LIFECORE BIOMEDICAL INC
EX-10.1 REVOLVING CREDIT AND SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>c74597exv10w1.txt
<DESCRIPTION>EX-10.1 REVOLVING CREDIT AND SECURITY AGREEMENT
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.1
                           REVOLVING CREDIT AGREEMENT
                          Dated as of December 18, 2002

         LifeCore Biomedical, Inc., a Minnesota corporation (the "Borrower"),
located at 3515 Lyman Boulevard, Chaska, MN 55318 and M&I Marshall and Ilsley
Bank, a Wisconsin state banking corporation (the "Bank"), located at 651
Nicollet Mall, Minneapolis, Minnesota 55402-1611, agree as follows:

                                   ARTICLE I.

                                  DEFINITIONS

        Section 1.1. Definitions. As used in this Agreement the
following terms shall have the following meanings (such meanings to be equally
applicable to singular and plural forms of the terms defined):

                  (a) "Affiliate" means any of the following Persons:

                           (i) any director, officer or employee of the
                  Borrower;

                           (ii) any person who, individually or with his
                  immediate family, beneficially owns or holds 5% or more of
                  voting interest of the Borrower; or

                           (iii) any Subsidiary and any company in which any
                  Person described above owns a 5% or greater equity interest.

                  (b) "Borrowing Base" means an amount equal to the sum of the
         following:

                           (i) 80% of the Value of Eligible Accounts; and

                           (ii) 50% of the Value of Eligible Inventory, provided
                  that the portion of the Borrowing Base attributable to this
                  factor shall not at any time exceed $1,000,000.00.


<PAGE>




                  (c) "Borrowing Base Certificate" means a certificate signed by
         the chief financial officer of the Borrower that shows as of the date
         of determination the Value of Eligible Accounts and the Value of
         Eligible Inventory and is delivered to the Bank pursuant to Section
         5.1(a).

                  (d) "Business Day" means any day other than a Saturday, Sunday
         or a public holiday or the equivalent under the laws of the State of
         Minnesota or the United States of America.

                  (e) "Debt" means (i) indebtedness for borrowed money or for
         the deferred purchase price of property or services, (ii) obligations
         as lessee under leases that have been or should be, in accordance with
         generally accepted accounting principles, recorded as capital leases,
         (iii) obligations under direct or indirect guaranties in respect of,
         and obligations (contingent or otherwise) to purchase or otherwise
         acquire, or otherwise to assure a creditor against loss in respect of,
         indebtedness or obligations of others of the kinds referred to in
         clause (i) or (ii) above, and (iv) liabilities in respect of unfunded
         vested benefits under plans covered by Title IV of ERISA.

                  (f) "Event of Default" means one of the events specified in
         Section 6.1.

                  (g) "Inventory" means the Borrower's finished goods and raw
         materials held for sale or use in the ordinary course of business, but
         excluding work-in-process.

                  (h) "Loan Documents" means this Agreement, the Note, the
         Security Agreement, and all other documents to be executed in
         connection with this Agreement.

                  (i) "Loan Party" means any Person obligated under any Loan
         Document.

                  (j) "Note" means the Revolving Note described in Section 2.2.

                                      C-2

<PAGE>




                  (k) "Person" means an individual, corporation, partnership,
         joint venture, trust or unincorporated organization or governmental
         agency or political subdivision thereof.

                  (l) "Prime Rate" means the rate established by the Bank from
         time to time as its prime rate.

                  (m) "Subsidiary" means any entity of which more than 50% of
         the outstanding equity interests having ordinary voting power to elect
         a majority of the Board of Directors, Board of Governors or comparable
         governing body of such entity (irrespective of whether or not at the
         time equity interests of such entity shall or might have voting power
         upon the occurrence of any contingency) is at the time directly or
         indirectly owned by the Borrower, by the Borrower and one or more other
         Subsidiaries, or by one or more other Subsidiaries.

                  (n) "Tangible Net Worth" means the aggregate of the capital
         stock, paid in surplus and retained earnings of the Borrower (excluding
         stock of the Borrower held by the Borrower), determined and computed in
         accordance with generally accepted accounting principles consistently
         applied from year to year, less the book value of all assets of the
         Borrower that would be treated as intangibles under generally accepted
         accounting principles including without limitation, such items as
         goodwill, trademarks, tradenames, service marks, copyrights, patents,
         licenses, internet domain names, uniform resource locators, and website
         contracts and registration rights and less the book value of all
         obligations owed to the Borrower by any of its Affiliates.



                                      C-3

<PAGE>




                  (o) "Total Liabilities" means the aggregate of the liabilities
         of the Borrower determined and computed in accordance with generally
         accepted accounting principles consistently applied from year to year.

                  (p) "Value of Eligible Accounts" means the aggregate net
         unpaid amount then due and owing under all domestic accounts receivable
         of the Borrower that: (i) arise from the provision of service or the
         sale of finished goods constituting part of Inventory in the ordinary
         course of business of the Borrower; (ii) are not dated more than 30
         days after delivery or performance and not more than 60 days past due;
         (iii) are not owed by an Affiliate of the Borrower; (iv) are subject to
         a perfected security interest in favor of only the Bank as required by
         this Agreement; (v) are not subject to dispute by the account debtor,
         provided that this exclusion shall not apply to the value of any
         portion of an account that is not subject to dispute; (vi) are not owed
         by an account debtor as to which any bankruptcy, receivership or
         similar insolvency proceeding is pending; and (vii) are not owed by the
         United States government or an agency of the United States government;
         provided, however, that no obligations of any account debtor to the
         Borrower shall be included in this computation if more than 10% of such
         account debtor's obligations to the Borrower are more than 60 days past
         due.

                  (q) "Value of Eligible Inventory" means an amount equal to the
         lesser of cost or fair market value of the Borrower's Inventory that is
         subject to a perfected security interest in favor of only the Bank as
         required by this Agreement as determined and computed in accordance
         with generally accepted accounting principles.



                                      C-4

<PAGE>




         Section 1.2. Accounting and Other Terms. All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
generally accepted accounting principles consistently applied as such principles
may change from time to time. Other terms defined herein shall have the meanings
ascribed to them herein.

                                   ARTICLE II.

                                 REVOLVING LOAN

         Section 2.1. Commitment for Revolving Loan. The Bank agrees, in
accordance with the terms of this Agreement, to make advances (the "Advances")
to the Borrower from time to time from the date hereof to and including December
31, 2005 (the "Termination Date") or the earlier termination of the Commitment
under the terms of this Agreement, in an aggregate amount not to exceed
$5,000,000.00 (the "Commitment"); provided, however, that (i) the aggregate
amount of Advances outstanding shall not at any time exceed the lesser of (A)
the Commitment or (B) the Borrowing Base and (ii) the Commitment shall expire on
December 31, 2003 if the Borrower fails to pay a facility fee of $12,500.00 to
the Bank on or before December 31, 2003. Each Advance shall be in an amount of
not less than $50,000.00. Within the limits of the Commitment the Borrower may
borrow, prepay pursuant to Section 2.5 and reborrow under this Section 2.1.

