on eligibility to borrow from CoBank).

 

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

 

SECTION 8.                            Affirmative
Covenants.  Unless otherwise agreed
to in writing by CoBank while this agreement is in effect, the Company agrees
to and with respect to Subsections 8(B) through 8(G) hereof, agrees to cause
each Subsidiary to:

 

(A)       Eligibility.  Maintain its status as an entity
eligible to borrow from CoBank.

 

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

 

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

 

(D)       Insurance.  Maintain insurance with insurance
companies or associations acceptable to CoBank in such amounts and covering
such risks as are usually carried by companies engaged in the same or similar
business and similarly situated, and make such increases in the type or amount
of coverage as CoBank may request.  All
such policies insuring any collateral for the Company’s obligations to CoBank
shall have mortgagee or lender loss payable clauses or

 

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endorsements in form and content acceptable to CoBank.  At CoBank’s request, all policies (or such
other proof of compliance with this Subsection as may be satisfactory to
CoBank) shall be delivered to CoBank.

 

(E)         Property
Maintenance.  Maintain all of its
property that is necessary to or useful in the proper conduct of its business
in good working condition, ordinary wear and tear excepted.

 

(F)         Books
and Records.  Keep adequate records
and books of account in which complete entries will be made in accordance with
generally accepted accounting principles (“GAAP”) consistently applied.

 

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

 

(H)       Reports
and Notices.  Furnish to CoBank:

 

(i)            Annual
Financial Statements.  As soon as available,
but in no event more than 120
days after the end of each fiscal year of the Company occurring during the term
hereof, annual consolidated and consolidating financial statements of the
Company and its consolidated Subsidiaries, if any, prepared in accordance with
GAAP consistently applied.  Such
financial statements shall:  (a) be
audited by independent certified public accountants selected by the Company and
acceptable to CoBank; (b) be accompanied by a report of such accountants
containing an opinion thereon acceptable to CoBank; (c) be prepared in
reasonable detail and in comparative form; and (d) include a balance
sheet, a statement of income, a statement of retained earnings, a statement of
cash flows, and all notes and schedules relating thereto.

 

(ii)        Interim
Financial Statements.  As soon as
available, but in no event more than 50
days after the end of each month (other than the last month in each fiscal year
of the Company), a consolidated balance sheet of the Company and its
consolidated Subsidiaries, if any, as of the end of such month, a consolidated statement of
income for the Company and its consolidated Subsidiaries, if any, for such
period and for the period year to date, and such other interim statements as
CoBank may specifically request, all prepared in reasonable detail and in
comparative form in accordance with GAAP consistently applied and, if required
by written notice from CoBank, certified by an authorized officer or employee
of the Company acceptable to CoBank.

 

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

 

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

 

(v)           Notice
of Environmental Litigation, Etc.  Promptly
after receipt thereof, notice of the receipt of all pleadings, orders, complaints,
indictments, or any other communication alleging a condition that may require
the Company or any Subsidiary to undertake or to contribute to a cleanup or
other response under environmental Laws, or which seek penalties, damages,
injunctive relief, or criminal sanctions related to alleged violations of such
Laws, or which claim personal injury or property damage to any person as a
result of environmental factors or conditions. 

 

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

 

(vii)   Compliance Certificate. 
Together with each set of financial statements furnished to CoBank
pursuant to Section 8(H) hereof, a certificate of an officer or employee
of the Company acceptable to CoBank setting forth calculations showing
compliance with the financial covenants set forth in Section 10 hereof.

 

4

 

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

 

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

 

SECTION 9.                            Negative
Covenants.  Unless otherwise agreed
to in writing by CoBank, while this agreement is in effect the Company will
not:

 

(A)       Borrowings.
 Create, incur, assume, or allow to
exist, directly or indirectly, any indebtedness or liability for borrowed money
(including trade or bankers’ acceptances), letters of credit, or the deferred
purchase price of property or services (including capitalized leases), except
for:  (i) debt to CoBank; (ii) accounts
payable to trade creditors incurred in the ordinary course of business; (iii)
current operating liabilities (other than for borrowed money) incurred in the
ordinary course of business; (iv) debt
of the Company to Massachusetts Mutual Life Insurance Company, Baystate Health
Systems, Inc., C. M. Life Insurance Company, The Security Mutual Life Insurance
Company of Lincoln, Nebraska, and the Canada Life Assurance Company, or their
successors in an amount not to exceed $23,500,000.00, and all extensions,
renewals and refinancings thereof; (v) purchase money indebtedness for real
property, plant, and equipment, provided that such indebtedness does not exceed
100% of the purchase price of the asset(s) being acquired and such indebtedness
does not exceed, in the aggregate, $1,000,000.00 at any one time outstanding;
and (vi) capitalized leases in existence from time to time.

