Document:

Exhibit 4.2

 

REGISTRATION
RIGHTS AGREEMENT

 

This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of January 15,
2010 is by and between Kinder Morgan Energy Partners, L.P., a Delaware limited
partnership (the “Partnership”), and US Development Group LLC, a Delaware
limited liability company (“USD”).

 

W I T N E S S E T H:

 

WHEREAS, USD has acquired
1,287,287 units representing limited partner interests of the Partnership (“Common
Units”) pursuant to a Membership Interest Purchase Agreement dated as of December 18,
2009, (the “Purchase Agreement”) by and between the Partnership, Kinder Morgan
Operating L.P. “C” and USD;

 

WHEREAS, USD and the
Partnership have entered into that certain Development Agreement concurrently
herewith (the “Development Agreement”); and

 

WHEREAS, as a condition to
the consummation of the transactions contemplated by the Purchase Agreement,
the Partnership has agreed to enter into this Agreement;

 

NOW THEREFORE, in
consideration of the premises and mutual covenants hereinafter set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

Section 1

Definitions

 

1.1          Specific Definitions.  Unless the context clearly requires
otherwise, the following terms shall have the meanings set forth below:

 

“Affiliate” means any Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified.

 

“Agreement” has the meaning
set forth in the preamble of this Agreement.

 

“Business Day” means any
day, other than a Saturday, Sunday or any other day on which commercial banks
located in Houston, Texas are authorized or obligated by law to close.

 

“Commission” means the
Securities and Exchange Commission.

 

“Common Units” has the
meaning set forth in the recitals of this Agreement.

 

“Development Agreement” has
the meaning set forth in the recitals of this Agreement.

 

 

“Purchase Agreement” has the
meaning set forth in the recitals of this Agreement.

 

“Entity” means a
corporation, limited liability company, venture, partnership, trust,
unincorporated organization, association or other entity.

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended.

 

“Holders” means USD, its
members or any of their respective Affiliates who acquires Units from USD.

 

“Partnership” has the
meaning set forth in the preamble of this Agreement.

 

“Person” means a natural
person or an Entity.

 

“Resale Registration
Statement” has the meaning set forth in Section 2.2(a)(i).

 

“Section” means a section of
this Agreement.

 

“Securities Act” means the
Securities Act of 1933, as amended.

 

“Units” means the Common
Units acquired concurrently herewith and from time to time hereafter by USD
from the Partnership pursuant to the Purchase Agreement and the Development
Agreement and any Common Units or other capital securities issued or issuable,
from time to time, as a distribution on or in exchange for or otherwise with
respect to the foregoing.

 

“USD” has the meaning set
forth in the preamble of this Agreement.

 

1.2          Rules of Construction. Unless the context
otherwise clearly requires:

 

(a)           terms defined include the plural as well as the singular
and vice versa;

 

(b)           references to any document, agreement, instrument or
provision thereof mean such document, agreement, instrument or provision
thereof as the same may be duly amended, supplemented or restated from time to
time;

 

(c)           “including” means including without limitation;

 

(d)           “or” is not exclusive; and

 

(e)           the words “herein,” “hereof,” “hereunder” and other words
of similar import refer to this Agreement as a whole and not to any particular Section or
other subdivision.

 

 

Section 2

Registration Rights

 

2.1          Request for Resale Registration.  USD hereby requests that the Partnership file
a registration statement under the Securities Act registering the resale by the
Holders of all of the Units.

 

2.2          Provisions Relating to Resale Registration Statement.

 

(a)           The Partnership agrees that it will:

 

(i)            prepare and file with the Commission as soon as
practicable, but in no event later than 10 Business Days after the date of this
Agreement (the “Filing Deadline”), except as provided in Section 2.4, one
registration statement on Form S-3 under the Securities Act registering
the resale by the Holders of all of the Units (the “Resale Registration
Statement”);

 

(ii)           use its reasonable efforts to cause the Resale
Registration Statement to become effective as soon as practicable after it is
filed with the Commission, including to (A) respond promptly to any and
all comments made by the staff of the Commission to the Resale Registration
Statement, (B) file any amendment or supplement to the Resale Registration
Statement or any prospectus used in connection therewith to the extent
necessary in order to cause such Resale Registration Statement to become
effective and (C) submit to the Commission, before the close of business
on the Business Day immediately following the Business Day on which the
Partnership learns (either by telephone or in writing) that no review of the
Resale Registration Statement will be made by the Commission or that the staff
of the Commission has no further comments on such Resale Registration
Statement, as the case may be, a request for acceleration of the effectiveness
of such Resale Registration Statement to a time and date as soon as
practicable;

 

(iii)          from the date of the effectiveness of the Resale
Registration Statement until the earlier of the date when (A) all Units
covered by the Resale Registration Statement are sold or (B) all of the
Units may be immediately sold to the public without registration or restriction
pursuant to Rule 144 under the Securities Act or any successor provision
(such period, the “Registration Period”), amend or supplement such Resale
Registration Statement or prospectus used in connection therewith to the extent
necessary in order to keep effective and maintain any registration,
qualification or approval obtained in connection with the Holders’ resale of
the Units;

 

