Document:

STOCK
PURCHASE AGREEMENT

     

    THIS
STOCK PURCHASE AGREEMENT is made and entered into as of the 30th day of April,
2010, by and among LANDEC CORPORATION, a Delaware corporation (the “Buyer”),
LIFECORE BIOMEDICAL, INC., a Delaware corporation formerly known as SBT
Biomaterials Inc. (the “Holding Company”), LIFECORE BIOMEDICAL, LLC, a Minnesota
limited liability company (the “Operating Company”), and WARBURG PINCUS PRIVATE
EQUITY IX, L.P., a Delaware limited partnership (the “Seller”).  The
Holding Company and the Operating Company shall sometimes be referred to herein
collectively as the “Company”.  Capitalized terms used but not
otherwise defined herein shall have the meaning assigned to such terms in Article XI
below.

     

    WITNESSETH:

     

    WHEREAS,
the Seller owns all of the issued and outstanding shares of the $0.01 par value
common stock of the Holding Company (the “Common Stock”);

     

    WHEREAS,
the Holding Company owns all of the issued and outstanding membership interests
of the Operating Company (the “Units”); and

     

    WHEREAS,
the Seller desires to sell to the Buyer, and the Buyer desires to purchase from
the Seller, all of the issued and outstanding shares of Common Stock upon the
terms and conditions set forth herein.

     

    NOW,
THEREFORE, the Buyer, the Holding Company, the Operating Company and the Seller,
in consideration of the mutual promises hereinafter set forth, do hereby promise
and agree as follows:

     

    ARTICLE
I

     

    Shares To Be
Purchased

     

    Subject
to the terms and conditions set forth in this Agreement, at the Closing, the
Seller shall sell and transfer to the Buyer, and the Buyer shall purchase from
the Seller, all of the issued and outstanding shares of the Common Stock of the
Holding Company (the “Subject Shares”).

     

    ARTICLE
II

     

    Closing; Purchase
Price

     

    2.1          Closing.  The Closing shall
be held at the offices of Willkie Farr & Gallagher LLP located at 787
Seventh Avenue, New York, New York, 10019 at 10:00 a.m. Eastern Daylight Time on
the date hereof, or at such other time and/or place as the Seller and the Buyer
shall mutually agree in writing; provided, that no
party hereto shall issue any press release or otherwise make any public
statement about this Agreement or any of the transactions contemplated hereby
prior to 4:00 p.m. Eastern Daylight Time on the Closing Date.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    2.2          Purchase Price.  The
consideration for the Subject Shares (the “Purchase Price”) shall be an amount
equal to the sum of (a) Forty Million Dollars ($40,000,000) (the “Cash Purchase
Price”), plus (b) the Cash Distribution Amount as provided in Section 2.5 and Section 2.6
below, plus (c) the Contingent Purchase Price as provided in Section 2.6
below.  The Purchase Price shall be paid as provided in Section 2.3, Section 2.4, Section 2.5 and Section 2.6
below.

     

    2.3          Cash Payment.  At the
Closing, the Buyer shall deliver to the Seller, by wire transfer of immediately
available funds to a bank account designated in writing by the Seller, an amount
equal to the Cash Purchase Price less (a) the Escrow Amount and (b) the amount,
if any, of outstanding Excluded Indebtedness as of the Closing (such net amount
being referred to herein as the “Cash Payment”).

     

    2.4          Escrow Amount.  At the
Closing, the Buyer shall deliver to the Escrow Agent, by wire transfer of
immediately available funds to a bank account designated in writing by the
Escrow Agent, an amount equal to the Escrow Amount to be held, managed and paid
out pursuant to the terms of the Escrow Agreement.

     

    2.5          Closing Cash Distribution
Amount.

     

    (a)           Immediately
prior to the Closing, the Operating Company shall deliver to the Holding
Company, and at the Closing, the Holding Company shall deliver to the Seller by
wire transfer of immediately available funds to a bank account designated in
writing by the Seller, an amount equal to the aggregate amount of Cash of the
Operating Company as of the Closing Date, up to a maximum of the Target Amount
(the “Closing Cash Distribution Amount”).

     

    (b)           Not
more than ten (10) business days, but in no event less than three (3) business
days, prior to the Closing Date, the Seller, after consultation with the Buyer,
shall prepare, in good faith and in accordance with GAAP, and deliver to the
Buyer an estimated balance sheet as of the open of business on the Closing Date
together with a statement setting forth the determination of the Target Amount,
the estimated amount of Cash of the Operating Company as of the open of business
on the Closing Date and the Closing Cash Distribution Amount on a reasonable
basis using the Company’s then available financial information as of such date
(collectively, the “Estimated Balance Sheet”).  The Estimated Balance
Sheet shall be used in order to determine the amount of the Closing Cash
Distribution Amount paid at the Closing pursuant to Section 2.5(a)
above.

     

    2.6          Contingent Purchase Price;
Closing Date Balance Sheet; Post-Closing Cash Distribution
Amount.

     

    (a)           Calculation of Contingent
Purchase Price.  For purposes of this Agreement, the
“Contingent Purchase Price” means an amount equal to the sum of (i) the amount
(if any) by which the Subject Net Revenues for calendar year 2011 exceed
Twenty-Five Million Dollars ($25,000,000), plus (ii) the amount (if any) by
which the Subject Net Revenues for calendar year 2012 exceed the greater of (A)
Twenty-Five Million Dollars ($25,000,000), or (B) the Subject Net Revenues for
calendar year 2011; provided, that the
Contingent Purchase Price shall in no event exceed Ten Million Dollars
($10,000,000).  For purposes of this Section 2.6, each of
calendar year 2011 and calendar year 2012 shall be referred to as an “Earn-Out
Period”, and the portion of the Contingent Purchase Price relating to each
Earn-Out Period shall be referred to as an “Earn-Out Amount”.

    
      
         

      

      
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    (b)           Preparation of Closing Date
Balance Sheet and Earn-Out Statement.  Within ninety (90) days
after the Closing Date, the Buyer shall prepare, in accordance with GAAP, and
deliver to the Seller an unaudited interim balance sheet of the Operating
Company as of the Closing Date together with a statement setting forth the final
determination of the Target Amount, the amount of Remaining Cash, the Closing
Cash Distribution Amount and the Post-Closing Cash Distribution Amount (if any)
(collectively, the “Closing Date Balance Sheet”), and within ninety (90) days
after the end of each Earn-Out Period, the Buyer shall prepare and deliver to
the Seller a statement setting forth the determination of the Earn-Out Amount
for such Earn-Out Period (each, an “Earn-Out Statement”).  The Seller
and its Representatives shall have the right to review all records, work papers
and calculations of the Buyer related to the Closing Date Balance Sheet
(including the calculations of the Target Amount, the amount of Remaining Cash,
the Closing Cash Distribution Amount and the Post-Closing Cash Distribution
Amount (if any) set forth therein) and each Earn-Out Statement.  The
Seller shall have thirty (30) days after delivery of the Closing Date Balance
Sheet or each Earn-Out Statement, as the case may be, in which to notify the
Buyer in writing of any discrepancy in, or disagreement with, the items
reflected on the Closing Date Balance Sheet (including the calculations of the
Target Amount, the amount of Remaining Cash, the Closing Cash Distribution
Amount and the Post-Closing Cash Distribution Amount (if any) set forth therein)
or the items reflected on such Earn-Out Statement or the determination of the
Earn-Out Amount (a “Notice of Objection”).  If the Seller does not
submit a Notice of Objection during such thirty (30) day period, then the
Closing Date Balance Sheet (including the calculations of the Target Amount, the
amount of Remaining Cash, the Closing Cash Distribution Amount and the
Post-Closing Cash Distribution Amount (if any) set forth therein) or such
Earn-Out Statement, as the case may be, shall be deemed to be accepted in the
form presented to the Seller.  If the Seller submits a Notice of
Objection during such thirty (30) day period and the Buyer agrees with the
adjustment requested by the Seller, then an appropriate adjustment shall be
made.  If the Buyer does not agree, within twenty (20) days after
receipt of a Notice of Objection, to make any adjustment timely requested by the
Seller, then the disputed items or amounts shall be submitted for review and
final determination by the Independent Accounting Firm.  Each of the
Buyer and the Seller shall make all records, work papers and calculations
related to the Closing Date Balance Sheet (including the calculations of the
Target Amount, the amount of Remaining Cash, the Closing Cash Distribution
Amount and the Post-Closing Cash Distribution Amount (if any) set forth therein)
and each Earn-Out Statement available to the Independent Accounting Firm, and
the Independent Accounting Firm shall have access to the employees of the Buyer,
the Company and the Seller during regular business hours and upon reasonable
prior notice in order to review the applicable calculations.  Each of
the Buyer and the Seller hereby agrees that it will cooperate and assist in the
preparation of the Closing Date Balance Sheet (including the calculations of the
Target Amount, the amount of Remaining Cash, the Closing Cash Distribution
Amount and the Post-Closing Cash Distribution Amount (if any) set forth therein)
and each Earn-Out Statement and in the conduct of reviews contemplated by this
Section
2.6(b).  The determination of the Independent Accounting Firm
shall be made as promptly as practical and shall be binding and conclusive upon
the parties hereto for purposes hereof.  The Independent Accounting
Firm shall not attribute a value to any disputed amount greater than the
greatest amount proposed by either party nor an amount less than the least
amount proposed by either party.  The fees, costs and expenses of the
Independent Accounting Firm shall be shared by the Buyer, on the one hand, and
the Seller, on the other, in inverse proportion to the amount in dispute for
which each of them is successful (by way of example, if the amount in dispute is
$100,000 and the Independent Accounting Firm determines that the Buyer is
entitled to $80,000 of the disputed amount and the Seller is entitled to $20,000
of the disputed amount, then the Seller shall pay 80% of the fees, costs and
expenses of the Independent Accounting Firm and the Buyer shall pay 20% of the
fees, costs and expenses of the Independent Accounting Firm).

    
      
         

      

      
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    (c)           Post-Closing Cash
Distribution Amount.  After the final determination of the
Closing Date Balance Sheet (including the calculations of the Target Amount, the
amount of Remaining Cash, the Closing Cash Distribution Amount and the
Post-Closing Cash Distribution Amount (if any) set forth therein) in accordance
with Section
2.6(b) above, in the event that the Closing Cash Distribution Amount was
less than the Target Amount, the Buyer shall cause the Operating Company to
deliver to the Seller within thirty (30) days after the final determination of
the Closing Date Balance Sheet, by wire transfer of immediately available funds
to a bank account designated in writing by the Seller, an amount equal to the
lesser of (i) One Million Dollars ($1,000,000), or (ii) the difference between
(A) the Target Amount, minus (B) the Closing Cash Distribution
Amount.  In the event that the Closing Cash Distribution Amount was
more than the Target Amount, the Seller shall deliver to the Operating Company
within thirty (30) days after the final determination of the Closing Date
Balance Sheet, by wire transfer of immediately available funds to a bank account
designated in writing by the Operating Company, the amount of any such
excess.  Any amount payable pursuant to this Section 2.6(c)
shall be referred to as the “Post-Closing Cash Distribution
Amount”.

     

    (d)           Payment of Contingent
Purchase Price.  Within thirty (30) days after each Earn-Out
Date of Final Determination, the Buyer shall cause the Operating Company to
deliver (i) to each Participant the applicable Earn-Out Bonus (as defined in the
Bonus Plan) (if any) and/or the applicable Incentive Bonus (as defined in the
Bonus Plan) (if any) payable to such Participant pursuant to the terms of the
Bonus Plan, and (ii) to the Seller, by wire transfer of immediately available
funds to a bank account designated in writing by the Seller, the applicable
Earn-Out Amount (if any) less any amounts paid to the Participants pursuant to
the terms of the Bonus Plan pursuant to this Section
2.6(d).

    
      
         

      

      
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    (e)           Acceleration of Contingent
Purchase Price Payments.  If, subsequent to the Closing Date
and prior to December 31, 2012, (i) a Change of Control of either the Operating
Company or the Holding Company occurs, (ii) the Operating Company terminates
Allingham’s employment without Cause, or (iii) Allingham terminates his
employment with the Operating Company for Good Reason, then, within sixty (60)
days after the closing of such Change of Control or the effective date of such
termination of employment, as the case may be, the Buyer shall cause the
Operating Company (or the surviving entity in the event of a Change of Control
in which the Operating Company does not survive) to deliver (A) to each
Participant the Earn-Out Bonus (if any) and/or the Incentive Bonus (if any)
payable to such Participant pursuant to the terms of the Bonus Plan, which shall
be delivered at the time prescribed by the Bonus Plan, and (B) to the Seller, by
wire transfer of immediately available funds to a bank account designated in
writing by the Seller, an amount equal to the difference between (I) Ten Million
Dollars ($10,000,000), minus (II) the aggregate amount of Earn-Out Bonuses (if
any) and Incentive Bonuses (if any) previously paid to the Participants pursuant
to Section
2.6(d) above and Earn-Out Amounts (if any) previously paid to the Seller
pursuant to Section 2.6(d)
above and (III) any amounts paid to Participants pursuant to this Section 2.6(e);
provided, that
in the event the Buyer is subject to an outstanding payment obligation under
Section 2.6(d)
above at the time of acceleration of the Contingent Purchase Price payments
pursuant to this Section 2.6(e), the
parties acknowledge and agree that such outstanding payment obligation under
Section 2.6(d)
above shall be null and void upon receipt by the Participants and the Seller of
the applicable payments under this Section
2.6(e).

     

    (f)           Conduct of Business During
the Earn-Out Periods.  After the Closing Date until the earlier
of (i) December 31, 2012, or (ii) the acceleration of the Contingent Purchase
Price Payments pursuant to Section 2.6(e) above,
the Buyer shall, and shall cause the Company:

     

    (i)           To
maintain separate books and records for the Company and maintain and operate the
Company as a separate and distinct segment in order to facilitate, among other
things, the calculation of the Subject Net Revenues contemplated
hereby;

     

    (ii)          To
conduct and operate the Company (or business and operations thereof) in good
faith taking into consideration the obligations under this Agreement; provided, that the
Company will not discontinue any product line without the prior written consent
of Allingham;

     

    (iii)         To
provide reasonable capital resources to the Company for its operations;
and

     

    (iv)         Not
to divert any revenues away from the Company and to the Buyer or any of the
Buyer’s Affiliates or Subsidiaries.

     

    (g)           Guaranty.  As
security for the Operating Company’s payment of the Contingent Purchase Price,
the Buyer will execute and deliver to the Seller at the Closing a guaranty in
the form of Exhibit
2.6(g) attached hereto (the “Guaranty”).

    
      
         

      

      
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    ARTICLE
III

     

    Conditions Precedent to
Closing; Closing Deliverables

     

    3.1          Conditions Precedent to the Buyer’s
Obligation.  The obligation of the Buyer to consummate the
transactions contemplated hereby is subject to the satisfaction as of the
Closing, or the waiver by the Buyer, of each of the following
conditions:

     

    (a)           The
warranties and representations of the Seller made in Article V of this
Agreement and the warranties and representations of the Company made in Article IV of this
Agreement shall be true and correct in all material respects on and as of the
date of this Agreement; and the Seller and the Company shall have performed in
all material respects the covenants of the Seller and the Company contained in
this Agreement required to be performed on or prior to the Closing.

     

    (b)          All
Consents, in a form reasonably satisfactory to the Buyer, shall have been
received by the Seller and a copy of each shall have been delivered to the Buyer
on or prior to the Closing Date.

     

    (c)           There
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by any Governmental Body directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided.

     

    (d)          The
Seller and/or the Company shall have delivered, or caused to have been
delivered, to the Buyer the following:

     

    (i)           Certificates
representing the Subject Shares, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank;

     

    (ii)          A
certificate from each of the Secretary of the Holding Company and the President
and Chief Executive Officer of the Operating Company, in a form reasonably
satisfactory to the Buyer, setting forth the resolutions of the Board of
Directors and the sole shareholder of the Holding Company or the sole member of
the Operating Company, as the case may be, authorizing the execution, delivery
and performance of this Agreement and all Ancillary Agreements to be executed,
delivered and performed by such entity in connection herewith and the taking of
any and all actions deemed necessary or advisable to consummate the transactions
contemplated hereby;

     

    (iii)         Resignations
of the directors and any officers who are not also employees of the Operating
Company of each of the Holding Company and the Operating Company, except as the
Buyer shall direct to the contrary in writing at least three (3) days prior to
the Closing Date;

     

    (iv)         Resignations
of the signatories of the bank and other depository accounts and safe deposit
boxes of the Company from any Persons who are not also employees of the
Operating Company, except as the Buyer shall direct to the contrary in writing
at least three (3) days prior to the Closing Date;

    
      
         

      

      
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    (v)          Constructive
possession of the complete Records relating to the business of the Company
(constructive possession shall be deemed to include, without limitation, the
presence of such Records at the Company’s headquarters);

     

    (vi)         A
recent good standing certificate (or comparable document) for each of the
Holding Company and the Operating Company issued by the Secretary of State (or
comparable office) of the jurisdiction in which such entity is
domiciled;

     

    (vii)        The
Bonus Agreements, duly executed by the Operating Company and the Former Option
Holders;

     

    (viii)       Written
evidence, in a form reasonably satisfactory to the Buyer, of the termination of
the Stock Incentive Plan, effective prior to the Closing;

     

    (ix)     
    The Change of Control Agreement Amendments, duly
executed by the Seller, the Operating Company and the Subject
Officers;

     

    (x)           The
Escrow Agreement, duly executed by each of the Seller and the Holding Company;
and

     

    (xi)          A
certificate dated the Closing Date and executed by a duly authorized officer of
each of the Holding Company and the Operating Company, in a form reasonably
satisfactory to the Buyer, certifying that all conditions set forth in Section 3.1(a) above,
have been fully satisfied.

     

    3.2          Conditions Precedent to the Seller’s
Obligation.  The obligation of the Seller to consummate the
transactions contemplated hereby is subject to the satisfaction as of the
Closing, or the waiver by the Seller, of the following conditions:

     

    (a)           The
warranties and representations of the Buyer made in Article VI of this
Agreement shall be true and correct in all material respects on and as of the
date of this Agreement; and the Buyer shall have performed in all material
respects the covenants of the Buyer contained in this Agreement required to be
performed on or prior to the Closing.

     

    (b)           There
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by any Governmental Body directing that the
transactions provided for herein, or any of them, not be consummated as herein
provided.

     

    (c)           The
Buyer shall have delivered, or caused to have been delivered, to the Seller the
following:

     

    (i)           The
Cash Payment as specified in Section 2.3
above;

     

    (ii)          A
certificate from the Secretary of the Buyer, in a form reasonably satisfactory
to the Seller, setting forth the resolutions of the Board of Directors of the
Buyer authorizing the execution of this Agreement and all Ancillary Agreements
to be executed, delivered and performed by the Buyer in connection herewith and
the taking of any and all actions deemed necessary or advisable to consummate
the transactions contemplated hereby;

    
      
         

      

      
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    (iii)         A
recent good standing certificate (or comparable document) for the Buyer issued
by the Secretary of State (or comparable office) of the jurisdiction in which
the Buyer is domiciled;

     

    (iv)         The
Escrow Agreement, duly executed by each of the Buyer and the Escrow
Agent;

     

    (v)          The
Guaranty, duly executed by the Buyer;

     

    (vi)         Such
other endorsements, assignments, affidavits and other good and sufficient
instruments of assignment, conveyance and transfer as are reasonably requested
by the Seller to reflect that the Permitted Indebtedness will remain an
obligation of the Company after the Closing; and

     

    (vii)        A
certificate dated the Closing Date and executed by a duly authorized officer of
the Buyer, in a form reasonably satisfactory to the Seller, certifying that all
conditions set forth in Section 3.2(a) above,
have been fully satisfied.

     

    (d)           The
Buyer shall have delivered to the Escrow Agent the Escrow Amount as specified in
Section 2.4
above.

     

    (e)           The
Holding Company shall have delivered to the Seller the Closing Cash Distribution
Amount as specified in Section 2.5(a)
above.

     

    ARTICLE
IV

     

    Warranties and
Representations of Company

     

    4.1          Warranties and
Representations.  Except as set forth in the Disclosure
Schedules (interpreted in accordance with the provisions of Section 12.12 below),
the Company hereby warrants and represents on and as of the date of this
Agreement to the Buyer, which warranties and representations shall survive the
Closing for the period set forth in Section 10.3(a)
below, as follows:

     

    4.1.1       Authority of Company.  The Company has the right, power and authority
to enter into this Agreement and the Ancillary Agreements to which it is a party
and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance by the Company of
this Agreement and the Ancillary Agreements to which the Company is a party have
been approved by the Board of Directors and sole shareholder of the Holding
Company and the sole member of the Operating Company, as the case may
be.  This Agreement has been, and each Ancillary Agreement to which
the Company is a party hereto will be, duly and validly executed and delivered
by the Company, and this Agreement and such Ancillary Agreements are and shall
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally or by general
principles of equity.

    
      
         

      

      
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    4.1.2       Corporate Matters.  The
Holding Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and the Operating Company is a
limited liability company duly organized and in good standing under the laws of
the State of Minnesota.  The Company has the power and authority to
own or lease its properties and assets and to carry on all business activities
now conducted by it.  Schedule
4.1.2 attached hereto contains a true, correct and complete list of all
current and former Subsidiaries of the Company.  All former
Subsidiaries of the Company which have been wound up, liquidated and dissolved
were wound up, liquidated and dissolved in compliance in all material respects
with all applicable Legal Requirements.  To the Knowledge of the
Company, there have been no, and there are not any facts, conditions or
circumstances that could reasonably be expected to give rise to any, third party
claims or any Proceedings arising from or in connection with the operation of
any former Subsidiaries of the Company during the period when such entity was a
Subsidiary of the Company or the winding up, liquidation and dissolution of any
such former Subsidiaries which have been wound up, liquidated and
dissolved.  The Company is duly qualified to do business as a foreign
entity and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its assets makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing would not, individually or in the aggregate, reasonably be
expected to impact materially the Company’s business.  Schedule
4.1.2 contains a true, complete and correct list of all jurisdictions in
which the Company is qualified to do business as a foreign corporation or
limited liability company, as the case may be.

     

    4.1.3       No Conflict.  Except as set
forth on Schedule
4.1.3 attached hereto, neither the execution, delivery and performance by
the Company of this Agreement or any of the Ancillary Agreements to which the
Company is a party nor the consummation or performance of any of the
transactions contemplated hereby or thereby will, directly or indirectly:
(a) contravene, conflict with, or result in a breach or violation of any
provision of the Certificate of Incorporation or By Laws of the Holding Company
or the Articles of Organization or the Member Control Agreement of the Operating
Company; (b) contravene, conflict with, or result in a breach or violation
of, or give any Governmental Body the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain relief under, any Legal
Requirement or any Order to which the Company or any of the assets of the
Company may be subject; (c) contravene, conflict with, or result in a breach or
violation of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, any Applicable Contract; (d) contravene,
conflict with, or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Company
or that otherwise relates to the business of or any of the assets owned or used
by the Company; or (e) result in the imposition of any Lien, claim or
restriction upon or with respect to any of the Subject Shares or any of the
assets owned or used by the Company (other than Permitted Liens with respect to
such assets), except with respect to clauses (b) through (d), for such
contraventions, conflicts, breaches, rights to challenge or exercise a remedy,
violations or rights of termination, acceleration, cancellation or modification
that would not have or would not reasonably be expected to impact materially the
Company’s business.  No action, consent, approval, Order or
authorization of, or registration, declaration or filing with, any Governmental
Body, including, without limitation, any labor organization pursuant to any
labor or collective bargaining agreement, is required to be obtained or made in
connection with the execution and delivery by the Company of this Agreement and
the Ancillary Agreements to which the Company is a party or the consummation by
the Company of the transactions contemplated hereby and
thereby.

    
      
         

      

      
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    4.1.4       Shareholder/Member
Agreements.  Except for this Agreement and the Ancillary
Agreements executed in connection herewith, there are no Contracts restricting
or otherwise relating to the management of the Company or the voting, dividend
rights or disposition of the Subject Shares or the Subject Units or otherwise
granting any Person any right in respect of such Subject Shares and/or Subject
Units, and there are no existing contractual restrictions on the transfer of the
Subject Shares or the Subject Units.

     

    4.1.5       Corporate Records; Equity
Interests.  The stock certificates, books of account, minute
books and other Records of the Company (copies of which have been made available
to the Buyer and its Representatives) are true, complete and correct in all
material respects.  All of the Company’s books and records are in the
possession of the Company.  The copies of the Holding Company’s
Certificate of Incorporation and By Laws and the Operating Company’s Articles of
Organization and Member Control Agreement previously made available to Buyer are
true, complete and correct and are in full force and effect without amendment or
modification.  Except as set forth on Schedule
4.1.5 attached hereto, the Company does not, directly or indirectly, own
or control, or have any Contract to acquire, any stock of, any equity interest
in or any other ownership or investment interest in any corporation,
partnership, limited liability company, joint venture or other business
entity.

     

    4.1.6       Capitalization;
Options.

     

    (a)           The
Holding Company’s authorized capital stock consists solely of Five Million
(5,000,000) shares of Common Stock and One Million (1,000,000) shares of
preferred stock, par value $0.01 per share (the “Preferred
Stock”).  The entire issued and outstanding capital stock of the
Holding Company (of whatever class, series or designation) consists of Two
Million Three Hundred Fifty-Two Thousand Nine Hundred Forty-One (2,352,941)
shares of Common Stock, and the entire issued and outstanding capital stock of
the Operating Company (of whatever class, series or designation) consists of
Fourteen Million One Hundred Seventeen Thousand Six Hundred Ninety-Seven
(14,117,697) Units, all of which shares or membership interests, as the case may
be, are duly authorized, validly issued and outstanding, fully paid and
nonassessable.  The Subject Shares are all of the shares of Common
Stock issued and outstanding.  No shares of Preferred Stock are issued
or outstanding.  The Units owned by the Holding Company (the “Subject
Units”) are all of the Units issued and outstanding.  Neither the
Subject Shares nor the Subject Units are subject to, nor issued in violation of,
any preemptive or subscription rights, or rights of first
refusal.

    
      
         

      

      
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    (b)           There
are no stock/membership interest award plans of the Company.  There
are no outstanding or authorized warrants, options, agreements, subscriptions,
rights, calls, puts, conversion rights, convertible or exchangeable securities
or other Contracts pursuant to which the Company is or may become obligated or
which are binding upon the Company to issue, sell, purchase, retire or redeem
any shares of capital stock or other securities of the Company.  There
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Company.  There are no voting trusts,
proxies or any other agreements or understandings with respect to the voting of
the capital stock of the Company.

     

    (c)           All
of the issued and outstanding shares of Common Stock and Units have been issued
in compliance with all Legal Requirements.

     

    (d)           The
Company has not entered into any commitment, arrangement or agreement, or is
otherwise obligated, to contribute capital, loan money or otherwise provide
funds or make additional investments in any Person.

     

    4.1.7       Title to and Condition of
Assets.  The Company has good and valid title to all of the
material property and material assets, personal and real, tangible and
intangible, which are used by the Company in connection with the conduct of the
Company’s business other than equipment and other personal property leased by
the Company and included within the Company’s assets, free and clear of all
Liens and claims whatsoever other than Permitted Liens.  The Company’s
assets are sufficient for the operation of the Company’s business in the
Ordinary Course of Business as presently being conducted and are suitable for
the purpose for which they are being used, in each case, in all material
respects.  Schedule
4.1.7(a) attached hereto contains a true, correct and complete list of
all material equipment and other material personal property leased by the
Company and included within the Company’s assets, all of which such property, to
the Knowledge of the Company, is in the condition required of such property by
the terms and conditions of the lease applicable thereto in all material
respects.  To the Company’s Knowledge, the Inventory is sufficient for
the operation of the Company in the Ordinary Course based on current levels of
operation, has been manufactured and/or purchased in the Ordinary Course of
Business consistent in quality and quantity with past practices of the Company,
is not damaged, obsolete or out of specification and is of a quality and
quantity usable and salable in the Ordinary Course of Business, net of any
applicable reserves to be reflected on the Closing Date Balance
Sheet.  All accounts receivable of the Company arose from bona fide
transactions in the Ordinary Course of Business.  The aggregate value
of all Inventory produced by the Company for the Persons listed on Schedule
4.1.7(b) attached hereto on hand as of the Closing Date and the aggregate
amount of all accounts receivable of the Company due and owing from the Persons
listed on Schedule
4.1.7(b) as of the Closing Date have been reserved for by the Company as
will be reflected on the Closing Date Balance Sheet.

     

    4.1.8       Real Property.  The Company
does not own any real property in connection with the operation of its business
other than the real property described on Schedule 4.1.8(a)
attached hereto (together with any buildings or other improvements located
thereon, the “Owned Real Property”).  Except as set forth on Schedule
4.1.8(b) attached hereto, the Company does not lease any real property in
connection with the operation of its business.  Other than the real
property described on Schedule
4.1.8(a) and Schedule
4.1.8(b), since January 1, 1995, the Company has not owned or leased any
real property.  The Company has not received written notice of any
pending Proceeding with respect to the Owned Real Property, nor does the Company
have Knowledge of any such pending or threatened Proceeding.  The
Company has not received written notice of any Order requiring repair,
alteration or correction of any existing condition affecting the Owned Real
Property, nor does the Company have Knowledge of any such pending or threatened
Order.

    
      
         

      

      
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    4.1.9       
Proceedings;
Orders.  Except as set forth on Schedule
4.1.9 attached hereto, there is no Proceeding pending or, to the
Company’s Knowledge, threatened against the Company.  The Company is
not currently subject to any Order.  To the Knowledge of the Company,
no event has occurred or circumstances exist that may give rise or serve as a
basis for the commencement of any Proceeding to prohibit the transactions
contemplated by this Agreement.

     

    4.1.10      Intellectual
Property.

     

    (a)           Schedule
4.1.10(a) attached hereto contains a complete list (specifying the owner
thereof and the registration or application number) of each of the following
which are owned by the Company: (i) all U.S. and foreign issued patents and
pending applications relating to any inventions, and all reissues, divisions,
continuations, continuations-in-part and extensions thereof; (ii) all U.S. and
foreign registered trademarks, registered service marks, trademark applications
and service mark applications, and all renewals and extensions thereof; (iii)
all U.S. and foreign registered copyrights and copyright applications, and all
renewals and extensions thereof; and (iv) all domain name registrations
(collectively, the “Registered Intellectual Property”).  The
Registered Intellectual Property, together with all common law trademarks,
service marks, copyrights, licenses, logos, trade names (including, but not
limited to, “Lifecore” and “Lifecore Biomedical”) and trade dress owned by the
Company and/or used by the Company in the operation of its business, all content
contained or stored in or displayed by the websites covered by the domain name
registrations listed on Schedule
4.1.10(a), all other inventions, trade secrets, methods, processes,
formulae, technical information, know-how, production protocols, product
specifications, improvements, blue-prints, architectural and other drawings,
computer programs and software owned by the Company and/or used by the Company
in the operation of its business and all other similar intellectual property
rights which are owned by the Company and/or used by the Company in the
operation of its business, shall hereinafter collectively be referred to as the
“Intellectual Property”.

     

    (b)           Schedule
4.1.10(b) attached hereto contains a complete list of: (i) all licenses
or other Contracts granted by the Company which create rights in any third
Person regarding any item of the Intellectual Property; and (ii) all material
licenses or other Contracts granted to the Company (excluding shrink-wrap,
click-wrap, click-through or other similar Contracts with respect to
off-the-shelf or personal computer software) which create rights in the Company
regarding any intellectual property rights owned by any third Person
(hereinafter individually referred to as an “IP Contract” and collectively
referred to as “IP Contracts”).

    
      
         

      

      
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    (c)           The
Company owns or has the valid right to use in the Ordinary Course operation of
the Company’s business all Intellectual Property, free and clear of all Liens
other than Permitted Liens.  To the Company’s Knowledge, no current or
former employee, officer or consultant of the Company has any right, title or
interest in or to any of the Intellectual Property.  All Intellectual
Property developed by or on behalf of the Company and owned or purported to be
owned by the Company was developed by employees or consultants who have executed
written agreements assigning exclusive rights in and to such developed and owned
Intellectual Property to the Company.

     

    (d)           The
Company has paid all fees required to be paid as of the Closing Date to maintain
the Registered Intellectual Property.  All registrations for the
Registered Intellectual Property are in force and have not been abandoned, and
all applications for the Registered Intellectual Property are active and
currently pending.

     

    (e)           There
are no existing or, to the Company’s Knowledge, threatened claims or Proceedings
by any Person relating to the use by the Company of the Intellectual Property or
challenging the Company’s ownership of, or the validity or enforceability of,
the Intellectual Property owned by the Company.  None of the
Intellectual Property is subject to any outstanding Order limiting the scope or
use of such Intellectual Property or declaring any of it abandoned, invalid or
unenforceable.  Except for any such written restrictions, undertakings
or agreements contained in the IP Contracts, and excluding shrink wrap,
click-wrap, click-through or other similar Contracts with respect to off the
shelf or personal computer software, none of the Intellectual Property owned by
the Company is subject to any written restriction, undertaking or agreement
limiting the scope or use of such Intellectual Property or declaring any of it
abandoned, invalid or unenforceable.

     

    (f)           (i)
To the Company’s Knowledge, the Company is not infringing, misappropriating or
otherwise violating in any material respect the intellectual property rights of
any other Person; (ii) the Company is not in receipt of any complaint, claim or
other notice alleging that the operation of the Company’s business or any of the
Intellectual Property is infringing, misappropriating or otherwise violating the
intellectual property rights of any other Person; and (iii) to the Company’s
Knowledge, no other Person is infringing, misappropriating or otherwise
violating the Intellectual Property.

     

    (g)           The
Company has taken commercially reasonable steps to maintain the confidentiality
of its trade secrets, and, to the Company’s Knowledge, none of such trade
secrets have been disclosed to any third Person except pursuant to written
confidentiality obligations.

     

    (h)           Except
for the IP Contracts, the Company has not granted any license, franchise, permit
or other right (including covenants not to sue) to any third Person to use any
of the Intellectual Property.

     

    4.1.11      Financial Statements.  The
Financial Statements attached hereto as Schedule
4.1.11 (a) fairly present in all material respects the financial
condition of the Company’s business on the dates designated thereon and the
results of operations for the period designated therein, (b) were prepared in
accordance with GAAP consistently applied throughout all of the periods covered
therein, except as disclosed therein and, with respect to the Interim Financial
Statements, for the absence of footnotes and year-end adjustments (which will
not be material individually or in the aggregate), and (c) were prepared from,
and are consistent with, the Records.

    
      
         

      

      
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    4.1.12      Taxes.

     

    (a)           Provision for
Taxes.  All income and other material Taxes of the Company
attributable to periods preceding or ending with the Closing Date that are
required to be paid have been paid by the Company.

