RDO EQUIPMENT CO
LOAN & SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>rdo025808_ex10-1.txt
<DESCRIPTION>LOAN & SECURITY AGREEMENT
<TEXT>
                                                                    Exhibit 10.1


                           LOAN AND SECURITY AGREEMENT

     This Loan and Security Agreement (this "Agreement") is entered into by and
     between RDO Construction Equipment Co. ("Borrower") and CitiCapital
     Commercial Corporation ("CitiCapital") as of October 23, 2002.
                                                          --

     The date upon which this Agreement and all documents, instruments,
     certificates and other agreements required to be executed or delivered
     pursuant to the terms of this Agreement are executed or delivered is
     referred to in this Agreement as the "Closing Date". For mutual
     consideration, the receipt and sufficiency of which is hereby acknowledged
     by Borrower and CitiCapital, Borrower and CitiCapital hereby agree to the
     following terms and conditions:


                              1. CREDIT FACILITIES

1.1  LINE OF CREDIT. CitiCapital, in its sole discretion and subject to the
     terms and conditions of this Agreement, agrees to make loans to Borrower
     during the period from the Closing Date up to and including the last day of
     September, 2003 in an amount not to exceed, in the aggregate at any one
     time outstanding, the "Line of Credit" which will be an amount equal to the
     lesser of (a) the Maximum Line of Credit (as defined below) or (b) the
     Borrowing Base (as defined below).

1.2  MAXIMUM LINE OF CREDIT. The "Maximum Line of Credit" means, at any time, an
     amount equal to $30,000,000 minus the aggregate unpaid balance of (i) that
     certain Loan and Security Agreement of even date herewith by and between
     RDO Agriculture Equipment Co. ("RDOA") and CitiCapital, and (ii) that
     certain Loan and Security Agreement of even date herewith by and between
     RDO Material Handling Co. ("RDOM") and CitiCapital, which shall not exceed
     $9,000,000. RDOA and RDOM will be individually and collectively referred to
     herein as the "Affiliates".

1.3  BORROWING BASE. The "Borrowing Base" means, at any time, an amount, as
     determined by CitiCapital in its sole discretion, equal to 95% of the net
     book value of Eligible Inventory calculated in accordance with GAAP (as
     defined below).

1.4  ELIGIBLE INVENTORY. "Eligible Inventory" shall mean the net book value of
     Borrower's inventory of construction equipment or machinery, which are
     listed on a Borrowing Base Certificate, or any attachment thereto or which
     form the basis for Eligible Inventory.

1.5  BORROWING BASE CERTIFICATE. Borrower must provide, on or before the 15th
     day of each month and also on the day of each request for each Advance
     hereunder, which request is in excess of $2,000,000, Borrower must provide
     a Borrowing Base Certificate in form as provided on the attached Exhibit A
     and in content acceptable to CitiCapital and all other worksheets,
     certificates and schedules relating to the Borrowing Base Certificate as
     shall be required by CitiCapital in its sole discretion. Borrowing Base
     Certificates shall be mailed to the following address or such address as
     CitiCapital may specify in the future: CitiCapital Commercial Corporation,
     250 East John Carpenter Freeway, Irving, Texas 75062, Attn: Wholesale
     Credit, 4 Decker.


                     2. SECURITY INTEREST AND DOCUMENTATION

2.1  SECURITY INTEREST. In order to secure the payment and performance of all
     absolute and all contingent obligations and liabilities of Borrower to
     CitiCapital now existing or hereafter arising under this Agreement,
     Borrower hereby grants to CitiCapital a security interest in and to the
     following described collateral (all herein referred to as the
     "Collateral"): all present and future inventory of construction equipment
     or machinery or other goods together with all attachments, accessories,
     exchanges, replacement parts, repairs and additions thereto, and all
     chattel paper, documents, general intangibles, instruments, accounts and
     contract rights now existing or hereafter arising with respect to any
     thereof and the cash and non-cash proceeds (including, without limitation,
     proceeds of proceeds) of any of the foregoing. In the event of default and
     upon the request of CitiCapital, Borrower will promptly (a)


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     deliver to CitiCapital all Collateral required by CitiCapital, (b) mark all
     chattel paper, documents and instruments and Borrower's books of account,
     ledger cards and other records relative to the Collateral with a notation
     satisfactory to CitiCapital disclosing that they are subject to
     CitiCapital's security interest, (c) execute and deliver to CitiCapital
     such instruments, Uniform Commercial Code financing statements, statements
     and agreements as CitiCapital may request to further evidence each advance
     or loan hereunder and the security interests granted under this Agreement,
     provided, however, Borrower's failure to comply with such request shall not
     affect or limit CitiCapital's security interest or other rights in and to
     the Collateral, and (d) permit CitiCapital or its representatives to
     examine the Collateral and Borrower's books and records at any and all
     reasonable times.

2.2  STATUS OF COLLATERAL. The Collateral is now, and at all times will be owned
     by Borrower free and clear of all liens, security interests, claims and
     encumbrances except for (i) the security granted to CitiCapital herein (ii)
     the security interest granted to Deere & Company, Deere Credit Services,
     Inc. and John Deere Construction Equipment Company, which must at all times
     be subject to an inter-creditor agreement acceptable in form and content to
     CitiCapital, or (iii) as specifically agreed to in writing by CitiCapital;
     and the interest of CitiCapital in the Collateral hereunder is and shall at
     all times be a valid, perfected, security interest therein.


                       3. ADVANCES, PAYMENTS AND INTEREST

3.1  ADVANCES. Subject to CitiCapital's discretion and the restrictions
     contained in this Agreement, Borrower may request and receive a loan or
     advance pursuant to this Agreement at any time when the aggregate
     outstanding advances to Borrower hereunder are less than the then specified
     Line of Credit. The minimum amount of any such advance is $100,000.
     CitiCapital will remit advances pursuant to the Line of Credit by wire
     transfer or automated clearinghouse payment. All proceeds of any loan or
     advance made by CitiCapital to or on behalf of Borrower under this
     Agreement must be used by Borrower in the continued operation of Borrower's
     business solely for internal business purposes and not for payment of
     dividends, loans, or acquisitions by any entity other than the Borrower.