(iv)          furnish to the Holders up to ten conformed copies, in the
aggregate, of the Resale Registration Statement and each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein, without exhibits) and such number of copies
as the Holders may reasonably request of the final prospectus including any
supplement thereto included in or filed by the Partnership in connection with
the Resale Registration Statement;

 

 

(v)           promptly notify the Holders of any stop order issued or,
to the knowledge of the Partnership, threatened to be issued by the Commission
with respect to the Resale Registration Statement and promptly take all
reasonable actions to prevent the entry of such stop order or to obtain its
withdrawal if entered;

 

(vi)          use its reasonable efforts to qualify the Units for resale
as soon as practicable after the date of this Agreement under the securities, “blue
sky” or similar laws of such states of the United States as the Holders shall
reasonably request and use its reasonable efforts to obtain as soon as
practicable after the date of this Agreement all appropriate registrations,
permits and consents required in connection therewith, except that the
Partnership shall not for any such purpose be required to qualify generally to
do business as a foreign limited partnership in any state wherein it is not so
qualified, to register as a broker dealer, to subject itself to taxation or to
file a general consent to service of process in any such state;

 

(vii)         promptly inform the Holders (i) of the date on which
such Resale Registration Statement or any post-effective amendment thereto
becomes effective and (ii) of any request by the Commission, any
securities exchange, government agency, self-regulatory body or other body
having jurisdiction for any amendment of or supplement to the Resale
Registration Statement or final prospectus or prospectus supplement included
therein or filed by the Partnership in connection therewith;

 

(viii)        subject to Section 2.4, as promptly
as practicable notify the Holders of the occurrence of an event requiring the
preparation of a supplement or amendment to the prospectus related to such
Resale Registration Statement so that such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, as promptly as
practicable make available to the Holders any such supplement or amendment;

 

(ix)          use its commercially reasonable efforts to promptly cause
all of the Units covered by any Resale Registration Statement to be listed or
designated for quotation on any national securities exchange or automated
quotation system on which securities of the same class or series issued by the
Partnership are then listed or quoted, if any, if the listing or quotation of
such Units is then permitted under the rules of such exchange or automated
quotation system; and

 

(x)           file with the Commission in a timely manner and make and
keep available all reports and other documents required of the Partnership
under the Exchange Act so long as the Partnership remains subject to such
requirements and the filing and availability of such reports and other
documents is required for the applicable provisions of Rule 144 under the
Securities Act.

 

 

(b)           After the expiration of the Registration Period, (i) the
Partnership shall have no obligation to keep the Resale Registration Statement
effective and may terminate the Resale Registration Statement and (ii) all
obligations under this Section 2.2 and Section 3 shall expire.

 

(c)           In connection with any offers or sales by the Holders of
Units under the Resale Registration Statement or otherwise, the Partnership
shall have no obligation to enter into any agreement, execute or deliver any
agreement, instrument, document, certificate, opinion of counsel, comfort
letter, or other matter, cause any of the foregoing to occur or take any
further action, except as necessary to fulfill the obligations set forth in Section 2.2(a).  The “Plan of Distribution” section of the
Resale Registration Statement shall not describe any underwritten offering or
other plan of sale or distribution that would generally be understood to
contemplate the taking or causing of any underwritten offering by the
Partnership or that would require the Partnership to take any such action.

 

(d)           USD shall promptly provide to the Partnership in writing
all information relating to the Holders and, subject to Section 2.2(c),
the Holders’ intended plan of distribution of the Units, necessary to comply
with legal requirements in connection with the preparation and filing of the
Resale Registration Statement and any filings under state securities or “blue
sky” laws.  Such information will conform
in all material respects to the applicable requirements of the Securities Act
and will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.  USD also agrees
to notify the Partnership if any event relating to any of the Holders occurs
that would require the preparation of a supplement or amendment to the prospectus
so that such prospectus will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

 

(e)           If at any time the Commission takes the position that the
offering of some or all of the Units in a Resale Registration Statement is not
eligible to be made on a delayed or continuous basis under the provisions of Rule 415
under the Securities Act or requires any of the Holders to be named as an “underwriter”,
the Partnership shall use its reasonable efforts to persuade the Commission
that the offering contemplated by the Resale Registration Statement is a valid
secondary offering and not an offering “by or on behalf of the issuer” as
defined in Rule 415 and that none of the Holders is an “underwriter”.  Each Holder shall have the right to
participate or have their counsel participate in any meetings or discussions
with the Commission regarding the Commission’s position and to comment or have
their counsel comment on any written submission made to the Commission with
respect thereto.  No such written
submission shall be made to the Commission to which any Holder’s counsel
reasonably objects.  In the event that,
despite the Partnership’s reasonable efforts and compliance with the terms of
this Section 2.2(e), the Commission refuses to alter its position, the
Partnership shall (i) remove from the Resale Registration Statement such
portion of the Units (the “Cut Back Units”) and/or (ii) agree to such
restrictions and limitations on the registration and resale of the Units as the
Commission may require to assure the Partnership’s compliance with the
requirements of Rule 415 (collectively, the “Commission Restrictions”);
provided, however, that the Partnership shall not agree to name any of the
Holders as an “underwriter” in such Resale Registration Statement

 

