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Exhibit 10.13 REIMBURSEMENT AGREEMENT BY AND BETWEEN LIFECORE BIOMEDICAL, INC. AND M&I MARSHALL & ILSLEY BANK IN CONNECTION WITH $5,699,411.00 LETTER OF CREDIT Dated As Of: August 1, 2004 This Instrument Was Drafted By:WINTHROP & WEINSTINE, P.A.225 South Sixth Street, Suite 3500Minneapolis, Minnesota 55402




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TABLE OF CONTENTS PageARTICLE I. DEFINITIONS
    
    
    1SECTION 1.1. Defined Terms
    
    
    1SECTION 1.2. Other Terms
    
    
    3SECTION 1.3. Reimbursement Agreement Controlling
    
    
    3ARTICLE II. COMMITMENT TO ISSUE LETTER OF CREDIT
    
    
    3SECTION 2.1. Issuance of Letter of Credit
    
    
    3SECTION 2.2. Expiration, Extension of Letter of Credit
    
    
    4SECTION 2.3. Draw Under Letter of Credit to Redeem Bonds
    
    
    4ARTICLE III. CONDITIONS PRECEDENT
    
    
    4SECTION 3.1. Conditions Precedent to Issuance of Letter of Credit
    
    
    4ARTICLE IV. REIMBURSEMENTS AND OTHER PAYMENTS; LENDERS RIGHT TO CURE
    
    
    5SECTION 4.1. Obligation of Reimbursement
    
    
    5SECTION 4.2. Payment of Credit Enhancement Fee
    
    
    5SECTION 4.3. Capital Adequacy/Change in Law
    
    
    6SECTION 4.4. Computation of Credit Enhancement Fee and Interest
    
    
    6SECTION 4.5. Right of Lender to Cure Defaults Under Bond Documents
    
    
    6SECTION 4.6. Payments
    
    
    7SECTION 4.7. Collateral
    
    
    7SECTION 4.8. Letter of Credit Fees
    
    
    7SECTION 4.9. Required Deposits
    
    
    7SECTION 4.10. Substitution/Termination Fee
    
    
    7SECTION 4.11. Cash Collateral Account
    
    
    7ARTICLE V. WARRANTIES, REPRESENTATIONS AND COVENANTS
    
    
    8SECTION 5.1. Warranties and Representations
    
    
    8SECTION 5.2. Covenants
    
    
    11ARTICLE VI. EVENT OF DEFAULT DEFINED; RIGHTS AND REMEDIES
    
    
    14SECTION 6.1. Event of Default Defined
    
    
    14SECTION 6.2. Rights and Remedies
    
    
    15ARTICLE VII. MISCELLANEOUS
    
    
    16SECTION 7.1. Indemnification by the Borrower
    
    
    16
 -i-




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PageSECTION 7.2. Expenses
    
    
    17SECTION 7.3. Addresses for Notices
    
    
    17SECTION 7.4. Time of Essence
    
    
    18SECTION 7.5. Binding Effect and Assignment
    
    
    18SECTION 7.6. Waivers
    
    
    18SECTION 7.7. Remedies Cumulative
    
    
    18SECTION 7.8. Governing Law and Entire Agreement
    
    
    18SECTION 7.9. Counterparts
    
    
    18SECTION 7.10. Not Joint Venturers
    
    
    18SECTION 7.11. Adequacy of Bond Proceeds
    
    
    18SECTION 7.12. Jurisdiction; Waiver of Jury Trial
    
    
    18SECTION 7.13. Interest Rate
    
    
    19SECTION 7.14. Obligations Absolute
    
    
    19SECTION 7.15. Liability of the Lender
    
    
    19SECTION 7.16. Security Interest in Funds and Bonds
    
    
    20SECTION 7.17. Term
    
    
    20SECTION 7.18. Financial Covenants
    
    
    20SECTION 7.19. USA Patriot Act
    
    
    21SIGNATURESEXHIBIT A
 -ii-




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REIMBURSEMENT AGREEMENT THIS REIMBURSEMENT AGREEMENT, made as of the 1st day of August, 2004, by and
between LIFECORE BIOMEDICAL, INC., a Minnesota corporation (the Borrower),
and M&I MARSHALL & ILSLEY BANK, a Wisconsin state banking corporation with its
banking house located in Milwaukee, Wisconsin (the Lender). ARTICLE I. DEFINITIONS SECTION 1.1. Defined Terms. As used in this Agreement, the following terms
shall have the meanings set out respectively after each (such meanings to be
equally applicable to both the singular and plural forms of the terms defined): (a) Agreement: this Reimbursement Agreement. (b) Bond Counsel: Dorsey & Whitney LLP, or such other bond counsel which
is acceptable to the Lender. (c) Bond Documents: individually or collectively, as the context
requires, the Loan Agreement, the Indenture, the Bond Purchase Agreement,
the Remarketing Agreement and the Tax Exemption Agreement. (d) Bond Purchase Agreement: the Bond Purchase Agreement dated as of
August 19, 2004, by and among the Borrower, the Issuer and the
Underwriter. (e) Bonds: the $5,630,000 Variable Rate Demand Purchase Revenue Bonds
(Lifecore Biomedical, Inc. Project), Series 2004, issued by the Issuer. (f) Borrower Documents: collectively, this Agreement, the Security
Agreement, the Mortgage, the Pledge and Security Agreement, the Credit
Agreement and any and all other documents and instruments executed by the
Borrower and delivered to the Lender in connection with the financing
transaction contemplated hereby. (g) Cash Collateral Account: shall have the meaning assigned thereto in
Section 4.11 hereof. (h) Commitment: the commitment of the Lender hereunder to issue the
Letter of Credit. (i) Credit Agreement: the Revolving Credit Agreement dated as of
December 18, 2002, by and between the Borrower and the Lender, as the
same may be extended, renewed, restated or modified from time to time. (j) Credit Enhancement Fee: shall have the meaning assigned thereto in
Section 4.2 hereof.