     

    (b)           Tax Returns
Filed.  All income and other material Tax Returns required to
be filed by or on behalf of the Company have been timely filed and, when filed,
were true, correct and complete in all material respects; provided, however, the
foregoing shall not constitute a representation or warranty regarding the
accuracy of the tax basis of the assets of the Company or the amount of any net
operating loss, net capital loss, unused investment or other credit, foreign tax
credit or any similar tax attribute of the Company.  Except as set
forth on Schedule
4.1.12(b) attached hereto, the Company is currently not the beneficiary
of any extension of time within which to file any income or other Tax
Return.

     

    (c)           Withholding.  The
Company has duly withheld and paid all Taxes that it is required to withhold and
pay in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party of the Company and all
forms W-2 and 1099 required with respect thereto have been properly completed
and timely filed.

     

    (d)           Tax
Audits.  Since January 15, 2008, no claim has been made by any
authority in a jurisdiction in which the Company does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction or
authority.  The Tax Returns of the Company that are under audit by the
IRS or other applicable Tax authorities, together with a true, correct and
complete list of all powers of attorney granted by Company with respect to any
such Tax matter, are set forth on Schedule
4.1.12(d) attached hereto.  The Company has not received from
the IRS or any other applicable Tax authorities any written notice of
underpayment or assessment of any income or other Taxes that has not been paid
or any objection to any income or other Tax Return filed by the
Company.  There are no outstanding Contracts or waivers extending the
statutory period of limitations applicable to any income or other Tax Return or
extending the time with respect to an income or other Tax assessment or
deficiency.  There is no dispute or claim or, to the Company’s
Knowledge, an intent to open an audit, request information or conduct other
review concerning any Tax of the Company, including Taxes of those jurisdictions
where the Company has not filed Tax Returns, either (i) claimed or raised by any
authority in writing, or (ii) as to which the Company has Knowledge based upon
personal contact with any agent of such authority.

     

    (e)           Consolidated
Group.  The Company has never been a member of an affiliated
group of corporations that filed a consolidated tax return and has no liability
or obligation for the Taxes of any other entity under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of state, municipal, county,
local, foreign or other Tax Legal Requirement) as a transferee or successor, by
Contract or otherwise.

    
      
         

      

      
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    (f)           No Tax
Liens.  The Company is not subject to any Liens for Taxes other
than for Taxes not yet due and owing.

     

    (g)           Tax
Positions.  The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code.  The Company has not received a Tax opinion with respect to any
transaction relating to the Company other than a transaction in the Ordinary
Course of Business.  The Company is not the direct or indirect
beneficiary of a guarantee of Tax benefits or any other arrangement that has the
same economic effect with respect to any transaction or Tax opinion relating to
the Company.  The Company is not and has not been a party to any
“reportable transaction” as defined in Section 6707A of the Code and Treasury
Regulation Section 1.6011-4(b).  The Company is not party to a lease
arrangement involving a defeasance of rent, interest or principal.

     

    (h)           Consents and
Rulings.  The Company has not (i) applied for any Tax ruling,
(ii) entered into a closing agreement as described in Section 7121 of the Code
or otherwise (or any corresponding or similar provision of state, municipal,
county, local, foreign or other Tax Legal Requirement) or any other Contract
with any Tax authority, (iii) filed an election under Section 338(g) or Section
338(h)(10) of the Code (nor has a deemed election under Section 338(e) of the
Code occurred), (iv) made any payments, or been a party to a Contract (including
this Agreement) that under any circumstances could obligate it to make payments
(either before or after the Closing Date) that will not be deductible because of
Section 162(m) or Section 280G of the Code, (v) been a party to any Tax
allocation, Tax sharing or Tax indemnification Contract (other than pursuant to
Contracts entered into in the Ordinary Course of Business pursuant to commercial
lending arrangements) or (vi) filed or made any material election for any Tax
purpose which has not been disclosed on Schedule
4.1.12(h) attached hereto.

     

    (i)           Real Property Holding
Company.  The Company is not a “United States real property
holding Company” within the meaning of Section 897 of the Code.

     

    (j)           Accounting
Methods.  The Company has not agreed, nor is it required to
make, any adjustment under Section 263A, Section 481 or Section 482 of the Code
(or any corresponding or similar provision of state, municipal, county, local,
foreign or other Tax Legal Requirement) by reason of a change in accounting
method or otherwise.

     

    (k)           Section 355
Transactions.  The Company has not been the “distributing
corporation” or a “controlled corporation” (within the meaning of Section 355 of
the Code) with respect to a transaction described in Section 355 of the
Code.

     

    (l)           Tax Agreements and
Arrangements.  The Company is in compliance with the terms and
conditions of any applicable Tax exemptions, Tax Contracts or Tax Orders of any
government or Governmental Body to which it may be subject or that it may have
claimed, and the transactions contemplated by this Agreement will not have any
adverse effect on such compliance.

    
      
         

      

      
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    (m)          Effect of
Transaction.  The Company will not be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any (i) installment sale or open transaction disposition made on or prior to the
Closing Date, (ii) prepaid amount received on or prior to the Closing Date, or
(iii) use of the cash, modified cash or modified accrual method of
accounting.

     

    4.1.13      No Undisclosed
Liabilities.  There are no commitments, liabilities or
obligations relating to the Company, whether known or unknown, accrued or
unaccrued, absolute, contingent or otherwise, including, without limitation, (a)
any liabilities arising, directly or indirectly, from or in connection with the
Lifecore Acquisition or the Dental Operations and Divestiture, or (b) guaranties
by the Company of the liabilities of third parties, except for (i) liabilities
disclosed, reflected or reserved against on the consolidated balance sheet of
the Company (including the notes thereto), dated as of the Interim Balance Sheet
Date, (ii) current liabilities incurred in the Ordinary Course of Business
between the Interim Balance Sheet Date and the Closing Date, and (iii)
liabilities relating to performance obligations under contracts, including
Applicable Contracts, and Permitted Liens in accordance with the terms and
conditions thereof which are not required by GAAP to be reflected on the
consolidated balance sheet of the Company.

     

    4.1.14      Contracts and Other
Agreements.  Schedule
4.1.14(a) attached hereto sets forth a true, correct and complete list of
all Applicable Contracts.  True, correct and complete copies (or
memoranda describing each with respect to oral agreements or plans) of each of
the Applicable Contracts, and all amendments and modifications thereof, have
been made available to the Buyer prior to the Closing Date.  Each
Applicable Contract is valid, binding and in full force and effect in all
material respects in accordance with its terms.  Except as set forth
on Schedule
4.1.14(b) attached hereto, neither the Company nor, to the Company’s
Knowledge, any other Person who is a party to any Applicable Contract is in
breach or default under any Applicable Contract (with or without the lapse of
time, or the giving of notice, or both).  Except as set forth on Schedule
4.1.14(b), since January 1, 2009 until the date of this Agreement, the
Company has not given or received from any other Person any written notice
regarding any actual or alleged violation or breach of, or default under, any
Applicable Contract or any termination or possible termination
thereof.  Except as set forth on Schedule
4.1.14(c) attached hereto, there are not, and since January 1, 2009 there
have not been any, renegotiations of or attempts to renegotiate any material
amounts paid or payable to the Company under any Applicable
Contract.

     

    4.1.15      Product Warranties.  To the
Company’s Knowledge, since January 15, 2008, all products and services
manufactured and/or sold by the Company (and the delivery thereof) prior to the
Closing Date have been in conformity with all applicable contractual commitments
and all expressed or implied warranties, in each case in all material
respects.  Except as set forth on Schedule
4.1.15 attached hereto, since January 15, 2008, no claim for product
liability has been asserted against the Company, and, to the Knowledge of the
Company, there are no facts, conditions or circumstances that could reasonably
be expected to give rise to any such claim.

    
      
         

      

      
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    4.1.16     Employees.  Schedule
4.1.16 attached hereto contains:

     

    (a)           A
list of all handbooks, manuals, policies and/or procedures relating to the
employees of the Company, true, correct and complete copies of which have been
made available to the Buyer prior to the Closing Date; and

     

    (b)           A
list of all employees of the Company as of March 31, 2010, together with their
job titles and current rates of salary, wages or commissions.

     

    4.1.17     Labor
Practices.

     

    (a)           The
Company is in compliance in all material respects with all Legal Requirements
applicable to the Company’s employees, including, but not limited to, Legal
Requirements relating to employment discrimination, family, medical and/or other
employee leave, employee welfare and benefits and labor
standards.  There are no pending or, to the Company’s Knowledge,
threatened claims, charges, complaints, causes of action, demands or liabilities
by any past or present employee of the Company, including, without limitation,
that such employee was subject to a wrongful discharge, any unlawful employment
discrimination or unlawful harassment by the Company or its management, a breach
of contract (whether written or oral, express or implied) or tortious conduct of
any type.

     

    (b)           The
Company is in compliance in all material respects with the Federal Occupational
Safety and Health Act, the regulations promulgated thereunder and all other
applicable Legal Requirements relating to the safety of employees or the
workplace or relating to the employment of labor, including, without limitation,
any provisions thereof relating to wages, bonuses, collective bargaining, equal
pay and the payment of social security and other payroll taxes.  No
Proceedings are pending before any Governmental Body relating to labor or
employment matters, and there is no pending investigation by any Governmental
Body or, to the Knowledge of the Company, threatened claim by any such
Governmental Body or other Person relating to labor or employment
matters.

     

    (c)           The
Company is not a party to any Contract with any union, labor organization,
employee group, or other similar Person which affects the labor or employment of
employees of the Company, including, but not limited to, any collective
bargaining agreements or labor contracts.  To the Company’s Knowledge,
none of the employees of the Company are in the process of being organized by or
into any other labor unions or organizations.  The Company has not
agreed to recognize any union or other collective bargaining unit, and no union
or collective bargaining unit has been certified as representing any employees
of the Company.  There is no strike, slowdown or other work stoppage
pending or, to the Company’s Knowledge, threatened, against the
Company.

     

    (d)           The
execution of this Agreement and the consummation of the transaction contemplated
by this Agreement will not result in any breach or other violation of any
employment agreement, consulting agreement, labor or collective bargaining
agreement or any other labor-related agreement to which the Company is a
party.

    
      
         

      

      
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    4.1.18     Employee Benefit
Plans.

     

    (a)           Schedule
4.1.18(a) attached hereto contains a true, correct and complete list of
all Plans.

     

    (b)          With
respect to each Plan, the Company has made available to the Buyer true and
complete copies of (i) the Plan document, including all amendments thereto,
(ii) the most recent summary plan description, including all summaries of
material modifications, (iii) all trust agreements, insurance contracts or other
funding instruments, (iv) the actuarial and financial reports and the annual
reports filed with any Governmental Body for the three (3) most recent three
plan years, (v) copies of all IRS determination and opinion letters in the case
of a Plan intended to qualify under Section 401(a) of the Code, (vi) the results
of all required coverage and nondiscrimination tests for the three (3) most
recent plan years, and (vii) any correspondence to or from the IRS, the U.S.
Department of Labor or any other Governmental Body relating to any potential
compliance issues.

     

    (c)           No
Plan is or has been a “multiemployer plan” (within the meaning of Section 3(37)
of ERISA), a “multiple employer plan” (within the meaning of Section 413 of the
Code) or a “multiple employer welfare arrangement” (within the meaning of
Section 3(40) of ERISA), and neither the Company nor, to the Company’s
Knowledge, any ERISA Affiliate has any actual or potential liability under any
such provision (or related provision) of ERISA or the Code.

     

    (d)           No
Plan is or has been covered by Title IV of ERISA, Section 302 of ERISA or
Section 412 or 430 of the Code, and neither the Company nor, to the Company’s
Knowledge, any ERISA Affiliate has any actual or potential liability under any
such provision (or related provision) of ERISA or the Code.

     

    (e)           Each
Plan intended to be qualified under Section 401(a) of the Code and each trust
intended to be exempt under Section 501(a) of the Code has been determined to be
so qualified or exempt by the IRS and is the subject of a favorable
determination letter covering all applicable Legal Requirements with respect to
which such a letter can be issued, or the Company has relied on the IRS opinion
letter issued to the prototype plan sponsor with respect to such
Plan.  Since the date of each most recent determination or opinion
letter, there has been no event, condition or circumstance that has adversely
affected or is reasonably likely to affect such qualified status.

     

    (f)           Full
payment has been made of all amounts which the Company or any ERISA Affiliate is
required to pay with respect to each Plan for the most recent plan year thereof
ended prior to the Closing Date, and all such amounts payable with respect to
the portion of the current plan year will be paid by the Company on or prior to
the Closing Date.

    
      
         

      

      
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    (g)           Each
of the Plans conforms to, and has been operated and administered in all material
respects in accordance with, all applicable Legal Requirements, including, but
not limited to, ERISA and the Code.  No event has occurred which could
subject the Company to any liability (other than routine claims for benefits)
under the terms of any Plan, ERISA, the Code or other applicable Legal
Requirements.  No Plan is currently under audit or review by any
Governmental Body and, to the Knowledge of the Company, no such audit or review
has been threatened.  No charge, complaint or Proceeding with respect
to any Plan or the administration of any Plan (except for claims for benefits
routinely submitted in the ordinary course of Plan administration) is pending
or, to the Knowledge of the Company, threatened with respect to any
Plan.

     

    (h)           To
the extent permitted under applicable Legal Requirements, each Plan can be
amended or terminated at any time without the consent of any non-Company party
and without liability other than for benefits accrued as of the date of such
amendment or termination.

     

    (i)           The
Company has no obligation to provide health benefits, death benefits or any
other welfare benefits to any employee of the Company (or any dependent of such
employee) following the termination of such employee’s employment, except as is
specifically required by applicable Legal Requirements.

     

    (j)           No
Plan is subject to the Legal Requirements of any jurisdiction outside of the
United States.

     

    (k)           Each
Plan which is a “nonqualified deferred compensation plan” (within the meaning of
Section 409A of the Code) has at all times since January 15, 2008 complied
with the requirements of paragraphs (2), (3) and (4) of
Section 409A(a) of the Code by its terms and has been operated in
accordance with such requirements.  No participant in any such Plan will
incur any Taxes on any benefit under such Plan before the date as of which such
benefit is actually paid to such participant.   No event has occurred
that would be treated by Section 409A(b) of the Code as a transfer of
property for purposes of Section 83 of the Code.  No Plan
requires the Company to gross up a payment to any former or current employee,
officer, director or contractor of the Company for Tax related payments under
Section 409A of the Code.

     

    (l)           Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in combination with
another event including notice, lapse of time or both) (i) result in any payment
becoming due, or increase the amount of any compensation or benefits due, to any
current or former employee of the Company or with respect to any Plan, (ii)
increase any benefits otherwise payable under any Plan, or (iii) result in the
payment of any amount that would, individually or in combination with any other
such payment, constitute an “excess parachute payment,” as defined in Section
280G(b)(1) of the Code.

     

    4.1.19     
Events Since December 31,
2009.  Since December 31, 2009, the Company has operated its
business in the Ordinary Course of Business, has used, preserved and maintained
its assets on a basis consistent with past practices, has maintained its books,
accounts and records in the usual manner and on a basis consistent with past
practices and has not made any payments of the kind described in the definition
of “Restricted Payments” set forth in Article XI
below.

    
      
         

      

      
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    4.1.20     Insurance.  The Company
maintains policies of fire and casualty, liability and other forms of insurance
and bonds in such amounts, with such deductibles, and against such risks and
losses which do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Company.  A true,
correct and complete list of all material insurance and bonds currently
maintained by the Company is attached hereto as Schedule
4.1.20(1).  The Company has paid all premiums due and has
otherwise performed in all material respects all of its obligations under each
insurance policy to which the Company is a party or that provides coverage to
the Company.  Each such insurance policy and bond is in full force and
effect and the Company has not received notice of any cancellation or, to the
Knowledge of the Company, threat of cancellation of, any such insurance or
bond.  Schedule 4.1.20(2)
attached hereto also sets forth all property damage, personal injury, workers’
compensation, products liability or other claims that have been made against the
Company or the Company’s insurance policies since January 15, 2008, or which are
pending against the Company or the Company’s insurance policies or, to the
Company’s Knowledge, threatened against the Company or any of the Company’s
insurance policies.  The Company has given notice to the insurer under
each insurance policy of any claims that may be insured thereby within the time
periods required.  Schedule
4.1.20(3) also sets forth a true, correct and complete list of any
self-insurance arrangements by or affecting the Company, including any reserves
established thereunder, and all Contracts or arrangements, other than policies
of insurance, for the transfer or sharing of any risk by the
Company.

     

    4.1.21     Environmental
Matters.

     

    (a)           Except
as set forth on Schedule
4.1.21(a) attached hereto, (i) there are no and there have never been any
Hazardous Substances at, on, in, above or under the Owned Real Property except
in the Ordinary Course of Business and in compliance with Environmental Laws,
and (ii) to the Knowledge of the Company, there are no and there have never been
any Hazardous Substances on any property adjacent to the Owned Real
Property.  Except in the Ordinary Course of Business and in compliance
with all Environmental Laws, no Hazardous Substances have ever been generated,
treated, stored or handled on, or removed from, the Owned Real
Property.

     

    (b)           Since
January 1, 2005, the Company has not received any written notice from any
Governmental Body or any third party notifying of (i) any Hazardous Substances
which are present on or have been generated, treated, stored, handled or removed
from, or disposed of on, the Real Property, in violation of Environmental Laws,
(ii) any Hazardous Substance which has migrated on, in, under or above or to the
Real Property from any adjacent property or which has migrated, emanated or
originated from the Real Property onto any other property, or (iii) any
actual or potential liability, arising out of or relating to any Environmental
Law with respect to the Company, the Owned Real Property or the Company’s prior
use of the Prior Real Property.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (c)           The
Company has obtained all material Governmental Authorizations required for the
operation of its business and the use of the Owned Real Property required by any
Environmental Law.  To the Company’s Knowledge, the consummation of
the transactions contemplated by this Agreement will not (i) impose any
obligation on the Company under any Environmental Law, including, without
limitation, for the investigation or cleanup of the Owned Real Property, or (ii)
require notification to or consent of any Governmental Body or third party
pursuant to any Environmental Law.

     

    (d)           The
Company, the Owned Real Property and the Company’s other assets are in
compliance in all material respects with each Environmental Law and with all
Governmental Authorizations issued in connection with the operation of the
Company’s business and the use of the Owned Real Property.

     

    (e)           No
material Environmental Claim with respect to the Company or the Owned Real
Property is pending or, to the Knowledge of the Company,
threatened.

     

    (f)           The
Owned Real Property does not contain, and, to the Knowledge of the Company, has
never contained, any (i) USTs, (ii) to the Knowledge of the Company,
asbestos-containing material, PCBs, radon or urea formaldehyde foam, (iii)
landfill or dumps, or (iv) a hazardous waste management facility as defined
pursuant to RCRA or any comparable state Legal Requirement.

     

    (g)           Schedule
4.1.21(g) attached hereto contains a list of all material Environmental
Claims, reports, studies, assessments and audits in the possession or control of
the Company relating to environmental matters and relating to the Company’s
business, the Owned Real Property or any of the Company’s other assets (complete
copies of which have been provided to the Buyer).

     

    (h)           To
the Knowledge of the Company, the assets of the Company are not required to be
materially upgraded, modified or replaced to be in compliance with any
Environmental Law.

    
      
         

      

      
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    4.1.22     FDA.  The Company develops,
manufactures, labels, stores, tests, distributes and markets, and since January
1, 2005 has developed, manufactured, labeled, stored, tested, distributed and
marketed, its products in all material respects in accordance with all
applicable rules and regulations of the United States Food and Drug
Administration (the “FDA”) (including the “Good Manufacturing Practices” and the
“Medical Device Reporting” regulations) and all other applicable foreign,
federal, state and local regulatory authorities, and the Company’s quality
control procedures in effect at the time of developing, manufacture, labeling,
storing, testing and distribution.  To the extent required, all of the
products currently sold by the Company have been approved or cleared for sale by
the FDA and applicable foreign regulatory agencies.  The Company has
not received any written notice from the FDA or any other federal, state or
foreign regulatory agency or third party (a) of any circumstances that have
arisen which would reasonably be expected to lead to the questioning of its
development, application, manufacturing or marketing practices or the safety or
efficacy of its products, or (b) threatening to revoke, suspend, cancel,
withdraw, place sales or marketing restrictions on, curtail any product
clearance or approval, or seek damages (for past or present products or product
candidates), and, with respect to clauses (a) and (b) above, the Company is not
aware of any intent to deliver any such notice.  To the Knowledge of
the Company, there are no circumstances which would reasonably be expected to
require any material recall, market withdrawal, correction, removal,
notification, take repair/replace/refund action or similar action, or claim by
order of any Governmental Body or any third party of any product or which would
reasonably be expected to lead to an injunction pertaining to such product,
including the procedures used to manufacture and test such
product.  Schedule
4.1.22(a) attached hereto contains a complete list of all products
manufactured or marketed by the Company, including those which require the
approval of, or premarket notification to, or listing with the FDA or any other
federal, state or foreign governmental agency or bureau under any existing Legal
Requirement.  Except as set forth on Schedule
4.1.22(b) attached hereto, none of the products identified on Schedule
4.1.22(a), or any product candidate or previously marketed or approved
product, has been the subject of any voluntary or involuntary recall, third
party action, or governmental investigation other than routine inspections of
the Company’s facilities.  All U.S. and international regulatory
approvals or premarket notifications are owned by and registered in the name of
the Company and are in full force and effect.  To the Knowledge of the
Company, all preclinical studies and clinical trials conducted by the Company
since January 1, 2005 have been, and are being, conducted in substantial
compliance with the requirements of Good Laboratory Practice, data
protection/privacy standards and Good Clinical Practice and applicable
requirements relating to protection of human subjects contained in Title 21,
Parts 50, 54 and 56 of the United States Code of Federal Regulations and foreign
equivalents.  Any preclinical tests and clinical trials associated
with the Company’s products and product candidates since January 1, 2005 were,
and, if still pending, are, to the Company’s Knowledge, being conducted in all
material respects in accordance with applicable Legal Requirements of the
appropriate regulatory authorities for each such test or trial and in accordance
with all Legal Requirements and with good clinical practices.  The
Company has no Knowledge of any studies or tests the results of which call into
question the efficacy, safety or approvability by the FDA or authorizations by
its foreign equivalents of the product or product candidate; and the Company has
not received any notices or other correspondence from the FDA or any committee
thereof or from any other U.S. or foreign government or drug, biologic or
medical device regulatory agency requiring the termination or suspension of any
clinical trials related to the Company’s product or product
candidates.

    
      
         

      

      
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    4.1.23     Compliance With Legal Requirements;
Governmental Authorizations.  The Company has complied in all
material respects with each Legal Requirement that is applicable to it for the
conduct or operation of its business or the ownership or use of its
assets.  No event has occurred or, to the Knowledge of the Company,
circumstances exist (with or without notice or lapse of time) that may
constitute or result in a violation by the Company of, or failure on the part of
the Company to comply with, any Legal Requirement.  The Company has
not received a written notice or other communication from any Governmental Body
or any other Person regarding any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement.  Schedule 4.1.23
attached hereto contains a list of all material Governmental Authorizations that
are held by the Company, including, without limitation, all approvals, premarket
notifications to, or listings with the FDA or any other federal, state or
foreign governmental agency or bureau under any existing Legal Requirement with
respect to any products listed on Schedule 4.1.22(a)
attached hereto, regardless of whether such approvals of, premarket
notifications and/or registrations are deemed material; and with respect to any
such approvals, premarket notifications and registrations, Schedule
4.1.23 specifies the type of approval, premarket notification or listing
required and the reference number or identification thereof.  Each
such Governmental Authorization is valid and in full force and effect in all
material respects.  The Company has complied in all material respects
with all of the terms and requirements of each Governmental Authorization
identified or required to be identified on Schedule
4.1.23.  No event has occurred that would or, to the Knowledge
of the Company, circumstances exist that may (with or without notice or lapse of
time) (a) constitute or result, directly or indirectly, in a material violation
of or a failure to comply with a term or requirement of any Governmental
Authorization, or (b) result, directly or indirectly, in the revocation,
withdrawal, suspension, cancellation or termination of, or modification to, any
Governmental Authorization.  The Company has not received any written
notice or other communication from any Governmental Body or any other Person
regarding (i) any actual, alleged, possible or potential violation of or failure
to comply with any term or requirement of any Governmental Authorization, or
(ii) any actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any Governmental
Authorization.  The Governmental Authorizations listed on Schedule 4.1.23
constitute all of the material Governmental Authorizations necessary to permit
the Company to conduct and operate lawfully its business in the manner in which
it is currently conducted and to permit the Company to own and use its assets in
the manner in which it currently owns and uses such assets.

     

    4.1.24     Customers; Suppliers.  Schedule
4.1.24 attached hereto sets forth, with respect to the twelve (12) month
period ended March 31, 2010, a list of (a) the ten (10) largest customers of the
Company (based on dollar amounts purchased from the Company) (the “Scheduled Customers”
and the dollar amount derived from each of them during such period, and (b) the
ten (10) largest suppliers of the Company (based on dollar amounts purchased by
the Company) (the “Scheduled Suppliers”)
and the dollar amount derived from each of them during such
period.  The Company has not received any written notice or, to the
Company’s Knowledge, indication (whether written or oral) of the intention of
any of the Scheduled Customers or Scheduled Suppliers to cease doing business or
to reduce in any material respect the business transacted with the Company or to
terminate or modify any Contracts with the Company (whether upon consummation of
the transactions contemplated hereby or otherwise).

     

    4.1.25     Accounts Payable.  All
material accounts payable and material accrued expenses of the Company have been
incurred and, to the extent paid prior to the Closing, have been paid in the
Ordinary Course of Business consistent with past business
practices.

     

    4.1.26     Brokers; Agents.  The
Company has not dealt with any agent, finder, broker or other representative in
any manner which could result in the Buyer or the Company being liable for any
fee or commission in the nature of a finder’s fee or originator’s fee in
connection with the subject matter of this Agreement.

     

    4.1.27     Accounts; Safe Deposit
Boxes.  Attached hereto as Schedule
4.1.27 is a true, correct and complete list of the bank and savings
accounts, certificates of deposit and safe deposit boxes of the Company and all
persons authorized to sign thereon.

    
      
         

      

      
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    4.1.28     Relationships with Related
Parties.  Except as set forth on Schedule
4.1.28 attached hereto, since January 15, 2008, (a) no officer, director
or Affiliate of the Company (other than the portfolio companies of the Seller or
its Affiliates) (i) has, or has had, any interest in any property being used in
or pertaining to the Company’s business, (ii) owns, or has owned an equity
interest or any other financial or profit interest in, a Person that has (x) had
business dealings or a material financial interest in any transaction with the
Company, or (y) engaged in competition with the Company with respect to any line
of products or services of the Company, or (iii) is a party to any Contract
with, or has any claim or right against, the Company, and (b) no Related
Person of the Seller is a party to any Applicable Contract with the Company or
has any claim or right against the Company with respect to any Applicable
Contract.  The Company is not a party to any management fee or similar
agreement (whether written or oral) with the Seller or any Related Person of the
Seller.

     

    4.1.29     Outstanding
Indebtedness.  As of the Closing Date, the Company shall have
no outstanding indebtedness for borrowed money (excluding the Permitted
Indebtedness and the Excluded Indebtedness (if any), which Excluded Indebtedness
will be paid in full prior to the Closing).  In addition, as of the
Closing Date, all indebtedness owed to the Company by the Seller or any
Affiliate of the Seller (excluding, in the case of any Affiliate of the Seller,
accounts payable incurred in the Ordinary Course of Business, if any) will have
been paid in full.

     

    4.1.30     Lifecore Acquisition.  To
the Company’s Knowledge, there was no material breach of any representation or
warranty made by Lifecore Biomedical, Inc. (n/k/a Lifecore Biomedical, LLC) to
SBT Holdings Inc. and SBT Acquisition Inc. in that certain Agreement and Plan of
Merger, dated as of January 15, 2008, among SBT Holdings Inc., SBT Acquisition
Inc. and Lifecore Biomedical, Inc. as of the closing of such
transaction.

     

    4.2          Disclaimer.  Except for the
representations and warranties of the Company contained in this Article IV, neither
the Company nor any Person on behalf of the Company makes any other express or
implied representation or warranty with respect to the Company or any of its
Affiliates or the execution and delivery of this Agreement or with respect to
any other information (including, but not limited to, the Cash Flow Projections
and any other projections, forecasts or estimates of revenues, earnings or
performance of the Company) provided by the Company or its
Affiliates.

     

    ARTICLE
V

     

    Warranties and
Representations of Seller

     

    5.1          Warranties and
Representations.  Except as set forth in the Disclosure
Schedules (interpreted in accordance with the provisions of Section 12.12 below),
the Seller hereby warrants and represents on and as of the date of this
Agreement to the Buyer, which warranties and representations shall survive the
Closing for the period set forth in Section 10.3(a)
below, as follows:

     

    5.1.1       Authority of Seller.  The
Seller has the right, power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby.  The execution, delivery and
performance by the Seller of this Agreement and the Ancillary Agreements to
which the Seller is a party have been duly and validly authorized by all
necessary limited partnership action.  This Agreement has been, and
each Ancillary Agreement to which the Seller is a party hereto will be, duly and
validly executed and delivered by the Seller, and this Agreement and such
Ancillary Agreements are and shall constitute the legal, valid and binding
obligations of the Seller enforceable against the Seller in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally or by general principles of equity.

    
      
         

      

      
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    5.1.2       Organizational Matters.  The
Seller is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware.  The Seller has the
power and authority to own or lease its properties and assets and to carry on
all business activities now conducted by it.

     

    5.1.3       No Conflict.  Neither the
execution, delivery and performance by the Seller of this Agreement or any of
the Ancillary Agreements to which the Seller is a party nor the consummation or
performance of any of the transactions contemplated hereby or thereby will,
directly or indirectly: (a) contravene, conflict with, or result in a breach or
violation of any provision of the organizational documents of the Seller; (b)
contravene, conflict with, or result in a breach or violation of, or give any
Governmental Body the right to challenge any of the transactions contemplated
hereby or to exercise any remedy or obtain relief under, any Legal Requirement
or any Order to which the Seller or the Subject Shares may be subject;
(c) contravene, conflict with, or result in a breach or violation of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any material Contract to which the Seller is subject; or
(d) result in the imposition of any Lien, claim or restriction upon or with
respect to any of the Subject Shares except for restrictions on the transfer of
unregistered securities under applicable securities laws; provided, that,
assuming the truthfulness and correctness of the Buyer’s investment purpose
warranties and representations set forth in Section 6.1.5 below,
no such restrictions on the transfer of unregistered securities under applicable
securities laws shall apply to the transfer of the Subject Shares contemplated
hereunder.  No action, consent, approval, Order or authorization of,
or registration, declaration or filing with, any Governmental Body is required
to be obtained or made in connection with the execution and delivery by the
Seller of this Agreement and the Ancillary Agreements to which the Seller is a
party or the consummation by the Seller of the transactions contemplated hereby
and thereby.

     

    5.1.4       Title to Subject
Shares.  The Seller is the beneficial and record owner of all
of the Subject Shares and at the Closing will deliver to the Buyer valid title
to such Subject Shares free and clear of all Liens and claims except for
restrictions on the transfer of unregistered securities under applicable
securities laws; provided, that,
assuming the truthfulness and correctness of the Buyer’s investment purpose
warranties and representations set forth in Section 6.1.5
below, no such restrictions on the transfer of unregistered securities under
applicable securities laws shall apply to the transfer of the Subject Shares
contemplated hereunder.

     

    5.1.5       Proceedings Against
Seller.  There is no Proceeding now pending which would affect
the Seller’s rights in and to the Subject Shares or the ability of the Seller to
consummate the sale and/or the transfer of the Subject Shares or the other
transactions contemplated by this Agreement or the Ancillary
Agreements.

    
      
         

      

      
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    5.1.6       Brokers; Agents.  The Seller
has not dealt with any agent, finder, broker or other representative in any
manner which could result in the Buyer or the Company being liable for any fee
or commission in the nature of a finder’s fee or originator’s fee in connection
with the subject matter of this Agreement.

     

    5.2          Disclaimer.  Except for the
representations and warranties of the Seller contained in this Article V, neither
the Seller nor any Person on behalf of the Seller makes any other express or
implied representation or warranty with respect to the Seller or any of its
Affiliates or the execution and delivery of this Agreement or with respect to
any other information provided by the Seller or its Affiliates.

     

    ARTICLE
VI

     

    Warranties and
Representations of Buyer

     

    6.1          Warranties and
Representations.  The Buyer hereby warrants and represents on
and as of the date of this Agreement to the Seller, which warranties and
representations shall survive the Closing for the period set forth in Section 10.3(a)
below, as follows:

     

    6.1.1       Authority of Buyer.  The
Buyer has the right, power and authority to enter into this Agreement and the
Ancillary Agreements which the Buyer is a party to and to consummate the
transactions contemplated hereby and thereby.  The execution, delivery
and performance by the Buyer of this Agreement and the Ancillary Agreements to
which the Buyer is a party have been approved by the Board of Directors of the
Buyer.  This Agreement has been, and each Ancillary Agreement to which
the Buyer is a party will be, duly and validly executed and delivered by the
Buyer, and this Agreement and such Ancillary Agreements are and shall constitute
the legal, valid and binding obligations of the Buyer enforceable against the
Buyer in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally or by general principles of equity.

     

    6.1.2       Corporate Matters.  The
Buyer is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware.  The Buyer has the power and
authority to own or lease its properties and assets and to carry on all business
activities now conducted by it.

     

    6.1.3       No Conflict.  Neither the
execution, delivery and performance by the Buyer of this Agreement or any of the
Ancillary Agreements to which the Buyer is a party nor the consummation or
performance of any of the transactions contemplated hereby or thereby will,
directly or indirectly: (a) contravene, conflict with, or result in a breach or
violation of any provision of the Certificate of Incorporation or By Laws of the
Buyer; (b) contravene, conflict with, or result in a breach or violation of, or
give any Governmental Body the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain relief under, any Legal
Requirement or any Order to which the Buyer may be subject; or (c) contravene,
conflict with, or result in a breach or violation of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate or modify,
any material Contract to which the Buyer is subject.  Other than any
filings required by, and any approvals required under, the applicable
requirements of the Exchange Act and the rules and regulations of The NASDAQ
Global Select Market, no action, consent, approval, Order or authorization of,
or registration, declaration or filing with, any Governmental Body is required
to be obtained or made in connection with the execution and delivery by the
Buyer of this Agreement and the Ancillary Agreements to which the Buyer is a
party or the consummation by the Buyer of the transactions contemplated hereby
and thereby.

    
      
         

      

      
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    6.1.4       Proceedings Against
Buyer.  There is no Proceeding now pending which would affect
the ability of the Buyer to consummate the purchase of the Subject Shares or the
other transactions contemplated by this Agreement or the Ancillary
Agreements.

