Execution Copy

 
First Amendment To Credit Agreement
 
This First Amendment To Credit Agreement (this “Amendment”) is entered into as
of August 9, 2010, by and between Lifecore Biomedical, LLC, a Minnesota limited
liability company (“Borrower”), and Wells Fargo Bank, National Association
(“Bank”).
 
Recitals
 
Whereas, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement, dated and made as of April 30,
2010, by and between Borrower and Bank (as amended, restated, modified and/or
supplemented from time to time, the “Credit Agreement”).
 
Whereas, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement to reflect such changes.
 
Now, Therefore, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree that the Credit Agreement
shall be amended as follows:
 
1.           Definitions.  Each capitalized term used and not otherwise defined
herein has the meaning ascribed thereto in the Credit Agreement.
 
2.           Amendments to Credit Agreement.  Subject to Section 5 hereof, the
Credit Agreement is hereby as follows:
 
(a)         Section 1.1 of the Credit Agreement is hereby amended by amending
and restating in their entirety each of the following definitions as follows:
 
“Net Income” means fiscal year-to-date after-tax net income from continuing
operations of the Companies, as determined in accordance with GAAP; provided,
however, that any amounts deducted in arriving at Borrower’s Net Income shall be
determined exclusive of (i) non-recurring fees and expenses incurred in
connection with the Acquisition in an aggregate amount not to exceed $2,537,000,
(ii) expenses incurred during the month ended April 30, 2010 relating to a
one-time reserve for Accounts and Inventory in an amount not to exceed $600,000
in the aggregate in connection with Borrower’s contract with a customer
previously disclosed to the Bank, (iii) expenses incurred during the two months
ended April 30, 2010 relating to a one-time reserve for Inventory in an amount
not to exceed $200,000 in the aggregate, and (iv) expenses related to the
one-time adjustment to Inventory in an aggregate amount not to exceed $1,500,000
as required by GAAP in connection with the Acquisition and the Warburg
Acquisition.
 

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“Quick Ratio” means, as of the last day of each fiscal quarter of Borrower, the
ratio of (i) the aggregate of unrestricted cash, unrestricted marketable
securities and receivables convertible into cash of the Companies as of the last
day of such fiscal quarter to (b) the aggregate of total current liabilities
and, without duplication, Contingent Purchase Price Payments payable of the
Companies as of the last day of the same fiscal quarter.
 
(b)         Section 1.1 of the Credit Agreement is hereby amended by adding each
of the following definitions thereto in such as manner as to retain proper
alphabetic order of the terms defined therein:
 
“Code” means the IRC, as defined herein.
 
“Warburg Acquisition” means the acquisition, prior to the Closing Date, by
Seller of all the issuing and outstanding equity interests of Holdings.
 
(c)         Section 6.3(a)(i) of the Credit Agreement is hereby amended by
amending and restating in its entirety the last paragraph thereof as follows:
 
For purposes of this Section 6.3(a)(i) Net Income After Taxes shall be
determined for all fiscal periods ending on or before April 30, 2010, as
reported in Borrower’s audited financial statements for such periods (i.e.,
since for such periods Borrower was a “disregarded entity” for tax purposes, as
if Borrower was a C-Corporation under the IRC), and for all fiscal periods
ending after April 30, 2010, to the extent that Borrower is treated as a pass
through entity for tax purposes, by calculating Net Income before taxes for the
four fiscal quarters then ended minus dividends and other distributions paid
during the same four fiscal quarters to each of Holdings and any other member of
the Borrower in connection with its federal income tax liability (and, if
applicable, state income tax liability) attributable to its share of Borrower’s
taxable income (determined in accordance with the IRC) (including estimated tax
payments determined in good faith by Borrower which are required to be made by
its members with respect thereto).
 