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(k) Event of Default: any of the events of default specified in Section
6.1 hereof. (l) Indenture: the Indenture of Trust of even date herewith by and
between the Issuer and the Trustee. (m) Issuer: the City of Chaska, Minnesota. (n) Land: the real property upon which the Project relating thereto is
situated which is legally described on Exhibit A to the Mortgage. (o) Letter of Credit: the Irrevocable Letter of Credit No. SB/IRB 314
issued by the Lender to the Trustee for the account of the Borrower in
the original stated amount of $5,699,411.00 (calculated by adding the sum
of (i) $5,630,000.00 representing the principal amount of the Bonds plus
(ii) $69,411.00 representing a forty-five (45) day interest reserve on
the Bonds calculated at 10%). (p) Loan Agreement: the Loan Agreement of even date herewith by and
between the Borrower and the Issuer. (q) Mortgage: the Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Financing Statement of even date herewith executed by
the Borrower in favor of the Lender, pursuant to which the Borrower has
granted to the Lender a first priority mortgage lien and security
interest in and to, and a first assignment of leases and rents with
respect to, the Project to secure repayment of the Borrowers obligations
to Lender under the Borrower Documents. (r) Obligation of Reimbursement: shall have the meaning assigned thereto
in Section 4.1 hereof. (s) Organizational Documents: collectively, the following documents each
of which shall be in form and substance acceptable to the Lender: (1) a copy of the Articles of Incorporation of the Borrower, duly
certified by the Secretary of State of the State of Minnesota; (2) a copy of the Bylaws of the Borrower, duly certified by an
officer of the Borrower; (3) an original current Certificate of Good Standing for the
Borrower, duly issued by the Secretary of State of the State of
Minnesota; (4) a copy of the resolutions of the Borrower authorizing the
execution, delivery and performance of the Borrower Documents and
the Bond Documents, duly certified by an officer of the Borrower;
and (5) an opinion of counsel for the Borrower dated as of the date
hereof and acceptable in form and substance to the Lender. -2-




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(t) Permitted Encumbrances: shall have the meaning assigned thereto in
the Mortgage. (u) Prime Rate: the prime or base rate of interest (or equivalent
successor rate) set and announced from time to time by the Lender as a
basis for determining the rate of interest on commercial borrowing,
whether or not the Lender makes loans to other customers at, above or
below said prime or base rate of interest. (v) Project: the manufacturing facility located on the Land, as the same
may from time to time exist. (w) Remarketing Agreement: the Remarketing Agreement of even date
herewith by and between the Borrower and the Underwriter. (x) Security Agreement: the Security Agreement of even date herewith
executed by the Borrower in favor of the Lender, pursuant to which the
Borrower has granted to the Lender a first priority security interest in
and to the property described therein to secure, among other things,
repayment of the Borrowers obligations to the Lender under the Borrower
Documents. (y) Tax Exemption Agreement: the Tax Exemption Agreement of even date
herewith by and among the Issuer, the Borrower and the Trustee. (z) Trustee: Wells Fargo Bank, National Association, and any co-trustee
or successor trustee appointed, qualified and then acting under the
provisions of the Indenture. (aa) Underwriter: Northland Securities, Inc. SECTION 1.2. Other Terms. All capitalized terms used herein and not otherwise
defined in this Agreement shall have the respective meanings for purposes of
this Agreement as are assigned to such terms in Article I of the Indenture or
Section 1.01 of the Loan Agreement, as the case may be, including, without
limitation, the following terms: Interest Payment Date; Business Day;
Remarketing Agent; and Substitute Letter of Credit. SECTION 1.3. Reimbursement Agreement Controlling. To the extent there exists
any inconsistencies as between the terms and/or provisions contained in this
Agreement and the Bond Documents, the language in this Agreement shall control. ARTICLE II. COMMITMENT TO ISSUE LETTER OF CREDIT SECTION 2.1. Issuance of Letter of Credit. The Lender and the Borrower agree
that, on the terms and subject to the conditions hereinafter set forth, the
Lender shall issue the Letter of Credit to secure payment of the Bonds. -3-




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SECTION 2.2. Expiration, Extension of Letter of Credit. The Letter of Credit
shall have an initial expiration date of September 15, 2007. The Borrower
acknowledges and agrees that the Lender shall have no obligation to extend the
Letter of Credit at any time in the future. The Lender agrees, however, to
provide the Borrower with at least one hundred twenty (120) days notice prior
to the expiration date of the Letter of Credit or any extension thereof that
the Lender will not be extending the expiration date of the Letter of Credit.
The Borrower agrees to pay to the Lender on demand such fees as are customarily
charged by the Lender in connection with extensions of letters of credit, as
the same may change from time to time, which are currently in the amount of
$750 per extension. The Borrower further acknowledges and understands that the
Bonds will be subject to mandatory redemption if the Lender does not extend the
Letter of Credit thereby resulting in a draw under the Letter of Credit unless
a Substitute Letter of Credit is delivered to the Trustee pursuant to the
Indenture or unless the Bonds are re-marketed pursuant to the terms of the
Indenture. SECTION 2.3. Draw Under Letter of Credit to Redeem Bonds. The Borrower
acknowledges and agrees that the consent of the Lender is required in order for
the Trustee to submit a drawing under the Letter of Credit for the purpose of
optionally redeeming Bonds pursuant to the Indenture. The Lender shall give
such consent provided (a) no Event of Default, and no event which with the
giving of notice or the passage of time or both would constitute an Event of
Default, has occurred and is then continuing, and (b) the Borrower provides
evidence acceptable to the Lender that the Borrower will have deposited into
the Cash Collateral Account by the time a drawing is submitted under the Letter
of Credit an amount sufficient to reimburse the Lender for the amount of such
draw. Amounts in the Cash Collateral Account may be utilized to reimburse the
Lender for amounts drawn under the Letter of Credit, but not to fund draws
under the Letter of Credit. ARTICLE III. CONDITIONS PRECEDENT SECTION 3.1. Conditions Precedent to Issuance of Letter of Credit. The
obligation of the Lender to issue the Letter of Credit shall be subject to the
conditions precedent that it shall have received and approved the following: (a) the Borrower Documents, duly executed and delivered by the Borrower; (b) the Bond Documents, duly executed by the parties thereto; (c) the Organizational Documents; (d) evidence that the Mortgage has been duly recorded in the office of
the County Recorder or the Registrar of Titles (as the case may be) for
the county in which the Land is located; (e) evidence that UCC-1 financing statements have been duly filed of
record in the office of the Minnesota Secretary of State, serving to
perfect valid first liens on the personal property subject to the
Mortgage and the Security Agreement; -4-