     CitiCapital will in no event be obligated to make any loan or advance to or
     for the benefit of Borrower if (a) Borrower is then or has in the past been
     in default under the terms of this Agreement or any other agreement between
     Borrower and CitiCapital or between Borrower and any affiliate of
     CitiCapital, (b) guarantor, if any, terminates or attempts to terminate its
     guaranty of the obligations of Borrower, (c) the requested loan or advance
     would increase the amount outstanding under this Agreement to an amount in
     excess of the applicable Line of Credit on the date the loan or advance is
     made, (d) CitiCapital has not received a written request for such advance
     in form and content acceptable to CitiCapital and signed by an authorized
     officer or employee of Borrower by 12:00 p.m. one day prior to the
     requested funding date of such advance, or (e) there shall have been a
     material adverse change in the financial condition of Borrower or any
     guarantor from the Closing Date. All of Borrower's representations and
     warranties must be true and accurate on the date of any advance and the
     request for any such advance will constitute a re-issuance of such
     representations and warranties by Borrower on the date of the advance.

3.2  PAYMENTS. If, at any time, the aggregate principal amount of all loans
     outstanding under this Agreement exceeds the Line of Credit, Borrower will
     immediately pay CitiCapital the amount necessary to reduce the aggregate
     principal outstandings to an amount not exceeding the Line of Credit. Any
     payments made by Borrower to CitiCapital pursuant to this Agreement may be
     applied, at the option of CitiCapital, first to the payment of accrued but
     unpaid interest and then to reduce the principal balance of any then
     outstanding loan or advance. Any payments made by Borrower to CitiCapital
     pursuant to this Agreement may be applied, at the option of CitiCapital,
     first to indebtedness under this Agreement that is not secured, then to
     delinquency charges, then to the payment of accrued but unpaid interest,
     then to insurance payments, then to any other fees or other amounts payable
     hereunder other than indebtedness secured by a purchase money security
     interest in the Collateral, until all of such indebtedness is paid in full,
     and then to the indebtedness secured by a purchase money security interest
     in the Collateral in the order in which that indebtedness was incurred.
     CitiCapital's books and records will be prima facie evidence of the amount
     from time to time owing hereunder.


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3.3  INTEREST AND RETURNED CHECKS. Borrower agrees to pay CitiCapital interest
     charges promptly as billed by the 15th of each month for such charges that
     have accrued during the prior month. Interest charges for each loan or
     advance which was outstanding pursuant to this Agreement during the prior
     month shall be computed and accrued at the lesser of (a) the Applicable
     Rate (as defined below) which is in effect during such month or (b) the
     lawful maximum rate, if any, in effect from time to time in the applicable
     jurisdiction for loans to borrowers of the type, in the amount, for the
     purposes, and otherwise of the kind contemplated. However, the Applicable
     Rate will not be less than 5.0% per annum unless prohibited by law.

     The "Applicable Rate" shall be the Libor Rate, as defined below, in effect
     on the last business day of the prior month for interest charges accruing
     during such month (as used herein "business day" shall mean any day that is
     not a Saturday, Sunday or other day in which banking institutions in
     Dallas, Texas are generally authorized or required by law or executive
     order to close), plus 3.0% per annum, provided, however, that the
     Applicable Rate, as calculated on the date of this Agreement, shall not
     increase by more than 5.0% per annum.

     The "Libor Rate" shall mean the highest of the London Interbank Offered
     Rates published in the Money Rates section of The Wall Street Journal as
     the average of Interbank offered rates for one month dollar deposits in the
     London market based upon quotations from major banks effective as to
     contracts entered into two days prior to publication by The Wall Street
     Journal. In the event the Libor Rate, as published in The Wall Street
     Journal ceases to exist, or The Wall Street Journal ceases publishing a
     Libor Rate, CitiCapital will substitute a comparable index that is outside
     the control of CitiCapital. In the event of an error by The Wall Street
     Journal, the "Libor Rate" will be based upon the Libor Rate as corrected.

     Borrower agrees to reimburse CitiCapital immediately upon demand for any
     amount charged to CitiCapital by any depository institution because a
     check, draft or other order made or drawn by or for the benefit of Borrower
     is returned unpaid for any reason and, if allowed by law, to pay
     CitiCapital an additional handling charge in the amount of $25.00 or in the
     event applicable law limits or restricts the amount of such reimbursement
     or handling charge, the amounts chargeable under this provision will be
     limited and/or restricted in accordance with applicable law.

     Time is of the essence hereof. If any payment is not received when due, the
     undersigned agrees to pay to the holder a delinquency charge calculated
     thereon at the rate of one and one-half percent (1 1/2%) per month for the
     period of the delinquency or, at CitiCapital's option, five percent (5%) of
     such payment, provided that such a delinquency charge is not prohibited by
     law, otherwise at the highest rate that the Borrower can legally obligate
     itself to pay and/or CitiCapital can legally collect.

3.4  TERM. The Line of Credit shall terminate on September 30, 2003. On the
     termination date, all amounts owing under the Line of Credit shall be due
     and payable in cash. CitiCapital shall also have the right to terminate
     this Agreement at any time without notice because of the occurrence of an
     Event of Default, in which event all advances and interest charges relating
     thereto shall be due and payable immediately upon demand. No termination
     hereunder shall in any way affect or impair any right of CitiCapital
     arising prior thereto or by reason thereof, nor shall any such termination
     relieve Borrower or any other party primarily or secondarily liable as to
     the advances until all of the advances and interest charges relating
     thereto are fully paid.