(d)         Section 6.3(a)(iii) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
 
(iii)Fixed Charge Coverage Ratio.  As of the last day of each fiscal quarter of
Borrower ending during the relevant period set forth below (commencing with the
fiscal quarter ending November 30, 2010), Borrower, together with the other
Companies, will maintain a Fixed Charge Coverage Ratio of not less than the
corresponding ratio set forth opposite such period:
 
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Period(s) Ending
Fixed Charge Coverage
Ratio shall not be less than:
Fiscal quarters ending
November 30, 2010 through
and including May 31, 2011
1.20 to 1.0
August 31, 2011
1.30 to 1.0
November 30, 2011
1.40 to 1.0
February 29, 2012 and each
fiscal quarter ending
thereafter
1.50 to 1.0

 
(e)         “Exhibit B-1” to the Credit Agreement is hereby deleted in its
entirety and Exhibit A attached hereto is substituted therefor and shall be
deemed for all purposes the “Exhibit B-1” referred to in the Credit Agreement.
 
(f)         “Exhibit B-2” to the Credit Agreement is hereby deleted in its
entirety and Exhibit B attached hereto is substituted therefor and shall be
deemed for all purposes the “Exhibit B-2” referred to in the Credit Agreement.
 
(g)         All references in the Credit Agreement and other Loan Documents to
the term “Note” shall be deemed to mean and refer to the Note as supplemented by
the Addendum to Promissory Note (Swap Agreement Adjustments) executed in
connection with this amendment, a form of which is attached hereto as Exhibit C
and incorporated herein by this reference.
 
3.          Survival of Terms; Interpretation.  Except as specifically provided
herein, all terms and conditions of the Credit Agreement remain in full force
and effect, without waiver or modification.  This Amendment and the Credit
Agreement shall be read together, as one document.  The Recitals hereto,
including the terms defined therein, are incorporated herein by this reference
and acknowledged by Borrower to be true, correct and accurate.
 
4.          Representations, Warranties and Covenants.  Borrower remakes all
representations and warranties contained in the Credit Agreement (except to the
extent that such representations and warranties relate solely to an earlier
date, in which case Borrower confirms that such representations and warranties
were correct as of the date made) and reaffirm all covenants set forth
therein.  Borrower further certifies that as of the date of this Amendment there
exists no Default or Event of Default, in each case, as defined in the Credit
Agreement.
 
5.          Effective Date.  This Amendment will become effective as of the date
first set forth above (the “Effective Date”), provided that all of the following
conditions precedent have been satisfied on or before August 13, 2010:
 
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(a)         Bank shall have received a duly executed original (or, if elected by
Bank, an executed facsimile copy, to be followed promptly by delivery of an
executed original) of each of the following, duly executed by each party thereto
and in form and substance satisfactory to Bank:
 
(i)          this Amendment;
 
(ii)         the General Consent and Reaffirmation attached hereto;
 
(iii)        the Addendum to Promissory Note attached hereto as Exhibit C; and
 
(iv)        Such other documents as Bank may require under any other Section of
this Amendment.
 
(b)         All of the representations and warranties contained herein (or
incorporated herein by reference) are true and correct as of the Effective Date.
 
(c)         All legal matters incidental hereto shall be reasonably satisfactory
to Bank’s counsel.
 
6.          Counterparts.  This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.  Delivery of an executed
counterpart of a signature page to this Amendment by telefacsimile shall be as
effective as delivery of a manually executed counterpart of this Amendment.
 
7.          Severability.  If any term or provision of this Amendment shall be
deemed prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this Amendment or
the Credit Agreement.
 
8.          Governing Law.  This Amendment shall be governed by and construed in
accordance with the internal laws of the State of California.
 
9.          Non-Impairment.  Except as expressly provided herein, nothing in
this Agreement shall alter or affect any provision, condition, or covenant
contained in the Loan Documents or affect or impair any rights, powers, or
remedies of Bank, it being the intent of the parties hereto that the provisions
of the Loan Documents shall continue in full force and effect except as
expressly modified hereby.
 
[Signatures on Next Page]
 
 
 
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In Witness Whereof, the parties hereto have caused this Amendment to be executed
as of the day and year first written above.