 

without the prior written consent of such Holder.  Any cut-back imposed on any of the Holders
pursuant to this Section 2.2(e) shall be allocated among them on a
pro rata basis, unless the Commission Restrictions otherwise require or provide
or such Holders otherwise agree.  From
and after such date as the Partnership is able to effect the registration of
such Cut Back Units in accordance with any Commission Restrictions (such date,
the “Restriction Termination Date” of such Cut Back Units), all of the
provisions of this Section 2 shall again be applicable to such Cut Back
Units; provided, however, that (i) the necessary amendment to such Resale
Registration Statement including such Cut Back Units shall be filed on or
before ten (10) Business Days after such Restriction Termination Date, and
(ii) the Partnership shall use the same standards contemplated in Section 2.2(a)(ii) to
obtain effectiveness with respect to such Cut Back Units under Section 2.2(a).

 

(f)            Subject to Section 2.2(g) below, if for any
reason the Resale Registration Statement shall not have become effective under
the Securities Act by the close of business on the 14th calendar day after the
Filing Deadline (the “Effectiveness Deadline”), the Partnership shall,
within three Business Days after the date on which the Resale Registration
Statement becomes effective (the “Effectiveness Date”), pay to USD an
amount in cash equal to (x) the product of 1,287,287 (i.e., the number of
Units issued concurrently with the execution of this Agreement upon the closing
of the transaction contemplated by the Purchase Agreement (the “Closing”))
multiplied by the excess, if any, of $62.92 (i.e., the ten-day average of the
closing prices for common units of the Partnership used to determine the number
of Units issued at Closing pursuant to Section 1.3(a) of the Purchase
Agreement) over the closing price of a Unit on the Effectiveness Date (as
reported on the principal national securities exchange or automated quotation
system on which the Units are then listed or quoted), less (y) the
aggregate amount of all cash dividends or distributions, if any, that the
Holders are entitled to receive as a result of their ownership of the Units
during the period commencing with the Closing and ending on the Effectiveness
Date (such number if a positive number, the “Delay Payment”).  Any Delay Payment paid by the Partnership to
USD shall for all purposes be considered to be an increase in the cash portion
of the Purchase Price (as defined in the Purchase Agreement) set forth in Section 1.3(b) of
the Purchase Agreement.

 

(g)           If the Partnership is obligated pursuant to Section 2.2(f) above
to make a Delay Payment, the Partnership may, at its option, and in lieu of
making the Delay Payment, elect to repurchase from the Holders all of the Units
issued pursuant to Section 1.3(a) of the Purchase Agreement for an
aggregate price of $81,000,000 less all cash dividends or distributions, if
any, that the Holders are entitled to receive as a result of their ownership of
the Units.  Such price shall be payable
in cash within three Business Days after the Effectiveness Date, subject to
receipt from the Holders of appropriate instruments of transfer.

 

2.3          Documents to be Furnished to the Holders.  The Partnership shall furnish to USD, for
distribution to the Holders, at least two Business Days prior to filing with
the Commission, the Resale Registration Statement, any amendment or supplement
to the Resale Registration Statement, any prospectus to be used in connection
therewith and any amendment or supplement to any such prospectus, which
documents will be subject to the reasonable review of USD, and the Partnership
shall not file any such documents with the Commission to which USD shall
reasonably object until USD and the Partnership have in good faith resolved any
of USD’s

 

 

objections, unless the Partnership in good faith believes that the
filing of such documents is required by law.

 

2.4                                 Certain Notices.

 

(a)           Upon
notice to USD, the Partnership may delay the filing of the Resale Registration
Statement otherwise required pursuant to Section 2.2 or require the
Holders to suspend the use of the prospectus or any prospectus supplement
related to the Resale Registration Statement, for a reasonable period time, if
the Partnership would be required to disclose material non-public information
it was not otherwise then required by law to disclose publicly, where the
Partnership reasonably deems it advisable not to disclose or incorporate by
reference such information in a registration statement, prospectus or
supplement.  The Partnership shall use
commercially reasonable efforts to limit such suspension periods to no more
than 45 consecutive days or 60 days in the aggregate, but in no event shall
such periods exceed 60 consecutive days or 90 calendar days in the aggregate.  Any periods under this Section 2.4(a) shall
be aggregated with periods under Section 2.4(b) in determining
whether the applicable periods have been exceeded.  During any such period, the Partnership’s
obligations under Section 2.2(a)(viii) are suspended.

 

(b)           USD agrees that, upon receipt of any notice from the
Partnership of the happening of any event of the kind described in Section 2.2(a)(viii) hereof,
the Holders will forthwith discontinue disposition of Units pursuant to the
Resale Registration Statement until USD’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 2.2(a)(viii),
and, if so directed by the Partnership, each Holder will deliver to the
Partnership (at the Partnership’s expense) all copies, other than permanent file
copies, then in the Holders’ possession, of the prospectus and any prospectus
supplement covering such Units current at the time of receipt of such notice.