            4. FINANCIAL AND ORGANIZATIONAL COVENANTS AND INFORMATION

4.1  CORPORATE AUTHORIZATION AND ORGANIZATION. Borrower hereby warrants and
     agrees as follows:

     (a)  Borrower warrants and agrees that the execution of and performance by
          Borrower under the terms of this Agreement have been approved for
          Borrower by all necessary corporate action and by Borrower's
          shareholders and that Borrower is and will continue to be a
          corporation validly existing under the laws of the state of North
          Dakota and is and will continue to be qualified and


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          licensed to do business in all jurisdictions in which the nature of
          Borrower's business requires Borrower to be qualified or licensed;

     (b)  So long as any amount remains unpaid under this Agreement, the
          Borrower will not take any action or allow any party to take any
          action to liquidate or dissolve Borrower, or make or allow any
          material change in the nature of its business as presently conducted,
          or acquire substantially all of the membership interests or assets of,
          or consolidate or merge with, any other firm, company or corporation
          without the prior written consent of CitiCapital; and

4.2  FINANCIAL INFORMATION AND REPORTS.

     (a)  Borrower represents that the fiscal year of Borrower currently ends
          January 31. Borrower agrees to notify CitiCapital in writing of any
          change in the fiscal year of Borrower at least 90 days prior to
          effectuating any such change. Borrower agrees to provide financial
          statements and such other information with respect to the business and
          operations of Borrower as CitiCapital may from time to time reasonably
          request. Without request, Borrower shall furnish to CitiCapital the
          following:

          (i)  As soon as available, and in any event within 125 days after the
               end of each annual fiscal year of RDO Equipment Co. ("Guarantor")
               and its Subsidiaries (as defined below), a copy of the complete
               audit report for such fiscal period and accompanying financial
               statements (including balance sheet, statement of cash flow and
               profit and loss statement) of Guarantor and its Subsidiaries as
               prepared in accordance with GAAP (as defined below) and certified
               by independent certified public accountants of recognized
               standing selected by Guarantor.

               The term "Subsidiaries" of Guarantor means any corporation,
               partnership, limited liability company or other business entity
               of which an aggregate of more than fifty percent (50%) of the
               outstanding stock is, at the time, directly or indirectly, owned
               or controlled by Guarantor and/or one or more Subsidiaries of
               Guarantor.

               The term "GAAP" means generally accepted accounting principles in
               the United States of America as in effect from time to time set
               forth in the opinions and pronouncements of the Accounting
               Principles Board and the American Institute of Certified Public
               Accountants and the statements and pronouncements of the
               Financial Accounting Standards Board, or in such other statements
               by such other entity as may be in general use by significant
               segments of the accounting profession, which are applicable to
               the circumstances as of the date of determination.

          (ii) As soon as available, and in any event within 50 days after the
               end of each fiscal quarter period of Borrower a copy of the
               balance sheet and profit and loss statement of Borrower for such
               period, signed by a duly authorized officer of Borrower, in
               reasonable detail, prepared by Borrower in accordance with GAAP.

     (b)  Borrower represents and warrants that all data and statements of fact
          furnished by Borrower and Guarantor to CitiCapital with respect to the
          business and financial condition of Borrower, Guarantor and its
          Subsidiaries were and continue to be true, accurate and correct and
          any such information hereafter furnished will be true, accurate and
          correct as of the date when such data or statement is furnished.

     (c)  So long as any amount remains unpaid under this Agreement, Borrower
          will permit CitiCapital or CitiCapital's representatives to enter, at
          all reasonable times and during normal business hours, upon Borrower's
          premises or any other premises where the Collateral may then be
          located to inspect the Collateral and to inspect, examine and audit
          Borrower's books and records with respect to the Collateral. Borrower
          agrees to pay to CitiCapital the greater of CitiCapital's


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          standard fee or actual costs relating to such examinations immediately
          upon receipt of CitiCapital's invoice therefor. Provided that Borrower
          is not in default in any of its obligations to CitiCapital,
          CitiCapital agrees that (i) it will audit Borrower's books and records
          with respect to the Collateral no more than twice a year and (ii) the
          fees and costs payable by Borrower and the Affiliates for such
          examinations will not exceed an aggregate of $10,000 per year.

     (d)  Borrower covenants and agrees that, unless the taxing authority to
          which the tax is owed agrees to accept payment at a later date without
          the imposition of a lien on any of the assets of Borrower, Borrower
          will pay all local, state and federal taxes (including withholding
          taxes) on or before the date when the same become due. The Federal
          Taxpayer Identification Number of Borrower is 45-0455407.

4.3  Financial Covenants. The following covenants must be satisfied at all times
     throughout the term of this Agreement:

     (a)  Guarantor must maintain an Adjusted Net Worth greater than an amount
          equal to $60,000,000 plus seventy-five percent (75%) of the positive
          Consolidated Net Income for the previous fiscal year. The first
          measurement period, for calculation of Consolidated Net Income, will
          commence on January 31, 2002.

          "Adjusted Net Worth" shall mean Tangible Net Worth plus Subordinated
          Indebtedness.

          The term "Tangible Net Worth" shall mean the excess of all tangible
          assets of the Guarantor and its Subsidiaries over all liabilities of
          the Guarantor and its Subsidiaries. For these purposes, the term
          "tangible assets" shall mean such of Guarantor's and its Subsidiaries'
          assets which have intrinsic and marketable value or collectability,
          such as real estate, plant and equipment, inventory, accounts
          receivable, money, negotiable instruments, marketable securities and
          the like, but shall not include:

          o    the amount, if any, by which the Guarantor's and its
               Subsidiaries' inventory exceeds the lower of cost or market value
               thereof, or the value of any inventory which is obsolete or
               damaged or is otherwise deemed by CitiCapital not to be of a
               marketable quality commensurate with Guarantor's and its
               Subsidiaries' inventory as a whole;

          o    accounts receivable which are deemed by Guarantor or CitiCapital
               to be uncollectable or which should be subject to a reserve for
               bad debts in accordance with generally accepted accounting
               principles, or which are subject to potential claims or setoffs;

          o    any asset which is intangible or lacks intrinsic and marketable
               value or collectability, including but not limited to goodwill,
               patents, copyrights, trademarks, franchises, organization or
               research and development costs.

