Document:

exv4w2

 

Exhibit 4.2

$5,630,000

City of Chaska, Minnesota

Variable Rate Demand Purchase Revenue Bonds

(Lifecore Biomedical, Inc. Project)

Series 2004

INDENTURE OF TRUST

Dated as of August 1, 2004

Between

CITY OF CHASKA, MINNESOTA

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

This instrument was drafted by:

Dorsey & Whitney LLP

Suite 1500

50 South Sixth Street

Minneapolis, Minnesota 55402-1498

 

 

TABLE OF CONTENTS

(This Table of Contents is not a part of the Indenture of Trust and is only for
convenience of reference.)

	 	 	 	 	 
	PARTIES
	 	 	1	 
	RECITALS
	 	 	1	 
	GRANTING CLAUSES
	 	 	1	 
	ARTICLE I DEFINITIONS
	 	 	3	 
	ARTICLE II THE BONDS
	 	 	11	 
	Section 2.01. Authorized Amount of Bonds
	 	 	11	 
	Section 2.02. Issuance of Bonds
	 	 	11	 
	Section 2.03. Execution; Limited Obligations
	 	 	13	 
	Section 2.04. Authentication
	 	 	13	 
	Section 2.05. Form of Bonds
	 	 	14	 
	Section 2.06. Delivery of Bonds
	 	 	14	 
	Section 2.07. Mutilated, Lost, Stolen or Destroyed Bonds
	 	 	14	 
	Section 2.08. Transfer of Bonds; Persons Treated as Owners
	 	 	14	 
	Section 2.09. Destruction of Bonds
	 	 	15	 
	Section 2.10. Temporary Bonds
	 	 	15	 
	Section 2.11. Book-Entry System
	 	 	16	 
	ARTICLE III REDEMPTION OF BONDS BEFORE MATURITY
	 	 	18	 
	Section 3.01. Extraordinary Redemption
	 	 	18	 
	Section 3.02. Optional Redemption
	 	 	18	 
	Section 3.03. Sinking Fund Redemption
	 	 	18	 
	Section 3.04. Notice of Redemption
	 	 	20	 
	Section 3.05. Redemption Payments
	 	 	20	 
	Section 3.06. Cancellation
	 	 	20	 
	Section 3.07. Partial Redemption of Bonds
	 	 	20	 
	ARTICLE IV CONVERSION OF INTEREST RATE; DEMAND PURCHASE OPTION
	 	 	21	 
	Section 4.01. Conversion of Interest Rate on Optional Conversion Date
	 	 	21	 
	Section 4.02. Conversion of Interest Rate on Automatic Conversion Date
	 	 	22	 
	Section 4.03. [Intentionally Omitted]
	 	 	22	 
	Section 4.04. Conditions to Conversion
	 	 	22	 
	Section 4.05. Additional Notices
	 	 	23	 
	Section 4.06. Demand Purchase Option
	 	 	23	 
	Section 4.07. Funds for Purchase of Bonds
	 	 	23	 
	Section 4.08. Delivery of Purchased Bonds
	 	 	23	 
	Section 4.09. Delivery of Proceeds of Sale of Purchased Bonds
	 	 	24	 
	Section 4.10. Duties of Trustee with Respect to Purchase of Bonds
	 	 	24	 
	Section 4.11. Election by Bank to Purchase Bonds
	 	 	25	 

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	ARTICLE V GENERAL COVENANTS
	 	 	26	 
	Section 5.01. Payment of Principal, Premium, if any, and Interest
	 	 	26	 
	Section 5.02. Performance of Covenants
	 	 	26	 
	Section 5.03. Instruments of Further Assurance
	 	 	26	 
	Section 5.04. Recording and Filing
	 	 	26	 
	Section 5.05. Inspection of Books
	 	 	27	 
	Section 5.06. Rights Under Agreement
	 	 	27	 
	ARTICLE VI REVENUES AND FUNDS
	 	 	28	 
	Section 6.01. Creation of the Bond Fund
	 	 	28	 
	Section 6.02. Payments into the Bond Fund
	 	 	28	 
	Section 6.03. Use of Money in the Bond Fund
	 	 	28	 
	Section 6.04. Rebate Fund
	 	 	28	 
	Section 6.05. Payments into the Rebate Fund; Investments
	 	 	28	 
	Section 6.06. Disbursements from Rebate Fund
	 	 	29	 
	Section 6.07. Creation of the Project Fund
	 	 	29	 
	Section 6.08. Payments into the Project Fund
	 	 	29	 
	Section 6.09. Disbursements from Project Fund
	 	 	29	 
	Section 6.10. Nonpresentment of Bonds
	 	 	29	 
	Section 6.11. Money to be Held in Trust
	 	 	30	 
	Section 6.12. Repayment to the Bank and the Borrower from the Bond Fund or
the Rebate Fund
	 	 	30	 
	Section 6.13. Letter of Credit and Substitute Letter of Credit
	 	 	30	 
	ARTICLE VII INVESTMENT OF MONEY
	 	 	31	 
	ARTICLE VIII DISCHARGE OF INDENTURE
	 	 	32	 
	Section 8.01. Discharge of Indenture
	 	 	32	 
	Section 8.02. Defeasance of Bonds
	 	 	32	 
	ARTICLE IX DEFAULTS AND REMEDIES
	 	 	34	 
	Section 9.01. Defaults
	 	 	34	 
	Section 9.02. Acceleration
	 	 	34	 
	Section 9.03. Other Remedies; Rights of Owners of Bonds
	 	 	35	 
	Section 9.04. Right of Owners of Bonds to Direct Proceedings
	 	 	35	 
	Section 9.05. [Intentionally Omitted]
	 	 	35	 
	Section 9.06. Waiver
	 	 	35	 
	Section 9.07. Application of Money
	 	 	36	 
	Section 9.08. Remedies Vested in Trustee
	 	 	37	 
	Section 9.09. Rights and Remedies of Owners of Bonds
	 	 	37	 
	Section 9.10. Termination of Proceedings
	 	 	38	 
	Section 9.11. Waivers of Default
	 	 	38	 
	ARTICLE X TRUSTEE
	 	 	40	 
	Section 10.01. Acceptance of Trusts
	 	 	40	 
	Section 10.02. Fees, Charges and Expenses of the Trustee
	 	 	42	 
	Section 10.03. Notice to Owners of Bonds
	 	 	42	 

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	Section 10.04. Intervention by the Trustee
	 	 	42	 
	Section 10.05. Successor Trustee
	 	 	42	 
	Section 10.06. Resignation by the Trustee
	 	 	43	 
	Section 10.07. Removal of the Trustee
	 	 	43	 
	Section 10.08. Appointment of Successor Trustee by Owners of Bonds
	 	 	43	 
	Section 10.09. Acceptance by Successor Trustee
	 	 	43	 
	Section 10.10. Appointment of Co-Trustee
	 	 	44	 
	Section 10.11. Notice to Owners
	 	 	44	 
	Section 10.12. Notices to Rating Agency
	 	 	44	 
	ARTICLE XI SUPPLEMENTAL INDENTURES
	 	 	45	 
	Section 11.01. Supplemental Indentures Not Requiring Consent of
Owners of Bonds
	 	 	45	 
	Section 11.02. Supplemental Indentures Requiring Consent of Owners
of Bonds
	 	 	45	 
	ARTICLE XII AMENDMENT OF AGREEMENT
	 	 	47	 
	Section 12.01. Amendments to Agreement Not Requiring Consent of
Owners of Bonds
	 	 	47	 
	Section 12.02. Amendments to Agreement Requiring Consent
of Owners of Bonds
	 	 	47	 
	ARTICLE XIII MISCELLANEOUS
	 	 	48	 
	Section 13.01. Consents of Owners of Bonds
	 	 	48	 
	Section 13.02. Limitation of Rights
	 	 	48	 
	Section 13.03. Severability
	 	 	48	 
	Section 13.04. Notices
	 	 	48	 
	Section 13.05. Payments Due on Saturdays, Sundays and Holidays
	 	 	49	 
	Section 13.06. Counterparts
	 	 	49	 
	Section 13.07. Applicable Provisions of Law
	 	 	49	 
	Section 13.08. Rules of Interpretation
	 	 	50	 
	Section 13.09. Captions
	 	 	50	 
	Section 13.10. Certain References to Bank, Bank, Letter of Credit, Etc.
	 	 	50	 
	Section 13.11. Limitation of Issuer’s Liability
	 	 	50	 
	EXHIBIT A (VARIABLE RATE FORM OF BOND)
	 	 	A-1	 
	EXHIBIT B (FIXED RATE FORM OF BOND)
	 	 	B-1	 

iii

 

 

INDENTURE OF TRUST

     This INDENTURE OF TRUST is dated and entered into as of August 1, 2004,
between CITY OF CHASKA, MINNESOTA, a Minnesota municipal corporation (the
“City” or the “Issuer”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national
association organized under the laws of the United States of America, as
trustee (referred to in such capacity as the “Trustee”).

W I T N E S S E T H

     WHEREAS, Lifecore Biomedical, Inc., a Minnesota corporation (the
“Borrower”), has requested that the Issuer issue its refunding revenue bonds
pursuant to Minnesota Statutes, Sections 469.153 to 169.1651, as amended (the
“Act”), to provide refinancing with respect to a “project,” within the meaning
of the Act (as more fully described in the Loan Agreement referred to below,
the “Project”) undertaken by the Borrower; and

     WHEREAS, as authorized by the Act, the Issuer proposes to issue its
Variable Rate Demand Purchase Revenue Bonds (Lifecore Biomedical, Inc.
Project), Series 2004, in the aggregate principal amount of $5,630,000 (the
“Bonds”) pursuant to this Indenture and to lend the proceeds thereof to the
Borrower pursuant to a Loan Agreement (the “Agreement”) of even date herewith
between the Issuer and the Borrower, in order to provide refinancing with
respect to the Project, all in accordance with the provisions hereof and of the
Agreement; and

     WHEREAS, all things necessary to make the Bonds when authenticated by the
Trustee and issued as in this Indenture provided, the valid, binding and legal
obligations of the Issuer according to the import thereof, and to constitute
this Indenture a valid assignment and pledge of the payments under the
Agreement (except for amounts payable to the Issuer under Sections 4.04(b),
6.01, 7.04 and 7.05 of the Agreement) for payment of the principal of, premium,
if any, and interest on the Bonds, and to constitute this Indenture a valid
assignment of the rights of the Issuer under the Agreement except as otherwise
stated herein, have been done and performed, and the creation, execution and
delivery of this Indenture, and the issuance of the Bonds, subject to the terms
hereof, have in all respects been duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

GRANTING CLAUSES

     That the Issuer, in consideration of the premises and the acceptance by
the Trustee of the trusts hereby created and of the purchase and acceptance of
the Bonds by the Owners thereof, and of the sum of one dollar, lawful money of
the United States of America, to it duly paid by the Trustee at or before the
execution and delivery of these presents, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, in order to secure
the payment of the principal of, premium, if any, and interest on the Bonds
according to their tenor and effect and to secure the performance and
observance by the Issuer of all the covenants expressed herein and in the
Bonds, does hereby assign and grant a security interest in the

 

 

following to the Trustee, and its successors in trust and assigns forever,
for the securing of the performance of the obligations of the Issuer
hereinafter set forth:

GRANTING CLAUSE FIRST

     All right, title and interest of the Issuer in and to the Agreement,
including, but not limited to, the present and continuing right to make claim
for, collect, receive and receipt for any of the sums, amounts, income,
revenues, issues and profits and any other sums of money payable or receivable
under the Agreement, to bring actions and proceedings thereunder or for the
enforcement thereof, and to do any and all things which the Issuer is or may
become entitled to do under the Agreement, except for the rights of the Issuer
under Sections 4.04, 6.01, 7.04 and 7.05 thereof;

GRANTING CLAUSE SECOND

     All right, title and interest of the Issuer in and to all money and
securities from time to time held by the Trustee under the terms of this
Indenture;

GRANTING CLAUSE THIRD

     Any and all other property rights and interests of every kind and nature
from time to time hereafter by delivery or by writing of any kind granted,
bargained, sold, alienated, demised, released, conveyed, assigned, transferred,
mortgaged, pledged, hypothecated or otherwise subjected hereto, as and for
additional security herewith, by the Borrower or any other person on its behalf
or with its written consent, including but not limited to the Letter of Credit
described herein and proceeds thereof, and the Trustee is hereby authorized to
receive any and all such property at any and all times and to hold and apply
the same subject to the terms hereof (all such property hereinafter designated
the “Trust Estate”);

     TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned
or hereafter acquired, unto the Trustee and its respective successors in said
trust and assigns forever;

     IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the
equal and proportionate benefit, security and protection of all present and
future Owners of the Bonds, from time to time, issued under and secured by this
Indenture without privilege, priority or distinction as to the lien or
otherwise of any of the Bonds over any of the other Bonds except in the case of
funds held hereunder for the benefit of particular Owners of Bonds, and for the
benefit of the Bank to the extent provided herein;

     PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of, premium, if any, and
interest on the Bonds due or to become due thereon, at the times and in the
manner set forth in the Bonds according to the true intent and meaning thereof,
and shall cause the payments to be made on the Bonds as required hereunder, or
shall provide, as permitted hereby, for the payment thereof by depositing with
the Trustee the entire amount due or to become due thereon, and shall well and
truly cause to be kept, performed and observed all of its covenants and
conditions pursuant to the terms of this Indenture, and shall pay or cause to
be paid to the Trustee all sums of money due or to become

2

 

due to it in accordance with the terms and provisions hereof, then upon
the final payment thereof this Indenture and the rights hereby granted shall
cease, determine and be void, except to the extent specifically provided in
Article VIII hereof; otherwise this Indenture shall remain in full force and
effect.

     THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all
Bonds issued and secured hereunder are to be issued, authenticated and
delivered and all said property, rights and interests, including, without
limitation, the amounts payable under the Agreement and any other amounts
hereby assigned and pledged are to be dealt with and disposed of under, upon
and subject to the terms, conditions, stipulations, covenants, agreements,
trusts, uses and purposes as herein expressed, and the Issuer has agreed and
covenanted, and does hereby agree and covenant with the Trustee and with the
respective Owners of the Bonds as follows:

ARTICLE I

DEFINITIONS

     All capitalized, undefined terms used herein shall have the meanings
assigned to such terms in Article I of the Agreement. In addition, the
following words and phrases shall have the following meanings:

     “Act” means Minnesota Statutes, Sections 469.152.152 to 469.1651, as
amended.

     “Agreement” or “Loan Agreement” means the Loan Agreement of even date
herewith between the Issuer and the Borrower, as amended or supplemented from
time to time.

     “Authorized Borrower Representative” means Borrower Representative.

     “Automatic Conversion Date” means the interest payment date immediately
preceding the Letter of Credit Termination Date; provided, that if the Letter
of Credit Termination Date falls on or after the final maturity date of the
Bonds, neither such date nor the interest payment date immediately preceding
such date shall constitute an Automatic Conversion Date.

     “Bank” means (i) M&I Marshall & Ilsley Bank, a state banking association
organized and existing under the laws of the State of Wisconsin, in its
capacity as issuer of the Letter of Credit, and (ii) any Substitute Bank.

     “Bank Insolvency” means a decree or order of a court or agency or
supervisory authority, having jurisdiction in the premises for the appointment
of a conservator or receiver or liquidator of any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceeding, or for the
winding-up or liquidation of its affairs has been entered against the Bank or
the Bank has consented to the appointment of a conservator or receiver or
liquidator in any such proceedings of or relating to the Bank or relating to
all or substantially all of its property.

     “Beneficial Owner” means with respect to Bonds while in Book-Entry Form,
each person who beneficially owns such Bond(s) and on whose behalf, directly or
indirectly, such Bond is held by the Depository pursuant to a Book-Entry
System.

3

 

     “Bond Fund” means the fund created in Section 6.01 hereof.

     “Bond Registrar” means the Trustee, as the registrar for the Bonds,
appointed by the Issuer pursuant to Section 2.08 hereof.

     “Bond Resolution” means the resolution adopted by the Issuer on July 19,
2004, authorizing the issuance of the Series 2004 Bonds, as amended or
supplemented from time to time.

     “Bonds” means the Variable Rate Demand Purchase Revenue Bonds (Lifecore
Biomedical, Inc. Project), Series 2004, issued by the Issuer pursuant to this
Indenture.

     “Book-Entry Form” means Bonds which are held in the name of the Depository
(or its nominee) with each maturity evidenced by a single Bond certificate.

     “Book-Entry System” means a system of record keeping, securities clearance
and funds transfer and settlement maintained for securities by the Depository
and Participants.

     “Borrower” means Lifecore Biomedical, Inc., a Minnesota corporation, its
successors and assigns.

     “Borrower Representative” or “Authorized Borrower Representative” means
the person or persons at the time designated to act on behalf of the Borrower
by a written certificate furnished to the Issuer and the Trustee containing the
specimen signatures of such person or persons and signed on behalf of the
Borrower by its President, any Vice President or Secretary. Such certificate
may designate an alternate or alternates.

     “Business Day” means a day which in each of the cities where the principal
corporate trust offices of the Trustee and the principal offices of the Bank
are located is not a Saturday, a Sunday or a day on which banking institutions
are authorized or required by law to close.

     “Call Date” means, whenever used with reference to the redemption of the
Refunded Bonds, September 1, 2004.

     “Code” or “Internal Revenue Code” means the Internal Revenue Code of 1986,
as amended.

     “Completion Date” shall have the meaning provided in the Loan Agreement.

     “Conversion Date” means the earlier to occur of either the Optional
Conversion Date or the Automatic Conversion Date.

     “Conversion Option” means the option granted to the Borrower pursuant to
Section 4.01 hereof, as a result of which the interest rate on the Bonds is
converted from the Variable Rate to the Fixed Rates as of the Optional
Conversion Date.

4

 

     “Credit Agreement” means (i) the Reimbursement Agreement, and (ii) the
letter of credit agreement or reimbursement agreement between the Borrower and
any Substitute Bank, as each of the same may be amended in accordance with its
terms.

     “Date of Issuance” means the date on which the Bonds are initially
authenticated and delivered pursuant to Section 2.06 hereof.

     “Default” means any Default under this Indenture as specified in and
defined by Section 9.01 hereof.

     “Demand Purchase Option” means the option granted to Owners of Bonds to
require that Bonds be purchased prior to the Conversion Date pursuant to
Section 4.06 hereof.

     “Depository” means The Depository Trust Company in New York, New York, its
successors or assigns, or any other person who shall be a Holder of all Bonds
directly or indirectly for the benefit of Beneficial Owners and approved by the
Borrower and Original Purchaser to act as the Depository; provided that any
Depository shall be registered or qualified as a “clearing agency” within the
meaning of Section 17A of the Securities Exchange Act of 1934, as amended.

     “Determination of Taxability” means the issuance of a statutory notice of
deficiency by the Internal Revenue Service, or a ruling of the National Office
or any District Office of the Internal Revenue Service, or a final decision by
any court of competent jurisdiction that interest on the Bonds is includible in
the gross income of the recipient under Section 103 and related Sections of the
Internal Revenue Code and regulations thereunder, except for any period during
which a Bond is owned by a “substantial user” or “related person,” within the
meaning of Section 147(a) of the Internal Revenue Code, provided that the
period for a contest or appeal, if any, of such action, ruling or decision has
expired without any such appeal or contest having been instituted, or, if
instituted, such contest or appeal has been unsuccessfully concluded.

     “First Optional Redemption Date” means the September 1 occurring in the
year which is a number of years after the Conversion Date equal to the number
of years between the September 1 immediately following the Conversion Date
(unless the Conversion Date is a September 1, in which case from such September
1), and September 1, 2020, multiplied by 1/2 and rounded up to the nearest
whole number.

     “Fixed Rates” means the interest rate or rates in effect on the Bonds from
and after the Conversion Date, as said rate or rates are determined in
accordance with Section 2.02(d) hereof.

     “Governmental Obligations” means any of the following which are
noncallable:

     (a) direct general obligations of, or obligations the payment of the
principal of and interest on which are unconditionally guaranteed by, the
United States of America;

     (b) bonds, debentures or notes issued by Federal National Mortgage
Association, Government National Mortgage Association, Federal Financing
Bank, Federal Farm Credit Banks, Federal Land Banks, Federal Home Loan
Banks, Farmers Home Administration, Federal Home Loan Mortgage
Corporation or any of their

5

 

successors or any other comparable federal agency hereafter created
to the extent that said obligations are unconditionally guaranteed by the
United States of America; and

     (c) shares of an investment company registered under the Federal
Investment Company Act of 1940 whose shares are registered under the
Securities Act of 1933 and whose only investments are in obligations
described in (a) or (b) above.

     “Indenture” means this Indenture of Trust dated as of August 1, 2004, as
the same may be amended or supplemented in accordance with its terms.

     “Independent Counsel” shall have the meaning provided in the Loan
Agreement.

     “Interest Payment Date” means, prior to the Conversion Date, the first day
of each month; the Conversion Date; and, after the Conversion Date, September 1
and March l of each year. If, prior to the Conversion Date, the first day of
any month is not a Business Day then payment of interest is calculated through
the last day of the preceding month and is payable on the first Business Day of
the next succeeding month.

     “Issuer” or “City” means the City of Chaska, Minnesota, a Minnesota
municipal corporation, its successors and assigns.

     “Letter of Credit” means (i) that certain direct-pay Irrevocable Letter of
Credit dated the Date of Issuance and issued by M&I Marshall & Ilsley Bank, as
the same may be extended from time to time (provided, however, that each such
extended expiration date shall be no earlier than one Business Day after an
interest payment date for the Bonds), and (ii) any Substitute Letter of Credit,
in each case securing the payment of the principal of, interest on and Purchase
Price of the Bonds in accordance with the terms hereof.

     “Letter of Credit Termination Date” means the later of (i) that date upon
which the Letter of Credit shall expire or terminate pursuant to its terms, or
(ii) the date of expiration or termination of a Substitute Letter of Credit.

     “Letter of Representations” means any Letter of Representations from the
Issuer to the Depository, providing for the issuance of the Bonds in Book-Entry
Form.

     “Loan Agreement” means the Agreement.

     “Optional Conversion Date” means that date, which shall be a Business Day
on or after December 1, 2004, from and after which the interest rate on the
Bonds is converted from the Variable Rate to the Fixed Rates as a result of the
exercise of the Conversion Option by the Borrower.

     “Original Purchaser” means Northland Securities, Inc.

     “Outstanding” or “Bonds Outstanding” means all Bonds which have been
authenticated and delivered under this Indenture, except:

6

 

     (a) Bonds canceled after purchase in the open market or because of
payment at or redemption prior to maturity;

     (b) Bonds paid or deemed to be paid pursuant to Article VIII hereof;

     (c) Bonds in lieu of which others have been authenticated under
Section 2.07 or Section 2.08 hereof; and

     (d) Bonds in lieu of which others have been issued pursuant to
Section 2.04(b) hereof.

     “Owner” means the person or persons in whose name or names a Bond shall be
registered on the books or records of the Bond Registrar kept for that purpose
in accordance with provisions of this Indenture.

     “Participants” means participants of the Depository in connection with the
Book-Entry System.

     “Pledged Bonds” means any Bonds which, at the time of determination
thereof, are pledged in favor of the Bank pursuant to the Credit Agreement or
otherwise.