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(f) an opinion of Bond Counsel issued in connection with the Bonds which
states that the Bonds are validly issued, and the interest on the Bonds
is not includable in gross income for federal income tax purposes, either
addressed to the Lender or accompanied by a reliance letter indicating
that the Lender is entitled to rely on the opinion; (g) certified copies of the resolution adopted by the Issuer authorizing
the issuance of the Bonds; (h) the Credit Enhancement Fee in the amount of $62,060.25 for the Letter
of Credit that will accrue from August 19, 2004, through and including
September 15, 2005, as required under Section 4.2 hereof; (i) evidence of payment to the Trustee of the $2,400.00 set up fee and
the first annual trustee fee in the amount of $2,400.00; (j) the non-refundable, fully-earned origination fee in the amount of
$28,150.00; (k) evidence of payment of all expenses incurred by the Lender which are
payable by the Borrower pursuant to Section 8.2 hereof; and (l) such other documents and instruments as the Lender may reasonably
request. ARTICLE IV. REIMBURSEMENTS AND OTHER PAYMENTS;
LENDERS RIGHT TO CURE SECTION 4.1. Obligation of Reimbursement. The Borrower hereby agrees to pay to
the Lender (the Obligation of Reimbursement) (a) on the day that the Lender
honors a draw under the Letter of Credit a sum equal to the amount drawn under
the Letter of Credit plus any and all reasonable charges and expenses which
the Lender may pay or incur relative to such draw, (b) on demand, any amounts
advanced by the Lender in its sole discretion to cure any event of default
under the Bond Documents, and (c) on demand, interest on all amounts remaining
unpaid by the Borrower
to the Lender under this Agreement at any time accruing from the date such
amounts become payable (in the case of an amount payable on demand, which
interest shall accrue from the date the Lender is first entitled to demand
payment, regardless of whether a demand for payment is actually made), until
payment in full, at an annual rate equal to two percent (2.00%) per annum in
excess of the Prime Rate, as the same changes from time to time; provided,
however, that no interest shall accrue or be payable on any amounts paid by the
Lender pursuant to a draw submitted under the Letter of Credit if the full
amount of such draw is reimbursed by the Borrower to the Lender, by 2:00
oclock p.m. on the same day such draw is paid by the Lender. The Borrower
agrees that it will have deposited with the Lender into the Cash Collateral
Account at least one (1) Business Day before a draw is made under the Letter of
Credit an amount equal to the anticipated amount of such draw. -5-




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SECTION 4.2. Payment of Credit Enhancement Fee. So long as the Letter of
Credit is outstanding, the Borrower agrees to pay the Lender a credit
enhancement fee with respect to the Letter of Credit (the Credit Enhancement
Fee) for each calendar year during the term of the Letter of Credit in an
amount equal to one percent (1.00%) per annum of the maximum amount available
to be drawn under the Letter of Credit as of the date of issuance of the Letter
of Credit and as of September 15 of each calendar year thereafter. The Credit
Enhancement Fee shall be payable in advance on the date hereof and on each
September 15 thereafter while the Letter of Credit is outstanding commencing
with September 15, 2005. Notwithstanding the foregoing, if and for so long as
an Event of Default has occurred and continues or exists, then, at the Lenders
option, the Credit Enhancement Fee shall thereafter be increased by an
additional one percent (1.00%) per annum. SECTION 4.3. Capital Adequacy/Change in Law. If any change in any law or
regulation or in the interpretation thereof by any court or administrative
governmental authority charged with the administration thereof shall either (a)
impose, modify or deem applicable or modify any capital adequacy, reserve,
special deposit or similar requirement against letters of credit issued by, or
assets held by, or deposits in or for the account of the Lender (including
without limitation, a requirement which affects the Lenders allocation of
capital resources), or (b) impose on the Lender any other condition regarding
this Agreement or the Letter of Credit, and the result of any event referred to
in the preceding clause (a) or (b) shall be to increase the cost (including
without limitation, reserve or similar cost) to the Lender of issuing or
maintaining the Letter of Credit or reduce the Lenders return hereunder or all
or any of the Lenders capital is reduced (which increase in cost or reduction
in return shall be determined by the Lenders reasonable allocation of the
aggregate of such cost increases or return reductions resulting from such
events), then upon demand by the Lender, the Borrower shall immediately pay to
the Lender, from time to time as specified by the Lender, additional amounts
which shall be sufficient to compensate the Lender for such increased cost
which will be incurred from and after the Lender first provides notice to the
Borrower of such increase, together with interest on each such amount from the
date demanded until payment in full thereof at the rate provided for in Section
4.1 hereof. A certificate as to such increased costs incurred by the Lender as
a result of any event mentioned in clause (a) or (b) above, submitted by the
Lender to the Borrower shall be conclusive, absent manifest error, as to the
amount thereof. SECTION 4.4. Computation of Credit Enhancement Fee and Interest. The Credit
Enhancement Fee and interest payable on amounts due under this Agreement shall
be computed on the basis of a 360-day year and charged for actual days elapsed. SECTION 4.5. Right of Lender to Cure Defaults Under Bond Documents. If the
Borrower shall fail to make any payments under the Bond Documents on the day
such payment is first due and payable by the Borrower, or shall fail to comply
with any other covenant or agreement of the Borrower under the Bond Documents,
or if any other default or event of default shall occur under the Bond
Documents, the Lender shall have the option, in the Lenders sole discretion,
to cure any such failure by taking action reasonably required to effect such
cure, including, without limitation, making the required payment directly to
the Trustee. Any such payment by the Lender shall constitute an advance
repayable by the Borrower in accordance with Section 4.1 hereof. The Borrower
shall be responsible for any costs and/or expenses incurred by the Lender in
curing any such default or event of default. -6-




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SECTION 4.6. Payments. All payments by the Borrower to the Lender hereunder
shall be made in lawful currency of the United States in immediately available
funds at the Lenders office at 651 Nicollet Mall, Minneapolis, Minnesota
55402. In addition, the Lender shall have the right to debit any of the
Borrowers accounts at the Lender without further authorization of the Borrower
to make any such payments. SECTION 4.7. Collateral. The Borrower hereby acknowledges that the Obligation
of Reimbursement and each and every other liability and indebtedness of the
Borrower under the Borrower Documents is secured by the Mortgage, the Pledge
and Security Agreement and the Security Agreement. SECTION 4.8. Letter of Credit Fees. In addition to the Credit Enhancement Fee,
the Borrower shall pay to the Lender, on demand, such fees as are customarily
charged by the Lender from time to time in connection with the extension,
amendment and administration of letters of credit, as the same change from time
to time, including, without limitation, an administrative fee of $300 for each
draw under the Letter of Credit which is in full compliance with the terms of
the Letter of Credit and $600 for each draw under the Letter of Credit which is
not in full compliance with the terms of the Letter of Credit. The Borrower
shall also pay a customary transfer fee to the Lender if the Letter of Credit
is transferred to a successor trustee under the Indenture. SECTION 4.9. Required Deposits. Commencing on September 1, 2004, and
continuing on the first (1st) day of each calendar month thereafter during the
term of this Agreement, the Borrower shall deposit into the Cash Collateral
Account an amount equal to one-twelfth (1/12th) of the next scheduled mandatory
sinking fund payment under the Indenture. In addition, to the extent not paid
from deposits made pursuant to the preceding sentence, Borrower shall deposit
into the Cash Collateral Account at least five (5) Business Days prior to the
date of each required redemption hereunder an amount sufficient to reimburse
Lender for the amount of such redemption. Amounts in the Cash Collateral
Account
may be utilized to reimburse the Lender for amounts drawn under the Letter of
Credit, but not to fund draws under the Letter of Credit. SECTION 4.10. Substitution/Termination Fee. In the event the Letter of Credit
is returned to the Lender prior to September 15, 2007, due to the issuance of a
Substitute Letter of Credit or a refunding or other refinancing of the Bonds,
the Borrower shall pay to the Lender at the time of such return a
substitution/termination fee in an amount equal to two percent (2.00%) of the
then outstanding principal balance of the Bonds. SECTION 4.11. Cash Collateral Account. There is hereby established a Cash
Collateral Account (the Cash Collateral Account) in the Borrowers name with
the Lender which shall be funded and administered in accordance with the terms
set forth herein. The Lender will from time to time invest funds on deposit in
the Cash Collateral Account in a money market account with the Lender. (1) The Borrower hereby pledges and grants to the Lender a security
interest in all funds held in the Cash Collateral Account from time to
time and all proceeds thereof, as security for the payment of all
amounts dues and to become due from the Borrower to the Lender under
this Agreement. -7-