          The term "Subordinated Indebtedness" means all Indebtedness of
          Guarantor and its Subsidiaries the repayment of which has been
          subordinated to Indebtedness owing to CitiCapital.

          "Indebtedness" of the Guarantor means without duplication (a) all
          indebtedness of Guarantor and its Subsidiaries for borrowed money
          (including reimbursement and all other obligations with respect to
          letters of credit, bankers' acceptances, surety bonds and performance
          bonds, whether or not matured) or for the deferred purchase price of
          property or services, (b) all obligations of Guarantor and its
          Subsidiaries evidenced by notes, bonds, debentures or similar
          instruments, (c) all indebtedness of Guarantor and its Subsidiaries
          created or arising under any conditional sale or other title retention
          agreement with respect to property acquired by Guarantor or its
          Subsidiaries (even though the rights and remedies of the seller or
          lender under such agreement in the event of default are limited to
          repossession or sale of such property), (d) the capitalized amount of
          all obligations of Guarantor or its Subsidiaries under any lease of


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          property by Guarantor or any of its Subsidiaries as lessee which would
          be accounted for as a capital lease on a balance sheet of Guarantor or
          its Subsidiaries, as determined on a consolidated basis in conformity
          with GAAP, (e) all guaranty obligations of Guarantor and its
          Subsidiaries, (f) all obligations of Guarantor or its Subsidiaries to
          purchase, redeem, retire, defease or otherwise acquire for value any
          stock or stock equivalents of Guarantor or any of its Subsidiaries,
          valued, in the case of redeemable preferred stock, at the greater of
          its voluntary or involuntary liquidation preference plus accrued and
          unpaid dividends, and (g) all Indebtedness referred to above secured
          by (or for which the holder of such Indebtedness has an existing
          right, contingent or otherwise, to be secured by) any lien upon or in
          property (including accounts and general intangibles) owned by the
          Guarantor or any of its Subsidiaries, even though the Guarantor or its
          Subsidiaries has not assumed or become liable for the payment of such
          Indebtedness.

          "Consolidated Net Income" means the net income (or loss) of Guarantor
          and its Subsidiaries for a particular period, determined on a
          consolidated basis in conformity with GAAP.

     (b)  Guarantor must maintain a maximum ratio for any period of Consolidated
          Total Liabilities for such period minus Subordinated Indebtedness for
          such period to Adjusted Net Worth for such period of 4.5 to 1.0. This
          ratio shall be measured on a quarterly basis.

          The term "Consolidated Total Liabilities" means the total liabilities
          of Guarantor and its Subsidiaries for a particular period, determined
          on a consolidated basis in conformity with GAAP.

     (c)  Guarantor must maintain a minimum Interest Coverage Ratio measured on
          a quarterly basis as follows:

          2Q03           3Q03            4Q03           2004 through end of term
          -0.75 to 1     -0.25 to 1      1 to 1                 1.5 to 1

          The term "Interest Coverage Ratio" for any period means the ratio of
          the rolling four quarter (i.e., the most recent and three prior) EBIT
          of Guarantor and its Subsidiaries for such period to the Interest
          Expense of Guarantor and its Subsidiaries for such period.

          The term "EBIT" means an amount equal to (a) Consolidated Net Income
          of Guarantor and its Subsidiaries for such period plus (b) the sum of,
          in each case to the extent included in the calculation of Consolidated
          Net Income of Guarantor and its Subsidiaries for such period in
          accordance with GAAP, but without duplication, (i) any provision for
          income taxes and (ii) interest expense.

          The term "Interest Expense" means, for any period, the difference
          between the total interest expense of Guarantor and its Subsidiaries
          for such period determined on a consolidated basis in conformity with
          GAAP minus any interest income of the Guarantor and its Subsidiaries
          for such period determined on a consolidated basis in conformity with
          GAAP.


             5. REPRESENTATION, WARRANTIES AND ADDITIONAL AGREEMENTS

5.1  ADDITIONAL WARRANTIES AND AGREEMENTS. Borrower warrants and agrees that:
     the Collateral is currently and, subject to ordinary use, will continue to
     be maintained in good operating condition and repair, and is currently and
     will continue to be used and operated with care only by personnel
     experienced in the use of such Collateral in the regular course of
     Borrower's business and in substantial compliance with all applicable
     governmental laws and regulations, manufacturer's specifications and the
     restrictions contained in any insurance policy insuring the Collateral;
     and, the Collateral is not currently and will not be used in conjunction
     with the storage, transportation or disposal of substances considered


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     to be toxic or hazardous, as defined in applicable environmental laws, or
     in conjunction with any activity that would be illegal or would subject the
     Collateral to confiscation by any governmental entity.

     Borrower further warrants and agrees that: the security interest in the
     Collateral granted to or retained by CitiCapital is and will continue to be
     superior to any title to or interest in the Collateral now or hereafter
     held or claimed by any other party except as specifically agreed to in
     writing by CitiCapital; the Collateral is free from and will be kept free
     from all liens, claims, security interests and encumbrances (whether
     superior or inferior to the interests of CitiCapital) other than that
     created by this Agreement and except as specifically agreed to in writing
     by CitiCapital; Borrower will not and will not allow any other party to
     consign, sell, encumber, pledge, transfer, secrete or otherwise dispose of
     any of the Collateral without CitiCapital's prior written consent except
     for sales in the ordinary course of business by Borrower; Borrower will
     take such action as CitiCapital reasonably requests to perfect or preserve
     the interests granted to CitiCapital under this Agreement and the first
     priority of such interests; any Manufacturer's Statement or Certificate of
     Origin or Certificate of Title relating to the Collateral shall be
     immediately delivered to CitiCapital in the event of default and, if a
     Certificate of Title or registration is required for any item of
     Collateral, Borrower will cooperate with CitiCapital in obtaining the
     Certificate of Title or registration disclosing the interests of Borrower
     and CitiCapital in the Collateral; Borrower will defend any action,
     proceeding or claim affecting the Collateral or the interests of
     CitiCapital in the Collateral; Borrower shall promptly pay all amounts
     payable in conjunction with the storage, maintenance or repair of the
     Collateral and all taxes, assessments, license fees and other public or
     private charges levied or assessed in conjunction with the operation or use
     of the Collateral or levied or assessed against the Collateral or this
     Agreement except for those which are being contested by Borrower in good
     faith by appropriate proceedings and which do not constitute a lien or
     encumbrance upon the Collateral.