     “Preliminary Expenditures” means architectural, engineering, surveying,
soil testing, reimbursement bond issuance, and similar costs that are incurred
prior to commencement of acquisition, construction, or rehabilitation of a
project, other than land acquisition, site preparation, and similar costs
incident to commencement of construction; provided, however, that such
expenditures in the aggregate are not in excess of 20% of the aggregate issue
price of the Bonds, all within the meaning of Treasury Regulation, §
1.150-2(f)(2).

     “Prior Indenture” means the Trust Indenture dated as of September 1, 1990,
between the Issuer and the Prior Trustee.

     “Prior Trustee” means Wells Fargo Bank, National Association
(successor-by-merger to “Norwest Bank Minnesota, National Association”), acting
in the capacity of trustee under the Prior Indenture.

     “Project” shall have the meaning generally set forth in the recitals
hereto, and as more fully set forth in the Loan Agreement.

     “Project Costs” means, without intending thereby to limit or restrict any
proper definition of such cost under any applicable laws and generally accepted
accounting principles, the following:

     (a) Payment of the outstanding principal amount of the Refunded
Bonds owing on the Call Date; and

     (b) Underwriting fees and commissions, title insurance premiums,
abstracting and filing fees, legal expenses and fees, fiscal consultant
fees and expenses, costs of

7

 

audits and of preparing, offering and issuing any of the Bonds, and
initial fees of the Trustee; and

     (c) Any other obligation or expense heretofore or hereafter incurred
by the Borrower in connection with the acquisition and construction of
the Project defined as and constituting a proper Project cost under the
Act and approved by the Authorized Borrower Representative.

     Provided, however, that notwithstanding the foregoing, Project Costs
shall be limited to any extent provided in Section 3.03 of the Loan
Agreement; and provided further, however, that Project Costs shall not
include any costs expended by the Borrower prior to the date that is
sixty (60) days prior to the Reimbursement Declaration Date for any of
the above items, except for (A) any Preliminary Expenditures, and (B)
expenditures not in excess of the lesser of $100,000 or 5% of the
proceeds of the Bonds, with respect to which costs described in either
(A) or (B) above, such sixty (60) day limitation shall not apply.

     “Project Equipment” shall have the meaning set forth in the Loan
Agreement.

     “Project Fund” means the fund created in Section 6.07 hereof.

     “Project Supervisor” means the Project Supervisor appointed pursuant to
Section 3.07 of the Loan Agreement, and includes any alternate or alternates.

     “Purchase Price” means an amount equal to 100% of the principal amount of
any Bond tendered or deemed tendered pursuant to Section 4.01, 4.02, 4.06 or
4.11 hereof, plus, in the case of purchase pursuant to Section 4.06 and 4.11
hereof, accrued and unpaid interest thereon to the date of purchase.

     “Qualified Investments” means those investments enumerated in Article VII
hereof, but only to the extent authorized by the Act.

     “Rating Agency” means any nationally recognized bond rating agency or
service which at the time has issued a rating on the Bonds. During any period
in which the Bonds are not rated by a Rating Agency, references herein to
“Rating Agency” shall be of no force or effect.

     “Rebate Fund” means the fund created in Section 6.04 hereof.

     “Record Date” means prior to the Conversion Date, that day which is the
Business Day immediately preceding each interest payment date, and on and after
the Conversion Date, the fifteenth day of the month prior to each interest
payment date.

     “Reference Rate” means the rate publicly announced by M&I Marshall &
Ilsley Bank from time to time as its base rate or prime rate; changes in the
Reference Rate shall be on the day they are announced; M&I Marshall & Ilsley
Bank may lend to its customers at rates that are at, above or below the
Reference Rate.

8

 

     “Refunded Bonds” means the Industrial Development Revenue Bonds (Lifecore
Biomedical, Inc. Project), Series 1990, issued by the Issuer in the original
aggregate principal amount of $7,000,000, pursuant to the Prior Indenture.

     “Reimbursement Agreement” means the Reimbursement Agreement of even date
herewith between the Borrower and the Bank, as the same may be amended or
supplemented from time to time in accordance with its terms.

     “Reimbursement Declaration Date” means the date, if any, on which the
Borrower adopted with respect to the Project an official intent, within the
meaning of Treasury Regulation, Section 1.150-2.

     “Remarketing Agent” means the Remarketing Agent acting as such under the
Remarketing Agreement. “Principal Office” of the Remarketing Agent means the
principal office of the Remarketing Agent designated in the Remarketing
Agreement.

     “Remarketing Agreement” means the Remarketing Agreement of even date
herewith between the Borrower and Northland Securities, Inc., and any
amendments or supplements thereto.

     “Series 2004 Bonds” means the Bonds.

     “Sinking Fund” means the Sinking Fund established by the Trustee pursuant
to Section 3.03 hereof as part of the Bond Fund.

     “State” means the State of Minnesota.

     “Substitute Bank” means a commercial bank, savings and loan association,
insurance company or other financial institution which has issued a Substitute
Letter of Credit.

     “Substitute Letter of Credit” means a direct-pay letter of credit,
insurance policy, guaranty or other credit device delivered to the Trustee in
accordance with Section 4.10 of the Agreement (i) issued by the Bank or a
Substitute Bank, (ii) replacing any existing Letter of Credit, (iii) dated as
of a date prior to the expiration or termination date of the Letter of Credit
for which the same is to be substituted, (iv) which shall expire on a date
which is no earlier than one Business Day after an interest payment date for
the Bonds and (v) issued on substantially identical terms and conditions as the
then-existing Letter of Credit, except that the Substitute Letter of Credit may
expire on a date which is later than the expiration date of the Letter of
Credit being replaced, and except that the stated amount of the Substitute
Letter of Credit shall equal the sum of (A) the aggregate principal amount of
Bonds at the time Outstanding, plus (B) an amount equal to at least 45 days’
interest (computed at the maximum interest rate applicable to the Bonds) on all
Bonds at the time Outstanding.

     “Tax Exemption Agreement” means the Tax Exemption Agreement of even date
herewith among the Issuer, the Borrower and the Trustee, as amended or
supplemented from time to time.

9

 

     “Trustee” means Wells Fargo Bank, National Association, and its successors
and any corporation resulting from or surviving any consolidation or merger to
which it or its successors may be a party and any successor trustee at the time
serving as successor trustee hereunder. “Principal Office” of the Trustee
means the address specified in Section 13.04 hereof or such other address as
may be designated in writing to the Issuer, the Remarketing Agent and the
Borrower.

     “Trust Estate” means the property conveyed to the Trustee pursuant to the
Granting Clauses hereof.

     “Variable Rate” means the interest rate in effect on the Bonds from the
date of issuance of the Bonds until (but not including) the Conversion Date, as
said rate is determined in accordance with Section 2.02(c) hereof.

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10

 

ARTICLE II

THE BONDS

     Section 2.01. Authorized Amount of Bonds. The total principal amount of Bonds that may be issued hereunder
is hereby expressly limited to $5,630,000.

     Section 2.02. Issuance of Bonds.

     (a) Prior to the Conversion Date, the Bonds shall be issuable in
fully registered form without coupons in authorized denominations of
$100,000 and, above $100,000, any integral multiple of $5,000. From and
after the Conversion Date, the Bonds shall be issuable in fully
registered form without coupons in authorized denominations of $5,000 or
any integral multiple thereof. Unless the Issuer shall otherwise direct,
the Bonds shall be lettered “R” and shall be numbered consecutively from
1 upward.

     (b) Each Bond shall be dated the date of its authentication and
shall bear interest, payable, so long as the Bonds bear interest at the
Variable Rate, on the first day of each month and on the Conversion Date,
commencing September 1, 2004, and payable from and after the Conversion
Date on September 1 and March 1 of each year, commencing on the September
1 or March 1 next following the Conversion Date, in each case from the
interest payment date next preceding the date thereof to which interest
has been paid or duly provided for, unless the date thereof is an
interest payment date to which interest has been paid or duly provided
for, in which case from the date thereof, or unless no interest has been
paid or duly provided for on the Bonds, in which case from the Date of
Issuance, until payment of the principal thereof has been made or duly
provided for. Notwithstanding the foregoing, any Bond dated after any
Record Date and before the following interest payment date shall bear
interest from such following interest payment date, provided, however,
that if the Issuer shall default in the payment of interest due on such
interest payment date, then such Bond shall bear interest from the next
preceding interest payment date to which interest has been paid or duly
provided for, or, if no interest has been paid or duly provided for on
the Bonds, from the Date of Issuance.

     The Bonds shall all mature on September 1, 2020, and shall be
subject to redemption on the terms and conditions and at the prices
specified in Article III hereof.

     (c) Prior to the Conversion Date, the Bonds shall bear interest at
the Variable Rate. From August 19, 2004, through and including August
23, 2004, the Variable Rate shall be equal to 1.28% per annum.
Thereafter, the Variable Rate shall be a variable rate of interest equal
to the lesser of:

     (i) 10.00% per annum, or

     (ii) that rate which the Remarketing Agent determines, as of
each Monday (or if the Remarketing Agent is not open for business
on any Monday then on the last preceding day on which it is open
for business) commencing Monday, August 23, 2004, is the minimum
rate which the Bonds would have to

11

 

bear in order to enable the
Remarketing Agent to remarket the Bonds at par on such date
(whether or not any Bonds are actually to be remarketed on such
date). In the event of any failure by the Remarketing Agent to so
reset the Variable Rate, the immediately preceding Variable Rate
shall remain in effect.

     The Variable Rate shall change each Tuesday (whether or not such day
is a Business Day) to the rate most recently determined in accordance
with the preceding paragraph.

     The Remarketing Agent shall notify the Trustee, and, upon request,
the Borrower, the Owners of the Bonds, and the Bank, by facsimile
(followed by written verification) of the initial Variable Rate and each
change in the Variable Rate by no later than 4:00 p.m. Minneapolis,
Minnesota, time on the day that a determination is made under clause (ii)
above. The determination of the Variable Rate by the Remarketing Agent
shall be conclusive and binding upon the Trustee, the Issuer, the
Borrower, the Bank and the Owners of the Bonds.

     (d) The Bonds shall bear interest at the Fixed Rates from and after
the Conversion Date until their stated maturities. The Fixed Rates shall
be provided for, as follows:

     (i) Not less than 25 days prior to the Conversion Date, the
Remarketing Agent shall deliver to the Trustee, the Bank and the
Borrower a schedule of the interest rate or rates constituting the
Fixed Rates. A separate interest rate shall be assigned to each
stated maturity, and shall be the rate which, in the judgment of
the Remarketing Agent, is the minimum rate which Bonds of such
stated maturity must bear in order to enable the Remarketing Agent
to remarket such Bonds at par on the Conversion Date.

     (ii) Upon receipt from the Remarketing Agent of the schedule
of the Fixed Rates, the Trustee shall cause the minimum
denomination of the Bonds to be reduced from $100,000 to $5,000 and
shall allocate to each $5,000 of principal amount of Bonds
Outstanding a stated maturity and a Fixed Rate in accordance with
the schedule of the Fixed Rates prepared by the Remarketing Agent.

     (iii) On the Conversion Date, the interest rate on the Bonds
shall be converted from the Variable Rate to the Fixed Rates
determined by the Remarketing Agent in accordance with clause (i).

     (e) Prior to the Conversion Date, interest on the Bonds shall be
computed on the basis of a 365-day or 366-day year, as the case may be,
and the actual number of days elapsed. On and after the Conversion Date,
interest on the Bonds shall be computed on the basis of a 360-day year of
twelve 30-day months. The principal of and premium, if
any, on the Bonds shall be payable in lawful money of the United
States of America at the designated office of the Trustee, or of its
successor in trust. The Purchase Price of the Bonds shall be payable in
lawful money of the United States of America by the Trustee to the Owner
of Bonds entitled to receive such Purchase Price at its address shown on
the

12

 

registration books maintained by the Trustee, unless otherwise
instructed by such Owner at least 24 hours prior to the time such
Purchase Price is due. Payment of interest on the Bonds shall be made on
each interest payment date to the Owner thereof as of the applicable
Record Date by check mailed by the Trustee to such Owner at its address
as it appears on the registration books maintained by the Trustee or at
such other address as is furnished to the Trustee in writing by such
Owner, or in such other manner as may be mutually acceptable to the
Trustee and the Owner of any Bond, including payment made by wire
transfer.

     Section 2.03. Execution; Limited Obligations. The Bonds shall be executed on behalf of the Issuer with the
manual or facsimile signature of one or more officers of the Issuer. All
authorized facsimile signatures shall have the same force and effect as if
manually signed. The Bonds shall not be general obligations of the Issuer but
shall be limited and special obligations payable solely from the amounts
payable under the Agreement and other amounts specifically pledged therefor
under this Indenture, and shall be a valid claim of the respective Owners
thereof only against the Bond Fund and other money held therefor by the Trustee
and the amounts payable under the Agreement or otherwise pledged therefor,
which amounts are hereby pledged, assigned and otherwise secured for the equal
and ratable payment of the Bonds and shall be used for no other purpose than to
pay the principal of, premium, if any, and interest on the Bonds, except as may
be otherwise expressly authorized in this Indenture. The principal of,
premium, if any, and interest on the Bonds shall be payable solely and only
from the Bond Fund, except as otherwise specifically provided hereby. Neither
the State, nor any political subdivision thereof or body corporate and politic
of the State other than the Issuer shall in any event be liable for the payment
of the principal of or interest on the Bonds or for the performance of any
pledge, obligation or agreement of any kind whatsoever of Issuer, and none of
the Bonds or any of Issuer’s agreements or obligations hereunder or in the
Bonds shall be construed to constitute an indebtedness of the State or any
political subdivision or body corporate and politic of the State other than the
Issuer, within the meaning of any constitutional or statutory provision
whatsoever. Neither the faith and credit nor the taxing power of Issuer is
pledged to the payment of principal of or interest on the Bonds.

     Section 2.04. Authentication.

     (a) No Bond shall be valid or obligatory for any purpose or entitled
to any security or benefit under this Indenture unless and until a
certificate of authentication on such Bond substantially in the form set
forth in either Exhibit A or Exhibit B attached hereto shall have been
duly executed by the Trustee, and such executed certificate of
authentication upon any such Bond shall be conclusive evidence that such
Bond has been authenticated and delivered under this Indenture. The
certificate of authentication on any Bond shall be deemed to have been
executed by the Trustee if signed by an authorized
signatory of the Trustee, but it shall not be necessary that the
same signatory execute the certificate of authentication on all of the
Bonds. No Bond shall be authenticated except in accordance with the
requirements of Section 2.06.

     (b) In the event any Bond is deemed tendered to the Trustee as
provided in Section 4.01 or 4.02 hereof but is not physically delivered
to the Trustee, the Issuer shall

13

 

execute and the Trustee shall
authenticate a new Bond of like denomination as that deemed tendered.

     Section 2.05. Form of Bonds. The
Bonds and the certificate of authentication to be endorsed thereon prior to the
Conversion Date are to be in substantially the form set forth in Exhibit A
attached hereto, with appropriate variations, omissions and insertions as
permitted or required by this Indenture. The Bonds which bear interest at the
Fixed Rates and the certificate of authentication to be endorsed thereon are to
be in substantially the form set forth in Exhibit B attached hereto, with
appropriate variations, omissions and insertions as permitted or required by
this Indenture.

     Section 2.06. Delivery of Bonds.
On the Date of Issuance the Issuer shall execute and deliver to the Trustee and
the Trustee shall authenticate the Bonds and deliver them as directed by the
Issuer as hereinafter in this Section provided.

     Notwithstanding anything else set forth herein, no Bond shall be
authenticated and delivered hereunder unless, prior thereto, the following
shall be furnished to or filed with the Trustee: (1) duly executed
counterparts of the Loan Agreement and this Indenture and the duly executed
Letter of Credit; (2) a certified copy of the Bond Resolution; (3) a request
and authorization to the Trustee on behalf of the Issuer and signed by the
Mayor, the City Administrator or any other officer of the Issuer to
authenticate and deliver the Bonds to or at the order of the Original Purchaser
thereof and for the purchase price therein identified; and (4) an opinion of
Dorsey & Whitney LLP, as Bond Counsel to the Borrower, to the effect that the
Bonds have been duly and validly issued and bear interest excludible from gross
income for purposes of federal income taxation. Upon payment of the proceeds
to the Trustee, the Trustee shall deposit such proceeds to the credit of the
Project Fund.

     Section 2.07. Mutilated, Lost, Stolen or Destroyed Bonds. In the event any Bond is mutilated, lost, stolen or
destroyed, the Issuer shall execute and the Trustee shall authenticate a new
Bond of like date and denomination as that mutilated, lost, stolen or
destroyed, provided that, in the case of any mutilated Bond, such mutilated
Bond shall first be surrendered to the Issuer or the Trustee, and in the case
of any lost, stolen, or destroyed Bond, there first shall be furnished to the
Issuer and the Trustee evidence of such loss, theft or destruction satisfactory
to the Issuer and the Trustee, together with an indemnity satisfactory to them
which indemnity shall, in any event, name the Trustee, the Issuer and the
Borrower as a beneficiary. In the event any such Bond shall have matured, the
Trustee, instead of issuing a duplicate Bond, may pay the same without
surrender thereof, making such requirements as it deems fit for its protection,
including a lost instrument bond. The Issuer and
the Trustee may charge the Owner of such Bond with their reasonable fees
and expenses for such service. In executing a new Bond, the Issuer may rely
conclusively upon a representation by the Trustee that the Trustee is satisfied
with the adequacy of the evidence presented concerning the mutilation, loss,
theft or destruction of any Bond.

     Section 2.08. Transfer of Bonds; Persons Treated as Owners. The Trustee shall keep records for the transfer
of the Bonds as provided in this Indenture, and the Trustee is hereby
constituted and appointed the Bond Registrar of the Issuer. Upon surrender for
transfer of any Bond at the designated office of the Trustee, duly endorsed for
transfer or accompanied by an

14

 

assignment duly executed by the Owner or his
attorney duly authorized in writing, the Issuer shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or transferees a
new Bond or Bonds in authorized denominations for a like aggregate principal
amount. Any Bond, upon surrender thereof at the designated office of the
Trustee duly endorsed for transfer or accompanied by an assignment duly
executed by the Owner or his attorney duly authorized in writing, may, at the
option of the Owner thereof, be exchanged for an equal aggregate principal
amount of Bonds of any denominations authorized by this Indenture in an
aggregate principal amount equal to the principal amount of such Bond. In each
case, the Trustee may require the payment by the Owner of the Bond requesting
exchange or transfer of any tax or other governmental charge required to be
paid with respect to such exchange or transfer.

     The Trustee shall not be required to exchange or register a transfer of
(a) any Bonds during the 15-day period next preceding the selection of Bonds to
be redeemed and thereafter until the date of the mailing of a notice of
redemption of Bonds selected for redemption, or (b) any Bonds selected, called
or being called for redemption in whole or in part except, in the case of any
Bond to be redeemed in part, the portion thereof not so to be redeemed;
provided that the foregoing shall not apply to the registration of transfer of
any Bond which has been tendered to the Trustee pursuant to Section 4.06
hereof, and in any such case, for purposes of selection for redemption, the
Bond so tendered and the Bond issued to the transferee thereof pursuant to
Section 4.08 hereof shall be deemed and treated as the same Bond. If any Bond
shall be transferred and delivered pursuant to Section 4.08(a) hereof after
such Bond has been called for redemption, the Trustee shall deliver to such
transferee a copy of the applicable redemption notice, indicating that the Bond
delivered to such transferee has previously been called for redemption.

     The Trustee and the Issuer may treat the person in whose name a Bond is
registered as the absolute Owner thereof for all purposes, and neither the
Issuer nor the Trustee shall be bound by any notice or knowledge to the
contrary, but such registration may be changed as hereinabove provided. All
payments made to the Owner shall be valid and effectual to satisfy and
discharge the liability upon such Bond to the extent of the sum or sums so
paid.

     Section 2.09. Destruction of Bonds. Whenever any Outstanding Bond shall be delivered to the Trustee for
cancellation pursuant to this Indenture, or for replacement pursuant to Section
2.07 hereof, such Bond shall be promptly canceled and cremated or otherwise
destroyed by the Trustee.

     Section 2.10. Temporary Bonds.
Until Bonds in definitive form are ready for delivery, the Issuer may execute,
and, upon the request of the Issuer, the Trustee shall authenticate and
deliver, subject to the provisions, limitations and conditions set forth above,
one or more Bonds in temporary form, whether printed, typewritten, lithographed
or otherwise produced, substantially in the form of the definitive Bonds, with
appropriate omissions, variations and insertions, and in authorized
denominations. Until exchanged for Bonds in definitive form, such Bonds in
temporary form shall be entitled to the benefits of this Indenture. Upon
presentation and surrender of any Bond or Bonds in temporary form, the Issuer
shall, at the request of the Trustee, execute and deliver to the Trustee, and
the Trustee shall authenticate and deliver, in exchange therefor, a Bond or
Bonds in definitive form. Such exchange shall be made by the

15

 

Trustee without
making any charge therefor to the Owner of such Bond in temporary form. Bonds
in definitive form may be issued hereunder in typewritten form.

     Section 2.11. Book-Entry System.
The Bonds may be issued, either initially or subsequently, in Book-Entry Form
by using and delivering to the Depository one typed Bond for each stated
maturity of the Bonds, registered to CEDE & Co., and by entering into the
Letter of Representations. While the Bonds remain issued in Book-Entry Form,
the provisions of this Indenture which conflict with the operation of the
Book-Entry System shall not apply, and the provisions of the Letter of
Representations relating to such Book-Entry System and the following provisions
shall prevail.

     (a) Registration, Recording and Transfer of Ownership. The
Depository (or its nominees) shall be and remain recorded on the
registration records maintained by the Trustee as the Holder of all Bonds
which are in Book-Entry Form. No transfer of any Bond in Book-Entry Form
shall be made, except from one Depository to another (or its nominee) or
except to terminate the Book-Entry Form. All Bonds of each stated
maturity in Book-Entry Form shall be issued and remain in a single Bond
certificate registered in the name of the Depository (or its nominee);
provided, however, that upon termination of the Book-Entry Form pursuant
to the Letter of Representations or as otherwise directed by written
notice from the Borrower to the Issuer, Trustee and Depository, the
Issuer shall, upon delivery of all Bonds from the Depository, promptly
execute, and the Trustee shall thereupon authenticate and deliver, Bonds
to all persons who were Beneficial Owners thereof immediately prior to
such termination; and the Trustee shall register such Beneficial Owners
as Holders of the applicable Bonds. The Trustee, as bond registrar and
paying agent, shall maintain accurate books and records of the principal
balance, if any, of each such Outstanding Bond in Book-Entry Form, which
shall be conclusive for all purposes whatsoever. Upon the authentication
of any new Bond in Book-Entry Form in exchange for a previous Bond, the
Trustee shall designate thereon the principal balance remaining on such
Bond according to the Trustee’s books and records.

     (b) Notices. The Issuer and Trustee shall each give notices to the
Depository of such matters and at such times as are required by the
Letter of Representations. All notices of any nature required or
permitted hereunder to be delivered to a Holder of a Bond in Book-Entry
Form shall be transmitted to Beneficial Owners of such bonds at
such times and in such manner as shall be determined by the
Depository and the Participants in accordance with the Book-Entry System
and Letter of Representations.

     (c) Payments. All payments of principal of, premium, if any, and
interest on Bonds while in Book-Entry Form shall be paid to the
Depository in accordance with the Book-Entry System and Letter of
Representations in same day funds by wire transfer. All payments of
principal of, premium, if any, and interest on any Bonds in Book-Entry
Form due Beneficial Owners shall be made at such times and in such manner
as shall be determined by the Depository and the Participants in
accordance with the Book-Entry System and Letter of Representations.