 

(B)       Liens.  Create, incur, assume, or allow to exist
any mortgage, deed of trust, pledge, lien (including the lien of an attachment,
judgment, or execution), security interest, or other encumbrance of any kind
upon any of its property, real or personal (collectively, “Liens”).  The foregoing restrictions shall not apply
to:  (i) Liens in favor of CoBank; (ii)
Liens for taxes, assessments, or governmental charges that are not past due;
(iii) Liens and deposits under workers’ compensation, unemployment insurance,
and social security Laws; (iv) Liens and deposits to secure the
performance of bids, tenders, contracts (other than contracts for the payment
of money), and like obligations arising in the ordinary course of business as
conducted on the date hereof; (v) Liens imposed by Law in favor of mechanics,
materialmen, warehousemen, and like persons that secure obligations that are
not past due; (vi) easements, rights-of-way, restrictions, and other
similar encumbrances which, in the aggregate, do not materially interfere with
the occupation, use, and enjoyment of the property or assets encumbered thereby
in the normal course of its business or materially impair the value of the
property subject thereto;  (vii) Liens existing on the date hereof in
favor of Massachusetts Mutual Life Insurance Company, Baystate Health Systems,
Inc., C. M. Life Insurance Company, The Security Mutual Life Insurance Company
of Lincoln, Nebraska, and Canada Life Assurance Company or their successors to
secure indebtedness permitted hereunder; and (viii)  purchase money Liens on real property, plant, and equipment,
provided that the Lien attaches only to the property being financed and fixed
improvements thereon, the Lien attaches at or about the time the property is
acquired, and the debt secured by such Lien is permitted under the terms of
this agreement.

 

(C)       Mergers,
Acquisitions, Etc.  Merge or
consolidate with any other entity or acquire all or a material part of the
assets of any person or entity, or form or create any new Subsidiary or
affiliate, or commence operations under any other name, organization, or
entity, including any joint venture.

 

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

 

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

 

(F)         Contingent
Liabilities.  Assume, guarantee,
become liable as a surety, endorse, contingently agree to purchase, or otherwise
be or become liable, directly or indirectly (including, but not limited to, by
means of a maintenance agreement, an asset or stock purchase agreement, or any
other agreement designed to ensure any creditor against loss), for

 

5

 

or on account of the obligation of any person or entity, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of the Company’s business.

 

(G)       Change
in Business.  Engage in any business
activities or operations substantially different from or unrelated to the
Company’s present business activities or operations.

 

SECTION 10.                     Financial
Covenants.  Unless otherwise agreed
to in writing, while this agreement is in effect:

 

(A)       Current Ratio.  The
Company and its consolidated Subsidiaries will have at the end of each period
for which financial statements are required to be furnished pursuant to
Section 8(H) hereof, a ratio of consolidated current assets to consolidated
current liabilities (both as determined in accordance with GAAP consistently
applied) of not less than 1.10 to 1.0 through and including July 31, 2004,
and of not less than 1.25 to 1.0 thereafter.

 

(B)       Long Term Debt to Net Worth Ratio.  The Company and its consolidated
Subsidiaries will have at the end of each period for which financial statements
are required to be furnished pursuant to Section 8(H) hereof, a ratio of
consolidated Long Term Debt to consolidated Net Worth of not more than 1.10 to
1.  Long Term Debt shall mean the sum of
long-term liabilities, minus deferred taxes payable, plus current liabilities,
minus the quotient of current assets divided by 1.35, plus the present value of
operating leases (all, together with Net Worth, as calculated in accordance
with GAAP consistently applied).