     Borrower's obligations and liabilities to CitiCapital are absolute and
     unconditional under all circumstances and regardless of any failure of
     operation or Borrower's loss of possession of any item of Collateral or the
     cessation or interruption of Borrower's business for any reason whatsoever.
     Borrower agrees to notify CitiCapital in writing in the event that Borrower
     anticipates removing any item of Collateral from the states of Arizona,
     California, Minnesota, Montana, Nebraska, North Dakota, south Dakota,
     Texas, Oregon, Nevada, Wisconsin, or Washington for a period in excess of
     30 days.

5.2  INSURANCE AND RISK OF LOSS. Borrower will at all times bear all risk of
     loss of, damage to or destruction of the Collateral. Borrower agrees to
     immediately procure and maintain insurance on the Collateral for the full
     insurable value thereof and for the life of this Agreement, containing the
     same or similar provisions as the insurance policies in place on the
     Closing Date in the form of "All Risk" or similar insurance (insuring the
     Collateral for fire, extended coverage, vandalism, theft and collision and
     containing only those exclusions from coverage which are acceptable to
     CitiCapital) plus such other insurance as CitiCapital may specify from time
     to time, all in form and amount and with such insurers satisfactory to
     CitiCapital. Borrower agrees to deliver promptly to CitiCapital
     certificates or, if requested, policies of insurance satisfactory to
     CitiCapital, each with a standard long-form loss-payable endorsement naming
     CitiCapital or its assigns as loss payee and providing that CitiCapital's
     rights under such policy will not be invalidated by any act, omission or
     neglect of anyone other than CitiCapital, and containing the insurer's
     agreement to give 30 days prior written notice to CitiCapital before any
     cancellation of or material change in the policy(s) will be effective as to
     CitiCapital, whether such cancellation or change is at the direction of
     Borrower or insurer. CitiCapital's acceptance of policies in lesser amounts
     or risks will not be a waiver of Borrower's obligation to procure insurance
     complying with the provisions hereof promptly after notice from
     CitiCapital. Borrower assigns to CitiCapital all proceeds of any physical
     damage or credit insurance that is maintained by Borrower in accordance
     herewith, including returned and unearned premiums, up to the amount owing
     hereunder by Borrower. Borrower directs all insurers to pay such proceeds
     solely to the order of CitiCapital for application to Borrower's
     indebtedness to CitiCapital in a manner determined by CitiCapital in its
     sole discretion.

5.3  PERFORMANCE BY CITICAPITAL. If Borrower fails to perform any of Borrower's
     obligations under this Agreement, CitiCapital may perform the same for the
     account of Borrower. Any such action by


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     CitiCapital will be in CitiCapital's sole discretion and CitiCapital will
     not be obligated in any way to do so. CitiCapital's performance on behalf
     of Borrower will not obligate CitiCapital to perform the same or any
     similar act in the future and will not cure or waive Borrower's failure of
     performance as an event of default hereunder. All sums advanced or costs
     and expenses incurred by CitiCapital pursuant to this Paragraph, including
     the reasonable fees of any attorney retained by CitiCapital, will be for
     the account of Borrower, will constitute indebtedness secured by
     CitiCapital's security interest in the Collateral, will bear interest at
     the highest rate allowed by law and will be immediately due and payable,
     unless CitiCapital, in CitiCapital's sole discretion, agrees otherwise in
     writing.

5.4  DOCUMENTATION. Prior to any advance hereunder:

     (a)  Borrower must have executed and delivered to CitiCapital this
          Agreement and other documents or instruments as CitiCapital requires
          to grant, evidence, perfect or record the first priority security
          interest or lien of CitiCapital in and to the Collateral described in
          this Agreement.

     (b)  Guarantor must have executed and delivered to CitiCapital Guarantor's
          unconditional continuing guaranty of the payment and performance by
          Debtor of all of its obligations to CitiCapital (the "Guaranty").

     (c)  CitiCapital must have received all documents, instruments, agreements
          and other items required to be executed or delivered pursuant to this
          Agreement.

     In the event that the Guarantor notifies CitiCapital of its intention not
     to guaranty any future advances under this Agreement, CitiCapital will not
     be obligated to make any such future advances. All documentation and the
     validity of all phases of the transactions contemplated by this Agreement,
     including but not limited to the validity and enforceability of any
     guaranty delivered pursuant to or in conjunction with this Agreement or the
     Collateral, must be satisfactory and acceptable to counsel for CitiCapital
     prior to the making of any loan or advance to Debtor.

5.5  DOCUMENTATION FEE. Borrower agrees to pay for CitiCapital's out-of-pocket
     expenses incurred in connection with the transactions contemplated by this
     Agreement including, without limitation, filing and recording fees, title
     searches and the cost of any legal service.