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(2) The Lender may, at any time or from time to time after funds are
deposited in the Cash Collateral Account, apply funds then held in the
Cash Collateral Account to the payment of any amounts, in such order
as the Lender may elect, as shall have become or shall become due and
payable by the borrower to the Lender under this Agreement. (3) Neither the Borrower nor any person or entity claiming on behalf
of or through the Borrower shall have any right to withdraw any of the
funds held in the Cash Collateral Account, except that after the
expiration of the Letter of Credit in accordance with its terms and
the payment of all amounts payable by the Borrower to the Lender under
this Agreement, any funds remaining in the Cash Collateral Account
shall promptly be returned by the Lender to the Borrower or paid to
whomever may be legally entitled thereto. (4) The Borrower agrees that it will not (A) sell or otherwise dispose
of any interest in the Cash Collateral Account or any funds held
therein, or (B) create or permit to exist any lien, security interest
or other change or encumbrance upon or with respect to the Cash
Collateral Account. (5) The Lender shall exercise reasonable care in the custody and
preservation of any funds held in the Cash Collateral Account and
shall be deemed to have exercised such care if such funds are accorded
treatment substantially equivalent to that which the Lender accords
its own property it being understood that the Lender shall not have
any responsibility for taking any necessary steps to preserve rights
against any parties with respect to any such funds. ARTICLE V. WARRANTIES, REPRESENTATIONS AND COVENANTS SECTION 5.1. Warranties and Representations. The Borrower hereby warrants,
represents and certifies to and for the benefit of the Lender as follows: (a) the Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota and to own its
property and conduct its business as presently conducted and as proposed
to be conducted; (b) the Borrower possesses adequate licenses, certificates, permits,
franchises, patents, copyrights, trademarks and trade names, or rights
thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted; (c) the execution, delivery and performance by the Borrower of the
Borrower Documents and the Bond Documents will not violate any provision
of the organizational documents of the Borrower or of any law, rule,
regulation or court order or result in the breach of or constitute a
default under any indenture or loan, credit or other agreement or
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected or result in the creation or
imposition of any lien, charge or encumbrance of any nature upon any of
its properties or assets contrary to the terms of any such instrument or
agreement; -8-




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(d) each of the Borrower Documents and the Bond Documents constitutes the
legal, valid and binding obligation of the Borrower enforceable in
accordance with its respective terms (except, as to enforceability, to
the extent limited by bankruptcy, insolvency and other similar laws
affected creditors rights generally); (e) the Project and the use thereof are permitted by and complies in all
material respects with all presently applicable use or other restrictions
and requirements in prior conveyances, zoning ordinances and all
development, pollution control, water conservation and other laws,
regulations, rules and ordinances of the United States and the State of
Minnesota and the respective agencies thereof, and the political
subdivision in which the Project is located; (f) except as disclosed by the Borrower in its Form 10-Q report for its
quarter ended March 31, 2004, as filed with the Securities and Exchange
Commission, and except as described on Exhibit A attached hereto, there
is no suit, action or proceeding pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower before or by any
court, arbitrator, administrative agency or other governmental authority
which, if adversely determined, would materially and adversely affect its
business, properties, operations, assets or condition (financial or
otherwise) or the validity of any of the transactions contemplated by the
Borrower Documents and the Bond Documents or any of the documents related
thereto, or the ability of the Borrower to perform its obligations
hereunder or thereunder or as contemplated hereby or thereby; (g) the Borrower has furnished the Lender with financial statements for
the Borrower, each of which financial statements fairly presents the
financial condition of the Borrower at and as of the date thereof, and,
as of said date, there were no material liabilities of the Borrower,
direct or indirect, fixed or contingent, which were not reflected in the
financial statements or the notes thereto; (h) the Borrower has filed all federal and state tax returns and reports
required to be filed, which returns properly reflect the taxes owed by it
for the period covered thereby and they have paid or made appropriate
provisions for the payment of all taxes which may become due pursuant to
said returns and for the payment of all present installments of any
assessments, fees and other governmental charges upon it or upon any of
its property; (i) no consent, approval or authorization of or permit or license from or
registration with or notice to any federal or state regulatory authority
or any third party is required in connection with the making or
performance of the Borrower Documents, the Bond Documents or any document
or instrument related thereto, or, if so required, such consent,
approval, authorization, permit or license has been requested and
obtained or such registration made or notice given or such other
appropriate action taken on or prior to the date hereof; -9-




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(j) the Borrower is not in default of a material provision under any
material agreement, instrument, decree or order to which it is a party or
to which it or its property is bound or affected; (k) no pollutants or other toxic or hazardous waste or substances,
including any solid, liquid, gaseous, or thermal irritant or contaminant,
such as smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste
(including materials to be recycled, reconditioned or reclaimed)
(collectively substances) which is regulated by law, regulation,
ordinance or code have existed in, on or under any property of the
Borrower or have been discharged, dispersed, released, stored, treated,
generated, disposed of, or allowed to escape (collectively referred to as
an incident) on any property of the Borrower; the Borrower shall not
permit third parties to cause an incident, shall take reasonable steps to
ensure that an incident does not occur, and shall promptly take all
appropriate steps to remedy an incident, in compliance with all local,
state and federal laws and regulations should an incident occur; (l) except as disclosed by the Borrower in its Form 10-Q report for its
quarter ended March 31, 2004, as filed with the Securities and Exchange
Commission, and except as described on Exhibit A attached hereto, no
investigation, administrative order, consent order and agreement,
litigation, or settlement (collectively referred to as the action)
including, but not limited to, proceedings or actions commenced by any
person (including, but not limited to any federal, state, or local
government or agency or entity before any court or administrative agency)
with respect to substances is proposed, threatened, anticipated or in
existence with respect to any of the Borrowers property; (m) except as disclosed by the Borrower in its Form 10-Q report for its
quarter ended March 31, 2004, as filed with the Securities and Exchange
Commission, and except as described on Exhibit A attached hereto, the
Project and the Borrowers operations at the Project always have been and
now are in compliance with all applicable federal, state and local
statutes, laws and regulations; no notice has been served on the Borrower
from any entity, governmental body or individual claiming any violation
of any law, regulation, ordinance or code, or requiring compliance with
any law, regulation, ordinance or code, or demanding payment or
contribution for environmental damage or injury to natural resources, or
any injury to human health; (n) no underground storage tanks are located on the Project or were
located on the Project and subsequently removed or filled; (o) no dumps, sanitary landfills or gasoline service stations are or were
located on the Project; (p) the Project is in compliance with all applicable provisions of the
Americans with Disabilities Act; and (q) each and all of the warranties and representations of Borrower set
forth and contained in each of the Bond Documents are true and correct in
all material respects as of the date hereof. -10-