     (d) Limitations on Liability. With respect to Bonds in Book-Entry
Form, and any Beneficial Owners thereof, except as expressly provided to
the contrary herein, the

16

 

Issuer, the Borrower and the Trustee shall have
no responsibility, liability or obligation of any nature whatsoever with
respect to (i) the non-payment to any Beneficial Owner or any other
person, other than the Depository, of any amount due for principal or
interest; (ii) the failure to give any notice or other information to the
applicable Beneficial Owner; (iii) the inaccuracy of the records of the
Depository or any Participant, or (iv) the failure in any manner of the
Depository or any Participant to timely or properly comply with
procedures or requirements of the Book-Entry System. No such payment,
failure or inaccuracy shall cause an Event of Default under the Indenture
or the Loan Agreement.

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ARTICLE III

REDEMPTION OF BONDS BEFORE MATURITY

     Section 3.01. Extraordinary Redemption. The Bonds are subject to extraordinary redemption in the event that (1)
the Borrower shall exercise its option to cause the Bonds to be redeemed as
provided in Sections 5.06 or 5.07 of the Agreement, or (2) the Borrower shall
be obligated, as a result of the occurrence of a Determination of Taxability,
to cause the Bonds to be redeemed as provided in Section 4.08 of the Agreement.
If called for extraordinary redemption, the Bonds shall be subject to
redemption, subject to any contrary provisions of the Agreement, on the
earliest interest payment date for which timely notice of redemption may be
given, in whole, at a redemption price equal to 100% of the principal amount
thereof plus accrued interest to the redemption date.

     In addition, the Bonds are subject to mandatory redemption, in whole, on
the Automatic Conversion Date, at a redemption price equal to 100% of the
principal amount thereof, in the event that any condition precedent required to
be satisfied pursuant to Section 4.04 hereof shall not have been satisfied on
or prior to the date required therefor.

     Section 3.02. Optional Redemption. On or prior to the Conversion Date, the Bonds are subject to
redemption, at the option of the Borrower, with the written consent of the
Bank, in whole or in part, on December 1, 2004, and any Interest Payment Date
thereafter, and if in part, the Bonds to be redeemed shall be selected as
provided in Section 3.07 hereof, at the redemption price of 100% of the
principal amount thereof plus accrued interest to the redemption date.

     After the Conversion Date, the Bonds are subject to redemption, at the
option of the Borrower, on or after the First Optional Redemption Date, in
whole at any time or in part on any interest payment date, and if in part, the
Bonds to be redeemed shall be selected as provided in Section 3.07 hereof, at
the redemption prices (expressed as percentages of principal amount) set forth
in the following table plus accrued interest to the redemption date:

	 	 	 	 	 
	 	 	Redemption
	Redemption Dates
	 	Prices

	First Optional Redemption Date through the following August 31
	 	 	102	%
	First Anniversary of the First Optional Redemption Date through
the following August 31
	 	 	101	%
	Second Anniversary of the First Optional Redemption Date and
thereafter
	 	 	100	%

     Section 3.03. Sinking Fund Redemption. All Bonds maturing on September 1, 2020, shall be subject to mandatory
sinking fund redemption as provided in this Section. For the retirement of
such Bonds, the Borrower has covenanted in the Loan Agreement to deposit in the

18

 

Sinking Fund, as required, an amount sufficient to redeem on September 1 of the
years indicated below the following principal amounts of the Bonds maturing on
September 1, 2020, on the dates specified (each such date being herein called a
“Sinking Fund redemption date”) at the principal amount thereof plus accrued
interest to the redemption date:

	 	 	 	 	 
	Year
	 	Amount

	2005
	 	$	280,000	 
	2006
	 	 	285,000	 
	2007
	 	 	290,000	 
	2008
	 	 	305,000	 
	2009
	 	 	315,000	 
	2010
	 	 	325,000	 
	2011
	 	 	330,000	 
	2012
	 	 	340,000	 
	2013
	 	 	355,000	 
	2014
	 	 	365,000	 
	2015
	 	 	375,000	 
	2016
	 	 	390,000	 
	2017
	 	 	400,000	 
	2018
	 	 	410,000	 
	2019
	 	 	425,000	 
	2020*
	 	 	440,000	 

*Final Maturity

From such cash Sinking Fund payments, to the maximum extent possible, the
Trustee shall redeem at 100% of the principal amount thereof plus accrued
interest to the Sinking Fund redemption date the Bonds maturing on September 1,
2020. At its option, to be exercised on or before the forty-fifth day next
preceding any such Sinking Fund redemption date, the Borrower may (i) deliver
to the Trustee for cancellation such Bonds in any aggregate principal amount
desired, or (ii) receive a credit in respect of such Sinking Fund redemption
obligation for any such Bonds which prior to said date have been purchased or
redeemed (otherwise than at the stated maturity thereof or through the
operation of such Sinking Fund) and cancelled by the Trustee and not
theretofore applied as a credit against such Sinking Fund redemption
obligation. Each such Bond so delivered or previously purchased or redeemed
shall be credited by the Trustee at 100% of the principal amount thereof on the
obligation of the Borrower on such Sinking Fund redemption date and any excess
amount shall be credited on future Sinking Fund
redemption obligations in chronological order, and the principal amount of such
Bonds to be redeemed by operation of the Sinking Fund shall be accordingly
reduced. The Borrower shall on or before the forty-fifth day next preceding
each such Sinking Fund redemption date furnish the Trustee with a Certificate
of the Authorized Borrower Representative indicating whether or not

19

 

and to what
extent the provisions of clauses (i) and (ii) of this Section are to be availed
of with respect to such Sinking Fund payment.

     Notwithstanding any other provision hereof or of the Loan Agreement, the
Sinking Fund shall be established and maintained by the Trustee as a separate
subaccount of the Bond Fund.

     Section 3.04. Notice of Redemption. Notice of the call for redemption, identifying the Bonds or portions
thereof to be redeemed, shall be given by the Trustee by mailing first class
mail a copy of the redemption notice by at least thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption to the Owner of
each Bond to be redeemed in whole or in part at the address shown on the
registration records maintained by the Trustee. Any notice mailed as provided
in this Section shall be conclusively presumed to have been duly given, whether
or not the Owner receives the notice. Notwithstanding the foregoing provisions
of this Section 3.04, delivery by the Trustee of a copy of a redemption notice
to a transferee of a Bond which has been called for redemption, pursuant to the
requirements of Section 2.08, shall be deemed to satisfy the requirements of
the first sentence of this Section 3.04 with respect to any such transferee.

     Section 3.05. Redemption Payments. Upon the giving of notice and the deposit of money for redemption at
the required times on or prior to the date fixed for redemption, as provided in
this Article, interest on the Bonds or portions thereof thus called shall no
longer accrue after the date fixed for redemption.

     Section 3.06. Cancellation. All
Bonds which have been redeemed shall not be reissued but shall be canceled and
cremated or otherwise destroyed by the Trustee in accordance with Section 2.09
hereof.

     Section 3.07. Partial Redemption of Bonds.

     (a) Upon surrender of any Bond for redemption in part only, the
Issuer shall execute and the Trustee shall authenticate and deliver to
the Owner thereof a new Bond or Bonds of authorized denominations, in an
aggregate principal amount equal to the unredeemed portion of the Bond
surrendered.

     (b) In case a Bond is of a denomination larger than the minimum
authorized denomination, a portion of such Bond may be redeemed, but
Bonds shall be redeemed only in principal amounts equal to the minimum
authorized denomination or any integral multiple thereof.

     (c) Whenever the Bonds are to be redeemed in part, Bonds which are
Pledged Bonds at the time of selection of Bonds for redemption shall be
selected for redemption prior to the selection of any other Bonds. After
the selection of Pledged Bonds, the Trustee shall select for redemption
Bonds in inverse order of maturities (if applicable, after the Conversion
Date) and, within any maturity, in such manner as the Trustee may
determine.

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ARTICLE IV

CONVERSION OF INTEREST RATE; DEMAND

PURCHASE OPTION

     Section 4.01. Conversion of Interest Rate on Optional Conversion
Date. The interest rate on the Bonds
shall be converted from the Variable Rate to the Fixed Rates upon the exercise
of the Conversion Option by the Borrower, with the written consent of the Bank,
to be exercised by delivery to the Trustee of a Certificate of the Authorized
Borrower Representative specifying the Optional Conversion Date. Upon exercise
of the Conversion Option the Bonds shall be subject to mandatory tender for
purchase by or on behalf of the Borrower from the Owners thereof on the
Optional Conversion Date, and the Owners shall have no right to retain the
ownership of their Bonds. Upon receipt of any such notice from the Borrower in
the form required hereby, and the satisfaction of the conditions precedent set
forth in Section 4.04 hereof, the Trustee shall deliver or mail by first class
mail a notice at least thirty (30) days but not more than forty-five (45) days
prior to the Optional Conversion Date to the Owner of each Bond at the address
shown on the registration books. Any notice given as provided in this Section
shall be conclusively presumed to have been duly given, whether or not the
Owner receives the notice. Said notice shall state in substance the following:

     1. The Optional Conversion Date.

     2. That all Owners of Bonds are required to tender their Bonds to
the Trustee at its Principal Office for purchase at the Purchase Price on
the Optional Conversion Date.

     3. That all Owners of Bonds shall be deemed to have tendered their
Bonds for purchase on the Optional Conversion Date regardless of whether
they tender their Bonds on or prior to such date and no interest will
accrue on or after the Optional Conversion Date to the Owners of Bonds
tendered or deemed tendered.

All Owners of Bonds shall be required to tender their Bonds to the Trustee for
purchase by the Borrower at the Purchase Price, and any such Bonds not
delivered to the Trustee on or prior to the Optional Conversion Date
(“Undelivered Bonds”), for which there has been irrevocably deposited in trust
with the Trustee an amount of money sufficient to pay the Purchase Price of the
Undelivered Bonds, shall be deemed to have been purchased on the Conversion
Date pursuant to this Section 4.01. IN THE EVENT OF A FAILURE BY AN OWNER OF
BONDS TO DELIVER ITS BONDS ON OR PRIOR TO THE OPTIONAL CONVERSION DATE, SAID
OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE
SUBSEQUENT TO THE OPTIONAL CONVERSION DATE) OTHER THAN THE PURCHASE PRICE FOR
SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED
TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE
PURCHASE PRICE THEREFOR.

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     Notwithstanding the foregoing, the Borrower may, by written notice given
to the Trustee, the Bank, and the Remarketing Agent at least 10 days prior to
the Optional Conversion Date, cancel the Conversion Option.

     So long as the Bank shall have honored all conforming draw requests to
effect the purchase of Bonds resulting from such conversion, on the Business
Day following the Optional Conversion Date, the Trustee shall surrender the
Letter of Credit to the Bank for cancellation.

     Section 4.02. Conversion of Interest Rate on Automatic Conversion
Date. The interest rate on the Bonds
shall be converted from the Variable Rate to the Fixed Rates on the Automatic
Conversion Date, and the Bonds shall be subject to mandatory tender for
purchase by the Borrower from the Owners thereof on the Automatic Conversion
Date. Upon satisfaction of the conditions precedent set forth in Section 4.04,
the Trustee shall deliver or mail a notice, conforming to the requirements set
forth in Section 4.01 above, at least thirty (30) days but not more than
forty-five (45) days prior to the Automatic Conversion Date to the Owner of
each Bond at the address shown on the registration books. Any notice given as
provided in this Section shall be conclusively presumed to have been duly
given, whether or not the Owner receives the notice. If any of the conditions
to the establishment of the Conversion Date set forth in Section 4.04 herein
are not met, the Bonds shall become subject to extraordinary redemption as
provided in Section 3.01 and the Trustee shall provide notice to Bondholders
that the Bonds shall be subject to extraordinary redemption on the Automatic
Conversion Date.

     All Owners of Bonds shall be required to tender their Bonds to the Trustee
for purchase by the Borrower at the Purchase Price, and any Bonds not delivered
to the Trustee on or prior to the Automatic Conversion Date (“Undelivered
Bonds”), for which there has been irrevocably deposited in trust with the
Trustee an amount of money sufficient to pay the Purchase Price of the
Undelivered Bonds, shall be deemed to have been purchased pursuant to this
Section 4.02. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS
BONDS ON OR PRIOR TO THE AUTOMATIC CONVERSION DATE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE SUBSEQUENT TO THE
AUTOMATIC CONVERSION DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED
BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF
THE INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE
THEREFOR.

     So long as the Bank shall have honored all conforming draw requests to
effect the purchase of Bonds resulting from such conversion, on the Business
Day following the Automatic Conversion Date, the Trustee shall surrender the
Letter of Credit to the Bank for cancellation.

     Section 4.03. [Intentionally Omitted].

     Section 4.04. Conditions to Conversion. As conditions to the giving of notice as provided in Section 4.01 or
4.02 above, the Borrower shall provide the Trustee with an opinion of
nationally recognized bond counsel to the
effect that the proposed conversion of the interest rate on the Bonds from
the Variable Rate to the Fixed Rates will not cause the interest on the Bonds
to become includible in the gross income of the recipients thereof for purposes
of federal income taxation, and the Remarketing Agent shall advise the Trustee
of the Fixed Rates.

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     Section 4.05. Additional Notices.
The Trustee shall promptly provide the Borrower and the Bank copies of any
notice delivered to the Owners of the Bonds pursuant to Section 4.01 or 4.02
hereof and any notice received by the Trustee from any Owner of a Bond pursuant
to Section 4.01 or 4.02 hereof.

     Section 4.06. Demand Purchase Option. Prior to the Conversion Date, any Bond shall be purchased at the
Purchase Price from the Owner thereof upon:

     (i) delivery in care of the Trustee at its principal office and to
the Remarketing Agent at its principal office of a notice (which shall be
irrevocable and effective upon receipt) which states (1) the aggregate
principal amount and Bond numbers (or other relevant book-entry account
information) of the Bonds to be purchased, and (2) the date on which such
Bonds are to be purchased, which date shall be a Business Day not prior
to the seventh (7th) day next succeeding the date of delivery of such
notice and which date shall be prior to the Conversion Date; and

     (ii) in the event that the Bonds are not then in Book-Entry-Only
form, delivery in care of the Trustee at its principal corporate trust
offices in Minneapolis, Minnesota, at or prior to 11:00 A.M.,
Minneapolis, Minnesota, time, on the Business Day preceding the date
designated for purchase in the notice described in (i) above, such Bonds
to be purchased, with an appropriate endorsement for transfer or
accompanied by a bond power endorsed in blank; provided, that if such
Bonds are not then in Book-Entry-Only form, such Bonds shall be so
purchased pursuant to this Section 4.06 only if the Bonds are delivered
to the Trustee and conform in all respects to the description thereof in
the notice described in clause (i).

     Section 4.07. Funds for Purchase of Bonds. On the date Bonds are to be purchased pursuant to Section 4.01,
4.02 or 4.06 hereof, such Bonds shall be purchased at the Purchase Price only
from the funds listed below. Funds for the payment of the Purchase Price shall
be derived from the following sources in the order of priority indicated:

     (i) money drawn by the Trustee under the Letter of Credit;

     (ii) the proceeds of the sale of such Bonds which have been
remarketed by the Remarketing Agent to any entity other than the Borrower
or the Issuer prior to 11:00 a.m., Minneapolis, Minnesota time, on the
Business Day preceding the date such Bonds are to be purchased in an
amount which the Remarketing Agent has telephonically
notified the Trustee is on deposit with the Remarketing Agent to be
transferred to the Trustee by the Remarketing Agent pursuant to the
Remarketing Agreement; and

     (iii) any other money furnished to the Trustee and available for
such purpose.

     Section 4.08. Delivery of Purchased Bonds.

     (a) Bonds purchased with money described in Section 4.07(i) hereof
with respect to which reimbursement is made to the Bank from proceeds of
a remarketing effected by the Remarketing Agent, and Bonds purchased with
money described in

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Section 4.07(ii) hereof, shall be delivered by the
Trustee to the Remarketing Agent for redelivery to or upon the order of
the purchasers thereof.

     (b) Bonds purchased with money described in Section 4.07(i) hereof
with respect to which reimbursement shall not have been made to the Bank
shall be held by the Trustee for the benefit of the Bank pursuant to the
Credit Agreement or otherwise.

     (c) Bonds purchased with money described in Section 4.07(iii) shall,
at the direction of the Borrower, be (i) delivered as instructed by the
Borrower or (ii) canceled by the Trustee; provided, however, that any
Bonds so purchased after the selection thereof by the Trustee for
redemption shall be canceled by the Trustee.

     (d) The Trustee shall deliver to the person to whom the Trustee is
to deliver such Bonds the due bills, if any, delivered to the Trustee
with such Bonds in accordance with Section 4.06 hereof.

     Bonds delivered as provided in this Section shall be registered in the
manner directed by the recipient thereof.

     Section 4.09. Delivery of Proceeds of Sale of Purchased Bonds.

     (a) Except in the case of the sale of any Pledged Bonds, the
proceeds of the sale of any Bonds delivered to the Trustee pursuant to
Section 4.01, 4.02 or 4.06 hereof shall be held in a separate subaccount
of the Bond Fund and, to the extent not required to pay the Purchase
Price thereof in accordance with Section 4.07 hereof, shall be paid to or
upon the order of the Bank for payment of any obligations owed the Bank
under the Reimbursement Agreement or, if the obligations then due the
Bank under the Reimbursement Agreement have been satisfied, such proceeds
shall be delivered to the Borrower. Such proceeds shall be invested as
provided in Article VII.

     (b) In the event the Remarketing Agent shall have remarketed any
Pledged Bonds, and the Bank shall have released such Pledged Bonds from
the lien of the Credit Agreement and shall have delivered to the Trustee
a written notice of reinstatement of the Letter of Credit, increasing the
amount of the Letter of Credit by an amount equal to the
principal amount of released Pledged Bonds, plus an amount equal to
45 days’ interest thereon at the maximum rate of 10.00% per annum, such
Bonds shall be delivered by the Trustee to the Remarketing Agent, in
accordance with Section 4.08(a) hereof, and the proceeds of sale of such
Bonds shall be delivered to the Bank.

     Section 4.10. Duties of Trustee with Respect to Purchase of Bonds.

     (a) The Trustee shall hold all Bonds delivered to it pursuant to
Section 4.01, 4.02 or 4.06 hereof in trust for the benefit of the
respective Owners of Bonds which shall have so delivered such Bonds until
money representing the Purchase Price of such Bonds shall have been
delivered to or for the account of or to the order of such Owners of
Bonds.

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     (b) The Trustee shall hold all money delivered to it pursuant to
this Indenture for the purchase of Bonds in a separate account in trust
for the benefit of the person or entity which shall have so delivered
such money until the Bonds purchased with such money shall have been
delivered to or for the account of such person or entity.

     (c) The Trustee shall promptly deliver to the Borrower and the Bank
a copy of each notice delivered to it in accordance with Section 4.06
hereof.

     (d) Upon any failure of the delivery to it of Bonds in accordance
with said Section 4.06, the Trustee shall give telephonic or telegraphic
notice thereof to the Borrower, the Remarketing Agent and the Bank.

     (e) The Trustee shall draw money under the Letter of Credit in
accordance with the terms thereof to the extent required by Sections 4.07
and 6.13 hereof to provide for timely payment of the Purchase Price of
Bonds.

     Section 4.11. Election by Bank to Purchase Bonds. Prior to the Letter of Credit Termination Date, at the
option of the Bank, the Bonds are subject to purchase by the Bank, in whole but
not in part, from proceeds derived from a draw under the Letter of Credit if
the Bank notifies the Trustee than an Event of Default has occurred under the
Credit Agreement and the Bank has elected to purchase rather than accelerate
the Bonds. In such event, the Trustee shall draw money under the Letter of
Credit in accordance with the terms thereof to pay the Purchase Price of the
Bonds on the payment date selected by the Trustee, which payment date shall be
a date not more than two Business Days after the date the Trustee receives
notice as aforesaid from the Bank.

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ARTICLE V

GENERAL COVENANTS

     Section 5.01. Payment of Principal, Premium, if any, and Interest. The Issuer covenants that it will promptly
pay or cause to be paid the principal of, premium, if any, and interest on
every Bond issued under this Indenture at the place, on the dates, and in the
manner provided herein and in said Bonds according to the true intent and
meaning thereof, but solely from the amounts pledged therefor which are from
time to time held by the Trustee in the Bond Fund. The principal of, premium,
if any, and interest on the Bonds are payable from the amounts to be paid under
the Agreement and otherwise as provided herein and in the Agreement, which
amounts are hereby specifically pledged to the payment thereof in the manner
and to the extent herein specified, and nothing in the Bonds or in this
Indenture shall be construed as pledging any other funds or assets of the
Issuer. Neither the Issuer, the State, nor any political subdivision of the
State shall in any event be liable for the payment of the principal of,
premium, if any, or interest on any of the Bonds or for the performance of any
pledge, obligation or agreement undertaken by the Issuer except to the extent
that the money pledged herein is sufficient therefor.

     No Owner of any Bonds has the right to compel any exercise of any taxing
power of the Issuer, the State or any political subdivision of the State to pay
the Bonds or the interest thereon, and the Bonds do not constitute an
indebtedness of the Issuer or a loan of credit thereof within the meaning of
any constitutional or statutory provision.

     Section 5.02. Performance of Covenants. The Issuer covenants that it will faithfully perform at all times any
and all covenants, undertakings, stipulations and provisions contained in this
Indenture and in the Agreement, in any and every Bond executed, authenticated
and delivered hereunder and in all of its proceedings pertaining hereto. The
Issuer covenants that it is duly authorized under the Constitution and laws of
the State, including particularly and without limitation the Act, to issue the
Bonds and to execute this Indenture, to assign the Agreement, and to pledge the
amounts to be paid under the Agreement and other amounts hereby pledged in the
manner and to the extent herein set forth, that all action on its part for the
issuance of the Bonds and the execution and delivery of this Indenture has been
duly and effectively taken, and that the Bonds in the hands of the Owners
thereof are and will be valid and enforceable obligations of the Issuer
according to the terms thereof and hereof.

     Section 5.03. Instruments of Further Assurance. The Issuer will do, execute, acknowledge and deliver or cause
to be done, executed, acknowledged and delivered, such indentures supplemental
hereto and such further acts, instruments and transfers as the Trustee may
reasonably require for the better assuring, transferring, conveying, pledging,
assigning and confirming unto the Trustee all and singular the amounts pledged
hereby to the payment of the principal of, premium, if any, and interest on the
Bonds. The Issuer, except as herein and in the Agreement provided, will not
sell, convey,
mortgage, encumber or otherwise dispose of any part of the amounts,
revenues and receipts payable under the Agreement or its rights under the
Agreement.

     Section 5.04. Recording and Filing. The Borrower has agreed pursuant to the Agreement that it will cause
all financing statements related to this Indenture and all supplements

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hereto
to be recorded and filed in such manner and in such places as may from time to
time be required by law in order to preserve and protect fully the security of
the Owners of the Bonds and the rights of the Trustee hereunder, and to take or
cause to be taken any and all other action necessary to perfect the security
interest, pledge and assignment created by this Indenture, as the Trustee may
request.

     Section 5.05. Inspection of Books. All books and records, if any, in the Issuer’s possession relating to
the Project and the amounts derived from the Project shall at all reasonable
times be open to inspection by such accountants or other agents as the Trustee
may from time to time designate.