                                   6. DEFAULT

6.1  EVENTS OF DEFAULT. Time is of the essence. An event of default will occur
     if:

     (a)  Borrower fails to pay, within five business days of CitiCapital's
          notice thereof, any amount owed by it to CitiCapital or any affiliate
          (including, without limitation, any direct or indirect parent,
          subsidiary or sister entity), successor or assignee of CitiCapital
          under this Agreement or if Borrower fails to pay when due any amount
          owed by it to CitiCapital or any affiliate (including, without
          limitation, any direct or indirect parent, subsidiary or sister
          entity), successor or assignee of CitiCapital under any other
          document, agreement or instrument;(including, without limitation, any
          direct or indirect parent, subsidiary or sister entity), successor or
          assignee of CitiCapital or otherwise acquired by CitiCapital or any
          affiliate of CitiCapital;

     (b)  Borrower fails to comply, within five business days of CitiCapital's
          notice thereof, with any of its agreements hereunder or any warranty
          made by Borrower in this Agreement, or if Borrower fails to perform or
          observe any term or provision to be performed or observed by it under
          any other document, instrument or agreement furnished by Borrower to
          CitiCapital or any affiliate of CitiCapital or otherwise acquired by
          CitiCapital or any affiliate of CitiCapital;

     (c)  The Affiliates or RDO Financial Services Co. fails to pay, within five
          business days of CitiCapital's notice thereof, when due any amount
          owed by it to CitiCapital or any affiliate


                                       34
<PAGE>


          (including, without limitation, any direct or indirect parent,
          subsidiary or sister entity), successor or assignee of CitiCapital
          under this Agreement or if the Affiliates or RDO Financial Services
          Co. fails to pay when due any amount owed by it to CitiCapital or any
          affiliate(including, without limitation, any direct or indirect
          parent, subsidiary or sister entity), successor or assignee of
          CitiCapital under any other document, agreement or instrument;

     (d)  The Affiliates or RDO Financial Services Co. fails to perform or
          observe, within five business days of CitiCapital's notice thereof,
          any term or provision to be performed or observed by it under any
          other document, instrument or agreement furnished by the Affiliates or
          RDO Financial Services Co. to CitiCapital or any affiliate of
          CitiCapital (including, without limitation, any direct or indirect
          parent, subsidiary or sister entity), successor or assignee of
          CitiCapital or otherwise acquired by CitiCapital or any affiliate of
          CitiCapital;

     (e)  any information, representation, or warranty furnished by Borrower to
          CitiCapital or to any affiliate of CitiCapital is materially
          inaccurate or incorrect as determined by CitiCapital in its sole
          discretion;

     (f)  Borrower becomes insolvent, or ceases to do or is prohibited by any
          court order or governmental action from conducting business as a going
          concern;

     (g)  any surety or bonding company assumes any of Borrower's
          responsibilities under any contract or job where such contract or job
          has a value in excess of $250,000 as a result of Borrower's default in
          its obligations to such surety or bonding company and Borrower has not
          cured such default within 30 days of such occurrence;

     (h)  Collateral with an aggregate book value equal to or greater than
          $250,000 is lost, stolen or destroyed and Borrower has not cured such
          default within 30 days of such occurrence;

     (i)  there shall occur an (i) appropriation, (ii) confiscation, (iii)
          retention, or (iv) seizure of control, custody or possession of
          Collateral with an aggregate book value equal to or greater than
          $100,000 by any governmental agency including, without limitation, any
          municipal, state, federal or other governmental entity or any
          governmental agency or instrumentality (all such entities, agencies
          and instrumentalities shall hereinafter be referred to as
          "Governmental Authority") and Borrower has not cured such default
          within 30 days of such occurrence;

     (j)  if anyone in the control, custody or possession of the Collateral or
          the Borrower is accused or alleged or charged (whether or not
          subsequently arraigned, indicted or convicted) by any Governmental
          Authority to have used the Collateral in connection with the
          commission of any crime (other than a misdemeanor moving violation)
          and such allegation relates to Collateral with an aggregate book value
          equal to or greater than $250,000, and Borrower has not cured such
          default within 30 days of such occurrence;

     (k)  if Borrower attempts to consign or sell any of the Collateral outside
          of the ordinary course of Borrower's business without the prior
          written consent of CitiCapital or allows another to do so;

     (l)  Borrower files a petition in bankruptcy, or for an arrangement,
          reorganization, or similar relief, or makes an assignment for the
          benefit of creditors, or applies for the appointment of a receiver or
          trustee for a substantial part of its assets or for any of the
          Collateral, or attempts to take advantage of any process or proceeding
          for the relief of debtors;

     (m)  or if any action described in subparagraph (l) above is taken against
          Borrower and such action or proceeding is not promptly contested by
          appropriate proceedings or is not dismissed within 60 days;


                                       35
<PAGE>


     (n)  any other party attempts to attach, repossess or execute upon
          Collateral with an aggregate book value equal to or greater than
          $100,000 and Borrower has not cured such default within 30 days of
          such occurrence;

     (o)  Borrower ceases to exist as a legal entity, or Borrower or any party
          in control of Borrower takes any action looking to dissolution of
          Borrower as a legal entity;

     (p)  if there is a material change in ownership, management or control of
          Borrower without the prior written consent of CitiCapital;

     (q)  if there shall be a material adverse change in any of the (i)
          condition (financial or otherwise), business, performance, prospects,
          operations or properties of the Borrower, (ii) legality, validity or
          enforceability of this Agreement, (iii) perfection or priority of the
          lien granted in favor of CitiCapital pursuant to this Agreement, (iv)
          ability of the Borrower to repay the indebtedness or perform its
          obligations under this Agreement or (v) rights and remedies of
          CitiCapital; or

     (r)  except for the security interest, lien or reservation of title in
          favor of CitiCapital or as otherwise granted herein or as specifically
          agreed to in writing by CitiCapital, there shall be any lien, claim or
          encumbrance on any of the Collateral.

     CitiCapital's inaction with respect to an event of default will not be a
     waiver of such default and CitiCapital's waiver of any default will not be
     a waiver of any other default.

6.2  REMEDIES UPON DEFAULT. Upon the occurrence of an event of default, and at
     any time thereafter as long as the default continues, CitiCapital may, at
     its option, with or without notice to Borrower:

     (a)  declare this Agreement to be in default;

     (b)  declare the indebtedness hereunder to be immediately due and payable;

     (c)  declare all other debts then owing by Borrower to CitiCapital or any
          affiliate (including, without limitation, any direct or indirect
          parent, subsidiary or sister entity), successor or assignee of
          CitiCapital to be immediately due and payable;

     (d)  cancel any insurance and credit any refund to the indebtedness; and

     (e)  exercise all of the rights and remedies of a secured party under the
          Uniform Commercial Code and any other applicable laws, including,
          without limitation, the right to require Borrower to assemble the
          Collateral and deliver it to CitiCapital at a place to be designated
          by CitiCapital which is reasonably convenient to both parties, and to
          lawfully enter any premises where the Collateral may be without
          judicial process and take possession thereof.