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SECTION 5.2. Covenants. In addition to the covenants and agreements of the
Borrower set forth and contained herein and the documents related hereto, the
Borrower hereby covenants and agrees to and with the Lender, so long as the
Letter of Credit remains outstanding, any amounts remain due and payable by the
Borrower to the Lender pursuant to Article IV hereof: (a) that the Project does and shall comply with all applicable
restrictions, conditions, ordinances, regulations and laws of
governmental departments and agencies having jurisdiction over the
Project, and does not and shall not violate any private restrictions or
covenants or encroach upon or interfere with easements affecting the
Land; (b) to keep, perform, enforce and maintain in full force and effect all
of the terms, covenants, conditions and requirements of the Borrower
Documents and the Bond Documents; not to amend, modify, supplement,
terminate, cancel or waive any of the terms, covenants, conditions or
requirements of any of said documents without the prior written consent
of the Lender; (c) to deliver to the Lender, upon the request by the Lender, from time
to time, and at any time, updated and recertified copies of the
Organizational Documents; (d) upon the demand of Lender for reasonable cause, from time to time, to
deliver to the Lender an updated survey showing the Project to be located
within applicable lot lines of the Land and setback lines and not
encroaching upon any easements, streets or adjoining property, and to
deliver to Lender, from time to time, and at any time, updated and
recertified copies of the Title Documents and the Organizational
Documents; (e) not to create, permit to be created or to allow to exist, any liens,
charges or encumbrances on the Project (other than Permitted
Encumbrances) and the lien of general real estate taxes and pending and
special assessments) except for such liens, charges and encumbrances
which are being diligently contested in good faith by appropriate
proceedings and provided that, if requested by Lender, Borrower shall
have provided to Lender security satisfactory to Lender; (f) to obtain and maintain, or cause to be obtained and maintained, at
all times during the term of this Agreement, if applicable (and, from
time to time at the request of Lender, furnish Lender with proof of
payment of premiums on): (1) comprehensive general liability insurance (including
operations, contingent liability, operations of subcontractors,
complete operations and contractual liability insurance) in such
amount as Lender may require from time to time (but with coverage
of not less than $2,000,000/$2,000,000) and naming Lender as an
additional insured; (2) hazard insurance insuring against loss by fire, lightning,
vandalism, malicious mischief and other risks customarily covered
by a standard extended coverage endorsement, in an amount not less
than the face amount of the Letter of Credit, or the full insurable
value of the Project, whichever is greater, and naming Lender as
mortgagee and loss payee; -11-




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(3) flood insurance, if any of the Land is located in a flood
plain as defined by the Federal Insurance Administration, in the
maximum obtainable amount up to the face amount of the Letter of
Credit, naming Lender as loss payee (unless Lender receives and
approves a flood certificate certifying that all of the Land is not
located in a flood plain as defined by the Federal Insurance
Administration); and (4) rent loss or business interruption insurance, with respect to
the perils set forth in paragraph (ii) above, in an amount
sufficient to enable the Borrower to make the required payments
under this Agreement, to pay taxes and insurance and continue
operations during an assumed reconstruction period of one (1) year,
naming Lender as mortgagee and loss payee; such policies of insurance to be in form and content satisfactory to the
Lender and to be placed with insurers acceptable to Lender licensed to
transact business in the State of Minnesota and to contain an agreement
of the insurer to give not less than thirty (30) days prior written
notice to the Lender in the event of cancellation, termination, amendment
change or non-renewal of such policy affecting the coverage thereunder;
acceptance of such insurance policies not to bar the Lender from
requiring additional insurance (either in type or amount) at a later date
which it reasonably deems necessary; (g) not to assign this Agreement or any interest herein; (h) to permit the Lender, acting by and through its officers, employees
and agents, to examine all books, records, contracts, plans, drawings,
permits, bills and statements of account pertaining to the Project and to
make extracts therefrom and copies thereof; (i) to furnish to the Lender as soon as possible and in any event within
three (3) days after the Borrower has obtained knowledge of the
occurrence of an Event of Default, or an event which with the giving of
notice or lapse of time or both would constitute an Event of Default, a
statement signed by the Borrower setting forth details of such Event of
Default or event and the action which the Borrower has taken, is taking
or proposes to take to correct the same; (j) to hold the Lender harmless, and the Lender shall have no liability
or obligation of any kind to the Borrower, creditors of the Borrower, or
any third party, in connection with any defective, improper or inadequate
workmanship performed in or about, or materials supplied to, the Land or
the Project, or any mechanics, suppliers or materialmens liens arising
as a result of such defective, improper or inadequate workmanship or
materials, and upon the Lenders reasonable request, to replace or cause
to be replaced any such defective, improper or inadequate workmanship or
materials; (k) to pay and discharge all real estate taxes prior to the attachment of
penalties with respect thereto and installments of special assessments
payable therewith, and insurance premiums with respect to the insurance
required to be maintained by the Borrower under the terms of any of the
Borrower Documents, and utility charges incurred by the Borrower prior to
or during the term of this Agreement, except if such taxes, assessments -12-




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or premiums are being contested in good faith by appropriate proceedings
and provided that, if requested by the Lender, the Borrower shall have
deposited into escrow with the Lender an amount equal to such taxes,
assessments or premiums plus penalties accrued thereon; (l) to keep accurate books of record and account for itself in which true
and complete entries will be made in accordance with generally acceptable
accounting principles consistently applied and, upon request of the
Lender, give any representative of the Lender access during normal
business hours to, and permit such representative to examine, copy or
make extracts from, any and all books, records, contracts, plans,
drawings, permits, bills and statements of account pertaining to the
Project, to inspect any of its properties and to discuss its affairs,
finances and accounts with any of the Borrowers officers, all at such
times and as often as it may reasonably be requested by the Lender or its
officers or representatives; (m) to cause to be prepared and delivered to the Lender the following: (1) as soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year of the Borrower,
audited financial statements of the Borrower, all in reasonable
detail and prepared by independent accountants of recognized
standing selected by the Borrower and acceptable to the Lender in
accordance with generally accepted accounting principles,
consistently applied; (2) as soon as available and in any event within forty-five (45)
days after the end of each calendar quarter, internally prepared
financial statements for the Borrower for such calendar quarter and
year to date; and (3) from time to time, with reasonable promptness, such further
information regarding the business, operations, affairs and
financial and other condition of the Borrower and the Project as
the Lender may reasonably request; (n) to promptly give notice in writing to the Lender of any and all
litigation involving the Borrower where the amount in dispute exceeds
$100,000 and is not covered by insurance, and of any and all litigation
if the aggregate amount in dispute in connection with such litigation
exceeds $100,000 and is not covered by insurance, and of any and all
material proceedings commenced against the Borrower by or before any
court or governmental or regulatory agency; (o) to comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority, a breach of which
would materially and adversely affect the business or credit of the
Borrower, except where diligently contested in good faith and by proper
proceedings; (p) to preserve and maintain all of the Borrowers rights, privileges and
franchises necessary or desirable in the normal conduct of the Borrowers
business, not to suspend business operations or convey, transfer,
encumber or pledge the Project; -13-