 

(C)       Consolidated Funded Debt to Consolidated Cash Flow Ratio.  The Company and its consolidated
Subsidiaries will have at the end of each fiscal quarter of the Company, a
Consolidated Funded Debt to Consolidated Cash Flow of not more than 4.0 to 1.0
calculated on a trailing four quarter basis through and including
April 30, 2004, and of not more than 3.0 to 1.0 thereafter.  Consolidated Funded Debt shall mean all debt
which would, in accordance with GAAP, constitute long term debt and including
any current portion thereof including: 
(a) any debt with a maturity of more than one year after the creation of
such debt; (b) any debt outstanding under a revolving credit or similar
agreement providing for borrowings (and renewables and extensions thereof)
which pursuant to its terms would constitute long term debt in accordance with
GAAP; (c) any Capital Lease obligation; and (d) any guarantee with respect to
Funded Debt of another person. 
Notwithstanding anything to the contrary contained herein any debt
outstanding under a revolving credit or similar agreement providing borrowings
which is paid down for a period of 30 consecutive days during any 12 months
period (and not merely refinanced with a short term credit facility) will not
be deemed to constitute Funded Debt. 
Consolidated Cash Flow shall mean the sum of Consolidated Net Earnings
after taxes of the Company and its Subsidiaries plus:  (i) provision for any applicable income taxes; (ii) depreciation
and amortization; and (iii) Consolidated Interest Expense for the period.

 

SECTION 11.                     Events
of Default.  Each of the following
shall constitute an “Event of Default” under this agreement:

 

(A)       Payment
Default.  The Company should fail to
make any payment to, or to purchase any equity in, CoBank when due.

 

(B)       Representations
and Warranties.  Any representation
or warranty made or deemed made by the Company herein or in any Supplement,
application, agreement, certificate, or other document related to or furnished
in connection with this agreement or any Supplement, shall prove to have been
false or misleading in any material respect on or as of the date made or deemed
made.

 

(C)       Certain
Affirmative Covenants.  The Company
or, to the extent required hereunder, any Subsidiary should fail to perform or
comply with Sections 8(A) through 8(H)(ii), 8(H)(vi), (vii), and (viii), or any reporting covenant set forth in any
Supplement hereto, and such failure continues for 15 days after written notice
thereof shall have been delivered by CoBank to the Company.

 

(D)       Other
Covenants and Agreements.  The
Company or, to the extent required hereunder, any Subsidiary should fail to
perform or comply with any other covenant or agreement contained herein or in
any other Loan Document or shall use the proceeds of any loan for an
unauthorized purpose.

 

6

 

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

 

(F)         Other
Indebtedness.  The Company or any
Subsidiary should fail to pay when due any indebtedness to any other person or
entity for borrowed money or any long-term obligation for the deferred purchase
price of property (including any capitalized lease), or any other event occurs
which, under any agreement or instrument relating to such indebtedness or
obligation, has the effect of accelerating or permitting the acceleration of
such indebtedness or obligation, whether or not such indebtedness or obligation
is actually accelerated or the right to accelerate is conditioned on the giving
of notice, the passage of time, or otherwise.

 

(G)       Judgments.
 A judgment, decree, or order for
the payment of money shall be rendered against the Company or any Subsidiary
and either:  (i) enforcement proceedings
shall have been commenced; (ii) a Lien prohibited under Section 9(B)
hereof shall have been obtained; or (iii) such judgment, decree, or order
shall continue unsatisfied and in effect for a period of 20 consecutive days
without being vacated, discharged, satisfied, or stayed pending appeal.

 

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

 

(I)            Material
Adverse Change.  Any material
adverse change occurs, as reasonably determined by CoBank, in the Company’s
financial condition, results of operation, or ability to perform its obligations
hereunder or under any instrument or document contemplated hereby.

 

(J)         Revocation of Guaranty.  Any
guaranty, suretyship, subordination agreement, maintenance agreement, or other
agreement furnished in connection with the Company’s obligations hereunder and
under any Supplement (including the Continuing Guarantee dated June 20,
2001, of Primo Piatto, Inc. ) shall, at any time, cease to be in full force and
effect, or shall be revoked or declared null and void, or the validity or
enforceability thereof shall be contested by the guarantor, surety or other
maker thereof (the “Guarantor”), or the Guarantor shall deny any further
liability or obligation thereunder, or shall fail to perform its obligations
thereunder, or any representation or warranty set forth therein shall be
breached, or the Guarantor shall breach or be in default under the terms of any
other agreement with CoBank (including any loan agreement or security
agreement), or a default set forth in Subsections (F) through (H) hereof shall
occur with respect to the Guarantor.