     Section 5.06. Rights Under Agreement. The Agreement, a duly executed counterpart of which has been filed with
the Trustee, sets forth the covenants and obligations of the Issuer and the
Borrower, and reference is hereby made to the Agreement for a detailed
statement of said covenants and obligations of the Borrower thereunder, and the
Issuer agrees that the Trustee in its name or in the name of the Issuer may
enforce all rights of the Issuer and all obligations of the Borrower under and
pursuant to the Agreement for and on behalf of the Owners of Bonds, whether or
not the Issuer is in default hereunder.

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ARTICLE VI

REVENUES AND FUNDS

     Section 6.01. Creation of the Bond Fund. There is hereby established with the Trustee a trust fund designated
the Bond Fund, which shall be used to pay when due the principal and Purchase
Price, as applicable, of, premium, if any, and interest on the Bonds.

     Section 6.02. Payments into the Bond Fund. There shall be deposited into the Bond Fund from time to time the
following:

     (a) all payments specified in Section 4.02 of the Agreement;

     (b) any money drawn under the Letter of Credit which money shall be
deposited in a separate sub-account of the Bond Fund and shall not be
commingled with any other money held by the Trustee;

     (c) amounts held by the Trustee pursuant to Section 4.10(b) hereof,
which amounts shall be deposited in a separate subaccount of the Bond
Fund; and

     (d) all other money received by the Trustee under and pursuant to
any of the provisions of the Agreement which is required to be or which
are accompanied by directions that such money is to be paid into the Bond
Fund.

     Section 6.03. Use of Money in the Bond Fund. Except as provided in Sections 4.07, 4.10 and 6.12 hereof, money
in the Bond Fund shall be used solely for the payment of the principal of,
premium, if any, and interest on the Bonds and for the redemption of the Bonds
prior to maturity. Funds for the payment of the principal of and interest on
the Bonds shall be derived from the following sources in the order of priority
indicated:

     (i) money drawn by the Trustee under the Letter of Credit;

     (ii) money on deposit in the Bond Fund from payments made by the
Borrower under Section 4.02 of the Agreement; and

     (iii) any other money furnished to the Trustee and available for
such purpose.

     Section 6.04. Rebate Fund. There
is hereby established with the Trustee a trust fund designated the Rebate Fund,
which shall be disbursed in accordance with the provisions of the Agreement and
this Indenture.

     Section 6.05. Payments into the Rebate Fund; Investments. The Trustee shall make information regarding the Bonds and investments
hereunder available to the Borrower, and shall make deposits and disbursements
into the Rebate Fund as directed by the Borrower in order that the Borrower may
comply with the provisions of Section 4.08(d) of the Agreement and Section 6.06
hereof.

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     Section 6.06. Disbursements from Rebate Fund. Not later than 60 days after each installment computation date and
not later than 60 days after the final computation date, the Trustee shall, at
the direction of the Borrower, cause to be paid to the United States an amount
equal to not less than the minimum amount required to be rebated to the United
States in respect of the Bonds under Section 148(f) of the Internal Revenue
Code and pertinent regulations. In any event, not later than 60 days after the
final computation date, the Trustee shall, at the direction of the Borrower,
pay to the United States one hundred percent (100%) of the rebatable arbitrage
owing with respect to the Bonds under Section 148(f) of the Internal Revenue
Code and pertinent regulations. All payments to be made under this Section by
the Trustee shall be made solely from amounts on deposit in the Rebate Fund or
from other amounts made available therefor by the Borrower or the Bank;
provided, however, that the Trustee shall not be entitled to draw money under
the Letter of Credit for deposit in the Rebate Fund. Each payment shall be
accompanied by such documents as may be required by then applicable Treasury
Regulations and by a statement prepared by or on behalf of the Borrower and
furnished to the Trustee summarizing the determination of the amount to be paid
to the United States. In performing the obligations set forth in this Section
6.06, all provisions of Section 4.08(d) of the Loan Agreement shall be
incorporated herein.

     Section 6.07. Creation of the Project Fund. There is hereby created by the Issuer and ordered established with
the Trustee a trust fund to be designated the Project Fund, which shall be
disbursed in accordance with the Agreement and this Indenture.

     Section 6.08. Payments into the Project Fund. Upon the original issuance and delivery of the Series 2004 Bonds,
the entire proceeds of the sale of the Series 2004 Bonds shall be deposited in
the Project Fund. Such additional moneys shall be deposited into the Project
Fund as shall be required pursuant to the Loan Agreement or the Credit
Agreement to provide for the refunding in full of the Refunded Bonds.

     Section 6.09. Disbursements from Project Fund.

     (a) Moneys in the Project Fund shall be disbursed only for Project
Costs and only in accordance with the provisions of Section 3.03 of the
Loan Agreement, and the applicable provisions of the Credit Agreement.
The Trustee is hereby authorized and directed to issue its checks for
each disbursement to be made from the Project Fund.

     (b) The Trustee shall maintain true and complete records pertaining
to the Project Fund and all disbursements therefrom.

     Section 6.10. Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the
principal thereof becomes due, either at maturity, or at the date fixed for
redemption thereof, or otherwise, if funds sufficient to pay any such Bond
shall have been made available to the Trustee for the benefit of the Owner
thereof, all liability of the Issuer to the Owner thereof for the payment of
such Bond shall forthwith cease, terminate and be completely discharged, and
thereupon it shall be the duty of the Trustee to hold such funds, without
liability for interest thereon, for the benefit of the Owner of such Bond who
shall thereafter be restricted exclusively to such funds for any claim of
whatever nature on his part under this Indenture with respect to such Bond.

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     Section 6.11. Money to be Held in Trust. All money required to be deposited with or paid to the Trustee for the
account of any fund or account referred to in any provision of this Indenture
or the Agreement shall be held by the Trustee in trust, and shall, while held
by the Trustee, constitute part of the Trust Estate and be subject to the lien
and security interest created hereby.

     Section 6.12. Repayment to the Bank and the Borrower from the Bond Fund or
the Rebate Fund. In the event that
any payment of interest or principal by the Borrower is on deposit in the Bond
Fund on the date such payment is due on the Bonds and the Trustee has drawn
money under the Letter of Credit to make such payment on the Bonds, the Trustee
shall transfer amounts on deposit in the Bond Fund to the extent of the amount
so drawn under the Letter of Credit to the Bank to be applied to the
satisfaction of the reimbursement obligations under the Credit Agreement. Any
amounts remaining in the Bond Fund, the Project Fund, the Rebate Fund or any
other fund or account created hereunder after payment in full of the principal
of, premium, if any, and interest on the Bonds, the fees, charges and expenses
of the Trustee and all other amounts required to be paid hereunder, including
any amounts due the United States under Section 148 of the Code, and including
any amounts owing to the Issuer under the Loan Agreement or this Indenture,
shall be paid immediately to the Bank to the extent of any indebtedness owed to
the Bank under the Credit Agreement, and, after repayment of all such
indebtedness and the payment of the fees, charges and expenses of the Issuer
and the Remarketing Agent, to the Borrower.

     Section 6.13. Letter of Credit and Substitute Letter of Credit.

     (a) During the term of the Letter of Credit, the Trustee shall draw
money under the Letter of Credit in accordance with the terms thereof (i)
to pay the principal of and interest on the Bonds when due (whether on an
interest payment date or by reason of maturity, redemption, acceleration
of maturity or otherwise), and (ii) to pay the Purchase Price of Bonds
when due. Specifically, the Trustee’s duties shall include, but not be
limited to, submitting to the Bank a drawing under the Letter of Credit
in accordance with the provisions thereof by not later than 10:30 a.m.,
Milwaukee, Wisconsin time, one Business Day in advance of any date on
which the principal of, Purchase Price for, or
interest on the Bonds is due. The Trustee shall not draw on the
Letter of Credit to make payments with respect to Pledged Bonds or Bonds
owned by the Borrower.

     (b) At any time during the term hereof, the Trustee shall accept
delivery of any Substitute Letter of Credit delivered to it by or on
behalf of the Borrower in accordance with the provisions of Section 4.10
of the Loan Agreement and meeting the requirements of Section 4.10(a) and
4.10(b) of the Loan Agreement. The Trustee shall give notice of such
Substitute Letter of Credit to the owners of 100% in aggregate principal
amount of the Bonds in accordance with the provisions of Section 10.11
hereof. Upon the effective date of the Substitute Letter of Credit, the
Trustee shall cancel and return to the former Bank the former Letter of
Credit.

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ARTICLE VII

INVESTMENT OF MONEY

     Any money held as a part of the Bond Fund, including any remarketing
proceeds, shall be invested or reinvested by the Trustee, to the extent
permitted by law, in Governmental Obligations maturing not later than the date
when needed and, in any event, in not more than 30 days. Any money held as a
part of any other Fund hereunder shall be invested or reinvested by the
Trustee, to the extent permitted by law, at the written request of and as
directed by a Borrower Representative, in any of the following Qualified
Investments: (i) Governmental Obligations; or (ii) certificates of deposit or
time deposits (including savings accounts) with the Bank or with any other
banking or savings institution which is insured by the Federal Deposit
Insurance Corporation; or (iii) any other investment authorized by law which is
approved in writing by the Bank; or (iv) money market funds the assets of which
are obligations of or guaranteed by the United States of America, including
those of the Trustee.

     The Trustee may make any and all such investments through itself or any
bank or trust company under common control with the Trustee. All such
investments shall at all times be a part of the fund or account from which the
money used to acquire such investments shall have come and all income and
profits on such investments shall be credited to, and losses thereon shall be
charged against, such fund. Investments in the Rebate Fund and Project Fund
shall be made so as to mature or be subject to redemption at the option of the
owner thereof on or prior to the date or dates that the Borrower anticipates
that money therefrom will be required. All investments hereunder shall be
registered in the name of the Trustee, as Trustee under this Indenture. All
investments hereunder shall be held by or under the control of the Trustee.
The Trustee shall sell and reduce to cash a sufficient amount of investments in
the Bond Fund whenever the cash balance in the Bond Fund is insufficient,
together with any other funds available therefor, to pay the principal or
Purchase Price, as applicable, of, premium, if any, and interest on the Bonds
when due.

     In the event that the Borrower upon the advice of nationally recognized
bond counsel or special tax counsel is of the opinion that it is necessary to
restrict or limit the yield on the investment of any moneys, securities or
other obligations paid to or held by the Trustee under the Indenture in order
to comply with or implement those provisions of the documents intended to
prevent the Bonds (or any series or portion thereof) from being considered an
“arbitrage bond” within the meaning of Section 148 of the Code and regulations
thereunder, the Borrower shall issue to the Trustee a written notice to such
effect (no other direction being required), and the Trustee hereby agrees to
take such actions as may be necessary to restrict the yield on such moneys,
securities or other obligations in accordance therewith.

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ARTICLE VIII

DISCHARGE OF INDENTURE

     Section 8.01. Discharge of Indenture. If the Issuer shall pay or cause to be paid, in accordance with the
provisions of this Indenture, to the Owners of the Bonds, the principal of,
premium, if any, and interest due or to become due thereon at the times and in
the manner stipulated therein, and if the Issuer shall not then be in default
in any of the other covenants and promises in the Bonds and in this Indenture
expressed as to be kept, performed and observed by it or on its part and if the
Issuer shall pay or cause to be paid to the Trustee all sums of money due or to
become due according to the provisions hereof, then these presents and the
estate and rights hereby granted shall cease, determine and be void, whereupon
the Trustee shall cancel and discharge the lien of this Indenture, and execute
and deliver to the Issuer such instruments in writing as shall be requested by
the Issuer and requisite to release the lien hereof and reconvey, release,
assign and deliver unto the Issuer any and all of the estate, right, title and
interest in and to any and all rights or property conveyed, assigned or pledged
to the Trustee or otherwise subject to the lien of this Indenture, except
amounts in the Bond Fund or Rebate Fund required to be paid to the United
States under Section 6.06 hereof or to such other party as is provided for
under Section 6.12 hereof and except cash held by the Trustee for the payment
of the principal or Purchase Price of, premium, if any, or interest on
particular Bonds.

     Section 8.02. Defeasance of Bonds. Any Bonds shall be deemed to be paid within the meaning of this Article
and for all purposes of this Indenture when: (a) payment of the principal of
and premium, if any, on such Bond, plus interest thereon (and, if the Bonds
shall at the time bear interest at the Variable Rate, the rate of interest
thereon for purposes of this section shall assumed to be the maximum rate of
10.00%) to the due date thereof (whether such due date is by reason of maturity
or upon redemption as provided herein) either (i) shall have been made or
caused to be made in accordance with the terms thereof, or (ii) shall have been
provided for by irrevocably depositing with the Trustee, in trust and
irrevocably set aside exclusively for such payment, (1) money sufficient to
make such payment or (2) Governmental Obligations maturing as to principal and
interest in such amounts and at such times as will ensure the availability of
sufficient money to make such payment; (b) all payments to the United States
under Section 6.06 hereof or Section 4.08(d) of the Loan Agreement, and all
necessary and proper fees, compensation and expenses of the Trustee and the
Issuer pertaining to the Bonds with respect to which such deposit is made,
shall have been paid or the payment thereof provided for to the satisfaction of
the Trustee; and (c) the rating on the Bonds, if any, shall be confirmed by
the Rating Agency. Bonds defeased pursuant to this Section shall be paid in
full by no later than the next forthcoming Interest Payment Date. At such time
as a Bond shall be deemed to be paid hereunder, as aforesaid, such Bond shall
no longer be secured by or entitled to the benefits of this Indenture, except
for the purposes of any such payment from such money or Governmental
Obligations.

     Notwithstanding the foregoing, no deposit under clause (a)(ii) of the
immediately preceding paragraph shall be deemed payment of such Bonds as
aforesaid until (a) proper notice of redemption of such Bonds shall have been
previously given in accordance with Article III of this Indenture, or in the
event said Bonds are not by their terms subject to redemption within the next
succeeding sixty (60) days, until the Borrower shall have given the Trustee, in
form

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satisfactory to the Trustee, irrevocable instructions to notify, as soon
as practicable, the Owners of the Bonds, that the deposit required by (a)(ii)
above has been made with the Trustee and that said Bonds are deemed to have
been paid in accordance with this Section 8.02 and stating the maturity or
redemption date upon which money is to be available for the payment of the
principal of and the applicable redemption premium, if any, on said Bonds, plus
interest thereon to the due date thereof, or (b) the maturity of such Bonds.

     All money so deposited with the Trustee as provided in this Section 8.02
may also be invested and reinvested, at the direction of the Borrower, in
Governmental Obligations, maturing in the amounts and times as hereinbefore set
forth, and all income from all Governmental Obligations in the hands of the
Trustee pursuant to this Section 8.02 which is not required for the payment of
the Bonds and interest and premium, if any, thereon with respect to which such
money shall have been so deposited shall be deposited in the Bond Fund as and
when realized and collected for use and application as is other money deposited
in the Bond Fund.

     The Trustee hereby covenants that no deposit will knowingly be made or
accepted and no use knowingly made of any such deposit which would cause the
Bonds to be treated as arbitrage bonds within the meaning of Section 148 of the
Code.

     Notwithstanding any provision of any other Article of this Indenture which
may be contrary to the provisions of this Section 8.02, all money or
Governmental Obligations set aside and held in trust pursuant to the provisions
of this Section 8.02 for the payment of Bonds (including interest and premium
thereon, if any) shall be applied to and used solely for the payment of the
particular Bonds (including the interest and premium thereon, if any) with
respect to which such money or Governmental Obligations have been so set aside
in trust.

     Anything in Article XI hereof to the contrary notwithstanding, if money or
Governmental Obligations have been deposited or set aside with the Trustee
pursuant to this Section 8.02 for the payment of Bonds and such Bonds shall not
have in fact been actually paid in full, no amendment to the provisions of this
Section 8.02 shall be made without the consent of the Owner of each Bond
affected thereby.

     Notwithstanding anything else in the Loan Agreement or this Indenture to
the contrary, there shall be required as a condition to any defeasance of Bonds
hereunder an opinion of nationally recognized bond counsel to the effect that
such defeasance will not cause the interest on the Bonds to become includible
in the gross income of the recipients thereof for purposes of federal income
taxation.

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ARTICLE IX

DEFAULTS AND REMEDIES

     Section 9.01. Defaults. If any
of the following events occur, it is hereby declared to constitute a “Default”:

     (a) default in the due and punctual payment of interest on any Bond
when due;

     (b) default in the due and punctual payment of the principal of or
premium, if any, on any Bond, whether at the stated maturity thereof, or
upon proceedings for redemption thereof, or upon the maturity thereof by
declaration of acceleration;

     (c) default in the due and punctual payment of the Purchase Price of
any Bond at the time required by Section 4.01, 4.02 or 4.06 hereof;

     (d) at any time prior to the Letter of Credit Termination Date,
receipt by the Trustee, within 7 Business Days following a drawing under
the Letter of Credit, of notice from the Bank that the Letter of Credit
will not be reinstated to an amount equal to at least the principal of
and 45 days’ interest on all Outstanding Bonds, assuming a maximum
interest rate of 10.00% per annum;

     (e) receipt by the Trustee of notice from the Bank that an “Event of
Default” has occurred under the Credit Agreement, together with a
direction from the Bank to the Trustee requiring the acceleration, or
purchase by the Bank in lieu of acceleration, of the Bonds;

     (f) prior to the Letter of Credit Termination Date, the date on
which the Bank notifies the Trustee or the date that the Trustee
otherwise ascertains that a Bank Insolvency has occurred, unless the
Borrower shall have exercised its Conversion Option or unless the
Borrower shall have furnished the Trustee with a Substitute Letter of
Credit, as more fully provided by the Loan Agreement and this Indenture.

     Section 9.02. Acceleration. Upon
the occurrence of (i) any Default under subsection (a), (b), (c) or (f) of
Section 9.01, the Trustee may, and, at the written request of the Owners of not
less than twenty-five percent (25%) in aggregate principal amount of
Outstanding Bonds shall, or (ii) any Default under subsection (d) or (e) of
Section 9.01, the Trustee shall, by notice in writing delivered to the Issuer
and the Borrower, immediately declare the principal of all Bonds and the
interest accrued thereon to the date of such acceleration to be immediately due
and payable. Interest on the Bonds shall cease to accrue on the date of
declaration of acceleration. Prior to the Letter of Credit Termination Date
upon the occurrence of an Event of Default under Section 9.01(e), the Trustee,
at the direction of the Bank, shall, by notice in writing delivered to the
Issuer and the Borrower, either (i) declare the principal of all Bonds and the
interest accrued thereon to the date of such acceleration to be immediately due
and payable or (ii) call all the
Bonds for purchase as provided in Section 4.11 hereof. Upon any
declaration of acceleration hereunder, the Trustee may immediately declare the
Loan Repayments required to be made by the Borrower under Section 4.02 of the
Loan Agreement to be immediately due and payable and,

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prior to the Letter of
Credit Termination Date, shall immediately draw money under the Letter of
Credit to pay (i) the principal of all Outstanding Bonds and the accrued
interest thereon to the date of acceleration to the extent required by Section
6.13 hereof or (ii) the Purchase Price of all Outstanding Bonds on the date of
purchase as provided in Section 4.11 hereof.

     Section 9.03. Other Remedies; Rights of Owners of Bonds. Subject to the provisions of Section 9.02 hereof, upon
the occurrence of a Default, and, if prior to the Letter of Credit Termination
Date, acceleration of the Bonds, the Trustee may pursue any available remedy at
law or in equity to enforce the payment of the principal of, premium, if any,
and interest on the Outstanding Bonds.

     Subject to the provisions of Section 9.02 hereof, if a Default and, if
prior to the Letter of Credit Termination Date, acceleration of the Bonds,
shall have occurred and be continuing and if requested so to do by the Owners
of twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds
and provided the Trustee is indemnified as provided in Section 10.01(1) hereof,
the Trustee shall be obligated to exercise such one or more of the rights and
powers conferred by this Section and by Section 9.02 hereof, as the Trustee,
being advised by counsel, shall deem most expedient in the interests of the
Owners of Bonds.

     Subject to the provisions of Section 9.02 hereof, no remedy by the terms
of this Indenture conferred upon or reserved to the Trustee (or to the Owners
of Bonds) is intended to be exclusive of any other remedy, but each and every
such remedy shall be cumulative and shall be in addition to any other remedy
given to the Trustee or to the Owners of Bonds hereunder or now or hereafter
existing at law or in equity.

     No delay or omission to exercise any right or power accruing upon any
Default shall impair any such right or power or shall be construed to be a
waiver of any such Default or acquiescence therein; such right or power may be
exercised from time to time as often as may be deemed expedient.

     No waiver of any Default hereunder, whether by the Trustee or by the
Owners of Bonds, shall extend to or shall affect any subsequent Default or
shall impair any rights or remedies consequent thereon.

     Section 9.04. Right of Owners of Bonds to Direct Proceedings. Subject to the provisions of Section 9.02 hereof,
the Owners of a majority in aggregate principal amount of the Outstanding Bonds
shall have the right, at any time, by an instrument or instruments in writing
executed and delivered to the Trustee, to direct the method and place of
conducting all proceedings to be taken in connection with the enforcement of
the terms and conditions of this Indenture, or for the appointment of a
receiver or any other proceedings hereunder provided that such direction shall
not be otherwise than in accordance with the provisions of law and of this
Indenture.

     Section 9.05. [Intentionally Omitted].

     Section 9.06. Waiver. Upon the
occurrence of a Default, to the extent that such rights may then lawfully be
waived, neither the Issuer nor anyone claiming through or under it, shall set
up, claim or seek to take advantage of any appraisement, valuation, stay,
extension or redemption

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laws of any jurisdiction now or hereafter in force, in
order to prevent or hinder the enforcement of this Indenture, and the Issuer,
for itself and all who may claim through or under it, hereby waives, to the
extent that it lawfully may do so, the benefit of all such laws.

     Section 9.07. Application of Money. All money received by the Trustee pursuant to any right given or action
taken under the provisions of this Article shall, after payment of the costs
and expenses of the proceedings resulting in the collection of such money and
of the fees, expenses, liabilities and advances incurred or made by the Trustee
(provided that money drawn by the Trustee under the Letter of Credit shall not
be used for such purposes), be deposited in the Bond Fund and applied as
follows:

     (a) Unless the principal of all the Bonds shall have become or shall
have been declared due and payable, all such money shall be applied:

     FIRST — to the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, in the order of the
maturity of the installments of such interest (with interest on
overdue installments of such interest, to the extent permitted by
law, at any applicable late payment rate provided for herein or in
the Bonds) and, if the amount available shall not be sufficient to
pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to the
persons entitled thereto, without any discrimination or privilege;
and

     SECOND — to the payment to the persons entitled thereto of the
unpaid principal of and premium, if any, on any of the Bonds which
shall have become due (other than Bonds matured or called for
redemption for the payment of which money is held pursuant to the
provisions of this Indenture), with interest on overdue
installments of principal and premium, if any, to the extent
permitted by law, at any applicable late payment rate provided for
herein or in the Bonds and, if the amount available shall not be
sufficient to pay in full all Bonds due on any particular date,
then to the payment ratably according to the amount of principal
due on such date, to the persons entitled thereto without any
discrimination or privilege; and

     THIRD — to the payment to the persons entitled thereto as the
same shall become due of the principal of and premium, if any, and
interest on the Bonds which may thereafter become due and, if the
amount available shall not be
sufficient to pay in full Bonds due on any particular date,
together with interest and premium, if any, then due and owing
thereon, payment shall be made ratably according to the amount of
interest, principal and premium, if any, due on such date to the
persons entitled thereto without any discrimination or privilege.