     

    6.1.5       Investment Purpose.  The
Buyer understands that the Subject Shares have not been registered under the
Securities Act of 1933, as amended, nor qualified under any state securities
laws, and that they are being offered and sold pursuant to an exemption from
such registration and qualification based in part upon the Buyer’s
representations contained herein.  The Buyer is acquiring the Subject
Shares solely for the Buyer’s own account for investment and not with a view
toward the resale, transfer or distribution thereof, nor with any present
intention of distributing the Subject Shares in violation of any securities
laws.  No other Person has any right with respect to or interest in
the Subject Shares to be purchased by the Buyer, nor has the Buyer agreed to
give any Person any such interest or right in the future.

     

    6.1.6       Brokers; Agents.  Other than
Grace Matthews, Inc., the Buyer has not dealt with any agent, finder, broker or
other representative in any manner which could result in the Seller being liable
for any fee or commission in the nature of a finder’s fee or originator’s fee in
connection with the subject matter of this Agreement.

     

    6.2          Disclaimer.  Except for the
representations and warranties of the Buyer contained in this Article VI, neither
the Buyer nor any Person on behalf of the Buyer makes any other express or
implied representation or warranty with respect to the Buyer or any of its
Affiliates or the execution and delivery of this Agreement or with respect to
any other information provided by the Seller or its Affiliates.

     

    ARTICLE
VII

     

    Certain Covenants of the
Buyer

     

    7.1           Benefits.  The Buyer agrees
that, during the period beginning on the Closing Date and ending one (1) year
following the Closing Date, all employees of the Company as of immediately prior
to the Closing who continue employment with the Buyer or any of its Affiliates
after the Closing (the “Continuing Employees”) shall be eligible to participate
in benefit plans and programs that are substantially similar in the aggregate to
either those currently provided by the Company or those provided to
similarly-situated employees of the Buyer or the Buyer’s Affiliates
(collectively, the “Specified Parent Benefit Plans”).

    
      
         

      

      
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    7.2          Eligibility; Service
Credit.  From and after the Closing, each Continuing Employee
shall (to the extent permitted by applicable Legal Requirements) be credited
under each Specified Parent Benefit Plan with his or her years of services with
the Company and their respective predecessors before the Closing for purposes of
vesting, eligibility and level of benefits (except for purposes of benefit
accrual under a defined benefit pension plan or where such credit would result
in a duplication of benefits) to the same extent as such Continuing Employee was
entitled, before the Closing, to credit for such service with the Company under
any similar Plan in which such Continuing Employee participated immediately
prior to the Closing.  In addition, and without limiting the
generality of the foregoing, the Buyer (or its Affiliates) shall (to the extent
that such limitation would not apply with respect to substantially similar plans
maintained by the Company prior to the Closing) use its commercially reasonable
efforts to (i) cause to be waived any eligibility requirements or pre-existing
condition limitations, and (ii) give effect, in determining any deductible
maximum out of pocket limitations, to amounts paid by such Continuing Employees
during the plan year in which the Closing occurs.

     

    7.3          No Third Party
Beneficiaries.  This Article VII shall be
binding upon and inure solely to the benefit of each of the parties to this
Agreement, and nothing in this Article VII,
expressed or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Article
VII.  Without limiting the foregoing, no provision of this
Article VII
shall create any third party beneficiary rights in any current or former
employee, director or consultant of the Company in respect of continued
employment or service (or resumed employment or service) or any other
matter.  Nothing in this Article VII is
intended to amend any Plan, or interfere with the Buyer’s or the Company’s right
from and after the Closing to amend or terminate any Plan or the employment or
provision of services by any director, employee, independent contractor or
consultant.

     

    7.4          Environmental Matters.  The
Buyer hereby acknowledges and agrees that Section 4.1.21
of this Agreement is the Company’s sole and exclusive representation as to
environmental matters and that none of the other representations and warranties
contained in this Agreement shall be deemed to apply, directly or indirectly, to
environmental matters.

     

    7.5          Bonus
Plan.  The Buyer hereby acknowledges that the Bonus Plan shall
continue pursuant to its terms after the Closing.

     

    ARTICLE
VIII

     

    Mutual
Covenants

     

    The
Seller and the Buyer covenant and agree as follows:

     

    8.1          Records.

     

    (a)           On
the Closing Date, the Seller will deliver or cause to be delivered to the Buyer
constructive possession of all original Records in the possession or control of
the Seller (constructive possession shall be deemed to include, without
limitation, the presence of such Records at the Company’s
headquarters);

    
      
         

      

      
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    (b)           For
a period of three (3) years after the Closing, upon reasonable written notice,
the Buyer and the Seller agree to furnish or cause to be furnished to each other
and their respective Representatives reasonable access, during normal business
hours, to such information in such parties’ possession directly related to the
Company and its operations with respect to periods prior to Closing and shall
otherwise cooperate with such other party at the expense of the requesting
party, to the extent such access is reasonably necessary for financial reporting
and accounting matters, the preparation and filing of any returns, reports or
forms with any Governmental Bodies or the defense of any Tax claim or
assessment; provided, however, that such
access (i) does not unreasonably disrupt the normal operations of the Seller,
the Buyer or the Company and (ii) is not reasonably likely to adversely affect
the ability of the disclosing party to assert attorney-client privilege,
work-product privilege or similar privilege.

     

    8.2          Public
Announcements.  Subject to the provisions of Section 2.1 above,
the Buyer, the Company and the Seller will consult with each other before
issuing any press release or otherwise making any public statements about this
Agreement or any of the transactions contemplated by this
Agreement.  Neither the Buyer, the Company nor the Seller will issue
any such press release or make any such public statement prior to such
consultation, except to the extent that the disclosing party determines in good
faith it is required to do so by applicable Legal Requirements, in which case
that party will use reasonable efforts to consult with the other parties hereto
before issuing any such release or making any such public
statement.

     

    8.3          Execution of Additional
Documents.  From time to time, as and when requested by a party
hereto, each party hereto shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments, and shall take, or cause to be
taken, all such further or other actions, as such other party may reasonably
deem necessary to consummate the transactions contemplated by this
Agreement.

     

    ARTICLE
IX

     

    Restrictive
Covenants

     

    9.1          Standstill.  At no time for
a period of three (3) years after the Closing Date shall the Seller, either
directly or indirectly through a Related Person, acquire an ownership interest
in any Person listed on Schedule
9.1 attached hereto, except as the holder of not more than five percent
(5%) of the publicly traded equity securities of such Person.  The
total amount of all Losses of all of the Buyer Indemnified Persons for claims
under this Section
9.1 shall in no event exceed the Purchase Price.

     

    9.2          Non-Solicitation.  The
Seller acknowledges and agrees that at no time for a period of three (3) years
after the Closing Date shall the Seller, either directly or indirectly through a
Related Person, induce, or attempt to induce, any person who is an employee or
consultant of the Company as of the Closing Date to leave the employ of, or
terminate his or her engagement with, the Company and/or to accept employment or
engagement elsewhere; provided, however, that
notwithstanding the foregoing, neither the Seller nor any of its Related Persons
shall be prohibited from engaging in any general solicitation (including in any
newspaper or magazine, over the internet or by any search or employment agency)
for employment or hiring of any person who responds to such general solicitation
if such general solicitation is not specifically directed towards an employee of
the Company or a solicitation of any individual whose employment by the Company
has ceased for reasons other than a breach of this Section
9.2.

    
      
         

      

      
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    9.3          Non-Disclosure of Confidential
Information.  The Seller acknowledges that for a period of
three (3) years after the Closing Date it shall not disclose any Confidential
Information (as defined below) to anyone other than to employees and
Representatives of the Buyer except any such Confidential Information which is
required to be disclosed by the Seller in connection with any court action or
any Proceeding before any Governmental Body or pursuant to any Legal
Requirement; provided, that the
Seller shall, to the extent practicable, give reasonable prior written notice to
the Buyer of the intention so to disclose such Confidential
Information.  For purposes of this Section 9.3, the
term “Confidential Information” shall mean all non-public and all proprietary
information relating to the Company, its customers and products and services
including, without limitation, the following: (a) all formulations, test
results, manufacturing and engineering specifications, production and
manufacturing information and know-how and all other technical information
relating to the manufacture, formulation or production of the products or
services of the Company; (b) all information and records concerning products or
services being researched by, under development by or being tested by the
Company but not yet offered for sale; (c) all trade secrets relating to the
Company; (d) all information concerning pricing policies of the Company, the
prices charged by the Company to its customers, the volume or orders of such
customers and other information concerning the transactions of the Company with
its customers or proposed customers; (e) the customer and prospective customer
lists of the Company; (f) financial information concerning the Company; (g)
information concerning salaries or wages paid to, the work records of and other
personnel information relative to employees of the Company; (h) information
concerning the marketing programs or strategies of the Company; and (i) all
other confidential and proprietary information of the
Company.  Notwithstanding the foregoing, the Seller acknowledges and
agrees that it will be bound by its obligations under applicable trade secret
Legal Requirements which, in the case of Confidential Information that qualifies
as a trade secret, may exceed the obligations imposed under this Section
9.3.  Nothing in this Section 9.3 shall be
construed to limit or supersede the common law of torts or statutory or other
protection of trade secrets where such law provides the Company with greater
protections or protections for a longer duration than that provided under this
Section
9.3.  “Confidential Information” shall not be deemed to mean or
refer to information that (i) is or becomes a matter of public knowledge through
no fault of the Seller; (ii) is rightfully received by the Seller from a third
Person (other than a Related Person of the Seller) without violation of any duty
of confidentiality; or (iii) is independently developed by the Seller without
use of or reference to the Confidential Information.

     

    9.4          Enforcement.  In addition to
all other legal remedies available to the Buyer for the enforcement of the
covenants of this Article IX, the
Seller acknowledges and agrees that the Buyer shall be entitled to seek
temporary and permanent injunctive relief by any court of competent jurisdiction
to prevent or restrain any breach hereof.  The Seller further agrees
that, because these restrictions arise in the context of the sale of a business
and the goodwill associated with such business, if any of the covenants set
forth in this Article
IX shall at any time be adjudged invalid to any extent by any court of
competent jurisdiction, such covenant shall be deemed modified to the extent
necessary to render it enforceable.

    
      
         

      

      
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    ARTICLE
X

     

    Indemnification

     

    10.1        Indemnification of the Buyer and the
Company.  The Seller agrees to indemnify the Buyer, the Company
and their respective shareholders, Representatives, controlling persons and
Affiliates and their respective successors and assigns (collectively, the “Buyer
Indemnified Persons”) and to hold them harmless from and against any and all
Losses, whether or not involving a third party claim, arising directly or
indirectly from, or in connection with, (a) any misrepresentation or breach of
any warranty or representation made by the Company and/or the Seller in Article IV and Article V of this
Agreement, (b) any breach or non-fulfillment of any agreement or covenant of the
Seller contained in this Agreement, (c) any failure of the Company to satisfy
the Excluded Indebtedness at or prior to the Closing, or (d) any of the Express
Indemnification Items.

     

    10.2         Indemnification of the
Seller.  The Buyer agrees to indemnify the Seller and its
partners, Representatives, controlling persons and Affiliates and their
respective successors and assigns (collectively, the “Seller Indemnified
Persons”) and to hold them harmless from and against any and all Losses, whether
or not involving a third party claim, arising directly or indirectly from, or in
connection with, (a) any misrepresentation or breach of any warranty or
representation made by the Buyer in this Agreement, or (b) any breach or
non-fulfillment of any agreement or covenant of the Buyer contained in this
Agreement.

     

    10.3        Liability Limitations;
Survival of Representations and Warranties.

     

    (a)           Survival of Representations
and Warranties.

     

    (i)           Notwithstanding
any investigation by or information supplied to the Buyer, the warranties and
representations of the Seller and the Company contained in this Agreement or any
certificate delivered pursuant hereto shall survive the Closing for a period of
eighteen (18) months after the Closing Date; provided, that (A)
any warranties and representations fraudulently made or intentionally
misrepresented shall survive the Closing and continue in full force and effect
indefinitely, (B) the warranties and representations of the Company contained in
Section 4.1.12
(Taxes) above, shall survive the Closing and continue in full force and effect
until the date that is sixty (60) days after the applicable statutory
limitations period has expired, including any extensions thereto, and
(C) the warranties and representations of (I) the Company contained in
Section 4.1.1
(Authority of Company), the first sentence of Section 4.1.7 (Title
to and Condition of Assets) and Section 4.1.21
(Environmental Matters) above, and (II) of the Seller contained in Section 5.1.1
(Authority of Seller) and Section 5.1.4 (Title
to Subject Shares) above shall survive the Closing and continue in full force
and effect for a period of two (2) years after the Closing Date.  Any
claim for indemnification under clause (a) of Section 10.1 above,
properly made in writing pursuant to this Article X prior to
the expiration of such applicable survival period, and the rights of indemnity
with respect thereto, shall survive such expiration, but only for purposes of
such claim, until resolved or judicially determined; and any such claim not so
made in writing prior to the expiration of such applicable survival period shall
be deemed to have been waived.

    
      
         

      

      
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    (ii)           The
warranties and representations of the Buyer contained in this Agreement or any
certificate delivered pursuant hereto shall survive the Closing for a period of
eighteen (18) months after the Closing Date; provided, that (A)
any warranties and representations fraudulently made or intentionally
misrepresented shall survive the Closing and continue in full force and effect
indefinitely, and (B) the warranties and representations contained in Section 6.1.1
(Authority of Buyer) above shall survive the Closing and continue in full force
and effect for a period of two (2) years after the Closing Date.  Any
claim for indemnification under clause (a) of Section 10.2 above,
properly made in writing pursuant to this Article X prior
to the expiration of such applicable survival period, and the rights of
indemnity with respect thereto, shall survive such expiration, but only for
purposes of such claim, until resolved or judicially determined; and any such
claim not so made in writing prior to the expiration of such applicable survival
period shall be deemed to have been waived.

     

    (b)           Threshold.  The
Seller shall not have any obligation to indemnify any Buyer Indemnified Person
for claims under clause (a) of Section 10.1 above
until the aggregate amount of Losses for which the Buyer Indemnified Persons are
entitled to indemnification under clause (a) of Section 10.1 above
exceeds Four Hundred Forty Thousand Dollars ($440,000) (the “Indemnification
Threshold”); provided, however, that once
such Losses for which the Buyer Indemnified Persons are entitled to
indemnification hereunder exceeds the Indemnification Threshold, then the Seller
shall be liable from the first dollar of all such
Losses.  Notwithstanding the foregoing, the limitations set forth in
this Section
10.3(b) shall not apply (i) to any indemnification obligations arising
under clause (a) of Section 10.1 above
from or in connection with any misrepresentation or breach of any warranty or
representation made by the Company in Section 4.1.1
(Authority of Company), the first sentence of Section 4.1.7 (Title
to and Condition of Assets), Section 4.1.12
(Taxes) or Section
4.1.21 (Environmental Matters) or by the Seller in Section 5.1.1
(Authority of Seller) and Section 5.1.4 (Title
to Subject Shares), (ii) to any indemnification obligations arising under clause
(b), (c) or (d) of Section 10.1 above,
or (iii) to any claims arising, directly or indirectly, from, or in connection
with, any fraud or intentional misrepresentation by the Seller or the
Company.

     

    (c)           Caps.

     

    (i)           The
total amount of Losses of all of the Buyer Indemnified Persons for claims under
clause (a) of Section
10.1 above shall in no event exceed Six Million Six Hundred Thousand
Dollars ($6,600,000) (the “General Cap”); provided, however, that the
General Cap shall not apply to (A) any claims arising directly or indirectly
from, or in connection with, any fraud or intentional misrepresentation by the
Seller or the Company; (B) any claims arising directly or indirectly from, or in
connection with, any misrepresentation or breach of any warranty or
representation made by the Company in Section 4.1.1
(Authority of Company), the first sentence of Section 4.1.7 (Title
to and Condition of Assets), Section 4.1.12
(Taxes) or Section
4.1.21 (Environmental Matters); or (C) any claims arising directly or
indirectly from, or in connection with, any misrepresentation or breach of any
warranty or representation made by the Seller in Section 5.1.1
(Authority of Seller) or Section 5.1.4 (Title
to Subject Shares).  Notwithstanding the foregoing, the total amount
of Losses of all of the Buyer Indemnified Persons for claims under clause (a) of
Section 10.1
above arising directly or indirectly from, or in connection with, any
misrepresentation or breach of any warranty or representation made by the
Company in Section
4.1.21 (Environmental Matters) above shall in no event exceed the
Purchase Price (the “Environmental Cap”).

    
      
         

      

      
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    (ii)          The
total amount of Losses of all of the Buyer Indemnified Persons for claims under
clause (d) of Section
10.1 above relating to clause (b) of the definition of “Express
Indemnification Items” set forth in Article XI below shall in no event exceed
the Purchase Price (the “Bonus Plan Cap”).

     

    (iii)         The
total amount of Losses of all of the Buyer Indemnified Persons for claims under
clause (d) of Section
10.1 above relating to clause (a) of the definition of “Express
Indemnification Items” set forth in Article XI below shall in no event exceed
the Purchase Price (the “FeHA Litigation Cap”).

     

    (iv)         Notwithstanding
anything to the contrary in this Agreement, in no event shall the Seller be
responsible for Losses under this Agreement in excess of the Purchase Price,
including, but not limited to, any Losses relating to claims under Section 9.1 and Section 10.1 of this
Agreement.

     

    (d)           Insurance
Effect.  The amount of any indemnifiable Loss otherwise
recoverable by a Buyer Indemnified Person hereunder shall be reduced by the
amount of any insurance proceeds paid to the Buyer Indemnified Person with
respect to the event giving rise to the Loss.  If the Buyer has
received the payment required by this Agreement from the Seller in respect of
any Losses and later receives proceeds from insurance or other amounts in
respect of such Losses, then it shall hold in trust for the benefit of the
Seller and shall, as promptly as practicable after receipt thereof, pay to the
Seller a sum equal to the amount of such proceeds or other amount received, up
to the aggregate amount of any payments received pursuant to this Agreement in
respect of such Losses.  Notwithstanding any other provisions of this
Agreement, it is the intention of the parties that no insurer or any other third
party shall be (x) entitled to a benefit it would not be entitled to receive in
the absence of the foregoing indemnification provisions, or (y) relieved of the
responsibility to pay any claims for which it is obligated.

    
      
         

      

      
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    10.4        Procedure Relative to
Indemnification.

     

    (a)           In
the event that any party hereto shall claim that it is entitled to be
indemnified pursuant to the terms of this Article X, such party
(the “Claiming Party”) shall so notify the party or parties against which the
claim is made (the “Indemnifying Party”) in writing (each, a “Claims Notice”) of
such claim within thirty (30) days after the Claiming Party receives notice of
any demand, claim or circumstance which is reasonably likely to give rise to a
claim or the commencement of any Proceeding (an “Asserted Liability”) that may
reasonably be expected to result in a claim for indemnification by the Claiming
Party against the Indemnifying Party; provided, however, that failure
to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure.  Each Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate the
amount (estimated, if necessary) of the Losses that have been or may be suffered
by the Claiming Party; provided, however, that failure
to provide such reasonable detail shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure; and provided, further, that in no
event shall the Claiming Party’s right to recoup Losses from the Indemnifying
Party be limited to the amount set forth or estimated in the Claims
Notice.  If such Losses are liquidated in amount, the Claims Notice
shall so state and such amount shall be deemed the amount of the claim of the
Claiming Party.  If the amount is not liquidated, the Claims Notice
shall so state and in such event a claim shall be deemed asserted against the
Indemnifying Party on behalf of the Claiming Party, but no payment shall be made
on account thereof until the amount of such claim is liquidated and the claim is
finally determined.

     

    (b)           The
following provisions shall apply to claims of the Claiming Party which are based
upon a Proceeding filed or instituted by any third party or by any Governmental
Body:

     

    (i)           Upon
receipt of a Claims Notice involving an Asserted Liability against or sought to
be collected by a third party, the Indemnifying Party shall have twenty (20)
days within which to notify the Claiming Party whether the Indemnifying Party
desires to assume the defense of such Asserted Liability.

     

    (ii)           If
the Indemnifying Party notifies the Claiming Party, within such twenty (20) day
period, that the Indemnifying Party desires to defend against such Asserted
Liability, then the Indemnifying Party shall assume the defense of such Asserted
Liability with counsel of the Indemnifying Party’s choice and, after notice from
the Indemnifying Party to the Claiming Party of its election to assume the
defense of such Asserted Liability, the Indemnifying Party will not be liable to
the Claiming Party under this Article X for any
fees and expenses of other counsel or any other expenses with respect to the
defense of such Asserted Liability subsequently incurred by the Claiming Party
in connection with the defense of such Asserted Liability, unless the
Indemnifying Party does not actually assume the defense thereof following notice
of such election.  The Claiming Party shall cooperate, at the
Indemnifying Party’s expense (with respect to out-of-pocket expenses incurred by
the Claiming Party), in the compromise of, or defense against such Asserted
Liability and may participate in, but not control, such Asserted Liability at
its own expense.  If the Indemnifying Party is controlling the defense
of an Asserted Liability, no compromise or settlement of such Asserted Liability
may be effected without the Claiming Party’s consent (which consent shall not be
withheld unreasonably) unless (A) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and
(B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party.

    
      
         

      

      
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    (iii)          If
a Claims Notice is given to an Indemnifying Party and the Indemnifying Party
does not, within twenty (20) days after receipt of the Claims Notice, notify the
Claiming Party that it elects to assume the defense of such Asserted Liability,
then the Claiming Party will have the right to conduct a defense of the Asserted
Liability, the Indemnifying Party will be bound by any determination made with
respect to such Asserted Liability or any compromise or settlement effected by
the Claiming Party and the Indemnifying Party will be responsible for paying all
reasonable professional fees and expenses incurred by the Claiming Party in
connection with such defense; provided, however, that in no
event shall the Claiming Party, without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld), settle,
compromise or offer to settle or compromise any such Asserted
Liability.

     

    (iv)          Notwithstanding
the foregoing, if (A) there exists a conflict of interest that would make it
inappropriate in the reasonable judgment of the Claiming Party for the same
counsel to represent both the Claiming Party and the Indemnifying Party; (B) the
third Person claim seeks injunctive or other non-monetary relief against the
Claiming Party; or (C) the Claiming Party elects to pursue one or more defenses
or counterclaims available to it that are inconsistent with one or more defenses
or counterclaims that are being pursued by the Indemnifying Party in respect of
such third Person claim or any litigation related thereto, then the Claiming
Party may, by notice to the Indemnifying Party, participate in the defense of
such third Person claim and shall be entitled to retain its own counsel at the
Indemnifying Party’s cost and expense.  It is understood and agreed
that the Indemnifying Party will not be bound by any determination of an
Asserted Liability so defended or any compromise or settlement effected by the
Claiming Party without its consent (which may not be withheld
unreasonably).

     

    (c)           Upon
receipt of a Claims Notice involving an Asserted Liability that does not involve
an Asserted Liability against or sought to be collected by a third Person, the
Indemnifying Party shall have twenty (20) days from the receipt of a Claims
Notice to notify the Claiming Party that the Indemnifying Party disputes such
Asserted Liability.  If the Indemnifying Party does not so notify the
Claiming Party, then the amount of such Asserted Liability shall be deemed,
conclusively, a liability of the Indemnifying Party hereunder.  If the
Indemnifying Party shall object in writing to such Asserted Liability, then the
Claiming Party shall have twenty (20) days to respond in a written statement to
the objection of the Indemnifying Party. If after such twenty (20) day period
there remains a dispute as to any Asserted Liability, then the parties shall
attempt in good faith for thirty (30) days to agree upon the rights of the
respective parties with respect to such Asserted Liability.  If the
parties should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties.  If after such thirty (30) day
period, the parties are unable in good faith to negotiate a resolution of the
dispute, then either party may submit the dispute for resolution to a court of
competent jurisdiction in accordance with Section 12.9 of this
Agreement.  Any payment in respect of an Asserted Liability as finally
determined shall be made by wire transfer of immediately available funds to an
account designed by the party entitled to such payment within ten (10) days
after the determination thereof; provided, however, to the
extent that any Buyer Indemnified Persons are entitled to indemnification from
the Seller pursuant to Section 10.1
above, such Buyer Indemnified Persons shall first recover any Losses from the
funds then held pursuant to the terms of the Escrow Agreement.

    
      
         

      

      
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    10.5        Characterization of Indemnification
Payments.  Except as otherwise required by applicable Legal
Requirements, any payment made pursuant to Section 10.1 above
shall be treated for Tax purposes as an adjustment to the Purchase
Price.

     

    10.6        No Punitive Damages.  Except
to the extent included in Losses incurred pursuant to an Asserted Liability
against or sought to be collected by a third Person, in no event shall the
Seller or the Buyer have any liability to a Buyer Indemnified Party or a Seller
Indemnified Party, respectively, hereunder for any exemplary or punitive damages
relating to the breach or alleged breach of any representation, warranty or
covenant in this Agreement.

     

    10.7        Set-Off.  The Seller and the
Buyer acknowledge and agree that the Buyer shall be entitled, in addition to any
other remedies which may be available to it, to set-off against the amount of
any unpaid Contingent Purchase Price the aggregate amount of any Losses, as
finally determined in accordance with the provisions of Section 10.4 above,
arising from, or in connection with, any misrepresentation or breach of any
warranty or representation made by the Company in Article IV of this
Agreement or by the Seller in Article V of this
Agreement.  It is understood and agreed that the exercise by the Buyer
of its right of set-off pursuant to this Section 10.7 shall be
subject to the provisions set forth in Section 2.6 of this
Agreement relating to the final determination of the Contingent Purchase
Price.

     

    10.8        Exclusive Remedy.  Except
for claims arising from, or in connection with, fraud or intentional
misrepresentation, the foregoing indemnification provisions shall constitute the
sole and exclusive remedy for monetary damages in respect of any breach of, or
default under, this Agreement by any party hereto and each party hereby waives
and releases any and all statutory, equitable, or common law remedy for monetary
damages any party may have in respect of any breach of or default under this
Agreement, including, without limitation, any rights of
contribution.

     

    ARTICLE
XI

     

    Definitions

     

    “Affiliate” means, as to any
Person, any other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person.  A Person
shall be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract or otherwise.  For purposes of
clarification, (a) any Related Persons of the Seller shall be deemed to be
Affiliates of the Seller, and (b) after the Closing, the Holding Company and the
Operating Company shall be deemed to be Affiliates of the
Buyer.

    
      
         

      

      
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    “Agreement” means this Stock
Purchase Agreement, as the same may be amended or modified from time to time,
including all Exhibits and Schedules attached hereto.

     

    “Allingham” means Dennis J.
Allingham.

     

    “Ancillary Agreements” means,
as to any party, the agreements, documents and instruments to be executed and
delivered by such party pursuant to this Agreement.

     

    “Applicable Contract” means
any Contract that is in effect on the Closing Date (a) under which the
Company is or may be entitled to receive revenues of more than $50,000 in any
calendar year, (b) under which the Company may become subject to any obligation
to pay a liability of more than $100,000 in any calendar year, (c) by which
assets owned or used by the Company having a net book value of at least $100,000
are bound, (d) which affects the voting, transfer, purchase or acquisition of
the Subject Shares, (e) whereby the Company has granted any license, franchise,
permit or right to any third party to use any of the Intellectual Property owned
by the Company or any Contract pursuant to which the Company has a license,
franchise, permit or other right to use any intellectual property owned by a
third party, (f) involving a share of profits or losses by the Company with any
other Person, including any joint venture, partnership or other similar
agreement, (g) containing covenants that in any way purport to restrict the
business activity of the Company or limit the freedom of the Company to use or
disclose confidential information (other than confidentiality agreements or
confidentiality provisions entered into in the Ordinary Course of Business) or
to engage in any line of business or to compete with any Person,
(h) entered into outside the Ordinary Course of Business, (i) which is
a  material lease, rental or occupancy agreement, license, installment
or conditional sale agreement or other Contract affecting the ownership of,
leasing of, title to, use of or any leasehold or other interest in, any real or
material personal property, (j) which is a Change of Control Agreement
Amendment, and (k) each material amendment, supplement and modification with
respect to any of the foregoing.

     

    “Asserted Liability” has the
meaning set forth in Section 10.4(a)
above.

     

    “Beneficially Owns” (including
the terms “Beneficially
Owned” or “Beneficially
Owning”) shall mean beneficial ownership within the meaning of Rule 13d-3
under the Exchange Act.

     

    “Bonus Agreements” means those
certain agreements between the Operating Company and the Former Option Holders
in the form of Exhibit
11(i) attached hereto pursuant to which the Former Option Holders, among
other things, waive their rights with respect to any stock options granted to
them pursuant to the Lifecore Biomedical, Inc. 2009 Stock Incentive Plan (which
2009 Stock Incentive Plan shall be terminated effective as of the
Closing).

     

    “Bonus Plan” has the meaning
set forth in Section
2.6(c) above.

     

    “Bonus Plan Cap” has the
meaning set forth in Section 10.3(c)(ii)
above.

     

    “Buyer” has the meaning set
forth in the preface above.

     

    “Buyer Indemnified Persons”
has the meaning set forth in Section 10.1
above.

    
      
         

      

      
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    “Capital Lease” means any
leasing or similar arrangement which, in accordance with GAAP, is classified as
a capital lease.

     

    “Cash” means cash and cash
equivalent assets (including, for this purpose, all collected funds and checks
included or located in any lock box accounts of the Company, at or prior to
12:01 a.m. New York City time on the Closing Date, but excluding, for this
purpose, all checks written by the Company and wire transfers sent by the
Company which have not cleared or been completed, as the case may be, at or
prior to 12:01 a.m. New York City time on the Closing Date).

     

    “Cash Distribution Amount”
means an amount equal to the sum of (a) the Closing Cash Distribution Amount,
plus or minus (b) the Post Closing Cash Distribution Amount (if
any).

     

    “Cash Flow Projections” means
the cash flow projections for the Operating Company for fiscal year 2010
delivered to Grace Matthews, Inc. and dated January 22, 2010, a copy of which
are attached hereto as Exhibit
11(a).

     

    “Cash Payment” has the meaning
set forth in Section
2.3 above.

     

    “Cash Purchase Price” has the
meaning set forth in Section 2.2
above.

     

    “Cause” means (a) Allingham’s
conviction of, indictment for, or pleading “guilty” or “no contest” to any crime
(whether or not involving the Company or its Affiliates) (i) constituting a
felony, or (ii) that has, or could reasonably be expected to result in, an
adverse impact on the performance of Allingham’s duties to the Company, or
otherwise has, or could reasonably be expected to result in, an adverse impact
to the business or reputation of the Company or its Affiliates; (b) Allingham’s
willful and continued failure to perform his duties or willful misconduct in the
course of his employment that has, or could reasonably be expected to result in,
material injury to the business or reputation of the Company or its Affiliates;
or (c) any material violation of the policies of the Company or its Affiliates,
including, but not limited to, those relating to sexual harassment, the
disclosure or misuse of confidential information, or those set forth in the
manuals or statements of policy of the Company or its Affiliates.  For
purposes of this definition, an act, or failure to act, shall be considered
“willful” if done, or omitted to be done, by Allingham in bad faith and without
reasonable belief that the action or omission was in the best interests of the
Company.

     

    “CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
codified at 42 U.S.C. 9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act of 1986.

     

    “Change of Control” means,
with respect to any entity, any transaction or series of transactions resulting
in any of the following:  (a) the direct or indirect acquisition by
one or more Unrelated Purchasers of all or substantially all of the assets of
such entity; (b) the direct or indirect acquisition of equity interests that
result in one or more Unrelated Purchasers Beneficially Owning more than fifty
percent (50%) of the issued and outstanding equity interests of such entity,
including, without limitation, pursuant to a purchase of stock, plan of merger,
share exchange or consolidation; or (c) a combination or plan of merger
involving such entity in which one or more Unrelated Purchasers Beneficially Own
more than fifty percent (50%) of the economic and voting interests of the
surviving entity.

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    “Change of Control Agreement
Amendments” means those certain amended and restated change of control
agreements among the Seller, the Operating Company and the Subject Officers in
the form of Exhibit
11(b) attached hereto.

     

    “Claiming Party” has the
meaning set forth in Section 10.4(a)
above.

     

    “Claims Notice” has the
meaning set forth in Section 10.4(a)
above.

     

    “Closing” means the closing of
the purchase and sale contemplated herein.

     

    “Closing Cash Distribution
Amount” has the meaning set forth in Section 2.5(a)
above.

     

    “Closing Date” means the date
on which the Closing occurs.

     

    “Closing Date Balance Sheet”
has the meaning set forth in Section 2.6(b)
above.

     

    “COBRA” means the Consolidated
Omnibus Budget Reconciliation Act of 1986 and the rules and regulations
promulgated thereunder, each as amended.

     

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

     

    “Common Stock” has the meaning
set forth in the recitals above.

     

    “Company” has the meaning set
forth in the preface above.

     

    “Confidential Information” has
the meaning set forth in Section 9.3
above.

     

    “Confidentiality Agreement”
means that certain Confidentiality Agreement, dated May 27, 2009, between
the Operating Company and the Buyer.

     

    “Consents” means the consents
and approvals from, or the written notifications to, the parties to those
Contracts listed on Exhibit
11(c) attached hereto.

     

    “Contingent Purchase Price”
has the meaning set forth in Section 2.6(a)
above.

     

    “Continuing Employee” has the
meaning set forth in Section 7.1
above.

     

    “Contract” means any
agreement, contract, arrangement, lease, license, obligation, promise,
understanding or undertaking (whether written or oral) that is legally
binding.

     

    “Dental Operations and
Divestiture” means, collectively, (a) the operation by the Company of its
dental business on or prior to June 2, 2008, and (b) the series of transactions
amongst Affiliates of the Seller culminating in the distribution of all of the
equity of the Operating Company to the Holding Company effective as of November
12, 2008.

     

    “Disclosure Schedules” means
the disclosure schedules attached to this Agreement.

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    “Earn-Out Amount” has the
meaning set forth in Section 2.6(a)
above.

     

    “Earn-Out Date of Final
Determination” means (a) the last day on which a Notice of Objection with
respect to an Earn-Out Statement may be given if no such Notice of Objection is
given, or (b) the date of resolution of any objections by the parties hereto or
by the Independent Accounting Firm if a Notice of Objection with respect to an
Earn-Out Statement is timely given.

     

    “Earn-Out Period” has the
meaning set forth in Section 2.6(a)
above.

     

    “Earn-Out Statement” has the
meaning set forth in Section 2.6(b)
above.

     

    “Environmental Cap” has the
meaning set forth in Section 10.3(c)(i)
above.