         Section 2.2. The Note. The Advances made by the Bank shall be evidenced
by a promissory note (the "Note") that is in substantially the form of Exhibit A
attached hereto and is delivered to the Bank pursuant to Article III.

         Section 2.3. Making of Advances. The Borrower may request Advances
under this Agreement by giving notice to the Bank, specifying the date of the
requested Advance and the amount thereof. Any request for an Advance shall be
deemed to be a representation that the


                                      C-5

<PAGE>




Borrower's representations and warranties contained in Section 4.1 are true and
correct as of the date of the Advance as though made on and as of such date and
that no event has occurred and is continuing, or will result from such Advance,
that constitutes an Event of Default or would constitute an Event of Default but
for the requirement that notice be given or time elapse or both. The Bank may
disburse each requested Advance by crediting immediately available funds in the
amount of the Advance to the Borrower's demand deposit account maintained with
the Bank.

         Section 2.4. Interest and Payments. The Borrower shall repay, and shall
pay interest on, the aggregate unpaid principal amount of all Advances in
accordance with the Note, except that after and during the continuance of an
Event of Default the Borrower shall pay interest at an annual rate equal to 2.0%
in excess of the rate of interest otherwise provided under the Note. All
payments of principal, interest and fees under this Agreement shall be made when
due to the Bank in immediately available funds. All computations of interest
shall be made by the Bank on the basis of the actual number of days elapsed in a
year of 360 days. Whenever any such payment shall be due on a non-Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest. The Bank is
expressly authorized to charge any principal or interest payment, when due, to
the Borrower's demand deposit account maintained at the Bank, or, if that
account shall not contain sufficient funds, to any other account maintained by
the Borrower at the Bank.

         Section 2.5. Voluntary Prepayment. The Borrower may prepay the Note in
whole or in part; provided, however, that each partial prepayment shall be in a
principal amount of not less than $50,000.00.



                                      C-6

<PAGE>




         Section 2.6. Mandatory Prepayment. In the event that the aggregate
outstanding principal amount of the Note shall exceed the Borrowing Base as
shown on the Borrowing Base Certificate most recently delivered to the Bank
pursuant to Section 5.1(a), the Borrower shall pay to the Bank the amount of
such excess together with the amount of accrued interest to the date of such
prepayment on the amount prepaid. In addition, the Borrower shall re-pay the
Note in full for a period of not less than 30 consecutive days during each
fiscal year of the Borrower.

         Section 2.7. Use of Proceeds. The proceeds of the Advances from the
Bank shall be used for working capital purposes.

                                  ARTICLE III.

                              CONDITIONS OF LENDING

         Section 3.1. Conditions Precedent to Initial Advance. The Bank shall
have no obligation to make the initial Advance hereunder unless the Bank shall
have received on or before the date of such Advance the following documents
along with an initial facility fee of $12,500.00:

                  (a) The Note, properly executed and delivered on behalf of the
         Borrower.

                  (b) A security agreement (the "Security Agreement"), in a form
         acceptable to the Bank properly executed and delivered on behalf of the
         Borrower, granting to the Bank a security interest in all of the
         Borrower's inventory, accounts, equipment, general intangibles and
         other property described therein as security for the performance of the
         Borrower's obligations under this Agreement and the Note, together with
         any UCC-1 Financing Statement or other document deemed necessary or
         desirable by the Bank to perfect the security interest granted by the
         Security Agreement.



                                      C-7

<PAGE>




                  (c) A certified copy of the resolutions of the Board of
         Directors of the Borrower, approving the execution and delivery of the
         Loan Documents to which it is a party and approving all other matters
         contemplated by this Agreement.

                  (d) A certificate by the Secretary or any Assistant Secretary
         of the Borrower certifying the names of the officer or officers of the
         Borrower authorized to sign the Loan Documents to which it is a party,
         together with a sample of the true signature of such officer.

         Section 3.2. Conditions Precedent to Each Advance. The obligation of
the Bank to make each Advance (including the initial Advance) shall be subject
to the further conditions precedent, that on the date of such Advance:

                  (a) The representations and warranties contained in Section
         4.1 of this Agreement are correct on and as of the date of such Advance
         as though made on such date; and

                  (b) No event has occurred and is continuing, or will result
         from such Advance, that constitutes an Event of Default or would
         constitute an Event of Default but for the requirement that notice be
         given or time elapse or both.

                                   ARTICLE IV.

                         REPRESENTATIONS AND WARRANTIES

         Section 4.1. Representations and Warranties of the Borrower. To induce
the Bank to make Advances, the Borrower represents and warrants as follows:

                  (a) Existence of Borrower. The Borrower is a corporation duly
         incorporated, validly existing and in good standing under the laws of
         the state indicated at the beginning of this Agreement. The Borrower
         has not, in the past five years, operated


                                      C-8


<PAGE>




         under any name, including any trade name or assumed name, other than
         the name indicated at the beginning of this Agreement.

                  (b) Authority to Execute. The execution, delivery and
         performance by the Borrower of the Loan Documents to which it is a
         party are within the Borrower's corporate powers, have been duly
         authorized by all necessary corporate action, do not and will not
         conflict with any provision of law or of the articles of incorporation
         or bylaws of the Borrower or of any agreement or contractual
         restriction binding upon or affecting the Borrower or any of its
         property, and need no further shareholder or creditor consent.

                  (c) Binding Obligation. This Agreement is, and the other Loan
         Documents when delivered hereunder will be, legal, valid and binding
         obligations of the Loan Parties enforceable against such Persons in
         accordance with their respective terms.

                  (d) Governmental Approval. No consent of, or filing with, any
         governmental authority is required on the part of any Loan Party in
         connection with the execution, delivery or performance of any Loan
         Documents.

                  (e) Financial Statements. The audited financial statements of
         the Borrower as of June 30, 2001 and the audited financial statements
         as of June 30, 2002, copies of which have been furnished to the Bank,
         have been prepared in conformity with generally accepted accounting
         principles consistently applied and present fairly the financial
         condition of the Borrower as of such dates, and the results of the
         operations of the Borrower for the financial periods then ended, and
         since such dates, there has been no materially adverse change in such
         financial condition.