     (b) If the principal of all the Bonds shall have become due or shall
have been declared due and payable, all such money shall be applied to
the payment of the principal and interest then due and unpaid upon the
Bonds, without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, ratably,
according

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to the amounts due, respectively, for principal and interest,
to the persons entitled thereto without any discrimination or privilege,
with interest on overdue installments of interest or principal, to the
extent permitted by law, at any applicable late payment rate provided for
herein or in the Bonds.

     (c) If the principal of all the Bonds shall have been declared due
and payable and if such declaration shall thereafter have been rescinded
and annulled under the provisions of this Article, then, subject to the
provisions of Section 9.07(b) hereof, in the event that the principal of
all the Bonds shall later become due or be declared due and payable, the
money shall be applied in accordance with the provisions of Section
9.07(a) hereof.

     Whenever money is to be applied pursuant to the provisions of this
Section, such money shall be applied at such times, and from time to time, as
the Trustee shall determine, having due regard to the amount of such money
available for application and the likelihood of additional money becoming
available for such application in the future. Subject to Section 9.02 hereof,
whenever the Trustee shall apply such funds, it shall fix the date (which shall
be an interest payment date unless it shall deem another date more suitable)
upon which such application is to be made and upon such date interest on the
amounts of principal to be paid on such dates shall cease to accrue. The
Trustee shall give such notice as it may deem appropriate of the deposit with
it of any such money and of the fixing of any such date, and shall not be
required to make payment to the Owner of any Bond until such Bond shall be
presented to the Trustee for appropriate endorsement or for cancellation if
fully paid.

     Whenever the principal of, premium, if any, and interest on all Bonds have
been paid under the provisions of this Section and all expenses and charges of
the Trustee have been paid or duly provided for, any balance remaining in the
Bond Fund shall be paid to the Borrower or the Bank as provided in Section 6.12
hereof.

     Money drawn under the Letter of Credit shall be applied only to the
payment of principal or Purchase Price of, and interest on, the Bonds.

     Section 9.08. Remedies Vested in Trustee. All rights of action (including the right to file proofs of claim)
under this Indenture or under any of the Bonds may be enforced by the Trustee
without the possession of any of the Bonds or the production thereof in any
trial or other proceeding relating thereto, and any such
suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without the necessity of joining as plaintiffs or defendants any
Owners of the Bonds, and any recovery of judgment shall be for the equal and
ratable benefit of the Owners of the Outstanding Bonds.

     Section 9.09. Rights and Remedies of Owners of Bonds. No Owner of any Bond shall have any right to institute any
suit, action or proceeding at law or in equity for the enforcement of this
Indenture or for the execution of any trust hereof or for the appointment of a
receiver or any other remedy hereunder, unless (subject to the provisions of
Section 9.02 hereof) (i) a Default has occurred of which the Trustee has been
notified as provided in Section 10.01(h) hereof, or of which by said subsection
it is deemed to have notice, (ii) the Owners of twenty-five percent (25%) in
aggregate principal amount of Outstanding Bonds shall have made written

37

 

request
to the Trustee and shall have offered it reasonable opportunity either to
proceed to exercise the powers hereinbefore granted or to institute such
action, suit or proceeding and shall have offered to the Trustee indemnity as
provided in Section 10.01(1), and (iii) the Trustee shall thereafter fail or
refuse to exercise the powers hereinbefore granted, or to institute such
action, suit or proceeding. Such notification, request and offer of indemnity
are hereby declared in every case at the option of the Trustee to be conditions
precedent to the execution of the powers and trusts of this Indenture, and to
any action or cause of action for the enforcement of this Indenture, or for the
appointment of a receiver or for any other remedy hereunder, it being
understood and intended that no one or more Owners of the Bonds shall have any
right in any manner whatsoever to affect, disturb or prejudice the lien of this
Indenture by their action or to enforce any right hereunder except in the
manner herein provided, and that all proceedings at law or equity shall be
instituted, had and maintained in the manner herein provided and for the equal
and ratable benefit of the Owners of all Outstanding Bonds. However, nothing
contained in this Indenture shall affect or impair the right of any Owner of
Bonds to enforce the payment of the principal of, premium, if any, and interest
on any Bond at and after the maturity thereof, or the obligation of the Issuer
to pay the principal of, premium, if any, and interest on each of the Bonds
issued hereunder to the respective Owners thereof at the time and place, from
the source and in the manner in the Bonds expressed. No Owner of any Bond
shall have any right to institute any suit, action or proceeding at equity or
at law to enforce a drawing under the Letter of Credit, except as may be
specifically required under the provisions of this Indenture.

     Section 9.10. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right
under this Indenture by the appointment of a receiver or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely, then and in every such case, subject to any
determination in such proceedings, the Issuer, the Trustee and the Owners of
Bonds shall be restored to their former positions and rights hereunder,
respectively, with regard to the property subject to this Indenture, and all
rights, remedies and powers of the Trustee shall continue as if no such
proceedings had been taken.

     Section 9.11. Waivers of Default. Subject to the further provisions of this Section, the Trustee shall
waive any Default hereunder and its consequences and rescind any declaration of
acceleration of principal (and shall waive any corresponding Default under the
Agreement and its consequences) upon the written request of the Owners of at
least a majority in aggregate principal amount of all Outstanding Bonds. Any
default under subsections (d) or (e) of Section 9.01 hereof may be waived only
if the Bank shall notify the Trustee in writing that the Letter of Credit has
been fully reinstated and the Bank shall have rescinded any notices given
pursuant to subsections (d) or (e). Any Default under subsection (e) of
Section 9.01 hereof (and the corresponding Default under the Agreement) may
only be waived upon the written request of the Bank (and in such case the
consent of the Owners of the Bonds shall not be required); and provided further
that there shall not be waived any Default specified in subsection (a), (b) or
(c) of Section 9.01 hereof unless prior to such waiver or rescission, all
arrears of principal and interest (other than principal of or interest on the
Bonds which became due and payable by declaration of acceleration), and all
expenses of the Trustee in connection with such Default shall have been paid or
provided for. In case of any waiver or rescission described above, or in case
any proceeding taken by the Trustee on account of any such Default shall have
been discontinued or concluded or determined adversely, then and in every such
case the Issuer, the

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Trustee and the Owners of Bonds shall be restored to their
former positions and rights hereunder, respectively, but no such waiver or
rescission shall extend to any subsequent or other Default, or impair any right
consequent thereon.

     No waiver, rescission or annulment of a Default hereunder shall be made
without the written consent of the Bank if the Bank shall theretofore have
honored in full all drawings under the Letter of Credit required to be made
under the provisions of this Indenture.

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ARTICLE X

TRUSTEE

     Section 10.01. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this
Indenture, and agrees to perform said trusts, but only upon and subject to the
following express terms and conditions:

     (a) The Trustee, prior to the occurrence of a Default and after the
curing of all Defaults which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture and the Agreement. In case a Default has occurred (which has
not been cured or waived), the Trustee shall exercise such of the rights
and powers vested in it by this Indenture, and use the same degree of
care and skill in the exercise of such rights and powers as an ordinary,
prudent man would exercise or use in the conduct of his own affairs.

     (b) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers or
employees, and shall be entitled to advice of counsel concerning its
duties hereunder, and may in all cases pay such reasonable compensation
to all such attorneys, agents, receivers and employees as may reasonably
be employed in connection with the trusts hereof. The Trustee may act
upon the opinion or advice of any attorney (who may be the attorney or
attorneys for the Issuer, the Borrower, the Bank, or the Bank) selected
by the Trustee in the exercise of reasonable care. The Trustee shall not
be responsible for any loss or damage resulting from any action or
inaction taken or not taken, as the case may be, in good faith in
reliance upon such opinion or advice.

     (c) The Trustee shall not be responsible for any recital herein or
in the Bonds (except with respect to the certificate of authentication
endorsed on the Bonds), or for the validity of the execution by the
Issuer of this Indenture or of any supplements hereto or instruments of
further assurance, or for the sufficiency of the security for the Bonds
issued hereunder or intended to be secured hereby, and the Trustee shall
not be bound to ascertain or inquire as to the performance or observance
of any covenants, conditions or agreements on the part of the Borrower
under the Agreement except as hereinafter set forth; but the Trustee may
require of the Issuer and the Borrower full information and advice as to
the performance of the aforesaid covenants, conditions and agreements.
The Trustee shall have no obligation to perform any of the duties of the
Issuer under the Agreement.

     (d) The Trustee shall not be accountable for the use of any Bonds
authenticated or delivered hereunder. The Trustee may become the Owner
of Bonds secured hereby with the same rights which it would have if not
the Trustee hereunder.

     (e) The Trustee shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram or
other paper or document believed to be genuine and correct and to have
been signed or sent by the proper person or persons.
Any action taken by the Trustee pursuant to this Indenture upon the
request or authority

40

 

or consent of any person who at the time of making
such request or giving such authority or consent is the Owner of any Bond
shall be conclusive and binding upon all future owners of the same Bond
and upon Bonds issued in exchange therefor or in place thereof.

     (f) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the
Trustee shall be entitled to rely upon a certificate signed by an
authorized officer of the Issuer or a Borrower Representative as
sufficient evidence of the facts therein contained and prior to the
occurrence of a Default of which the Trustee has been notified as
provided in Section 10.01(h) hereof, or of which by said subsection the
Trustee is deemed to have notice, shall also be at liberty to accept a
similar certificate to the effect that any particular dealing,
transaction or action is necessary or expedient, but may at its
discretion secure such further evidence deemed by it to be necessary or
advisable, but shall in no case be bound to secure the same. The Trustee
may accept a certificate of the Secretary of the Issuer to the effect
that a resolution in the form therein set forth has been adopted by the
Issuer as conclusive evidence that such resolution has been duly adopted
and is in full force and effect.

     (g) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty.

     (h) The Trustee shall not be required to take notice or be deemed to
have notice of any Default hereunder except for Defaults specified in
subsections (a), (b), (c), (d), (e) or (f) of Section 9.01 hereof, unless
the Trustee shall be specifically notified in writing of such Default by
the Issuer, the Bank, or by the Owners of at least twenty-five percent
(25%) in aggregate principal amount of Outstanding Bonds, and all notices
or other instruments required by this Indenture to be delivered to the
Trustee, must, in order to be effective, be delivered at the Principal
Office of the Trustee, and in the absence of such notice so delivered the
Trustee may conclusively assume there is no Default except as aforesaid.

     (i) At any and all reasonable times the Trustee, and its duly
authorized agents, attorneys, experts, engineers, accountants and
representatives, shall have the right fully to inspect all books and
records of the Issuer pertaining to the Project and the Bonds, and to
make such copies and memoranda from and with regard thereto as may be
desired.

     (j) The Trustee shall not be required to give any bond or surety in
respect of the execution of this Indenture or otherwise in respect of the
premises.

     (k) Notwithstanding anything elsewhere in this Indenture with
respect to the authentication of any Bonds, the withdrawal of any cash,
the release of any property or any action whatsoever within the purview
of this Indenture, the Trustee shall have the right, but shall not be
required, to demand any showings, certificates, opinions, appraisals or
other information, or corporate action or evidence thereof, in addition
to that by the terms hereof required as a condition of such action,
deemed desirable by the Trustee for the purpose of establishing the right
of the Issuer to the authentication of any Bonds, the withdrawal of any
cash or the taking of any other action.

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     (l) Before taking any action under this Indenture or under the
Agreement, other than action under Sections 4.01, 4.02, 4.03, 6.13 or
9.02, the Trustee may require that a satisfactory indemnity bond be
furnished for the reimbursement of any expenses to which it may be put
and to protect it against all liability, except liability which is
adjudicated to have resulted from its gross negligence or willful default
in connection with any such action.

     (m) All money received by the Trustee shall, until used or applied
or invested as herein provided, be held in trust for the purpose or
purposes for which it was received but need not be segregated from other
funds except to the extent otherwise required herein or required by law.

     (n) The Trustee’s right to payment of its fees and expenses shall
survive final payment or defeasance of the Bonds and the Trustee’s
removal or resignation.

     Section 10.02. Fees, Charges and Expenses of the Trustee. The Trustee shall be entitled to payment of reasonable
fees for its services rendered hereunder and reimbursement of all advances,
counsel fees and other expenses reasonably made or incurred by the Trustee in
connection with such services. Upon the occurrence of a Default, but only upon
the occurrence of a Default, the Trustee shall have a first lien with right of
payment prior to payment on account of principal of, premium, if any, and
interest on any Bond upon the Trust Estate (exclusive of the proceeds of any
drawing under the Letter of Credit) for the foregoing fees, charges and
expenses of the Trustee. When the Trustee incurs expenses or renders services
after the occurrence of an Act of Bankruptcy with respect to the Borrower, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any federal or state bankruptcy, insolvency,
arrangement, moratorium, reorganization or other debtor relief law. The Issuer
shall have no liability to pay any fees, charges or other expenses of the
Trustee hereinabove mentioned except from the amounts pledged under this
Indenture.

     Section 10.03. Notice to Owners of Bonds. If a Default occurs of which the Trustee has been notified as
provided in Section 10.01(h) hereof, or of which by said subsection it is
deemed to have notice, or in the event of the appointment of a separate or
Co-Trustee or the succession of a new Trustee hereunder, then the Trustee shall
promptly give notice thereof to the Bank and to the Owner of each Bond.

     Section 10.04. Intervention by the Trustee. In any judicial proceeding which in the opinion of the Trustee and
its counsel has a substantial bearing on the interests of the Owners of the
Bonds, the Trustee may intervene on behalf of the Owners of the Bonds and shall
do so if requested in writing by the Bank or the Owners of at least twenty-five
percent (25%) of the aggregate principal amount of Outstanding Bonds.

     Section 10.05. Successor Trustee. Any corporation or association into which the Trustee may be converted
or merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which it is a party, shall be and become
successor Trustee hereunder and vested with all of the title to the Trust
Estate and all the trusts, powers, discretion’s, immunities, privileges and all
other matters

42

 

as was its predecessor, without the execution or filing of any
instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.

     Section 10.06. Resignation by the Trustee. The Trustee and any successor Trustee may at any time resign from
the trusts hereby created by giving thirty (30) days’ notice to the Issuer, the
Bank, the Borrower, and to the Owner of each Bond. Such resignation shall not
take effect until the appointment of a successor Trustee or temporary Trustee.

     Section 10.07. Removal of the Trustee. The Trustee may be removed at any time by an instrument or concurrent
instruments in writing delivered to the Trustee and to the Issuer and signed by
the Owners of a majority in aggregate principal amount of Outstanding Bonds.
Such removal shall not take effect until the appointment of a successor Trustee
or temporary Trustee.

     Section 10.08. Appointment of Successor Trustee by Owners of Bonds. In case the Trustee hereunder shall resign
or be removed, or be dissolved, or shall be in the course of dissolution or
liquidation, or otherwise become incapable of acting hereunder, or in case it
shall be taken under the control of any public officer or officers, or of a
receiver appointed by a court, a successor may be appointed by the Owners of a
majority in aggregate principal amount of Outstanding Bonds by an instrument or
concurrent instruments in writing signed by such Owners, or by their
attorneys-in-fact duly authorized, a copy of which shall be delivered
personally or sent by registered mail to the Issuer, the Borrower and the Bank.
In case of any such vacancy, the Issuer, at the direction of the Borrower, may
appoint a temporary successor Trustee to fill such vacancy until a successor
Trustee shall be appointed by the Owners of Bonds in the manner above provided;
such temporary successor Trustee shall immediately and without further act be
superseded by the Trustee appointed by the Owners of Bonds. If no successor
Trustee has accepted appointment in the manner provided in Section 10.09 hereof
within ninety (90) days after the Trustee has given notice of resignation to
the Issuer and the Owner of each Bond, the Trustee may petition any court of
competent jurisdiction for the appointment of a temporary successor Trustee;
any such temporary successor Trustee shall immediately and without further act
be superseded by a Trustee appointed by the Issuer or the Owners of Bonds as
provided above. Every successor Trustee appointed pursuant to the provisions
of this Section shall be, if there be such an institution willing, qualified
and able to accept the trust upon customary terms, a bank or trust company
within or without the State, in good standing and having reported capital and
surplus of not less than $25,000,000.

     Section 10.09. Acceptance by Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to its or his predecessor and also to the Issuer, the Bank and the
Borrower an instrument in writing accepting such appointment hereunder and
thereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, trusts,
duties and obligations of its predecessor; but its predecessor shall,
nevertheless, on the written request of the Borrower, or of its successor,
execute and deliver an instrument transferring to such successor all the
estates, properties, rights, powers and trusts of such predecessor hereunder;
and every predecessor Trustee shall deliver all securities and money held by it
as Trustee hereunder to its successor. Should any instrument in writing from
the Issuer be required by any successor Trustee for more fully and certainly
vesting in such successor the estate, rights, powers and duties hereby vested
or intended to be vested in

43

 

the predecessor, any and all such instruments in
writing shall, on request, be executed, acknowledged and delivered by the
Issuer.

     Section 10.10. Appointment of Co-Trustee. It is the purpose of this Indenture that there shall be no
violation of any law of any jurisdiction (including particularly the law of the
State) denying or restricting the right of banking corporations or associations
to transact business as Trustee in such jurisdiction. It is recognized that in
case of litigation under this Indenture or the Agreement, and in particular in
case of the enforcement thereof on Default, or in case the Trustee deems that
by reason of any present or future law of any jurisdiction it may not exercise
any of the powers, rights or remedies herein or therein granted to the Trustee
or hold title to the properties, in trust, as herein granted, or take any other
action which may be desirable or necessary in connection therewith, the Trustee
may appoint an additional individual or institution as a separate or
Co-Trustee, in which event each and every remedy, power, right, claim, demand,
cause of action, immunity, estate, title, interest and lien expressed or
intended by this Indenture or the Agreement to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest
in such separate or Co-Trustee, but only to the extent necessary to enable such
separate or Co-Trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or
Co-Trustee shall run to and be enforceable by either of them.

     Should any deed, conveyance or instrument in writing from the Issuer be
required by the separate or Co-Trustee so appointed by the Trustee for more
fully and certainly vesting in and confirming to him or it such properties,
rights, powers, trusts, duties and obligations, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer. In case any separate or Co-Trustee,
or a successor, shall die, become incapable of acting, resign or be removed,
all the estates, properties, rights, powers, trusts, duties and obligations of
such separate or Co-Trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a successor to such separate
or Co-Trustee. Any Co-Trustee appointed by the Trustee pursuant to this
Section may be removed by the Trustee, in which case all powers, rights and
remedies vested in the Co-Trustee shall again vest in the Trustee as if no such
appointment of a Co-Trustee had been made.

     Section 10.11. Notice to Owners. The Trustee shall provide each Owner of a Bond with prompt written
notice of any Substitute Bank or Substitute Letter of Credit not less than
thirty (30) days prior to the effectiveness thereof.

     Section 10.12. Notices to Rating Agency. Prior to the occurrence of any of the following, the Trustee shall
provide the Rating Agency (if the Bonds are then rated) with written notice
thereof: (a) termination or substitution of the Letter of Credit; (b)
redemption, acceleration, payment in full, conversion of or mandatory purchase
of the Bonds; (c) any changes to the Letter of Credit, the Indenture or the
Remarketing Agreement; or (d) a change of the Trustee. The Trustee, upon
written request, shall also provide the Rating Agency with any other
information necessary or desirable to maintain its rating on the Bonds.

44

 

ARTICLE XI

SUPPLEMENTAL INDENTURES

     Section 11.01. Supplemental Indentures Not Requiring Consent of Owners of
Bonds. The Issuer and the Trustee
may, with the written consent of the Bank, and without consent of, or notice
to, any of the Owners of Bonds, enter into an indenture or indentures
supplemental to this Indenture for any one or more of the following purposes:

     (a) To cure any ambiguity or formal defect or omission in this
Indenture;

     (b) To grant to or confer upon the Trustee for the benefit of the
Owners of Bonds any additional rights, remedies, powers or authorities
that may lawfully be granted to or conferred upon the Owners of Bonds or
the Trustee;

     (c) To subject to this Indenture additional revenues, properties or
collateral;

     (d) To modify, amend or supplement this Indenture or any indenture
supplemental hereof in such manner as to permit the qualification hereof
and thereof under the Trust Indenture Act of 1939, as amended, or any
similar federal statute hereafter in effect or to permit the
qualification of the Bonds for sale under the securities laws of any of
the states of the United States of America;

     (e) To evidence the appointment of a separate or Co-Trustee or the
succession of a new Trustee hereunder;

     (f) To make any amendment or modification required in order to
achieve or maintain any credit rating on the Bonds; or

     (g) To effect any other change herein which, in the judgment of the
Trustee, is not to the prejudice of the Trustee or the Owners of Bonds.

     Section 11.02. Supplemental Indentures Requiring Consent of Owners of
Bonds. Exclusive of supplemental
indentures permitted by Section 11.01 hereof and subject to the terms and
provisions contained in this Section, and not otherwise, the Owners of not less
than a majority in aggregate principal amount of the Outstanding Bonds, with
the written consent of the Bank, shall have the right, from time to time, to
consent to and approve the execution by the Issuer and the Trustee of such
other indenture or indentures supplemental hereto as shall be deemed necessary
and desirable for the purpose of modifying, altering, amending, adding to or
rescinding, in any particular, any of the terms or provisions contained in this
Indenture or in any supplemental indenture; provided, however, that nothing in
this Section or in Section 11.01 hereof contained shall permit, or be construed
as permitting, without the written consent of the Bank and the Owners of all
Bonds Outstanding, (a) an extension of the maturity of the principal of, or the
interest on, any Bond issued hereunder, or (b) a reduction in the principal
amount or Purchase Price of, or redemption premium on, any Bond or the rate of
interest thereon, or (c) a
privilege or priority of any Bond or Bonds over any other Bond or Bonds,
or (d) a reduction in the aggregate principal amount of the Bonds required for
consent to such supplemental indentures or any modifications or waivers of the
provisions of this Indenture or the Agreement,

45

 

or (e) the creation of any lien
ranking prior to or on a parity with the lien of this Indenture on the Trust
Estate or any part thereof, except as hereinbefore expressly permitted, or (f)
the deprivation of the Owner of any Outstanding Bond of the lien hereby created
on the Trust Estate.

     If at any time the Borrower shall request the Issuer and the Trustee to
enter into any such supplemental indenture for any of the purposes of this
Section, the Trustee shall, upon being satisfactorily indemnified with respect
to expenses, cause notice of the proposed execution of such supplemental
indenture to be given to the Bank and to the Owners of the Bonds, in the manner
provided in Section 3.04 of this Indenture. Such notice shall briefly set
forth the nature of the proposed supplemental indenture and shall state that
copies thereof are on file at the Principal Office of the Trustee for
inspection by all Owners of Bonds. If, within sixty (60) days or such longer
period as shall be prescribed by the Borrower following such notice, the Bank
and the Owners of not less than a majority in aggregate principal amount of the
Bonds Outstanding at the time of the execution of any such supplemental
indenture shall have consented to and approved the execution thereof as herein
provided, no Owner of any Bond shall have any right to object to any of the
terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the Issuer from executing the same or from taking any
action pursuant to the provisions thereof. Upon the execution of any such
supplemental indenture as in this Section permitted and provided, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith.

