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Exhibit 10.16 PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT is made as of the 1st day of August, 2004,
among LIFECORE BIOMEDICAL, INC., a Minnesota corporation (the Pledgor), M&I
MARSHALL & ILSLEY BANK, a Wisconsin state banking corporation (the Lender),
and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as
trustee (the Agent). R E C I T A L S: WHEREAS, the City of Chaska, Minnesota (the Issuer) is issuing its $5,630,000
Variable Rate Demand Purchase Revenue Bonds (Lifecore Biomedical, Inc.
Project), Series 2004 (the Bonds), under the Indenture of Trust dated as of
August 1, 2004 (the Indenture), between the Issuer and the Agent, as Trustee; WHEREAS, the Indenture requires the Agent, as Trustee, acting for the Pledgor,
to purchase the Bonds from the holders thereof under certain circumstances as
set forth in the Indenture; WHEREAS, the Pledgor has entered into the Reimbursement Agreement dated as of
August 1, 2004, between the Pledgor and the Lender (hereinafter, as the same
may from time to time be amended or supplemented, the Reimbursement
Agreement), in order for the Lender to issue the letter of credit thereunder
(the Letter of Credit) which may be drawn upon, inter alia, to pay the
purchase price of the Bonds, and WHEREAS, it is a condition precedent to the Lenders delivery of the Letter of
Credit that the Pledgor and the Agent shall execute and deliver this Pledge
Agreement; NOW, THEREFORE, in consideration of the premises and in order to induce the
Lender to enter into the Reimbursement Agreement and issue the Letter of Credit
thereunder and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Pledgor and the Agent hereby
agree with the Lender as follows: 1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement shall have such defined meanings when used herein. 2. Pledge. As collateral security for the prompt and complete payment when due
of all amounts due from the Pledgor to the Lender under the Reimbursement
Agreement and the performance of all other obligations of the Pledgor under the
Reimbursement Agreement (all the foregoing being hereinafter called the
Obligations), the Pledgor hereby pledges, assigns, hypothecates, transfers
and grants to the Lender a lien on and security interest in all its right,
title and interest to all Bonds purchased with proceeds of draws on the Letter
of Credit, together with all payments, earnings, proceeds and substitutions of
such Bonds (collectively, such Bonds and all payments, earnings, proceeds and
substitutions of such Bonds are hereinafter referred to as the Borrower
Bonds). The Pledgor agrees that the Agent shall receive, hold and deliver
Borrower Bonds as provided in the Indenture. (All property at any time pledged
to the Lender
hereunder and all income therefrom and proceeds thereof, are herein
collectively sometimes called the Collateral.)




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3. Registration and Custody of Borrower Bonds. The Pledgor and the Agent
acknowledge and agree that during any period in which the Agent holds Borrower
Bonds, the Agent shall hold them as agent and custodian for the Lender, shall
register the Borrower Bonds in the name of the Lender, as pledgee, and shall,
upon written request of the Lender, deliver to the Lender (or a person
designated by the Lender) the Borrower Bonds. The Agent acknowledges the
Lenders security interest in the Borrower Bonds and agrees to hold the
Borrower Bonds in accordance with the terms of this Agreement. The Lender
appoints the Agent as its attorney to transfer the Borrower Bonds on the books
kept for the registration thereof in accordance with the terms of this
Agreement. 4. Payments on Borrower Bonds; Voting Rights. (a) All payments on the Borrower Bonds, including (without limitation)
any payment of principal of or premium, if any, or interest on, or
proceeds of sale of the Borrower Bonds, shall be subject to this
Agreement, and the Agent, as agent for the Lender, shall receive, collect
and hold any such payments in respect of the Borrower Bonds. The Agent
agrees to pay any such payment to the Lender forthwith upon receipt. In
the event any such payments are received by the Pledgor, the Pledgor
agrees to accept such payments as the Lenders agent, to hold such
payments in trust on behalf of the Lender and to deliver such payments
forthwith to the Agent. All sums of money so paid in respect of the
Borrower Bonds which shall be paid directly to the Lender by the Agent
shall be credited against the Obligations. (b) The Lender shall be entitled to exercise all of the rights of an
owner of the Borrower Bonds with respect to voting, consenting and
directing the Agent as if the Lender were the owner of the Borrower
Bonds, and the Pledgor hereby grants and assigns to the Lender all such
rights. 5. Release of Borrower Bonds. If a payment is made by or on behalf of the
Pledgor in respect of its Obligations and if the other conditions respecting
payment of amounts due to the Lender under the Reimbursement Agreement are met,
the Lender agrees upon receipt of such payment to release from the lien of this
Agreement and to instruct the Agent to deliver to the Pledgor or to such other
party as shall make payment to the Lender, as the case may be, Borrower Bonds
in the principal amount so paid and upon receipt of such instruction the Agent
shall deliver such Borrower Bonds to such party; provided, however, that if
such payment is less than the minimum denomination of Bonds then available
under the Indenture, Borrower Bonds shall be released only at such time as the
cumulative amount of payments made under the Reimbursement Agreement and for
which no Borrower Bonds have been released under this paragraph equal to the
minimum denomination of Bonds then available. If the Bonds are then rated by a
Rating Agency (as that term is defined in the Indenture), no Borrower Bonds
shall be released pursuant to this paragraph unless the Lender has,
contemporaneously with such payment, reinstated the amount available to be
drawn under the Letter of Credit by an amount equal to the principal amount
drawn under the Letter of Credit at the time the Bonds became Borrower Bonds.
Notwithstanding the foregoing, no Borrower Bonds shall be released from the
lien of this Agreement if the Agent receives notice from the Lender that an
Event of Default has occurred and is continuing, unless the Lender shall
otherwise agree in writing. - 2 -