                                      C-9


<PAGE>




                  (f) Litigation. No litigation or governmental proceeding is
         pending or threatened against the Borrower that may have a materially
         adverse effect on the financial condition or operations of the
         Borrower, except for the existing litigation known as the "Straumann
         Litigation" previously disclosed to the Bank.

                  (g) Title to Assets. The Borrower has good and marketable
         title to all assets used in connection with its trades or businesses,
         and none of such assets is subject to any mortgage, pledge, lien,
         security interest or encumbrance of any kind, except for current taxes
         not delinquent, and except for Permitted Liens.

                  (h) Taxes. The Borrower has filed all federal and state income
         tax returns that are required to be filed, and has paid all taxes shown
         on such returns to be due and all other tax assessments received by it
         to the extent that such assessments have become due.

                  (i) ERISA. No plan (as that term is defined in the Employee
         Retirement Income Security Act of 1974 ("ERISA")) of the Borrower (a
         "Plan") that is subject to Part 3 of Subtitle B of Title 1 of ERISA had
         an accumulated funding deficiency (as such term is defined in ERISA) as
         of the last day of the most recent fiscal year of such Plan ended prior
         to the date hereof, or would have had such an accumulated funding
         deficiency on such date if such year were the first year of such Plan,
         and no material liability to the Pension Benefit Guaranty Corporation
         has been, or is expected by the Borrower to be, incurred with respect
         to any such Plan. No Reportable Event (as defined in ERISA) has
         occurred and is continuing in respect to any such Plan.

                  (j) Defaults. The Borrower is not in default in the payment of
         principal or interest on any indebtedness for borrowed money and is not
         in default under any



                                      C-10

<PAGE>




         instrument or agreement under or subject to which any indebtedness for
         borrowed money has been issued, and no event has occurred and is
         continuing that, with or without the lapse of time or the giving of
         notice, or both, constitutes or would constitute an event of default
         under any such instrument or agreement or an Event of Default
         hereunder.

                  (k) Subsidiaries. The Borrower has no Subsidiaries.

                  (l) Burdensome Contracts. The Borrower is not subject to any
         contracts or agreements the terms of which, if enforced, would
         materially adversely affect the financial condition or operations of
         the Borrower.

                  (m) Patents, Trademarks, Etc. The Borrower has good and
         marketable title to all patents, trademarks, processes, copyrights,
         franchises and licenses title to which is necessary for the operation
         of the Borrower's businesses.

                  (n) Use of Proceeds For Securities Transactions. No proceeds
         of any Advance will be used to acquire any security in any transaction
         that is subject to Section 12 of the Securities Exchange Act of 1934.

                  (o) Regulation U. The 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 issued by the Board of
         Governors of the Federal Reserve System), and no proceeds of any
         Advance 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.


                                      C-11

<PAGE>





                                   ARTICLE V.

                            COVENANTS OF THE BORROWER

         Section 5.1. Affirmative Covenants. So long as the Note shall remain
unpaid or the Bank shall have a Commitment hereunder, the Borrower will, unless
the Bank shall give its prior written consent:


                  (a) Financial Reporting. Furnish to the Bank: (i) as soon as
         available and in any event within 45 days after the end of each quarter
         of each fiscal year of the Borrower, unaudited balance sheets of the
         Borrower as of the end of such quarter and unaudited statements of
         income and retained earnings of the Borrower for the period commencing
         at the end of the previous fiscal year and ending with the end of such
         quarter, certified by the chief financial officer of the Borrower; (ii)
         as soon as available and in any event within 120 days after the end of
         each fiscal year of the Borrower, (A) a copy of the annual report for
         such year for the Borrower, containing financial statements for such
         year certified in a manner acceptable to the Bank by Grant Thornton,
         LLP or other independent public accountants acceptable to the Bank and
         (B) a budget and projections prepared by the Borrower in a form
         reasonably acceptable to the Bank for the following fiscal year; (iii)
         promptly upon the sending or filing thereof copies of all public
         reports issued by the Borrower to any of its security holders, to the
         Securities and Exchange Commission or to any national securities
         exchange; (iv) promptly upon the filing or receiving thereof, copies of
         all reports that the Borrower files under ERISA or that the Borrower
         receives from the Pension Benefit Guaranty Corporation if such report
         shows any material violation or potential violation by the Borrower of
         its obligations under ERISA; (v) such other information concerning the
         conditions or operations, financial or


                                      C-12

<PAGE>




         otherwise, of the Borrower as the Bank from time to time may reasonably
         request; (vi) within 30 days after the end of each month, a Borrowing
         Base Certificate, together with an accounts receivable and accounts
         payable aging, for such month.

                  (b) Visitation Rights. At any reasonable time and from time to
         time, permit the Bank or any agents or representatives thereof, to
         examine and make copies of and abstracts from the records and books of
         account of, and visit the properties of, the Borrower, and to discuss
         the affairs, finances and accounts of the Borrower with any of its
         officers or directors. The Borrower will reimburse the Bank for its
         reasonable costs and expenses of conducting such periodic examinations,
         provided that so long as no Event of Default has occurred and is
         continuing, the Borrower shall not be required to reimburse the Bank
         for more than one such examination in each fiscal year.

                  (c) Notification of Default, Etc. Notify the Bank as promptly
         as practicable (but in any event not later than 5 Business Days) after
         the Borrower obtains knowledge of: (i) the occurrence of any event
         which constitutes an Event of Default or which would constitute an
         Event of Default with the passage of time or the giving of notice or
         both; or (ii) the commencement of any litigation or governmental
         proceedings of any type that could materially adversely affect the
         financial condition or business operations of the Borrower.

                  (d) Compliance Certificate. At the time any financial
         statement is required to be provided to Bank under this Agreement, the
         Borrower will provide to Bank a certificate of the chief financial
         officer of the Borrower substantially in the form of Exhibit B attached
         hereto (appropriately completed). If that certificate shows that an


                                      C-13

<PAGE>




         Event of Default or any event that would constitute an Event of Default
         with the passage of time or the giving of notice or both, has occurred,
         the certificate shall state in reasonable detail the circumstances
         surrounding such event and action proposed by the Borrower to cure such
         event.

                  (e) Keeping of Financial Records and Books of Account.
         Maintain proper financial records in accordance with generally accepted
         accounting principles consistently applied that fully and correctly
         reflect all financial transactions and all assets and liabilities of
         the Borrower.

                  (f) Tangible Net Worth. Maintain as of the end of each fiscal
         quarter (a) Tangible Net Worth of not less than $42,000,000.00 and (b)
         a ratio of Total Liabilities to Tangible Net Worth of not more than
         0.50 to 1.

                  (g) Net Income. Obtain a positive net income in each fiscal
         year.