     

    “Environmental Claims” means
any investigation, notice, violation, demand, allegation, action, suit,
injunction, order, consent decree, penalty, fine, Lien, proceeding or claim
(whether administrative, judicial or private in nature) arising (a) pursuant to
an actual or alleged violation of any applicable Environmental Law; (b) from the
release of a Hazardous Substance; (c) from any abatement, removal, remedial,
corrective or other response action in connection with Hazardous Substances,
Environmental Law or other order of a Governmental Body; or (d) from any actual
or alleged damage, injury, threat, or harm to human health, safety, natural
resources, wildlife or the environment.

     

    “Environmental Law” means any
Legal Requirements pertaining to (a) human health, safety, natural resources,
wildlife or the environment, (b) the Occupational Safety and Health
Administration, the U.S. Environmental Protection Agency, the Nuclear Regulatory
Commission, the Minnesota Department of Natural Resources and the Minnesota
Pollution Control Agency, or (c) the management, manufacture, possession,
presence, use, generation, transportation, treatment, storage, disposal,
release, threatened release, abatement, removal, remediation, emission,
discharge or handling of, or exposure to, any petroleum products or Hazardous
Substances into ambient air, surface water, ground water or land, or any
exposure or impact on worker health and safety, and all amendments,
modifications and additions thereto, in each case as amended to date, including,
without limitation, CERCLA, RCRA, the Toxic Substances Control Act of 1976,
codified at 15 U.S.C. 2601 et seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, codified at 33 U.S.C. 1251 et seq., the
Clean Air Act of 1966, codified at 42 U.S.C. 741 et seq., the Hazardous
Materials Transportation Act, codified at 49, U.S.C. 651 et seq., the Oil
Pollution Act of 1990, codified at 33 U.S.C. 2701 et seq., the Emergency
Planning and Community Right-To-Know Act of 1986, codified at 42 U.S.C. 11001,
et seq., the National Environmental Policy Act of 1969, codified at 42 U.S.C.
4321, et seq., the Occupational Safety and Health Act of 1970, the Safe Drinking
Water Act of 1974, codified at 42 U.S.C. 300(f), et seq., the Atomic Energy
Community Act of 1955, the Atomic Testing Liability Act, the Atomic Energy
Damages Act, the Atomic Energy Omnibus Act, the Atomic/Nuclear Waste Policy Act
of 1982, the Atomic/Nuclear Waste Policy Amendments of 1987 or any similar,
implementing or successor law.

     

    “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

    “ERISA Affiliate” means any
Person (whether or not incorporated) that is treated as a single employer with
the Company under Section 414(b), (c), (m) or (o) of the Code.

     

    “Escrow Agent” means Wells
Fargo Bank, N.A.

     

    “Escrow Agreement” means that
certain Escrow Agreement among the Buyer, the Seller, the Holding Company and
the Escrow Agent in the form attached hereto as Exhibit 11(d).

     

    “Escrow Amount” means an
amount equal to Six Million Six Hundred Thousand Dollars ($6,600,000), as set
forth in the Escrow Agreement.

     

    “Estimated Balance Sheet” has
the meaning set forth in Section 2.5(b)
above.

     

    “Exchange Act” means the
Securities Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

     

    “Excluded Indebtedness” means
all outstanding indebtedness of the Company for borrowed money as of the Closing
Date, including, without limitation, interest-bearing debt and obligations under
Capital Leases, as set forth on Exhibit
11(e) attached hereto (if any), but excluding the Permitted
Indebtedness.

     

    “Express Indemnification Items”
means (a) any Losses arising directly or indirectly from or in connection
with the Proceeding described on Schedule
4.1.9 attached hereto, and (b) any Losses arising directly or
indirectly from or in connection with the Bonus Plan and/or the Bonus Agreements
referenced therein (including, without limitation, Losses arising directly or
indirectly from or in connection with a claim of a Participant under the Bonus
Plan) other than any such Losses arising directly or indirectly from or in
connection with a breach by the Company of its scheduled payment obligations
thereunder, the willful misconduct or gross negligence of the Company or any
other action or inaction of the Company.

     

    “FDA” has the meaning set
forth in Section
4.1.22 above.

     

    “FeHA Litigation Cap” has the
meaning set forth in Section 10.3(c)(iii)
above.

     

    “Financial Statements” means
(a) the audited balance sheet of each of the Holding Company and the Operating
Company as of December 31, 2008, and the related statement of operations,
statement of changes in stockholder/member equity and statement of cash flows
for the fiscal period beginning March 26, 2008 and ending December 31, 2008, (b)
the audited balance sheet of each of the Holding Company and the Operating
Company as of December 31, 2009, and the related statement of operations,
statement of changes in stockholder/member equity and statement of cash flows
for the fiscal period then ended, and (c) the unaudited interim balance sheet of
each of the Holding Company and the Operating Company as of March 31, 2010 (the
“Interim Balance Sheet Date”), and the related statement of operations,
statement of changes in stockholder/member equity and statement of cash flows
for the three (3) month period then ended, all attached hereto as Schedule
4.1.11.

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

    “Former Option Holders” means
Allingham, Larry D. Hiebert, James G. Hall, Kipling Thacker, Jeff Rue, Scott
Collins, Phil Sticha, Karl Reindel and Tom Clemens.

     

    “GAAP” means United States
generally accepted accounting principles and practices as in effect from time to
time, consistently applied.

     

    “General Cap” has the meaning
set forth in Section
10.3(c)(i) above.

     

    “Good Reason” means the
occurrence of any of the following events without Allingham’s written consent:
(a) a material diminution in Allingham’s authority, duties or responsibilities
as in effect during the ninety (90) day period immediately preceding the
Closing; (b) a material diminution in Allingham’s annual base salary or annual
bonus opportunity as in effect immediately preceding the Closing; (c) the
Company requiring Allingham to be based more than fifty (50) miles from where
his office is located immediately prior to the Closing, except for required
travel on the Company’s business, and then only to the extent substantially
consistent with the business travel obligations which Allingham undertook on
behalf of the Company during the ninety (90) day period ending on the Closing
Date (without regard to travel related to or in anticipation of the Closing); or
(d) any other action or inaction that constitutes a material breach (i) by the
Holding Company of the Bonus Plan which relates to the rights of Allingham
asserting Good Reason under the Bonus Plan, or (ii) by the Operating Company of
the Change of Control Agreement Amendment to which Allingham is a
party.  Allingham may not terminate employment for Good Reason unless
Allingham has provided written notice to the Operating Company of the existence
of the event constituting Good Reason within ninety (90) days of the initial
existence of the event and the Operating Company has not remedied the condition
within thirty (30) days after such notice is received.  Allingham’s
mental or physical incapacity following the occurrence of an event described
above in clauses (a) through (d) shall not affect Allingham’s ability to
terminate employment for Good Reason, and Allingham’s death following delivery
of a notice of termination for Good Reason shall not affect Allingham’s estate’s
entitlement to severance payments or benefits provided under the Bonus Plan upon
a termination of employment for Good Reason.  Notwithstanding the
foregoing, none of the foregoing events shall be considered “Good Reason” if it
occurs in connection with Allingham’s death or permanent disability or
termination for Cause.

     

    “Governmental Authorization”
means any permit, license, variance, certificate, closure, exemption, action,
consent, waiver or approval or other authorization issued, granted, given or
otherwise made available by, or under the authority of, any Governmental Body or
pursuant to any Legal Requirement.

     

    “Governmental Body” means any
(a) nation, state, county, city, town, village, district or other jurisdiction
of any nature; (b) federal, state, local, municipal, foreign or other
government; (c) governmental or quasi-governmental authority of any nature
(including any governmental agency, bureau, branch, department, official or
entity and any court or other tribunal); or (d) body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
regulatory or taxing authority, including self-regulatory
organizations.

     

    “Guaranty” has the meaning set
forth in Section
2.6(g) above.

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

    “Hazardous Substances” means
and includes any “hazardous substance” and any “pollutant or contaminant” as
those terms are defined in CERCLA; any “hazardous waste” as that term is defined
in RCRA; and any “hazardous material” as that term is defined in the Hazardous
Materials Transportation Act (49 U.S.C. § 1801 et seq.), as amended (including
as those terms are further defined, construed or otherwise used in rules,
regulations issued pursuant to said Environmental Laws); and including, without
limitation, any petroleum product or byproduct, solvent, flammable or explosive
material, radioactive material, asbestos, polychlorinated biphenyls (PCBs),
dioxins, dibenzofurans, heavy metals, radon gas, urea formaldehyde foam,
hazardous waste source and raw materials which include hazardous constituents;
and including any other substance, chemical, compound, product, solid, gas,
liquid, waste, by-product, material, pollutant or contaminant which is
hazardous, toxic or otherwise harmful to health, safety, natural resources
wildlife or the environment.

     

    “Holding Company” has the
meaning set forth in the preface above.

     

    “Indemnification Threshold”
has the meaning set forth in Section 10.3(b)
above.

     

    “Indemnifying Party” has the
meaning set forth in Section 10.4(a)
above.

     

    “Independent Accounting Firm”
means Grant Thornton, LLP.

     

    “Intellectual Property” has
the meaning set forth in Section 4.1.10(a)
above.

     

    “Interim Balance Sheet Date”
has the meaning set forth in the definition of “Financial Statements” set forth
above in this Article
XI.

     

    “Interim Financial Statements”
means the unaudited interim balance sheet of each of the Holding Company and the
Operating Company as of the Interim Balance Sheet Date, and the related
statement of operations, statement of changes in stockholder/member equity and
statement of cash flows for the three (3) month period then ended.

     

    “Inventory” means all
inventories relating to the business of the Company, wherever located,
including, without limitation, raw materials, work in process and finished
goods.

     

    “IP Contract” has the meaning
set forth in Section
4.1.10(b) above.

     

    “IRS” means the United States
Internal Revenue Service.

     

    “Knowledge” – An individual
will be deemed to have “Knowledge” of a particular fact or other matter if such
individual is actually aware of such fact or other matter following a reasonable
inquiry of the subject matter thereof.  The Company will be deemed to
have “Knowledge” of a particular fact or other matter if any of Allingham, Larry
D. Hiebert, Scott Collins, James G. Hall or Kipling Thacker is actually aware of
such fact or other matter following a reasonable inquiry of the subject matter
thereof.

     

    “Legal Requirement” means any
federal, state, local, municipal, foreign, international, multinational,
territorial or other administrative constitution, law, ordinance, code, policy,
principle of common law, rule, regulation, statute, treaty and the
like.

    
      
         

      

      
        43

        
          

        

      

      
         

      

    

    “Lien” means any mortgage,
deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or otherwise) or other security interest of any
kind or nature whatsoever (including those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing.

     

    “Lifecore Acquisition” means
the acquisition by SBT Holdings Inc., a Delaware corporation, of the business of
the Operating Company pursuant to the terms and conditions of that certain
Agreement and Plan of Merger, dated as of January 15, 2008, among SBT Holdings
Inc., SBT Acquisition Inc. and Lifecore Biomedical, Inc. (n/k/a Lifecore
Biomedical, LLC).

     

    “Losses” means all damages,
losses, deficiencies, liabilities, claims, actions, demands, judgments, fines,
fees, costs and expenses (including, without limitation, reasonable attorneys’
and accountants’ fees and expenses).

     

    “Member Control Agreement”
means that certain Second Amended and Restated Member Control Agreement of
Lifecore Biomedical, LLC, dated as of November 12, 2008, by and between the
Operating Company and the Holding Company.

     

    “Notice of Objection” has the
meaning set forth in Section 2.6(b)
above.

     

    “Operating Company” has the
meaning set forth in the preface above.

     

    “Order” means any award,
decision, injunction, judgment, order, ruling, subpoena or verdict entered,
issued, made or rendered by any court, administrative agency or any other
Governmental Body or by any arbitrator.

     

    “Ordinary Course of Business”
or “Ordinary Course”
means any action taken by a Person which (a) is consistent with past practices
of such Person and is taken in the ordinary course of the normal day to day
operations of such Person; (b) is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and (c) is similar in nature and magnitude in actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day to day operations of other Persons that are in the same
line of business as such Person.

     

    “Owned Real Property” has the
meaning set forth in Section 4.1.8
above.

     

    “Participant” has the meaning
set forth in the Bonus Plan.

     

    “Permitted Indebtedness” means
the obligations of the Company set forth on Exhibit 11(f)
attached hereto.

    
      
         

      

      
        44

        
          

        

      

      
         

      

    

    “Permitted Liens” means (a)
Liens for Taxes and assessments not yet due and payable or which are being
contested in good faith by appropriate Proceedings, (b) Liens of carriers,
warehousemen, mechanics, materialmen and repairmen incurred in the Ordinary
Course of Business consistent with past practice and not yet delinquent, and (c)
the Liens set forth on Exhibit
11(g) attached hereto.

     

    “Person” means any individual,
corporation, general or limited partnership, limited liability company,
association, joint stock company, joint venture, estate, trust association,
organization, labor union or other entity or Governmental Body.

     

    “Plan” means (a) any “employee
benefit plan,” as defined in Section 3(3) of ERISA, that (i) is subject to Title
I of ERISA, (ii) is maintained, administered or contributed to by the Company,
and (iii) covers or covered any current or former employee, officer, director or
shareholder of, or any other Person that performed or is performing services
for, the Company, and (b) any other employment, severance, benefit or similar
Contract (whether or not written and whether or not currently in effect) or
Contract, plan, program or policy (whether or not written and whether or not
currently in effect) providing any compensation or benefits to any current or
former employee, officer, director or shareholder of the Company or the
dependents of any such individual (including, without limitation, any Contract,
plan, program or policy making available bonuses, equity awards, non-taxable
benefits such as those provided under a Section 125 Cafeteria Plan or deferred
compensation).

     

    “Post-Closing Cash Distribution
Amount” has the meaning set forth in Section 2.6(c)
above.

     

    “Preferred Stock” has the
meaning set forth in Section 4.1.6(a)
above.

     

    “Prior Real Property” means
all real property previously owned or leased by the Company (together with any
buildings or other improvements that were located thereon during the period of
the Company’s use thereof).

     

    “Proceeding” means any action,
arbitration, audit, hearing, formal investigation by a Governmental Body,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Body.

     

    “Purchase Price” has the
meaning set forth in Section 2.2
above.

     

    “RCRA” means the Solid Waste
Disposal Act, codified at 42 U.S.C. 6901 et seq., as amended by the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendment of 1984.

     

    “Real Property” means
collectively the Owned Real Property and the Prior Real Property.

     

    “Records” means all books,
records, manuals and other materials of the Company, including, without
limitation, all sales, manufacturing, customer, prospective customer and
supplier/vendor records, advertising, promotional, marketing and sales
literature, catalogs and materials, personnel and payroll records, accounting
records, purchase and sale records, price lists, correspondence, quality control
records and research and development files, wherever located.

    
      
         

      

      
        45

        
          

        

      

      
         

      

    

    “Registered Intellectual
Property” has the meaning set forth in Section 4.1.10(a)
above.

     

    “Related Person” means, with
respect to the Seller, (a) any affiliated investment fund of Warburg Pincus
Partners LLC, Warburg Pincus LLC, Warburg Pincus International LLC or any of
their respective Affiliates, (b) any “portfolio company” (as such term is
customarily used among private equity investors) of the Seller or any other such
affiliated investment fund with respect to which Warburg Pincus Partners LLC,
Warburg Pincus LLC, Warburg Pincus International LLC or any of their respective
Affiliates directs the investment decisions of such portfolio company (for the
purposes hereof, a Person shall be deemed to direct the investment decision of a
portfolio company if such Person specifically authorizes the portfolio company
to make such investment), (c) any “portfolio company” (as such term is
customarily used among private equity investors) of the Seller or any other such
affiliated investment fund with respect to which the Seller or such other
affiliated investment fund possesses the right to appoint or elect more than
fifty percent (50%) of the members of the Board of Directors (or similar body)
of such portfolio company and/or owns more than fifty percent (50%) of the
voting securities of such portfolio company, or (d) the Persons listed on Schedule
XI attached hereto.

     

    “Remaining Cash” means an
amount equal to the Cash of the Company as of the open of business on the
Closing Date, as finally determined pursuant to the terms of this Agreement, but
not including the Closing Cash Distribution Amount.

     

    “Representative” means with
respect to a particular Person, any director, officer, employee, agent,
consultant, advisor or other representative of such Person, including legal
counsel, accountants and financial advisors.

     

    “Restricted Payments” means
(a) any debt payments (other than scheduled debt payments reflected in the Cash
Flow Projections), dividend declarations and/or payments, distributions on
capital stock, payments to any Affiliates of the Seller outside of the Ordinary
Course of Business (other than any payments made in respect of compensation,
salary, wages, commissions or fees payable to the officers, directors or
employees of the Company in the Ordinary Course of Business), including, without
limitation, Keystone Dental, Inc., a Delaware corporation, any funds of Warburg
Pincus Partners LLC, Warburg Pincus LLC and Warburg Pincus International LLC,
and any other affiliated funds, and any portfolio companies of any of such
funds, or payments of any costs or expenses related to the transactions
contemplated by this Agreement or otherwise not incurred in the Ordinary Course
of Business made by the Company between February 2, 2010 and the Closing Date,
and (b) payments of Closing Bonuses (as defined in the Bonus Plan) made by the
Company pursuant to the terms of the Bonus Plan.

     

    “Satisfied Liens” means all
Liens on the assets of the Company other than Permitted Liens, including those
specified on Exhibit
11(h) attached hereto, which Liens shall be released by the holder(s)
thereof at or prior to the Closing.

     

    “Scheduled Customers” has the
meaning set forth in Section 4.1.24
above.

    
      
         

      

      
        46

        
          

        

      

      
         

      

    

    “Scheduled Suppliers” has the
meaning set forth in Section 4.1.24
above.

     

    “Seller” has the meaning set
forth in the preface above.

     

    “Seller Indemnified Persons”
has the meaning set forth in Section 10.2
above.

     

    “Specified Parent Benefit
Plan” has the meaning set forth in Section 7.1
above.

     

    “Stock Incentive Plan” means
the Lifecore Biomedical, Inc. 2009 Stock Incentive Plan, to be terminated prior
to the Closing.

     

    “Subject Net Revenues” means,
for any given period, the Ordinary Course gross sales of the Company during such
period, determined in accordance with GAAP consistent with the past practices of
the Company, net of (a) any returns made during such period or made, but not
taken into account, during any prior period, and (b) any allowances, discounts,
authorized deductions and/or credits paid and/or given by the Company and
approved by Allingham with respect to any such sales, in each case, calculated
in accordance with GAAP consistent with the past practices of the Company; provided, that
“Subject Net Revenues” shall include any revenues generated from the sale of
products and/or services (whether sold or provided by the Company, the Buyer or
any of their respective Subsidiaries or Affiliates) related to (i) the business
or assets of the Company as of the Closing Date; (ii) any technology,
processes, methods or similar proprietary rights (whether owned or licensed by
the Company) or assets of the Company as of the Closing Date, in any form and
including derivatives and modifications thereon made after the Closing Date,
including, but not limited to, the use of hyaluronan in any indication
(including, but not limited to, ophthalmic, orthopedic, medical and veterinary
applications) that is sold, produced, under development or previously under
development by the Company as of the Closing Date; or (iii) any such revenues
that are diverted from the Company by the Buyer or any of its Affiliates
(whether due to the direct or indirect acquisition of any third Person,
including, without limitation, pursuant to a purchase of stock, plan of merger,
share exchange or consolidation, or acquisition of assets of any third Person)
or otherwise allocated from the Company to the Buyer or any of its Affiliates;
provided further, that
“Subject Net Revenues” shall exclude any revenues generated from the sale of
products and/or services (whether sold or provided by the Company, the Buyer or
any of their respective Subsidiaries or Affiliates) (v) related to the
business or assets of any other business or entity acquired (including, without
limitation, pursuant to a purchase of stock, plan of merger, share exchange or
consolidation, or acquisition of assets of any third Person) by the Company
after the Closing Date, (w) related to any technology, processes, methods or
similar proprietary rights contributed by the Buyer or any Affiliate or
Subsidiary of the Buyer to the business of the Company, (x) related to any
operations of the Company that are not related to the Intellectual Property
owned or licensed by the Company as of the Closing Date or the business
conducted by the Company as of the Closing Date, (y) related to the use of
hyaluronan in any indication (including, but not limited to, ophthalmic,
orthopedic, medical and veterinary applications) that is not sold, produced,
under development or previously under development by the Company as of the
Closing Date, or (z) which, but for the technology or other assets of the
Buyer or any other Affiliate or Subsidiary of the Buyer, would not have been
made.

     

    “Subject Officers” means
Allingham, Larry D. Hiebert and James G. Hall.

    
      
         

      

      
        47

        
          

        

      

      
         

      

    

    “Subject Shares” has the
meaning set forth in Article I
above.

     

    “Subject Units” has the
meaning set forth in Section 4.1.6(a)
above.

     

    “Subsidiary” means, with
respect to any Person, any corporation or other Person of which (or in which)
50% or more of (a) the outstanding capital stock or other equity interest having
voting power to elect a majority of the Board of Directors of such corporation
or Persons having a similar role as to an entity that is not a corporation, (b)
the interest in the profits of such partnership or joint venture, or (c) the
beneficial interest of such trust or estate are at such time directly or
indirectly owned by such Person or one or more of such Person’s
Subsidiaries.

     

    “Target Amount” means Eight
Million Dollars ($8,000,000) less the aggregate amount of any Restricted
Payments.

     

    “Tax” or “Taxes” means all federal,
state, county, local, foreign and other taxes or assessments, however
denominated, including, without limitation, income, estimated income, business,
occupation, franchise, property (real and personal), sales, employment, gross
receipts, use, transfer, ad valorem, profits, license, capital, payroll,
employee withholding, unemployment, excise, goods and services, severance and
stamp, and including interest, penalties and additions in connection therewith,
for which any applicable Person is or may be required to pay, withhold or
collect.

     

    “Tax Return” means any return,
declaration, report, estimate, claim for refund or information return or
statement relating to, or required to be filed in connection with, any Taxes,
including any schedule, form, attachment or amendment.

     

    “Treasury Regulations” means
the regulations adopted from time to time by the United States Department of
Treasury under the Code.

     

    “Units” has the meaning set
forth in the recitals above.

     

    “Unrelated Purchaser” means
any Person other than the Buyer or an Affiliate of the Buyer.

     

    “UST” means an underground
storage tank, including as that term is defined, construed and otherwise used in
the RCRA and in rules, regulations, standards, guidelines and publications
issued pursuant to RCRA and comparable state and local laws.

     

    ARTICLE
XII

     

    Miscellaneous

     

    12.1        Expenses.  Except as
otherwise specifically provided herein, the parties hereto shall pay their own
expenses, including, without limitation, accountants’ and attorneys’ fees and
expenses incurred in connection with the negotiation and consummation of the
transactions contemplated by this Agreement, except that the Seller shall be
responsible for all expenses that are incurred by the Company in connection with
the transactions contemplated by this Agreement prior to the Closing Date but
which are not paid by the Company on or prior to the Closing
Date.  The Seller and the Buyer shall share equally all Taxes or fees
(including any penalties and interest) applicable to, imposed upon or arising
out of the sale or transfer of the Subject Shares to the Buyer and the other
transactions contemplated hereby (all necessary Tax Returns and other
documentation with respect thereto which shall be filed by the party obligated
to make such filings under applicable law at its own
expense).  Neither the Seller nor the Company shall have any
obligation to pay any fees to any one or more third Persons for the purposes of
obtaining the Consents or any cost and expense of any one or more third Persons
resulting from the process of obtaining any Consents.

    
      
         

      

      
        48

        
          

        

      

      
         

      

    

    12.2        Notices.  All notices or
other communications required or permitted to be given hereunder shall be in
writing and shall be considered to be given and received in all respects when
hand delivered, one (1) business day after sent by prepaid express or courier
delivery service, when sent by facsimile transmission actually received by the
receiving equipment or three (3) days after deposited in the United States mail,
certified mail, postage prepaid, return receipt requested, in each case
addressed as follows, or to such other address as shall be designated by notice
duly given:

     

    IF TO THE
BUYER:                               Landec
Corporation

    3603
Haven Avenue

    Menlo
Park, CA 94025

    Attn:  Gary
Steele

    Fax
No.:  (650) 368-9818

     

    with a
copy (which shall not constitute notice) to:

     

    Godfrey
& Kahn, S.C.

    780 North
Water Street

    Milwaukee,
WI  53202

    Attn:  Nicholas
P. Wahl

    Fax
No.:  (414) 273-5198

     

    IF TO THE
SELLER:                             Warburg
Pincus Private Equity IX, L.P.

    c/o
Warburg Pincus LLC

    One
Market Plaza

    Spear
Tower, Suite 1700

    San
Francisco, CA 94105

    Attn:  Sean
Carney

       Noah
Knauf

    Fax
No.:  (212) 716-8682

    
      
         

      

      
        49

        
          

        

      

      
         

      

    

    with a
copy (which shall not constitute notice) to:

     

    Willkie
Farr & Gallagher LLP

    787
Seventh Avenue

    New York,
NY  10019

    Attn:  Steven
J. Gartner

    Mark A.
Cognetti

    Fax
No.:  (212) 728-8111

     

    12.3        Right to Specific
Performance.  The parties agree that the Subject Shares
constitute unique property, that there is no adequate remedy at law for the
damage which any of them might sustain for the failure of the others to
consummate this Agreement, and, accordingly, that each of them is entitled to
the remedy of specific performance to enforce such consummation.

     

    12.4        Entire Agreement;
Amendment.  This Agreement, the Exhibits attached hereto, the
Disclosure Schedules and the Ancillary Agreements constitute the entire
agreement among the parties hereto relating to the subject matter hereof, and
all prior agreements, correspondence, discussions and understandings of the
parties (whether oral or written), with the exception of the Confidentiality
Agreement, are merged herein and made a part hereof, it being the intention of
the parties hereto that this Agreement and the instruments and agreements
contemplated hereby shall serve as the complete and exclusive statement of the
terms of their agreement together.  No amendment, waiver or
modification hereto or hereunder shall be valid unless in writing signed by an
authorized signatory of the party or parties to be affected
thereby.  Each party to this Agreement acknowledges that no other
party, nor any agent or attorney of any party, has made any promise,
representation or warranty whatsoever, express or implied, not contained herein,
concerning the subject matter hereof, to induce the other party to execute this
Agreement, and each party acknowledges that it has not executed this Agreement
in reliance on any such promise, representation or warranty not contained
herein.

     

    12.5        Waiver.  The waiver by any
party of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any party.

     

    12.6        Binding Effect.  This
Agreement shall be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns.

     

    12.7        Section Headings.  The
headings in this Agreement are for purposes of convenience and ease of reference
only and shall not be construed to limit or otherwise affect the meaning of any
part of this Agreement.

     

    12.8        Severability.  The parties
agree that if any provision of this Agreement shall under any circumstances be
deemed invalid or inoperative, this Agreement shall be construed with the
invalid or inoperative provision deleted, and the rights and obligations of the
parties shall be construed and enforced accordingly.

     

    12.9        Applicable Law; Venue.  This
Agreement and all questions arising in connection herewith shall be governed by
and construed in accordance with the laws of the State of Delaware without
application of choice of law or conflicts of law principles.  All
disputes arising hereunder and any claims made relating to the representations,
warranties, covenants or agreements contained in this Agreement shall be
resolved exclusively in state or federal courts located in Hennepin County,
Minnesota, to which jurisdiction the parties hereto irrevocably
consent.

    
      
         

      

      
        50

        
          

        

      

      
         

      

    

    12.10      Assignment.  No party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other parties hereto.

     

    12.11      Parties in Interest.  With
the exception of the Buyer Indemnified Persons and Seller Indemnified Persons
who are not parties to this Agreement but who may have rights, benefits or
remedies under Article
X above, this Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this
Agreement.  The Seller and the Buyer shall not be liable for actions
or inactions of the Escrow Agent in connection with the performance of the
Escrow Agent’s obligations, except as explicitly set forth in the Escrow
Agreement.

     

    12.12      Disclosure Schedules and
Exhibits.  Any reference to a section or subsection in the
Disclosure Schedules and/or the Exhibits attached hereto refers to the sections
and subsections of this Agreement, unless the context requires otherwise; provided, however, a particular
matter disclosed in any section or subsection of the Disclosure Schedules or the
Exhibits attached hereto that a reasonable buyer would infer, based on the
location and express content of such disclosure, qualifies another section or
subsection of this Agreement shall also be deemed to qualify such other section
or subsection of this Agreement.  No disclosure of any matter
contained in the applicable Disclosure Schedules shall create an implication
that such matter meets any standard of materiality (matters reflected in the
applicable Disclosure Schedule are not necessarily limited to matters required
by this Agreement to be reflected in the applicable Disclosure Schedule); such
additional matters are set forth for informational purposes only and do not
necessarily include other matters of a similar nature, nor shall the inclusion
of any item be construed as implying that any such item is “material” for any
purpose.  All capitalized terms used in the Disclosure Schedules and
the Exhibits attached hereto and not otherwise defined therein shall have the
same meanings as are ascribed to such terms in this Agreement.

     

    12.13      Counterparts; Facsimile
Copy.  This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.  This Agreement may be
executed in facsimile copy or by other electronic means with the same binding
effect as the original.

     

    12.14      Passage of Title.  Legal
title, equitable title and risk of loss with respect to the Subject Shares will
not pass to Buyer until the Subject Shares are transferred at the Closing, which
transfer, once it has occurred, will be deemed effective for tax, accounting and
other computational purposes as of 12:01 a.m. New York City time on the Closing
Date.

     

    Signature
page follows.

    
      
         

      

      
        51

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day, month
and year first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    HOLDING
      COMPANY:

                                  	 
	 
      	 
      	 
	
                                    LIFECORE
      BIOMEDICAL, INC. (formerly known as SBT BIOMATERIALS
  INC.)

                                  
	 
      	 
      	 
	
                                    By:

                                  	
                                    /s/
      Dennis J Allingham

                                  	 
	 
      	
                                     Dennis
      J. Allingham, President

                                  	 
	 
      	 
      	 
	
                                    OPERATING
      COMPANY:

                                  	 
	 
      	 
      	 
	
                                    LIFECORE
      BIOMEDICAL, LLC

                                  	 
	 
      	 
      	 
	
                                    By:

                                  	
                                    /s/
      Dennis J. Allingham

                                  	 
	 
      	
                                     Dennis
      J. Allingham, President

                                  	 
	 
      	 
      	 
	
                                    SELLER:

                                  	 
	 
      	 
      	 
	
                                    WARBURG
      PINCUS PRIVATE EQUITY IX, L.P.

                                  
	 
      	 
      	 
	
                                    By:

                                  	
                                    Warburg
      Pincus IX, LLC, its General Partner

                                  
	 
      	 
      	 
	
                                    By:

                                  	
                                    Warburg
      Pincus Partners LLC, its Sole Member

                                  
	 
      	 
      	 
	
                                    By:

                                  	
                                    Warburg
      Pincus & Co., its Managing Member

                                  
	 
      	 
      	 
	
                                    By:

                                  	
                                    /s/
      Sean D. Carney

                                  	 
	 
      	
                                     Sean
      D. Carney, Managing Director

                                  	 
	 
      	 
      	 
	
                                    BUYER:

                                  	 
	 
      	 
      	 
	
                                    LANDEC
      CORPORATION

                                  	 
	 
      	 
      	 
	
                                    By:

                                  	
                                    /s/
      Gary T. Steele

                                  	 
	 
      	
                                     Gary
      T. Steele, Chief Executive Officer

                                  	 

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    [Signature
Page to Stock Purchase Agreement]

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    Exhibits:

     

    
      
        	
                Exhibit 2.6(g)

              	 
      	
                Form
      of Guaranty

              
	
                Exhibit
      11(a)

              	 
      	
                Cash
      Flow Projections

              
	
                Exhibit
      11(b)

              	 
      	
                Form
      of Change of Control Agreement Amendments

              
	
                Exhibit
      11(c)

              	 
      	
                Consents

              
	
                Exhibit
      11(d)

              	 
      	
                Form
      of Escrow Agreement

              
	
                Exhibit
      11(e)

              	 
      	
                Excluded
      Indebtedness

              
	
                Exhibit
      11(f)

              	 
      	
                Permitted
      Indebtedness

              
	
                Exhibit
      11(g)

              	 
      	
                Permitted
      Liens

              
	
                Exhibit 11(h)

              	 
      	
                Satisfied
      Liens

              
	
                Exhibit
      11(i)

              	 
      	
                Form
      of Bonus AgreementsExhibit
10.2

     

    
      

      

    

    Credit
Agreement

    

    by and
between

    

    Lifecore
Biomedical, LLC,

    

    as
Borrower,

    

    and

    

    Wells
Fargo Bank, National Association,

    

    as
Bank

    

    Dated as
of April 30, 2010

     

    
      

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Table of
Contents

     

    
      
        
          	
                  Article I

                	
                  Definitions

                	
                  1

                
	 
      	 
      	 
      
	
                  Section 1.1.

                	
                  Definitions

                	
                  1

                
	
                  Section 1.2.

                	
                  Other
      Definitional Terms; Rules of Interpretation

                	
                  11

                
	 
      	 
      	 
      
	
                  Article II

                	
                  Amount
      and Terms of the Term Loan

                	
                  12

                
	 
      	 
      	 
      
	
                  Section 2.1.

                	
                  Term
      Loan

                	
                  12

                
	
                  Section 2.2.

                	
                  Usury

                	
                  12

                
	
                  Section 2.3.

                	
                  Collection
      of Payments

                	
                  12

                
	
                  Section 2.4.

                	
                  Fees

                	
                  12

                
	
                  Section 2.5.

                	
                  Prepayments

                	
                  12

                
	
                  Section 2.6.

                	
                  Increased
      Costs; Capital Adequacy; Funding Exceptions

                	
                  13

                
	
                  Section 2.7.

                	
                  Liability
      Records

                	
                  15

                
	 
      	 
      	 
      
	
                  Article III

                	
                  Security
      Interest; Guaranties

                	
                  15

                
	 
      	 
      	 
      
	
                  Section 3.1.

                	
                  Guaranties

                	
                  15

                
	
                  Section 3.2.

                	
                  Grant
      of Security Interest

                	
                  15

                
	
                  Section 3.3.

                	
                  Financing
      Statements

                	
                  15

                
	
                  Section 3.4.

                	
                  Pledge
      of Equity Interest in Borrower

                	
                  16

                
	 
      	 
      	 
      
	
                  Article IV

                	
                  Conditions
      of Lending

                	
                  16

                
	 
      	 
      	 
      
	
                  Section 4.1.

                	
                  Conditions
      Precedent to the Loan

                	
                  16

                
	 
      	 
      	 
      
	
                  Article
      V

                	
                  Representations
      and Warranties

                	
                  18

                
	 
      	 
      	 
      
	
                  Section 5.1.

                	
                  Existence
      and Power; Name; Chief Executive Office; Inventory and Equipment
      Locations; Federal Employer Identification Number

                	
                  18

                
	
                  Section 5.2.

                	
                  Capitalization

                	
                  19

                
	
                  Section 5.3.

                	
                  Authorization
      of Borrowing; No Conflict as to Law or Agreements

                	
                  19

                
	
                  Section 5.4.