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6. Rights of the Lender. The Lender shall not be liable for failure to collect
or realize upon the Obligations or any collateral security or guarantee
therefor, or any part thereof, or for any delay in so doing nor shall it be
under any obligation to take any action whatsoever with regard thereto. Except
as otherwise required by the provisions of the Uniform Commercial Code, if an
Event of Default has occurred and is continuing, the Lender may thereafter,
without notice, exercise all rights, privileges or options pertaining to any
Borrower Bonds as if it were the holder and absolute owner thereof, upon such
terms and conditions as it may determine, all without liability except to
account for property actually received by it, but the Lender shall have no duty
to exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing. 7. Remedies. If any portion of the Obligations has been declared due and
payable, the Lender without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived), may, subject to compliance with requirements of the Uniform
Commercial Code, forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give an
option or options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral, or any part thereof, in one or more parcels at public
or private sale or sales, at any exchange, brokers board or at any of the
Lenders offices or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk, with the right to the
Lender upon any such sale or sales, public or private, to purchase the whole or
any part of said collateral so sold, free of any right or equity of redemption
in the Pledgor, which right or equity is hereby expressly waived or released.
The Lender shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care,
safekeeping or otherwise of any and all of the Collateral or in any way
relating to the rights of the Lender hereunder, including reasonable attorneys
fees and legal expenses, to the payment, in whole or in part, of the
Obligations in such order as the Lender may elect, the Pledgor remaining liable
for any deficiency remaining unpaid after such application, and only after so
applying such net proceeds and after the payment by the Lender of any other
amount required by any provision of law, including, without limitation, the
Uniform Commercial Code, need the Lender account for the surplus, if any, to
the Pledgor. The Pledgor agrees that the Lender need not give more than ten
days notice of the time and place of any public sale or of the time after
which a private sale or other intended disposition is to take place and that
such notice is reasonable notification of such matters. No notification need
be given to the Pledgor if it has signed after default a statement renouncing
or modifying any right to notification of sale or other intended disposition.
In addition to the rights and remedies granted to it in this Agreement and in
any other instrument or agreement securing, evidencing or relating to any of
the Obligations, the Lender shall have all the rights and remedies of a secured
party under the Uniform Commercial Code of the State of Minnesota. The Pledgor
further agrees that the Pledgor shall be liable for the deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay all amounts to which the Lender is entitled, and the fees of any attorneys
employed by the Lender to collect such deficiency. - 3 -




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8. Representations, Warranties and Covenants of the Pledgor. The Pledgor
represents and warrants that: (a) on the date of delivery to the Lender of any
Borrower Bonds, neither the Issuer nor the Agent will have any right, title or
interest in and to the Borrower Bonds (except the interest of the Agent as
agent for the Lender); (b) the Pledgor has, and on the date of delivery to the
Lender of any Borrower Bonds will have, full power, authority and legal right
to pledge all of its right, title and interest in and to such Borrower Bonds
pursuant to this Agreement; (c) this Agreement has been duly authorized,
executed and delivered by the Pledgor and constitutes a legal, valid and
binding obligation of the Pledgor enforceable in accordance with its terms
(subject, as to enforceability, to limitations resulting from Bankruptcy,
insolvency and other similar laws affecting creditors rights generally and
principles of equity); (d) no consent of any other party (including, without
limitation, creditors of the Pledgor) and no consent, license, permit, approval
or authorization of, exemption by, notice or report to, or registration, filing
or declaration with, any governmental authority, domestic or foreign, is
required to be obtained by the Pledgor in connection with the execution,
delivery or performance of this Agreement; (e) the execution, delivery and
performance of this Agreement will not violate any provision of any applicable
law or regulation or of any order, judgment, writ, award or decree of any
court, arbitrator or governmental authority, domestic or foreign, or of any
securities issued by the Pledgor, or of any mortgage, indenture, lease,
contract, or other agreement, instrument or undertaking to which the Pledgor is
a party or which purports to be binding upon the Pledgor or upon any of its
assets and will not result in the creation or imposition of any lien, charge or
encumbrance on or security interest in any of the assets of the Pledgor except
as contemplated by this Agreement; and (f) the pledge, assignment and delivery
of Borrower Bonds pursuant to this Agreement, and as provided in the Indenture,
will create a valid first lien on and a first perfected security interest in
all right, title or interest of the Pledgor in or to such Borrower Bonds, and
the proceeds thereof, subject to no prior pledge, lien, mortgage,
hypothecation, security interest, charge, option or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of the Pledgor which would include the Borrower Bonds. The
Pledgor covenants and agrees that it will defend the Lenders right, title and
security interest in and to the Borrower Bonds and the proceeds thereof against
the claims and demands of all persons whosoever; and covenants and agrees that
it will have like title to and right to pledge any other property at any time
hereafter pledged to the Lender as collateral hereunder and will likewise
defend the Lenders right thereto and security interest therein. The Pledgor
shall be deemed to have represented and warranted to the Lender on each date
that a drawing is made under the Letter of Credit that the statements contained
herein are true and correct. 9. No Disposition, etc. Without the prior written consent of the Lender, the
Pledgor agrees that it will not sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, nor will it
create, incur or permit to exist any pledge, lien, mortgage, hypothecation,
security interest, charge, option or any other encumbrance with respect to any
of the Collateral, or any interest therein, or any proceeds thereof, except for
the lien and security interest provided for by this Agreement. 10. Sale of Collateral. (a) The Pledgor recognizes that the Lender may be unable to effect a
public sale of any or all of the Borrower Bonds by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, but may be compelled to resort to one
or more private sales thereof to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities - 4 -