                  (h) Maintenance of Insurance. Maintain such insurance with
         reputable insurance carriers as is normally carried by companies
         engaged in similar businesses and owning similar property, and name the
         Bank as loss payee on all policies insuring personal property in which
         the Bank has a security interest and provide the Bank with certificates
         of insurance evidencing its status as a loss payee. The loss payee
         endorsement shall provide for payment to the Bank notwithstanding any
         acts or omissions of the Borrower and shall require notice to the Bank
         30 days prior to the expiration or cancellation of the insurance.



                                      C-14

<PAGE>




                  (i) Maintenance of Properties, Etc. Maintain and preserve all
         of its properties, necessary or useful in the proper conduct of its
         business, in good working order and condition, ordinary wear and tear
         excepted.

                  (j) Payment of Taxes. Pay all taxes, assessments and
         governmental charges of any kind payable by it as such taxes,
         assessments and charges become due and before any penalty shall be
         imposed, except as the Borrower shall contest in good faith and by
         appropriate proceedings providing such reserves as are required by
         generally accepted accounting principles.

                  (k) Compliance with ERISA. Cause each Plan to comply and be
         administered in accordance with those provisions of ERISA that are
         applicable to such Plan.

                  (l) Maintenance of Accounts. Maintain its corporate bank
         accounts at the Bank except for such incidental accounts that
         reasonable business judgment requires to be maintained elsewhere, and
         either (i) keep collected demand deposit balances in such accounts in
         the amount necessary to compensate the Bank for applicable activity
         charges in such accounts, as calculated by the Bank and applied to such
         balances in a manner consistent with all similar accounts or (ii) pay
         such activity charges on a monthly basis.

                  (m) Preservation of Corporate Existence, Etc. Preserve and
         maintain its corporate existence, rights, franchises and privileges in
         the jurisdiction of its incorporation, and qualify and remain
         qualified, as a foreign corporation in each jurisdiction in which such
         qualification is necessary or desirable in view of its business and
         operations or the ownership of its properties.


                                      C-15

<PAGE>




         Section 5.2. Negative Covenants. So long as the Note shall remain
unpaid or the Bank shall have a Commitment hereunder, the Borrower will not,
unless the Bank shall give its prior written consent:

                  (a) Liens. Create or suffer to exist any mortgage, pledge,
         lien, security interest or other encumbrance with respect to any assets
         now owned or hereafter acquired by the Borrower except (i) encumbrances
         made in favor of the Bank, (ii) existing encumbrances, (iii) purchase
         money liens on, or leases of, equipment, (iv) deposits or pledges to
         secure payment of workers' compensation, unemployment insurance, old
         age pensions or other social security obligations, in the ordinary
         course of business of the Borrower; (v) liens for taxes, fees,
         assessments and governmental charges not delinquent or to the extent
         that payment therefor shall not at the time be required to be made in
         accordance with the provisions of Section 5.1(j); (vi) liens of
         carriers, warehousemen, mechanics and materialmen, and other like liens
         arising in the ordinary course of business, for sums not due or to the
         extent that payment therefor shall not at the time be required to be
         made; (vii) liens incurred or deposits or pledges made or given in
         connection with, or to secure payment of, indemnity, performance or
         other similar bonds; and (viii) encumbrances in the nature of zoning
         restrictions, easements and rights or restrictions of record on the use
         of real property and landlord's liens under leases on the premises
         rented, which do not materially detract from the value of such property
         or impair the use thereof in the business of the Borrower ("Permitted
         Liens").

                  (b) Merger, Etc. Merge or consolidate with any other Person;
         sell, transfer, convey, lease or otherwise dispose of (whether in one
         transaction or in a series of


                                      C-16

<PAGE>




         transactions) all or a substantial portion of its assets (whether now
         owned or hereafter acquired) to any other Person.

                  (c) Transactions with Affiliates. Engage in any transaction
         (including, without limitation, loans or financial accommodations of
         any kind) with any Affiliate provided that such transactions are
         permitted if they are on terms no less favorable to the Borrower than
         would be obtainable if no such relationship existed.

                  (d) Investments in Other Persons. Make any loan or advance to
         any Person; or purchase or otherwise acquire the capital stock, assets,
         or obligations of, or any interest in, any other Person other than (i)
         readily marketable direct obligations of the United States of America
         or any agency thereof, (ii) certificates of deposits, bankers'
         acceptances or deposits in commercial banks of recognized standing
         operating in the United States of America, (iii) investments existing
         on the date of this Agreement and disclosed in the financial statements
         previously provided to the Bank; (iv) travel advances to management
         personnel and employees in the ordinary course of business; (v)
         commercial paper given the highest rating by a nationally recognized
         rating service; (vi) other readily marketable Investments in debt
         securities which are reasonably acceptable to the Bank; and (vii) other
         investments in an aggregate amount outstanding at any time not in
         excess of $1,000,000.00.

                  (e) Change in Nature of Business. Make any material change in
         the nature of the business of the Borrower, taken as a whole, as
         carried on at the date hereof.


                                      C-17

<PAGE>





                                   ARTICLE VI.

                                     DEFAULT

         Section 6.1. Events of Default. "Events of Default" in this Agreement
means any of the following events:

                  (a) Failure of the Borrower to pay the principal of the Note
         when due;

                  (b) Failure of the Borrower to pay any interest or fees
         required to be paid hereunder or under the Note when due;

                  (c) Any representation or warranty made by, or on behalf of,
         any Loan Party in, or pursuant to, any Loan Document shall prove to
         have been incorrect in any material respect when made or the Borrower
         shall dispose of any collateral described in the Security Agreement in
         violation of the Security Agreement;

                  (d) Default in performance of any other covenant or agreement
         of any Loan Party in, or pursuant to, any Loan Document and continuance
         of such default or breach for a period of 30 days after written notice
         thereof to such Person by the Bank;

                  (e) Any Loan Party shall generally not pay its or his debts as
         such debts become due, or shall admit in writing its or his inability
         to pay its or his debts generally, or shall make a general assignment
         for the benefit of creditors; or any proceeding shall be instituted by
         or against any Loan Party seeking to adjudicate it or him a bankrupt or
         insolvent, or seeking liquidation, winding up, reorganization,
         arrangement, adjustment, custodianship, protection, relief, or
         composition of it or him or its or his debts under any law relating to
         bankruptcy, insolvency or reorganization or relief of debtors, or
         seeking the entry of an order for relief, or the appointment of a
         receiver, custodian, trustee, or other similar official for it or him
         or for any substantial part of its or his property; or any