     No supplemental indenture under this Article shall become effective unless
and until the Borrower shall have consented to the execution and delivery of
such supplemental indenture. In this regard, the Trustee shall cause notice of
the proposed execution of any such supplemental indenture together with a copy
of the proposed supplemental indenture to be mailed to the Borrower at least
fifteen (15) Business Days prior to the proposed date of execution and delivery
of any such supplemental indenture.

46

 

ARTICLE XII

AMENDMENT OF AGREEMENT

     Section 12.01. Amendments to Agreement Not Requiring Consent of Owners of
Bonds. The Issuer, at the request of the Borrower, and the Trustee may, with
the written consent of the Bank, and without the consent of or notice to the
Owners of Bonds, consent to any amendment, change or modification of the
Agreement as may be required (i) by the provisions of the Agreement, (ii) for
the purpose of curing any ambiguity or formal defect or omission in the
Agreement, (iii) so as more precisely to identify the Project, or to substitute
or add additional improvements or equipment to the Project or additional rights
or interests in property acquired in accordance with the provisions of the
Agreement, (iv) to enter into an indenture or indentures supplemental hereto as
provided in Section 11.01 hereof, or (v) in connection with any other change
therein which, in the judgment of the Trustee, is not to the prejudice of the
Trustee or the Owners of Bonds.

     Section 12.02. Amendments to Agreement Requiring Consent of Owners of
Bonds. Except for the amendments, changes or modifications as provided in
Section 12.01 hereof, neither the Issuer nor the Trustee shall consent to any
other amendment, change or modification of the Agreement without mailing of
notice and the written approval or consent of the Bank and the Owners of at
least a majority in aggregate principal amount of the Outstanding Bonds,
provided that the written consent of the Bank and the Owners of all Bonds
Outstanding is required for any amendment, change or modification of the
Agreement that would permit the termination or cancellation of the Agreement or
a reduction in or postponement of the payments under the Agreement or any
change in the provisions relating to payment thereunder. If at any time the
Borrower shall request the consent of the Issuer and the Trustee to any such
proposed amendment, change or modification of the Agreement, the Trustee shall,
upon being satisfactorily indemnified with respect to expenses, cause notice of
such proposed amendment, change or modification to be given in the same manner
as provided by Section 11.02 hereof with respect to supplemental indentures.
Such notice shall briefly set forth the nature of such proposed amendment,
change or modification and shall state that copies of the instrument embodying
the same are on file at the principal office of the Trustee for inspection by
all Owners of Bonds.

47

 

ARTICLE XIII

MISCELLANEOUS

     Section 13.01. Consents of Owners of Bonds. Any consent, request,
direction, approval, objection or other instrument required by this Indenture
to be signed and executed by the Owners of Bonds may be in any number of
concurrent documents and may be executed by such Owners of Bonds in person or
by an agent or agents appointed in writing. Proof of the execution of any such
consent, request, direction, approval, objection or other instrument or of the
written appointment of any such agent or of the ownership of Bonds, if made in
the following manner, shall be sufficient for any of the purposes of this
Indenture, and shall be conclusive in favor of the Trustee with regard to any
action taken by it under such request or other instrument. The fact and date
of the execution by any person of any such instrument or writing may be proved
by the affidavit of a witness of such execution or by an officer authorized by
law to take acknowledgments of deeds certifying that the person signing such
instrument or writing acknowledged to him the execution thereof. The fact of
ownership of Bonds and the amount or amounts, numbers and other identification
of such Bonds, and the date of owning the same shall be proved by the
registration books of the Issuer maintained by the Trustee pursuant to Section
2.08 hereof.

     Section 13.02. Limitation of Rights. With the exception of any rights
herein expressly conferred, nothing expressed or mentioned in or to be implied
from this Indenture or the Bonds is intended or shall be construed to give to
any person or company other than the parties hereto, the Bank and the Owners of
the Bonds any legal or equitable right, remedy or claim under or with respect
to this Indenture or any covenants, conditions and provisions herein contained;
this Indenture and all of the covenants, conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto, the Bank and the Owners of the Bonds as herein provided.

     Section 13.03. Severability. If any provision of this Indenture shall be
held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to
any extent whatever.

     Section 13.04. Notices. Any notice, request, complaint, demand,
communication or other paper shall be sufficiently given and shall be deemed
given when delivered or mailed by first class mail, postage prepaid, or sent by
facsimile, promptly confirmed by delivery or first class mail, addressed as
follows:

	 	 	 	 	 	 	 
	A.

	 	To the Issuer
	 	—
	 	City of Chaska, Minnesota
	

	 	 	 	 	 	City Hall
	

	 	 	 	 	 	Chaska, Minnesota 55318
	

	 	 	 	 	 	Attention: City Administrator

48

 

	 	 	 	 	 	 	 
	B.

	 	To the Borrower
	 	—
	 	Lifecore Biomedical, Inc.
	

	 	 	 	 	 	3515 Lyman Boulevard
	

	 	 	 	 	 	Chaska, Minnesota 55318
	

	 	 	 	 	 	Attention: Chief Financial Officer
	 
	 	 	 	 	 	 
	C.

	 	To the Trustee
	 	—
	 	Wells Fargo Bank, National Association
	

	 	 	 	 	 	MAC N9303-110
	

	 	 	 	 	 	Sixth and Marquette
	

	 	 	 	 	 	Minneapolis, MN 55479
	

	 	 	 	 	 	Attention: Corporate Trust Services
	 
	 	 	 	 	 	 
	D.

	 	To the Bank
	 	 	 	M&I Marshall & Ilsley Bank
	

	 	 	 	 	 	651 Nicollet Mall
	

	 	 	 	 	 	Minneapolis, MN 55402
	

	 	 	 	 	 	Attention: Commercial Banking
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	with a copy to:
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	M&I Marshall & Ilsley Bank
	

	 	 	 	 	 	770 North Water Street, NW 18
	

	 	 	 	 	 	Milwaukee, WI 53202
	 
	 	 	 	 	 	 
	E.

	 	To the
	 	—
	 	Northland Securities, Inc.
	

	 	Remarketing Agent
	 	 	 	45 South Seventh Street
	

	 	 	 	 	 	Suite 2500
	

	 	 	 	 	 	Minneapolis, Minnesota 55402
	

	 	 	 	 	 	Attention: Public Finance Department

A duplicate copy of each notice required to be given hereunder by any person
listed above shall also be given to the others. The Issuer, the Borrower, the
Trustee, the Remarketing Agent and the Bank may designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.

     Section 13.05. Payments Due on Saturdays, Sundays and Holidays. In any
case where the date of maturity of interest on or principal of the Bonds or the
date fixed for purchase or redemption of any Bonds shall not be a Business Day,
then payment of principal, Purchase Price, premium, if any, or interest need
not be made on such date but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the date
fixed for purchase or redemption.

     Section 13.06. Counterparts. This Indenture may be simultaneously
executed in several counterparts, each of which shall be an original and all of
such shall constitute but one and the same instrument.

     Section 13.07. Applicable Provisions of Law. This Indenture is governed by the laws of the State, without regard to
the choice of law rules of the State. Venue for any action under this
Indenture to which the Issuer is a party shall lie within the district courts
of the State, and the

49

 

parties hereto consent to the jurisdiction and venue of
any such court and hereby waive any argument that venue in such forums is not
convenient.

     Section 13.08. Rules of Interpretation. Unless expressly indicated
otherwise, references to Sections or Articles are to be construed as references
to Sections or Articles of this instrument as originally executed. Use of the
words “herein,” “hereby,” “hereunder,” “hereof,” “hereinbefore,” “hereinafter”
and other equivalent words refer to this Indenture and not solely to the
particular portion in which such word is used.

     Section 13.09. Captions. The captions and headings in this Indenture are
for convenience only and in no way define, limit or describe the scope or
intent of any provisions or Sections of this Indenture.

     Section 13.10. Certain References to Bank, Bank, Letter of Credit, Etc.
If at any time the Bank has failed to honor a conforming draft submitted under
the Letter of Credit in accordance with the provisions thereof, or is subject
to any insolvency or receivership proceeding, and at all times following the
Letter of Credit Termination Date, all references herein or in the Loan
Agreement to the Bank or the Credit Agreement, and all provisions herein or in
the Loan Agreement requiring the consent of the Bank for any purpose shall no
longer be of any force or effect and the Loan Agreement and this Indenture
shall be construed as if all such references were void. If at any time there
shall be no Letter of Credit required at such time to be in effect, all
references herein or in the Loan Agreement to the Bank or its consent or to the
Letter of Credit or the Credit Agreement shall be of no force or effect and the
Loan Agreement and this Indenture shall be construed as if all such references
were void.

     Section 13.11. Limitation of Issuer’s Liability. No agreement or
provision contained in this Indenture nor any agreement, covenant or
undertaking by the Issuer contained in any document executed by the Issuer in
connection with the Project or the issuance, sale and delivery of the Bonds
shall give rise to any pecuniary liability of the Issuer or a charge against
its general credit or taxing powers, or shall obligate the Issuer financially
in any way except with respect to the proceeds of the Bonds and the revenues
under the Agreement pledged to the payment of the Bonds and the interest
thereon. No Owner shall ever have the right to compel any exercise of the
taxing power of the Issuer to pay the Bonds or interest thereon, nor to enforce
payment of them against any property of the Issuer except the revenues under

the Agreement pledged to the payment thereof. No failure of the Issuer to
comply with any term, condition, covenant or agreement herein shall subject the
Issuer to liability for any claim for damages, costs or other financial or
pecuniary charge except to the extent that the same can be paid or recovered
from the revenues under the Agreement pledged to the payment of the Bonds and
the interest thereon or proceeds of the Bonds; and no execution on any claim,
demand, cause of action or judgment shall be levied upon or collected from the
general credit, general funds or taxing powers of the Issuer. Nothing
herein shall preclude a proper party in interest from seeking and obtaining
specific performance against the Issuer for any failure to comply with any
term, condition, covenant or agreement herein; provided, that no costs,
expenses or other monetary relief shall be recoverable from the Issuer except
as may be payable from the revenues under the Agreement pledged to the payment
of the Bonds and the interest thereon.

50

 

     IN WITNESS WHEREOF, the Issuer has caused these presents to be executed in
its name, and to evidence its acceptance of the trusts hereby created, the
Trustee has caused these presents to be executed in its name.

	 	 	 	 	 
	 	 	CITY OF CHASKA, MINNESOTA
	 
	 	 	 	 
	

	 	By
	 	    /s/ GARY F. VAN EYLL
	

	 	 	 	

	

	 	 	 	Mayor
	 
	 	 	 	 
	

	 	And by
	 	  /s/ DAVE POKORNEY
	

	 	 	 	

	

	 	 	 	City Administrator

[Signature page to Indenture of Trust dated as of August 1, 2004, between the

City of Chaska, Minnesota and Wells Fargo Bank, National Association, as Trustee]

51

 

	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,
	 	 	as Trustee
	 
	 	 	 	 
	

	 	By:
	 	/s/ MARTHA K. EARLEY
	

	 	 	 	

	

	 	 	 	Its Assistant Vice President

[Signature page to Indenture of Trust dated as of August 1, 2004, between the

the City of Chaska, Minnesota and Wells Fargo Bank, National Association, as Trustee]

52

 

EXHIBIT A

(VARIABLE RATE FORM OF BOND)

UNITED STATES OF AMERICA

STATE OF MINNESOTA

CITY OF CHASKA

VARIABLE RATE DEMAND PURCHASE REVENUE BOND

(LIFECORE BIOMEDICAL, INC. PROJECT)

SERIES 2004

	 	 	 	 	 
	No. R-1

	 	 	 	$5,630,000

     THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME AND IN
THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE DEEMED TO
HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Date of Original	 	 
	Interest Rate
	 	Maturity Date
	 	Issuance
	 	CUSIP

	Variable
	 	September 1, 2020	 	August __, 2004	 	 	 	 

See Reverse for Certain Definitions

Registered Owner: Cede & Co.

Principal Amount: $5,630,000

     City of Chaska, a Minnesota municipal corporation (the “Issuer”), for
value received, hereby promises to pay, solely from the sources hereinafter
described, to the registered owner named above or registered assigns, on the
maturity date specified above, upon surrender hereof, the principal sum stated
above, and in like manner to pay interest on said sum at the rate described
below on the first day of each month and on the Conversion Date, commencing
September 1, 2004 from the preceding interest payment date to which interest
has been paid or duly provided for, unless no interest has been paid or duly
provided for on the Bonds (as hereinafter defined), in which case from the Date
of Original Issuance specified above, until payment of the principal hereof has
been made or duly provided for. The principal of this Bond is payable in
lawful money of the United States of America at the principal corporate trust
offices of Wells Fargo Bank, National Association, in Minneapolis, Minnesota.
Payment of interest on this Bond shall be made on each interest payment date to
the registered Owner hereof as of the close of business on the Business Day
immediately preceding such interest payment date (a “Record Date”) and shall be
paid by the Trustee to such registered Owner at his address as it appears on
the registration records maintained by the Trustee as Bond Registrar or at such
other address as is furnished to the Trustee in writing by such registered
Owner, or in such other manner as may be mutually acceptable to the Trustee and
the registered Owner of this Bond.

A-1

 

The Purchase Price (hereinafter defined) of this Bond shall be payable by
the Trustee to the registered Owner hereof at his address as it appears on the
registration books maintained by the Trustee as Bond Registrar or at such other
address as may be specified by such Owner at least 24 hours prior to the time
such Purchase Price is due. Notwithstanding anything else set forth herein,
however, so long as the Bonds are in Book-Entry Form, as provided in the
Indenture of Trust dated as of August 1, 2004, between the Issuer and the
Trustee (the “Indenture”), principal and interest shall be paid in accordance
with the requirements of The Depository Trust Company, New York, New York
(“DTC”), as in effect from time to time. So long as the Bonds are in
Book-Entry Form, the operating procedures of DTC and the Issuer’s Blanket
Letter of Representations shall apply, notwithstanding anything to the contrary
set forth in this Bond or the Indenture.

     Neither the Bonds nor the interest thereon, nor any of the agreements or
obligations of the Issuer, shall be construed to constitute an indebtedness of
the City of Chaska, Minnesota, or the State of Minnesota within the meaning of
any constitutional or statutory limitation, or to constitute or give rise to a
charge against the general credit or taxing powers of the Issuer. The Bonds
are limited obligations of the Issuer payable solely from the revenues
described in the Indenture. Neither the Issuer, the State, nor any political
subdivision thereof shall be obligated to pay the principal of or interest on
the Bonds except from said revenues, and neither the faith and credit nor any
taxing power of the Issuer, the State or any political subdivision thereof is
pledged to the payment of the principal of or interest on the Bonds.

     This Bond shall bear interest as follows:

     (A) Prior to the Conversion Date, this Bond shall bear interest at the
“Variable Rate.” From August 19, 2004 through and including August 23, 2004,
the Variable Rate shall be equal to the rate set forth in the Indenture.
Thereafter, the “Variable Rate” shall be a variable rate of interest equal to
the lesser of (i) 10.00% per annum, or (ii) that rate which the Remarketing
Agent determines, as of each Monday (or if the Remarketing Agent is not open
for business on any Monday then on the last preceding day on which it is open
for business) is the minimum rate which the Bonds would have to bear in order
to enable the Remarketing Agent to remarket such Bonds at par on such date
(whether or not any Bonds are actually to be remarketed on such date). The
Variable Rate shall change on each Tuesday following any such determination.

     (B) The Bonds shall bear interest at the Fixed Rates from and after the
Conversion Date until their stated maturities. A separate interest rate shall
be assigned to each stated maturity and shall be the rate which, in the
judgment of the Remarketing Agent, is the minimum rate which Bonds of such
stated maturity must bear in order to enable the Remarketing Agent to remarket
such Bonds at par on the Conversion Date. On the Conversion Date, the interest
rate borne by the Bonds shall be converted to the rate or rates so determined
by the Remarketing Agent.

     Prior to the Conversion Date, interest on the Bonds shall be computed on
the basis of a 365-day or 366-day year, as the case may be, and the actual
number of days elapsed. On and after the Conversion Date, interest on the
Bonds shall be computed on the basis of a 360-day year of twelve 30-day months.

A-2

 

     As used herein, the term “Conversion Date” means the earlier to occur of
either the Optional Conversion Date or the Automatic Conversion Date; the term
“Automatic Conversion Date” means the interest payment date immediately
preceding the Letter of Credit Termination Date, unless a Substitute Letter of
Credit conforming to the Indenture is procured by the Borrower; the term
“Optional Conversion Date” means that date, which shall be a Business Day, from
and after which the interest rate on the Bonds is converted from the Variable
Rate as a result of the exercise of the Conversion Option by Lifecore
Biomedical, Inc., a Minnesota corporation (the “Borrower”); the term
“Conversion Option” means the option granted to the Borrower in the Indenture
pursuant to which the interest rate on the Bonds is converted from the Variable
Rate to the Fixed Rates as of the Optional Conversion Date; the term “Purchase
Price” means an amount equal to 100% of the principal amount of any Bond
tendered or deemed tendered for purchase pursuant to the Indenture or with
respect to which the Demand Purchase Option (as defined below) has been
exercised or with respect to which the Bank has exercised its option to
purchase in lieu of acceleration of the maturity thereof, plus, in the case of
a purchase pursuant to the exercise of such Demand Purchase Option or purchase
in lieu of acceleration, accrued and unpaid interest thereon to the date of
purchase.

     The interest rate on the Bonds may be converted from the Variable Rate to
the Fixed Rates upon satisfaction of certain conditions and notice given by the
Borrower in accordance with the requirements of the Indenture, and the Bonds
shall be subject to mandatory tender by the Owners thereof for purchase by the
Borrower on the Conversion Date. On and after the Conversion Date the Demand
Purchase Option will not be available to the Owners of the Bonds. On the
Conversion Date, Owners of Bonds shall be required to tender their Bonds to the
Trustee for purchase by or on behalf of the Borrower at the Purchase Price.
Accrued interest on the Bonds will be payable on the Conversion Date to the
Owners of Bonds as of the applicable Record Date. Any Bonds not delivered to
the Tender Agent on or prior to the Conversion Date (“Undelivered Bonds”), for
which there has been irrevocably deposited in trust with the Trustee an amount
of money sufficient to pay the Purchase Price of the Undelivered Bonds, shall
be deemed to have been purchased on the Conversion Date at the Purchase Price.
IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS ON OR PRIOR
TO THE CONVERSION DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT
(INCLUDING ANY INTEREST TO ACCRUE SUBSEQUENT TO THE CONVERSION DATE) OTHER THAN
THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL
NO LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PURPOSE
OF PAYMENT OF THE PURCHASE PRICE THEREFOR.

     This Bond shall be purchased, at the option of the Owner hereof (“Demand
Purchase Option”) at the Purchase Price, upon:

     (a) delivery in care of the Trustee at its principal corporate trust
office and to the Remarketing Agent at its principal office of a notice
(which shall be irrevocable and effective upon receipt) which states (i)
the aggregate principal amount and the numbers (or other relevant
book-entry account information) of Bonds to be purchased; and (ii) the
date on which such Bonds are to be purchased, which date shall be a
Business Day not prior to the seventh (7th) day next succeeding the date
of delivery of such notice and which date shall be prior to the
Conversion Date; and

A-3

 

     (b) in the event that the Bonds are not then in Book-Entry-Only
Form, delivery in care of the Trustee at its principal corporate trust
office at or prior to 11:00 A.M., Minneapolis, Minnesota, time, on the
Business Day preceding the date designated for purchase in the notice
described in (a) above of such Bonds to be purchased with an appropriate
endorsement for transfer or accompanied by a bond power endorsed in
blank; provided, that if this Bond is not then in Book-Entry-Only Form,
this Bond shall be so purchased only if this Bond is delivered to the
Trustee and conforms in all respects to the description thereof in the
notice described in (a).

     Any delivery of a notice required to be made to the Trustee at its
principal corporate trust office pursuant to paragraph (a) or (b) above shall
be delivered to the Trustee at its principal corporate trust offices in
Minneapolis, Minnesota, or to the office designated for such purpose by any
successor Trustee. Any delivery of a notice required to be made to the
Remarketing Agent pursuant to paragraph (a) above shall be delivered to the
principal offices of the Remarketing Agent in Minneapolis, Minnesota, or to the
office designated for such purpose by any successor Remarketing Agent.

     This Bond is one of an authorized issue of Bonds limited in aggregate
principal amount to $5,630,000 (the “Bonds”) issued for the purpose of
providing financing for a project of the Borrower, as described in the Loan
Agreement mentioned below. The proceeds from the sale of the Bonds have been
lent by the Issuer to the Borrower under the terms of a Loan Agreement dated as
of August 1, 2004 (which agreement, as from time to time amended and
supplemented, is hereinafter referred to as the “Agreement”), under which the
Borrower is obligated to pay or cause to be paid amounts which are sufficient
to pay the principal and Purchase Price of, premium, if any, and interest on
the Bonds as the same shall become due in accordance with their terms and
provisions and the terms and provisions of the Indenture.

     The Bonds are all issued under and are equally and ratably secured by and
entitled to the protection of the Indenture, pursuant to which all payments due
from the Borrower to the Issuer under the Agreement (other than certain
indemnification payments and the payment of certain expenses of the Issuer) are
assigned to the Trustee to secure the payment of the principal and Purchase
Price of, and premium, if any, and interest on the Bonds. The Borrower has
caused to be delivered to the Trustee an irrevocable Letter of Credit (together
with any Substitute Letter of Credit, the “Letter of Credit”) issued by M&I
Marshall & Ilsley Bank (in such capacity, the “Bank”), which will expire,
unless earlier terminated, on September 15, 2007. Subject to certain
conditions, the Letter of Credit may be replaced by a letter of credit,
guaranty, insurance policy or other credit device (a “Substitute Letter of
Credit”) of another commercial bank, savings and loan association, insurance
company or other financial institution. Under the Letter of Credit, the
Trustee will be entitled to draw up to an amount sufficient to pay (a) the
principal of the Bonds or the portion of the Purchase Price corresponding to
the principal of the Bonds and (b) up to 45 days’ accrued interest (at maximum
rate of 10.00% per annum) on the Bonds or the portion of the Purchase Price of
the Bonds corresponding to accrued interest thereon. Reference is hereby made
to the Indenture for a description of the property pledged and assigned, the
provisions, among others, with respect to the nature and extent of the
security, the rights, duties and obligations of the Issuer, the Trustee and the
Owners of the Bonds and the terms upon which the Bonds are issued and secured.

A-4

 

     This Bond is transferable by the registered Owner hereof in person or by
its attorney duly authorized in writing, at the designated corporate trust
office of the Trustee, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new registered Bond or Bonds
of authorized denomination or denominations for the same aggregate principal
amount will be issued to the transferee in exchange therefor. The Issuer and
the Trustee may deem and treat the registered Owner hereof as the absolute
Owner hereof (whether or not this Bond shall be overdue) for all purposes, and
neither the Issuer nor the Trustee shall be bound by any notice or knowledge to
the contrary.

     Prior to the Conversion Date, the Bonds are issuable as fully registered
bonds in the authorized denominations of $100,000 and, above $100,000, any
integral multiple of $5,000. From and after the Conversion Date, the Bonds
shall be issuable as fully registered bonds in the denominations of $5,000 or
any integral multiple thereof.