Lifecore Biomedical, LLC,
  a Minnesota limited liability company
 
Wells Fargo Bank,
  National Association
                 
By:
/s/ Dennis J. Allingham 
 
By:
/s/ Tim Palmer
   
Dennis J. Allingham
 
Name:
Tim Palmer 
   
President and Chief Executive Officer
 
Title:
Vice President  

 
 
 
 
 
 
 
 
 
 
 
Signature Page to First Amendment To Credit Agreement

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General Consent and Reaffirmation
 
Each of the undersigned guarantors of, and/or third party pledgors having
pledged property securing, all indebtedness of Lifecore Biomedical, LLC
hereby:  (i) consents to the foregoing First Amendment to Credit Agreement dated
as of August 9, 2010; (ii) reaffirms its obligations under its respective
guaranty, security agreement and/or pledge agreement; (iii) reaffirms its
waivers of each and every one of the defenses to such obligations as set forth
in its respective guaranty, security agreement and/or pledge agreement; and
(iv) reaffirms that its obligations under its respective guaranty, security
agreement and/or pledge agreement are separate and distinct from the obligations
of any other party under such First Amendment to Credit Agreement, the Credit
Agreement referred to therein and the other Loan Documents (as defined in the
Credit Agreement).
 
Agreed and Acknowledged as of August 9, 2010:
 
Lifecore Biomedical, Inc.
 
Apio, Inc.
                 
By:
/s/ Dennis J. Allingham  
By:
/s/ Gary T. Steele
   
Dennis J. Allingham
   
Gary T. Steele
   
President/Secretary
   
Secretary
                         
Cal Ex Trading Company
 
Landec AG, LLC
                 
By:
/s/ Gary T. Steele
 
By:
/s/ Gary T. Steele
   
Gary T. Steele
   
Gary T. Steele
   
Secretary
   
President/Chief Executive Officer
                 
Landec Corporation
 
 
                 
By:
/s/ Gary T. Steele
       
Gary T. Steele
       
President/Chief Executive Officer/
Chairman of the Board
     

 
 
 
 
 
Signature Page to General Consent and Reaffirmation

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Exhibit A

to First Amendment to Credit Agreement

Exhibit B-1

Form of Compliance Certificate
(Lifecore Biomedical, LLC)

 
To:
Caroline Peyton

Wells Fargo Bank, National Association
 
Date:
__________________, 201__

 
Subject:
Lifecore Biomedical, LLC

 
Financial Statements
 
In accordance with our Credit Agreement, dated as of April 30, 2010 (the “Credit
Agreement”), attached are the financial statements of Lifecore Biomedical (the
“Borrower”) as of and for ________________, 20___ (the “Reporting Date”) and the
year-to-date period then ended (the “Current Financials”).  All terms used in
this certificate have the meanings given in the Credit Agreement.
 
I certify that the Current Financials have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and fairly present the Companies’
financial condition as of the date thereof.
 
Events of Default.  (Check one):
 
 
o
The undersigned does not have knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement except as previously reported in writing
to Bank.

 
 
o
The undersigned has knowledge of the occurrence of a Default or Event of Default
under the Credit Agreement not previously reported in writing to Bank and
attached hereto is a statement of the facts with respect to thereto.  Borrower
acknowledges that Bank may impose the Default Rate at any time during the
resulting Default Period.

 
Financial Covenants.  I further hereby certify as follows:
 
1.          Minimum Net Income After Taxes. Pursuant to Section 6.3(a)(i)(A) of
the Credit Agreement, as of the Reporting Date, the Companies’ Net Income After
Taxes, measured on a trailing four quarter basis (other than the four quarters
ending August 31, 2010), was $___________ which o satisfies o does not satisfy
the requirement that such amount be not less than $1.00 for the four fiscal
quarters then ended.
 
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2.          Minimum Net Income After Taxes. Pursuant to Section 6.3(a)(i)(B) of
the Credit Agreement, as of the Reporting Date, the Companies’ Net Income After
Taxes, measured for the fiscal quarter ended August 31, 2010, was $___________
which o satisfies o does not satisfy the requirement that such amount be not
less than $500,000 for the fiscal quarter then ended.
 
3.          Minimum Net Income After Taxes.  Pursuant to Section 6.3(a)(i)(C) of
the Credit Agreement, as of the Reporting Date, the Companies’ o did not have o
had Net Income After Taxes less than or equal to $1.00 for two (2) consecutive
fiscal quarters during the four fiscal quarters then ended.
 