 

SECTION 12.                     Remedies.  Upon the occurrence and during the
continuance of an Event of Default or any Potential Default, CoBank shall have
no obligation to continue to extend credit to the Company and may discontinue
doing so at any time without prior notice. 
For all purposes hereof, the term “Potential Default” means the
occurrence of any event which, with the passage of time or the giving of notice
or both would become an Event of Default. 
In addition, upon the occurrence and during the continuance of any Event
of Default, CoBank may, upon notice to the Company, terminate any commitment
and declare the entire unpaid principal balance of the loans, all accrued
interest thereon, and all other amounts payable under this agreement, all
Supplements, and the other Loan Documents to be immediately due and
payable.  Upon such a declaration, the
unpaid principal balance of the loans and all such other amounts shall become
immediately due and payable, without protest, presentment, demand, or further
notice of any kind, all of which are hereby expressly waived by the
Company.  In addition, upon such an
acceleration:

 

(A)       Enforcement.  CoBank may proceed to protect, exercise,
and enforce such rights and remedies as may be provided by this agreement, any
other Loan Document or under Law.  Each
and every one of such rights and remedies shall be cumulative and may be
exercised from time to time, and no failure on the part of CoBank to exercise,
and no delay in exercising, any right or remedy shall operate as a waiver
thereof, and no single or partial exercise of any right or remedy shall
preclude any other or future exercise thereof, or the exercise of any other
right.  Without limiting the

 

7

 

foregoing, CoBank may hold and/or set off and apply against the
Company’s obligations to CoBank the proceeds of any equity in CoBank, any cash
collateral held by CoBank, or any balances held by CoBank for the Company’s
account (whether or not such balances are then due).

 

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

 

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

 

SECTION 13.                     Broken
Funding Surcharge.  Notwithstanding
any provision contained in any Supplement giving the Company the right to repay
any loan prior to the date it would otherwise be due and payable, the Company
agrees to provide three Business Days’ prior written notice for any prepayment
of a fixed rate balance and that in the event it repays any fixed rate balance
prior to its scheduled due date or prior to the last day of the fixed rate
period applicable thereto (whether such payment is made voluntarily, as a
result of an acceleration, or otherwise), the Company will pay to CoBank a
surcharge in an amount equal to the greater of:  (i) an amount which would result in CoBank being made whole (on a
present value basis) for the actual or imputed funding losses incurred by
CoBank as a result thereof; or (ii) $300.00. 
Notwithstanding the foregoing, in the event any fixed rate balance is
repaid as a result of the Company refinancing the loan with another lender or
by other means, then in lieu of the foregoing, the Company shall pay to CoBank
a surcharge in an amount sufficient (on a present value basis) to enable CoBank
to maintain the yield it would have earned during the fixed rate period on the
amount repaid.  Such surcharges will be
calculated in accordance with methodology established by CoBank (a copy of
which will be made available to the Company upon request).

 

SECTION 14.                     Complete
Agreement, Amendments.  This agreement,
all Supplements, and all other instruments and documents contemplated hereby
and thereby, are intended by the parties to be a complete and final expression
of their agreement.  No amendment,
modification, or waiver of any provision hereof or thereof, and no consent to
any departure by the Company herefrom or therefrom, shall be effective unless
approved by CoBank and contained in a writing signed by or on behalf of CoBank,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. 
In the event this agreement is amended or restated, each such amendment
or restatement shall be applicable to all Supplements hereto.

 

SECTION 15.                     Other
Types of Credit.  From time to time,
CoBank may issue letters of credit or extend other types of credit to or for
the account of the Company.  In the
event the parties desire to do so under the terms of this agreement, such
extensions of credit may be set forth in any Supplement hereto and this
agreement shall be applicable thereto.