 

Section 3

Expenses

 

3.1           Registration Expenses.  The Partnership agrees to bear and to pay or
cause to be paid promptly upon request being made therefor all third party
expenses incident to the Partnership’s performance of or compliance with this
Agreement, including (a) all Commission filing fees; (b) all fees and
expenses in connection with the qualification of the securities being
registered for offering and sale under the state securities and blue sky laws
referred to in Section 2.2(a)(vi), including reasonable fees and
disbursements of its counsel, in connection with such qualifications; (c) all
expenses relating to the preparation, distribution and reproduction of the
Resale Registration Statement required to be filed hereunder, each prospectus
included therein or prepared for distribution pursuant hereto, each amendment
or supplement to the foregoing, and all other documents relating hereto; (d) fees,
disbursements and expenses of counsel and independent certified public
accountants of the Partnership in connection with the Resale Registration
Statement; and (e) fees, expenses and disbursements of any other Persons,
including special experts, retained by the Partnership in connection with such
registration.  The Partnership shall bear
its own internal expenses, including all salaries and expenses of its officers
and employees performing legal or accounting duties.  The Holder shall pay all fees and

 

 

expenses incurred by it in connection with this Agreement, the Resale
Registration Statement and the offer and sale of the Units, including the fees
and disbursements of any counsel or other advisors or experts retained by the
Holder, and any selling fees, discounts or commissions.

 

Section 4

Representations and Warranties

 

4.1           Representations and Warranties of the Partnership.  The Partnership represents and warrants to,
and agrees with, the Holder that:

 

(a)           The Partnership has reasonable grounds to believe that it
meets all the requirements for the filing of a registration statement on Form S-3
with the Commission.  The Resale
Registration Statement, at the time it becomes effective, and the final prospectus
contained therein, will comply, and when any post-effective amendment to the
Resale Registration Statement becomes effective or any supplement to such
prospectus is filed with the Commission, the Registration Statement, the final
prospectus and any such amendment or supplement, respectively, will comply, in
all material respects with the applicable requirements of the Securities Act
and the applicable rules adopted by the Commission thereunder; the
documents incorporated, or deemed to be incorporated, into the Resale
Registration Statement or the related prospectus by reference pursuant to the
requirements of Item 12 of Form S-3 under the Securities Act, when they
were or are filed with the Commission, conformed or will conform as of their
respective dates in all material respects with the applicable requirements of
the Exchange Act and the applicable rules and regulations adopted by the
Commission thereunder; and each part of the Resale Registration Statement and
any amendment thereto, at the time it became effective, and the final
prospectus and any amendment or supplement thereto, at the time it was filed
with the Commission pursuant to Rule 424 under the Securities Act, will
not contain an untrue statement of a material fact or omit to a state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and at all times at and subsequent to the time when the Resale Registration
Statement has been declared effective under the Securities Act, other than (i) from
such time as a notice has been given to USD pursuant to Section 2.2(a)(viii) until
such time as the Partnership furnishes an amended or supplemented prospectus
pursuant to Section 2.2(a)(viii) or such earlier time as the
Partnership provides notice that offers and sales pursuant to the Resale
Registration Statement may continue, or (ii) during any period when the
Holders are to suspend use of the prospectus or prospectus supplement related
to the Resale Registration Statement as provided in Section 2.4(a), each
prospectus contained in or prepared in connection with any Resale Registration
Statement, and each prospectus furnished pursuant to Section 2.2(a)(iv),
as then amended or supplemented, will conform in all material respects to the
applicable requirements of the Securities Act and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty in this Section 4.1(a) shall
not apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Partnership by or on behalf of any
Holder expressly for use therein in any such Resale Registration Statement,
prospectus or supplement.

 

 

(b)           The execution, delivery and performance of this Agreement
by the Partnership will not (i) result in a breach or violation of any of
the terms and provisions of the limited partnership agreement of the
Partnership, (ii) constitute a breach or default under any material
agreement or contract to which the Partnership is a party, except where any
such foregoing occurrence will not prevent the consummation of the transactions
contemplated herein or would not have a material adverse effect on the
Partnership and its subsidiaries taken as a whole, or (iii) result in a
violation of any provision of law, statute, rule, regulation, or any existing
applicable decree, judgment or order of any court or governmental agency or
body having jurisdiction over the Partnership.

 

(c)           This Agreement has been duly authorized, executed and delivered
by the Partnership.

 

4.2           Representations and Warranties of USD.  USD represents and warrants to, and agrees
with, the Partnership that:

 

(a)           The execution, delivery and performance of this Agreement
by USD will not (i) result in a breach or violation of any of the terms
and provisions of the limited liability company agreement of USD, (ii) constitute
a breach or default under any material agreement or contract to which USD is a
party, except where any such foregoing occurrence will not prevent the consummation
of the transactions contemplated herein or would not have a material adverse
effect on USD and its subsidiaries taken as a whole, or (iii) result in a
violation of any provision of law, statute, rule, regulation, or any existing
applicable decree, judgment or order of any court or governmental agency or
body having jurisdiction over USD.

 

(b)           This Agreement has been duly authorized, executed and
delivered by USD.

 

 

Section 5

Indemnification and Contributions

 

5.1           (a)           The
Partnership will indemnify and hold harmless each Holder against any losses,
claims, damages or liabilities, joint or several, to which such Holder may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, any Resale Registration Statement
or any prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse such Holder for any legal or other expenses
reasonably incurred by such Holder in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Partnership shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus, any Resale Registration Statement
or any prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Partnership by or on
behalf of any Holder expressly for use therein.