     Acceleration of any or all indebtedness, if so elected by CitiCapital, will
     be subject to all applicable laws including those pertaining to refunds and
     rebates of unearned charges. Any property other than the Collateral that is
     in or upon the Collateral at the time of repossession may be taken and held
     without liability until its return is requested by Borrower. Any sale or
     other disposition of any of the Collateral may be made at public or private
     sale or through public auction at the option of CitiCapital. CitiCapital
     may buy at any sale and become the owner of the Collateral. CitiCapital may
     sell the Collateral without giving any warranties as to the Collateral.
     CitiCapital may disclaim any warranties of title, possession, quiet
     enjoyment, or the like. This procedure will not be considered to adversely
     affect the commercial reasonableness of any sale of the Collateral. Unless
     otherwise provided by law, any requirement of reasonable notice which
     CitiCapital may be obligated to give regarding the sale or other
     disposition of Collateral will be met if such notice is given to Borrower
     at least ten days before the time of sale or other disposition. Borrower
     agrees that CitiCapital may bring any legal proceedings it deems necessary
     to enforce the payment and performance of Borrower's obligations hereunder
     in any court in the state of


                                       36
<PAGE>


     North Dakota, or Texas. The filing by CitiCapital of any action or
     proceeding with respect to the Collateral or any of Borrower's obligations
     hereunder will not constitute an election by CitiCapital of CitiCapital's
     remedies or a waiver of CitiCapital's rights to take possession of the
     Collateral as provided above. Expenses of retaking, holding, preparing for
     sale, selling and the like will include (a) the reasonable fees of any
     attorneys retained by CitiCapital, (b) any amounts advanced or expenses
     incurred by CitiCapital pursuant hereto, and (c) all other legal and other
     expenses incurred by CitiCapital. Borrower agrees that they will continue
     to be liable for and will promptly pay any deficiency remaining after any
     disposition of Collateral after default and all costs and expenses,
     including the reasonable fees of any attorney, incurred by CitiCapital in
     the collection of any such deficiency.


                                   7. NOTICES

     Any notices or consents required or permitted by the terms of this
     Agreement will be in writing and will be deemed delivered if (a) delivered
     in person, (b) sent by certified or registered mail, postage prepaid,
     return receipt requested, (c) sent by means of an overnight carrier such as
     Federal Express with a delivery receipt required or (d) transmitted by
     facsimile machine with receipt of such facsimile transmission confirmed, to
     the such address or fax number as the recipient designates in writing.
     Notices delivered in person or sent by overnight carrier will be deemed
     delivered at the time of delivery. Notices sent by mail in accordance with
     this paragraph will be deemed delivered on the third business day after the
     deposit of such notice with the United States Post Office. If a notice is
     sent by facsimile transmission prior to 3:00 p.m. (recipient's time) on a
     day, which is a normal business day for the recipient, it will be deemed
     delivered on the date upon which receipt of the transmission by the
     recipient is confirmed. Any other notice sent by facsimile transmission
     will be deemed delivered normal business day of the recipient which
     immediately follows the date upon which receipt of the transmission by the
     recipient is confirmed.


                              8. GENERAL PROVISIONS

8.1  POWER OF ATTORNEY. Borrower hereby appoints CitiCapital or any officer,
     employee or designee of CitiCapital or any assignee of CitiCapital (or any
     designee of such assignee) as Borrower's attorney-in-fact, to, in the event
     of default, and acting in Borrower's or CitiCapital's name: (a) prepare,
     execute and submit any notice or proof of loss in order to realize the
     benefits of any insurance policy insuring the Collateral, and (b) prepare,
     execute and file any agreement, document, financing statement, instrument
     (or any other writing or record) that, in CitiCapital's opinion, is
     necessary to perfect and/or give public notice of the interests of
     CitiCapital in any collateral that secures or may secure any obligations or
     indebtedness of Borrower to CitiCapital, and (c) endorse Borrower's name on
     any remittance representing proceeds of any insurance relating to the
     Collateral or the proceeds of the sale or other disposition of any of the
     Collateral (whether or not such disposition is a default hereunder).
     Borrower agrees to execute and deliver to CitiCapital, upon CitiCapital's
     request, such documents, writings, records and assurances as CitiCapital
     deems necessary or advisable for the confirmation or perfection of the
     security interest in the Collateral and CitiCapital's rights hereunder,
     including such documents, writings, records and assurances as CitiCapital
     may require for filing or recording. Borrower authorizes CitiCapital or any
     officer, employee or designee of CitiCapital or any assignee of CitiCapital
     (or any designee of such assignee) to file a financing statement describing
     the Collateral as well as any assets of the Borrower other than the
     Collateral described herein. These powers are coupled with an interest and
     are irrevocable so long as any indebtedness secured hereunder remains
     unpaid.

8.2  ASSIGNMENT. Borrower will not assign this Agreement without the prior
     written consent of CitiCapital. CitiCapital, or any assignee or successor
     of CitiCapital shall have the right to transfer, sell or assign all or any
     portion of this Agreement or the indebtedness or obligations hereunder,
     with notice, but without acknowledgment or consent from Borrower. Upon
     assignment, the term "CitiCapital" shall mean and refer to any assignee who
     is the holder of this Agreement. The assignor will not be the assignee's
     agent for any purpose. Borrower waives and will not assert against any
     assignee of Borrower any claims, counterclaims, claims in recoupment,
     abatement, reduction, defenses or set-offs for breach of warranty or for
     any other reason that Borrower could assert against CitiCapital, except
     defenses that cannot be


                                       37
<PAGE>


     waived under the Uniform Commercial Code. Upon full payment of all
     obligations secured by this Agreement, the assignee may deliver all
     original papers to the assignor for Borrower.