                                      C-18

<PAGE>




         Loan Party shall take any corporate action to authorize any of the
         actions set forth above in this subsection; and in the case of a
         proceeding of the type described in this paragraph commenced against
         any Loan Party, that proceeding shall not be dismissed within 60 days
         or that Loan Party shall consent to that proceeding;

                  (f) The Borrower shall fail to pay any material Debt (but
         excluding Debt evidenced by the Note) of the Borrower or any interest
         or premium thereon, when due (whether by scheduled maturity, required
         prepayment, acceleration, demand or otherwise) and such failure shall
         continue after the applicable grace period, if any, specified in the
         agreement or instrument relating to such material Debt; or any other
         default under any agreement or instrument relating to any such material
         Debt, or any other event, shall occur and shall continue after the
         applicable grace period, if any, specified in such agreement or
         instrument, if the effect of such default or event is to accelerate, or
         to permit the acceleration of, the maturity of such material Debt; or
         any such material Debt shall be declared to be due and payable, or
         required to be prepaid (other than by a regularly scheduled required
         prepayment), prior to the stated maturity thereof;

                  (g) The entry against any Loan Party of a final judgment,
         decree or order for the payment of money in excess of $250,000.00 and
         the continuance of such judgment, decree or order unsatisfied for a
         period of 30 days without a stay of execution;

                  (h) Any Reportable Event (as defined in ERISA) shall have
         occurred and continue for 30 days; or any Plan shall have been
         terminated by the Borrower not in compliance with ERISA, or a trustee
         shall have been appointed by a court to administer


                                      C-19


<PAGE>




         any Plan, or the Pension Benefit Guaranty Corporation shall have
         instituted proceedings to terminate any Plan or to appoint a trustee to
         administer any Plan.

         Section 6.2. Rights and Remedies. If any Event of Default shall occur
and be continuing, the Bank may exercise any or all of the following rights and
remedies:

                  (a) By written notice to the Borrower, suspend or terminate
         the Commitment, whereupon the same shall forthwith be suspended or
         terminated;

                  (b) Declare the Note, all interest thereon, and all other
         obligations under, or pursuant to, any Loan Document to be immediately
         due and payable, and upon such declaration such Note, interest and
         other obligations shall immediately be due and payable, without
         presentment, demand, protest or any notice of any kind, all of which
         are expressly waived;

                  (c) Exercise any right or remedy under the Security Agreement,
         or any other right or remedy of a secured party under the Uniform
         Commercial Code as in effect in Minnesota;

                  (d) Exercise any other right or remedy available to the Bank
         at law or in equity.

                                  ARTICLE VII.

                                  MISCELLANEOUS

         Section 7.1. No Waiver; Cumulative Remedies. No failure or delay on the
part of the Bank in exercising any right or remedy under, or pursuant to, any
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy or power preclude other or further exercise
thereof, or the exercise of any other right, remedy or power.



                                      C-20

<PAGE>




The remedies in the Loan Documents are cumulative and are not exclusive of any
remedies provided by law.

         Section 7.2. Amendments and Waivers. No amendment or waiver of any
provision of any Loan Document shall be effective unless such amendment or
waiver is in writing and is signed by the Bank, and such amendment or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given.

         Section 7.3. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier communication)
and mailed or telecopied or delivered, if to the Borrower, at its address stated
in the preamble hereof, Attention: David Noel; and if to the Bank, at its
address stated in the preamble hereof, Attention: John Dan; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall, when
mailed or telecopied, be effective when deposited in the mails or transmitted by
telecopier, respectively, addressed as provided above, except that notices to
the Bank pursuant to the provisions of Article II shall not be effective until
received by the Bank.

         Section 7.4. Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses of the Bank in connection with the preparation of the
Loan Documents, including reasonable attorneys fees and legal expenses, as well
as all costs and expenses of the Bank, including reasonable attorneys fees and
expenses, in connection with the administration and enforcement of the Loan
Documents (whether suit is commenced or not).

         Section 7.5. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Bank is hereby authorized at any time
and from time to time, to the fullest



                                      C-21

<PAGE>




extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the account
of the Borrower against any and all of the obligations of the Borrower now or
hereafter existing under any Loan Document, irrespective of whether or not the
Bank shall have made any demand under any Loan Document and although such
obligations may be unmatured. The Bank agrees promptly to notify the Borrower
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Bank under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that the Bank may have.

         Section 7.6. Governing Law. All Loan Documents shall be governed by the
laws of the State of Minnesota. Any term used in this Agreement and not
otherwise defined shall have the definition given that term in the Uniform
Commercial Code as in effect in the State of Minnesota from time to time, and
such definition automatically shall change on the effective date of any
amendment to the Uniform Commercial Code that changes such definition. If any
term in this Agreement shall be held to be illegal or unenforceable, the
remaining portions of this Agreement shall not be affected, and this Agreement
shall be construed and enforced as if this Agreement did not contain the term
held to be illegal or unenforceable. The Borrower hereby irrevocably submits to
the jurisdiction of the Minnesota District Court, Fourth District, and the
Federal District Court, District of Minnesota, Fourth Division, over any action
or proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court.



                                      C-22

<PAGE>




         Section 7.7. Binding Effect; Assignment. All Loan Documents shall be
binding upon and inure to the benefit of the Loan Parties and the Bank and their
respective successors and assigns. No Loan Party shall have the right to assign
its rights or interest under any such agreement without the prior written
consent of the Bank.

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


                                      LifeCore Biomedical, Inc.


                                      By        /s/ Dennis J. Allingham
                                      ------------------------------------------
                                           Its     Exec. Vice President and CFO
                                           -------------------------------------


                                      M&I Marshall and Ilsley Bank


                                      By        /s/ Scott Thorson
                                      ------------------------------------------
                                           Its     Senior Vice President
                                           -------------------------------------


                                      By        /s/ Thomas Droemueller
                                      ------------------------------------------
                                           Its     Vice President
                                           -------------------------------------


                                      C-23


<PAGE>

                                                                    EXHIBIT 10.1


                               SECURITY AGREEMENT

                            DATED: December 18, 2002

DEBTOR:                                            SECURED PARTY:

LifeCore Biomedical, Inc.                          M&I Marshall and Ilsley Bank
3515 Lyman Boulevard                               651 Nicollet Mall
Chaska, MN 55318                                   Minneapolis, MN 55402-1611
State of Formation: Minnesota
State Organizational No.:  1J-75

         1. Security Interest and Collateral. To secure the payment and
performance of each and every debt, liability and obligation of every type and
description that Debtor may now or at any time hereafter owe to Secured Party
under the Credit Agreement (as defined herein), including the Debtor's
obligation on any promissory note or notes under the Credit Agreement and any
note or notes hereafter issued in substitution or replacement thereof (whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
joint, several or joint and several; all such debts, liabilities and obligations
collectively referred to as the "Obligations"), Debtor hereby grants Secured
Party a security interest (the "Security Interest") in the following property
(the "Collateral"):