 

(b)           USD will indemnify and hold harmless the Partnership
against any losses, claims, damages or liabilities, joint or several, to which
the Partnership may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, any
Resale Registration Statement or any prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any preliminary prospectus, any Resale
Registration Statement or any prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Partnership by USD expressly for use therein; and will reimburse the Partnership
for any legal or other expenses reasonably incurred by the Partnership in
connection with investigating or defending any such action or claim as such
expenses are incurred.

 

(c)           Promptly after receipt by a party indemnified under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability that
it may have to any indemnified party otherwise than under such subsection and
shall not relieve the indemnifying party from any liability that it may have to
any indemnified party under this Agreement unless such failure to give notice
actually prejudices the indemnifying party’s ability to defend the claim.  In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate

 

 

therein and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.  No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party
from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.

 

(d)           If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Partnership and by
USD, respectively, from the transactions contemplated by this Agreement.  If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above
and such failure actually prejudiced the indemnifying party’s ability to defend
the claim, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Partnership and USD in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations.  The relative benefits received by the
Partnership shall be deemed to include the proportional value of the
consideration paid to USD by virtue of the issuance of the Units to USD
pursuant to the Purchase Agreement, and the relative benefits received by USD
shall be deemed to include the profit made by the Holders on the sale of the
Units pursuant to the Resale Registration Statement.  The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Partnership or USD and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.  The Partnership and USD agree that
it would not be just or equitable if contributions pursuant to this
subsection (d) were determined by pro
rata allocation or by any other method of allocation that does not
take account of the equitable considerations referred to above in this
subsection (d).  The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No Person guilty of fraudulent

 

 

misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.

 

(e)           The obligations of the Partnership under this Section 5
shall be in addition to any liability that the Partnership may otherwise have
and shall extend, upon the same terms and conditions, to each Person, if any,
who controls USD within the meaning of the Securities Act; and the obligations
of USD under this Section 5 shall be in addition to any liability that USD
may otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the general partner of the Partnership or its
delegate and to each Person, if any, who controls the Partnership, its general
partner or its delegate within the meaning of the Act.

 

(f)            For purposes of this Section 5 only, the term “Resale
Registration Statement” shall mean the Resale Registration Statement as amended
at the time it is declared effective by the Commission.

 

Section 6

Miscellaneous

 

6.1           Provision of Information.  USD shall complete and execute all such
questionnaires and other documents as the Partnership shall reasonably request
in connection with any registration of the resale of the Units pursuant to this
Agreement.

 

6.2           Injunctions. 
Irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specified terms
or were otherwise breached.  Therefore,
the parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms of provisions hereof in any court having jurisdiction, such remedy being
in addition to any other remedy to which they may be entitled at law or in
equity.

 

6.3           Severability. 
If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms and provisions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term or provision.

 

6.4           Further Assurances. 
Subject to the specific terms of this Agreement, USD and the Partnership
shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.

 

6.5           Entire Agreement. 
This Agreement contains the entire understanding of the parties with
respect to the registration rights of the Holders for the Units and the
transactions contemplated hereby and supersedes all agreements and
understandings entered into with respect thereto prior to the execution hereof.

 

 

6.6           Amendment. 
This Agreement may be amended only by an agreement in writing signed by
each of the parties hereto.

 

6.7           Counterparts. 
For the convenience of the parties hereto, any number of counterparts of
this Agreement may be executed by the parties hereto, but all such counterparts
shall be deemed one and the same instrument.

 

6.8           Notices.  All
notices, consents, requests, demands and other communications hereunder shall
be in writing and shall be given by hand or by mail (return receipt requested)
or sent by overnight delivery service or facsimile transmission to the parties
at the following addresses or at such other address as shall be specified by
the parties by like notice.

 

(a)           if to the
Partnership, to:

 

Kinder Morgan Energy
Partners, L.P.

c/o Kinder Morgan
Management, LLC,

the delegate of its General
Partner

500 Dallas Street, Suite 1000

Houston, Texas  77002

Attention:  General Counsel

Phone: 713-369-9000

Fax No.:  713-369-9410

 

with a copy to:

 

Bracewell &
Giuliani LLP

711 Louisiana, Suite 2300

Houston, Texas 
77002

Attn: Gary W. Orloff

Phone: 713-221-1306

Fax: 713-221-2166

 

 

(b)           if to USD, to:

 

US Development Group LLC

c/o USD Holdings, LLC

2655 LeJune Road, Suite 527

Coral Gables, Florida 33134

Attention:  James C. Hutson-Wiley

Phone: (305) 461-1952

Fax: (305) 461-1860

 

with a copy to:

 

Drinker Biddle &
Reath LLP

One Logan Square

18th and Cherry Streets

Philadelphia, Pennsylvania
19103

Attention:  F. Douglas Raymond, III

Phone: (215) 988-2548

Fax: (215) 988-2757

 

Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the third business day after posting, in the
case of notice so given by overnight delivery service or personal delivery, on
the day of actual receipt, and in the case of notice so given by facsimile
transmission, on the date of actual delivery if confirmed by appropriate
answerback if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day after receipt if not received
during the recipient’s normal business hours.