                	
                  Legal
      Agreements

                	
                  19

                
	
                  Section 5.5.

                	
                  Subsidiaries

                	
                  19

                
	
                  Section 5.6.

                	
                  Financial
      Condition; No Adverse Change

                	
                  19

                
	
                  Section 5.7.

                	
                  Litigation

                	
                  19

                
	
                  Section 5.8.

                	
                  Regulation
      U

                	
                  20

                
	
                  Section 5.9.

                	
                  Taxes

                	
                  20

                
	
                  Section 5.10.

                	
                  Titles
      and Liens

                	
                  20

                
	
                  Section 5.11.

                	
                  Intellectual
      Property Rights

                	
                  20

                
	
                  Section 5.12.

                	
                  Plans

                	
                  21

                
	
                  Section 5.13.

                	
                  Default

                	
                  22

                
	
                  Section 5.14.

                	
                  Environmental
      Matters

                	
                  22

                
	
                  Section 5.15.

                	
                  Submissions
      to Bank

                	
                  22

                

        

      

    

     

    
      
         

      

      
        - i
-

        
          

        

      

      
         

      

    

    

    
      
        	
                Section 5.16.

              	
                Financing
      Statements

              	
                23

              
	
                Section 5.17.

              	
                Rights
      to Payment

              	
                23

              
	
                Section 5.18.

              	
                Broker
      Fees.

              	
                23

              
	
                Section 5.19.

              	
                No
      Default

              	
                23

              
	
                Section 5.20.

              	
                Fraudulent
      Transfer

              	
                23

              
	
                Section 5.21.

              	
                Permits,
      Franchises

              	
                23

              
	
                Section 5.22.

              	
                No
      Subordination

              	
                23

              
	
                Section 5.23.

              	
                Compliance
      with Laws; OFAC

              	
                23

              
	
                Section 5.24.

              	
                Investment
      Company

              	
                24

              
	
                Section 5.25.

              	
                Stock
      Purchase Agreement

              	
                24

              
	 
      	 
      	 
      
	
                Article
      VI

              	
                Covenants

              	
                24

              
	 
      	 
      	 
      
	
                Section 6.1.

              	
                Punctual
      Payments

              	
                24

              
	
                Section 6.2.

              	
                Reporting
      Requirements

              	
                25

              
	
                Section 6.3.

              	
                Financial
      Covenants

              	
                28

              
	
                Section 6.4.

              	
                Permitted
      Liens; Financing Statements

              	
                30

              
	
                Section 6.5.

              	
                Indebtedness

              	
                31

              
	
                Section 6.6.

              	
                Guaranties

              	
                31

              
	
                Section 6.7.

              	
                Investments
      and Subsidiaries

              	
                32

              
	
                Section 6.8.

              	
                Dividends
      and Distributions

              	
                32

              
	
                Section 6.9.

              	
                Salaries

              	
                33

              
	
                Section 6.10.

              	
                Performance
      by Bank

              	
                33

              
	
                Section 6.11.

              	
                Books
      and Records; Inspection and Examination

              	
                33

              
	
                Section 6.12.

              	
                Account
      Verification

              	
                34

              
	
                Section 6.13.

              	
                Compliance
      with Laws; OFAC

              	
                34

              
	
                Section 6.14.

              	
                Payment
      of Taxes and Other Claims

              	
                34

              
	
                Section 6.15.

              	
                Maintenance
      of Properties

              	
                35

              
	
                Section 6.16.

              	
                Insurance

              	
                35

              
	
                Section 6.17.

              	
                Preservation
      of Existence

              	
                35

              
	
                Section 6.18.

              	
                Delivery
      of Instruments, etc

              	
                35

              
	
                Section 6.19.

              	
                Sale
      or Transfer of Assets; Suspension of Business Operations

              	
                36

              
	
                Section 6.20.

              	
                Consolidation
      and Merger; Asset Acquisitions

              	
                36

              
	
                Section 6.21.

              	
                Sale
      and Leaseback

              	
                36

              
	
                Section 6.22.

              	
                Restrictions
      on Nature of Business

              	
                36

              
	
                Section 6.23.

              	
                Accounting

              	
                36

              
	
                Section 6.24.

              	
                Plans

              	
                36

              
	
                Section 6.25.

              	
                Place
      of Business; Name

              	
                37

              
	
                Section 6.26.

              	
                Constituent
      Documents

              	
                37

              
	
                Section 6.27.

              	
                Transactions
      With Affiliates

              	
                37

              
	
                Section 6.28.

              	
                Use
      of Funds

              	
                37

              
	
                Section 6.29.

              	
                Subordination
      of Debt

              	
                37

              
	
                Section 6.30.

              	
                Management
      Fees; Contingent Purchase Price Payments

              	
                37

              
	
                Section 6.31.

              	
                Maintenance
      of Accounts with Bank

              	
                38

              

      

    

     

    
      
         

      

      
        - ii
-

        
          

        

      

      
         

      

    

    

    
      
        	
                Article
      VII

              	
                Events
      of Default, Rights and Remedies

              	
                38

              
	 
      	 
      	 
      
	
                Section 7.1.

              	
                Events
      of Default

              	
                38

              
	
                Section 7.2.

              	
                Rights
      and Remedies

              	
                41

              
	
                Section 7.3.

              	
                Disclaimer
      of Warranties

              	
                43

              
	
                Section 7.4.

              	
                Compliance
      With Laws

              	
                43

              
	
                Section 7.5.

              	
                No
      Marshalling

              	
                43

              
	
                Section 7.6.

              	
                Borrower
      to Cooperate

              	
                43

              
	
                Section 7.7.

              	
                Application
      of Proceeds

              	
                43

              
	
                Section 7.8.

              	
                Remedies
      Cumulative

              	
                44

              
	
                Section 7.9.

              	
                Bank
      Not Liable For The Collateral

              	
                44

              
	 
      	 
      	 
      
	
                Article
      VIII

              	
                Miscellaneous

              	
                44

              
	 
      	 
      	 
      
	
                Section 8.1.

              	
                No
      Waiver

              	
                44

              
	
                Section 8.2.

              	
                Amendments,
      Etc

              	
                44

              
	
                Section 8.3.

              	
                Addresses
      for Notices; Requests for Accounting

              	
                44

              
	
                Section 8.4.

              	
                Further
      Documents

              	
                45

              
	
                Section 8.5.

              	
                Costs
      and Expenses

              	
                45

              
	
                Section 8.6.

              	
                Indemnity

              	
                45

              
	
                Section 8.7.

              	
                Participants

              	
                46

              
	
                Section 8.8.

              	
                Advertising
      and Promotion

              	
                46

              
	
                Section 8.9.

              	
                Execution
      in Counterparts; Telefacsimile Execution

              	
                46

              
	
                Section 8.10.

              	
                Retention
      of Borrower’s Records

              	
                46

              
	
                Section 8.11.

              	
                Binding
      Effect; Assignment; Complete Agreement; Exchanging
    Information

              	
                47

              
	
                Section 8.12.

              	
                Severability
      of Provisions

              	
                47

              
	
                Section 8.13.

              	
                Revival
      and Reinstatement of Obligations

              	
                47

              
	
                Section 8.14.

              	
                Headings

              	
                48

              
	
                Section 8.15.

              	
                Governing
      Law

              	
                48

              
	
                Section 8.16.

              	
                Submission
      to Jurisdiction

              	
                48

              
	
                Section 8.17.

              	
                Waiver
      of Jury Trial

              	
                48

              
	
                Section 8.18.

              	
                Arbitration

              	
                48

              
	
                Section 8.19.

              	
                Confidentiality

              	
                51

              

      

    

     

    
      
         

      

      
        - iii
-

        
          

        

      

      
         

      

    

     

    Credit
Agreement

     

    This
Credit
Agreement (this “Agreement”) is dated and
made as of April 30, 2010, by and between Lifecore
Biomedical, LLC, a Minnesota limited liability company (“Borrower”), and Wells
Fargo Bank, National Association (“Bank”).

     

    Recitals

     

    Whereas,
Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

     

    NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Bank and Borrower hereby agree as follows:

     

    Article I

    Definitions

     

    Section 1.1.Definitions.  For
all purposes of this Agreement, except as otherwise expressly provided, the
following terms shall have the meanings assigned to them in this Section or in
the Section referenced after such term:

     

    “Account Debtor” means any
Person who is or who may become obligated under, with respect to, or on account
of, an Account, chattel paper, or a General Intangible.

     

    “Accounts” means all of
Borrower’s now owned or hereafter acquired right, title, and interest with
respect to “accounts” (as that term is defined in the UCC), and any and all
supporting obligations in respect thereof.

     

    “Acquisition” means the
acquisition by Parent of all the issuing and outstanding equity interests of
Holdings pursuant to the Stock Purchase Agreement.

     

    “Affiliate” means, as applied
to any Person, any other Person who, directly or indirectly, controls, is
controlled by, or is under common control with, such Person.  For
purposes of this definition, “control” means the possession, directly or
indirectly, of the power to direct the management and policies of a Person,
whether through the ownership of stock, by contract, or otherwise; provided, however, that, in any
event:  (a) any Person which owns directly or indirectly 10% or
more of the securities having ordinary voting power for the election of
directors or other members of the governing body of a Person or 10% or more of
the partnership or other ownership interests of a Person (other than as a
limited partner of such Person) shall be deemed to control such Person,
(b) each director (or comparable manager) of a Person shall be deemed to be
an Affiliate of such Person, and (c) each partnership or joint venture in
which a Person is a partner or joint venturer shall be deemed to be an Affiliate
of such Person.

     

    “Agreement” means this Credit
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Bankruptcy Code” means
Bankruptcy Reform Act, Title 11 of the United States Code.

     

    “Bond Documents” means all
documents, instruments and agreements related to or governing the indebtedness
arising under or pursuant to the Bonds.

     

    “Bond L/C” means each
irrevocable transferable letter of credit issued by Bank pursuant to the
Reimbursement Agreement to the Trustee to facilitate the payment on the
Bonds.

     

    “Bonds” means the $5,630,000
Variable Rate Demand Purchase Revenue Bonds issued by the City of Chaska,
Minnesota, the proceeds of which were advanced to Borrower in connection with
the construction of the Mortgaged Premises.

     

    “Business Day” means any day
other than a Saturday, Sunday or any other day on which commercial banks in
California are authorized or required by law to close.

     

    “Cal Ex” means Cal Ex Trading
Company, a Delaware corporation.

     

    “Capital Expenditures” means
for a period, any expenditure of money during such period for the purchase or
construction of assets, or for improvements or additions thereto, which are
capitalized on the Companies’ balance sheet.

     

    “Cash Equivalents” has the
meaning set forth in Section 6.7(a).

     

    “Change of Control” means the
occurrence of any of the following events:

     

    (a)     
any Person or “group” (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934), other than Parent, is or becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, except that a Person will be deemed to have “beneficial
ownership” of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than twenty-five percent of the voting power of
all classes of voting stock of Borrower; or

     

    (b)     
the failure of Parent and/or Holdings to own directly or indirectly,
beneficially and of record, 100.00% of the aggregate ordinary voting power and
economic interests represented by the issued and outstanding equity interests of
Borrower; or

     

    (c)     
during any consecutive two-year period, individuals who at the beginning of such
period constituted the board of Directors of Borrower (together with any new
Directors whose election to such board of Directors, or whose nomination for
election by the owners of Borrower, was approved by a vote of 66-2/3% of the
Directors then still in office who were either Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
Directors of Borrower then in office.

    
      
         

      

      
        - 2
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    “Closing Date” means
April 30, 2010.

     

    “Collateral” means
(a) “Collateral” as such term is defined in the Security Agreement plus
(b) all collateral subject to the Lien of any Security Document other than
the Security Agreement.

     

    “Collateral Account” is
defined in Section 2.5(b) hereof.

     

    “Companies” means Borrower
and Holdings.

     

    “Commitment” is defined in
Section 2.1 hereof.

     

    “Contingent Purchase Price Payments”
means certain payments not to exceed $10,000,000 in the aggregate made by
the Borrower to the Seller and other designated Persons in accordance with the
Stock Purchase Agreement and the Lifecore Biomedical, Inc. Transaction Bonus
Plan.

     

    “Constituent Documents” means
with respect to any Person, as applicable, such Person’s certificate of
incorporation, articles of incorporation, by-laws, certificate of formation,
articles of organization, limited liability company agreement, management
agreement, operating agreement, shareholder agreement, partnership agreement or
similar document or agreement governing such Person’s existence, organization or
management or concerning disposition of ownership interests of such Person or
voting rights among such Person’s owners.

     

    “Credit Facility” means the
credit facility being made available to Borrower by Bank under Article II
hereof.

     

    “Default” means an event, or
condition which, but for the lapse of time or the giving of notice, or both,
would constitute an Event of Default.

     

    “Default Period” means any
period of time beginning on the day a Default or Event of Default occurs and
ending on the date that such Default or Event of Default has been cured or
waived, as determined by Bank in its sole and absolute discretion.

     

    “Default Rate” is defined in
the Note.

     

    “Disposition” means the sale,
lease, conveyance or other disposition of Property, other than sales or other
dispositions expressly permitted under Sections 6.19(v), (w), (x) and (y)
hereof.

     

    “Director” means a director,
member or manager of Borrower or any Guarantor, as applicable.

     

    “Dollars” or “$” means lawful
currency of the United States of America.

    
      
         

      

      
        - 3
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    “EBITDA” means, as of any
date of determination for any period, Parent’s and its Subsidiaries’
consolidated net profit before tax plus interest expense (net of any capitalized
interest), depreciation expense, and amortization expense.

     

    “Environmental Laws” means
any and all Federal, state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to
pollution, the protection of the environment or the release of any materials
into the environment, including those related to Hazardous Substances or wastes,
air emissions and discharges to waste or public systems.

     

    “Equipment” means all of
Borrower’s equipment, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies, and
including specifically the goods described in any equipment schedule or list
herewith or hereafter furnished to Bank by Borrower.

     

    “ERISA” means the Employee
Retirement Income Security Act of 1974.

     

    “ERISA Affiliate” means any
trade or business (whether or not incorporated) that is a member of a group
which includes Borrower and which is treated as a single employer under
Section 414 of the IRC.

     

    “Event of Default” has the
meaning given in Section 7.1.

     

    “Event of Loss” means, with
respect to any Property, any of the following:  (a) any loss,
destruction or damage of such Property or (b) any condemnation, seizure, or
taking, by exercise of the power of eminent domain or otherwise, of such
Property, or confiscation of such Property or the requisition of the use of such
Property.

     

    “Financial Covenants” means
the covenants set forth in Section 6.3.

     

    “Fixed Charge Coverage Ratio”
means, as of the last day of each fiscal quarter of Borrower, the ratio of
(a) the sum of (i) Net Income after taxes for the four fiscal quarters
then ended, plus
(ii) depreciation expense, amortization expense, cash capital
contributions, increases in subordinated debt and non-cash expenses associated
with the issuance of stock options of the Companies for the four fiscal quarters
then ended, minus
(iii) management fees, dividends, distributions and decreases in
subordinated debt of the Companies for the twelve months then ended, to
(b) (x) the aggregate of the current maturity of long-term debt and
current maturity of subordinated debt as of the last day of the fiscal quarter
ending immediately prior to the last day of such fiscal quarter (or with respect
to each fiscal quarter ending on or prior to May 31, 2011, as of the last
day of such fiscal quarter), and (y) capitalized lease payments of the
Companies as of the last day of such fiscal quarter.

     

    “Funded Debt” means as the
sum of all obligations for Indebtedness for borrowed money (including
subordinated debt) of Parent and its Subsidiaries, plus all capital lease
obligations of Parent and its Subsidiaries, in each case determined on a
consolidated basis.

    
      
         

      

      
        - 4
-

        
          

        

      

      
         

      

    

     

    “GAAP” means generally
accepted accounting principles in the United States of America, consistently
applied, which are in effect as of the date of this Agreement.  If any
changes in accounting principles from those in effect on the date hereof are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards or terms found herein,
then the parties hereto agree to enter into and diligently pursue negotiations
in order to amend such financial covenants, standards or terms so as to
equitably reflect such changes, with the desired result that the criteria for
evaluating financial condition and results of operations of Borrower and the
Subsidiaries shall be the same after such changes as if such changes had not
been made.

     

    “General Intangibles” means
all of Borrower’s general intangibles, as such term is defined in the UCC,
whether now owned or hereafter acquired, including all present and future
Intellectual Property Rights, customer or supplier lists and contracts, manuals,
operating instructions, permits, franchises, the right to use Borrower’s name,
and the goodwill of Borrower’s business.

     

    “Governmental Authority”
means any federal, state, local, or other governmental or administrative body,
instrumentality, department, or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body.

     

    “Guarantor” or “Guarantors” is defined in
Section 3.1 hereof.

     

    “Guaranty” or “Guaranties” is defined in
Section 3.1 hereof.

     

    “Hazardous Substances” means
pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and
fractions thereof, and all other chemicals, wastes, substances and materials
listed in, regulated by or identified in any Environmental Law.

     

    “Hedging Obligations” means
all liabilities of Borrower under Swap Contracts entered into with Bank or one
of its Affiliates.

     

    “Holdings” means Lifecore
Biomedical, Inc., a Delaware corporation.

     

    “Immaterial Intellectual Property
Rights” means Intellectual Property Rights that Borrower, in its
commercially reasonable judgment, determines from time to time to be no longer
material to the operation of its business.

     

    “Indebtedness” means of a
Person as of a given date, all items of indebtedness or liability which in
accordance with GAAP would be included in determining total liabilities as shown
on the liabilities side of a balance sheet for such Person and shall also
include the aggregate payments required to be made by such Person at any time
under any lease that is considered a capitalized lease under
GAAP.

    
      
         

      

      
        - 5
-

        
          

        

      

      
         

      

    

     

    “Infringe” means, when used
with respect to Intellectual Property Rights, any infringement or other
violation of such Intellectual Property Rights.

     

    “Insolvency Proceeding” means
any proceeding commenced by or against any Person under any provision of
Bankruptcy Code or under any other state or federal bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.

     

    “Intellectual Property
Rights” means all actual or prospective rights arising in connection with
any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.

     

    “Inventory” means all of
Borrower’s inventory, as such term is defined in the UCC, whether now owned or
hereafter acquired, whether consisting of whole goods, spare parts or
components, supplies or materials, whether acquired, held or furnished for sale,
for lease or under service contracts or for manufacture or processing, and
wherever located.

     

    “Investment Property” means
all of Borrower’s investment property, as such term is defined in the UCC,
whether now owned or hereafter acquired, including but not limited to all
securities, security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market shares and
U.S. Government securities.

     

    “IRC” means the Internal
Revenue Code of 1986.

     

    “Landec AG” means Landec AG,
Inc., a Delaware corporation.

     

    “Licensed Intellectual
Property” has the meaning given in Section 5.11(c).

     

    “Lien” means any security
interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title
retention agreement or analogous instrument or device, including the interest of
each lessor under any capitalized lease and the interest of any bondsman under
any payment or performance bond, in, of or on any assets or properties of a
Person, whether now owned or hereafter acquired and whether arising by agreement
or operation of law.

     

    “Loan” is defined in
Section 2.1 hereof.

     

    “Loan Documents” means this
Agreement, the Note, any Guaranties, the Security Documents, and each other
instrument or document to be delivered by Borrower or any Guarantor hereunder or
thereunder or otherwise in connection herewith or therewith.

     

    “Management” means
Dennis J. Allingham, Larry Hiebert and James Hall.

     

    “M&I” means M&I
Marshall & Ilsley Bank, a Wisconsin state banking
corporation.

    
      
         

      

      
        - 6
-

        
          

        

      

      
         

      

    

     

    “Material Adverse Effect”
means any of the following:

     

    (i)     
a material adverse effect on the business, operations, results of operations,
assets, liabilities or financial condition of the Companies, taken as a whole,
or Parent and its Subsidiaries, taken as a whole;

     

    (ii)    
a material adverse effect on the ability of Borrower or any Guarantor to perform
its obligations under the Loan Documents;

     

    (iii)   
a material adverse effect on the ability of Bank to enforce the Obligations or
to realize the intended benefits of the Security Documents, including a material
adverse effect on the validity or enforceability of any Loan Document or of any
rights against any Guarantor, or on the status, existence, perfection, priority
(subject to Permitted Liens) or enforceability of any Lien securing payment or
performance of the Obligations; or

     

    (iv)    any
claim against Borrower or any Guarantor or threat of litigation which is
reasonably likely to be determined adversely to Borrower or any Guarantor and,
if so determined, would cause Borrower or such Guarantor to be liable to pay an
amount exceeding $500,000 over applicable insurance coverage, or would be an
event described in clauses (i), (ii) and (iii) above.

     

    “Mortgage” means that certain
Mortgage and Assignment of Rents and Leases dated as of the date of the
Reimbursement Agreement, between the Borrower and the Bank, as the same may be
amended, modified, supplemented, or restated from time to time.

     

    “Mortgaged Premises” means
the real property of Borrower commonly known as 3515 Lyman Boulevard, Chaska,
Minnesota and all buildings and improvements thereon, and all rents, issues, and
profits therefrom.

     

    “Multiemployer Plan” means a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which
Borrower or any ERISA Affiliate contributes or is obligated to
contribute.

     

    “Net Cash Proceeds” means, as
applicable, (a) with respect to any Disposition by a Person, cash and Cash
Equivalent proceeds received by or for such Person’s account, net of
(i) reasonable direct costs relating to such Disposition and
(ii) sale, use or other transactional taxes paid or payable by such Person
as a direct result of such Disposition, (b) with respect to any Event of
Loss of a Person, cash and Cash Equivalent proceeds received by or for such
Person’s account (whether as a result of payments made under any applicable
insurance policy therefor or in connection with condemnation proceedings or
otherwise), net of reasonable direct costs incurred in connection with the
collection of such proceeds, awards or other payments, and (c) with respect
to any offering of equity securities of a Person or the issuance of any
Indebtedness by a Person, cash and Cash Equivalent proceeds received by or for
such Person’s account, net of reasonable legal, underwriting, and other fees and
expenses incurred as a direct result thereof.

    
      
         

      

      
        - 7
-

        
          

        

      

      
         

      

    

     

    “Net Income” means fiscal
year-to-date after-tax net income from continuing operations of the Companies,
as determined in accordance with GAAP; provided, however, that any amounts
deducted in arriving at Borrower’s Net Income shall be determined exclusive of
(i) non-recurring fees and expenses incurred in connection with the Acquisition
in an aggregate amount not to exceed $500,000, (ii) expenses incurred during the
month ended April 30, 2010 relating to a one-time reserve for Accounts and
Inventory in an amount not to exceed $600,000 in the aggregate in connection
with Borrower’s contract with a customer previously disclosed to the Bank, (iii)
expenses incurred during the two months ended April 30, 2010 relating to a
one-time reserve for Inventory in an amount not to exceed $200,000 in the
aggregate, and (iv) expenses related to the one-time adjustment to Inventory in
an aggregate amount not to exceed $1,500,000 as required by GAAP in connection
with the Acquisition.

     

    “Net Income After Taxes” is
defined in Section 6.3(a)(i) hereof.

     

    “Note” is defined in
Section 2.1 hereof.

     

    “Obligations” means the Note,
any Hedging Obligations, any Treasury Management Obligations, and each and every
other debt, liability and obligation of Borrower arising under this Agreement or
any other Loan Document, whether such debt, liability or obligation now exists
or is hereafter created or incurred, whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and whether now in
effect or hereafter entered into.

     

    “OFAC” means the United States
Department of Treasury Office of Foreign Assets Control.

     

    “OFAC Event” means the event specified
in Section 6.13(c) hereof.

     

    “OFAC Sanctions Programs” means all laws,
regulations, and Executive Orders administered by OFAC, including without
limitation, Bank Secrecy Act, anti-money laundering laws (including, without
limitation, the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a
the USA Patriot Act)), and all economic and trade sanction programs administered
by OFAC, any and all similar United States federal laws, regulations or
Executive Orders, and any similar laws, regulators or orders adopted by any
State within the United States.

     

    “OFAC SDN List” means the list of the
Specially Designated Nationals and Blocked Persons maintained by
OFAC.

     

    “Officer” means a duly
appointed and presently sitting officer of Borrower.

     

    “Owned Intellectual Property”
has the meaning given in Section 5.11(a).

     

    “Parent” means Landec
Corporation, a California corporation.

    
      
         

      

      
        - 8
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    “Pension Plan” means a
pension plan (as defined in Section 3(2) of ERISA) maintained for employees
of Borrower or any ERISA Affiliate and covered by Title IV of
ERISA.

     

    “Permitted Lien” has the
meaning given in Section 6.4(a).

     

    “Person” means any
individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

     

    “Plan” means an employee
benefit plan (as defined in Section 3(3) of ERISA) maintained for employees
of Borrower or any ERISA Affiliate.

     

    “Premises” means all premises
where Borrower conducts its business and has any rights of possession, including
the premises described in Exhibit C attached hereto.

     

    “Property” means, as to any
Person, all types of real, personal, tangible, intangible or mixed property
owned by such Person whether or not included in the most recent balance sheet of
such Person and its subsidiaries under GAAP.

     

    “Quick Ratio” means, as of
the last day of each fiscal quarter of Borrower, the ratio of (i) the
aggregate of unrestricted cash, unrestricted marketable securities and
receivables convertible into cash of the Companies as of the last day of such
fiscal quarter to (b) total current liabilities of the Companies as of the last
day of the same fiscal quarter.

     

    “Reimbursement Agreement”
means that certain Reimbursement Agreement dated on or about the Closing Date,
between Bank and Borrower, as the same may be amended, modified, restated or
supplemented from time to time.

     

    “Reportable Event” means a
reportable event (as defined in Section 4043 of ERISA), other than an event
for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the Pension Benefit Guaranty Corporation.

     

    “Security Agreement” means
that certain Security Agreement, dated as of even date herewith, executed by
Borrower in favor of Bank.

     

    “Security Agreement and Collateral
Assignment of Membership Interests” means that certain Security Agreement
and Collateral Assignment of Membership Interests, dated as of even date
herewith, executed by Holdings in favor of Bank.

     

    “Security Agreement re: Patents and
Trademarks” means that certain Security Agreement Re:  Patents
and Trademarks, dated as of even date herewith, executed by Borrower in favor of
Bank.

     

    “Security Documents” means
this Agreement, the Security Agreement, the Security Agreement and Collateral
Assignment of Membership Interests, the Security Agreement re:  Patent
and Trademarks, and any other agreement, instrument or document delivered to
Bank from time to time to secure the Obligations.

    
      
         

      

      
        - 9
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    “Security Interest” has the
meaning given in Section 3.2.

     

    “Seller” means Warburg Pincus
Private Equity IX, L.P.

     

    “Stock Purchase Agreement”
means that certain Stock Purchase Agreement dated as of April 30, 2010,
by and among Parent, Borrower, Holdings, and the Seller.

     

    “Solvent” means, as to any
Person at any time, that:  (a) the fair value of the property of
such Person on a going concern basis is greater than the amount of such Person’s
liabilities (including contingent liabilities), as such value is established and
such liabilities are evaluated for purposes of Section 101(32) of the
Bankruptcy Code and, in the alternative, for purposes of the California Uniform
Fraudulent Transfer Act or any similar state statute applicable to Borrower
thereof; (b) the present fair salable value of the property of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured; (c) such
Person is able to realize upon its property and pay its debts and other
liabilities (including contingent liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability to
pay as such debts and liabilities mature; and (e) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which such Person’s property would constitute unreasonably
small capital

     

    “Subsidiary” means, as to any
Person, any Person of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned, or
the management of which is otherwise controlled, directly, or indirectly through
one or more intermediaries, or both, by such Person.  Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall
refer to a Subsidiary or Subsidiaries of a Borrower.

     

    “Swap Contract”
means:  (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement; and (b) any and all
transactions of any kind, and the related confirmations, that are subject to the
terms and conditions of, or governed by, any form of master agreement published
by the International Swaps and Derivatives Association, Inc., any International
Foreign Exchange Master Agreement, or any other master agreement including any
such obligations or liabilities under any such master agreement (in each case,
together with any related schedules).

    
      
         

      

      
        - 10
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    “Term Loan Maturity Date”
means the earliest of (i) April 30, 2015, or (ii) the date Bank
demands payment of the Obligations after an Event of Default pursuant to
Section 7.2 hereof.

     

    “Treasury Management
Agreement” means any agreement to provide cash management services,
including treasury, depository, overdraft, credit or debit car, electronic funds
transfer or other cash management arrangement, in each case entered into between
Borrower, on the one hand, and Bank or one of its Affiliates, on the other
hand.

     

    “Treasury Management
Obligations” means all obligations of Borrower thereof under all Treasury
Management Agreements.

     

    “Trustee” means Wells Fargo
Bank, National Association, and any co-trustee or successor trustee appointed,
qualified, and then acting under the provisions of Bond Documents.

     

    “UCC” means the Uniform
Commercial Code as in effect in the state designated in Section 8.15 as the
state whose laws shall govern this Agreement, or in any other state whose laws
are held to govern this Agreement or any portion hereof.

     

    Section 1.2.     
Other Definitional Terms;
Rules of Interpretation.  The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.  All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.  All terms defined
in the UCC and not otherwise defined herein have the meanings assigned to them
in the UCC.  References to Articles, Sections, subsections, Exhibits,
Schedules and the like, are to Articles, Sections and subsections of, or
Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided.  The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”.  Unless the
context in which used herein otherwise clearly requires, “or” has the inclusive
meaning represented by the phrase “and/or”.  Defined terms include in
the singular number the plural and in the plural number the
singular.  Reference to any agreement (including the Loan Documents),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms thereof
(and, if applicable, in accordance with the terms hereof and the other Loan
Documents), except where otherwise explicitly provided, and reference to any
promissory note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor.  Reference to any
law, rule, regulation, order, decree, requirement, policy, guideline, directive
or interpretation means as amended, modified, codified, replaced or reenacted,
in whole or in part, and in effect on the determination date, including rules
and regulations promulgated thereunder.

    
      
         

      

      
        - 11
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    Article II

    Amount
and Terms of the Term Loan

     

    Section 2.1.     
Term
Loan.  Subject to the terms and conditions hereof, Bank agrees
to make a term loan to Borrower in the principal amount of $20,000,000 (the
“Commitment”, and the
term loan made pursuant thereto being referred to herein as the “Loan”).  The Loan
shall be made on the Closing Date, at which time the commitment of Bank to make
the Loan shall expire.  There shall be only one advance made under the
Commitment, and any portion of the Commitment not advanced on the date of such
borrowing shall thereupon expire.  The Loan shall be made against and
evidenced by a promissory note of Borrower in the form (with appropriate
insertions) attached hereto as Exhibit A (the “Note”).  The Note
shall be dated the date of issuance thereof and be expressed to bear interest as
set forth therein.  The Note, and the Loan evidenced thereby, shall
mature in fifty-nine (59) monthly principal installments,
with each such principal installment to be at the time and in the amounts set
forth in the Note, with a final installment in the amount of all principal not
sooner paid due and payable on the Term Loan Maturity Date.

     

    Section 2.2.     
Usury.  In
any event, no rate change shall be put into effect which would result in a rate
greater than the highest rate permitted by law.  Notwithstanding
anything to the contrary contained in any Loan Document, all agreements which
either now are or which shall become agreements between Borrower and Bank are
hereby limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest and other
charges exceed the applicable limits imposed by any applicable usury
laws.  If any payments in the nature of interest, additional interest
and other charges made under any Loan Document are held to be in excess of the
limits imposed by any applicable usury laws, it is agreed that any such amount
held to be in excess shall be considered payment of principal hereunder, and the
indebtedness evidenced by the Note shall be reduced by such amount so that the
total liability for payments in the nature of interest, additional interest and
other charges shall not exceed the applicable limits imposed by any applicable
usury laws, in compliance with the desires of Borrower and Bank.  This
provision shall never be superseded or waived and shall control every other
provision of the Loan Documents and all agreements between Borrower and Bank, or
their successors and assigns.

     

    Section 2.3.     
Collection of
Payments.  All payments to Bank shall be made in immediately
available funds and shall be applied to the Obligations upon receipt by
Bank.

     

    Section 2.4.     
Fees.  Except
as set forth in Section 8.5 hereof, there are no fees in connection with
the Loan.

     

    Section 2.5.     
Prepayments.  (a) Optional.  Borrower
may prepay the Note, in whole or in part, on the terms and conditions set forth
therein.

    
      
         

      

      
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    (b)     
Mandatory.  (i) If
Borrower shall at any time or from time to time make or agree to make a
Disposition or shall suffer an Event of Loss with respect to any Property, then
Borrower shall promptly notify Bank of such proposed Disposition or Event of
Loss (including the amount of the estimated Net Cash Proceeds to be received by
Borrower in respect thereof) and, promptly upon receipt by Borrower of the Net
Cash Proceeds of such Disposition or Event of Loss, Borrower shall prepay the
Obligations in an aggregate amount equal to 100% of the amount of all such Net
Cash Proceeds; provided
that (x) so long as no Default or Event of Default then exists, this
subsection shall not require any such prepayment with respect to Net Cash
Proceeds received on account of an Event of Loss so long as such Net Cash
Proceeds are applied to replace or restore the relevant Property in accordance
with the relevant Collateral Documents, (y) this subsection shall not
require any such prepayment with respect to Net Cash Proceeds received on
account of Dispositions during any fiscal year of Borrower not exceeding
$250,000 in the aggregate so long as no Default or Event of Default then exists,
and (z) in the case of any Disposition not covered by clause (y)
above, so long as no Default or Event of Default then exists, if Borrower states
in its notice of such event that Borrower intends to reinvest, within
90 days of the applicable Disposition, the Net Cash Proceeds thereof in
assets similar to the assets which were subject to such Disposition, then
Borrower shall not be required to make a mandatory prepayment under this
subsection in respect of such Net Cash Proceeds to the extent such Net Cash
Proceeds are actually reinvested in such similar assets with such 90-day
period.  Promptly after the end of such 90-day period, Borrower shall
notify Bank whether Borrower has reinvested such Net Cash Proceeds in such
similar assets, and, to the extent such Net Cash Proceeds have not been so
reinvested, Borrower shall promptly prepay the Obligations in the amount of such
Net Cash Proceeds not so reinvested.  The amount of each such
prepayment shall be applied first to the outstanding Term Loan until paid in
full and then to cash collateralize the Bond L/C.   If Bank so request, all
proceeds of such Disposition or Event of Loss shall be deposited with Bank (or
its agent) and held by it in a collateral account for the benefit of Bank (the
“Collateral
Account”).  So long as no Default or Event of Default exists,
Bank is authorized to disburse amounts representing such proceeds from the
Collateral Account to or at Borrower’s direction for application to or
reimbursement for the costs of replacing, rebuilding or restoring such
Property.