                  (a) INVENTORY:

                  All inventory of Debtor, whether now owned or hereafter
         acquired and wherever located;

                  (b) EQUIPMENT:

                  All equipment of Debtor, whether now owned or hereafter
         acquired, including but not limited to all present and future
         machinery, vehicles, furniture, fixtures,




<PAGE>




         manufacturing equipment, shop equipment, office and recordkeeping
         equipment, parts and tools, and the goods described in any equipment
         schedule or list herewith or hereafter furnished to Secured Party by
         Debtor (but no such schedule or list need be furnished in order for the
         security interest granted herein to be valid as to all of Debtor's
         equipment); provided that no Security Interest is granted in equipment
         to the extent that doing so would cause a default under any equipment
         lease or other purchase money financing;

                  (c)      ACCOUNTS AND OTHER RIGHTS TO PAYMENT:

                  Each and every right of Debtor to the payment of money,
         whether such right to payment now exists or hereafter arises, whether
         such right to payment arises out of a sale, lease or other disposition
         of goods or other property by Debtor, out of a rendering of services by
         Debtor, out of a loan by Debtor, out of the overpayment of taxes or
         other liabilities of Debtor, or otherwise arises under any contract or
         agreement, whether such right to payment is or is not already earned by
         performance, and howsoever such right to payment may be evidenced,
         together with all other rights and interests (including all liens and
         security interests) that Debtor may at any time have by law or
         agreement against any account debtor or other obligor obligated to make
         any such payment or against any of the property of such account debtor
         or other obligor; all including but not limited to all present and
         future payment intangibles, debt instruments, chattel papers, accounts,
         loans and obligations receivable and tax refunds;

                  (d)      INTANGIBLES:

                  All intangibles of Debtor, whether now owned or hereafter
         acquired, including but not limited to, general intangibles, investment
         property, software, applications for patents, patents, copyrights,
         trademarks, trade secrets, goodwill, tradenames, customers lists,


                                       2

<PAGE>




         permits and franchises, internet domain names, uniform resource
         locators (URL's),

         website contracts and registration rights and the right to use Debtor's
name; together with all substitutions and replacements for and products of any
of the foregoing property and together with proceeds of any and all of the
foregoing property and, in the case of all tangible Collateral, together with
all accessions and together with (i) all accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any such goods, and (ii) all warehouse receipts, bills of lading
and other documents of title now or hereafter covering such goods.

         2. Representations, Warranties and Agreements. Debtor represents,
warrants and agrees that:

                  (a) Debtor is a corporation.

                  (b) The Collateral will be used primarily for business
         purposes.

                  (c) Debtor's chief executive office is located at the address
         of Debtor shown at the beginning of this Agreement.

         3. Additional Representations, Warranties and Agreements. Debtor
represents, warrants and agrees that:

                  (a) Debtor has (or will have at the time Debtor acquires
         rights in Collateral hereafter arising) absolute title to each item of
         Collateral free and clear of all security interests, liens and
         encumbrances, except the Security Interest and Permitted Liens (as
         defined in the Credit Agreement), and will defend the Collateral
         against all claims or demands of all persons other than Secured Party.
         Any such security interests, liens or encumbrances not permitted under
         this Agreement shall be void. Debtor will not sell or otherwise dispose
         of the Collateral or any interest therein without the prior written


                                       3

<PAGE>




         consent of Secured Party, except that, until the occurrence of an Event
         of Default and the revocation by Secured Party of Debtor's right to do
         so, Debtor may (i) sell any inventory constituting Collateral to buyers
         in the ordinary course of business; (ii) dispose of used, worn-out or
         surplus equipment in the ordinary course of business; and (iii) sell
         equipment to the extent that such equipment is exchanged for credit
         against the purchase price of similar replacement equipment, or the
         proceeds of such sale are applied with reasonable promptness to the
         purchase price of such replacement equipment. This Agreement has been
         duly and validly authorized by all necessary corporate action.

                  (b) Debtor will not permit any tangible Collateral to be
         located in any state (and, if county filing is required, in any county)
         in which a financing statement covering such Collateral is required to
         be, but has not in fact been, filed in order to perfect the Security
         Interest.

                  (c) Each right to payment and each instrument, document,
         chattel paper and other agreement constituting or evidencing Collateral
         is (or will be when arising or issued) the valid, genuine and legally
         enforceable obligation, subject to no defense, set-off or counterclaim
         (other than those arising in the ordinary course of business) of the
         account debtor or other obligor named therein or in Debtor's records
         pertaining thereto as being obligated to pay such obligation. Debtor
         will neither agree to any material modification or amendment nor agree
         to any cancellation of any material obligation without Secured Party's
         prior written consent, and will not subordinate any material right to
         claims of other creditors of such account debtor or other obligor.

                  (d) Debtor will:



                                       4

<PAGE>




                           (i)      keep all tangible Collateral in good repair,
                                    working order and condition, normal
                                    depreciation excepted, and, exercising
                                    reasonable business judgment, will, from
                                    time to time, replace any worn, broken or
                                    defective parts thereof;

                           (ii)     promptly pay all taxes and other
                                    governmental charges levied or assessed upon
                                    or against any Collateral or upon or against
                                    the creation, perfection or continuance of
                                    the Security Interest except as Debtor shall
                                    contest in good faith and by appropriate
                                    proceedings providing such reserves as are
                                    required by generally accepted accounting
                                    principles;

                           (iii)    keep all Collateral free and clear of all
                                    security interests, liens and encumbrances
                                    except the Security Interest and Permitted
                                    Liens;

                           (iv)     at all reasonable times, permit Secured
                                    Party or its representatives to examine or
                                    inspect any Collateral, wherever located,
                                    and to examine, inspect and copy Debtor's
                                    books and records pertaining to the
                                    Collateral and its business and financial
                                    condition and, upon the occurrence and
                                    during the continuance of an Event of
                                    Default, to send and discuss with account
                                    debtors and other obligors requests for
                                    verifications of amounts owed to Debtor;

                           (v)      keep accurate and complete records
                                    pertaining to the Collateral and pertaining
                                    to Debtor's business and financial condition
                                    and submit to Secured Party such periodic
                                    reports concerning the Collateral and
                                    Debtor's business and financial condition as
                                    Secured Party may from time to time
                                    reasonably request;

                           (vi)     promptly notify Secured Party of any loss of
                                    or material damage to any Collateral or of
                                    any adverse change, known to Debtor, in the
                                    prospect of payment of any sums due on or
                                    under any instrument, chattel paper, or
                                    account constituting Collateral;