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(q) to keep all of the assets and properties necessary in the Borrowers
business in good working order and condition, ordinary wear and tear
excepted; (r) to obtain all necessary and convenient state, federal, local and
private clearances, authorizations, permits and licenses with respect to
the business operations of the Borrower; (s) to comply with all covenants and agreements in any other credit or
similar agreement now or hereafter entered into between the Borrower and
the Lender and any third party; and (t) to perform each and all of the covenants and agreements set forth and
contained in the Bond Documents. ARTICLE VI. EVENT OF DEFAULT DEFINED; RIGHTS AND REMEDIES SECTION 6.1. Event of Default Defined. As used herein, the term Event of
Default shall mean and include each or all of the following events: (a) the Borrower shall fail to pay, when due, any amounts required to be
paid by the Borrower under the Borrower Documents or the Bond Documents
or any other indebtedness of the Borrower to the Lender, the Trustee or
any third party, whether any such indebtedness is now existing or
hereafter arises and whether direct or indirect, due or to become due,
absolute or contingent, primary or secondary or joint or joint and
several; (b) the Borrower shall fail to observe or perform any of the covenants,
conditions or agreements to be observed or performed by it under the
Borrower Documents, the Bond Documents or any credit or similar agreement
between the Borrower and the Lender for a period of ten (10) days after
written notice, specifying such default and requesting that it be
remedied, given to such party by the Lender; (c) the Borrower shall file a petition in bankruptcy or for
reorganization or for an arrangement pursuant to any present or future
state or federal bankruptcy act or under any similar federal or state
law, or shall be adjudicated a bankrupt or insolvent, or shall make a
general assignment for the benefit of its creditors, or shall be unable
to pay its debts generally as they become due; (d) if a petition or answer proposing the adjudication of the Borrower as
a bankrupt or its reorganization under any present or future state or
federal bankruptcy act or any similar federal or state law shall be filed
in any court and such petition or answer shall not be discharged or
denied within sixty (60) days after the filing thereof; or if a receiver,
trustee or liquidator of the Borrower or of all or substantially all of
the assets of the Borrower or of the Project shall be appointed in any
proceeding brought against the Borrower and shall not be discharged
within sixty (60) days of such appointment; or if -14-




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the Borrower shall
consent to or acquiesce in such appointment; or if any property of the
Borrower (including, without limitation, the estate or interest of the
Borrower in the Project or any part thereof) shall be levied upon or
attached in any proceeding; (e) final judgment(s) for the payment of money in excess of $100,000,
individually or in the aggregate, shall be rendered against the Borrower
and shall remain undischarged for a period of thirty (30) days during
which execution shall not be effectively stayed; (f) the Borrower shall be or become insolvent (whether in the equity or
bankruptcy sense); (g) any representation or warranty made by the Borrower in the Borrower
Documents, the Bond Documents or any document related thereto shall prove
to be untrue or misleading in any material respect, or any statement,
certificate or report furnished hereunder or under any of the foregoing
documents by or on behalf of the Borrower shall prove to be untrue or
misleading in any material respect on the date when the facts set forth
and recited therein are stated or certified; (h) the Project is condemned, destroyed or damaged to any material extent
and the same is not covered by insurance; or (i) the Borrower fails to maintain its operating line of credit and
primary banking relationship with the Lender. SECTION 6.2. Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, the Lender may, at its option, exercise any
and all of the following rights and remedies (and any other rights and remedies
available to it): (a) The Lender may instruct the Trustee to accelerate the Bonds and
submit a drawing under the Letter of Credit pursuant to the Indenture. (b) The Lender may, by written notice to the Borrower, declare all
indebtedness of every type or description owed by the Borrower to the
Lender to be immediately due and payable and the same shall thereupon be
immediately due and payable. (c) The Lender shall have the right, in addition to any other rights
provided by law, to enforce its rights and remedies under the Borrower
Documents and the documents related thereto. (d) The Lender may make demand upon the Borrower and forthwith upon such
demand the Borrower will pay to the Lender in immediately available funds
for deposit in the Cash Collateral Account an amount equal to the maximum
amount then available to be drawn under the Letter of Credit (assuming
compliance with all conditions for drawing thereunder). (e) The Lender, in its sole discretion, may pay any amount owing under
the Bond Documents, including without limitation, principal of, interest
and premium on the Bonds or the Lender may cure any other Event of
Default under the Bond Documents. -15-




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(f) The Lender may offset any deposits of the Borrower held by the Lender
(including those held by the Lender in the Cash Collateral Account and
any unmatured time deposits) against sums due hereunder or against any
other indebtedness then owed by the Borrower to the Lender, whether or
not then due. ARTICLE VII. MISCELLANEOUS SECTION 7.1. Indemnification by the Borrower. (a) The Borrower agrees to indemnify and hold harmless the Lender, its
officers, agents and employees, against any and all losses, claims,
damages or liability to which the Lender, its officers, agents and
employees, may become subject under any law in connection with the
carrying out of the transactions contemplated by this Agreement or the
Bond Documents or the conduct of any activity at the Project (other than
as a result of the act of commission or omission, including negligence or
willful misconduct, of the
Lender, its officers, agents and employees), and to reimburse the Lender,
its officers, agents and employees, for any out-of-pocket legal and other
expenses (including reasonable attorneys fees) incurred by the Lender,
its officers, agents and employees, in connection with investigating any
such losses, claims, damages or liabilities or in connection with
defending any actions relating thereto. The Lender agrees, at the
request and expense of the Borrower, to cooperate in the making of any
investigation in defense of any such claim and promptly to assert any or
all of the rights and privileges and defenses which may be available to
the Lender. The Borrower further releases and agrees to hold harmless
the Lender, its officers, agents and employees, from any liability to the
Borrower arising out of any covenant, representation or undertaking of
the Borrower contained in this Agreement, the Bond Documents or the
documents related hereto. The provisions of this Section shall survive
payment of the Letter of Credit and the payment and/or redemption of the
Bonds. (b) Without limiting the generality of the foregoing, the Borrower shall
bear all loss, expense (including reasonable attorneys fees) and damage
in connection with, and agrees to indemnify and hold harmless, the
Lender, its agents, servants and employees from all claims, demands and
judgments made or recovered against the Lender, its agents, servants and
employees, because of bodily injuries, including death at any time
resulting therefrom, and/or because of damages to property of the Lender,
its agents, servants, employees, or others (including loss of use) from
any cause whatsoever, if due to any act of omission or commission,
including negligence, of the Borrower, its employees, servants or agents,
but excluding any acts of omission or commission of the Lender, its
employees, servants or agents. The Borrowers liability hereunder shall
not be limited to the extent of insurance carried by or provided by the
Borrower or subject to any exclusions from coverage in any insurance
policy. The obligations of the Borrower under this Section shall survive
payment of the Letter of Credit and the payment and/or redemption of the
Bonds. -16-