     

    (ii)     
If after the Closing Date Borrower shall issue new equity securities (whether
common or preferred stock or otherwise), other than equity securities issued to
Holdings or Parent, Borrower shall promptly notify Bank of the estimated Net
Cash Proceeds of such issuance to be received by or for the account of Borrower
in respect thereof.  Promptly upon receipt by Borrower of Net Cash
Proceeds of such issuance, Borrower shall prepay the Obligations in an aggregate
amount equal to 100% of the amount of such Net Cash Proceeds. The amount of each such
prepayment shall be applied first to the outstanding Term Loan until paid in
full and then to cash collateralize the Bond L/C.  Borrower acknowledges
that its performance hereunder shall not limit the rights and remedies of Bank
for any breach of Section 6.19 or Section 7.1(c) hereof or any other
terms of the Loan Documents.

     

    (iii)    
If after the Closing Date Borrower shall issue any Indebtedness, other than
Indebtedness permitted by Section 6.5 hereof, Borrower shall promptly
notify Bank of the estimated Net Cash Proceeds of such issuance to be received
by or for the account of Borrower in respect thereof.  Promptly upon
receipt by Borrower of Net Cash Proceeds of such issuance, Borrower shall prepay
the Obligations in an aggregate amount equal to 100% of the amount of such Net
Cash Proceeds.  The amount of each such prepayment shall be applied
first to the outstanding Term Loan until paid in full and then to cash
collateralize the Bond L/C.  Borrower acknowledges that its
performance hereunder shall not limit the rights and remedies of Bank for any
breach of Section 6.7 hereof or any other terms of the Loan
Documents.

     

    Section 2.6.     
Increased Costs; Capital
Adequacy; Funding Exceptions.

     

    (a)     
Increased Costs; Capital
Adequacy.  If Bank determines at any time that its Return (as
defined below) has been reduced as a result of any Rule Change (as defined
below), Bank may so notify Borrower and require Borrower, beginning thirty (30)
days after such notice is received by Borrower, to pay it the amount necessary
to restore its Return to what it would have been had there been no Rule
Change.  For purposes of this Section 2.6:

    
      
         

      

      
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    (i)     
“Capital Adequacy Rule”
means any law, rule, regulation, guideline, directive, requirement or request
regarding capital adequacy, or the interpretation or administration thereof by
any Governmental Authority, whether or not having the force of law, that applies
to any Related Bank (as defined below), including rules requiring financial
institutions to maintain total capital in amounts based upon percentages of
outstanding loans, binding loan commitments and letters of credit.

     

    (ii)     “Related Bank” includes (but
is not limited to) Bank, any parent of Bank and any assignee of any interest of
Bank hereunder.

     

    (iii)    “Return”, for any period,
means the percentage determined by dividing (i) the sum of interest and
ongoing fees earned by Bank under this Agreement during such period, by
(ii) the average capital such Bank is required to maintain during such
period as a result of its being a party to this Agreement, as determined by Bank
based upon its total capital requirements and a reasonable attribution formula
that takes account of the Capital Adequacy Rules then in effect, costs of
issuing or maintaining the Loan and amounts received or receivable under this
Agreement or the Note with respect to the Loan.  Return may be
calculated for each calendar quarter and for the shorter period between the end
of a calendar quarter and the date of termination in whole of this
Agreement.

     

    (v)     “Rule Change” means any
change in any Capital Adequacy Rule occurring after the date of this Agreement,
but the term does not include any changes that at the Closing Date are scheduled
to take place under the existing Capital Adequacy Rules or any increases in the
capital that Bank is required to maintain to the extent that the increases are
required due to a regulatory authority’s assessment of that Bank’s financial
condition.

     

    (b)     
The initial notice sent by Bank shall be sent as promptly as practicable after
Bank learns that its Return has been reduced, shall include a demand for payment
of the amount necessary to restore Bank’s Return for the subsequent quarter in
which the notice is sent, and shall state in reasonable detail the cause for the
reduction in its Return and its calculation of the amount of such
reduction.  Thereafter, Bank may send a new notice during each
calendar quarter setting forth the calculation of the reduced Return for that
quarter and including a demand for payment of the amount necessary to restore
its Return for that quarter. Bank’s calculation in any such notice shall be
prima facie evidence of such amount.

     

    (c)     
Borrower shall not be required to compensate Bank pursuant to the provisions of
this Section 2.6 for any reduction of its Return suffered more than 90 days
prior to the date that Bank notifies Borrower of the Rule Change giving rise to
such reduction and of Bank’s intention to claim compensation therefore; provided, that any Rule
Change that is applied retroactively shall be applied retroactively, then the 90
day period referred to above shall be extended to include the period of
retroactive effect hereof.

    
      
         

      

      
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    Section 2.7.     
Liability
Records.  Bank may maintain from time to time, at its
discretion, records as to the Obligations.  All entries made on any
such record shall be presumed correct until Borrower establishes the
contrary.  Upon Bank’s demand, Borrower will admit and certify in
writing the exact principal balance of the Obligations that Borrower then
asserts to be outstanding.  Any billing statement or accounting
rendered by Bank shall be conclusive and fully binding on Borrower unless
Borrower gives Bank specific written notice of exception within 30 days after
receipt.

     

    Article III

    Security
Interest; Guaranties

     

    Section 3.1.     
Guaranties  The
payment and performance of the Obligations shall at all times be guaranteed by
Parent, Holdings and each direct and indirect Subsidiary of Parent (Parent,
Holdings and such Subsidiaries shall be collectively referred to herein as the
“Guarantors”) pursuant
to one or more guaranty agreements in form and substance reasonably acceptable
to Bank, as the same may be amended, modified, or supplemented from time to time
(individually a “Guaranty” and collectively
the “Guaranties”).  Notwithstanding
the foregoing or anything contained herein or in any other Loan Document to the
contrary, (i) Parent shall be permitted to sell its interest in Landec AG or Cal
Ex, and/or (ii) Parent in its reasonable business judgment shall be permitted to
authorize Landec AG and/or Cal Ex to wind down, dissolve or ortherwise terminate
its existence (and any such wind down, dissolution or termination shall not
constitute an Event of Default hereunder), in each case without any prior
approval or consent of Bank.

     

    Section 3.2.     
Grant of Security
Interest.  Borrower hereby pledges, assigns and grants to Bank
a Lien and security interest (collectively referred to as the “Security Interest”) in the
Collateral, as security for the payment and performance of the
Obligations.  Upon request by Bank, Borrower will grant Bank a
security interest in all commercial tort claims it may have against any
Person.

     

    All of
the foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank (including, without
limitation, the Security Documents).  Borrower shall reimburse Bank
within fifteen (15) days after written demand for all reasonable costs and
expenses incurred by Bank in connection with any of the foregoing security,
including without limitation, filing and recording fees and costs of appraisals
and audits.

     

    Section 3.3.     
Financing
Statements.  Borrower authorizes Bank to file from time to time
where permitted by law, such financing statements against collateral described
as “all personal property” or describing specific items of collateral including
commercial tort claims as Bank deems necessary or useful to perfect the Security
Interest, including, without limitation, amendments to any financing statements
that were filed prior to the Closing Date.  A carbon, photographic or
other reproduction of this Agreement or of any financing statements authorized
by Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby.

    
      
         

      

      
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    Section 3.4.     
Pledge of Equity Interest in
Borrower.  The Obligations and the Guaranty delivered by
Holdings shall at all times be secured by a pledge of all of Holdings’ equity
interest in Borrower pursuant to the Security Agreement and Collateral
Assignment of Membership Interest.

     

    Article IV

    Conditions
of Lending

     

    Section 4.1.     
Conditions Precedent to the
Loan.  The
obligation of Bank to extend any credit contemplated by this Agreement is
subject to the fulfillment to Bank’s satisfaction of all of the following
conditions:

     

    (a)     
This Agreement, duly executed by Borrower and Bank.

     

    (b)     
The Note, duly executed by Borrower.

     

    (c)     
The Security Documents, duly executed by Borrower and Holdings (as applicable),
together with (i) any financing statements requested by Bank, (ii) an
acknowledgment to the collateral assignment of Holdings’ membership interest in
the Borrower, (iii) deposit account, securities account, and commodity account
control agreements to the extent requested by Bank, and (v) landlord waiver
letters for Borrower’s collateral locations to the extent required by
Bank.

     

    (d)     
The Guaranties, duly executed by each of the Guarantors.

     

    (e)     
One or more certificates of Borrower’s Secretary or Assistant Secretary
certifying that attached to such certificate, or incorporated therein, are
(i) the resolutions of Borrower’s Directors authorizing the execution,
delivery and performance of the Loan Documents to which Borrower is a party,
(ii) true, correct and complete copies of Borrower’s Constituent Documents,
and (iii) examples of the signatures of Borrower’s Officers or agents
authorized to execute and deliver the Loan Documents to which Borrower is a
party and other instruments, agreements and certificates, on Borrower’s
behalf.

     

    (f)     
A current certificate issued by the Secretary of State of Minnesota, certifying
that Borrower is in good standing and is in compliance with all applicable
formation requirements of the State of Minnesota.

     

    (g)     
One or more certificates from each Guarantor’s Secretary or Assistant Secretary
certifying that attached to such certificate, or incorporated therein, are
(i) the resolutions of each Guarantor’s Directors authorizing the
execution, delivery and performance of the Loan Documents to which such
Guarantor is a party, (ii) true, correct and complete copies of each
Guarantor’s Constituent Documents, and (iii) examples of the signatures of
each Guarantor’s corporate officers or agents authorized to execute and deliver
the Loan Documents to which such Guarantor is a party and other instruments,
agreements and certificates on such Guarantor’s behalf.

    
      
         

      

      
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    (h)     
Current copies of the certificates of good standing for each Guarantor from the
office of the secretary of the state of its incorporation or
organization;

     

    (i)     
Evidence that Borrower is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary.

     

    (j)     
A certificate of an Officer of Borrower confirming that the representations and
warranties contained in this Article IV and Article V are correct on and as
of the Closing Date as though made on and as of such date, except to the extent
that such representations and warranties relate solely to an earlier
date.

     

    (k)     
A favorable opinion of counsel to Borrower and Guarantors, addressed to
Bank.

     

    (l)     
Certificates of the insurance required hereunder, with all hazard insurance
containing a lender’s loss payable endorsement in Bank’s favor and with all
liability insurance naming Bank as an additional insured.

     

    (m)     
Payment of reasonable expenses incurred by Bank through such date and required
to be paid by Borrower under Section 8.5 including all reasonable legal
expenses.

     

    (n)     
The capital and organizational structure of Holdings and Borrower shall be
reasonably satisfactory to Bank.

     

    (o)     
Bank shall have received financing statement, tax, and judgment lien search
results against the Property of Borrower and each Guarantor evidencing the
absence of Liens on the Collateral except as permitted by Section 6.4
hereof.

     

    (p)     
Bank shall have received pay-off and lien release letters from secured creditors
of Borrower setting forth, among other things, the total amount of Indebtedness
outstanding and owing to them (or outstanding letters of credit issued for the
account of Borrower) and containing an undertaking to cause to be delivered to
Bank UCC termination statements and any other lien release instruments necessary
to release their Liens on the assets of Borrower, which pay-off and lien release
letters shall be in form and substance reasonably acceptable to
Bank.

     

    (q)     
Intentionally Omitted.

     

    (r)     
Receipt by Bank of copies of the Bond Documents, the management fee agreement
(if any), the
Transaction Bonus Plan and the Stock Purchase
Agreement.

     

    (s)     
Since March 31, 2010, no material adverse change in the financial condition
of the Companies or Parent shall have occurred since the date of the most recent
financial statement of Borrower or Parent, as applicable, received by
Bank.

     

    (t)     
A duly completed Internal Revenue Service Form W-9 for Borrower and each
Guarantor.

    
      
         

      

      
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    (u)     
The representations and warranties in the Stock Purchase Agreement shall be true
and correct in all material respects as of the Closing Date, and the Acquisition
shall close prior to or concurrently with the funding of the Loans without the
waiver by Parent, Holdings or Borrower of any material conditions to any of
their obligations under the Stock Purchase Agreement.

     

    (v)     
The Acquisition shall have been approved by Holdings’ Directors and (if
necessary) owners, and all necessary legal and regulatory approvals with respect
to the Acquisition shall have been obtained.  On the Closing Date,
both before and after giving effect to the Acquisition, there shall be no
injunction, temporary restraining order or other legal action in effect which
would prohibit or seek to unwind the Acquisition or any component thereof, or
would prohibit the making of the Loans, or other litigation which would
reasonably be expected to have a Material Adverse Effect, shall be pending, or
to the best knowledge of Borrower, threatened.

     

    (w)     
No event has occurred and is continuing, or would result from making the Loan,
which constitutes a Default or an Event of Default.

     

    (x)     
Such other documents as Bank may reasonably require.

     

    Section 4.2.     
Conditions Subsequent to the
Loan.  Not later than fifteen (15) days after the Closing Date,
the Borrower shall deliver to Bank the Companies’ pro forma balance sheet as of
the Closing Date after giving effect to the transactions contemplated by this
Agreement.

     

    Article
V

    Representations
and Warranties

     

    Borrower
represents and warrants to Bank as follows:

     

    Section 5.1.     
Existence and Power; Name;
Chief Executive Office; Inventory and Equipment Locations; Federal Employer
Identification Number.  Borrower is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Minnesota, and is duly licensed or qualified to transact business
in all jurisdictions where the  character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse
Effect.  Borrower has all requisite power and authority to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under, the Loan Documents to which it is a
party.  During its existence, Borrower has done business solely under
the names set forth in Schedule 5.1 and all of Borrower’s records relating
to its business or the Collateral are kept at the location set forth on
Schedule 5.1.  Borrower’s chief executive office and principal
place of business is located at the address set forth in
Schedule 5.1.  All Inventory and Equipment is located at that
location or at one of the other locations listed in
Schedule 5.1.  Borrower’s federal employer identification number
and organizational identification number are each correctly set forth in
Section 5.1.

    
      
         

      

      
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    Section 5.2.     
Capitalization.  Except
as set forth on Schedule 5.2, the Borrower does not own or control or have
any contract to acquire any ownership interests.

     

    Section 5.3.     
Authorization of Borrowing; No
Conflict as to Law or Agreements.  The execution, delivery and
performance by Borrower of the Loan Documents to which it is a party and the
borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent
or approval of Borrower’s owners; (ii) require any authorization, consent
or approval by, or registration, declaration or filing with, or notice to, any
Governmental Authority, or any third Person, except such authorization, consent,
approval, registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof; (iii) violate any provision
of any law, rule or regulation (including Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to Borrower or of Borrower’s
Constituent Documents; (iv) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other material agreement,
lease or instrument to which Borrower is a party or by which it or its
properties may be bound or affected, in each case, the failure of which to
comply with would result in a Material Adverse Effect; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by Borrower.

     

    Section 5.4.     
Legal
Agreements.  This Agreement and the other Loan Documents to
which Borrower is a party, upon their execution and delivery in accordance with
the provisions hereof, will constitute the legal, valid and binding obligations
of Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to
or limiting creditors’ rights generally or by general principles of
equity.

     

    Section 5.5.     
Subsidiaries.  Borrower
has no Subsidiaries other than as set forth in Schedule 5.5
hereto.

     

    Section 5.6.     
Financial Condition; No
Adverse Change.  Borrower has furnished to Bank the Companies’
audited financial statements for the fiscal year ended December 31, 2009
and unaudited financial statements as of and for the period ended March 31,
2010, and those statements fairly present in all material respects the
Companies’ financial condition on the dates thereof and the results of their
operations and cash flows for the periods then ended and were prepared in
accordance GAAP, except with respect to the unaudited financial statements, for
the absence of footnotes and year-end adjustments.  Since
March 31, 2010, there has been no change in the Companies’ business,
properties or condition (financial or otherwise) which has had a Material
Adverse Effect (it being understood that the transactions contemplated in the
Stock Purchase Agreement shall not be deemed to have a Material Adverse
Effect.

     

    Section 5.7.     
Litigation.  There
are no actions, suits or proceedings pending or, to Borrower’s knowledge,
threatened against or affecting Borrower or any of its Affiliates or the
properties of Borrower or any Guarantor before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, is reasonably likely to be adversely determined and, if
determined adversely to Borrower or any of Guarantor, would have a Material
Adverse Effect.

    
      
         

      

      
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    Section 5.8.     
Regulation
U.  Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of the Loan will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.

     

    Section 5.9.     
Taxes.  Borrower
and the Guarantors have paid or caused to be paid to the proper authorities when
due all federal and other material state and local taxes required to be paid by
each of them (other than taxes that are being contested in good faith through
appropriate processes and for which adequate reserves have been established) and
Borrower has no knowledge of any pending assessments or adjustments of its
income tax payable with respect to any year or the income tax payable by any
Guarantor with respect to any year.  Except as set forth in Schedule
5.9, Borrower and the Guarantors have filed all federal, state and local tax
returns which to the knowledge of the Officers of Borrower or the officers of
any Guarantor, as the case may be, are required to be filed, and Borrower and
the Guarantors have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
any of them to the extent such taxes have become due.

     

    Section 5.10.     
Titles and
Liens.  Borrower has good and absolute title to all Collateral
free and clear of all Liens other than Permitted Liens.  No financing
statement naming Borrower as debtor is on file in any office except to perfect
only Permitted Liens.

     

    Section 5.11.     
Intellectual Property
Rights.

     

    (a)     
Owned Intellectual
Property.  Schedule 5.11 (as updated by written notice to
Bank from time to time) contains a complete list of all patents, applications
for patents, trademarks, applications for trademarks, service marks,
applications for service marks, mask works, trade dress and copyrights for which
Borrower is the registered owner (the “Owned Intellectual
Property”).  Except for Immaterial Intellectual Property Rights
or as otherwise disclosed on Schedule 5.11, (i) Borrower owns the
Owned Intellectual Property free and clear of all Liens other than Permitted
Liens, (ii) no Person other than Borrower owns or has been granted any
right in the Owned Intellectual Property, (iii) all Owned Intellectual
Property is valid, subsisting and enforceable, and there are no existing, or to
Borrower’s knowledge, threatened claims challenging Borrower’s ownership of, or
the validity or enforceability of the owned Intellectual Property, and
(iv) Borrower has taken all commercially reasonable action necessary to
maintain the Owned Intellectual Property.

     

    (b)     
Agreements with Employees and
Contractors.  To Borrower’s knowledge, Borrower has entered
into a legally enforceable agreement with each of its employees and
subcontractors obligating each such Person to assign to Borrower, without any
additional compensation, any Intellectual Property Rights created, discovered or
invented by such Person in the course of such Person’s employment or engagement
with Borrower (except to the extent prohibited by law), and further requiring
such Person to cooperate with Borrower, without any additional compensation, in
connection with securing and enforcing any Intellectual Property Rights therein;
provided that the
foregoing shall not apply with respect to employees and subcontractors whose job
descriptions are of the type such that no such assignments are reasonably
foreseeable.

    
      
         

      

      
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      (c)     
Intellectual Property Rights
Licensed from Others.  Schedule 5.11 (as updated by
written notice to Bank from time to time) contains a complete list of all
agreements under which Borrower has licensed Intellectual Property Rights from
another Person (“Licensed
Intellectual Property”) other than readily available, non-negotiated
licenses of computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”).  Except as disclosed on Schedule 5.11 and in
written agreements copies of which have been given to Bank, Borrower’s licenses
to use the Licensed Intellectual Property are free and clear of all
restrictions, Liens, court orders, injunctions, decrees, or writs, whether by
written agreement or otherwise.  Except as disclosed on
Schedule 5.11 (as updated by written notice to Bank from time to time),
Borrower is not obligated or under any liability whatsoever to make any payments
of a material nature by way of royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any Intellectual Property
Rights.

       

      (d)      Other Intellectual Property Needed
for Business.  Except for Off-the-shelf Software and as
disclosed on Schedule 5.11 (as updated by written notice to Bank from time
to time), the Owned Intellectual Property and the Licensed Intellectual Property
constitute all Intellectual Property Rights used or necessary to conduct
Borrower’s business as it is presently conducted.

       

      (e)      Infringement.  Except
as disclosed on Schedule 5.11 (as updated by written notice to Bank from
time to time), Borrower has no knowledge of, and has not received any written
claim or notice alleging, any Infringement of another Person’s Intellectual
Property Rights (including any written claim that Borrower must license or
refrain from using the Intellectual Property Rights of any third
party).

       

      Section 5.12.  
Plans.  Except as
disclosed to Bank in writing prior to the date hereof, neither Borrower nor any
ERISA Affiliate (i) maintains or has maintained any Pension Plan,
(ii) contributes or has contributed to any Multiemployer Plan or
(iii) provides or has provided post-retirement medical or insurance
benefits with respect to employees or former employees (other than benefits
required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law).  Neither Borrower nor any ERISA Affiliate has
received any notice that it is not in full compliance with any of the
requirements of ERISA, the IRC or applicable state law with respect to any
Plan.  To Borrower’s knowledge, no Reportable Event exists in
connection with any Pension Plan.  Each Plan which is intended to
qualify under the IRC is so qualified or exempt by the IRS, to Borrower’s
knowledge, and no fact or circumstance exists which is reasonably likely to have
an adverse effect on the Plan’s tax-qualified status.  Neither
Borrower nor any ERISA Affiliate has (i) any accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the IRC) under
any Plan, whether or not waived, (ii) any liability under Section 4201
or 4243 of ERISA for any withdrawal, partial withdrawal, reorganization or other
event under any Multiemployer Plan or (iii) any liability or knowledge of
any facts or circumstances which could result in any liability to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, the Department of
Labor or any participant in connection with any Plan (other than routine claims
for benefits under the Plan).

      
        
           

        

        
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      Section 5.13.  
Default.  Borrower
is in compliance with all provisions of all agreements, instruments, decrees and
orders to which it is a party or by which it or its Property is bound or
affected, the breach or default of which would have a Material Adverse
Effect.

       

      Section 5.14.  
Environmental
Matters.  (a) To Borrower’s knowledge, there are not
present in, on or under the Premises, any Hazardous Substances except in the
ordinary course of business and in compliance with applicable Environmental
Law.  Except in the ordinary course of business and in compliance with
applicable Environmental Law, no Hazardous Substances have ever been stored,
buried, spilled, leaked, discharged, emitted or released in, on or under the
Premises.

       

      (b)      To
Borrower’s knowledge, Borrower has not disposed of Hazardous Substances except
in the ordinary course of business and in compliance with applicable
Environmental Law.

       

      (c)      Since
January 1, 2005, to Borrower’s knowledge, Borrower has not received any
written notice of any requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in any way to the
Premises or Borrower, alleging material liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto.  To Borrower’s knowledge, no
such matter is threatened or impending.

       

      (d)      To
Borrower’s knowledge, Borrower’s businesses are and have in the past always been
conducted in compliance in all material respects with all Environmental Laws and
all licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in Borrower’s possession and are in full force and
effect.

       

      (e)      To
Borrower’s best knowledge, the Premises are not and never have been listed on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state or
local list, schedule, log, inventory or database.

       

      (f)      
Borrower has made available to Bank all environmental assessments, audits,
reports, permits, licenses and other documents describing or relating in any way
to the Mortgaged Premises or Borrower’s businesses.

       

      Section 5.15.  
Submissions to
Bank.  The representations and warranties made by Borrower in
this Agreement and all financial and other information provided to Bank by or on
behalf of Borrower in connection with Borrower’s request for the credit
facilities contemplated hereby are (i) true and correct in all material
respects, (ii) do not omit any material fact necessary to make such
representations, warranties or information not misleading in any material
respect when made, and (iii) as to projections, valuations or proforma
financial statements, present a good faith opinion as to such projections,
valuations and proforma condition and results.

      
        
           

        

        
          - 22
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      Section 5.16.  
Financing
Statements.  Borrower has authorized the filing of financing
statements sufficient when filed to perfect the Security Interest and the other
security interests created by the Security Documents.  When such
financing statements are filed in the offices noted therein, Bank will have a
valid and perfected security interest in all Collateral which is capable of
being perfected by filing financing statements.  None of the
Collateral is or will become a fixture on real estate, unless a sufficient
fixture filing is in effect with respect thereto.

       

      Section 5.17.  
Rights to
Payment.  To Borrower’s best knowledge, each right to payment
and each instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the Account Debtor or other
obligor named therein or in Borrower’s records pertaining thereto as being
obligated to pay such obligation.

       

      Section 5.18.  
Broker
Fees.  No broker’s or finder’s fee or commission will be
payable with respect hereto or any of the transactions contemplated thereby; and
Borrower hereby indemnifies Bank against, and agrees that it will hold Bank
harmless from, any claim, demand, or liability for any such broker’s or finder’s
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable attorneys’ fees) arising in connection with any
such claim, demand, or liability.

       

      Section 5.19.  
No
Default.  No Default or Event of Default has occurred and is
continuing.

       

      Section 5.20.  
Fraudulent
Transfer.  Borrower is Solvent.  No transfer of
property is being made by Borrower and no obligation is being incurred by
Borrower in connection with the transactions contemplated by this Agreement or
the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of Borrower.

       

      Section 5.21.  
Permits,
Franchises.  Borrower possesses, and will hereafter possess,
all permits, consents, approvals, franchises and licenses required and rights to
all trademarks, trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in compliance with
applicable law and the failure of which to obtain would result in a Material
Adverse Effect.

       

      Section 5.22.  
No
Subordination.  There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s obligations
subject to this Agreement to any other obligation of Borrower.

       

      Section 5.23.  
Compliance with Laws;
OFAC.  (a) Borrower and the Guarantors are in compliance
with the requirements of all foreign, federal, state and local laws, rules and
regulations applicable to or pertaining to their Property or business operations
(including, without limitation, the Occupational Safety and Health Act of 1970,
the Americans with Disabilities Act of 1990, and laws and regulations
establishing quality criteria and standards for air, water, land and toxic or
hazardous wastes and substances), non-compliance with which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse
Effect.  Neither Borrower nor any Guarantor has received notice to the
effect that its operations are not in compliance with any of the requirements of
applicable federal, state or local environmental, health and safety statutes and
regulations or are the subject of any governmental investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

      
        
           

        

        
          - 23
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      (b)     
(i) Borrower is in compliance with the requirements of all OFAC Sanctions
Programs applicable to it; (ii) each Guarantor is in compliance with the
requirements of all OFAC Sanctions Programs applicable to such Guarantor; (iii)
Borrower has provided to Bank all information regarding Borrower and its
Affiliates and the Guarantors necessary for Bank to comply with all applicable
OFAC Sanctions Programs; and (iv) to the best of Borrower’s knowledge,
neither Borrower nor any of its Affiliates or the Guarantors is, as of the date
hereof, named on the current OFAC SDN List.

       

      Section 5.24.   
Investment
Company.  Borrower is not an “investment company” or a company
“controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

       

      Section 5.25.  
Stock Purchase
Agreement.  Borrower has provided to Bank a true and correct
copy of the Stock Purchase Agreement.  The Stock Purchase Agreement is
in full force and effect and has not, except as reflected in amendments provided
to Bank, been amended or modified in any material respect from the version so
delivered to Bank, and no material condition to the effectiveness thereof or the
obligations of the Seller, Parent, Holdings or Borrower thereunder have been
waived, except to the extent approved by Bank, and Borrower is not aware of any
default thereunder.  No authorization, consent, license, or exemption
from, or filing or registration with, any court or governmental department,
agency, or instrumentality, nor any approval or consent of any other Person, is
or will be necessary to the valid execution, delivery, or performance by
Borrower of the Stock Purchase Agreement or of any other instrument or document
executed and delivered in connection therewith, except for such thereof that
have been heretofore obtained and remain in full force and effect.

       

      Article
VI

      Covenants

       

      So long
as the Obligations shall remain unpaid, or the Credit Facility shall remain
outstanding, Borrower will comply with the following requirements, unless Bank
shall otherwise consent in writing:

       

      Section 6.1.     
Punctual
Payments.  Borrower shall punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein.

      
        
           

        

        
          - 24
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      Section 6.2.     
Reporting
Requirements.  Borrower will deliver, or cause to be delivered,
to Bank each of the following, which shall be in form and detail reasonably
acceptable to Bank:

       

      (a)      
Financial
Statements.

       

      (i)      As
soon as available, and in any event within 90 days after the end of each fiscal
year of Parent (or within 120 days in the case of filing Parent’s annual Form
10-K with the Securities and Exchange Commission), Borrower will deliver, or
cause to be delivered, to Bank, audited financial statements of Parent with the
unqualified opinion of independent certified public accountants selected by
Parent and acceptable to Bank, which annual financial statements shall include
Parent’s balance sheet as at the end of such fiscal year and the related
statements of Parent’s income, reconciliation of retained earnings and cash
flows for the fiscal year then ended, prepared on a consolidated basis to
include Parent’s Subsidiaries and any Affiliates, all in reasonable detail and
prepared in accordance with GAAP, together with (A) copies of all
management letters prepared by such accountants; and (B) a certificate of
the chief financial officer of Parent stating that such financial statements
have been prepared in accordance with GAAP, fairly represent Parent’s financial
position and the results of its operations, and whether or not such officer has
knowledge of the occurrence of any Default or Event of Default and, if so,
stating in reasonable detail the facts with respect thereto.

       

      (ii)     As
soon as available, and in any event within 45 days after the end of each fiscal
quarter of Parent, Borrower will deliver, or cause to be delivered, to Bank,
Parent’s internally-prepared financial statements, which financial statements
shall include Parent’s balance sheet as at the end of such fiscal quarter and
the related statements of Parent’s income, reconciliation of retained earnings
and cash flows for the fiscal quarter then ended, prepared on a consolidated
basis to include Parent’s Subsidiaries and any Affiliates, all in reasonable
detail and prepared in accordance with GAAP.

       

      (iii)    As soon as
available, and in any event within 60 days after the end of each fiscal year of
Borrower, Borrower will deliver to Bank an unaudited/internal balance sheet and
statements of income and reconciliation of retained earnings of the Companies as
at the end of and for such fiscal year, prepared, if Bank so requests, on a
consolidating and consolidated basis to include any Subsidiaries, in reasonable
detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP, subject
to year-end audit adjustments and fairly representing in all material respects
the Companies’ and their Subsidiaries’ financial position and the results of
their operations.

       

      (iv)    As soon as
available, and in any event within 30 days after the end of each fiscal quarter
of Borrower, Borrower will deliver to Bank an unaudited/internal balance sheet
and statements of income and reconciliation of retained earnings of the
Companies as at the end of and for such fiscal quarter and for the year to date
period then ended, prepared, if Bank so requests, on a consolidating and
consolidated basis to include any Subsidiaries, in reasonable detail and stating
in comparative form the figures for the corresponding date and periods in the
previous year, all prepared in accordance with GAAP, subject to year-end audit
adjustments and fairly representing in all material respects the Companies’ and
their Subsidiaries’ financial position and the results of their
operations.

      
        
           

        

        
          - 25
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      (b)      Other
Information.  Borrower will, or cause Parent to, deliver to
Bank the following documents at the following times in form reasonably
satisfactory to Bank:

      

      
        
          
            
              	
                      Quarterly

                    	
                      (i)

                    	
                      a
      certificate of the chief financial officer of Borrower, substantially in
      the form of Exhibit B-1 hereto stating (i) whether or not such
      officer has knowledge of the occurrence of any Default or Event of Default
      not theretofore reported and remedied and, if so, stating in reasonable
      detail the facts with respect thereto, and (ii) all relevant facts in
      reasonable detail to evidence, and the computations as to, whether or not
      Borrower is compliance with the Financial Covenants set forth in
      Section 6.3(a) and other covenants contained in this
      Agreement,

                    
	 
      	 
      	 
      
	 
      	
                      (ii)

                    	
                      a
      certificate of the chief financial officer of Parent, substantially in the
      form of Exhibit B-2 hereto stating all relevant facts in reasonable
      detail to evidence, and the computations as to, whether or not Parent is
      compliance with the Financial Covenants set forth in
      Section 6.3(b),

                    
	 
      	 
      	 
      
	
                      Upon
      request by Bank

                    	
                      (iii)

                    	
                      such
      other reports or information as to the Collateral, or the financial
      condition of Borrower, or otherwise, as Bank may reasonably
      request.

                    

            

          

        

      

       

      (c)      Projections.  Within
30 days after the beginning of each fiscal year of Parent, Borrower will
deliver, or will cause Parent to deliver, to Bank the projected balance sheets
and income statements for each month of such year for Parent and its
Subsidiaries on a consolidating basis and for Borrower, each in reasonable
detail, representing Borrower’s good faith projections and certified by the
chief financial officer of Borrower and Parent, as applicable, as being the most
accurate projections available and identical to the projections used by Borrower
and Parent for internal planning purposes, together with a statement of
underlying assumptions and such supporting schedules and information as Bank may
in its discretion reasonably require.

       

      (d)      Litigation.  Immediately
after the commencement thereof, Borrower will deliver to Bank notice in writing
of all litigation and of all proceedings before any governmental or regulatory
agency affecting Borrower (i) of the type described in Section 5.14(c)
or (ii) which seek a monetary recovery against Borrower in excess of
$500,000.

       

      (e)      Defaults.  As
promptly as practicable (but in any event not later than five business days)
after an Officer of Borrower obtains knowledge of the occurrence of any Default
or Event of Default, Borrower will deliver to Bank notice of such occurrence,
together with a detailed statement by a responsible Officer of Borrower of the
steps being taken by Borrower to cure the effect thereof.

      
        
           

        

        
          - 26
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      (f)      
Plans.  As
soon as possible, and in any event within 30 days after Borrower knows or has
reason to know that any Reportable Event with respect to any Pension Plan has
occurred, Borrower will deliver to Bank a statement of the chief financial
officer of Borrower setting forth details as to such Reportable Event and the
action which Borrower proposes to take with respect thereto, together with a
copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within 10 days after Borrower
fails to make any quarterly contribution required with respect to any Pension
Plan under Section 412(m) of the IRC, Borrower will deliver to Bank a
statement of the chief financial officer of Borrower setting forth details as to
such failure and the action which Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation.  As soon as
possible, and in any event within 10 days after Borrower knows or has reason to
know that it has or is reasonably expected to have any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan, Borrower will
deliver to Bank a statement of the chief financial officer of Borrower setting
forth details as to such liability and the action which Borrower proposes to
take with respect thereto.

       

      (g)      Disputes.  Promptly
upon knowledge thereof, Borrower will deliver to Bank notice of (i) any
disputes or claims by Borrower’s customers exceeding $250,000
individually or $500,000 in the aggregate during any fiscal year; or
(ii) any goods returned to or recovered by Borrower with a value exceeding
$250,000 from any individual Account Debtor or $500,000 in the aggregate from
all Account Debtors.

       

      (h)      Officers and
Directors.  Promptly upon knowledge thereof, Borrower will
deliver to Bank notice of any change in the persons constituting Borrower’s
Officers and Directors or Management.