                           (vii)    if Secured Party at any time so requests
                                    (whether the request is made before or after
                                    the occurrence of an Event of Default),
                                    promptly deliver to Secured Party any
                                    instrument, document or chattel paper
                                    constituting Collateral, duly endorsed or
                                    assigned by Debtor;

                           (viii)   at all times keep all tangible Collateral
                                    insured against risks of fire (including
                                    so-called extended coverage), theft,
                                    collision (in case of Collateral consisting
                                    of motor vehicles) and such other risks as
                                    provided in the Credit Agreement;



                                       5

<PAGE>




                           (ix)     from time to time authorize such financing
                                    statements as Secured Party may reasonably
                                    require in order to perfect the Security
                                    Interest and, if any Collateral consists of
                                    an asset subject to a certificate of title,
                                    execute such documents as may be required to
                                    have the Security Interest properly noted on
                                    a certificate of title;

                           (x)      pay when due or reimburse Secured Party on
                                    demand for all costs of collection of any of
                                    the Obligations and all other out-of-pocket
                                    expenses (including in each case all
                                    reasonable attorneys' fees) incurred by
                                    Secured Party in connection with the
                                    creation, perfection, satisfaction,
                                    protection, defense or enforcement of the
                                    Security Interest or the creation,
                                    continuance, protection, defense or
                                    enforcement of this Agreement or any or all
                                    of the Obligations, including expenses
                                    incurred in any litigation or bankruptcy or
                                    insolvency proceedings;

                           (xi)     execute, deliver or endorse any and all
                                    instruments, documents, assignments,
                                    security agreements and other agreements and
                                    writings that Secured Party may at any time
                                    reasonably request in order to secure,
                                    protect, perfect or enforce the Security
                                    Interest and Secured Party's rights under
                                    this Agreement;

                           (xii)    not use or keep any Collateral, or permit it
                                    to be used or kept, for any unlawful purpose
                                    or in violation of any federal, state or
                                    local law, statute or ordinance;

                           (xiii)   not permit any tangible Collateral to become
                                    part of or to be affixed to any real
                                    property without first assuring to the
                                    reasonable satisfaction of Secured Party
                                    that the Security Interest will be prior and
                                    senior to any interest, or lien then held or
                                    thereafter acquired by any mortgagee of such
                                    real property or the owner or purchaser of
                                    any interest therein; and

                           (xiv)    inform Secured Party of any change to
                                    Debtor's name, address or state of formation
                                    prior to the effective date of such change
                                    and authorize and deliver to Secured Party
                                    any financing statement that is necessary as
                                    a result of that change to maintain the
                                    perfected status of the Security Interest.

         If Debtor at any time fails to perform or observe any agreement
         contained in this Section 3(d), and if such failure shall continue for
         a period of ten calendar days after Secured Party gives Debtor written
         notice thereof (or, in the case of the agreements contained in



                                       6


<PAGE>




         clauses (viii) and (ix) of this Section 3(d), immediately upon the
         occurrence of such failure, without notice or lapse of time), Secured
         Party may (but need not) perform or observe such agreement on behalf
         and in the name, place and stead of Debtor (or, at Secured Party's
         option, in Secured Party's own name) and may (but need not) take any
         and all other actions that Secured Party may reasonably deem necessary
         to cure or correct such failure (including, without limitation, the
         payment of taxes, the satisfaction of security interests, liens, or
         encumbrances, the performance of obligations under contracts or
         agreements with account debtors or other obligors, the procurement and
         maintenance of insurance, the execution of financing statements, the
         endorsement of instruments, and the procurement of repairs,
         transportation or insurance); and, except to the extent that the effect
         of such payment would be to render any loan or forbearance of money
         usurious or otherwise illegal under any applicable law, Debtor shall
         thereupon pay Secured Party on demand the amount of all moneys expended
         and all costs and expenses (including reasonable attorneys' fees)
         incurred by Secured Party in connection with or as a result of Secured
         Party's performing or observing such agreements or taking such actions,
         together with interest thereon from the date expended or incurred by
         Secured Party at the highest rate then applicable to any of the
         Obligations. To facilitate the performance or observance by Secured
         Party of such agreements of Debtor, upon the occurrence and during the
         continuance of an Event of Default, Debtor hereby irrevocably appoints
         (which appointment is coupled with an interest) Secured Party, or its
         delegate, as the attorney-in-fact of Debtor 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 Debtor, any and all
         instruments, documents, financing statements, termination statements
         for filings not


                                       7

<PAGE>




         permitted under this Agreement held by other secured parties,
         applications for insurance and other agreements and writings required
         to be obtained, executed, delivered or endorsed by Debtor under this
         Section 3 and Section 4.

         4. Lock Box, Collateral Account. If Secured Party so requests at any
time after the occurrence and during the continuance of an Event of Default,
Debtor will direct each of its account debtors to make payments due under the
relevant account or chattel paper directly to a special lockbox to be under the
control of Secured Party. Debtor hereby authorizes and directs Secured Party to
deposit into a special collateral account to be established and maintained with
Secured Party all checks, drafts and cash payments, received in such lockbox.
All deposits in such collateral account shall constitute proceeds of Collateral
and shall not constitute payment of any Obligations. At its option, Secured
Party may at any time, apply finally collected funds on deposit in such
collateral account to the payment of the Obligations in such order of
application as Secured Party may determine, or permit Debtor to withdraw all or
any part of the balance on deposit in such collateral account. If a collateral
account is so established, Debtor agrees that it will promptly deliver to
Secured Party, for deposit into such collateral account all payments on accounts
and chattel paper received by it. All such payments shall be delivered to
Secured Party in the form received (except for Debtor's endorsement where
necessary). Until so deposited, all payments on accounts and chattel paper
received by Debtor shall be held in trust by Debtor for and as the property of
Secured Party and shall not be commingled with any funds or property of Debtor.

         5. Account Verification and Collection Rights of Secured Party. Secured
Party shall have the right to verify any accounts in the name of Debtor or in
its own name as provided herein; and Debtor, whenever requested, shall furnish
Secured Party with duplicate statements of



                                       8

<PAGE>




the accounts, which statements may be mailed or delivered by Secured Party for
that purpose, provided that such verification occurs only in writing and on a
"blind" basis. Notwithstanding Secured Party's rights under Section 4 with
respect to any and all debt instruments, chattel papers, accounts, and other
rights to payment constituting Collateral (including proceeds), Secured Party
may at any time after the occurrence and during the continuation of an Event of
Default, notify any account debtor, or any other person obligated to pay any
amount due, that such chattel paper, account, or other right to payment has been
assigned or transferred to Secured Party for security and shall be paid directly
to Secured Party. If Secured Party so requests at any such time, Debtor will so
notify such account debtors and other obligors in writing and will indicate on
all invoices to such account debtors or other obligors that the amount due is
payable directly to Secured Party. At any time after Secured Party or Debtor
gives such notice to an account debtor or other obligor, Secured Party may (but
need not), in its own name or in Debtor's name, demand, sue for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any such chattel paper, account, or other right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor.