8.3  PRIVACY WAIVER. CitiCapital may receive from and disclose to any
     individual, corporation, business trust, association, company, partnership,
     joint venture, or other entity (herein collectively, the "Entity"),
     including, without limiting the generality of the foregoing, CitiCapital's
     parent or any affiliate or any subsidiary of CitiCapital and any credit
     reporting agency or other entity whether or not related to CitiCapital for
     any purpose SOLELY RELATED TO THE EXTENSION OF CREDIT TO BORROWER HEREUNDER
     OR THE OBLIGATIONS OF PARTIES UNDER THIS AGREEMENT, information about
     Borrower's accounts, credit application and credit experience with
     CitiCapital and Borrower authorizes any Entity to release to CitiCapital
     any information related to Borrower's accounts, credit experience and
     account information regarding the Borrower. This shall be continuing
     authorization for all present and future disclosures of Borrower's account
     information, credit application and credit experience on Borrower made by
     CitiCapital, or any Entity requested to release such information to
     CitiCapital.

8.4  LOCATION OF BORROWER. (i) If Borrower is a corporation, limited liability
     company, limited partnership or other registered organization, its state of
     incorporation is in the state set forth immediately below its signature on
     the last page of this Agreement; (ii) if Borrower is an individual, his/her
     principal place of residence is at the address set forth immediately below
     his/her signature on the last page of this Agreement; (iii) if Borrower is
     an organization, its place of business or if it has more than one place of
     business its chief executive office, is located at the address set forth
     immediately below its signature on the last page of this Agreement.
     Borrower agrees that it will not, without the prior written consent of
     CitiCapital, change its state of organization if it is a corporation,
     limited liability company, limited partnership or other registered
     organization or the location of its chief executive office or its place of
     business if it is an organization. If Borrower is an individual, Borrower
     must notify CitiCapital in writing of a change in his/her principal place
     of residence 30 days prior to such change.

8.5  PAYMENT PROCESSING. Borrower hereby agrees that any payments made by
     Borrower hereunder by check and received by CitiCapital at an address other
     than the address specified on the related invoice may be replaced by
     CitiCapital with a substitute instrument of equal amount and presented to
     Borrower's financial institution for payment from the account referenced on
     the check from Borrower. If Borrower sends any payment hereunder by check
     to CitiCapital at an address other than the one specified on the related
     invoice, then Borrower shall be deemed to have authorized CitiCapital to
     substitute such check with an instrument of equal amount and present the
     substitute instrument to CitiCapital's financial institution for payment
     from the account referenced on Borrower's check.

8.6  MISCELLANEOUS.

     (a)  All of CitiCapital's rights hereunder are cumulative and not
          alternative.

     (b)  All of the terms and provisions hereof will apply to and be binding
          upon Borrower, and their representatives, successors and assigns and
          will inure to the benefit of CitiCapital, its successors and assigns.

     (c)  BORROWER AND CITICAPITAL HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN
          ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE TRANSACTION
          CONTEMPLATED HEREBY.

     (d)  BORROWER HEREBY EXPRESSLY WAIVES NOTICE OF NONPAYMENT, PRESENTMENT,
          PROTEST, DISHONOR, DEFAULT, INTENT TO ACCELERATE THE MATURITY HEREOF
          AND OF ACCELERATION OF THE MATURITY HEREOF.

     (e)  No waiver or change in this Agreement or in any related note will be
          binding upon CitiCapital, or CitiCapital's assignee, unless such
          waiver or change is in writing and signed by one of its officers and
          any such waiver or change will then be effective only upon the terms
          and to the extent provided in such writing.


                                       38
<PAGE>


     (f)  The acceptance by CitiCapital of any remittance from a party other
          than the obligor on the related indebtedness will in no way constitute
          CitiCapital's consent to the transfer of any of the Collateral to such
          party.

     (g)  Any captions or headings included in this Agreement are for
          convenience of reference only and will not limit or otherwise affect
          the meaning of any provision contained in this Agreement.

     (h)  Any provision contained herein which is contrary to, prohibited by or
          invalid under applicable laws or regulations will be deemed
          inapplicable and omitted from this Agreement, but will not invalidate
          the remaining provisions hereof.


                                    INSURANCE

     PHYSICAL DAMAGE INSURANCE COVERING THE COLLATERAL IS REQUIRED. BORROWER CAN
     FURNISH THIS INSURANCE THROUGH AN AGENT OR BROKER OF BORROWER'S CHOICE.
     BORROWER HEREBY AUTHORIZES CITICAPITAL AND ANY ASSIGNEE TO RELEASE TO ANY
     INSURANCE COMPANY AFFILIATED WITH CITICAPITAL ANY INFORMATION RELATING TO A
     CONTRACT OR POLICY OF INSURANCE, WHICH IS PROVIDING OR MAY PROVIDE
     INSURANCE COVERAGE AGAINST PHYSICAL DAMAGE TO THE COLLATERAL.

     THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
     AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
     SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
     AGREEMENTS BETWEEN THE PARTIES.

     THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
     OF THE STATE OF NORTH DAKOTA.

RDO CONSTRUCTION EQUIPMENT CO.                CITICAPITAL COMMERCIAL CORPORATION

By: /s/ Steven B. Dewald                      By: /s/ James C. Chesser
    ------------------------------------          ------------------------------
Title:  CFO                                   Title: VP
        --------------------------------             ---------------------------

State of Organization: North Dakota
                       -----------------

Chief Executive Office:
       2829 South University Drive
----------------------------------------
       Fargo, ND 58103
----------------------------------------


Acknowledged and agreed to this 25th day
                                ----
of October, 2002
   -------------


RDO EQUIPMENT CO.

By: /s/ Steven B. Dewald
    ------------------------------------
Title: CFO
       ---------------------------------

AD102180 (Rev. 10/14/02)


                                       39

</TEXT>
</DOCUMENT>