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(c) The Borrower hereby indemnifies and holds harmless the Lender from
and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever which the Lender may incur (or which may be claimed
against the Lender by any person or entity whatsoever) (i) by reason of
any untrue statement or alleged untrue statement of any material fact
contained in any official statement or other offering document relating
to the offer or sale of the Bonds or the omission or alleged omission to
state therein a material fact necessary to make such statements, in light
of the circumstances under which they are made, not misleading (except
any statement or omission relating to the Lender contained in any written
materials supplied or approved by the Lender), or (ii) by reason of or in
connection with the execution and delivery or transfer of, or payment or
failure to pay under the Letter of Credit; provided, however, that the
Borrower shall not be required to indemnify the Lender for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by the willful misconduct or gross negligence of
the Lender or its officers, directors, agents or employees, in connection
with paying or wrongfully dishonoring a draw presented under the Letter
of Credit. Nothing in this Section 7.1 is intended to limit the
Borrowers Obligation of Reimbursement. SECTION 7.2. Expenses. The Borrower shall reimburse the Lender, upon demand,
for all costs and expenses, including without limitation reasonable attorneys
fees, appraisal fees, survey fees, closing charges, inspection fees, collateral
audit fees, documentary or tax stamps, recording and filing fees, mortgage
registration tax, insurance premiums and service charges, paid or incurred by
the Lender in connection with (i) the preparation, negotiation, approval,
execution and delivery of the Borrower Documents and any other documents and
instruments related thereto; (ii) the review and approval of documents
submitted by the Borrower to the Lender to satisfy the conditions precedent set
forth in Article IV hereof or to obtain an Advance pursuant to Article III
hereof; (iii) the negotiation of any amendments or modifications to any of the
foregoing documents, instruments or agreements and the preparation of any and
all documents necessary or desirable to effect such amendments or
modifications; and (iv) the enforcement by the Lender during the term hereof or
thereafter of any of the rights or remedies of the Lender hereunder or under
any of the foregoing documents, instruments or agreements, including without
limitation costs and expenses of collection in the Event of Default, whether or
not suit is filed with respect thereto. SECTION 7.3. Addresses for Notices. All notices to be given by any party to
the others hereunder shall be in writing and deemed to have been given when
delivered personally or when deposited in the United States mail, registered or
certified, postage prepaid, addressed as follows: If to the Borrower:
    
    Lifecore Biomedical, Inc.3515 Lyman BoulevardChaska, Minnesota 55318Attention: Chief Financial OfficerIf to the Lender:
    
    M&I Marshall & Ilsley Bank651 Nicollet MallMinneapolis, Minnesota 55402Attention: Scott D. Thorson
 -17-




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SECTION 7.4. Time of Essence. Time is of the essence in the performance of
this Agreement. SECTION 7.5. Binding Effect and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Lender and their
respective successors and permitted assigns, except that the Borrower may not
transfer or assign its rights hereunder without the prior written consent of
the Lender. SECTION 7.6. Waivers. No waiver by the Lender of any right, remedy or Event of
Default hereunder shall operate as a waiver of any other right, remedy, or
Event of Default or of the same right, remedy or Event of Default on a future
occasion. No delay on the part of the Lender in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right or remedy preclude other or future exercise thereof or
the exercise of any other right or remedy. SECTION 7.7. Remedies Cumulative. The rights and remedies herein specified of
the Lender are cumulative and not exclusive of any rights or remedies which the
Lender would otherwise have at law or in equity or by statute. SECTION 7.8. Governing Law and Entire Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Minnesota. The Borrower Documents and the documents related thereto contain
the entire agreement of the parties on the matters covered herein. No other
agreement, statement or promise relating to the subject matter hereof made by
any party or by any employee, officer, or agent of any party that is not in
writing and signed by all parties to this Agreement shall be binding. SECTION 7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but such counterparts shall together constitute one and the same
instrument. SECTION 7.10. Not Joint Venturers. The Lender is not, and shall not by reason
of any provision of any of the Borrower Documents or the documents related
thereto be deemed to be, a joint venturer with or partner or agent of the
Borrower. SECTION 7.11. Adequacy of Bond Proceeds. The Lender has not made, nor shall it
be deemed to have made, any representation or warranty that the funds to be
advanced hereunder to the Borrower are or will be sufficient to fully complete
the refunding of the prior Bonds. SECTION 7.12. Jurisdiction; Waiver of Jury Trial. THE BORROWER HEREBY SUBMITS
ITSELF TO THE JURISDICTION OF THE STATE OF MINNESOTA AND THE FEDERAL COURTS OF
THE UNITED STATES LOCATED IN SUCH STATE IN RESPECT OF ALL ACTIONS ARISING OUT
OF OR IN CONNECTION WITH THE INTERPRETATION OR ENFORCEMENT OF THIS AGREEMENT
AND THE DOCUMENTS RELATED HERETO. THE BORROWER AND THE LENDER HEREBY WAIVE ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OF PROCEEDING RELATING TO THIS
AGREEMENT AND ANY OF THE OTHER BORROWER DOCUMENTS, THE OBLIGATIONS HEREUNDER OR
THEREUNDER, ANY COLLATERAL SECURING THE OBLIGATIONS, OR ANY TRANSACTION ARISING
THEREFROM OR CONNECTED THERETO. THE BORROWER AND THE LENDER EACH REPRESENT TO
THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN. -18-