4.          Minimum Quick Ratio. Pursuant to Section 6.3(a)(ii) of the Credit
Agreement, as of the Reporting Date, the Companies’ Quick Ratio was _____ : 1.0
which o satisfies o does not satisfy the requirement that ratio must not be less
than (i) 1.1 to 1.0 for each fiscal quarter ending from the Closing Date through
and including the fiscal quarter ending May 31, 2011 and (ii) 1.25 to 1.0 for
each fiscal quarter ending thereafter.
 
5.Fixed Charge Coverage Ratio. Pursuant to Section 6.3(a)(iii) of the Credit
Agreement, the Companies’ Fixed Charge Coverage Ratio for the four fiscal
quarters ending on the Reporting Date, was ____ : 1.0, which o satisfies o does
not satisfy the requirement that such ratio be not less than _____ : 1.0 during
such period as set forth in table below:
 
Period(s) Ending
Fixed Charge Coverage
Ratio shall not be less than:
Fiscal quarters ending
November 30, 2010 through
and including May 31, 2011
1.20 to 1.0
August 31, 2011
1.30 to 1.0
November 30, 2011
1.40 to 1.0
February 29, 2012 and each
fiscal quarter ending
thereafter
1.50 to 1.0

 
6.          Capital Expenditures. Pursuant to Section 6.3(a)(iv) of the Credit
Agreement, the Companies have expended $__________________ in the aggregate
during the last full fiscal year, ending May 31, 201___, for Capital
Expenditures, which o satisfies o does not satisfy the requirement that such
expenditures not exceed $3,000,000 in the aggregate during such year.
 
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Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above.  These computations
were made in accordance with GAAP (except for the computation of Net Income to
the extent Net Income is determined without giving effect to the amounts
deducted arriving in such Net Income as set forth in the proviso of such
definition).
 

 
Lifecore Biomedical, LLC
                 
By
     
Its
Chief Financial Officer
 

 
 
 
 
 
 
 
 
 
 
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Exhibit B

to First Amendment to Credit Agreement

Exhibit B-2

Form of Compliance Certificate
(Landec Corporation)

 
To:
Caroline Peyton

Wells Fargo Bank, National Association
 
Date:
__________________, 201__

 
Subject:
Lifecore Biomedical, LLC

 
Financial Statements
 
In accordance with that certain Credit Agreement, dated as of April 30, 2010
(the “Credit Agreement”) between Lifecore Biomedical, LLC (the “Borrower” and
Wells Fargo Bank, National Association (“Bank”), attached are the consolidated
financial statements of Landec Corporation (the “Parent”) as of and for
________________, 20___ (the “Reporting Date”) and the year-to-date period then
ended (the “Current Financials”).  All terms used in this certificate have the
meanings given in the Credit Agreement.
 
I certify that the Current Financials have been prepared in accordance with
GAAP, subject to year-end audit adjustments, and fairly present Parent’s
consolidated financial condition as of the date thereof.
 
Financial Covenants. I further hereby certify as follows:
 
1.          Minimum Net Income After Taxes. Pursuant to Section 6.3(b)(i) of the
Credit Agreement, as of the Reporting Date, the Net Income after taxes of Parent
and its Subsidiaries, measured on a trailing four quarter basis, was
$___________ which o satisfies o does not satisfy the requirement that such
amount be not less than $1.00 for the four fiscal quarters then ended.
 
2.          Leverage Ratio.  Pursuant to Section 6.3(b)(ii) of the Credit
Agreement, as of the Reporting Date, the ratio of Funded Debt of Parent and its
Subsidiaries as of the Reporting Date to EBITDA of Parent and its Subsidiaries
for the four fiscal quarters of Parent and its Subsidiaries ending on the
Reporting Date, was ____ : 1.0, which o satisfies o does not satisfy the
requirement that such ratio be not greater than 2.0 to 1.0.
 
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Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP.
 