       

      (i)      
Collateral.  Promptly
upon knowledge thereof, Borrower will deliver to Bank notice of any loss of or
material damage to any material portion of the Collateral or of any substantial
adverse change in any material portion of the Collateral or the prospect of
payment thereof.

       

      (j)      
Commercial Tort
Claims.  Promptly upon knowledge thereof, Borrower will deliver
to Bank notice of any commercial tort claims it may bring against any person,
including the name and address of each defendant, a summary of the facts, an
estimate of Borrower’s damages, copies of any complaint or demand letter
submitted by Borrower, and such other information as Bank may
request.

       

      (k)      
Intellectual Property.

       

      (i)     
Borrower will give Bank 30 days prior written notice of its intent to acquire
material Intellectual Property Rights; except for transfers permitted under
Section 6.19, Borrower will give Bank 30 days prior written notice of its
intent to dispose of material Intellectual Property Rights; and upon request,
shall provide Bank with copies of all applicable documents and
agreements.

       

      (ii)     Promptly
upon knowledge thereof, Borrower will deliver to Bank notice of (A) any
Infringement of its Intellectual Property Rights by others, (B) claims that
Borrower is Infringing another Person’s Intellectual Property Rights and
(C) any threatened cancellation, termination or material limitation of its
Intellectual Property Rights.

      
        
           

        

        
          - 27
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      (iii)    Promptly upon
receipt, Borrower will give Bank copies of all registrations and filings with
respect to its Intellectual Property Rights.

       

      (l)       
Reports to
Owners.  Promptly upon their distribution, Borrower will
deliver to Bank copies of all financial statements, reports and proxy statements
which Parent shall have sent to its shareholders.

       

      (m)      SEC
Filings.  Promptly after the sending or filing thereof,
Borrower will deliver to Bank copies of all regular and periodic reports which
Parent shall file with the Securities and Exchange Commission or any national
securities exchange.

       

      (n)      Violations of
Law.  Promptly upon knowledge thereof, Borrower will deliver to
Bank notice of Borrower’s violation of any law, rule or regulation, the
non-compliance with which could materially and adversely affect Borrower’s
business or its financial condition.

       

      (o)      Contingent Purchase Price
Payments.  Promptly upon notice thereof, Borrower will provide
notice to Bank of any Contingent Purchase Price Payments that are due (including
any accelerated Contingent Purchase Price Payments).

       

      (p)      Other
Reports.  From time to time, with reasonable promptness,
Borrower will deliver to Bank any and all receivables schedules, collection
reports, deposit records, Equipment schedules, copies of invoices to Account
Debtors, shipment documents and delivery receipts for goods sold, and such other
material, reports, records or information as Bank may reasonably
request.

       

      Section 6.3.     
Financial
Covenants.

       

      (a)      
Borrower’s Financial
Covenants.

       

      (i)      Minimum Net Income After Taxes.
(A) Borrower, together with
the other Companies, will maintain, as of the last day each fiscal quarter
(other than the  fiscal quarter ending August 31, 2010), Net Income
After Taxes of not less than $1.00 for the four fiscal quarters then
ended.

       

      (B)     Borrower,
together with other Companies, will maintain, as of August 31, 2010, Net Income
After Taxes of not less than $500,000 for the fiscal quarter ending August 31,
2010.

       

      (C)     Borrower,
together with other Companies, will not, at any time, have Net Income After
Taxes less than or
equal to $1.00 for any two (2) consecutive fiscal quarters.

      
        
           

        

        
          - 28
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      For
purposes of this Section 6.3(a)(i) Net Income After Taxes shall be
determined, to the extent that the Borrower is treated as a pass-through entity
for tax purposes, by calculating Net Income before taxes for the four fiscal
quarters then ended minus dividends and other
distributions paid during the same four fiscal quarters to each of Holdings and
any other member of the Borrower in connection with its federal income tax
liability (and, if applicable, state income tax liability) attributable to its
share of Borrower’s taxable income (determined in accordance with the Code)
(including estimated tax payments determined in good faith by Borrower which are
required to be made by its members with respect thereto).

       

      (ii)     Minimum Quick
Ratio.  Borrower, together with the other Companies, shall not,
as of the last day of each fiscal quarter, permit its Quick Ratio to be less
than (i) 1.1 to 1.0 for each fiscal quarter ending during the period from
the Closing Date through and including the fiscal quarter ending May 31,
2011, and (ii) 1.25 to 1.0 for each fiscal quarter ending after
June 1, 2011.

       

      (iii)    Fixed Charge Coverage
Ratio.  As of the last day of each fiscal quarter of Borrower
ending during the relevant period set forth below (commencing with the fiscal
quarter ending November 30, 2010), Borrower, together with the other Companies,
will maintain a Fixed Charge Coverage Ratio of not less than the corresponding
ratio set forth opposite such period:

      

      
        
          
            
              
                
                  
                    
                      	
                              Period(s) Ending

                            	 	
                              Fixed Charge Coverage

                              Ratio shall not be less
    than:

                            
	
                              Fiscal
      quarters ending November 30, 2010 through and including May 31,
      2011

                            	 	
                              1.20
      to 1.0

                            
	
                              August 31,
      2011

                            	 	
                              1.30
      to 1.0

                            
	
                              November
      30, 2011

                            	 	
                              1.40
      to 1.0

                            
	
                              January 31,
      2012 and each fiscal quarter ending thereafter

                            	 	
                              1.50
      to
1.0

                            

                    

                  

                

              

            

          

        

      

       

      (iv)    Capital
Expenditures.  Borrower, together with the other Companies,
will not incur financed or unfinanced Capital Expenditures of more than
$3,000,000 in the aggregate during any fiscal year.

       

      (b)      
Parent’s Financial
Covenants.

       

      (i)      Minimum Net Income After Taxes.
Parent, together with its Subsidiaries, will maintain, as of the last day
of each fiscal quarter, Net income after taxes of not less than $1.00 for the
four fiscal quarters then ended.

       

      (ii)     Leverage
Ratio.  Parent, together with its Subsidiaries, shall not, as
the last day of each fiscal quarter of Parent, permit the ratio of Funded
Debt as of the last day of such fiscal quarter, to EBITDA for the four
fiscal quarters then ended to be greater than 2.0 to 1.0.

      
        
           

        

        
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      Section 6.4.     
Permitted Liens; Financing
Statements.

       

      (a)     
Borrower will not create, incur or suffer to exist any Lien upon or of any of
its assets, now owned or hereafter acquired, to secure any Indebtedness; excluding, however, from the
operation of the foregoing, the following (collectively, “Permitted
Liens”):

       

      (i)     
covenants, restrictions, rights, easements and minor irregularities in title
which do not materially interfere with Borrower’s business or operations as
presently conducted;

       

      (ii)     Liens in
existence on the date hereof and listed in Schedule 6.4 hereto securing
Indebtedness for borrowed money permitted under Section 6.5;

       

      (iii)    the Security
Interest and Liens created by the Security Documents;

       

      (iv)    liens of
carriers, warehousemen, mechanics, materialmen, vendors, and landlords and other
similar liens imposed by law incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided that adequate
reserves for the payment thereof have been established in accordance with
GAAP;

       

      (v)    deposits under
workers’ compensation, unemployment insurance and social security laws or to
secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, or to secure statutory obligations of surety or
appeal bonds or to secure indemnity, performance or other similar bonds in the
ordinary course business;

       

      (vi)    banker’s liens
and similar liens (including set-off rights) in respect of bank
deposits;

       

      (vii)   purchase money Liens
incurred in connection with Capital Expenditures otherwise permitted pursuant to
this Agreement; provided that such Liens attach only to the Equipment acquired
thereby;

       

      (viii)  Liens incurred in
connection with extensions, renewals or refinancings of the indebtedness secured
by Liens of the type described above;

       

      (ix)    Liens incurred
in connection with leases, subleases, licenses and sublicenses granted, in the
ordinary course of Borrower’s business, to Persons not interfering in any
material respect with the business of Borrower and its Subsidiaries and any
interest or title of a lessee or licensee under any such lease, sublease,
license or sublicense; and

      
        
           

        

        
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      (x)     so long as
the Bond L/C has not been issued, Liens on a cash of Borrower to secure the
letter of credit issued by M&I Bank to the Trustee; provided, that the aggregate
amount of such cash does not at any one time exceed 105% of the reimbursement
obligations under such letter of credit.

       

      (b)      
Borrower will not amend any financing statements in favor of Bank except as
permitted by law.  Any authorization by Bank to any Person to amend
financing statements in favor of Bank shall be in writing.

       

      Section 6.5.    
Indebtedness.  Borrower
will not incur, create, assume or permit to exist any Indebtedness or liability
on account of deposits or advances or any Indebtedness for borrowed money or
letters of credit issued on Borrower’s behalf, or any other Indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations,
except:

       

      (a)      Indebtedness
arising hereunder;

       

      (b)     
Indebtedness of Borrower in existence on the date hereof and listed in
Schedule 6.5 hereto;

       

      (c)     
Indebtedness relating to Permitted Liens;

       

      (d)     
Indebtedness of Borrower arising from the endorsement of instruments for
collection in the ordinary course of business;

       

      (e)     
Indebtedness of Borrower under initial or successive refinancings of any
Indebtedness permitted by clause (b) or (c) above, provided that (i) the
principal amount of any such refinancing does not exceed the principal amount of
the Indebtedness being refinanced and (ii) the material terms and
provisions of any such refinancing (including maturity, redemption, prepayment,
default and subordination provisions) are no less favorable to Bank than the
Indebtedness being refinanced;

       

      (f)      
Indebtedness evidenced by the Bond Documents and the Bond L/C;

       

      (g)     
Indebtedness of Borrower which may be deemed to exist in connection with any
Contingent Purchase Price Payments;

       

      (h)      so
long as the Bond L/C has not been issued, Indebtedness owing to M&I Bank so
long as such Indebtedness is secured by a Lien permitted pursuant to
Section 6.4(a)(x) hereof; and

       

      (i)       any
Hedging Obligations in connection with bona fide hedging activities in the
ordinary course of business and not for speculative purposes.

       

      Section 6.6.    
Guaranties.  Borrower
will not assume, guarantee, endorse or otherwise become directly or contingently
liable in connection with any obligations of any other Person, except the
endorsement of negotiable instruments by Borrower for deposit or collection or
similar transactions in the ordinary course of business.

      
        
           

        

        
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      Section 6.7.    
Investments and
Subsidiaries.  Borrower will not purchase or hold beneficially
any stock or other securities or evidences of indebtedness of, make or permit to
exist any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including any partnership or joint venture,
except:

       

      (a)     
investments in direct obligations of the United States of America or any agency
or instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America having a maturity of one year or
less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
Standard & Poor’s Corporation or “P-1” or “P-2” by Moody’s Investors Service
or certificates of deposit or bankers’ acceptances having a maturity of one year
or less issued by members of the Federal Reserve System having deposits in
excess of $100,000,000 (which certificates of deposit or bankers’ acceptances
are fully insured by the Federal Deposit Insurance Corporation) (each of the
foregoing, collectively, “Cash
Equivalents”);

       

      (b)     
travel advances or loans to Borrower’s Officers and employees not exceeding at
any one time an aggregate of $50,000; and

       

                 (c)       current
investments in the Subsidiaries in existence on the date hereof and listed in
Schedule 5.5 hereto.

       

      Section 6.8.    
Dividends and
Distributions.  Borrower will not declare or pay any dividends
(other than dividends payable solely in stock of Borrower) on any class of its
stock or make any payment on account of the purchase, redemption or other
retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly; provided, however, that the
foregoing shall not operate or prevent:

       

      (i)      the
making of any dividends or distributions by any Subsidiary to
Borrower,

       

      (ii)     Borrower may
make dividends and distributions during any fiscal year in amounts necessary to
allow Holdings to make payments in respect of its federal income tax liability
(and, if applicable, state income tax liability) attributable to its share of
Borrower’s taxable income (determined in accordance with the Code) (including
estimated tax payments determined in good faith by Borrower which are required
to be made by its members with respect thereto) so long as Borrower shall have
elected to be treated as an limited liability company or other pass-through
entity for income tax purposes, and

       

      (iii)    the making
of any other dividends or distributions to Holdings so long as both before and
after giving effect to such dividends or other distributions (A) no Default
or Event of Default has occurred and is continuing and (B) Borrower is in
compliance with the Financial Covenants set forth in Section 6.3(a)
hereof.

      
        
           

        

        
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      Section 6.9.     
Salaries.  Borrower
will not pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other compensation to the extent that such payment would
cause an Event of Default.

       

      Section 6.10.  
Performance by
Bank.  If Borrower at any time fails to perform or observe any
of the foregoing covenants contained in this Article VI or elsewhere
herein, and if such failure shall continue for a period of ten calendar days
after Bank gives Borrower written notice thereof (or in the case of the
agreement contained in Section 6.16, immediately upon the occurrence of
such failure, without notice or lapse of time), Bank may, but need not, perform
or observe such covenant or covenants on behalf and in the name, place and stead
of Borrower (or, at Bank’s option, in Bank’s name) and may, but need not, take
any and all other actions which Bank may reasonably deem necessary to cure or
correct such failure (including the payment of taxes, the satisfaction of Liens,
the performance of obligations owed to Account Debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
Borrower shall thereupon pay to Bank within fifteen (15) days after written
demand the amount of all monies expended and all costs and expenses (including
reasonable attorneys’ fees and legal expenses) incurred by Bank in connection
with or as a result of the performance or observance of such agreements or the
taking of such action by Bank, together with interest thereon from the date
expended or incurred at the Default Rate.  To facilitate Bank’s
performance or observance of such covenants of Borrower, Borrower hereby
irrevocably appoints Bank, or Bank’s delegate, acting alone, as Borrower’s
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Borrower under this
Section 6.10.

       

      Section 6.11.  
Books and Records; Inspection
and Examination.  Borrower will keep accurate books of record
and account for itself pertaining to the Collateral and pertaining to Borrower’s
business and financial condition and such other matters as Bank may from time to
time reasonably request in which true and complete entries will be made in
accordance with GAAP and, upon Bank’s request, will permit any officer,
employee, attorney or accountant for Bank to audit, review, make extracts from
or copy any and all company and financial books and records of Borrower during
ordinary business hours and upon one Business Day’s advance notice (unless a
Default Period exists in which case no notice shall be required), and to discuss
Borrower’s affairs with any of its Directors, Officers, and/or accounting
personnel.  Borrower hereby irrevocably authorizes all accountants and
third parties to disclose and deliver to Bank, at Borrower’s expense, all
financial information, books and records, work papers, management reports and
other information in its possession regarding Borrower.  Borrower will
permit Bank, or its employees, accountants, attorneys or agents, to examine and
inspect any Collateral or any other property of Borrower during ordinary
business hours and upon one Business Day’s advance notice (unless a Default
Period exists in which case no notice shall be required).

      
        
           

        

        
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      Section 6.12.   Account
Verification.  Bank may at any time and from time to time upon
written notice to Borrower send or require Borrower to send requests for
verification of accounts and amounts owed to Account Debtors and other
obligors.  Bank may also at any time an Event of Default has occurred
and is continuing and from time to time telephone Account Debtors and other
obligors to verify accounts and send such Account Debtors and other obligors
notification of the assignment of Accounts to Bank.

       

      Section 6.13.  
Compliance with Laws;
OFAC.

       

      (a)     
Borrower will (i) comply with the requirements of applicable laws and
regulations, the non-compliance with which would materially and adversely affect
its business or its financial condition and (ii) use and keep the
Collateral, and require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or
ordinance.

       

      (b)     
Without limiting the foregoing undertakings, Borrower specifically agrees that
it will comply with all applicable Environmental Laws and obtain and comply with
all permits, licenses and similar approvals required by any Environmental Laws,
and will not generate, use, transport, treat, store or dispose of any Hazardous
Substances except in the ordinary course of business and in compliance with
applicable Environmental Law.

       

      (c)     
(i) Borrower shall at all times comply with the requirements of all OFAC
Sanctions Programs applicable to Borrower and shall cause each Guarantor to
comply with the requirements of all OFAC Sanctions Programs applicable to such
Guarantor; (ii) Borrower shall provide Bank any information regarding
Borrower, its Affiliates, and each Guarantor necessary for Bank to comply with
all applicable OFAC Sanctions Programs; subject however, in the case of
Affiliates and Guarantors, to Borrower’s ability to provide information
applicable to them; and (iii) if Borrower obtains actual knowledge or
receives any written notice that Borrower, any Affiliate or any Guarantor is
named on the then current OFAC SDN List (such occurrence, an “OFAC Event”), Borrower shall
promptly (x) give written notice to Bank of such OFAC Event, and
(y) comply with all applicable laws with respect to such OFAC Event
(regardless of whether the party included on the OFAC SDN List is located within
the jurisdiction of the United States of America), including the OFAC Sanctions
Programs, and Borrower hereby authorizes and consents to Bank taking any and all
steps Bank deems necessary, in its sole but reasonable discretion, to avoid
violation of all applicable laws with respect to any such OFAC Event, including
the requirements of the OFAC Sanctions Programs (including the freezing and/or
blocking of assets and reporting such action to OFAC).

       

      Section 6.14.  
Payment of Taxes and Other
Claims.  Borrower will pay or discharge, when due, (a) all
taxes, assessments and governmental charges levied or imposed upon it or upon
its income or profits, upon any properties belonging to it (including the
Collateral) or upon or against the creation, perfection or continuance of the
Security Interest, prior to the date on which penalties attach thereto,
(b) all federal, state and local taxes required to be withheld by it, and
(c) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon any properties of Borrower; provided that Borrower shall
not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.

      
        
           

        

        
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      Section 6.15.   
Maintenance of
Properties.

       

      (a)     
Borrower will keep and maintain the Collateral and all of its other properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted) and will from time to time replace or repair any
worn, defective or broken parts; provided that nothing in this
Section 6.15 shall prevent Borrower from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in Borrower’s
commercially reasonable judgment, desirable in the conduct of Borrower’s
business and not disadvantageous in any material respect to
Bank.  Borrower will take all commercially reasonable steps necessary
to protect and maintain its Intellectual Property Rights, other than Immaterial
Intellectual Property Rights.

       

      (b)     
Borrower will defend the Collateral against all Liens, claims or demands of all
Persons (other than Bank) claiming the Collateral or any interest
therein.  Borrower will keep all Collateral free and clear of all
Liens except Permitted Liens.  Borrower will take all commercially
reasonable steps necessary to prosecute any Person Infringing its Intellectual
Property Rights and to defend itself against any Person accusing it of
Infringing any Person’s Intellectual Property Rights.

       

      Section 6.16.  
Insurance.  Borrower
will obtain and at all times maintain insurance with insurers believed by
Borrower to be responsible and reputable, in such amounts and against such risks
as may from time to time be required by Bank, but in all events in such amounts
and against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which
Borrower operates.  Without limiting the generality of the foregoing,
Borrower will at all times keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft, collision (for Collateral
consisting of motor vehicles) and such other risks and in such amounts as Bank
may reasonably request, with any loss payable to Bank to the extent of its
interest, and all policies of such insurance shall contain a lender’s loss
payable endorsement for Bank’s benefit.  All policies of liability
insurance required hereunder shall name Bank as an additional
insured.

       

      Section 6.17.  
Preservation of
Existence.  Borrower will preserve and maintain its existence
and all of its rights, privileges and franchises necessary or desirable in the
normal conduct of its business and shall conduct its business in an orderly,
efficient and regular manner.

       

      Section 6.18.  
Delivery of Instruments,
etc.  Upon request by Bank, Borrower will promptly deliver to
Bank in pledge all instruments, documents and chattel paper having a face value
in excess of $25,000 constituting Collateral, duly endorsed or assigned by
Borrower.

      
        
           

        

        
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      Section 6.19.  
Sale or Transfer of Assets;
Suspension of Business Operations.  Borrower will not sell,
lease, assign, transfer or otherwise dispose of (i) the stock of any
Subsidiary, (ii) all or a substantial part of its assets, or (iii) any
Collateral or any interest therein (whether in one transaction or in a series of
transactions) to any other Person other than (v) the sale of Inventory in
the ordinary course of business, (w) dispositions of obsolete, surplus,
worn or nonfunctional Equipment, (x) dispositions of cash or Cash
Equivalents not otherwise prohibited under this Agreement, (y) transfers of
Intellectual Property Rights as permitted under this Section 6.19 and
(z) dispositions of other assets in any given fiscal year in an aggregate
amount not to exceed $250,000.  Borrower will not liquidate, dissolve
or suspend business operations.  Borrower will not transfer any part
of its ownership interest in any Intellectual Property Rights except for
transfers of Immaterial Intellectual Property Rights and licensing or
sublicensing of Intellectual Property Rights in the ordinary course of
Borrower’s business.  If Borrower transfers any Intellectual Property
Rights for value, other than transfers of Immaterial Intellectual Property
Rights and licensing or sublicensing of Intellectual Property Rights in the
ordinary course of Borrower’s business, Borrower will pay over the proceeds to
Bank for application to the Obligations in accordance with Section 2.5(b)
hereof.  Bank hereby agrees that in the event Borrower licenses or
sublicenses any Intellectual Property Rights pursuant to the terms of this
Section 6.19, following written demand of Borrower, Bank shall execute a
form of estoppel reasonably acceptable in form and substance to Borrower and
Bank pursuant to which Bank shall represent that upon its exercise of any of its
rights or remedies hereunder or under any other Loan Document with respect to
the licensed or sublicensed Intellectual Property Rights, including a
foreclosure under any Security Document, so long as there shall then exist no
breach, default, or event of default on the part of the related licensee or
sublicensee, as applicable, which breach, default or event of default has
continued beyond any cure periods provided in the license or sublicense, Bank
shall not extinguish or terminate the interest of the licensee or sublicensee,
as applicable, by reason of such foreclosure.

       

      Section 6.20.  
Consolidation and Merger;
Asset Acquisitions.  Borrower will not consolidate with or
merge into any Person, or permit any other Person to merge into Borrower, or
acquire (in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the assets of any other Person.

       

      Section 6.21.  
Sale and
Leaseback.  Borrower will not enter into any arrangement,
directly or indirectly, with any other Person whereby Borrower shall sell or
transfer any real or personal property, whether now owned or hereafter acquired,
and then or thereafter rent or lease as lessee such property or any part thereof
or any other property which Borrower intends to use for substantially the same
purpose or purposes as the property being sold or transferred.

       

      Section 6.22.   Restrictions on Nature of
Business.  Borrower will not engage in any line of business
materially different from that presently engaged in by Borrower or reasonably
incidental thereto and will not purchase, lease or otherwise acquire assets not
related to its business.

       

      Section 6.23.  
Accounting.  Borrower
will not adopt any material change in accounting principles other than as
required by GAAP.  Borrower will not adopt, permit or consent to any
change in its fiscal year.

       

      Section 6.24.  
Plans.  Unless
disclosed to Bank pursuant to Section 5.12, neither Borrower nor any ERISA
Affiliate will (i) adopt, create, assume or become a party to any Pension
Plan, (ii) incur any obligation to contribute to any Multiemployer Plan,
(iii) incur any obligation to provide post-retirement medical or insurance
benefits with respect to employees or former employees (other than benefits
required by law) or (iv) amend any Plan in a manner that would materially
increase its funding obligations.

      
        
           

        

        
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      Section 6.25.  
Place of Business;
Name.  Borrower will not transfer its chief executive office or
principal place of business, or move, relocate, close or sell any business
location.  Borrower will not permit any tangible Collateral or any
records pertaining to the Collateral to be located in any state or area in
which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest.  Borrower will not change its name or
jurisdiction of organization without giving Bank at least ten (10) days
prior written notice.

       

      Section 6.26.  
Constituent
Documents.  Borrower will not amend its Constituent Documents
in any respect that will result in a Material Adverse Effect.

       

      Section 6.27.  
Transactions With
Affiliates.  Borrower will not directly or indirectly enter
into or permit to exist any transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms, that are fully disclosed to Bank, and that are no
less favorable to Borrower than would be obtained in an arm’s length transaction
with a non-Affiliate.

       

      Section 6.28.  
Use of
Funds.  Borrower will not use any of the proceeds of the Loan
except for its working capital and general corporate purposes not in
contravention of any law or of any Loan Document.

       

      Section 6.29.  
Subordination of
Debt.  All obligations of Borrower to any Guarantor or any
Affiliate of Borrower (other than amounts
arising pursuant to a tax sharing agreement among the Companies and Parent)
permitted hereunder shall be subordinated in right of repayment to all
obligations of Borrower to Bank, as evidenced by and subject to the terms of
subordination agreements in form and substance satisfactory to
Bank.

       

      Section 6.30.  
Management Fees; Contingent
Purchase Price Payments.  (a) Management
Fees.  The Companies, collectively, will not pay management
fees to Parent in an amount greater than $2,500,000 during any one fiscal year
and, with respect solely to operating expenses paid by Parent on behalf of the
Companies in the ordinary course of business of such parties and in line with
historical practices, will reimburse Parent only for the reasonable portion of
any such expenses; provided during any Default
Period, Borrower shall not make any payments of management fees or expense
reimbursements and any such items that would otherwise be paid notwithstanding
such Default Period shall be accrued until such time, if any, following the
expiration of such Default Period.  Any management fees paid by
Borrower to Parent shall be paid no more frequently than once per
month.

       

      (b)      Contingent Purchase Price
Payments.  The Borrower will not make Contingent Purchase Price
Payments unless and so long as (A) no Default or Event of Default has
occurred and is continuing or would immediately result therefrom and
(B) both before and after giving effect to such Contingent Purchase Price
Payments, the Borrower is in compliance with the Financial Covenants set forth
in Section 6.3(a).  In the event that Borrower is prohibited from
making the Contingent Purchase Price Payments, Borrower shall cause Parent to
make such payments in accordance with its guaranty delivered to Seller under the
Stock Purchase Agreement.

      
        
           

        

        
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      Section 6.31.  
Maintenance of Accounts with
Bank.  No later than 120 days after the Closing Date,
Borrower shall, and shall cause each of the other Companies to, at all times,
maintain its primary depository accounts with Bank pursuant to account
agreements and terms mutually acceptable to Borrower and Bank.

       

      Article
VII

      Events
of Default, Rights and Remedies

       

      Section 7.1.    
Events of
Default.  “Event of Default”, wherever
used herein, means any one of the following events:

       

      (a)     
 Default in the payment when due of all or any part of the principal of the
Loan (whether at the stated maturity thereof or at any other time provided for
in this Agreement), or default for a period of three (3) Business Days in
the payment when due of any interest, fee or other Obligation
payable hereunder or under any other Loan Document;

       

      (b)     
Default not otherwise listed in this Section 7.1 in the performance, or
breach, of any covenant or agreement of Borrower contained in this Agreement or
in any other Loan Document, and (i) with respect to any such default under
Section 6.2, such default shall continue unremedied for a period of five
(5) days, and (ii) and with respect to any such default under
Sections 6.13, 6.14, 6.15 and 6.18, such default shall continue unremedied
for twenty (20) days after the earlier of (A) the date upon which an
Officer or Director of Borrower obtained actual knowledge of such failure or
(B) the date upon which written notice thereof is given to Borrower by
Bank.

       

      (c)      
A Change of Control shall occur;

       

      (d)      An
Insolvency Proceeding is commenced by Borrower or any Guarantor;

       

      (e)      An
Insolvency Proceeding is commenced against Borrower or any Guarantor, and any of
the following events occur:  (a) Borrower or such Guarantor
consents to the institution of such Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within sixty (60) calendar days of the date of the filing
thereof; provided that,
during the pendency of such period, Bank shall be relieved of its obligations to
extend credit hereunder, (d) an interim trustee is appointed to take
possession of all or any substantial portion of the properties or assets of, or
to operate all or any substantial portion of the business of, Borrower or any
such Guarantor, or (e) an order for relief shall have been entered
therein;

       

      (f)       Any
material portion of Borrower’s or any Guarantor’s assets is attached, seized,
subjected to a writ or distress warrant, levied upon, or comes into the
possession of any third Person;

       

      (g)     
Borrower or any Guarantor is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;

      
        
           

        

        
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      (h)      A
notice of Lien, levy, or assessment is filed of record with respect to any of
Borrower’s or any Guarantor’s assets by the United States, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to any
one or more of such entities becomes a Lien, whether choate or otherwise, upon
any of Borrower’s or any Guarantor’s assets valued in excess of $500,000 and the
same is not paid before such payment is delinquent;

       

      (i)      
This Agreement or any other Loan Document that purports to create a Lien, shall,
for any reason, fail or cease to create a valid and perfected and, except to the
extent permitted by the terms hereof or thereof, first priority Lien on or
security interest in the Collateral covered hereby or thereby; provided that any such event
described in this clause (i) shall not be an Event of Default for so long
as Borrower is diligently assisting Bank, as determined by Bank in its sole and
absolute discretion, in correcting the applicable problem;

       

      (j)      
Any material provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested by Borrower, or a proceeding shall be commenced by Borrower, or by any
Governmental Authority having jurisdiction over Borrower, seeking to establish
the invalidity or unenforceability thereof, or Borrower shall deny that Borrower
has any liability or obligation purported to be created under any Loan
Document;

       

      (k)      Any
representation or warranty made by Borrower in this Agreement or in any other
Loan Document, by any Guarantor in any guaranty delivered to Bank, or by
Borrower (or any of its Officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such guaranty shall prove to have been incorrect in any material respect when
deemed to be effective;

       

      (l)      
The rendering against Borrower of an arbitration award, final judgment, decree
or order for the payment of money in excess of $500,000 over applicable
insurance coverage and the continuance of such arbitration award, judgment,
decree or order unsatisfied and in effect for any period of 60 consecutive days
without a stay of execution;

       

      (m)      A
default under any bond, debenture, note or other evidence of material
Indebtedness of Borrower (other than the Bond Documents) owed to any Person
other than Bank, or under any indenture or other instrument under which any such
evidence of Indebtedness has been issued or by which it is governed, or under
any material lease or other contract, and the expiration of the applicable
period of grace, if any, specified in such evidence of Indebtedness, indenture,
other instrument, lease or contract, and the effect of such failure, event or
condition is to cause, or permit the holder or holders thereof to cause,
Indebtedness of Borrower (other than the Obligations) (in an aggregate amount
exceeding $500,000 in the event that such Indebtedness is unsecured) to become
redeemable, due or otherwise payable (whether at scheduled maturity, by required
prepayment, upon acceleration or otherwise);

      
        
           

        

        
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      (n)      Any
Reportable Event, which Bank determines in good faith might constitute grounds
for the termination of any Pension Plan or for the appointment by the
appropriate United States District Court of a trustee to administer any Pension
Plan, shall have occurred and be continuing 30 days after written notice to such
effect shall have been given to Borrower by Bank; or a trustee shall have been
appointed by an appropriate United States District Court to administer any
Pension Plan; or the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Pension Plan or to appoint a trustee to administer
any Pension Plan; or Borrower or any ERISA Affiliate shall have filed for a
distress termination of any Pension Plan under Title IV of ERISA; or
Borrower or any ERISA Affiliate shall have failed to make any quarterly
contribution required with respect to any Pension Plan under Section 412(m)
of the IRC, which Bank determines in good faith may by itself, or in combination
with any such failures that Bank may determine are likely to occur in the
future, result in the imposition of a Lien on Borrower’s assets in favor of the
Pension Plan; or any withdrawal, partial withdrawal, reorganization or other
event occurs with respect to a Multiemployer Plan which results or could
reasonably be expected to result in a material liability of Borrower to the
Multiemployer Plan under Title IV of ERISA.

       

      (o)      An
event of default shall occur under any Security Document;

       

      (p)     
Borrower or any Guarantor shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the ordinary
course, or sell or attempt to sell all or substantially all of its
assets;

       

      (q)     
Default in the payment of any amount owed by Borrower to Bank other than any
Indebtedness arising hereunder after the expiration of any applicable express
grace period related to such amount;

       

      (r)      
Any Guarantor shall repudiate, purport to revoke or fail to perform its
obligations under its guaranty in favor of Bank;

       

      (s)      The
occurrence of any “Default” or “Event of Default” under, and as defined in, any
agreement between any Affiliate of Borrower and Bank (but giving effect to any
applicable grace or cure periods with respect thereto);

       

      (t)      
The occurrence of any “Event of Default” under, and as defined in, the
Reimbursement Agreement, the Bond L/C and the Bond Documents (but giving effect
to any applicable grace or cure periods with respect thereto);

       

      (u)      Any
member of the Management shall become unable to perform, or cease to be
employed, in his current position with Borrower, and shall not be replaced,
within 180 days (or such greater time as approved by the Bank in its
reasonable discretion), by an individual with comparable education, experience
and qualifications as determined by Parent in its reasonable discretion;
or

       

      (v)     
Holdings owns any assets other than the equity interests of Borrower or incurs,
issues, assumes, creates or has outstanding any indebtedness, obligations or
liabilities other than its obligations under its Guaranty or engages in any
operations, other than (i) owning the equity interest in Borrower and
activities reasonably related thereto or to the maintenance of its existence or
compliance with applicable law or (ii) acting as a Guarantor pursuant to
the Guaranty.