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SECTION 7.13. Interest Rate. Notwithstanding anything herein to the contrary
notwithstanding, the obligations of the Borrower under this Agreement shall be
subject to the limitation that payments of interest shall not be required to
the extent that contracting for or receipt thereof would be contrary to the
provisions
of law applicable to the Lender limiting the highest rate of interest which may
be lawfully contracted for, charged or received by the Lender. SECTION 7.14. Obligations Absolute. Subject to Section 7.15 hereof, the
obligations of the Borrower under this Agreement shall be absolute,
unconditional and irrevocable, and shall be paid and performed strictly in
accordance with the terms of this Agreement, under all circumstances
whatsoever, including, the following circumstances: (a) any lack of validity or enforceability of the Letter of Credit, the
Bonds, any of the Bond Documents, or any other agreement or instrument
relating thereto (collectively the Related Documents); (b) any amendment or any waiver of or any consent to departure from all
or any of the Related Documents; (c) the existence of any claim, set-off, defense or other right which the
Borrower may have at any time against the Issuer, the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any person or
entity for whom the Issuer, the Trustee, any such beneficiary or any such
transferee may be acting), or any other person or entity, whether in
connection with this Agreement, the transactions contemplated herein or
in the Related Documents or any unrelated transactions; (d) any statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever; or (e) payment by the Lender under the Letter of Credit against presentation
of a draft or certificate which does not comply with the terms of the
Letter of Credit. SECTION 7.15. Liability of the Lender. The Borrower assumes all risks of the
acts or omissions of the Issuer, the Trustee or any beneficiary or transferee
of the Letter of Credit with respect to its use of the Letter of Credit.
Neither the Lender nor any of their employees, officers or directors, in its or
their capacity as issuer of the Letter of Credit shall be liable or responsible
for: (a) the use which may be made of the Letter of Credit or for any acts or
omissions of the Issuer, the Trustee or any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; or -19-




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(c) payment by the Lender against presentation of documents which do not
comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of
Credit; except that the Borrower shall have a claim against the Lender, and the
Lender shall be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages (including
reasonable attorneys fees, costs and expenses) suffered by the Borrower
which were caused by: (1) the willful misconduct or gross negligence of the Lender or its
officers, directors, agents or employees in determining whether
documents presented under the Letter of Credit comply with the
terms of the Letter of Credit; or (2) the willful failure or gross negligence of the Lender or its
officers, directors, agents or employees to pay under the Letter of
Credit after the presentation to it by the Trustee or an approved
successor trustee of a draw and certificate strictly complying with
the terms and conditions of the Letter of Credit. SECTION 7.16. Security Interest in Funds and Bonds. As additional security for
payment of its obligations under this Agreement, the Borrower hereby grants a
security interest to the Lender in all securities, assets, deposits in and
rights to payment from all funds now or hereafter on deposit in or otherwise a
part of any fund created by the Trustee under the Indenture or any and all
other accounts created under the Indenture, including Bonds and Bond proceeds
held pursuant to the Indenture, and in the proceeds realized from the
investment of any such items, and in any and all Bonds and substitutions of
such Bonds at any time held by the Trustee; and the Borrower hereby consents to
the Lenders appointment of the Trustee as the Lenders agent to perfect the
Lenders security interest in such funds and other assets. The security
interest granted hereunder shall be subordinate to the Trustees right to apply
such funds in accordance with the Indenture and subordinate to the rights of
holders of the Bonds in and to such funds. All payments on Bonds or funds held
by the Trustee as agent for the Lender under this Section 7.16, including
(without limitation) any payment of principal or interest or proceeds of sale,
shall be paid directly to the Lender. All such payments received by the Lender
shall be credited against the Borrowers Obligation of Reimbursement. The
Lender shall be entitled to exercise all of the rights of an owner of the Bonds
held by the Trustee as agent for the Lender with respect to voting, consenting
and directing the Trustee as if the Lender were the owner of such Bonds, and
the Borrower hereby grants and assigns to the Lender all such rights. SECTION 7.17. Term. This Agreement shall automatically terminate upon the
later of (i) expiration of the Letter of Credit, or (ii) payment in full of the
Obligation of Reimbursement and all other amounts due and payable by the
Borrower to the Lender hereunder or under the documents related hereto. SECTION 7.18. Financial Covenants. It is acknowledged that the Borrower and
the Lender have entered into the Credit Agreement concerning the extension by
the Lender to the Borrower of a line of credit. The failure by the Borrower to
comply with any of the financial covenants in such credit agreement, as the
same may be amended, restated or reduced, shall, pursuant to Section 6.1(b)
hereof, constitute an Event of Default hereunder. In the event that during the
term -20-




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of this Agreement, the Borrower and the Lender are no longer parties to a
credit or similar agreement, the financial covenants set forth in the most
recent credit or similar agreement shall continue to be binding on
the Borrower for the purposes of this Agreement unless and until the Borrower
and the Lender agree in writing to modify or amend such financial covenants. SECTION 7.19. USA Patriot Act. The Lender hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the Patriot Act), the Lender is
required to obtain, verify and record information that identifies the Borrower,
which information includes the name and address of the Borrower and other
information that will allow the Lender to identify the Borrower in accordance
with the Patriot Act. THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK -21-




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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of 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 PresidentBy:
    
    /s/ STEVEN NOLANDERIts: Officer
 [SIGNATURE PAGE TO REIMBURSEMENT AGREEMENT] -22-




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EXHIBIT A The Borrower has been named as a defendant in 40 product liability
lawsuits filed by 37 different plaintiffs (three plaintiffs have filed more
than one case) alleging that the plaintiffs suffered injuries due to the
defective nature of INTERGEL Solution manufactured by the Borrower and marketed
by ETHICON. In the majority of the cases, the Borrower has not yet been served
with the complaints. The Borrower has been served in the following cases, in
addition to those cases disclosed in the Borrowers Quarterly Report on Form
10-Q for the Quarter ended March 31, 2004:  1.
    
    Rebecca J. Rezendes v. Lifecore Biomedical, Inc. et al.
(Carver County District Court, MN)2.
    
    Melissa Powers v. Ethicon, Inc. et al. (Orleans Parish,
Louisiana)3.
    
    Natalie Sanders v. Johnson & Johnson, Inc. et al. (D. N.J.)4.
    
    Monika Shumbo-Poissant v. Lifecore Biomedical, Inc. et al.
(Superior Court of New Jersey, Middlesex County) ETHICON is currently defending the Borrower in each of these lawsuits.
The Borrower has also received claim letters alleging claims similar to the
complaints listed above as follows:  1.
    
    Heather Dunne, letter dated October 9, 20032.
    
    Margery LeRoux, letter dated September 9, 20033.
    
    Kenna Schaller, letter dated July 10, 20034.
    
    Julia Smith, letter dated May 10, 2004 ETHICON is responding to the above-listed claim letters on behalf of the
Borrower. In addition to the above-listed claim letters, the Borrower has
received a claim letter on behalf of Melody Whitfield, dated October 2, 2003,
relating to injuries unrelated to INTERGEL Solution suffered in a second-look
surgery as part of a clinical trial. Whitfield is seeking $195,000 in damages.
The Borrower has not received any response to its letter dated February 19,
2003 disputing her claim. ETHICON has denied Borrowers tender of defense of
Whitfields claim. -23-