 

6.9           Governing Law. 
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ANY CHOICE OF
LAW PRINCIPLES WHICH MIGHT REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.

 

6.10         Successors and Assigns.  This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by and against the successors and
permitted assigns of the parties hereto. 
Except with the consent of the other parties, which may be withheld at
the sole discretion of a party, the parties may not assign their rights or
obligations under this Agreement.  Any
attempted assignment or delegation prohibited hereby shall be void.  No purchaser of Units from a Holder shall be
deemed to be a successor or permitted assign by reason of such purchase.

 

6.11         Parties in Interest. 
Except as otherwise specifically provided herein, nothing in this
Agreement expressed or implied is intended or shall be construed to confer any
right or benefit upon any Person, firm or corporation other than the Holders
and the Partnership and their respective successors and permitted assigns.

 

(The signature page follows.)

 

 

IN WITNESS WHEREOF, each of
the parties has caused this Agreement to be duly executed as of the date first
above written.

 

 

	
   

  	
  Kinder
  Morgan Energy Partners, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kinder
  Morgan G.P., Inc.,

  
	
   

  	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kinder
  Morgan Management, LLC,

  
	
   

  	
   

  	
   

  	
  its delegate

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Jeff Armstrong

  
	
   

  	
   

  	
  Name:

  	
  Jeff
  Armstrong

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  US
  Development Group LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daniel Borgen

  
	
   

  	
  Name:

  	
  Daniel
  Borgen

  
	
   

  	
  Title:

  	
  PresidentExhibit 10.1

 

MASTER LOAN AGREEMENT

 

THIS MASTER LOAN AGREEMENT is entered into as of January 13,
2010, 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 May 23,
2005, 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 January 13, 2010 and numbered
RIE539S01G; (B) the Non-Revolving Credit Supplement dated January 13,
2010 and numbered RIE539T05G; (C) the Multiple Advance Term Loan
Supplement dated January 13, 2010 and numbered RIE539T06C; and (D) the
Multiple Advance Term Loan Supplement dated January 13, 2010 and numbered
RIE539T07B.

 

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

 

1

 

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.

 

SECTION 4.         Capitalization.  The Company agrees to
acquire equity in CoBank in such amounts and at such times as CoBank may from
time to time require in accordance with its Bylaws and Capital Plan (as each
may be amended from time to time), except that the maximum amount of equity
that the Company may be required to purchase in connection with a loan may not
exceed the maximum amount permitted by the Bylaws at the time the Supplement
relating to such loan is entered into or such loan is renewed or refinanced by
CoBank.  The rights and obligations of
the parties with respect to such equity and any patronage or other
distributions made by CoBank shall be governed by CoBank’s Bylaws and Capital
Plan (as each may be amended from time to time).

 

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:  (A) 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 (B) 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:

 

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

 

2

 

(2)       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.

 

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

 

(4)       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:

 

(1)       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.

 

(2)       Subsidiaries.  The Company has the following “Subsidiary(ies)
(as defined below):  (1) Primo
Piatto, Inc.; and (2) DNA Dreamfields Company, LLC.  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:

 

(1)       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.

 

(2)       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.

 

3

 

(3)       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).

 

(4)       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.  (1) Preserve
and keep in full force and effect its existence and good standing in the
jurisdiction of its incorporation or formation; (2) qualify and remain
qualified to transact business in all jurisdictions where such qualification is
required; and (3) 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 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.

 

4

 

(H)      Reports
and Notices.  Furnish to
CoBank:

 

(1)       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.

 

(2)       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.

 

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

 

(4)       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.

 

(5)       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.

 

(6)       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.

 

(7)       Compliance
Certificates.  Together
with each set of financial statements furnished to CoBank pursuant to
Subsection (H)(2) hereof for a period corresponding to a period for which
one or more of the financial covenants set forth in Section 10 hereof are
required to be tested, a certificate of an officer or employee of the Company
acceptable to CoBank setting forth 

 

5

 

calculations showing compliance with each of the financial covenants
that require compliance at the end of the period for which the statements are
being furnished.

 

(8)       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.

 

(9)       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)(4) and (5) above.

 

(I)        Company
Post-Closing Property Search, Mortgage and Title Policy.

 

(1)       On or before February 28,
2010, provide CoBank with:

 

(a)       a property
search for Company-owned property in Foster County, North Dakota (the “Foster
County Property”); and

 

(b)       a property
search for Company-owned property in Hennepin County, Minnesota (the “Hennepin
County Property”).

 

(2)       On or before March 31,
2010, provide CoBank with:

 

(a)       new
or amended mortgage(s) or deed(s) of trust in the face amount of
$76,000,000.00 granting to CoBank a first lien (subject only to exceptions
approved in writing by CoBank) on the Foster County Property; and

 

(b)       new
or amended mortgage(s) or deed(s) of trust in the face amount of
$26,000,000.00 granting to CoBank a first lien (subject only to exceptions
approved in writing by CoBank) on the Hennepin County Property.