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for their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that
any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale and, notwithstanding
such circumstances, agrees that the fact that the Borrower Bonds are sold
in a private sale shall not in and of itself be deemed a failure to sell
the Borrower Bonds in a commercially reasonable manner. (b) The Pledgor further agrees to do or cause to be done all such other
acts and things as may be necessary to make such sale or sales of any
portion or all of the Borrower Bonds valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction
over any such sale or sales, all at the Pledgors expense. The Pledgor
further agrees that a breach of any of the covenants contained in this
paragraph 10 will cause irreparable injury to the Lender, that the Lender
has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this
paragraph shall be specifically enforceable against the Pledgor and the
Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense
that no Event of Default has occurred under the Reimbursement Agreement. (c) Notwithstanding anything to the contrary contained in paragraph 7 or
this paragraph 10, at the time of the sale of any Borrower Bonds as
contemplated herein, any rating assigned to such Bonds by a Rating Agency
shall cease to apply to such Borrower Bonds unless the Lender has
reinstated the amount available to be drawn under the Letter of Credit by
an amount equal to the principal amount drawn under the Letter of Credit
at the time the Bonds became Borrower Bonds. 11. Further Assurances. The Pledgor agrees that at any time and from time to
time upon the written request of the Lender, the Pledgor will execute and
deliver such further documents and do such further acts and things as the
Lender may reasonably request in order to effect the purposes of this
Agreement. 12. Severability. Any provision of this Agreement 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. 13. No Waiver, Cumulative Remedies. The Lender shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder and no waiver shall be valid unless in writing, signed by the Lender,
and then only to the extent therein set forth. A waiver by the Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Lender would otherwise have on any further
occasion. No failure to exercise nor any delay in exercising on the part of
the Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power or privilege. The rights and remedies herein
provided are cumulative and may be exercised singly or concurrently, and are
not exclusive of any rights or remedies provided by law. - 5 -




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14. Indemnification. The Pledgor agrees to indemnify Agent for, and to hold it
harmless against, any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on its part, arising out of or in connection
with the acceptance or administration of its duties hereunder including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. 15. Waivers, Amendments; Applicable Law. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Lender and the Pledgor. This
Agreement and all obligations of the Pledgor and the Agent hereunder shall be
binding upon the successors and assigns of the Pledgor and the Agent,
respectively, and shall, together with the rights and remedies of the Lender
hereunder, inure to the benefit of the Lender and its successors and assigns.
This Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of Minnesota. 16. Term. This Agreement shall remain in full force and effect for so long as
the Letter of Credit or any of the Obligations remains outstanding. 17. Notice. All notices and other communications provided for hereunder shall
be given as provided in the Indenture. 18. Counterparts. This Agreement may be executed in several counterparts, each
of which shall constitute one and the same instrument. 19. Section Headings. Section headings in this Agreement are included for
convenience only and shall not constitute a part of this Agreement for any
other purpose. - 6 -




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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered on the day and year first above written. LIFECORE BIOMEDICAL, INC.By:
    
    /s/ DENNIS J. ALLINGHAMIts: President and CEOM&I MARSHALL & ILSLEY BANKBy:
    
    /s/ SCOTT THORSONIts: Senior Vice PresidentWELLS FARGO BANK, NATIONALASSOCIATIONBy:
    
    /s/ MARTHA K. EARLEYIts: Assistant Vice President
 - 7 -