     The Bonds are subject to extraordinary redemption upon the occurrence of
any of the events described in Section 3.01 of the Indenture, including
exercise by the Borrower of its option to cause the Bonds to be redeemed as
provided in Sections 5.06 and 5.07 of the Agreement, or the occurrence of a
Determination of Taxability, as more fully provided in Section 4.08 of the
Agreement. If called for extraordinary redemption, the Bonds shall be subject
to redemption on any interest payment date, in whole, at a redemption price of
one hundred percent (100%) of the principal amount thereof plus accrued
interest to the redemption date. Reference is hereby made to Section 3.01 of
the Indenture and Sections 4.07(a) and 4.08 of the Agreement for a description
of the circumstances under which the Bonds are subject to extraordinary
redemption.

     The Bonds are subject to mandatory redemption, in whole, on the Automatic
Conversion Date, at 100% of the principal amount thereof plus accrued interest
to the redemption date, if on or prior to the twentieth day prior to the
Automatic Conversion Date (i) the Borrower has failed to provide the Trustee
with an opinion of nationally recognized bond counsel to the effect that the
proposed conversion of the interest rate on the Bonds to the Fixed Rates on the
Automatic Conversion Date will not cause the interest on the Bonds to become
includible in the gross income of the recipients thereof for purposes of
federal income taxation, or (ii) the Fixed Rates have not been established in
accordance with the terms of the Indenture.

     On or prior to the Conversion Date, the Bonds are subject to optional
redemption, at the option of the Borrower, on any interest payment date on or
after December 1, 2004, in whole or in part, and if in part, the Bonds to be
redeemed to be selected in such manner as the Trustee shall determine (except
as otherwise provided in the Indenture), at a redemption price of 100% of the
principal amount thereof plus accrued interest to the redemption date.

     The Bonds are subject to mandatory sinking fund redemption on September 1
of the years and in the amounts set forth in Section 3.03 of the Indenture.

     After the Conversion Date, the Bonds are subject to optional redemption,
at the option of the Borrower, on or after the First Optional Redemption Date
(hereinafter defined), in whole at any time or in part on any interest payment
date, less than all of the Bonds to be selected in such

A-5

 

manner as the Trustee shall determine (except as otherwise provided in the
Indenture), at the redemption prices (expressed as percentages of principal
amount) set forth in the following table plus accrued interest to the
redemption date:

	 	 	 	 	 
	 	 	Redemption
	Redemption Dates
	 	Prices

	First Optional Redemption Date through the following August 31
	 	 	102	%
	First Anniversary of the First Optional Redemption Date through
the following August 31
	 	 	101	%
	Second Anniversary of the First Optional Redemption Date and
thereafter
	 	 	100	%

As used herein, the term “First Optional Redemption Date” means the September 1
occurring in the year which is a number of years after the Conversion Date
equal to the number of years between the September 1 immediately following the
Conversion Date (unless the Conversion Date is a September 1, in which case
from such September 1) and September 1, 2020, multiplied by 1/2 and rounded up
to the nearest whole number.

     In the event any of the Bonds or portions thereof are called for
redemption as aforesaid, notice of the call for redemption, identifying the
Bonds or portions thereof to be redeemed, shall be given by the Trustee by
mailing a copy of the redemption notice at least thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption to the Owner of
each Bond to be redeemed in whole or in part at the address shown on the
registration books maintained by the Trustee as Bond Registrar. Any notice
mailed as provided above shall be conclusively presumed to have been duly
given, whether or not the Owner receives the notice. No further interest shall
accrue on the principal of any Bond called for redemption after the redemption
date if funds sufficient for such redemption have been deposited with the
Trustee. Notwithstanding the foregoing, the notice requirements contained in
the first sentence of this paragraph may be deemed satisfied with respect to a
transferee of a Bond which has been purchased pursuant to the Demand Purchase
Option after such Bond has previously been called for redemption,
notwithstanding the failure to satisfy the notice requirements of the first
sentence of this paragraph with respect to such transferee, as more fully
provided in Section 3.04 of the Indenture.

     This Bond and all other Bonds of the issue of which it forms a part are
issued under and pursuant to Minnesota Statutes, Sections 469.152 to 469.1651,
as amended (the “Act”), and pursuant to a Bond Resolution adopted by the
Issuer. This Bond and the issue of which it forms a part are not an
indebtedness or other liability of the Issuer, the State or of any political
subdivision of the State and are payable solely out of Bond proceeds, revenues
and other amounts derived under the hereinafter described Loan Agreement, and
the funds and accounts held under and pursuant to the Indenture and pledged
therefor. The Bonds, the interest thereon and any other payments or costs
incident thereto do not constitute an indebtedness of the Issuer,

A-6

 

the State or any political subdivision thereof within the meaning of any
constitutional or statutory provisions. The Issuer shall not pledge its faith
or credit nor the faith or credit of the State nor any political subdivision of
the State to the payment of this Bond. The issuance of this Bond by the Issuer
does not directly, indirectly or contingently obligate the Issuer, the State or
a political subdivision of the State to apply money from, or levy or pledge any
form of taxation whatever to the payment of this Bond. The Bonds and the
interest payable thereon do not give rise to a pecuniary liability of the
Issuer or a charge against its general credit or taxing power of the Issuer,
the State of Minnesota or any political subdivision thereof for the payment of
the Bonds or the interest thereon or other payments or costs incident thereto.

     The Owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, unless certain circumstances described in the Indenture shall have
occurred. In certain events, on the conditions, in the manner and with the
effect set forth in the Indenture, the principal of all the Bonds issued under
the Indenture and then outstanding may become or may be declared due and
payable before the stated maturity thereof, together with interest accrued
thereon.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Owners of the Bonds at any time by the Issuer and
the Trustee, at the request of the Borrower, and with the written consent of
the Bank and the holders of a majority in aggregate principal amount of the
Bonds at the time outstanding. Any such consent or any waiver by the Bank and
the holders of a majority in aggregate principal amount of the Bonds shall be
conclusive and binding upon the Owner and upon all future Owners of this Bond
and of any Bond issued in replacement hereof whether or not notation of such
consent or waiver is made upon this Bond. The Indenture also contains
provisions which, subject to certain conditions, permit or require the Trustee
to waive certain past defaults under the Indenture and their consequences.

     It is hereby certified, recited and declared that all acts, conditions and
things required to exist, to happen and to be performed precedent to and in the
execution and delivery of the Indenture and the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required
by law; and that the issuance of this Bond and the issue of which it forms a
part, together with all other obligations of the Issuer, does not exceed or
violate any constitutional or statutory limitation.

     This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the certificate
of authentication hereon shall have been signed by the Trustee.

A-7

 

     IN WITNESS WHEREOF, City of Chaska, Minnesota, has caused this Bond to be
duly executed in its name by the manual or facsimile signature of one or more
of its duly authorized officers.

	 	 	 	 	 	 	 
	 	 	 	 	CITY OF CHASKA, MINNESOTA
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	

	

	 	 	 	 	 	Mayor
	Attest:	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	
	 	 	 	 
	

	 	City Administrator	 	 	 	 
	 
	 	 	 	 	 	 
	[SEAL]	 	 	 	 

A-8

 

(Form of Certificate of Authentication)

CERTIFICATE OF AUTHENTICATION

     This Bond is one of the Bonds of the issue described in the
within-mentioned Indenture of Trust.

Date of Authentication:

	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,
	 	 	as Trustee
	 
	 	 	 	 
	

	 	By
	 	

	

	 	 	 	Authorized Signatory

A-9

 

     FOR
VALUE RECEIVED,                    , the undersigned, hereby
sells, assigns and transfers unto        
            the within
Bond and all rights thereunder, and hereby irrevocably constitutes and appoints
                    attorney to transfer the within Bond on the records kept
for registration thereof, with full power of substitution in the premises.

	 	 	 
	Dated:                                                                             

	 	________________________________________________
	PLEASE INSERT SOCIAL SECURITY

NUMBER OR OTHER IDENTIFYING

NUMBER OF ASSIGNEE

                                                         

/                                                         /

	 	NOTICE: The signature to this assignment
must correspond with the name as it
appears upon the face of the within Bond
in every particular, without alteration or
enlargement or any change whatever.
Signature guarantee must be provided in
accordance with the prevailing standards
and procedures of the Registrar and
Transfer Agent which may require
signatures to be guaranteed by certain
eligible guarantor institutions which
participate in a recognized signature
guarantee program.

     The following abbreviations, when used in the inscription on the face of
this Bond, shall be construed as though they were written out in full according
to applicable laws or regulations:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TEN COM —	 	as tenants	 	UNIF TRANS MIN ACT	 	___________	 	 	Custodian	 	____________
	

	 	in common
	 	 	 	 	 	 	(Cust)	 	 	 	 	(Minor)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TEN ENT —

	 	as tenants	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	by the entireties	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	JT TEN —	 	as joint tenants

with right of	 	 	 	under Uniform Transfers to

Minors Act ________________	 	 
	

	 	survivorship and
not as tenants
in common
	 	 	 	 	 	 	(State)	 	 	 	 	 

Additional abbreviations may also be used

although not in the above list.

`

A-10

 

EXHIBIT B

(FIXED RATE FORM OF BOND)

UNITED STATES OF AMERICA

STATE OF MINNESOTA

CITY OF CHASKA

REVENUE BOND

(LIFECORE BIOMEDICAL, INC.)

SERIES 2004

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Interest Rate
	 	Maturity Date
	 	Date of Issuance
	 	CUSIP

	 
	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 
	SEE REVERSE FOR CERTAIN DEFINITIONS
	 	 
	 
	 	 
	REGISTERED OWNER:
	 	 
	 
	 	 
	PRINCIPAL AMOUNT:

	 	DOLLARS
	 
	 	 
	No. R-                   

	 	$                   

     City of Chaska, Minnesota, a Minnesota municipal corporation (the
“Issuer”), for value received, hereby promises to pay solely from the source
and as hereinafter provided, to the registered owner named above or registered
assigns, on the maturity date specified above, upon surrender hereof, the
principal sum stated above and in like manner to pay interest (calculated on
the basis of a 360-day year of twelve 30-day months) on said sum at the rate
per annum specified above on September 1 and March 1 of each year, commencing
      1,      , or from the interest payment date next preceding the date
hereof to which interest has been paid or duly provided for, unless the date
hereof is an interest payment date to which interest has been paid or duly
provided for, in which case from the date hereof or unless no interest has been
paid or duly provided for on the Bonds (as hereinafter defined), in which case
from the Date of Issuance specified above until payment of the principal hereof
has been made or duly provided for. The principal of this Bond is payable in
lawful money of the United States of America at the principal corporate trust
offices of Wells Fargo Bank, National Association, in Minneapolis, Minnesota.
Payment of interest on this Bond shall be made on each interest payment date to
the registered Owner hereof as of the close of business on the fifteenth day of
the month (whether or not a Business Day) preceding the month in which there
occurs such interest payment date and shall be paid by check mailed by the
Trustee to such registered Owner at his address as it appears on the
registration books maintained by the Trustee as Bond Registrar or at such other
address as is furnished to the Trustee in writing by such registered Owner, or
in such other manner as may be mutually acceptable to the Trustee and the
registered Owner of this Bond.

B-1

 

     This Bond is one of an authorized issue of Bonds limited in aggregate
principal amount to $5,630,000 (the “Bonds”) issued for the purpose of
providing financing for a “project” of Lifecore Biomedical, Inc., a Minnesota
corporation (the “Borrower”). The proceeds from the sale of the Bonds have
been lent by the Issuer to the Borrower under the terms of a Loan Agreement
dated as of August 1, 2004 (which agreement, as from time to time amended and
supplemented, is hereinafter referred to as the “Agreement”), under which the
Borrower is obligated to pay amounts which are sufficient to pay the principal
of, premium, if any, and interest on the Bonds as the same shall become due in
accordance with their terms and provisions and the terms and provisions of the
Indenture of Trust dated as of August 1, 2004 between the Issuer and the
Trustee (the “Indenture”).

     Neither the Bonds nor the interest thereon, nor any of the agreements or
obligations of the Issuer, shall be construed to constitute an indebtedness of
City of Chaska, Minnesota, or the State of Minnesota (the “State”) within the
meaning of any constitutional or statutory limitation, or to constitute or give
rise to a charge against the general credit or taxing powers of the Issuer.
The Bonds are limited obligations of the Issuer payable solely from the
revenues described in the Indenture. Neither the Issuer, the State, nor any
political subdivision thereof shall be obligated to pay the principal of or
interest on the Bonds except from said revenues, and neither the faith and
credit nor the taxing power of the Issuer, the State or any political
subdivision thereof is pledged to the payment of the principal of or interest
on the Bonds.

     ADDITIONAL PROVISIONS OF THIS BOND ARE CONTAINED ON THE REVERSE HEREOF AND
SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET
FORTH HEREIN.

     This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the certificate
of authentication hereon shall have been signed by the Trustee.

B-2

 

     IN WITNESS WHEREOF, the City of Chaska, Minnesota, has caused this Bond to
be duly executed in its name by the manual or facsimile signatures of one or
more of its duly authorized officers.

	 	 	 	 	 	 	 
	 	 	 	 	CITY OF CHASKA, MINNESOTA
	[SEAL]	 	 	 	 
	

	 	 	 	By:
	 	

	

	 	 	 	 	 	Mayor
	Attest:	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	
	 	 	 	 
	

	 	City Administrator	 	 	 	 
	 
	 	 	 	 	 	 

B-3

 

(Form of Certificate of Authentication)

CERTIFICATE OF AUTHENTICATION

     This Bond is one of the Bonds of the issue described in the
within-mentioned Indenture of Trust.

Date of Authentication:

	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,
	 	 	as Trustee
	 
	 	 	 	 
	

	 	By
	 	

	

	 	 	 	Authorized Signature

[Reverse of Bond]

     The Bonds are all issued under and are equally and ratably secured by and
entitled to the protection of the Indenture, pursuant to which all payments due
from the Borrower to the Issuer under the Agreement (other than certain
indemnification payments and the payment of certain expenses of the Issuer) are
assigned to the Trustee to secure the payment of the principal of and premium,
if any, and interest on the Bonds. Reference is hereby made to the Indenture
for a description of the property pledged and assigned, the provisions, among
others, with respect to the nature and extent of the security, the rights,
duties and obligations of the Issuer, the Trustee and the Owners of the Bonds,
and the terms upon which the Bonds are issued and secured.

     This Bond is transferable by the registered Owner hereof in person or by
its attorney duly authorized in writing, at the principal corporate trust
office of the Trustee but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond. Upon such transfer a new registered Bond or Bonds
of authorized denomination or denominations for the same aggregate principal
amount will be issued to the transferee in exchange therefor. The Issuer and
the Trustee may deem and treat the registered Owner hereof as the absolute
Owner hereof (whether or not this Bond shall be overdue) for all purposes, and
neither the Issuer nor the Trustee shall be bound by any notice or knowledge to
the contrary.

     The Bonds are issuable as fully registered Bonds in the denomination of
$5,000 or any integral multiple thereof.

     The Bonds are subject to redemption in the event (1) the Borrower shall
exercise its option to cause the Bonds to be redeemed as provided in Section
4.07(a) of the Agreement, or (2) the Borrower shall be obligated to cause the
Bonds to be redeemed as provided in Section 4.08 of the Agreement. If called
for redemption at any time pursuant to (1) or (2) above, the Bonds shall be
subject to redemption by the Issuer on any interest payment date, in whole at a
redemption price of one hundred percent (100%) of the principal amount thereof
plus

B-4

 

accrued interest to the redemption date. Reference is hereby made to
Section 4.07(a) and Section 4.08 of the Agreement for a description of the
circumstances under which the Borrower may cause or be required to cause the
Bonds to be redeemed.

     [Insert any mandatory sinking fund redemption provisions]

     The Bonds are subject to redemption by the Issuer, at the option of the
Borrower, on or after September 1,          , in whole at any time or in part on any
interest payment date, and if less than all of the Bonds are to be redeemed,
the Bonds to be redeemed shall be selected [in inverse order of maturity and]
in such manner as the Trustee shall determine (except as otherwise provided in
the Indenture), at the redemption prices (expressed as percentages of principal
amount) set forth in the following table plus accrued interest to the
redemption date:

	 	 	 	 	 
	Redemption Dates
	 	Redemption Prices

	September 1, ____ through August 31, ____
	 	 	102	%
	September 1, ____ through August 31, ____
	 	 	101	%
	September 1, ____ and thereafter
	 	 	100	%

     In the event any of the Bonds or portions thereof are called for
redemption as aforesaid, notice of the call for redemption, identifying the
Bonds or portions thereof to be redeemed, shall be given by the Trustee by
mailing a copy of the redemption notice at least thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption to the Owner of
each Bond to be redeemed in whole or in part at the address shown on the
registration books maintained by the Trustee as Bond Registrar. Any notice
mailed as provided above shall be conclusively presumed to have been duly
given, whether or not the Owner receives the notice. No further interest shall
accrue on the principal of any Bond called for redemption after the redemption
date if funds sufficient for such redemption have been deposited with the
Trustee.

     This Bond and all other Bonds of the issue of which it forms a part are
issued under and pursuant to Minnesota Statutes, Sections 469.152 to 469.1651,
as amended (the “Act”), and pursuant to a Bond Resolution adopted by the
Issuer. This Bond and the issue of which it forms a part are not an
indebtedness or other liability of the Issuer, the State or of any political
subdivision of the State and are payable solely out of Bond proceeds, revenues
and other amounts derived under the hereinafter described Loan Agreement, and
the funds and accounts held under and pursuant to the Indenture and pledged
therefor. The Bonds, the interest thereon and any other payments or costs
incident thereto do not constitute an indebtedness of the Issuer, the State or
any political subdivision thereof within the meaning of any constitutional or
statutory provisions. The Issuer shall not pledge its faith or credit nor the
faith or credit of the State nor any political subdivision of the State to the
payment of this Bond. The issuance of this Bond by the Issuer does not
directly, indirectly or contingently obligate the Issuer, the State or a
political subdivision of the State to apply money from, or levy or pledge any
form of taxation whatever to the payment of this Bond. The Bonds and the
interest payable thereon do not give rise to a pecuniary liability of the
Issuer or a charge against its general credit or taxing power of the Issuer,
the State of Minnesota or any political subdivision thereof for the payment of
the Bonds or the interest thereon or other payments or costs incident thereto.

B-5

 

     The Owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, unless certain circumstances described in the Indenture shall have
occurred. In certain events, on the conditions, in the manner and with the
effect set forth in the Indenture, the principal of all the Bonds issued under
the Indenture and then outstanding may become or may be declared due and
payable before the stated maturity thereof, together with interest accrued
thereon.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Owners of the Bonds at any time by the Issuer with
the consent of the Owners of a majority in aggregate principal amount of the
Bonds at the time outstanding. Any such consent or any waiver by the Owners of
a majority in aggregate principal amount of the Bonds shall be conclusive and
binding upon the Owner and upon all future Owners of this Bond and of any Bond
issued in replacement hereof whether or not notation of such consent or waiver
is made upon this Bond. The Indenture also contains provisions which, subject
to certain conditions, permit or require the Trustee to waive certain past
defaults under the Indenture and their consequences.

     It is hereby certified, recited and declared that all acts, conditions and
things required to exist, to happen and to be performed precedent to and in the
execution and delivery of the Indenture and the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required
by law; and that the issuance of this Bond and the issue of which it forms a
part, together with all other obligations of the Issuer does not exceed or
violate any constitutional or statutory limitation.

B-6

 

     FOR
VALUE RECEIVED,           assigns and transfers unto
          the within Bond and all rights thereunder, and hereby
irrevocably constitutes and appoints        
  attorney to
transfer the within Bond on the books kept for registration thereof with full
power of substitution in the premises.

	 	 	 
	Dated: _______________________	 	________________________________________________
	

	 	NOTICE: The signature to this assignment
must correspond with the name as it
appears upon the face of the within Bond
in every particular, without alteration or
enlargement or any change whatever.
Signature guarantee must be provided in
accordance with the prevailing standards
and procedures of the Registrar and
	PLEASE INSERT SOCIAL SECURITY

NUMBER OR OTHER IDENTIFYING

NUMBER OF ASSIGNEE

                                                         

/                                                         /

	Transfer Agent which may require
signatures to be guaranteed by certain
eligible guarantor institutions which
participate in a recognized signature
guarantee program.

     The following abbreviations, when used in the inscription on the face of
this Bond, shall be construed as though they were written out in full according
to applicable laws or regulations:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TEN COM —	 	as tenants	 	UNIF TRANS MIN ACT	 	 	___________	 	 	Custodian	 	____________
	

	 	in common
	 	 	 	 	 	 	(Cust)	 	 	 	 	(Minor)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TEN ENT —

	 	as tenants	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	by the entireties	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	JT TEN —	 	as joint tenants

with right of	 	 	 	under Uniform Transfers to

Minors Act ______________	 	 
	

	 	survivorship and
not as tenants
in common
	 	 	 	 	 	 	(State)	 	 	 	 	 

Additional abbreviations may also be used

although not in the above list.

B-7exv10w6

 

Exhibit 10.6

LIFECORE BIOMEDICAL, INC.

2003 STOCK INCENTIVE PLAN

SEPTEMBER 24, 2003

 

 

Table of Contents

	 	 	 	 	 	 	 
	Section 1.
	 	Purpose	 	 	1	 
	Section 2.
	 	Definitions	 	 	1	 
	Section 3.
	 	Administration	 	 	3	 
	(a)
	 	Power and Authority of the Committee	 	 	3	 
	(b)
	 	Delegation	 	 	3	 
	(c)
	 	Power and Authority of the Board	 	 	4	 
	Section 4.
	 	Shares Available for Awards	 	 	4	 
	(a)
	 	Shares Available	 	 	4	 
	(b)
	 	Accounting for Awards	 	 	4	 
	(c)
	 	Adjustments	 	 	4	 
	(d)
	 	Award Limitations Under the Plan	 	 	4	 
	Section 5.
	 	Eligibility	 	 	5	 
	Section 6.
	 	Awards	 	 	5	 
	(a)
	 	Options	 	 	5	 
	(b)
	 	Stock Appreciation Rights	 	 	6	 
	(c)
	 	Restricted Stock and Restricted Stock Units	 	 	6	 
	(d)
	 	Performance Awards	 	 	7	 
	(e)
	 	Other Stock Grants	 	 	7	 
	(f)
	 	Other Stock-Based Awards	 	 	7	 
	(g)
	 	General	 	 	8	 
	Section 7.
	 	Amendment and Termination; Adjustments	 	 	9	 
	(a)
	 	Amendments to the Plan	 	 	9	 
	(b)
	 	Amendments to Awards	 	 	10	 
	(c)
	 	Correction of Defects, Omissions and Inconsistencies	 	 	10	 
	Section 8.
	 	Income Tax Withholding	 	 	10	 
	Section 9.
	 	General Provisions	 	 	11	 
	(a)
	 	No Rights to Awards	 	 	11	 
	(b)
	 	Award Agreements	 	 	11	 
	(c)
	 	Plan Provisions Control	 	 	11	 
	(d)
	 	No Rights of Shareholders	 	 	11	 
	(e)
	 	No Limit on Other Compensation Arrangements	 	 	11	 
	(f)
	 	No Right to Employment	 	 	11	 
	(g)
	 	Governing Law	 	 	12	 
	(h)
	 	Severability	 	 	12	 
	(i)
	 	No Trust or Fund Created	 	 	12	 

ii 

 

	 	 	 	 	 	 	 
	(j)
	 	Other Benefits	 	 	12	 
	(k)
	 	No Fractional Shares	 	 	12	 
	(l)
	 	Headings	 	 	12	 
	(m)
	 	Section 16 Compliance; Section 162(m) Administration	 	 	12	 
	(n)
	 	Conditions Precedent to Issuance of Shares	 	 	13	 
	Section 10.
	 	Effective Date of the Plan	 	 	13	 
	Section 11.
	 	Term of the Plan	 	 	13	 

iii 

 

LIFECORE BIOMEDICAL, INC.