         6. Assignment of Insurance. Debtor hereby assigns to Secured Party, as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party. Both before and after the occurrence of an Event of
Default, Secured


                                       9

<PAGE>




Party may (but need not), in its own name or in Debtor's name, execute and
deliver proofs of claim, receive all such moneys, endorse checks and other
instruments representing payment of such moneys, and adjust, litigate,
compromise or release any claim against the issuer of such policy.
Notwithstanding any of the foregoing, so long as no Event of Default exists, the
Debtor shall be entitled to all insurance proceeds with respect to equipment or
inventory included in Collateral provided that such proceeds are applied to the
cost of replacement equipment or inventory to be included in Collateral.

         7. Events of Default. An Event of Default under the Revolving Credit
Agreement (the "Credit Agreement") between Debtor and Secured Party dated as of
the date hereof shall be an Event of Default hereunder.

         8. Remedies upon Event of Default. Upon the occurrence of an Event of
Default under Section 7 and at any time thereafter, Secured Party may exercise
any one or more of the following rights and remedies: (i) declare all unmatured
Obligations to be immediately due and payable, and the same shall thereupon be
immediately due and payable, without presentment of other notice or demand; (ii)
exercise and enforce any or all rights and remedies available upon default to a
secured party under the Uniform Commercial Code, including but not limited to
the right to take possession of any Collateral, proceeding without judicial
process or by judicial process (without a prior hearing or notice thereof, which
Debtor hereby expressly waives), and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith, Secured
Party may require Debtor to make the Collateral available to Secured Party at a
place to be designated by Secured Party that is reasonably convenient to both
parties, and if notice to Debtor of any intended disposition of Collateral or
any other intended action is required by law in a particular instance, such
notice shall be deemed commercially reasonable if given (in


                                       10

<PAGE>




the manner specified in Section 10) at least 10 calendar days prior to the date
of intended disposition or other action; (iii) exercise or enforce any or all
other rights or remedies available to Secured Party by law or agreement against
the Collateral, against Debtor or against any other person or property. Upon the
occurrence and during the continuance of an Event of Default, Secured Party is
hereby granted a nonexclusive, worldwide and royalty-free license to use or
otherwise exploit all trademarks, trade secrets, franchises, copyrights and
patents of Debtor that Secured Party deems necessary or appropriate to the
disposition of any Collateral.

         9. Other Personal Property. Unless at the time Secured Party takes
possession of any tangible Collateral, or within seven days thereafter, Debtor
gives written notice to Secured Party of the existence of any goods, papers or
other property of Debtor, not affixed to or constituting a part of such
Collateral, but that are located or found upon or within such Collateral,
describing such property, Secured Party shall not be responsible or liable to
Debtor for any action taken or omitted by or on behalf of Secured Party with
respect to such property without actual knowledge of the existence of any such
property or without actual knowledge that it was located or to be found upon or
within such Collateral.

         10. Miscellaneous. This Agreement does not contemplate a sale of
accounts, payment intangibles or chattel paper. This Agreement can be waived,
modified, amended, terminated or discharged and the Security Interest can be
released, only explicitly in a writing signed by Secured Party; provided,
however, that upon payment in full of the Obligations and the expiration of any
obligation of the Secured Party to extend credit accommodations to the Debtor,
the Security Interest granted hereby shall terminate. Upon any such termination,
the Secured Party will return to the Debtor such of the Collateral then in the
possession of the Secured Party as shall not have been sold or otherwise applied
pursuant to the terms hereof and execute and



                                       11

<PAGE>






deliver to the Debtor such documents as the Debtor shall reasonably request to
evidence such termination. A waiver signed by Secured Party shall be effective
only in a specific instance and for the specific purpose given. Mere delay or
failure to act shall not preclude the exercise or enforcement of any of Secured
Party's rights or remedies. All rights and remedies of Secured Party shall be
cumulative and may be exercised singularly or concurrently, at Secured Party's
option, and the exercise or enforcement of any one such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other. All
notices to be given to Debtor shall be deemed sufficiently given if delivered or
mailed by registered or certified mail, postage prepaid, to Debtor at its
address set forth above or at the most recent address shown on Secured Party's
records. Secured Party's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if Secured Party
exercises reasonable care in physically safekeeping such Collateral or, in the
case of Collateral in the custody or possession of a bailee or other third
person, exercises reasonable care in the selection of the bailee or other third
person, and Secured Party need not otherwise preserve, protect, insure or care
for any Collateral. Secured Party shall not be obligated to preserve any rights
Debtor may have against prior parties, to realize on the Collateral at all or in
any particular manner or order, or to apply any cash proceeds of Collateral in
any particular order of application and Secured Party may disclaim any and all
implied warranties (as imposed by law) in connection with the disposition of
Collateral. This Agreement shall be binding upon and inure to the benefit of
Debtor and Secured Party and their respective heirs, representatives, successors
and assigns and shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof. Secured
Party may execute this Agreement if appropriate for the purpose of filing, but
the failure of Secured Party to execute this Agreement shall not affect or
impair the



                                       12

<PAGE>






validity or effectiveness of this Agreement. A carbon, photographic or other
reproduction of this Agreement or of any financing statement signed by Debtor
shall have the same force and effects as the original for all purposes of a
financing statement. This Agreement shall be governed by the internal laws of
the State of Minnesota. If any provision or application of this Agreement is
held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other provisions or applications that can be
given effect and this Agreement shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein or
prescribed hereby. All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations. Debtor hereby
irrevocably submits to the jurisdiction of the Minnesota District Court, Fourth
District, and the Federal District Court, District of Minnesota, Fourth
Division, over any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of such action or proceeding may
be heard and determined in any such court.


M&I Marshall and Ilsley Bank             LifeCore Biomedical, Inc.


By         /s/ Scott Thorson             By       /s/ Dennis J. Allingham
------------------------------           ---------------------------------------
    Its      Senior Vice President           Its    Exec. Vice President and CFO
    -------------------------------          -----------------------------------

By       /s/ Thomas Droegemueller
---------------------------------
    Its     Vice President
    ----------------------


                                       13



</TEXT>
</DOCUMENT>