      
        
           

        

        
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      Section 7.2.    
Rights and
Remedies.  Upon the occurrence and during the continuation of
an Event of Default, Bank may exercise any or all of the following rights and
remedies, all of which Borrower acknowledges and agrees are commercially
reasonable:

       

      (a)      
Bank may, by notice to Borrower, declare the Credit Facility to be terminated,
whereupon the same shall forthwith terminate;

       

      (b)      Bank
may, by notice to Borrower, declare the Obligations to be forthwith due and
payable, whereupon all Obligations shall become and be forthwith due and
payable, without presentment, notice of dishonor, protest or further notice of
any kind, all of which Borrower hereby expressly waives;

       

      (c)      
Bank may, without notice to Borrower and without further action, apply any and
all money owing by Bank to Borrower to the payment of the
Obligations;

       

      (d)      Bank
may settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Bank considers advisable, and in such cases, Bank
will credit the Obligations with only the net amounts received by Bank in
payment of such disputed Accounts after deducting all expenses incurred or
expended by Bank in connection therewith;

       

      (e)      Bank
may cause Borrower to hold all returned Inventory in trust for Bank, segregate
all returned Inventory from all other assets of Borrower or in Borrower’s
possession and conspicuously label said returned Inventory as the property of
Bank;

       

      (f)      
without notice to or demand upon Borrower or any Guarantor, Bank may make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interests in the Collateral.  Borrower agrees to assemble
the Collateral if Bank so requires, and to make the Collateral available to Bank
at a place that Bank may designate which is reasonably convenient to both
parties.  Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any Lien that in Bank’s
determination appears to conflict with Bank’s Liens and to pay all expenses
incurred in connection therewith and to charge the Obligations
therefor.  With respect to any of Borrower’s owned or leased premises,
Borrower hereby grants Bank a license to enter into possession of such premises
and to occupy the same, without charge, in order to exercise any of Bank’s
rights or remedies provided herein, at law, in equity, or
otherwise;

       

      (g)     
without notice to Borrower (such notice being expressly waived), and without
constituting a retention of any collateral in satisfaction of an obligation
(within the meaning of the UCC), Bank may set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank (including
any amounts received in the Lockbox), or (ii) Indebtedness at any time
owing to or for the credit or the account of Borrower held by
Bank;

      
        
           

        

        
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      (h)      Bank
may hold, as cash collateral, any and all balances and deposits of Borrower held
by Bank, and any amounts received in the Lockbox, to secure the full and final
repayment of all of the Obligations;

       

      (i)       
Bank may ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral;

       

      (j)       
Bank may sell the Collateral at either a public or private sale, or both, by way
of one or more contracts or transactions, for cash or on terms, in such manner
and at such places (including Borrower’s premises) as Bank determines is
commercially reasonable.  It is not necessary that the Collateral be
present at any such sale;

       

      (k)      
Bank shall give notice of the disposition of the Collateral as
follows:

       

      (i)      Bank
shall give Borrower a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, the time on or after which the private
sale or other disposition is to be made; and

       

      (ii)     The notice
shall be personally delivered or mailed, postage prepaid, to Borrower as
provided in Section 8.3, at least 10 days before the earliest time of
disposition set forth in the notice; no notice needs to be given prior to the
disposition of any portion of the Collateral that is perishable or threatens to
decline speedily in value or that is of a type customarily sold on a recognized
market;

       

      (l)       
Bank may credit bid and purchase at any public sale;

       

      (m)      Bank
may seek the appointment of a receiver or keeper to take possession of all or
any portion of the Collateral or to operate the same and, to the maximum extent
permitted by law, may seek the appointment of such a receiver without the
requirement of prior notice or a hearing;

       

      (n)      If
Bank sells any of the Collateral on credit, the Obligations will be reduced only
to the extent of payments actually received.  If the purchaser fails
to pay for the Collateral, Bank may resell the Collateral and shall apply any
proceeds actually received to the Obligations;

       

      (o)      Bank
shall have no obligation to attempt to satisfy the Obligations by collecting
them from any third Person which may be liable for them or any portion thereof,
and Bank may release, modify or  waive any collateral provided by any
other Person as security for the Obligations or any portion thereof, all without
affecting Bank’s rights against Borrower.  Borrower waives any right
it may have to require Bank to pursue any third Person for any of the
Obligations;

       

      (p)      Bank
may make demand upon Borrower and, forthwith upon such demand, Borrower will pay
to Bank in immediately available funds for deposit in the Special Account an
amount equal to the aggregate maximum amount available to be drawn under all
Letters of Credit then outstanding, assuming compliance with all conditions for
drawing thereunder;

      
        
           

        

        
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      (q)      Bank
may exercise and enforce its rights and remedies under the Loan Documents;
and

       

      (r)      
Bank may exercise any other rights and remedies available to it by law or
agreement.

       

      Notwithstanding
the foregoing, upon the occurrence of an Event of Default described in
subsections (d) or (e) of Section 7.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.

       

      Section 7.3.    
Disclaimer of
Warranties.  Bank may sell the Collateral without giving any
warranties as to the Collateral.  Bank may specifically disclaim any
warranties of title or the like.  This procedure will not be
considered to adversely affect the commercial reasonableness of any sale of the
Collateral.

       

      Section 7.4.    
Compliance With
Laws.  Bank may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral, and Bank’s
compliance therewith will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.

       

      Section 7.5.    
No
Marshalling.  Bank shall be under no obligation to marshal any
assets in favor of Borrower, or against or in payment of the Obligations or any
other obligation owned to Bank by Borrower or any other Person.

       

      Section 7.6.    
Borrower to
Cooperate.  Upon the exercise by Bank of any power, right,
privilege, or remedy pursuant to this Agreement which requires any consent,
approval, registration, qualification, or authorization of any Governmental
Authority, Borrower agrees to execute and deliver, or will cause the execution
and delivery of, all applications, certificates, instruments, assignments, and
other documents and papers that Bank or any purchaser of the Collateral may be
required to obtain for such governmental consent, approval, registration,
qualification, or authorization.

       

      Section 7.7.     
Application of
Proceeds.  All proceeds realized as the result of any sale of
the Collateral shall be applied by Bank:

       

      FIRST to
the costs, expenses, liabilities, obligations and attorneys’ fees incurred by
Bank in the exercise of its rights under this Agreement;

       

      SECOND to
the interest and fees due upon any of the Obligations; and

       

      THIRD to
the principal of the Obligations and to cash collateralize the Bond L/C by an
amount not less than 105% of the obligations arising under or pursuant to the
Reimbursement Agreement, in such order as Bank shall determine in its sole
discretion.  Any surplus shall be paid to Borrower or other Persons
legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency.

      
        
           

        

        
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    Section 7.8.      Remedies
Cumulative.  The rights and remedies of Bank under this
Agreement, the other Loan Documents, and all other agreements contemplated
hereby and thereby shall be cumulative.  Bank shall have all other
rights and remedies not inconsistent herewith as provided under the UCC, by law,
or in equity.  No exercise by Bank of any one right or remedy shall be
deemed an election of remedies, and no waiver by Bank of any default on
Borrower’s part shall be deemed a continuing waiver of any further
defaults.

     

    Section 7.9.      Bank Not Liable For The
Collateral.  So long as Bank complies with the obligations, if
any, imposed by the UCC,  Bank shall not otherwise be liable or
responsible in any way or manner for:  (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion or from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person whomsoever, in each case, other than arising
as a result of the gross negligence or willful misconduct of
Bank.  Borrower bears the risk of loss or damage of the
Collateral.

     

    Article
VIII

    Miscellaneous

     

    Section 8.1.      No Waiver.  No
failure or delay by Bank in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents.

     

    Section 8.2.      Amendments,
Etc.  No amendment, modification, termination or waiver of any
provision of any Loan Document or consent to any departure by Borrower therefrom
or any release of a Security Interest shall be effective unless the same shall
be in writing and signed by Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.  No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances.

     

    Section 8.3.      Addresses for Notices; Requests for
Accounting.  Except as otherwise expressly provided herein, all
notices, requests, demands and other communications provided for under the Loan
Documents shall be in writing and shall be (a) personally delivered,
(b) sent by first class United States mail, (c) sent by overnight
courier of national reputation, or (d) transmitted by telecopy, in each
case addressed or telecopied to the party to whom notice is being given at its
address or telecopier number as set forth below next to its signature or, as to
each party, at such other address or telecopier number as may hereafter be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section.  All such notices, requests,
demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in
the mail if delivered by mail, (c) the date sent if sent by overnight
courier, or (d) the date of transmission if delivered by telecopy, except
that notices or requests to Bank pursuant to any of the provisions of
Article II shall not be effective until received by Bank.  All
requests under Section 9210 of the UCC (i) shall be made in a writing
signed by a person authorized under Section 2.1(d), (ii) shall be
personally delivered, sent by registered or certified mail, return receipt
requested, or by overnight courier of national reputation (iii) shall be
deemed to be sent when received by Bank and (iv) shall otherwise comply
with the requirements of Section 9210.  Borrower requests that
Bank respond to each such request which on its face appears to come from an
authorized individual and releases Bank from any liability for so
responding.  Borrower shall pay Bank the maximum amount allowed by law
for responding to such requests.

    
      
         

      

      
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    Section 8.4.     Further
Documents.  Borrower will from time to time execute and deliver
or endorse any and all instruments, documents, conveyances, assignments,
security agreements, financing statements, control agreements and other
agreements and writings that Bank may reasonably request in order to secure,
protect, perfect or enforce the Security Interest or Bank’s rights under the
Loan Documents (but any failure to request or assure that Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).

     

    Section 8.5.     Costs and
Expenses.  Borrower shall pay within fifteen (15) days after
written demand all costs and expenses, including reasonable attorneys’ fees and
expenses relating to a survey, an environmental report, and an appraisal report,
incurred by Bank in connection with the Obligations, this Agreement, the Loan
Documents, and any other document or agreement related hereto or thereto, and
the transactions contemplated hereby, including all such costs, expenses and
fees incurred in connection with the negotiation, preparation, execution,
amendment, administration, performance, collection and enforcement of the
Obligations and all such documents and agreements and the creation, perfection,
protection, satisfaction, foreclosure or enforcement of the Security
Interest.

     

    Section 8.6.     Indemnity.  In
addition to the payment of expenses pursuant to Section 8.5, Borrower shall
indemnify, defend and hold harmless Bank, and any of its participants, parent
corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the “Indemnitees”) from and
against any of the following (collectively, “Indemnified Liabilities”),
in each, other than arising as a result of the gross negligence or willful
misconduct of any Indemnitee:

     

    (i)      any
and all transfer taxes, documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of the Loan
Documents or the making of the Loan;

     

    (ii)     any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 5.14 proves to be incorrect
in any respect or as a result of any violation of the covenant contained in
Section 6.13(b); and

    
      
         

      

      
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    (iii)    any
and all other liabilities, losses, damages, penalties, judgments, suits, claims,
costs and expenses of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel) in connection with the foregoing and any
other investigative, administrative or judicial proceedings, whether or not such
Indemnitee shall be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any manner related to or
arising out of or in connection with the Credit Facility and the Loan Documents
or the use or intended use of the proceeds of the Line of Credit.

     

    If any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon such Indemnitee’s request,
Borrower, or counsel designated by Borrower and satisfactory to the Indemnitee,
will resist and defend such action, suit or proceeding to the extent and in the
manner directed by the Indemnitee, at Borrower’s sole costs and
expense.  Each Indemnitee will use its best efforts to cooperate in
the defense of any such action, suit or proceeding.  If the foregoing
undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable
law.  Borrower’s obligation under this Section 8.6 shall survive
the termination of this Agreement and the discharge of Borrower’s other
obligations hereunder.

     

    Section 8.7.     Participants.  Borrower
hereby authorizes Bank to disclose to any assignee or any participant
(either, a “Transferee”) and any
prospective Transferee any and all financial information in Bank’s possession
concerning Borrower which has been delivered to Bank by Borrower pursuant to
this Agreement or which has been delivered to Bank by Borrower in connection
with Bank’s credit evaluation prior to entering into this
Agreement.  Bank and its participants, if any, are not partners or
joint venturers, and Bank shall not have any liability or responsibility for any
obligation, act or omission of any of its participants.  All rights
and powers specifically conferred upon Bank may be transferred or delegated to
any of Bank’s participants, successors or assigns.

     

    Section 8.8.     Advertising and
Promotion.  Borrower agrees that Bank may use Borrower’s name
in advertising and promotional materials, and in conjunction therewith, Bank may
disclose the amount of the Credit Facility and the purpose thereof, only upon
the express consent of Borrower, which consent shall not be unreasonably
withheld.

     

    Section 8.9.    
Execution in Counterparts;
Telefacsimile Execution.  This Agreement and the other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same
instrument.  Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement.  Any party delivering an executed
counterpart of this Agreement by telefacsimile also shall deliver an original
executed counterpart of this Agreement but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Agreement.

     

    Section 8.10.   Retention of Borrower’s
Records.  Bank shall have no obligation to maintain any
electronic records or any documents, schedules, invoices, or other papers
delivered to Bank by Borrower or in connection with the Loan Documents for more
than twelve months after receipt by Bank; provided that Borrower shall
not have any obligation to provide Bank with duplicate records and documents
after the same have been destroyed by Bank.

    
      
         

      

      
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    Section 8.11.    Binding Effect; Assignment; Complete
Agreement; Exchanging Information.  The Loan Documents shall be
binding upon and inure to the benefit of Borrower and Bank and their respective
successors and assigns, except that Borrower shall not have the right to assign
its rights thereunder or any interest therein without Bank’s prior written
consent.  Bank shall not assign any of its rights and obligations
arising under this Agreement or the Note without the prior written consent of
Borrower, which consent shall not be unreasonably withheld or delayed; provided notwithstanding the
foregoing, Borrower’s consent to any such assignment shall not be required
(i) if a Default Period has occurred and is continuing, (ii) if Bank
assigns this Agreement in connection with any sale or all or any portion of its
loan portfolio,  (iii) if Bank assigns this Agreement to any
Affiliate of Bank, or (iv) Bank may pledge or grant a security interest in all
or any portion of this Agreement to secure its obligations, including any such
pledge or grant to a Federal Reserve Bank, and this Section shall not apply to
any such grant or pledge; provided, that no such pledge
or grant of a security interest shall release Bank from any of its obligations
hereunder or substitute any such pledgee or secured party for Bank as party
hereto.  To the extent permitted by law, Borrower waives and will not
assert against any assignee any claims, defenses or set-offs which Borrower
could assert against Bank.  This Agreement shall also bind all Persons
who become a party to this Agreement as Borrower.  This Agreement,
together with the Loan Documents, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof.  Without
limiting Bank’s right to share information regarding Borrower and its Affiliates
with Bank’s participants, accountants, lawyers and other advisors, Bank, Wells
Fargo & Company, and all direct and indirect subsidiaries of Wells Fargo
& Company, may exchange any and all information they may have in their
possession regarding Borrower and its Affiliates, and Borrower waives any right
of confidentiality it may have with respect to such exchange of such
information.

     

    Section 8.12.    Severability of
Provisions.  Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

     

    Section 8.13.    Revival and Reinstatement of
Obligations.  If the incurrence or payment of the Obligations
by Borrower or any Guarantor or the transfer to Bank of any property should for
any reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors’ rights, including provisions of Bankruptcy
Code relating to fraudulent conveyances, preferences, or other voidable or
recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if
Bank is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Bank is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Bank related thereto, the liability of Borrower or any
Guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.

    
      
         

      

      
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    Section 8.14.   Headings.  Article,
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

     

    Section 8.15.   Governing
Law. This
Agreement and the other loan documents (except as otherwise specified therein),
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the internal laws of the State of
California.

     

    Section 8.16.   Submission
to Jurisdiction.  Subject
to Section 8.17:  (i) any legal action or proceeding with
respect to this Agreement or any other Loan Document may be brought solely in
the courts of the state of California or of the United States for the Northern
District of California, and, by execution and delivery hereof, each of Borrower
and Bank consents, for itself and in respect of its property, to the
jurisdiction of those courts; (ii) each of Borrower and Bank irrevocably
waives any objection, including any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of this
agreement or any document related hereto.  Each of Borrower and Bank
waives personal service of any summons, complaint or other process, which may be
made by any other means permitted by California law.

     

    Section 8.17.   Waiver
of Jury Trial.  Each
of Borrower and Bank, to the fullest extent permitted by applicable law, hereby
irrevocably waives all right to a trail by jury in any action, proceeding,
counterclaim or other litigation in any way arising out of or relating to this
Agreement, any other of the Loan Documents or any of the transactions or events
referenced herein or therein or contemplated hereby or thereby, whether with
respect to contract claims, tort claims or otherwise.  This waiver
shall apply to any subsequent amendments, renewals, supplements or modifications
to this Agreement or any other of the Loan Documents.  A copy of this
Section 8.17 may be filed with any court as written evidence of the waiver
of the right to trial by jury and the consent to trial by
court.

     

    Section 8.18.   Arbitration.  (a) Arbitration.  The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether
in tort, contract or otherwise in any way arising out of or relating to
(i) any credit subject hereto, or any of the Loan Documents, and their
negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional
credit.

    
      
         

      

      
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    (b)      Governing
Rules.  Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association (“AAA”); (ii) be governed
by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the “Rules”).  If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control.  Any party who fails or
refuses to submit to arbitration following a demand by any other party shall
bear all costs and expenses incurred by such other party in compelling
arbitration of any dispute.  Nothing contained herein shall be deemed
to be a waiver by any party that is a bank of the protections afforded to it
under 12 U.S.C. §91 or any similar applicable state law.

     

    (c)      No Waiver of Provisional Remedies,
Self-Help and Foreclosure.  The arbitration requirement does
not limit the right of any party to (i) foreclose against the Collateral;
(ii) exercise self-help remedies relating to Collateral or proceeds of
Collateral such as setoff or repossession; or (iii) obtain provisional or
ancillary remedies such as replevin, injunctive relief, attachment or the
appointment of a receiver, before during or after the pendency of any
arbitration proceeding.  This exclusion does not constitute a waiver
of the right or obligation of any party to submit any dispute to arbitration or
reference hereunder, including those arising from the exercise of the actions
detailed in sections (i), (ii) and (iii) of this paragraph.

     

    (d)      Arbitrator Qualifications and
Powers.  Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator
selected according to the Rules, and who shall not render an award of greater
than $5,000,000.00.  Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided
however, that all three arbitrators must actively participate in all
hearings and deliberations.  The arbitrator will be a neutral attorney
licensed in the State of California or a neutral retired judge of the state or
federal judiciary of California, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The arbitrator will determine whether or
not an issue is arbitratable and will give effect to the statutes of limitation
in determining any claim.  In any arbitration proceeding the
arbitrator will decide (by documents only or with a hearing at the arbitrator’s
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication.  The
arbitrator shall resolve all disputes in accordance with the substantive law of
California and may grant any remedy or relief that a court of such state could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award.  The arbitrator shall also have the power
to award recovery of all costs and fees, to impose sanctions and to take such
other action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil
Procedure or other applicable law.  Judgment upon the award rendered
by the arbitrator may be entered in any court having
jurisdiction.  The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

    
      
         

      

      
        - 49
-

        
          

        

      

      
         

      

    

     

    (e)      Discovery.  In any
arbitration proceeding, discovery will be permitted in accordance with the
Rules.  All discovery shall be expressly limited to matters directly
relevant to the dispute being arbitrated and must be completed no later than 20
days before the hearing date.  Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party’s presentation and that no alternative means for
obtaining information is available.

     

    (f)      Class Proceedings and
Consolidations.  No party hereto shall be entitled to join or
consolidate disputes by or against others in any arbitration, except parties who
have executed any Loan Document, or to include in any arbitration any dispute as
a representative or member of a class, or to act in any arbitration in the
interest of the general public or in a private attorney general
capacity.

     

    (g)      Payment Of Arbitration Costs And
Fees.  The arbitrator shall award all costs and expenses of the
arbitration proceeding.

     

    (h)      Real Property Collateral; Judicial
Reference.  Notwithstanding anything herein to the contrary, no
dispute shall be submitted to arbitration if the dispute concerns indebtedness
secured directly or indirectly, in whole or in part, by any real property unless
(i) the holder of the mortgage, lien or security interest specifically
elects in writing to proceed with the arbitration, or (ii) all parties to
the arbitration waive any rights or benefits that might accrue to them by virtue
of the single action rule statute of California, thereby agreeing that all
indebtedness and obligations of the parties, and all mortgages, liens and
security interests securing such indebtedness and obligations, shall remain
fully valid and enforceable.  If any such dispute is not submitted to
arbitration, the dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and this general
reference agreement is intended to be specifically enforceable in accordance
with said Section 638.  A referee with the qualifications
required herein for arbitrators shall be selected pursuant to the AAA’s
selection procedures.  Judgment upon the decision rendered by a
referee shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and
645.

     

    (i)    
  Miscellaneous.  To
the maximum extent practicable, the AAA, the arbitrators and the parties shall
take all action required to conclude any arbitration proceeding within
180 days of the filing of the dispute with the AAA.  No
arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation.  If more than one agreement for arbitration by or between
the parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the dispute
shall control.  This arbitration provision shall survive termination,
amendment or expiration of any of the Loan Documents or any relationship between
the parties.

     

    (j)    
  Small Claims
Court.  Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction.  Further, this arbitration provision shall apply
only to disputes in which either party seeks to recover an amount of money
(excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of
the Small Claims Court.

    
      
         

      

      
        - 50
-

        
          

        

      

      
         

      

    

     

    Section 8.19.   Confidentiality.  Except
as set forth in Section 8.7 and Section 8.8 hereof, Bank shall hold
all confidential non-public information obtained by Bank in accordance with
Bank’s customary procedures for handling confidential information of this
nature; provided that
Bank may disclose such confidential information (i) to its examiners,
Affiliates, outside auditors, counsel and other professional advisors on a need
to know basis, (ii) to any prospective participant or transferee of Bank’s
rights or obligations hereunder, provided such participant or transferee agrees,
prior to the disclosure of such information by Bank, to be bound by the terms of
this Section 8.19 with respect to such information and (iii) as
required or requested by any Governmental Authority or representative thereof or
pursuant to legal process; provided further that this
duty shall expire if such information becomes publicly available through no
breach of this Section 8.19 by Bank; provided further that unless
specifically prohibited by applicable law or court order, Bank shall use
commercially reasonable efforts, prior to disclosure thereof, to notify Borrower
of the request for disclosure of such non-public information (A) by a
Governmental Authority or representative thereof or (B) pursuant to legal
process.  Notwithstanding anything herein to the contrary, Bank may
disclose to any and all Persons, without limitation of any kind, any information
with respect to the “tax treatment” and “tax structure” (in each case, within
the meaning of Treasury Regulation Section 1.6011-4) of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are provided Bank relating to such tax treatment and tax
structure; provided
that with respect to any document or similar item that in either case contains
information concerning the tax treatment or tax structure of the transaction as
well as other information, this sentence shall only apply to such portions of
the document or similar item that relate to the tax treatment or tax structure
of the transactions contemplated hereby.

    

    [Signatures
on Next Page]

    
      
         

      

      
        - 51
-

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date first above
written.

    

    
      
        
          	
                  Lifecore
      Biomedical, LLC

                	
                  Lifecore
      Biomedical, LLC, a Minnesota

                
	
                  3515
      Lyman Boulevard

                	
                  limited
      liability company

                
	
                  Chaska,
      MN  55318

                	 
      
	
                  Telecopier:
      (952) 368-3411

                	
                  By:

                	
                  /s/Dennnis J. Allingham

                
	
                  Attention:
      Director of Finance

                	 
      	
                  Dennis
      J. Allingham

                
	
                  e-mail:
      scott.collins@lifecore.com

                	 
      	
                  President
      and Chief Executive Officer

                
	 	 
	
                  Wells
      Fargo Bank, N.A.

                	
                  Wells
      Fargo Bank, National Association

                
	
                  Peninsula
      RCBO

                	 
      
	
                  400
      Hamilton Avenue, P.O. Box 150

                	 
      
	
                  Palo
      Alto, CA  94302

                	
                  By:

                	
                  /s/TimPalmer

                
	
                  Telecopier:  (650)
      328-0814

                	 
      	
                  Tim
      Palmer

                
	
                  Attention:
      Caroline Peyton

                	 
      	
                  Vice
      President

                
	
                  e-mail:
      caroline.peyton@wellsfargo.com

                	 
      

        

      

    

    
      
         

      

      
        - 52
-

        
          

        

      

      
         

      

    

     

    Table
of Exhibits and Schedules

     

    
      
        
          
            
              	
                      Exhibit
      A

                    	
                      Form
      of Note

                    
	 
      	 
      
	
                      Exhibit
      B-1

                    	
                      Form
      of Compliance Certificate (Borrower)

                    
	 
      	 
      
	
                      Exhibit
      B-2

                    	
                      Form
      of Compliance Certificate (Parent)

                    
	 
      	 
      
	
                      Exhibit
      C

                    	
                      Premises

                    
	 
      	 
      
	
                      Schedule
      5.1

                    	
                      Trade
      Names, Chief Executive Office, Principal Place of Business, and Locations
      of Collateral

                    
	 
      	 
      
	
                      Schedule
      5.2

                    	
                      Capitalization
      and Organizational Chart

                    
	 
      	 
      
	
                      Schedule
      5.5

                    	
                      Subsidiaries

                    
	 
      	 
      
	
                      Schedule
      5.9

                    	
                      Taxes

                    
	 
      	 
      
	
                      Schedule
      5.11

                    	
                      Intellectual
      Property Disclosures

                    
	 
      	 
      
	
                      Schedule
      6.4

                    	
                      Permitted
      Liens

                    
	 
      	 
      
	
                      Schedule
      6.5

                    	
                      Permitted
      Indebtedness and
Guaranties

                    

            

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Exhibit
A

    TERM
NOTE

     

    
      
        	
                $20,000,000

              	
                Palo
      Alto, California

              

      

    

    April 30,
2010

     

    FOR VALUE
RECEIVED, the undersigned LIFECORE BIOMEDICAL, LLC, a Minnesota limited
liability company (“Borrower”) promises to pay to the order of WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”) at its office at  400 Hamilton Avenue,
Palo Alto, California  94302, California, or at such other place as
the holder hereof may designate, in lawful money of the United States of America
and in immediately available funds, the principal sum of Twenty Million and
No/100 Dollars ($20,000,000), with interest thereon as set forth
herein.

     

    
      DEFINITIONS:

    

     

    Capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
the Credit Agreement (as defined below).  As used herein, the
following terms shall have the meanings set forth after each, and any other term
defined in this Note shall have the meaning set forth at the place
defined:

     

    (a)      “Business
Day” means any day except a Saturday, Sunday or any other day on which
commercial banks in California are authorized or required by law to
close.

     

    (b)      “Credit
Agreement” means that certain Credit Agreement dated as of even day herewith
between Borrower and Bank, as the same may be amended, modified, restated or
supplemented from time to time.

     

    (c)      “Daily
Three Month LIBOR” means, for any day, the rate of interest equal to LIBOR then
in effect for delivery for a three (3) month period.

     

    (d)      “Fixed
Rate Term” means a period commencing on a Business Day and continuing for 1, 2,
or 3 months, as designated by Borrower, during which all or a portion of the
outstanding principal balance of this Note bears interest determined in relation
to LIBOR; provided however, that no Fixed Rate Term may be selected for a
principal amount less than Two Hundred Fifty and No/100 Dollars ($250,000); and
provided further, that no Fixed Rate Term shall extend beyond the Term Loan
Maturity Date.  If any Fixed Rate Term would end on a day which is not
a Business Day, then such Fixed Rate Term shall be extended to the next
succeeding Business Day.

     

    (e)      “LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8
of 1%) and determined pursuant to the following formula:

    
      
        
          
            	 	 	 	 
	
                    LIBOR
      =

                  	 	
                    Base
      LIBOR

                  	 
      
	 
      	 	
                    100%
      - LIBOR Reserve Percentage

                  	 
      

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      (i)    
  “Base LIBOR” means the rate per annum for United States dollar
deposits quoted by Bank (A) for the purpose of calculating effective
rates of interest for loans making reference to LIBOR, as the Inter-Bank Market
Offered Rate, with the understanding that such rate is quoted by Bank for the
purpose of calculating effective rates of interest for loans making reference
thereto, on the first day of a Fixed Rate Term for delivery of funds on said
date for a period of time approximately equal to the number of days in such
Fixed Rate Term and in an amount approximately equal to the principal amount to
which such Fixed Rate Term applies, or (B) for the purpose of calculating
effective rates of interest for loans making reference to the Daily Three Month
LIBOR Rate, as the Inter-Bank Market Offered Rate in effect from time to time
for delivery of funds for three (3) month in amounts approximately equal to the
principal amount of such loans.  Borrower understands and agrees that
Bank may base its quotation of the Inter-Bank Market Offered Rate upon such
offers or other market indicators of the Inter-Bank Market as Bank in its
discretion deems appropriate including, but not limited to, the rate offered for
U.S. dollar deposits on the London Inter-Bank Market.

    

     

    (ii)      “LIBOR
Reserve Percentage” means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for “Eurocurrency
Liabilities” (as defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve percentage
during the applicable term of this Note.

     

    
      INTEREST:

    

     

    (a)      Interest.  The
outstanding principal balance of this Note shall bear interest (computed on the
basis of a 360-day year, actual days elapsed) as selected by Borrower either
(i) at a fluctuating rate per annum determined by Bank to be two percent
(2.0%) above the Daily Three Month LIBOR Rate in effect from time to time, or
(ii) at a fixed rate per annum determined by Bank to be two percent (2.0%)
above LIBOR in effect on the first day of the applicable Fixed Rate
Term.  When interest is determined in relation to the Daily Three
Month LIBOR Rate, each change in the interest rate shall become effective each
Business Day that Bank determines that the Daily Three Month LIBOR Rate has
changed.  Bank is hereby authorized to note the date, principal amount
and interest rate applicable thereto and any payments made thereon on Bank’s
books and records (either manually or by electronic entry) and/or on any
schedule attached to this Note, which notations shall be prima facie evidence of
the accuracy of the information noted.

    
      
         

      

      
        - 2
-

        
          

        

      

      
         

      

    

     

    (b)      Selection of Interest Rate
Options.  At any time any portion of this Note bears interest
determined in relation to LIBOR for a Fixed Rate Term, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Daily Three Month
LIBOR Rate or to LIBOR for a new Fixed Rate Term designated by
Borrower.  At any time any portion of this Note bears interest
determined in relation to the Daily Three Month LIBOR Rate, Borrower may at any
time convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower.  At
such time as Borrower requests an advance hereunder or wishes to select an
interest rate determined in relation to the Daily Three Month LIBOR Rate or a
Fixed Rate Term for all or a portion of the outstanding principal balance
hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice
specifying:  (i) the interest rate option selected by Borrower;
(ii) the principal amount subject thereto; and (iii) for each LIBOR
selection for a Fixed Rate Term, the length of the applicable Fixed Rate
Term.  Any such notice may be given by telephone (or such other
electronic method as Bank may permit) so long as, with respect to each LIBOR
selection for a Fixed Rate Term, (A) if requested by Bank, Borrower
provides to Bank written confirmation thereof not later than three (3)
Business Days after such notice is given, and (B) such notice is given to
Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a
later time during any Business Day if Bank, at its sole option but without
obligation to do so, accepts Borrower’s notice and quotes a fixed rate to
Borrower.  If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate.  If no specific designation of interest is made at the
time any advance is requested hereunder or at the end of any Fixed Rate Term,
Borrower shall be deemed to have made a Daily Three Month LIBOR Rate interest
selection for such advance or the principal amount to which such Fixed Rate Term
applied.

     

    (c)      Taxes and Regulatory
Costs.  Borrower shall pay to Bank immediately within
fifteen (15) days after written demand, in addition to any other amounts
due or to become due hereunder, any and all (i) withholdings, interest
equalization taxes, stamp taxes or other taxes (except income and franchise
taxes) imposed by any domestic or foreign governmental authority and related in
any manner to LIBOR, and (ii) future, supplemental, emergency or other
changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal
Deposit Insurance Corporation, or similar requirements or costs imposed by any
domestic or foreign governmental authority or resulting from compliance by Bank
with any request or directive (whether or not having the force of law) from any
central bank or other governmental authority and related in any manner to LIBOR
to the extent they are not included in the calculation of LIBOR.  In
determining which of the foregoing are attributable to any LIBOR option
available to Borrower hereunder, any reasonable allocation made by Bank among
its operations shall be conclusive and binding upon Borrower.

     

    (d)      Payment of
Interest.  Interest accrued on this Note shall be payable on
the last day of each month, commencing May 31, 2010.

     

    (e)      Default
Interest.  From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Bank’s option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to two percent (2%) above
the rate of interest from time to time applicable to this Note (“Default
Interest”).

     

    
      
        REPAYMENT
AND PREPAYMENT:

      

    

     

    (a)      Repayment.  Principal
shall be payable on the last day of each month in installments of Three Hundred
Thirty-Three Thousand Three Hundred Thirty Three and 33/100 Dollars
($333,333.33) each, commencing May 31, 2010, and continuing up to and
including March 31, 2015, with a final installment consisting of all
remaining unpaid principal due and payable in full on the Term Loan Maturity
Date.

    
      
         

      

      
        - 3
-

        
          

        

      

      
         

      

    

     

    (b)      Application of
Payments.  Each payment made on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof.  All payments credited to principal shall be applied first, to
the outstanding principal balance of this Note which bears interest determined
in relation to the Daily Three Month LIBOR Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.

     

    (c)      Prepayment.  Borrower
shall repay the Note in accordance with Section 2.5(b) of the Credit
Agreement and may prepay the Note as follows:

     

    Daily Three Month LIBOR
Rate.  Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to the Daily Three Month LIBOR
Rate at any time, in any amount and without penalty.

     

    LIBOR.  Borrower
may prepay principal on any portion of this Note which bears interest determined
in relation to LIBOR at any time and in the minimum amount of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000); provided however, that if the
outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof.  In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:

     

    
      
        	
              	
                (i)

              	
                Determine the
      amount of interest which would have accrued each month on the amount
      prepaid at the interest rate applicable to such amount had it remained
      outstanding until the last day of the Fixed Rate Term applicable
      thereto.

              

      

    

     

    
      
        	
              	
                (ii)

              	
                Subtract from
      the amount determined in (i) above the amount of interest which would have
      accrued for the same month on the amount prepaid for the remaining term of
      such Fixed Rate Term at LIBOR in effect on the date of prepayment for new
      loans made for such term and in a principal amount equal to the amount
      prepaid.

              

      

    

     

    
      
        	
              	
                (iii)

              	
                If
      the result obtained in (ii) for any month is greater than zero, discount
      that difference by LIBOR used in (ii)
above.

              

      

    

     

    Borrower
acknowledges that prepayment of such amount may result in Bank incurring
additional costs, expenses and/or liabilities, and that it is difficult to
ascertain the full extent of such costs, expenses and/or
liabilities.  Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.  If
Borrower fails to pay any prepayment fee when due, the amount of such prepayment
fee shall thereafter bear interest until paid at a rate per annum two percent
(2.0%) above the Daily Three Month LIBOR Rate in effect from time to time
(computed on the basis of a 360-day year, actual days elapsed).

    
      
         

      

      
        - 4
-

        
          

        

      

      
         

      

    

     

    All
prepayments of principal shall be applied on the most remote principal
installment or installments then unpaid.

     

    
      EVENTS
OF DEFAULT:

    

     

    This Note
is made pursuant to and is subject to the terms and conditions of the Credit
Agreement.  Any default in the payment or performance of any
obligation under this Note, or any Event of Default under the Credit Agreement,
shall constitute an “Event of Default” under this Note.

     

    
      MISCELLANEOUS:

    

     

    (a)    
Remedies.  Upon
the occurrence of any Event of Default, the holder of this Note, at the holder’s
option and in addition to any other remedies set forth in the Credit Agreement,
may declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, notice of
nonperformance, notice of protest, protest or notice of dishonor, all of which
are expressly waived by Borrower.  Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of the holder’s in-house counsel), expended
or incurred by the holder in connection with the enforcement of the holder’s
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in any way related to
this Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

     

    (b)    
Obligations Joint and
Several.  Should more than one person or entity sign this Note
as a Borrower, the obligations of each such Borrower shall be joint and
several.

     

    (c)    
Governing
Law.  This Note shall be governed by and construed in
accordance with the laws of the State of California.

     

    IN
WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

    

    Lifecore
Biomedical, LLC, a

      Minnesota
limited liability company

    

    
      
        
          	
                  By:

                	
                     

                
	 
      	
                  Dennis
      J. Allingham

                
	 
      	
                  President
      and Chief Executive
Officer

                

        

      

    

    
      
         

      

      
        - 5
-

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