 
Landec Corporation
                 
By
      
Its
Chief Financial Officer
 

 
 
 
 
 

 
- B-2 -

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Exhibit C

to First Amendment to Credit Agreement

Form of

Addendum to Promissory Note (Swap Agreement Adjustments)

Execution Copy
 
ADDENDUM TO PROMISSORY NOTE
(SWAP AGREEMENT ADJUSTMENTS)

THIS ADDENDUM is attached to and made a part of that certain promissory note
executed by LIFECORE BIOMEDICAL, LLC (“Borrower”) and payable to WELLS FARGO
BANK, NATIONAL ASSOCIATION (“Bank”), or order, dated April 30, 2010, in the
original principal amount of Twenty Million Dollars ($20,000,000.00) (the
“Note”).

The following provisions are hereby incorporated into the Note to reflect the
interest rate adjustments agreed to by Bank and Borrower in connection with any
interest rate swap agreement entered into in connection with this Note:

SWAP AGREEMENT PROVISIONS:

Notwithstanding anything to the contrary set forth herein, at any time during
which an interest rate swap confirmation between Borrower and Bank (a “Swap
Confirmation”) is in effect with respect to all or a portion of the principal
balance outstanding under this Note, the following revisions to this Note shall
be in effect with respect to that portion of the principal balance outstanding
under this Note which is subject to the Swap Confirmation (the “Swap Portion”),
but not with respect to any portion of the principal balance outstanding under
this Note which is not subject to the Swap Confirmation:

(a)
With respect to the Swap Portion, no Daily Three Month LIBOR Rate interest
option shall be available hereunder.

(b)
With respect to the Swap Portion, the definition of “Fixed Rate Term” shall be
amended and restated to read as follows:

“Fixed Rate Term” means a period of one (1) month during which the Swap Portion
bears interest determined in relation to LIBOR, with the understanding that (i)
the initial Fixed Rate Term shall commence on the later of (A) the effective
date stated on the Swap Confirmation and (B) the date this Note is initially
disbursed and shall continue up to, but shall not include, the first day of the
next occurring calculation period designated in the Swap Confirmation, (ii)
there shall be successive Fixed Rate Terms thereafter, each of which shall
commence automatically, without notice to or consent from Borrower, and run
concurrently with the calculation period designated in the Swap Confirmation and
(iii) if, on the first day of the last Fixed Rate Term applicable hereto the
remaining term of this Note is less than one (1) month, said Fixed Rate Term
shall be in effect only until the scheduled maturity date hereof, except that if
the scheduled maturity date hereof is not a Business Day, then such Fixed Rate
Term shall be extended to the next succeeding Business Day.
 
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(c)
The Swap Portion shall be in an amount equal to or greater than Two Hundred
Fifty Thousand Dollars ($250,000.00).

Borrower understands and acknowledges that each Swap Confirmation constitutes an
independent agreement between Borrower and Bank and that nothing contained in
this Note shall be construed as amending or modifying any such Swap Confirmation
or be interpreted in any way as inferring or creating an obligation on the part
of Bank to amend or modify such Swap Confirmation, based on any action that may
be taken by Borrower in respect of this Note.  Further, Borrower acknowledges
that Borrower is responsible for verifying the terms of any Swap Confirmation
into which it enters; understands the effect of a Swap Confirmation having
payment dates that do not concur exactly with the payment dates of this Note;
and agrees that any Swap Confirmation may still be considered in effect with
respect to any principal portion of this Note even if the payment dates thereon
do not concur exactly with the payment dates of this Note.

[Signatures on Next Page]
 
 
 
 
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IN WITNESS WHEREOF, this Addendum has been executed as of August 9, 2010.

LIFECORE BIOMEDICAL, LLC,
  a Minnesota limited liability company
         
By:
/s/ Dennis J. Allingham     
Dennis J. Allingham
   
President and Chief Executive Officer
 

ACCEPTED AND AGREED:

WELLS FARGO BANK,
  NATIONAL ASSOCIATION
         
By:
/s/ Tim Palmer    
Name:
Tim Palmer    
Title:
Vice President      

 
 
 
 
 
 
Signature Page to Addendum To Promissory Note
(Swap Agreement Adjustments)
 
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