 

(c)       a title
commitment from a title insurance company acceptable to CoBank to issue an ALTA
lender’s policy of title insurance in the face amount of $30,000,000.00
insuring the Company mortgage(s) or deed(s) of trust to CoBank as
first priority lien(s) on the Foster County Property, subject only to
exceptions approved in writing by CoBank.

 

(d)       a title
commitment from a title insurance company acceptable to CoBank to issue an ALTA
lender’s policy of title insurance in the face amount of $26,000,000.00
insuring the Company mortgage(s) or deed(s) of trust to CoBank as
first priority lien(s) on the Hennepin County Property, subject only to
exceptions approved in writing by CoBank.

 

(3)       CoBank agrees
to pay 100% of the cost of such property searches, commitments, and policies,
together with such endorsements as may be reasonably requested by CoBank.  The Company agrees that if, for any reason, a
final lender’s policy is not issued to CoBank by June 30, 2010, or such
later date as may be agreeable to CoBank, then an “Event of Default” shall be
deemed to have occurred under this agreement.

 

6

 

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

 

(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:  (1) debt to CoBank; (2) accounts
payable to trade creditors incurred in the ordinary course of business; (3) current
operating liabilities (other than for borrowed money) incurred in the ordinary
course of business; (4) debt of the Company to Massachusetts
Mutual Life Insurance Company, Baystate Health Systems, Inc., C.M. Life
Insurance Company, Security Mutual Life Insurance Company of Lincoln, Nebraska;
and Canada Life Assurance Company; or their successors in an amount not to
exceed $23,500,000.00, and all extensions, renewals, and refinancings thereof; (5) 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 (6) capitalized leases existing on the
date hereof.

 

(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 forgoing restrictions shall not apply
to:  (1) Liens in favor of CoBank; (2) Liens
for taxes, assessments, or governmental charges that are not past due; (3) Liens
and deposits under workers’ compensation, unemployment insurance, and social
security Laws; (4) 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; (5) Liens
imposed by Law in favor of mechanics, materialmen, warehousemen, and like
persons that secure obligations that are not past due; (6) 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; (7) Liens
existing on the date hereof in favor of Massachusetts Mutual Life Insurance
Company, Baystate Health Systems, Inc., C.M. Life Insurance Company,
Security Mutual Life Insurance Company of Lincoln, Nebraska, and Canada Life
Assurance Company; or their successors to secure indebtedness permitted
hereunder; and (8) purchase money security interests on real property,
plant and equipment, provided that the Lien attaches only to the property being
financed and fixed improvement 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
and Investments.  Make any loan
or advance to any person or entity, or purchase any capital stock, obligations
or other securities of, make any capital contribution to, or otherwise invest
in any person or entity, or form or create any partnerships or joint ventures 

 

7

 

except:  (1) trade credit extended in the ordinary course of
business; (2) loans and investments by the Company in the stock or other
equities of DNA Dreamfields Company, LLC; (3) loans and investments by the
Company in the stock and other equities of Primo Piatto, Inc.; and (4) other
loans and investments 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 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.

 

(H)      Dividends,
Etc.  Intentionally Omitted.

 

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 fiscal quarter of the
Company a ratio of consolidated current assets to consolidated current
liabilities (both as determined in accordance with GAAP consistently applied)
of not less than 1.20 to 1.

 

(B)      Maximum
Total Debt to EBITDA.  The
Company and its consolidated Subsidiaries will have at the end of each fiscal
quarter of the Company a “Total Debt to EBITDA” ratio of not greater than 4.25
to 1.  For
purposes hereof:  (1) Total Debt”
shall mean the sum of:  (a) all
indebtedness, obligations and liabilities of the Company with respect to
borrowed money (including the issuance of debt securities), (b) all
guaranties, endorsements and other contingent obligations of the Company with
respect to indebtedness arising from money borrowed by others, (c) all
reimbursement and other obligations with respect to letters of credit, bankers
acceptances, customer advances, and other extensions of credit whether or not
representing obligations for borrowed money, (d) the aggregate of the
principal components of all leases and other agreements for the use,
acquisitions retention of real or personal property which are required to be
capitalized under GAAP, (e) all indebtedness, obligations and liabilities
representing the deferred purchase price of property or services, (f) all
indebtedness secured by a lien of the Property of the Company, whether or not
the Company has assumed or become liable for the payment of such indebtedness,
and (g) all obligations of the Company under any agreement providing for
an interest rate swap, cap, and floor, contingent participation or other
hedging mechanisms with respect to interest payable on any of the items
described above; and (2) “EBITDA” shall mean:  (a) net income before provision for
incomes taxes for the preceding four fiscal quarter period ending on such date
(the “Four Quarter Period”), plus (b) interest expense, including without
limitation, implicit interest expense on capitalized leases for the Four Quarter
Period, plus (c) depreciation expense, amortization expense, and similar
noncash charges for the Four Quarter Period, plus (d) any extraordinary,
unusual or non-recurring losses or charges for the Four Quarter Period, minus (e) any
gain associated with the sale or write-down of 

 

8

 

assets for the Four Quarter Period, minus (f) any
gain from discontinuance of operations for the Four Quarter Period, minus (g) any
extraordinary, unusual or non-recurring gains or credits for the Four Quarter
period (all a determined in accordance with GAAP consistently applied).