 

SECTION 16.                     Applicable
Law.  Except to the extent governed
by applicable federal law, this agreement and each Supplement shall be governed
by and construed in accordance with the laws of the State of Colorado, without
reference to choice of law doctrine.

 

8

 

SECTION 17.                     Notices.  All notices hereunder shall be in
writing and shall be deemed to be duly given upon delivery if personally
delivered or sent by telegram or facsimile transmission, or three days after
mailing if sent by express, certified or registered mail, to the parties at the
following addresses (or such other address for a party as shall be specified by
like notice):

 

	
  If to CoBank, as follows:

  	
  If to the Company, as follows:

  
	
   

  	
   

  
	
  For
  general correspondence purposes:

  	
  Dakota
  Growers Pasta Company, Inc.

  
	
  P.O.
  Box 5110

  	
  One
  Pasta Avenue

  
	
  Denver,
  Colorado  80217-5110

  	
  Carrington,
  North Dakota  58421

  
	
   

  	
   

  
	
  For
  direct delivery purposes, when desired:

  	
   

  
	
  5500
  South Quebec Street

  	
   

  
	
  Greenwood
  Village, Colorado  80111-1914

  	
   

  
	
   

  	
   

  
	
  Attention:  Credit Information Services

  	
  Attention:  Chief Financial Officer

  
	
  Fax
  No.:  (303) 224-6101

  	
  Fax No.:  (701) 652-3552

  

 

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

 

SECTION 19.                     Effectiveness
and Severability.  This agreement
shall continue in effect until: 
(i) all indebtedness and obligations of the Company under this
agreement, all Supplements, and all other Loan Documents shall have been paid
or satisfied; (ii) CoBank has no commitment to extend credit to or for the
account of the Company under any Supplement; and (iii) either party sends
written notice to the other terminating this agreement.  Any provision of this agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof.

 

SECTION 20.                     Successors
and Assigns.  This agreement, each
Supplement, and the other Loan Documents shall be binding upon and inure to the
benefit of the Company and CoBank and their respective successors and assigns,
except that the Company may not
assign or transfer its rights or obligations under this agreement, any
Supplement or any other Loan Document without the prior written consent of
CoBank.

 

SECTION 21.                     Participations, Etc.  From
time to time, CoBank may sell to one or more banks, financial institutions or
other lenders a participation in one or more of the loans or other extensions
of credit made pursuant to this agreement. 
However, no such participation shall relieve CoBank of any commitment
made to the Company under any Supplement hereto.  In connection with the foregoing, CoBank may disclose information
concerning the Company and its Subsidiaries to any participant or prospective
participant, provided that such participant or prospective participant agrees
to keep such information confidential. 
CoBank agrees that all Loans that are made by CoBank and that are
retained for its own account and are not included in a sale of participation
interest shall be entitled to patronage distributions in accordance with the
bylaws of CoBank and its practices and procedures related to patronage
distribution.  Accordingly, all Loans
that are included in a sale of participation interest shall not be entitled to
patronage distributions.  A sale of
participation interest may include certain voting rights of the participants
regarding the loans hereunder (including without limitation the administration,
servicing and enforcement thereof). 
CoBank agrees to give written notification to the Company of any sale of
participation interests.

 

SECTION 22.                     Agency and Intercreditor Agreement.  The Company acknowledges that all loans made
by CoBank to the Company are subject to the terms of an Agency and
Intercreditor Agreement dated as of July 15, 1998, by

 

9

 

and between CoBank (under the name of its
predecessor, St. Paul Bank for Cooperatives), Massachusetts Mutual Life
Insurance Company, MML Bay State Life Insurance Company, C. M. Life Insurance
Company, The Security Mutual Life Insurance Company of Lincoln, Nebraska, and
The Canada Life Assurance Company (referred to collectively as the
“Lenders”).  The Company hereby
reaffirms and consents to the terms thereof.

 

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

 

	
  CoBANK, ACB

  	
  DAKOTA
  GROWERS PASTA COMPANY,

  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Teresa L. Fountain

  	
   

  	
  By:

  	
  /s/
  Thomas Friezen

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Assistant
  Corporate Secretary

  	
   

  	
  Title:

  	
  CFO

  	
   

  

 

10

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