2003 STOCK INCENTIVE PLAN

Section 1. Purpose

     The purpose of the Plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting and retaining employees,
officers, consultants, independent contractors and directors capable of
assuring the future success of the Company, to offer such persons incentives to
put forth maximum efforts for the success of the Company’s business and to
afford such persons an opportunity to acquire a proprietary interest in the
Company.

Section 2. Definitions

     As used in the Plan, the following terms shall have the meanings set forth
below:

     (a) “Affiliate” shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the Committee.

     (b) “Award” shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Other Stock Grant or Other
Stock-Based Award granted under the Plan.

     (c) “Award Agreement” shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan. Each Award
Agreement shall be subject to the applicable terms and conditions of the Plan
and any other terms and conditions (not inconsistent with the Plan) determined
by the Committee.

     (d) “Board” shall mean the Board of Directors of the Company.

     (e) “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.

     (f) “Committee” shall mean a committee of Directors designated by the
Board to administer the Plan, which shall initially be the Company’s
compensation committee. The Committee shall be comprised of not less than such
number of Directors as shall be required to permit Awards granted under the
Plan to qualify under Rule 16b-3 and Section 162(m) of the Code, and each
member of the Committee shall be a “Non-Employee Director.”

     (g) “Company” shall mean Lifecore Biomedical, Inc., a Minnesota
corporation, and any successor corporation.

     (h) “Director” shall mean a member of the Board, including any
Non-Employee Director.

 

 

     (i) “Eligible Person” shall mean any employee, officer, consultant,
independent contractor or director providing services to the Company or any
Affiliate who the Committee determines to be an Eligible Person.

     (j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

     (k) “Fair Market Value” shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods or procedures as shall
be established from time to time by the Committee. Notwithstanding the
foregoing and unless otherwise determined by the Committee, the Fair Market
Value of a Share as of a given date shall be, if the Shares are then listed on
the Nasdaq National Market, the closing sale price of one Share as reported on
the Nasdaq National Market on such date or, if the Nasdaq National Market is
not open for trading on such date, on the most recent preceding date when it is
open for trading.

     (l) “Incentive Stock Option” shall mean an option granted under Section
6(a) of the Plan that is intended to qualify as an “incentive stock option” in
accordance with the terms of Section 422 of the Code or any successor
provision.

     (m) “Non-Employee Director” shall mean any Director who is not also an
employee of the Company or an Affiliate within the meaning of Rule 16b-3 and an
“outside director” within the meaning of Section 162(m) of the Code.

     (n) “Non-Qualified Stock Option” shall mean an option granted under
Section 6(a) of the Plan that is not an Incentive Stock Option.

     (o) “Option” shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

     (p) “Other Stock Grant” shall mean any right granted under Section 6(e) of
the Plan.

     (q) “Other Stock-Based Award” shall mean any right granted under Section
6(f) of the Plan.

     (r) “Participant” shall mean an Eligible Person designated to be granted
an Award under the Plan.

     (s) “Performance Award” shall mean any right granted under Section 6(d) of
the Plan.

     (t) “Person” shall mean any individual or entity, including a corporation,
partnership, limited liability company, association, joint venture or trust.

     (u) “Plan” shall mean the Lifecore Biomedical, Inc. 2003 Stock Incentive
Plan, as amended from time to time, the provisions of which are set forth
herein.

     (v) “Restricted Stock” shall mean any Share granted under Section 6(c) of
the Plan.

2

 

     (w) “Restricted Stock Unit” shall mean any unit granted under Section 6(c)
of the Plan evidencing the right to receive a Share (or a cash payment equal to
the Fair Market Value of a Share) at some future date.

     (x) “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation.

     (y) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (z) “Share” or “Shares” shall mean a share or shares of common stock, $.01
par value per share, of the Company or such other securities or property as may
become subject to Awards pursuant to an adjustment made under Section 4(c) of
the Plan.

     (aa) “Stock Appreciation Right” shall mean any right granted under Section
6(b) of the Plan.

Section 3. Administration

     (a) Power and Authority of the Committee. The Plan shall be administered
by the Committee. Subject to the express provisions of the Plan and to
applicable law, the Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of Awards to be
granted to each Participant under the Plan; (iii) determine the number of
Shares to be covered by (or the method by which payments or other rights are to
be determined in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of any Option
or waive any restrictions relating to any Award; (vi) determine whether, to
what extent and under what circumstances Awards may be exercised in cash,
Shares, promissory notes (provided, however, that the acceptance of such
promissory notes does not conflict with Section 402 of the Sarbanes-Oxley Act
of 2002) other securities, other Awards or other property, or canceled,
forfeited or suspended; (vii) interpret and administer the Plan and any
instrument or agreement, including an Award Agreement, relating to the Plan;
(viii) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive and binding upon any
Eligible Person and any holder or beneficiary of any Award.

     (b) Delegation. The Committee may delegate to one or more officers or
Directors of the Company, subject to such terms, conditions and limitations as
the Committee may establish in its sole discretion, the authority to grant
Options; provided, however, that the Committee shall not
delegate such authority (i) with regard to grants of Options to be made to
officers or directors of the Company or any Affiliate who are subject to
Section 16 of the Exchange Act or (ii) in such a manner as would cause the Plan
not to comply with the requirements of Section 162(m) of

3

 

the Code or (iii) in
such a manner as would contravene Section 409 of the Minnesota Business
Corporation Act.

     (c) Power and Authority of the Board. Notwithstanding anything to the
contrary contained herein, the Board may, at any time and from time to time,
without any further action of the Committee, exercise the powers and duties of
the Committee under the Plan.

Section 4. Shares Available for Awards

     (a) Shares Available. Subject to adjustment as provided in Section 4(c)
of the Plan, the aggregate number of Shares that may be issued under the Plan
shall be 1,000,000. Notwithstanding the foregoing, (i) the number of Shares
available for granting Incentive Stock Options under the Plan shall not exceed
1,000,000, subject to adjustment as provided in Section 4(c) of the Plan and
subject to the provisions of Section 422 or 424 of the Code or any successor
provision and (ii) the number of Shares available for granting Restricted Stock
and Restricted Stock Units shall not exceed 500,000, subject to adjustment as
provided in Section 4(c) of the Plan.

     (b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan. If any Shares covered by an Award or to
which an Award relates are not purchased or are forfeited, or if an Award
otherwise terminates without delivery of any Shares, then the number of Shares
counted against the aggregate number of Shares available under the Plan with
respect to such Award, to the extent of any such forfeiture or termination,
shall again be available for granting Awards under the Plan.

     (c) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of
Shares (or other securities or other property) that thereafter may be made the
subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and
(iii) the purchase price or exercise price with respect to any Award; provided,
however, that the number of Shares covered by any Award or to which such Award
relates shall always be a whole number.

     (d) Award Limitations Under the Plan. No Eligible Person may be granted
any Award or Awards under the Plan, the value of which Award or Awards is based
solely on an increase in the value of the Shares after the date of grant of
such Award or Awards, for more

4

 

than 100,000 Shares (subject to adjustment as
provided for in Section 4(c) of the Plan), in the aggregate in any taxable
year. The foregoing annual limitation specifically includes the grant of any
Award or Awards representing “qualified performance-based compensation” within
the meaning of Section 162(m) of the Code.

Section 5. Eligibility

     Any Eligible Person shall be eligible to be designated a Participant. In
determining which Eligible Persons shall receive an Award and the terms of any
Award, the Committee may take into account the nature of the services rendered
by the respective Eligible Persons, their present and potential contributions
to the success of the Company or such other factors as the Committee, in its
discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive
Stock Option may only be granted to full-time or part-time employees (which
term as used herein includes, without limitation, officers and directors who
are also employees), and an Incentive Stock Option shall not be granted to an
employee of an Affiliate unless such Affiliate is also a “subsidiary
corporation” of the Company within the meaning of Section 424(f) of the Code or
any successor provision.

Section 6. Awards

     (a) Options. The Committee is hereby authorized to grant Options to
Eligible Persons with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the
Plan as the Committee shall determine:

     (i) Exercise Price. The purchase price per Share purchasable under
an Option shall be determined by the Committee; provided, however, that
such purchase price shall not be less than 100% of the Fair Market Value
of a Share on the date of grant of such Option.

     (ii) Option Term. The term of each Option shall be fixed by the
Committee at the time of grant.

     (iii) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part
and the method or methods by which, and the form or forms (including,
without limitation, cash, Shares, promissory notes (provided, however,
that the acceptance of such promissory notes does not conflict with
Section 402 of the Sarbanes-Oxley Act of 2002) other securities, other
Awards or other property, or any combination thereof, having a Fair
Market Value on the exercise date equal to the applicable exercise price)
in which, payment of the exercise price with respect thereto may be made
or deemed to have been made.

     (iv) Incentive Stock Options. Notwithstanding anything in the Plan
to the contrary, the following additional provisions shall apply to the
grant of stock options which are intended to qualify as Incentive Stock
Options:

     (A) The Committee will not grant Incentive Stock Options in
which the aggregate Fair Market Value (determined as of the time
the option is granted) of

5

 

the Shares with respect to which
Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under this Plan and all other
plans of the Company and its Affiliates) shall exceed $100,000.

     (B) All Incentive Stock Options must be granted within ten
years from the earlier of the date on which this Plan was adopted
by the Board or the date this Plan was approved by the shareholders
of the Company.

     (C) Unless sooner exercised, all Incentive Stock Options shall
expire and no longer be exercisable no later than 10 years after
the date of grant; provided, however, that in the case of a grant
of an Incentive Stock Option to a Participant who, at the time such
Option is granted, owns (within the meaning of Section 422 of the
Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its Affiliate,
such Incentive Stock Option shall expire and no longer be
exercisable no later than five years from the date of grant.

     (D) The purchase price per Share for an Incentive Stock Option
shall be not less than 100% of the Fair Market Value of a Share on
the date of grant of the Incentive Stock Option; provided, however,
that, in the case of the grant of an Incentive Stock Option to a
Participant who, at the time such Option is granted, owns (within
the meaning of Section 422 of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of
the Company or of its Affiliate, the purchase price per Share
purchasable under an Incentive Stock Option shall be not less than
110% of the Fair Market Value of a Share on the date of grant of
the Incentive Stock Option.

     (E) Any Incentive Stock Option authorized under the Plan shall
contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain
all provisions required in order to qualify the Option as an
Incentive Stock Option.

     (b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Eligible Persons subject to the terms of the
Plan. Each Stock Appreciation Right granted under the Plan shall confer on the
holder upon exercise the right to receive, as determined by the Committee,
cash or a number of Shares equal to the excess of (i) the Fair Market
Value of one Share on the date of exercise over (ii) the grant price of the
Stock Appreciation Right as determined by the Committee, which grant price
shall not be less than 100% of the Fair Market Value of one Share on the date
of grant of the Stock Appreciation Right. Subject to the terms of the Plan,
the grant price, term, methods of exercise, dates of exercise, methods of
settlement and any other terms and conditions (including conditions or
restrictions on the exercise thereof) of any Stock Appreciation Right shall be
as determined by the Committee.

     (c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Restricted Stock and Restricted Stock Units to Eligible
Persons with the following terms and conditions and with such additional terms

6

 

and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

     (i) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, a restriction on or prohibition against
the right to receive any dividend or other right or property with respect
thereto), which restrictions may lapse separately or in combination at
such time or times, in such installments or otherwise as the Committee
may deem appropriate.

     (ii) Stock Certificates. Any Restricted Stock granted under the
Plan shall be evidenced by the issuance of a stock certificate or
certificates, which shall be held by the Company. Such certificate or
certificates shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the applicable Award Agreement
and possible forfeiture of such shares of Restricted Stock.

     (iii) Forfeiture. Except as otherwise determined by the Committee,
upon a Participant’s termination of employment (as determined under
criteria established by the Committee) during the applicable restriction
period, all applicable Shares of Restricted Stock and Restricted Stock
Units at such time subject to restriction shall be forfeited and
reacquired by the Company; provided, however, that the Committee may,
when it finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all remaining restrictions with respect
to Shares of Restricted Stock or Restricted Stock Units.

     (d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Eligible Persons subject to the terms of the Plan. A
Performance Award granted under the Plan (i) may be denominated or payable in
cash, Shares (including, without limitation, Restricted Stock and Restricted
Stock Units), other securities, other Awards or other property and (ii) shall
confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan,
the performance goals to be achieved during any performance period, the length
of any performance period, the amount of any Performance Award granted, the
amount of any payment or transfer to be made pursuant to any Performance
Award and any other terms and conditions of any Performance Award shall be
determined by the Committee.

     (e) Other Stock Grants. The Committee is hereby authorized, subject to
the terms of the Plan, to grant to Eligible Persons Shares without restrictions
thereon as are deemed by the Committee to be consistent with the purpose of the
Plan.

     (f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Eligible Persons, subject to the terms of the Plan, such other Awards that
are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as are deemed by the Committee to be
consistent with the purpose of the Plan. Shares or other securities delivered

7

 

pursuant to a purchase right granted under this Section 6(f) shall be purchased
for such consideration, which may be paid by such method or methods and in such
form or forms (including, without limitation, cash, Shares, promissory notes
(provided, however, that the acceptance such promissory notes does not conflict
with Section 402 of the Sarbanes-Oxley Act of 2002) other securities, other
Awards or other property or any combination thereof), as the Committee shall
determine, the value of which consideration, as established by the Committee,
shall not be less than 100% of the Fair Market Value of such Shares or other
securities as of the date such purchase right is granted.

     (g) General.

     (i) Consideration for Awards. Awards may be granted for no cash
consideration or for any cash or other consideration as determined by the
Committee and required by applicable law.

     (ii) Awards May Be Granted Separately or Together. Awards may, in
the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award
granted under any plan of the Company or any Affiliate. Awards granted
in addition to or in tandem with other Awards or in addition to or in
tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.

     (iii) Forms of Payment under Awards. Subject to the terms of the
Plan, payments or transfers to be made by the Company or an Affiliate
upon the grant, exercise or payment of an Award may be made in such form
or forms as the Committee shall determine (including, without limitation,
cash, Shares, promissory notes (provided, however, that the acceptance of
such promissory notes does not conflict with Section 402 of the
Sarbanes-Oxley Act of 2002), other securities, other Awards or other
property or any combination thereof), and may be made in a single payment
or transfer, in
installments or on a deferred basis, in each case in accordance with
rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments.

     (iv) Limits on Transfer of Awards. No Award (other than Other Stock
Grants) and no right under any such Award shall be transferable by a
Participant otherwise than by will or by the laws of descent and
distribution and the Company shall not be required to recognize any
attempted assignment of such rights by any Participant; provided,
however, that, if so determined by the Committee, a Participant may, in
the manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant and receive any
property distributable with respect to any Award upon the death of the
Participant; provided, further, that, if so determined by the Committee,
a Participant may transfer a Non-Qualified Stock Option to any Family
Member (as such term is defined in the General Instructions to Form S-8
(or successor to such Instructions or such Form)) at any time that such
Participant holds such Option,

8

 

provided that the Participant may not
receive any consideration for such transfer, the Family Member may not
make any subsequent transfers other than by will or by the laws of
descent and distribution and the Company receives written notice of such
transfer, provided, further, that, if so determined by the Committee and
except in the case of an Incentive Stock Option, Awards may be
transferable as determined by the Committee. Except as otherwise
determined by the Committee, each Award (other than an Incentive Stock
Option) or right under any such Award shall be exercisable during the
Participant’s lifetime only by the Participant or, if permissible under
applicable law, by the Participant’s guardian or legal representative.
Except as otherwise determined by the Committee, no Award (other than an
Incentive Stock Option) or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or other encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

     (v) Term of Awards. Subject to Section 6(a)(iv)(C) of the Plan, the
term of each Award shall be for such period as may be determined by the
Committee.

     (vi) Restrictions; Securities Exchange Listing. All Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan,
applicable federal or state securities laws and regulatory requirements,
and the Committee may direct appropriate stop transfer orders and cause
other legends to be placed on the certificates for such Shares or other
securities to reflect such restrictions. If the Shares or other
securities are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award
unless and until such Shares or other securities have been admitted for
trading on such securities exchange.

     (vii) Prohibition on Repricing. Except as provided in Section 4(c)
of the Plan, no Option or Stock Appreciation Right may be amended to
reduce its initial exercise
price and no Option or Stock Appreciation Right shall be canceled
and replaced with Options or Stock Appreciation Rights having a lower
exercise price, without the approval of the stockholders of the Company
or unless there would be no material adverse effect on the Company’s
financial statements as prepared in accordance with Generally Accepted
Accounting Principles.

Section 7. Amendment and Termination; Adjustments

     (a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan at any time; provided, however, that,
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:

     (i) violates the rules or regulations of the National Association of
Securities Dealers, Inc. or of any other securities exchange that are
applicable to the Company;

9

 

     (ii) causes the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan;

     (iii) increases the number of shares authorized under the Plan as
specified in Section 4(a) of the Plan;

     (iv) permits the award of Options or Stock Appreciation Rights at a
price less than 100% of the Fair Market Value of a Share on the date of
grant of such Option or Stock Appreciation Right, as prohibited by
Sections 6(a)(i) and 6(b)(ii) of the Plan or the repricing of Options or
Stock Appreciation Rights, as prohibited by Section 6(g)(vii) of the
Plan; or

     (v) would prevent the grant of Options or Stock Appreciation Rights
that would qualify under Section 162(m) of the Code.

     (b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided herein or in an Award Agreement,
the Committee may not amend, alter, suspend, discontinue or terminate any
outstanding Award, prospectively or retroactively, if such action would
adversely affect the rights of the holder of such Award, without the consent of
the Participant or holder or beneficiary thereof.

     (c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable
to carry the Plan into effect.

Section 8. Income Tax Withholding

     In order to comply with all applicable federal, state or local income tax
laws or regulations, the Company may take such action as it deems appropriate
to ensure that all applicable federal, state or local payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of a
Participant, are withheld or collected from such Participant. In order to
assist a Participant in paying all or a portion of the federal, state and local
taxes to be withheld or collected upon exercise or receipt of (or the lapse of
restrictions relating to) an Award, the Committee, in its discretion and
subject to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such tax obligation by (i) electing to have the Company
withhold a portion of the Shares otherwise to be delivered upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes (but only to the extent of the
minimum amount required to be withheld under applicable laws or regulations) or
(ii) delivering to the Company Shares other than Shares issuable upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.

10

 

Section 9. General Provisions

     (a) No Rights to Awards. No Eligible Person or other Person shall have
any claim to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment of Eligible Persons or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be the same
with respect to any Participant or with respect to different Participants.

     (b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company and, if requested by the Company, signed
by the Participant.

     (c) Plan Provisions Control. In the event that any provision of an Award
Agreement conflicts with or is inconsistent in any respect with the terms of
the Plan as set forth herein or subsequently amended, the terms of the Plan
shall control.

     (d) No Rights of Shareholders. Except with respect to Shares of
Restricted Stock as to which the Participant has been granted the right to
vote, neither a Participant nor the Participant’s legal representative shall
be, or have any of the rights and privileges of, a shareholder of the Company
with respect to any Shares issuable to such Participant upon the exercise or
payment of any Award, in whole or in part, unless and until such Shares have
been issued in the name of such Participant or such Participant’s legal
representative without restrictions thereto.

     (e) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.

     (f) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ, or as giving a
director of the Company or an Affiliate the right to continue as a director or
an Affiliate of the Company or any Affiliate, nor will it affect in any way the
right of the Company or an Affiliate to terminate such employment at any time,
with or without cause. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, or terminate the term of a director
of the Company or an Affiliate, free from any liability or any claim under the
Plan or any Award, unless otherwise expressly provided in the Plan or in any
Award Agreement. Nothing in this Plan shall confer on any person any legal or
equitable right against the Company or any Affiliate, directly or indirectly,
or give rise to any cause of action at law or in equity against the Company or
an Affiliate. The Awards granted hereunder shall not form any part of the
wages or salary of any Eligible Person for purposes of severance pay or
termination indemnities, irrespective of the reason for termination of
employment. Under no circumstances shall any person ceasing to be an employee
of the Company or any Affiliate be entitled to any compensation for any loss of
any right or benefit under the Plan which such employee might otherwise have
enjoyed but for termination of employment, whether such compensation is claimed
by way of damages for wrongful or unfair dismissal, breach of contract or
otherwise. By participating in the Plan, each

11

 

Participant shall be deemed to
have accepted all the conditions of the Plan and the terms and conditions of
any rules and regulations adopted by the Committee and shall be fully bound
thereby.

     (g) Governing Law. The validity, construction and effect of the Plan or
any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the internal laws, and not the law of
conflicts, of the State of Minnesota.

     (h) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent
of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.

     (i) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate and an Eligible Person or any other Person. To the
extent that any Person acquires a right to receive payments from the Company or
any Affiliate pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company or any Affiliate.

     (j) Other Benefits. No compensation or benefit awarded to or realized by
any Participant under the Plan shall be included for the purpose of computing
such Participant’s compensation under any compensation-based retirement,
disability, or similar plan of the Company unless required by law or otherwise
provided by such other plan.

     (k) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

     (l) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.

     (m) Section 16 Compliance; Section 162(m) Administration. The Plan is
intended to comply in all respects with Rule 16b-3 or any successor provision,
as in effect from time to time, and in all events the Plan shall be construed
in accordance with the requirements of Rule 16b-3. If any Plan provision does
not comply with Rule 16b-3 as hereafter amended or interpreted, the provision
shall be deemed inoperative. The Board of Directors, in its absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the
use of any provision of the Plan with respect to persons who are officers or
directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other Eligible Persons. With
respect to Options and Stock Appreciation Rights, the Company intends to have
the Plan

12

 

administered in accordance with the requirements for the award of
“qualified performance-based compensation” within the meaning of Section 162(m)
of the Code.

     (n) Conditions Precedent to Issuance of Shares. Shares shall not be
issued pursuant to the exercise or payment of the purchase price relating to an
Award unless such exercise or payment and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, the rules
and regulations promulgated thereunder, the requirements of any applicable
Stock Exchange and the Minnesota Business
Corporation Act. As a condition to the exercise or payment of the
purchase price relating to such Award, the Company may require that the person
exercising or paying the purchase price represent and warrant that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation and warranty is required by law.

Section 10. Effective Date of the Plan

     The Plan shall be effective upon its adoption by the Board, provided,
however, that in the event the Plan is not approved by the shareholders of the
Company within one year thereafter, the Plan will be terminated and all Awards
granted under the Plan will be terminated and deemed null and void, provided,
further, that no Award may vest and no Shares (including Shares of Restricted
Stock) may be issued under the Plan prior to approval of the Plan by the
Shareholders of the Company.

Section 11. Term of the Plan

     No Award shall be granted under the Plan after ten years from earlier of
date of adoption of Plan by Board or date of shareholder approval or any
earlier date of discontinuation or termination established pursuant to Section
7(a) of the Plan. However, unless otherwise expressly provided in the Plan or
in an applicable Award Agreement, any Award theretofore granted may extend
beyond such date, and the authority of the Committee provided for hereunder
with respect to the Plan and any Awards, and the authority of the Board to
amend the Plan, shall extend beyond the termination of the Plan.

13

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