 

(C)      Minimum Fixed Charge Coverage Ratio.  The Company
and its consolidated subsidiaries, if any, will have at the end of each fiscal
quarter ending during the period of the Company, a “Minimum Fixed Charge
Coverage Ratio” (as defined below)  of
not less than 1.15 to 1.  For purposes
hereof, the term “Minimum Fixed Charge Coverage Ratio” shall mean the ratio
of:  (1) EBITDA (as defined above) for the Four Quarter Period (as
defined above), minus capital expenditures (excluding capitalized expenses) not
funded by debt for the Four Quarter Period, minus stock repurchases for the
Four Quarter Period, minus equity retirements and dividends declared during the
Four Quarter Period; to (2) interest expense for the Four Quarter Period,
plus the sum of all scheduled principal payments made in respect of the long
term debt for the Four Quarter Period.

 

(D)      Minimum
Tangible Net Worth.  The Company
and its consolidated Subsidiaries will maintain at the end of each fiscal
quarter of the Company an excess of consolidated “Tangible Assets” (as defined
below) over consolidated total liabilities (as determined in accordance with
GAAP consistently applied) of not less than the
sum of:  (1) $25,000,000.00, plus (2) 30%
of cumulative net income of the Company and its consolidated subsidiaries
beginning with consolidated net income for fiscal year ending July 31,
2007 and accumulating thereafter with consolidated net income at all subsequent
fiscal year ends, plus (3) 100% of all contributed capital received by the
Company and its consolidated subsidiaries. 
For purposes hereof, “Tangible Assets” shall mean all assets (as
determined in accordance with GAAP consistently applied) less all assets which
would be classified as intangible assets under GAAP (including, but not limited
to, goodwill, patents, trademarks, trade names, copyrights, and
franchises).  In addition, for purposes
of subsection (2) above, “net income” shall not include any net loss, such
that, in the event of a net loss at any fiscal year end, such net loss shall
not reduce the cumulative net income.

 

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)(2), 8(H)(6)-(8), 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 

 

9

 

agreement contained herein or in any other Loan Document or shall use
the proceeds of any loan for an unauthorized purpose.

 

(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, or between the Company and any affiliate of
CoBank, including without limitation Farm Credit Leasing Services Corporation.

 

(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:  (1) enforcement proceedings
shall have been commenced; (2) a Lien prohibited under Section 9(B) hereof
shall have been obtained; or (3) 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:  (1) 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 (2) suspend its business
operations or a material part thereof or make an assignment for the benefit of
creditors; or (3) 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 (4) 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 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 

 

10

 

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 foregoing,
CoBank may hold and/or set off and apply against the Company’s obligation 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:  (1) upon the occurrence and during the
continuance of an Event of Default, then at CoBank’s option in each instance,
the entire indebtedness outstanding hereunder and under all Supplements shall
bear interest from the date of such Event of Default until such Event of
Default shall have been waived or cured in a manner satisfactory to CoBank at
4.00% per annum in excess of the rate(s) of interest that would otherwise
be in effect on that loan; and (2) 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 4.00% 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:  (A) 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 (B) $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 

 

11

 

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.  Without giving effect to the
principles of conflict of laws and except to the extent governed by federal
law, the Laws of the State of Colorado, without reference to choice of law
doctrine, shall govern this agreement, each Supplement and any other Loan Documents
for which Colorado is specified as the applicable law, and all disputes and
matters between the parties to this agreement, including all disputes and
matters whatsoever arising under, in connection with or incident to the lending
and/or leasing or other business relationship between the parties, and the
rights and obligations of the parties to this agreement or any other Loan
Documents by and between the parties for which Colorado is specified as the
applicable law.

 

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 58421-0021

  
	
   

  	
   

  	
   

  
	
  For
  direct delivery purposes, when desired:

  	
   

  	
   

  
	
  5500
  South Quebec Street

  	
   

  	
   

  
	
  Greenwood
  Village, Colorado 80111-1914

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attention:
  Credit Information Services

  	
   

  	
  Attention:
  CFO

  
	
  Fax
  No.: (303) 224-6101

  	
   

  	
  Fax
  No.: (701) 652-3734

  

 

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 

 

12

 

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:  (A) all
indebtedness and obligations of the Company under this agreement, all
Supplements, and all other Loan Documents shall have been paid or satisfied; (B) CoBank
has no commitment to extend credit to or for the account of the Company under
any Supplement; and (C) 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
hereunder.  In connection with the
foregoing, CoBank may disclose information concerning the Company and its
Subsidiaries, if any, to any participant or prospective participant, provided
that such participant or prospective participant agrees to keep such
information confidential.  Patronage
distributions in the event of a sale of a participation interest shall be
governed by CoBank’s Bylaws and Capital Plan (as each may be amended from time
to time).  A sale of a 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 a participation
interest.

 

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 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, Security Mutual Life Insurance Company of Lincoln, Nebraska,
and Canada Life Assurance Company (referred to collectively as the “Lenders”).  The Company hereby reaffirms and consents to
the terms thereof.

 

13

 

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:

  	
   

  	
   

  	
  By:

  	
  /s/
  Edward Irion

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
  CFO

  

 

14

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